Delaware | 1-14106 | No. 51-0354549 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Exhibit Number | Description |
Press Release dated February 13, 2019 announcing the registrant’s financial results for the quarter and year ended December 31, 2018. |
DAVITA INC. | ||
Date: February 13, 2019 | By: | /s/ James K. Hilger |
James K. Hilger | ||
Chief Accounting Officer |
• | Consolidated revenues of $2,821 million. |
• | Operating income of $388 million, including advocacy costs of $30 million. |
• | Operating cash flow of $307 million and free cash flow of $112 million, from continuing operations. |
Three months ended December 31, | Year ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income (loss) attributable to DaVita Inc.: | (dollars in millions, except per share data) | |||||||||||||||
Net income from continuing operations | $ | 160 | $ | 156 | $ | 624 | $ | 901 | ||||||||
Per share | $ | 0.96 | $ | 0.85 | $ | 3.62 | $ | 4.71 | ||||||||
Adjusted net income from continuing operations(1) | $ | 149 | $ | 170 | $ | 616 | $ | 635 | ||||||||
Per share adjusted(1) | $ | 0.90 | $ | 0.92 | $ | 3.57 | $ | 3.32 | ||||||||
Net (loss) income | $ | (150 | ) | $ | 303 | $ | 159 | $ | 664 | |||||||
Per share | $ | (0.90 | ) | $ | 1.64 | $ | 0.92 | $ | 3.47 |
Three months ended December 31, | Year ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating income: | (dollars in millions) | |||||||||||||||
Operating income | $ | 388 | $ | 150 | $ | 1,526 | $ | 1,813 | ||||||||
Adjusted operating income(1) | $ | 370 | $ | 430 | $ | 1,513 | $ | 1,616 |
(1) | For the definitions of non-GAAP financial measures such as adjusted net income from continuing operations attributable to DaVita Inc., see the note titled “Note on Non-GAAP Financial Measures” below. |
Three months ended | Year ended | ||||||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | ||||||||||||
(dollars in millions) | |||||||||||||||
Operating charges: | |||||||||||||||
Gain on changes in ownership interests, net | $ | (28 | ) | $ | — | $ | (61 | ) | $ | (6 | ) | ||||
Impairment charges | — | 280 | 20 | 330 | |||||||||||
Gain on settlement, net | — | — | — | (527 | ) | ||||||||||
Equity investment loss (income): | |||||||||||||||
Loss due to business sale in APAC JV | 9 | — | 9 | — | |||||||||||
Loss due to impairments in APAC JV | 2 | — | 8 | 6 | |||||||||||
Income related to gain on settlement | — | — | — | (3 | ) | ||||||||||
Loss related to restructuring charges | — | — | — | 1 | |||||||||||
General and administrative: | |||||||||||||||
Restructuring charges | — | — | 11 | 2 | |||||||||||
Total non-GAAP adjustments | $ | (18 | ) | $ | 280 | $ | (13 | ) | $ | (197 | ) |
Three months ended December 31, | Year ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Cash flow: | (dollars in millions) | |||||||||||||||
Operating cash flow | $ | 389 | $ | 345 | $ | 1,772 | $ | 1,913 | ||||||||
Operating cash flow from continuing operations | $ | 307 | $ | 287 | $ | 1,481 | $ | 1,556 | ||||||||
Free cash flow from continuing operations | $ | 112 | $ | 150 | $ | 869 | $ | 1,042 |
2019 Guidance | |||||||
Low | High | ||||||
(dollars in billions) | |||||||
Consolidated operating income | $ | 1.540 | $ | 1.640 | |||
Operating cash flow from continuing operations | $ | 1.375 | $ | 1.575 | |||
Effective income tax rate attributable to DaVita Inc. | 28.5 | % | 29.5 | % |
• | the concentration of profits generated by higher-paying commercial payor plans for which there is continued downward pressure on average realized payment rates, and a reduction in the number of patients under such plans, including as a result of restrictions or prohibitions on the use and/or availability of charitable premium assistance, which may result in the loss of revenues or patients, or our making incorrect assumptions about how our patients will respond to any change in financial assistance from charitable organizations; |
• | the extent to which the ongoing implementation of healthcare exchanges or changes in or new legislation, regulations or guidance, or enforcement thereof, including among other things those regarding the exchanges, results in a reduction in reimbursement rates for our services from and/or the number of patients enrolled in higher-paying commercial plans; |
• | a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs; |
• | the impact of the Medicare Advantage benchmark structure; |
• | risks arising from potential and proposed federal and/or state legislation, regulation or ballot or other initiatives, including healthcare-related and labor-related legislation, regulation or ballot or other initiatives; |
• | the impact of the changing political environment and related developments on the current health care marketplace and on our business, including with respect to the future of the Affordable Care Act, the exchanges and many other core aspects of the current health care marketplace; |
• | uncertainties related to the impact of federal tax reform legislation; |
• | changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to calcimimetics; |
• | legal compliance risks, such as our continued compliance with complex government regulations and the provisions of our current corporate integrity agreement and current or potential investigations by various government entities and related government or private-party proceedings, and restrictions on our business and operations required by our corporate integrity agreement and other current or potential settlement terms and the financial impact thereof and our ability to recover any losses related to such legal matters from third parties; |
• | continued increased competition from dialysis providers and others, and other potential marketplace changes; |
• | our ability to reduce administrative expenses while maintaining targeted levels of service and operating performance, including our ability to achieve anticipated savings from our recent restructurings; |
• | our ability to maintain contracts with physician medical directors, changing affiliation models for physicians, and the emergence of new models of care introduced by the government or private sector that may erode our patient base and |
• | our ability to complete acquisitions, mergers or dispositions that we might announce or be considering, on terms favorable to us or at all, or to integrate and successfully operate any business we may acquire or have acquired, or to successfully expand our operations and services in markets outside the United States, or to businesses outside of dialysis; |
• | noncompliance by us or our business associates with any privacy laws or any security breach by us or a third party involving the misappropriation, loss or other unauthorized use or disclosure of confidential information; |
• | the variability of our cash flows; |
• | the risk that we may not be able to generate sufficient cash in the future to service our indebtedness or to fund our other liquidity needs, 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, including market conditions, the price of our common stock, our cash flow position, borrowing capacity and leverage ratios, and legal, regulatory and contractual requirements; |
• | the risk that we might invest material amounts of capital and incur significant costs in connection with the growth and development of our international operations, yet we might not be able to consistently operate them profitably anytime soon, if at all; |
• | risks arising from the use of accounting estimates, judgments and interpretations in our financial statements; |
• | impairment of our goodwill, investments or other assets; |
• | the risks and uncertainties associated with the timing, conditions and receipt of regulatory approvals and satisfaction of other closing conditions of the DMG sale transaction and continued disruption in connection with the DMG sale transaction making it more difficult to maintain business and operational relationships; |
• | risks and uncertainties related to our ability to complete the DMG sale transaction on the timetable expected, and on the terms set forth in the equity purchase agreement or at all; |
• | uncertainties related to our liquidity following the close of the DMG sale transaction and our planned subsequent entry into new external financing arrangements, which may be less than we anticipate; |
• | uncertainties related to our use of the proceeds from the DMG sale transaction and other available funds, including external financing and cash flow from operations, which may be used in ways that may not improve our results of operations or enhance the value of our common stock; |
• | risks related to certain contractual restrictions on the conduct of DMG’s business while the DMG sale transaction is pending; |
• | the risk that we may recognize additional valuation adjustments or goodwill impairment related to DMG; |
• | the risk that laws regulating the corporate practice of medicine could restrict the manner in which DMG conducts its business; |
• | the risk that the cost of providing services under DMG’s agreements may exceed our compensation; |
• | the risk that any reductions in reimbursement rates, including Medicare Advantage rates, and future regulations may negatively impact DMG’s business, revenue and profitability; |
• | the risk that DMG may not be able to successfully establish a presence in new geographic regions or successfully address competitive threats that could reduce its profitability; |
• | the risk that a disruption in DMG’s healthcare provider networks could have an adverse effect on DMG’s business operations and profitability; |
• | the risk that reductions in the quality ratings of health plans DMG serves or healthcare services that DMG provides could have an adverse effect on DMG’s business; and |
• | the risk that health plans that acquire health maintenance organizations may not be willing to contract with DMG or may be willing to contract only on less favorable terms. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Dialysis and related lab patient service revenues | $ | 2,729,803 | $ | 2,614,732 | $ | 10,709,981 | $ | 10,093,670 | |||||||
Provision for uncollectible accounts | (13,749 | ) | (149,385 | ) | (49,587 | ) | (485,364 | ) | |||||||
Net dialysis and related lab patient service revenues | 2,716,054 | 2,465,347 | 10,660,394 | 9,608,306 | |||||||||||
Other revenues | 105,070 | 315,566 | 744,457 | 1,268,328 | |||||||||||
Total revenues | 2,821,124 | 2,780,913 | 11,404,851 | 10,876,634 | |||||||||||
Operating expenses and charges: | |||||||||||||||
Patient care costs and other costs | 2,027,069 | 1,941,687 | 8,195,513 | 7,640,005 | |||||||||||
General and administrative | 268,532 | 265,424 | 1,135,454 | 1,064,026 | |||||||||||
Depreciation and amortization | 155,157 | 144,367 | 591,035 | 559,911 | |||||||||||
Equity investment loss | 10,610 | 3,184 | 4,484 | 8,640 | |||||||||||
Provision for uncollectible accounts | — | (5,652 | ) | (7,300 | ) | (7,033 | ) | ||||||||
Investment and other asset impairments | — | 280,066 | 17,338 | 295,234 | |||||||||||
Goodwill impairment charges | — | 1,500 | 3,106 | 36,196 | |||||||||||
Gain on changes in ownership interest, net | (28,152 | ) | — | (60,603 | ) | (6,273 | ) | ||||||||
Gain on settlement, net | — | — | — | (526,827 | ) | ||||||||||
Total operating expenses and charges | 2,433,216 | 2,630,576 | 9,879,027 | 9,063,879 | |||||||||||
Operating income | 387,908 | 150,337 | 1,525,824 | 1,812,755 | |||||||||||
Debt expense | (128,300 | ) | (108,997 | ) | (487,435 | ) | (430,634 | ) | |||||||
Other (loss) income, net | (494 | ) | 5,485 | 10,089 | 17,665 | ||||||||||
Income from continuing operations before income taxes | 259,114 | 46,825 | 1,048,478 | 1,399,786 | |||||||||||
Income tax expense (benefit) | 51,748 | (150,267 | ) | 258,400 | 323,859 | ||||||||||
Net income from continuing operations | 207,366 | 197,092 | 790,078 | 1,075,927 | |||||||||||
Net (loss) income from discontinued operations, net of tax | (309,209 | ) | 143,587 | (457,038 | ) | (245,372 | ) | ||||||||
Net (loss) income | (101,843 | ) | 340,679 | 333,040 | 830,555 | ||||||||||
Less: Net income attributable to noncontrolling interests | (47,929 | ) | (37,283 | ) | (173,646 | ) | (166,937 | ) | |||||||
Net (loss) income attributable to DaVita Inc. | $ | (149,772 | ) | $ | 303,396 | $ | 159,394 | $ | 663,618 | ||||||
Earnings per share attributable to DaVita Inc.: | |||||||||||||||
Basic net income from continuing operations per share | $ | 0.97 | $ | 0.86 | $ | 3.66 | $ | 4.78 | |||||||
Basic net (loss) income per share | $ | (0.90 | ) | $ | 1.66 | $ | 0.93 | $ | 3.52 | ||||||
Diluted net income from continuing operations per share | $ | 0.96 | $ | 0.85 | $ | 3.62 | $ | 4.71 | |||||||
Diluted net (loss) income per share | $ | (0.90 | ) | $ | 1.64 | $ | 0.92 | $ | 3.47 | ||||||
Weighted average shares for earnings per share: | |||||||||||||||
Basic | 165,984,925 | 182,261,673 | 170,785,999 | 188,625,559 | |||||||||||
Diluted | 166,477,914 | 184,825,329 | 172,364,581 | 191,348,533 | |||||||||||
Amounts attributable to DaVita Inc.: | |||||||||||||||
Net income from continuing operations | $ | 160,332 | $ | 156,210 | $ | 624,321 | $ | 901,277 | |||||||
Net (loss) income from discontinued operations | (310,104 | ) | 147,186 | (464,927 | ) | (237,659 | ) | ||||||||
Net (loss) income attributable to DaVita Inc. | $ | (149,772 | ) | $ | 303,396 | $ | 159,394 | $ | 663,618 |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net (loss) income | $ | (101,843 | ) | $ | 340,679 | $ | 333,040 | $ | 830,555 | ||||||
Other comprehensive income, net of tax: | |||||||||||||||
Unrealized (losses) gains on interest rate cap agreements: | |||||||||||||||
Unrealized (losses) gains | (953 | ) | 42 | (133 | ) | (5,437 | ) | ||||||||
Reclassification into net income | 1,606 | 1,265 | 6,286 | 5,058 | |||||||||||
Unrealized losses (gains) on investments: | |||||||||||||||
Unrealized gains | — | 228 | — | 3,705 | |||||||||||
Reclassification into net income | — | 1 | — | (220 | ) | ||||||||||
Unrealized (losses) gains on foreign currency translation: | |||||||||||||||
Foreign currency translation adjustments | (6,469 | ) | 8,222 | (45,944 | ) | 99,770 | |||||||||
Other comprehensive (loss) income | (5,816 | ) | 9,758 | (39,791 | ) | 102,876 | |||||||||
Total comprehensive (loss) income | (107,659 | ) | 350,437 | 293,249 | 933,431 | ||||||||||
Less: Comprehensive income attributable to noncontrolling interests | (47,929 | ) | (37,283 | ) | (173,646 | ) | (166,935 | ) | |||||||
Comprehensive (loss) income attributable to DaVita Inc. | $ | (155,588 | ) | $ | 313,154 | $ | 119,603 | $ | 766,496 |
Year ended December 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 333,040 | $ | 830,555 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 591,035 | 777,485 | |||||
Impairment charges | 61,981 | 981,589 | |||||
Valuation adjustment on disposal group | 316,840 | — | |||||
Stock-based compensation expense | 73,061 | 35,092 | |||||
Deferred income taxes | 273,660 | (395,217 | ) | ||||
Equity investment income, net | 26,449 | 28,925 | |||||
Gain on sales of business interests, net | (85,699 | ) | (23,402 | ) | |||
Other non-cash charges, net | 82,374 | 66,920 | |||||
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | |||||||
Accounts receivable | (81,176 | ) | (156,305 | ) | |||
Inventories | 73,505 | (18,625 | ) | ||||
Other receivables and other current assets | 236,995 | (111,432 | ) | ||||
Other long-term assets | 3,497 | (11,945 | ) | ||||
Accounts payable | (35,959 | ) | 26,876 | ||||
Accrued compensation and benefits | 84,165 | (78,239 | ) | ||||
Other current liabilities | (157,462 | ) | 1,908 | ||||
Income taxes | (23,635 | ) | (52,176 | ) | |||
Other long-term liabilities | (1,031 | ) | 11,157 | ||||
Net cash provided by operating activities | 1,771,640 | 1,913,166 | |||||
Cash flows from investing activities: | |||||||
Additions of property and equipment | (987,138 | ) | (905,250 | ) | |||
Acquisitions | (183,156 | ) | (803,879 | ) | |||
Proceeds from asset and business sales | 150,205 | 92,336 | |||||
Purchase of investments available for sale | (8,448 | ) | (13,117 | ) | |||
Purchase of investments held-to-maturity | (5,963 | ) | (228,990 | ) | |||
Proceeds from sale of investments available for sale | 9,526 | 6,408 | |||||
Proceeds from investments held-to-maturity | 34,862 | 492,470 | |||||
Purchase of equity investments | (19,177 | ) | (4,816 | ) | |||
Distributions received on equity investments | 3,646 | 106 | |||||
Net cash used in investing activities | (1,005,643 | ) | (1,364,732 | ) |
Year ended December 31, | |||||||
2018 | 2017 | ||||||
Cash flows from financing activities: | |||||||
Borrowings | 59,576,291 | 50,991,960 | |||||
Payments on long-term debt and other financing costs | (58,881,514 | ) | (50,837,112 | ) | |||
Purchase of treasury stock | (1,161,511 | ) | (802,949 | ) | |||
Distributions to noncontrolling interests | (196,441 | ) | (211,467 | ) | |||
Stock award exercises and other share issuances, net | 13,577 | 21,252 | |||||
Contributions from noncontrolling interests | 52,311 | 74,552 | |||||
Proceeds from sales of additional noncontrolling interests | 15 | 2,864 | |||||
Purchases of noncontrolling interests | (28,082 | ) | (5,357 | ) | |||
Net cash used in financing activities | (625,354 | ) | (766,257 | ) | |||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (3,350 | ) | 254 | ||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 137,293 | (217,569 | ) | ||||
Less: Net increase (decrease) in cash, cash equivalents and restricted cash from discontinued operations | 240,793 | (53,026 | ) | ||||
Net decrease in cash, cash equivalents and restricted cash from continuing operations | (103,500 | ) | (164,543 | ) | |||
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year | 518,920 | 683,463 | |||||
Cash, cash equivalents and restricted cash of continuing operations at end of the year | $ | 415,420 | $ | 518,920 |
December 31, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 323,038 | $ | 508,234 | |||
Restricted cash and equivalents | 92,382 | 10,686 | |||||
Short-term investments | 2,935 | 32,830 | |||||
Accounts receivable, net | 1,858,608 | 1,714,750 | |||||
Inventories | 107,381 | 181,799 | |||||
Other receivables | 469,796 | 399,262 | |||||
Income tax receivable | 68,614 | 49,440 | |||||
Prepaid and other current assets | 111,840 | 112,058 | |||||
Current assets held for sale, net | 5,389,565 | 5,761,642 | |||||
Total current assets | 8,424,159 | 8,770,701 | |||||
Property and equipment, net | 3,393,669 | 3,149,213 | |||||
Intangible assets, net | 95,329 | 113,827 | |||||
Equity method and other investments | 224,611 | 245,534 | |||||
Long-term investments | 35,424 | 37,695 | |||||
Other long-term assets | 71,583 | 47,287 | |||||
Goodwill | 6,865,477 | 6,610,279 | |||||
$ | 19,110,252 | $ | 18,974,536 | ||||
LIABILITIES AND EQUITY | |||||||
Accounts payable | $ | 463,270 | $ | 509,116 | |||
Other liabilities | 595,850 | 579,005 | |||||
Accrued compensation and benefits | 658,913 | 616,116 | |||||
Current portion of long-term debt | 1,929,369 | 178,213 | |||||
Current liabilities held for sale | 1,243,759 | 1,185,070 | |||||
Total current liabilities | 4,891,161 | 3,067,520 | |||||
Long-term debt | 8,172,847 | 9,158,018 | |||||
Other long-term liabilities | 450,669 | 365,325 | |||||
Deferred income taxes | 562,536 | 486,247 | |||||
Total liabilities | 14,077,213 | 13,077,110 | |||||
Commitments and contingencies: | |||||||
Noncontrolling interests subject to put provisions | 1,124,641 | 1,011,360 | |||||
Equity: | |||||||
Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued) | |||||||
Common stock ($0.001 par value, 450,000,000 shares authorized; 166,387,307 and 182,462,278 shares issued and outstanding, respectively) | 166 | 182 | |||||
Additional paid-in capital | 995,006 | 1,042,899 | |||||
Retained earnings | 2,743,194 | 3,633,713 | |||||
Accumulated other comprehensive (loss) income | (34,924 | ) | 13,235 | ||||
Total DaVita Inc. shareholders' equity | 3,703,442 | 4,690,029 | |||||
Noncontrolling interests not subject to put provisions | 204,956 | 196,037 | |||||
Total equity | 3,908,398 | 4,886,066 | |||||
$ | 19,110,252 | $ | 18,974,536 |
Three months ended | Year ended December 31, 2018 | ||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||||||
1. Consolidated Business Metrics: | |||||||||||||||
Operating income margin | 13.8 | % | 10.2 | % | 5.4 | % | 13.4 | % | |||||||
Adjusted operating income margin excluding certain items(2) (6) | 13.1 | % | 11.0 | % | 15.5 | % | 13.3 | % | |||||||
General and administrative expenses as a percent of consolidated revenues(3) | 9.5 | % | 11.8 | % | 9.5 | % | 10.0 | % | |||||||
Effective income tax rate on income from continuing operations | 20.0 | % | 31.1 | % | (320.9 | )% | 24.6 | % | |||||||
Effective income tax rate on income from continuing operations attributable to DaVita Inc.(2) | 24.3 | % | 41.4 | % | (2,590.5 | )% | 29.2 | % | |||||||
Effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc.(2) | 23.1 | % | 38.0 | % | 40.4 | % | 29.2 | % | |||||||
2. Summary of Division Financial Results: | |||||||||||||||
Revenues(1) | |||||||||||||||
U.S. net dialysis and related lab patient services and other | $ | 2,633 | $ | 2,577 | $ | 2,393 | $ | 10,336 | |||||||
Other—Ancillary services and strategic initiatives | |||||||||||||||
U.S. other | 100 | 191 | 316 | 749 | |||||||||||
International net dialysis patient service and other | 124 | 113 | 95 | 447 | |||||||||||
224 | 304 | 410 | 1,196 | ||||||||||||
Eliminations | (35 | ) | (34 | ) | (23 | ) | (127 | ) | |||||||
Total consolidated revenues | $ | 2,821 | $ | 2,847 | $ | 2,781 | $ | 11,405 | |||||||
Operating income (loss) | |||||||||||||||
U.S. dialysis and related lab services | $ | 437 | $ | 390 | $ | 459 | $ | 1,710 | |||||||
Other—Ancillary services and strategic initiatives | |||||||||||||||
U.S. | (19 | ) | (50 | ) | (2 | ) | (70 | ) | |||||||
International | (10 | ) | (10 | ) | (294 | ) | (23 | ) | |||||||
(29 | ) | (60 | ) | (296 | ) | (94 | ) | ||||||||
Corporate administrative support | (20 | ) | (41 | ) | (12 | ) | (90 | ) | |||||||
Total consolidated operating income | $ | 388 | $ | 289 | $ | 150 | $ | 1,526 |
Three months ended | Year ended December 31, 2018 | ||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||||||
3. Summary of Reportable Segment Financial Results: | |||||||||||||||
U.S. Dialysis and Related Lab Services | |||||||||||||||
Revenue:(1) | |||||||||||||||
Net dialysis and related lab patient service revenues | $ | 2,628 | $ | 2,572 | $ | 2,388 | $ | 10,316 | |||||||
Other revenues | 5 | 5 | 5 | 20 | |||||||||||
Total operating revenues | 2,633 | 2,577 | 2,393 | 10,336 | |||||||||||
Operating expenses: | |||||||||||||||
Patient care costs | 1,872 | 1,819 | 1,619 | 7,280 | |||||||||||
General and administrative | 210 | 233 | 186 | 836 | |||||||||||
Depreciation and amortization | 147 | 139 | 134 | 559 | |||||||||||
Equity investment income | (5 | ) | (4 | ) | (5 | ) | (20 | ) | |||||||
Gain on changes in ownership interests, net | (28 | ) | — | — | (28 | ) | |||||||||
Total operating expenses | 2,196 | 2,187 | 1,934 | 8,626 | |||||||||||
Segment operating income | $ | 437 | $ | 390 | $ | 459 | $ | 1,710 | |||||||
Reconciliation for non-GAAP measure: | |||||||||||||||
Gain on changes in ownership interests, net | (28 | ) | — | — | (28 | ) | |||||||||
Adjusted segment operating income(2) | $ | 409 | $ | 390 | $ | 459 | $ | 1,682 | |||||||
4. U.S. Dialysis and Related Lab Services Business Metrics: | |||||||||||||||
Volume | |||||||||||||||
Treatments | 7,552,412 | 7,377,277 | 7,244,555 | 29,435,304 | |||||||||||
Number of treatment days | 79.4 | 78.0 | 78.5 | 312.9 | |||||||||||
Treatments per day | 95,119 | 94,580 | 92,287 | 94,073 | |||||||||||
Per day year over year increase | 3.1 | % | 4.0 | % | 5.8 | % | 4.0 | % | |||||||
Normalized non-acquired treatment growth year over year | 2.6 | % | 3.3 | % | 3.5 | % | |||||||||
Operating net revenues(1) | |||||||||||||||
Dialysis and related lab services net revenue per treatment | $ | 347.97 | $ | 348.62 | $ | 329.68 | $ | 350.47 | |||||||
Expenses | |||||||||||||||
Patient care costs per treatment | $ | 247.81 | $ | 246.55 | $ | 223.47 | $ | 247.32 | |||||||
General and administrative expenses per treatment | $ | 27.86 | $ | 31.64 | $ | 25.67 | $ | 28.40 | |||||||
Accounts receivable | |||||||||||||||
Net receivables | $ | 1,703 | $ | 1,643 | $ | 1,524 | |||||||||
DSO | 60 | 59 | 60 | ||||||||||||
5. Discontinued Operations | |||||||||||||||
Operating results | |||||||||||||||
Net revenues(1) | $ | 1,231 | $ | 1,253 | $ | 1,215 | $ | 4,964 | |||||||
Expenses | 1,282 | 1,261 | 1,238 | 4,962 | |||||||||||
Valuation adjustment | 219 | 98 | — | 317 | |||||||||||
Goodwill impairment charges | 42 | — | — | 42 | |||||||||||
Loss from discontinued operations before taxes | (313 | ) | (106 | ) | (23 | ) | (357 | ) | |||||||
Income tax (benefit) expense | (3 | ) | 106 | (167 | ) | 100 | |||||||||
Net (loss) income from discontinued operations, net of tax | $ | (309 | ) | $ | (212 | ) | $ | 144 | $ | (457 | ) |
Three months ended | Year ended December 31, 2018 | ||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||||||
6. Cash Flow: | |||||||||||||||
Operating cash flow | $ | 389 | $ | 458 | $ | 345 | $ | 1,772 | |||||||
Operating cash flow from continuing operations | $ | 307 | $ | 362 | $ | 287 | $ | 1,481 | |||||||
Operating cash flow from continuing operations, last twelve months | $ | 1,481 | $ | 1,460 | $ | 1,556 | |||||||||
Free cash flow from continuing operations(2) | $ | 112 | $ | 226 | $ | 150 | $ | 869 | |||||||
Free cash flow from continuing operations, last twelve months(2) | $ | 869 | $ | 908 | $ | 1,042 | |||||||||
Capital expenditures from continuing operations: | |||||||||||||||
Routine maintenance/IT/other | $ | 139 | $ | 90 | $ | 91 | $ | 415 | |||||||
Development and relocations | $ | 123 | $ | 130 | $ | 152 | $ | 487 | |||||||
Acquisition expenditures | $ | 65 | $ | 22 | $ | 57 | $ | 176 | |||||||
Proceeds from sale of self-developed properties | $ | 13 | $ | 7 | $ | 7 | $ | 45 | |||||||
7. Debt and Capital Structure: | |||||||||||||||
Total debt(4)(5) | $ | 10,154 | $ | 10,278 | $ | 9,400 | |||||||||
Net debt, net of cash and cash equivalents(4)(5) | $ | 9,831 | $ | 9,830 | $ | 8,892 | |||||||||
Leverage ratio (see calculation on page 15) | 4.52x | 4.29x | 3.63x | ||||||||||||
Weighted average effective interest rate: | |||||||||||||||
During the quarter | 5.07 | % | 4.93 | % | 4.80 | % | |||||||||
At end of the quarter | 5.19 | % | 5.03 | % | 4.88 | % | |||||||||
On the senior secured credit facilities at end of the quarter | 5.11 | % | 4.80 | % | 4.45 | % | |||||||||
Debt with fixed and capped rates as a percentage of total debt: | |||||||||||||||
Debt with rates fixed by its terms | 48 | % | 47 | % | 52 | % | |||||||||
Debt with rates fixed or capped by cap agreements | 82 | % | 81 | % | 89 | % | |||||||||
Share repurchases | $ | — | $ | 344 | $ | 462 | $ | 1,154 | |||||||
Total number of shares repurchased | — | 4,849,051 | 7,409,849 | 16,844,067 |
(1) | On January 1, 2018, the Company adopted FASB Accounting Standards Codification Topic 606 Revenue from Contracts with Customers using the cumulative effect method for those contracts which were not substantially completed as of January 1, 2018. Results for reporting periods beginning on and after January 1, 2018 are presented under Topic 606, while prior period amounts continue to be reported in accordance with our historical accounting under Revenue Recognition (Topic 605). |
(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) | General and administrative expenses includes certain corporate support, long-term incentive compensation and advocacy costs. In addition, the three months ended September 30, 2018 and twelve months ended December 31, 2018 also include restructuring charges. |
(4) | The reported balance sheet amounts at December 31, 2018, September 30, 2018 and December 30, 2017, exclude $52.0 million, $53.6 million and $64.0 million, respectively, of a debt discount associated with our Term Loan B and other deferred financing costs. The reported balance sheet amounts exclude DMG debt which is classified as held for sale liabilities for all periods presented. |
(5) | The reported total debt and net debt, net of cash and cash equivalents, excludes DMG cash and debt classified as held for sale assets and liabilities, respectively, for all periods presented. |
(6) | Adjusted operating income margin is a calculation of adjusted operating income divided by consolidated revenues. |
Rolling twelve months ended December 31, 2018 | |||
Net income attributable to DaVita Inc. | $ | 159,394 | |
Income taxes | 358,168 | ||
Interest expense | 451,251 | ||
Depreciation and amortization | 591,035 | ||
Impairment charges | 61,981 | ||
Noncontrolling interests and equity investment income, net | 183,855 | ||
Stock-settled stock-based compensation | 73,081 | ||
Gain on changes in ownership interest, net | (85,699 | ) | |
Valuation adjustment on disposal group | 316,840 | ||
Other | 41,084 | ||
“Consolidated EBITDA” | $ | 2,150,990 | |
December 31, 2018 | |||
Total debt, excluding debt discount and other deferred financing costs of $52.0 million | $ | 10,190,763 | |
Letters of credit issued | 36,987 | ||
10,227,750 | |||
Less: Cash and cash equivalents including short-term investments (excluding DMG’s physician owned entities cash) | (501,695 | ) | |
Consolidated net debt | $ | 9,726,055 | |
Last twelve months “Consolidated EBITDA” | $ | 2,150,990 | |
Leverage ratio | 4.52x |
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, 2018 | September 30, 2018 | December 31, 2017 | |||||||||||||||||||||
Dollars | Per share | Dollars | Per share | Dollars | Per share | ||||||||||||||||||
Net income from continuing operations attributable to DaVita Inc. | $ | 160,332 | $ | 0.96 | $ | 73,371 | $ | 0.44 | $ | 156,210 | $ | 0.85 | |||||||||||
Operating charges: | |||||||||||||||||||||||
(Gain) loss on changes in ownership interests, net | (28,152 | ) | (0.17 | ) | 1,506 | 0.01 | — | — | |||||||||||||||
Impairment of other assets | — | — | 6,093 | 0.04 | — | — | |||||||||||||||||
Impairment of investments | — | — | — | — | 280,066 | 1.52 | |||||||||||||||||
Equity investment loss (income): | |||||||||||||||||||||||
Loss due to business sale in APAC JV | 8,715 | 0.05 | — | — | — | — | |||||||||||||||||
Loss due to impairments in APAC JV | 1,530 | 0.01 | 5,995 | 0.04 | — | — | |||||||||||||||||
General and administrative: | |||||||||||||||||||||||
Restructuring charges | — | — | 11,366 | 0.07 | — | — | |||||||||||||||||
Tax reform | — | — | — | — | (251,510 | ) | (1.36 | ) | |||||||||||||||
Related income tax | 6,719 | 0.04 | (5,190 | ) | (0.03 | ) | (14,418 | ) | (0.08 | ) | |||||||||||||
Adjusted net income from continuing operations attributable to DaVita Inc. | $ | 149,144 | $ | 0.90 | $ | 93,141 | $ | 0.56 | $ | 170,348 | $ | 0.92 |
Year ended | |||||||||||||||
December 31, 2018 | December 31, 2017 | ||||||||||||||
Dollars | Per share | Dollars | Per share | ||||||||||||
Net income from continuing operations attributable to DaVita Inc. | $ | 624,321 | $ | 3.62 | $ | 901,277 | $ | 4.71 | |||||||
Operating charges: | |||||||||||||||
Gain on changes in ownership interests, net | (60,603 | ) | (0.35 | ) | (6,273 | ) | (0.03 | ) | |||||||
Impairment of other assets | 17,338 | 0.10 | 15,168 | 0.08 | |||||||||||
Impairment of investments | — | — | 280,066 | 1.46 | |||||||||||
Goodwill impairment charges | 3,106 | 0.02 | 34,696 | 0.18 | |||||||||||
Gain on settlement, net | — | — | (526,827 | ) | (2.75 | ) | |||||||||
Equity investment loss (income): | |||||||||||||||
Loss due to business sale in APAC JV | 8,715 | 0.05 | — | — | |||||||||||
Loss due to impairments in APAC JV | 7,525 | 0.04 | 6,293 | 0.03 | |||||||||||
Income related to gain on settlement | — | — | (2,677 | ) | (0.01 | ) | |||||||||
Loss related to restructuring charges | — | — | 1,000 | 0.01 | |||||||||||
General and administrative: | |||||||||||||||
Restructuring charges | 11,366 | 0.07 | 1,700 | 0.01 | |||||||||||
Tax reform | — | — | (251,510 | ) | (1.31 | ) | |||||||||
Noncontrolling interests associated with adjustments: | |||||||||||||||
Gain on settlement, net | — | — | 24,029 | 0.13 | |||||||||||
Goodwill impairment charges | — | — | (9,865 | ) | (0.05 | ) | |||||||||
Related income tax | 4,181 | 0.02 | 167,818 | 0.88 | |||||||||||
Adjusted net income from continuing operations attributable to DaVita Inc. | $ | 615,949 | $ | 3.57 | $ | 634,895 | $ | 3.32 |
Three months ended | Year ended | ||||||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | |||||||||||||||
Consolidated: | |||||||||||||||||||
Operating income | $ | 387,908 | $ | 289,038 | $ | 150,337 | $ | 1,525,824 | $ | 1,812,755 | |||||||||
Operating charges: | |||||||||||||||||||
(Gain) loss on changes in ownership interests, net | (28,152 | ) | 1,506 | — | (60,603 | ) | (6,273 | ) | |||||||||||
Impairment of other assets | — | 6,093 | — | 17,338 | 15,168 | ||||||||||||||
Impairment of investments | — | — | 280,066 | — | 280,066 | ||||||||||||||
Goodwill impairment charges | — | — | — | 3,106 | 34,696 | ||||||||||||||
Gain on settlement, net | — | — | — | — | (526,827 | ) | |||||||||||||
Equity investment loss (income): | |||||||||||||||||||
Loss due to business sale in APAC JV | 8,715 | — | — | 8,715 | — | ||||||||||||||
Loss due to impairments in APAC JV | 1,530 | 5,995 | — | 7,525 | 6,293 | ||||||||||||||
Income related to gain on settlement | — | — | — | — | (2,677 | ) | |||||||||||||
Loss related to restructuring charges | — | — | — | — | 1,000 | ||||||||||||||
General and administrative: | |||||||||||||||||||
Restructuring charges | — | 11,366 | — | 11,366 | 1,700 | ||||||||||||||
Adjusted operating income | $ | 370,001 | $ | 313,998 | $ | 430,403 | $ | 1,513,271 | $ | 1,615,901 |
Three months ended | Year ended | ||||||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | |||||||||||||||
Consolidated: | |||||||||||||||||||
U.S. dialysis and related lab services: | |||||||||||||||||||
Segment operating income | $ | 436,893 | $ | 390,006 | $ | 459,210 | $ | 1,709,721 | $ | 2,297,198 | |||||||||
Gain on changes in ownership interests, net | (28,152 | ) | — | — | (28,152 | ) | — | ||||||||||||
Gain on settlement, net | — | — | — | — | (526,827 | ) | |||||||||||||
Equity investment income related to gain on settlement | — | — | — | — | (2,677 | ) | |||||||||||||
Adjusted U.S. dialysis and related lab services operating income | 408,742 | 390,006 | 459,210 | 1,681,570 | 1,767,694 | ||||||||||||||
Other - Ancillary services and strategic initiatives: | |||||||||||||||||||
U.S. | |||||||||||||||||||
Segment operating loss | (18,993 | ) | (50,170 | ) | (2,452 | ) | (70,396 | ) | (110,269 | ) | |||||||||
Loss (gain) on changes in ownership interests | — | 1,506 | — | (33,699 | ) | — | |||||||||||||
Impairment of other assets | — | 6,093 | — | 17,338 | 15,168 | ||||||||||||||
Goodwill impairment charges | — | — | — | — | 34,696 | ||||||||||||||
Restructuring charges | — | 11,366 | — | 11,366 | — | ||||||||||||||
Adjusted operating loss | (18,993 | ) | (31,205 | ) | (2,452 | ) | (75,390 | ) | (60,405 | ) | |||||||||
International | |||||||||||||||||||
Segment operating loss | (10,489 | ) | (9,963 | ) | (294,043 | ) | (23,394 | ) | (329,209 | ) | |||||||||
Loss (gain) on changes in ownership interests | — | — | — | 1,248 | (6,273 | ) | |||||||||||||
Impairment on investment | — | — | 280,066 | — | 280,066 | ||||||||||||||
Goodwill impairment charge | — | — | — | 3,106 | — | ||||||||||||||
Equity investment loss (income): | |||||||||||||||||||
Loss due to business sale in APAC JV | 8,715 | — | — | 8,715 | — | ||||||||||||||
Loss due to impairments in APAC JV | 1,530 | 5,995 | — | 7,525 | 6,293 | ||||||||||||||
Loss related to restructuring charges | — | — | — | — | 1,000 | ||||||||||||||
Restructuring charges | — | — | — | — | 1,700 | ||||||||||||||
Adjusted operating loss | (245 | ) | (3,967 | ) | (13,977 | ) | (2,800 | ) | (46,422 | ) | |||||||||
Adjusted Other - Ancillary services and strategic initiatives operating loss | (19,238 | ) | (35,172 | ) | (16,428 | ) | (78,190 | ) | (106,827 | ) | |||||||||
Corporate administrative support: | |||||||||||||||||||
Segment operating loss | (19,502 | ) | (40,836 | ) | (12,378 | ) | (90,108 | ) | (44,966 | ) | |||||||||
Adjusted operating income | $ | 370,001 | $ | 313,998 | $ | 430,403 | $ | 1,513,271 | $ | 1,615,901 |
Three months ended | Year ended December 31, 2018 | ||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||||||
Income from continuing operations before income taxes | $ | 259,114 | $ | 167,118 | $ | 46,825 | $ | 1,048,478 | |||||||
Income tax expense (benefit) | $ | 51,748 | $ | 52,047 | $ | (150,267 | ) | $ | 258,400 | ||||||
Effective income tax rate on income from continuing operations | 20.0 | % | 31.1 | % | (320.9 | )% | 24.6 | % |
Three months ended | Year ended December 31, 2018 | ||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||||||
Income from continuing operations before income taxes | $ | 259,114 | $ | 167,118 | $ | 46,825 | $ | 1,048,478 | |||||||
Less: Noncontrolling owners’ income primarily attributable to non-tax paying entities | (47,203 | ) | (41,880 | ) | (41,019 | ) | (166,545 | ) | |||||||
Income before income taxes attributable to DaVita Inc. | $ | 211,911 | $ | 125,238 | $ | 5,806 | $ | 881,933 | |||||||
Income tax expense (benefit) | $ | 51,748 | $ | 52,047 | $ | (150,267 | ) | $ | 258,400 | ||||||
Less: Income tax attributable to noncontrolling interests | (169 | ) | (180 | ) | (137 | ) | (788 | ) | |||||||
Income tax expense (benefit) attributable to DaVita Inc. | $ | 51,579 | $ | 51,867 | $ | (150,404 | ) | $ | 257,612 | ||||||
Effective income tax rate on income from continuing operations attributable to DaVita Inc. | 24.3 | % | 41.4 | % | (2,590.5 | )% | 29.2 | % |
Three months ended | Year ended December 31, 2018 | ||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||||||
Income from continuing operations before income taxes | $ | 259,114 | $ | 167,118 | $ | 46,825 | $ | 1,048,478 | |||||||
Operating charges: | |||||||||||||||
(Gain) loss on changes in ownership interests, net | (28,152 | ) | 1,506 | — | (60,603 | ) | |||||||||
Impairment of other assets | — | 6,093 | — | 17,338 | |||||||||||
Impairment of investments | — | — | 280,066 | — | |||||||||||
Goodwill impairment charges | — | — | — | 3,106 | |||||||||||
Equity investment loss (income): | |||||||||||||||
Loss due to business sale in APAC JV | 8,715 | — | — | 8,715 | |||||||||||
Loss due to impairments in APAC JV | 1,530 | 5,995 | — | 7,525 | |||||||||||
General and administrative: | |||||||||||||||
Restructuring charges | — | 11,366 | — | 11,366 | |||||||||||
Noncontrolling owners’ income primarily attributable to non-tax paying entities | (47,203 | ) | (41,880 | ) | (41,019 | ) | (166,545 | ) | |||||||
Adjusted income from continuing operations before income taxes attributable to DaVita Inc. | $ | 194,004 | $ | 150,198 | $ | 285,872 | $ | 869,380 | |||||||
Income tax expense (benefit) | $ | 51,748 | $ | 52,047 | $ | (150,267 | ) | $ | 258,400 | ||||||
Add income tax related to: | |||||||||||||||
(Gain) loss on changes in ownership interests, net | (7,247 | ) | 388 | — | (13,004 | ) | |||||||||
Impairment of other assets | — | 1,568 | — | 4,463 | |||||||||||
Impairment of investments | — | — | 14,418 | — | |||||||||||
Goodwill impairment charges | — | — | — | 598 | |||||||||||
Equity investment loss (income): | |||||||||||||||
Loss due to business sale in APAC JV | 449 | — | — | 449 | |||||||||||
Loss due to impairments in APAC JV | 79 | 308 | — | 387 | |||||||||||
Restructuring charges | — | 2,926 | — | 2,926 | |||||||||||
Tax reform | — | — | 251,510 | — | |||||||||||
Less income tax related to: | |||||||||||||||
Noncontrolling interests | (169 | ) | (180 | ) | (137 | ) | (788 | ) | |||||||
Income tax on adjusted income from continuing operations attributable to DaVita Inc. | $ | 44,860 | $ | 57,057 | $ | 115,524 | $ | 253,431 | |||||||
Effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. | 23.1 | % | 38.0 | % | 40.4 | % | 29.2 | % |
Three months ended | |||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||
Cash provided by continuing operating activities | $ | 307,278 | $ | 361,786 | $ | 286,716 | |||||
Less: Distributions to noncontrolling interests | (56,768 | ) | (45,667 | ) | (45,429 | ) | |||||
Cash provided by continuing operating activities attributable to DaVita Inc. | 250,510 | 316,119 | 241,287 | ||||||||
Less: Expenditures for routine maintenance and information technology | (138,745 | ) | (90,154 | ) | (91,355 | ) | |||||
Free cash flow from continuing operations | $ | 111,765 | $ | 225,965 | $ | 149,932 |
Rolling 12-Month Period | |||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||
Cash provided by continuing operating activities | $ | 1,480,956 | $ | 1,460,394 | $ | 1,555,892 | |||||
Less: Distributions to noncontrolling interests | (196,441 | ) | (185,102 | ) | (210,892 | ) | |||||
Cash provided by continuing operating activities attributable to DaVita Inc. | 1,284,515 | 1,275,292 | 1,345,000 | ||||||||
Less: Expenditures for routine maintenance and information technology | (415,038 | ) | (367,648 | ) | (302,697 | ) | |||||
Free cash flow from continuing operations | $ | 869,477 | $ | 907,644 | $ | 1,042,303 |
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