DENVER, Feb. 16, 2017 /PRNewswire/ -- DaVita Inc. (NYSE:
DVA) today announced results for the quarter and year ended
December 31, 2016.
- Net income attributable to DaVita Inc. for the quarter and year
ended December 31, 2016 was
$158 million, or $0.80 per share and $880
million, or $4.29 per share,
respectively.
- Adjusted net income attributable to DaVita Inc. for the quarter
and year ended December 31, 2016,
excluding the non-GAAP items described below, was $192 million, or $0.98 per share, and $789
million, or $3.85 per share,
respectively.
- Additionally, adjusted net income attributable to DaVita Inc.
for the quarter and year ended December 31,
2016, exluding the non-GAAP items described below and
further excluding the amortization of intangible assets associated
with acquisitions, was $222 million,
or $1.13 per share, and $897 million, or $4.38 per share, respectively.
- Net (loss) income attributable to DaVita Inc. for the quarter
and year ended December 31, 2015 was
$(6) million, or $(0.03) per share, and $270 million, or $1.25 per share, respectively.
- Adjusted net income attributable to DaVita Inc. for the quarter
and year ended December 31, 2015,
excluding the non-GAAP items described below, was $214 million, or $1.01 per share, and $828
million, or $3.83 per share,
respectively.
- Additionally, adjusted net income attributable to DaVita Inc.
for the quarter and year ended December 31,
2015, exluding the non-GAAP items described below and
further excluding the amortization of intangible assets associated
with acquisitions, was $239 million,
or $1.12 per share, and $930 million, or $4.30 per share, respectively.
The Company's adjusted net income attributable to DaVita Inc.,
adjusted diluted net income per share, adjusted operating income,
adjusted effective income tax rate attributable to DaVita Inc. and
free cash flow discussed above and below (collectively its
"non-GAAP measures") exclude the effect of certain items that are
reconciled to their most comparable GAAP measures at Notes 2, 3, 4
and 5 hereto.
For the quarter ended December 31,
2016, these non-GAAP measures excluded a goodwill impairment
charge related to our vascular access reporting unit and an
impairment of a minority equity investment (as discussed below), as
well as an additional estimated accrual for damages and liabilities
associated with our pharmacy business.
For the year ended December 31,
2016, these non-GAAP measures excluded the non-GAAP items
mentioned above as well as goodwill impairment charges on certain
DaVita Medical Group (DMG) reporting units, a gain on changes in
ownership interest upon the formation of our Asia Pacific dialysis joint venture (APAC JV),
a gain on the sale of a portion of our Tandigm ownership interest,
a loss on the sale of our DMG Arizona business, and estimated
accruals for damages and liabilities associated with our pharmacy
and DMG Nevada hospice businesses.
For the quarter ended December 31,
2015, these non-GAAP measures excluded estimated goodwill
and other intangible asset impairment charges and an estimated
accrual for damages and liabilities associated with our pharmacy
business. For the year ended December 31,
2015, these non-GAAP measures also excluded the debt
redemption charges and a settlement charge related to a private
civil suit.
Financial and operating highlights include:
- Cash flow: For the quarter and year ended
December 31, 2016, operating cash
flow was $482 million and
$1.963 billion, respectively, and
free cash flow was $329 million and
$1.412 billion, respectively. For the
definition of free cash flow, see Note 5 to the reconciliation of
non-GAAP measures.
- Operating income and adjusted operating income:
Operating income for the quarter ended December 31, 2016 was $381
million, and adjusted operating income for the quarter was
$445 million. Operating income
for the year ended December 31, 2016
was $1.895 billion, and adjusted
operating income for the year was $1.849
billion.
In connection with the acquisition of DMG, we recorded receivables
against the acquisition escrow balance to offset specific potential
tax liabilities. Certain of these potential tax liabilities
expired, resulting in the reduction of this asset during the third
and fourth quarters of 2016. This negatively impacted operating
income by $4 million and $31 million for the quarter and year-ended
December 31, 2016, respectively, and
is included in our general and administrative expenses. The
reduction in operating income was directly offset by a reduction in
income tax expense due to the expiration of the corresponding tax
liabilities.
Operating income for the quarter ended December 31, 2015 was $245
million, and adjusted operating income for the quarter was
$474 million. Operating income for
the year ended December 31, 2015 was
$1.171 billion and adjusted operating
income for the year was $1.898
billion.
- Volume: Total U.S. dialysis treatments for the
fourth quarter of 2016 were 6,889,069, or 87,203 treatments per
day, representing a per day increase of 3.7% over the fourth
quarter of 2015. Normalized non-acquired treatment growth in the
fourth quarter of 2016 as compared to the fourth quarter of 2015
was 4.0%.
The number of member months for which DMG provided care during the
fourth quarter of 2016 was approximately 2.3 million, of which
approximately 1.0 million, 1.0 million and 0.3 million related to
senior, commercial and Medicaid members, respectively.
- Goodwill and other asset impairment charges:
During the quarter ended December 31,
2016, we determined that circumstances indicated it had
become more likely than not that the goodwill of our vascular
access reporting unit had become impaired. These circumstances
included changes in governmental reimbursement and our expected
ability to mitigate them. We have performed the required
valuations to estimate the fair value of the net assets and implied
goodwill of this reporting unit with the assistance of a
third-party valuation firm. Based on this assessment, we
recorded a goodwill impairment charge of $28
million, of which $8 million
was attributed to noncontrolling interests. In addition, we
recognized an income tax benefit of $7
million related to this charge.
During the fourth quarter of 2016, we also recognized an impairment
charge of $15 million on a minority
equity investment within our international business, offset by an
income tax benefit of $5 million
related to this charge.
- Effective tax rate: Our effective tax rate was
32.3% and 30.6% for the quarter and year ended December 31, 2016, respectively. The effective
tax rate attributable to DaVita Inc. was 36.3% and 34.1% for the
quarter and year ended December 31,
2016, respectively.
Our effective tax rate for the quarter ended December 31, 2016 was impacted by a
non-deductible portion of the estimated accrual associated with our
pharmacy business and an adjustment to reduce a receivable
associated with the DMG acquisition escrow provision relating to an
income tax item. Our effective tax rate for the year ended
December 31, 2016 was impacted by the
foregoing items as well as partially deductible and non-deductible
goodwill impairment charges, the loss on the sale of our DMG
Arizona business, a non-deductible portion of the estimated
accruals associated with our DMG Nevada hospice and pharmacy
businesses, a gain on the APAC JV ownership changes, the
adjustments related to the reduction in the receivables associated
with the DMG acquisition escrow provision relating to income tax
items, and the amount of third-party owners' income attributable to
non-tax paying entities.
The adjusted effective tax rate attributable to DaVita Inc. for the
quarter and year ended December 31,
2016, excluding these items from their respective periods
was 36.5% and 38.4%, respectively. The decrease in our adjusted
effective tax rate attributable to DaVita Inc. compared to the
third quarter of 2016 of 40.0% is due to a decrease in the state
tax rate and related true-ups.
- Center activity: As of December
31, 2016, we provided dialysis services to a total of
approximately 203,000 patients at 2,504 outpatient dialysis
centers, of which 2,350 centers were located in the United States and 154 centers were located
in 11 countries outside of the United
States. During the fourth quarter of 2016, we opened a total
of 27 new dialysis centers and acquired four dialysis centers in
the United States. We also
acquired ten dialysis centers and opened five new dialysis centers
outside of the United States.
- Share repurchases: During the quarter ended December 31, 2016, we repurchased a total of
6,718,658 shares of our common stock for $416 million, or an average price of $61.96 per share. During the year ended
December 31, 2016, we repurchased
16,649,090 shares of our common stock for $1.1 billion, or an average price of $64.41 per share. We have not repurchased any
shares of our common stock subsequent to December 31, 2016. As a result of these
transactions, as of February 16, 2017
we have a total of approximately $677
million in outstanding Board repurchase authorizations.
- Settlement: In the first quarter of 2017, we reached an
agreement with the government for $538
million for amounts owed to us for dialysis services
provided over several years to patients covered by the Veterans'
Administration. This one-time gain, subject to taxes and
consideration of noncontrolling interests, is expected to be
recognized in the first quarter of 2017 and is excluded from our
2017 adjusted operating income guidance.
Outlook
The following forward-looking measures and the underlying
assumptions involve significant risks and uncertainties, including
those described below, and actual results may vary significantly
from these current forward-looking measures. We do not provide
guidance for consolidated operating income, Kidney Care operating
income or effective tax rate attributable to DaVita Inc. on a GAAP
basis nor a reconciliation of those forward-looking non-GAAP
financial measures to the most directly comparable GAAP financial
measures on a forward-looking basis because we are unable to
predict certain items contained in the GAAP measures without
unreasonable efforts. These non-GAAP financial measures do not
include certain items, including the anticipated gain related to
the government settlement.
- We expect our adjusted consolidated operating income guidance
for 2017 to be in the range of $1.635
billion to $1.775 billion.
- We expect our adjusted operating income guidance for Kidney
Care for 2017 to be in the range of $1.525
billion to $1.625 billion.
- We expect our operating income guidance for DMG for 2017 to be
in the range of $110 million to $150
million.
- We expect our consolidated operating cash flow for 2017 to be
in the range of $1.750 billion to $1.950
billion, which includes the net benefit of the anticipated
VA payment.
- We expect our 2017 adjusted effective tax rate attributable to
DaVita Inc. to be approximately 39.5% to 40.5%.
We will be holding a conference call to discuss our results for
the fourth quarter ended December 31,
2016 on February 16, 2017 at
5:00 p.m. Eastern Time. To join the
conference call, please dial (877) 918-6630 from the U.S. or (517)
308-9087 from outside the U.S. A replay of the conference call will
be available on our website at investors.davita.com, for the
following 30 days.
This release contains forward-looking statements within the
meaning of the federal securities laws, including without
limitation statements related to our guidance and expectations for
our 2017 consolidated operating income, our 2017 Kidney Care
operating income, DMG's 2017 operating income, our 2017
consolidated operating cash flows, our 2017 effective tax rate
attributable to DaVita Inc., the timing of recognition of the
government settlement and our estimated charges and accruals.
Factors that could impact future results include the uncertainties
associated with the risk factors set forth in our SEC filings,
including our annual report on Form 10-K for the year ended
December 31, 2015, our subsequent
quarterly and annual reports, and our current reports on Form 8-K.
The forward-looking statements should be considered in light of
these risks and uncertainties.
These risks and uncertainties include, but are not limited
to, and are qualified in their entirety by reference to the full
text of those risk factors in our SEC filings relating
to:
- the concentration of profits generated by higher-paying
commercial payor plans for which there is continued downward
pressure on average realized payment rates, and a reduction in the
number of patients under such plans, which may result in the loss
of revenues or patients, and the extent to which the ongoing
implementation of healthcare exchanges or changes in regulations or
enforcement of regulations, including but not limited to those
regarding the exchanges, results in a reduction in reimbursement
rates for our services from and/or the number of patients enrolled
in higher-paying commercial plans,
- a reduction in government payment rates under the Medicare
End Stage Renal Disease program or other government-based
programs,
- the impact of the Medicare Advantage benchmark
structure,
- risks arising from potential federal and/or state
legislation or regulation that could have an adverse effect on our
operations and profitability,
- the impact of the 2016 Congressional and Presidential
elections on the current health care marketplace and on our
business, including with respect to the future of the Affordable
Care Act, the exchanges and many other core aspects of the current
health care marketplace,
- changes in pharmaceutical or anemia management practice
patterns, payment policies, or pharmaceutical pricing,
- legal compliance risks, including our continued compliance
with complex government regulations and the provisions of our
current corporate integrity agreement and current or potential
investigations by various government entities and related
government or private-party proceedings, and restrictions on our
business and operations required by our corporate integrity
agreement and other settlement terms, and the financial impact
thereof,
- continued increased competition from large- and medium-sized
dialysis providers that compete directly with us,
- our ability to maintain contracts with physician medical
directors, changing affiliation models for physicians, and the
emergence of new models of care introduced by the government or
private sector, that may erode our patient base and reimbursement
rates, such as accountable care organizations, independent practice
associations and integrated delivery systems,
- our ability to complete acquisitions, mergers or
dispositions that we might be considering or announce, or to
integrate and successfully operate any business we may acquire or
have acquired, including DMG, or to expand our operations and
services to markets outside the United
States, or to businesses outside of dialysis and DMG's
business,
- the variability of our cash flows,
- the risk that we might invest material amounts of capital
and incur significant costs in connection with the growth and
development of our international operations, yet we might not be
able to operate them profitably anytime soon, if at all,
- risks arising from the use of accounting estimates,
judgments and interpretations in our financial statements,
- the risk that laws regulating the corporate practice of
medicine could restrict the manner in which DMG conducts its
business,
- the risk that the cost of providing services under DMG's
agreements may exceed our compensation,
- the risk that reductions in reimbursement rates, including
Medicare Advantage rates, and future regulations may negatively
impact DMG's business, revenue and profitability,
- the risk that DMG may not be able to successfully establish
a presence in new geographic regions or successfully address
competitive threats that could reduce its profitability,
- the risk that a disruption in DMG's healthcare provider
networks could have an adverse effect on DMG's business operations
and profitability,
- the risk that reductions in the quality ratings of health
maintenance organization plan customers of DMG could have an
adverse effect on DMG's business, or
- the risk that health plans that acquire health maintenance
organizations may not be willing to contract with DMG or may be
willing to contract only on less favorable terms.
We base our forward-looking statements on information currently
available to us at the time of this release, and we undertake no
obligation to update or revise any forward-looking statements,
whether as a result of changes in underlying factors, new
information, future events or otherwise.
This release contains non-GAAP financial measures. For
reconciliations of these non-GAAP financial measures to their most
comparable measure calculated and presented in accordance with
GAAP, see the attached reconciliation schedules. For the reasons
stated in the reconciliation schedules, we believe our presentation
of non-GAAP financial measures provides useful supplemental
information for investors.
Contact:
|
Jim
Gustafson
|
|
Investor
Relations
|
|
DaVita
Inc.
|
|
(310)
536-2585
|
DAVITA
INC.
|
CONSOLIDATED
STATEMENTS OF INCOME
|
(unaudited)
|
(dollars in
thousands, except per share data)
|
|
|
Three
months ended
December 31,
|
Year ended
December 31,
|
|
2016
|
2015
|
2016
|
2015
|
|
|
|
|
|
Patient service
revenues
|
$
2,645,520
|
$
2,430,851
|
$
10,354,161
|
$
9,480,279
|
Less: Provision for
uncollectible accounts
|
(115,165 )
|
(113,279 )
|
(451,353 )
|
(427,860 )
|
Net patient service
revenues
|
2,530,355
|
2,317,572
|
9,902,808
|
9,052,419
|
Capitated
revenues
|
864,516
|
865,543
|
3,518,679
|
3,509,095
|
Other
revenues
|
320,871
|
350,474
|
1,323,618
|
1,220,323
|
Total net
revenues
|
3,715,742
|
3,533,589
|
14,745,105
|
13,781,837
|
Operating expenses
and charges:
|
|
|
|
|
Patient care costs and
other costs
|
2,695,749
|
2,515,131
|
10,646,736
|
9,824,834
|
General and
administrative
|
412,484
|
408,882
|
1,592,698
|
1,452,135
|
Depreciation and
amortization
|
188,777
|
163,330
|
720,252
|
638,024
|
Provision for
uncollectible accounts
|
1,821
|
2,743
|
11,677
|
9,240
|
Equity investment
income
|
(7,925)
|
(7,601 )
|
(13,044 )
|
(18,325 )
|
Goodwill and other
asset impairment charges
|
43,408
|
206,169
|
296,408
|
210,234
|
Gain on changes in
ownership interests, net
|
—
|
—
|
(404,165 )
|
—
|
Settlement
charge
|
—
|
—
|
—
|
495,000
|
Total operating
expenses and charges
|
3,334,314
|
3,288,654
|
12,850,562
|
12,611,142
|
Operating
income
|
381,428
|
244,935
|
1,894,543
|
1,170,695
|
Debt
expense
|
(104,023 )
|
(103,259 )
|
(414,382)
|
(408,380 )
|
Debt redemption
charges
|
—
|
—
|
—
|
(48,072 )
|
Other income,
net
|
667
|
4,631
|
8,734
|
8,893
|
Income before income
taxes
|
278,072
|
146,307
|
1,488,895
|
723,136
|
Income tax
expense
|
89,802
|
111,833
|
455,813
|
295,726
|
Net income
|
188,270
|
34,474
|
1,033,082
|
427,410
|
Less: Net income
attributable to noncontrolling interests
|
(30,544 )
|
(40,474 )
|
(153,208 )
|
(157,678 )
|
Net income (loss)
attributable to DaVita Inc.
|
$
157,726
|
$
(6,000)
|
$ 879,874
|
$
269,732
|
Earnings per
share:
|
|
|
|
|
Basic net income
(loss) per share attributable to DaVita Inc.
|
$
0.81
|
$
(0.03)
|
$
4.36
|
$
1.27
|
Diluted net income
(loss) per share attributable to DaVita Inc.
|
$
0.80
|
$
(0.03)
|
$
4.29
|
$
1.25
|
Weighted average
shares for earnings per share:
|
|
|
|
|
Basic
|
193,999,701
|
208,762,717
|
201,641,173
|
211,867,714
|
Diluted
|
196,743,187
|
208,762,717
|
204,904,656
|
216,251,807
|
DAVITA
INC.
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Three
months ended
December 31,
|
Year ended
December 31,
|
|
2016
|
2015
|
2016
|
2015
|
|
|
|
|
|
Net income
|
$
188,270
|
$
34,474
|
$
1,033,082
|
$
427,410
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
Unrealized gains
(losses) on interest rate swap and cap agreements:
|
|
|
|
|
Unrealized gains
(losses) on interest rate swap and cap agreements
|
4,568
|
(2,177)
|
(3,670)
|
(12,241)
|
Reclassifications of
net swap and cap agreements realized losses into net
income
|
1,265
|
739
|
2,566
|
3,111
|
Unrealized gains
(losses) on investments:
|
|
|
|
|
Unrealized (losses)
gains on investments
|
(561)
|
(45)
|
1,427
|
(1,413)
|
Reclassification of
net investment realized gains into net income
|
(279)
|
(1)
|
(423)
|
(377)
|
Unrealized losses on
foreign currency translation:
|
|
|
|
|
Foreign currency
translation adjustments
|
(45,000)
|
(4,007)
|
(39,614)
|
(23,889)
|
Reclassification of
foreign currency translation adjustment realized losses into net
income
|
2,574
|
—
|
10,087
|
—
|
Other comprehensive
loss
|
(37,433)
|
(5,491)
|
(29,627)
|
(34,809)
|
Total comprehensive
income
|
150,837
|
28,983
|
1,003,455
|
392,601
|
Less: Comprehensive
income attributable to noncontrolling interests
|
(30,527)
|
(40,474)
|
(153,398)
|
(157,678)
|
Comprehensive income
(loss) attributable to DaVita Inc.
|
$
120,310
|
$
(11,491)
|
$
850,057
|
$
234,923
|
DAVITA
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Year ended
December 31,
|
|
2016
|
2015
|
|
|
|
Cash flows from
operating activities:
|
|
|
Net income
|
$
1,033,082
|
$
427,410
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Settlement
charge
|
—
|
495,000
|
Settlement
payments
|
—
|
(493,775 )
|
Depreciation and
amortization
|
720,252
|
638,024
|
Debt redemption
charges
|
—
|
48,072
|
Goodwill and other
asset impairment charges
|
296,408
|
210,234
|
Stock-based
compensation expense
|
38,338
|
56,664
|
Tax benefits from
stock award exercises
|
28,397
|
45,749
|
Excess tax benefits
from stock award exercises
|
(13,251 )
|
(28,157 )
|
Deferred income
taxes
|
52,010
|
61,744
|
Equity investment
income, net
|
17,766
|
9,293
|
Gain on changes in
ownership interests, net
|
(404,165 )
|
—
|
Other non-cash
charges
|
(7,338 )
|
44,691
|
Changes in operating
assets and liabilities, other than from acquisitions and
divestitures:
|
|
|
Accounts
receivable
|
(152,240 )
|
(202,867 )
|
Inventories
|
22,920
|
(48,313 )
|
Other receivables and
other current assets
|
(54,038 )
|
32,761
|
Other long-term
assets
|
35,893
|
3,723
|
Accounts
payable
|
11,897
|
30,998
|
Accrued compensation
and benefits
|
68,272
|
54,950
|
Other current
liabilities
|
176,494
|
113,470
|
Income
taxes
|
62,230
|
24,175
|
Other long-term
liabilities
|
30,517
|
33,354
|
Net cash provided by
operating activities
|
1,963,444
|
1,557,200
|
Cash flows from
investing activities:
|
|
|
Additions of property
and equipment
|
(829,095 )
|
(707,998 )
|
Acquisitions
|
(563,856 )
|
(96,469 )
|
Proceeds from asset
and business sales
|
64,725
|
19,715
|
Purchase
of investments available for sale
|
(13,539 )
|
(8,783 )
|
Purchase of
investments held-to-maturity
|
(1,133,192
)
|
(1,709,883
)
|
Proceeds from sale of
investments available for sale
|
18,963
|
2,058
|
Proceeds from
investments held-to-maturity
|
1,240,502
|
1,637,358
|
Purchase of equity
investments
|
(27,096 )
|
(17,911 )
|
Proceeds from sale of
equity investments
|
40,920
|
—
|
Distributions received
on equity investments
|
—
|
129
|
Net cash used in
investing activities
|
(1,201,668
)
|
(881,784 )
|
Cash flows from
financing activities:
|
|
|
Borrowings
|
51,991,490
|
54,541,988
|
Payments on long-term
debt and other financing costs
|
(52,115,932
)
|
(53,922,290
)
|
Deferred financing and
debt redemption costs
|
(188 )
|
(76,672 )
|
Purchase of treasury
stock
|
(1,097,822
)
|
(549,935 )
|
Distributions to
noncontrolling interests
|
(192,401 )
|
(174,635 )
|
Stock award exercises
and other share issuances, net
|
23,543
|
26,155
|
Excess tax benefits
from stock award exercises
|
13,251
|
28,157
|
Contributions from
noncontrolling interests
|
47,590
|
54,644
|
Purchase of
noncontrolling interests
|
(21,512 )
|
(66,382 )
|
Net cash used in
financing activities
|
(1,351,981
)
|
(138,970 )
|
Effect of exchange
rate changes on cash and cash equivalents
|
4,276
|
(2,571 )
|
Net (decrease)
increase in cash and cash equivalents
|
(585,929 )
|
533,875
|
Cash and cash
equivalents at beginning of the year
|
1,499,116
|
965,241
|
Cash and cash
equivalents at end of the period
|
$
913,187
|
$
1,499,116
|
DAVITA
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(unaudited)
|
(dollars in
thousands, except per share data)
|
|
|
December
31,
|
December
31,
|
|
2016
|
2015
|
|
|
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
913,187
|
$
1,499,116
|
Short-term
investments
|
310,198
|
408,084
|
Accounts receivable,
less allowance of $252,056 and $264,144
|
1,917,302
|
1,724,228
|
Inventories
|
164,858
|
185,575
|
Other
receivables
|
453,483
|
435,885
|
Other current
assets
|
210,604
|
190,322
|
Income taxes
receivable
|
10,596
|
60,070
|
Total current
assets
|
3,980,228
|
4,503,280
|
Property and
equipment, net of accumulated depreciation of $2,832,160 and
$2,397,007
|
3,175,367
|
2,788,740
|
Intangible assets,
net of accumulated amortization of $940,731 and $770,691
|
1,527,767
|
1,687,326
|
Equity
investments
|
502,389
|
78,368
|
Long-term
investments
|
103,679
|
89,122
|
Other long-term
assets
|
44,510
|
73,560
|
Goodwill
|
9,407,317
|
9,294,479
|
|
$
18,741,257
|
$
18,514,875
|
LIABILITIES AND
EQUITY
|
|
|
Accounts
payable
|
$
522,415
|
$
513,950
|
Other
liabilities
|
856,847
|
682,123
|
Accrued compensation
and benefits
|
815,761
|
741,926
|
Medical
payables
|
336,381
|
332,102
|
Current portion of
long-term debt
|
165,041
|
129,037
|
Total current
liabilities
|
2,696,445
|
2,399,138
|
Long-term
debt
|
8,947,327
|
9,001,308
|
Other long-term
liabilities
|
465,358
|
439,229
|
Deferred income
taxes
|
809,128
|
726,962
|
Total
liabilities
|
12,918,258
|
12,566,637
|
Commitments and
contingencies:
|
|
|
Noncontrolling
interests subject to put provisions
|
973,258
|
864,066
|
Equity:
|
|
|
Preferred stock
($0.001 par value, 5,000,000 shares authorized; none
issued)
|
|
|
Common stock ($0.001
par value, 450,000,000 shares authorized; 194,554,491 and
217,120,346 shares issued and 194,554,491 and 209,754,247 shares
outstanding, respectively)
|
195
|
217
|
Additional paid-in
capital
|
1,027,182
|
1,118,326
|
Retained
earnings
|
3,710,313
|
4,356,835
|
Treasury stock
(7,366,099 shares at December 31, 2015)
|
—
|
(544,772)
|
Accumulated other
comprehensive loss
|
(89,643)
|
(59,826)
|
Total DaVita Inc.
shareholders' equity
|
4,648,047
|
4,870,780
|
Noncontrolling
interests not subject to put provisions
|
201,694
|
213,392
|
Total
equity
|
4,849,741
|
5,084,172
|
|
$
18,741,257
|
$
18,514,875
|
DAVITA
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
Three months
ended
|
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Year
ended
December 31,
2016
|
1. Consolidated
Financial Results:
|
|
|
|
|
Consolidated net
revenues
|
$
3,716
|
$
3,731
|
$
3,534
|
$
14,745
|
Operating
income
|
$
381
|
$
819
|
$
245
|
$
1,895
|
Adjusted operating
income excluding certain items(1)
|
$
445
|
$
472
|
$
474
|
$
1,849
|
Operating income
margin
|
10.3%
|
22.0%
|
6.9%
|
12.8%
|
Adjusted operating
income margin excluding certain items(1) (5)
|
12.0%
|
12.6%
|
13.4%
|
12.5%
|
Net income (loss)
attributable to DaVita Inc
|
$
158
|
$
571
|
$
(6)
|
$
880
|
Adjusted net income
attributable to DaVita Inc. excluding certain
items(1)
|
$
192
|
$
197
|
$
214
|
$
789
|
Diluted net income
(loss) per share attributable to DaVita Inc
|
$
0.80
|
$
2.76
|
$
(0.03)
|
$
4.29
|
Adjusted diluted net
income per share attributable to DaVita Inc. excluding certain
items(1)
|
$
0.98
|
$
0.95
|
$
1.01
|
$
3.85
|
|
|
|
|
|
2. Consolidated
Business Metrics:
|
|
|
|
|
Expenses
|
|
|
|
|
General and
administrative expenses as a percent of consolidated net
revenues(2)
|
11.1%
|
10.9%
|
11.6%
|
10.8%
|
Consolidated effective
tax rate
|
32.3%
|
14.6%
|
76.4%
|
30.6%
|
Consolidated effective
tax rate attributable to DaVita Inc.(1)
|
36.3%
|
15.4%
|
105.7%
|
34.1%
|
Adjusted consolidated
effective tax rate attributable to DaVita
Inc.(1)
|
36.5%
|
40.0%
|
36.0%
|
38.4%
|
|
|
|
|
|
3. Summary of
Division Financial Results:
|
|
|
|
|
Net
revenues
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
U.S. dialysis and
related lab services
|
$
2,323
|
$
2,324
|
$
2,216
|
$
9,138
|
Ancillary services and
strategic initiatives, including international dialysis
operations:
|
|
|
|
|
U.S. ancillary
services and strategic initiatives
|
338
|
359
|
360
|
1,413
|
International
dialysis
|
58
|
53
|
38
|
208
|
|
396
|
412
|
398
|
1,621
|
Elimination of
intersegment
|
(40)
|
(33)
|
(22)
|
(128)
|
Total Kidney
Care
|
2,679
|
2,703
|
2,592
|
10,631
|
DMG
|
1,037
|
1,028
|
942
|
4,114
|
Total net consolidated
revenues
|
$
3,716
|
$
3,731
|
$
3,534
|
$
14,745
|
Operating income
(loss)
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
U.S. Dialysis and
related lab services
|
$
436
|
$
452
|
$
464
|
$
1,777
|
Other – Ancillary
services and strategic initiatives, including international
dialysis operations:
|
|
|
|
|
U.S. ancillary
services and strategic initiatives
|
(59)
|
(6)
|
(15)
|
(65)
|
International
dialysis
|
(14)
|
368
|
(19)
|
332
|
|
(73)
|
362
|
(34)
|
267
|
Corporate support and
related long-term incentive compensation
|
—
|
(1)
|
(4)
|
(14)
|
Reduction of
receivables associated with the DMG acquisition escrow
provision
|
(4)
|
(27)
|
—
|
(31)
|
Total Kidney
Care
|
359
|
786
|
426
|
1,999
|
DMG
|
22
|
33
|
(181)
|
(104)
|
Total consolidated
operating income
|
$
381
|
$
819
|
$
245
|
$
1,895
|
DAVITA
INC.
|
SUPPLEMENTAL
FINANCIAL DATA—continued
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
Three months
ended
|
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Year
ended
December 31,
2016
|
4. Summary of
Reportable Segment Financial Results:
|
|
|
|
|
U.S. Dialysis
and Related Lab Services
|
|
|
|
|
Revenue:
|
|
|
|
|
Patient services
revenues
|
$
2,427
|
$
2,429
|
$
2,316
|
$
9,551
|
Provision for
uncollectible accounts
|
(109)
|
(109)
|
(104)
|
(430)
|
Net patient service
operating revenues
|
2,318
|
2,320
|
2,212
|
9,121
|
Other
revenues
|
5
|
4
|
4
|
17
|
Total net operating
revenues
|
$
2,323
|
$
2,324
|
$
2,216
|
$
9,138
|
Operating
expenses:
|
|
|
|
|
Patient care
costs
|
$
1,568
|
$
1,565
|
$
1,462
|
$
6,145
|
General and
administrative
|
199
|
188
|
181
|
751
|
Depreciation and
amortization
|
124
|
123
|
112
|
483
|
Equity investment
income
|
(4)
|
(4)
|
(3)
|
(18)
|
Total operating
expenses
|
1,887
|
1,872
|
1,752
|
7,361
|
Segment operating
income
|
$
436
|
$
452
|
$
464
|
$
1,777
|
|
|
|
|
|
DMG
|
|
|
|
|
Revenue:
|
|
|
|
|
DMG capitated
revenues
|
$
845
|
$
846
|
$
850
|
$
3,431
|
Patient services
revenues
|
179
|
173
|
80
|
642
|
Provision for
uncollectible accounts
|
(6)
|
(6)
|
(4)
|
(20)
|
Net patient service
operating revenues
|
173
|
167
|
76
|
622
|
Other
revenues
|
19
|
15
|
16
|
61
|
Total net operating
revenues
|
$
1,037
|
$
1,028
|
$
942
|
$
4,114
|
Operating
expenses:
|
|
|
|
|
Patient care
costs
|
$
834
|
$
824
|
$
757
|
$
3,291
|
General and
administrative
|
123
|
121
|
121
|
489
|
Depreciation and
amortization
|
58
|
53
|
44
|
211
|
Goodwill and other
asset impairment charges
|
─
|
─
|
206
|
253
|
Gains on changes in
ownership interests, net
|
─
|
─
|
─
|
(30)
|
Equity investment
(income) loss
|
─
|
(3)
|
(5)
|
4
|
Total operating
expenses
|
1,015
|
995
|
1,123
|
4,218
|
Segment operating
income (loss)
|
$
22
|
$
33
|
$
(181)
|
$
(104)
|
Reconciliation
for non-GAAP measure:
|
|
|
|
|
Add:
|
|
|
|
|
Goodwill and other
intangible asset impairment charges
|
─
|
─
|
206
|
253
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16
|
Gain on changes in
ownership interests, net
|
|
|
|
|
Gain on sale of
Tandigm ownership interest
|
─
|
─
|
─
|
(40)
|
Loss on sale of DMG
Arizona
|
─
|
─
|
─
|
10
|
Adjusted segment
operating income(1)
|
$
22
|
$
33
|
$
25
|
$
135
|
DAVITA
INC.
|
SUPPLEMENTAL
FINANCIAL DATA—continued
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
Three months
ended
|
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Year ended December 31,
2016
|
5. U.S.
Dialysis and Related Lab Services Business
Metrics:
|
|
|
|
|
Volume
|
|
|
|
|
Treatments
|
6,889,069
|
6,887,992
|
6,649,227
|
27,162,545
|
Number of treatment
days
|
79.0
|
79.0
|
79.1
|
313.9
|
Treatments per
day
|
87,203
|
87,190
|
84,061
|
86,532
|
Per day year over year
increase
|
3.7%
|
4.2%
|
3.2%
|
4.1%
|
Normalized
non-acquired treatment growth year over year
|
4.0%
|
4.4%
|
3.7%
|
4.2%
|
Operating
revenues before provision for uncollectible
accounts
|
|
|
|
|
Dialysis and related
lab services revenue per treatment
|
$
352.38
|
$
352.62
|
$
348.26
|
$
351.64
|
Per treatment
(decrease) increase from previous quarter
|
(0.1%)
|
0.5%
|
0.1%
|
|
Per treatment increase
from previous year
|
1.2%
|
1.3%
|
0.4%
|
1.2%
|
Percent of
consolidated net revenues
|
61.9%
|
61.9%
|
62.3%
|
61.5%
|
Expenses
|
|
|
|
|
Patient care
costs
|
|
|
|
|
Percent of total
segment operating net revenues
|
67.5%
|
67.3%
|
66.0%
|
67.2%
|
Per
treatment
|
$
227.68
|
$
227.16
|
$
219.86
|
$
226.24
|
Per treatment increase
(decrease) from previous quarter
|
0.2%
|
1.1%
|
(0.5%)
|
|
Per treatment increase
from previous year
|
3.6%
|
2.8%
|
0.5%
|
2.2%
|
General and
administrative expenses
|
|
|
|
|
Percent of total
segment operating net revenues
|
8.5%
|
8.1%
|
8.2%
|
8.2%
|
Per
treatment
|
$
28.82
|
$
27.36
|
$
27.21
|
$
27.63
|
Per treatment increase
from previous quarter
|
5.3%
|
—
|
5.5%
|
|
Per treatment increase
(decrease) from previous year
|
5.9%
|
6.1%
|
(8.5%)
|
1.3%
|
Accounts
receivable
|
|
|
|
|
Net
receivables
|
$
1,358
|
$
1,306
|
$
1,255
|
|
DSO
|
55
|
52
|
53
|
|
Provision for
uncollectible accounts as a percentage of revenues
|
4.5%
|
4.5%
|
4.5%
|
4.5%
|
|
|
|
|
|
6. DMG Business
Metrics:
|
|
|
|
|
Capitated
membership
|
|
|
|
|
Total
members
|
749,300
|
749,900
|
807,400
|
|
Total member
months
|
|
|
|
|
Senior
|
913,300
|
914,000
|
951,500
|
3,760,000
|
Commercial
|
1,018,400
|
1,026,300
|
1,109,900
|
4,130,800
|
Medicaid
|
318,800
|
326,500
|
367,100
|
1,320,800
|
Total member
months
|
2,250,500
|
2,266,800
|
2,428,500
|
9,211,600
|
Capitated
revenues by sources
|
|
|
|
|
Senior
revenues
|
$
617
|
$
634
|
$
607
|
$
2,537
|
Commercial
revenues
|
175
|
165
|
184
|
701
|
Medicaid
revenues
|
53
|
47
|
59
|
193
|
Total capitated
revenues
|
$
845
|
$
846
|
$
850
|
$
3,431
|
DAVITA
INC.
|
SUPPLEMENTAL
FINANCIAL DATA—continued
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
Three months
ended
|
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Year
ended
December 31,
2016
|
6. DMG Business
Metrics: (continued)
|
|
|
|
|
Other
|
|
|
|
|
Total care dollars
under management(1)
|
$
1,295
|
$
1,300
|
$
1,213
|
$
5,203
|
Ratio of operating
income (loss) to total care dollars under
management(1)
|
1.7%
|
2.5%
|
(14.9%)
|
(2.0%)
|
Ratio of adjusted
operating income to total care dollars under
management(1)(6)
|
1.7%
|
2.5%
|
2.1%
|
2.6%
|
DMG
clinicians
|
2,037
|
1,996
|
1,400
|
|
IPA primary care
physicians
|
2,555
|
2,570
|
2,937
|
|
|
|
|
|
|
7. Cash
Flow:
|
|
|
|
|
Operating cash
flow
|
$
482.2
|
$
535.6
|
$
436.7
|
$
1,963.4
|
Operating cash flow,
last twelve months
|
$
1,963.4
|
$
1,917.9
|
$
1,557.2
|
|
Free cash
flow(1)
|
$
329.4
|
$
386.3
|
$
256.2
|
$
1,412.3
|
Free cash flow, last
twelve months(1)
|
$
1,412.3
|
$
1,339.1
|
$
1,055.5
|
|
Capital
expenditures:
|
|
|
|
|
Routine
maintenance/IT/other
|
$
105.4
|
$
98.5
|
$
131.8
|
$
358.7
|
Development and
relocations
|
$
148.5
|
$
118.1
|
$
114.0
|
$
470.4
|
Acquisition
expenditures
|
$
66.5
|
$
24.0
|
$
5.8
|
$
563.9
|
|
|
|
|
|
8. Debt and
Capital Structure:
|
|
|
|
|
Total
debt(3)
|
$
9,192
|
$
9,209
|
$
9,226
|
|
Net debt, net of cash
and cash equivalents(3)
|
$
8,279
|
$
8,295
|
$
7,727
|
|
Leverage ratio (see
calculation on page 15)
|
3.16x
|
2.98x
|
2.95x
|
|
Overall weighted
average effective interest rate during the quarter
|
4.49%
|
4.42%
|
4.40%
|
|
Overall weighted
average effective interest rate at end of the quarter
|
4.52%
|
4.49%
|
4.39%
|
|
Weighted average
effective interest rate on the senior secured credit facilities at
end of the quarter
|
3.68%
|
3.61%
|
3.50%
|
|
Fixed and economically
fixed interest rates as a percentage of our total debt
|
53%
|
53%(4)
|
61%(4)
|
|
Fixed and economically
fixed interest rates, including our interest rate cap agreements,
as a percentage of our total debt
|
91%
|
91%(4)
|
90%(4)
|
|
|
|
|
|
|
|
|
|
(1)
|
These are non-GAAP
financial measures. For a reconciliation of these non-GAAP
financial measures to their most comparable measure calculated and
presented in accordance with GAAP, and for a definition of adjusted
amounts, see attached reconciliation schedules.
|
|
|
(2)
|
Consolidated
percentages of revenues are comprised of the dialysis and related
lab services business, DMG's business and other ancillary services
and strategic initiatives. General and administrative expenses
includes certain corporate support and long-term incentive
compensation, as well as an adjustment to reduce the receivables
associated with the DMG acquisition escrow provision relating to
income tax items for the third and fourth quarters of 2016 and year
ended December 31, 2016, and the estimated accruals associated with
our pharmacy business for the fourth quarters of 2015 and 2016, and
the year ended December 31, 2016, and the estimated accrual for the
DMG Nevada hospice business for the year ended December 31,
2016.
|
|
|
(3)
|
The reported balance
sheet amounts at December 31, 2016, September 30, 2016, and
December 31, 2015, excludes $79.9 million, $83.9 million and $96.0
million, respectively, of a debt discount associated with our Term
Loan A, Term Loan B and senior notes, and other deferred financing
costs.
|
|
|
(4)
|
The Term Loan B is
subject to a LIBOR floor of 0.75%. At December 31, 2016, the actual
LIBOR-based variable component of our interest rate exceeded 0.75%
on the Term Loan B, and was subject to LIBOR-based interest rate
volatility on the LIBOR variable component of our interest rate on
all of the Term Loan B. However, we are limited to a maximum rate
of 3.50% on the outstanding principal debt on the Term Loan B as a
result of interest rate cap agreements. Actual LIBOR, for the three
months ended September 30, 2016 and December 31, 2015 was lower
than the embedded LIBOR floor during such periods and the interest
rate on the Term Loan B was set at its floor during such periods.
The Term Loan A bears interest at LIBOR plus an interest margin of
1.75%. We are limited to a maximum rate of 3.50% on $87.5 million
of the Term Loan A as a result of interest rate cap agreements. In
addition, the uncapped portion of the Term Loan A, which is subject
to the variability of LIBOR, is $775 million.
|
|
|
(5)
|
Adjusted operating
income margin is a calculation of adjusted operating income divided
by consolidated net revenues.
|
|
|
(6)
|
Ratio of adjusted
operating income to total care dollars under management is a
calculation of adjusted operating income divided by total care
dollars under management.
|
DAVITA
INC.
|
SUPPLEMENTAL
FINANCIAL DATA—continued
|
(unaudited)
|
(dollars in
thousands)
|
|
Note 1:
Calculation of the Leverage Ratio
|
|
Under the senior
secured credit facilities (Credit Agreement), the leverage ratio is
defined as all funded debt plus the face amount of all letters of
credit issued, minus cash and cash equivalents, including
short-term investments, divided by "Consolidated EBITDA". The
leverage ratio determines the interest rate margin payable by the
Company for its Term Loan A and revolving line of credit under the
Credit Agreement by establishing the margin over the base interest
rate (LIBOR) that is applicable. The following leverage ratio was
calculated using "Consolidated EBITDA" as defined in the Credit
Agreement. The calculation below is based on the last twelve months
of "Consolidated EBITDA", pro forma for routine acquisitions that
occurred during the period. The Company's management believes the
presentation of "Consolidated EBITDA" is useful to users to enhance
their understanding of the Company's leverage ratio under its
Credit Agreement. The leverage ratio calculated by the Company is a
non-GAAP measure and should not be considered a substitute for debt
to net income attributable to DaVita Inc., net income attributable
to DaVita Inc. or total debt as determined in accordance with
United States generally accepted accounting principles
(GAAP). The Company's calculation of its leverage ratio might
not be calculated in the same manner as, and thus might not be
comparable to, similarly titled measures by other
companies.
|
|
|
Year
ended
December 31,
2016
|
Net income
attributable to DaVita Inc.
|
$
879,874
|
Income
taxes
|
455,813
|
Interest
expense
|
384,946
|
Depreciation and
amortization
|
720,252
|
Goodwill and other
intangible asset impairment charges
|
296,408
|
Noncontrolling
interests and equity investment income, net
|
170,857
|
Stock-settled
stock-based compensation
|
37,970
|
Gain on changes in
ownership interest, net
|
(404,165)
|
Other
|
43,063
|
"Consolidated
EBITDA"
|
$
2,585,018
|
|
|
|
December 31,
2016
|
Total debt, excluding
debt discount and other deferred financing costs of $79.9
million
|
$
9,192,229
|
Letters of credit
issued
|
96,915
|
|
9,289,144
|
Less: Cash and cash
equivalents including short-term investments (excluding DMG's
physician owned entities cash)
|
(1,107,761)
|
Consolidated net
debt
|
$
8,181,383
|
Last twelve months
"Consolidated EBITDA"
|
$
2,585,018
|
Leverage
ratio
|
3.16x
|
In accordance with
the Credit Agreement, the Company's leverage ratio cannot exceed
4.50 to 1.00 as of December 31, 2016. At that date the Company's
leverage ratio did not exceed 4.50 to 1.00.
|
|
|
|
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands except for per share data)
|
|
Note
2: Adjusted net income and adjusted diluted net income
per share attributable to DaVita Inc.
|
|
We believe that
adjusted net income and adjusted diluted net income per share
attributable to DaVita Inc., excluding a gain on the APAC JV
ownership changes, goodwill and other intangible asset impairment
charges, an impairment of a minority equity investment, a gain on
the sale of a portion of our Tandigm ownership interest, a loss on
the sale of our DMG Arizona business, adjustments to reduce the
receivables associated with the DMG acquisition escrow provision
relating to income tax items, estimated accruals for damages and
liabilities associated with our pharmacy and DMG Nevada hospice
businesses, debt redemption charges and a settlement charge related
to a private civil suit, net of related tax, enhances a user's
understanding of our normal net income attributable to DaVita Inc.
and diluted net income per share attributable to DaVita Inc. for
these periods by providing a measure that is meaningful because it
excludes certain items which we do not believe are indicative of
our ordinary results, and accordingly, is comparable to prior
periods and indicative of normal net income attributable to DaVita
Inc. and diluted net income per share attributable to DaVita Inc.
These measures are not measures of financial performance under GAAP
and should not be considered as an alternative to net income
attributable to DaVita Inc. and diluted net income per share
attributable to DaVita Inc.
|
|
|
Three months
ended
|
Year
ended
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
December
31,
2016
|
December
31,
2015
|
Net income (loss)
attributable to DaVita Inc.
|
$
157,726
|
$
571,332
|
$
(6,000)
|
$
879,874
|
$
269,732
|
Gain on APAC JV
ownership changes
|
─
|
(374,374)
|
─
|
(374,374)
|
─
|
Goodwill and other
intangible asset impairment charges
|
28,415
|
─
|
206,169
|
281,415
|
210,234
|
Goodwill impairment
charge attributable to noncontrolling interests
|
(8,078)
|
─
|
─
|
(8,078)
|
─
|
Impairment of minority
equity investment
|
14,993
|
─
|
─
|
14,993
|
─
|
Pharmacy
accruals
|
15,770
|
─
|
22,530
|
15,770
|
22,530
|
Gain on sale of
Tandigm ownership interest
|
─
|
─
|
─
|
(40,280)
|
─
|
Loss on sale of DMG
Arizona
|
─
|
─
|
─
|
10,489
|
─
|
Reduction in the
receivables associated with the DMG acquisition escrow
provision
|
3,894
|
27,040
|
─
|
30,934
|
─
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16,000
|
─
|
Debt redemption
charges
|
─
|
─
|
─
|
─
|
48,072
|
Settlement
charge
|
─
|
─
|
─
|
─
|
495,000
|
Related income
tax
|
(20,686)
|
(27,040)
|
(8,643)
|
(37,312)
|
(217,781)
|
Adjusted net income
attributable to DaVita Inc.
|
$
192,034
|
$
196,958
|
$
214,056
|
$
789,431
|
$
827,787
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands except for per share data)
|
|
|
Three months
ended
|
Year
ended
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
December
31,
2016
|
December
31,
2015
|
Diluted net income
(loss) per share attributable to DaVita Inc.
|
$
0.80
|
$
2.76
|
$
(0.03)
|
$
4.29
|
$
1.25
|
Gain on APAC JV
ownership changes
|
─
|
(1.81)
|
─
|
(1.82)
|
─
|
Goodwill and other
intangible asset impairment charges
|
0.15
|
─
|
0.98
|
1.37
|
0.97
|
Goodwill impairment
charge attributable to noncontrolling interests
|
(0.04)
|
─
|
─
|
(0.04)
|
─
|
Impairment of minority
equity investment
|
0.08
|
─
|
─
|
0.07
|
─
|
Pharmacy
accruals
|
0.08
|
─
|
0.10
|
0.08
|
0.10
|
Gain on sale of
Tandigm ownership interest
|
─
|
─
|
─
|
(0.20)
|
─
|
Loss on sale of DMG
Arizona
|
─
|
─
|
─
|
0.05
|
─
|
Reduction in the
receivables associated with the DMG acquisition escrow
provision
|
0.02
|
0.13
|
─
|
0.15
|
─
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
0.08
|
─
|
Debt redemption
charges
|
─
|
─
|
─
|
─
|
0.22
|
Settlement
charge
|
─
|
─
|
─
|
─
|
2.29
|
Tax effect of
adjustments
|
(0.11)
|
(0.13)
|
(0.04)
|
(0.18)
|
(1.00)
|
Adjusted diluted net
income per share attributable to DaVita Inc.
|
$
0.98
|
$
0.95
|
$
1.01
|
$
3.85
|
$
3.83
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES – (continued)
|
(unaudited)
|
(dollars in
thousands except for per share data)
|
|
In addition, we have
excluded amortization of intangible assets associated with
acquisitions from our adjusted net income attributable to DaVita
Inc., net of tax, and from our adjusted diluted net income per
share attributable to DaVita Inc. as we believe this presentation
enhances a user's understanding of our operating results for these
periods by providing a different reflection of the Company's
operating performance since it excludes the amortization of
intangible assets that relate to the fair value measurement of
acquired intangible assets associated with our acquisitions, and
accordingly is indicative of consistent adjusted net income
excluding amortization of acquired intangibles, attributable to
DaVita Inc. and diluted net income per share attributable to DaVita
Inc. These measures are not measures of financial performance under
GAAP and should not be considered as an alternative to net income
attributable to DaVita Inc. and diluted net income per share
attributable to DaVita Inc.
|
|
|
Three months
ended
|
Year
ended
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
December
31,
2016
|
December
31,
2015
|
Adjusted net income
attributable to DaVita Inc.
|
$
192,034
|
$
196,958
|
$
214,056
|
$
789,431
|
$
827,787
|
Add:
|
|
|
|
|
|
Amortization of intangible assets associated with acquisitions for
the dialysis and ancillary operations
|
3,480
|
3,588
|
3,992
|
14,551
|
23,185
|
Amortization of intangible assets associated with acquisitions for
the DMG operations
|
44,290
|
39,303
|
35,727
|
159,967
|
143,354
|
Less: Related income
tax
|
(17,436)
|
(17,156)
|
(14,418)
|
(66,816)
|
(64,001)
|
|
$
222,368
|
$
222,693
|
$
239,357
|
$
897,133
|
$
930,325
|
|
|
|
|
|
|
Adjusted diluted net
income per share attributable to DaVita Inc
|
$
0.98
|
$
0.95
|
$
1.01
|
$
3.85
|
$
3.83
|
Add:
|
|
|
|
|
|
Amortization of
intangible assets per share associated with acquisitions for the
dialysis and ancillary operations
|
0.02
|
0.02
|
0.02
|
0.08
|
0.11
|
Amortization of
intangible assets per share associated with acquisitions for the
DMG operations
|
0.22
|
0.19
|
0.16
|
0.78
|
0.66
|
Tax effect of
adjustments
|
(0.09)
|
(0.08)
|
(0.07)
|
(0.33)
|
(0.30)
|
|
$
1.13
|
$
1.08
|
$
1.12
|
$
4.38
|
$
4.30
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
Note
3: Adjusted operating income.
|
|
Adjusted operating
income is defined as operating income before certain items we do
not believe are indicative of ordinary results, including a gain on
the APAC JV ownership changes, goodwill and other intangible asset
impairment charges, an impairment of a minority equity investment,
a gain on the sale of a portion of our Tandigm ownership interest,
a loss on the sale of our DMG Arizona business, adjustments to
reduce the receivables associated with the DMG acquisition escrow
provision relating to income tax items, estimated accruals for
damages and liabilities associated with our pharmacy and DMG Nevada
hospice businesses, and a settlement charge related to a private
civil suit.
|
|
We use adjusted
operating income as a measure to assess operating and financial
performance. We believe that this measure enhances a user's
understanding of the normal operating income and of our
consolidated enterprise and of our individual reportable
segments.
|
|
Adjusted operating
income is not a measure of financial performance computed in
accordance with GAAP and should not be considered in isolation nor
as a substitute for operating income, net income, cash flows from
operations, or other statement of operations or cash flow data
prepared in conformity with GAAP, or as a measure of profitability
or liquidity. In addition, the calculation of adjusted operating
income is susceptible to varying interpretations and calculations,
and the amounts presented may not be comparable to similarly titled
measures of other companies. Adjusted operating income may not be
indicative of historical operating results, and we do not intend
these calculations to be predictive of future results of operations
or cash flows.
|
|
|
Three months
ended
|
Year
ended
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
December
31,
2016
|
December
31,
2015
|
Consolidated:
|
|
|
|
|
|
Operating
income
|
$
381,428
|
$
819,156
|
$
244,935
|
$
1,894,543
|
$
1,170,695
|
Gain on APAC JV
ownership changes
|
─
|
(374,374)
|
─
|
(374,374)
|
─
|
Goodwill and other
intangible asset impairment charges
|
28,415
|
─
|
206,169
|
281,415
|
210,234
|
Impairment of minority
equity investment
|
14,993
|
─
|
─
|
14,993
|
─
|
Pharmacy
accruals
|
15,770
|
─
|
22,530
|
15,770
|
22,530
|
Gain on sale of
Tandigm ownership interest
|
─
|
─
|
─
|
(40,280)
|
─
|
Loss on sale of DMG
Arizona
|
─
|
─
|
─
|
10,489
|
─
|
Reduction in the
receivables associated with the DMG acquisition escrow
provision
|
3,894
|
27,040
|
─
|
30,934
|
─
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16,000
|
─
|
Settlement
charge
|
─
|
─
|
─
|
─
|
495,000
|
Adjusted operating
income
|
$
444,500
|
$
471,822
|
$
473,634
|
$
1,849,490
|
$
1,898,459
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Three months
ended
|
Year ended
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
December 31,
2016
|
Kidney
Care:
|
|
|
|
|
U.S. dialysis and
related lab services:
|
|
|
|
|
Segment operating
income
|
$
435,581
|
$
452,187
|
$
464,378
|
$
1,777,014
|
Add: Settlement
charge
|
─
|
─
|
─
|
─
|
Adjusted operating
income
|
$
435,581
|
$
452,187
|
$
464,378
|
$
1,777,014
|
Other — Ancillary
services and strategic initiatives:
|
|
|
|
|
U.S. ancillary
services and strategic initiatives
|
|
|
|
|
Segment operating
loss
|
$
(58,562)
|
$
(5,935)
|
$
(14,505)
|
$
(65,586)
|
Add:
|
|
|
|
|
Goodwill impairment
charge
|
28,415
|
─
|
─
|
28,415
|
Pharmacy
accruals
|
15,770
|
─
|
22,530
|
15,770
|
Adjusted operating
loss
|
$
(14,377)
|
$
(5,935)
|
$
8,025
|
$
(21,401)
|
International
dialysis
|
|
|
|
|
Segment operating
income
|
$
(13,273)
|
$
367,838
|
$
(19,243)
|
$
331,910
|
Add:
|
|
|
|
|
Gain on APAC JV
ownership changes
|
─
|
(374,374)
|
─
|
(374,374)
|
Impairment of
investment
|
14,993
|
─
|
─
|
14,993
|
Adjusted operating
income (loss)
|
$
1,720
|
$
(6,536)
|
$
(19,243)
|
$
(27,471)
|
Adjusted operating
loss
|
$
(12,657)
|
$
(12,471)
|
$
(11,218)
|
$
(48,872)
|
Corporate
administrative support:
|
|
|
|
|
Segment operating
loss
|
$
(4,195)
|
$
(28,028)
|
$
(4,432)
|
$
(44,562)
|
Add: Reduction in the
receivables associated with the DMG acquisition escrow
provision
|
3,894
|
27,040
|
─
|
30,934
|
Adjusted operating
loss
|
$
(301)
|
$
(988)
|
$
(4,432)
|
$
(13,628)
|
Kidney Care adjusted
operating income
|
$
422,623
|
$
438,728
|
$
448,728
|
$
1,714,514
|
DMG:
|
|
|
|
|
Segment operating
income (loss)
|
$
21,877
|
$
33,094
|
$
(181,263)
|
$
(104,233)
|
Add:
|
|
|
|
|
Goodwill and other
intangible asset impairment charges
|
─
|
─
|
206,169
|
253,000
|
Gain on sale of
Tandigm ownership interest
|
─
|
─
|
─
|
(40,280)
|
Loss on sale of DMG
Arizona
|
─
|
─
|
─
|
10,489
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16,000
|
DMG adjusted operating
income
|
$
21,877
|
$
33,094
|
$
24,906
|
$
134,976
|
Consolidated adjusted
operating income
|
$
444,500
|
$
471,822
|
$
473,634
|
$
1,849,490
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
Note
4: Effective income tax rates and adjusted effective
income tax rates.
|
|
We believe that
reporting the effective income tax rate attributable to DaVita Inc.
as well as the adjusted effective income tax rate attributable to
DaVita Inc., excluding a gain on the APAC JV ownership changes,
goodwill and other intangible asset impairment charges, an
impairment of a minority equity investment, a gain on the sale of a
portion of our Tandigm ownership interest, a loss on the sale of
our DMG Arizona business, adjustments to reduce the receivables
associated with the DMG acquisition escrow provision relating to
income tax items, and estimated accruals for damages and
liabilities associated with our pharmacy and DMG Nevada hospice
businesses, net of tax, enhances a user's understanding of DaVita
Inc.'s effective income tax rate and DaVita Inc.'s adjusted
effective income tax rate for the periods presented because it
excludes noncontrolling owners' income that primarily relates to
non-tax paying entities and certain non-deductible charges which we
do not believe are indicative of our ordinary results, and,
therefore, these adjusted measures are meaningful to a user to
fully understand the related income tax effects on DaVita Inc.'s
operating results. These are not measures under GAAP and should not
be considered as an alternative to the effective income tax rate
calculated in accordance with GAAP.
|
|
Effective income tax
rate as compared to the effective income tax rate attributable to
DaVita Inc. is as follows:
|
|
|
Three months
ended
|
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Year
ended
December 31,
2016
|
Income before income
taxes
|
$
278,072
|
$
716,451
|
$
146,307
|
$
1,488,895
|
Income tax
expense
|
$
89,802
|
$
104,301
|
$
111,833
|
$
455,813
|
Effective income tax
rate
|
32.3%
|
14.6%
|
76.4%
|
30.6%
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Year
ended
December 31,
2016
|
Income before income
taxes
|
$
278,072
|
$
716,451
|
$
146,307
|
$
1,488,895
|
Less:
Noncontrolling owners' income primarily attributable to non-tax
paying entities
|
(30,646)
|
(40,909)
|
(40,587)
|
(153,641)
|
Income before income
taxes attributable to DaVita Inc
|
$
247,426
|
$
675,542
|
$
105,720
|
$
1,335,254
|
|
|
|
|
|
Income tax
expense
|
$
89,802
|
$
104,301
|
$
111,833
|
$
455,813
|
Less: Income tax
attributable to noncontrolling interests
|
(102)
|
(91)
|
(113)
|
(433)
|
Income tax expense
attributable to DaVita Inc
|
$
89,700
|
$
104,210
|
$
111,720
|
$
455,380
|
|
|
|
|
|
Effective income tax
rate attributable to DaVita Inc
|
36.3%
|
15.4%
|
105.7%
|
34.1%
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
Adjusted effective
income tax rate as compared to the adjusted effective income tax
rate attributable to DaVita Inc. is as follows:
|
|
|
Three months
ended
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Year
ended
December 31,
2016
|
Income before income
taxes
|
$
278,072
|
$
716,451
|
$
146,307
|
$
1,488,895
|
Add:
|
|
|
|
|
Goodwill and other
intangible asset impairment charges
|
28,415
|
─
|
206,169
|
281,415
|
Pharmacy
accruals
|
15,770
|
─
|
22,530
|
15,770
|
Impairment of minority
equity investment
|
14,993
|
─
|
─
|
14,993
|
Loss on sale of DMG
Arizona
|
─
|
─
|
─
|
10,489
|
Reduction in the
receivables associated with the DMG acquisition escrow
provision
|
3,894
|
27,040
|
─
|
30,934
|
DMG Nevada hospice
accrual
|
─
|
─
|
─
|
16,000
|
Less:
|
|
|
|
|
Gain on APAC JV
ownership changes
|
─
|
(374,374)
|
─
|
(374,374)
|
Gain on sale of
Tandigm ownership interest
|
─
|
─
|
─
|
(40,280)
|
Noncontrolling owners'
income primarily attributable to non-tax paying entities
|
(30,646)
|
(40,909)
|
(40,587)
|
(153,641)
|
Goodwill impairment
charge attributable to noncontrolling interests
|
(8,078)
|
─
|
─
|
(8,078)
|
Adjusted income
before income taxes attributable to DaVita Inc
|
$
302,420
|
$
328,208
|
$
334,419
|
$
1,282,123
|
|
|
|
|
|
Income tax
expense
|
$
89,802
|
$
104,301
|
$
111,833
|
$
455,813
|
Add income tax
related to:
|
|
|
|
|
Sale of DMG
Arizona
|
─
|
─
|
─
|
4,490
|
Reduction in
receivables associated with the DMG acquisition escrow
provision
|
3,894
|
27,040
|
─
|
30,934
|
Goodwill and other
intangible asset impairment charges
|
7,342
|
─
|
6,647
|
7,342
|
Pharmacy
accruals
|
4,090
|
─
|
1,996
|
4,090
|
Impairment of minority
equity investment
|
5,360
|
─
|
─
|
5,360
|
Less income tax
related to:
|
─
|
─
|
─
|
─
|
Sale of Tandigm
ownership interest
|
─
|
─
|
─
|
(14,904)
|
Noncontrolling
interests
|
(102)
|
(91)
|
(113)
|
(433)
|
Adjusted income tax
attributable to DaVita Inc
|
$
110,386
|
$
131,250
|
$
120,363
|
$
492,692
|
Adjusted effective
income tax rate attributable to DaVita Inc
|
36.5%
|
40.0%
|
36.0%
|
38.4%
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
Note
5: Free cash flow.
|
|
Free cash flow
represents net cash provided by operating activities less
distributions to noncontrolling interests and capital expenditures
for routine maintenance and information technology. We believe free
cash flow is a useful adjunct to cash flow from operating
activities and other measurements under GAAP, since free cash flow
is a meaningful measure of our ability to fund acquisitions and
development activities and meet our debt service requirements. In
addition, free cash flow excluding distributions to noncontrolling
interests provides a user with an understanding of free cash flows
that are attributable to DaVita Inc. Free cash flow is not a
measure of financial performance under GAAP and should not be
considered as an alternative to cash flows from operating,
investing or financing activities, as an indicator of cash flows or
as a measure of liquidity.
|
|
|
Three months
ended
|
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Year
ended
December 31,
2016
|
Cash provided by
operating activities
|
$
482,182
|
$
535,623
|
$
436,673
|
$
1,963,444
|
Less:
Distributions to noncontrolling interests
|
(47,329)
|
(50,919)
|
(48,697)
|
(192,401)
|
Cash provided by
operating activities attributable to DaVita Inc
|
434,853
|
484,704
|
387,976
|
1,771,043
|
Less: Expenditures
for routine maintenance and information technology
|
(105,441)
|
(98,464)
|
(131,769)
|
(358,739)
|
Free cash
flow
|
$
329,412
|
$
386,240
|
$
256,207
|
$
1,412,304
|
|
|
|
|
|
|
|
|
|
|
|
|
Rolling 12-Month
Period
|
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Cash provided by
operating activities
|
|
$
1,963,444
|
$
1,917,935
|
$
1,557,200
|
Less:
Distributions to noncontrolling interests
|
|
(192,401)
|
(193,769)
|
(174,635)
|
Cash provided by
operating activities attributable to DaVita Inc
|
|
1,771,043
|
1,724,166
|
1,382,565
|
Less: Expenditures
for routine maintenance and information technology
|
|
(358,739)
|
(385,067)
|
(327,079)
|
Free cash
flow
|
|
$
1,412,304
|
$
1,339,099
|
$
1,055,486
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
Note
6: Total care dollars under management.
|
|
In California, as a
result of our managed care administrative services agreements with
hospitals and health plans, DMG does not assume the direct
financial risk for institutional (hospital) services in most cases,
but is responsible for managing the care dollars associated with
both the professional (physician) and institutional services being
provided for the Per Member Per Month (PMPM) fee attributable to
both professional and institutional services. In cases where DMG
does not assume the direct financial risk, DMG recognizes the
surplus of institutional revenue less institutional expense as DMG
net revenue recorded as capitated revenues. In addition to revenues
recognized for financial reporting purposes, DMG measures its total
care dollars under management, which includes the PMPM fee payable
to third parties for institutional services where DMG manages the
care provided to its members by the hospitals and other
institutions, which are not included in GAAP revenues. DMG uses
total care dollars under management as a supplement to GAAP
revenues as it allows DMG to measure profit margins on a comparable
basis across both the global capitation model (where DMG assumes
the full financial risk for all services, including institutional
services) and the risk sharing models (where DMG operates under
managed care administrative services agreements where DMG does not
assume the full risk). DMG believes that presenting amounts in this
manner is useful because it presents its operations on a unified
basis without the complication caused by models that DMG has
adopted in its California market as a result of various regulations
related to the assumption of institutional risk. Total care dollars
under management is not a measure of financial performance computed
in accordance with GAAP and should not be considered in isolation
or as a substitute for revenues calculated in accordance with GAAP.
Total care dollars under management includes PMPM payments received
from third parties that are recorded net of expenses in our
accounting records. The following table reconciles total care
dollars under management to medical revenues for the periods
indicated.
|
|
|
Three months
ended
|
|
|
December
31,
2016
|
September
30,
2016
|
December
31,
2015
|
Year
ended
December 31,
2016
|
Medical
revenues
|
$
1,017,576
|
$ 1,012,908
|
$
925,764
|
$ 4,052,337
|
Less: Risk share
revenue, net
|
(37,243)
|
(26,125)
|
(44,134)
|
(142,138)
|
Add: Institutional
capitation amounts
|
315,033
|
313,367
|
331,736
|
1,293,253
|
Total care dollars
under management
|
$
1,295,366
|
$
1,300,150
|
$
1,213,366
|
$
5,203,452
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/davita-inc-4th-quarter-2016-results-300409124.html
SOURCE DaVita Inc.