(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Title of each class: | Trading symbol(s): | Name of each exchange on which registered: | ||
Exhibit Number | Description |
Press Release dated July 30, 2020 announcing the registrant’s financial results for the quarter ended June 30, 2020. | |
104.0 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
DAVITA INC. | ||
Date: July 30, 2020 | By: | /s/ John D. Winstel |
John D. Winstel | ||
Chief Accounting Officer |
• | Consolidated revenues of $2.880 billion. |
• | Operating income of $410 million or 14.2% operating margin and adjusted operating income of $461 million or 16.0% adjusted operating margin. |
• | Diluted earnings per share from continuing operations of $1.62 and adjusted diluted earnings per share from continuing operations of $1.95. |
• | Operating cash flow from continuing operations of $651 million and free cash flow from continuing operations of $507 million. |
• | Issued an aggregate principal amount of $1.750 billion of 4.625% senior notes. The net proceeds from the offering, together with cash on hand, were used to redeem in full our $1.750 billion in aggregate principal amount of outstanding 5.125% senior notes in July. |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income attributable to DaVita Inc.: | (dollars in millions, except per share data) | |||||||||||||||
Net income from continuing operations | $ | 202 | $ | 194 | $ | 431 | $ | 314 | ||||||||
Diluted per share | $ | 1.62 | $ | 1.16 | $ | 3.44 | $ | 1.89 | ||||||||
Adjusted net income from continuing operations(1) | $ | 242 | $ | 203 | $ | 474 | $ | 356 | ||||||||
Diluted per share adjusted(1) | $ | 1.95 | $ | 1.22 | $ | 3.78 | $ | 2.13 | ||||||||
Net income | $ | 202 | $ | 274 | $ | 441 | $ | 423 | ||||||||
Diluted per share | $ | 1.62 | $ | 1.64 | $ | 3.52 | $ | 2.54 |
(1) | For definitions of non-GAAP financial measures, see the note titled “Note on Non-GAAP Financial Measures” and related reconciliations beginning on page 16. |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
Amount | Margin | Amount | Margin | Amount | Margin | Amount | Margin | |||||||||||||||||||||
Operating income: | (dollars in millions) | |||||||||||||||||||||||||||
Operating income | $ | 410 | 14.2 | % | $ | 462 | 16.2 | % | $ | 875 | 15.3 | % | $ | 802 | 14.4 | % | ||||||||||||
Adjusted operating income(1)(2) | $ | 461 | 16.0 | % | $ | 462 | 16.2 | % | $ | 927 | 16.2 | % | $ | 843 | 15.1 | % |
(1) | For definitions of non-GAAP financial measures, see the note titled “Note on Non-GAAP Financial Measures” and related reconciliations beginning on page 16. |
(2) | Adjusted operating income margin is adjusted operating income divided by consolidated revenues. |
Three months ended | Quarter change | Six months ended | Year to date change | ||||||||||||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2020 | June 30, 2019 | ||||||||||||||||||||
Per treatment metrics: | |||||||||||||||||||||||
Revenue | $ | 352.26 | $ | 347.54 | $ | 4.72 | $ | 349.91 | $ | 349.18 | $ | 0.73 | |||||||||||
Patient care costs | $ | 238.02 | $ | 237.35 | $ | 0.67 | $ | 237.69 | $ | 241.75 | $ | (4.06 | ) | ||||||||||
General and administrative | $ | 27.78 | $ | 27.14 | $ | 0.64 | $ | 27.46 | $ | 27.85 | $ | (0.39 | ) |
Three months ended June 30, | Rolling twelve months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Cash flow: | (dollars in millions) | |||||||||||||||
Operating cash flow | $ | 651 | $ | 610 | $ | 2,333 | $ | 1,598 | ||||||||
Operating cash flow from continuing operations | $ | 651 | $ | 574 | $ | 2,337 | $ | 1,316 | ||||||||
Free cash flow from continuing operations (1) | $ | 507 | $ | 393 | $ | 1,543 | $ | 400 |
(1) | For definitions of non-GAAP financial measures, see the note titled “Note on Non-GAAP Financial Measures” and related reconciliations beginning on page 16. |
Three months ended June 30, 2020 | Six months ended June 30, 2020 | |||||
Effective income tax rate on: | ||||||
Income from continuing operations | 24.6 | % | 24.7 | % | ||
Income from continuing operations attributable to DaVita Inc.(1) | 29.2 | % | 28.8 | % | ||
Adjusted income from continuing operations attributable to DaVita Inc.(1) | 28.0 | % | 28.2 | % |
(1) | For definitions of non-GAAP financial measures, see the note titled “Note on Non-GAAP Financial Measures” and related reconciliations beginning on page 16. |
Current 2020 guidance | Prior 2020 guidance | ||||||||||||||
Low | High | Low | High | ||||||||||||
(dollars in millions, except per share data) | |||||||||||||||
Revenue | $ | 11,500 | $ | 11,700 | $ | 11,500 | $ | 11,700 | |||||||
Adjusted operating income margin | 14.0 | % | 14.75 | % | 13.0 | % | 14.0 | % | |||||||
Effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. | 28.0 | % | 29.5 | % | 28.0 | % | 29.5 | % | |||||||
Adjusted diluted net income from continuing operations per share attributable to DaVita Inc. | $ | 6.25 | $ | 6.75 | $ | 5.75 | $ | 6.25 | |||||||
Capital expenditures from continuing operations | $ | 700 | $ | 750 | $ | 700 | $ | 750 | |||||||
Free cash flow from continuing operations | $ | 800 | $ | 1,000 | $ | 600 | $ | 800 |
• | Collaborating with dialysis providers across the nation to develop a nationwide contingency plan with a goal of maintaining continuity of care for dialysis patients by creating isolation cohort capacity that can be accessed by other dialysis providers. |
• | Requiring proactive screenings to evaluate everyone who enters our outpatient dialysis centers for COVID-19-like symptoms and exposure. |
• | Early cohorting of patients who have or are suspected of having COVID-19 to help keep our other dialysis patients and frontline caregivers safe. |
• | Restricting visitors who are not necessary for patient care. |
• | Onsite testing of patients and teammates for COVID-19 at select facilities. |
• | Implementing a mask policy for all individuals—patients, teammates, essential visitors—at all times in our centers early in the COVID-19 outbreak. |
• | Providing all necessary personal protective equipment (e.g., masks, gowns, shields, hand sanitizer) for teammates' safety. |
• | Updating our sick leave policy to align with CDC guidance for health care professionals. |
• | Offering telehealth options to our physicians in all of our locations to help protect our patients, teammates, and physician partners from potential virus exposure while maintaining continuity of care. |
• | Continuing to offer home dialysis to over 28,000 patients through over 1,750 DaVita locations across the United States with options for home remote monitoring and a dedicated HIPAA-compliant home dialysis telehealth platform. |
• | Sending nearly 100 clinicians who volunteered to travel from their home center to other states to support clinics and acute care hospitals providing dialysis to patients in COVID-19 hotspots. |
• | Providing relief reimbursement to eligible teammates. |
• | Implementing double overtime pay as extra compensation for eligible teammates who worked over 40 hours per work week, during a period of time in the quarter ended June 30, 2020. |
• | Making paid time off (PTO) policy changes, including: |
• | Establishing a donation platform for teammates to give PTO and financial support to other teammates in need. |
• | Sending care packages with helpful resources to frontline teammates. |
• | Transitioning central business office teammates to work remotely without disruption in service levels. |
• | Offering 10 days of free emergency backup child or elder care to our teammates through Bright Horizons. |
• | Providing no-cost resources to help teammates and their families to cope with stress and to enhance mental and emotional well-being through our Employee Assistance Program. |
• | Providing regular communications and updates to teammates on COVID-19-related issues. |
• | Continuing to provide outpatient dialysis to nearly 70% of patients with suspected and confirmed COVID-19, which helps maintain continuity of care and reduces the burden on hospitals. |
• | Returning approximately $250 million of CARES Act provider relief funding to the federal government so it could be allocated to providers in greater need of emergency relief. |
• | Committing millions in charitable donations for initiatives to enhance social justice. |
• | Continuing the DaVita Way of Giving program which allows teammates to direct donations to local nonprofits across the U.S. |
• | the continuing impact of the dynamic and rapidly evolving COVID-19 pandemic, including, without limitation, on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition and results of operations, the government’s response to the COVID-19 pandemic, and the consequences of an extended economic downturn resulting from the impacts of COVID-19, any of which may also have the effect of heightening many of the other risks and uncertainties discussed below; |
• | our need, ability and willingness to utilize any funds received under the CARES Act or subsequent legislation, and the consequences of our decisions with respect thereto; |
• | 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 or percentage of our patients under such plans, including without limitation 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; |
• | noncompliance by us or our business associates with any privacy or security laws or any security breach by us or a third party involving the misappropriation, loss or other unauthorized use or disclosure of confidential information; |
• | the extent to which the ongoing implementation of healthcare reform, or changes in or new legislation, regulations or guidance, enforcement thereof or related litigation result in a reduction in coverage or reimbursement rates for our services, a reduction in the number of patients enrolled in higher-paying commercial plans or that are enrolled in or select Medicare Advantage plans, or other material impacts to our business; or our making incorrect assumptions about how our patients will respond to any such developments; |
• | a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs and the impact of the Medicare Advantage benchmark structure; |
• | risks arising from potential and proposed federal and/or state legislation, regulation, ballot, executive action or other initiatives, including such initiatives related to healthcare and/or labor matters, such as Proposition 23 in California; |
• | the impact of the upcoming election cycle, the political environment and related developments on the current healthcare marketplace and on our business, including with respect to the future of the Affordable Care Act, the exchanges and many other core aspects of the current healthcare marketplace; |
• | our ability to successfully implement our strategy with respect to home-based dialysis, including maintaining our existing business and further developing our capabilities in a complex and highly regulated environment; |
• | changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to calcimimetics; |
• | legal and compliance risks, such as our continued compliance with complex government regulations; |
• | continued increased competition from dialysis providers and others, and other potential marketplace changes; |
• | our ability to maintain contracts with physician medical directors, changing affiliation models for physicians, and the emergence of new models of care introduced by the government or private sector that may erode our patient base and |
• | our ability to complete acquisitions, mergers or dispositions that we might announce or be considering, on terms favorable to us or at all, or to integrate and successfully operate any business we may acquire or have acquired, or to successfully expand our operations and services in markets outside the United States, or to businesses outside of dialysis; |
• | uncertainties related to potential payments and/or adjustments under certain provisions of the equity purchase agreement for the sale of our DaVita Medical Group (DMG) business, such as post-closing adjustments and indemnification obligations; |
• | the variability of our cash flows, including without limitation any extended billing or collections cycles; the risk that we may not be able to generate or access 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; |
• | risks arising from the use of accounting estimates, judgments and interpretations in our financial statements; |
• | impairment of our goodwill, investments or other assets; and |
• | uncertainties associated with the other risk factors set forth in DaVita Inc.'s Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and the risks and uncertainties discussed in any subsequent reports that DaVita has filed or furnished with the SEC from time to time. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Dialysis patient service revenues | $ | 2,758,197 | $ | 2,723,816 | $ | 5,471,478 | $ | 5,353,505 | |||||||
Other revenues | 121,782 | 118,889 | 249,738 | 232,312 | |||||||||||
Total revenues | 2,879,979 | 2,842,705 | 5,721,216 | 5,585,817 | |||||||||||
Operating expenses and charges: | |||||||||||||||
Patient care costs | 1,984,564 | 1,957,753 | 3,960,013 | 3,922,688 | |||||||||||
General and administrative | 316,209 | 275,338 | 579,785 | 526,151 | |||||||||||
Depreciation and amortization | 157,376 | 152,242 | 312,055 | 300,770 | |||||||||||
Equity investment income | (4,342 | ) | (4,514 | ) | (22,185 | ) | (7,222 | ) | |||||||
Loss on changes in ownership interest, net | 16,252 | — | 16,252 | — | |||||||||||
Goodwill impairment charges | — | — | — | 41,037 | |||||||||||
Total operating expenses and charges | 2,470,059 | 2,380,819 | 4,845,920 | 4,783,424 | |||||||||||
Operating income | 409,920 | 461,886 | 875,296 | 802,393 | |||||||||||
Debt expense | (81,381 | ) | (131,666 | ) | (169,984 | ) | (263,185 | ) | |||||||
Debt prepayment and refinancing charges | — | (12,160 | ) | (2,948 | ) | (12,160 | ) | ||||||||
Other income, net | 9,545 | 5,643 | 5,195 | 12,583 | |||||||||||
Income from continuing operations before income taxes | 338,084 | 323,703 | 707,559 | 539,631 | |||||||||||
Income tax expense | 83,212 | 75,938 | 174,772 | 132,684 | |||||||||||
Net income from continuing operations | 254,872 | 247,765 | 532,787 | 406,947 | |||||||||||
Net income from discontinued operations, net of tax | — | 79,392 | 9,980 | 109,697 | |||||||||||
Net income | 254,872 | 327,157 | 542,767 | 516,644 | |||||||||||
Less: Net income attributable to noncontrolling interests | (53,270 | ) | (53,606 | ) | (101,572 | ) | (93,804 | ) | |||||||
Net income attributable to DaVita Inc. | $ | 201,602 | $ | 273,551 | $ | 441,195 | $ | 422,840 | |||||||
Earnings per share attributable to DaVita Inc.: | |||||||||||||||
Basic net income from continuing operations per share | $ | 1.65 | $ | 1.17 | $ | 3.49 | $ | 1.89 | |||||||
Basic net income per share | $ | 1.65 | $ | 1.64 | $ | 3.57 | $ | 2.54 | |||||||
Diluted net income from continuing operations per share | $ | 1.62 | $ | 1.16 | $ | 3.44 | $ | 1.89 | |||||||
Diluted net income per share | $ | 1.62 | $ | 1.64 | $ | 3.52 | $ | 2.54 | |||||||
Weighted average shares for earnings per share: | |||||||||||||||
Basic | 122,074,452 | 166,346,041 | 123,485,412 | 166,366,886 | |||||||||||
Diluted | 124,068,278 | 166,799,525 | 125,478,913 | 166,789,978 | |||||||||||
Amounts attributable to DaVita Inc.: | |||||||||||||||
Net income from continuing operations | $ | 201,602 | $ | 194,223 | $ | 431,215 | $ | 314,477 | |||||||
Net income from discontinued operations | — | 79,328 | 9,980 | 108,363 | |||||||||||
Net income attributable to DaVita Inc. | $ | 201,602 | $ | 273,551 | $ | 441,195 | $ | 422,840 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income | $ | 254,872 | $ | 327,157 | $ | 542,767 | $ | 516,644 | |||||||
Other comprehensive income, net of tax: | |||||||||||||||
Unrealized losses on interest rate cap agreements: | |||||||||||||||
Unrealized losses | (1,824 | ) | (31 | ) | (14,842 | ) | (611 | ) | |||||||
Reclassifications of net realized losses into net income | 1,623 | 1,606 | 3,246 | 3,212 | |||||||||||
Unrealized gains (losses) on foreign currency translation: | |||||||||||||||
Foreign currency translation adjustments | 5,619 | 12,365 | (76,013 | ) | (1,288 | ) | |||||||||
Other comprehensive income (loss) | 5,418 | 13,940 | (87,609 | ) | 1,313 | ||||||||||
Total comprehensive income | 260,290 | 341,097 | 455,158 | 517,957 | |||||||||||
Less: Comprehensive income attributable to noncontrolling interests | (53,270 | ) | (53,606 | ) | (101,572 | ) | (93,804 | ) | |||||||
Comprehensive income attributable to DaVita Inc. | $ | 207,020 | $ | 287,491 | $ | 353,586 | $ | 424,153 |
Six months ended June 30, | |||||||
2020 | 2019 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 542,767 | $ | 516,644 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 312,055 | 300,770 | |||||
Debt refinancing charges | 884 | — | |||||
Impairment charges | — | 41,037 | |||||
Stock-based compensation expense | 42,125 | 29,045 | |||||
Deferred income taxes | 132,101 | 60,706 | |||||
Equity investment (loss) income, net | (6,494 | ) | 2,631 | ||||
Loss on sales of business interests, net | 16,252 | 23,022 | |||||
Other non-cash charges, net | (5,885 | ) | 25,857 | ||||
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | |||||||
Accounts receivable | 15,194 | (288,437 | ) | ||||
Inventories | (696 | ) | 11,542 | ||||
Other receivables and other current assets | (131,988 | ) | (5,142 | ) | |||
Other long-term assets | 1,950 | (410 | ) | ||||
Accounts payable | (15,858 | ) | (68,887 | ) | |||
Accrued compensation and benefits | (19,325 | ) | (88,473 | ) | |||
Other current liabilities | 146,490 | 151,780 | |||||
Income taxes | (4,800 | ) | 57,551 | ||||
Other long-term liabilities | (13,269 | ) | (18,121 | ) | |||
Net cash provided by operating activities | 1,011,503 | 751,115 | |||||
Cash flows from investing activities: | |||||||
Additions of property and equipment | (291,667 | ) | (373,918 | ) | |||
Acquisitions | (44,267 | ) | (65,970 | ) | |||
Proceeds from asset and business sales | 70,615 | 3,851,381 | |||||
Purchase of debt investments held-to-maturity | (142,483 | ) | (3,322 | ) | |||
Purchase of other debt and equity investments | (3,034 | ) | (4,812 | ) | |||
Proceeds from debt investments held-to-maturity | 7,621 | — | |||||
Proceeds from sale of other debt and equity investments | 3,438 | 5,893 | |||||
Purchase of equity method investments | (8,101 | ) | (6,715 | ) | |||
Distributions from equity method investments | 739 | 155 | |||||
Net cash (used in) provided by investing activities | (407,139 | ) | 3,402,692 | ||||
Cash flows from financing activities: | |||||||
Borrowings | 2,324,300 | 32,367,300 | |||||
Payments on long-term debt | (635,695 | ) | (33,527,788 | ) | |||
Deferred financing and debt redemption costs | (20,375 | ) | (3,621 | ) | |||
Purchase of treasury stock | (321,798 | ) | (73,078 | ) | |||
Distributions to noncontrolling interests | (118,553 | ) | (95,714 | ) | |||
Stock award exercises and other share issuances, net | (2,106 | ) | 2,107 | ||||
Contributions from noncontrolling interests | 20,582 | 31,281 | |||||
Purchases of noncontrolling interests | (6,782 | ) | (11,040 | ) | |||
Net cash provided by (used in) financing activities | 1,239,573 | (1,310,553 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (16,936 | ) | (77 | ) | |||
Net increase in cash, cash equivalents and restricted cash | 1,827,001 | 2,843,177 | |||||
Less: Net decrease in cash, cash equivalents and restricted cash from discontinued operations | — | (423,813 | ) | ||||
Net increase in cash, cash equivalents and restricted cash from continuing operations | 1,827,001 | 3,266,990 | |||||
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year | 1,208,718 | 415,420 | |||||
Cash, cash equivalents and restricted cash of continuing operations at end of the year | $ | 3,035,719 | $ | 3,682,410 |
June 30, 2020 | December 31, 2019 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 2,928,910 | $ | 1,102,372 | |||
Restricted cash and equivalents | 106,809 | 106,346 | |||||
Short-term investments | 154,115 | 11,572 | |||||
Accounts receivable | 1,772,259 | 1,795,598 | |||||
Inventories | 97,902 | 97,949 | |||||
Other receivables | 614,606 | 489,695 | |||||
Prepaid and other current assets | 63,266 | 66,866 | |||||
Income tax receivable | 41,963 | 19,772 | |||||
Total current assets | 5,779,830 | 3,690,170 | |||||
Property and equipment, net of accumulated depreciation of $4,229,363 and $3,969,566, respectively | 3,417,918 | 3,473,384 | |||||
Operating lease right-of-use assets | 2,826,620 | 2,830,047 | |||||
Intangible assets, net of accumulated amortization of $88,133 and $81,922, respectively | 113,379 | 135,684 | |||||
Equity method and other investments | 255,489 | 241,983 | |||||
Long-term investments | 28,340 | 36,519 | |||||
Other long-term assets | 92,909 | 115,972 | |||||
Goodwill | 6,790,606 | 6,787,635 | |||||
$ | 19,305,091 | $ | 17,311,394 | ||||
LIABILITIES AND EQUITY | |||||||
Accounts payable | $ | 357,283 | $ | 403,840 | |||
Other liabilities | 902,019 | 756,174 | |||||
Accrued compensation and benefits | 686,700 | 695,052 | |||||
Current portion of operating lease liabilities | 360,405 | 343,912 | |||||
Current portion of long-term debt | 1,906,560 | 130,708 | |||||
Income tax payable | 61,596 | 42,412 | |||||
Total current liabilities | 4,274,563 | 2,372,098 | |||||
Long-term operating lease liabilities | 2,709,569 | 2,723,800 | |||||
Long-term debt | 7,894,674 | 7,977,526 | |||||
Other long-term liabilities | 144,121 | 160,809 | |||||
Deferred income taxes | 706,410 | 577,543 | |||||
Total liabilities | 15,729,337 | 13,811,776 | |||||
Commitments and contingencies | |||||||
Noncontrolling interests subject to put provisions | 1,241,937 | 1,180,376 | |||||
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; 126,036,632 and 121,984,334 shares issued and outstanding at June 30, 2020, respectively and 125,842,853 shares issued and outstanding at December 31, 2019) | 126 | 126 | |||||
Additional paid-in capital | 719,102 | 749,043 | |||||
Retained earnings | 1,872,933 | 1,431,738 | |||||
Treasury stock (4,052,298 and zero shares, respectively) | (303,139 | ) | — | ||||
Accumulated other comprehensive loss | (135,107 | ) | (47,498 | ) | |||
Total DaVita Inc. shareholders' equity | 2,153,915 | 2,133,409 | |||||
Noncontrolling interests not subject to put provisions | 179,902 | 185,833 | |||||
Total equity | 2,333,817 | 2,319,242 | |||||
$ | 19,305,091 | $ | 17,311,394 |
Three months ended | Six months ended June 30, 2020 | ||||||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||||||||
1. Consolidated business metrics: | |||||||||||||||
Operating income margin | 14.2 | % | 16.4 | % | 16.2 | % | 15.3 | % | |||||||
Adjusted operating income margin excluding certain items(1)(3) | 16.0 | % | 16.4 | % | 16.2 | % | 16.2 | % | |||||||
General and administrative expenses as a percent of consolidated revenues(2) | 11.0 | % | 9.3 | % | 9.7 | % | 10.1 | % | |||||||
Effective income tax rate on income from continuing operations | 24.6 | % | 24.8 | % | 23.5 | % | 24.7 | % | |||||||
Effective income tax rate on income from continuing operations attributable to DaVita Inc.(1) | 29.2 | % | 28.5 | % | 28.0 | % | 28.8 | % | |||||||
Effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc.(1) | 28.0 | % | 28.5 | % | 27.9 | % | 28.2 | % | |||||||
2. Summary of financial results: | |||||||||||||||
Revenues: | |||||||||||||||
U.S. net dialysis patient services and other | $ | 2,675 | $ | 2,617 | $ | 2,637 | $ | 5,292 | |||||||
Other—Ancillary services | |||||||||||||||
U.S. other | 116 | 124 | 114 | 240 | |||||||||||
International net dialysis patient service and other | 129 | 137 | 125 | 265 | |||||||||||
245 | 261 | 239 | 506 | ||||||||||||
Eliminations | (40 | ) | (36 | ) | (34 | ) | (76 | ) | |||||||
Total consolidated revenues | $ | 2,880 | $ | 2,841 | $ | 2,843 | $ | 5,721 | |||||||
Operating income (loss): | |||||||||||||||
U.S. dialysis | $ | 523 | $ | 492 | $ | 499 | $ | 1,014 | |||||||
Other—Ancillary services | |||||||||||||||
U.S. | (41 | ) | (19 | ) | (16 | ) | (60 | ) | |||||||
International(4) | 1 | 17 | 1 | 18 | |||||||||||
(40 | ) | (3 | ) | (15 | ) | (42 | ) | ||||||||
Corporate administrative support expenses | (73 | ) | (24 | ) | (22 | ) | (97 | ) | |||||||
Total consolidated operating income | $ | 410 | $ | 465 | $ | 462 | $ | 875 |
Three months ended | Six months ended June 30, 2020 | ||||||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||||||||
3. Summary of reportable segment financial results: | |||||||||||||||
U.S. dialysis | |||||||||||||||
Revenue: | |||||||||||||||
Dialysis patient service revenues | $ | 2,667 | $ | 2,611 | $ | 2,632 | $ | 5,278 | |||||||
Other revenues | 8 | 5 | 6 | 13 | |||||||||||
Total operating revenues | 2,675 | 2,617 | 2,637 | 5,292 | |||||||||||
Operating expenses: | |||||||||||||||
Patient care costs | 1,802 | 1,783 | 1,785 | 3,585 | |||||||||||
General and administrative | 210 | 204 | 216 | 414 | |||||||||||
Depreciation and amortization | 148 | 146 | 145 | 295 | |||||||||||
Equity investment income | (8 | ) | (9 | ) | (7 | ) | (17 | ) | |||||||
Total operating expenses | 2,152 | 2,125 | 2,139 | 4,277 | |||||||||||
Segment operating income | $ | 523 | $ | 492 | $ | 499 | $ | 1,014 | |||||||
4. U.S. dialysis business metrics: | |||||||||||||||
Volume: | |||||||||||||||
Treatments | 7,570,908 | 7,513,321 | 7,520,587 | 15,084,229 | |||||||||||
Number of treatment days | 78.0 | 77.6 | 78.0 | 155.6 | |||||||||||
Average treatments per day | 97,063 | 96,821 | 96,418 | 96,942 | |||||||||||
Per day year over year increase | 0.7 | % | 1.6 | % | 2.6 | % | 1.1 | % | |||||||
Normalized non-acquired treatment growth year over year(5) | 1.6 | % | 2.3 | % | 2.1 | % | |||||||||
Operating net revenues: | |||||||||||||||
Average patient service revenue per treatment | $ | 352.26 | $ | 347.54 | $ | 349.97 | $ | 349.91 | |||||||
Expenses: | |||||||||||||||
Patient care costs per treatment | $ | 238.02 | $ | 237.35 | $ | 237.34 | $ | 237.69 | |||||||
General and administrative expenses per treatment | $ | 27.78 | $ | 27.14 | $ | 28.68 | $ | 27.46 | |||||||
Accounts receivable: | |||||||||||||||
Net receivables | $ | 1,649 | $ | 1,668 | $ | 1,816 | |||||||||
DSO | 57 | 59 | 63 |
Three months ended | Six months ended June 30, 2020 | ||||||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||||||||
5. Cash flow: | |||||||||||||||
Operating cash flow | $ | 651 | $ | 360 | $ | 610 | $ | 1,012 | |||||||
Operating cash flow from continuing operations | $ | 651 | $ | 360 | $ | 574 | $ | 1,012 | |||||||
Operating cash flow from continuing operations, last twelve months | $ | 2,337 | $ | 2,260 | $ | 1,316 | |||||||||
Free cash flow from continuing operations(1) | $ | 507 | $ | 184 | $ | 393 | $ | 691 | |||||||
Free cash flow from continuing operations, last twelve months(1) | $ | 1,543 | $ | 1,429 | $ | 400 | |||||||||
Capital expenditures from continuing operations: | |||||||||||||||
Routine maintenance/IT/other | $ | 74 | $ | 82 | $ | 61 | $ | 156 | |||||||
Development and relocations | $ | 63 | $ | 73 | $ | 95 | $ | 136 | |||||||
Acquisition expenditures | $ | 10 | $ | 34 | $ | 54 | $ | 44 | |||||||
Proceeds from sale of self-developed properties | $ | 42 | $ | 27 | $ | 14 | $ | 69 | |||||||
6. Debt and capital structure: | |||||||||||||||
Total debt(6) | $ | 9,886 | $ | 8,657 | $ | 9,004 | |||||||||
Net debt, net of cash and cash equivalents(6) | $ | 6,957 | $ | 7,275 | $ | 5,428 | |||||||||
Leverage ratio (see calculation on page 15) | 3.66x | 3.17x | 2.47x | ||||||||||||
Weighted average effective interest rate: | |||||||||||||||
During the quarter | 3.64 | % | 4.35 | % | 5.17 | % | |||||||||
At end of the quarter | 3.65 | % | 3.75 | % | 5.30 | % | |||||||||
On the senior secured credit facilities at end of the quarter | 2.10 | % | 2.78 | % | 5.31 | % | |||||||||
Debt with fixed and capped rates as a percentage of total debt: | |||||||||||||||
Debt with rates fixed by its terms | 54 | % | 42 | % | 54 | % | |||||||||
Debt with rates fixed by its terms or capped by cap agreements | 90 | % | 82 | % | 93 | % | |||||||||
Amount spent on share repurchases | $ | — | $ | 303 | $ | 112 | $ | 303 | |||||||
Number of shares repurchased | — | 4,052,298 | 2,059,976 | 4,052,298 |
(1) | These are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, and for a definition of adjusted amounts, see attached reconciliation schedules. |
(2) | General and administrative expenses includes certain corporate support, long-term incentive compensation, accruals for legal matters and advocacy costs. |
(3) | Adjusted operating income margin is adjusted operating income divided by consolidated revenues. |
(4) | The reported operating income (loss) for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, include approximately $(3.7), $9.7 and $(0.5), respectively, of foreign currency gain (loss). |
(5) | Normalized non-acquired treatment growth reflects year over year growth in treatment volume, adjusted to exclude acquisitions and other similar transactions, further adjusted to normalize for the number and mix of treatment days in a given quarter versus the prior year quarter. |
(6) | The reported balance sheet amounts at June 30, 2020, March 31, 2020 and June 30, 2019, exclude approximately $85.1, $68.8 and $34.5, respectively, of debt discount and other deferred financing costs related to our senior secured credit facilities and senior notes in effect or outstanding, respectively at that time. |
Rolling twelve months ended | |||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||||
Net income attributable to DaVita Inc. from continuing operations (1) | $ | 823,570 | $ | 816,191 | $ | 548,180 | |||||
Income taxes | 321,716 | 314,442 | 236,479 | ||||||||
Interest expense | 307,509 | 354,995 | 476,507 | ||||||||
Depreciation and amortization | 626,436 | 621,302 | 601,927 | ||||||||
Impairment charges | 83,855 | 83,855 | 47,130 | ||||||||
Noncontrolling interests and equity investment income, net | 221,002 | 222,118 | 194,434 | ||||||||
Stock-settled stock-based compensation | 80,228 | 72,918 | 77,766 | ||||||||
Debt prepayment, refinancing and redemption charges | 24,190 | 36,350 | 12,160 | ||||||||
Loss (gain) on changes in ownership interest, net | 16,252 | — | (26,646 | ) | |||||||
Other | 10,264 | (10,216 | ) | 56,176 | |||||||
“Consolidated EBITDA” | $ | 2,515,022 | $ | 2,511,955 | $ | 2,224,113 | |||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||||
Total debt, excluding debt discount and other deferred financing costs(2) | $ | 9,886,314 | $ | 8,657,211 | $ | 9,003,631 | |||||
Letters of credit issued | 57,452 | 57,705 | 72,763 | ||||||||
9,943,766 | 8,714,916 | 9,076,394 | |||||||||
Less: Cash and cash equivalents including short-term investments(3) | (750,000 | ) | (750,000 | ) | (3,578,751 | ) | |||||
Consolidated net debt | $ | 9,193,766 | $ | 7,964,916 | $ | 5,497,643 | |||||
Last twelve months “Consolidated EBITDA” | $ | 2,515,022 | $ | 2,511,955 | $ | 2,224,113 | |||||
Leverage ratio | 3.66x | 3.17x | 2.47x | ||||||||
Maximum leverage ratio permitted under New and Prior Credit Agreement | 5.00x | 5.00x | 5.00x |
(1) | The reported net income is our reported net income from continuing operations attributable to DaVita Inc. as the Credit Agreement requires divestitures to be reflected on a pro forma basis, as such net income from discontinued operations is excluded from our leverage ratio calculation. |
(2) | The reported total debt amounts at June 30, 2020, March 31, 2020 and June 30, 2019, exclude $85,080, $68,757 and $34,502, respectively, of debt discount and other deferred financing costs related to our senior secured credit facilities and senior notes in effect at that time. |
(3) | Excluding amounts not readily convertible to cash related to the Company's non-qualified deferred compensation plans for all periods presented. The Company's New Credit Agreement limits the amount deducted for cash and cash equivalents to the lesser of all unrestricted cash and cash equivalents of the Company or $750,000. |
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 | |||||||||||||||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||||||||||||||||
Dollars | Per share | Dollars | Per share | Dollars | Per share | ||||||||||||||||||
Net income from continuing operations attributable to DaVita Inc. | $ | 201,602 | $ | 1.62 | $ | 229,613 | $ | 1.81 | $ | 194,223 | $ | 1.16 | |||||||||||
Operating charges: | |||||||||||||||||||||||
Goodwill impairment charges | — | — | — | — | — | — | |||||||||||||||||
Loss on changes in ownership interests, net | 16,252 | 0.13 | — | — | — | — | |||||||||||||||||
General and administrative: | |||||||||||||||||||||||
Accruals for legal matters | 35,000 | 0.28 | — | — | — | — | |||||||||||||||||
Debt prepayment and refinancing charges | — | — | 2,948 | 0.02 | 12,160 | 0.07 | |||||||||||||||||
Related income tax | (10,988 | ) | (0.09 | ) | (736 | ) | (0.01 | ) | (3,130 | ) | (0.02 | ) | |||||||||||
Adjusted net income from continuing operations attributable to DaVita Inc. | $ | 241,866 | $ | 1.95 | $ | 231,825 | $ | 1.83 | $ | 203,253 | $ | 1.22 |
Six months ended | |||||||||||||||
June 30, 2020 | June 30, 2019 | ||||||||||||||
Dollars | Per share | Dollars | Per share | ||||||||||||
Net income from continuing operations attributable to DaVita Inc. | $ | 431,215 | $ | 3.44 | $ | 314,477 | $ | 1.89 | |||||||
Operating charges: | |||||||||||||||
Goodwill impairment charges | — | — | 41,037 | 0.25 | |||||||||||
Loss on changes in ownership interests, net | 16,252 | 0.13 | — | — | |||||||||||
General and administrative: | |||||||||||||||
Accruals for legal matters | 35,000 | 0.28 | — | — | |||||||||||
Debt prepayment and refinancing charges | 2,948 | 0.02 | 12,160 | 0.07 | |||||||||||
Related income tax | (11,724 | ) | (0.09 | ) | (11,995 | ) | (0.07 | ) | |||||||
Adjusted net income from continuing operations attributable to DaVita Inc. | $ | 473,691 | $ | 3.78 | $ | 355,679 | $ | 2.13 |
Three months ended | Six months ended | ||||||||||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||||
Consolidated: | |||||||||||||||||||
Operating income | $ | 409,920 | $ | 465,376 | $ | 461,886 | $ | 875,296 | $ | 802,393 | |||||||||
Operating charges: | |||||||||||||||||||
Goodwill impairment charges | — | — | — | — | 41,037 | ||||||||||||||
Loss on changes in ownership interests, net | 16,252 | — | — | 16,252 | — | ||||||||||||||
General and administrative: | |||||||||||||||||||
Accruals for legal matters | 35,000 | — | — | 35,000 | — | ||||||||||||||
Adjusted operating income | $ | 461,172 | $ | 465,376 | $ | 461,886 | $ | 926,548 | $ | 843,430 |
Three months ended | Six months ended | ||||||||||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||||
Consolidated: | |||||||||||||||||||
U.S. dialysis: | |||||||||||||||||||
Segment operating income | $ | 522,630 | $ | 491,607 | $ | 498,957 | $ | 1,014,236 | $ | 915,939 | |||||||||
Other - Ancillary services: | |||||||||||||||||||
U.S. | |||||||||||||||||||
Segment operating loss | (40,991 | ) | (19,369 | ) | (15,652 | ) | (60,361 | ) | (30,570 | ) | |||||||||
Loss on changes in ownership interests, net | 16,252 | — | — | 16,252 | — | ||||||||||||||
Adjusted operating loss | (24,739 | ) | (19,369 | ) | (15,652 | ) | (44,109 | ) | (30,570 | ) | |||||||||
International | |||||||||||||||||||
Segment operating income (loss) | 1,370 | 16,723 | 602 | 18,093 | (42,110 | ) | |||||||||||||
Goodwill impairment charges | — | — | — | — | 41,037 | ||||||||||||||
Adjusted operating income (loss) | 1,370 | 16,723 | 602 | 18,093 | (1,073 | ) | |||||||||||||
Adjusted Other - Ancillary services operating loss | (23,370 | ) | (2,646 | ) | (15,050 | ) | (26,016 | ) | (31,643 | ) | |||||||||
Corporate administrative support expenses | |||||||||||||||||||
Segment expenses | (73,088 | ) | (23,585 | ) | (22,021 | ) | (96,672 | ) | (40,866 | ) | |||||||||
Accruals for legal matters | 35,000 | — | — | 35,000 | — | ||||||||||||||
Adjusted Corporate administrative support expenses | (38,088 | ) | (23,585 | ) | (22,021 | ) | (61,672 | ) | (40,866 | ) | |||||||||
Adjusted operating income | $ | 461,172 | $ | 465,376 | $ | 461,886 | $ | 926,548 | $ | 843,430 |
Three months ended | Six months ended June 30, 2020 | ||||||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||||||||
Income from continuing operations before income taxes | $ | 338,084 | $ | 369,475 | $ | 323,703 | $ | 707,559 | |||||||
Less: Noncontrolling owners’ income primarily attributable to non-tax paying entities | (53,335 | ) | (48,372 | ) | (53,916 | ) | (101,707 | ) | |||||||
Income from continuing operations before income taxes attributable to DaVita Inc. | $ | 284,749 | $ | 321,103 | $ | 269,787 | $ | 605,852 | |||||||
Income tax expense for continuing operations | $ | 83,212 | $ | 91,560 | $ | 75,938 | $ | 174,772 | |||||||
Less: Income tax attributable to noncontrolling interests | (65 | ) | (70 | ) | (374 | ) | (135 | ) | |||||||
Income tax expense from continuing operations attributable to DaVita Inc. | $ | 83,147 | $ | 91,490 | $ | 75,564 | $ | 174,637 | |||||||
Effective income tax rate on income from continuing operations attributable to DaVita Inc. | 29.2 | % | 28.5 | % | 28.0 | % | 28.8 | % |
Three months ended | Six months ended June 30, 2020 | ||||||||||||||
June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||||||||
Income from continuing operations before income taxes | $ | 338,084 | $ | 369,475 | $ | 323,703 | $ | 707,559 | |||||||
Operating charges: | |||||||||||||||
Loss on changes in ownership interests, net | 16,252 | — | — | 16,252 | |||||||||||
General and administrative: | |||||||||||||||
Accruals for legal matters | 35,000 | — | — | 35,000 | |||||||||||
Debt prepayment and refinancing charges | — | 2,948 | 12,160 | 2,948 | |||||||||||
Noncontrolling owners’ income primarily attributable to non-tax paying entities | (53,335 | ) | (48,372 | ) | (53,916 | ) | (101,707 | ) | |||||||
Adjusted income from continuing operations before income taxes attributable to DaVita Inc. |