EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

Contact:    LeAnne Zumwalt
   Investor Relations
   DaVita Inc.
   (650) 696-8910

DAVITA 2nd QUARTER 2009 RESULTS

El Segundo, California, August 4, 2009 – DaVita Inc. (NYSE: DVA) today announced results for the quarter ended June 30, 2009. Net income attributable to DaVita Inc. for the three and six months ended June 30, 2009 was $105.8 million and $202.0 million, or $1.02 per share and $1.94 per share, respectively. This compares to net income attributable to DaVita Inc. for the three and six months ended June 30, 2008 of $95.0 million and $181.9 million, or $0.90 per share and $1.70 per share, respectively.

Financial and operating highlights include:

 

   

Cash Flow: For the rolling 12 months ended June 30, 2009 operating cash flow was $705 million and free cash flow was $527 million. For the three months ended June 30, 2009 operating cash flow was $212 million and free cash flow was $174 million.

 

   

Operating Income: Operating income for the three and six months ended June 30, 2009 was $236 million and $457 million, respectively, as compared to $218 million and $424 million, respectively, for the same periods of 2008.

 

   

Volume: Total treatments for the second quarter of 2009 were 4,228,179, or 54,207 treatments per day, representing a per day increase of 5.2% over the second quarter of 2008. Non-acquired treatment growth in the quarter was 4.5% over the prior year’s second quarter.

 

   

Effective Tax Rate: Our effective tax rate was 37.1% and 37.2% for the three and six months ended June 30, 2009, respectively. This effective tax rate is impacted by the amount of third party owners’ income attributable to non-tax paying entities. The effective tax rate attributable to DaVita Inc. was 40.0% and 40.1% for the three and six months ended June 30, 2009 which was in the range of our previously stated guidance. Our effective tax rate for 2009 is still projected to be in the range of 37.0% to 38.0% and our 2009 effective tax rate attributable to DaVita Inc. is still projected to be in a range of 39.5% to 40.5%.

 

   

Center Activity: As of June 30, 2009, we operated or provided administrative services at 1,493 outpatient dialysis centers serving approximately 116,000 patients, of which 1,464 centers are consolidated in our financial statements. During the second quarter of 2009, we acquired two centers, opened 23 new centers, merged five centers and sold two centers.

 

1


Outlook

We are narrowing our operating income guidance for 2009 to be in the range of $900-$930 million. Our operating cash flow guidance remains unchanged at a range of $550-$600 million. These projections and the underlying assumptions involve significant risks and uncertainties, including those described below and actual results may vary significantly from these current projections.

DaVita will be holding a conference call to discuss its results for the second quarter ended June 30, 2009 on August 4, 2009 at 5:00 p.m. Eastern Time. The dial in number is (800) 399-4406. A replay of the conference call will be available on DaVita’s official web page, www.davita.com, for the following 30 days.

This release contains forward-looking statements, including statements related to our 2009 operating results and 2009 expected effective tax rate and the expected effective tax rate attributable to DaVita Inc. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, competition, accounting estimates and the risk factors set forth in our SEC filings, including our Form 10-K for the year ended December 31, 2008 and subsequent quarterly reports on Form 10-Q. The forward-looking statements should be considered in light of these risks and uncertainties.

These risks and uncertainties include those relating to:

 

   

the concentration of profits generated from commercial payor plans,

 

   

continued downward pressure on average realized payment rates from commercial payors, which may result in the loss of revenue or patients,

 

   

a reduction in the number of patients under higher-paying commercial plans,

 

   

a reduction in government payment rates or the structure of payments under the Medicare ESRD Program which result in lower reimbursement for services we provide to Medicare patients,

 

   

changes in pharmaceutical or anemia management practice patterns payment policies, or pharmaceutical pricing,

 

   

our ability to maintain contracts with physician medical directors,

 

   

legal compliance risks, including our continued compliance with complex government regulations and compliance with the corporate integrity agreement applicable to the dialysis centers acquired from Gambro Healthcare and assumed in connection with such acquisition, and

 

   

the resolution of ongoing investigations by various federal and state governmental agencies.

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.

 

2


DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars in thousands, except per share data)

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2009     2008     2009     2008  

Net operating revenues

   $ 1,519,041      $ 1,407,304      $ 2,966,681      $ 2,752,028   

Operating expenses and charges:

        

Patient care costs

     1,051,879        973,286        2,057,765        1,903,495   

General and administrative

     132,166        125,199        259,439        245,964   

Depreciation and amortization

     58,185        52,892        115,308        105,703   

Provision for uncollectible accounts

     41,233        37,497        77,969        72,128   

Equity investment (income) loss

     (376     (4     (358     523   
                                

Total operating expenses and charges

     1,283,087        1,188,870        2,510,123        2,327,813   
                                

Operating income

     235,954        218,434        456,558        424,215   

Debt expense

     (47,088     (55,320     (95,389     (114,386

Other income

     1,273        2,987        2,027        7,850   
                                

Income before income taxes

     190,139        166,101        363,196        317,679   

Income tax expense

     70,507        58,273        135,290        113,843   
                                

Net income

     119,632        107,828        227,906        203,836   

Less: Net income attributable to noncontrolling interests

     (13,813     (12,877     (25,876     (21,951
                                

Net income attributable to DaVita Inc.

   $ 105,819      $ 94,951      $ 202,030      $ 181,885   
                                

Earnings per share:

        

Basic earnings per share attributable to DaVita Inc.

   $ 1.02      $ 0.91      $ 1.95      $ 1.71   
                                

Diluted earnings per share attributable to DaVita Inc.

   $ 1.02      $ 0.90      $ 1.94      $ 1.70   
                                

Weighted average shares for earnings per share:

        

Basic

     103,705,683        104,814,817        103,791,579        106,082,024   
                                

Diluted

     103,925,843        105,617,173        104,166,964        106,927,556   
                                

 

3


DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

 

     Six months ended
June 30,
 
     2009     2008  

Cash flows from operating activities:

    

Net income

   $ 227,906      $ 203,836   

Adjustments to reconcile net income to cash provided by operating activities:

    

Depreciation and amortization

     115,308        105,703   

Stock-based compensation expense

     22,412        19,216   

Tax benefits from stock award exercises

     9,974        5,264   

Excess tax benefits from stock award exercises

     (7,591     (3,055

Deferred income taxes

     30,006        17,171   

Equity investment (income) loss

     (358     523   

Loss on disposal of assets

     4,813        4,462   

Non-cash debt and non-cash rent charges

     6,567        6,953   

Changes in operating assets and liabilities, other than from acquisitions and divestitures:

    

Accounts receivable

     (54,073     (119,996

Inventories

     19,044        (301

Other receivables and other current assets

     4,026        (12,493

Other long-term assets

     3,324        (10,344

Accounts payable

     (51,960     (18,255

Accrued compensation and benefits

     37,077        4,091   

Other current liabilities

     (42,359     58,078   

Income taxes

     35,535        (10,074

Other long-term liabilities

     (13,019     4,178   
                

Net cash provided by operating activities

     346,632        254,957   
                

Cash flows from investing activities:

    

Additions of property and equipment, net

     (138,205     (145,007

Acquisitions

     (43,314     (46,763

Proceeds from asset sales

     5,784        125   

Purchase of investments available for sale

     (1,429     (1,352

Purchase of investments held-to-maturity

     (15,193     (15,777

Proceeds from sale of investments available for sale

     16,537        5,321   

Proceeds from maturities of investments held-to-maturity

     15,620        15,462   

Distributions received on equity investments

     88        513   

Purchase of intangible assets and other

     (260     (65
                

Net cash used in investing activities

     (160,372     (187,543
                

Cash flows from financing activities:

    

Borrowings

     9,114,319        8,397,822   

Payments on long-term debt

     (9,136,951     (8,397,476

Deferred financing costs

     (42     (130

Purchase of treasury stock

     (32,016     (169,673

Excess tax benefits from stock award exercises

     7,591        3,055   

Stock award exercises and other share issuances, net

     16,691        12,770   

Distributions to noncontrolling interests

     (29,895     (29,423

Contributions from noncontrolling interests

     6,504        10,048   

Proceeds from sales of additional noncontrolling interests

     5,475        8,422   

Purchases from noncontrolling interests

     (4,704     (22,889
                

Net cash used in financing activities

     (53,028     (187,474
                

Net increase (decrease) in cash and cash equivalents

     133,232        (120,060

Cash and cash equivalents at beginning of period

     410,881        447,046   
                

Cash and cash equivalents at end of period

   $ 544,113      $ 326,986   
                

 

4


DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except per share data)

 

ASSETS    June 30,
2009
    December 31,
2008
 

Cash and cash equivalents

   $ 544,113      $ 410,881   

Short-term investments

     19,109        35,532   

Accounts receivable, less allowance of $222,067 and $211,222

     1,128,330        1,075,457   

Inventories

     65,354        84,174   

Other receivables

     226,931        239,165   

Other current assets

     37,851        33,761   

Income tax receivable

     —          32,130   

Deferred income taxes

     211,709        217,196   
                

Total current assets

     2,233,397        2,128,296   

Property and equipment, net

     1,075,349        1,048,075   

Amortizable intangibles, net

     148,923        160,521   

Investments in third-party dialysis businesses

     24,144        19,274   

Long-term investments

     6,827        5,656   

Other long-term assets

     44,104        47,330   

Goodwill

     3,908,290        3,876,931   
                
   $ 7,441,034      $ 7,286,083   
                
LIABILITIES AND EQUITY     

Accounts payable

   $ 230,576      $ 282,883   

Other liabilities

     453,048        495,239   

Accrued compensation and benefits

     329,517        312,216   

Current portion of long-term debt

     92,290        72,725   

Income taxes payable

     3,409        —     
                

Total current liabilities

     1,108,840        1,163,063   

Long-term debt

     3,579,417        3,622,421   

Other long-term liabilities

     100,209        101,442   

Alliance and product supply agreement, net

     33,312        35,977   

Deferred income taxes

     274,303        244,884   
                

Total liabilities

     5,096,081        5,167,787   

Commitments and contingencies

    

Noncontrolling interests subject to put provisions

     288,458        291,397   

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; 134,862,283 shares issued; 103,989,672 and 103,753,673 shares outstanding)

     135        135   

Additional paid-in capital

     620,259        584,358   

Retained earnings

     2,091,480        1,889,450   

Treasury stock, at cost (30,872,611 and 31,108,610 shares)

     (701,783     (691,857

Accumulated other comprehensive loss

     (10,033     (14,339
                

Total DaVita Inc. shareholders’ equity

     2,000,058        1,767,747   

Noncontrolling interests not subject to put provisions

     56,437        59,152   
                

Total equity

     2,056,495        1,826,899   
                
   $ 7,441,034      $ 7,286,083   
                

 

5


DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

(dollars in millions, except for per share and per treatment data)

 

     Three months ended     Six months
ended
June 30, 2009
 
     June 30,
2009
    March 31,
2009
    June 30,
2008
   
1. Consolidated Financial Results:         

Revenues

   $ 1,519      $ 1,448      $ 1,407      $ 2,967   

Operating income

   $ 236.0      $ 220.6      $ 218.4      $ 456.6   

Operating income margin

     15.5     15.2     15.5     15.4

Net income attributable to DaVita Inc.

   $ 105.8      $ 96.2      $ 95.0      $ 202.0   

Diluted earnings per share attributable to DaVita Inc.

   $ 1.02      $ 0.92      $ 0.90      $ 1.94   

2. Consolidated Business Metrics:

        

Expenses

        

Patient care costs as a percent of consolidated revenue(3)

     69.2     69.5     69.2     69.4

General and administrative expenses as a percent of consolidated revenue(3)

     8.7     8.8     8.9     8.7

Bad debt expense as a percent of consolidated revenue

     2.7     2.5     2.7     2.6

Consolidated effective tax rate attributable to DaVita
Inc.
(1)

     40.0     40.2     38.0     40.1

3. Segment Financial Results: (dollar amounts rounded to nearest million)

        

Dialysis and related lab services

        

Revenues

   $ 1,441      $ 1,377      $ 1,351      $ 2,818   

Direct operating expenses

   $ 1,190      $ 1,140      $ 1,113      $ 2,330   
                                

Dialysis segment margin

   $ 251      $ 237      $ 238      $ 488   
                                

Other – Ancillary services and strategic initiatives

        

Revenues

   $ 78      $ 71      $ 56      $ 149   

Direct operating expenses

   $ 82        76        66      $ 158   
                                

Ancillary segment loss

   $ (4   $ (5   $ (10   $ (9
                                

Total segment margin

   $ 247      $ 232      $ 228      $ 479   

Reconciling items:

        

Stock-based compensation

     (11     (11     (10     (22
                                

Consolidated operating income

   $ 236      $ 221      $ 218      $ 457   
                                

 

6


DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

(dollars in millions, except for per share and per treatment data)

 

     Three months ended     Six months
ended
June 30, 2009
 
     June 30,
2009
    March 31,
2009
    June 30,
2008
   

4. Segment Business Metrics:

        

Dialysis and related lab services:

        

Volume

        

Treatments

     4,228,179        4,082,439        4,018,763        8,310,617   

Number of treatment days

     78.0        76.5        78.0        154.5   

Treatments per day

     54,207        53,365        51,523        53,790   

Per day year over year increase

     5.2     5.0     6.0     5.1

Non-acquired growth year over year

     4.5     4.0     4.5     4.3

Revenue

        

Dialysis and related lab services revenue per treatment

   $ 340.35      $ 336.73      $ 335.98      $ 338.58   

Per treatment increase from previous quarter

     1.1     1.2     2.1     —     

Per treatment increase (decrease) from previous year

     1.3     2.4     (0.6 %)      1.8

Percent of consolidated revenue

     94.9     95.1     96.0     95.0

Expenses

        

Patient care costs

        

Percent of segment revenue

     68.6     68.8     68.7     68.7

Per treatment

   $ 233.93      $ 231.88      $ 230.92      $ 232.92   

Per treatment increase from previous quarter

     0.9     1.6     2.1     —     

Per treatment increase from previous year

     1.3     2.5     1.2     1.9

General and administrative expenses

        

Percent of segment revenue

     7.3     7.4     7.3     7.4

Per treatment

   $ 24.92      $ 24.99      $ 24.64      $ 24.96   

Per treatment (decrease) increase from previous quarter

     (0.3 %)      (1.5 %)      4.9     —     

Per treatment increase (decrease) from previous year

     1.1     6.3     (7.2 %)      3.7

5. Cash Flow

        

Operating cash flow

   $ 212.4      $ 134.2      $ 147.0      $ 346.6   

Operating cash flow last twelve months

   $ 705.4      $ 640.0      $ 596.9     

Free cash flow(1)

   $ 173.6      $ 89.5      $ 114.4      $ 263.1   

Free cash flow, last twelve months(1)

   $ 526.8      $ 467.7      $ 445.1     

Capital expenditures:

        

Development and relocations

   $ 42.5      $ 42.0      $ 60.2      $ 84.5   

Routine maintenance/IT other

   $ 22.5      $ 31.2      $ 20.2      $ 53.7   

Acquisition expenditures

   $ 3.5      $ 39.8      $ 41.1      $ 43.3   

6. Accounts Receivable

        

Net receivables

   $ 1,128      $ 1,089      $ 1,047     

DSO

     70        70        70     

 

7


DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

(dollars in millions, except for per share and per treatment data)

 

     Three months ended     Six months
ended
June 30, 2009
     June 30,
2009
    March 31,
2009
    June 30,
2008
   

7. Debt and Capital Structure

        

Total debt(2)

   $ 3,669      $ 3,680      $ 3,705     

Net debt, net of cash( 2)

   $ 3,124      $ 3,275      $ 3,378     

Leverage ratio (see Note 1 on page 9)

     2.66x        2.83x        3.07x     

Overall effective weighted average interest rate during the quarter

     4.92     5.04     5.75  

Overall effective weighted average interest rate at end of the quarter

     4.87     5.04     5.68  

Effective weighted average interest rate on the Senior Secured Credit Facilities at end of the quarter

     3.02     3.36     4.59  

Economically fixed interest rates as a percentage of our total debt

     64     66     69  

Share repurchases

   $ —        $ 32.0      $ 137.2      $ 32.0

8. Clinical (quarterly averages)

        

Dialysis adequacy -% of patients with Kt/V > 1.2

     95     95     95  

90 day patients with Hb>=10 <=13

     88     87         

Patients with arteriovenous fistulas placed

     63     62     60  

 

(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, see attached reconciliation schedules.
(2) This is a non-GAAP financial measure. It excludes $3.1 million, for the quarter ended June 30, 2009, the unamortized balance of a debt premium associated with our senior notes that is not actually outstanding debt principal.
(3) Consolidated percentages of revenue and per treatment amounts are comprised of the dialysis and related lab services business, other ancillary services and strategic initiatives, as well as stock-based compensation expenses.

 

8


DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

(dollars in thousands)

 

Note 1: Calculation of the Leverage Ratio

Under the Company’s current 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, 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 the routine acquisitions that occurred during the period. The Company’s management believes the presentation of “Consolidated EBITDA” is useful to investors to enhance their understanding of the Company’s leverage ratio under its Credit Agreement.

 

     Rolling twelve
months ended
June 30, 2009
 

Net income attributable to DaVita Inc.

   $ 394,305   

Income taxes

     256,918   

Debt expense

     205,719   

Depreciation and amortization

     226,522   

Noncontrolling interests and equity investment loss, net

     49,408   

Other

     15,413   

Stock-based compensation expense

     44,429   
        

“Consolidated EBITDA”

   $ 1,192,714   
        
     June 30, 2009  

Total debt, excluding debt premium of $3.1 million

   $ 3,668,589   

Letters of credit issued

     48,401   
        
     3,716,990   

Less: cash and cash equivalents

     (544,113
        

Consolidated net debt

   $ 3,172,877   
        

Last twelve months “Consolidated EBITDA”

   $ 1,192,714   
        

Leverage ratio

     2.66x   
        

In accordance with the Company’s Credit Agreement, the Company’s leverage ratio cannot exceed 4.25 to 1.0 as of June 30, 2009. At that date the Company’s leverage ratio did not exceed 4.25 to 1.0.

 

9


DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

1. Effective Income Tax Rates

We believe that reporting the effective income tax rate attributable to DaVita Inc. enhances a user understanding of DaVita’s effective income tax rate for the periods presented because it excludes noncontrolling owners’ income that primarily relates to non-tax paying entities and accordingly is more comparable to prior periods presentations regarding DaVita’s effective income tax rate and is more meaningful to a user to fully understand the related income tax effects on DaVita Inc. operating results. This measure is not a measure of financial performance under United States generally accepted accounting principles and should not be considered as an alternative to the effective income tax rate.

Effective income tax rate as compared to the effective income tax rate attributable to DaVita Inc. is as follows:

 

     Three months ended     Six months
ended
June 30, 2009
 
     June 30,
2009
    March 31,
2009
    June 30,
2008
   

Income before income taxes

   $ 190,139      $ 173,057      $ 166,101      $ 363,196   
                                

Income tax expense

   $ 70,507      $ 64,783      $ 58,273      $ 135,290   
                                

Effective income tax rate

     37.1     37.4     35.1     37.2
                                
     Three months ended     Six months
ended
June 30, 2009
 
     June 30,
2009
    March 31,
2009
    June 30,
2008
   

Income before income taxes

   $ 190,139      $ 173,057      $ 166,101      $ 363,196   

Less: Noncontrolling owners’ income primarily attributable to non-tax paying entities

     (13,913     (12,156     (12,880     (26,069
                                

Income before income taxes attributable to DaVita Inc.

   $ 176,226      $ 160,901      $ 153,221      $ 337,127   
                                

Income tax expense

   $ 70,507      $ 64,783      $ 58,273      $ 135,290   

Less income tax attributable to noncontrolling interests

     (100     (93     (3     (193
                                

Income tax attributable to DaVita Inc.

   $ 70,407      $ 64,690      $ 58,270      $ 135,097   
                                

Effective income tax rate attributable to DaVita Inc.

     40.0     40.2     38.0     40.1
                                

 

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DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

2. Free cash flow

Free cash flow represents net cash provided by operating activities less income 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 United States generally accepted accounting principles, since free cash flow is a meaningful measure of our ability to fund acquisition and development activities and meet our debt service requirements. In addition, free cash flow excluding income distributions to noncontrolling interests also 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 United States generally accepted accounting principles 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     Six months
ended
June 30, 2009
 
     June 30,
2009
    March 31,
2009
    June 30,
2008
   

Cash provided by operating activities

   $ 212,383      $ 134,249      $ 147,045      $ 346,632   

Less: Income distributions to noncontrolling interests

     (16,328     (13,567     (12,535     (29,895
                                

Cash provided by operating activities attributable to DaVita Inc.

   $ 196,055      $ 120,682      $ 134,510      $ 316,737   

Less: Expenditures for routine maintenance and information technology

     (22,502     (31,155     (20,153     (53,657
                                

Free cash flow

   $ 173,553      $ 89,527      $ 114,357      $ 263,080   
                                

 

     Rolling 12-Month Period  
     June 30,
2009
    March 31,
2009
    June 30,
2008
 

Cash provided by operating activities

   $ 705,376      $ 640,038      $ 596,860   

Less: Income distributions to noncontrolling interests

     (58,242     (54,449     (52,222
                        

Cash provided by operating activities attributable to DaVita Inc.

   $ 647,134      $ 585,589      $ 544,638   

Less: Expenditures for routine maintenance and information technology

     (120,286     (117,937     (99,521
                        

Free cash flow

   $ 526,848      $ 467,652      $ 445,117   
                        

 

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