DENVER, Aug. 1, 2018 /PRNewswire/ -- DaVita Inc. (NYSE:
DVA) today announced results for the quarter ended June 30,
2018.
- Net income from continuing operations attributable to DaVita
Inc. for the quarter ended June 30,
2018 was $200 million, or
$1.15 per share. Adjusted net income
from continuing operations attributable to DaVita Inc. for the
quarter ended June 30, 2018 was
$183 million, or $1.05 per share.
- Net income from continuing operations attributable to DaVita
Inc. for the six months ended June 30,
2018 was $391 million, or
$2.19 per share. Adjusted net income
from continuing operations attributable to DaVita Inc. for the six
months ended June 30, 2018 was
$374 million, or $2.10 per share.
- Net income from continuing operations attributable to DaVita
Inc. for the quarter ended June 30,
2017 was $151 million, or
$0.78 per share. Adjusted net income
from continuing operations attributable to DaVita Inc. for the
quarter ended June 30, 2017 was
$156 million, or $0.80 per share.
- Net income from continuing operations attributable to DaVita
Inc. for six months ended June 30,
2017 was $592 million, or
$3.04 per share. Adjusted net income
from continuing operations attributable to DaVita Inc. for the six
months ended June 30, 2017 was
$303 million, or $1.56 per share.
For the definitions of non-GAAP financial measures such as
adjusted net income from continuing operations attributable to
DaVita Inc., see the note titled "Note on Non-GAAP Financial
Measures" below.
Financial and operating highlights include:
Cash flow: For the
rolling twelve months ended June 30, 2018, consolidated
operating cash flow was $1,823
million, of which $1,454
million was from continuing operations. For the three months
ended June 30, 2018, consolidated operating cash flow was
$562 million, of which $606 million was from continuing operations. Free
cash flow from continuing operations was $470 million and $902
million for the quarter and rolling twelve months ended
June 30, 2018, respectively.
Operating income and adjusted
operating income: Operating income for the quarter ended
June 30, 2018 was $438 million
and adjusted operating income for the same period was $419 million. Operating income for the quarter
ended June 30, 2017 was $391
million, and adjusted operating income for the same period
was $402 million.
Operating income for the six
months ended June 30, 2018 was $849
million and adjusted operating income for the same period
was $829 million. Operating income
for the six months ended June 30, 2017 was $1,267 million, and adjusted operating income for
the same period was $781 million.
Gain on changes in ownership
interests, net: We sold our Paladina Health direct
primary care business in June 2018
and exited an international business for a net gain of $34 million.
Other asset and goodwill
impairment charges: During the quarter ended June 30, 2018, we recognized an asset impairment
charge of $11 million related to the
restructuring of our pharmacy business. In addition, we recognized
a goodwill impairment charge of $3
million related to one of our international businesses.
Volume: Total U.S.
dialysis treatments for the second quarter of 2018 were 7,331,590,
or 93,995 treatments per day, representing a per day increase of
4.2% over the second quarter of 2017. Normalized non-acquired
treatment growth in the second quarter of 2018 as compared to the
second quarter of 2017 was 3.4%.
Effective income tax
rate: Our effective income tax rate on income from
continuing operations was 26.2% and 24.8% for the three and six
months ended June 30, 2018. These effective tax rates are
impacted by the amount of third party owners' income attributable
to non-tax paying entities. The effective income tax rate on income
from continuing operations attributable to DaVita Inc. was 29.5%
and 28.3% for the three and six months ended June 30,
2018.
Our effective tax rate was
impacted by the impairment charges and the net gain on business
ownership changes. Excluding these items our adjusted effective tax
rate attributable to DaVita Inc. for the three and six months ended
June 30, 2018 would have been 30.7%
and 28.9%, respectively. Our adjusted effective tax rate increased
this quarter due to non-deductible advocacy costs as well as the
impact of increased non-deductible expenses due to changes from the
Tax Cuts and Jobs Act of 2017.
Center activity: As
of June 30, 2018, we provided dialysis services to a total of
approximately 225,500 patients at 2,833 outpatient dialysis
centers, of which 2,580 centers were located in the United States and 253 centers were located
in 10 countries outside of the United
States. During the second quarter of 2018, we opened a total
of 43 new dialysis centers, acquired one dialysis center, and
closed two centers in the United
States. We also acquired 14 dialysis centers, opened one new
dialysis center, and closed three dialysis centers outside of
the United States.
New revenue accounting
standard: On January 1,
2018, we adopted Topic 606, Revenue from Contracts with
Customers, using the cumulative effect method. Results for
reporting periods beginning on January 1,
2018 are presented under this new guidance, while prior
periods continue to be presented under the prior guidance. Due to a
policy election we made allowing us to apply the new guidance only
to contracts not completed as of January 1,
2018, we recognized $12
million and $36 million in the
three and six months ended June 30,
2018, respectively, relating to Medicare bad debt revenue
from 2017 dates of service.
Pending sale of DMG:
As previously announced in December
2017, we entered into an agreement to sell our DMG division
to Optum, a subsidiary of UnitedHealth Group Inc. for $4.9 billion in cash, subject to net working
capital and other customary adjustments. The transaction is subject
to regulatory approvals and other customary closing conditions, and
we continue to expect it to close in 2018. As a result, the DMG
business is classified as held for sale and the results of
operations are reported as discontinued operations for all periods
presented.
Share repurchases: During
the quarter ended June 30, 2018, we repurchased a total of
7,797,712 shares of our common stock for approximately $512 million at an average price of $65.60 per share. We have also repurchased
3,871,905 shares of our common stock for $273 million at an average price of $70.48 per share from July
1, 2018 through July 31, 2018.
As of July 31, 2018, we have
repurchased a total of 15,866,921 shares of our common stock for
approximately $1,083 million at an
average price of $68.24 during
2018.
On July 11,
2018, our Board of Directors approved an additional share
repurchase authorization in the amount of approximately
$1,390 million. This recently
approved authorization was in addition to the approximately
$110 million remaining at that time
under our Board of Directors' prior share repurchase authorization
approved in October 2017. As of
July 31, 2018, we have a total of
approximately $1,426 million in
outstanding Board repurchase authorizations remaining under our
stock repurchase program. These share repurchase authorizations
have no expiration dates.
New debt capacity: On
March 29, 2018, we entered into an
agreement to increase our borrowing capacity under our existing
Senior Secured Credit Agreement. Pursuant to this agreement, the
Company entered into an additional $995
million Term Loan A-2 which bears interest at LIBOR plus
1.00%. As of June 30, 2018, the Company has drawn $952 million of the Term Loan A-2. The remaining
amount of $43 million on Term Loan
A-2 was drawn subsequent to June 30, 2018.
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 Kidney Care consolidated operating income or effective
tax rate on income from continuing operations 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 goodwill and asset impairment charges, gain (loss) on
ownership changes and foreign currency fluctuations.
- We still expect our Kidney Care adjusted consolidated operating
income for 2018 to be in the range of $1.5
billion to $1.6 billion,
although our guidance now includes expected costs associated with
countering the union policy efforts, including ballot initiatives,
which had previously been excluded from our guidance.
- We still expect our operating cash flow from continuing
operations for 2018 to be in the range of $1.4 billion to $1.6
billion.
- We now expect our 2018 effective tax rate on income from
continuing operations attributable to DaVita Inc. to be
approximately 28.5% to 29.5%.
Our previous guidance for our 2018 effective tax rate on income
from continuing operations attributable to DaVita Inc. was
approximately 26.5% to 27.5%.
We will be holding a conference call to discuss our results for
the second quarter ended June 30, 2018 on August 1, 2018 at 5:00
p.m. Eastern Time. To join the conference call, please dial
(877) 918-6630 from the U.S. or (517) 308-9042 from outside the
U.S., and provide the operator the password 'Earnings'. A replay of
the conference call will be available on our website at
investors.davita.com, for the following 30 days.
Note on Non-GAAP Financial Measures
As used in this press release the term "adjusted" refers to
non-GAAP measures as follows, each as reconciled to its most
comparable GAAP measure as presented in the non-GAAP
reconciliations in the notes to this press release: (i) for income
measures, the term "adjusted" refers to operating performance
measures that exclude certain items such as impairment charges,
gains (losses) on ownership changes, restructuring charges,
accruals for legal matters, recent federal tax reform legislation,
and gains and charges associated with settlements; and (ii) the
term "effective income tax rate on adjusted income from continuing
operations attributable to DaVita Inc." represents the Company's
effective tax rate excluding applicable non-GAAP items and
noncontrolling owners' income, which primarily relates to non-tax
paying entities.
These non-GAAP or "adjusted" measures are presented because
management believes these measures are useful adjuncts to GAAP
results. However, these non-GAAP measures should not be considered
alternatives to the corresponding measures determined under
GAAP.
Specifically, we use adjusted operating income, adjusted net
income from continuing operations and adjusted diluted net income
from continuing operations per share attributable to DaVita Inc. to
compare and evaluate our performance period over period and
relative to competitors, to analyze the underlying trends in our
business, to establish operational budgets and forecasts and for
incentive compensation purposes. We believe these non-GAAP measures
are useful to management, investors and analysts in evaluating our
performance over time and relative to competitors, as well as in
analyzing the underlying trends in our business. We also believe
these presentations enhance a user's understanding of our normal
consolidated operating income by excluding certain items which we
do not believe are indicative of our ordinary results of
operations. As a result, adjusting for these amounts allows for
comparison to our normalized prior period results.
In addition, the effective income tax rate on income from
continuing operations attributable to DaVita Inc. excludes
noncontrolling owners' income, which primarily relates to non-tax
paying entities, and the effective income tax rate on adjusted
income from continuing operations attributable to DaVita Inc.
excludes noncontrolling owners' income and certain non-deductible
and other charges which we do not believe are indicative of our
ordinary results. Accordingly, we believe these adjusted effective
income tax rates are useful to management, investors and analysts
in evaluating our performance concerning and establishing
expectations for income taxes incurred on our ordinary results
attributable to DaVita Inc.
Finally, free cash flow from continuing operations represents
net cash provided by operating activities from continuing
operations less distributions to noncontrolling interests and
capital expenditures for routine maintenance and information
technology from continuing operations. We believe this non-GAAP
measure is useful to management, investors and analysts as an
adjunct to cash flow from operating activities from continuing
operations and other measures under GAAP, since free cash flow from
continuing operations is meaningful for assessing our ability to
fund acquisition and development activities and meet our debt
service obligations.
It is important to bear in mind that these non-GAAP "adjusted"
measures are not measures of financial performance or liquidity
under GAAP and should not be considered in isolation from, nor as
substitutes for, their most comparable GAAP measures.
Reconciliations of the non-GAAP measures presented herein to their
most comparable GAAP measures are included at Notes 2, 3, 4 and 5
at the end of this press release.
DaVita Inc. and its representatives may from time to time
make written and oral forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 ("PSLRA"),
including statements in this release, filings with the Securities
and Exchange Commission ("SEC"), reports to stockholders and in
meetings with investors and analysts. All such statements in this
release, during the related presentation or other meetings, other
than statements of historical fact, are forward-looking statements
and as such are intended to be covered by the safe harbor for
"forward-looking statements" provided by the PSLRA. Without
limiting the foregoing, statements including the words "expect,"
"intend," "will," "plan," "anticipate," "believe," "forecast,"
"guidance," "outlook," "goals," and similar expressions are
intended to identify forward-looking statements.
The forward-looking statements should be considered in light
of these risks and uncertainties. All forward-looking statements in
this release are based on information available to us on the date
of this presentation. We undertake no obligation to publicly update
or revise any of our guidance, the assessment of the underlying
assumptions or other forward-looking statements, whether as a
result of changed circumstances, new information, future events or
otherwise.
These forward-looking statements could include but are not
limited to statements related to our guidance and expectations for
our 2018 Kidney Care adjusted consolidated operating income, our
2018 operating cash flows from continuing operations, our 2018
effective tax rate on income from continuing operations
attributable to DaVita Inc., our expected costs associated with
countering the union policy efforts, including ballot initiatives,
our expectations related to our stock repurchase program, and
uncertainties associated with the other risk factors set forth in
our most recent annual report on Form 10-K for the year ended
December 31, 2017, and the other
risks discussed in our subsequent periodic and current reports
filed with the SEC from time to time.
Our actual results could differ materially from any
forward-looking statements due to numerous factors that involve
substantial known and unknown risks and uncertainties. These risks
and uncertainties include, among other things, 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, including as a result of
restrictions or prohibitions on the use and/or availability of
charitable premium assistance, which may result in the loss of
revenues or patients, or our making incorrect assumptions about how
our patients will respond to any change in financial assistance
from charitable organizations;
- the extent to which the ongoing implementation of healthcare
exchanges or changes in or new legislation, regulations or
guidance, or enforcement thereof, including among other things
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 and proposed federal and/or
state legislation or regulation, including healthcare-related and
labor-related legislation or regulation;
- the impact of the changing political environment and related
developments 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;
- uncertainties related to the impact of federal tax reform
legislation;
- changes in pharmaceutical practice patterns, reimbursement
and payment policies and processes, or pharmaceutical pricing,
including with respect to calcimimetics;
- legal compliance risks, such as 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 current or potential settlement terms, and the
financial impact thereof and our ability to recover any losses
related to such legal matters from third parties;
- continued increased competition from large- and medium-sized
dialysis providers and others who compete, or will compete directly
with us;
- our ability to reduce administrative expenses while
maintaining targeted levels of service and operating performance,
including our ability to achieve anticipated savings from our
recent restructurings;
- 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 announce or be considering, on terms
favorable to us or at all, or to integrate and successfully operate
any business we may acquire or have acquired, or to successfully
expand our operations and services in markets outside the United States, or to businesses outside of
dialysis;
- noncompliance by us or our business associates with any
privacy laws or any security breach by us or a third party
involving the misappropriation, loss or other unauthorized use or
disclosure of confidential information;
- the variability of our cash flows;
- the risk that we may not be able to generate sufficient cash
in the future to service our indebtedness or to fund our other
liquidity needs;
- factors that may impact our ability to repurchase stock
under our stock repurchase program and the timing of any such stock
repurchases, including market conditions, the price of our common
stock, our cash flow position, borrowing capacity and leverage
ratios, and legal, regulatory and contractual
requirements;
- 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;
- impairment of our goodwill, investments or other
assets;
- the risks and uncertainties associated with the timing,
conditions and receipt of regulatory approvals and satisfaction of
other closing conditions of the DMG sale transaction and potential
disruption in connection with the DMG sale transaction making it
more difficult to maintain business and operational
relationships;
- 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; and
- 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.
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 June
30,
|
|
Six
months ended June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Dialysis and related
lab patient service revenues
|
$
|
2,718,403
|
|
|
$
|
2,494,609
|
|
|
$
|
5,309,477
|
|
|
$
|
4,917,395
|
|
Provision for
uncollectible accounts
|
(49,406)
|
|
|
(109,600)
|
|
|
(23,861)
|
|
|
(216,658)
|
|
Net dialysis and
related lab patient service revenues
|
2,668,997
|
|
|
2,385,009
|
|
|
5,285,616
|
|
|
4,700,737
|
|
Other
revenues
|
217,956
|
|
|
314,390
|
|
|
450,781
|
|
|
629,913
|
|
Total
revenues
|
2,886,953
|
|
|
2,699,399
|
|
|
5,736,397
|
|
|
5,330,650
|
|
Operating expenses
and charges:
|
|
|
|
|
|
|
|
Patient care costs
and other costs
|
2,069,089
|
|
|
1,894,664
|
|
|
4,104,674
|
|
|
3,746,709
|
|
General and
administrative
|
264,094
|
|
|
262,796
|
|
|
530,623
|
|
|
525,691
|
|
Depreciation and
amortization
|
147,079
|
|
|
140,026
|
|
|
289,878
|
|
|
272,910
|
|
Equity investment
(income) loss
|
(9,795)
|
|
|
825
|
|
|
(9,950)
|
|
|
148
|
|
Provision for
uncollectible accounts
|
(2,100)
|
|
|
(606)
|
|
|
(8,100)
|
|
|
1,304
|
|
Investment and other
asset impairments
|
11,245
|
|
|
—
|
|
|
11,245
|
|
|
15,168
|
|
Goodwill impairment
charges
|
3,106
|
|
|
10,498
|
|
|
3,106
|
|
|
34,696
|
|
Gain on changes in
ownership interests, net
|
(33,957)
|
|
|
—
|
|
|
(33,957)
|
|
|
(6,273)
|
|
Gain on settlement,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
(526,827)
|
|
Total operating
expenses and charges
|
2,448,761
|
|
|
2,308,203
|
|
|
4,887,519
|
|
|
4,063,526
|
|
Operating
income
|
438,192
|
|
|
391,196
|
|
|
848,878
|
|
|
1,267,124
|
|
Debt
expense
|
(119,692)
|
|
|
(107,934)
|
|
|
(233,208)
|
|
|
(212,331)
|
|
Other income,
net
|
1,994
|
|
|
4,798
|
|
|
6,576
|
|
|
8,784
|
|
Income from
continuing operations before income taxes
|
320,494
|
|
|
288,060
|
|
|
622,246
|
|
|
1,063,577
|
|
Income tax
expense
|
83,868
|
|
|
101,915
|
|
|
154,605
|
|
|
383,580
|
|
Net income from
continuing operations
|
236,626
|
|
|
186,145
|
|
|
467,641
|
|
|
679,997
|
|
Net income (loss)
from discontinued operations, net of tax
|
69,696
|
|
|
(24,520)
|
|
|
63,910
|
|
|
(18,087)
|
|
Net income
|
306,322
|
|
|
161,625
|
|
|
531,551
|
|
|
661,910
|
|
Less: Net income
attributable to noncontrolling interests
|
(39,046)
|
|
|
(34,624)
|
|
|
(85,589)
|
|
|
(87,212)
|
|
Net income
attributable to DaVita Inc.
|
$
|
267,276
|
|
|
$
|
127,001
|
|
|
$
|
445,962
|
|
|
$
|
574,698
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic net income from
continuing operations per share attributable to DaVita
Inc.
|
$
|
1.16
|
|
|
$
|
0.79
|
|
|
$
|
2.23
|
|
|
$
|
3.09
|
|
Basic net income per
share attributable to DaVita Inc.
|
$
|
1.56
|
|
|
$
|
0.66
|
|
|
$
|
2.54
|
|
|
$
|
3.00
|
|
Diluted net income
from continuing operations per share attributable to
DaVita Inc.
|
$
|
1.15
|
|
|
$
|
0.78
|
|
|
$
|
2.19
|
|
|
$
|
3.04
|
|
Diluted net income
per share attributable to DaVita Inc.
|
$
|
1.53
|
|
|
$
|
0.65
|
|
|
$
|
2.51
|
|
|
$
|
2.95
|
|
Weighted average
shares for earnings per share:
|
|
|
|
|
|
|
|
Basic
|
171,617,238
|
|
|
191,088,216
|
|
|
175,267,270
|
|
|
191,728,913
|
|
Diluted
|
174,105,884
|
|
|
193,987,983
|
|
|
177,949,934
|
|
|
194,630,936
|
|
Amounts
attributable to DaVita Inc.:
|
|
|
|
|
|
|
|
Net income from
continuing operations
|
$
|
199,603
|
|
|
$
|
151,292
|
|
|
$
|
390,618
|
|
|
$
|
592,197
|
|
Net income (loss)
from discontinued operations
|
67,673
|
|
|
(24,291)
|
|
|
55,344
|
|
|
(17,499)
|
|
Net income
attributable to DaVita Inc.
|
$
|
267,276
|
|
|
$
|
127,001
|
|
|
$
|
445,962
|
|
|
$
|
574,698
|
|
DAVITA
INC.
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Three
months ended June
30,
|
|
Six
months ended June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net income
|
$
|
306,322
|
|
|
$
|
161,625
|
|
|
$
|
531,551
|
|
|
$
|
661,910
|
|
Other comprehensive
(loss) income, net of tax:
|
|
|
|
|
|
|
|
Unrealized (losses)
gains on interest rate cap agreements:
|
|
|
|
|
|
|
|
Unrealized (losses)
gains on interest rate cap agreements
|
(268)
|
|
|
(1,815)
|
|
|
782
|
|
|
(5,002)
|
|
Reclassifications of
net realized losses on interest rate cap
agreements into net income
|
1,537
|
|
|
1,265
|
|
|
3,074
|
|
|
2,529
|
|
Unrealized gains on
investments:
|
|
|
|
|
|
|
|
Unrealized gains on
investments
|
—
|
|
|
1,057
|
|
|
—
|
|
|
2,614
|
|
Reclassification of
net investment realized gains into net income
|
—
|
|
|
(71)
|
|
|
—
|
|
|
(211)
|
|
Unrealized (losses)
gains on foreign currency translation:
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments
|
(50,529)
|
|
|
49,142
|
|
|
(30,648)
|
|
|
62,403
|
|
Other comprehensive
(loss) income
|
(49,260)
|
|
|
49,578
|
|
|
(26,792)
|
|
|
62,333
|
|
Total comprehensive
income
|
257,062
|
|
|
211,203
|
|
|
504,759
|
|
|
724,243
|
|
Less: Comprehensive
income attributable to noncontrolling interests
|
(39,046)
|
|
|
(34,624)
|
|
|
(85,589)
|
|
|
(87,210)
|
|
Comprehensive income
attributable to DaVita Inc.
|
$
|
218,016
|
|
|
$
|
176,579
|
|
|
$
|
419,170
|
|
|
$
|
637,033
|
|
DAVITA
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Six
months ended June 30,
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
531,551
|
|
|
$
|
661,910
|
|
Adjustments to
reconcile net income to net cash provided by
operating activities:
|
|
|
|
Depreciation and
amortization
|
289,878
|
|
|
390,244
|
|
Impairment
charges
|
14,351
|
|
|
100,483
|
|
Stock-based
compensation expense
|
19,861
|
|
|
17,504
|
|
Deferred income
taxes
|
56,882
|
|
|
40,938
|
|
Equity investment
income, net
|
(434)
|
|
|
9,367
|
|
Gain on sales of
business interests, net
|
(59,053)
|
|
|
(6,273)
|
|
Other non-cash
charges, net
|
44,337
|
|
|
28,611
|
|
Changes in operating
assets and liabilities, net of effect of acquisitions
and divestitures:
|
|
|
|
Accounts
receivable
|
(101,746)
|
|
|
(113,208)
|
|
Inventories
|
71,632
|
|
|
(31,067)
|
|
Other receivables and
other current assets
|
(91,685)
|
|
|
(108,852)
|
|
Other long-term
assets
|
3,454
|
|
|
(12,124)
|
|
Accounts
payable
|
35,228
|
|
|
(55,897)
|
|
Accrued compensation
and benefits
|
23,818
|
|
|
(63,727)
|
|
Other current
liabilities
|
58,321
|
|
|
13,991
|
|
Income
taxes
|
24,356
|
|
|
123,637
|
|
Other long-term
liabilities
|
3,824
|
|
|
19,520
|
|
Net cash provided by
operating activities
|
924,575
|
|
|
1,015,057
|
|
Cash flows from
investing activities:
|
|
|
|
Additions of property
and equipment
|
(473,977)
|
|
|
(398,940)
|
|
Acquisitions
|
(89,465)
|
|
|
(619,839)
|
|
Proceeds from asset
and business sales
|
116,241
|
|
|
70,236
|
|
Purchase of
investments available for sale
|
(4,195)
|
|
|
(6,812)
|
|
Purchase of
investments held-to-maturity
|
(3,726)
|
|
|
(220,591)
|
|
Proceeds from sale of
investments available for sale
|
5,662
|
|
|
5,049
|
|
Proceeds from
investments held-to-maturity
|
32,628
|
|
|
320,484
|
|
Purchase of equity
investments
|
(10,241)
|
|
|
(1,194)
|
|
Distributions
received on equity investments
|
3,009
|
|
|
—
|
|
Net cash used in
investing activities
|
(424,064)
|
|
|
(851,607)
|
|
DAVITA
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS - continued
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Six
months ended June 30,
|
|
2018
|
|
2017
|
Cash flows from
financing activities:
|
|
|
|
Borrowings
|
28,128,131
|
|
|
25,529,555
|
|
Payments on long-term
debt and other financing costs
|
(27,556,348)
|
|
|
(25,593,587)
|
|
Purchase of treasury
stock
|
(805,179)
|
|
|
(231,674)
|
|
Stock award exercises
and other share issuances, net
|
3,132
|
|
|
8,163
|
|
Distributions to
noncontrolling interests
|
(94,006)
|
|
|
(116,075)
|
|
Contributions from
noncontrolling interests
|
31,569
|
|
|
39,872
|
|
Proceeds from sales
of additional noncontrolling interests
|
15
|
|
|
—
|
|
Purchases of
noncontrolling interests
|
(13,223)
|
|
|
(1,432)
|
|
Net cash used in
financing activities
|
(305,909)
|
|
|
(365,178)
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
(3,473)
|
|
|
4,192
|
|
Net increase
(decrease) in cash, cash equivalents and restricted cash
|
191,129
|
|
|
(197,536)
|
|
Less: Net increase in
cash, cash equivalents and restricted cash from
discontinued operations
|
229,901
|
|
|
32,720
|
|
Net decrease in cash,
cash equivalents and restricted cash from
continuing operations
|
(38,772)
|
|
|
(230,256)
|
|
Cash, cash
equivalents and restricted cash of continuing operations at
beginning of the year
|
518,920
|
|
|
683,463
|
|
Cash, cash
equivalents and restricted cash of continuing operations at end of
the period
|
$
|
480,148
|
|
|
$
|
453,207
|
|
DAVITA
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(unaudited)
|
(dollars in
thousands, except per share data)
|
|
|
June
30, 2018
|
|
December 31,
2017
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
389,264
|
|
|
$
|
508,234
|
|
Restricted cash and
equivalents
|
90,884
|
|
|
10,686
|
|
Short-term
investments
|
4,528
|
|
|
32,830
|
|
Accounts receivable,
net
|
1,842,108
|
|
|
1,714,750
|
|
Inventories
|
112,729
|
|
|
181,799
|
|
Other
receivables
|
471,802
|
|
|
372,919
|
|
Income tax
receivable
|
23,540
|
|
|
49,440
|
|
Prepaid and other
current assets
|
97,426
|
|
|
112,058
|
|
Current assets held
for sale
|
6,053,081
|
|
|
5,761,642
|
|
Total current
assets
|
9,085,362
|
|
|
8,744,358
|
|
Property and
equipment, net of accumulated depreciation of $3,328,176 and
$3,103,662
|
3,229,098
|
|
|
3,149,213
|
|
Intangible assets,
net of accumulated amortization of $362,054 and $356,774
|
100,255
|
|
|
113,827
|
|
Equity method and
other investments
|
249,020
|
|
|
245,534
|
|
Long-term
investments
|
34,200
|
|
|
37,695
|
|
Other long-term
assets
|
59,070
|
|
|
47,287
|
|
Goodwill
|
6,678,559
|
|
|
6,610,279
|
|
|
$
|
19,435,564
|
|
|
$
|
18,948,193
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Accounts
payable
|
$
|
542,272
|
|
|
$
|
509,116
|
|
Other
liabilities
|
568,536
|
|
|
552,662
|
|
Accrued compensation
and benefits
|
633,092
|
|
|
616,116
|
|
Current portion of
long-term debt
|
1,768,514
|
|
|
178,213
|
|
Current liabilities
held for sale
|
1,271,364
|
|
|
1,185,070
|
|
Total current
liabilities
|
4,783,778
|
|
|
3,041,177
|
|
Long-term
debt
|
8,175,573
|
|
|
9,158,018
|
|
Other long-term
liabilities
|
418,123
|
|
|
365,325
|
|
Deferred income
taxes
|
526,425
|
|
|
486,247
|
|
Total
liabilities
|
13,903,899
|
|
|
13,050,767
|
|
Commitments and
contingencies:
|
|
|
|
Noncontrolling
interests subject to put provisions
|
1,047,158
|
|
|
1,011,360
|
|
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; 182,815,212 and
182,462,278 shares issued and 170,820,196 and 182,462,278 shares
outstanding, respectively)
|
183
|
|
|
182
|
|
Additional paid-in
capital
|
1,022,783
|
|
|
1,042,899
|
|
Retained
earnings
|
4,088,043
|
|
|
3,633,713
|
|
Treasury stock
(11,995,016 and zero shares, respectively)
|
(809,900)
|
|
|
—
|
|
Accumulated other
comprehensive (loss) income
|
(21,925)
|
|
|
13,235
|
|
Total DaVita Inc.
shareholders' equity
|
4,279,184
|
|
|
4,690,029
|
|
Noncontrolling
interests not subject to put provisions
|
205,323
|
|
|
196,037
|
|
Total
equity
|
4,484,507
|
|
|
4,886,066
|
|
|
$
|
19,435,564
|
|
|
$
|
18,948,193
|
|
DAVITA
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
Three months
ended
|
|
Six months
ended June 30, 2018
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017 (1)
|
|
1. Consolidated
Financial Results:
|
|
|
|
|
|
|
|
Consolidated revenues(2)
|
$
|
2,887
|
|
|
$
|
2,849
|
|
|
$
|
2,699
|
|
|
$
|
5,736
|
|
Operating income
|
$
|
438
|
|
|
$
|
411
|
|
|
$
|
391
|
|
|
$
|
849
|
|
Adjusted
operating income excluding certain items(3)
|
$
|
419
|
|
|
$
|
411
|
|
|
$
|
402
|
|
|
$
|
829
|
|
Operating income margin
|
15.2
|
%
|
|
14.4
|
%
|
|
14.5
|
%
|
|
14.8
|
%
|
Adjusted
operating income margin excluding certain items(3)
(7)
|
14.5
|
%
|
|
14.4
|
%
|
|
14.9
|
%
|
|
14.5
|
%
|
Net
income from continuing operations attributable
to DaVita Inc.
|
$
|
200
|
|
|
$
|
191
|
|
|
$
|
151
|
|
|
$
|
391
|
|
Adjusted
net income from continuing operations attributable
to DaVita Inc. excluding certain
items(3)
|
$
|
183
|
|
|
$
|
191
|
|
|
$
|
156
|
|
|
$
|
374
|
|
Diluted
net income from continuing operations per
share attributable to DaVita Inc.
|
$
|
1.15
|
|
|
$
|
1.05
|
|
|
$
|
0.78
|
|
|
$
|
2.19
|
|
Adjusted
diluted net income from continuing operations per share
attributable to DaVita Inc. excluding certain items
(3)
|
$
|
1.05
|
|
|
$
|
1.05
|
|
|
$
|
0.80
|
|
|
$
|
2.10
|
|
|
|
|
|
|
|
|
|
2. Consolidated
Business Metrics:
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
General
and administrative expenses as a percent
of consolidated revenues(4)
|
9.1
|
%
|
|
9.4
|
%
|
|
9.7
|
%
|
|
9.3
|
%
|
Effective income tax rate on income from continuing
operations
|
26.2
|
%
|
|
23.4
|
%
|
|
35.4
|
%
|
|
24.8
|
%
|
Effective income tax rate on income from continuing
operations attributable to DaVita Inc.(3)
|
29.5
|
%
|
|
27.0
|
%
|
|
40.2
|
%
|
|
28.3
|
%
|
Effective income tax rate on adjusted income from continuing
operations attributable to DaVita Inc.(3)
|
30.7
|
%
|
|
27.0
|
%
|
|
40.1
|
%
|
|
28.9
|
%
|
|
|
|
|
|
|
|
|
3. Summary of
Division Financial Results:
|
|
|
|
|
|
|
|
Revenues(2)
|
|
|
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
|
|
|
U.S. dialysis and
related lab patient services and other
|
$
|
2,588
|
|
|
$
|
2,538
|
|
|
$
|
2,325
|
|
|
$
|
5,126
|
|
Other—Ancillary
services and strategic initiatives
|
|
|
|
|
|
|
|
U.S. other
|
221
|
|
|
237
|
|
|
314
|
|
|
458
|
|
International dialysis
patient service and other
|
107
|
|
|
103
|
|
|
79
|
|
|
210
|
|
|
328
|
|
|
340
|
|
|
394
|
|
|
668
|
|
Eliminations
|
(29)
|
|
|
(29)
|
|
|
(19)
|
|
|
(58)
|
|
Total consolidated
revenues
|
$
|
2,887
|
|
|
$
|
2,849
|
|
|
$
|
2,699
|
|
|
$
|
5,736
|
|
DAVITA
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, 2018
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017 (1)
|
|
3. Summary of
Division Financial Results: (continued)
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
|
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
|
|
|
U.S. dialysis and
related lab services
|
$
|
449
|
|
|
$
|
433
|
|
|
$
|
450
|
|
|
$
|
883
|
|
Other—Ancillary services and strategic initiatives
|
|
|
|
|
|
|
|
U.S.
|
4
|
|
|
(5)
|
|
|
(36)
|
|
|
(1)
|
|
International
|
(1)
|
|
|
(2)
|
|
|
(13)
|
|
|
(3)
|
|
|
3
|
|
|
(7)
|
|
|
(48)
|
|
|
(4)
|
|
Corporate
administrative support
|
(14)
|
|
|
(16)
|
|
|
(11)
|
|
|
(30)
|
|
Total consolidated
operating income
|
$
|
438
|
|
|
$
|
411
|
|
|
$
|
391
|
|
|
$
|
849
|
|
|
|
|
|
|
|
|
|
4. Summary of
Reportable Segment Financial Results:
|
|
|
|
|
|
|
|
U.S. Dialysis
and Related Lab Services
|
|
|
|
|
|
|
|
Revenue:(2)
|
|
|
|
|
|
|
|
Net dialysis and
related lab patient service revenues
|
$
|
2,583
|
|
|
$
|
2,533
|
|
|
$
|
2,320
|
|
|
$
|
5,116
|
|
Other
revenues
|
5
|
|
|
5
|
|
|
5
|
|
|
10
|
|
Total operating
revenues
|
2,588
|
|
|
2,538
|
|
|
2,325
|
|
|
5,126
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Patient care
costs
|
1,810
|
|
|
1,779
|
|
|
1,561
|
|
|
3,590
|
|
General and
administrative
|
196
|
|
|
196
|
|
|
189
|
|
|
392
|
|
Depreciation and
amortization
|
138
|
|
|
135
|
|
|
130
|
|
|
273
|
|
Equity investment
income
|
(6)
|
|
|
(5)
|
|
|
(5)
|
|
|
(11)
|
|
Total operating
expenses
|
2,139
|
|
|
2,105
|
|
|
1,875
|
|
|
4,243
|
|
Segment operating
income
|
$
|
449
|
|
|
$
|
433
|
|
|
$
|
450
|
|
|
$
|
883
|
|
|
|
|
|
|
|
|
|
5. U.S.
Dialysis and Related Lab Services Business
Metrics:
|
|
|
|
|
|
|
|
Volume
|
|
|
|
|
|
|
|
Treatments
|
7,331,590
|
|
|
7,174,026
|
|
|
7,035,894
|
|
|
14,505,615
|
|
Number of treatment
days
|
78.0
|
|
|
77.5
|
|
|
78.0
|
|
|
155.5
|
|
Treatments per
day
|
93,995
|
|
|
92,568
|
|
|
90,204
|
|
|
93,284
|
|
Per day year over year
increase
|
4.2
|
%
|
|
4.8
|
%
|
|
4.3
|
%
|
|
4.5
|
%
|
Normalized
non-acquired treatment growth year over year
|
3.4
|
%
|
|
3.4
|
%
|
|
3.6
|
%
|
|
|
Operating net
revenues(2)
|
|
|
|
|
|
|
|
Dialysis and related
lab services net revenue per treatment
|
$
|
352.37
|
|
|
$
|
353.05
|
|
|
$
|
329.79
|
|
|
$
|
352.71
|
|
Revenue per treatment
changes from previous quarter
|
(0.2)
|
%
|
|
7.1
|
%
|
|
(1.0)
|
%
|
|
|
Revenue per treatment
changes from previous year
|
6.8
|
%
|
|
6.0
|
%
|
|
(1.6)
|
%
|
|
6.4
|
%
|
Percent of
consolidated revenues
|
89.0
|
%
|
|
88.4
|
%
|
|
85.6
|
%
|
|
88.7
|
%
|
DAVITA
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, 2018
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017 (1)
|
|
5. U.S.
Dialysis and Related Lab Services Business
Metrics: (continued)
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Patient care
costs
|
|
|
|
|
|
|
|
Percent of total
segment operating net revenues
|
69.9
|
%
|
|
70.1
|
%
|
|
67.1
|
%
|
|
70.0
|
%
|
Per
treatment
|
$
|
246.90
|
|
|
$
|
248.02
|
|
|
$
|
221.82
|
|
|
$
|
247.46
|
|
Per treatment changes
from previous quarter
|
(0.5)
|
%
|
|
11.0
|
%
|
|
(2.5)
|
%
|
|
|
Per treatment changes
from previous year
|
11.3
|
%
|
|
9.0
|
%
|
|
(1.3)
|
%
|
|
10.2
|
%
|
General and
administrative expenses
|
|
|
|
|
|
|
|
Percent of total
segment operating net revenues
|
7.6
|
%
|
|
7.7
|
%
|
|
8.1
|
%
|
|
7.7
|
%
|
Per
treatment
|
$
|
26.80
|
|
|
$
|
27.28
|
|
|
$
|
26.85
|
|
|
$
|
27.04
|
|
Per treatment changes
from previous quarter
|
(1.8)
|
%
|
|
6.3
|
%
|
|
(2.9)
|
%
|
|
|
Per treatment changes
from previous year
|
(0.2)
|
%
|
|
(1.3)
|
%
|
|
(1.9)
|
%
|
|
(0.7)
|
%
|
Accounts
receivable
|
|
|
|
|
|
|
|
Net
receivables
|
1,646
|
|
|
1,620
|
|
|
1,420
|
|
|
|
DSO
|
59
|
|
|
59
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
6. Discontinued
Operations
|
|
|
|
|
|
|
|
Operating
results
|
|
|
|
|
|
|
|
Net
revenues(2)
|
$
|
1,252
|
|
|
$
|
1,228
|
|
|
$
|
1,196
|
|
|
$
|
2,480
|
|
Expenses
|
1,193
|
|
|
1,226
|
|
|
1,158
|
|
|
2,419
|
|
Goodwill impairment
charges
|
—
|
|
|
—
|
|
|
51
|
|
|
—
|
|
Income (loss) from
discontinued operations before taxes
|
60
|
|
|
2
|
|
|
(13)
|
|
|
61
|
|
Income tax (expense)
benefit
|
10
|
|
|
(7)
|
|
|
(12)
|
|
|
2
|
|
Net income (loss)
from discontinued operations, net of tax
|
$
|
70
|
|
|
$
|
(6)
|
|
|
$
|
(25)
|
|
|
$
|
64
|
|
|
|
|
|
|
|
|
|
7. Cash
Flow:
|
|
|
|
|
|
|
|
Operating cash
flow
|
$
|
562.0
|
|
|
$
|
362.5
|
|
|
$
|
149.9
|
|
|
$
|
924.6
|
|
Operating cash flow
from continuing operations
|
$
|
605.6
|
|
|
$
|
206.3
|
|
|
$
|
144.3
|
|
|
$
|
811.9
|
|
Operating cash flow
from continuing operations, last twelve months
|
$
|
1,453.9
|
|
|
$
|
992.6
|
|
|
$
|
1,716.6
|
|
|
|
Free cash flow from
continuing operations(3)
|
$
|
470.2
|
|
|
$
|
61.6
|
|
|
$
|
14.8
|
|
|
$
|
531.7
|
|
Free cash flow from
continuing operations, last twelve months(3)
|
$
|
902.2
|
|
|
$
|
446.9
|
|
|
$
|
1,200.1
|
|
|
|
Capital expenditures
from continuing operations:
|
|
|
|
|
|
|
|
Routine
maintenance/IT/other
|
$
|
86.8
|
|
|
$
|
99.3
|
|
|
$
|
56.7
|
|
|
$
|
186.1
|
|
Development and
relocations
|
$
|
132.4
|
|
|
$
|
102.1
|
|
|
$
|
106.8
|
|
|
$
|
234.5
|
|
Acquisition
expenditures
|
$
|
72.5
|
|
|
$
|
15.7
|
|
|
$
|
522.6
|
|
|
$
|
88.2
|
|
Proceeds from sale of
self-developed properties
|
7.6
|
|
|
$
|
18.2
|
|
|
3.5
|
|
|
25.8
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended June 30, 2018
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017 (1)
|
|
8. Debt and
Capital Structure:
|
|
|
|
|
|
|
|
Total
debt(5)(6)
|
$
|
10,002
|
|
|
$
|
9,526
|
|
|
$
|
9,161
|
|
|
|
Net debt, net of cash
and cash equivalents(5)(6)
|
$
|
9,613
|
|
|
$
|
9,167
|
|
|
$
|
8,449
|
|
|
|
Leverage ratio (see
calculation on page 16)
|
3.99x
|
|
|
3.75x
|
|
|
3.38x
|
|
|
|
Overall weighted
average effective interest rate during the quarter
|
4.91
|
%
|
|
4.87
|
%
|
|
4.69
|
%
|
|
|
Overall weighted
average effective interest rate at end of the quarter
|
4.99
|
%
|
|
4.98
|
%
|
|
4.76
|
%
|
|
|
Weighted average
effective interest rate on the senior secured credit facilities at
end of the quarter
|
4.72
|
%
|
|
4.67
|
%
|
|
4.20
|
%
|
|
|
Fixed and economically
fixed interest rates as a percentage of our total debt
|
49
|
%
|
|
51
|
%
|
|
53
|
%
|
|
|
Fixed and economically
fixed interest rates, including our interest rate cap agreements,
as a percentage of our total debt
|
84
|
%
|
|
88
|
%
|
|
91
|
%
|
|
|
|
Certain columns, rows
or percentages may not sum or recalculate due to the use of rounded
numbers.
|
|
(1)
|
As a result of the
pending sale of DMG announced in December 2017, the DMG business
has been classified as held for sale and its results of operations
are presented as discontinued operations for all periods
presented.
|
|
|
(2)
|
On January 1, 2018,
the Company adopted FASB Accounting Standards Codification Topic
606 Revenue from Contracts with Customers using the
cumulative effect method for those contracts which were not
completed as of January 1, 2018. Results for reporting periods
beginning on and after January 1, 2018 are presented under Topic
606, while prior period amounts continue to be reported in
accordance with our historical accounting under Revenue
Recognition (Topic 605).
|
|
|
(3)
|
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.
|
|
|
(4)
|
Consolidated
percentages of revenues are comprised of the dialysis and related
lab services business and other ancillary services and strategic
initiatives. General and administrative expenses includes certain
corporate support and long-term incentive compensation.
|
|
|
(5)
|
The reported balance
sheet amounts at June 30, 2018, March 31, 2018, and June 30, 2017,
exclude $57.9 million, $62.0 million and $71.9 million,
respectively, of a debt discount associated with our Term Loan B
and other deferred financing costs. The reported balance sheet
amounts exclude DMG debt which is classified as held for sale
liabilities for all periods presented.
|
|
|
(6)
|
The reported total
debt and net debt, net of cash and cash equivalents excludes DMG
cash and debt classified as held for sale assets and liabilities,
respectively, for all periods presented.
|
|
|
(7)
|
Adjusted operating
income margin is a calculation of adjusted operating income divided
by consolidated revenues.
|
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.
|
Rolling twelve
months ended June 30, 2018
|
Net income
attributable to DaVita Inc.
|
$
|
534,882
|
|
Income
taxes
|
(290,623)
|
|
Interest
expense
|
416,933
|
|
Depreciation and
amortization
|
677,119
|
|
Impairment
charges
|
895,457
|
|
Noncontrolling
interests and equity investment income, net
|
184,438
|
|
Stock-settled
stock-based compensation
|
37,346
|
|
Gain on changes in
ownership interest, net
|
(76,182)
|
|
Other
|
14,957
|
|
"Consolidated
EBITDA"
|
$
|
2,394,327
|
|
|
|
|
June 30,
2018
|
Total debt, excluding
debt discount and other deferred financing costs of $57.9
million
|
$
|
10,038,699
|
|
Letters of credit
issued
|
36,917
|
|
|
10,075,616
|
|
Less: Cash and cash
equivalents including short-term investments (excluding
DMG's physician owned entities cash)
|
(526,819)
|
|
Consolidated net
debt
|
$
|
9,548,797
|
|
Last twelve months
"Consolidated EBITDA"
|
$
|
2,394,327
|
|
Leverage
ratio
|
3.99x
|
|
In accordance with the Credit Agreement, the Company's
leverage ratio cannot exceed 4.50 to 1.00 as of June 30, 2018.
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)
The following Notes 2 through 5 provide reconciliations of the
non-GAAP financial measures presented in this press release to
their most comparable GAAP measures. For more information on the
nature, purposes and limitations of these non-GAAP measures, see
our "Note on Non-GAAP Financial Measures" on page 3.
Note 2: Adjusted net income from
continuing operations and adjusted diluted net income from
continuing operations per share attributable to DaVita Inc.
|
Three months
ended
|
|
Six months
ended
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017
|
|
June
30, 2018
|
|
June
30, 2017
|
Net income from
continuing operations attributable to DaVita Inc.
|
$
|
199,603
|
|
|
$
|
191,015
|
|
|
$
|
151,292
|
|
|
$
|
390,618
|
|
|
$
|
592,197
|
|
Goodwill impairment
charges
|
3,106
|
|
|
—
|
|
|
10,498
|
|
|
3,106
|
|
|
34,696
|
|
Impairment of other
assets
|
11,245
|
|
|
—
|
|
|
—
|
|
|
11,245
|
|
|
15,168
|
|
Gain on settlement,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(526,827)
|
|
Equity investment
income related to gain on settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,677)
|
|
Gain on changes in
ownership interests
|
(33,957)
|
|
|
—
|
|
|
—
|
|
|
(33,957)
|
|
|
(6,273)
|
|
Noncontrolling
interests associated with adjustments:
|
|
|
|
|
|
|
|
|
|
Goodwill impairment
charges
|
—
|
|
|
—
|
|
|
(2,985)
|
|
|
—
|
|
|
(9,865)
|
|
Gain on settlement,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,029
|
|
Related income
tax
|
2,652
|
|
|
—
|
|
|
(2,850)
|
|
|
2,652
|
|
|
182,312
|
|
Adjusted net income
from continuing operations attributable to DaVita
Inc.
|
$
|
182,649
|
|
|
$
|
191,015
|
|
|
$
|
155,955
|
|
|
$
|
373,664
|
|
|
$
|
302,760
|
|
Diluted net income
from continuing operations per share attributable to
DaVita Inc.
|
$
|
1.15
|
|
|
$
|
1.05
|
|
|
$
|
0.78
|
|
|
$
|
2.19
|
|
|
$
|
3.04
|
|
Goodwill impairment
charges
|
0.02
|
|
|
—
|
|
|
0.05
|
|
|
0.02
|
|
|
0.18
|
|
Impairment of other
assets
|
0.06
|
|
|
—
|
|
|
—
|
|
|
0.06
|
|
|
0.08
|
|
Gain on settlement,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.70)
|
|
Equity investment
income related to gain on settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01)
|
|
Gain on changes in
ownership interests
|
(0.20)
|
|
|
—
|
|
|
—
|
|
|
(0.19)
|
|
|
(0.03)
|
|
Noncontrolling
interests associated with adjustments:
|
|
|
|
|
|
|
|
|
|
Goodwill impairment
charges
|
—
|
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
|
(0.05)
|
|
Gain on settlement,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.12
|
|
Related income
tax
|
0.02
|
|
|
—
|
|
|
(0.01)
|
|
|
0.01
|
|
|
0.94
|
|
Adjusted diluted net
income from continuing operations per share attributable to DaVita
Inc.
|
$
|
1.05
|
|
|
$
|
1.05
|
|
|
$
|
0.80
|
|
|
$
|
2.10
|
|
|
$
|
1.56
|
|
|
Certain columns or
rows may not sum or recalculate due to the use of rounded
numbers.
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES - continued
|
(unaudited)
|
(dollars in
thousands)
|
|
Note 3:
Adjusted operating income
|
|
|
Three months
ended
|
|
Six months
ended
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017
|
|
June
30, 2018
|
|
June
30, 2017
|
Consolidated:
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
438,192
|
|
|
$
|
410,686
|
|
|
$
|
391,196
|
|
|
$
|
848,878
|
|
|
$
|
1,267,124
|
|
Goodwill
impairment charges
|
3,106
|
|
|
—
|
|
|
10,498
|
|
|
3,106
|
|
|
34,696
|
|
Impairment of other assets
|
11,245
|
|
|
—
|
|
|
—
|
|
|
11,245
|
|
|
15,168
|
|
Gain on
settlement, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(526,827)
|
|
Equity
investment income related to gain on settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,677)
|
|
Gain on
changes in ownership interests
|
(33,957)
|
|
|
—
|
|
|
—
|
|
|
(33,957)
|
|
|
(6,273)
|
|
Adjusted operating
income
|
$
|
418,586
|
|
|
$
|
410,686
|
|
|
$
|
401,694
|
|
|
$
|
829,272
|
|
|
$
|
781,211
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
June
30,
2018
|
|
March
31,
2018
|
|
June
30,
2017
|
|
June
30,
2018
|
|
June
30,
2017
|
Kidney
Care:
|
|
|
|
|
|
|
|
|
|
U.S. dialysis and
related lab services:
|
|
|
|
|
|
|
|
|
|
Segment operating
income
|
$
|
449,443
|
|
|
$
|
433,380
|
|
|
$
|
450,472
|
|
|
$
|
882,822
|
|
|
$
|
1,395,212
|
|
Gain on settlement,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(526,827)
|
|
Equity investment
income related to gain on settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,677)
|
|
Adjusted U.S.
dialysis and related lab services operating income
|
449,443
|
|
|
433,380
|
|
|
450,472
|
|
|
882,822
|
|
|
865,708
|
|
Other - Ancillary
services and strategic initiatives:
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss)
|
3,953
|
|
|
(5,186)
|
|
|
(35,545)
|
|
|
(1,233)
|
|
|
(88,572)
|
|
Goodwill impairment
charges
|
—
|
|
|
—
|
|
|
10,498
|
|
|
—
|
|
|
34,696
|
|
Gain on changes in
ownership interests
|
(35,205)
|
|
|
—
|
|
|
—
|
|
|
(35,205)
|
|
|
—
|
|
Impairment of other
assets
|
11,245
|
|
|
—
|
|
|
—
|
|
|
11,245
|
|
|
15,168
|
|
Adjusted operating
loss
|
(20,007)
|
|
|
(5,186)
|
|
|
(25,047)
|
|
|
(25,193)
|
|
|
(38,708)
|
|
International
|
|
|
|
|
|
|
|
|
|
Segment operating
loss
|
(1,138)
|
|
|
(1,804)
|
|
|
(12,700)
|
|
|
(2,942)
|
|
|
(17,893)
|
|
Goodwill impairment
charge
|
3,106
|
|
|
—
|
|
|
—
|
|
|
3,106
|
|
|
—
|
|
Loss (gain) on
changes in ownership interests
|
1,248
|
|
|
—
|
|
|
—
|
|
|
1,248
|
|
|
(6,273)
|
|
Adjusted operating
income (loss)
|
3,216
|
|
|
(1,804)
|
|
|
(12,700)
|
|
|
1,412
|
|
|
(24,166)
|
|
Adjusted Other -
Ancillary services and strategic initiatives operating
loss
|
(16,791)
|
|
|
(6,990)
|
|
|
(37,747)
|
|
|
(23,781)
|
|
|
(62,874)
|
|
Corporate
administrative support:
|
|
|
|
|
|
|
|
|
|
Segment operating
loss
|
(14,066)
|
|
|
(15,704)
|
|
|
(11,031)
|
|
|
(29,769)
|
|
|
(21,623)
|
|
Adjusted Kidney Care
operating income
|
$
|
418,586
|
|
|
$
|
410,686
|
|
|
$
|
401,694
|
|
|
$
|
829,272
|
|
|
$
|
781,211
|
|
|
Certain columns or
rows may not sum or recalculate due to the use of rounded
numbers.
|
DAVITA INC.
RECONCILIATIONS FOR
NON-GAAP MEASURES -
continued
(unaudited)
(dollars in
thousands)
Note 4: Effective income tax rates and
adjusted effective income tax rates
The effective income tax rate on income from continuing
operations and on income from continuing operations attributable to
DaVita Inc. is computed as follows:
|
Three months
ended
|
|
Six months
ended June 30, 2018
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017
|
|
Income from
continuing operations before income taxes
|
$
|
320,494
|
|
|
$
|
301,752
|
|
|
$
|
288,060
|
|
|
$
|
622,246
|
|
Income tax
expense
|
$
|
83,868
|
|
|
$
|
70,737
|
|
|
$
|
101,915
|
|
|
$
|
154,605
|
|
Effective income tax
rate on income from continuing operations
|
26.2
|
%
|
|
23.4
|
%
|
|
35.4
|
%
|
|
24.8
|
%
|
|
|
Three months
ended
|
|
Six months
ended June 30, 2018
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017
|
|
Income from
continuing operations before income taxes
|
$
|
320,494
|
|
|
$
|
301,752
|
|
|
$
|
288,060
|
|
|
$
|
622,246
|
|
Less: Noncontrolling
owners' income primarily attributable to non-tax paying
entities
|
(37,374)
|
|
|
(40,088)
|
|
|
(35,135)
|
|
|
(77,462)
|
|
Income before income
taxes attributable to DaVita Inc.
|
$
|
283,120
|
|
|
$
|
261,664
|
|
|
$
|
252,925
|
|
|
$
|
544,784
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
$
|
83,868
|
|
|
$
|
70,737
|
|
|
$
|
101,915
|
|
|
$
|
154,605
|
|
Less: Income tax
attributable to noncontrolling interests
|
(351)
|
|
|
(88)
|
|
|
(282)
|
|
|
(439)
|
|
Income tax expense
attributable to DaVita Inc.
|
$
|
83,517
|
|
|
$
|
70,649
|
|
|
$
|
101,633
|
|
|
$
|
154,166
|
|
|
|
|
|
|
|
|
|
Effective income tax
rate on income from continuing operations attributable
to DaVita Inc.
|
29.5
|
%
|
|
27.0
|
%
|
|
40.2
|
%
|
|
28.3
|
%
|
|
Certain columns, rows
or percentages may not sum or recalculate due to the use of rounded
numbers.
|
DAVITA INC.
RECONCILIATIONS FOR
NON-GAAP MEASURES -
continued
(unaudited)
(dollars in
thousands)
The effective income tax rate on adjusted income from continuing
operations attributable to DaVita Inc. is computed as follows:
|
Three months
ended
|
|
Six months
ended June 30, 2018
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017
|
|
Income from
continuing operations before income taxes
|
$
|
320,494
|
|
|
$
|
301,752
|
|
|
$
|
288,060
|
|
|
$
|
622,246
|
|
Goodwill impairment
charges
|
3,106
|
|
|
—
|
|
|
10,498
|
|
|
3,106
|
|
Impairment of other
assets
|
11,245
|
|
|
—
|
|
|
—
|
|
|
11,245
|
|
Gain on changes in
ownership interests
|
(33,957)
|
|
|
—
|
|
|
—
|
|
|
(33,957)
|
|
Noncontrolling
owners' income primarily attributable to non-tax paying
entities
|
(37,374)
|
|
|
(40,088)
|
|
|
(35,135)
|
|
|
(77,462)
|
|
Noncontrolling
interests associated with adjustments
|
|
|
|
|
|
|
|
Goodwill impairment
charges
|
—
|
|
|
—
|
|
|
(2,985)
|
|
|
—
|
|
Adjusted income from
continuing operations before income taxes attributable
to DaVita Inc.
|
$
|
263,514
|
|
|
$
|
261,664
|
|
|
$
|
260,438
|
|
|
$
|
525,178
|
|
Income tax expense
(benefit)
|
$
|
83,868
|
|
|
$
|
70,737
|
|
|
$
|
101,915
|
|
|
$
|
154,605
|
|
Add income tax
related to:
|
|
|
|
|
|
|
|
Goodwill impairment
charges
|
598
|
|
|
—
|
|
|
2,850
|
|
|
598
|
|
Impairment of other
assets
|
2,895
|
|
|
—
|
|
|
—
|
|
|
2,895
|
|
Gain on changes in
ownership interests, net
|
(6,145)
|
|
|
—
|
|
|
—
|
|
|
(6,145)
|
|
Less income tax
related to:
|
|
|
|
|
|
|
|
Noncontrolling
interests
|
(351)
|
|
|
(88)
|
|
|
(282)
|
|
|
(439)
|
|
Income tax on
adjusted income from continuing operations attributable
to DaVita Inc.
|
$
|
80,865
|
|
|
$
|
70,649
|
|
|
$
|
104,483
|
|
|
$
|
151,514
|
|
Effective income tax
rate on adjusted income from continuing operations
attributable to DaVita Inc.
|
30.7
|
%
|
|
27.0
|
%
|
|
40.1
|
%
|
|
28.9
|
%
|
|
Certain columns, rows
or percentages may not sum or recalculate due to the use of rounded
numbers.
|
DAVITA
INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES - continued
|
(unaudited)
|
(dollars in
thousands)
|
|
Note
5: Free cash flow from continuing
operations
|
|
|
Three months
ended
|
|
Six months
ended June 30, 2018
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017
|
|
Cash provided by
continuing operating activities
|
$
|
605,601
|
|
|
$
|
206,291
|
|
|
$
|
144,256
|
|
|
$
|
811,892
|
|
Less: Distributions
to noncontrolling interests
|
(48,539)
|
|
|
(45,467)
|
|
|
(72,759)
|
|
|
(94,006)
|
|
Cash provided by
continuing operating activities attributable to DaVita
Inc.
|
557,062
|
|
|
160,824
|
|
|
71,497
|
|
|
717,886
|
|
Less: Expenditures
for routine maintenance and information technology
|
(86,871)
|
|
|
(99,268)
|
|
|
(56,651)
|
|
|
(186,139)
|
|
Free cash flow from
continuing operations
|
$
|
470,191
|
|
|
$
|
61,556
|
|
|
$
|
14,846
|
|
|
$
|
531,747
|
|
|
Rolling 12-Month
Period
|
|
June
30, 2018
|
|
March
31, 2018
|
|
June
30, 2017
|
Cash provided by
continuing operating activities
|
$
|
1,453,942
|
|
|
$
|
992,597
|
|
|
$
|
1,716,611
|
|
Less: Distributions
to noncontrolling interests
|
(188,823)
|
|
|
(213,043)
|
|
|
(214,325)
|
|
Cash provided by
continuing operating activities attributable to DaVita
Inc.
|
1,265,119
|
|
|
779,554
|
|
|
1,502,286
|
|
Less: Expenditures
for routine maintenance and information technology
|
(362,883)
|
|
|
(332,663)
|
|
|
(302,195)
|
|
Free cash flow from
continuing operations
|
$
|
902,236
|
|
|
$
|
446,891
|
|
|
$
|
1,200,091
|
|
|
Certain columns or
rows may not sum or recalculate due to the use of rounded
numbers.
|
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SOURCE DaVita Inc.