EL SEGUNDO, Calif., April 27 /PRNewswire-FirstCall/ -- DaVita Inc. (NYSE: DVA) today announced results for the quarter ended March 31, 2009. Net income attributable to DaVita Inc. for the three months ended March 31, 2009 was $96.2 million, or $0.92 per share, as compared to $86.9 million, or $0.80 per share, for the same period of 2008. (Logo: http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO) Financial and operating highlights include: -- Significant New Accounting Policies: On January 1, 2009 we adopted SFAS No. 160 Noncontrolling Interests in Consolidated Financial Statements and implemented SEC Topic No. D-98 Classification and Measurement of Redeemable Securities. These standards changed the presentation and measurement of noncontrolling interests in our financial statements for all periods presented, which primarily affected the presentation of operating income, operating cash flows and the effective income tax rate. See reconciliations for non-GAAP measures beginning on page 10 of this release for further details of the impact on our financial statements of adopting these standards. -- Cash Flow: For the rolling 12 months ended March 31, 2009 operating cash flow was $640 million and free cash flow was $468 million. For the three months ended March 31, 2009 operating cash flow was $134 million and free cash flow was $90 million. -- Operating Income: Operating income for the three months ended March 31, 2009 was $221 million, as compared to $206 million for the same period of 2008. -- Volume: Total treatments for the first quarter of 2009 were 4,082,439, or 53,365 treatments per day, representing a per day increase of 5.0% over the first quarter of 2008. Non-acquired treatment growth in the quarter was 4.0% over the prior year's first quarter. -- Effective Tax Rate: Our effective tax rate was 37.4% for the three months ended March 31, 2009. This effective tax rate is impacted by the amount of third parties owners' income attributable to non-tax paying entities. The effective tax rate attributable to DaVita Inc. was 40.2% for the three months ended March 31, 2009 which was in the range of our previous stated guidance. Our effective tax rate for 2009 is projected to be in the range of 37.0% to 38.0% and our 2009 effective tax rate attributable to DaVita Inc. is still projected to be in a range of 39.5% to 40.5%. -- Share Repurchases: During the first quarter of 2009 we repurchased a total of 744,400 of our common stock for $32.0 million, or an average price of $43.01 per share, pursuant to previously announced Board authorizations. We have not repurchased any additional shares of our common stock subsequent to March 31, 2009. -- Center Activity: As of March 31, 2009, we operated or provided administrative services at 1,475 outpatient dialysis centers serving approximately 114,000 patients, of which 1,446 centers are consolidated in our financial statements. During the first quarter of 2009, we acquired seven centers, opened 18 new centers, merged one center and closed one center. Outlook Our operating income guidance attributable to DaVita Inc. for 2009 remains unchanged at a range of $820-$880 million. However, as a result of adopting SFAS No. 160, the classification of noncontrolling interests was changed to no longer be deducted from our operating income as previously reported. Therefore, our operating income guidance based on the current presentation under SFAS No. 160 is projected to be in the range of $870-$930 million, even though the underlying fundamental economics of our business have not changed. In addition, our operating cash flow guidance is now projected to be in the range of $550-$600 million. See supplemental financial data on page 8 for further details. These projections and the underlying assumptions involve significant risks and uncertainties, including those described below and actual results may vary significantly from these current projections. DaVita will be holding a conference call to discuss its results for the three months ended March 31, 2009 on April 28, 2009 at 8:30 a.m. Eastern Time. The dial in number is (800) 399-4406. A replay of the conference call will be available on DaVita's official web page, http://www.davita.com/, for the following 30 days. This release contains forward-looking statements, including statements related to our 2009 operating results and 2009 expected effective tax rate and the expected effective tax rate attributable to DaVita Inc. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, competition, accounting estimates and the risk factors set forth in our SEC filings, including our Form 10-K for the year ended December 31, 2008. The forward-looking statements should be considered in light of these risks and uncertainties. These risks and uncertainties include those relating to: -- the concentration of profits generated from commercial payor plans, -- continued downward pressure on average realized payment rates from commercial payors, which may result in the loss of revenue or patients, -- a reduction in the number of patients under higher-paying commercial plans, -- a reduction in government payment rates or the structure of payments under the Medicare ESRD Program which result in lower reimbursement for services we provide to Medicare patients, -- changes in pharmaceutical or anemia management practice patterns, payment policies, or pharmaceutical pricing, -- our ability to maintain contracts with physician medical directors, -- legal compliance risks, including our continued compliance with complex government regulations and compliance with the corporate integrity agreement applicable to the dialysis centers acquired from Gambro Healthcare and assumed in connection with such acquisition, and -- the resolution of ongoing investigations by various federal and state governmental agencies. We undertake no obligation to update or revise any forward-looking statements, whether as a result of changes in underlying factors, new information, future events or otherwise. This release contains non-GAAP financial measures. For reconciliations of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, see the attached reconciliation schedules. DAVITA INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) (dollars in thousands, except per share data) Three months ended March 31, 2009 2008 Net operating revenues $1,447,640 $1,344,724 Operating expenses and charges: Patient care costs 1,005,886 930,209 General and administrative 127,273 120,765 Depreciation and amortization 57,123 52,811 Provision for uncollectible accounts 36,736 34,631 Equity investment loss 18 527 Total operating expenses and charges 1,227,036 1,138,943 Operating income 220,604 205,781 Debt expense (48,301) (59,066) Other income 754 4,863 Income before income taxes 173,057 151,578 Income tax expense 64,783 55,570 Net income 108,274 96,008 Less: Net income attributable to noncontrolling interests (12,063) (9,074) Net income attributable to DaVita Inc. $96,211 $86,934 Earnings per share: Basic earnings per share attributable to DaVita Inc. $0.93 $0.81 Diluted earnings per share attributable to DaVita Inc. $0.92 $0.80 Weighted average shares for earnings per share: Basic 103,878,417 107,367,356 Diluted 104,409,026 108,239,360 DAVITA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands) Three months ended March 31, 2009 2008 Cash flows from operating activities: Net income attributable to DaVita Inc. $ 96,211 $86,934 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 57,123 52,811 Stock-based compensation expense 11,009 9,548 Tax benefits from stock award exercises 2,161 2,618 Excess tax benefits from stock award exercises (779) (1,411) Deferred income taxes 16,430 (7,439) Net income attributable to noncontrolling interests 12,063 9,074 Equity investment loss 18 527 Loss on disposal of assets 3,629 1,355 Non-cash debt and non-cash rent charges 3,422 4,074 Changes in operating assets and liabilities, other than from acquisitions and divestitures: Accounts receivable (13,757) (33,168) Inventories 13,055 3,499 Other receivables and other current assets 41,417 16,846 Other long-term assets 1,422 (537) Accounts payable (65,411) (39,217) Accrued compensation and benefits (21,403) (47,571) Other current liabilities (54,116) (6,500) Income taxes 40,339 56,653 Other long-term liabilities (8,584) (184) Net cash provided by operating activities 134,249 107,912 Cash flows from investing activities: Additions of property and equipment, net (73,203) (64,673) Acquisitions (39,828) (5,671) Proceeds from asset sales 4,199 23 Purchase of investments available for sale (514) (839) Purchase of investments held-to-maturity (6) (109) Proceeds from sale of investments available for sale 10,669 4,955 Proceeds from maturities of investments held-to-maturity 20 73 Purchase of intangible assets and other - (20) Net cash used in investing activities (98,663) (66,261) Cash flows from financing activities: Borrowings 2,619,540 4,050,363 Payments on long-term debt (2,630,739) (4,052,066) Deferred financing costs - (130) Purchase of treasury stock (32,016) (7,144) Excess tax benefits from stock award exercises 779 1,411 Stock award exercises and other share issuances, net 9,102 8,525 Distributions to noncontrolling interests (13,567) (16,888) Contributions from noncontrolling interests 4,460 5,103 Proceeds from sales of additional noncontrolling interests 3,081 4,612 Purchase of noncontrolling interests (1,424) (3,167) Net cash used in financing activities (40,784) (9,381) Net (decrease) increase in cash and cash equivalents (5,198) 32,270 Cash and cash equivalents at beginning of period 410,881 447,046 Cash and cash equivalents at end of period $405,683 $479,316 DAVITA INC. CONSOLIDATED BALANCE SHEETS (unaudited) (dollars in thousands, except per share data) ASSETS March 31, December 31, 2009 2008 Cash and cash equivalents $405,683 $410,881 Short-term investments 25,413 35,532 Accounts receivable, less allowance of $216,261 and $211,222 1,088,584 1,075,457 Inventories 71,353 84,174 Other receivables 194,637 239,165 Other current assets 32,454 33,761 Income tax receivable - 32,130 Deferred income taxes 213,339 217,196 Total current assets 2,031,463 2,128,296 Property and equipment, net 1,067,289 1,048,075 Amortizable intangibles, net 155,823 160,521 Investments in third-party dialysis businesses 23,856 19,274 Long-term investments 5,212 5,656 Other long-term assets 46,006 47,330 Goodwill 3,905,762 3,876,931 $7,235,411 $7,286,083 LIABILITIES AND EQUITY Accounts payable $217,125 $282,883 Other liabilities 441,124 495,239 Accrued compensation and benefits 276,851 312,216 Current portion of long-term debt 83,295 72,725 Income taxes payable 8,211 - Total current liabilities 1,026,606 1,163,063 Long-term debt 3,600,233 3,622,421 Other long-term liabilities 100,085 101,442 Alliance and product supply agreement, net 34,645 35,977 Deferred income taxes 260,101 244,884 Total liabilities 5,021,670 5,167,787 Commitments and contingencies Noncontrolling interests subject to put provisions 289,592 291,397 Equity: Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued) Common stock ($0.001 par value, 450,000,000 shares authorized; 134,862,283 shares issued; 103,409,287 and 103,753,673 shares outstanding) 135 135 Additional paid-in capital 607,234 584,358 Retained earnings 1,985,661 1,889,450 Treasury stock, at cost (31,452,996 and 31,108,610 shares) (714,977) (691,857) Accumulated other comprehensive loss (12,111) (14,339) Total DaVita Inc. shareholders' equity 1,865,942 1,767,747 Noncontrolling interests not subject to put provisions 58,207 59,152 Total equity 1,924,149 1,826,899 $7,235,411 $7,286,083 DAVITA INC. SUPPLEMENTAL FINANCIAL DATA (unaudited) (dollars in millions, except for per share and per treatment data) Three months ended March 31, December 31, March 31, 2009 2008 2008 1. Consolidated Financial Results: Revenues $1,448 $1,461 $1,345 Operating income $220.6 $223.1 $205.8 Operating income margin 15.2% 15.3% 15.3% Net income attributable to DaVita Inc. $96.2 $98.4 $86.9 Diluted earnings per share attributable to DaVita Inc. $0.92 $0.94 $0.80 2. Consolidated Business Metrics: Expenses Patient care costs as a percent of consolidated revenue (3) 69.5% 69.2% 69.2% General and administrative expenses as a percent of consolidated revenue (3) 8.8% 9.1% 9.0% Bad debt expense as a percent of consolidated revenue 2.5% 2.5% 2.6% Consolidated effective tax rate attributable to DaVita Inc.(1) 40.2% 37.7% 39.0% 3. Segment Financial Results: (dollar amounts rounded to nearest million) Dialysis and related lab services Revenues $1,377 $1,389 $1,297 Direct operating expenses 1,140 1,148 1,068 Dialysis segment margin $237 $241 $229 Other - Ancillary services and strategic initiatives Revenues $71 $72 $48 Direct operating expenses 76 79 61 Ancillary segment loss $(5) $(7) $(13) Total segment margin $232 $234 $216 Reconciling items: Stock-based compensation (11) (11) (10) Equity investment loss - - (1) Consolidated operating income $221 $223 $206 DAVITA INC. SUPPLEMENTAL FINANCIAL DATA--continued (unaudited) (dollars in millions, except for per share and per treatment data) Three months ended March 31, December 31, March 31, 2009 2008 2008 4. Segment Business Metrics: Dialysis and related lab services: Volume Treatments 4,082,439 4,172,468 3,934,777 Number of treatment days 76.5 79.5 77.4 Treatments per day 53,365 52,484 50,837 Per day year over year increase 5.0% 4.9% 6.3% Non-acquired growth year over year 4.0% 4.0% 5.0% Revenue Dialysis and related lab services revenue per treatment $336.73 $332.61 $328.95 Per treatment increase (decrease) from previous quarter 1.2% (1.1%) 0.3% Per treatment increase (decrease) from previous year 2.4% 1.4% (2.6%) Percent of consolidated revenue 95.1% 95.1% 96.4% Expenses Patient care costs Percent of segment revenue 68.8% 68.6% 68.7% Per treatment $231.88 $228.29 $226.21 Per treatment increase (decrease) from previous quarter 1.6% (1.8%) 1.4% Per treatment increase (decrease) from previous year 2.5% 2.3% (2.5%) General and administrative expenses Percent of segment revenue 7.4% 7.6% 7.1% Per treatment $24.99 $25.36 $23.50 Per treatment (decrease) increase from previous quarter (1.5%) 2.8% (12.5%) Per treatment increase (decrease) from previous year 6.3% (5.6%) (6.6%) 5. Cash Flow Operating cash flow $134.2 $198.5 $107.9 Operating cash flow last twelve months $640.0 $613.7 $590.8 Free cash flow(1) $ 89.5 $144.8 $72.6 Free cash flow, last twelve months(1) $467.7 $450.7 $432.5 Capital expenditures: Development and relocations $42.0 $54.7 $46.1 Routine maintenance/IT other $31.2 $39.4 $18.5 Acquisition expenditures $39.8 $24.8 $5.7 6. Accounts Receivable Net receivables $1,089 $1,075 $960 DSO 70 70 68 DAVITA INC. SUPPLEMENTAL FINANCIAL DATA--continued (unaudited) (dollars in millions, except for per share and per treatment data) Three months ended March 31, December 31, March 31, 2009 2008 2008 7. Debt and Capital Structure Total debt(2) $3,680 $3,691 $3,701 Net debt, net of cash(2) $3,275 $3,281 $3,222 Leverage ratio (see Note 1: Calculation of the Leverage Ratio) 2.83x 2.88x 2.94x Overall effective weighted average interest rate during the quarter 5.04% 5.77% 6.10% Overall effective weighted average interest rate at end of the quarter 5.04% 5.10% 5.79% Effective weighted average interest rate on the Senior Secured Credit Facilities at end of the quarter 3.36% 3.48% 4.80% Economically fixed interest rates as a percentage of our total debt 66% 69% 72% Share repurchases $32.0 $63.0 $32.5 8. Clinical (quarterly averages) Dialysis adequacy -% of patients with Kt/V > 1.2 95% 95% 95% 90 day patients with Hb>=10