EX-99.1 3 dex991.htm PRESS RELEASE, DATED MAY 5, 2003 Press Release, dated May 5, 2003

 

EXHIBIT 99.1

 

LOGO

 

Contact:    LeAnne Zumwalt

Investor Relations

DaVita Inc.

310-750-2072

 

DAVITA INC. REPORTS 1st QUARTER 2003 RESULTS

 

Torrance, California, May 5, 2003 – DaVita Inc. (NYSE: DVA), today announced results for the quarter ended March 31, 2003. Net income for the three months ended March 31, 2003 was $36 million or $0.52 per share, compared with $36 million or $0.40 per share for the same period of 2002.

 

Financial and operating highlights include:

 

·   For the rolling 12 months ended March 31, 2003 operating cash flow was $302 million and free cash flow was $244 million. These cash flow numbers exclude prior period lab receipts, accounts receivable recoveries and valuation adjustments. Operating cash flow for the quarter ended March 31, 2003 was $81 million and free cash flow was $70 million.
·   Operating income for the quarter was $79 million.
·   EBITDA and EBITDA margin for the quarter were $98 million and 21.3%, respectively.
·   Total treatments for the first quarter were 1,503,031 up 4.8% over the prior year’s quarter. Non-acquired treatment growth was 3.3%, with acquisitions contributing the additional 1.5% to treatment growth.
·   First quarter dialysis revenue per treatment was $296, compared to $291 in the fourth quarter, an increase of 1.8%.
·   DSO for the first quarter decreased by one day during the quarter to 69 days.
·   As of March 31, 2003, we operated 523 outpatient centers serving approximately 45,000 patients. During the first quarter we acquired a controlling interest in two centers in which we previously had minority ownership and opened seven de novo centers. We also closed one center. Included in this patient and center count are approximately 3,300 patients in 30 centers under management.

Our 2003 EBITDA guidance remains at $380 million to $400 million. This guidance implies Generally Accepted Accounting Principles (GAAP) operating income of $300 million to $320 million for 2003.

 

DaVita will be holding a conference call to discuss its first quarter 2003 results on May 5, 2003, at 1:30 PM Eastern Daylight Time. The dial in number is 800 399-4406. A replay of the conference call will be available on DaVita’s official web page, www.davita.com, for the following 30 days.

 

This press release includes non-GAAP financial measures, which we believe provide useful information to investors by excluding certain nonrecurring expenses and prior period recoveries and by allowing consistency and comparability in our financial reporting to prior periods for which these non-GAAP measures were previously reported. These measures should be considered in addition to results prepared in accordance with GAAP, but are not a substitute for or superior to GAAP results. Included in this press release is a reconciliation of these non-GAAP measures to the most comparable GAAP financial measures.

 

This release also contains forward-looking statements. Factors which could impact future results include the uncertainties associated with governmental regulation, general economic and other market conditions, and the risk factors set forth in the Company’s SEC filings, including its Form 10-K for the year ended December 31, 2002. The forward-looking statements should be considered in light of these risks and uncertainties. These risks include those relating to:

 

  •   possible reductions in private mix and private and government reimbursement rates,

 

  •   the concentration of profits generated from PPO and private indemnity patients and from ancillary services including the administration of pharmaceuticals,

 

  •   changes in pharmaceutical practice patterns or reimbursement policies,

 

  •   the ongoing review of the Company’s Florida laboratory subsidiary by its Medicare carrier and the Department of Justice.

 

  •   the ongoing review by the US Attorney’s Office and HHS Office of Inspector General in Philadelphia and

 

  •   the Company’s ability to maintain contracts with physician medical directors.

 

 

DAVITA INC.

 

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

 

    

March 31, 2003

     

December 31, 2002

  

ASSETS

                  

Cash and cash equivalents

   

$

304,994

 

   

$

96,475

 

Accounts receivable, less allowance of $48,743 and $48,927

   

 

346,145

 

   

 

344,292

 

Inventories

   

 

25,465

 

   

 

34,929

 

Other current assets

   

 

24,049

 

   

 

28,667

 

Deferred income taxes

   

 

41,773

 

   

 

40,163

 

    
  

Total current assets

   

 

742,426

 

   

 

544,526

 

Property and equipment, net

   

 

305,742

 

   

 

298,475

 

Amortizable intangibles, net

   

 

60,080

 

   

 

63,159

 

Investments in third-party dialysis businesses

   

 

3,368

 

   

 

3,227

 

Other long-term assets

   

 

2,609

 

   

 

1,520

 

Goodwill

   

 

865,449

 

   

 

864,786

 

    
  
    

$

1,979,674

 

   

$

1,775,693

 

    
  

LIABILITIES AND SHAREHOLDERS’ EQUITY

                  

Accounts payable

   

$

71,295

 

   

$

77,890

 

Other liabilities

   

 

113,505

 

   

 

101,389

 

Accrued compensation and benefits

   

 

82,391

 

   

 

95,435

 

Current portion of long-term debt

   

 

43,908

 

   

 

7,978

 

Income taxes payable

   

 

26,550

 

   

 

9,909

 

    
  

Total current liabilities

   

 

337,649

 

   

 

292,601

 

Long-term debt

   

 

1,420,585

 

   

 

1,311,252

 

Other long-term liabilities

   

 

10,346

 

   

 

9,417

 

Deferred income taxes

   

 

72,381

 

   

 

65,930

 

Minority interests

   

 

27,156

 

   

 

26,229

 

Shareholders’ equity:

                  

Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued)

                  

Common stock ($0.001 par value, 195,000,000 shares authorized; 89,162,390 and 88,874,896 shares issued)

   

 

89

 

   

 

89

 

Additional paid-in capital

   

 

523,572

 

   

 

519,369

 

Retained earnings

   

 

249,750

 

   

 

213,337

 

Treasury stock, at cost (28,187,326 and 28,216,177 shares)

   

 

(661,854

)

   

 

(662,531

)

    
  

Total shareholders’ equity

   

 

111,557

 

   

 

70,264

 

    
  
    

$

1,979,674

 

   

$

1,775,693

 

    
  

 

 

3

DAVITA INC.

 

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(dollars in thousands, except per share data)

 

    

Three months ended

March 31,

    

2003

   

2002

Net operating revenues

   

$

459,807

   

$

427,665

Operating expenses and charges:

              

Dialysis centers and labs

   

 

316,710

   

 

291,634

General and administrative

   

 

36,787

   

 

36,053

Depreciation and amortization

   

 

17,445

   

 

15,805

Provision for uncollectible accounts

   

 

8,237

   

 

5,255

Minority interests and equity income, net

   

 

1,294

   

 

2,135

    
  

Total operating expenses and charges

   

 

380,473

   

 

350,882

    
  

Operating income

   

 

79,334

   

 

76,783

Debt expense

   

 

19,456

   

 

15,072

Other income, net

   

 

785

   

 

267

    
  

Income before income taxes

   

 

60,663

   

 

61,978

Income tax expense

   

 

24,250

   

 

26,000

    
  

Net income

   

$

36,413

   

$

35,978

    
  

Comprehensive income

   

$

36,413

   

$

35,978

    
  

Earnings per share:

              

Basic

   

$

0.60

   

$

0.43

    
  

Diluted

   

$

0.52

   

$

0.40

    
  

Weighted average shares for earnings per share:

              

Basic

   

 

60,905,056

   

 

82,967,141

    
  

Diluted

   

 

78,772,410

   

 

102,246,452

    
  

 

4

DAVITA INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

 

    

Three months ended

March 31,

  
    

2003

     

2002

  

Cash flows from operating activities:

                  

Net income

   

$

36,413

 

   

$

35,978

 

Adjustments to reconcile net income to cash provided by operating activities:

                  

Depreciation and amortization

   

 

17,445

 

   

 

15,805

 

Loss (gain) on divestitures

   

 

119

 

   

 

(458

)

Deferred income taxes

   

 

4,841

 

   

 

7,861

 

Non-cash debt expense

   

 

840

 

   

 

634

 

Stock options, principally tax benefits

   

 

1,378

 

   

 

8,931

 

Equity investment income

   

 

(519

)

   

 

(298

)

Minority interests in income of consolidated subsidiaries

   

 

1,813

 

   

 

2,433

 

Distributions to minority interests

   

 

(2,465

)

   

 

(1,501

)

Changes in operating assets and liabilities, excluding acquisitions and divestitures:

                  

Accounts receivable

   

 

(676

)

   

 

(11,163

)

Inventories

   

 

9,543

 

   

 

6,726

 

Other current assets

   

 

4,721

 

   

 

(2,840

)

Other long-term assets

   

 

(2,457

)

         

Accounts payable

   

 

(6,674

)

   

 

8,969

 

Accrued compensation and benefits

   

 

(13,075

)

   

 

(2,617

)

Other current liabilities

   

 

11,952

 

   

 

15,050

 

Income taxes

   

 

16,641

 

   

 

261

 

Other long-term liabilities

   

 

809

 

   

 

(287

)

    
  

Net cash provided by operating activities

   

 

80,649

 

   

 

83,484

 

    
  

Cash flows from investing activities:

                  

Additions of property and equipment, net

   

 

(21,708

)

   

 

(16,115

)

Acquisitions and divestitures, net

   

 

(718

)

   

 

(1,379

)

Investments in affiliates, net

   

 

1,931

 

   

 

499

 

Intangible assets

   

 

(300

)

         
    
  

Net cash used in investing activities

   

 

(20,795

)

   

 

(16,995

)

    
  

Cash flows from financing activities:

                  

Borrowings

   

 

623,822

 

   

 

335,883

 

Payments on long-term debt

   

 

(478,659

)

   

 

(355,803

)

Deferred financing costs

            

 

(57

)

Purchase of treasury stock

            

 

(67,877

)

Proceeds from issuance of common stock

   

 

3,502

 

   

 

16,351

 

    
  

Net cash provided by (used in) financing activities

   

 

148,665

 

   

 

(71,503

)

    
  

Net increase (decrease) in cash

   

 

208,519

 

   

 

(5,014

)

Cash and cash equivalents at beginning of period

   

 

96,475

 

   

 

36,711

 

    
  

Cash and cash equivalents at end of period

   

$

304,994

 

   

$

31,697

 

    
  

 

5

DAVITA INC.

 

SUPPLEMENTAL FINANCIAL DATA

 

    

Q1 2003

     

Q4 2002

   

Q1 2002

Financial Results:

                       

Net earnings, excluding prior period Medicare lab revenue, extraordinary items, recoveries, and valuation adjustments (in 000’s)

   

$

36,400

 

   

$

34,600

   

$

34,600

Basic EPS

   

$

0.60

 

   

$

0.57

   

$

0.42

EPS assuming dilution

   

$

0.52

 

   

$

0.50

   

$

0.39

EBITDA, excluding prior period Medicare lab revenue, recoveries and valuation adjustments

                       

Consolidated (in 000’s)

   

$

98,000

 

   

$

97,000

   

$

92,500

Continental U.S (in 000’s)

   

$

98,000

 

   

$

97,000

   

$

91,900

Continental EBITDA margin

   

 

21.3%

 

   

 

21.0%

   

 

21.7%

Business Metrics (Continental U.S.):

                       

Volume

                       

Treatments

   

 

1,503,031

 

   

 

1,537,821

   

 

1,433,803

Number of treatment days

   

 

76.4

 

   

 

79.6

   

 

76.4

Treatments per day

   

 

19,673

 

   

 

19,319

   

 

18,767

Per day year over year increase

   

 

4.8%

 

   

 

3.8%

   

 

6.2%

Same center growth

   

 

3.1%

 

   

 

2.9%

   

 

4.2%

Non-acquired growth

   

 

3.3%

 

   

 

2.9%

   

 

4.2%

Revenue, excluding prior period Medicare lab revenue and recoveries of $41,555 in Q4 2002

                       

Revenue (in 000’s)

   

$

460,000

 

   

$

462,000

   

$

424,000

Dialysis revenue per treatment

   

$

296.31

 

   

$

291.02

   

$

290.45

Per treatment increase from previous quarter

   

 

1.8%

 

   

 

0.0%

   

 

2.6%

Per treatment increase from prior year

   

 

2.0%

 

   

 

2.8%

   

 

5.9%

Expenses, excluding prior period Medicare lab revenue and recoveries

                       

A.  Dialysis centers and lab operating expenses

                       

Percent of revenue

   

 

68.9%

 

   

 

68.7%

   

 

68.0%

Per treatment

   

$

210.71

 

   

$

206.17

   

$

201.02

Per treatment increase from previous quarter

   

 

2.2%

 

   

 

1.4%

   

 

3.6%

B.  General & administrative expenses

                       

Percent of revenue

   

 

8.0%

 

   

 

8.5%

   

 

8.5%

Per treatment

   

$

24.48

 

   

$

25.57

   

$

25.14

Per treatment increase (decrease) from previous quarter

   

 

(4.3%

)

   

 

4.7%

   

 

10.2%

C.  Bad debt expense as a percent of current-period revenue

   

 

1.8%

 

   

 

1.8%

   

 

1.8%

D.  Consolidated effective tax rate

   

 

40.0%

 

   

 

40.8%

   

 

42.0%

 

6

 

DAVITA INC.

 

SUPPLEMENTAL FINANCIAL DATA, CONTINUED

 

    

Q1 2003

     

Q4 2002

     

Q1 2002

  

Cash Flow (Consolidated, including prior period recoveries, in 000’s)

                           

Operating cash flow

   

$

81,000

 

   

$

66,000

 

   

$

83,000

 

Free cash flow (before share repurchase, acquisition and development spending)

   

$

70,000

 

   

$

49,000

 

   

$

74,000

 

Capital expenditures:

                           

Development

   

$

11,900

 

   

$

19,600

 

   

$

7,600

 

Routine maintenance/IT/other

   

$

10,500

 

   

$

16,700

 

   

$

9,100

 

Acquisition expenditures, net

   

$

700

 

   

$

6,500

 

   

$

1,400

 

Accounts Receivable

                           

Net receivables (in 000’s)

   

$

346,000

 

   

$

344,000

 

   

$

337,000

 

DSO

   

 

69

 

   

 

70

 

   

 

73

 

Debt/Capital Structure (Consolidated)

                           

Total debt (in 000’s)

   

$

1,464,000

 

   

$

1,319,000

 

   

$

800,000

 

Net debt, net of cash (in 000’s)

   

$

1,159,000

 

   

$

1,223,000

 

   

$

769,000

 

LQA net leverage ratio

   

 

3.0x

 

   

 

3.1x

 

   

 

2.1x

 

Shares repurchased (in 000’s)

   

 

—

 

   

 

1,900

 

   

 

2,900

 

Average repurchase price

   

 

—

 

   

$

23.80

 

   

$

23.02

 

Clinical

                           

Dialysis adequacy—% of patients with URR > 65

   

 

89

%

   

 

88

%

   

 

88

%

Dialysis adequacy—% of patients with Kt/V > 1.2

   

 

92

%

   

 

92

%

   

 

92

%

Anemia measure—% of patients with HCT > 33

   

 

83

%

   

 

83

%

   

 

79

%

 

7

 

DAVITA INC.

 

RECONCILIATIONS FOR NON-GAAP MEASURES

 

    

Rolling 12-month period ended Q1 2003

     

Q1 2003

     

Q4 2002

     

Q1 2002

  
    

(dollars in thousands)

  

Operating cash flow excluding lab and accounts receivable recoveries related to prior years’ services and free cash flow:

                                    

Cash provided by operating activities

   

$

339,160

 

   

$

80,649

 

   

$

66,318

 

   

$

83,484

 

Exclusions:

                                    

Prior period lab receipts

   

 

(58,778

)

            

 

(41,555

)

         

Impairments and valuations adjustments

   

 

(380

)

            

 

2,010

 

         

Accounts receivable recoveries

   

 

(2,938

)

            

 

(510

)

   

 

(2,254

)

    
  
  
  
    

 

(62,096

)

            

 

(40,055

)

   

 

(2,254

)

Related income tax expense

   

 

24,559

 

            

 

15,842

 

   

 

891

 

    
  
  
  

Exclusions, net of tax

   

 

(37,537

)

            

 

(24,213

)

   

 

(1,363

)

    
  
  
  

Operating cash flow excluding lab and accounts receivable recoveries related to prior years’ services

   

 

301,623

 

   

 

80,649

 

   

 

42,105

 

   

 

82,121

 

Less expenditures for routine maintenance and information technology

   

 

(57,337

)

   

 

(10,490

)

   

 

(16,706

)

   

 

(9,090

)

    
  
  
  

Free cash flow

   

$

244,286

 

   

$

70,159

 

   

$

25,399

 

   

$

73,031

 

    
  
  
  

Net income, excluding impairments, prior period lab receipts and accounts receivable recoveries:

                                    

Net income

            

$

36,413

 

   

$

58,811

 

   

$

35,978

 

Less exclusions, net of tax

                     

 

(24,213

)

   

 

(1,363

)

             
  
  
             

$

36,413

 

   

$

34,598

 

   

$

34,615

 

             
  
  

EBITDA, excluding impairments, prior period lab receipts and accounts receivable recoveries:

                                    

Operating income

            

$

79,334

 

   

$

118,377

 

   

$

76,783

 

Additions:

                                    

Depreciation

            

 

14,946

 

   

 

14,385

 

   

 

13,295

 

Amortization

            

 

2,499

 

   

 

2,510

 

   

 

2,510

 

Minority interests and equity income, net

            

 

1,294

 

   

 

1,802

 

   

 

2,135

 

             
  
  

EBITDA

            

 

98,073

 

   

 

137,074

 

   

 

94,723

 

Exclusions:

                                    

Prior period lab receipts

                     

 

(41,555

)

         

Impairments and valuations adjustments

                     

 

2,010

 

         

Accounts receivable recoveries

                     

 

(510

)

   

 

(2,254

)

             
  
  
                      

 

(40,055

)

   

 

(2,254

)

             
  
  
             

$

98,073

 

   

$

97,019

 

   

$

92,469

 

             
  
  

Last quarter annualized (LQA) net leverage ratio:

                                    

EBITDA, excluding impairments, prior period lab receipts and accounts receivable recoveries

            

$

98,073

 

   

$

97,019

 

   

$

92,469

 

             

 

x4

 

   

 

x4

 

   

 

x4

 

             
  
  

Annualized EBITDA, less exclusions

            

$

392,292

 

   

$

388,076

 

   

$

369,876

 

             
  
  

Net debt, net of cash

            

$

1,159,000

 

   

$

1,223,000

 

   

$

769,000

 

             
  
  

Annualized EBITDA, less exclusions divided by net debt, net of cash

            

 

2.95x

 

   

 

3.15x

 

   

 

2.08x

 

             
  
  

 

8