Form 8-K DAVITA HEALTHCARE PARTNE For: Aug 04
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 4, 2015
DAVITA HEALTHCARE PARTNERS INC.
(Exact name of registrant as specified in its charter)
| Delaware | 1-14106 | No. 51-0354549 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
2000 16th Street
Denver, CO 80202
(Address of principal executive offices including Zip Code)
(303) 405-2100
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 240.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On August 4, 2015, DaVita HealthCare Partners Inc. issued a press release announcing its financial results for the three and six months ended June 30, 2015. A copy of the press release is furnished as Exhibit 99.1 to this report.
The information contained in this Form 8-K (including Exhibit 99.1 attached hereto) is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number |
Description | |
| 99.1 | Press Release dated August 4, 2015 announcing the registrant’s financial results for the three and six months ended June 30, 2015. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DAVITA HEALTHCARE PARTNERS INC. | ||||
| Date: August 4, 2015 | By: | /s/ James K. Hilger | ||
| James K. Hilger | ||||
| Chief Accounting Officer | ||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press Release dated August 4, 2015, announcing the registrant’s financial results for the three and six months ended June 30, 2015. | |
Exhibit 99.1
Contact: Jim Gustafson
Investor Relations
DaVita HealthCare Partners Inc.
(310) 536-2585
DaVita HealthCare Partners Inc. 2nd Quarter 2015 Results
Denver, Colorado, August 4, 2015 – DaVita HealthCare Partners Inc. (NYSE: DVA) today announced results for the quarter ended June 30, 2015. Adjusted net income attributable to DaVita HealthCare Partners Inc. for the three months ended June 30, 2015 was $207 million, or $0.95 per share, excluding after-tax debt redemption charges of approximately $29 million, or $0.13 per share, and a tax adjustment related to the settlement of the Vainer private civil suit (the Vainer suit) of approximately $8 million, or $0.04 per share. Net income attributable to DaVita HealthCare Partners Inc. for the three months ended June 30, 2015 including these items was $170 million, or $0.78 per share.
Adjusted net income attributable to DaVita HealthCare Partners Inc. for the six months ended June 30, 2015 was $394 million, or $1.81 per share, excluding after-tax debt redemption charges as stated above and an after-tax settlement charge of $305 million, or $1.41 per share, related to the Vainer suit, which has been further updated for a tax adjustment related to the settlement of the Vainer suit of approximately $8 million, or $0.04 per share, in the second quarter of 2015. Net income attributable to DaVita HealthCare Partners Inc. for the six months ended June 30, 2015 including these items was $60 million, or $0.27 per share.
Adjusted net income attributable to DaVita HealthCare Partners Inc. for the three and six months ended June 30, 2014 was $206 million and $389 million, or $0.95 and $1.80 per share, respectively, excluding after-tax debt redemption and refinancing charges of $58 million, or $0.27 per share. Net income attributable to DaVita HealthCare Partners Inc. for the three and six months ended June 30, 2014 including this item was $148 million and $331 million, or $0.68 and $1.53 per share, respectively.
Financial and operating highlights include:
| • | Cash Flow: For the rolling twelve months ended June 30, 2015, operating cash flow was $1.219 billion and free cash flow was $786 million. For the three months ended June 30, 2015, operating cash flow was $31 million and free cash flow was $(77) million. Operating cash flow and free cash flow for the three and six months ended and rolling twelve months ended June 30, 2015 were negatively impacted by approximately $304 million of after-tax payments made during the second quarter of 2015 in connection with the settlement of the Vainer suit. In addition, the rolling twelve months ended June 30, 2015 was negatively impacted by approximately $269 million of after-tax payments made in connection with the settlement of the 2010 and 2011 U.S. Attorney physician relationship investigations. Excluding these items, operating cash flow for the rolling twelve months ended June 30, 2015 would have been $1.792 billion. |
| • | Operating Income and Adjusted Operating Income: Operating income for the three months ended June 30, 2015 was $481 million. Adjusted operating income for the six months ended June 30, 2015 was $911 million, excluding a settlement charge of $495 million related to the Vainer suit. Operating income for the six months ended June 30, 2015, including this item was $416 million. |
Operating income for the three and six months ended June 30, 2014 was $484 million and $926 million, respectively.
| • | Adjusted Diluted Net Income Per Share: Adjusted net income attributable to DaVita HealthCare Partners Inc. for the three months ended June 30, 2015, excluding the amortization of intangible assets associated with acquisitions and debt redemption charges, net of tax, and a tax adjustment related the settlement of the Vainer suit as stated above, was $233 million and adjusted diluted net income per share was $1.07. Adjusted net income attributable to DaVita HealthCare Partners Inc. for the six months ended June 30, 2015, excluding the amortization of intangible assets associated with acquisitions, the Vainer suit settlement charge, debt redemption charges, net of tax, a tax adjustment related to the settlement of the Vainer suit as stated above, was $446 million and adjusted diluted net income per share was $2.05. |
1
Adjusted net income 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 redemption and refinancing charges, net of tax, was $231 million and $439 million, respectively, and adjusted diluted net income per share was $1.06 and $2.03, respectively.
| • | Volume: Total U.S. dialysis treatments for the second quarter of 2015 were 6,463,058, or 82,860 treatments per day, representing a per day increase of 4.3% over the second quarter of 2014. Non-acquired treatment growth and normalized non-acquired treatment growth in the second quarter of 2015 were both 3.7% over the second quarter of 2014. |
The number of member months for which HCP provided capitated care during the second quarter of 2015 specifically related to its legacy markets was approximately 2.4 million representing an increase of 2.8% as compared to the second quarter of 2014, inclusive of growth contributed from acquisitions.
| • | Effective Tax Rate: Our effective tax rate was 37.1% and 21.9% for the three and six months ended June 30, 2015, repectively. 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 41.8% and 37.8% for the three and six months ended June 30, 2015, respectively. The adjusted effective tax rate attributable to DaVita HealthCare Partners Inc. excluding the Vainer suit settlement charge was 39.2% and 38.3% for the three and six months ended June 30, 2015, respectively, which was further updated for the tax adjustment as stated above. |
We currently expect our 2015 effective tax rate attributable to DaVita HealthCare Partners Inc. to be approximately 39.0% to 40.0%, excluding the Vainer suit settlement charge.
| • | Center Activity: As of June 30, 2015, we provided dialysis services to a total of approximately 184,000 patients at 2,306 outpatient dialysis centers, of which 2,210 centers are located in the United States and 96 centers are located in ten countries outside of the United States. During the second quarter of 2015, we opened a total of 13 new dialysis centers in the United States. We also acquired one and opened two new dialysis centers outside of the United States. |
| • | Share Repurchases: During the first six months of 2015, we repurchased a total of 1,067,139 shares of our common stock for $84 million, or an average price of $78.82 per share. During the three months ended June 30, 2015, we repurchased 175,710 shares of our common stock for $14 million, or an average price of $79.96 per share. We have not repurchased any additional shares of our common stock subsequent to June 30, 2015. |
| • | Issuance of New Senior Notes: In April 2015, we issued $1.500 billion of 5.0% Senior Notes due 2025 (the 5.0% Senior Notes). The proceeds from the 5.0% Senior Notes were used to repurchase all of the outstanding principal balances of the $775 million of 6 5⁄8% Senior Notes due 2020 (the 6 5⁄8% Senior Notes) through a combination of a tender offer and a redemption process, to pay fees and expenses, and the remaining proceeds may be used for general corporate purposes, for future acquisitions and share repurchases. As a result, we incurred $48 million of pre-tax debt redemption charges consisting of tender and redemption fees and the write-off of deferred financing fees associated with the repurchase of the 6 5⁄8% Senior Notes. |
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Outlook
| • | We are updating the low end of our consolidated operating income for 2015 to now be in the range of $1.825 billion to $1.925 billion. |
Our previous consolidated operating income guidance for 2015 was in the range of $1.800 billion to $1.925 billion.
| • | We are also updating the low end of our operating income for Kidney Care for 2015 to now be in the range of $1.600 billion to $1.650 billion. |
Our previous operating income guidance for Kidney Care for 2015 was in the range of $1.575 billion to $1.650 billion.
| • | We still expect our operating income for HCP for 2015 to be in the range of $225 million to $275 million. |
| • | We are updating our consolidated operating cash flow for 2015 to now be in the range of $1.600 billion to $1.750 billion. |
Our previous consolidated operating cash flow for 2015 was in the range of $1.500 billion to $1.700 billion.
The above projected ranges exclude the Vainer suit settlement charge and the corresponding settlement payments made in 2015.
These projections and the underlying assumptions involve significant risks and uncertainties, including those described below, and actual results may vary significantly from these current projections.
We will be holding a conference call to discuss our results for the second quarter ended June 30, 2015 on August 4, 2015 at 5:00 p.m. Eastern Time. To join the conference call, please dial (888) 282-0359 from the U.S. or (312) 470-7167 from outside the U.S. A replay of the conference call will be available on DaVita’s official web page, www.davitahealthcarepartners.com, for the following 30 days.
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This release contains forward-looking statements within the meaning of the federal securities laws, including statements related to our guidance and expectations for our 2015 consolidated operating income, our 2015 Kidney Care operating income, HCP’s 2015 operating income, our 2015 consolidated operating cash flows and our 2015 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, 2014, 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) 2015 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 including compliance with 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, or to businesses outside of dialysis and HealthCare Partners’ (HCP) business, |
| • | 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 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, |
| • | loss of key HCP employees, potential disruption from the HCP transaction making it more difficult to maintain business and operational relationships with customers, partners, associated physicians and physician groups, hospitals and others, |
| • | the risk that laws regulating the corporate practice of medicine could restrict the manner in which HCP conducts its business, |
| • | 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, |
4
| • | 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 except as required by law 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.
5
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, |
|||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Patient service revenues |
$ | 2,363,579 | $ | 2,187,249 | $ | 4,635,394 | $ | 4,301,347 | ||||||||
| Less: Provision for uncollectible accounts |
(105,965 | ) | (88,052 | ) | (205,129 | ) | (171,249 | ) | ||||||||
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| Net patient service revenues |
2,257,614 | 2,099,197 | 4,430,265 | 4,130,098 | ||||||||||||
| Capitated revenues |
866,190 | 799,369 | 1,716,705 | 1,586,934 | ||||||||||||
| Other revenues |
310,814 | 273,923 | 575,613 | 498,233 | ||||||||||||
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| Total net revenues |
3,434,618 | 3,172,489 | 6,722,583 | 6,215,265 | ||||||||||||
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| Operating expenses and charges: |
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| Patient care costs and other costs |
2,446,076 | 2,246,538 | 4,808,688 | 4,426,310 | ||||||||||||
| General and administrative |
352,025 | 298,636 | 693,826 | 582,697 | ||||||||||||
| Depreciation and amortization |
158,843 | 145,907 | 312,632 | 288,486 | ||||||||||||
| Provision for uncollectible accounts |
2,159 | 3,208 | 3,986 | 5,719 | ||||||||||||
| Equity investment income |
(5,033 | ) | (6,095 | ) | (7,941 | ) | (13,467 | ) | ||||||||
| Settlement charge |
— | — | 495,000 | — | ||||||||||||
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| Total operating expenses and charges |
2,954,070 | 2,688,194 | 6,306,191 | 5,289,745 | ||||||||||||
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| Operating income |
480,548 | 484,295 | 416,392 | 925,520 | ||||||||||||
| Debt expense |
(104,248 | ) | (106,132 | ) | (201,640 | ) | (212,467 | ) | ||||||||
| Debt redemption and refinancing charges |
(48,072 | ) | (97,548 | ) | (48,072 | ) | (97,548 | ) | ||||||||
| Other income, net |
2,311 | 1,693 | 1,778 | 3,391 | ||||||||||||
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| Income before income taxes |
330,539 | 282,308 | 168,458 | 618,896 | ||||||||||||
| Income tax expense |
122,762 | 100,887 | 36,829 | 225,738 | ||||||||||||
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| Net income |
207,777 | 181,421 | 131,629 | 393,158 | ||||||||||||
| Less: Net income attributable to noncontrolling interests |
(37,300 | ) | (33,738 | ) | (71,769 | ) | (62,186 | ) | ||||||||
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| Net income attributable to DaVita HealthCare Partners Inc. |
$ | 170,477 | $ | 147,683 | $ | 59,860 | $ | 330,972 | ||||||||
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| Earnings per share: |
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| Basic net income per share attributable to DaVita HealthCare Partners Inc. |
$ | 0.80 | $ | 0.70 | $ | 0.28 | $ | 1.56 | ||||||||
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| Diluted net income per share attributable to DaVita HealthCare Partners Inc. |
$ | 0.78 | $ | 0.68 | $ | 0.27 | $ | 1.53 | ||||||||
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| Weighted average shares for earnings per share: |
||||||||||||||||
| Basic |
212,991,606 | 212,258,994 | 213,188,268 | 211,817,893 | ||||||||||||
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| Diluted |
217,606,198 | 216,720,944 | 217,790,617 | 216,420,713 | ||||||||||||
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6
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net income |
$ | 207,777 | $ | 181,421 | $ | 131,629 | $ | 393,158 | ||||||||
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| Other comprehensive (loss) income, net of tax: |
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| Unrealized losses on interest rate swap and cap agreements: |
||||||||||||||||
| Unrealized loss on interest rate swap and cap agreements |
(2,453 | ) | (5,209 | ) | (8,213 | ) | (7,714 | ) | ||||||||
| Reclassifications of net swap and cap agreements realized loss into net income |
789 | 4,997 | 1,601 | 8,356 | ||||||||||||
| Unrealized (losses) gains on investments: |
||||||||||||||||
| Unrealized (losses) gains on investments |
(99 | ) | 578 | 283 | 909 | |||||||||||
| Reclassification of net investment realized gains into net income |
(16 | ) | — | (173 | ) | (207 | ) | |||||||||
| Foreign currency translation adjustments |
5,025 | 1,939 | (12,860 | ) | 1,967 | |||||||||||
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| Other comprehensive income (loss) |
3,246 | 2,305 | (19,362 | ) | 3,311 | |||||||||||
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| Total comprehensive income |
211,023 | 183,726 | 112,267 | 396,469 | ||||||||||||
| Less: Comprehensive income attributable to noncontrolling interests |
(37,300 | ) | (33,738 | ) | (71,769 | ) | (62,186 | ) | ||||||||
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| Comprehensive income attributable to DaVita HealthCare Partners Inc. |
$ | 173,723 | $ | 149,988 | $ | 40,498 | $ | 334,283 | ||||||||
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7
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
| Six months ended June 30, |
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| 2015 | 2014 | |||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 131,629 | $ | 393,158 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
| Settlement charge |
495,000 | — | ||||||
| Settlement payments |
(493,775 | ) | — | |||||
| Depreciation and amortization |
312,632 | 288,470 | ||||||
| Debt redemption and refinancing charges |
48,072 | 97,548 | ||||||
| Stock-based compensation expense |
28,299 | 29,699 | ||||||
| Tax benefits from stock award exercises |
28,040 | 42,110 | ||||||
| Excess tax benefits from stock award exercises |
(16,913 | ) | (30,238 | ) | ||||
| Deferred income taxes |
4,418 | 13,826 | ||||||
| Equity investment income, net |
5,257 | 2,257 | ||||||
| Other non-cash charges and loss on disposal of assets |
24,718 | 22,861 | ||||||
| Changes in operating assets and liabilities, other than from acquisitions and divestitures: |
||||||||
| Accounts receivable |
(142,950 | ) | (65,079 | ) | ||||
| Inventories |
(22,780 | ) | (10,731 | ) | ||||
| Other receivables and other current assets |
(50,362 | ) | (95,580 | ) | ||||
| Other long-term assets |
378 | 2,158 | ||||||
| Accounts payable |
50,823 | (46,022 | ) | |||||
| Accrued compensation and benefits |
(26,316 | ) | 19,912 | |||||
| Other current liabilities |
177,733 | 31,970 | ||||||
| Income taxes |
(109,460 | ) | 2,886 | |||||
| Other long-term liabilities |
(2,912 | ) | (17,707 | ) | ||||
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| Net cash provided by operating activities |
441,531 | 681,498 | ||||||
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| Cash flows from investing activities: |
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| Additions of property and equipment |
(290,873 | ) | (278,593 | ) | ||||
| Acquisitions |
(45,059 | ) | (98,442 | ) | ||||
| Proceeds from asset and business sales |
3,415 | 215 | ||||||
| Purchase of investments available for sale |
(3,872 | ) | (6,117 | ) | ||||
| Purchase of investments held-to-maturity |
(1,039,632 | ) | (121,333 | ) | ||||
| Proceeds from sale of investments available for sale |
1,550 | 1,277 | ||||||
| Proceeds from investments held-to-maturity |
434,684 | 64,561 | ||||||
| Purchase of intangible assets |
— | (10 | ) | |||||
| Purchase of equity investments |
(7,550 | ) | (4,750 | ) | ||||
| Distributions received on equity investments |
— | 337 | ||||||
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| Net cash used in investing activities |
(947,337 | ) | (442,855 | ) | ||||
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| Cash flows from financing activities: |
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| Borrowings |
28,144,986 | 33,136,743 | ||||||
| Payments on long-term debt and other financing costs |
(27,476,994 | ) | (32,788,307 | ) | ||||
| Deferred financing costs and debt redemption and refinancing costs |
(58,539 | ) | (106,937 | ) | ||||
| Purchase of treasury stock |
(84,113 | ) | — | |||||
| Distributions to noncontrolling interests |
(79,040 | ) | (65,818 | ) | ||||
| Stock award exercises and other share issuances, net |
4,680 | 7,274 | ||||||
| Excess tax benefits from stock award exercises |
16,913 | 30,238 | ||||||
| Contributions from noncontrolling interests |
18,040 | 28,265 | ||||||
| Proceeds from sales of additional noncontrolling interests |
— | 933 | ||||||
| Purchase of noncontrolling interests |
(10,840 | ) | (5,743 | ) | ||||
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| Net cash provided by financing activities |
475,093 | 236,648 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
(793 | ) | (567 | ) | ||||
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| Net (decrease) increase in cash and cash equivalents |
(31,506 | ) | 474,724 | |||||
| Cash and cash equivalents at beginning of the year |
965,241 | 946,249 | ||||||
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| Cash and cash equivalents at end of the period |
$ | 933,735 | $ | 1,420,973 | ||||
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8
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
| June 30, 2015 |
December 31, 2014 |
|||||||
| ASSETS | ||||||||
| Cash and cash equivalents |
$ | 933,735 | $ | 965,241 | ||||
| Short-term investments |
942,141 | 337,399 | ||||||
| Accounts receivable, less allowance of $265,797 and $242,674 |
1,666,969 | 1,525,849 | ||||||
| Inventories |
159,353 | 136,085 | ||||||
| Other receivables |
456,502 | 400,916 | ||||||
| Other current assets |
189,528 | 186,842 | ||||||
| Income tax receivable |
193,681 | 83,839 | ||||||
| Deferred income taxes |
239,012 | 240,626 | ||||||
|
|
|
|
|
|||||
| Total current assets |
4,780,921 | 3,876,797 | ||||||
| Property and equipment, net of accumulated depreciation of $2,207,320 and $2,029,506 |
2,564,708 | 2,469,099 | ||||||
| Intangibles, net of accumulated amortization of $706,413 and $621,891 |
1,868,432 | 1,949,498 | ||||||
| Equity investments |
67,173 | 65,637 | ||||||
| Long-term investments |
92,864 | 89,389 | ||||||
| Other long-term assets |
121,774 | 77,000 | ||||||
| Goodwill |
9,450,946 | 9,415,295 | ||||||
|
|
|
|
|
|||||
| $ | 18,946,818 | $ | 17,942,715 | |||||
|
|
|
|
|
|||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable |
$ | 490,460 | $ | 445,453 | ||||
| Other liabilities |
716,250 | 510,223 | ||||||
| Accrued compensation and benefits |
678,853 | 698,475 | ||||||
| Medical payables |
339,932 | 314,347 | ||||||
| Current portion of long-term debt |
108,795 | 120,154 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
2,334,290 | 2,088,652 | ||||||
| Long-term debt |
9,101,052 | 8,383,280 | ||||||
| Other long-term liabilities |
400,475 | 389,806 | ||||||
| Deferred income taxes |
900,959 | 890,701 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
12,736,776 | 11,752,439 | ||||||
| Commitments and contingencies: |
||||||||
| Noncontrolling interests subject to put provisions |
863,126 | 829,965 | ||||||
| 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; 216,533,208 and 215,640,968 shares issued and 215,466,069 and 215,640,968 shares outstanding, respectively) |
217 | 216 | ||||||
| Additional paid-in capital |
1,128,161 | 1,108,211 | ||||||
| Retained earnings |
4,146,963 | 4,087,103 | ||||||
| Treasury stock (1,067,139 shares) |
(84,113 | ) | — | |||||
| Accumulated other comprehensive loss |
(44,379 | ) | (25,017 | ) | ||||
|
|
|
|
|
|||||
| Total DaVita HealthCare Partners Inc. shareholders’ equity |
5,146,849 | 5,170,513 | ||||||
| Noncontrolling interests not subject to put provisions |
200,067 | 189,798 | ||||||
|
|
|
|
|
|||||
| Total equity |
5,346,916 | 5,360,311 | ||||||
|
|
|
|
|
|||||
| $ | 18,946,818 | $ | 17,942,715 | |||||
|
|
|
|
|
|||||
9
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, 2015 |
|||||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||||||
| 1. Consolidated Financial Results: |
||||||||||||||||
| Consolidated net revenues |
$ | 3,435 | $ | 3,288 | $ | 3,172 | $ | 6,723 | ||||||||
| Operating income (loss) |
$ | 481 | $ | (64 | ) | $ | 484 | $ | 416 | |||||||
| Adjusted operating income excluding a settlement charge(1) |
$ | 481 | $ | 431 | $ | 484 | $ | 911 | ||||||||
| Operating income (loss) margin |
14.0 | % | (2.0 | %) | 15.3 | % | 6.2 | % | ||||||||
| Adjusted operating income margin excluding a settlement charge(1) |
14.0 | % | 13.1 | % | 15.3 | % | 13.6 | % | ||||||||
| Net income (loss) attributable to DaVita HealthCare Partners Inc. |
$ | 170 | $ | (111 | ) | $ | 148 | $ | 60 | |||||||
| Adjusted net income attributable to DaVita HealthCare Partners Inc. excluding debt redemption and refinancing charges and a settlement charge and the related tax adjustment(1) |
$ | 207 | $ | 187 | $ | 206 | $ | 394 | ||||||||
| Diluted net income (loss) per share attributable to DaVita HealthCare Partners Inc. |
$ | 0.78 | $ | (0.52 | ) | $ | 0.68 | $ | 0.27 | |||||||
| Adjusted diluted net income per share attributable to DaVita HealthCare Partners Inc. excluding debt redemption and refinancing charges and a settlement charge and the related tax adjustment(1) |
$ | 0.95 | $ | 0.86 | $ | 0.95 | $ | 1.81 | ||||||||
| 2. Consolidated Business Metrics: |
||||||||||||||||
| Expenses |
||||||||||||||||
| General and administrative expenses as a percent of consolidated net revenues(2) |
10.2 | % | 10.4 | % | 9.4 | % | 10.3 | % | ||||||||
| Consolidated effective tax rate |
37.1 | % | 53.0 | % | 35.7 | % | 21.9 | % | ||||||||
| Consolidated effective tax rate attributable to DaVita HealthCare Partners Inc.(1) |
41.8 | % | 43.7 | % | 40.5 | % | 37.8 | % | ||||||||
| Adjusted consolidated effective tax rate attributable to DaVita HealthCare Partners Inc.(1) |
39.2 | % | 37.5 | % | 40.5 | % | 38.3 | % | ||||||||
| 3. Summary of Division Financial Results: |
||||||||||||||||
| Net revenues |
||||||||||||||||
| Kidney Care: |
||||||||||||||||
| Net dialysis and related lab services revenues |
$ | 2,154 | $ | 2,072 | $ | 2,025 | $ | 4,226 | ||||||||
| Net ancillary services and strategic initiatives revenues, including international dialysis operations |
334 | 305 | 274 | 639 | ||||||||||||
| Elimination of intersegment revenues |
(19 | ) | (17 | ) | (14 | ) | (36 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Kidney Care net revenues |
2,469 | 2,360 | 2,285 | 4,829 | ||||||||||||
| Net HCP revenues |
966 | 928 | 887 | 1,894 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total net consolidated revenues |
$ | 3,435 | $ | 3,288 | $ | 3,172 | $ | 6,723 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
||||||||||||||||
| Kidney Care: |
||||||||||||||||
| Dialysis and related lab services operating income (loss) |
$ | 438 | $ | (104 | ) | $ | 408 | $ | 333 | |||||||
| Other – Ancillary services and strategic initiatives, including international dialysis operations operating loss |
(26 | ) | (14 | ) | (2 | ) | (40 | ) | ||||||||
| Corporate support and related long-term incentive compensation |
(3 | ) | (6 | ) | (4 | ) | (10 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Kidney Care operating income (loss) |
409 | (124 | ) | 402 | 283 | |||||||||||
| HCP operating income |
72 | 60 | 82 | 133 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total consolidated operating income (loss) |
$ | 481 | $ | (64 | ) | $ | 484 | $ | 416 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
10
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, 2015 |
|||||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||||||
| 4. Summary of Reportable Segment Financial Results: |
||||||||||||||||
| Dialysis and Related Lab Services |
||||||||||||||||
| Revenue: |
||||||||||||||||
| Patient services revenues |
$ | 2,252 | $ | 2,166 | $ | 2,106 | $ | 4,418 | ||||||||
| Provision for uncollectible accounts |
(101 | ) | (97 | ) | (84 | ) | (199 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net patient service operating revenues |
2,151 | 2,069 | 2,022 | 4,219 | ||||||||||||
| Other revenues |
3 | 3 | 3 | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total net operating revenues |
$ | 2,154 | $ | 2,072 | $ | 2,025 | $ | 4,226 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Patient care costs |
$ | 1,436 | $ | 1,396 | $ | 1,358 | $ | 2,833 | ||||||||
| General and administrative |
174 | 183 | 164 | 358 | ||||||||||||
| Depreciation and amortization |
110 | 105 | 99 | 215 | ||||||||||||
| Equity investment income |
(4 | ) | (3 | ) | (4 | ) | (8 | ) | ||||||||
| Settlement charge |
— | 495 | — | 495 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
1,716 | 2,176 | 1,617 | 3,893 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Segment operating income (loss) |
$ | 438 | $ | (104 | ) | $ | 408 | $ | 333 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| HCP |
||||||||||||||||
| Revenue: |
||||||||||||||||
| HCP capitated revenues |
$ | 848 | $ | 833 | $ | 783 | $ | 1,681 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Patient services revenues |
86 | 81 | 62 | 168 | ||||||||||||
| Provision for uncollectible accounts |
(4 | ) | (1 | ) | (4 | ) | (6 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net patient service operating revenues |
82 | 80 | 58 | 162 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other revenues |
36 | 15 | 46 | 51 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total net operating revenues |
$ | 966 | $ | 928 | $ | 887 | $ | 1,894 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Patient care costs |
$ | 750 | $ | 733 | $ | 688 | $ | 1,482 | ||||||||
| General and administrative |
102 | 92 | 77 | 194 | ||||||||||||
| Depreciation and amortization |
43 | 43 | 42 | 86 | ||||||||||||
| Equity investment income |
(1 | ) | — | (2 | ) | (1 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
894 | 868 | 805 | 1,761 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Segment operating income |
$ | 72 | $ | 60 | $ | 82 | $ | 133 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 5. Dialysis and Related Lab Services Business Metrics: |
||||||||||||||||
| Volume |
||||||||||||||||
| Treatments |
6,463,058 | 6,262,635 | 6,196,394 | 12,725,693 | ||||||||||||
| Number of treatment days |
78 | 76.6 | 78.0 | 154.6 | ||||||||||||
| Treatments per day |
82,860 | 81,758 | 79,441 | 82,314 | ||||||||||||
| Per day year over year increase |
4.3 | % | 4.5 | % | 5.6 | % | 4.4 | % | ||||||||
| Non-acquired growth year over year |
3.7 | % | 3.9 | % | 5.0 | % | 3.8 | % | ||||||||
| Normalized non-acquired growth year over year |
3.7 | % | 4.5 | % | 5.0 | % | 4.1 | % | ||||||||
| Operating revenues before provision for uncollectible accounts |
||||||||||||||||
| Dialysis and related lab services revenue per treatment |
$ | 348.32 | $ | 345.88 | $ | 339.82 | $ | 347.12 | ||||||||
| Per treatment increase (decrease) from previous quarter |
0.7 | % | (0.3 | %) | (0.3 | %) | ||||||||||
| Per treatment increase from previous year |
2.5 | % | 1.5 | % | 0.3 | % | 2.0 | % | ||||||||
| Percent of net consolidated revenues |
62.3 | % | 62.7 | % | 63.5 | % | 62.5 | % | ||||||||
11
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, 2015 |
|||||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||||||
| 5. Dialysis and Related Lab Services Business Metrics: (continued) |
||||||||||||||||
| Expenses |
||||||||||||||||
| Patient care costs |
||||||||||||||||
| Percent of total segment operating revenues |
66.7 | % | 67.4 | % | 67.1 | % | 67.0 | % | ||||||||
| Per treatment |
$ | 222.17 | $ | 222.99 | $ | 219.16 | $ | 222.57 | ||||||||
| Per treatment (decrease) increase from previous quarter |
(0.4 | %) | 1.9 | % | (1.0 | %) | ||||||||||
| Per treatment increase from previous year |
1.4 | % | 0.8 | % | 1.6 | % | 1.1 | % | ||||||||
| General and administrative expenses |
||||||||||||||||
| Percent of total segment operating revenues |
8.1 | % | 8.8 | % | 8.1 | % | 8.5 | % | ||||||||
| Per treatment |
$ | 26.99 | $ | 29.25 | $ | 26.47 | $ | 28.10 | ||||||||
| Per treatment (decrease) increase from previous quarter |
(7.7 | %) | (1.7 | %) | 1.8 | % | ||||||||||
| Per treatment increase (decrease) from previous year |
2.0 | % | 12.5 | % | (8.3 | %) | 7.1 | % | ||||||||
| Accounts receivable |
||||||||||||||||
| Net receivables |
$ | 1,227 | $ | 1,261 | $ | 1,148 | — | |||||||||
| DSO |
53 | 56 | 53 | — | ||||||||||||
| Provision for uncollectible accounts as a percentage of revenues |
4.5 | % | 4.5 | % | 4.0 | % | 4.5 | % | ||||||||
| 6. HCP Business Metrics: |
||||||||||||||||
| Capitated membership |
||||||||||||||||
| Total |
826,500 | 830,400 | 820,400 | — | ||||||||||||
| Member months |
2,472,400 | 2,482,500 | 2,430,300 | 4,954,800 | ||||||||||||
| Capitated revenues by sources |
||||||||||||||||
| Commercial revenues |
$ | 177 | $ | 185 | $ | 177 | $ | 362 | ||||||||
| Senior revenues |
623 | 602 | 576 | 1,225 | ||||||||||||
| Medicaid revenues |
48 | 46 | 30 | 94 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total capitated revenues |
$ | 848 | $ | 833 | $ | 783 | $ | 1,681 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other |
||||||||||||||||
| Total care dollars under management(1) |
$ | 1,245 | $ | 1,233 | $ | 1,125 | $ | 2,478 | ||||||||
| Ratio of operating income to total care dollars under management(1) |
5.8 | % | 4.9 | % | 7.3 | % | 5.4 | % | ||||||||
| Full time clinicians |
1,272 | 1,299 | 1,134 | — | ||||||||||||
| IPA primary care physicians |
2,732 | 2,829 | 3,340 | — | ||||||||||||
| 7. Cash Flow: |
||||||||||||||||
| Operating cash flow |
$ | 31.4 | $ | 410.1 | $ | 262.4 | $ | 441.5 | ||||||||
| Operating cash flow, last twelve months |
$ | 1,219.4 | $ | 1,450.4 | $ | 1,768.8 | — | |||||||||
| Free cash flow(1) |
$ | (76.9 | ) | $ | 319.6 | $ | 165.2 | $ | 242.7 | |||||||
| Free cash flow, last twelve months(1) |
$ | 786.0 | $ | 1,028.1 | $ | 1,350.2 | — | |||||||||
| Capital expenditures: |
||||||||||||||||
| Routine maintenance/IT/other |
$ | 70.8 | $ | 49.0 | $ | 64.5 | $ | 119.8 | ||||||||
| Development and relocations |
$ | 98.7 | $ | 72.4 | $ | 87.5 | $ | 171.1 | ||||||||
| Acquisition expenditures |
$ | 4.4 | $ | 40.7 | $ | 30.6 | $ | 45.1 | ||||||||
12
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, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||
| 8. Debt and Capital Structure: |
||||||||||||
| Total debt(3) |
$ | 9,225 | $ | 8,513 | $ | 8,817 | ||||||
| Net debt, net of cash and cash equivalents(3) |
$ | 8,291 | $ | 7,502 | $ | 7,396 | ||||||
| Leverage ratio (see calculation on page 14) |
3.03x | 2.94x | 2.98x | |||||||||
| Overall weighted average effective interest rate during the quarter |
4.42 | % | 4.48 | % | 4.85 | % | ||||||
| Overall weighted average effective interest rate at end of the quarter |
4.38 | % | 4.47 | % | 4.56 | % | ||||||
| Weighted average effective interest rate on the Senior Secured Credit Facilities at end of the quarter |
3.44 | % | 3.44 | % | 3.51 | % | ||||||
| Fixed and economically fixed interest rates as a percentage of our total debt |
61 | %(4) | 58 | %(4) | 59 | % | ||||||
| Fixed and economically fixed interest rates, including our interest rate cap agreements, as a percentage of our total debt |
90 | %(4) | 90 | %(4) | 90 | % | ||||||
| 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 | % | 73 | % | 73 | % | ||||||
| (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 includes certain corporate support and related long-term incentive compensation. |
| (3) | The reported balance sheet amounts at June 30, 2015, March 31, 2015 and June 30, 2014, excludes $14.9 million, $15.6 million and $17.5 million, respectively, of a debt discount associated with our Term Loan B. |
| (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 B, 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 $730 million outstanding principal balance of the Term Loan B is subject to LIBOR-based interest rate volatility above a floor of 0.75%. |
13
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, 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 investors to enhance their understanding of the Company’s leverage ratio under its Credit Agreement.
| Rolling twelve months ended June 30, 2015 |
||||
| Net income attributable to DaVita HealthCare Partners Inc. |
$ | 452,002 | ||
| Income taxes |
257,434 | |||
| Interest expense |
375,777 | |||
| Depreciation and amortization |
615,081 | |||
| Settlement charge |
512,000 | |||
| Noncontrolling interests and equity investment income, net |
163,768 | |||
| Stock-settled stock-based compensation |
55,511 | |||
| Debt redemption charges |
48,072 | |||
| Other |
9,953 | |||
|
|
|
|||
| “Consolidated EBITDA” |
$ | 2,489,598 | ||
|
|
|
|||
| June 30, 2015 | ||||
| Total debt, excluding debt discount of $14.9 million |
$ | 9,224,769 | ||
| Letters of credit issued |
96,424 | |||
|
|
|
|||
| 9,321,193 | ||||
| Less: Cash and cash equivalents including short-term investments (excluding HCP’s physician owned entities cash) |
(1,776,069 | ) | ||
|
|
|
|||
| Consolidated net debt |
$ | 7,545,124 | ||
|
|
|
|||
| Last twelve months “Consolidated EBITDA” |
$ | 2,489,598 | ||
|
|
|
|||
| Leverage ratio |
3.03x | |||
|
|
|
|||
In accordance with the Credit Agreement, the Company’s leverage ratio cannot exceed 5.00 to 1.00 as of June 30, 2015. At that date the Company’s leverage ratio did not exceed 5.00 to 1.00.
14
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands except for per share data)
1. Adjusted net income and diluted net income per share attributable to DaVita HealthCare Partners Inc. excluding debt redemption and refinancing charges, a settlement charge and a tax adjustment related to the settlement of the Vainer suit.
We believe that adjusted net income attributable to DaVita HealthCare Partners Inc. excluding debt redemption and refinancing charges, a settlement charge, net of related tax, and a tax adjustment related to the settlement of the Vainer suit, enhances a user’s understanding of our normal net income attributable to DaVita HealthCare Partners Inc. and adjusted diluted net income 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 redemption charges that resulted from the redemption of the $775 million 6 5⁄8% Senior Notes due 2020, debt refinancing charges that resulted from the refinancing of our Secured Credit Facilities, the redemption of the $775 million 6 3⁄8% Senior Notes due 2018, as well as the termination of certain interest rate swap agreements, and a settlement charge and a tax adjustment related to the settlement of the Vainer suit, and accordingly, is comparable to prior periods and indicative of normal net income attributable to DaVita HealthCare Partners Inc. and diluted net income 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 net income attributable to DaVita HealthCare Partners Inc. and diluted net income per share attributable to DaVita HealthCare Partners Inc.
Adjusted net income attributable to DaVita HealthCare Partners Inc. excluding debt redemption and refinancing charges, a settlement charge and a related tax adjustment related to the settlement of the Vainer suit:
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, 2015 |
March 31, 2015(1) |
June 30, 2014 |
June 30, 2015 |
June 30, 2014 |
||||||||||||||||
| Net income (loss) attributable to DaVita HealthCare Partners Inc. |
$ | 170,477 | $ | (110,617 | ) | $ | 147,683 | $ | 59,860 | $ | 330,972 | |||||||||
| Add: |
||||||||||||||||||||
| Debt redemption and refinancing charges |
48,072 | — | 97,548 | 48,072 | 97,548 | |||||||||||||||
| Settlement charge |
— | 495,000 | — | 495,000 | — | |||||||||||||||
| Tax adjustment related to the settlement of the Vainer suit |
7,501 | — | — | 7,501 | — | |||||||||||||||
| Less: Related income tax |
(18,892 | ) | (197,747 | ) | (39,507 | ) | (216,639 | ) | (39,507 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 207,158 | $ | 186,636 | $ | 205,724 | $ | 393,794 | $ | 389,013 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
15
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands except for per share data)
Adjusted diluted net income per share attributable to DaVita HealthCare Partners Inc. excluding debt redemption and refinancing charges, a settlement charge and a tax adjustment related to the settlement of the Vainer suit:
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, 2015 |
March 31, 2015(1) |
June 30, 2014 |
June 30, 2015 |
June 30, 2014 |
||||||||||||||||
| Diluted net income (loss) per share attributable to DaVita HealthCare Partners Inc. |
$ | 0.78 | $ | (0.52 | ) | $ | 0.68 | $ | 0.27 | $ | 1.53 | |||||||||
| Add: |
||||||||||||||||||||
| Debt redemption and refinancing charges |
0.13 | — | 0.27 | 0.13 | 0.27 | |||||||||||||||
| Settlement charge including the effects of diluted net loss per share attributable to DaVita HealthCare Partners Inc. |
— | 1.38 | — | 1.37 | — | |||||||||||||||
| Tax adjustment related to the settlement of the Vainer suit |
0.04 | — | — | 0.04 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 0.95 | $ | 0.86 | $ | 0.95 | $ | 1.81 | $ | 1.80 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Adjusted diluted net income per share attributable to DaVita HealthCare Partners Inc. for the three months ended March 31, 2015 is calculated using 217,977,358 shares, which includes shares that would be dilutive based on adjusted net income attributable to DaVita HealthCare Partners Inc. of $186,636 excluding a settlement charge. |
16
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 net income attributable to DaVita HealthCare Partners Inc. and from our adjusted diluted net income 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 fair value measurement of acquired intangible assets associated with our acquisitions to fair value, and accordingly is indicative of consistent net income excluding amortization of acquired intangibles, attributable to DaVita HealthCare Partners Inc. and diluted net income 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 net income attributable to DaVita HealthCare Partners Inc. and diluted net income per share attributable to DaVita HealthCare Partners Inc.
Adjusted net income and adjusted diluted net income 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, 2015 |
March 31, 2015 |
June 30, 2014 |
June 30, 2015 |
June 30, 2014 |
||||||||||||||||
| Adjusted net income attributable to DaVita HealthCare Partners Inc. |
$ | 207,158 | $ | 186,636 | $ | 205,724 | $ | 393,794 | $ | 389,013 | ||||||||||
| Add: |
||||||||||||||||||||
| Amortization of intangible assets associated with acquisitions for the dialysis and ancillary operations |
6,384 | 6,524 | 6,713 | 12,908 | 13,580 | |||||||||||||||
| Amortization of intangible assets associated with acquisitions for the HCP operations |
35,838 | 35,878 | 35,298 | 71,716 | 70,150 | |||||||||||||||
| Less: Related income tax |
(16,593 | ) | (15,901 | ) | (17,014 | ) | (32,494 | ) | (33,910 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 232,787 | $ | 213,137 | $ | 230,721 | $ | 445,924 | $ | 438,833 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted diluted net income per share attributable to DaVita HealthCare Partners Inc. |
$ | 0.95 | $ | 0.86 | $ | 0.95 | $ | 1.81 | $ | 1.80 | ||||||||||
| 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 |
0.10 | 0.10 | 0.09 | 0.20 | 0.19 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 1.07 | $ | 0.98 | $ | 1.06 | $ | 2.05 | $ | 2.03 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
17
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
2. Adjusted operating income excluding a pre-tax settlement charge
We believe that adjusted operating income excluding a pre-tax settlement charge enhances a user’s understanding of our normal operating income for these periods by providing a measure that is meaningful because it excludes an unusual amount that was incurred for a settlement charge related to the Vainer suit 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.
Adjusted operating income excluding a pre-tax settlement charge:
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
June 30, 2015 |
June 30, 2014 |
||||||||||||||||
| Operating income (loss) |
$ | 480,548 | $ | (64,156 | ) | $ | 484,295 | $ | 416,392 | $ | 925,520 | |||||||||
| Add: |
||||||||||||||||||||
| Settlement charge |
— | 495,000 | — | 495,000 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted operating income |
$ | 480,548 | $ | 430,844 | $ | 484,295 | $ | 911,392 | $ | 925,520 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
18
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
3. Effective income tax rates and adjusted 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 settlement charge and a tax adjustment related to the settlement of the Vainer suit, 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 unusual amounts that include a settlement charge and a tax adjustment related to the settlement of the Vainer suit, and, therefore, 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, 2015 |
|||||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||||||
| Income (loss) from continuing operations before income taxes |
$ | 330,539 | $ | (162,081 | ) | $ | 282,308 | $ | 168,458 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income tax expense (benefit) |
$ | 122,762 | $ | (85,933 | ) | $ | 100,887 | $ | 36,829 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Effective income tax rate |
37.1 | % | 53.0 | % | 35.7 | % | 21.9 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Three months ended | Six months ended June 30, 2015 |
|||||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||||||
| Income (loss) from continuing operations before income taxes |
$ | 330,539 | $ | (162,081 | ) | $ | 282,308 | $ | 168,458 | |||||||
| Less: Noncontrolling owners’ income primarily attributable to non-tax paying entities |
(37,622 | ) | (34,536 | ) | (34,105 | ) | (72,158 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (loss) before income taxes attributable to DaVita HealthCare Partners Inc. |
$ | 292,917 | $ | (196,617 | ) | $ | 248,203 | $ | 96,300 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income tax expense (benefit) |
122,762 | (85,933 | ) | $ | 100,887 | $ | 36,829 | |||||||||
| Less: Income tax attributable to noncontrolling interests |
(322 | ) | (67 | ) | (367 | ) | (389 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income tax expense (benefit) attributable to DaVita HealthCare Partners Inc. |
$ | 122,440 | $ | (86,000 | ) | $ | 100,520 | $ | 36,440 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Effective income tax rate attributable to DaVita HealthCare Partners Inc. |
41.8 | % | 43.7 | % | 40.5 | % | 37.8 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
19
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
Adjusted effective income tax rates attributable to DaVita HealthCare Partners Inc. excluding a settlement charge and a tax adjustment related to the settlement of the Vainer suit:
| Three months ended | Six months ended June 30, 2015 |
|||||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||||||
| Income (loss) from continuing operations before income taxes |
$ | 330,539 | $ | (162,081 | ) | $ | 282,308 | $ | 168,458 | |||||||
| Add: Settlement charge |
— | 495,000 | — | 495,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 330,539 | 332,919 | 282,308 | 663,458 | |||||||||||||
| Less: Noncontrolling owners’ income primarily attributable to non- tax paying entities |
(37,622 | ) | (34,536 | ) | (34,105 | ) | (72,158 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted income before income taxes attributable to DaVita HealthCare Partners Inc. |
$ | 292,917 | $ | 298,383 | $ | 248,203 | $ | 591,300 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income tax expense (benefit) |
$ | 122,762 | $ | (85,933 | ) | $ | 100,887 | $ | 36,829 | |||||||
| Add: Income taxes attributable to the settlement charge |
— | 197,747 | — | 197,747 | ||||||||||||
| Tax adjustment related to the settlement of the Vainer suit |
(7,501 | ) | — | — | (7,501 | ) | ||||||||||
| Less: Income tax attributable to noncontrolling interests |
(322 | ) | (67 | ) | (367 | ) | (389 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted income tax attributable to DaVita HealthCare Partners Inc. |
$ | 114,939 | $ | 111,747 | $ | 100,520 | $ | 226,686 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted effective income tax rate attributable to DaVita HealthCare Partners Inc. |
39.2 | % | 37.5 | % | 40.5 | % | 38.3 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
20
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
4. Free cash flow and adjusted operating 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. We have also presented adjusted operating cash flow excluding the payments made in the second quarter of 2015 related to the settlement of the Vainer suit and in the fourth quarter of 2014 related to the settlement of the 2010 and 2011 U.S. Attorney physician relationship investigations, net of tax. We believe this measure is meaningful to investors to understand our operating cash flows that were generated excluding these unusual payments that were part of the settlements. Free cash flow and adjusted operating cash flow are not measures 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, 2015 |
|||||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||||||
| Cash provided by operating activities |
$ | 31,442 | $ | 410,089 | $ | 262,391 | $ | 441,531 | ||||||||
| Less: Distributions to noncontrolling interests |
(37,541 | ) | (41,499 | ) | (32,671 | ) | (79,040 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cash (used in) provided by operating activities attributable to DaVita HealthCare Partners Inc. |
(6,099 | ) | 368,590 | 229,720 | 362,491 | |||||||||||
| Less: Expenditures for routine maintenance and information technology |
(70,757 | ) | (49,010 | ) | (64,549 | ) | (119,767 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Free cash flow |
$ | (76,856 | ) | $ | 319,580 | $ | 165,171 | $ | 242,724 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Rolling 12-Month Period | ||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||
| Cash provided by operating activities |
$ | 1,219,440 | $ | 1,450,389 | $ | 1,768,813 | ||||||
| Less: Distributions to noncontrolling interests |
(162,561 | ) | (157,691 | ) | (139,938 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Cash provided by operating activities attributable to DaVita HealthCare Partners Inc. |
1,056,879 | 1,292,698 | 1,628,875 | |||||||||
| Less: Expenditures for routine maintenance and information technology |
(270,841 | ) | (264,633 | ) | (278,707 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Free cash flow |
786,038 | $ | 1,028,065 | $ | 1,350,168 | |||||||
|
|
|
|
|
|
|
|||||||
| June 30, 2015 | ||||||||||||
| Three months ended |
Six months ended |
Rolling twelve months ended |
||||||||||
| Cash provided by operating activities |
$ | 31,442 | $ | 441,531 | $ | 1,219,440 | ||||||
| Payment in connection with the settlement of the Vainer suit |
493,775 | 493,775 | 493,775 | |||||||||
| Payment in connection with the settlement of the 2010 and 2011 U.S. Attorney physician relationship investigations |
— | — | 410,356 | |||||||||
| Related tax benefit |
(190,246 | ) | (190,246 | ) | (331,733 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Adjusted operating cash flow |
$ | 334,971 | $ | 745,060 | $ | 1,791,838 | ||||||
|
|
|
|
|
|
|
|||||||
21
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, 2015 |
|||||||||||||||
| June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
||||||||||||||
| Medical revenues |
$ | 930,878 | $ | 912,588 | $ | 839,877 | $ | 1,843,466 | ||||||||
| Less: Risk share revenue, net |
(18,127 | ) | (12,956 | ) | (8,924 | ) | (31,083 | ) | ||||||||
| Add: Institutional capitation amounts |
332,456 | 333,108 | 294,244 | 665,564 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total care dollars under management |
$ | 1,245,207 | $ | 1,232,740 | $ | 1,125,197 | $ | 2,477,947 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
22