EX-99.1 2 d532507dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Contact: Jim Gustafson

Investor Relations

DaVita HealthCare Partners Inc.

(310) 536-2585

DaVita HealthCare Partners Inc. 1st Quarter 2013 Results

Denver, Colorado, May 7, 2013 – DaVita HealthCare Partners Inc. (NYSE: DVA) today announced results for the quarter ended March 31, 2013. Adjusted income from continuing operations attributable to DaVita HealthCare Partners Inc. for the three months ended March 31, 2013 was $196.9 million, or $1.84 per share, excluding a loss contingency reserve as further discussed below. Income from continuing operations including this item was $16.9 million, or $0.16 per share.

Adjusted income from continuing operations attributable to DaVita HealthCare Partners Inc. for the quarter ended March 31, 2012 was $143.8 million, or $1.50 per share, excluding after-tax transaction expenses associated with the acquisition of HCP of $3.6 million, or $0.04 per share. Income from continuing operations attributable to DaVita HealthCare Partners Inc. for the quarter ended March 31, 2012 including this item was $140.2 million, or $1.46 per share.

Financial and operating highlights include:

 

 

Cash Flow: For the rolling twelve months ended March 31, 2013, operating cash flow was $1,148 million and free cash flow was $764 million. For the three months ended March 31, 2013, operating cash flow was $379 million and free cash flow was $299 million. For a definition of free cash flow see Note 4 to the reconciliations of non-GAAP measures.

 

 

Operating Income: Adjusted operating income for the three months ended March 31, 2013 was $467 million, excluding a pre-tax loss contingency reserve of $300 million, as further discussed below. Operating income for the three months ended March 31, 2013 including this item was $167 million.

Adjusted operating income for the three months ended March 31, 2012 was $327 million, excluding transactions expenses associated with the acquisition of HCP of $6 million. Operating income for the three months ended March 31, 2012 including this item was $321 million.

 

 

Adjusted Diluted Income from Continuing Operations: Adjusted diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc. for the three months ended March 31, 2013, excluding a loss contingency reserve and amortization of intangible assets associated with acquisitions, which net of tax impacts totaled $221.1 million, was $2.07 per share.

Adjusted diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc. for the three months ended March 31, 2012, excluding transaction expenses associated with the acquisition of HCP and the amortization of intangible assets associated with acquisitions, which net of related tax impacts totaled $147.7 million, was $1.54 per share.

 

 

Volume: Total U.S. dialysis treatments for the first quarter of 2013 were 5,628,799, or 73,579 treatments per day, representing a per day increase of 8.0% over the first quarter of 2012. Non-acquired treatment growth in the quarter was 4.3% over the prior year’s first quarter. Our normalized non-acquired treatment growth in the quarter was 4.4% over the prior year’s first quarter.

The number of member months for which HCP provided capitated care during the first quarter of 2013 was approximately 2.2 million, representing an increase of 5.8% as compared to the fourth quarter of 2012 and an increase of 20.3% as compared to the first quarter of 2012, inclusive of growth contributed from acquisitions. These calculations include data prior to our merger with HCP on November 1, 2012.

 

 

Effective Tax Rate: Our effective tax rate was 24.6% for the three months ended March 31, 2013. 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 HealthCare Partners Inc. was 47.1% for the three months ended March 31, 2013. Excluding the impact of the loss contingency reserve our effective tax rate attributable to DaVita HealthCare Partners Inc. would have been 40.7%. We expect our 2013 effective tax rate attributable to DaVita HealthCare Partners Inc. to be in the range of 40.0% to 41.0%.

 

1


 

Loss Contingency Reserve: We are engaged in good faith discussions with the attorneys from the United States Attorney’s Office for the District of Colorado, the Civil Division of the United States Department of Justice and the Office of the Inspector General in an effort to find a mutually acceptable resolution to the 2010 and the 2011 U.S. Attorney Physician Relationship Investigations. Discussions have advanced to a point where we believe it is appropriate to accrue an estimated loss contingency reserve of $300 million in the first quarter of 2013 in connection with an offer to settle the related civil, administrative and criminal matters. However, the discussions are ongoing, and until concluded, there can be no certainty about the timing or likelihood of a definitive resolution or the scope of any potential restrictions that may be agreed upon in connection with a settlement. As these discussions proceed and additional information becomes available to us, the amount of the estimated loss contingency reserve may need to be increased or decreased to reflect this new information.

 

 

Debt Transactions: In March 2013, we entered into several new interest rate swap agreements. As of March 31, 2013, the amortizing notional amounts of these swap agreements totaled $1.33 billion. These agreements have the economic effect of modifying the LIBOR variable component of the Company’s interest rate on an equivalent amount of our Term Loan A-3 to fixed rates ranging from 0.49% to 0.52%, resulting in an overall weighted average effective interest rate of 3.01%, including the Term Loan A-3 margin of 2.50%. The swap agreements expire by September 30, 2016 and require monthly interest payments.

In addition, in March 2013, we entered into several interest rate forward swap agreements with amortizing notional amounts totaling $600 million. These forward swap agreements will be effective September 30, 2014 and will have the economic effect of modifying the LIBOR variable component of our interest rate on an equivalent amount of our outstanding debt to fixed rates ranging from 0.72% to 0.75%. These swap agreements expire on September 30, 2016 and will require quarterly interest payments beginning in October 2014.

Any unrealized gains or losses resulting from changes in the fair value of these swaps will be recorded in other comprehensive income.

During March 2013, we entered into several interest rate cap agreements with notional amounts totaling $1.25 billion on our Term Loan B debt and $1.49 billion on our Term Loan B-2 debt. These agreements have the economic effect of capping the LIBOR variable component of our interest rate at a maximum of 2.50% on an equivalent amount of our Term Loan B and Term Loan B-2 debt. The cap agreements expire on September 30, 2016.

 

 

Center Activity: As of March 31, 2013, we provided dialysis services to a total of 158,600 patients at 2,032 outpatient dialysis centers, of which 41 are located in nine countries outside of the United States. During the first quarter of 2013, we acquired eight dialysis centers and opened a total of 27 dialysis centers located in the United States. We also provided management and administrative services to four dialysis centers and opened one dialysis center outside of the United States.

Outlook

 

 

We are updating our consolidated operating income guidance for 2013 to now be in the range of $1,800 million to $1,900 million. Our previous consolidated operating income guidance was expected to be in the range of $1,750 million to $1,900 million.

 

 

In addition, we are also updating our operating income guidance for our dialysis services and related ancillary businesses for 2013 to now be in the range of $1,400 million to $1,450 million. Our previous dialysis services and related ancillary businesses guidance was expected to be in the range of $1,350 million to $1,450 million.

 

 

Operating income guidance for HCP for 2013 is still expected to be in the range of $400 million to $450 million.

 

 

Consolidated operating cash flows for 2013 are still expected to be in the range of $1,350 million to $1,500 million.

The consolidated and dialysis services and related ancillary businesses operating income guidance amounts exclude the estimated loss contingency reserve of $300 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.

We will be holding a conference call to discuss our results for the first quarter ended March 31, 2013 on May 7, 2013 at 5:00 p.m. Eastern Time. The dial in number for the U.S. is (800) 399-4406 and for international is (937) 528-2121. A replay of the conference call will be available on DaVita’s official web page, www.davita.com, for the following 30 days.

 

2


This release contains forward-looking statements within the meaning of the federal securities laws, including statements related to our guidance and expectations for our 2013 operating income, our 2013 operating cash flows and our 2013 effective tax rate attributable to DaVita HealthCare Partners Inc. 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, 2012, and 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 the continued downward pressure on average realized payment rates from, and a reduction in the number of patients under higher-paying commercial payor plans, which may result in the loss of revenues or patients,

 

   

a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs,

 

   

the impact of health care reform legislation that was enacted in the United States in March 2010,

 

   

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 current or potential investigations by various government entities and related government or private-party proceedings, including risks relating to the resolution of the 2010 and 2011 U.S. Attorney Physician Relationship Investigations,

 

   

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,

 

   

our ability to complete any 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 HCP, or to expand our operations and services to markets outside the United States,

 

   

risks arising from the use of accounting estimates, judgments and interpretation in our financial statements,

 

   

the risk that the cost of providing services under HCP’s agreements may exceed our compensation,

 

   

the risk that reductions in reimbursement rates, including Medicare Advantage rates, and future regulations may negatively impact HCP’s business, revenue and profitability,

 

   

the risk that HCP 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 HCP’s healthcare provider networks could have an adverse effect on HCP’s business operations and profitability,

 

   

the risk that reductions in the quality ratings of health maintenance organization plan customers of HCP could have an adverse effect on HCP’s business, or

 

   

the risk that health plans that acquire health maintenance organizations may not be willing to contract with HCP 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.

 

3


DAVITA HEALTHCARE PARTNERS INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars in thousands, except per share data)

 

     Three months ended
March  31,
 
     2013     2012  

Patient service revenues

   $ 1,979,873      $ 1,765,482   

Less: Provision for uncollectible accounts

     (70,057     (53,008
  

 

 

   

 

 

 

Net patient service revenues

     1,909,816        1,712,474   

HCP capitated revenues

     746,071        —     

Other revenues

     173,695        137,059   
  

 

 

   

 

 

 

Total net revenues

     2,829,582        1,849,533   
  

 

 

   

 

 

 

Operating expenses and charges:

    

Patient care costs

     1,953,929        1,249,395   

General and administrative

     291,372        205,401   

Depreciation and amortization

     125,909        75,381   

Provision for uncollectible accounts

     878        1,106   

Equity investment income

     (9,367     (2,632

Loss contingency reserve

     300,000        —     
  

 

 

   

 

 

 

Total operating expenses and charges

     2,662,721        1,528,651   
  

 

 

   

 

 

 

Operating income

     166,861        320,882   

Debt expense

     (105,817     (61,381

Other income

     598        1,039   
  

 

 

   

 

 

 

Income from continuing operations before income taxes

     61,642        260,540   

Income tax expense

     15,144        95,556   
  

 

 

   

 

 

 

Income from continuing operations

     46,498        164,984   

Discontinued operations:

    

Loss from operations of discontinued operations, net of tax

     (139     (101

Gain on disposal of discontinued operations, net of tax

     13,375        —     
  

 

 

   

 

 

 

Net income

     59,734        164,883   

Less: Net income attributable to noncontrolling interests

     (29,570     (24,763
  

 

 

   

 

 

 

Net income attributable to DaVita HealthCare Partners Inc.

   $ 30,164      $ 140,120   
  

 

 

   

 

 

 

Earnings per share:

    

Basic income from continuing operations per share attributable to DaVita HealthCare Partners Inc.

   $ 0.16      $ 1.50   
  

 

 

   

 

 

 

Basic net income per share attributable to DaVita HealthCare Partners Inc.

   $ 0.29      $ 1.49   
  

 

 

   

 

 

 

Diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc.

   $ 0.16      $ 1.46   
  

 

 

   

 

 

 

Diluted net income per share attributable to DaVita HealthCare Partners Inc.

   $ 0.28      $ 1.46   
  

 

 

   

 

 

 

Weighted average shares for earnings per share:

    

Basic

     104,484,476        93,769,092   
  

 

 

   

 

 

 

Diluted

     107,063,633        95,729,105   
  

 

 

   

 

 

 

Amounts attributable to DaVita HealthCare Partners Inc.:

    

Income from continuing operations

   $ 16,915      $ 140,220   

Discontinued operations

     13,249        (100
  

 

 

   

 

 

 

Net income

   $ 30,164      $ 140,120   
  

 

 

   

 

 

 

 

4


DAVITA HEALTHCARE PARTNERS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(dollars in thousands)

 

     Three months ended
March 31,
 
     2013     2012  

Net income

   $ 59,734      $ 164,883   
  

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax:

    

Unrealized losses on interest rate swap and cap agreements:

    

Unrealized losses on interest rate swap and cap agreements

     (2,369     (2,261

Less: Reclassifications of net swap and cap agreements realized losses into net income

     2,507        2,520   

Unrealized gains on investments:

    

Unrealized gains on investments

     618        1,146   

Less: Reclassification of net investment realized gains into net income

     (94     (75

Foreign currency translation adjustments

     (2,106     (619
  

 

 

   

 

 

 

Other comprehensive (loss) income

     (1,444     711   
  

 

 

   

 

 

 

Total comprehensive income

     58,290        165,594   

Less: Comprehensive income attributable to the noncontrolling interests

     (29,570     (24,763
  

 

 

   

 

 

 

Comprehensive income attributable to DaVita HealthCare Partners Inc.

   $ 28,720      $ 140,831   
  

 

 

   

 

 

 

 

5


DAVITA HEALTHCARE PARTNERS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

 

     Three months ended
March 31,
 
     2013     2012  

Cash flows from operating activities:

    

Net income

   $ 59,734      $ 164,883   

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

    

Loss contingency reserve

     300,000        —     

Depreciation and amortization

     125,756        75,975   

Stock-based compensation expense

     16,021        12,550   

Tax benefits from stock award exercises

     9,368        10,890   

Excess tax benefits from stock award exercises

     (6,957     (6,101

Deferred income taxes

     (111,331     (13,335

Equity investment income, net

     (2,486     483   

Other non-cash charges and (gain) loss on disposal of assets

     (11,396     7,125   

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

    

Accounts receivable

     (92,339     (71,706

Inventories

     2,162        4,851   

Other receivables and other current assets

     (32,281     56,452   

Other long-term assets

     (9,865     3,742   

Accounts payable

     (83,896     (20,624

Accrued compensation and benefits

     (3,790     41,623   

Other current liabilities

     79,277        17,462   

Income taxes

     93,401        43,072   

Other long-term liabilities

     47,829        4,532   
  

 

 

   

 

 

 

Net cash provided by operating activities

     379,207        331,874   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Additions of property and equipment, net

     (116,724     (112,459

Acquisitions

     (91,498     (132,699

Proceeds from asset and business sales

     62,357        825   

Purchase of investments available for sale

     (1,212     (489

Purchase of investments held-to-maturity

     (4     (3,212

Proceeds from sale of investments available for sale

     1,091        6,791   

Proceeds from maturities of investments held-to-maturity

     —          7,551   

Purchase of intangible assets

     (137     —     

Distributions received on equity investments

     116        2   
  

 

 

   

 

 

 

Net cash used in investing activities

     (146,011     (233,690
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings

     16,797,510        8,634,603   

Payments on long-term debt

     (16,860,949     (8,658,001

Interest rate cap premiums and other deferred financing costs

     (248     3   

Distributions to noncontrolling interests

     (34,926     (26,405

Stock award exercises and other share issuances, net

     5,833        1,663   

Excess tax benefits from stock award exercises

     6,957        6,101   

Contributions from noncontrolling interests

     14,257        3,651   

Proceeds from sales of additional noncontrolling interests

     4,174        100   

Purchases from noncontrolling interests

     —          (4,372
  

 

 

   

 

 

 

Net cash used in financing activities

     (67,392     (42,657

Effect of exchange rate changes on cash and cash equivalents

     119        11  
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     165,923        55,538   

Cash and cash equivalents at beginning of period

     533,748        393,752   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 699,671      $ 449,290   
  

 

 

   

 

 

 

 

6


DAVITA HEALTHCARE PARTNERS INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except per share data)

 

     March 31,
2013
    December 31,
2012
 
ASSETS     

Cash and cash equivalents

   $ 699,671      $ 533,748   

Short-term investments

     7,142        7,138   

Accounts receivable, less allowance of $239,669 and $245,122

     1,516,642        1,424,303   

Inventories

     76,582        78,126   

Other receivables

     298,871        265,671   

Other current assets

     150,432        201,572   

Income tax receivable

     —         55,454   

Deferred income taxes

     441,828        315,782   
  

 

 

   

 

 

 

Total current assets

     3,191,168        2,881,794   

Property and equipment, net of accumulated depreciation of $1,546,266 and $1,522,183

     1,915,453        1,872,370   

Intangibles, net of accumulated amortization of $349,332 and $304,323

     2,104,044        2,128,118   

Equity investments

     37,520        35,150   

Long-term investments

     63,451        59,341   

Other long-term assets

     86,806        79,854   

Goodwill

     9,015,035        8,947,736   
  

 

 

   

 

 

 
   $ 16,413,477      $ 16,004,363   
  

 

 

   

 

 

 
LIABILITIES AND EQUITY     

Accounts payable

   $ 330,247      $ 414,143   

Other liabilities

     565,262        563,365   

Accrued compensation and benefits

     565,206        566,911   

Medical payables

     298,322        238,964   

Loss contingency reserve

     300,000        —    

Current portion of long-term debt

     228,219        227,791   

Income tax payable

     37,983        —    
  

 

 

   

 

 

 

Total current liabilities

     2,325,239        2,011,174   

Long-term debt

     8,277,259        8,326,534   

Other long-term liabilities

     497,708        443,743   

Alliance and product supply agreement, net

     13,325        14,657   

Deferred income taxes

     737,521        710,638   
  

 

 

   

 

 

 

Total liabilities

     11,851,052        11,506,746   

Commitments and contingencies

    

Noncontrolling interests subject to put provisions

     605,894        580,692   

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; 105,702,448 and 105,498,575 shares outstanding)

     135        135   

Additional paid-in capital

     1,208,315        1,208,800   

Retained earnings

     3,761,999        3,731,835   

Treasury stock, at cost (29,159,835 and 29,363,708 shares)

     (1,154,266     (1,162,336

Accumulated other comprehensive loss

     (16,741     (15,297
  

 

 

   

 

 

 

Total DaVita HealthCare Partners Inc. shareholders’ equity

     3,799,442        3,763,137   

Noncontrolling interests not subject to put provisions

     157,089        153,788   
  

 

 

   

 

 

 

Total equity

     3,956,531        3,916,925   
  

 

 

   

 

 

 
   $ 16,413,477      $ 16,004,363   
  

 

 

   

 

 

 

 

7


DAVITA HEALTHCARE PARTNERS INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

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

 

    Three months ended  
    March 31,
2013
    December 31,
2012
    March 31,
2012
 

1. Consolidated Financial Results:

     

Consolidated net revenues

  $ 2,830      $ 2,478      $ 1,850   

Operating income

  $ 166.9      $ 388.1      $ 320.9   

Operating income excluding a loss contingency reserve, transaction expenses associated with the acquisition of HCP and other legal settlement expenses(1)

  $ 466.9      $ 407.6      $ 326.9   

Operating income margin

    5.9     15.7     17.3

Operating income margin excluding a loss contingency reserve, transaction expenses associated with the acquisition of HCP and other legal settlement expenses(1)

    16.5     16.4     17.7

Income from continuing operations attributable to DaVita HealthCare Partners Inc.

  $ 16.9      $ 156.3      $ 140.2   

Income from continuing operations attributable to DaVita HealthCare Partners Inc. excluding a loss contingency reserve, transaction expenses associated with the acquisition of HCP, debt refinancing charges and other legal settlement expenses, which are all net of related tax(1)

  $ 196.9      $ 173.8      $ 143.8   

Diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc.

  $ 0.16      $ 1.51      $ 1.46   

Diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc. excluding a loss contingency reserve, transaction expenses associated with the acquisition of HCP, debt refinancing charges and other legal settlement expenses, which are all net of related tax(1)

  $ 1.84      $ 1.68      $ 1.50   

2. Consolidated Business Metrics:

     

Expenses

     

General and administrative expenses as a percent of consolidated net revenues(2)

    10.3     11.2     11.1

Consolidated effective tax rate

    24.6     34.7     36.7

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

    47.1     38.5     40.5

3. Summary of Segment Financial Results:

     

Net revenues

     

Net dialysis and related lab services revenues

  $ 1,852      $ 1,831      $ 1,717   

Net HCP revenues

    804        477        —     

Net ancillary services and strategic initiatives revenues

    184        178        139   
 

 

 

   

 

 

   

 

 

 

Total net segment revenues

    2,840        2,486        1,856   

Elimination of intersegment revenues

    (10     (8     (6
 

 

 

   

 

 

   

 

 

 

Total net consolidated revenues

  $ 2,830      $ 2,478      $ 1,850   
 

 

 

   

 

 

   

 

 

 

Operating income

     

Dialysis and related lab services operating income

  $ 87      $ 362      $ 359   

HCP operating income

    110        67        —     

Other – Ancillary services and strategic initiatives, including international dialysis operations operating losses

    (15     (15     (18
 

 

 

   

 

 

   

 

 

 

Total segment operating income

    182        414        341   

Reconciling items:

     

Corporate support and related long-term incentive based compensation

    (15     (13     (14

Transaction expenses

    —          (13     (6
 

 

 

   

 

 

   

 

 

 

Consolidated operating income

  $ 167      $ 388      $ 321   
 

 

 

   

 

 

   

 

 

 

 

8


DAVITA HEALTHCARE PARTNERS INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

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

 

    Three months ended  
    March 31,
2013
    December 31,
2012
    March 31,
2012
 

3. Segment Financial Results: (continued)

     

Dialysis and Related Lab Services

     

Revenue:

     

Patient services revenues

  $ 1,916      $ 1,894      $ 1,767   

Provision for uncollectible accounts

    (67     (66     (53
 

 

 

   

 

 

   

 

 

 

Net patient service operating revenues

    1,849        1,828        1,714   

Other revenues

    3        3        3   
 

 

 

   

 

 

   

 

 

 

Total net operating revenues

  $ 1,852      $ 1,831      $ 1,717   
 

 

 

   

 

 

   

 

 

 

Operating expenses:

     

Patient care cost

  $ 1,216      $ 1,219      $ 1,129   

General and administrative

    167        163        158   

Depreciation and amortization

    85        83        74   

Equity income

    (3     (3     (3

Loss contingency reserve and other legal settlement expenses

    300        7        —     
 

 

 

   

 

 

   

 

 

 

Total operating expenses

    1,765        1,469        1,358   
 

 

 

   

 

 

   

 

 

 

Segment operating income

  $ 87      $ 362      $ 359   
 

 

 

   

 

 

   

 

 

 

HCP(3)

     

Revenue:

     

HCP capitated revenues

  $ 746      $ 419      $ —     
 

 

 

   

 

 

   

 

 

 

Patient services revenues

    57        36        —     

Provision for uncollectible accounts

    (3     (2     —     
 

 

 

   

 

 

   

 

 

 

Net patient service operating revenues

    54        34        —     
 

 

 

   

 

 

   

 

 

 

Other revenues

    4        24        —     
 

 

 

   

 

 

   

 

 

 

Total net operating revenues

  $ 804      $ 477      $ —     
 

 

 

   

 

 

   

 

 

 

Operating expenses:

     

Patient care cost

  $ 588      $ 339      $ —     

General and administrative

    74        52        —     

Depreciation and amortization

    38        24        —     

Equity income

    (6     (5     —     
 

 

 

   

 

 

   

 

 

 

Total operating expenses

    694        410        —     
 

 

 

   

 

 

   

 

 

 

Segment operating income

  $ 110      $ 67      $ —     
 

 

 

   

 

 

   

 

 

 

4. Dialysis and Related Lab Services Business Metrics:

     

Volume

     

Treatments

    5,628,799        5,736,776        5,314,275   

Number of treatment days

    76.5        79.5        78.0   

Treatments per day

    73,579        72,161        68,132   

Per day year over year increase

    8.0     9.1     14.2

Non-acquired growth year over year

    4.3     4.7     5.5

Operating revenues before provision for uncollectible accounts

     

Dialysis and related lab services revenue per treatment

  $ 340.44      $ 330.16      $ 332.43   

Per treatment increase (decrease) from previous quarter

    3.1     (0.5 %)      1.2

Per treatment increase from previous year

    2.4     0.5     1.8

Percent of net consolidated revenues

    65.2     73.7     92.6

 

9


DAVITA HEALTHCARE PARTNERS INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

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

 

    Three months ended  
    March 31,
2013
    December 31,
2012
    March 31,
2012
 
4. Dialysis and Related Lab Services Business Metrics: (continued)      

Expenses

     

Patient care costs

     

Percent of total segment operating revenues

    65.7     66.6     65.7

Per treatment

  $ 216.03      $ 212.51      $ 212.31   

Per treatment increase (decrease) from previous quarter

    1.7     (0.7 %)      1.7

Per treatment increase (decrease) from previous year

    1.8     1.7     (5.0 %) 

General and administrative expenses

     

Percent of total segment operating revenues

    9.0     8.9     9.2

Per treatment

  $ 29.70      $ 28.41      $ 29.74   

Per treatment increase from previous quarter

    4.5     2.5     2.1

Per treatment (decrease) increase from previous year

    (0.1 %)      (2.5 %)      13.3

Accounts receivable

     

Net receivables

  $ 1,164      $ 1,169      $ 1,224   

DSO

    57        59        65   

Provision for uncollectible accounts as a percentage of net revenues

    3.5     3.5     3.0

5. HCP Business Metrics(3):

     

Capitated membership

     

Total

    742,000        724,000        —     

Member months

    2,239,400        1,422,600        —     

Capitated revenues by sources

     

Commercial revenues

  $ 182      $ 112      $ —     

Senior revenues

    552        298        —     

Medicaid revenues

    12        9        —     
 

 

 

   

 

 

   

 

 

 

Total capitated revenues

  $ 746      $ 419      $ —     
 

 

 

   

 

 

   

 

 

 

Other

     

Total care dollars under management(1)

  $ 1,045      $ 614        —     

Ratio of operating income to total care dollars under management

    10.6     10.9     —     

Full time clinicians

    1,069        1,079        —     

IPA primary care physicians

    2,845        1,806        —     

6. Cash Flow:

     

Operating cash flow

  $ 379.2      $ 200.2      $ 331.9   

Operating cash flow, last twelve months

  $ 1,148.2      $ 1,100.8      $ 1,182.1   

Free cash flow(1)

  $ 298.9      $ 82.6      $ 249.9   

Free cash flow, last twelve months(1)

  $ 764.3      $ 715.3      $ 837.2   

Capital expenditures:

     

Routine maintenance/IT/other

  $ 45.4      $ 86.1      $ 55.6   

Development and relocations

  $ 71.3      $ 85.1      $ 56.8   

Acquisition expenditures

  $ 91.5      $ 3,875.0      $ 132.7   

 

10


DAVITA HEALTHCARE PARTNERS INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

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

 

    Three months ended  
    March 31,
2013
    December 31,
2012
    March 31,
2012
 

7. Debt and Capital Structure:

     

Total debt(4)

  $ 8,526      $ 8,576      $ 4,499   

Net debt, net of cash and cash equivalents(4)

  $ 7,826      $ 8,042      $ 4,050   

Leverage ratio (see calculation on page 12)

    3.41x        3.55x        2.55x   

Overall weighted average effective interest rate during the quarter

    4.76     4.93     5.27

Overall weighted average effective interest rate at end of the quarter

    4.79     4.73     5.28

Weighted average effective interest rate on the Senior Secured Credit Facilities at end of the quarter

    4.09     4.02     4.63

Fixed and economically fixed interest rates as a percentage of our total debt(5)

    61     45     57

Fixed and economically fixed interest rates, including our interest rate cap agreements, as a percentage of our total debt(5)

    93     59     85

8. Clinical: (quarterly averages)

     

Dialysis adequacy -% of patients with Kt/V > 1.2 at the end of the quarter

    98     98     97

Dialysis patients with arteriovenous fistulas placed

    71     71     69

 

(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) Consolidated percentages of revenues are comprised of the dialysis and related lab services business, HCP’s business and other ancillary services and strategic initiatives, and in case of general and administrative expenses, includes other certain corporate support and related stock-based compensation and transaction expenses associated with the acquisition of HCP.
(3) Operating results of HCP for the three months ended December 31, 2012, include only the period November 1, 2012 through December 31, 2012.
(4) The reported balance sheet amounts at March 31, 2013, December 31, 2012 and March 31, 2012, are net of $20.6 million, $21.5 million and $7.4 million, respectively, of debt discounts associated with our Term Loan B, Term Loan B-2 and our Term Loan A-2.
(5) The Term Loan B and Term Loan B-2 are subject to LIBOR floors of 1.50% and 1.00%, respectively. Because LIBOR, for all periods presented above, was lower than either of these embedded LIBOR floors, the interest rates on the Term Loan B and the Term Loan B-2 are set at their respective floors. At such time as the LIBOR-based component of our interest rate exceeds 1.50% on the Term Loan B and 1.00% on the Term Loan B-2, 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, as well as for the Term Loan B-2, but limited to a maximum rate of 2.50% on $1.25 billion of outstanding principal debt on the Term Loan B and $1.49 billion of outstanding principal debt on the Term Loan B-2 as a result of interest rate cap agreements. The remaining $461 million outstanding principal balance of the Term Loan B is subject to LIBOR-based interest rate volatility above a floor of 1.50%. The remaining $161 million outstanding principal balance of the Term Loan B-2 is subject to LIBOR-based volatility above a floor of 1.00%.

 

11


DAVITA HEALTHCARE PARTNERS 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, 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 investors to enhance their understanding of the Company’s leverage ratio under its Credit Agreement.

 

     Rolling twelve
months ended
March 31, 2013
 

Net income attributable to DaVita HealthCare Partners Inc.

   $ 426,061   

Income taxes

     279,689   

Interest expense and debt refinancing charges

     321,562   

Depreciation and amortization

     393,580   

Loss contingency reserve

     300,000   

Noncontrolling interests and equity investment income, net

     110,442   

Stock-based compensation

     48,855   

Other (primarily pro-forma EBITDA on acquisitions)

     489,364   
  

 

 

 

“Consolidated EBITDA”

   $ 2,369,553   
  

 

 

 
     March 31, 2013  

Total debt, excluding debt discount of $20.6 million

   $ 8,526,052   

Letters of credit issued

     114,456   
  

 

 

 
     8,640,508   

Less: Cash and cash equivalents

     (569,092
  

 

 

 

Consolidated net debt

   $ 8,071,416   
  

 

 

 

Last twelve months “Consolidated EBITDA”

   $ 2,369,553   
  

 

 

 

Leverage ratio

     3.41x   
  

 

 

 

In accordance with the Credit Agreement, the Company’s leverage ratio cannot exceed 5.00 to 1.00 as of March 31, 2013. At that date the Company’s leverage ratio did not exceed 5.00 to 1.00.

 

12


DAVITA HEALTHCARE PARTNERS INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

 

1. Income from continuing operations and diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc. excluding a loss contingency reserve, transaction expenses associated with the acquisition of HCP, debt refinancing charges and other legal settlement expenses, which are all net of related tax.

We believe that income from continuing operations attributable to DaVita HealthCare Partners Inc. excluding a loss contingency reserve, transaction expenses associated with the acquisition of HCP, debt refinancing charges and other legal settlement expenses, which are all net of related tax, enhances a user’s understanding of our normal income from continuing operations attributable to DaVita HealthCare Partners Inc. and diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc. for these periods by providing a measure that is meaningful because it excludes an unusual amount for a loss contingency reserve related to the 2010 and 2011 U.S. Attorney Physician Relationship Investigation, an unusual amount of transaction expenses associated with the acquisition of HCP, debt refinancing charges related to the amendment of our credit agreement and the repayment of our Term Loan A-2 and other legal expenses associated with a legal settlement that we reached to settle federal program claims relating to our historical Epogen practices and accordingly, is more comparable to prior periods and indicative of consistent income from continuing operations attributable to DaVita HealthCare Partners Inc. and diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc. These measures are not measures of financial performance under United States generally accepted accounting principles (GAAP) and should not be considered as an alternative to income from continuing operations attributable to DaVita HealthCare Partners Inc. and diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc.

 

Income from continuing operations attributable to DaVita HealthCare
Partners Inc. excluding a loss  contingency reserve, transaction expenses
associated with the acquisition of HCP, debt refinancing charges and other
legal settlement expenses, which are  all net of related tax:
   Three months ended  
     March 31,
2013
    December 31,
2012
    March 31,
2012
 

Income from continuing operations attributable to DaVita HealthCare Partners Inc.

   $ 16,915      $ 156,283      $ 140,220   

Add:

      

Loss contingency reserve

     300,000        —          —     

Transaction expenses associated with the acquisition of HCP

     —          12,982        6,053   

Debt refinancing charges

     —          8,901        —     

Other legal settlement expenses

     —          6,545        —     

Less: Related income tax

     (120,000     (10,945     (2,452
  

 

 

   

 

 

   

 

 

 
   $ 196,915      $ 173,766      $ 143,821   
  

 

 

   

 

 

   

 

 

 

 

Diluted income from continuing operations per share attributable to DaVita
HealthCare Partners Inc.  excluding a loss contingency reserve, transaction
expenses associated with the acquisition of HCP, debt refinancing charges
and other legal settlement  expenses, which are all net of related tax:
   Three months ended  
     March 31,
2013
     December 31,
2012
     March 31,
2012
 

Diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc.

   $ 0.16       $ 1.51       $ 1.46   

Add:

        

Loss contingency reserve

     1.68         —           —     

Transaction expenses associated with the acquisition of HCP

     —           0.08         0.04   

Debt refinancing charges

     —           0.05         —     

Other legal settlement expenses

     —           0.04         —     
  

 

 

    

 

 

    

 

 

 
   $ 1.84       $ 1.68       $ 1.50   
  

 

 

    

 

 

    

 

 

 

 

13


DAVITA HEALTHCARE PARTNERS INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

 

In addition, we have also excluded amortization of intangible assets associated with acquisitions from our adjusted income from continuing operations attributable to DaVita HealthCare Partners Inc. and from our adjusted diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc. as we believe this presentation enhances a user’s understanding of our operating results for these periods by providing an accurate reflection of the Company’s operating performance since it excludes the amortization of intangible assets that relate to the remeasurement of acquired intangible assets associated with our acquisitions to fair value, and accordingly is indicative of consistent income from continuing operations attributable to DaVita HealthCare Partners Inc. and diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc. These measures are not measures of financial performance under GAAP and should not be considered as an alternative to income from continuing operations attributable to DaVita HealthCare Partners Inc. and diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc.

 

Adjusted income from continuing operations and adjusted diluted income from
continuing operations per share attributable to DaVita HealthCare Partners
Inc. excluding the amortization of intangible assets associated with acquisitions:
   Three months ended  
     March 31,
2013
    December 31,
2012
    March 31,
2012
 

Adjusted income from continuing operations attributable to DaVita HealthCare Partners Inc.

   $ 196,915      $ 173,766      $ 143,821   

Add: Amortization of intangible assets associated with acquisitions

     40,244        28,448        6,489   

Related income tax

     (16,098     (10,953     (2,628
  

 

 

   

 

 

   

 

 

 
   $ 221,061      $ 191,261      $ 147,682   
  

 

 

   

 

 

   

 

 

 

Adjusted diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc.

   $ 1.84      $ 1.68      $ 1.50   

Add: Amortization of intangible assets associated with acquisitions, net of tax

     0.23        0.17        0.04   
  

 

 

   

 

 

   

 

 

 
   $ 2.07      $ 1.85      $ 1.54   
  

 

 

   

 

 

   

 

 

 

 

14


DAVITA HEALTHCARE PARTNERS INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

 

2. Operating income excluding a pre-tax loss contingency reserve, pre-tax transaction expenses related to the acquisition of HCP and pre-tax other legal settlement expenses.

We believe that operating income excluding a pre-tax loss contingency reserve, pre-tax transaction expenses associated with the acquisition of HCP and pre-tax other legal settlement expenses enhances a user’s understanding of our normal operating income for these periods by providing a measure that is meaningful because it excludes an unusual amount for a loss contingency reserve related to the 2010 and 2011 U.S. Attorney Physician Relationship Investigations, an unusual amount of transaction expenses associated with the acquisition of HCP and expenses associated with a legal settlement that was reached to settle federal program claims relating to our historical Epogen practices and accordingly, is more comparable to prior periods and indicative of consistent operating income. This measure is not a measure of financial performance under GAAP and should not be considered as an alternative to operating income.

 

Operating income excluding a pre-tax loss contingency reserve,
pre-tax transaction expenses associated  with the acquisition of HCP and pre-
tax other legal settlement expenses:
   Three months ended  
     March 31,
2013
     December 31,
2012
     March 31,
2012
 

Operating income

   $ 166,861       $ 388,056       $ 320,882   

Add:

        

Loss contingency reserve

     300,000         —           —     

Transactions expenses associated with the acquisition of HCP

     —           12,982         6,053   

Other legal settlement expenses

     —           6,545         —     
  

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 466,861       $ 407,583       $ 326,935   
  

 

 

    

 

 

    

 

 

 

 

15


DAVITA HEALTHCARE PARTNERS INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

 

3. Effective Income Tax Rates

We believe that reporting the effective income tax rate attributable to DaVita HealthCare Partners Inc., as well as the adjusted effective income tax rate attributable to DaVita HealthCare Partners Inc., excluding a loss contingency reserve, enhances an investor’s understanding of DaVita’s effective income tax rate and DaVita’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 an unusual amount for a loss contingency reserve related to the 2010 and 2011 U.S. Attorney Physician Relationship Investigations and accordingly is more comparable to prior periods presentations regarding DaVita’s effective income tax rate and is meaningful to an investor to fully understand the related income tax effects on DaVita HealthCare Partners 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 HealthCare Partners Inc. is as follows:

 

     Three months ended  
     March 31,
2013
    December 31,
2012
    March 31,
2012
 

Income from continuing operations before income taxes

   $ 61,642      $ 282,162      $ 260,540   
  

 

 

   

 

 

   

 

 

 

Income tax expense

   $ 15,144      $ 97,902      $ 95,556   
  

 

 

   

 

 

   

 

 

 

Effective income tax rate

     24.6     34.7     36.7
  

 

 

   

 

 

   

 

 

 

 

     Three months ended  
     March 31,
2013
    December 31,
2012
    March 31,
2012
 

Income from continuing operations before income taxes

   $ 61,642      $ 282,162      $ 260,540   

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

     (29,638     (28,036     (24,883
  

 

 

   

 

 

   

 

 

 

Income before income taxes attributable to DaVita HealthCare Partners Inc.

   $ 32,004      $ 254,126      $ 235,657   
  

 

 

   

 

 

   

 

 

 

Income tax expense

     15,144        97,902      $ 95,556   

Less: Income tax attributable to noncontrolling interests

     (68     (75     (120
  

 

 

   

 

 

   

 

 

 

Income tax attributable to DaVita HealthCare Partners Inc.

   $ 15,076      $ 97,827      $ 95,436   
  

 

 

   

 

 

   

 

 

 

Effective income tax rate attributable to DaVita HealthCare Partners Inc.

     47.1     38.5     40.5
  

 

 

   

 

 

   

 

 

 

 

     Three months ended  
     March 31,
2013
    December 31,
2012
    March 31,
2012
 

Adjusted effective income tax rates excluding the loss contingency reserve

      

Income from continuing operations before income taxes

   $ 61,642      $ 282,162      $ 260,540   

Add: Loss contingency reserve

     300,000        —          —     
  

 

 

   

 

 

   

 

 

 
     361,642        282,162        260,540   

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

     (29,638     (28,036     (24,883
  

 

 

   

 

 

   

 

 

 

Adjusted income before income taxes attributable to DaVita HealthCare Partners Inc.

   $ 332,004      $ 254,126      $ 235,657   
  

 

 

   

 

 

   

 

 

 

Income tax expense

   $ 15,144      $ 97,902      $ 95,556   

Add: Income taxes attributable to loss contingency reserve

     120,000        —          —     

Less: Income tax attributable to noncontrolling interests

     (68     (75     (120
  

 

 

   

 

 

   

 

 

 

Adjusted income tax attributable to DaVita HealthCare Partners Inc.

   $ 135,076      $ 97,827      $ 95,436   
  

 

 

   

 

 

   

 

 

 

Adjusted effective income tax rate attributable to DaVita HealthCare Partners Inc.

     40.7     38.5     40.5
  

 

 

   

 

 

   

 

 

 

 

16


DAVITA HEALTHCARE PARTNERS 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 acquisition and development activities and meet our debt service requirements. In addition, free cash flow excluding distributions to noncontrolling interests provides an investor with an understanding of free cash flows that are attributable to DaVita HealthCare Partners 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  
     March 31,
2013
    December 31,
2012
    March 31,
2012
 

Cash provided by operating activities

   $ 379,207      $ 200,235      $ 331,874   

Less: Distributions to noncontrolling interests

     (34,926     (31,526     (26,405
  

 

 

   

 

 

   

 

 

 

Cash provided by operating activities attributable to DaVita HealthCare Partners Inc.

     344,281        168,709        305,469   

Less: Expenditures for routine maintenance and information technology

     (45,426     (86,065     (55,609
  

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 298,855      $ 82,644      $ 249,860   
  

 

 

   

 

 

   

 

 

 

 

     Rolling 12-Month Period  
     March 31,
2013
    December 31,
2012
    March 31,
2012
 

Cash provided by operating activities

   $ 1,148,181      $ 1,100,848      $ 1,182,137   

Less: Distributions to noncontrolling interests

     (122,025     (113,504     (104,871
  

 

 

   

 

 

   

 

 

 

Cash provided by operating activities attributable to DaVita HealthCare Partners Inc.

     1,026,156        987,344        1,077,266   

Less: Expenditures for routine maintenance and information technology

     (261,812     (271,995     (240,047
  

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 764,344      $ 715,349      $ 837,219   
  

 

 

   

 

 

   

 

 

 

 

17


DAVITA HEALTHCARE PARTNERS INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

 

5. Total care dollars under management

In California, as a result of its managed care administrative services agreement with hospitals, HCP does not assume the direct financial risk for institutional (hospital) services, 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 those cases, HCP recognizes the surplus of institutional revenue less institutional expense as HCP revenue. In addition to revenues recognized for financial reporting purposes, HCP measures its total care dollars under management, which includes the Per Member Per Month (PMPM) fee payable to third parties for institutional (hospital) services where HCP manages the care provided to its members by the hospitals and other institutions, which are not included in GAAP revenues. HCP uses total care dollars under management as a supplement to GAAP revenues as it allows HCP to measure profit margins on a comparable basis across both the global capitation model (where HCP assumes the full financial risk for all services, including institutional services) and the risk sharing models (where HCP operates under managed care administrative services agreements where HCP does not assume the full risk). HCP 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 HCP 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 to third parties that are not recorded in our accounting records and have not been reviewed and are not otherwise subject to procedures by our independent auditors. The following table reconciles Total Care Dollars Under Management to medical revenues to the periods indicated. “Total Care Dollars Under Management” is a non-GAAP measure.

 

     Three months
ended
March 31, 2013
 

Medical revenues

   $ 799,673   

Less: Risk share revenue, net

     (39,824

Add: Institutional capitation amounts

     284,733   
  

 

 

 

Total care dollars under management

   $ 1,044,582   
  

 

 

 

 

18