EL SEGUNDO, Calif., Aug. 4 /PRNewswire-FirstCall/ -- DaVita Inc. (NYSE: DVA) today announced results for the quarter ended June 30, 2009. Net income attributable to DaVita Inc. for the three and six months ended June 30, 2009 was $105.8 million and $202.0 million, or $1.02 per share and $1.94 per share, respectively. This compares to net income attributable to DaVita Inc. for the three and six months ended June 30, 2008 of $95.0 million and $181.9 million, or $0.90 per share and $1.70 per share, respectively. (Logo: http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO) Financial and operating highlights include: -- Cash Flow: For the rolling 12 months ended June 30, 2009 operating cash flow was $705 million and free cash flow was $527 million. For the three months ended June 30, 2009 operating cash flow was $212 million and free cash flow was $174 million. -- Operating Income: Operating income for the three and six months ended June 30, 2009 was $236 million and $457 million, respectively, as compared to $218 million and $424 million, respectively, for the same periods of 2008. -- Volume: Total treatments for the second quarter of 2009 were 4,228,179, or 54,207 treatments per day, representing a per day increase of 5.2% over the second quarter of 2008. Non-acquired treatment growth in the quarter was 4.5% over the prior year's second quarter. -- Effective Tax Rate: Our effective tax rate was 37.1% and 37.2% for the three and six months ended June 30, 2009, respectively. This effective tax rate is impacted by the amount of third party owners' income attributable to non-tax paying entities. The effective tax rate attributable to DaVita Inc. was 40.0% and 40.1% for the three and six months ended June 30, 2009 which was in the range of our previously stated guidance. Our effective tax rate for 2009 is still projected to be in the range of 37.0% to 38.0% and our 2009 effective tax rate attributable to DaVita Inc. is still projected to be in a range of 39.5% to 40.5%. -- Center Activity: As of June 30, 2009, we operated or provided administrative services at 1,493 outpatient dialysis centers serving approximately 116,000 patients, of which 1,464 centers are consolidated in our financial statements. During the second quarter of 2009, we acquired two centers, opened 23 new centers, merged five centers and sold two centers. Outlook We are narrowing our operating income guidance for 2009 to be in the range of $900-$930 million. Our operating cash flow guidance remains unchanged at a range of $550-$600 million. 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 second quarter ended June 30, 2009 on August 4, 2009 at 5:00 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, http://www.davita.com/, for the following 30 days. This release contains forward-looking statements, including statements related to our 2009 operating results and 2009 expected effective tax rate and the expected effective tax rate attributable to DaVita Inc. 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 our SEC filings, including our Form 10-K for the year ended December 31, 2008 and subsequent quarterly reports on Form 10-Q. 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, which may result in the loss of revenue or patients, -- a reduction in the number of patients under higher-paying commercial plans, -- a reduction in government payment rates or the structure of payments under the Medicare ESRD Program which result in lower reimbursement for services we provide to Medicare patients, -- 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 Six months ended June 30, June 30, -------- -------- 2009 2008 2009 2008 ---- ---- ---- ---- Net operating revenues $1,519,041 $1,407,304 $2,966,681 $2,752,028 Operating expenses and charges: Patient care costs 1,051,879 973,286 2,057,765 1,903,495 General and administrative 132,166 125,199 259,439 245,964 Depreciation and amortization 58,185 52,892 115,308 105,703 Provision for uncollectible accounts 41,233 37,497 77,969 72,128 Equity investment (income) loss (376) (4) (358) 523 ---- -- ---- --- Total operating expenses and charges 1,283,087 1,188,870 2,510,123 2,327,813 --------- --------- --------- --------- Operating income 235,954 218,434 456,558 424,215 Debt expense (47,088) (55,320) (95,389) (114,386) Other income 1,273 2,987 2,027 7,850 ----- ----- ----- ----- Income before income taxes 190,139 166,101 363,196 317,679 Income tax expense 70,507 58,273 135,290 113,843 ------ ------ ------- ------- Net income 119,632 107,828 227,906 203,836 Less: Net income attributable to noncontrolling interests (13,813) (12,877) (25,876) (21,951) -------- -------- -------- -------- Net income attributable to DaVita Inc. $105,819 $94,951 $202,030 $181,885 ======== ======= ======== ======== Earnings per share: Basic earnings per share attributable to DaVita Inc. $1.02 $0.91 $1.95 $1.71 ===== ===== ===== ===== Diluted earnings per share attributable to DaVita Inc. $1.02 $0.90 $1.94 $1.70 ===== ===== ===== ===== Weighted average shares for earnings per share: Basic 103,705,683 104,814,817 103,791,579 106,082,024 =========== =========== =========== =========== Diluted 103,925,843 105,617,173 104,166,964 106,927,556 =========== =========== =========== =========== DAVITA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands) Six months ended June 30, -------- 2009 2008 ---- ---- Cash flows from operating activities: Net income $227,906 $203,836 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 115,308 105,703 Stock-based compensation expense 22,412 19,216 Tax benefits from stock award exercises 9,974 5,264 Excess tax benefits from stock award exercises (7,591) (3,055) Deferred income taxes 30,006 17,171 Equity investment (income) loss (358) 523 Loss on disposal of assets 4,813 4,462 Non-cash debt and non-cash rent charges 6,567 6,953 Changes in operating assets and liabilities, other than from acquisitions and divestitures: Accounts receivable (54,073) (119,996) Inventories 19,044 (301) Other receivables and other current assets 4,026 (12,493) Other long-term assets 3,324 (10,344) Accounts payable (51,960) (18,255) Accrued compensation and benefits 37,077 4,091 Other current liabilities (42,359) 58,078 Income taxes 35,535 (10,074) Other long-term liabilities (13,019) 4,178 -------- ----- Net cash provided by operating activities 346,632 254,957 ------- ------- Cash flows from investing activities: Additions of property and equipment, net (138,205) (145,007) Acquisitions (43,314) (46,763) Proceeds from asset sales 5,784 125 Purchase of investments available for sale (1,429) (1,352) Purchase of investments held-to-maturity (15,193) (15,777) Proceeds from sale of investments available for sale 16,537 5,321 Proceeds from maturities of investments held-to-maturity 15,620 15,462 Distributions received on equity investments 88 513 Purchase of intangible assets and other (260) (65) ----- ---- Net cash used in investing activities (160,372) (187,543) --------- --------- Cash flows from financing activities: Borrowings 9,114,319 8,397,822 Payments on long-term debt (9,136,951) (8,397,476) Deferred financing costs (42) (130) Purchase of treasury stock (32,016) (169,673) Excess tax benefits from stock award exercises 7,591 3,055 Stock award exercises and other share issuances, net 16,691 12,770 Distributions to noncontrolling interests (29,895) (29,423) Contributions from noncontrolling interests 6,504 10,048 Proceeds from sales of additional noncontrolling interests 5,475 8,422 Purchases from noncontrolling interests (4,704) (22,889) ------- -------- Net cash used in financing activities (53,028) (187,474) -------- --------- Net increase (decrease) in cash and cash equivalents 133,232 (120,060) Cash and cash equivalents at beginning of period 410,881 447,046 ------- ------- Cash and cash equivalents at end of period $544,113 $326,986 ======== ======== DAVITA INC. CONSOLIDATED BALANCE SHEETS (unaudited) (dollars in thousands, except per share data) ASSETS June 30, December 31, 2009 2008 ---- ---- Cash and cash equivalents $544,113 $410,881 Short-term investments 19,109 35,532 Accounts receivable, less allowance of $222,067 and $211,222 1,128,330 1,075,457 Inventories 65,354 84,174 Other receivables 226,931 239,165 Other current assets 37,851 33,761 Income tax receivable - 32,130 Deferred income taxes 211,709 217,196 ------- ------- Total current assets 2,233,397 2,128,296 Property and equipment, net 1,075,349 1,048,075 Amortizable intangibles, net 148,923 160,521 Investments in third-party dialysis businesses 24,144 19,274 Long-term investments 6,827 5,656 Other long-term assets 44,104 47,330 Goodwill 3,908,290 3,876,931 --------- --------- $7,441,034 $7,286,083 ========== ========== LIABILITIES AND EQUITY Accounts payable $230,576 $282,883 Other liabilities 453,048 495,239 Accrued compensation and benefits 329,517 312,216 Current portion of long-term debt 92,290 72,725 Income taxes payable 3,409 - ----- --- Total current liabilities 1,108,840 1,163,063 Long-term debt 3,579,417 3,622,421 Other long-term liabilities 100,209 101,442 Alliance and product supply agreement, net 33,312 35,977 Deferred income taxes 274,303 244,884 ------- ------- Total liabilities 5,096,081 5,167,787 Commitments and contingencies Noncontrolling interests subject to put provisions 288,458 291,397 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; 103,989,672 and 103,753,673 shares outstanding) 135 135 Additional paid-in capital 620,259 584,358 Retained earnings 2,091,480 1,889,450 Treasury stock, at cost (30,872,611 and 31,108,610 shares) (701,783) (691,857) Accumulated other comprehensive loss (10,033) (14,339) -------- -------- Total DaVita Inc. shareholders' equity 2,000,058 1,767,747 Noncontrolling interests not subject to put provisions 56,437 59,152 ------ ------ Total equity 2,056,495 1,826,899 --------- --------- $7,441,034 $7,286,083 ========== ========== DAVITA INC. SUPPLEMENTAL FINANCIAL DATA (unaudited) (dollars in millions, except for per share and per treatment data) Three months ended Six months ------------------ ended June 30, March 31, June 30, June 30, 2009 2009 2008 2009 ---- ---- ---- ---- 1. Consolidated Financial Results: Revenues $1,519 $1,448 $1,407 $2,967 Operating income $236.0 $220.6 $218.4 $456.6 Operating income margin 15.5% 15.2% 15.5% 15.4% Net income attributable to DaVita Inc. $105.8 $96.2 $95.0 $202.0 Diluted earnings per share attributable to DaVita Inc. $1.02 $0.92 $0.90 $1.94 2. Consolidated Business Metrics: Expenses Patient care costs as a percent of consolidated revenue (3) 69.2% 69.5% 69.2% 69.4% General and administrative expenses as a percent of consolidated revenue (3) 8.7% 8.8% 8.9% 8.7% Bad debt expense as a percent of consolidated revenue 2.7% 2.5% 2.7% 2.6% Consolidated effective tax rate attributable to DaVita Inc. (1) 40.0% 40.2% 38.0% 40.1% 3. Segment Financial Results: (dollar amounts rounded to nearest million) Dialysis and related lab services Revenues $1,441 $1,377 $1,351 $2,818 Direct operating expenses $1,190 $1,140 $1,113 $2,330 ------ ------ ------ ------ Dialysis segment margin $251 $237 $238 $488 ==== ==== ==== ==== Other - Ancillary services and strategic initiatives Revenues $78 $71 $56 $149 Direct operating expenses $82 76 66 $158 --- -- -- ---- Ancillary segment loss $(4) $(5) $(10) $(9) === === ==== === Total segment margin $247 $232 $228 $479 Reconciling items: Stock-based compensation (11) (11) (10) (22) ---- ---- ---- ---- Consolidated operating income $236 $221 $218 $457 ==== ==== ==== ==== DAVITA INC. SUPPLEMENTAL FINANCIAL DATA--continued (unaudited) (dollars in millions, except for per share and per treatment data) Three months ended Six months ------------------ ended June 30, March 31, June 30, June 30, 2009 2009 2008 2009 ---- ---- ---- ---- 4. Segment Business Metrics: Dialysis and related lab services: Volume Treatments 4,228,179 4,082,439 4,018,763 8,310,617 Number of treatment days 78.0 76.5 78.0 154.5 Treatments per day 54,207 53,365 51,523 53,790 Per day year over year increase 5.2% 5.0% 6.0% 5.1% Non-acquired growth year over year 4.5% 4.0% 4.5% 4.3% Revenue Dialysis and related lab services revenue per treatment $340.35 $336.73 $335.98 $338.58 Per treatment increase from previous quarter 1.1% 1.2% 2.1% - Per treatment increase (decrease)from previous year 1.3% 2.4% (0.6%) 1.8% Percent of consolidated revenue 94.9% 95.1% 96.0% 95.0% Expenses Patient care costs Percent of segment revenue 68.6% 68.8% 68.7% 68.7% Per treatment $233.93 $231.88 $230.92 $232.92 Per treatment increase from previous quarter 0.9% 1.6% 2.1% - Per treatment increase from previous year 1.3% 2.5% 1.2% 1.9% General and administrative expenses Percent of segment revenue 7.3% 7.4% 7.3% 7.4% Per treatment $24.92 $24.99 $24.64 $24.96 Per treatment (decrease) increase from previous quarter (0.3%) (1.5%) 4.9% - Per treatment increase (decrease) from previous year 1.1% 6.3% (7.2%) 3.7% 5. Cash Flow Operating cash flow $212.4 $134.2 $147.0 $346.6 Operating cash flow last twelve months $705.4 $640.0 $596.9 Free cash flow(1) $173.6 $89.5 $114.4 $263.1 Free cash flow, last Twelve months(1) $526.8 $467.7 $445.1 Capital expenditures: Development and relocations $42.5 $42.0 $60.2 $84.5 Routine maintenance/IT other $22.5 $31.2 $20.2 $53.7 Acquisition expenditures $3.5 $39.8 $41.1 $43.3 6. Accounts Receivable Net receivables $1,128 $1,089 $1,047 DSO 70 70 70 DAVITA INC. SUPPLEMENTAL FINANCIAL DATA--continued (unaudited) (dollars in millions, except for per share and per treatment data) Three months ended Six months ------------------ ended June 30, March 31, June 30, June 30, 2009 2009 2008 2009 ---- ---- ---- ---- 7. Debt and Capital Structure Total debt(2) $3,669 $3,680 $3,705 Net debt, net of cash(2) $3,124 $3,275 $3,378 Leverage ratio (see Note 1 on page 9) 2.66x 2.83x 3.07x Overall effective weighted average interest rate during the quarter 4.92% 5.04% 5.75% Overall effective weighted average interest rate at end of the quarter 4.87% 5.04% 5.68% Effective weighted average interest rate on the Senior Secured Credit Facilities at end of the quarter 3.02% 3.36% 4.59% Economically fixed interest rates as a percentage of our total debt 64% 66% 69% Share repurchases $- $32.0 $137.2 $32.0 8. Clinical (quarterly averages) Dialysis adequacy -% of patients with Kt/V > 1.2 95% 95% 95% 90 day patients with Hb>=10