DENVER, July 31, 2014 /PRNewswire/ -- DaVita
HealthCare Partners Inc. (NYSE: DVA) today announced results for
the quarter ended June 30, 2014.
Adjusted income from continuing operations attributable to DaVita
HealthCare Partners Inc. for the three and six months ended
June 30, 2014 was $205.7 million and $389.0
million, or $0.95 and
$1.80 per share, respectively,
excluding debt refinancing charges. Income from continuing
operations attributable to DaVita HealthCare Partners Inc. for the
three and six months ended June 30,
2014 including this item was $147.7
million and $331.0 million, or
$0.68 and $1.53 per share, respectively.
Adjusted income from continuing operations attributable to
DaVita HealthCare Partners Inc. for the three and six months ended
June 30, 2013 was $197.4 million and $394.3
million, or $0.92 and
$1.84 per share, respectively,
excluding a contingent earn-out obligation adjustment. In addition,
adjusted income from continuing operations attributable to DaVita
HealthCare Partners Inc. for the six months ended June 30, 2013 excluded a loss contingency
reserve. Income from continuing operations attributable to DaVita
HealthCare Partners Inc. for the three and six months ended
June 30, 2013 including these items
was $254.4 million and $271.3 million, or $1.18 and $1.26 per
share, respectively.
Financial and operating highlights include:
- Cash Flow: For the rolling twelve months ended
June 30, 2014, operating cash flow
was $1.769 billion and free cash flow
was $1.350 billion. For the three
months ended June 30, 2014, operating
cash flow was $262 million and free
cash flow was $165 million. For a
definition of free cash flow see Note 4 to the reconciliations of
non-GAAP measures.
- Operating / Adjusted Operating Income:
Operating income for the three and six months ended June 30, 2014 was $484
million and $926 million,
respectively. Adjusted operating income for the three and six
months ended June 30, 2013 was
$465 million and $932 million, respectively, excluding a
contingent earn-out obligation. In addition, adjusted operating
income for the six months ended June 30,
2013 excluded a pre-tax loss contingency reserve. Operating
income for the three and six months ended June 30, 2013 including these items was
$522 million and $689 million, respectively.
HCP's operating income for the three months ended June 30, 2014, benefited from the recognition of
net deferred revenues of approximately $26
million related to the maintenance of existing physician
networks, of which $6 million was
related to the first quarter of 2014 and the remaining $20 million was primarily related to 2013.
- Adjusted Diluted Income from Continuing Operations
Per Share: Adjusted income from continuing
operations attributable to DaVita HealthCare Partners Inc. for the
three and six months ended June 30,
2014, excluding the amortization of intangible assets
associated with acquisitions and debt refinancing charges, which
net of tax impacts was $231 million
and $439 million, respectively, and
adjusted diluted income from continuing operations was $1.06 and $2.03 per
share, respectively.
Adjusted income from continuing operations attributable to
DaVita HealthCare Partners Inc. for the three months ended
June 30, 2013, excluding the
amortization of intangible assets associated with acquisitions, and
a contingent earn-out obligation adjustment, which net of tax
impacts was $222 million, and
adjusted diluted income from continuing operations was $1.03 per share. In addition, adjusted income
from continuing operations for the six months ended June 30, 2013 as further adjusted to exclude a
loss contingency reserve, which net of tax impacts was $443 million, and adjusted diluted income from
continuing operations was $2.06 per
share.
- Volume: Total U.S. dialysis treatments for the
second quarter of 2014 were 6,196,394, or 79,441 treatments per
day, representing a per day increase of 5.6% over the second
quarter of 2013. Non-acquired treatment growth and normalized
non-acquired treatment growth in the quarter increased 5.0% over
the second quarter of 2013.
The number of member months for which HCP provided capitated
care during the second quarter of 2014 was approximately 2.5
million representing an increase of 11% as compared to the second
quarter of 2013, inclusive of growth contributed from
acquisitions.
- Effective Tax Rate: Our effective tax rate was
35.7% and 36.5% for the three and six months ended June 30, 2014, 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 HealthCare Partners Inc. was 40.5% for
the three and six months ended June 30,
2014.
We still expect our 2014 effective tax rate attributable to
DaVita HealthCare Partners Inc. to be in the range of 40.0% to
41.0%.
- Debt Transactions: As previously announced
in June 2014, we entered into
$5.5 billion of New Senior Secured
Credit Facilities consisting of a $1.0
billion revolving line of credit, a $1.0 billion New Term Loan A and a $3.5 billion New Term Loan B. In addition, we
issued $1.75 billion 5 ⅛% Senior
Notes due 2024. As a result, we received total proceeds of
$6.25 billion and used a portion of
the proceeds to pay-off all outstanding principal balances under
our then existing Senior Secured Credit Facilities, to purchase or
redeem all of our $775 million 6 ⅜%
Senior Notes due 2018 (6 ⅜% Senior Notes), to pay fees and other
expenses related to the refinancing, as well as for general
corporate purposes.
As a result of these transactions, we recorded debt refinancing
charges of $97.5 million that consist
of the cash tender premiums, a redemption premium, the write-off of
existing deferred financing costs, the write-off of certain new
refinancing costs, other professional fees and $3.1 million of losses associated with the
termination of several of our interest rate swap agreements.
- Center Activity: As of June 30, 2014, we provided dialysis services to a
total of approximately 174,000 patients at 2,203 outpatient
dialysis centers, of which 2,119 centers are located in
the United States and 84 centers
are located in ten countries outside of the United States. During the second quarter
of 2014, we opened a total of 22 new dialysis centers in
the United States. We also
acquired three dialysis centers and opened six new dialysis centers
outside of the United States.
Outlook
- We are updating our consolidated operating income guidance for
2014 to now be in the range of $1.755
billion to $1.840 billion. Our previous consolidated
operating income guidance for 2014 was in the range of $1.725 billion to $1.840 billion.
- We are also updating our operating income guidance for our
dialysis services and related ancillary businesses including our
corporate level expenses, which we refer to as Kidney Care, for
2014 to now be in the range of $1.550
billion to $1.600 billion. Our previous operating income
guidance for Kidney Care for 2014 was in the range of $1.520 billion to $1.580 billion.
- We are lowering the high end of our operating income guidance
for HCP for 2014 to now be in the range of $205 million to $240 million. Our previous
operating income guidance for HCP for 2014 was in the range of
$205 million to $260 million.
- We still expect our consolidated operating cash flow for 2014
to be in the range of $1.450 billion to
$1.550 billion.
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. Our consolidated operating cash flow amounts for 2014
exclude any potential payment relating to the 2010 and 2011 U.S.
Attorney Physician Relationship Investigations.
We will be holding a conference call to discuss our results for
the second quarter ended June 30,
2014 on July 31, 2014 at
5:00 p.m. Eastern Time. The
dial in number for the U.S. is (888) 950-9401 and for international
is (517) 308-9354. A replay of the conference call will be
available on DaVita's official web page,
www.davitahealthcarepartners.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 2014 consolidated
operating income, our 2014 Kidney Care operating income, HCP's 2014
operating income, our 2014 consolidated operating cash flows and
our 2014 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, 2013, 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,
- a reduction in government payment rates
under the Medicare End Stage Renal Disease program or other
government-based programs,
- the impact of the Center for Medicare and
Medicaid Services (CMS) 2014 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
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, such as restrictions on our
business and operations required by a corporate integrity agreement
and other settlement terms, and the financial impact
thereof,
- 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 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,
- 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 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.
Contact: Jim Gustafson
Investor Relations
DaVita HealthCare Partners Inc.
(310) 536-2585
DAVITA HEALTHCARE
PARTNERS INC.
|
CONSOLIDATED
STATEMENTS OF INCOME
|
(unaudited)
|
(dollars in
thousands, except per share data)
|
|
|
Three
months ended
June
30,
|
Six months ended
June 30,
|
|
2014
|
2013
|
2014
|
2013
|
Patient service
revenues
|
$ 2,187,249
|
$ 2,048,651
|
$ 4,301,347
|
$ 4,028,524
|
Less: Provision for
uncollectible accounts
|
(88,052)
|
(72,191)
|
(171,249)
|
(142,248)
|
Net patient service
revenues
|
2,099,197
|
1,976,460
|
4,130,098
|
3,886,276
|
Capitated
revenues
|
799,369
|
710,074
|
1,586,934
|
1,472,689
|
Other
revenues
|
273,923
|
185,139
|
498,233
|
342,290
|
Total net
revenues
|
3,172,489
|
2,871,673
|
6,215,265
|
5,701,255
|
Operating expenses
and charges:
|
|
|
|
|
Patient care costs and
other costs
|
2,246,538
|
2,014,320
|
4,426,310
|
3,975,211
|
General and
administrative
|
298,636
|
268,110
|
582,697
|
552,520
|
Depreciation and
amortization
|
145,907
|
130,589
|
288,486
|
256,498
|
Provision for
uncollectible accounts
|
3,208
|
1,260
|
5,719
|
2,138
|
Equity investment
income
|
(6,095)
|
(7,649)
|
(13,467)
|
(17,016)
|
Loss contingency
reserve
|
─
|
─
|
─
|
300,000
|
Contingent earn-out
obligation adjustment
|
─
|
(56,977)
|
─
|
(56,977)
|
Total operating
expenses and charges
|
2,688,194
|
2,349,653
|
5,289,745
|
5,012,374
|
Operating
income
|
484,295
|
522,020
|
925,520
|
688,881
|
Debt
expense
|
(106,132)
|
(108,096)
|
(212,467)
|
(213,913)
|
Debt refinancing
charges
|
(97,548)
|
─
|
(97,548)
|
─
|
Other income (loss),
net
|
1,693
|
(1,374)
|
3,391
|
(776)
|
Income from
continuing operations before income taxes
|
282,308
|
412,550
|
618,896
|
474,192
|
Income tax
expense
|
100,887
|
129,192
|
225,738
|
144,336
|
Income from
continuing operations
|
181,421
|
283,358
|
393,158
|
329,856
|
Discontinued
operations:
|
|
|
|
|
Loss from operations
of discontinued operations, net of tax
|
─
|
─
|
─
|
(139)
|
Gain on disposal of
discontinued operations, net of tax
|
─
|
─
|
─
|
13,375
|
Net income
|
181,421
|
283,358
|
393,158
|
343,092
|
Less: Net income
attributable to noncontrolling interests
|
(33,738)
|
(28,982)
|
(62,186)
|
(58,552)
|
Net income
attributable to DaVita HealthCare Partners Inc.
|
$ 147,683
|
$ 254,376
|
$ 330,972
|
$ 284,540
|
Earnings per
share:
|
|
|
|
|
Basic income from
continuing operations per share attributable to DaVita HealthCare
Partners Inc.
|
$
0.70
|
$
1.21
|
$
1.56
|
$
1.29
|
Basic net income per
share attributable to DaVita HealthCare Partners Inc.
|
$
0.70
|
$
1.21
|
$
1.56
|
$
1.36
|
Diluted income from
continuing operations per share attributable to DaVita HealthCare
Partners Inc.
|
$
0.68
|
$
1.18
|
$
1.53
|
$
1.26
|
Diluted net income per
share attributable to DaVita HealthCare Partners Inc.
|
$
0.68
|
$
1.18
|
$
1.53
|
$
1.33
|
Weighted average
shares for earnings per share:
|
|
|
|
|
Basic
|
212,258,994
|
209,797,334
|
211,817,893
|
209,385,380
|
Diluted.
|
216,720,944
|
214,849,164
|
216,420,713
|
214,490,452
|
Amounts
attributable to DaVita HealthCare Partners Inc.:
|
|
|
|
|
Income from continuing
operations
|
$ 147,683
|
$ 254,376
|
$ 330,972
|
$ 271,291
|
Discontinued
operations
|
─
|
─
|
─
|
13,249
|
Net income
|
$ 147,683
|
$ 254,376
|
$ 330,972
|
$ 284,540
|
DAVITA HEALTHCARE
PARTNERS INC.
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(dollars in
thousands)
|
(unaudited)
|
|
|
Three months
ended
June
30,
|
Six months ended
June 30,
|
|
2014
|
2013
|
2014
|
2013
|
Net income
|
$ 181,421
|
$ 283,358
|
$ 393,158
|
$ 343,092
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
Unrealized losses on
interest rate swap and cap agreements:
|
|
|
|
|
Unrealized (loss) gain
on interest rate swap and cap agreements
|
(5,209)
|
11,685
|
(7,714)
|
9,316
|
Reclassifications of
net swap and cap agreements realized loss into net
income
|
4,997
|
3,462
|
8,356
|
5,969
|
Unrealized gains on
investments:
|
|
|
|
|
Unrealized gain on
investments
|
578
|
101
|
909
|
719
|
Reclassification of
net investment realized gains into net income
|
─
|
─
|
(207)
|
(94)
|
Foreign currency
translation adjustments
|
1,939
|
(1,841)
|
1,967
|
(3,947)
|
Other comprehensive
income
|
2,305
|
13,407
|
3,311
|
11,963
|
Total comprehensive
income
|
183,726
|
296,765
|
396,469
|
355,055
|
Less: Comprehensive
income attributable to noncontrolling interests
|
(33,738)
|
(28,982)
|
(62,186)
|
(58,552)
|
Comprehensive income
attributable to DaVita HealthCare Partners Inc.
|
$ 149,988
|
$ 267,783
|
$ 334,283
|
$ 296,503
|
DAVITA HEALTHCARE
PARTNERS INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Six months
ended
June 30,
|
|
2014
|
2013
|
Cash flows from
operating activities:
|
|
|
Net income
|
$
393,158
|
$
343,092
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
Loss contingency
reserve
|
─
|
300,000
|
Depreciation and
amortization
|
288,470
|
256,382
|
Debt refinancing
charges
|
97,548
|
─
|
Stock-based
compensation expense
|
29,699
|
32,266
|
Tax benefits from
stock award exercises
|
42,110
|
36,524
|
Excess tax benefits
from stock award exercises
|
(30,238)
|
(28,442)
|
Deferred income
taxes
|
13,826
|
(102,039)
|
Equity investment
income, net
|
2,257
|
(496)
|
Other non-cash
(income) charges and loss on disposal of assets
|
22,861
|
(69,050)
|
Changes in operating
assets and liabilities, other than from acquisitions and
divestitures:
|
|
|
Accounts
receivable
|
(65,079)
|
(17,829)
|
Inventories
|
(10,731)
|
924
|
Other receivables and
other current assets
|
(95,580)
|
(65,349)
|
Other long-term
assets
|
2,158
|
(1,220)
|
Accounts
payable
|
(46,022)
|
(94,894)
|
Accrued compensation
and benefits
|
19,912
|
(14,279)
|
Other current
liabilities
|
31,970
|
82,905
|
Income
taxes
|
2,886
|
(9,182)
|
Other long-term
liabilities
|
(17,707)
|
36,713
|
Net cash provided by
operating activities
|
681,498
|
686,026
|
Cash flows from
investing activities:
|
|
|
Additions of property
and equipment, net
|
(278,593)
|
(258,396)
|
Acquisitions
|
(98,442)
|
(152,112)
|
Proceeds from asset
and business sales
|
215
|
64,363
|
Purchase of
investments available for sale
|
(6,117)
|
(3,286)
|
Purchase of
investments held-to-maturity
|
(121,333)
|
(1,032)
|
Proceeds from sale of
investments available for sale
|
1,277
|
1,091
|
Proceeds from sale of
investments held to maturity
|
64,561
|
1,376
|
Purchase of intangible
assets and equity investment
|
(4,760)
|
(7)
|
Distributions received
on equity investments
|
337
|
116
|
Net cash used in
investing activities
|
(442,855)
|
(347,887)
|
Cash flows from
financing activities:
|
|
|
Borrowings
|
33,136,743
|
33,445,567
|
Payments on long-term
debt and other financing costs
|
(32,788,307)
|
(33,696,216)
|
Deferred financing
costs and debt redemption costs
|
(106,937)
|
(716)
|
Distributions to
noncontrolling interests
|
(65,818)
|
(65,206)
|
Stock award exercises
and other share issuances, net
|
7,274
|
8,819
|
Excess tax benefits
from stock award exercises
|
30,238
|
28,442
|
Contributions from
noncontrolling interests
|
28,265
|
20,132
|
Proceeds from sales of
additional noncontrolling interests
|
933
|
5,903
|
Purchases from
noncontrolling interests
|
(5,743)
|
(474)
|
Net cash provided by
(used in) financing activities
|
236,648
|
(253,749)
|
Effect of exchange
rate changes on cash and cash equivalents
|
(567)
|
(234)
|
Net increase in cash
and cash equivalents
|
474,724
|
84,156
|
Cash and cash
equivalents at beginning of the year
|
946,249
|
533,748
|
Cash and cash
equivalents at end of the year
|
$
1,420,973
|
$
617,904
|
DAVITA HEALTHCARE
PARTNERS INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(unaudited)
|
(dollars in
thousands, except per share data)
|
|
|
June
30,
2014
|
December
31, 2013
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
1,420,973
|
$
946,249
|
Short-term
investments
|
63,835
|
6,801
|
Accounts receivable,
less allowance of $244,878 and $237,143
|
1,550,252
|
1,485,163
|
Inventories
|
99,650
|
88,805
|
Other
receivables
|
455,620
|
349,090
|
Other current
assets
|
164,591
|
176,414
|
Income tax
receivable
|
6,965
|
10,315
|
Deferred income
taxes
|
399,361
|
409,441
|
Total current
assets
|
4,161,247
|
3,472,278
|
Property and
equipment, net of accumulated depreciation of $1,936,494 and
$1,778,259
|
2,290,844
|
2,189,411
|
Intangibles, net of
accumulated amortization of $565,839 and $483,773
|
2,022,875
|
2,024,373
|
Equity
investments
|
42,842
|
40,686
|
Long-term
investments
|
87,614
|
79,557
|
Other long-term
assets
|
66,106
|
79,598
|
Goodwill
|
9,254,043
|
9,212,974
|
|
$ 17,925,571
|
$ 17,098,877
|
LIABILITIES AND
EQUITY
|
|
|
Accounts
payable
|
$
405,751
|
$
435,465
|
Other
liabilities
|
465,242
|
464,422
|
Accrued compensation
and benefits
|
626,617
|
603,013
|
Medical
payables
|
304,551
|
287,452
|
Loss contingency
reserve
|
397,000
|
397,000
|
Senior notes (6 ⅜%
Senior Notes)
|
291,907
|
─
|
Current portion of
long-term debt
|
117,080
|
274,697
|
Total current
liabilities
|
2,608,148
|
2,462,049
|
Long-term
debt
|
8,390,578
|
8,141,231
|
Other long-term
liabilities
|
386,033
|
380,337
|
Deferred income
taxes
|
823,745
|
812,419
|
Total
liabilities
|
12,208,504
|
11,796,036
|
Commitments and
contingencies
|
|
|
Noncontrolling
interests subject to put provisions
|
760,242
|
697,300
|
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; 214,759,091 and
213,163,248 shares issued and outstanding at June 30, 2014 and at
December 31, 2013, respectively)
|
215
|
213
|
Additional paid-in
capital
|
1,089,929
|
1,070,922
|
Retained
earnings
|
3,694,961
|
3,363,989
|
Accumulated other
comprehensive income (loss)
|
666
|
(2,645)
|
Total DaVita
HealthCare Partners Inc. shareholders' equity
|
4,785,771
|
4,432,479
|
Noncontrolling
interests not subject to put provisions
|
171,054
|
173,062
|
Total
equity
|
4,956,825
|
4,605,541
|
|
$ 17,925,571
|
$ 17,098,877
|
DAVITA HEALTHCARE
PARTNERS INC.
|
|
SUPPLEMENTAL
FINANCIAL DATA
|
|
(unaudited)
|
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
|
|
Three months
ended
|
Six
months
ended
June 30,
2014
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
1. Consolidated
Financial Results:
|
|
|
|
|
Consolidated net
revenues
|
$ 3,172
|
$ 3,043
|
$ 2,872
|
$ 6,215
|
Operating
income
|
$ 484.3
|
$ 441.2
|
$ 522.0
|
$ 925.5
|
Operating income
margin
|
15.3%
|
14.5%
|
18.2%
|
14.9%
|
Operating income
excluding a contingent earn-out obligation
adjustment(1)
|
$ 484.3
|
$ 441.2
|
$ 465.0
|
$ 925.5
|
Operating income
margin excluding a contingent earn-out obligation
adjustment(1)
|
15.3%
|
14.5%
|
16.2%
|
14.9%
|
Income from continuing
operations attributable to DaVita HealthCare Partners
Inc.
|
$ 147.7
|
$ 183.3
|
$ 254.4
|
$ 331.0
|
Income from continuing
operations attributable to DaVita HealthCare Partners Inc.
excluding debt financing charges and a contingent earn-out
obligation adjustment, which are all net of related
tax(1)
|
$ 205.7
|
$ 183.3
|
$ 197.4
|
$ 389.0
|
Diluted income from
continuing operations per share attributable to DaVita HealthCare
Partners Inc.
|
$ 0.68
|
$ 0.85
|
$ 1.18
|
$ 1.53
|
Diluted income from
continuing operations per share attributable to DaVita HealthCare
Partners Inc. excluding debt financing charges and a contingent
earn-out obligation adjustment, which are all net of related
tax(1)
|
$ 0.95
|
$ 0.85
|
$ 0.92
|
$ 1.80
|
|
|
|
|
|
2. Consolidated
Business Metrics:
|
|
|
|
|
Expenses
|
|
|
|
|
General and
administrative expenses as a percent of consolidated net
revenues(2)
|
9.4%
|
9.3%
|
9.3%
|
9.4%
|
Consolidated effective
tax rate
|
35.7%
|
37.1%
|
31.3%
|
36.5%
|
Consolidated effective
tax rate attributable to DaVita HealthCare Partners
Inc.(1)
|
40.5%
|
40.5%
|
33.6%
|
40.5%
|
Adjusted consolidated
effective tax rate attributable to DaVita HealthCare Partners
Inc.(1)
|
40.5%
|
40.5%
|
39.5%
|
40.5%
|
|
|
|
|
|
3. Summary of
Division Financial Results:
|
|
|
|
|
Net
revenues
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
Net dialysis and
related lab services revenues
|
$ 2,025
|
$ 1,958
|
$ 1,922
|
$ 3,983
|
Net ancillary services
and strategic initiatives revenues, including international
dialysis operations
|
274
|
257
|
200
|
530
|
Elimination of
intersegment revenues
|
(14)
|
(13)
|
(11)
|
(26)
|
Total kidney care net
revenues
|
2,285
|
2,202
|
2,111
|
4,487
|
Net HCP
revenues
|
887
|
841
|
761
|
1,728
|
Total net consolidated
revenues
|
$ 3,172
|
$ 3,043
|
$ 2,872
|
$ 6,215
|
Operating
income
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
Dialysis and related
lab services operating income
|
$
408
|
$
387
|
$ 402
|
$ 795
|
Other – Ancillary
services and strategic initiatives, including international
dialysis operations operating losses
|
(2)
|
2
|
(7)
|
─
|
Corporate support and
related long-term incentive compensation
|
(4)
|
(2)
|
(11)
|
(5)
|
Contingent earn-out
obligation adjustment
|
─
|
─
|
57
|
─
|
Total kidney care
operating income
|
402
|
387
|
441
|
790
|
HCP operating
income
|
82
|
54
|
81
|
136
|
Total consolidated
operating income
|
$
484
|
$
441
|
$ 522
|
$ 926
|
DAVITA HEALTHCARE
PARTNERS 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,
2014
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
4. Summary of
Reportable Segment Financial Results:
|
|
|
|
|
Dialysis and
Related Lab Services
|
|
|
|
|
Revenue:
|
|
|
|
|
Patient services
revenues
|
$ 2,106
|
$ 2,037
|
$ 1,988
|
$ 4,142
|
Provision for
uncollectible accounts
|
(84)
|
(82)
|
(69)
|
(166)
|
Net patient service
operating revenues
|
2,022
|
1,955
|
1,919
|
3,976
|
Other
revenues
|
3
|
3
|
3
|
7
|
Total net operating
revenues
|
$ 2,025
|
$ 1,958
|
$ 1,922
|
$ 3,983
|
Operating
expenses:
|
|
|
|
|
Patient care
cost
|
$ 1,358
|
$ 1,323
|
$ 1,265
|
$ 2,680
|
General and
administrative
|
164
|
155
|
169
|
319
|
Depreciation and
amortization
|
99
|
96
|
89
|
196
|
Equity investment
income
|
(4)
|
(3)
|
(3)
|
(7)
|
Total operating
expenses
|
1,617
|
1,571
|
1,520
|
3,188
|
Segment operating
income
|
$
408
|
$
387
|
$
402
|
$
795
|
HCP
|
|
|
|
|
Revenue:
|
|
|
|
|
HCP capitated
revenues
|
$
783
|
$
772
|
$ 693
|
$ 1,555
|
Patient services
revenues
|
62
|
58
|
52
|
119
|
Provision for
uncollectible accounts
|
(4)
|
(2)
|
(3)
|
(5)
|
Net patient service
operating revenues
|
58
|
56
|
49
|
114
|
Other
revenues
|
46
|
13
|
19
|
59
|
Total net operating
revenues
|
$ 887
|
$ 841
|
$ 761
|
$ 1,728
|
Operating
expenses:
|
|
|
|
|
Patient care
cost
|
$ 688
|
$ 672
|
$ 590
|
$ 1,360
|
General and
administrative
|
77
|
78
|
56
|
155
|
Depreciation and
amortization
|
42
|
42
|
39
|
84
|
Equity investment
income
|
(2)
|
(5)
|
(5)
|
(7)
|
Total operating
expenses
|
805
|
787
|
680
|
1,592
|
Segment operating
income
|
$
82
|
$
54
|
$
81
|
$
136
|
|
|
|
|
|
5. Dialysis and
Related Lab Services Business Metrics:
|
|
|
|
|
Volume
|
|
|
|
|
Treatments
|
6,196,394
|
5,975,627
|
5,867,973
|
12,172,021
|
Number of treatment
days
|
78.0
|
76.4
|
78.0
|
154.4
|
Treatments per
day
|
79,441
|
78,215
|
75,230
|
78,834
|
Per day year over year
increase
|
5.6%
|
6.3%
|
7.6%
|
5.9%
|
Non-acquired growth
year over year
|
5.0%
|
5.5%
|
5.0%
|
5.0%
|
Normalized
non-acquired growth year over year
|
5.0%
|
5.0%
|
5.0%
|
5.0%
|
Operating
revenues before provision for uncollectible
accounts
|
|
|
|
|
Dialysis and related
lab services revenue per treatment
|
$ 339.82
|
$ 340.81
|
$ 338.86
|
$ 340.31
|
Per treatment
(decrease) increase from previous quarter
|
(0.3%)
|
0.2%
|
(0.5%)
|
─
|
Per treatment increase
from previous year
|
0.3%
|
0.1%
|
1.9%
|
0.2%
|
Percent of net
consolidated revenues
|
63.5%
|
64.1%
|
66.6%
|
63.9%
|
DAVITA HEALTHCARE
PARTNERS 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,
2014
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
5. Dialysis and
Related Lab Services Business Metrics:
(continued)
|
|
|
|
|
Expenses
|
|
|
|
|
Patient care
costs
|
|
|
|
|
Percent of total
segment operating revenues
|
67.1%
|
67.5%
|
65.8%
|
67.3%
|
Per
treatment
|
$ 219.16
|
$ 221.31
|
$ 215.70
|
$ 220.22
|
Per treatment
(decrease) increase from previous quarter
|
(1.0%)
|
2.0%
|
(0.2%)
|
─
|
Per treatment increase
from previous year
|
1.6%
|
2.4%
|
0.8%
|
2.0%
|
General and
administrative expenses
|
|
|
|
|
Percent of total
segment operating revenues
|
8.1%
|
7.9%
|
8.7%
|
8.0%
|
Per
treatment
|
$ 26.47
|
$ 26.00
|
$ 28.86
|
$ 26.24
|
Per treatment increase
(decrease) from previous quarter
|
1.8%
|
(13.9%)
|
(4.1%)
|
─
|
Per treatment
(decrease) increase from previous year
|
(8.3%)
|
(13.6%)
|
1.4%
|
(11.0%)
|
Accounts
receivable
|
|
|
|
|
Net
receivables
|
$ 1,148
|
$ 1,168
|
$ 1,117
|
$
─
|
DSO
|
53
|
55
|
54
|
─
|
Provision for
uncollectible accounts as a percentage of net revenues
|
4.0%
|
4.0%
|
3.5%
|
4.0%
|
|
|
|
|
|
6. HCP Business
Metrics:
|
|
|
|
|
Capitated
membership
|
|
|
|
|
Total
|
829,000
|
795,000
|
733,000
|
─
|
Member
months
|
2,456,000
|
2,373,000
|
2,209,000
|
4,829,000
|
Capitated revenues
by sources
|
|
|
|
|
Commercial
revenues
|
$ 177
|
$ 187
|
$
176
|
$
363
|
Senior
revenues
|
576
|
565
|
496
|
1,141
|
Medicaid
revenues
|
30
|
20
|
21
|
51
|
Total capitated
revenues
|
$ 783
|
$ 772
|
$
693
|
$ 1,555
|
Other
|
|
|
|
|
Total care dollars
under management(1)
|
$ 1,125
|
$ 1,083
|
$
997
|
$ 2,208
|
Ratio of operating
income to total care dollars under management
|
7.3%
|
5.0%
|
8.2%
|
6.2%
|
Full time
clinicians
|
1,134
|
1,129
|
1,073
|
─
|
IPA primary care
physicians
|
3,402
|
3,337
|
2,846
|
─
|
|
|
|
|
|
7. Cash
Flow:
|
|
|
|
|
Operating cash
flow
|
$ 262.4
|
$ 419.1
|
$ 306.8
|
$ 681.5
|
Operating cash flow,
last twelve months
|
$ 1,768.8
|
$ 1,813.2
|
$ 1,252.9
|
$
─
|
Free cash
flow(1)
|
$ 165.2
|
$ 336.6
|
$ 218.3
|
$ 501.8
|
Free cash flow, last
twelve months(1)
|
$ 1,350.2
|
$ 1,403.3
|
$ 871.2
|
$
─
|
Capital
expenditures:
|
|
|
|
|
Routine
maintenance/IT/other
|
$ 64.5
|
$ 49.3
|
$ 58.3
|
$ 113.9
|
Development and
relocations
|
$ 87.5
|
$ 77.2
|
$ 83.4
|
$ 165.4
|
Acquisition
expenditures
|
$ 30.6
|
$ 67.9
|
$ 60.6
|
$ 98.4
|
DAVITA HEALTHCARE
PARTNERS INC.
|
SUPPLEMENTAL
FINANCIAL DATA—continued
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
|
|
Three months
ended
|
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
8. Debt and
Capital Structure:
|
|
|
|
|
Total
debt(3)
|
$ 8,817
|
$ 8,381
|
$ 8,496
|
|
Net debt, net of cash
and cash equivalents(3)
|
$ 7,396
|
$ 7,273
|
$ 7,878
|
|
Leverage ratio (see
calculation on page 12)
|
2.98x
|
2.98x
|
3.39x
|
|
Overall weighted
average effective interest rate during the quarter
|
4.85%
|
4.89%
|
4.86%
|
|
Overall weighted
average effective interest rate at end of the quarter
|
4.56%
|
4.87%
|
4.85%
|
|
Weighted average
effective interest rate on the Senior Secured Credit Facilities at
end of the quarter
|
3.51%
|
4.19%
|
4.18%
|
|
Fixed and economically
fixed interest rates as a percentage of our total
debt(4)
|
59%
|
60%
|
61%
|
|
Fixed and economically
fixed interest rates, including our interest rate cap agreements,
as a percentage of our total debt(4)
|
90%
|
93%
|
93%
|
|
|
|
|
|
|
9. Clinical:
(quarterly averages)
|
|
|
|
|
Dialysis adequacy -%
of patients with Kt/V > 1.2 at the end of the quarter
|
98%
|
98%
|
98%
|
|
Dialysis patients with
arteriovenous fistulas placed
|
73%
|
72%
|
72%
|
|
_________________
|
|
(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. General and administrative expenses also includes
other certain corporate support and related long-term incentive
compensation.
|
(3) The reported balance
sheet amount at June 30, 2014, excludes $17.5 million of debt
discount associated with our New Term Loan B. In addition, the
reported balance sheet amounts at March 31, 2014, and June 30,
2013, exclude $16.7 million and $19.6 million, respectively, of
debt discounts associated with our then existing Term Loan B and
Term Loan B-2.
|
(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, 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 2.50% on $2.75 billion
of outstanding principal debt on the Term Loan B as a result of
interest rate cap agreements. The remaining $765 million
outstanding principal balance of the Term Loan B is subject to
LIBOR-based interest rate volatility above a floor of
0.75%.
|
|
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
June 30,
2014
|
Income from
continuing operations attributable to DaVita HealthCare Partners
Inc.
|
$
679,878
|
Income
taxes
|
462,415
|
Interest
expense
|
396,273
|
Depreciation and
amortization
|
560,725
|
Loss contingency
reserve
|
97,000
|
Noncontrolling
interests and equity investment income, net
|
133,014
|
Stock-based
compensation
|
57,431
|
Debt refinancing
charges
|
97,548
|
Other
|
42,293
|
"Consolidated
EBITDA"
|
$
2,526,577
|
|
|
|
June 30,
2014
|
Total debt, excluding
debt discount of $17.5 million
|
$
8,817,065
|
Letters of credit
issued
|
83,607
|
|
8,900,672
|
Less: Cash and cash
equivalents (less HCP's physician owned entities cash)
|
(1,367,871)
|
Consolidated net
debt
|
$
7,532,801
|
Last twelve months
"Consolidated EBITDA"
|
$
2,526,577
|
Leverage
ratio
|
2.98x
|
In accordance with
the Credit Agreement, the Company's leverage ratio cannot exceed
5.00 to 1.00 as of June 30, 2014. At that date the Company's
leverage ratio did not exceed 5.00 to 1.00.
|
DAVITA HEALTHCARE
PARTNERS INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands except for per share data)
|
|
1.
Income from continuing operations and diluted income from
continuing operations per share attributable to DaVita HealthCare
Partners Inc. excluding debt refinancing charges, a contingent
earn-out obligation adjustment and a loss contingency reserve, net
of related tax.
|
|
We believe that
income from continuing operations attributable to DaVita HealthCare
Partners Inc. excluding debt refinancing charges, a contingent
earn-out obligation adjustment and a loss contingency reserve, 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 unusual amounts related to the debt refinancing charges
that resulted from the refinancing of our Senior Secured Credit
Facilities, the redemption of the $775 million 6 ⅜% Senior Notes,
as well as the termination of certain interest rate swap
agreements, an adjustment to HCP's contingent earn-out obligation
and a loss contingency reserve related to the 2010 and 2011 U.S.
Attorney Physician Relationship Investigations and accordingly, is
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 debt refinancing charges, a contingent earn-out
obligation adjustment and a loss contingency reserve, net of
related tax:
|
Three months
ended
|
Six months
ended
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
June
30,
2014
|
June
30,
2013
|
Income from
continuing operations attributable to DaVita HealthCare Partners
Inc.
|
$ 147,683
|
$183,289
|
$ 254,376
|
$ 330,972
|
$ 271,291
|
Add
(Less):
|
|
|
|
|
|
Debt refinancing
charges
|
97,548
|
─
|
─
|
97,548
|
─
|
Contingent earn-out
obligation adjustment
|
─
|
─
|
(56,977)
|
─
|
(56,977)
|
Loss contingency
reserve
|
─
|
─
|
─
|
─
|
300,000
|
Less: Related
income tax
|
(39,507)
|
─
|
─
|
(39,507)
|
(120,000)
|
|
$ 205,724
|
$183,289
|
$ 197,399
|
$ 389,013
|
$ 394,314
|
Diluted income
from continuing operations per share attributable to DaVita
HealthCare Partners Inc. excluding debt refinancing charges, a
contingent earn-out obligation adjustment and a loss contingency
reserve, net of tax:
|
Three months
ended
|
Six months
ended
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
June
30,
2014
|
June
30,
2013
|
Diluted income from
continuing operations per share attributable to DaVita HealthCare
Partners Inc.
|
$
0.68
|
$ 0.85
|
$ 1.18
|
$ 1.53
|
$ 1.26
|
Add
(Less):
|
|
|
|
|
|
Debt refinancing
charges
|
0.27
|
─
|
─
|
0.27
|
─
|
Contingent earn-out
obligation adjustment
|
─
|
─
|
(0.26)
|
─
|
(0.26)
|
Loss contingency
reserve
|
─
|
─
|
─
|
─
|
0.84
|
|
$ 0.95
|
$ 0.85
|
$ 0.92
|
$ 1.80
|
$ 1.84
|
DAVITA HEALTHCARE
PARTNERS 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 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 a different 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., further adjusted to exclude the amortization of
intangible assets associated with acquisitions:
|
Three months
ended
|
Six months
ended
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
June
30,
2014
|
June
30,
2013
|
Adjusted income from
continuing operations attributable to DaVita HealthCare Partners
Inc.
|
$ 205,724
|
$ 183,289
|
$ 197,399
|
$ 389,013
|
$ 394,314
|
Add:
|
|
|
|
|
|
Amortization of
intangible assets associated with acquisitions for the dialysis and
ancillary operations
|
6,713
|
6,867
|
6,827
|
13,580
|
13,709
|
Amortization of
intangible assets associated with acquisitions for the HCP
operations
|
35,298
|
34,852
|
33,088
|
70,150
|
66,450
|
Related income
tax
|
(17,014)
|
(16,896)
|
(15,767)
|
(33,910)
|
(31,865)
|
|
$ 230,721
|
$ 208,112
|
$ 221,547
|
$ 438,833
|
$ 442,608
|
|
|
|
|
|
|
Adjusted diluted
income from continuing operations per share attributable to DaVita
HealthCare Partners Inc.
|
$ 0.95
|
$ 0.85
|
$ 0.92
|
$ 1.80
|
$ 1.84
|
Add:
|
|
|
|
|
|
Amortization of
intangible assets per share associated with acquisitions for the
dialysis and ancillary operations, net of tax.
|
0.02
|
0.02
|
0.02
|
0.04
|
0.04
|
Amortization of
intangible assets per share associated with acquisitions for the
HCP operations, net of tax
|
0.09
|
0.10
|
0.09
|
0.19
|
0.18
|
|
$ 1.06
|
$ 0.97
|
$ 1.03
|
$ 2.03
|
$ 2.06
|
DAVITA HEALTHCARE
PARTNERS INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
2.
Operating income excluding a pre-tax contingent earn-out obligation
adjustment and a pre-tax loss contingency reserve.
|
|
We believe that
operating income excluding a pre-tax contingent earn-out obligation
and a pre-tax loss contingency reserve, enhances a user's
understanding of our normal operating income for these periods by
providing a measure that is meaningful because it excludes unusual
amounts for an adjustment for HCP's contingent earn-out obligation
adjustment and for a loss contingency reserve related to the 2010
and 2011 U.S. Attorney Physician Relationship Investigations, and
accordingly, is 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 contingent earn-out obligation adjustment and a
pre-tax loss contingency reserve:
|
Three months
ended
|
Six months
ended
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
June
30,
2014
|
June
30,
2013
|
Operating
income
|
$ 484,295
|
$ 441,225
|
$ 522,020
|
$ 925,520
|
$ 688,881
|
Add
(Less):
|
|
|
|
|
|
Contingent earn-out
obligation adjustment
|
─
|
─
|
(56,977)
|
─
|
(56,977)
|
Loss contingency
reserve
|
─
|
─
|
─
|
─
|
300,000
|
Adjusted operating
income
|
$ 484,295
|
$ 441,225
|
$ 465,043
|
$ 925,520
|
$ 931,904
|
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 contingent earn-out obligation adjustment, enhances an investor's
understanding of DaVita HealthCare Partners Inc.'s effective income
tax rate and DaVita HealthCare Partners 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 an unusual amount related to an adjustment to
HCP's contingent earn-out obligation adjustment, 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
|
Six
months
ended
June 30,
2014
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
Income from
continuing operations before income taxes
|
$ 282,308
|
$ 336,588
|
$ 412,550
|
$ 618,896
|
Income tax
expense
|
$ 100,887
|
$ 124,851
|
$ 129,192
|
$ 225,738
|
Effective income tax
rate
|
35.7%
|
37.1%
|
31.3%
|
36.5%
|
|
|
|
|
Three months
ended
|
Six
months
ended
June 30,
2014
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
Income from
continuing operations before income taxes
|
$ 282,308
|
$ 336,588
|
$ 412,550
|
$ 618,896
|
Less:
Noncontrolling owners' income primarily attributable to non-tax
paying entities
|
(34,105)
|
(28,539)
|
(29,294)
|
(62,644)
|
Income before income
taxes attributable to DaVita HealthCare Partners Inc.
|
$ 248,203
|
$ 308,049
|
$ 383,256
|
$ 556,252
|
|
|
|
|
|
Income tax
expense
|
100,887
|
124,851
|
$ 129,192
|
$ 225,738
|
Less: Income tax
attributable to noncontrolling interests
|
(367)
|
(91)
|
(312)
|
(458)
|
Income tax
attributable to DaVita HealthCare Partners Inc.
|
$ 100,520
|
$ 124,760
|
$ 128,880
|
$ 225,280
|
|
|
|
|
|
Effective income tax
rate attributable to DaVita HealthCare Partners Inc.
|
40.5%
|
40.5%
|
33.6%
|
40.5%
|
DAVITA HEALTHCARE
PARTNERS INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Three months
ended
|
Six
months
ended
June 30,
2014
|
Adjusted effective
income tax rates attributable to DaVita HealthCare Partners Inc.
excluding a contingent earn-out obligation
adjustment:
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
Income from
continuing operations before income taxes
|
$ 282,308
|
$ 336,588
|
$ 412,550
|
$ 618,896
|
Less:
Contingent earn-out obligation adjustment
|
─
|
─
|
(56,977)
|
─
|
|
282,308
|
336,588
|
355,573
|
618,896
|
Less:
Noncontrolling owners' income primarily attributable to non-
tax paying entities
|
(34,105)
|
(28,539)
|
(29,294)
|
(62,644)
|
Adjusted income
before income taxes attributable to DaVita HealthCare Partners
Inc.
|
$ 248,203
|
$ 308,049
|
$ 326,279
|
$ 556,252
|
Income tax
expense
|
$ 100,887
|
$ 124,851
|
$ 129,192
|
$ 225,738
|
Less: Income tax
attributable to noncontrolling interests
|
(367)
|
(91)
|
(312)
|
(458)
|
Adjusted income tax
attributable to DaVita HealthCare Partners Inc.
|
$ 100,520
|
$ 124,760
|
$ 128,880
|
$ 225,280
|
Adjusted effective
income tax rate attributable to DaVita HealthCare Partners
Inc.
|
40.5%
|
40.5%
|
39.5%
|
40.5%
|
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
|
Six months
ended
June 30,
2014
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
Cash provided by
operating activities
|
$ 262,391
|
$ 419,107
|
$ 306,819
|
$ 681,498
|
Less:
Distributions to noncontrolling interests
|
(32,671)
|
(33,147)
|
(30,280)
|
(65,818)
|
Cash provided by
operating activities attributable to DaVita HealthCare Partners
Inc.
|
229,720
|
385,960
|
276,539
|
615,680
|
Less: Expenditures
for routine maintenance and information technology
|
(64,549)
|
(49,349)
|
(58,264)
|
(113,898)
|
Free cash
flow
|
$ 165,171
|
$ 336,611
|
$ 218,275
|
$ 501,782
|
|
Rolling 12-Month
Period
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
Cash provided by
operating activities
|
$ 1,768,813
|
$ 1,813,241
|
$ 1,252,895
|
Less:
Distributions to noncontrolling interests
|
(139,938)
|
(137,547)
|
(128,232)
|
Cash provided by
operating activities attributable to DaVita HealthCare Partners
Inc.
|
1,628,875
|
1,675,694
|
1,124,663
|
Less: Expenditures
for routine maintenance and information technology.
|
(278,707)
|
(272,422)
|
(253,473)
|
Free cash
flow
|
$ 1,350,168
|
$ 1,403,272
|
$ 871,190
|
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 our managed care administrative services agreements with
hospitals, HCP 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 HCP does not assume the
direct financial risk, HCP recognizes the surplus of institutional
revenue less institutional expense as HCP net revenue. In addition
to revenues recognized for financial reporting purposes, HCP
measures its total care dollars under management, which includes
the 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 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 to the periods indicated.
|
|
|
Three months
ended
|
Six
months
ended
June 30,
2014
|
|
June
30,
2014
|
March
31,
2014
|
June
30,
2013
|
Medical
revenues
|
$ 839,877
|
$ 827,831
|
$ 741,790
|
$ 1,667,709
|
Less: Risk share
revenue, net
|
(8,924)
|
(29,558)
|
(20,504)
|
(38,482)
|
Add: Institutional
capitation amounts
|
294,244
|
284,389
|
276,003
|
578,632
|
Total care dollars
under management
|
$ 1,125,197
|
$ 1,082,662
|
$ 997,289
|
$ 2,207,859
|
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SOURCE DaVita HealthCare Partners Inc.