EL SEGUNDO, Calif., Feb. 10 /PRNewswire-FirstCall/ -- DaVita Inc. today announced results for the quarter and year ended December 31, 2008. Net income for the three months ended December 31, 2008 was $98.4 million, or $0.94 per share, as compared to $85.7 million, or $0.79 per share, for the same period of 2007.
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Net income for the year ended December 31, 2008 was $374.2 million, or $3.53 per share, as compared to $340.3 million, or $3.17 per share, for the same period of 2007, excluding after-tax gains from insurance settlements, after-tax gains on the sale of investment securities and the valuation gain on the Company’s alliance and product supply agreement with Gambro Renal Products. Net income for the year ended December 31, 2007 including these items was $381.8 million, or $3.55 per share.
Financial and operating highlights include:
-- Cash Flow: For the year ended December 31, 2008 operating cash flow was $556 million and free cash flow was $451 million. For the three months ended December 31, 2008 operating cash flow was $184 million and free cash flow was $145 million.
-- Operating Income: Operating income for the three months ended December 31, 2008 was $212 million as compared to $195 million for 2007. Operating income for the year ended December 31, 2008 was $822 million, as compared to $800 million for the same period of 2007, excluding pre-tax gains from insurance settlements of $6.8 million and the pre-tax valuation gain on the Company’s product supply agreement with Gambro Renal Products of $55 million. Operating income for the year ended December 31, 2007 including these items was $862 million.
-- Volume: Total treatments for the fourth quarter of 2008 were 4,172,468, or 52,484 treatments per day, representing a per day increase of 4.9% over the fourth quarter of 2007. Non-acquired treatment growth in the quarter was 4.0% over the prior year’s fourth quarter.
-- Effective Tax Rate: The effective tax rate was 37.7% and 38.6% for the three and twelve months ended December 31, 2008, respectively. The 2008 effective tax rate included certain one time benefits. We are projecting our 2009 effective tax rate to be in a range of 39.5% to 40.5%.
-- Share Repurchases: During the fourth quarter of 2008, and for the year ended December 31, 2008, we repurchased a total of 1,327,528 and 4,788,881 shares, respectively, of our common stock for $63.0 million and $232.7 million, or an average price of $47.49 and $48.59 per share, respectively, pursuant to previously announced Board authorizations. We have not repurchased any additional shares of our common stock subsequent to December 31, 2008.
-- Center Activity: As of December 31, 2008, we operated or provided administrative services at 1,449 outpatient dialysis centers serving approximately 112,000 patients, of which 1,426 centers are consolidated in our financial statements. During the fourth quarter of 2008, we acquired 4 centers, opened 26 new centers, merged 3 centers, closed 3 centers, ceased operations at 1 joint venture in which we owned a minority interest, and provided management and administrative services to 1 additional center.
Outlook
Our operating income guidance for 2009 remains unchanged at a range of $820-$880 million. These projections and the underlying assumptions involve significant risks and uncertainties, including those described below and actual results may vary significantly from these current projections.
DaVita will be holding a conference call to discuss its results for the fourth quarter and year ended December 31, 2008 on February 11, 2009 at 9:30 a.m. Eastern Time. The dial in number is (800) 399-4406. A replay of the conference call will be available on DaVita’s official web page, http://www.davita.com, for the following 30 days.
This release contains forward-looking statements, including statements related to our 2009 operating results and our 2009 expected effective tax rate. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, competition, accounting estimates and the risk factors set forth in the Company’s SEC filings, including its Form 10-Q for the quarter ended September 30, 2008. The forward-looking statements should be considered in light of these risks and uncertainties.
We undertake no obligation to update or revise any forward-looking statements, whether as a result of changes in underlying factors, new information, future events or otherwise.
Note 1: Calculation of the Leverage Ratio
Under the Company’s current Senior Secured Credit Facilities (Credit Agreement), the leverage ratio is defined as all funded debt plus the face amount of all letters of credit issued, minus cash and cash equivalents, divided by “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 following leverage ratio was calculated using “Consolidated EBITDA” as defined in the Credit Agreement. The calculation below is based on the last twelve months of “Consolidated EBITDA”, pro forma for the routine acquisitions that occurred during the period. 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.
In accordance with the Company’s Credit Agreement, the Company’s leverage ratio cannot exceed 4.50 to 1.0 as of December 31, 2008. At that date the Company’s leverage ratio did not exceed 4.50 to 1.0.
1. Net income excluding gains from insurance settlements, gains on the sale of investment securities and the valuation gain on the alliance and product supply agreement (the Product Supply Agreement):
We believe that net income excluding gains from insurance settlements, gains on the sale of investment securities and the valuation gain on the Product Supply Agreement enhances a user’s understanding of our normal net income for these periods by providing a measure that is more meaningful because it excludes insurance settlement gains related to insurance proceeds from Hurricane Katrina and from a fire that destroyed one of our centers, as well as non-recurring gains on the sale of investment securities and a non- recurring non-cash item that resulted from the termination of our purchase obligation for dialysis machines from Gambro Renal Products Inc. under the Product Supply Agreement, and accordingly is more comparable to current and prior periods and indicative of consistent net income. This measure is not a measure of financial performance under United States generally accepted accounting principles and should not be considered as an alternative to net income.
2. Operating income excluding pre-tax gains from insurance settlements and the pre-tax valuation gain on the Product Supply Agreement:
We believe that operating income excluding gains from insurance settlements and the valuation gain on the Product Supply Agreement enhances a user’s understanding of our normal operating income for these periods by providing a measure that is more meaningful because it excludes insurance settlements gains related to insurance proceeds from Hurricane Katrina and from a fire that destroyed one of our centers and a non-recurring non-cash item that resulted from the termination of our purchase obligation for dialysis machines from Gambro Renal Products Inc. under the Product Supply Agreement, and accordingly is more comparable to current and prior periods and indicative of consistent operating income items. This measure is not a measure of financial performance under United States generally accepted accounting principles and should not be considered as an alternative to operating income.
Free cash flow represents net cash provided by operating activities less capital expenditures for routine maintenance and information technology. We believe free cash flow is a useful adjunct to cash flow from operating activities and other measurements under United States generally accepted accounting principles, since free cash flow is a meaningful measure of our ability to fund acquisition and development activities and meet our debt service requirements. Free cash flow is not a measure of financial performance under United States generally accepted accounting principles and should not be considered as an alternative to cash flows from operating, investing or financing activities, as an indicator of cash flows or as a measure of liquidity.
CONTACT: LeAnne Zumwalt, Investor Relations of DaVita Inc.,
+1-650-696-8910
Web site: http://www.davita.com//
