DENVER, Aug. 3, 2023
/PRNewswire/ -- DaVita Inc. (NYSE: DVA) announced financial and
operating results for the quarter ended June 30, 2023.
"Over the first half of the year, DaVita has been focused on
innovation in our clinical systems and driving operational
improvements throughout our organization," said Javier Rodriguez, CEO of DaVita Inc. "Our second
quarter performance reflects strong traction across those
initiatives, putting us on a path to deliver strong clinical
outcomes and financial results for the year."
Financial and operating highlights for the quarter ended
June 30, 2023:
- Consolidated revenues were $3.0
billion.
- Operating income was $405 million
and adjusted operating income was $432
million.
- Diluted earnings per share was $1.91 and adjusted diluted earnings per share was
$2.08.
- Operating cash flow was $450
million and free cash flow was $260
million.
- Refinanced existing Term Loan A and revolver with a new
$1.25 billion Term Loan A-1 and
revolving line of credit in the aggregate principal amount of up to
$1.5 billion.
|
Three months
ended
|
|
Six months ended
June 30,
|
|
June 30,
2023
|
|
March 31,
2023
|
|
2023
|
|
2022
|
Net income
attributable to DaVita Inc.:
|
(dollars in
millions, except per share data)
|
Net income
|
$
179
|
|
$
116
|
|
$
294
|
|
$
387
|
Diluted per share
|
$
1.91
|
|
$
1.25
|
|
$
3.17
|
|
$
3.90
|
Adjusted net income(1)
|
$
194
|
|
$
146
|
|
$
340
|
|
$
395
|
Adjusted diluted per share(1)
|
$
2.08
|
|
$
1.58
|
|
$
3.65
|
|
$
3.98
|
______________________
|
(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
|
|
Six months ended
June 30,
|
|
June 30,
2023
|
|
March 31,
2023
|
|
2023
|
|
2022
|
|
Amount
|
|
Margin
|
|
Amount
|
|
Margin
|
|
Amount
|
|
Margin
|
|
Amount
|
|
Margin
|
Operating
income
|
(dollars in
millions)
|
Operating
income
|
$ 405
|
|
13.5 %
|
|
$ 312
|
|
10.8 %
|
|
$ 717
|
|
12.2 %
|
|
$
771
|
|
13.4 %
|
Adjusted operating
income(1)(2)
|
$ 432
|
|
14.4 %
|
|
$ 352
|
|
12.2 %
|
|
$ 784
|
|
13.3 %
|
|
$
782
|
|
13.6 %
|
_______________________
|
(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.
|
U.S. dialysis metrics:
Volume: Total U.S. dialysis treatments for
the second quarter of 2023 were 7,231,242, or an average of 92,708
treatments per day, representing a per day increase of 0.3%
compared to the first quarter of 2023. Normalized non-acquired
treatment growth in the second quarter of 2023 compared to the
second quarter of 2022 was (0.2)%.
|
Three months
ended
|
|
Quarter
change
|
|
Six months
ended
|
|
Year to
date
change
|
|
June 30,
2023
|
|
March 31,
2023
|
|
|
June 30,
2023
|
|
June 30,
2022
|
|
|
(dollars in
millions, except per treatment data)
|
Revenue per
treatment
|
$
376.73
|
|
$
366.14
|
|
$
10.59
|
|
$
371.48
|
|
$
363.47
|
|
$
8.01
|
Patient care costs per
treatment
|
$
252.57
|
|
$
257.34
|
|
$
(4.77)
|
|
$
254.94
|
|
$
249.85
|
|
$
5.09
|
General and
administrative
|
$
279
|
|
$
259
|
|
$
20
|
|
$
538
|
|
$
458
|
|
$
80
|
Primary drivers of the changes in the table above were as
follows:
Revenue: The quarter change was primarily due to normal
seasonal improvements driven by patients meeting their co-insurance
and deductibles, increases in average reimbursement rates due to
normal annual rate increases and favorable improvements in mix
including the continued shift to Medicare Advantage plans, as well
as positive impacts from improved cash collections. The quarter
change was negatively impacted by a seasonal decrease in hospital
inpatient revenues. The year to date change was primarily driven by
a net increase in the Medicare rate due to base rate increase in
2023 partially offset by the phased in increase of sequestration of
1% in April 2022 and full 2%
beginning July 1, 2022 and
thereafter. The year to date increase was also impacted by the
continued shift to Medicare Advantage plans and overall favorable
mix improvements, increases in hospital inpatient dialysis revenues
and other normal annual rate increases.
Patient care costs: The quarter change was primarily due
to seasonal decreases in payroll taxes, as well as decreased center
closure costs, as described below, travel costs, contract wages and
pharmaceutical costs. In addition, our fixed other direct operating
expenses positively impacted patient care costs per treatment due
to increased treatments in the second quarter of 2023. The quarter
change was negatively impacted by increased medical supplies
expense and professional fees. The year to date change was
primarily due to increased compensation expenses including
increased wage rates and headcount. Other drivers of the increase
include increases in other direct operating expenses associated
with our dialysis centers, medical supplies expense, professional
fees, travel costs, as well as center closure costs, as described
below. These increases were partially offset by decreased
pharmaceutical costs, contract wages and insurance costs.
General and administrative: The quarter change was
primarily due to increased compensation expenses, a refund received
in the first quarter of 2023 related to 2022 advocacy costs,
increased professional fees, long-term incentive compensation and
center closure costs, as described below. These increases were
partially offset by decreased severance costs, as described below.
The year to date change was primarily due to increases in
compensation expenses including increased wage rates and severance
costs, as described below. Other drivers of this change include
gains recognized on the sale of our self-developed properties in
the second quarter of 2022, center closure costs, as described
below, increased travel costs, contract wages related to the
deployment of IT projects and other IT-related costs. These
increases were partially offset by decreased advocacy costs,
including a refund received in 2023 related to 2022 advocacy
costs.
Certain items impacting the quarter:
Closure costs. During the third quarter of 2022, we
began a strategic review of our outpatient clinic capacity
requirements and utilization, which have been impacted both by
declines in our patient census in some markets due to the COVID-19
pandemic, as well as by our initiatives toward, and advances in,
increasing the proportion of our home dialysis patients. This
review has resulted in higher than normal charges for center
capacity closures. These capacity closure costs include net losses
on assets retired, lease costs, asset impairments and accelerated
depreciation and amortization.
During the three month ended and the six months ended
June 30, 2023, we incurred charges
for U.S. dialysis center closures of approximately $21.1 million and $43.3
million, respectively. For a breakdown of how these closure
costs have impacted our income statement for respective periods,
see Note 3 in our Non-GAAP reconciliations that follow.
Severance costs and other. During the fourth quarter
of 2022, we committed to a plan to increase efficiencies and cost
savings in certain general and administrative support functions. As
a result of this plan, we recognized expenses related to
termination and other benefit commitments in our U.S. dialysis
business. This plan included additional charges of $5.3 million during the second quarter of 2023
and $23.3 million during the six
months ended June 30, 2023.
Debt transactions. In April
2023, we entered into the Second Amendment to our senior
secured credit agreement. The Second Amendment transitions the
interest pricing on Term B-1 to SOFR + 1.75% plus an additional
credit spread adjustment (CSA). In addition, we entered into a
Third Amendment to our senior secured credit agreement that
refinanced Term Loan A and revolving line of credit with a secured
Term Loan A-1 facility in aggregate principal amount of
$1.25 billion and a secured revolving
line of credit in the aggregate principal amount of up to
$1.5 billion (the foregoing referred
to as the new Term Loan A-1 and new revolving line of credit,
respectively).
The new Term Loan A-1 and new revolving line of credit initially
bear interest at Term SOFR, plus a CSA of 0.10% and an interest
margin of 2.0%, which is subject to adjustment depending upon the
leverage ratio defined in the agreement and can range from
1.25%-2.25%. We used a portion of the proceeds from the new Term
Loan A-1 and initial borrowing of $400
million on the new revolving line of credit to pay off the
remaining principal balance outstanding and accrued interest and
fees on its prior Term Loan A and prior revolving line of credit in
the amount of $1,602 million. The
remaining borrowings added cash to the balance sheet for general
corporate purposes.
Mozarc investment. On April
1 2023, the Company acquired a 50% voting equity interest in
Mozarc Medical Holding LLC (Mozarc). At closing, the Company made a
cash payment to Medtronic, Inc. (Medtronic) of $44.7 million, subject to certain customary
post-closing adjustments, and contributed certain other non-cash
assets to Mozarc. In addition, the Company agreed to pay Medtronic
additional consideration of up to $300
million if certain regulatory, commercial and financial
milestones are achieved. At close, the Company and Medtronic also
each contributed an additional $224.4
million in cash to Mozarc to fund its development
initiatives. The Company's investment in Mozarc was recorded at an
initial estimate of $371.0 million,
subject to finalization of certain post-closing adjustments yet to
be completed between the parties and finalization of related
third-party valuations. As a result of this transaction the Company
recognized a gain of $14.0 million on
the non-cash assets contributed to Mozarc, which was recognized in
"Other income (loss), net" in the financial statements along with
equity method losses from Mozarc for the quarter.
Financial and operating metrics:
|
Three months
ended
June
30,
|
|
Twelve months
ended
June
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Cash
flow:
|
(dollars in
millions)
|
Operating cash
flow
|
$
450
|
|
$
188
|
|
$
1,967
|
|
$
1,607
|
Free cash
flow(1)
|
$
260
|
|
$
95
|
|
$
1,100
|
|
$
890
|
______________________
|
(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, 2023
|
|
Six months
ended
June 30,
2023
|
Effective income tax
rate on:
|
|
|
|
Income
|
16.5 %
|
|
18.2 %
|
Income attributable to
DaVita Inc.(1)
|
21.3 %
|
|
23.9 %
|
Adjusted income
attributable to DaVita Inc.(1)
|
21.6 %
|
|
24.0 %
|
_______________________
|
(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.
|
Center activity: As of June 30, 2023, we
provided dialysis services to a total of approximately 248,000
patients at 3,056 outpatient dialysis centers, of which 2,703
centers were located in the United
States and 353 centers were located in 11 countries outside
of the United States. During the
second quarter of 2023, we opened a total of 10 new dialysis
centers and closed 16 dialysis centers in the United States. We also acquired two
dialysis centers, opened two new dialysis centers and closed two
dialysis centers outside of the United
States during the second quarter of 2023.
Integrated kidney care (IKC): As of June 30,
2023, we had approximately 64,000 patients in risk-based integrated
care arrangements representing approximately $5.2 billion in annualized medical spend. We also
had an additional 15,000 patients in other integrated care
arrangements; we do not include the medical spend for these
patients in this annualized medical spend estimate. See additional
description of these metrics at Note 2.
Outlook:
The following forward-looking measures and the underlying
assumptions involve significant known and unknown risks and
uncertainties, including those described below, and actual results
may vary materially from these forward-looking measures. For
example, the widespread impact of the COVID-19 pandemic continues
to generate significant risk and uncertainty, and as a result, our
future results could vary materially from the guidance provided
below. We do not provide guidance for operating income or diluted
net income per share attributable to DaVita Inc. on a basis
consistent with United States
generally accepted accounting principles (GAAP) nor a
reconciliation of forward-looking non-GAAP financial measures to
the most directly comparable GAAP financial measures on a
forward-looking basis because we are unable to predict certain
items contained in the GAAP measures without unreasonable efforts.
These non-GAAP financial measures do not include certain items,
including capacity closure charges, severance costs and foreign
currency fluctuations, which may be significant. The guidance for
our effective income tax rate on adjusted income attributable to
DaVita Inc. also excludes the amount of third-party owners' income
and related taxes attributable to non-tax paying entities.
|
Current 2023
guidance
|
|
Prior 2023
guidance
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
(dollars in
millions, except per share data)
|
Adjusted operating
income
|
$1,565
|
|
$1,675
|
|
$1,475
|
|
$1,625
|
Adjusted diluted net
income per share attributable to DaVita Inc.
|
$7.00
|
|
$7.80
|
|
$6.20
|
|
$7.30
|
Free cash
flow
|
$850
|
|
$1,100
|
|
$750
|
|
$1,000
|
We will be holding a conference call to discuss our results for
the second quarter ended June 30, 2023, on August 3,
2023, at 5:00 p.m. Eastern Time. To
join the conference call, please dial (877) 918-6630 from the U.S.
or (517) 308-9042 from outside the U.S., and provide the operator
the password 'Earnings'. This call is being webcast and can be
accessed at the DaVita Investor Relations website
investors.davita.com. A replay of the conference call will also be
available at investors.davita.com for the following 30
days.
Forward looking statements
DaVita Inc. and its representatives may from time to time
make written and oral forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 (PSLRA),
including statements in this release, filings with the Securities
and Exchange Commission (SEC), reports to stockholders and in
meetings with investors and analysts. All statements in this
release, during the related presentation or other meetings, other
than statements of historical fact, are forward-looking statements
and as such are intended to be covered by the safe harbor for
"forward-looking statements" provided by the PSLRA. These
forward-looking statements could include, among other things,
including statements about our balance sheet and liquidity, our
expenses and expense offsets, revenues, billings and collections,
availability or cost of supplies, treatment volumes, mix
expectation, such as the percentage or number of patients under
commercial insurance, DaVita's response to and the continuing
impact of the coronavirus (COVID-19) pandemic, the continuing
impact of the COVID-19 pandemic on the U.S. and global economies,
labor market conditions, and overall impact on our patients and
teammates, as well as other statements regarding our future
operations, financial condition and prospects, expenses, strategic
initiatives, government and commercial payment rates, expectations
related to value-based care, integrated kidney care, and Medicare
Advantage (MA) plan enrollment and our ongoing stock repurchase
program, and statements related to our guidance and expectations
for future periods and the assumptions underlying any such
projections. All statements in this release, other than statements
of historical fact, are forward-looking statements. Without
limiting the foregoing, statements including the words "expect,"
"intend," "will," "could," "plan," "anticipate," "believe,"
"forecast," "guidance," "outlook," "goals," and similar expressions
are intended to identify forward-looking statements. These
forward-looking statements are based on DaVita's current
expectations and are based solely on information available as of
the date of this release. DaVita undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of changed circumstances, new information, future
events or otherwise, except as may be required by law. Actual
future events and results could differ materially from any
forward-looking statements due to numerous factors that involve
substantial known and unknown risks and uncertainties. These risks
and uncertainties include, among other things:
- the current macroeconomic and marketplace conditions, and
global events, many of which are interrelated and which relate to,
among other things, inflation, rising interest rates, labor market
conditions, wage pressure, evolving monetary policies, and the
continuing impact of the COVID-19 pandemic on our patients,
teammates, physician partners, suppliers, business, operations,
reputation, financial condition and results of operations; further
spread or resurgence of the virus, including as a result of the
emergence of new strains of the virus; the continuing impact of the
pandemic on our revenues and non-acquired growth due to lower
treatment volumes; COVID-19's impact on the chronic kidney disease
(CKD) population and our patient population including on the
mortality of these patients; any potential negative impact on our
commercial mix or the number of our patients covered by commercial
insurance plans; our ability to successfully implement cost savings
initiatives; supply chain challenges and disruptions; and elevated
teammate turnover and training costs and higher salary and wage
expense, driven in part by persisting labor market conditions and a
high demand for our clinical personnel, any of which may also have
the effect of heightening many of the other risks and uncertainties
discussed below, and in many cases, the impact of the pandemic and
the aforementioned global economic conditions on our business may
persist even as the pandemic continues to subside;
- the concentration of profits generated by higher-paying
commercial payor plans for which there is continued downward
pressure on average realized payment rates; 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, as a result of our
making incorrect assumptions about how our patients will respond to
any change in financial assistance from charitable organizations;
or as a result of payors' implementing restrictive plan designs,
including, without limitation, actions taken in response to the
U.S. Supreme Court's decision in Marietta Memorial Hospital
Employee Health Benefit Plan, et al. v. DaVita Inc. et al.
(Marietta); how and whether regulators and legislators will respond
to the Marietta decision including, without limitation, whether
they will issue regulatory guidance or adopt new legislation; how
courts will interpret other anti-discriminatory provisions that may
apply to restrictive plan designs; whether there could be other
potential negative impacts of the Marietta decision; and the timing
of each of these items;
- 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 or that select higher-paying
commercial plans, including for example MA plans or other material
impacts to our business or operations; or our making incorrect
assumptions about how our patients will respond to any such
developments;
- risks arising from potential changes in laws, regulations or
requirements applicable to us, such as potential and proposed
federal and/or state legislation, regulation, ballot, executive
action or other initiatives, including, without limitation, those
related to healthcare, antitrust matters, including, among others,
restrictive covenants, and/or labor matters;
- our ability to attract, retain and motivate teammates and
our ability to manage operating cost increases or productivity
decreases whether due to union organizing activities, which
continue to increase in the dialysis industry, legislative or other
changes, demand for labor, volatility and uncertainty in the labor
market, the current challenging and highly competitive labor market
conditions, or other reasons;
- Our ability to respond to challenging U.S. and global
economic and marketplace conditions, including among other things
our ability to successfully identify cost savings opportunities and
to implement cost savings initiatives such as ongoing initiatives
that increase our use of third-party service providers to perform
certain activities, initiatives that relate to clinic optimization
and capacity utilization improvement, and procurement
opportunities, among other things;
- our ability to successfully implement our strategies with
respect to integrated kidney care and value-based care initiatives
and home based dialysis in the desired time frame and in a complex,
dynamic and highly regulated environment, including, among other
things, maintaining our existing business; meeting growth
expectations; recovering our investments; entering into agreements
with payors, third party vendors and others on terms that are
competitive and, as appropriate, prove actuarially sound;
structuring operations, agreements and arrangements to comply with
evolving rules and regulations; finding, training and retaining
appropriate staff; and further developing our integrated care and
other capabilities to provide competitive programs at
scale;
- a reduction in government payment rates under the Medicare
End Stage Renal Disease program, state Medicaid or other
government-based programs and the impact of the Medicare Advantage
benchmark structure;
- 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;
- legal and compliance risks, such as our continued compliance
with complex, and at times, evolving government regulations and
requirements;
- the impact of the political environment and related
developments on the current healthcare marketplace and on our
business, including with respect to the Affordable Care Act, the
exchanges and many other core aspects of the current healthcare
marketplace, as well as the composition of the U.S. Supreme Court
and the current presidential administration and congressional
majority;
- changes in pharmaceutical practice patterns, reimbursement
and payment policies and processes, or pharmaceutical pricing,
including with respect to hypoxia inducible factors, among other
things;
- our ability to develop and maintain relationships with
physicians and hospitals, changing affiliation models for
physicians, and the emergence of new models of care or other
initiatives introduced by the government or private sector that,
among other things, may erode our patient base and impact
reimbursement rates;
- our ability to complete acquisitions, mergers, dispositions,
joint ventures or other strategic transactions that we might
announce or be considering, on terms favorable to us or at all, to
successfully integrate any acquired businesses, to successfully
operate any acquired businesses, joint ventures or other strategic
transactions, or to successfully expand our operations and services
in markets outside the United
States, or to businesses or products outside of dialysis
services;
- continued increased competition from dialysis providers and
others, and other potential marketplace changes, including without
limitation increased investment in and availability of funding to
new entrants in the dialysis and pre-dialysis marketplace;
- 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, as well as our use of a considerable amount of
available funds to repurchase stock;
- risks arising from the use of accounting estimates,
judgments and interpretations in our financial statements;
- impairment of our goodwill, investments or other
assets;
- our aspirations, goals and disclosures related to
environmental, social and governance (ESG) matters, including,
among other things, evolving regulatory requirements affecting ESG
standards, measurements and reporting requirements; the
availability of suppliers that can meet our sustainability
standards; and our ability to recruit, develop and retain diverse
talent in our labor markets; and
- the other risk factors, trends and uncertainties set forth
in our Annual Report on Form 10-K for the year ended December 31, 2022 and Quarterly Report on Form
10-Q for the quarter ended March 31,
2023, and the risks and uncertainties discussed in any
subsequent reports that we file or furnish with the SEC from time
to time.
The financial information presented in this release is
unaudited and is subject to change as a result of subsequent events
or adjustments, if any, arising prior to the filing of the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2023.
DAVITA INC.
|
CONSOLIDATED
STATEMENTS OF INCOME
|
(unaudited)
|
(dollars and shares
in thousands, except per share data)
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Dialysis patient
service revenues
|
$
2,890,685
|
|
$
2,810,099
|
|
$ 5,650,719
|
|
$ 5,526,380
|
Other
revenues
|
109,684
|
|
116,658
|
|
222,349
|
|
217,932
|
Total
revenues
|
3,000,369
|
|
2,926,757
|
|
5,873,068
|
|
5,744,312
|
Operating
expenses:
|
|
|
|
|
|
|
|
Patient care
costs
|
2,055,844
|
|
2,016,788
|
|
4,114,033
|
|
4,035,317
|
General and
administrative
|
364,016
|
|
315,219
|
|
695,630
|
|
610,039
|
Depreciation and
amortization
|
183,672
|
|
171,176
|
|
361,743
|
|
344,120
|
Equity investment
income, net
|
(8,454)
|
|
(9,141)
|
|
(15,274)
|
|
(16,187)
|
Total operating
expenses
|
2,595,078
|
|
2,494,042
|
|
5,156,132
|
|
4,973,289
|
Operating
income
|
405,291
|
|
432,715
|
|
716,936
|
|
771,023
|
Debt
expense
|
(103,507)
|
|
(82,586)
|
|
(204,281)
|
|
(156,377)
|
Debt prepayment and
refinancing charges
|
(7,962)
|
|
—
|
|
(7,962)
|
|
—
|
Other income (loss),
net
|
1,373
|
|
(1,284)
|
|
5,125
|
|
(3,070)
|
Income before income
taxes
|
295,195
|
|
348,845
|
|
509,818
|
|
611,576
|
Income tax
expense
|
48,818
|
|
64,229
|
|
92,773
|
|
121,242
|
Net income
|
246,377
|
|
284,616
|
|
417,045
|
|
490,334
|
Less: Net income
attributable to noncontrolling interests
|
(67,686)
|
|
(59,807)
|
|
(122,807)
|
|
(103,403)
|
Net income attributable
to DaVita Inc.
|
$
178,691
|
|
$
224,809
|
|
$
294,238
|
|
$
386,931
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to DaVita Inc.:
|
|
|
|
|
|
|
|
Basic net
income
|
$
1.96
|
|
$
2.38
|
|
$
3.24
|
|
$
4.06
|
Diluted net
income
|
$
1.91
|
|
$
2.30
|
|
$
3.17
|
|
$
3.90
|
|
|
|
|
|
|
|
|
Weighted average
shares for earnings per share:
|
|
|
|
|
|
|
|
Basic
shares
|
90,984
|
|
94,457
|
|
90,742
|
|
95,382
|
Diluted
shares
|
93,418
|
|
97,772
|
|
92,952
|
|
99,121
|
DAVITA INC.
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net income
|
$
246,377
|
|
$
284,616
|
|
$
417,045
|
|
$
490,334
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
|
|
|
Unrealized gains on
interest rate cap agreements:
|
|
|
|
|
|
|
|
Unrealized
gains
|
24,849
|
|
13,217
|
|
21,310
|
|
54,349
|
Reclassifications of
net realized (gains) losses into net income
|
(18,956)
|
|
1,033
|
|
(34,698)
|
|
2,066
|
Unrealized gains
(losses) on foreign currency translation:
|
41,961
|
|
(91,176)
|
|
75,522
|
|
(28,964)
|
Other comprehensive
income (loss)
|
47,854
|
|
(76,926)
|
|
62,134
|
|
27,451
|
Total comprehensive
income
|
294,231
|
|
207,690
|
|
479,179
|
|
517,785
|
Less: Comprehensive
income attributable to noncontrolling interests
|
(67,686)
|
|
(59,807)
|
|
(122,807)
|
|
(103,403)
|
Comprehensive income
attributable to DaVita Inc.
|
$
226,545
|
|
$
147,883
|
|
$
356,372
|
|
$
414,382
|
DAVITA INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOW
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Six months ended
June 30,
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
417,045
|
|
$
490,334
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
361,743
|
|
344,120
|
Debt prepayment and
refinancing charges
|
7,132
|
|
—
|
Stock-based
compensation expense
|
55,197
|
|
50,109
|
Deferred income
taxes
|
(16,178)
|
|
9,069
|
Equity investment
loss, net
|
14,571
|
|
90
|
Other non-cash
charges, net
|
(5,160)
|
|
(32,858)
|
Changes in operating
assets and liabilities, net of effect of acquisitions and
divestitures:
|
|
|
|
Accounts
receivable
|
141,503
|
|
(132,043)
|
Inventories
|
(116)
|
|
(1,927)
|
Other receivables and
prepaid and other current assets
|
33,182
|
|
(61,811)
|
Other long-term
assets
|
(607)
|
|
(49,093)
|
Accounts
payable
|
(40,615)
|
|
24,517
|
Accrued compensation
and benefits
|
(68,800)
|
|
(102,513)
|
Other current
liabilities
|
17,242
|
|
42,517
|
Income
taxes
|
5,200
|
|
(63,638)
|
Other long-term
liabilities
|
(8,675)
|
|
(6,557)
|
Net cash provided by
operating activities
|
912,664
|
|
510,316
|
Cash flows from
investing activities:
|
|
|
|
Additions of property
and equipment
|
(272,204)
|
|
(265,461)
|
Acquisitions
|
(2,575)
|
|
(9,491)
|
Proceeds from asset
and business sales
|
21,198
|
|
114,829
|
Purchase of debt
investments held-to-maturity
|
(30,419)
|
|
(89,530)
|
Purchase of other debt
and equity investments
|
(6,366)
|
|
(3,010)
|
Proceeds from debt
investments held-to-maturity
|
94,414
|
|
8,415
|
Proceeds from sale of
other debt and equity investments
|
3,873
|
|
3,775
|
Purchase of equity
method investments
|
(273,336)
|
|
(23,806)
|
Distributions from
equity method investments
|
1,758
|
|
1,047
|
Net cash used in
investing activities
|
(463,657)
|
|
(263,232)
|
Cash flows from
financing activities:
|
|
|
|
Borrowings
|
2,136,873
|
|
1,182,911
|
Payments on long-term
debt
|
(2,347,120)
|
|
(841,687)
|
Deferred and debt
related financing costs
|
(45,009)
|
|
—
|
Purchase of treasury
stock
|
—
|
|
(617,432)
|
Distributions to
noncontrolling interests
|
(124,178)
|
|
(118,315)
|
Net payments related
to stock purchases and awards
|
(43,612)
|
|
(47,866)
|
Contributions from
noncontrolling interests
|
6,946
|
|
9,116
|
Proceeds from sales of
additional noncontrolling interests
|
50,962
|
|
3,673
|
Purchases of
noncontrolling interests
|
(7,610)
|
|
(15,365)
|
Net cash used in
financing activities
|
(372,748)
|
|
(444,965)
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash
|
6,922
|
|
(1,342)
|
Net increase (decrease)
in cash, cash equivalents and restricted cash
|
83,181
|
|
(199,223)
|
Cash, cash equivalents
and restricted cash at beginning of the year
|
338,989
|
|
554,960
|
Cash, cash equivalents
and restricted cash at end of the period
|
$
422,170
|
|
$
355,737
|
DAVITA INC.
|
CONSOLIDATED BALANCE
SHEETS
|
(unaudited)
|
(dollars and shares
in thousands, except per share data)
|
|
|
June 30,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
327,443
|
|
$
244,086
|
Restricted cash and
equivalents
|
94,727
|
|
94,903
|
Short-term
investments
|
12,484
|
|
77,693
|
Accounts
receivable
|
2,009,692
|
|
2,132,070
|
Inventories
|
110,299
|
|
109,122
|
Other
receivables
|
354,921
|
|
413,976
|
Prepaid and other
current assets
|
90,061
|
|
78,839
|
Income tax
receivable
|
2,341
|
|
4,603
|
Total current
assets
|
3,001,968
|
|
3,155,292
|
Property and equipment,
net of accumulated depreciation of $5,503,439 and $5,265,372,
respectively
|
3,158,450
|
|
3,256,397
|
Operating lease
right-of-use assets
|
2,547,053
|
|
2,666,242
|
Intangible assets, net
of accumulated amortization of $39,766 and $49,772,
respectively
|
191,849
|
|
182,687
|
Equity method and other
investments
|
593,269
|
|
231,108
|
Long-term
investments
|
46,005
|
|
44,329
|
Other long-term
assets
|
314,009
|
|
315,587
|
Goodwill
|
7,106,242
|
|
7,076,610
|
|
$
16,958,845
|
|
$
16,928,252
|
LIABILITIES AND
EQUITY
|
|
|
|
Accounts
payable
|
$
427,894
|
|
$
479,780
|
Other
liabilities
|
817,608
|
|
802,469
|
Accrued compensation
and benefits
|
630,289
|
|
692,654
|
Current portion of
operating lease liabilities
|
394,465
|
|
395,401
|
Current portion of
long-term debt
|
101,113
|
|
231,404
|
Income tax
payable
|
32,049
|
|
18,039
|
Total current
liabilities
|
2,403,418
|
|
2,619,747
|
Long-term operating
lease liabilities
|
2,384,471
|
|
2,503,068
|
Long-term
debt
|
8,598,162
|
|
8,692,617
|
Other long-term
liabilities
|
183,137
|
|
105,233
|
Deferred income
taxes
|
760,038
|
|
782,787
|
Total
liabilities
|
14,329,226
|
|
14,703,452
|
Commitments and
contingencies
|
|
|
|
Noncontrolling
interests subject to put provisions
|
1,423,549
|
|
1,348,908
|
Equity:
|
|
|
|
Preferred stock
($0.001 par value, 5,000 shares authorized; none issued)
|
—
|
|
—
|
Common stock ($0.001
par value, 450,000 shares authorized; 91,271 and 90,411 shares
issued
and outstanding
at June 30, 2023 and December 31, 2022,
respectively)
|
91
|
|
90
|
Additional paid-in
capital
|
555,680
|
|
606,935
|
Retained
earnings
|
468,725
|
|
174,487
|
Accumulated other
comprehensive loss
|
(7,052)
|
|
(69,186)
|
Total DaVita Inc.
shareholders' equity
|
1,017,444
|
|
712,326
|
Noncontrolling
interests not subject to put provisions
|
188,626
|
|
163,566
|
Total
equity
|
1,206,070
|
|
875,892
|
|
$
16,958,845
|
|
$
16,928,252
|
DAVITA INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
(unaudited)
|
(dollars in millions
and shares in thousands, except per treatment data)
|
|
|
Three months
ended
|
|
Six months
ended June 30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
1. Consolidated
business metrics:
|
|
|
|
|
|
Operating
margin
|
13.5 %
|
|
10.8 %
|
|
12.2 %
|
Adjusted operating
margin excluding certain items(1)(2)
|
14.4 %
|
|
12.2 %
|
|
13.3 %
|
General and
administrative expenses as a percent of consolidated
revenues(3)
|
12.1 %
|
|
11.5 %
|
|
11.8 %
|
Effective income tax
rate on income
|
16.5 %
|
|
20.5 %
|
|
18.2 %
|
Effective income tax
rate on income attributable to DaVita Inc.(1)
|
21.3 %
|
|
27.5 %
|
|
23.9 %
|
Effective income tax
rate on adjusted income attributable to DaVita
Inc.(1)
|
21.6 %
|
|
27.0 %
|
|
24.0 %
|
|
|
|
|
|
|
2. Summary of
financial results:
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
U.S. dialysis patient
services and other
|
$ 2,731
|
|
$ 2,612
|
|
$ 5,343
|
Other—Ancillary
services
|
|
|
|
|
|
Integrated kidney
care
|
94
|
|
98
|
|
193
|
Other U.S.
ancillary
|
7
|
|
7
|
|
14
|
International dialysis
patient service and other
|
190
|
|
179
|
|
369
|
|
292
|
|
284
|
|
575
|
Eliminations
|
(22)
|
|
(23)
|
|
(45)
|
Total consolidated
revenues
|
$ 3,000
|
|
$ 2,873
|
|
$ 5,873
|
Operating income
(loss):
|
|
|
|
|
|
U.S.
dialysis
|
$
461
|
|
$
361
|
|
$
822
|
Other—Ancillary
services
|
|
|
|
|
|
Integrated kidney
care
|
(39)
|
|
(37)
|
|
(77)
|
Other U.S.
ancillary
|
(2)
|
|
(3)
|
|
(5)
|
International(4)
|
20
|
|
15
|
|
35
|
|
(22)
|
|
(25)
|
|
(46)
|
Corporate
administrative support expenses
|
(34)
|
|
(25)
|
|
(58)
|
Total consolidated
operating income
|
$
405
|
|
$
312
|
|
$
717
|
DAVITA INC.
|
SUPPLEMENTAL
FINANCIAL DATA - continued
|
(unaudited)
|
(dollars in millions
and shares in thousands, except per treatment data)
|
|
|
Three months
ended
|
|
Six
months
ended June 30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
3. Summary of
reportable segment financial results and metrics:
|
|
|
|
|
|
U.S.
dialysis
|
|
|
|
|
|
Financial
results
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
Dialysis patient
service revenues
|
$ 2,724
|
|
$ 2,606
|
|
$ 5,330
|
Other
revenues
|
6
|
|
6
|
|
13
|
Total operating
revenues
|
2,731
|
|
2,612
|
|
5,343
|
Operating
expenses:
|
|
|
|
|
|
Patient care
costs
|
1,826
|
|
1,832
|
|
3,658
|
General and
administrative
|
279
|
|
259
|
|
538
|
Depreciation and
amortization
|
172
|
|
167
|
|
339
|
Equity investment
income
|
(8)
|
|
(6)
|
|
(14)
|
Total operating
expenses
|
2,270
|
|
2,251
|
|
4,521
|
Segment operating
income
|
$
461
|
|
$
361
|
|
$
822
|
Reconciliation
for non-GAAP measure:
|
|
|
|
|
|
Closure
charges
|
21
|
|
22
|
|
43
|
Severance and other
costs
|
5
|
|
17
|
|
22
|
Adjusted segment
operating income(1)
|
$
487
|
|
$
400
|
|
$
887
|
Metrics
|
|
|
|
|
|
Volume:
|
|
|
|
|
|
Treatments
|
7,231,242
|
|
7,117,427
|
|
14,348,669
|
Number of treatment
days
|
78.0
|
|
77.0
|
|
155.0
|
Average treatments per
day
|
92,708
|
|
92,434
|
|
92,572
|
Per day year-over-year
(decrease) increase
|
(0.5) %
|
|
0.1 %
|
|
(0.2) %
|
Normalized
year-over-year non-acquired treatment
growth(5)
|
(0.2) %
|
|
— %
|
|
|
Operating net
revenues:
|
|
|
|
|
|
Average patient
service revenue per treatment
|
$
376.73
|
|
$
366.14
|
|
$
371.48
|
Expenses:
|
|
|
|
|
|
Patient care costs per
treatment
|
$
252.57
|
|
$
257.34
|
|
$
254.94
|
General and
administrative expenses per treatment
|
$ 38.60
|
|
$ 36.39
|
|
$ 37.50
|
Depreciation and
amortization expense per treatment
|
$ 23.76
|
|
$ 23.46
|
|
$ 23.62
|
Accounts
receivable:
|
|
|
|
|
|
Receivables
|
$ 1,700
|
|
$ 1,769
|
|
|
DSO
|
57
|
|
62
|
|
|
DAVITA INC.
|
SUPPLEMENTAL
FINANCIAL DATA - continued
|
(unaudited)
|
(dollars in millions
and shares in thousands, except per treatment data)
|
|
|
Three months
ended
|
|
Six months
ended June 30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
4. Cash
flow:
|
|
|
|
|
|
Operating cash
flow
|
$
450
|
|
$
463
|
|
$
913
|
Operating cash flow,
last twelve months
|
$ 1,967
|
|
$ 1,705
|
|
|
Free cash
flow(1)
|
$
260
|
|
$
265
|
|
$
525
|
Free cash flow, last
twelve months(1)
|
$ 1,100
|
|
$
935
|
|
|
Capital
expenditures:
|
|
|
|
|
|
Routine
maintenance/IT/other
|
$
86
|
|
$
109
|
|
$
194
|
Development and
relocations
|
$
39
|
|
$
39
|
|
$
78
|
Acquisition
expenditures
|
$
3
|
|
$
—
|
|
$
3
|
Proceeds from sale of
self-developed properties
|
$
2
|
|
$
—
|
|
$
2
|
|
|
|
|
|
|
5. Debt and capital
structure:
|
|
|
|
|
|
Total
debt(6)
|
$ 8,760
|
|
$ 8,701
|
|
|
Net debt, net of cash
and cash equivalents(6)
|
$ 8,432
|
|
$ 8,384
|
|
|
Leverage
ratio(7)
|
3.69x
|
|
3.89x
|
|
|
Weighted average
effective interest rate:
|
|
|
|
|
|
During the
quarter
|
4.67 %
|
|
4.55 %
|
|
|
At end of the
quarter
|
4.66 %
|
|
4.53 %
|
|
|
On the senior secured
credit facilities at end of the quarter
|
4.90 %
|
|
4.60 %
|
|
|
Debt with fixed and
capped rates as a percentage of total debt:
|
|
|
|
|
|
Debt with rates fixed
by its terms
|
52 %
|
|
53 %
|
|
|
Debt with rates fixed
by its terms or capped by cap agreements
|
92 %
|
|
93 %
|
|
|
|
Certain columns, rows
or percentages may not sum or recalculate due to the presentation
of rounded numbers.
|
______________________
|
(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)
|
Adjusted operating
income margin is adjusted operating income divided by consolidated
revenues.
|
(3)
|
General and
administrative expenses include certain corporate support,
long-term incentive compensation and advocacy costs.
|
(4)
|
The reported operating
income for the three months ended June 30, 2023, and March 31, 2023
and for the six months ended June 30, 2023 includes foreign
currency gains (losses) embedded in equity method income recognized
from our Asia Pacific joint venture of approximately $1.2, $(0.7)
and $0.5, respectively.
|
(5)
|
Normalized non-acquired
treatment growth reflects year-over-year growth in treatment
volume, adjusted to exclude acquisitions and other similar
transactions, and further adjusted to normalize for the number and
mix of treatment days in a given quarter versus the prior year
quarter.
|
(6)
|
The debt amounts as of
June 30, 2023 and March 31, 2023 presented exclude approximately
$60.6 and $41.5, respectively, of debt discount, premium and other
deferred financing costs related to our senior secured credit
facilities and senior notes in effect or outstanding at that
time.
|
(7)
|
See Note 1: Calculation
of the Leverage Ratio on page 14.
|
DAVITA INC.
SUPPLEMENTAL FINANCIAL
DATA-continued
(unaudited)
(dollars in
millions)
Note 1: Calculation of the Leverage Ratio
Under our amended senior secured credit facilities (the Amended
Credit Agreement) dated April 28,
2023, and our prior senior secured credit agreement (the
Prior Agreement) the leverage ratio is defined as (a) all funded
debt, minus unrestricted cash and cash equivalents (including
short-term investments) not to exceed $750 divided by (b) "Consolidated EBITDA." The
Prior Credit Agreement also included the face amount of all letters
of credit issued as debt. The leverage ratio determines the
interest rate margin payable by the Company for its Term Loan A-1
and new revolving line of credit under the Amended Credit Agreement
by establishing the margin over the base interest rate (SOFR plus
credit spread adjustment) that is applicable. The following
leverage ratios were calculated using the last 12 months of
"Consolidated EBITDA" and "Consolidated net debt" at the end of
each reported period, each as defined in the credit agreement that
was in effect at the end of each such period (the Applicable Credit
Agreement). The calculation of "Consolidated EBITDA" below sets
forth, among other things, certain pro forma adjustments described
in the Applicable Credit Agreement, including, as applicable, pro
forma adjustments for acquisitions or divestitures that occurred
during the period and certain projected net cost savings, expense
reductions and cost synergies. These pro forma adjustments are
determined according to specified criteria set forth in the
Applicable Credit Agreement, and as a result, the total adjustments
calculated pursuant to the Applicable Credit Agreement may not be
comparable to the Company's estimates for other purposes, including
as operating performance measures. The Company's management
believes the presentation of "Consolidated EBITDA" as defined in
the Applicable Credit Agreement is useful to investors to enhance
their understanding of the Company's leverage ratio under the
Applicable Credit Agreement and should not be evaluated for any
other purpose. The leverage ratio calculated by the
Company is a non-GAAP measure and should not be considered a
substitute for the ratio of total debt to operating income,
determined in accordance with GAAP. The Company's calculation
of its leverage ratio might not be calculated in the same manner
as, and thus might not be comparable to, similarly titled measures
of other companies.
|
Twelve months
ended
|
|
June 30,
2023
|
|
March 31,
2023
|
Net income from
continuing operations attributable to DaVita Inc.
|
$
454
|
|
$
500
|
Income taxes
|
170
|
|
185
|
Interest
expense
|
367
|
|
350
|
Depreciation and
amortization
|
750
|
|
738
|
Net income attributable
to noncontrolling interests
|
241
|
|
233
|
Stock-settled
stock-based compensation
|
99
|
|
95
|
Debt prepayment and
refinancing charges
|
8
|
|
|
Expected cost savings
and expense reductions
|
73
|
|
|
Severance and other
related costs
|
49
|
|
44
|
Other
|
71
|
|
37
|
"Consolidated
EBITDA"
|
$
2,281
|
|
$
2,182
|
|
|
|
|
|
June 30,
2023
|
|
March 31,
2023
|
Total debt, excluding
debt discount and other deferred financing
costs(1)
|
$
8,760
|
|
$
8,701
|
Letters of credit
issued
|
—
|
|
151
|
|
8,760
|
|
8,853
|
Less: Cash and cash
equivalents including short-term
investments(2)
|
(336)
|
|
(364)
|
Consolidated net
debt
|
$
8,424
|
|
$
8,489
|
Last twelve months
"Consolidated EBITDA"
|
$
2,281
|
|
$
2,182
|
Leverage
ratio
|
3.69x
|
|
3.89x
|
Maximum leverage ratio
permitted under the Credit Agreement
|
5.00x
|
|
5.00x
|
|
Certain columns or rows
may not sum or recalculate due to the presentation of rounded
numbers.
|
_______________________
|
(1)
|
The debt amounts as of
June 30, 2023 and March 31, 2023 presented exclude approximately
$60.6 and $41.5, respectively, of debt discount, premium and other
deferred financing costs related to our senior secured credit
facilities and senior notes in effect or outstanding at that
time.
|
(2)
|
This excludes amounts
not readily convertible to cash related to the Company's
non-qualified deferred compensation plans for all periods
presented. The Credit Agreement limits the amount deducted for cash
and cash equivalents, including short-term investments, to the
lesser of all unrestricted cash and cash equivalents, including
short-term investments of the Company or $750.
|
DAVITA INC.
INTEGRATED CARE
METRICS
(unaudited)
Note 2: Integrated Care Metrics
Our integrated kidney care (IKC) business is party to a variety
of risk-based integrated care and disease management arrangements,
including value-based care (VBC) contracts under which we assume
full or shared financial risk for the total medical cost of care
for patients below or above a benchmark.
The aggregate amount of medical spend associated with risk-based
integrated care arrangements that we disclose includes both medical
costs included in our reported expenses for certain risk-based
arrangements (such as its special needs plans), as well as the
aggregate estimated benchmark amount above or below which we will
incur profit or loss on for VBC arrangements under which
third-party medical costs are not included in our reported results.
This metric is an annualization of our estimate of this amount for
the most recent quarter.
A number of our VBC contracts are subject to complex or novel
patient attribution mechanics and benchmark adjustments, some of
which are based on information not reported to us until periods
after we report our quarterly results. As a result, our estimates
of our patients under, and the dollar amount of, our value-based
contracts remain subject to estimation uncertainty.
DAVITA INC.
RECONCILIATIONS FOR
NON-GAAP MEASURES
(unaudited)
Note on Non-GAAP Financial Measures
As used in this press release, the term "adjusted" refers to
non-GAAP measures as follows, each as reconciled to its most
comparable GAAP measure as presented in the non-GAAP
reconciliations in the notes to this press release: (i) for income
and expense measures, the term "adjusted" refers to operating
performance measures that exclude certain items such as impairment
charges, (gain) loss on ownership changes, capacity closure
charges, restructuring charges, accruals for legal matters and debt
prepayment and refinancing charges; and (ii) the term "effective
income tax rate on adjusted income attributable to DaVita Inc."
represents the Company's effective tax rate excluding applicable
non-GAAP items and the tax associated with them as well as
noncontrolling owners' income, which primarily relates to non-tax
paying entities. Note that the non-GAAP measures presented for
prior periods below have been conformed to the non-GAAP measures
presented for the current period.
These non-GAAP or "adjusted" measures are presented because
management believes these measures are useful adjuncts to GAAP
results. However, these non-GAAP measures should not be considered
alternatives to the corresponding measures determined under
GAAP.
Specifically, management uses adjusted measures of operating
expenses for its U.S. dialysis business, adjusted U.S. dialysis
patient care costs per treatment, adjusted operating income,
adjusted net income attributable to DaVita Inc. and adjusted
diluted net income per share attributable to DaVita Inc. to compare
and evaluate our performance period over period and relative to
competitors, to analyze the underlying trends in our business, to
establish operational budgets and forecasts and for incentive
compensation purposes. We believe these non-GAAP measures also are
useful to investors and analysts in evaluating our performance over
time and relative to competitors, as well as in analyzing the
underlying trends in our business. Furthermore, we believe these
presentations enhance a user's understanding of our normal
consolidated results by excluding certain items which we do not
believe are indicative of our ordinary results of operations. As a
result, adjusting for these amounts allows for comparison to our
normalized prior period results.
The effective income tax rate on adjusted income attributable to
DaVita Inc. excludes noncontrolling owners' income and certain
non-deductible and other charges which we do not believe are
indicative of our ordinary results. Accordingly, we believe these
adjusted effective income tax rates are useful to management,
investors and analysts in evaluating our performance and
establishing expectations for income taxes incurred on our ordinary
results attributable to DaVita Inc.
Finally, free cash flow represents net cash provided by
operating activities less distributions to noncontrolling interests
and all capital expenditures (including development capital
expenditures, routine maintenance and information technology); plus
contributions from noncontrolling interests and proceeds from the
sale of self-developed properties. Management uses this measure to
assess our ability to fund acquisitions and meet our debt service
obligations and we believe this measure is equally useful to
investors and analysts as an adjunct to cash flows from operating
activities and other measures under GAAP.
It is important to bear in mind that these non-GAAP "adjusted"
measures are not measures of financial performance or liquidity
under GAAP and should not be considered in isolation from, nor as
substitutes for, their most comparable GAAP measures.
The following Notes 3 through 7 provide reconciliations of the
non-GAAP financial measures presented in this press release to
their most comparable GAAP measures.
DAVITA INC.
RECONCILIATIONS FOR
NON-GAAP MEASURES -
continued
(unaudited)
(dollars in millions,
except per share data)
Note 3: Adjusted net income and adjusted diluted
net income per share attributable to DaVita Inc.
|
Three months
ended
|
|
Six months
ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2023
|
|
June 30,
2022
|
|
Dollars
|
|
Per
share
|
|
Dollars
|
|
Per
share
|
|
Dollars
|
|
Per
share
|
|
Dollars
|
|
Per
share
|
Consolidated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to DaVita Inc.
|
$ 179
|
|
$
1.91
|
|
$ 116
|
|
$
1.25
|
|
$ 294
|
|
$
3.17
|
|
$ 387
|
|
$
3.90
|
Closure charges
impacting:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient care
costs
|
6
|
|
0.06
|
|
13
|
|
0.14
|
|
18
|
|
0.20
|
|
8
|
|
0.08
|
General and
administrative:
|
8
|
|
0.08
|
|
5
|
|
0.05
|
|
13
|
|
0.14
|
|
2
|
|
0.02
|
Depreciation and
amortization
|
8
|
|
0.08
|
|
5
|
|
0.05
|
|
12
|
|
0.13
|
|
1
|
|
0.01
|
Total closure
charges
|
21
|
|
0.23
|
|
22
|
|
0.24
|
|
43
|
|
0.47
|
|
11
|
|
0.11
|
Severance and other
costs
|
5
|
|
0.06
|
|
18
|
|
0.19
|
|
23
|
|
0.25
|
|
—
|
|
—
|
Other income (loss),
net — Mozarc gain
|
(14)
|
|
(0.15)
|
|
—
|
|
—
|
|
(14)
|
|
(0.15)
|
|
—
|
|
—
|
Debt prepayment and
refinancing charges
|
8
|
|
0.09
|
|
—
|
|
—
|
|
8
|
|
0.09
|
|
—
|
|
—
|
Related income
tax
|
(5)
|
|
(0.05)
|
|
(10)
|
|
(0.11)
|
|
(15)
|
|
(0.16)
|
|
(3)
|
|
(0.03)
|
Adjusted net income
attributable to DaVita Inc.
|
$ 194
|
|
$
2.08
|
|
$ 146
|
|
$
1.58
|
|
$ 340
|
|
$
3.65
|
|
$ 395
|
|
$
3.98
|
|
Certain columns, rows
or percentages may not sum or recalculate due to the presentation
of rounded numbers.
|
DAVITA INC.
RECONCILIATIONS FOR
NON-GAAP MEASURES -
continued
(unaudited)
(dollars in millions,
except per share data)
Note 4: Adjusted operating income
|
Three months
ended
|
|
Six months
ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2023
|
|
June 30,
2022
|
Consolidated:
|
|
|
|
|
|
|
|
Operating
income
|
$
405
|
|
$
312
|
|
$
717
|
|
$
771
|
Closure charges
impacting:
|
|
|
|
|
|
|
|
Patient care
costs
|
6
|
|
13
|
|
18
|
|
8
|
General and
administrative:
|
8
|
|
5
|
|
13
|
|
2
|
Depreciation and
amortization
|
8
|
|
5
|
|
12
|
|
1
|
Total closure
charges
|
21
|
|
22
|
|
43
|
|
11
|
Severance and other
costs
|
5
|
|
18
|
|
23
|
|
—
|
Adjusted operating
income
|
$
432
|
|
$
352
|
|
$
784
|
|
$
782
|
|
|
Three months
ended
|
|
Six months
ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2023
|
|
June 30,
2022
|
Consolidated:
|
|
|
|
|
|
|
|
U.S.
dialysis:
|
|
|
|
|
|
|
|
Segment operating
income
|
$
461
|
|
$
361
|
|
$
822
|
|
$
879
|
Closure
charges
|
21
|
|
22
|
|
43
|
|
11
|
Severance and other
costs
|
5
|
|
17
|
|
22
|
|
—
|
Adjusted U.S. dialysis
operating income
|
487
|
|
400
|
|
887
|
|
890
|
Other - Ancillary
services:
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
Integrated kidney
care
|
(39)
|
|
(37)
|
|
(77)
|
|
(59)
|
Other U.S.
ancillary
|
(2)
|
|
(3)
|
|
(5)
|
|
(6)
|
Segment operating
loss
|
(42)
|
|
(40)
|
|
(82)
|
|
(64)
|
Severance and other
costs
|
—
|
|
—
|
|
—
|
|
—
|
Adjusted operating
loss
|
(42)
|
|
(39)
|
|
(81)
|
|
(64)
|
International
|
|
|
|
|
|
|
|
Segment operating
income
|
20
|
|
15
|
|
35
|
|
23
|
Other - Ancillary
services operating loss
|
(22)
|
|
(24)
|
|
(46)
|
|
(41)
|
Corporate
administrative support expenses:
|
|
|
|
|
|
|
|
Segment
expenses
|
(34)
|
|
(25)
|
|
(58)
|
|
(67)
|
Severance and other
costs
|
—
|
|
1
|
|
1
|
|
—
|
Adjusted Corporate
administrative support expenses
|
(33)
|
|
(24)
|
|
(57)
|
|
(67)
|
Adjusted operating
income
|
$
432
|
|
$
352
|
|
$
784
|
|
$
782
|
|
Certain columns, rows
or percentages may not sum or recalculate due to the presentation
of rounded numbers.
|
DAVITA INC.
RECONCILIATIONS FOR
NON-GAAP MEASURES -
continued
(unaudited)
(dollars in millions,
except per share data)
Note 5: Adjusted U.S. dialysis expense
measures
|
Three months
ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
GAAP
|
|
Non-GAAP
adjustment
|
|
Adjusted
|
|
GAAP
|
|
Non-GAAP
adjustment
|
|
Adjusted
|
|
(dollars in
millions)
|
U.S.
dialysis
|
|
|
|
|
|
|
|
|
|
|
|
Treatments
|
7,231,242
|
|
—
|
|
7,231,242
|
|
7,117,427
|
|
—
|
|
7,117,427
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Patient care
costs
|
$ 1,826
|
|
$
(6)
|
|
$ 1,821
|
|
$ 1,832
|
|
$
(13)
|
|
$ 1,819
|
General and
administrative
|
279
|
|
(13)
|
|
266
|
|
259
|
|
(22)
|
|
237
|
Depreciation and
amortization
|
172
|
|
(8)
|
|
164
|
|
167
|
|
(5)
|
|
162
|
Equity investment
income
|
(8)
|
|
—
|
|
(8)
|
|
(6)
|
|
—
|
|
(6)
|
Total operating
expenses
|
$ 2,270
|
|
$
(26)
|
|
$ 2,244
|
|
$ 2,251
|
|
$
(39)
|
|
$ 2,212
|
Patient care costs per
treatment(1)
|
$
252.57
|
|
|
|
$
251.78
|
|
$
257.34
|
|
|
|
$
255.56
|
|
Certain columns, rows,
per treatment amounts or percentages may not sum or recalculate due
to the presentation of rounded numbers.
|
_______________________
|
(1)
|
Patient care costs per
treatment and adjusted patient care costs per treatment are patient
care costs or adjusted patient care costs divided by number of U.S.
dialysis treatments, respectively.
|
DAVITA INC.
RECONCILIATIONS FOR
NON-GAAP MEASURES -
continued
(unaudited)
(dollars in
millions)
Note 6: Effective income tax rates on income
attributable to DaVita Inc.
|
Three months
ended
|
|
Six months
ended
June 30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
Income before income
taxes
|
$
295
|
|
$
215
|
|
$
510
|
Noncontrolling owners'
income primarily attributable to non-tax paying entities
|
(68)
|
|
(55)
|
|
(123)
|
Income before income
taxes attributable to DaVita Inc.
|
$
227
|
|
$
159
|
|
$
386
|
|
|
|
|
|
|
Income tax
expense
|
$ 49
|
|
$ 44
|
|
$ 93
|
Income tax
attributable to noncontrolling interests
|
—
|
|
—
|
|
(1)
|
Income tax expense
attributable to DaVita Inc.
|
$ 48
|
|
$ 44
|
|
$ 92
|
|
|
|
|
|
|
Effective income tax
rate on income attributable to DaVita Inc.
|
21.3 %
|
|
27.5 %
|
|
23.9 %
|
The effective income tax rate on adjusted income attributable to
DaVita Inc. is computed as follows:
|
Three months
ended
|
Six months
ended
June 30,
2023
|
June 30,
2023
|
|
March 31,
2023
|
|
Income before income
taxes
|
$
295
|
|
$
215
|
|
$
510
|
Closure charges
impacting:
|
|
|
|
|
|
Patient care
costs
|
6
|
|
13
|
|
18
|
General and
administrative:
|
8
|
|
5
|
|
13
|
Depreciation and
amortization
|
8
|
|
5
|
|
12
|
Severance and other
costs
|
5
|
|
18
|
|
23
|
Other income (loss),
net — Mozarc gain
|
(14)
|
|
—
|
|
(14)
|
Debt prepayment and
refinancing charges
|
8
|
|
—
|
|
8
|
Noncontrolling owners'
income primarily attributable to non-tax paying entities
|
(68)
|
|
(55)
|
|
(123)
|
Adjusted income before
income taxes attributable to DaVita Inc.
|
$
247
|
|
$
200
|
|
$
447
|
Income tax
expense
|
$ 49
|
|
$ 44
|
|
$ 93
|
Plus income tax related
to:
|
|
|
|
|
|
Closure charges
impacting:
|
|
|
|
|
|
Patient care
costs
|
1
|
|
3
|
|
5
|
General and
administrative:
|
2
|
|
1
|
|
3
|
Depreciation and
amortization
|
2
|
|
1
|
|
3
|
Severance and other
costs
|
1
|
|
4
|
|
6
|
Other income (loss),
net — Mozarc gain
|
(3)
|
|
—
|
|
(3)
|
Debt prepayment and
refinancing charges
|
2
|
|
—
|
|
2
|
Less income tax related
to:
|
|
|
|
|
|
Noncontrolling
interests
|
—
|
|
—
|
|
(1)
|
Income tax on adjusted
income attributable to DaVita Inc.
|
$ 53
|
|
$ 54
|
|
$
107
|
Effective income tax
rate on adjusted income attributable to DaVita Inc.
|
21.6 %
|
|
27.0 %
|
|
24.0 %
|
|
Certain columns, rows
or percentages may not sum or recalculate due to the presentation
of rounded numbers.
|
DAVITA INC.
RECONCILIATIONS
FOR NON-GAAP MEASURES -
continued
(unaudited)
(dollars in millions,
except per share data)
Note 7: Free cash flow
|
Three months
ended
|
|
Six months
ended
June 30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
|
Net cash provided by
operating activities
|
$
450
|
|
$
463
|
|
$
188
|
|
$
913
|
Adjustments to
reconcile net cash provided by operating activities to
free cash
flow:
|
|
|
|
|
|
|
|
Distributions to
noncontrolling interests
|
(69)
|
|
(55)
|
|
(53)
|
|
(124)
|
Contributions from
noncontrolling interests
|
2
|
|
5
|
|
4
|
|
7
|
Expenditures for
routine maintenance and information technology
|
(86)
|
|
(109)
|
|
(96)
|
|
(194)
|
Expenditures for
development and relocations
|
(39)
|
|
(39)
|
|
(46)
|
|
(78)
|
Proceeds from sale of
self-developed properties
|
2
|
|
—
|
|
98
|
|
2
|
Free cash
flow
|
$
260
|
|
$
265
|
|
$
95
|
|
$
525
|
|
Twelve months
ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Net cash provided by
operating activities
|
$
1,967
|
|
$
1,705
|
|
$
1,607
|
Adjustments to
reconcile net cash provided by operating activities to free cash
flow:
|
|
|
|
|
|
Distributions to
noncontrolling interests
|
(274)
|
|
(257)
|
|
(263)
|
Contributions from
noncontrolling interests
|
13
|
|
15
|
|
25
|
Expenditures for
routine maintenance and information technology
|
(445)
|
|
(455)
|
|
(421)
|
Expenditures for
development and relocations
|
(165)
|
|
(173)
|
|
(192)
|
Proceeds from sale of
self-developed properties
|
4
|
|
100
|
|
133
|
Free cash
flow
|
$
1,100
|
|
$
935
|
|
$
890
|
|
Certain columns or rows
may not sum or recalculate due to the presentation of rounded
numbers.
|
Contact:
|
Investor
Relations
|
|
DaVita Inc.
|
|
ir@davita.com
|
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SOURCE DaVita