DaVita Inc. 4th Quarter 2020 Results

DENVER, Feb. 11, 2021 /PRNewswire/ -- DaVita Inc. DVA announced financial and operating results for the quarter and year ended December 31, 2020. For the full year diluted earnings per share from continuing operations was $6.39, an increase of 38.9% from the prior year, and adjusted diluted earnings per share from continuing operations was $7.26, an increase of 34.4% from the prior year. Fourth quarter diluted earnings per share from continuing operations of $1.67 was impacted by the challenges of responding to COVID-19, with an estimated net impact on operating income of approximately $(60) million. This impact was primarily driven by higher patient mortality, fewer offsets in the fourth quarter including higher health benefit expenses, and higher direct costs related to COVID-19.

"Throughout the pandemic, including the recent surge in the number of COVID-19 cases across the United States, our teammates continue to respond with a focus on the health and safety of 240,000 patients receiving high quality, life-sustaining care," said Javier Rodriguez, CEO of DaVita. "Over the past six weeks, we have begun providing vaccinations to our front-line caregivers, and we are now beginning the process of providing COVID-19 vaccinations to our patients."

Financial results for the quarter and year ended December 31, 2020:

  • Consolidated revenues of $2.905 billion and $11.551 billion for the three months and year ended December 31, 2020, respectively.
  • Operating income of $382 million or 13.1% operating margin for the three months ended December 31, 2020. Operating income of $1.695 billion or 14.7% operating margin and adjusted operating income of $1.746 billion or 15.1% adjusted operating margin for the year ended December 31, 2020.
  • Diluted earnings per share from continuing operations of $1.67 for the three months ended December 31, 2020. Diluted earnings per share from continuing operations and adjusted diluted earnings per share from continuing operations of $6.39 and $7.26, respectively for the year ended December 31, 2020.
  • Operating cash flow and free cash flow, both from continuing operations, of $485 million and $210 million, respectively for the three months ended December 31, 2020. Operating cash flow and free cash flow, both from continuing operations, were $1.979 billion and $1.188 billion, respectively for the year ended December 31, 2020.

 



Three months ended December 31,



Year ended December 31,



2020



2019



2020



2019

Net income attributable to DaVita Inc.:

(dollars in millions, except per share data)



Net income from continuing operations

$

193





$

242





$

783





$

707





Diluted per share

$

1.67





$

1.86





$

6.39





$

4.60





Adjusted net income from continuing operations(1)

$

193





$

242





$

890





$

830





Diluted per share adjusted(1)

$

1.67





$

1.86





$

7.26





$

5.40





Net income

$

174





$

245





$

774





$

811





Diluted per share

$

1.50





$

1.88





$

6.31





$

5.27



_____________________

(1)

For definitions of non-GAAP financial measures, see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 14.

 



Three months ended December 31,



Year ended December 31,



2020



2019



2020



2019



Amount



Margin



Amount



Margin



Amount



Margin



Amount



Margin

Operating income:

(dollars in millions)



Operating income

$

382





13.1

%



$

463





16.0

%



$

1,695





14.7

%



$

1,643





14.4

%



Adjusted operating income(1)(2)

$

382





13.1

%



$

463





16.0

%



$

1,746





15.1

%



$

1,768





15.5

%

_____________________

(1)

For definitions of non-GAAP financial measures, see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 14.

(2)

Adjusted operating margin is adjusted operating income divided by consolidated revenues.

U.S. dialysis metrics:

Volume: Total U.S. dialysis treatments for the fourth quarter of 2020 were 7,574,217, or an average of 95,876 treatments per day, representing a per day decline of (0.9)% compared to the fourth quarter of 2019. Normalized non-acquired treatment growth in the fourth quarter of 2020 compared to the fourth quarter of 2019 was (0.3)%.



Three months ended



Quarter

change



Year ended



Annual

change



December 31,

2020



September 30,

2020





December 31,

2020



December 31,

2019



Per treatment metrics:























Revenue

$

351.78





$

349.63





$

2.15





$

350.31





$

349.02





$

1.29



Patient care costs

$

245.06





$

232.57





$

12.49





$

238.24





$

239.27





$

(1.03)



General and administrative

$

31.80





$

39.62





$

(7.82)





$

31.62





$

28.41





$

3.21



Primary drivers of the changes in the table above were as follows:

Revenue: The quarter change was primarily due to increases in government revenue per treatment and in hospital inpatient dialysis services revenue due to normal seasonality and COVID-19, partially offset by a decline in calcimimetics revenue. The annual change was primarily due to an increase in Medicare rates due to a base rate increase in 2020, the temporary suspension of Medicare sequestration, as well as an increase in hospital inpatient dialysis services revenue per treatment, partially offset by a decline in calcimimetics reimbursement.

Patient care costs: The quarter change was primarily due to increases in COVID-19-related costs, including compensation expense, medical supplies and teammate reimbursement and benefit program expenses. In addition, there were increases in health benefit expenses, labor costs and other direct dialysis center operating expenses partially offset by a decrease in pharmaceutical intensity. The annual change was primarily due to decreases in pharmaceutical unit costs as well as travel expenses, partially offset by an increase in labor costs and COVID-19-related costs, including compensation expenses, medical supplies and teammate relief reimbursement and benefit program expenses.

General and administrative: The quarter change was primarily due to decreases in advocacy costs to counter union policy efforts, including a California ballot initiative and contributions to DaVita's charitable foundation partially offset by an increase in professional fees. The annual change was primarily due to increases in advocacy costs as described above, contributions to DaVita's charitable foundation, labor costs and COVID-19-related costs, including compensation expenses. These increases were partially offset by decreases in travel expenses and long-term incentive compensation expense.

Certain items impacting the quarter:

Share repurchases: During the three months ended December 31, 2020, we repurchased 4,193,401 shares for $417 million, at an average cost of $99.55 per share.

Subsequent to December 31, 2020 through February 10, 2021, the Company has repurchased 1,063,000 shares of our common stock for $123 million at an average cost of $115.98 per share.

Financial and operating metrics:



Three months ended

December 31,



Year ended

December 31,



2020



2019



2020



2019

Cash flow:

(dollars in millions)



Operating cash flow

$

485





$

681





$

1,979





$

2,072





Operating cash flow from continuing operations

$

485





$

678





$

1,979





$

1,973





Free cash flow from continuing operations (1)

$

210





$

415





$

1,188





$

1,127



___________________

(1)

For definitions of non-GAAP financial measures, see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 14.

 



Three months ended

December 31, 2020



Year ended

December 31, 2020

Effective income tax rate on:





Income from continuing operations

22.4

%



23.8

%



Income from continuing operations attributable to DaVita Inc.(1)

27.5

%



28.6

%



Adjusted income from continuing operations attributable to DaVita Inc.(1)

27.5

%



28.0

%

____________________

(1)

For definitions of non-GAAP financial measures, see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 14.

Center activity: As of December 31, 2020, we provided dialysis services to a total of approximately 240,400 patients at 3,137 outpatient dialysis centers, of which 2,816 centers were located in the United States and 321 centers were located in ten countries outside of the United States. During the fourth quarter of 2020, we opened a total of 14 new dialysis centers and closed seven dialysis centers in the United States. We also acquired 30 dialysis centers outside of the United States, including entering a new country, the United Kingdom, during the fourth quarter of 2020.

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. In particular, 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, diluted net income from continuing operations per share attributable to DaVita Inc., effective income tax rate on income from continuing operations or free cash flow from continuing operations 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 foreign currency fluctuations, which may be significant. Our effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. also excludes the amount of third party owners' income and related taxes attributable to non-tax paying entities.



Current 2021 guidance



Low



High



(dollars in millions, except per share data)

Adjusted operating income

$

1,675





$

1,825



Adjusted diluted net income from continuing operations per share attributable to DaVita Inc.

$

7.75





$

8.75



Free cash flow from continuing operations

$

900





$

1,150



We will be holding a conference call to discuss our results for the fourth quarter and year ended December 31, 2020, on February 11, 2021, 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'. A replay of the conference call will be available on our website at investors.davita.com for the following 30 days.

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, DaVita's response to and the expected future impacts of the novel coronavirus (COVID-19), including statements about our balance sheet and liquidity, our expenses and expense offsets, revenues, billings and collections, potential need, ability or willingness to use any funds under government relief programs, availability or cost of supplies, treatment volumes, mix expectation, such as the percentage or number of patients under commercial insurance, the availability and administration of COVID-19 vaccines, 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 and Medicare Advantage 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 continuing impact of the dynamic and 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; the availability, acceptance, impact and efficacy of COVID-19 treatments, therapies and vaccines; 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 revenue and non-acquired growth due to lower treatment volumes; the consequences of an extended economic downturn resulting from the impacts of COVID-19, such as a potential negative impact on our commercial mix, which may persist even after the pandemic subsides; and continuing COVID-19-related costs, such as costs to procure equipment and clinical supplies and higher salary and wage expense. The aforementioned risks and uncertainties may also have the effect of heightening many of the other risks and uncertainties discussed below;
  • 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 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 those related to healthcare and/or labor matters, such as AB 290 in California;
  • the impact of 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, as well as the composition of the U.S. Supreme Court and the new presidential administration and congressional majority;
  • our ability to successfully implement our strategies with respect to home-based dialysis, value-based care and/or integrated kidney care, 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 hypoxia inducible factors;
  • 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 reimbursement rates, such as accountable care organizations, independent practice associations and integrated delivery systems;
  • 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;
  • 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; and
  • uncertainties associated with the other risk factors set forth in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2019, as updated by our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 2020, and as may be further updated by 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 Annual Report on Form 10-K for the year ended December 31, 2020.

Contact:

Jim Gustafson



Investor Relations



DaVita Inc.



(310) 536-2585

 

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars and shares in thousands, except per share data)





Three months ended December 31,



Year ended December 31,



2020



2019



2020



2019

Dialysis patient service revenues

$

2,773,123





$

2,766,009





$

11,026,251





$

10,896,706



Other revenues

132,199





132,575





524,353





491,773



Total revenues

2,905,322





2,898,584





11,550,604





11,388,479



Operating expenses and charges:















Patient care costs

2,056,881





2,000,625





7,988,613





7,914,485



General and administrative

304,519





278,425





1,247,584





1,103,312



Depreciation and amortization

161,486





158,467





630,435





615,152



Equity investment loss (income)

765





(1,521)





(26,916)





(12,679)



Loss on changes in ownership interest, net









16,252







Goodwill impairment charges













124,892



Total operating expenses and charges

2,523,651





2,435,996





9,855,968





9,745,162



Operating income

381,671





462,588





1,694,636





1,643,317



Debt expense

(60,469)





(92,050)





(304,111)





(443,824)



Debt prepayment, refinancing and redemption charges









(89,022)





(33,402)



Other income, net

6,169





11,485





16,759





29,348



Income from continuing operations before income taxes

327,371





382,023





1,318,262





1,195,439



Income tax expense

73,368





81,690





313,932





279,628



Net income from continuing operations

254,003





300,333





1,004,330





915,811



Net (loss) income from discontinued operations, net of tax

(19,633)





2,629





(9,653)





105,483



Net income

234,370





302,962





994,677





1,021,294



Less: Net income attributable to noncontrolling interests

(60,597)





(58,091)





(221,035)





(210,313)



Net income attributable to DaVita Inc.

$

173,773





$

244,871





$

773,642





$

810,981



















Earnings per share attributable to DaVita Inc.:















Basic net income from continuing operations

$

1.73





$

1.87





$

6.54





$

4.61



Basic net income

$

1.56





$

1.89





$

6.46





$

5.29



Diluted net income from continuing operations

$

1.67





$

1.86





$

6.39





$

4.60



Diluted net income

$

1.50





$

1.88





$

6.31





$

5.27



















Weighted average shares for earnings per share:















Basic shares

111,690





129,447





119,797





153,181



Diluted shares

115,957





130,505





122,623





153,812



















Amounts attributable to DaVita Inc.:















Net income from continuing operations

$

193,406





$

242,242





$

783,295





$

706,832



Net (loss) income from discontinued operations

(19,633)





2,629





(9,653)





104,149



Net income attributable to DaVita Inc.

$

173,773





$

244,871





$

773,642





$

810,981



 

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(dollars in thousands)





Three months ended

December 31,



Year ended

December 31,



2020



2019



2020



2019

Net income

$

234,370





$

302,962





$

994,677





$

1,021,294



Other comprehensive income (loss), net of tax:















Unrealized losses on interest rate cap agreements:















Unrealized gains (losses)

124





2,822





(16,346)





1,151



Reclassifications of net realized losses into net income

1,033





1,595





5,313





6,377



Unrealized gains (losses) on foreign currency translation:















Foreign currency translation adjustments

55,219





25,688





(7,623)





(20,102)



Other comprehensive income (loss)

56,376





30,105





(18,656)





(12,574)



Total comprehensive income

290,746





333,067





976,021





1,008,720



Less: Comprehensive income attributable to noncontrolling interests

(60,597)





(58,091)





(221,035)





(210,313)



Comprehensive income attributable to DaVita Inc.

$

230,149





$

274,976





$

754,986





$

798,407



 

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)





Year ended December 31,



2020



2019

Cash flows from operating activities:







Net income

$

994,677





$

1,021,294



Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation and amortization

630,435





615,152



Debt prepayment, refinancing and redemption charges

86,957





33,402



Impairment charges





124,892



Stock-based compensation expense

91,458





67,850



Deferred income taxes

240,848





41,723



Equity investment income, net

13,830





8,582



Loss on sales of business interests, net

24,248





23,022



Other non-cash charges, net

747





49,579



Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:







Accounts receivable

(21,087)





(79,957)



Inventories

(12,349)





10,158



Other receivables and other current assets

(79,277)





2,790



Other long-term assets

(6,123)





6,965



Accounts payable

37,200





(84,539)



Accrued compensation and benefits

(20,931)





(14,697)



Other current liabilities

105,637





181,940



Income taxes

(87,391)





95,645



Other long-term liabilities

(19,851)





(31,446)



Net cash provided by operating activities

1,979,028





2,072,355



Cash flows from investing activities:







Additions of property and equipment

(674,541)





(766,546)



Acquisitions

(182,013)





(100,861)



Proceeds from asset and business sales

50,139





3,877,392



Purchase of debt investments held-to-maturity

(150,701)





(101,462)



Purchase of other debt and equity investments

(3,757)





(5,458)



Proceeds from debt investments held-to-maturity

151,213





95,376



Proceeds from sale of other debt and equity investments

3,491





3,676



Purchase of equity method investments

(22,341)





(9,366)



Distributions from equity method investments

3,139





2,589



Net cash (used in) provided by investing activities

(825,371)





2,995,340



Cash flows from financing activities:







Borrowings

4,046,775





38,525,850



Payments on long-term debt

(4,110,304)





(40,520,722)



Deferred financing and debt redemption costs

(105,848)





(85,319)



Purchase of treasury stock

(1,458,442)





(2,383,816)



Distributions to noncontrolling interests

(253,118)





(233,123)



Net (payments) receipts related to stock purchases and awards

(975)





11,382



Contributions from noncontrolling interests

42,966





57,317



Purchases of noncontrolling interests

(7,831)





(68,019)



Net cash used in financing activities

(1,846,777)





(4,696,450)



Effect of exchange rate changes on cash, cash equivalents and restricted cash

(13,808)





(1,760)



Net (decrease) increase in cash, cash equivalents and restricted cash

(706,928)





369,485



Less: Net decrease in cash, cash equivalents and restricted cash from discontinued operations





(423,813)



Net (decrease) increase in cash, cash equivalents and restricted cash from continuing operations

(706,928)





793,298



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 period

$

501,790





$

1,208,718



 

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars and shares in thousands, except per share data)





December 31,

2020



December 31,

2019

ASSETS







Cash and cash equivalents

$

324,958





$

1,102,372



Restricted cash and equivalents

176,832





106,346



Short-term investments

20,101





11,572



Accounts receivable

1,824,282





1,795,598



Inventories

111,625





97,949



Other receivables

544,376





489,695



Prepaid and other current assets

76,387





66,866



Income tax receivable

70,163





19,772



Total current assets

3,148,724





3,690,170



Property and equipment, net of accumulated depreciation of $4,480,429 and $3,969,566, respectively

3,521,824





3,473,384



Operating lease right-of-use assets

2,863,089





2,830,047



Intangible assets, net of accumulated amortization of $70,141 and $81,922, respectively

166,585





135,684



Equity method and other investments

257,491





241,983



Long-term investments

32,193





36,519



Other long-term assets

79,501





115,972



Goodwill

6,919,109





6,787,635





$

16,988,516





$

17,311,394



LIABILITIES AND EQUITY







Accounts payable

$

434,253





$

403,840



Other liabilities

810,529





756,174



Accrued compensation and benefits

685,555





695,052



Current portion of operating lease liabilities

369,497





343,912



Current portion of long-term debt

168,541





130,708



Income tax payable

7,768





42,412



Total current liabilities

2,476,143





2,372,098



Long-term operating lease liabilities

2,738,670





2,723,800



Long-term debt

7,917,263





7,977,526



Other long-term liabilities

150,060





160,809



Deferred income taxes

809,600





577,543



Total liabilities

14,091,736





13,811,776



Commitments and contingencies







Noncontrolling interests subject to put provisions

1,330,028





1,180,376



Equity:







Preferred stock ($0.001 par value, 5,000 shares authorized; none issued)







Common stock ($0.001 par value, 450,000 shares authorized; 109,933 and 125,843 shares issued and outstanding at December 31, 2020 and 2019, respectively)

110





126



Additional paid-in capital

597,073





749,043



Retained earnings

852,537





1,431,738



Accumulated other comprehensive loss

(66,154)





(47,498)



Total DaVita Inc. shareholders' equity

1,383,566





2,133,409



Noncontrolling interests not subject to put provisions

183,186





185,833



Total equity

1,566,752





2,319,242





$

16,988,516





$

17,311,394



 

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

(dollars in millions, except for per share and per treatment data)





Three months ended



Year ended

December 31,

2020



December 31,

2020



September 30,

2020



December 31,

2019



1. Consolidated business metrics:















Operating margin

13.1

%



15.0

%



16.0

%



14.7

%

Adjusted operating margin excluding certain items(1)(3)

13.1

%



15.0

%



16.0

%



15.1

%

General and administrative expenses as a percent of consolidated revenues(2)

10.5

%



12.4

%



9.6

%



10.8

%

Effective income tax rate on income from continuing operations

22.4

%



23.2

%



21.4

%



23.8

%

Effective income tax rate on income from continuing operations attributable to DaVita Inc.(1)

27.5

%



29.2

%



25.2

%



28.6

%

Effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc.(1)

27.5

%



28.0

%



25.2

%



28.0

%

















2. Summary of financial results:















Revenues:















U.S. dialysis patient services and other

$

2,674





$

2,694





$

2,687





$

10,660



Other—Ancillary services















U.S. other

124





125





122





489



International dialysis patient service and other

152





147





132





564





276





271





255





1,053



Eliminations

(45)





(41)





(43)





(162)



Total consolidated revenues

$

2,905





$

2,924





$

2,899





$

11,551



Operating income (loss):















U.S. dialysis

$

433





$

471





$

508





$

1,918



Other—Ancillary services















U.S.

(25)





(14)





(21)





(99)



International(4)

(2)





7





2





23





(27)





(7)





(19)





(76)



Corporate administrative support expenses

(24)





(26)





(27)





(147)



Total consolidated operating income

$

382





$

438





$

463





$

1,695



 

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA - continued

(unaudited)

(dollars in millions, except for per share and per treatment data)





Three months ended



Year ended

December 31,

2020



December 31,

2020



September 30,

2020



December 31,

2019



3. Summary of reportable segment financial results:















U.S. dialysis















Revenue:















Dialysis patient service revenues

$

2,664





$

2,677





$

2,676





$

10,619



Other revenues

10





17





11





41



Total operating revenues

2,674





2,694





2,687





10,660



Operating expenses:















Patient care costs

1,856





1,781





1,824





7,222



General and administrative

241





303





209





958



Depreciation and amortization

152





148





150





595



Equity investment income

(7)





(9)





(5)





(33)



Total operating expenses

2,241





2,224





2,179





8,742



Segment operating income

$

433





$

471





$

508





$

1,918



















4. U.S. dialysis business metrics:















Volume:















Treatments

7,574,217





7,656,173





7,681,462





30,314,619



Number of treatment days

79.0





79.0





79.4





313.6



Average treatments per day

95,876





96,914





96,744





96,667



Per day year-over-year (decrease) increase

(0.9)

%



(0.2)

%



1.7

%



0.3

%

Normalized year-over-year non-acquired treatment growth(5)

(0.3)

%



0.6

%



2.1

%





Operating net revenues:















Average patient service revenue per treatment

$

351.78





$

349.63





$

348.31





$

350.31



Expenses:















Patient care costs per treatment

$

245.06





$

232.57





$

237.44





$

238.24



General and administrative expenses per treatment

$

31.80





$

39.62





$

27.27





$

31.62



Accounts receivable:















Receivables

$

1,681





$

1,670





$

1,671







DSO

59





58





58







 

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA - continued

(unaudited)

(dollars in millions, except for per share and per treatment data)





Three months ended



Year ended

December 31,

2020



December 31,

2020



September 30,

2020



December 31,

2019



5. Cash flow:















Operating cash flow

$

485





$

483





$

681





$

1,979



Operating cash flow from continuing operations

$

485





$

483





$

678





$

1,979



Operating cash flow from continuing operations, last twelve months

$

1,979





$

2,172





$

1,973







Free cash flow from continuing operations(1)

$

210





$

287





$

415





$

1,188



Free cash flow from continuing operations, last twelve months(1)

$

1,188





$

1,393





$

1,127







Capital expenditures from continuing operations:















Routine maintenance/IT/other

$

160





$

84





$

130





$

399



Development and relocations

$

65





$

75





$

89





$

275



Acquisition expenditures

$

69





$

68





$

24





$

182



Proceeds from sale of self-developed properties

$

14





$

11





$

19





$

93



















6. Debt and capital structure:















Total debt(6)

$

8,164





$

8,111





$

8,181







Net debt, net of cash and cash equivalents(6)

$

7,839





$

7,401





$

7,079







Leverage ratio (see calculation on page 13)

3.21x





2.96x





3.08x







Weighted average effective interest rate:















During the quarter

3.07

%



3.31

%



4.55

%





At end of the quarter

3.06

%



3.11

%



4.46

%





On the senior secured credit facilities at end of the quarter

2.03

%



2.11

%



3.93

%





Debt with fixed and capped rates as a percentage of total debt:















Debt with rates fixed by its terms

44

%



45

%



44

%





Debt with rates fixed by its terms or capped by cap agreements

87

%



88

%



87

%





Amount spent on share repurchases

$

417





$

725





$

542





$

1,447



Number of shares repurchased

4,193,401





8,231,679





8,368,506





16,477,378







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)

General and administrative expenses include certain corporate support, long-term incentive compensation, accruals for legal matters, advocacy costs and charitable contributions.

(3)

Adjusted operating margin is adjusted operating income divided by consolidated revenues.

(4)

The reported operating (loss) income for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, includes foreign currency losses of approximately $6.0, $2.9 and $4.1, respectively, and approximately $2.9 for the year ended December 31, 2020.

(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 December 31, 2020, September 30, 2020 and December 31, 2019 presented exclude approximately $77.7, $80.9 and $72.8, respectively, of debt discount and other deferred financing costs related to our senior secured credit facilities and senior notes in effect or outstanding at that time.

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA-continued

(unaudited)

(dollars in millions)

Note 1: Calculation of the Leverage Ratio

Under our senior secured credit facilities (the Credit Agreement) dated August 12, 2019, the leverage ratio is defined as (a) all funded debt plus the face amount of all letters of credit issued, minus unrestricted cash and cash equivalents (including short-term investments) not to exceed $750 divided by (b) "Consolidated EBITDA." The leverage ratio determines the interest rate margin payable by the Company for its Term Loan A and revolving line of credit under the Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The calculation below is based on the last twelve months of "Consolidated EBITDA," as of the end of the reported period and pro forma for acquisitions or divestitures that occurred during the period, and "Consolidated net debt" at the end of the reported period, each as defined in the Credit Agreement. The Company's management believes the presentation of "Consolidated EBITDA" is useful to investors to enhance their understanding of the Company's leverage ratio under its Credit Agreement. 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.



Rolling twelve months ended



December 31,

2020



September 30,

2020



December 31,

2019

Net income attributable to DaVita Inc. from continuing operations (1)

$

783





$

832





$

707



Income taxes

314





322





280



Interest expense

272





297





398



Depreciation and amortization

630





627





615



Impairment charges









125



Noncontrolling interests and equity investment income, net

235





226





223



Stock-settled stock-based compensation

90





86





63



Debt prepayment, refinancing and redemption charges

89





89





33



Loss on changes in ownership interest, net

16





16







Other

29





18





(12)



"Consolidated EBITDA"

$

2,460





$

2,515





$

2,432

















December 31,

2020



September 30,

2020



December 31,

2019

Total debt, excluding debt discount and other deferred financing costs(2)

$

8,164





$

8,111





$

8,181



Letters of credit issued

65





65





73





8,228





8,176





8,254



Less: Cash and cash equivalents including short-term investments(3)

(333)





(719)





(750)



Consolidated net debt

$

7,895





$

7,457





$

7,504



Last twelve months "Consolidated EBITDA"

$

2,460





$

2,515





$

2,432



Leverage ratio

3.21x





2.96x





3.08x



Maximum leverage ratio permitted under the Credit Agreement

5.00x





5.00x





5.00x







Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.

______________________

(1)

The net income measure presented is our net income from continuing operations attributable to DaVita Inc., since the Credit Agreement requires divestitures to be reflected on a pro forma basis for our leverage ratio calculation, and this measure of net income already excludes our discontinued operations divested.

(2)

The debt amounts as of December 31, 2020, September 30, 2020 and December 31, 2019 presented exclude approximately $77.7, $80.9, and $72.8, 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)

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 of the Company or $750.

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 measures, the term "adjusted" refers to operating performance measures that exclude certain items such as impairment charges, (gain) loss on ownership changes, restructuring charges, accruals for legal matters and debt prepayment and refinancing charges; and (ii) the term "effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc." represents the Company's effective tax rate excluding applicable non-GAAP items and noncontrolling owners' income, which primarily relates to non-tax paying entities.

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 operating income, adjusted net income from continuing operations attributable to DaVita Inc. and adjusted diluted net income from continuing operations 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 operating income 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.

In addition, the effective income tax rate on income from continuing operations attributable to DaVita Inc. excludes noncontrolling owners' income, which primarily relates to non-tax paying entities.

The effective income tax rate on adjusted income from continuing operations 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 from continuing operations represents net cash provided by operating activities from continuing operations 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 from continuing operations 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 2 through 5 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 for per share data)



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



December 31, 2020



September 30, 2020



December 31, 2019



Dollars



Per share



Dollars



Per share



Dollars



Per share

Net income from continuing operations attributable to DaVita Inc.

$

193





$

1.67





$

159





$

1.28





$

242





$

1.86



Debt prepayment, refinancing and redemption charges









86





0.69











Related income tax









(21)





(0.17)











Adjusted net income from continuing operations attributable to DaVita Inc.

$

193





$

1.67





$

223





$

1.80





$

242





$

1.86





Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.

 



Year ended



December 31, 2020



December 31, 2019



Dollars



Per share



Dollars



Per share

Net income from continuing operations attributable to DaVita Inc.

$

783





$

6.39





$

707





$

4.60



Operating charges:















Loss on changes in ownership interests, net

16





0.13











Goodwill impairment charges









125





0.81



General and administrative:















Accruals for legal matters

35





0.29











Debt prepayment, refinancing and redemption charges

89





0.73





33





0.22



Related income tax

(33)





(0.27)





(35)





(0.23)



Adjusted net income from continuing operations attributable to DaVita Inc.

$

890





$

7.26





$

830





$

5.40





Certain columns or rows 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 for per share data)



Note 3:  Adjusted operating income





Three months ended



Year ended



December 31,

2020



September 30,

2020



December 31,

2019



December 31,

2020



December 31,

2019

Consolidated:



















Operating income

$

382





$

438





$

463





$

1,695





$

1,643



Operating charges:



















Loss on changes in ownership interests, net













16







Goodwill impairment charges

















125



General and administrative:



















Accruals for legal matters













35







Adjusted operating income

$

382





$

438





$

463





$

1,746





$

1,768









Three months ended



Year ended



December 31,

2020



September 30,

2020



December 31,

2019



December 31,

2020



December 31,

2019

Consolidated:



















U.S. dialysis:



















Segment operating income

$

433





$

471





$

508





$

1,918





$

1,925



Other - Ancillary services:



















U.S.



















Segment operating loss

(25)





(14)





(21)





(99)





(66)



Loss on changes in ownership interests, net













16







Adjusted operating loss

(25)





(14)





(21)





(83)





(66)



International



















Segment operating (loss) income

(2)





7





2





23





(123)



Goodwill impairment charges

















125



Adjusted operating (loss) income

(2)





7





2





23





2



Adjusted Other - Ancillary services operating loss

(27)





(7)





(19)





(60)





(64)



Corporate administrative support expenses:



















Segment expenses

(24)





(26)





(27)





(147)





(92)



Accruals for legal matters













35







Adjusted Corporate administrative support expenses

(24)





(26)





(27)





(112)





(92)



Adjusted operating income

$

382





$

438





$

463





$

1,746





$

1,768





Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.

 

DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES - continued

(unaudited)

(dollars in millions)



Note 4:  Effective income tax rates on income from continuing operations attributable to DaVita Inc.





Three months ended



Year ended

December 31,

2020



December 31,

2020



September 30,

2020



December 31,

2019



Income from continuing operations before income taxes

$

327





$

283





$

382





$

1,318



Less: Noncontrolling owners' income primarily attributable to non-tax paying entities

(61)





(59)





(58)





(222)



Income from continuing operations before income taxes attributable to DaVita Inc.

$

267





$

224





$

324





$

1,097



















Income tax expense for continuing operations

$

73





$

66





$

82





$

314



Less: Income tax attributable to noncontrolling interests













(1)



Income tax expense from continuing operations attributable to DaVita Inc.

$

73





$

65





$

82





$

313



















Effective income tax rate on income from continuing operations attributable to DaVita Inc.

27.5

%



29.2

%



25.2

%



28.6

%





The effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. is computed as follows:





Three months ended



Year ended

December 31,

2020



December 31,

2020



September 30,

2020



December 31,

2019



Income from continuing operations before income taxes

$

327





$

283





$

382





$

1,318



Operating charges:















Loss on changes in ownership interests, net













16



General and administrative:















Accruals for legal matters













35



Debt prepayment, refinancing and redemption charges





86









89



Noncontrolling owners' income primarily attributable to non-tax paying entities

(61)





(59)





(58)





(222)



Adjusted income from continuing operations before income taxes attributable to DaVita Inc.

$

267





$

310





$

324





$

1,237



Income tax expense

$

73





$

66





$

82





$

314



Plus income tax related to:













Operating charges:















Loss on changes in ownership interests, net













2



General and administrative:















Accruals for legal matters













9



Debt prepayment, refinancing and redemption charges





21









22



Less income tax related to:















Noncontrolling interests













(1)



Income tax on adjusted income from continuing operations attributable to DaVita Inc.

$

73





$

87





$

82





$

347



Effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc.

27.5

%



28.0

%



25.2

%



28.0

%



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)



Note 5:  Free cash flow from continuing operations





Three months ended



December 31,

2020



September 30,

2020



December 31,

2019

Net cash provided by continuing operating activities

$

485





$

483





$

678



Less: Distributions to noncontrolling interests

(74)





(61)





(76)



Plus: Contributions from noncontrolling interests

10





12





13



Cash provided by continuing operating activities attributable to DaVita Inc.

$

421





$

434





$

615



Less: Expenditures for routine maintenance and information technology

(160)





(84)





(130)



Less: Expenditures for development

(65)





(75)





(89)



Plus: Proceeds from sale of self-developed properties

14





11





19



Free cash flow from continuing operations

$

210





$

287





$

415









Rolling twelve months ended



December 31,

2020



September 30,

2020



December 31,

2019

Net cash provided by continuing operating activities

$

1,979





$

2,172





$

1,973



Less: Distributions to noncontrolling interests

(253)





(255)





(233)



Plus: Contributions from noncontrolling interests

43





46





57



Cash provided by continuing operating activities attributable to DaVita Inc.

$

1,769





$

1,963





$

1,797



Less: Expenditures for routine maintenance and information technology

(399)





(370)





(355)



Less: Expenditures for development

(275)





(300)





(373)



Plus: Proceeds from sale of self-developed properties

93





99





58



Free cash flow from continuing operations

$

1,188





$

1,393





$

1,127





Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.

 

DaVita Logo (PRNewsfoto/DaVita)

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/davita-inc-4th-quarter-2020-results-301227266.html

SOURCE DaVita Inc.

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