Exhibit 99.1
| Contact: |
LeAnne Zumwalt | |
| Investor Relations | ||
| DaVita Inc. | ||
| (650) 696-8910 |
DAVITA 1st QUARTER 2008 RESULTS
El Segundo, California, April 29, 2008 – DaVita Inc. (NYSE: DVA) today announced results for the quarter ended March 31, 2008. Net income for the three months ended March 31, 2008 was $86.9 million, or $0.80 per share, as compared to $76.6 million, or $0.72 per share, for the same period of 2007.
Financial and operating highlights include:
| • | Cash Flow: For the rolling 12-months ended March 31, 2008 operating cash flow was $536 million and free cash flow was $433 million. For the three months ended March 31, 2008 operating cash flow was $91 million and free cash flow was $73 million. |
| • | Operating Income: Operating income for the three months ended March 31, 2008 was $197 million, as compared to $193 million for the same period of 2007. |
| • | Volume: Total treatments for the first quarter of 2008 were 3,934,777 or 50,837 treatments per day, as compared to 3,700,271 or 47,807 treatments per day for the first quarter of 2007. Non-acquired treatment growth in the quarter was 5.0% over the prior year’s first quarter. |
| • | Effective Tax Rate: The effective tax rate for the first quarter of 2008 was 39.0% and we currently project our annual effective tax rate for 2008 to be in the range of 39.0% to 40.0%. |
| • | Shares Repurchases: During the first quarter of 2008, we repurchased a total of 682,500 shares of our common stock for $32.5 million, or an average price of $47.66 per share, pursuant to previously announced Board authorizations. From the period April 1, 2008 to April 28, 2008, we repurchased an additional 2,120,977 shares of our common stock for a total of approximately $103.7 million, or an average price of $48.89 per share. |
| • | Center Activity: As of March 31, 2008, we operated or provided administrative services at 1,390 outpatient dialysis centers serving approximately 107,000 patients, of which 1,366 centers are consolidated in our financial statements. During the first quarter of 2008, we acquired 4 centers, opened 27 new centers, closed one center, and provided administrative services to one additional center. |
Outlook
Our operating income guidance for 2008 is still projected to be in the range of $790-850 million. We continue to believe that operating income is more likely to be in the lower end of the range. These projections and the underlying assumptions involve significant risks and uncertainties, including those described below and actual results may vary significantly from these current projections.
DaVita will be holding a conference call to discuss its results for the first quarter ended March 31, 2008 on April 29, 2008 at 4:30 p.m. 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, including statements related to our 2008 operating results. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, competition, accounting estimates and the risk factors set forth in the Company’s SEC filings, including its Form 10-K for the year ended December 31, 2007. 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 commercial payor plans, |
| • | continued downward pressure on average realized payment rates from commercial payors and possible reductions in government payment rates, |
| • | changes in the structure of and payment rates under the Medicare ESRD Program which may further reduce Medicare payment rates, |
| • | changes in pharmaceutical or anemia management practice patterns, payment policies, or pharmaceutical pricing, |
| • | our ability to maintain contracts with physician medical directors, |
| • | legal compliance risks, including our continued compliance with complex government regulations and compliance with the corporate integrity agreement applicable to the dialysis centers acquired from Gambro Healthcare and assumed in connection with such acquisition, and |
| • | the resolution of ongoing investigations by various federal and state governmental agencies. |
We undertake no obligation to update or revise any forward-looking statements, whether as a result of changes in underlying factors, 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, |
||||||||
| 2008 | 2007 | |||||||
| Net operating revenues |
$ | 1,344,724 | $ | 1,278,166 | ||||
| Operating expenses and charges: |
||||||||
| Patient care costs |
930,209 | 881,585 | ||||||
| General and administrative |
120,765 | 113,221 | ||||||
| Depreciation and amortization |
52,811 | 45,790 | ||||||
| Provision for uncollectible accounts |
34,631 | 33,635 | ||||||
| Minority interests and equity income, net |
9,581 | 10,618 | ||||||
| Total operating expenses and charges |
1,147,997 | 1,084,849 | ||||||
| Operating income |
196,727 | 193,317 | ||||||
| Debt expense |
(59,066 | ) | (68,870 | ) | ||||
| Other income |
4,863 | 3,195 | ||||||
| Income before income taxes |
142,524 | 127,642 | ||||||
| Income tax expense |
55,590 | 51,060 | ||||||
| Net income |
$ | 86,934 | $ | 76,582 | ||||
| Earnings per share: |
||||||||
| Basic earnings per share |
$ | 0.81 | $ | 0.73 | ||||
| Diluted earnings per share |
$ | 0.80 | $ | 0.72 | ||||
| Weighted average shares for earnings per share: |
||||||||
| Basic |
107,367,000 | 105,013,000 | ||||||
| Diluted |
108,239,000 | 106,739,000 | ||||||
3
DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
| Three months ended March 31, |
||||||||
| 2008 | 2007 | |||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 86,934 | $ | 76,582 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
| Depreciation and amortization |
52,811 | 45,790 | ||||||
| Stock-based compensation expense |
9,548 | 7,702 | ||||||
| Tax benefits from stock award exercises |
2,618 | 6,307 | ||||||
| Excess tax benefits from stock award exercises |
(1,411 | ) | (5,426 | ) | ||||
| Deferred income taxes |
(7,439 | ) | (2,194 | ) | ||||
| Minority interests in income of consolidated subsidiaries |
9,054 | 10,828 | ||||||
| Distributions to minority interests |
(16,888 | ) | (10,106 | ) | ||||
| Equity investment losses (income) |
527 | (210 | ) | |||||
| Loss on disposal of assets |
1,355 | 1,552 | ||||||
| Non-cash debt and non-cash rent charges |
4,074 | 6,946 | ||||||
| Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: |
||||||||
| Accounts receivable |
(33,168 | ) | 25,875 | |||||
| Inventories |
3,499 | 19,667 | ||||||
| Other receivables and other current assets |
16,846 | (4,471 | ) | |||||
| Other long term assets |
(537 | ) | (1,873 | ) | ||||
| Accounts payable |
(39,217 | ) | (46,387 | ) | ||||
| Accrued compensation and benefits |
(47,571 | ) | (33,988 | ) | ||||
| Other current liabilities |
(6,500 | ) | (31,636 | ) | ||||
| Income taxes |
56,673 | 26,389 | ||||||
| Other long-term liabilities |
(184 | ) | (3,316 | ) | ||||
| Net cash provided by operating activities |
91,024 | 88,031 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions of property and equipment, net |
(64,673 | ) | (49,444 | ) | ||||
| Acquisitions and purchases of other ownership interests |
(8,838 | ) | (189 | ) | ||||
| Proceeds from divestitures and asset sales |
23 | 98 | ||||||
| Purchase of investments available-for-sale |
(839 | ) | (20,960 | ) | ||||
| Purchase of investments held-to-maturity |
(109 | ) | (15 | ) | ||||
| Proceeds from sale of investments available-for-sale |
4,955 | 6,236 | ||||||
| Proceeds from maturities of investments held-to-maturity |
73 | — | ||||||
| Contributions from minority owners |
9,759 | 4,650 | ||||||
| Purchase of intangible assets |
(64 | ) | (55 | ) | ||||
| Net cash used in investing activities |
(59,713 | ) | (59,679 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Borrowings |
4,050,363 | 3,898,955 | ||||||
| Payments on long-term debt |
(4,052,066 | ) | (3,894,640 | ) | ||||
| Deferred financing costs |
(130 | ) | (4,048 | ) | ||||
| Purchase of treasury stock |
(7,144 | ) | — | |||||
| Excess tax benefits from stock award exercises |
1,411 | 5,426 | ||||||
| Stock award exercises and other share issuances, net |
8,525 | 12,137 | ||||||
| Net cash provided by financing activities |
959 | 17,830 | ||||||
| Net increase in cash and cash equivalents |
32,270 | 46,182 | ||||||
| Cash and cash equivalents at beginning of period |
447,046 | 310,202 | ||||||
| Cash and cash equivalents at end of period |
$ | 479,316 | $ | 356,384 | ||||
4
DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
| March 31, 2008 |
December 31, 2007 |
|||||||
| ASSETS | ||||||||
| Cash and cash equivalents |
$ | 479,316 | $ | 447,046 | ||||
| Short-term investments |
45,859 | 40,278 | ||||||
| Accounts receivable, less allowance of $205,528 and $195,953 |
959,837 | 927,949 | ||||||
| Inventories |
76,807 | 80,173 | ||||||
| Other receivables |
185,238 | 198,744 | ||||||
| Other current assets |
29,604 | 34,482 | ||||||
| Deferred income taxes |
241,816 | 247,578 | ||||||
| Total current assets |
2,018,477 | 1,976,250 | ||||||
| Property and equipment, net |
954,858 | 939,326 | ||||||
| Amortizable intangibles, net |
175,161 | 183,042 | ||||||
| Investments in third-party dialysis businesses |
18,568 | 19,446 | ||||||
| Long-term investments |
12,524 | 22,562 | ||||||
| Other long-term assets |
35,938 | 35,401 | ||||||
| Goodwill |
3,774,906 | 3,767,933 | ||||||
| $ | 6,990,432 | $ | 6,943,960 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Accounts payable |
$ | 211,600 | $ | 225,461 | ||||
| Other liabilities |
479,651 | 486,151 | ||||||
| Accrued compensation and benefits |
288,559 | 334,961 | ||||||
| Current portion of long-term debt |
35,626 | 23,431 | ||||||
| Income taxes payable |
55,298 | 16,492 | ||||||
| Total current liabilities |
1,070,734 | 1,086,496 | ||||||
| Long-term debt |
3,669,809 | 3,683,887 | ||||||
| Other long-term liabilities |
98,286 | 83,448 | ||||||
| Alliance and product supply agreement, net |
39,975 | 41,307 | ||||||
| Deferred income taxes |
164,026 | 166,055 | ||||||
| Minority interests (fair value of potential put obligations - $316,000 and $330,000) |
149,276 | 150,517 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ 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; 134,862,283 shares issued; 106,806,458 and 107,130,127 shares outstanding) |
135 | 135 | ||||||
| Additional paid-in capital |
723,565 | 707,080 | ||||||
| Retained earnings |
1,602,224 | 1,515,290 | ||||||
| Treasury stock, at cost (28,055,825 and 27,732,156 shares) |
(513,958 | ) | (487,744 | ) | ||||
| Accumulated other comprehensive loss |
(13,640 | ) | (2,511 | ) | ||||
| Total shareholders’ equity |
1,798,326 | 1,732,250 | ||||||
| $ | 6,990,432 | $ | 6,943,960 | |||||
5
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)
| Three months ended |
||||||||||||
| March 31, 2008 |
December 31, 2007 |
March 31, 2007 |
||||||||||
| Financial Results: |
||||||||||||
| Net income |
$ | 86.9 | $ | 85.7 | $ | 76.6 | ||||||
| Diluted earnings per share |
$ | 0.80 | $ | 0.79 | $ | 0.72 | ||||||
| Operating income |
$ | 196.7 | $ | 195.3 | $ | 193.3 | ||||||
| Operating income margin |
14.6 | % | 14.4 | % | 15.1 | % | ||||||
| Other comprehensive income |
||||||||||||
| Unrealized (loss) gain on securities, net of tax benefits (expense) of $7.1, $4.8, and ($0.5) |
$ | (11.1 | ) | $ | (7.5 | ) | $ | 0.8 | ||||
| Business Metrics: |
||||||||||||
| Volume |
||||||||||||
| Treatments |
3,934,777 | 3,983,542 | 3,700,271 | |||||||||
| Number of treatment days |
77.4 | 79.6 | 77.4 | |||||||||
| Treatments per day |
50,837 | 50,045 | 47,807 | |||||||||
| Per day year over year increase |
6.3 | % | 5.6 | % | 5.1 | % | ||||||
| Non-acquired growth year over year |
5.0 | % | 4.6 | % | 4.0 | % | ||||||
| Revenue |
||||||||||||
| Total operating revenue |
$ | 1,345 | $ | 1,355 | $ | 1,278 | ||||||
| Dialysis revenue per treatment, including the lab |
$ | 328.95 | $ | 328.11 | $ | 337.84 | ||||||
| Per treatment increase (decrease) from previous quarter |
0.3 | % | (1.6 | %) | 1.0 | % | ||||||
| Per treatment (decrease) increase from previous year |
(2.6 | %) | (1.9 | %) | 3.5 | % | ||||||
| Expenses |
||||||||||||
| A. Patient care costs |
||||||||||||
| Percent of revenue |
69.2 | % | 68.5 | % | 69.0 | % | ||||||
| Per treatment |
$ | 236.41 | $ | 232.83 | $ | 238.25 | ||||||
| Per treatment increase from previous quarter |
1.5 | % | 0.5 | % | 1.7 | % | ||||||
| Per treatment (decrease) increase from previous year |
(0.8 | %) | (0.7 | %) | 2.0 | % | ||||||
| B. General & administrative expenses |
||||||||||||
| Percent of revenue |
9.0 | % | 10.0 | % | 8.9 | % | ||||||
| Per treatment |
$ | 30.69 | $ | 33.89 | $ | 30.60 | ||||||
| Per treatment (decrease) increase from previous quarter |
(9.4 | %) | 8.0 | % | (8.5 | %) | ||||||
| Per treatment increase from previous year |
0.3 | % | 1.4 | % | 2.9 | % | ||||||
| C. Bad debt expense as a percent of current-period revenue |
2.6 | % | 2.6 | % | 2.6 | % | ||||||
| D. Consolidated effective tax rate |
39.0 | % | 37.9 | % | 40.0 | % | ||||||
6
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA—continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
| Three months ended | ||||||||||||
| March 31, 2008 |
December 31, 2007 |
March 31, 2007 |
||||||||||
| Cash Flow |
||||||||||||
| Operating cash flow |
$ | 91.0 | $ | 223.3 | $ | 88.0 | ||||||
| Operating cash flow, last twelve months |
$ | 536.0 | $ | 533.0 | $ | 631.2 | ||||||
| Free cash flow (1) |
$ | 73.2 | $ | 184.6 | $ | 61.4 | ||||||
| Free cash flow, last twelve months (1) |
$ | 433.1 | $ | 421.4 | $ | 515.2 | ||||||
| Capital expenditures: |
||||||||||||
| Development and relocations |
$ | 46.1 | $ | 60.4 | $ | 21.3 | ||||||
| Routine maintenance/IT/other |
$ | 18.5 | $ | 39.7 | $ | 28.1 | ||||||
| Acquisition expenditures |
$ | 8.8 | $ | 45.3 | — | |||||||
| Accounts Receivable |
||||||||||||
| Net receivables |
$ | 960 | $ | 928 | $ | 907 | ||||||
| DSO |
68 | 66 | 66 | |||||||||
| Debt/Capital Structure |
||||||||||||
| Total debt, excluding debt premium of $4.3 million |
$ | 3,701 | $ | 3,703 | $ | 3,750 | ||||||
| Net debt, net of cash, excluding debt premium of $4.3 million |
$ | 3,222 | $ | 3,256 | $ | 3,394 | ||||||
| Leverage ratio (see Note 1) |
2.94x | 2.99x | 3.48x | |||||||||
| Clinical (quarterly averages) |
||||||||||||
| Dialysis adequacy - % of patients with Kt/V > 1.2 |
95 | % | 94 | % | 93 | % | ||||||
| Patients with albumin ³ 3.5 |
82 | % | 84 | % | 83 | % | ||||||
| Patients with HCT ³ 33 |
80 | % | 82 | % | 85 | % | ||||||
| (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, see attached reconciliation schedules. |
7
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA—continued
(unaudited)
(dollars in thousands)
Note 1: Calculation of the Leverage Ratio
Under the Company’s current Senior Secured Credit Facilities (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, divided by “Consolidated EBITDA”. The leverage ratio determines the interest rate margin payable by the Company for its term loan A and revolving line of credit under the Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The following leverage ratio was calculated using “Consolidated EBITDA” as defined in the Credit Agreement. The calculation below is based on the last twelve months of “Consolidated EBITDA”, pro forma for the routine acquisitions that occurred during the period. The Company’s management believes that the presentation of “Consolidated EBITDA” is useful to investors to enhance their understanding of the Company’s leverage ratio under its Credit Agreement.
| Rolling 12-months ended March 31, 2008 |
||||
| Net income |
$ | 392,130 | ||
| Income taxes |
250,274 | |||
| Debt expense including the write-off of deferred financing costs |
247,343 | |||
| Depreciation and amortization |
200,491 | |||
| Minority interests and equity income, net |
44,448 | |||
| Valuation gain on Product Supply Agreement |
(55,275 | ) | ||
| Other |
(4,743 | ) | ||
| Stock-based compensation expense |
35,995 | |||
| “Consolidated EBITDA” |
$ | 1,110,663 | ||
| March 31, 2008 |
||||
| Total debt, excluding debt premium of $4.3 million |
$ | 3,701,137 | ||
| Letters of credit issued |
41,002 | |||
| 3,742,139 | ||||
| Less: cash and cash equivalents |
(479,316 | ) | ||
| Consolidated net debt |
$ | 3,262,823 | ||
| Last twelve months “Consolidated EBITDA” |
$ | 1,110,663 | ||
| Leverage ratio |
2.94x | |||
In accordance with the Company’s Credit Agreement, the Company’s leverage ratio cannot exceed 5.00 to 1.0 as of March 31, 2008. At that date, the Company’s leverage ratio did not exceed 5.00 to 1.0.
8
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
| 1. | Free cash flow |
Free cash flow represents net cash provided by operating activities less capital expenditures for routine maintenance and information technology. We believe free cash flow is a useful adjunct to cash flow from operating activities and other measurements under United States generally accepted accounting principles, since free cash flow 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 United States generally accepted accounting principles 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.
| Three months ended | ||||||||||||
| March 31, 2008 |
December 31, 2007 |
March 31, 2007 |
||||||||||
| Cash provided by operating activities |
$ | 91,024 | $ | 223,326 | $ | 88,031 | ||||||
| Less: Expenditures for routine maintenance and information technology |
(17,827 | ) | (38,688 | ) | (26,589 | ) | ||||||
| Free cash flow |
$ | 73,197 | $ | 184,638 | $ | 61,442 | ||||||
| Rolling 12-Month Period | ||||||||||||
| March 31, 2008 |
December 31, 2007 |
March 31, 2007 |
||||||||||
| Cash provided by operating activities |
$ | 536,029 | $ | 533,036 | $ | 631,166 | ||||||
| Less: Expenditures for routine maintenance and information technology |
(102,901 | ) | (111,663 | ) | (115,994 | ) | ||||||
| Free cash flow |
$ | 433,128 | $ | 421,373 | $ | 515,172 | ||||||
9