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Feb. 10, 2020, 4:01 p.m. EST

DaVita Inc. 4th Quarter 2019 Results

DENVER, Feb. 10, 2020 /PRNewswire/ -- DaVita Inc. /zigman2/quotes/204229673/composite DVA -2.78% today announced results for the quarter and year ended December 31, 2019.

Fourth quarter 2019 highlights:

  • Consolidated revenues of $2.899 billion.

  • Operating income of $463 million or 16.0% operating margin.

  • Diluted earnings per share from continuing operations of $1.86.

  • Operating cash flow from continuing operations of $678 million and free cash flow from continuing operations of $415 million.

  • Repurchased 8,368,506 shares of our common stock at an average cost of $64.80 per share.

 


Three months endedDecember 31,
Year endedDecember 31,

2019
2018
2019
2018
Net income attributable to DaVita Inc.: (dollars in millions, except per share data)

Net income from continuing operations $ 242

$ 160

$ 707

$ 624

Per share $ 1.86

$ 0.96

$ 4.60

$ 3.62

Adjusted net income from continuing operations(1) $ 242

$ 149

$ 830

$ 616

Per share adjusted(1) $ 1.86

$ 0.90

$ 5.40

$ 3.57

Net income (loss) $ 245

$ (150)

$ 811

$ 159

Per share $ 1.88

$ (0.90)

$ 5.27

$ 0.92

 


Three months ended
Year endedDecember 31,

2019
2018
2019
2018
Operating income: (dollars in millions)

Operating income $ 463

$ 388

$ 1,643

$ 1,526

Adjusted operating income(1) $ 463

$ 370

$ 1,768

$ 1,513





(1) For the definitions of non-GAAP financial measures see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 15.

U.S. dialysis metrics:

Volume:   Total U.S. dialysis treatments for the fourth quarter of 2019 were 7,681,462, or an average of 96,744 treatments per day, representing a per day increase of 1.7% over the fourth quarter of 2018. Normalized non-acquired treatment growth in the fourth quarter of 2019 as compared to the fourth quarter of 2018 was 2.1%.


Three months ended


Year ended


December 31, 2019
September 30,2019
Quarterchange
December 31, 2019
December 31, 2018
Annual
Per treatment metrics:










Revenue $ 348.31

$ 349.41

$ (1.10)

$ 349.02

$ 350.47

$ (1.45)
Patient care costs $ 237.44

$ 236.32

$ 1.12

$ 239.27

$ 247.32

$ (8.05)
General and administrative $ 27.27

$ 30.63

$ (3.36)

$ 28.41

$ 28.40

$ 0.01

Primary drivers of the changes in the table above are as follows:

Revenue: The quarter change was primarily due to lower calcimimetics revenue. The annual change was primarily due to lower calcimimetics revenue and was also negatively impacted by additional Medicare bad debt revenue recognized in 2018, partially offset by an increase in Medicare rates.

Patient care costs: The quarter change was primarily due to higher direct center operating expenses and medical supply costs, partially offset by lower pharmaceutical costs. The annual change was primarily due to lower pharmaceutical costs, partially offset by higher benefit costs and direct center operating expenses.

General and administrative:  The quarter change was primarily due to lower compensation expense. The annual change was primarily due to higher compensation expenses, partially offset by lower advocacy costs.

Certain items impacting the quarter and year:

Share repurchases: The following table summarizes repurchases of our common stock during the quarter and year ended December 31, 2019:


Three months ended December 31, 2019
Year ended December 31, 2019

Shares repurchased
Amount paid(in millions)
Paid pershare
Sharesrepurchased
Amount paid(in millions)
Paid pershare
Tender offer(1)

$

$

21,801,975

$ 1,234

$ 56.60
Open market repurchases 8,368,506

542

64.80

19,218,257

1,168

60.79

8,368,506

$ 542

$ 64.80

41,020,232

$ 2,402

$ 58.57





(1) The amount paid for shares repurchased associated with our modified "Dutch auction" tender offer during the year ended December 31, 2019 includes the clearing price of $56.50 per share plus related fees and expenses of approximately $2 million.

Subsequent to December 31, 2019 through February 7, 2020, we have repurchased 290,904 shares of our common stock for $22 million at an average cost of $74.92 per share. As of February 7, 2020, we have a total of $1.682 billion available for additional share repurchases under our current repurchase authorization. Although this share repurchase authorization does not have an expiration date, we remain subject to share repurchase limitations, including under the terms of our senior secured credit facilities and the indentures governing our senior notes.

Financial and operating metrics:


Three months endedDecember 31,
Year endedDecember 31,

2019
2018
2019
2018
Cash flow: (dollars in millions)

Operating cash flow $ 681

$ 389

$ 2,072

$ 1,772

Operating cash flow from continuing operations $ 678

$ 307

$ 1,973

$ 1,481

Free cash flow from continuing operations (new definition)(1) $ 415

$ 11

$ 1,127

$ 480





(1) For the definitions of non-GAAP financial measures see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 15.

 


Three months endedDecember 31, 2019
Year endedDecember 31, 2019
Effective income tax rate on:

Income from continuing operations 21.4 %
23.4 %

Income from continuing operations attributable to DaVita Inc. 25.2 %
28.3 %

Adjusted income from continuing operations attributable to  DaVita Inc.(1) 25.2 %
27.5 %





(1) For the definitions of non-GAAP financial measures see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 15.

Our effective tax rate for the fourth quarter and year ended December 31, 2019 benefited from a decrease in our estimated state tax rate.

Center activity:   As of December 31, 2019, we provided dialysis services to a total of approximately 235,500 patients at 3,012 outpatient dialysis centers, of which 2,753 centers were located in the United States and 259 centers were located in ten countries outside of the United States. During the fourth quarter of 2019, we opened a total of 31 new dialysis centers and closed 14 dialysis centers in the United States. In addition, we opened three new dialysis centers and acquired seven dialysis centers outside of the United States during the fourth quarter of 2019.

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 diluted net income from continuing operations per share attributable to DaVita Inc., effective tax rate on income from continuing operations or free cash flow from continuing operations 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, any of which may be significant. The guidance for effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. also excludes the amount of third party owners' income and related taxes attributable to non-tax paying entities.


Current 2020 guidance
Prior 2020 guidance

Low
High
Low
High

(dollars in millions, except per share data)
Revenue $ 11,500

$ 11,700




Operating income margin 13.0 %
14.0 %



Effective income tax rate on adjusted income from 28.0 %
29.5 %



Adjusted diluted net income from continuing $ 5.75

$ 6.25

$ 5.25

$ 5.75
Capital expenditures from continuing operations $ 700

$ 750

$ 700

$ 750
Free cash flow from continuing operations $ 600

$ 800




We will be holding a conference call to discuss our results for the fourth quarter ended December 31, 2019, on February 10, 2020, 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.

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," "we are confident that," "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 solely on information available to us on the date of this release. 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 future periods and the assumptions underlying any such projections.

Our actual results and other events 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 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 reform, or changes in or new legislation, regulations or guidance, enforcement thereof or related litigation; the extent to which such developments result in a reduction in coverage or reimbursement rates for our services, a reduction in the number of patients enrolled in higher-paying commercial plans, or other material impacts to our business; or our making incorrect assumptions about how our patients will respond to any such developments;

  • a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs and the impact of the Medicare Advantage benchmark structure;

  • risks arising from potential and proposed federal and/or state legislation, regulation and ballot, executive action or other initiatives, including such initiatives related to healthcare and/or labor matters;

  • the impact of the political environment and related developments on the current healthcare marketplace and on our business, including with respect to the future of the Affordable Care Act, the exchanges and many other core aspects of the current health care marketplace;

  • changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to calcimimetics;

  • legal and compliance risks, such as our continued compliance with complex government regulations;

  • continued increased competition from dialysis providers and others, and other potential marketplace changes;

  • 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;

  • uncertainties related to potential payments and/or adjustments under certain provisions of the equity purchase agreement for the sale of our DaVita Medical Group business, such as post-closing adjustments and indemnification obligations;

  • 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;

  • 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; 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;

  • uncertainties related to our use of the proceeds from the DaVita Medical Group sale transaction and other available funds, including external financing and cash flow from operations, which may be or have been used in ways that we cannot assure will improve our results of operations or enhance the value of our common stock; and

  • uncertainties associated with the other risk factors set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 as updated by our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, and the other risks and uncertainties discussed in any subsequent reports that we file or furnish with 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 Annual Report on Form 10-K for the year ended December 31, 2019.

DAVITA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share data)


Three months endedDecember 31,
Year endedDecember 31,

2019
2018
2019
2018
Dialysis patient service revenues $ 2,768,035

$ 2,729,803

$ 10,918,421

$ 10,709,981
Provision for uncollectible accounts (2,026)

(13,749)

(21,715)

(49,587)
Net dialysis patient service revenues 2,766,009

2,716,054

10,896,706

10,660,394
Other revenues 132,575

105,070

491,773

744,457
Total revenues 2,898,584

2,821,124

11,388,479

11,404,851
Operating expenses and charges:






Patient care costs 2,000,625

2,027,069

7,914,485

8,195,513
General and administrative 278,425

268,532

1,103,312

1,135,454
Depreciation and amortization 158,467

155,157

615,152

591,035
Provision for uncollectible accounts





(7,300)
Equity investment (income) loss (1,521)

10,610

(12,679)

4,484
Investment and other asset impairments





17,338
Goodwill impairment charges



124,892

3,106
Gain on changes in ownership interest, net

(28,152)



(60,603)
Total operating expenses and charges 2,435,996

2,433,216

9,745,162

9,879,027
Operating income 462,588

387,908

1,643,317

1,525,824
Debt expense (92,050)

(128,300)

(443,824)

(487,435)
Debt prepayment, refinancing and redemption charges



(33,402)


Other income (loss), net 11,485

(494)

29,348

10,089
Income from continuing operations before income taxes 382,023

259,114

1,195,439

1,048,478
Income tax expense 81,690

51,748

279,628

258,400
Net income from continuing operations 300,333

207,366

915,811

790,078
Net income (loss) from discontinued operations, net of tax 2,629

(309,209)

105,483

(457,038)
Net income (loss) 302,962

(101,843)

1,021,294

333,040
Less: Net income attributable to noncontrolling interests (58,091)

(47,929)

(210,313)

(173,646)
Net income (loss) attributable to DaVita Inc. $ 244,871

$ (149,772)

$ 810,981

$ 159,394
Earnings per share attributable to DaVita Inc.:






Basic net income from continuing operations per share $ 1.87

$ 0.97

$ 4.61

$ 3.66
Basic net income (loss) per share $ 1.89

$ (0.90)

$ 5.29

$ 0.93
Diluted net income from continuing operations per share $ 1.86

$ 0.96

$ 4.60

$ 3.62
Diluted net income (loss) per share $ 1.88

$ (0.90)

$ 5.27

$ 0.92
Weighted average shares for earnings per share:






Basic 129,446,558

165,984,925

153,180,908

170,785,999
Diluted 130,504,514

166,477,914

153,812,064

172,364,581
Amounts attributable to DaVita Inc.:






Net income from continuing operations $ 242,242

$ 160,332

$ 706,832

$ 624,321
Net income (loss) from discontinued operations 2,629

(310,104)

104,149

(464,927)
Net income (loss) attributable to DaVita Inc. $ 244,871

$ (149,772)

$ 810,981

$ 159,394

 

DAVITA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)


Three months endedDecember 31,
Year endedDecember 31,

2019
2018
2019
2018
Net income (loss) $ 302,962

$ (101,843)

$ 1,021,294

$ 333,040
Other comprehensive income (loss), net of tax:






Unrealized gains (losses) on interest rate cap agreements:






Unrealized gains (losses) 2,822

(953)

1,151

(133)
Reclassifications into net income (loss) 1,595

1,606

6,377

6,286
Unrealized gains (losses) on foreign currency translation:






Foreign currency translation adjustments 25,688

(6,469)

(20,102)

(45,944)
Other comprehensive income (loss) 30,105

(5,816)

(12,574)

(39,791)
Total comprehensive income (loss) 333,067

(107,659)

1,008,720

293,249
Less: Comprehensive income attributable to noncontrolling interests (58,091)

(47,929)

(210,313)

(173,646)
Comprehensive income (loss) attributable to DaVita Inc. $ 274,976

$ (155,588)

$ 798,407

$ 119,603

 

DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)


Year ended December 31,

2019
2018
Cash flows from operating activities:


Net income $ 1,021,294

$ 333,040
Adjustments to reconcile net income to net cash provided by operating activities:


Depreciation and amortization 615,152

591,035
Impairment charges 124,892

61,981
Valuation adjustment on disposal group

316,840
Debt prepayment, refinancing and redemption charges 33,402


Stock-based compensation expense 67,850

73,061
Deferred income taxes 41,723

273,660
Equity investment income, net 8,582

26,449
Gain (loss) on sales of business interests, net 23,022

(85,699)
Other non-cash charges, net 49,579

82,374
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:


Accounts receivable (79,957)

(81,176)
Inventories 10,158

73,505
Other receivables and other current assets 2,790

236,995
Other long-term assets 6,965

3,497
Accounts payable (84,539)

(35,959)
Accrued compensation and benefits (14,697)

84,165
Other current liabilities 181,940

(157,462)
Income taxes 95,645

(23,635)
Other long-term liabilities (31,446)

(1,031)
Net cash provided by operating activities 2,072,355

1,771,640
Cash flows from investing activities:


Additions of property and equipment (766,546)

(987,138)
Acquisitions (100,861)

(183,156)
Proceeds from asset and business sales 3,877,392

150,205
Purchase of other debt and equity investments (5,458)

(8,448)
Purchase of investments held-to-maturity (101,462)

(5,963)
Proceeds from sale of other debt and equity investments 3,676

9,526
Proceeds from investments held-to-maturity 95,376

34,862
Purchase of equity investments (9,366)

(19,177)
Distributions received on equity investments 2,589

3,646
Net cash provided by (used in) investing activities 2,995,340

(1,005,643)
Cash flows from financing activities:


Borrowings 38,525,850

59,934,750
Payments on long-term debt and other financing costs (40,606,041)

(59,239,973)
Purchase of treasury stock (2,383,816)

(1,161,511)
Distributions to noncontrolling interests (233,123)

(196,441)
Stock award exercises and other share issuances, net 11,382

13,577
Contributions from noncontrolling interests 57,317

52,311
Proceeds from sales of additional noncontrolling interest

15
Purchases of noncontrolling interests (68,019)

(28,082)
Net cash used in financing activities (4,696,450)

(625,354)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,760)

(3,350)
Net increase in cash, cash equivalents and restricted cash 369,485

137,293
Less: Net (decrease) increase in cash, cash equivalents and restricted cash from discontinued  operations (423,813)

240,793
Net increase (decrease) in cash, cash equivalents and restricted cash from continuing operations 793,298

(103,500)
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year 415,420

518,920
Cash, cash equivalents and restricted cash of continuing operations at end of the year $ 1,208,718

$ 415,420

 

DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except share data)


December 31, 2019
December 31, 2018
ASSETS


Cash and cash equivalents $ 1,102,372

$ 323,038
Restricted cash and equivalents 106,346

92,382
Short-term investments 11,572

2,935
Accounts receivable, net 1,795,598

1,858,608
Inventories 97,949

107,381
Other receivables 489,695

469,796
Prepaid and other current assets 66,866

111,840
Income tax receivable 19,772

68,614
Current assets held for sale, net

5,389,565
Total current assets 3,690,170

8,424,159
Property and equipment, net 3,473,384

3,393,669
Operating lease right-of-use assets 2,830,047


Intangible assets, net 135,684

118,846
Equity method and other investments 241,983

224,611
Long-term investments 36,519

35,424
Other long-term assets 115,972

71,583
Goodwill 6,787,635

6,841,960

$ 17,311,394

$ 19,110,252
LIABILITIES AND EQUITY


Accounts payable $ 403,840

$ 463,270
Other liabilities 756,174

595,850
Accrued compensation and benefits 695,052

658,913
Current portion of operating lease liabilities 343,912


Current portion of long-term debt 130,708

1,929,369
Income tax payable 42,412


Current liabilities held for sale

1,243,759
Total current liabilities 2,372,098

4,891,161
Long-term operating lease liabilities 2,723,800


Long-term debt 7,977,526

8,172,847
Other long-term liabilities 160,809

450,669
Deferred income taxes 577,543

562,536
Total liabilities 13,811,776

14,077,213
Commitments and contingencies


Noncontrolling interests subject to put provisions 1,180,376

1,124,641
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; 125,842,853 and  166,387,307 shares issued and outstanding, respectively) 126

166
Additional paid-in capital 749,043

995,006
Retained earnings 1,431,738

2,743,194
Accumulated other comprehensive loss (47,498)

(34,924)
Total DaVita Inc. shareholders' equity 2,133,409

3,703,442
Noncontrolling interests not subject to put provisions 185,833

204,956
Total equity 2,319,242

3,908,398

$ 17,311,394

$ 19,110,252

 

DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)


Three months ended
Year ended

December 31,2019
September 30,2019
December 31,2018
December 31, 2019
1. Consolidated business metrics:






Operating income margin 16.0 %
13.0 %
13.8 %
14.4 %
Adjusted operating income margin excluding certain items(1)(5) 16.0 %
15.9 %
13.1 %
15.5 %
General and administrative expenses as a percent of consolidated revenues(2) 9.6 %
10.3 %
9.5 %
9.7 %
Effective income tax rate on income from continuing operations 21.4 %
23.8 %
20.0 %
23.4 %
Effective income tax rate on income from continuing operations attributable to DaVita Inc.(1) 25.2 %
30.3 %
24.3 %
28.3 %
Effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc.(1) 25.2 %
27.6 %
23.1 %
27.5 %








2. Summary of financial results:






Revenues:






U.S. net dialysis patient services and other $ 2,687

$ 2,691

$ 2,633

$ 10,563
Other—Ancillary services
122


118


100


464
U.S. other










International net dialysis patient service and other 132

131

124

508

255

248

224

972
Eliminations (43)

(36)

(35)

(146)
Total consolidated revenues $ 2,899

$ 2,904

$ 2,821

$ 11,388
Operating income (loss):






U.S. dialysis $ 508

$ 501

$ 437

$ 1,925
Other—Ancillary services
(21)


(15)


(19)


(66)
U.S.










International 2

(83)

(10)

(123)

(19)

(98)

(29)

(189)
Corporate administrative support expenses (27)

(25)

(20)

(92)
Total consolidated operating income $ 463

$ 378

$ 388

$ 1,643

 

DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA - continued
(unaudited)
(dollars in millions, except for per share and per treatment data)


Three months ended
Year ended

December 31,2019
September 30,2019
December 31,2018
December 31,2019
3. Summary of reportable segment financial results:














U.S. dialysis






Revenue:






Net dialysis patient service revenues $ 2,676

$ 2,681

$ 2,628

$ 10,531
Other revenues 11

10

5

32
Total operating revenues 2,687

2,691

2,633

10,563
Operating expenses:






Patient care costs 1,824

1,813

1,872

7,219
General and administrative 209

235

210

857
Depreciation and amortization 150

148

147

583
Equity investment income (5)

(5)

(5)

(22)
Gain on changes in ownership interests, net



(28)


Total operating expenses 2,179

2,191

2,196

8,638
Segment operating income $ 508

$ 501

$ 437

$ 1,925
Reconciliation for non-GAAP measure:






Gain on changes in ownership interests, net



(28)


Adjusted segment operating income(1) $ 508

$ 501

$ 409

$ 1,925








4. U.S. dialysis business metrics:






Volume:






Treatments 7,681,462

7,673,191

7,552,412

30,172,699
Number of treatment days 79.4

79.0

79.4

313.0
Average treatments per day 96,744

97,129

95,119

96,398
Per day year over year increase 1.7 %
2.7 %
3.1 %
2.5 %
Normalized non-acquired treatment growth year over year 2.1 %
2.2 %
2.6 %

Operating net revenues:






U.S. dialysis services net revenue per treatment $ 348.31

$ 349.41

$ 347.97

$ 349.02
Expenses:






Patient care costs per treatment $ 237.44

$ 236.32

$ 247.81

$ 239.27
General and administrative expenses per treatment $ 27.27

$ 30.63

$ 27.86

$ 28.41
Accounts receivable:






Net receivables $ 1,671

$ 1,719

$ 1,703


DSO 58

60

60










5. Discontinued operations






Operating results:






Net revenues $

$

$ 1,231

$ 2,713
Expenses 2

2

1,282

2,544
Valuation adjustment



219


Goodwill impairment charges



42


(Loss) income from discontinued operations before taxes (2)

(2)

(313)

169
Loss on sale of discontinued operations, before taxes





(23)
Income tax (benefit) expense (5)

5

(3)

41
Net income (loss) from discontinued operations, net of tax $ 3

$ (7)

$ (309)

$ 105

 

DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA - continued
(unaudited)
(dollars in millions, except for per share and per treatment data)


Three months ended
Year ended

December 31,2019
September 30,2019
December 31,2018
December 31, 2019
6. Cash flow:






Operating cash flow $ 681

$ 641

$ 389

$ 2,072
Operating cash flow from continuing operations $ 678

$ 648

$ 307

$ 1,973
Operating cash flow from continuing operations, last twelve months $ 1,973

$ 1,602

$ 1,481


Free cash flow from continuing operations (new definition)(1) $ 415

$ 437

$ 11

$ 1,127
Free cash flow from continuing operations, last twelve months (new definition)(1) $ 1,127

$ 722

$ 480


Capital expenditures from continuing operations:






Routine maintenance/IT/other $ 130

$ 84

$ 139

$ 355
Development and relocations $ 89

$ 90

$ 123

$ 373
Acquisition expenditures $ 24

$ 11

$ 65

$ 99
Proceeds from sale of self-developed properties $ 19

$ 12

$ 13

$ 58








7. Debt and capital structure:






Total debt(3)(4) $ 8,181

$ 8,212

$ 10,154


Net debt, net of cash and cash equivalents(3)(4) $ 7,079

$ 6,959

$ 9,831


Leverage ratio (see calculation on page 14) 3.08x

3.21x

4.52x


Weighted average effective interest rate:






During the quarter 4.55 %
5.09 %
5.07 %

At end of the quarter 4.46 %
4.66 %
5.19 %

On the senior secured credit facilities at end of the quarter 3.93 %
4.30 %
5.11 %

Debt with fixed and capped rates as a percentage of total debt:






Debt with rates fixed by its terms 44 %
44 %
48 %

Debt with rates capped by cap agreements 87 %
86 %
82 %

Amount spent on share repurchases $ 542

$ 1,748

$

$ 2,402
Number of shares repurchased 8,368,506

30,591,750



41,020,232

Certain columns, rows or percentages may not sum or recalculate due to the use of rounded numbers.















(1) These are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, and for a definition of adjusted amounts, see attached reconciliation schedules.
(2) General and administrative expenses includes certain corporate support, long-term incentive compensation and advocacy costs.
(3) The reported balance sheet amounts at December 31, 2019, September 30, 2019 and December 31, 2018, exclude approximately $72.8, $76.0 and $52.0, respectively, of debt discount associated with the Term Loan B and other deferred financing costs related to our senior secured credit facilities and senior notes in effect at that time. The reported balance sheet amounts exclude DMG debt which was classified as held for sale liabilities as of December 31, 2018.
(4) 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, as of December 31, 2018.
(5) 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 our new senior secured credit facilities (the New Credit Agreement) dated August 12, 2019 and our prior senior secured credit facilities (the Prior 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, not to exceed certain limits under the New Credit Agreement, including short-term investments, divided by "Consolidated EBITDA". The leverage ratio determines the interest rate margin payable by the Company for its new Term Loan A and new revolving line of credit under the New Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The following leverage ratios were calculated using "Consolidated EBITDA" and "Consolidated net debt" as defined in the credit agreement that was in effect at the end of each period. 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 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 in effect at that time. 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

December 31,2019
September 30,2019
December 31,2018
Net income(1) $ 706,832

$ 624,922

$ 159,394
Income taxes 279,628

249,686

358,168
Interest expense 397,934

437,513

451,251
Depreciation and amortization 615,151

611,841

591,035
Impairment charges 124,892

124,892

61,981
Noncontrolling interests and equity investment income, net 223,175

210,641

183,855
Stock-settled stock-based compensation 63,404

56,784

73,081
Debt prepayment, refinancing and redemption charges 33,402

33,402


Gain on changes in ownership interest, net

(28,152)

(85,699)
Valuation adjustment



316,840
Other (12,025)

24,088

41,084
"Consolidated EBITDA" $ 2,432,393

$ 2,345,617

$ 2,150,990







December 31,2019
September 30,2019
December 31,2018
Total debt, excluding debt discount and other deferred financing costs(2) $ 8,181,074

$ 8,211,895

$ 10,190,763
Letters of credit issued 72,759

72,777

36,987

8,253,833

8,284,672

10,227,750
Less: Cash and cash equivalents including short-term investments(3) (750,000)

(750,000)

(501,695)
Consolidated net debt $ 7,503,833

$ 7,534,672

$ 9,726,055
Last twelve months "Consolidated EBITDA" $ 2,432,393

$ 2,345,617

$ 2,150,990
Leverage ratio 3.08x

3.21x

4.52x
Maximum leverage ratio permitted under New and Prior Credit Agreement 5.00x

5.00x

5.00x





(1) The reported net income for December 31, 2019 and September 30, 2019 is our reported net income from continuing operations attributable to DaVita Inc. as the New Credit Agreement requires divestitures to be reflected on a proforma basis, as such DMG is excluded from our leverage ratio calculation. The reported net income for December 31, 2018 is our reported net income attributable to DaVita Inc.
(2) The reported total debt amounts at December 31, 2019, September 30, 2019 and December 31, 2018, exclude $72,840, $75,979 and $52,000, respectively, of debt discount associated with the Term Loan B and other deferred financing costs.
(3) Excluding DMG's-physician owned entities' cash for the twelve months ended December 31, 2018 and amounts not readily convertible to cash related to the Company's non-qualified deferred compensation plans for all periods presented. The Company's New Credit Agreement limits the amount deducted for cash and cash equivalents to the lesser of all unrestricted cash and cash equivalents of the Company or $750,000.

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, debt prepayment charges 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, management uses adjusted operating income, adjusted net income from continuing operations attributable to DaVita Inc. 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 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 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.

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 and establishing expectations for income taxes incurred on our ordinary results attributable to DaVita Inc.

Finally, under our new definition, free cash flow from continuing operations represents net cash provided by operating activities from continuing operations less distributions to noncontrolling interests and all capital expenditures (including development capital expenditures, routine maintenance and information technology); plus contributions from noncontrolling interests and sale leaseback proceeds. 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 from continuing operations 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 2 through 5 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 thousands, except for per share data)

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

December 31, 2019
September 30, 2019
December 31, 2018

Dollars
Per share
Dollars
Per share
Dollars
Per share
Net income from continuing operations attributable to DaVita Inc. $ 242,242

$ 1.86

$ 150,113

$ 0.99

$ 160,332

$ 0.96
Operating charges:










Goodwill impairment charges



83,855

0.55




Gain on changes in ownership interests, net







(28,152)

(0.17)
Equity investment:










Loss due to business sale in APAC JV







8,715

0.05
Loss due to impairments in the APAC JV







1,530

0.01
Debt prepayment, refinancing and redemption charges



21,242

0.14




Related income tax



(23,236)

(0.15)

6,719

0.04
Adjusted net income from continuing operations attributable to DaVita Inc. $ 242,242

$ 1.86

$ 231,974

$ 1.53

$ 149,144

$ 0.90

 


Year ended

December 31, 2019
December 31, 2018

Dollars
Per share
Dollars
Per share
Net income from continuing operations attributable to DaVita Inc. $ 706,832

$ 4.60

$ 624,321

$ 3.62
Operating charges:






Goodwill impairment charges 124,892

0.81

3,106

0.02
Impairment of other assets



17,338

0.10
Gain on changes in ownership interests, net



(60,603)

(0.35)
Equity investment:






Loss due to business sale in APAC JV



8,715

0.05
Loss due to impairments in the APAC JV



7,525

0.04
General and administrative:






Restructuring charges



11,366

0.07
Debt prepayment, refinancing and redemption charges 33,402

0.22




Related income tax (35,231)

(0.23)

4,181

0.02
Adjusted net income from continuing operations attributable to DaVita Inc. $ 829,895

$ 5.40

$ 615,949

$ 3.57

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
Year ended

December 31,2019
September 30,2019
December 31,2018
December 31,2019
December 31,2018
Consolidated:








Operating income $ 462,588

$ 378,336

$ 387,908

$ 1,643,317

$ 1,525,824
Operating charges:








Goodwill impairment charges

83,855



124,892

3,106
Impairment of other assets







17,338
Gain on changes in ownership interests, net



(28,152)



(60,603)
Equity investment:








Loss due to business sale in APAC JV



8,715



8,715
Loss due to impairments in the APAC JV



1,530



7,525
General and administrative:








Restructuring charges







11,366
Adjusted operating income $ 462,588

$ 462,191

$ 370,001

$ 1,768,209

$ 1,513,271

 


Three months ended
Year ended

December 31,2019
September 30,2019
December 31,2018
December 31,2019
December 31,2018
Consolidated:








U.S. dialysis:








Segment operating income $ 508,146

$ 500,742

$ 436,893

$ 1,924,826

$ 1,709,721
Gain on changes in ownership interests, net



(28,152)



(28,152)
Adjusted U.S. dialysis operating income $ 508,146

$ 500,742

$ 408,742

$ 1,924,826

$ 1,681,570
Other - Ancillary services:








U.S.








Segment operating loss $ (20,878)

$ (14,928)

$ (18,993)

$ (66,377)

$ (70,396)
Impairment of other assets







17,338
Restructuring charges







11,366
Gain on changes in ownership interests







(33,699)
Adjusted operating loss $ (20,878)

$ (14,928)

$ (18,993)

$ (66,377)

$ (75,390)
International








Segment operating income (loss) $ 2,109

$ (82,797)

$ (10,489)

$ (122,797)

$ (23,394)
Goodwill impairment charges

83,855



124,892

3,106
Loss on changes in ownership interests







1,248
Equity investment:








Loss due to business sale in the APAC JV



8,715



8,715
Loss due to impairments in the APAC JV



1,530



7,525
Adjusted operating income (loss) $ 2,109

$ 1,058

$ (245)

$ 2,095

$ (2,800)
Adjusted Other - Ancillary services operating loss $ (18,770)

$ (13,870)

$ (19,238)

$ (64,282)

$ (78,190)
Corporate administrative support expenses $ (26,788)

$ (24,681)

$ (19,502)

$ (92,335)

$ (90,108)
Adjusted operating income $ 462,588

$ 462,191

$ 370,001

$ 1,768,209

$ 1,513,271

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 on income from continuing operations attributable to DaVita Inc.


Three months ended
Year ended

December 31,2019
September 30,2019
December 31,2018
December 31,2019
Income from continuing operations before income taxes $ 382,023

$ 273,785

$ 259,114

$ 1,195,439
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities (58,118)

(58,502)

(47,203)

(209,544)
Income from continuing operations before income taxes attributable to DaVita Inc. $ 323,905

$ 215,283

$ 211,911

$ 985,895








Income tax expense for continuing operations $ 81,690

$ 65,254

$ 51,748

$ 279,628
Less: Income tax attributable to noncontrolling interests (27)

(84)

(169)

(565)
Income tax expense from continuing operations attributable to DaVita Inc. $ 81,663

$ 65,170

$ 51,579

$ 279,063








Effective income tax rate on income from continuing operations attributable to DaVita Inc. 25.2 %
30.3 %
24.3 %
28.3 %

The effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. is computed as follows:


Three months ended
Year ended
December 31,2019
September 30,2019
December 31,2018
December 31,2019
Income from continuing operations before income taxes $ 382,023

$ 273,785

$ 259,114

$ 1,195,439
Operating charges:






Goodwill impairment charges

83,855



124,892
Gain on changes in ownership interests, net



(28,152)


Equity investment:






Loss due to business sale in APAC JV



8,715


Loss due to impairments in the APAC JV



1,530


Debt prepayment, refinancing and redemption charges

21,242



33,402
Noncontrolling owners' income primarily attributable to non-tax paying entities (58,118)

(58,502)

(47,203)

(209,544)
Adjusted income from continuing operations before income taxes attributable to DaVita Inc. $ 323,905

$ 320,380

$ 194,004

$ 1,144,189
Income tax expense $ 81,690

$ 65,254

$ 51,748

$ 279,628
Add income tax related to:






Operating charges:






Goodwill impairment charges

17,768



26,633
Gain on changes in ownership interests, net



(7,247)


Equity investment:






Loss due to business sale in APAC JV



449


Loss due to impairments in the APAC JV



79


Debt prepayment, refinancing and redemption charges

5,468



8,598
Less income tax related to:






Noncontrolling interests (27)

(84)

(169)

(565)
Income tax on adjusted income from continuing operations attributable to DaVita Inc. $ 81,663

$ 88,406

$ 44,860

$ 314,294
Effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. 25.2 %
27.6 %
23.1 %
27.5 %

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 (new definition)


Three months ended

December 31,2019
September 30,2019
December 31,2018
Net cash provided by continuing operating activities $ 677,901

$ 647,553

$ 307,278
Less: Distributions to noncontrolling interests (75,953)

(61,456)

(56,768)
Plus: Contributions to noncontrolling interests 13,222

12,814

9,132
Cash provided by continuing operating activities attributable to DaVita Inc. 615,170

598,911

259,642
Less: Expenditures for routine maintenance and information technology (130,243)

(83,513)

(138,745)
Less: Expenditures for development (89,120)

(89,752)

(122,793)
Plus: Proceeds from sale of self-developed properties 19,365

11,616

12,606
Free cash flow from continuing operations (new definition) $ 415,172

$ 437,262

$ 10,710

 


Rolling twelve months ended

December 31,2019
September 30,2019
December 31,2018
Net cash provided by continuing operating activities $ 1,972,721

$ 1,602,098

$ 1,480,956
Less: Distributions to noncontrolling interests (233,123)

(213,938)

(196,441)
Plus: Contributions to noncontrolling interests 57,317

53,227

52,311
Cash provided by continuing operating activities attributable to DaVita Inc. 1,796,915

1,441,387

1,336,826
Less: Expenditures for routine maintenance and information technology (355,444)

(363,946)

(415,038)
Less: Expenditures for development (372,636)

(406,309)

(486,877)
Plus: Proceeds from sale of self-developed properties 57,817

51,058

45,314
Free cash flow from continuing operations (new definition) $ 1,126,652

$ 722,190

$ 480,225

Certain columns or rows may not sum or recalculate due to the use of rounded numbers.

 

Contact:  Jim Gustafson

Investor Relations

DaVita Inc.

(310) 536-2585

 

DaVita Logo (PRNewsfoto/DaVita)

 

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/zigman2/quotes/204229673/composite
US : U.S.: NYSE
$ 74.82
-2.14 -2.78%
Volume: 1.27M
April 9, 2020 4:10p
P/E Ratio
13.95
Dividend Yield
N/A
Market Cap
$9.67 billion
Rev. per Employee
$146,781
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