DENVER, Aug. 1, 2022 /PRNewswire/ -- DaVita
Inc. (NYSE: DVA) announced financial and operating results for the
quarter ended June 30, 2022.
"We are living in a dynamic time with a sustained global
pandemic, labor shortage, supply chain disruption, and more.
Despite all this, my confidence in our business and our dedicated
caregivers and team has never wavered," said Javier Rodriguez. "Their hard work and
commitment has enabled us to continue delivering high quality and
equitable care to all of our constituents."
Financial and operating highlights for the quarter ended
June 30, 2022:
- Consolidated revenues were $2.927
billion.
- Operating income was $433
million.
- Diluted earnings per share was $2.30.
- Operating cash flow and free cash flow were $188 million and $95
million, respectively.
- Repurchased 3.9 million shares of our common stock at an
average cost of $95.56 per
share.
|
Three months
ended
|
|
Six months ended
June 30,
|
|
June 30,
2022
|
|
March 31,
2022
|
|
2022
|
|
2021
|
Net income
attributable to DaVita Inc.:
|
(dollars in
millions, except per share data)
|
Net income
|
$
225
|
|
$
162
|
|
$
387
|
|
$
531
|
Diluted per
share
|
$
2.30
|
|
$
1.61
|
|
$
3.90
|
|
$
4.72
|
|
Three months
ended
|
Six months ended
June 30,
|
|
June 30,
2022
|
|
March 31,
2022
|
|
2022
|
|
2021
|
|
Amount
|
|
Margin
|
|
Amount
|
|
Margin
|
|
Amount
|
|
Margin
|
|
Amount
|
|
Margin
|
|
(dollars in
millions)
|
Operating
income
|
$ 433
|
|
14.8 %
|
|
$ 338
|
|
12.0 %
|
|
$ 771
|
|
13.4 %
|
|
$
933
|
|
16.3 %
|
U.S. dialysis metrics:
Volume: Total U.S. dialysis treatments for the
second quarter of 2022 were 7,269,160, or an average of 93,194
treatments per day, representing a per day increase of 0.9%
compared to the first quarter of 2022. Normalized non-acquired
treatment growth in the second quarter of 2022 compared to the
second quarter of 2021 was (1.9)%.
|
Three months
ended
|
|
Quarter
change
|
|
Six months
ended
|
|
Year to
date
change
|
|
June 30,
2022
|
|
March 31,
2022
|
|
|
June 30,
2022
|
|
June 30,
2021
|
|
|
(dollars in
millions, except per treatment data)
|
Revenue per
treatment
|
$
365.54
|
|
$
361.35
|
|
$
4.19
|
|
$
363.47
|
|
$
357.35
|
|
$
6.12
|
Patient care costs per
treatment
|
$
247.14
|
|
$
252.61
|
|
$
(5.47)
|
|
$
249.85
|
|
$
237.79
|
|
$
12.06
|
General and
administrative
|
$
241
|
|
$
217
|
|
$
24
|
|
$
458
|
|
$
456
|
|
$
2
|
Primary drivers of the changes in the table above were as
follows:
Revenue: The quarter change was primarily due to normal
seasonal improvements driven by patients meeting their co-insurance
and deductibles, as well as the continued shift to Medicare
Advantage plans. The quarter change was negatively impacted by a
seasonal decrease in hospital inpatient dialysis treatments and
decreased government rate related to the reinstatement of 1%
Medicare sequestration beginning April 1,
2022. The year to date change was primarily due to an
increase in commercial mix and rate, an increase in the Medicare
base rate in 2022 and the continued shift to Medicare Advantage
plans, partially offset by the reinstatement of 1% Medicare
sequestration described above.
Patient care costs: The quarter change was primarily due
to decreased other direct operating expenses associated with our
dialysis centers, including decreased utilities expense due to
seasonality and our virtual power purchase arrangements. In
addition, our fixed other direct operating expenses positively
impacted patient care costs per treatment due to increased
treatments in the second quarter of 2022. Other drivers of this
change include declines in compensation expenses primarily related
to seasonal decreases in payroll taxes, as well as decreases in
health benefit expenses, professional fees, pharmaceutical unit
costs and medical supplies expense. These decreases were partially
offset by increased insurance expense. The year to date change was
primarily due to increased compensation expenses driven by
increased wage rates and increases in other direct operating
expenses associated with our dialysis centers, which include
increases in utilities expense resulting from lower expense in the
first half of 2021 related to our virtual power purchase
arrangements. In addition, our fixed other direct operating
expenses negatively impacted patient care costs per treatment due
to decreased treatments in the first half of 2022. Other drivers of
this change include increases in insurance expense and costs
related to travel and management meetings, partially offset by
decreased pharmaceutical unit costs and professional fees.
General and administrative: The quarter change was
primarily due to increased advocacy costs to counter union policy
efforts, including a California
ballot initiative, increased compensation expense including
increased wage rates, as well as increased travel costs. These
increases were offset by gains recognized on the sale of our
self-developed properties. The year to date change was primarily
due to increases in advocacy costs, as described above, travel
costs and compensation expenses partially offset the gains on sale,
as described above, and decreases in professional fees and
contributions to our charitable foundation.
Share repurchases: During the three months ended
June 30, 2022, we repurchased 3.9 million shares of our common
stock for $370 million, at an average
cost of $95.56 per share.
Subsequent to June 30, 2022 through July 29, 2022, we
repurchased 0.9 million shares of our common stock for $75 million, at an average cost of $82.94 per share.
Financial and operating metrics:
|
Three months
ended
June
30,
|
|
Twelve months
ended
June
30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Cash
flow:
|
(dollars in
millions)
|
Operating cash
flow
|
$
188
|
|
$
680
|
|
$
1,607
|
|
$
1,802
|
Free cash
flow(1)
|
$
95
|
|
$
503
|
|
$
890
|
|
$
982
|
|
|
(1)
|
For definitions of
non-GAAP financial measures, see the note titled "Note on Non-GAAP
Financial Measures" and related reconciliations beginning on page
16.
|
|
Three months
ended
June 30,
2022
|
|
Six months
ended
June 30,
2022
|
Effective income tax
rate on:
|
|
|
|
Income
|
18.4 %
|
|
19.8 %
|
Income attributable to
DaVita Inc.(1)
|
22.1 %
|
|
23.8 %
|
|
|
(1)
|
For definitions of
non-GAAP financial measures, see the note titled "Note on Non-GAAP
Financial Measures" and related reconciliations beginning on page
16.
|
Center activity: As of June 30, 2022, we
provided dialysis services to a total of approximately 243,700
patients at 3,159 outpatient dialysis centers, of which 2,810
centers were located in the United
States and 349 centers were located in 11 countries outside
of the United States. During the
second quarter of 2022, we opened a total of 18 new dialysis
centers and closed 17 dialysis centers in the United States. We also acquired two
dialysis centers and opened one dialysis center outside of
the United States during the
second quarter of 2022.
Integrated kidney care (IKC): As of June 30,
2022, we had approximately 44,000 patients in risk-based integrated
care arrangements representing approximately $3.7 billion in annualized medical spend. We also
had an additional 12,000 patients in other integrated care
arrangements; we do not include the medical spend for these
patients in this annualized medical spend estimate. See additional
description of these metrics at Note 2.
Certain items impacting the quarter:
Advocacy costs: During the three and six months
ended June 30, 2022, we incurred
advocacy costs of approximately $23
million to counter union policy efforts, including a
California ballot initiative.
These costs are included in the U.S. dialysis segment's general and
administrative expense.
Outlook:
The following forward-looking measures and the underlying
assumptions involve significant known and unknown risks and
uncertainties, including those described below, and actual results
may vary materially from these forward-looking measures. For
example, the widespread impact of the COVID-19 pandemic continues
to generate significant risk and uncertainty, and as a result, our
future results could vary materially from the guidance provided
below. We do not provide guidance for operating income or diluted
net income per share attributable to DaVita Inc. on a basis
consistent with United States
generally accepted accounting principles (GAAP) nor a
reconciliation of 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 foreign currency fluctuations, which may be significant.
The guidance for our effective income tax rate on adjusted income
attributable to DaVita Inc. also excludes the amount of third-party
owners' income and related taxes attributable to non-tax paying
entities.
|
2022
guidance
|
|
Low
|
|
High
|
|
(dollars in
millions, except per share data)
|
Adjusted operating
income
|
$1,525
|
|
$1,675
|
Adjusted diluted net
income per share attributable to DaVita Inc.
|
$7.50
|
|
$8.50
|
Free cash
flow
|
$850
|
|
$1,100
|
Key drivers of 2023 adjusted operating income
growth1:
(dollars in
millions)
|
Absence of ballot
initiative expenses
|
$60
|
Integrated Kidney
Care
|
$0 — $25
|
Treatment volume
growth
|
($25) — $125
|
Revenue per treatment
growth
|
$200 — $250
|
Labor pressure and
inflation
|
($275) —
($225)
|
Cost savings
initiatives
|
$125 — $175
|
|
|
2023 Adjusted
Operating Income Growth
|
$200 —
$300
|
|
|
(1)
|
Adjusted operating
income growth outlook relative to 2022 adjusted operating income
outlook, excluding certain items in both periods.
|
We will be holding a conference call to discuss our results for
the second quarter ended June 30, 2022, on August 1,
2022, 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'. This call is being webcast and can be
accessed at the DaVita Investor Relations website
investors.davita.com. A replay of the conference call will also be
available at investors.davita.com for the following 30 days.
Forward looking statements
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 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. These
forward-looking statements could include, among other things,
DaVita's response to and the expected future impacts of the
coronavirus (COVID-19), including statements about our balance
sheet and liquidity, our expenses and expense offsets, revenues,
billings and collections, availability or cost of supplies,
treatment volumes, mix expectation, such as the percentage or
number of patients under commercial insurance, the availability,
acceptance, impact, administration and efficacy of COVID-19
vaccines, treatments and therapies, the continuing impact on the
U.S. and global economies, unemployment and labor market
conditions, and overall impact on our patients and teammates, as
well as other statements regarding our future operations, financial
condition and prospects, expenses, strategic initiatives,
government and commercial payment rates, expectations related to
value-based care, integrated kidney care, and Medicare Advantage
plan enrollment and our ongoing stock repurchase program, and
statements related to our guidance and expectations for future
periods and the assumptions underlying any such projections. All
statements in this release, other than statements of historical
fact, are forward-looking statements. Without limiting the
foregoing, statements including the words "expect," "intend,"
"will," "could," "plan," "anticipate," "believe," "forecast,"
"guidance," "outlook," "goals," and similar expressions are
intended to identify forward-looking statements. These
forward-looking statements are based on DaVita's current
expectations and are based solely on information available as of
the date of this release. DaVita undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of changed circumstances, new information, future
events or otherwise, except as may be required by law. Actual
future events and 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:
- the continuing impact of the dynamic and evolving COVID-19
pandemic, including, without limitation, on our patients,
teammates, physician partners, suppliers, business, operations,
reputation, financial condition and results of operations; the
government's response to the COVID-19 pandemic, including, among
other things, federal, state and local vaccine mandates or
surveillance testing requirements and the extent to which they may
ultimately be applicable to us; the pandemic's continuing impact on
the U.S. and global economies, unemployment and other labor market
conditions, interest rates, inflation and evolving monetary
policies; the availability, acceptance, impact and efficacy of
COVID-19 vaccines, treatments and therapies; further spread or
resurgence of the virus, including as a result of the emergence of
new strains of the virus, such as the Omicron variant and its
subvariants; the continuing impact of the pandemic on our revenue
and non-acquired growth due to lower treatment volumes; COVID-19's
impact on the chronic kidney disease (CKD) population and our
patient population including on the mortality of these patients;
any potential negative impact on our commercial mix or the number
of our patients covered by commercial insurance plans; continued
increased COVID-19-related costs;our ability to successfully
implement planned cost savings initiatives in response to
COVID-19-related impacts on us; supply chain challenges and
disruptions, including with respect to our clinical supplies; and
higher salary and wage expense driven in part by labor market
conditions and a high demand for our clinical personnel, any of
which may also have the effect of heightening many of the other
risks and uncertainties discussed below, and in many cases, the
impact of the pandemic and the aforementioned global economic
conditions on our business may persist after the pandemic
subsides;
- the extent to which the ongoing implementation of healthcare
reform, or changes in or new legislation, regulations or guidance,
enforcement thereof or related litigation result in a reduction in
coverage or reimbursement rates for our services, a reduction in
the number of patients enrolled in or that select higher-paying
commercial plans, including for example Medicare Advantage plans or
other material impacts to our business or operations; or our making
incorrect assumptions about how our patients will respond to any
such developments;
- risks arising from potential changes in laws, regulations or
requirements applicable to us, such as potential and proposed
federal and/or state legislation, regulation, ballot, executive
action or other initiatives, including, without limitation, those
related to healthcare and/or labor matters, such as AB 290 and the
Dialysis Clinic Requirements Initiative in California;
- the concentration of profits generated by higher-paying
commercial payor plans for which there is continued downward
pressure on average realized payment rates; a reduction in the
number or percentage of our patients under such plans, including,
without limitation, 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, as a result of our
making incorrect assumptions about how our patients will respond to
any change in financial assistance from charitable organizations;
as a result of payors' implementing restrictive plan designs,
including, without limitation, actions taken in response to the
U.S. Supreme Court's decision in Marietta Memorial Hospital
Employee Health Benefit Plan, et al. v. DaVita Inc. et al.
("Marietta"); how and whether regulators and legislators will
respond to the Marietta decision including, without limitation,
whether they will issue regulatory guidance or adopt new
legislation; how courts will interpret other anti-discriminatory
provisions that may apply to restrictive plan designs; whether
there could be other potential negative impacts of the Marietta
decision; and the timing of each of these items;
- our ability to successfully implement our strategies with
respect to integrated kidney care and value-based care initiatives
and home based dialysis in the desired time frame and in a complex,
dynamic and highly regulated environment, including, among other
things, maintaining our existing business; meeting growth
expectations; recovering our investments; entering into agreements
with payors, third party vendors and others on terms that are
competitive and, as appropriate, prove actuarially sound;
structuring operations, agreements and arrangements to comply with
evolving rules and regulations; finding, training and retaining
appropriate staff; and further developing our integrated care and
other capabilities to provide competitive programs at
scale;
- a reduction in government payment rates under the Medicare
End Stage Renal Disease program, state Medicaid or other
government-based programs and the impact of the Medicare Advantage
benchmark structure;
- our ability to attract, retain and motivate teammates and
our ability to manage operating cost increases or productivity
decreases whether due to union organizing activities, legislative
or other changes, demand for labor, volatility and uncertainty in
the labor market, the current challenging and highly competitive
labor market conditions, or other reasons;
- U.S. and global economic and marketplace conditions,
interest rates, inflation, unemployment, labor market conditions,
and evolving monetary policies, and our ability to respond to these
changing conditions, including our ability to successfully
implement cost savings initiatives in response;
- noncompliance by us or our business associates with any
privacy or security laws or any security breach by us or a third
party involving the misappropriation, loss or other unauthorized
use or disclosure of confidential information;
- legal and compliance risks, such as our continued compliance
with complex, and at times, evolving government regulations and
requirements;
- the impact of the political environment and related
developments on the current healthcare marketplace and on our
business, including with respect to the Affordable Care Act, the
exchanges and many other core aspects of the current healthcare
marketplace, as well as the composition of the U.S. Supreme Court
and the current presidential administration and congressional
majority;
- changes in pharmaceutical practice patterns, reimbursement
and payment policies and processes, or pharmaceutical pricing,
including with respect to hypoxia inducible factors, among other
things;
- our ability to develop and maintain relationships with
physicians and hospitals, changing affiliation models for
physicians, and the emergence of new models of care or other
initiatives introduced by the government or private sector that,
among other things, may erode our patient base and impact
reimbursement rates;
- our ability to complete acquisitions, mergers, dispositions,
joint ventures or other strategic transactions that we might
announce or be considering, on terms favorable to us or at all, or
to successfully integrate any acquired businesses, or to
successfully operate any acquired businesses, joint ventures or
other strategic transactions, or to successfully expand our
operations and services in markets outside the United States, or to businesses or
products outside of dialysis services;
- continued increased competition from dialysis providers and
others, and other potential marketplace changes, including without
limitation increased investment in and availability of funding to
new entrants in the dialysis and pre-dialysis marketplace;
- the variability of our cash flows, including without
limitation any extended billing or collections cycles; the risk
that we may not be able to generate or access sufficient cash in
the future to service our indebtedness or to fund our other
liquidity needs; and the risk that we may not be able to refinance
our indebtedness as it becomes due, on terms favorable to us or at
all;
- factors that may impact our ability to repurchase stock
under our stock repurchase program and the timing of any such stock
repurchases, as well as our use of a considerable amount of
available funds to repurchase stock;
- risks arising from the use of accounting estimates,
judgments and interpretations in our financial statements;
- impairment of our goodwill, investments or other
assets;
- our aspirations, goals and disclosures related to
environmental, social and governance (ESG) matters, including
evolving regulatory requirements affecting ESG standards,
measurements and reporting requirements; the availability of
suppliers that can meet our sustainability standards; and our
ability to recruit, develop and retain diverse talent in our labor
markets; and
- the other risk factors, trends and uncertainties set forth
in our Annual Report on Form 10-K for the year ended December 31, 2021 and Quarterly Report on Form
10-Q for the quarter ended March 31,
2022, and the risks and uncertainties discussed in any
subsequent reports that we file or furnish with the SEC from time
to time.
The financial information presented in this release is
unaudited and is subject to change as a result of subsequent events
or adjustments, if any, arising prior to the filing of the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2022.
DAVITA
INC.
CONSOLIDATED
STATEMENTS OF INCOME
(unaudited)
(dollars and shares
in thousands, except per share data)
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Dialysis patient
service revenues
|
$
2,810,099
|
|
$
2,817,957
|
|
$ 5,526,380
|
|
$ 5,532,544
|
Other
revenues
|
116,658
|
|
98,553
|
|
217,932
|
|
203,967
|
Total
revenues
|
2,926,757
|
|
2,916,510
|
|
5,744,312
|
|
5,736,511
|
Operating
expenses:
|
|
|
|
|
|
|
|
Patient care
costs
|
2,016,788
|
|
1,965,277
|
|
4,035,317
|
|
3,903,607
|
General and
administrative
|
315,219
|
|
298,091
|
|
610,039
|
|
579,517
|
Depreciation and
amortization
|
171,176
|
|
169,689
|
|
344,120
|
|
335,390
|
Equity investment
income, net
|
(9,141)
|
|
(7,023)
|
|
(16,187)
|
|
(15,081)
|
Total operating
expenses
|
2,494,042
|
|
2,426,034
|
|
4,973,289
|
|
4,803,433
|
Operating
income
|
432,715
|
|
490,476
|
|
771,023
|
|
933,078
|
Debt
expense
|
(82,586)
|
|
(73,324)
|
|
(156,377)
|
|
(140,338)
|
Other (loss) income,
net
|
(1,284)
|
|
15,188
|
|
(3,070)
|
|
16,356
|
Income before income
taxes
|
348,845
|
|
432,340
|
|
611,576
|
|
809,096
|
Income tax
expense
|
64,229
|
|
81,309
|
|
121,242
|
|
166,520
|
Net income
|
284,616
|
|
351,031
|
|
490,334
|
|
642,576
|
Less: Net income
attributable to noncontrolling interests
|
(59,807)
|
|
(57,211)
|
|
(103,403)
|
|
(111,353)
|
Net income attributable
to DaVita Inc.
|
$
224,809
|
|
$
293,820
|
|
$
386,931
|
|
$
531,223
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to DaVita Inc.:
|
|
|
|
|
|
|
|
Basic net
income
|
$
2.38
|
|
$
2.76
|
|
$
4.06
|
|
$
4.94
|
Diluted net
income
|
$
2.30
|
|
$
2.64
|
|
$
3.90
|
|
$
4.72
|
|
|
|
|
|
|
|
|
Weighted average
shares for earnings per share:
|
|
|
|
|
|
|
|
Basic
shares
|
94,457
|
|
106,364
|
|
95,382
|
|
107,606
|
Diluted
shares
|
97,772
|
|
111,423
|
|
99,121
|
|
112,555
|
DAVITA
INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in
thousands)
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net income
|
$
284,616
|
|
$
351,031
|
|
$
490,334
|
|
$
642,576
|
Other comprehensive
(loss) income, net of tax:
|
|
|
|
|
|
|
|
Unrealized gains
(losses) on interest rate cap agreements:
|
|
|
|
|
|
|
|
Unrealized gains
(losses)
|
13,217
|
|
(2,059)
|
|
54,349
|
|
2,823
|
Reclassifications of
net realized losses into net income
|
1,033
|
|
1,033
|
|
2,066
|
|
2,066
|
Unrealized (losses)
gains on foreign currency translation:
|
(91,176)
|
|
57,910
|
|
(28,964)
|
|
(4,634)
|
Other comprehensive
(loss) income
|
(76,926)
|
|
56,884
|
|
27,451
|
|
255
|
Total comprehensive
income
|
207,690
|
|
407,915
|
|
517,785
|
|
642,831
|
Less: Comprehensive
income attributable to
noncontrolling
interests
|
(59,807)
|
|
(57,211)
|
|
(103,403)
|
|
(111,353)
|
Comprehensive income
attributable to DaVita Inc.
|
$
147,883
|
|
$
350,704
|
|
$
414,382
|
|
$
531,478
|
DAVITA
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOW
(unaudited)
(dollars in
thousands)
|
|
|
Six months ended
June 30,
|
|
2022
|
|
2021
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
490,334
|
|
$
642,576
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
344,120
|
|
335,390
|
Stock-based
compensation expense
|
50,109
|
|
51,717
|
Deferred income
taxes
|
9,069
|
|
40,685
|
Equity investment loss
(income), net
|
90
|
|
(2,764)
|
Other non-cash
charges, net
|
(32,858)
|
|
1,274
|
Changes in operating
assets and liabilities, net of effect of acquisitions and
divestitures:
|
|
|
|
Accounts
receivable
|
(132,043)
|
|
(117,171)
|
Inventories
|
(1,927)
|
|
(3,270)
|
Other receivables and
prepaid and other current assets
|
(61,811)
|
|
14,465
|
Other long-term
assets
|
(49,093)
|
|
(13,706)
|
Accounts
payable
|
24,517
|
|
(47,390)
|
Accrued compensation
and benefits
|
(102,513)
|
|
(90,381)
|
Other current
liabilities
|
42,517
|
|
25,090
|
Income
taxes
|
(63,638)
|
|
10,753
|
Other long-term
liabilities
|
(6,557)
|
|
(13,232)
|
Net cash provided by
operating activities
|
510,316
|
|
834,036
|
Cash flows from
investing activities:
|
|
|
|
Additions of property
and equipment
|
(265,461)
|
|
(294,438)
|
Acquisitions
|
(9,491)
|
|
(23,890)
|
Proceeds from asset
and business sales
|
114,829
|
|
29,774
|
Purchase of debt
investments held-to-maturity
|
(89,530)
|
|
(7,923)
|
Purchase of other debt
and equity investments
|
(3,010)
|
|
(2,164)
|
Proceeds from debt
investments held-to-maturity
|
8,415
|
|
7,923
|
Proceeds from sale of
other debt and equity investments
|
3,775
|
|
11,908
|
Purchase of equity
method investments
|
(23,806)
|
|
(6,029)
|
Distributions from
equity method investments
|
1,047
|
|
1,140
|
Net cash used in
investing activities
|
(263,232)
|
|
(283,699)
|
Cash flows from
financing activities:
|
|
|
|
Borrowings
|
1,182,911
|
|
1,611,086
|
Payments on long-term
debt
|
(841,687)
|
|
(754,407)
|
Deferred financing and
debt redemption costs
|
—
|
|
(9,089)
|
Purchase of treasury
stock
|
(617,432)
|
|
(560,507)
|
Distributions to
noncontrolling interests
|
(118,315)
|
|
(99,362)
|
Net payments related
to stock purchases and awards
|
(47,866)
|
|
(43,605)
|
Contributions from
noncontrolling interests
|
9,116
|
|
15,925
|
Proceeds from sales of
additional noncontrolling interests
|
3,673
|
|
—
|
Purchases of
noncontrolling interests
|
(15,365)
|
|
(4,493)
|
Net cash (used in)
provided by financing activities
|
(444,965)
|
|
155,548
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash
|
(1,342)
|
|
(1,197)
|
Net (decrease) increase
in cash, cash equivalents and restricted cash
|
(199,223)
|
|
704,688
|
Cash, cash equivalents
and restricted cash at beginning of the year
|
554,960
|
|
501,790
|
Cash, cash equivalents
and restricted cash at end of the period
|
$
355,737
|
|
$ 1,206,478
|
DAVITA
INC.
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(dollars and shares
in thousands, except per share data)
|
|
|
June 30,
2022
|
|
December 31,
2021
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
262,605
|
|
$
461,900
|
Restricted cash and
equivalents
|
93,132
|
|
93,060
|
Short-term
investments
|
100,489
|
|
22,310
|
Accounts
receivable
|
2,093,830
|
|
1,957,583
|
Inventories
|
109,522
|
|
107,428
|
Other
receivables
|
502,921
|
|
427,321
|
Prepaid and other
current assets
|
63,539
|
|
72,517
|
Income tax
receivable
|
38,070
|
|
25,604
|
Total current
assets
|
3,264,108
|
|
3,167,723
|
Property and equipment,
net of accumulated depreciation of $4,989,142 and $4,763,135,
respectively
|
3,304,596
|
|
3,479,972
|
Operating lease
right-of-use assets
|
2,771,757
|
|
2,824,787
|
Intangible assets, net
of accumulated amortization of $44,985 and $60,730,
respectively
|
184,740
|
|
177,693
|
Equity method and other
investments
|
253,457
|
|
238,881
|
Long-term
investments
|
44,562
|
|
49,514
|
Other long-term
assets
|
257,577
|
|
136,677
|
Goodwill
|
7,019,778
|
|
7,046,241
|
|
$
17,100,575
|
|
$
17,121,488
|
LIABILITIES AND
EQUITY
|
|
|
|
Accounts
payable
|
$
402,308
|
|
$
402,049
|
Other
liabilities
|
752,717
|
|
709,345
|
Accrued compensation
and benefits
|
559,791
|
|
659,960
|
Current portion of
operating lease liabilities
|
398,421
|
|
394,357
|
Current portion of
long-term debt
|
197,510
|
|
179,030
|
Income tax
payable
|
—
|
|
53,792
|
Total current
liabilities
|
2,310,747
|
|
2,398,533
|
Long-term operating
lease liabilities
|
2,606,391
|
|
2,672,713
|
Long-term
debt
|
9,064,916
|
|
8,729,150
|
Other long-term
liabilities
|
105,137
|
|
119,158
|
Deferred income
taxes
|
852,389
|
|
830,954
|
Total
liabilities
|
14,939,580
|
|
14,750,508
|
Commitments and
contingencies
|
|
|
|
Noncontrolling
interests subject to put provisions
|
1,385,821
|
|
1,434,832
|
Equity:
|
|
|
|
Preferred stock
($0.001 par value, 5,000 shares authorized; none issued)
|
—
|
|
—
|
Common stock ($0.001
par value, 450,000 shares authorized; 98,179 and 92,206
shares
issued and
outstanding at June 30, 2022, respectively, and 97,289 shares
issued and outstanding
at
December 31, 2021)
|
98
|
|
97
|
Additional paid-in
capital
|
578,272
|
|
540,321
|
Retained
earnings
|
741,268
|
|
354,337
|
Treasury stock (5,973
and zero shares, respectively)
|
(603,058)
|
|
—
|
Accumulated other
comprehensive loss
|
(111,796)
|
|
(139,247)
|
Total DaVita Inc.
shareholders' equity
|
604,784
|
|
755,508
|
Noncontrolling
interests not subject to put provisions
|
170,390
|
|
180,640
|
Total
equity
|
775,174
|
|
936,148
|
|
$ 17,100,575
|
|
$
17,121,488
|
DAVITA
INC.
SUPPLEMENTAL
FINANCIAL DATA
(unaudited)
(dollars in millions and shares in thousands, except per treatment
data)
|
|
|
Three months
ended
|
|
Six months
ended June 30,
|
|
June 30,
2022
|
|
March 31,
2022
|
|
2022
|
1. Consolidated
business metrics:
|
|
|
|
|
|
Operating
margin
|
14.8 %
|
|
12.0 %
|
|
13.4 %
|
General and
administrative expenses as a percent of consolidated
revenues(1)
|
10.8 %
|
|
10.5 %
|
|
10.6 %
|
Effective income tax
rate on income
|
18.4 %
|
|
21.7 %
|
|
19.8 %
|
Effective income tax
rate on income attributable to DaVita Inc.(2)
|
22.1 %
|
|
26.0 %
|
|
23.8 %
|
|
|
|
|
|
|
2. Summary of
financial results:
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
U.S. dialysis patient
services and other
|
$ 2,663
|
|
$ 2,575
|
|
$ 5,238
|
Other—Ancillary
services
|
|
|
|
|
|
Integrated kidney
care
|
103
|
|
87
|
|
189
|
Other U.S.
ancillary
|
5
|
|
5
|
|
10
|
International dialysis
patient service and other
|
175
|
|
173
|
|
348
|
|
283
|
|
265
|
|
548
|
Eliminations
|
(19)
|
|
(22)
|
|
(42)
|
Total consolidated
revenues
|
$ 2,927
|
|
$ 2,818
|
|
$ 5,744
|
Operating income
(loss):
|
|
|
|
|
|
U.S.
dialysis
|
$
473
|
|
$
406
|
|
$
879
|
Other—Ancillary
services
|
|
|
|
|
|
Integrated kidney
care
|
(21)
|
|
(37)
|
|
(59)
|
Other U.S.
ancillary
|
(2)
|
|
(3)
|
|
(6)
|
International(3)
|
15
|
|
8
|
|
23
|
|
(9)
|
|
(32)
|
|
(41)
|
Corporate
administrative support expenses
|
(31)
|
|
(36)
|
|
(67)
|
Total consolidated
operating income
|
$
433
|
|
$
338
|
|
$
771
|
DAVITA
INC.
SUPPLEMENTAL
FINANCIAL DATA - continued
(unaudited)
(dollars in millions
and shares in thousands, except per treatment data)
|
|
|
Three months
ended
|
|
Six months
ended June 30,
|
|
June 30,
2022
|
|
March 31,
2022
|
|
2022
|
3. Summary of
reportable segment financial results and metrics:
|
|
|
|
|
|
U.S.
dialysis
|
|
|
|
|
|
Financial
results
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
Dialysis patient
service revenues
|
$ 2,657
|
|
$ 2,569
|
|
$ 5,226
|
Other
revenues
|
6
|
|
6
|
|
12
|
Total operating
revenues
|
2,663
|
|
2,575
|
|
5,238
|
Operating
expenses:
|
|
|
|
|
|
Patient care
costs
|
1,796
|
|
1,796
|
|
3,593
|
General and
administrative
|
241
|
|
217
|
|
458
|
Depreciation and
amortization
|
161
|
|
162
|
|
323
|
Equity investment
income
|
(7)
|
|
(6)
|
|
(14)
|
Total operating
expenses
|
2,190
|
|
2,169
|
|
4,359
|
Segment operating
income
|
$
473
|
|
$
406
|
|
$
879
|
Metrics
|
|
|
|
|
|
Volume:
|
|
|
|
|
|
Treatments
|
7,269,160
|
|
7,109,788
|
|
14,378,948
|
Number of treatment
days
|
78.0
|
|
77.0
|
|
155.0
|
Average treatments per
day
|
93,194
|
|
92,335
|
|
92,767
|
Per day year-over-year
decrease
|
(1.9) %
|
|
(2.4) %
|
|
(2.2) %
|
Normalized
year-over-year non-acquired treatment
growth(4)
|
(1.9) %
|
|
(1.9) %
|
|
|
Operating net
revenues:
|
|
|
|
|
|
Average patient
service revenue per treatment
|
$
365.54
|
|
$
361.35
|
|
$
363.47
|
Expenses:
|
|
|
|
|
|
Patient care costs per
treatment
|
$
247.14
|
|
$
252.61
|
|
$
249.85
|
General and
administrative expenses per treatment
|
$ 33.11
|
|
$ 30.50
|
|
$ 31.82
|
Depreciation and
amortization expense per treatment
|
$ 22.10
|
|
$ 22.79
|
|
$ 22.44
|
Accounts
receivable:
|
|
|
|
|
|
Receivables
|
$ 1,870
|
|
$ 1,837
|
|
|
DSO
|
65
|
|
65
|
|
|
DAVITA
INC.
SUPPLEMENTAL
FINANCIAL DATA - continued
(unaudited)
(dollars in millions
and shares in thousands, except per treatment data)
|
|
|
Three months
ended
|
|
Six months
ended June 30,
|
|
June 30,
2022
|
|
March 31,
2022
|
|
2022
|
4. Cash
flow:
|
|
|
|
|
|
Operating cash
flow
|
$
188
|
|
$
322
|
|
$
510
|
Operating cash flow,
last twelve months
|
$ 1,607
|
|
$ 2,099
|
|
|
Free cash
flow(2)
|
$
95
|
|
$
147
|
|
$
242
|
Free cash flow, last
twelve months(2)
|
$
890
|
|
$ 1,297
|
|
|
Capital
expenditures:
|
|
|
|
|
|
Routine
maintenance/IT/other
|
$
96
|
|
$
84
|
|
$
181
|
Development and
relocations
|
$
46
|
|
$
39
|
|
$
85
|
Acquisition
expenditures
|
$
4
|
|
$
5
|
|
$
9
|
Proceeds from sale of
self-developed properties
|
$
98
|
|
$
8
|
|
$
106
|
|
|
|
|
|
|
5. Debt and capital
structure:
|
|
|
|
|
|
Total
debt(5)
|
$ 9,313
|
|
$ 8,927
|
|
|
Net debt, net of cash
and cash equivalents(5)
|
$ 9,050
|
|
$ 8,599
|
|
|
Leverage
ratio(6)
|
3.80x
|
|
3.50x
|
|
|
Weighted average
effective interest rate:
|
|
|
|
|
|
During the
quarter
|
3.68 %
|
|
3.35 %
|
|
|
At end of the
quarter
|
4.10 %
|
|
3.52 %
|
|
|
On the senior secured
credit facilities at end of the quarter
|
3.77 %
|
|
2.54 %
|
|
|
Debt with fixed and
capped rates as a percentage of total debt:
|
|
|
|
|
|
Debt with rates fixed
by its terms
|
50 %
|
|
52 %
|
|
|
Debt with rates fixed
by its terms or capped by cap agreements
|
87 %
|
|
91 %
|
|
|
Amount spent on share
repurchases
|
$
370
|
|
$
233
|
|
$
603
|
Number of shares
repurchased
|
3,869
|
|
2,104
|
|
5,973
|
|
Certain columns, rows
or percentages may not sum or recalculate due to the presentation
of rounded numbers.
|
|
|
(1)
|
General and
administrative expenses include certain corporate support,
long-term incentive compensation and advocacy costs.
|
(2)
|
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.
|
(3)
|
The reported operating
income for the three months ended June 30, 2022 and March 31, 2022
and the six months ended June 30, 2022 includes foreign currency
gains embedded in equity method income recognized from our Asia
Pacific joint venture of approximately $2.1, $0.3 and $2.4,
respectively.
|
(4)
|
Normalized non-acquired
treatment growth reflects year-over-year growth in treatment
volume, adjusted to exclude acquisitions and other similar
transactions, and further adjusted to normalize for the number and
mix of treatment days in a given quarter versus the prior year
quarter.
|
(5)
|
The debt amounts as of
June 30, 2022 and March 31, 2022 presented exclude approximately
$50.6 and $53.6, respectively, of debt discount, premium and other
deferred financing costs related to our senior secured credit
facilities and senior notes in effect or outstanding at that
time.
|
(6)
|
See Note 1: Calculation
of the Leverage Ratio on page 14.
|
DAVITA INC.
SUPPLEMENTAL FINANCIAL
DATA-continued
(unaudited)
(dollars in
millions)
Note 1: Calculation of the Leverage Ratio
Under our senior secured credit facilities (the Credit
Agreement) dated August 12, 2019, the
leverage ratio is defined as (a) all funded debt plus the face
amount of all letters of credit issued, minus unrestricted cash and
cash equivalents (including short-term investments) not to exceed
$750 divided by (b) "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
calculation below is based on the last twelve months of
"Consolidated EBITDA," as of the end of the reported period and pro
forma for acquisitions or divestitures that occurred during the
period, and "Consolidated net debt" at the end of the reported
period, each as defined in the Credit Agreement. 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. The leverage
ratio calculated by the Company is a non-GAAP measure and
should not be considered a substitute for the ratio of total debt
to operating income, determined in accordance with 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 of other companies.
|
Twelve months
ended
|
|
June 30,
2022
|
|
March 31,
2022
|
Net income attributable
to DaVita Inc.
|
$
834
|
|
$
903
|
Income taxes
|
261
|
|
279
|
Interest
expense
|
275
|
|
268
|
Depreciation and
amortization
|
689
|
|
688
|
Noncontrolling
interests and equity investment income, net
|
225
|
|
223
|
Stock-settled
stock-based compensation
|
100
|
|
102
|
Other
|
(4)
|
|
20
|
"Consolidated
EBITDA"
|
$
2,382
|
|
$
2,481
|
|
|
|
|
|
June 30,
2022
|
|
March 31,
2022
|
Total debt, excluding
debt discount and other deferred financing
costs(1)
|
$
9,313
|
|
$
8,927
|
Letters of credit
issued
|
108
|
|
108
|
|
9,421
|
|
9,035
|
Less: Cash and cash
equivalents including short-term
investments(2)
|
(360)
|
|
(344)
|
Consolidated net
debt
|
$
9,061
|
|
$
8,691
|
Last twelve months
"Consolidated EBITDA"
|
$
2,382
|
|
$
2,481
|
Leverage
ratio
|
3.80x
|
|
3.50x
|
Maximum leverage ratio
permitted under the Credit Agreement
|
5.00x
|
|
5.00x
|
|
Certain columns or rows
may not sum or recalculate due to the presentation of rounded
numbers.
|
|
|
(1)
|
The debt amounts as of
June 30, 2022 and March 31, 2022 presented exclude approximately
$50.6 and $53.6, respectively, of debt discount, premium and other
deferred financing costs related to our senior secured credit
facilities and senior notes in effect at that time.
|
(2)
|
This excludes amounts
not readily convertible to cash related to the Company's
non-qualified deferred compensation plans for all periods
presented. The Credit Agreement limits the amount deducted for cash
and cash equivalents, including short-term investments, to the
lesser of all unrestricted cash and cash equivalents, including
short-term investments of the Company or $750.
|
DAVITA INC.
INTEGRATED CARE
METRICS
(unaudited)
Note 2: Integrated Care Metrics
Our integrated kidney care (IKC) business is party to a variety
of risk-based integrated care and disease management arrangements,
including value-based care (VBC) contracts under which we assume
full or shared financial risk for the total medical cost of care
for patients below or above a benchmark.
The aggregate amount of medical spend associated with risk-based
integrated care arrangements that we disclose includes both medical
costs included in our reported expenses for certain risk-based
arrangements (such as its special needs plans), as well as the
aggregate estimated benchmark amount above or below which we will
incur profit or loss on for VBC arrangements under which
third-party medical costs are not included in our reported results.
This metric is an annualization of our estimate of this amount for
the most recent quarter.
A number of our VBC contracts are subject to complex or novel
patient attribution mechanics and benchmark adjustments, some of
which are based on information not reported to us until periods
after we report our quarterly results. As a result, our estimates
of our patients under, and the dollar amount of, our value-based
contracts remain subject to estimation uncertainty.
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP
MEASURES
(unaudited)
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,
(gain) loss on ownership changes, restructuring charges, accruals
for legal matters and debt prepayment and refinancing charges; and
(ii) the term "effective income tax rate on adjusted income
attributable to DaVita Inc." represents the Company's effective tax
rate excluding applicable non-GAAP items and the tax associated
with them as well as 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, management uses adjusted operating income,
adjusted net income attributable to DaVita Inc. and adjusted
diluted net income 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 also are
useful to investors and analysts in evaluating our performance over
time and relative to competitors, as well as in analyzing the
underlying trends in our business. Furthermore, we believe these
presentations enhance a user's understanding of our normal
consolidated results 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.
The effective income tax rate on adjusted income 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 and
establishing expectations for income taxes incurred on our ordinary
results attributable to DaVita Inc.
Finally, free cash flow represents net cash provided by
operating activities less distributions to noncontrolling interests
and all capital expenditures (including development capital
expenditures, routine maintenance and information technology); plus
contributions from noncontrolling interests and proceeds from the
sale of self-developed properties. Management uses this measure to
assess our ability to fund acquisitions and meet our debt service
obligations and we believe this measure is equally useful to
investors and analysts as an adjunct to cash flows from operating
activities and other measures under GAAP.
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.
The following Notes 3 through 4 provide reconciliations of the
non-GAAP financial measures presented in this press release to
their most comparable GAAP measures.
DAVITA
INC.
RECONCILIATIONS FOR
NON-GAAP MEASURES - continued
(unaudited)
(dollars in
millions)
|
Note 3:
Effective income tax rates on income attributable to DaVita
Inc.
|
|
|
Three months
ended
|
|
Six months
ended June 30,
2022
|
|
June 30,
2022
|
|
March 31,
2022
|
|
Income before income
taxes
|
$ 349
|
|
$ 263
|
|
$ 612
|
Noncontrolling owners'
income primarily attributable to non-tax paying entities
|
(60)
|
|
(44)
|
|
(104)
|
Income before income
taxes attributable to DaVita Inc.
|
$ 289
|
|
$ 219
|
|
$ 508
|
|
|
|
|
|
|
Income tax
expense
|
$
64
|
|
$
57
|
|
$ 121
|
Income tax
attributable to noncontrolling interests
|
—
|
|
—
|
|
(1)
|
Income tax expense
attributable to DaVita Inc.
|
$
64
|
|
$
57
|
|
$ 121
|
|
|
|
|
|
|
Effective income tax
rate on income attributable to DaVita Inc.
|
22.1 %
|
|
26.0 %
|
|
23.8 %
|
|
Certain columns, rows
or percentages may not sum or recalculate due to the presentation
of rounded numbers.
|
Note
4: Free cash flow
|
|
Three months
ended
|
|
Six months
ended June 30,
2022
|
|
June 30,
2022
|
|
March 31,
2022
|
|
June 30,
2021
|
|
Net cash provided by
operating activities
|
$
188
|
|
$
322
|
|
$
680
|
|
$
510
|
Adjustments to
reconcile net cash provided by operating activities to
free
cash
flow:
|
|
|
|
|
|
|
|
Distributions to
noncontrolling interests
|
(53)
|
|
(65)
|
|
(45)
|
|
(118)
|
Contributions from
noncontrolling interests
|
4
|
|
5
|
|
5
|
|
9
|
Expenditures for
routine maintenance and information technology
|
(96)
|
|
(84)
|
|
(91)
|
|
(181)
|
Expenditures for
development and relocations
|
(46)
|
|
(39)
|
|
(58)
|
|
(85)
|
Proceeds from sale of
self-developed properties
|
98
|
|
8
|
|
13
|
|
106
|
Free cash
flow
|
$
95
|
|
$
147
|
|
$
503
|
|
$
242
|
|
Twelve months
ended
|
|
June 30,
2022
|
|
March 31,
2022
|
|
June 30,
2021
|
Net cash provided by
operating activities
|
$
1,607
|
|
$
2,099
|
|
$
1,802
|
Adjustments to
reconcile net cash provided by operating activities to free cash
flow:
|
|
|
|
|
|
Distributions to
noncontrolling interests
|
(263)
|
|
(256)
|
|
(234)
|
Contributions from
noncontrolling interests
|
25
|
|
26
|
|
38
|
Expenditures for
routine maintenance and information technology
|
(421)
|
|
(416)
|
|
(425)
|
Expenditures for
development and relocations
|
(192)
|
|
(204)
|
|
(252)
|
Proceeds from sale of
self-developed properties
|
133
|
|
48
|
|
54
|
Free cash
flow
|
$
890
|
|
$
1,297
|
|
$
982
|
|
Certain columns or rows
may not sum or recalculate due to the presentation of rounded
numbers.
|
Contact:
|
Investor
Relations
|
|
DaVita Inc.
|
|
ir@davita.com
|
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SOURCE DaVita Inc.