DENVER, Nov. 2, 2016 /PRNewswire/ -- DaVita Inc. (NYSE:
DVA) today announced results for the quarter ended September 30, 2016. Net income attributable to
DaVita Inc. for the three months ended September 30, 2016 was $571 million, or $2.76 per share, which included a gain on changes
in ownership interest upon the formation of the Asia Pacific dialysis joint venture (APAC JV),
as discussed below.
Adjusted net income attributable to DaVita Inc. for the three
months ended September 30, 2016
excluding this item was $197 million,
or $0.95 per share.
Net income attributable to DaVita Inc. for the nine months ended
September 30, 2016 was $722 million, or $3.48 per share, which included goodwill
impairment charges related to certain DaVita Medical Group (DMG,
formerly known as HealthCare Partners or HCP) reporting units, a
gain on the APAC JV ownership changes, a gain on the sale of a
portion of our Tandigm ownership interest, a loss on the sale of
our DMG Arizona business, and an estimated accrual for damages and
liabilities associated with our DMG Nevada hospice business.
Adjusted net income attributable to DaVita Inc. for the nine
months ended September 30, 2016
excluding these items was $597
million, or $2.88 per
share.
Additionally, adjusted net income attributable to DaVita Inc.
for the three and nine months ended September 30, 2016, excluding the items listed
above from their respective periods and excluding the amortization
of intangible assets associated with acquisitions, was $223 million, or $1.08 per share, and $675
million, or $3.25 per share,
respectively.
Net income attributable to DaVita Inc. for the three months
ended September 30, 2015 was
$216 million, or $1.00 per share.
Net income attributable to DaVita Inc. for the nine months ended
September 30, 2015 was $276 million, or $1.27 per share, which included debt redemption
charges, goodwill impairment charges, a settlement charge related
to a private civil suit and a related tax adjustment. Adjusted net
income attributable to DaVita Inc. for the nine months ended
September 30, 2015 excluding these
items was $614 million, or
$2.82 per share.
Additionally, adjusted net income attributable to DaVita Inc.
for the three and nine months ended September 30, 2015, excluding the items listed
above from their respective periods and excluding the amortization
of intangible assets associated with acquisitions, was $241 million, or $1.11 per share, and $691
million, or $3.18 per share,
respectively.
For reconciliations of these non-United States generally accepted accounting
principles (GAAP) financial measures to their most comparable
measure calculated and presented in accordance with GAAP, see the
attached reconciliation schedules.
Financial and operating highlights include:
- Cash Flow: For the rolling twelve months ended
September 30, 2016, operating cash
flow was $1,918 million and free cash
flow was $1,339 million. For the
three months ended September 30,
2016, operating cash flow was $536
million and free cash flow was $386
million. For the definition of free cash flow, see Note 4 to
the reconciliation of non-GAAP measures.
- Operating Income and Adjusted Operating Income:
Operating income for the three months ended September 30, 2016 was $819 million, which included a gain on the APAC
JV ownership changes and an adjustment to reduce a receivable
associated with the DMG acquisition escrow provision relating to an
income tax item, as discussed below. Adjusted operating income
for the three months ended September 30,
2016 excluding these items was $472
million. Operating income for the nine months ended
September 30, 2016 was $1,513 million including goodwill impairment
charges, a gain on the APAC JV ownership changes, a gain on the
sale of a portion of our Tandigm ownership interest, a loss on the
sale of our DMG Arizona business, an adjustment to reduce a
receivable associated with the DMG acquisition escrow provision
relating to an income tax item, and the estimated DMG Nevada
hospice accrual. Adjusted operating income for the nine months
ended September 30, 2016 excluding
these items was $1,405 million.
In connection with the acquisition of DMG, we recorded a receivable
against the acquisition escrow balance to offset specific potential
tax liabilities. Certain of these potential tax liabilities
expired, resulting in the reduction of this asset during the third
quarter of 2016. This negatively impacted operating income by
$27 million and is included in our
general and administrative expenses. The reduction in operating
income was directly offset by a reduction in income tax expense due
to the expiration of the corresponding tax liability.
Operating income for the three months ended September 30, 2015 was $509 million. Operating income for the nine
months ended September 30, 2015 was
$926 million, which included a
goodwill impairment charge of $4
million and a settlement charge related to a private civil
suit. Adjusted operating income for the nine months ended
September 30, 2015, excluding these
items was $1,425 million.
- Gain on Changes in Ownership Interests: Effective
August 1, 2016, we consummated an
agreement with Khazanah Nasional Berhad (Khazanah) and Mitsui and
Co., Ltd (Mitsui) whereby Khazanah and Mitsui subscribed to invest
a total of $300 million over three
years in exchange for a 40% total equity interest in our
Asia Pacific dialysis business.
Khazanah and Mitsui each made related initial investments of
$50 million in this business on
August 1, 2016. As a result of this
transaction, we deconsolidated our Asia
Pacific dialysis business at that time and recognized a
non-cash gain of $374 million on our
retained interest in the APAC JV.
- Trade Name: As of September 1,
2016, we committed to a plan to change the HCP trade name to
DMG. As a result of this decision, we began to accelerate the
amortization of the remaining carrying value of the HCP trade name
which resulted in additional amortization of $2 million for the three months ended
September 30, 2016. This additional
non-cash amortization will continue at a rate of approximately
$7 million per quarter through the
first quarter of 2019.
- Volume: Total U.S. dialysis treatments for the third
quarter of 2016 were 6,887,992, or 87,190 treatments per day,
representing a per day increase of 4.2% over the third quarter of
2015. Normalized non-acquired treatment growth in the third quarter
of 2016 as compared to the third quarter of 2015 was 4.4%.
The number of member months for which DMG provided care during the
third quarter of 2016 was approximately 2.3 million, of which
approximately 1.0 million, 1.0 million and 0.3 million related to
Medicare, commercial and Medicaid members, respectively.
- Effective Tax Rate: Our effective tax rate was 14.6% and
30.2% for the three and nine months ended September 30, 2016, respectively. The effective
tax rate attributable to DaVita Inc. was 15.4% and 33.6% for the
three and nine months ended September 30,
2016, respectively. Our effective tax rate for the three and
nine months ended September 30, 2016
was impacted by the gain on the APAC JV ownership changes, an
adjustment related to the reduction in a receivable associated with
the DMG acquisition escrow provision relating to an income tax
item, and the amount of third-party owners' income attributable to
non-tax paying entities. Additionally, the effective tax rate for
the nine months ended September 30,
2016 was impacted by the non-deductible goodwill impairment
charges, the loss on the sale of our DMG Arizona business and the
non-deductible estimated DMG Nevada hospice accrual. The adjusted
effective tax rate attributable to DaVita Inc. for the three and
nine months ended September 30, 2016,
excluding these items from their respective periods was 40.0% and
39.0%, respectively.
We currently estimate our 2016 adjusted effective tax rate
attributable to DaVita Inc. to be approximately 39.0%, excluding
the gain on the APAC JV ownership changes, goodwill impairment
charges, the loss on the sale of our DMG Arizona business, the
estimated DMG Nevada hospice accrual and the income tax adjustment
related to the reduction in a receivable associated with the DMG
acquisition escrow provision relating to an income tax item.
We do not provide guidance for our estimated 2016 effective tax
rate attributable to DaVita Inc. on a GAAP basis nor a
reconciliation of that forward-looking non-GAAP financial measure
to the most directly comparable GAAP financial measure on a
forward-looking basis because we are unable to predict certain
items contained in the GAAP measure without unreasonable
efforts.
-
Center Activity: As of September
30, 2016, we provided dialysis services to a total of
approximately 199,000 patients at 2,457 outpatient dialysis
centers, of which 2,318 centers were located in the United States and 139 centers were located
in 11 countries outside of the United
States. During the third quarter of 2016, we opened a total
of 28 new dialysis centers and closed three dialysis centers in
the United States. We also
acquired eight dialysis centers and opened four new dialysis center
outside of the United States.
- Share Repurchases: During the three months ended
September 30, 2016, we repurchased a
total of 6,240,694 shares of our common stock for $407 million, or an average price of $65.15 per share. During the nine months ended
September 30, 2016, we repurchased
9,930,432 shares of our common stock for $656 million, or an average price of $66.07 per share. We also repurchased 3,367,024
shares of our common stock for $212
million, or an average price of $63.07 per share, subsequent to September 30, 2016. As a result of these
transactions, as of October 31, 2016
we have a total of approximately $881
million in outstanding Board repurchase authorizations.
Outlook
The following forward-looking measures and the underlying
assumptions involve significant risks and uncertainties, including
those described below, and actual results may vary significantly
from these current forward-looking measures. We do not provide
guidance for consolidated operating income, Kidney Care operating
income or DMG operating income on a GAAP basis nor a reconciliation
of those forward-looking non-GAAP financial measures to the most
directly comparable GAAP financial measures on a forward-looking
basis because we are unable to predict certain items contained in
the GAAP measures without unreasonable efforts. These non-GAAP
financial measures do not include certain items, including goodwill
impairment charges, the gain on the sale of a portion of our
Tandigm ownership interest, the loss on the sale of our DMG Arizona
business, the estimated accrual associated with the DMG Nevada
hospice business, an adjustment related to the reduction in a
receivable associated with the DMG acquisition escrow provision
relating to an income tax item and a gain on the APAC JV ownership
changes.
- We are updating our adjusted consolidated operating income
guidance for 2016 to be in the range of $1.810 billion to $1.870 billion.
Our previous adjusted consolidated
operating income guidance for 2016 was in the range of $1.785 billion to $1.875 billion.
- We are updating our adjusted operating income guidance for
Kidney Care for 2016 to be in the range of $1.695 billion to $1.725 billion.
Our previous operating income
guidance for Kidney Care for 2016 was in the range of $1.675 billion to $1.725 billion.
- We are updating our adjusted operating income guidance for DMG
for 2016 to be in the range of $115 million
to $145 million.
Our previous adjusted operating
income guidance for DMG for 2016 was in the range of $110 million to $150 million.
- We are updating our consolidated operating cash flow for 2016
to be in the range of $1.750 billion to
$1.850 billion.
Our previous consolidated operating cash flow for 2016 was in the
range of $1.600 billion to $1.750
billion.
We will be holding a conference call to discuss our results for
the third quarter ended September 30,
2016 on November 2, 2016 at
5:00 p.m. Eastern Time. To join the
conference call, please dial (877) 918-6630 from the U.S. or (517)
308-9087 from outside the U.S. A replay of the conference call will
be available on our website at investors.davita.com, for the
following 30 days.
This release contains forward-looking statements within the
meaning of the federal securities laws, including statements
related to our guidance and expectations for our 2016 consolidated
operating income, our 2016 Kidney Care operating income, DMG's 2016
operating income, our 2016 consolidated operating cash flows, our
2016 effective tax rate attributable to DaVita Inc. and our
estimated charges and accruals. Factors that could impact future
results include the uncertainties associated with the risk factors
set forth in our SEC filings, including our annual report on Form
10-K for the year ended December 31,
2015, our subsequent quarterly and annual reports, and our
current reports on Form 8-K. The forward-looking statements should
be considered in light of these risks and uncertainties.
These risks and uncertainties include, but are not limited
to, and are qualified in their entirety by reference to the full
text of those risk factors in our SEC filings relating
to:
- the concentration of profits generated by higher-paying
commercial payor plans for which there is continued downward
pressure on average realized payment rates, and a reduction in the
number of patients under such plans, which may result in the loss
of revenues or patients, and the extent to which the ongoing
implementation of healthcare exchanges or changes in regulations or
enforcement of regulations regarding the exchanges results in a
reduction in reimbursement rates for our services from and/or the
number of patients enrolled in higher-paying commercial
plans,
- a reduction in government payment rates under the Medicare
End Stage Renal Disease program or other government-based
programs,
- the impact of the Medicare Advantage benchmark
structure,
- risks arising from potential federal and/or state
legislation that could have an adverse effect on our operations and
profitability,
- changes in pharmaceutical or anemia management practice
patterns, payment policies, or pharmaceutical pricing,
- legal compliance risks, including our continued compliance
with complex government regulations and the provisions of our
current corporate integrity agreement and current or potential
investigations by various government entities and related
government or private-party proceedings, and restrictions on our
business and operations required by our corporate integrity
agreement and other settlement terms, and the financial impact
thereof,
- continued increased competition from large- and medium-sized
dialysis providers that compete directly with us,
- our ability to maintain contracts with physician medical
directors, changing affiliation models for physicians, and the
emergence of new models of care introduced by the government or
private sector, that may erode our patient base and reimbursement
rates, such as accountable care organizations, independent practice
associations and integrated delivery systems,
- our ability to complete acquisitions, mergers or
dispositions that we might be considering or announce, or to
integrate and successfully operate any business we may acquire or
have acquired, including DMG, or to expand our operations and
services to markets outside the United
States, or to businesses outside of dialysis and DMG's
business,
- the variability of our cash flows,
- the risk that we might invest material amounts of capital
and incur significant costs in connection with the growth and
development of our international operations, yet we might not be
able to operate them profitably anytime soon, if at all,
- risks arising from the use of accounting estimates,
judgments and interpretations in our financial statements,
- the risk that laws regulating the corporate practice of
medicine could restrict the manner in which DMG conducts its
business,
- the risk that the cost of providing services under DMG's
agreements may exceed our compensation,
- the risk that reductions in reimbursement rates, including
Medicare Advantage rates, and future regulations may negatively
impact DMG's business, revenue and profitability,
- the risk that DMG may not be able to successfully establish
a presence in new geographic regions or successfully address
competitive threats that could reduce its profitability,
- the risk that a disruption in DMG's healthcare provider
networks could have an adverse effect on DMG's business operations
and profitability,
- the risk that reductions in the quality ratings of health
maintenance organization plan customers of DMG could have an
adverse effect on DMG's business, or
- the risk that health plans that acquire health maintenance
organizations may not be willing to contract with DMG or may be
willing to contract only on less favorable terms.
We base our forward-looking statements on information
currently available to us at the time of this release, and we
undertake no obligation to update or revise any forward-looking
statements, whether as a result of changes in underlying factors,
new information, future events or otherwise.
This release contains non-GAAP financial measures. For
reconciliations of these non-GAAP financial measures to their most
comparable measure calculated and presented in accordance with
GAAP, see the attached reconciliation schedules. For the reasons
stated in the reconciliation schedules, we believe our presentation
of non-GAAP financial measures provides useful supplemental
information for investors.
Contact:
|
Jim
Gustafson
|
|
Investor
Relations
|
|
DaVita
Inc.
|
|
(310)
536-2585
|
DAVITA
INC.
CONSOLIDATED
STATEMENTS OF INCOME
(unaudited)
(dollars in
thousands, except per share data)
|
|
|
Three
months ended
September 30,
|
Nine
months ended
September 30,
|
|
2016
|
2015
|
2016
|
2015
|
|
|
|
|
|
Patient service
revenues
|
$
2,629,661
|
$
2,414,034
|
$
7,678,053
|
$
7,049,428
|
Less: Provision for
uncollectible accounts
|
(115,555)
|
(109,452)
|
(336,188)
|
(314,581)
|
Net patient service
revenues
|
2,514,106
|
2,304,582
|
7,341,865
|
6,734,847
|
Capitated
revenues
|
869,290
|
926,847
|
2,654,163
|
2,643,552
|
Other
revenues
|
347,180
|
294,236
|
1,033,335
|
869,849
|
Total net
revenues
|
3,730,576
|
3,525,665
|
11,029,363
|
10,248,248
|
Operating expenses
and charges:
|
|
|
|
|
Patient care costs and
other costs
|
2,697,629
|
2,501,015
|
7,950,987
|
7,309,703
|
General and
administrative
|
406,890
|
353,492
|
1,180,214
|
1,043,253
|
Depreciation and
amortization
|
181,739
|
162,062
|
531,475
|
474,694
|
Provision for
uncollectible accounts
|
3,773
|
2,511
|
9,856
|
6,497
|
Equity investment
income
|
(4,237)
|
(2,783)
|
(5,119)
|
(10,724)
|
Goodwill impairment
charges
|
—
|
—
|
253,000
|
4,065
|
Gain on changes in
ownership interests, net
|
(374,374)
|
—
|
(404,165)
|
—
|
Settlement
charge
|
—
|
—
|
—
|
495,000
|
Total operating
expenses and charges
|
2,911,420
|
3,016,297
|
9,516,248
|
9,322,488
|
Operating
income
|
819,156
|
509,368
|
1,513,115
|
925,760
|
Debt
expense
|
(104,581)
|
(103,481)
|
(310,359)
|
(305,121)
|
Debt redemption
charges
|
—
|
—
|
—
|
(48,072)
|
Other income,
net
|
1,876
|
2,484
|
8,067
|
4,262
|
Income before income
taxes
|
716,451
|
408,371
|
1,210,823
|
576,829
|
Income tax
expense
|
104,301
|
147,064
|
366,011
|
183,893
|
Net income
|
612,150
|
261,307
|
844,812
|
392,936
|
Less: Net income
attributable to noncontrolling interests
|
(40,818)
|
(45,435)
|
(122,664)
|
(117,204)
|
Net income
attributable to DaVita Inc
|
$
571,332
|
$
215,872
|
$ 722,148
|
$
275,732
|
Earnings per
share:
|
|
|
|
|
Basic net income per
share attributable to DaVita Inc
|
$
2.80
|
$
1.02
|
$
3.54
|
$
1.30
|
Diluted net income per
share attributable to DaVita Inc
|
$
2.76
|
$
1.00
|
$
3.48
|
$
1.27
|
Weighted average
shares for earnings per share:
|
|
|
|
|
Basic
|
203,761,433
|
212,374,897
|
204,206,979
|
212,914,126
|
Diluted
|
206,961,450
|
216,691,461
|
207,643,794
|
217,421,213
|
DAVITA
INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in
thousands)
|
|
|
|
|
Three
months ended
September 30,
|
Nine
months ended
September 30,
|
|
2016
|
2015
|
2016
|
2015
|
|
|
|
|
|
Net income
|
$
612,150
|
$
261,307
|
$
844,812
|
$
392,936
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
Unrealized losses on
interest rate swap and cap agreements:
|
|
|
|
|
Unrealized losses on
interest rate swap and cap agreements
|
(153)
|
(1,851)
|
(8,238)
|
(10,064)
|
Reclassifications of
net swap and cap agreements realized losses into net
income
|
388
|
771
|
1,301
|
2,372
|
Unrealized gains
(losses) on investments:
|
|
|
|
|
Unrealized gains
(losses) on investments
|
1,121
|
(1,651)
|
1,988
|
(1,368)
|
Reclassification of
net investment realized gains into net income
|
(50)
|
(203)
|
(143)
|
(376)
|
Unrealized gains
(losses) on foreign currency translation:
|
|
|
|
|
Foreign currency
translation adjustments
|
(951)
|
(7,023)
|
5,386
|
(19,883)
|
Reclassification of
foreign currency translation adjustment realized loss into net
income
|
7,513
|
—
|
7,513
|
—
|
Other comprehensive
income (loss)
|
7,868
|
(9,957)
|
7,807
|
(29,319)
|
Total comprehensive
income
|
620,018
|
251,350
|
852,619
|
363,617
|
Less: Comprehensive
income attributable to noncontrolling interests
|
(40,876)
|
(45,435)
|
(122,871)
|
(117,204)
|
Comprehensive income
attributable to DaVita Inc
|
$
579,142
|
$
205,915
|
$
729,748
|
$
246,413
|
DAVITA
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in
thousands)
|
|
|
Nine months
ended
September 30,
|
|
2016
|
2015
|
Cash flows from
operating activities:
|
|
|
Net income
|
$
844,812
|
$
392,936
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Settlement
charge
|
—
|
495,000
|
Settlement
payments
|
—
|
(493,775)
|
Depreciation and
amortization
|
531,475
|
474,694
|
Debt redemption
charges
|
—
|
48,072
|
Goodwill impairment
charges
|
253,000
|
4,065
|
Stock-based
compensation expense
|
29,817
|
42,794
|
Tax benefits from
stock award exercises
|
27,012
|
31,069
|
Excess tax benefits
from stock award exercises
|
(12,584)
|
(19,555)
|
Deferred income
taxes
|
48,778
|
(1,994)
|
Equity investment
income, net
|
16,825
|
10,563
|
Gain on changes in
ownership interests, net
|
(404,165)
|
—
|
Other non-cash
charges
|
9,163
|
22,518
|
Changes in operating
assets and liabilities, other than from acquisitions and
divestitures:
|
|
|
Accounts
receivable
|
(85,660)
|
(178,148)
|
Inventories
|
(13,045)
|
(35,856)
|
Other receivables and
other current assets
|
(1,616)
|
54,924
|
Other long-term
assets
|
31,081
|
1,940
|
Accounts
payable
|
(45,507)
|
11,473
|
Accrued compensation
and benefits
|
79,289
|
123,081
|
Other current
liabilities
|
119,549
|
96,671
|
Income
taxes
|
65,164
|
35,282
|
Other long-term
liabilities
|
(12,126)
|
4,773
|
Net cash provided by
operating activities
|
1,481,262
|
1,120,527
|
Cash flows from
investing activities:
|
|
|
Additions of property
and equipment
|
(575,243)
|
(462,213)
|
Acquisitions
|
(497,331)
|
(90,709)
|
Proceeds from asset
and business sales
|
18,991
|
6,865
|
Purchase of
investments available for sale
|
(9,041)
|
(6,667)
|
Purchase of
investments held-to-maturity
|
(976,411)
|
(1,555,604)
|
Proceeds from sale of
investments available for sale
|
8,636
|
1,961
|
Proceeds from
investments held-to-maturity
|
743,941
|
969,549
|
Purchase of intangible
assets
|
(75)
|
—
|
Purchase of equity
investments
|
(11,629)
|
(13,623)
|
Proceeds from sale of
equity investments
|
40,920
|
—
|
Distributions received
on equity investments
|
—
|
57
|
Net cash used in
investing activities
|
(1,257,242)
|
(1,150,384)
|
Cash flows from
financing activities:
|
|
|
Borrowings
|
39,102,302
|
41,371,392
|
Payments on long-term
debt and other financing costs
|
(39,201,016)
|
(40,732,075)
|
Deferred financing and
debt redemption costs
|
(188)
|
(59,354)
|
Purchase of treasury
stock
|
(620,898)
|
(384,110)
|
Distributions to
noncontrolling interests
|
(145,072)
|
(125,938)
|
Stock award exercises
and other share issuances, net
|
18,515
|
19,802
|
Excess tax benefits
from stock award exercises
|
12,584
|
19,555
|
Contributions from
noncontrolling interests
|
35,524
|
28,212
|
Purchase of
noncontrolling interests
|
(9,727)
|
(23,605)
|
Net cash (used in)
provided by financing activities
|
(807,976)
|
113,879
|
Effect of exchange
rate changes on cash and cash equivalents
|
(1,664)
|
(1,844)
|
Net (decrease)
increase in cash and cash equivalents
|
(585,620)
|
82,178
|
Cash and cash
equivalents at beginning of the year
|
1,499,116
|
965,241
|
Cash and cash
equivalents at end of the period
|
$
913,496
|
$
1,047,419
|
DAVITA
INC
CONSOLIDATED
BALANCE SHEETS
(unaudited)
(dollars in
thousands, except per share data)
|
|
|
|
September
30,
2016
|
December
31,
2015
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
913,496
|
$
1,499,116
|
Short-term
investments
|
659,478
|
408,084
|
Accounts receivable,
less allowance of $251,593 and $264,144
|
1,850,425
|
1,724,228
|
Inventories
|
200,563
|
185,575
|
Other
receivables
|
451,953
|
435,885
|
Other current
assets
|
177,248
|
190,322
|
Income taxes
receivable
|
8,196
|
60,070
|
Total current
assets
|
4,261,359
|
4,503,280
|
Property and
equipment, net of accumulated depreciation of $2,728,217 and
$2,397,007
|
3,044,988
|
2,788,740
|
Intangible assets,
net of accumulated amortization of $895,034 and $770,691
|
1,576,157
|
1,687,326
|
Equity
investments
|
516,383
|
78,368
|
Long-term
investments
|
100,786
|
89,122
|
Other long-term
assets
|
42,984
|
73,560
|
Goodwill
|
9,382,996
|
9,294,479
|
|
$
18,925,653
|
$
18,514,875
|
LIABILITIES AND
EQUITY
|
|
|
Accounts
payable
|
$
498,422
|
$
513,950
|
Other
liabilities
|
828,535
|
682,123
|
Accrued compensation
and benefits
|
845,879
|
741,926
|
Medical
payables
|
313,869
|
332,102
|
Current portion of
long-term debt
|
152,764
|
129,037
|
Total current
liabilities
|
2,639,469
|
2,399,138
|
Long-term
debt
|
8,972,002
|
9,001,308
|
Other long-term
liabilities
|
420,938
|
439,229
|
Deferred income
taxes
|
802,109
|
726,962
|
Total
liabilities
|
12,834,518
|
12,566,637
|
Commitments and
contingencies:
|
|
|
Noncontrolling
interests subject to put provisions
|
971,744
|
864,066
|
Equity:
|
|
|
Preferred stock
($0.001 par value, 5,000,000 shares authorized; none
issued)
|
|
|
Common stock ($0.001
par value, 450,000,000 shares authorized; 217,338,629 and
217,120,346 shares issued and 200,778,434 and 209,754,247 shares
outstanding, respectively)
|
217
|
217
|
Additional paid-in
capital
|
1,032,739
|
1,118,326
|
Retained
earnings
|
5,078,983
|
4,356,835
|
Treasury stock
(16,560,195 and 7,366,099 shares, respectively)
|
(1,147,967)
|
(544,772)
|
Accumulated other
comprehensive loss
|
(52,226)
|
(59,826)
|
Total DaVita Inc.
shareholders' equity
|
4,911,746
|
4,870,780
|
Noncontrolling
interests not subject to put provisions
|
207,645
|
213,392
|
Total
equity
|
5,119,391
|
5,084,172
|
|
$
18,925,653
|
$
18,514,875
|
DAVITA
INC.
SUPPLEMENTAL
FINANCIAL DATA
(unaudited)
(dollars in
millions, except for per share and per treatment
data)
|
|
|
Three months
ended
|
Nine months
ended
September 30,
2016
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
1. Consolidated
Financial Results:
|
|
|
|
|
Consolidated net
revenues
|
$
3,731
|
$
3,718
|
$
3,526
|
$
11,029
|
Operating
income
|
$
819
|
$
329
|
$
509
|
$
1,513
|
Adjusted operating
income excluding certain items(1)
|
$
472
|
$
475
|
$
509
|
$
1,405
|
Operating income
margin
|
22.0%
|
8.8%
|
14.4%
|
13.7%
|
Adjusted operating
income margin excluding certain items(1) (5)
|
12.6%
|
12.8%
|
14.4%
|
12.7%
|
Net income
attributable to DaVita Inc
|
$
571
|
$
53
|
$
216
|
$
722
|
Adjusted net income
attributable to DaVita Inc. excluding certain
items(1)
|
$
197
|
$
210
|
$
216
|
$
597
|
Diluted net income per
share attributable to DaVita Inc
|
$
2.76
|
$
0.26
|
$
1.00
|
$
3.48
|
Adjusted diluted net
income per share attributable to DaVita Inc. excluding certain
items(1)
|
$
0.95
|
$
1.01
|
$
1.00
|
$
2.88
|
|
|
|
|
|
2. Consolidated
Business Metrics:
|
|
|
|
|
Expenses
|
|
|
|
|
General and
administrative expenses as a percent of consolidated net
revenues(2)
|
10.9%
|
10.4%
|
10.0%
|
10.7%
|
Consolidated effective
tax rate
|
14.6%
|
58.8%
|
36.0%
|
30.2%
|
Consolidated effective
tax rate attributable to DaVita Inc.(1)
|
15.4%
|
71.6%
|
40.5%
|
33.6%
|
Adjusted consolidated
effective tax rate attributable to DaVita
Inc.(1)
|
40.0%
|
37.2%
|
40.5%
|
39.0%
|
|
|
|
|
|
3. Summary of
Division Financial Results:
|
|
|
|
|
Net
revenues
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
Net U.S. dialysis and
related lab services revenues
|
$
2,324
|
$
2,264
|
$
2,201
|
$
6,815
|
Net ancillary services
and strategic initiatives revenues, including international
dialysis operations
|
412
|
423
|
345
|
1,226
|
Elimination of
intersegment revenues
|
(33)
|
(29)
|
(21)
|
(88)
|
Total Kidney Care net
revenues
|
2,703
|
2,658
|
2,525
|
7,953
|
Net DMG
revenues
|
1,028
|
1,060
|
1,001
|
3,076
|
Total net consolidated
revenues
|
$
3,731
|
$
3,718
|
$
3,526
|
$
11,029
|
Operating
income
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
U.S. Dialysis and
related lab services operating income
|
$
452
|
$
449
|
$
462
|
$
1,341
|
Other – Ancillary
services and strategic initiatives, including international
dialysis operations operating income (loss)
|
362
|
(13)
|
(30)
|
338
|
Corporate support and
related long-term incentive compensation
|
(1)
|
(5)
|
(6)
|
(13)
|
Reduction of
receivable associated with the DMG acquisition escrow
provision
|
(27)
|
—
|
—
|
(27)
|
Total Kidney Care
operating income
|
786
|
431
|
426
|
1,639
|
DMG operating income
(loss)
|
33
|
(102)
|
83
|
(126)
|
Total consolidated
operating income
|
$
819
|
$
329
|
$
509
|
$
1,513
|
DAVITA
INC.
SUPPLEMENTAL
FINANCIAL DATA—continued
(unaudited)
(dollars in
millions, except for per share and per treatment
data)
|
|
|
Three months
ended
|
Nine months
ended
September 30,
2016
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
4. Summary of
Reportable Segment Financial Results:
|
|
|
|
|
U.S. Dialysis
and Related Lab Services
|
|
|
|
|
Revenue:
|
|
|
|
|
Patient services
revenues
|
$
2,429
|
$
2,367
|
$
2,301
|
$
7,124
|
Provision for
uncollectible accounts
|
(109)
|
(107)
|
(103)
|
(321)
|
Net patient service
operating revenues
|
2,320
|
2,260
|
2,198
|
6,803
|
Other
revenues
|
4
|
4
|
3
|
12
|
Total net operating
revenues
|
$
2,324
|
$
2,264
|
$
2,201
|
$
6,815
|
Operating
expenses:
|
|
|
|
|
Patient care
costs
|
$
1,565
|
$
1,515
|
$
1,461
|
$
4,577
|
General and
administrative
|
188
|
185
|
170
|
552
|
Depreciation and
amortization
|
123
|
119
|
112
|
358
|
Equity investment
income
|
(4)
|
(4)
|
(4)
|
(13)
|
Total operating
expenses
|
1,872
|
1,815
|
1,739
|
5,474
|
Segment operating
income
|
$
452
|
$
449
|
$
462
|
$
1,341
|
|
|
|
|
|
DMG
|
|
|
|
|
Revenue:
|
|
|
|
|
DMG capitated
revenues
|
$
846
|
$
874
|
$
907
|
$
2,586
|
Patient services
revenues
|
159
|
160
|
84
|
432
|
Provision for
uncollectible accounts
|
(6)
|
(4)
|
(5)
|
(14)
|
Net patient service
operating revenues
|
153
|
156
|
79
|
418
|
Other
revenues
|
29
|
30
|
15
|
72
|
Total net operating
revenues
|
$
1,028
|
$
1,060
|
$
1,001
|
$
3,076
|
Operating
expenses:
|
|
|
|
|
Patient care
costs
|
$
824
|
$
840
|
$
768
|
$
2,457
|
General and
administrative
|
121
|
118
|
106
|
365
|
Depreciation and
amortization
|
53
|
54
|
43
|
153
|
Goodwill impairment
charges
|
─
|
176
|
─
|
253
|
Gains on changes in
ownership interests, net
|
─
|
(30)
|
─
|
(30)
|
Equity investment
(income) loss
|
(3)
|
4
|
1
|
4
|
Total operating
expenses
|
995
|
1,162
|
918
|
3,202
|
Segment operating
income (loss)
|
$
33
|
$
(102)
|
$
83
|
$
(126)
|
Reconciliation
for non-GAAP measure:
|
|
|
|
|
Add:
|
|
|
|
|
Goodwill impairment
charges
|
─
|
176
|
─
|
253
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16
|
Gain on changes in
ownership interests, net
|
|
|
|
|
Gain on sale of
Tandigm ownership interest
|
─
|
(40)
|
─
|
(40)
|
Loss on sale of DMG
Arizona
|
─
|
10
|
─
|
10
|
Adjusted segment
operating income(1)
|
$
33
|
$
44
|
$
83
|
$
113
|
DAVITA
INC.
SUPPLEMENTAL
FINANCIAL DATA—continued
(unaudited)
(dollars in
millions, except for per share and per treatment
data)
|
|
|
Three months
ended
|
Nine months
ended
September 30,
2016
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
5. U.S.
Dialysis and Related Lab Services Business
Metrics:
|
|
|
|
|
Volume
|
|
|
|
|
Treatments
|
6,887,992
|
6,745,610
|
6,611,799
|
20,273,476
|
Number of treatment
days
|
79.0
|
78.0
|
79.0
|
234.9
|
Treatments per
day
|
87,190
|
86,482
|
83,694
|
86,307
|
Per day year over year
increase
|
4.2%
|
4.4%
|
4.2%
|
4.3%
|
Normalized
non-acquired growth year over year
|
4.4%
|
4.3%
|
3.5%
|
4.3%
|
Operating
revenues before provision for uncollectible
accounts
|
|
|
|
|
Dialysis and related
lab services revenue per treatment
|
$
352.62
|
$
350.90
|
$
348.01
|
$
351.39
|
Per treatment increase
(decrease) from previous quarter
|
0.5%
|
0.1%
|
(0.1%)
|
|
Per treatment increase
from previous year
|
1.3%
|
0.7%
|
2.0%
|
1.1%
|
Percent of net
consolidated revenues
|
61.9%
|
60.5%
|
62.0%
|
61.4%
|
Expenses
|
|
|
|
|
Patient care
costs
|
|
|
|
|
Percent of total
segment operating net revenues
|
67.3%
|
66.9%
|
66.4%
|
67.2%
|
Per
treatment
|
$
227.16
|
$
224.75
|
$
220.92
|
$
225.75
|
Per treatment increase
(decrease) from previous quarter
|
1.1%
|
(0.2%)
|
(0.6%)
|
|
Per treatment increase
from previous year
|
2.8%
|
1.2%
|
0.8%
|
1.7%
|
General and
administrative expenses
|
|
|
|
|
Percent of total
segment operating net revenues
|
8.1%
|
8.2%
|
7.7%
|
8.1%
|
Per
treatment
|
$
27.36
|
$
27.37
|
$
25.78
|
$
27.23
|
Per treatment
(decrease) increase from previous quarter
|
—
|
1.5%
|
(4.5%)
|
|
Per treatment increase
(decrease) from previous year
|
6.1%
|
1.4%
|
(4.0%)
|
(0.3%)
|
Accounts
receivable
|
|
|
|
|
Net
receivables
|
$
1,306
|
$
1,273
|
$
1,243
|
|
DSO
|
52
|
52
|
52
|
|
Provision for
uncollectible accounts as a percentage of revenues
|
4.5%
|
4.5%
|
4.5%
|
4.5%
|
|
|
|
|
|
6. DMG Business
Metrics:
|
|
|
|
|
Capitated
membership
|
|
|
|
|
Total
members
|
749,900
|
761,400
|
808,300
|
|
Total member
months
|
|
|
|
|
Medicare
|
914,000
|
957,400
|
950,100
|
2,846,700
|
Commercial
|
1,026,300
|
1,037,500
|
1,120,600
|
3,112,400
|
Medicaid
|
326,500
|
333,000
|
374,600
|
1,002,000
|
Total member
months
|
2,266,800
|
2,327,900
|
2,445,300
|
6,961,100
|
Capitated
revenues by sources
|
|
|
|
|
Senior
revenues
|
$
634
|
$
638
|
$
641
|
$
1,920
|
Commercial
revenues
|
165
|
189
|
181
|
525
|
Medicaid
revenues
|
47
|
47
|
85
|
141
|
Total capitated
revenues
|
$
846
|
$
874
|
$
907
|
$
2,586
|
DAVITA
INC.
SUPPLEMENTAL
FINANCIAL DATA—continued
(unaudited)
(dollars in
millions, except for per share and per treatment
data)
|
|
|
Three months
ended
|
Nine months
ended
September 30,
2016
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
6. DMG Business
Metrics: (continued)
|
|
|
|
|
Other
|
|
|
|
|
Total care dollars
under management(1)
|
$
1,287
|
$
1,323
|
$
1,260
|
$
3,877
|
Ratio of operating
(loss) income to total care dollars under
management(1)
|
2.6%
|
(7.7%)
|
6.6%
|
(3.2%)
|
Ratio of adjusted
operating income to total care dollars under
management(1)(6)
|
2.6%
|
3.3%
|
6.6%
|
2.9%
|
Full time
clinicians
|
1,803
|
1,760
|
1,313
|
|
IPA primary care
physicians
|
2,570
|
2,518
|
2,935
|
|
|
|
|
|
|
7. Cash
Flow:
|
|
|
|
|
Operating cash
flow
|
$
535.6
|
$
516.6
|
$
679.0
|
$
1,481.3
|
Operating cash flow,
last twelve months
|
$
1,917.9
|
$
2,061.3
|
$
1,050.5
|
|
Free cash
flow(1)
|
$
386.3
|
$
391.3
|
$
556.6
|
$
1,082.9
|
Free cash flow, last
twelve months(1)
|
$
1,339.1
|
$
1,509.4
|
$
602.3
|
|
Capital
expenditures:
|
|
|
|
|
Routine
maintenance/IT/other
|
$
98.5
|
$
81.5
|
$
75.5
|
$
253.3
|
Development and
relocations
|
$
118.1
|
$
103.9
|
$
95.8
|
$
321.9
|
Acquisition
expenditures
|
$
24.0
|
$
68.2
|
$
45.7
|
$
497.3
|
|
|
|
|
|
8. Debt and
Capital Structure:
|
|
|
|
|
Total
debt(3)
|
$
9,209
|
$
9,189
|
$
9,211
|
|
Net debt, net of cash
and cash equivalents(3)
|
$
8,295
|
$
7,906
|
$
8,164
|
|
Leverage ratio (see
calculation on page 15)
|
2.98x
|
2.93x
|
2.93x
|
|
Overall weighted
average effective interest rate during the quarter
|
4.42%
|
4.42%
|
4.40%
|
|
Overall weighted
average effective interest rate at end of the quarter
|
4.49%
|
4.43%
|
4.40%
|
|
Weighted average
effective interest rate on the senior secured credit facilities at
end of the quarter
|
3.61%
|
3.52%
|
3.50%
|
|
Fixed and economically
fixed interest rates as a percentage of our total debt
|
53%(4)
|
60%(4)
|
61%(4)
|
|
Fixed and economically
fixed interest rates, including our interest rate cap agreements,
as a percentage of our total debt
|
91%(4)
|
90%(4)
|
90%(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These are non-GAAP
financial measures. For a reconciliation of these non-GAAP
financial measures to their most comparable measure calculated and
presented in accordance with GAAP, and for a definition of adjusted
amounts, see attached reconciliation schedules.
|
|
|
(2)
|
Consolidated
percentages of revenues are comprised of the dialysis and related
lab services business, DMG's business and other ancillary services
and strategic initiatives. General and administrative expenses
includes certain corporate support and long-term incentive
compensation, as well as an adjustment to reduce a receivable
associated with the DMG acquisition escrow provision relating to an
income tax item for the three and nine months ended September 30,
2016 and the estimated DMG Nevada hospice accrual for the nine
months ended September 30, 2016.
|
|
|
(3)
|
The reported balance
sheet amounts at September 30, 2016, June 30, 2016, and September
30, 2015, excludes $83.9 million, $87.9 million and $68.7 million,
respectively, of a debt discount associated with our Term Loan A,
Term Loan B and senior notes, and other deferred financing
costs.
|
|
|
(4)
|
The Term Loan B is
subject to a LIBOR floor of 0.75%. Because actual LIBOR, for all
periods presented above, was lower than this embedded LIBOR floor,
the interest rate on the Term Loan B is set at its respective
floor. At such time as the actual LIBOR-based variable component of
our interest rate exceeds 0.75% on the Term Loan B, we will then be
subject to LIBOR-based interest rate volatility on the LIBOR
variable component of our interest rate on all of the Term Loan B.
However, we are limited to a maximum rate of 3.50% on the
outstanding principal debt on the Term Loan B as a result of
interest rate cap agreements. The Term Loan A bears interest at
LIBOR plus an interest margin of 1.75%. We are limited to a maximum
rate of 3.50% on $78.8 million of the Term Loan A as a result of
interest rate cap agreements. In addition, the uncapped portion of
the Term Loan A, which is subject to the variability of LIBOR, is
$803 million.
|
|
|
(5)
|
Adjusted operating
income margin is a calculation of adjusted operating income divided
by consolidated net revenues.
|
|
|
(6)
|
Ratio of adjusted
operating income to total care dollars under management is a
calculation of adjusted operating income divided by total care
dollars under management.
|
DAVITA
INC.
|
SUPPLEMENTAL
FINANCIAL DATA—continued
|
(unaudited)
|
(dollars in
thousands)
|
|
Note 1:
Calculation of the Leverage Ratio
|
|
Under the senior
secured credit facilities (Credit Agreement), the leverage ratio is
defined as all funded debt plus the face amount of all letters of
credit issued, minus cash and cash equivalents, including
short-term investments, divided by "Consolidated EBITDA". The
leverage ratio determines the interest rate margin payable by the
Company for its Term Loan A and revolving line of credit under the
Credit Agreement by establishing the margin over the base interest
rate (LIBOR) that is applicable. The following leverage ratio was
calculated using "Consolidated EBITDA" as defined in the Credit
Agreement. The calculation below is based on the last twelve months
of "Consolidated EBITDA", pro forma for routine acquisitions that
occurred during the period. The Company's management believes the
presentation of "Consolidated EBITDA" is useful to users to enhance
their understanding of the Company's leverage ratio under its
Credit Agreement. The leverage ratio calculated by the Company is a
non-GAAP measure and should not be considered a substitute for debt
to net income attributable to DaVita Inc., net income attributable
to DaVita Inc. or total debt as determined in accordance with
United States generally accepted accounting principles
(GAAP). The Company's calculation of its leverage ratio might
not be calculated in the same manner as, and thus might not be
comparable to, similarly titled measures by other
companies.
|
|
|
|
Rolling
twelve
months
ended
September 30,
2016
|
Net income
attributable to DaVita Inc
|
$
716,148
|
Income
taxes
|
477,844
|
Interest
expense
|
384,188
|
Depreciation and
amortization
|
694,805
|
Goodwill and other
intangible asset impairment charges
|
459,169
|
Noncontrolling
interests and equity investment income, net
|
180,858
|
Stock-settled
stock-based compensation
|
43,212
|
Other
|
(321,793)
|
"Consolidated
EBITDA"
|
$
2,634,431
|
|
|
|
September 30,
2016
|
Total debt, excluding
debt discount and other deferred financing costs of $83.9
million
|
$
9,208,653
|
Letters of credit
issued
|
92,930
|
|
9,301,583
|
Less: Cash and cash
equivalents including short-term investments (excluding DMG's
physician owned entities cash)
|
(1,457,404)
|
Consolidated net
debt
|
$
7,844,179
|
Last twelve months
"Consolidated EBITDA"
|
$
2,634,431
|
Leverage
ratio
|
2.98x
|
|
In accordance with
the Credit Agreement, the Company's leverage ratio cannot exceed
4.50 to 1.00 as of September 30, 2016. At that date the Company's
leverage ratio did not exceed 4.50 to 1.00.
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands except for per share data)
|
|
1.
Adjusted net income and adjusted diluted net income per share
attributable to DaVita Inc. excluding a gain on the APAC JV
ownership changes, goodwill impairment charges, a gain on the sale
of a portion of our Tandigm ownership interest, a loss on the sale
of our DMG Arizona business, an adjustment to reduce a receivable
associated with the DMG acquisition escrow provision relating to an
income tax item, estimated accruals for our DMG Nevada hospice
business, debt redemption charges, a settlement charge, and a
subsequent tax adjustment related to the settlement charge, net of
related tax.
|
|
We believe that
adjusted net income and adjusted diluted net income per share
attributable to DaVita Inc., excluding a gain on the APAC JV
ownership changes, goodwill impairment charges, a gain on the sale
of a portion of our Tandigm ownership interest, a loss on the sale
of our DMG Arizona business, an adjustment to reduce a receivable
associated with the DMG acquisition escrow provision relating to an
income tax item, estimated accruals for damages and liabilities
associated with our DMG Nevada hospice business, debt redemption
charges and a settlement charge related to a private civil suit,
and a subsequent tax adjustment related to the settlement charge,
net of related tax, enhances a user's understanding of our normal
net income attributable to DaVita Inc. and diluted net income per
share attributable to DaVita Inc. for these periods by providing a
measure that is meaningful because it excludes certain items which
we do not believe are indicative of our ordinary results, and
accordingly, is comparable to prior periods and indicative of
normal net income attributable to DaVita Inc. and diluted net
income per share attributable to DaVita Inc. These measures are not
measures of financial performance under GAAP and should not be
considered as an alternative to net income attributable to DaVita
Inc. and diluted net income per share attributable to DaVita
Inc.
|
|
|
|
|
Adjusted net
income attributable to DaVita Inc. excluding a gain on the APAC JV
ownership changes, goodwill impairment charges, a gain on the sale
of a portion of our Tandigm ownership interest, a loss on
the sale of our DMG Arizona business, estimated accruals for
damages and liabilities associated with our DMG
Nevada hospice business, an adjustment to reduce a receivable
associated with the DMG acquisition escrow provision relating to an
income tax item, debt redemption charges, a settlement charge
related to a private civil suit, and a subsequent tax adjustment
related to the settlement charge, net of related
tax:
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
September
30,
2016
|
September
30,
2015
|
Net income
attributable to DaVita Inc
|
$
571,332
|
$
53,382
|
$
215,872
|
$
722,148
|
$
275,732
|
Add:
|
|
|
|
|
|
Gain on APAC JV
ownership changes
|
(374,374)
|
─
|
─
|
(374,374)
|
─
|
Goodwill impairment
charges
|
─
|
176,000
|
─
|
253,000
|
4,065
|
Gain on sale of
Tandigm ownership interest
|
─
|
(40,280)
|
─
|
(40,280)
|
─
|
Loss on sale of DMG
Arizona
|
─
|
10,489
|
─
|
10,489
|
─
|
Reduction in a
receivable associated with the DMG acquisition escrow
provision
|
27,040
|
─
|
─
|
27,040
|
─
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16,000
|
─
|
Debt redemption
charges
|
─
|
─
|
─
|
─
|
48,072
|
Settlement
charge
|
─
|
─
|
─
|
─
|
495,000
|
Tax adjustment related
to the settlement of a private civil suit
|
─
|
─
|
─
|
─
|
7,501
|
Less: Related
income tax
|
(27,040)
|
10,414
|
─
|
(16,626)
|
(216,639)
|
|
$
196,958
|
$
210,005
|
$
215,872
|
$
597,397
|
$
613,731
|
DAVITA
INC
RECONCILIATIONS
FOR NON-GAAP MEASURES
(unaudited)
(dollars in
thousands except for per share data)
|
|
|
|
Adjusted diluted
net income per share attributable to DaVita Inc. excluding a gain
on the APAC JV ownership changes, goodwill impairment charges, a
gain on the sale of a portion of our Tandigm ownership
interest, a loss on the sale of our DMG Arizona business, an
adjustment to reduce a receivable associated with the DMG
acquisition escrow provision relating to an income tax item,
estimated accruals for damages and liabilities associated with our
DMG Nevada hospice business, debt redemption charges, a settlement
charge related to a private civil suit and a subsequent tax
adjustment related to the settlement charge, net of related
tax:
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
September
30,
2016
|
September
30,
2015
|
Diluted net income
per share attributable to DaVita Inc
|
$
2.76
|
$
0.26
|
$
1.00
|
$
3.48
|
$
1.27
|
Add:
|
|
|
|
|
|
Gain on APAC JV
ownership changes
|
(1.81)
|
─
|
─
|
(1.81)
|
─
|
Goodwill and other
intangible asset impairment charges
|
─
|
0.84
|
─
|
1.22
|
0.02
|
Gain on sale of
Tandigm ownership interest
|
─
|
(0.19)
|
─
|
(0.19)
|
─
|
Loss on sale of DMG
Arizona
|
─
|
0.05
|
─
|
0.05
|
─
|
Reduction in a
receivable associated with the DMG acquisition escrow
provision
|
0.13
|
─
|
─
|
0.13
|
─
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
0.08
|
─
|
Debt redemption
charges
|
─
|
─
|
─
|
─
|
0.22
|
Settlement
charge
|
─
|
─
|
─
|
─
|
2.28
|
Tax adjustment related
to the settlement of a private civil suit
|
─
|
─
|
─
|
─
|
0.03
|
Tax effect of
adjustments
|
(0.13)
|
0.05
|
─
|
(0.08)
|
(1.00)
|
|
$
0.95
|
$
1.01
|
$
1.00
|
$
2.88
|
$
2.82
|
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES – (continued)
|
(unaudited)
|
(dollars in
thousands except for per share data)
|
|
In addition, we have
excluded amortization of intangible assets associated with
acquisitions from our adjusted net income attributable to DaVita
Inc., net of tax, and from our adjusted diluted net income per
share attributable to DaVita Inc. as we believe this presentation
enhances a user's understanding of our operating results for these
periods by providing a different reflection of the Company's
operating performance since it excludes the amortization of
intangible assets that relate to the fair value measurement of
acquired intangible assets associated with our acquisitions, and
accordingly is indicative of consistent adjusted net income
excluding amortization of acquired intangibles, attributable to
DaVita Inc. and diluted net income per share attributable to DaVita
Inc. These measures are not measures of financial performance under
GAAP and should not be considered as an alternative to net income
attributable to DaVita Inc. and diluted net income per share
attributable to DaVita Inc.
|
|
|
|
|
Adjusted net
income and adjusted diluted net income per share attributable to
DaVita Inc., further adjusted to exclude the amortization of
intangible assets associated with acquisitions, net of
tax:
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
September
30,
2016
|
September
30,
2015
|
Adjusted net income
attributable to DaVita Inc
|
$
196,958
|
$
210,005
|
$
215,872
|
$
597,397
|
$
613,731
|
Add:
|
|
|
|
|
|
Amortization of intangible assets associated with acquisitions for
the dialysis and ancillary operations
|
3,588
|
3,674
|
6,285
|
11,071
|
19,193
|
Amortization of intangible assets associated with acquisitions for
the DMG operations
|
39,303
|
40,296
|
35,911
|
115,677
|
107,627
|
Less: Related income
tax
|
(17,156)
|
(16,269)
|
(17,089)
|
(49,380)
|
(49,583)
|
|
$
222,693
|
$
237,706
|
$
240,979
|
$
674,765
|
$
690,968
|
|
|
|
|
|
|
Adjusted diluted net
income per share attributable to DaVita Inc
|
$
0.95
|
$
1.01
|
$
1.00
|
$
2.88
|
$
2.82
|
Add:
|
|
|
|
|
|
Amortization of
intangible assets per share associated with acquisitions for the
dialysis and ancillary operations
|
0.02
|
0.02
|
0.02
|
0.05
|
0.08
|
Amortization of
intangible assets per share associated with acquisitions for the
DMG operations
|
0.19
|
0.19
|
0.17
|
0.56
|
0.50
|
Tax effect of
adjustments
|
(0.08)
|
(0.08)
|
(0.08)
|
(0.24)
|
(0.22)
|
|
$
1.08
|
$
1.14
|
$
1.11
|
$
3.25
|
$
3.18
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
2.
Adjusted operating income.
|
|
Adjusted operating
income is defined as operating income before certain items we do
not believe are indicative of ordinary results, including a gain on
the APAC JV ownership changes, goodwill impairment charges, a gain
on the sale of a portion of our Tandigm ownership interest, a loss
on the sale of our DMG Arizona business, an adjustment to reduce a
receivable associated with the DMG acquisition escrow provision
relating to an income tax item, estimated accruals for damages and
liabilities associated with our DMG Nevada hospice business, and a
settlement charge related to a private civil suit.
|
|
We use adjusted
operating income as a measure to assess operating and financial
performance. We believe that this measure enhances a user's
understanding of the normal operating income and of our
consolidated enterprise and of our individual reportable
segments.
|
|
Adjusted operating
income is not a measure of financial performance computed in
accordance with GAAP and should not be considered in isolation nor
as a substitute for operating income, net income, cash flows from
operations, or other statement of operations or cash flow data
prepared in conformity with GAAP, or as a measure of profitability
or liquidity. In addition, the calculation of adjusted operating
income is susceptible to varying interpretations and calculations,
and the amounts presented may not be comparable to similarly titled
measures of other companies. Adjusted operating income may not be
indicative of historical operating results, and we do not intend
these calculations to be predictive of future results of operations
or cash flows.
|
|
|
|
|
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
September
30,
2016
|
September
30,
2015
|
Consolidated:
|
|
|
|
|
|
Operating
income
|
$
819,156
|
$
329,070
|
$
509,368
|
$
1,513,115
|
$
925,760
|
Add:
|
|
|
|
|
|
Gain on APAC JV
ownership changes
|
(374,374)
|
─
|
─
|
(374,374)
|
─
|
Goodwill impairment
charges
|
─
|
176,000
|
─
|
253,000
|
4,065
|
Gain on sale of
Tandigm ownership interest
|
─
|
(40,280)
|
─
|
(40,280)
|
─
|
Loss on sale of DMG
Arizona
|
─
|
10,489
|
─
|
10,489
|
─
|
Reduction in a
receivable associated with the DMG acquisition escrow
provision
|
27,040
|
─
|
─
|
27,040
|
─
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16,000
|
─
|
Settlement
charge
|
─
|
─
|
─
|
─
|
495,000
|
Adjusted operating
income
|
$
471,822
|
$
475,279
|
$
509,368
|
$
1,404,990
|
$
1,424,825
|
DAVITA
INC
RECONCILIATIONS
FOR NON-GAAP MEASURES
(unaudited)
(dollars in
thousands)
|
|
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
September
30,
2016
|
September
30,
2015
|
Kidney
Care:
|
|
|
|
|
|
U.S. dialysis and
related lab services:
|
|
|
|
|
|
Segment operating
income
|
$
452,187
|
$
449,190
|
$
461,899
|
$
1,341,432
|
$
795,254
|
Add: Settlement
charge
|
─
|
─
|
─
|
─
|
495,000
|
Adjusted operating
income
|
$
452,187
|
$
449,190
|
$
461,899
|
$
1,341,432
|
$
1,290,254
|
Other — Ancillary
services and strategic initiatives:
|
|
|
|
|
|
Segment operating
income
|
$
361,903
|
$
(12,644)
|
$
(30,118)
|
$
338,159
|
$
(70,152)
|
Add:
|
|
|
|
|
|
Gain on APAC JV
ownership changes
|
(374,374)
|
─
|
─
|
(374,374)
|
─
|
Goodwill impairment
charge
|
─
|
─
|
─
|
─
|
4,065
|
Adjusted operating
income
|
$
(12,471)
|
$
(12,644)
|
$
(30,118)
|
$
(36,215)
|
$
(66,087)
|
Corporate
administrative support:
|
|
|
|
|
|
Segment operating
income
|
$
(28,028)
|
$
(5,417)
|
$
(4,976)
|
$
(40,366)
|
$
(14,534)
|
Add: Reduction in a
receivable associated with the DMG acquisition escrow
provisionprovision
|
27,040
|
─
|
─
|
27,040
|
─
|
Adjusted operating
income
|
$
(988)
|
$
(5,417)
|
$
(4,976)
|
$
(13,326)
|
$
(14,534)
|
Adjusted operating
income
|
$
438,728
|
$
431,129
|
$
426,805
|
$
1,291,891
|
$
1,209,633
|
DMG:
|
|
|
|
|
|
Segment operating
income (loss)
|
$
33,094
|
$
(102,059)
|
$
82,563
|
$
(126,110)
|
$
215,192
|
Add:
|
|
|
|
|
|
Goodwill impairment
charges
|
─
|
176,000
|
─
|
253,000
|
─
|
Gain on sale of
Tandigm ownership interest
|
─
|
(40,280)
|
─
|
(40,280)
|
─
|
Loss on sale of DMG
Arizona
|
─
|
10,489
|
─
|
10,489
|
─
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16,000
|
─
|
Adjusted operating
income
|
$
33,094
|
$
44,150
|
$
82,563
|
$
113,099
|
$
215,192
|
Consolidated adjusted
operating income
|
$
471,822
|
$
475,279
|
$
509,368
|
$
1,404,990
|
$
1,424,825
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
3.
Effective income tax rates and adjusted effective income tax
rates.
|
|
We believe that
reporting the effective income tax rate attributable to DaVita Inc.
as well as the adjusted effective income tax rate attributable to
DaVita Inc., excluding a gain on the APAC JV ownership changes,
goodwill impairment charges, a gain on the sale of a portion of our
Tandigm ownership interest, a loss on the sale of our DMG Arizona
business, an adjustment to reduce a receivable associated with the
DMG acquisition escrow provision relating to an income tax item,
and estimated accruals for damages and liabilities associated with
our DMG Nevada hospice business, net of tax, enhances a user's
understanding of DaVita Inc.'s effective income tax rate and DaVita
Inc.'s adjusted effective income tax rate for the periods presented
because it excludes noncontrolling owners' income that primarily
relates to non-tax paying entities and certain non-deductible
charges which we do not believe are indicative of our ordinary
results, and, therefore, these adjusted measures are meaningful to
a user to fully understand the related income tax effects on DaVita
Inc.'s operating results. These are not measures under GAAP and
should not be considered as an alternative to the effective income
tax rate calculated in accordance with GAAP.
|
|
Effective income tax
rate as compared to the effective income tax rate attributable to
DaVita Inc. is as follows:
|
|
|
|
|
|
Three months
ended
|
Nine months
ended
September 30,
2016
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
Income before income
taxes
|
$
716,451
|
$
229,391
|
$
408,371
|
$
1,210,823
|
Income tax
expense
|
$
104,301
|
$
134,888
|
$
147,064
|
$
366,011
|
Effective income tax
rate
|
14.6%
|
58.8%
|
36.0%
|
30.2%
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
Nine months
ended
September 30,
2016
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
Income before income
taxes
|
$
716,451
|
$
229,391
|
$
408,371
|
$
1,210,823
|
Less:
Noncontrolling owners' income primarily attributable to non-tax
paying entities
|
(40,909)
|
(41,289)
|
(45,559)
|
(122,995)
|
Income before income
taxes attributable to DaVita Inc
|
$
675,542
|
$
188,102
|
$
362,812
|
$
1,087,828
|
|
|
|
|
|
Income tax
expense
|
$
104,301
|
$
134,888
|
$
147,064
|
$
366,011
|
Less: Income tax
attributable to noncontrolling interests
|
(91)
|
(168)
|
(124)
|
(331)
|
Income tax expense
attributable to DaVita Inc
|
$
104,210
|
$
134,720
|
$
146,940
|
$
365,680
|
|
|
|
|
|
Effective income tax
rate attributable to DaVita Inc
|
15.4%
|
71.6%
|
40.5%
|
33.6%
|
DAVITA
INC
RECONCILIATIONS
FOR NON-GAAP MEASURES
(unaudited)
(dollars in
thousands)
|
|
|
|
Adjusted effective
income tax rates attributable to DaVita Inc. excluding a gain on
the APAC JV ownership changes, goodwill impairment charges, a gain
on the sale of a portion of our Tandigm ownership interest, a loss
on the sale of our DMG Arizona business, an adjustment to reduce a
receivable associated with the DMG acquisition escrow provision
relating to an income tax item, and estimated accruals for
damages and liabilities associated with our DMG Nevada hospice
business, net of tax:
|
Three months
ended
|
Nine months
ended
September 30,
2016
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
Income before income
taxes
|
$
716,451
|
$
229,391
|
$
408,371
|
$
1,210,823
|
Add:
|
|
|
|
|
Goodwill impairment
charges
|
─
|
176,000
|
─
|
253,000
|
Loss on sale of DMG
Arizona
|
─
|
10,489
|
─
|
10,489
|
Reduction in a
receivable associated with the DMG acquisition escrow
provision
|
27,040
|
─
|
─
|
27,040
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16,000
|
Less:
|
|
|
|
|
Gain on APAC JV
ownership changes
|
(374,374)
|
─
|
─
|
(374,374)
|
Gain on sale of
Tandigm ownership interest
|
─
|
(40,280)
|
─
|
(40,280)
|
Noncontrolling owners'
income primarily attributable to non-tax paying entities
|
(40,909)
|
(41,289)
|
(45,559)
|
(122,995)
|
Adjusted income
before income taxes attributable to DaVita Inc
|
$
328,208
|
$
334,311
|
$
362,812
|
$
979,703
|
|
|
|
|
|
Income tax
expense
|
$
104,301
|
$
134,888
|
$
147,064
|
$
366,011
|
Add:
|
|
|
|
|
Income tax on sale of
DMG Arizona
|
─
|
4,490
|
─
|
4,490
|
Income tax adjustment
attributable to a reduction in a receivable associated with the DMG
acquisition escrow provision
|
27,040
|
─
|
─
|
27,040
|
Less:
|
|
|
|
|
Income tax on sale of
Tandigm ownership interest
|
─
|
(14,904)
|
─
|
(14,904)
|
Income tax
attributable to noncontrolling interests
|
(91)
|
(168)
|
(124)
|
(331)
|
Adjusted income tax
attributable to DaVita Inc
|
$
131,250
|
$
124,306
|
$
146,940
|
$
382,306
|
Adjusted effective
income tax rate attributable to DaVita Inc
|
40.0%
|
37.2%
|
40.5%
|
39.0%
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
4.
Free cash flow.
|
|
Free cash flow
represents net cash provided by operating activities less
distributions to noncontrolling interests and capital expenditures
for routine maintenance and information technology. We believe free
cash flow is a useful adjunct to cash flow from operating
activities and other measurements under GAAP, since free cash flow
is a meaningful measure of our ability to fund acquisitions and
development activities and meet our debt service requirements. In
addition, free cash flow excluding distributions to noncontrolling
interests provides a user with an understanding of free cash flows
that are attributable to DaVita Inc. Free cash flow is not a
measure of financial performance under GAAP and should not be
considered as an alternative to cash flows from operating,
investing or financing activities, as an indicator of cash flows or
as a measure of liquidity.
|
|
Three months
ended
|
Nine months
ended
September 30,
2016
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
Cash provided by
operating activities
|
$
535,623
|
$
516,637
|
$
678,996
|
$
1,481,262
|
Less:
Distributions to noncontrolling interests
|
(50,870)
|
(43,744)
|
(46,898)
|
(145,023)
|
Cash provided by
operating activities attributable to DaVita Inc
|
484,753
|
472,893
|
632,098
|
1,336,239
|
Less: Expenditures
for routine maintenance and information technology
|
(98,464)
|
(81,546)
|
(75,543)
|
(253,298)
|
Free cash
flow
|
$
386,289
|
$
391,347
|
$
556,555
|
$
1,082,941
|
|
|
|
|
|
|
|
|
Rolling 12-Month
Period
|
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
Cash provided by
operating activities
|
|
$
1,917,935
|
$
2,061,308
|
$
1,050,536
|
Less:
Distributions to noncontrolling interests
|
|
(193,720)
|
(189,748)
|
(170,134)
|
Cash provided by
operating activities attributable to DaVita Inc
|
|
1,724,215
|
1,871,560
|
880,402
|
Less: Expenditures
for routine maintenance and information technology
|
|
(385,067)
|
(362,146)
|
(278,121)
|
Free cash
flow
|
|
$
1,339,148
|
$
1,509,414
|
$
602,281
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
5.
Total care dollars under management.
|
|
In California, as a
result of our managed care administrative services agreements with
hospitals and health plans, DMG does not assume the direct
financial risk for institutional (hospital) services in most cases,
but is responsible for managing the care dollars associated with
both the professional (physician) and institutional services being
provided for the Per Member Per Month (PMPM) fee attributable to
both professional and institutional services. In cases where DMG
does not assume the direct financial risk, DMG recognizes the
surplus of institutional revenue less institutional expense as DMG
net revenue recorded as capitated revenues. In addition to revenues
recognized for financial reporting purposes, DMG measures its total
care dollars under management, which includes the PMPM fee payable
to third parties for institutional services where DMG manages the
care provided to its members by the hospitals and other
institutions, which are not included in GAAP revenues. DMG uses
total care dollars under management as a supplement to GAAP
revenues as it allows DMG to measure profit margins on a comparable
basis across both the global capitation model (where DMG assumes
the full financial risk for all services, including institutional
services) and the risk sharing models (where DMG operates under
managed care administrative services agreements where DMG does not
assume the full risk). DMG believes that presenting amounts in this
manner is useful because it presents its operations on a unified
basis without the complication caused by models that DMG has
adopted in its California market as a result of various regulations
related to the assumption of institutional risk. Total care dollars
under management is not a measure of financial performance computed
in accordance with GAAP and should not be considered in isolation
or as a substitute for revenues calculated in accordance with GAAP.
Total care dollars under management includes PMPM payments received
from third parties that are recorded net of expenses in our
accounting records. The following table reconciles total care
dollars under management to medical revenues for the periods
indicated.
|
|
|
|
|
|
Three months
ended
|
Nine months
ended
September 30,
2016
|
|
September
30,
2016
|
June
30,
2016
|
September
30,
2015
|
Medical
revenues
|
$
999,375
|
$ 1,030,470
|
$
985,483
|
$ 3,004,172
|
Less: Risk share
revenue, net
|
(26,125)
|
(50,369)
|
(70,752)
|
(104,895)
|
Add: Institutional
capitation amounts
|
313,367
|
343,077
|
345,550
|
978,167
|
Total care dollars
under management
|
$
1,286,617
|
$
1,323,178
|
$
1,260,281
|
$
3,877,444
|
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SOURCE DaVita Inc.