Exhibit 99.1
| Contact: | LeAnne Zumwalt | |
| Investor Relations | ||
| DaVita Inc. | ||
| 310 536-2420 |
DAVITA INC. REPORTS 1st QUARTER 2005 RESULTS
El Segundo, California, April 27, 2005 – DaVita Inc. (NYSE: DVA), today announced results for the quarter ended March 31, 2005. Net income for the quarter ended March 31, 2005, was $56.3 million or $0.55 per share compared with $52.9 million or $0.51 per share for the same period of 2004.
Net income for the three months ended March 31, 2005 included refinancing charges of $6.9 million and $1 million of additional debt expense incurred as a result of the issuance of the new senior notes, offset by swap valuation gains of $8.4 million.
Financial and operating highlights include:
| • | Cash Flow: Operating cash flow for the quarter ended March 31, 2005 was $111 million and free cash flow was $104 million. For the rolling 12-month ended March 31, 2005 operating cash flow was $356 million and free cash flow was $307 million, excluding the tax benefit from stock option exercises and the after-tax benefit of prior years’ Medicare lab recoveries. Including those items, the rolling 12-month operating cash flow was $405 million and free cash flow was $357 million. |
| • | Operating Income: Operating income for the first quarter was $106 million. |
| • | Volume: Total treatments for the first quarter were 1,868,787 or 24,270 treatments per day, an increase of 13.5% per day compared to the first quarter of last year. Non-acquired treatment growth was 5.6% for the first quarter. |
| • | Center Activity: As of March 31, 2005, we operated or provided administrative services at 665 outpatient centers serving approximately 54,900 patients. During the first quarter we acquired one center, opened 10 de novo centers, and closed one center. In addition, the operations of three centers were merged into three other existing centers. |
Gambro Healthcare Acquisition:
The Company continues to be involved in active discussions with the Federal Trade Commission (FTC) staff regarding its planned acquisition of Gambro Healthcare, Inc. Although no agreement with the FTC has yet been reached, based on our discussions to date we expect we will be required to divest approximately 5% of the combined number of Gambro Healthcare and DaVita centers, which represents the same percentage of the combined revenues. However, the final resolution with the FTC could be materially different.
Recent Transactions
On March 22, 2005, we issued $500 million of 6 5/8% senior notes due 2013 and $850 million of 7 1/4% senior subordinated notes due 2015. We used the net proceeds along with available cash to repay all outstanding amounts under the Term Loan portions of our existing credit facilities, including accrued interest.
Outlook
Our 2005 operating income guidance is for operating income to be up 2% to 6% over 2004, exclusive of the effects of the proposed Gambro acquisition and related debt financing. At this time, we expect the Gambro Healthcare acquisition together with the related debt financing to be dilutive to EPS in the first year, neutral in the second year and accretive thereafter.
DaVita will be holding a conference call to discuss its first quarter results for 2005 on April 28, 2005, at 11:30 AM Eastern 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 release contains forward–looking statements. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, acquisitions and the risk factors set forth in the Company’s SEC filings, including its Form 10-K for the year ended December 31, 2004. The forward-looking statements should be considered in light of these risks and uncertainties.
These risks and uncertainties include those relating to:
| • | the concentration of profits generated from PPO and private indemnity patients, |
| • | possible reductions in private and government reimbursement rates, |
| • | changes in pharmaceutical practice patterns or reimbursement policies, |
| • | the Company’s ability to maintain contracts with physician medical directors, |
| • | legal compliance risks, including our continued compliance with complex government regulations and the ongoing review by the U.S. Attorney’s Office for the Eastern District of Pennsylvania and the OIG, the subpoena from the U.S. Attorney’s Office for the Eastern District of New York and the subpoena from the U.S. Attorney’s Office, Eastern District of Missouri, and |
| • | the Company’s ability to complete acquisitions of businesses, including the consummation of the Gambro Healthcare acquisition, and the percentage of centers we expect we will be required to divest, terms of the related financing, and subsequent integration of the business. |
This Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
This release contains non-GAAP financial measures. For reconciliations of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, see the attached reconciliation schedules.
DAVITA INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands, except per share data)
| Three months ended March 31, | ||||||
| 2005 |
2004 | |||||
| Net operating revenues |
$ | 609,958 | $ | 535,431 | ||
| Operating expenses and charges: |
||||||
| Patient care costs |
409,949 | 363,429 | ||||
| General and administrative |
54,263 | 42,604 | ||||
| Depreciation and amortization |
24,848 | 20,270 | ||||
| Provision for uncollectible accounts |
10,886 | 9,577 | ||||
| Minority interests and equity income, net |
4,016 | 2,718 | ||||
| Total operating expenses and charges |
503,962 | 438,598 | ||||
| Operating income |
105,996 | 96,833 | ||||
| Debt expense |
17,534 | 11,636 | ||||
| Refinancing charges |
6,872 | |||||
| Swap valuation gains |
8,392 | |||||
| Other income |
1,627 | 1,443 | ||||
| Income before income taxes |
91,609 | 86,640 | ||||
| Income tax expense |
35,275 | 33,775 | ||||
| Net income |
$ | 56,334 | $ | 52,865 | ||
| Earnings per share: |
||||||
| Basic |
$ | 0.57 | $ | 0.54 | ||
| Diluted |
$ | 0.55 | $ | 0.51 | ||
| Weighted average shares for earnings per share: |
||||||
| Basic |
99,399,612 | 98,099,476 | ||||
| Diluted |
103,150,299 | 102,883,453 | ||||
3
DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
| Three months ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 56,334 | $ | 52,865 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
| Depreciation and amortization |
24,848 | 20,270 | ||||||
| Stock options, principally tax benefits |
15,934 | 14,389 | ||||||
| Swap valuation gains |
(8,392 | ) | ||||||
| Refinancing charges |
6,872 | |||||||
| Deferred income taxes |
(5,814 | ) | (1,016 | ) | ||||
| Minority interests in income of consolidated subsidiaries |
4,410 | 3,160 | ||||||
| Distributions to minority interests |
(3,518 | ) | (2,082 | ) | ||||
| Non-cash debt expense |
625 | 484 | ||||||
| Equity investment income |
(394 | ) | (442 | ) | ||||
| Loss on divestitures |
(193 | ) | (628 | ) | ||||
| Changes in operating assets and liabilities, other than from acquisitions and divestitures: |
||||||||
| Accounts receivable |
(10,888 | ) | (12,511 | ) | ||||
| Medicare lab recoveries |
19,000 | |||||||
| Inventories |
(2,820 | ) | 6,818 | |||||
| Other current assets |
(289 | ) | 697 | |||||
| Other long-term assets |
385 | 1,592 | ||||||
| Accounts payable |
(4,865 | ) | 8,843 | |||||
| Accrued compensation and benefits |
5,421 | 2,393 | ||||||
| Other current liabilities |
9,088 | 1,779 | ||||||
| Income taxes |
28,500 | 5,315 | ||||||
| Other long-term liabilities |
(3,838 | ) | 5,190 | |||||
| Net cash provided by operating activities |
111,406 | 126,116 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions of property and equipment, net |
(25,625 | ) | (24,681 | ) | ||||
| Acquisitions and divestitures, net |
(2,501 | ) | (17,088 | ) | ||||
| Investments in and advances to affiliates, net |
2,677 | 2,191 | ||||||
| Intangible assets |
(395 | ) | (360 | ) | ||||
| Net cash used in investing activities |
(25,844 | ) | (39,938 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Borrowings |
1,741,183 | 774,534 | ||||||
| Payments on long-term debt |
(1,748,663 | ) | (786,791 | ) | ||||
| Deferred financing costs |
(29,213 | ) | ||||||
| Stock option exercises |
17,031 | 17,578 | ||||||
| Net cash (used in) provided by financing activities |
(19,662 | ) | 5,321 | |||||
| Net increase in cash and cash equivalents |
65,900 | 91,499 | ||||||
| Cash and cash equivalents at beginning of period |
251,979 | 61,657 | ||||||
| Cash and cash equivalents at end of period |
$ | 317,879 | $ | 153,156 | ||||
4
DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
| March 31, 2005 |
December 31, 2004 |
|||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 317,879 | $ | 251,979 | ||||
| Accounts receivable, less allowance of $60,279 and $58,166 |
472,983 | 462,095 | ||||||
| Inventories |
34,697 | 31,843 | ||||||
| Other current assets |
44,441 | 44,210 | ||||||
| Deferred income taxes |
91,917 | 78,593 | ||||||
| Total current assets |
961,917 | 868,720 | ||||||
| Property and equipment, net |
415,713 | 412,064 | ||||||
| Amortizable intangibles, net |
79,585 | 60,719 | ||||||
| Investments in third-party dialysis businesses |
3,356 | 3,332 | ||||||
| Other long-term assets |
28,626 | 10,898 | ||||||
| Goodwill |
1,160,615 | 1,156,226 | ||||||
| $ | 2,649,812 | $ | 2,511,959 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Accounts payable |
$ | 91,366 | $ | 96,231 | ||||
| Other liabilities |
166,302 | 157,214 | ||||||
| Accrued compensation and benefits |
139,340 | 133,919 | ||||||
| Current portion of long-term debt |
6,346 | 53,364 | ||||||
| Income taxes payable |
29,507 | 1,007 | ||||||
| Total current liabilities |
432,861 | 441,735 | ||||||
| Long-term debt |
1,362,006 | 1,322,468 | ||||||
| Other long-term liabilities |
22,473 | 22,570 | ||||||
| Deferred income taxes |
156,369 | 148,859 | ||||||
| Minority interests |
57,690 | 53,193 | ||||||
| Commitments and contingencies |
||||||||
| 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; 134,862,283 shares issued) |
135 | 135 | ||||||
| Additional paid-in capital |
550,987 | 542,714 | ||||||
| Retained earnings |
667,621 | 611,287 | ||||||
| Treasury stock, at cost (34,878,913 and 36,295,339 shares) |
(608,040 | ) | (632,732 | ) | ||||
| Accumulated comprehensive income valuations |
7,710 | 1,730 | ||||||
| Total shareholders’ equity |
618,413 | 523,134 | ||||||
| $ | 2,649,812 | $ | 2,511,959 | |||||
5
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)
| Q1 2005 |
Q4 2004 |
Q1 2004 |
||||||||||
| Financial Results: |
||||||||||||
| Net income |
$ | 56.3 | $ | 56.6 | $ | 52.9 | ||||||
| Basic EPS |
$ | .57 | $ | .58 | $ | .54 | ||||||
| EPS assuming dilution |
$ | .55 | $ | .56 | * | $ | .51 | |||||
| Operating income |
$ | 106 | $ | 105.2 | $ | 96.8 | ||||||
| Operating income margin |
17.4 | % | 17.1 | % | 18.1 | % | ||||||
| Other comprehensive income |
||||||||||||
| Unrealized gain (loss) on securities, net of tax (expense) benefit of $(3.7), $(1.3) and $1.6 |
$ | 6.0 | $ | 2.1 | $ | (2.6 | ) | |||||
| Business Metrics: |
||||||||||||
| Volume |
||||||||||||
| Treatments |
1,868,787 | 1,895,952 | 1,657,055 | |||||||||
| Number of treatment days |
77.0 | 79.0 | 77.5 | |||||||||
| Treatments per day |
24,270 | 23,999 | 21,381 | |||||||||
| Per day year over year increase |
13.5 | % | 14.5 | % | 8.7 | % | ||||||
| Non-acquired growth |
5.6 | % | 6.0 | % | 4.1 | % | ||||||
| Revenue |
||||||||||||
| Total operating revenue |
$ | 610 | $ | 616 | $ | 535 | ||||||
| Dialysis revenue per treatment |
$ | 310.92 | $ | 311.22 | $ | 311.02 | ||||||
| Per treatment change from previous quarter |
(0.1 | )% | (0.8 | )% | 1.5 | % | ||||||
| Per treatment change from prior year |
0.0 | % | 1.6 | % | 5.0 | % | ||||||
| Expenses |
||||||||||||
| A. Patient care costs |
||||||||||||
| Percent of revenue |
67.2 | % | 68.1 | % | 67.9 | % | ||||||
| Per treatment |
$ | 219.37 | $ | 221.31 | $ | 219.32 | ||||||
| Per treatment change from previous quarter |
(0.9 | )% | 0.6 | % | 1.5 | % | ||||||
| Per treatment change from previous year |
0.0 | % | 2.4 | % | 4.1 | % | ||||||
| B. General & administrative expenses |
||||||||||||
| Percent of revenue |
8.9 | % | 8.6 | % | 8.0 | % | ||||||
| Per treatment |
$ | 29.04 | $ | 28.03 | $ | 25.71 | ||||||
| Per treatment change from previous quarter |
3.6 | % | 0.0 | % | 6.2 | % | ||||||
| Per treatment change from previous year |
13.0 | % | 15.8 | % | 5.0 | % | ||||||
| C. Bad debt expense as a percent of current-period revenue |
1.8 | % | 1.8 | % | 1.8 | % | ||||||
| D. Consolidated effective tax rate |
38.5 | % | 37.4 | % | 39.0 | % | ||||||
| * | Earnings per share benefited from a year-to-date reduction in the annualized tax rate that added $0.01 to the fourth quarter of 2004. |
6
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA—continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
| Q1 2005 |
Q4 2004 |
Q1 2004 |
||||||||||
| Cash Flow |
||||||||||||
| Operating cash flow, excluding Medicare lab recoveries |
$ | 111.4 | $ | 82.3 | $ | 114.5 | ||||||
| Operating cash flow, excluding Medicare lab recoveries and tax benefit from stock option exercises |
$ | 95.5 | $ | 70.0 | $ | 100.1 | ||||||
| Free cash flow, excluding Medicare lab recoveries |
$ | 103.8 | $ | 67.4 | $ | 108.7 | ||||||
| Free cash flow, excluding Medicare lab recoveries and tax benefit from stock option exercises |
$ | 87.8 | $ | 55.1 | $ | 94.3 | ||||||
| Capital expenditures: |
||||||||||||
| Development |
$ | 18.1 | $ | 25.0 | $ | 19.2 | ||||||
| Routine maintenance/IT/other |
$ | 7.6 | $ | 14.9 | $ | 5.8 | ||||||
| Acquisition expenditures, net |
$ | 2.5 | $ | 19.8 | $ | 17.1 | ||||||
| Accounts Receivable | ||||||||||||
| Net receivables |
$ | 473 | $ | 462 | $ | 400 | ||||||
| DSO |
71 | 70 | 70 | |||||||||
| Debt/Capital Structure | ||||||||||||
| Total debt |
$ | 1,368 | $ | 1,376 | $ | 1,155 | ||||||
| Net debt, (net of cash balance) |
$ | 1,050 | $ | 1,124 | $ | 1,002 | ||||||
| Leverage ratio (see Note 1) |
2.0x | 2.2x | 2.1x | |||||||||
| Share repurchases (in millions) |
.3 | |||||||||||
| Average repurchase price |
$ | 30.14 | ||||||||||
| Clinical (quarterly averages) | ||||||||||||
| Dialysis adequacy - % of patients with Kt/V > 1.2 |
94 | % | 94 | % | 94 | % | ||||||
| Anemia measure - % of patients with HCT > 33 |
86 | % | 86 | % | 85 | % | ||||||
| Patients with arteriovenous fistula |
43 | % | ||||||||||
7
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA—continued
(unaudited)
(dollars in thousands)
Note 1:
The leverage ratio under the Company’s existing senior secured credit agreement is defined as all funded debt plus the face amount of all Letters of Credit issued, minus cash and cash equivalents, divided by “EBITDA”. The leverage ratio determines the interest rate payable by the Company under the credit agreement by establishing the margin over the base interest rate that is applicable. The following Leverage Ratio was calculated using “Consolidated EBITDA” as defined in the indentures governing our recently issued Senior Notes. Such calculation is consistent with the definition of “EBITDA” contained in the existing senior secured credit agreement, except that pro forma incremental “EBITDA” relating to acquisitions is included in the calculation of “EBITDA” under the existing senior secured credit agreement and is not included in the following calculations.
| Q1 2005 |
Q4 2004 |
Q1 2004 |
||||||||||
| Net income |
$ | 56,334 | $ | 56,602 | $ | 52,865 | ||||||
| Debt expense |
17,534 | 15,777 | 11,636 | |||||||||
| Refinancing charges |
6,872 | |||||||||||
| Income taxes |
35,275 | 33,845 | 33,775 | |||||||||
| Depreciation and amortization |
24,848 | 23,212 | 20,270 | |||||||||
| Minority interests and equity income, net |
4,016 | 3,880 | 2,718 | |||||||||
| Swap valuation gains |
(8,392 | ) | ||||||||||
| “Consolidated EBITDA” as defined in the indentures |
$ | 136,487 | $ | 133,316 | $ | 121,264 | ||||||
| Annualized “Consolidated EBITDA” as defined in the indentures |
$ | 545,948 | $ | 533,264 | $ | 485,056 | ||||||
| Q1 2005 |
Q4 2004 |
Q1 2004 |
||||||||||
| Total debt |
$ | 1,368,352 | $ | 1,375,832 | $ | 1,155,302 | ||||||
| Letters of credit issued |
22,959 | 22,959 | 23,738 | |||||||||
| 1,391,311 | 1,398,791 | 1,179,040 | ||||||||||
| Less cash and cash equivalents |
(317,879 | ) | (251,979 | ) | (153,156 | ) | ||||||
| $ | 1,073,432 | $ | 1,146,812 | $ | 1,025,884 | |||||||
| Annualized “Consolidated EBITDA” as defined in the indentures |
$ | 545,948 | $ | 533,264 | $ | 485,056 | ||||||
| Leverage Ratio |
2.0x | 2.2x | 2.1x | |||||||||
8
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
1. Operating cash flow, excluding Medicare lab recoveries related to prior years’ services, and tax benefit from stock option exercises:
| Q1 2005 |
Q4 2004 |
Q1 2004 |
Rolling 12- month period ended Q1 2005 |
|||||||||||||
| Cash provided by operating activities |
$ | 111,406 | $ | 87,341 | $ | 126,116 | $ | 405,235 | ||||||||
| Less: Medicare lab recoveries for prior years’ services |
(8,293 | ) | (19,000 | ) | (8,293 | ) | ||||||||||
| Related income tax expense |
3,234 | 7,410 | 3,234 | |||||||||||||
| Operating cash flow, excluding Medicare lab recoveries |
111,406 | 82,282 | 114,526 | 400,176 | ||||||||||||
| Less: Tax benefit from stock option exercises |
(15,934 | ) | (12,305 | ) | (14,389 | ) | (44,315 | ) | ||||||||
| $ | 95,472 | $ | 69,977 | $ | 100,137 | $ | 355,861 | |||||||||
| 2. Free cash flow, excluding Medicare lab recoveries related to prior years’ services, and tax benefit from stock option exercises:
|
| |||||||||||||||
| Free cash flow represents net cash provided by operating activities less non-development capital expenditures. We believe free cash flow is a useful adjunct to cash flow from operating activities and other measurements under generally accepted accounting principles in the United States since it is a meaningful measure of our ability to fund acquisition and development activities and meet our debt service requirements. Free cash flow is not a measure of financial performance under generally accepted accounting principles in the United States and should not be considered as an alternative to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. | ||||||||||||||||
| Q1 2005 |
Q4 2004 |
Q1 2004 |
Rolling 12- month period ended Q1 2005 |
|||||||||||||
| Cash provided by operating activities |
$ | 111,406 | $ | 87,341 | $ | 126,116 | $ | 405,235 | ||||||||
| Less: Expenditures for routine maintenance and information technology |
(7,634 | ) | (14,883 | ) | (5,816 | ) | (48,372 | ) | ||||||||
| Free cash flow |
103,772 | 72,458 | 120,300 | 356,863 | ||||||||||||
| Medicare lab recoveries related to prior years’ services |
(8,293 | ) | (19,000 | ) | (8,293 | ) | ||||||||||
| Related income tax expense |
3,234 | 7,410 | 3,234 | |||||||||||||
| Free cash flow, excluding Medicare lab recoveries |
103,772 | 67,399 | 108,710 | 351,804 | ||||||||||||
| Less: Tax benefit from stock option exercises |
(15,934 | ) | (12,305 | ) | (14,389 | ) | (44,315 | ) | ||||||||
| $ | 87,838 | $ | 55,094 | $ | 94,321 | $ | 307,489 | |||||||||
9