Denver, Colorado, February 11, 2021 — DaVita Inc. (NYSE: 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.
1
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.
2
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.
3
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
4
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.
5
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
6
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
7
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
8
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
9
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
10
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:
(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.
12
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.
13
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.
14
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.
15
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.
16
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.
17
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.
