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Share Name | Share Symbol | Market | Type |
---|---|---|---|
DaVita Inc | NYSE:DVA | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.53 | -0.37% | 142.16 | 142.80 | 139.27 | 140.79 | 558,571 | 22:08:12 |
DaVita Inc. (NYSE: DVA) today announced results for the quarter and year ended December 31, 2011. Income from continuing operations attributable to DaVita Inc. for the quarter and year ended December 31, 2011 was $149.4 million and $496.2 million, or $1.58 and $5.14 per share, respectively, which for the year ended December 31, 2011 excludes an after-tax non-cash goodwill impairment charge of approximately $14.4 million, or $0.15 per share, that was recorded in the second quarter of 2011 related to our infusion therapy business. Income from continuing operations attributable to DaVita Inc. for the year ended December 31, 2011 including this item was $481.8 million, or $4.99 per share.
Income from continuing operations attributable to DaVita Inc. for the quarter and year ended December 31, 2010 was $111.9 million and $450.8 million, or $1.13 and $4.37 per share, respectively, which excludes after-tax debt refinancing and redemption charges of $42.9 million and $45.4 million, or $0.43 per share and $0.44 per share, respectively. Income from continuing operations attributable to DaVita Inc. for the quarter and year ended December 31, 2010 including these items was $68.9 million and $405.4 million, or $0.70 per share and $3.93 per share, respectively.
Financial and operating highlights include:
Outlook
Our operating income guidance for 2012 is still expected to be in the range of $1,200 million to $1,300 million. We also expect our operating cash flows for 2012 to be in the range of $950 million to $1,050 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.
We will be holding a conference call to discuss our results for the fourth quarter ended December 31, 2011 on February 16, 2012 at 5:00 p.m. Eastern Time. The dial in number is (800) 399-4406. A replay of the conference call will be available on DaVita’s official web page, www.davita.com, for the following 30 days.
This release contains forward-looking statements, within the meaning of the federal securities laws, including statements related to our 2012 operating income, our 2012 operating cash flows and our 2012 expected effective tax rate attributable to DaVita Inc. Factors that could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, competition, accounting estimates, the variability of our cash flows and the risk factors set forth in our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2010, our quarterly report on Form 10-Q for the third quarter ended September 30, 2011 and subsequent quarterly reports to be filed on Form 10-Q. The forward-looking statements should be considered in light of these risks and uncertainties.
These risks and uncertainties include those relating to:
We base our forward-looking statements on information currently available to us at the time of this release, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of changes in underlying factors, new information, future events or otherwise.
This release contains non-GAAP financial measures. For reconciliations of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, see the attached reconciliation schedules. For the reasons stated in the reconciliation schedules, we believe our presentation of non-GAAP financial measures provides useful supplemental information for investors.
DAVITA INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) (dollars in thousands, except per share data) Three months ended December 31, Year ended December 31, 2011 2010 2011 2010 Net operating revenues $ 1,862,318 $ 1,646,924 $ 6,982,214 $ 6,438,050 Operating expenses and charges: Patient care costs 1,213,912 1,133,008 4,680,772 4,467,107 General and administrative 193,210 157,578 691,243 579,000 Depreciation and amortization 72,987 59,910 266,628 233,730 Provision for uncollectible accounts 54,318 43,201 197,565 170,652 Equity investment income (2,221 ) (2,031 ) (8,776 ) (8,999 ) Goodwill impairment charge - - 24,000 - Total operating expenses and charges 1,532,206 1,391,666 5,851,432 5,441,490 Operating income 330,112 255,258 1,130,782 996,560 Debt expense (61,750 ) (53,879 ) (241,090 ) (181,607 ) Debt refinancing and redemption charges - (70,255 ) - (74,382 ) Other income 787 1,091 2,982 3,419 Income from continuing operations before income taxes 269,149 132,215 892,674 743,990 Income tax expense 91,710 39,863 315,744 260,052 Income from continuing operations 177,439 92,352 576,930 483,938 Discontinued operations: Income (loss) from operations of discontinued operations, net of tax (239 ) 93 1,221 281 Loss on disposal of discontinued operations, net of tax (1,068 ) - (4,756 ) - Net income. 176,132 92,445 573,395 484,219 Less: Net income attributable to noncontrolling interests (28,009 ) (23,425 ) (95,394 ) (78,536 ) Net income attributable to DaVita Inc. $ 148,123 $ 69,020 $ 478,001 $ 405,683 Earnings per share: Basic income from continuing operations per share attributable to DaVita Inc. $ 1.60 $ 0.71 $ 5.09 $ 3.99 Basic net income per share attributable to DaVita Inc. $ 1.59 $ 0.71 $ 5.05 $ 4.00 Diluted income from continuing operations per share attributable to DaVita Inc. $ 1.58 $ 0.70 $ 4.99 $ 3.93 Diluted net income per share attributable to DaVita Inc. $ 1.56 $ 0.70 $ 4.96 $ 3.94 Weighted average shares for earnings per share: Basic 93,485,001 97,099,341 94,658,027 101,504,373 Diluted 94,968,029 99,058,745 96,532,110 103,059,171 Amounts attributable to DaVita Inc.: Income from continuing operations $ 149,430 $ 68,927 $ 481,755 $ 405,402 Discontinued operations (1,307 ) 93 (3,754 ) 281 Net income $ 148,123 $ 69,020 $ 478,001 $ 405,683 DAVITA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands) Year endedDecember 31, 2011 2010 Cash flows from operating activities: Net income $ 573,395 $ 484,219 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 267,315 234,378 Stock-based compensation expense 48,718 45,551 Tax benefits from stock award exercises 38,199 26,706 Excess tax benefits from stock award exercises (20,834 ) (6,283 ) Deferred income taxes 53,438 75,399 Equity investment income, net 354 (3,298 ) Loss on disposal of assets and other non-cash charges 20,329 9,585 Goodwill impairment charge 24,000 - Debt refinancing and redemption charges - 74,382 Changes in operating assets and liabilities, other than from acquisitions and divestitures: Accounts receivable (88,848 ) 55,379 Inventories 10,270 (3,892 ) Other receivables and other current assets 53,697 (44,719 ) Other long-term assets 2,039 901 Accounts payable 84,400 4,228 Accrued compensation and benefits 77,074 39,588 Other current liabilities (51,979 ) (111,444 ) Income taxes 77,418 (45,737 ) Other long-term liabilities 11,061 4,740 Net cash provided by operating activities 1,180,046 839,683 Cash flows from investing activities: Additions of property and equipment, net (400,156 ) (273,602 ) Acquisitions (1,077,442 ) (188,502 ) Proceeds from asset sales 75,183 22,727 Purchase of investments available for sale (5,971 ) (1,125 ) Purchase of investments held-to-maturity (37,628 ) (56,615 ) Proceeds from sale of investments available for sale 1,149 900 Proceeds from maturities of investments held-to-maturity 47,695 59,932 Purchase of equity investments and other assets (2,398 ) (709 ) Distributions received on equity investments 340 361 Net cash used in investing activities (1,399,228 ) (436,633 ) Cash flows from financing activities: Borrowings 36,395,105 24,809,258 Payments on long-term debt (36,249,584 ) (24,134,502 ) Interest rate cap premiums and other deferred financing costs (17,861 ) - Debt refinancing costs including tender and call premiums - (113,810 ) Purchase of treasury stock (323,348 ) (618,496 ) Distributions to noncontrolling interests (100,653 ) (83,591 ) Stock award exercises and other share issuances, net 11,316 53,760 Excess tax benefits from stock award exercises 20,834 6,283 Contributions from noncontrolling interests 21,010 9,510 Proceeds from sales of additional noncontrolling interests 9,687 3,410 Purchases from noncontrolling interests (13,689 ) (14,214 ) Net cash used in financing activities (247,183 ) (82,392 ) Net (decrease) increase in cash and cash equivalents (466,365 ) 320,658 Cash and cash equivalents at beginning of period 860,117 539,459 Cash and cash equivalents at end of period $ 393,752 $ 860,117 DAVITA INC. CONSOLIDATED BALANCE SHEETS (unaudited) (dollars in thousands, except per share data) December 31,2011 December 31,2010 ASSETS Cash and cash equivalents $ 393,752 $ 860,117 Short-term investments 17,399 23,003 Accounts receivable, less allowance of $250,343 and $235,629 1,195,163 1,048,976 Inventories 75,731 76,008 Other receivables 269,832 304,366 Other current assets 49,349 43,994 Income tax receivables - 40,330 Deferred income taxes 280,382 226,060 Total current assets 2,281,608 2,622,854 Property and equipment, net 1,432,651 1,170,808 Amortizable intangibles, net 159,491 162,635 Equity investments 27,325 25,918 Long-term investments 9,890 8,848 Other long-term assets 34,231 32,054 Goodwill 4,946,976 4,091,307 $ 8,892,172 $ 8,114,424 LIABILITIES AND EQUITY Accounts payable $ 289,653 $ 181,033 Other liabilities 325,734 342,943 Accrued compensation and benefits 412,972 325,477 Current portion of long-term debt 87,345 74,892 Income tax payable 37,412 - Total current liabilities 1,153,116 924,345 Long-term debt 4,417,624 4,233,850 Other long-term liabilities 132,006 89,290 Alliance and product supply agreement, net 19,987 25,317 Deferred income taxes 423,098 421,436 Total liabilities 6,145,831 5,694,238 Commitments and contingencies Noncontrolling interests subject to put provisions 478,216 383,052 Equity: Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued) Common stock ($0.001 par value, 450,000,000 shares authorized; 134,862,283 shares issued; 93,641,363 and 96,001,535 shares outstanding) 135 135 Additional paid-in capital 596,300 620,546 Retained earnings 3,195,818 2,717,817 Treasury stock, at cost (41,220,920 and 38,860,748 shares)(1,631,694
)
(1,360,579
)
Accumulated other comprehensive (loss) income(19,484
)
503 Total DaVita Inc. shareholders’ equity 2,141,075 1,978,422 Noncontrolling interests not subject to put provisions 127,050 58,712 Total equity 2,268,125 2,037,134 $ 8,892,172 $ 8,114,424 DAVITA INC. SUPPLEMENTAL FINANCIAL DATA (unaudited) (dollars in millions, except for per share and per treatment data) Three months endedYear endedDecember 31, 2011
December 31,2011
September 30,2011
December 31,2010
1. Consolidated Financial Results: Revenues $ 1,862 $ 1,808 $ 1,647 $ 6,982 Operating income $ 330.1 $ 318.7 $ 255.3 $ 1,130.8 Operating income, excluding the pre-tax non-cash goodwill impairment charge(1) $ 330.1 $ 318.7 $ 255.3 $ 1,154.8 Operating income margin 17.7 % 17.6 % 15.5 % 16.2 % Operating income margin, excluding the pre-tax non-cash goodwill impairment charge(1) 17.7 % 17.6 % 15.5 % 16.5 % Income from continuing operations attributable to DaVita Inc. $ 149.4 $ 138.2 $ 68.9 $ 481.8 Income from continuing operations attributable to DaVita Inc., excluding the after-tax non-cash goodwill impairment charge and debt refinancing and redemption charges(1) $ 149.4 $ 138.2 $ 111.9 $ 496.2 Diluted income from continuing operations per share attributable to DaVita Inc. $ 1.58 $ 1.45 $ 0.70 $ 4.99 Diluted income from continuing operations per share attributable to DaVita Inc., excluding the after-tax non-cash goodwill impairment charge and debt refinancing and redemption charges(1) $ 1.58 $ 1.45 $ 1.13 $ 5.14 2. Consolidated Business Metrics: Expenses Patient care costs as a percent of consolidated revenue(2) 65.2 % 65.8 % 68.8 % 67.0 % General and administrative expenses as a percent of consolidated revenue (2) 10.4 % 10.1 % 9.6 % 9.9 % Bad debt expense as a percent of consolidated revenue 2.9 % 2.9 % 2.6 % 2.8 % Consolidated effective tax rate attributable to DaVita Inc.(1) 38.0 % 40.5 % 36.5 % 39.6 % 3. Segment Financial Results: (dollar amounts rounded to nearest million) Revenues Dialysis and related lab services $ 1,720 $ 1,675 $ 1,542 $ 6,485 Other – Ancillary services and strategic initiatives 148 137 107 514 Total segment revenue 1,868 1,812 1,649 6,999 Less elimination of intersegment revenue (6 ) (4 ) (2 ) (17 ) Total consolidated revenue $ 1,862 $ 1,808 $ 1,647 $ 6,982 Operating Income Dialysis and related lab services $ 353 $ 332 $ 268 $ 1,225 Other – U.S. Ancillary services and strategic initiatives (5 ) 2 (2 ) (34 ) – International operations (8 ) (5 ) - (20 ) Total other – Ancillary services and strategic initiatives (13 ) (3 ) (2 ) (54 ) Total segment operating income $ 340 $ 329 $ 266 $ 1,171 Reconciling items: Stock-based compensation (12 ) (13 ) (12 ) (49 ) Equity investment income 2 3 2 9 Consolidated operating income $ 330 $ 319 $ 255 $ 1,131 DAVITA INC. SUPPLEMENTAL FINANCIAL DATA—continued (unaudited) (dollars in millions, except for per share and per treatment data) Three months endedYear ended December 31, 2011
December 31,2011
September 30,2011
December 31,2010
4. Segment Business Metrics: Dialysis and related lab services Volume Treatments 5,227,167 5,008,094 4,649,610 19,599,472 Number of treatment days 79.0 79.0 79.0 313.0 Treatments per day 66,167 63,394 58,856 62,618 Per day year over year increase 12.4 % 9.6 % 6.8 % 9.1 % Non-acquired growth year over year 4.4 % 5.0 % 4.4 % 4.6 % Revenue Dialysis and related lab services revenue per treatment $ 328.54 $ 333.86 $ 331.14 $ 330.31 Per treatment (decrease) increase from previous quarter (1.6 %) 0.5 % (2.3 %) Per treatment decrease from previous year (0.8 %) (1.5 %) (2.4 %) (2.0 %) Percent of consolidated revenue 92.2 % 92.5 % 93.5 % 92.7 % Expenses Patient care costs Percent of segment revenue 63.4 % 64.5 % 67.8 % 65.7 % Per treatment $ 208.66 $ 215.66 $ 224.86 $ 217.32 Per treatment decrease from previous quarter (3.2 %) (3.2 %) (3.4 %) Per treatment decrease from previous year (7.2 %) (7.4 %) (4.1 %) (6.2 %) General and administrative expenses Percent of segment revenue 8.9 % 8.8 % 8.4 % 8.5 % Per treatment $ 29.45 $ 29.28 $ 27.70 $ 28.12 Per treatment increase from previous quarter 0.6 % 9.3 % 4.1 % Per treatment increase from previous year 6.3 % 10.0 % 7.4 % 7.2 % 5. Cash Flow: Operating cash flow $ 150.7 $ 495.2 $ 120.6 $ 1,180.0 Operating cash flow, last twelve months $ 1,180.0 $ 1,149.9 $ 839.7 Free cash flow(1) $ 32.1 $ 423.1 $ 37.3 $ 855.0 Free cash flow, last twelve months(1) $ 855.0 $ 860.2 $ 599.9 Capital expenditures: Routine maintenance/IT/other $ 85.3 $ 51.1 $ 60.8 $ 224.4 Development and relocations $ 63.1 $ 45.7 $ 44.5 $ 175.8 Acquisition expenditures $ 150.3 $ 775.9 $ 50.9 $ 1,077.4 6. Accounts Receivable: Net receivables $ 1,195 $ 1,165 $ 1,049 DSO 61 60 61 DAVITA INC. SUPPLEMENTAL FINANCIAL DATA—continued (unaudited) (dollars in millions, except for per share and per treatment data) Three months endedYear ended December 31, 2011
December 31,2011
September 30,2011
December 31,2010
7. Debt and Capital Structure: Total debt(3) $ 4,513 $ 4,508 $ 4,317 Net debt, net of cash(3) $ 4,119 $ 3,967 $ 3,457Leverage ratio (see Note 1 on page 9)
2.72x
2.73x
2.72x
Overall weighted average effective interest rate during the quarter 5.27 % 5.30 % 4.86 % Overall weighted average effective interest rate at end of the quarter 5.27 % 5.27 % 4.94 % Weighted average effective interest rate on the Senior Secured Credit Facilities at end of the quarter 4.61 % 4.61 % 4.05 % Effectively fixed interest rates as a percentage of our total debt at December 31, 2011(4) and September 30, 2011(4) and fixed interest rates at December 31, 2010 100 % 100 % 77 % Share repurchases $ - $ 7.3 $ 420.0 $ 323.3 8. Clinical: (quarterly averages) Dialysis adequacy -% of patients with Kt/V > 1.2 at the end of the quarter 97 % 97 % 96 % Patients with arteriovenous fistulas placed 69 % 69 % 67 %_________________
(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, see attached reconciliation schedules. (2) Consolidated percentages of revenue are comprised of the dialysis and related lab services business, other ancillary services and strategic initiatives, as well as stock-based compensation expenses. (3) The quarters ended December 31, 2011 and September 30, 2011, excludes $7.8 million and $8.3 million, respectively, of debt discounts associated with our Term Loan B and our Term Loan A-2 that are not actually outstanding debt principal. The quarter ended December 31, 2010, excludes $8.4 million of a debt discount associated with our Term Loan B that is not actually outstanding debt principal. (4) The Term Loan A-2 and Term Loan B are subject to LIBOR floors of 1.00% and 1.50%, respectively. Because LIBOR, as of December 31, 2011, was lower than either of these floors, the interest rates on the Term Loan A-2 and the Term Loan B are treated as “fixed” for purposes of the table above. We have included both of these Term loans in the fixed rate totals in the table above until such time as the LIBOR-based component of our interest rate exceeds 1.00% on the Term Loan A-2 and 1.50% on the Term Loan B. at such time, we will then be subject to LIBOR-based interest rate volatility on the LIBOR variable component of our interest rate on all of the Term Loan A-2, as well as for the Term Loan B, but limited to a maximum rate of 4.00% on $1.25 billion of outstanding principal debt on the Term Loan B. The remaining $483 million outstanding principal balance of the Term Loan B is subject to LIBOR-based interest rate volatility above a floor of 1.50%. DAVITA INC. SUPPLEMENTAL FINANCIAL DATA—continued (unaudited) (dollars in thousands)Note 1: Calculation of the Leverage Ratio
Under the Company’s 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 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.
Year ended December 31, 2011
Net income attributable to DaVita Inc. $ 478,001 Income taxes 315,726 Interest expense 224,909 Depreciation and amortization 267,315 Non-cash goodwill impairment charge 24,000 Noncontrolling interests and equity investment income, net 95,748 Other, including pro-forma EBITDA associated with acquisitions 80,029 Stock-based compensation expense 48,718 “Consolidated EBITDA” $ 1,534,446 December 31, 2011 Total debt, excluding debt discount of $7.8 million $ 4,512,811 Letters of credit issued 47,711 4,560,522 Less: cash and cash equivalents (393,752 ) Consolidated net debt $ 4,166,770 Last twelve months “Consolidated EBITDA” $ 1,534,446Leverage ratio
2.72x
In accordance with the Credit Agreement, the Company’s leverage ratio cannot exceed 4.25 to 1.0 as of December 31, 2011. At that date the Company’s leverage ratio did not exceed 4.25 to 1.0.
DAVITA INC. RECONCILIATIONS FOR NON-GAAP MEASURES (unaudited) (dollars in thousands)1. Income from continuing operations attributable to DaVita Inc. excluding an after-tax non-cash goodwill impairment charge and after-tax debt refinancing and redemption charges and diluted income from continuing operations per share attributable to DaVita Inc. excluding an after-tax non-cash goodwill impairment charge and after-tax debt refinancing and redemption charges.
We believe that income from continuing operations attributable to DaVita Inc. excluding an after-tax non-cash goodwill impairment charge and after-tax debt refinancing and redemption charges enhances a user’s understanding of our normal income from continuing operations attributable to DaVita Inc. and diluted income from continuing operations per share attributable to DaVita Inc. for these periods by providing a measure that is more meaningful because it excludes: (1) a non-cash goodwill impairment charge that resulted from a decrease in the implied fair value of goodwill below its carrying amount associated with our infusion therapy business during the second quarter of 2011 and (2) charges that resulted from the refinancing of our Senior Secured Credit Facilities and the redemption of the aggregate principal amounts of our outstanding 6 ⅝% senior notes due 2013 and the aggregate principal amount of our outstanding 7 ¼% senior subordinated notes due 2015, as well as a partial redemption of $200 million aggregate principal amount of our outstanding 6⅝% senior notes due 2013 that occurred in the second quarter of 2010 and accordingly, is more comparable to prior periods and indicative of consistent income from continuing operations attributable to DaVita Inc. and diluted income from continuing operations per share attributable to DaVita Inc. These measures are not measures of financial performance under United States generally accepted accounting principles (GAAP) and should not be considered as an alternative to income from continuing operations attributable to DaVita Inc. and diluted income from continuing operations per share attributable to DaVita Inc.
Income from continuing operations attributable to DaVita Inc. excluding an after-tax non-cash goodwill impairment charge and after-tax debt refinancing and redemption charges: Three months ended Year ended December 31,2011
September 30,2011
December 31,2010
December 31,2011
December 31,2010
Net income attributable to DaVita Inc. $ 148,123 $ 135,361 $ 69,020 $ 478,001 $ 405,683 Discontinued operations attributable to DaVita Inc. 1,307 2,831 (93 ) 3,754 (281 ) Income from continuing operations attributable to DaVita Inc. 149,430 138,192 68,927 481,755 405,402 Add: Non-cash goodwill impairment charge - - - 24,000 - Add: Debt refinancing and redemption charges - - 70,255 - 74,382 Less: Related income tax - - (27,329 ) (9,600 ) (28,935 ) $ 149,430 $ 138,192 $ 111,853 $ 496,155 $ 450,849 Diluted income from continuing operations per share attributable to DaVita Inc. excluding an after-tax non-cash goodwill impairment charge and after-tax debt refinancing and redemption charges: Three months ended Year ended December 31,2011
September 30,2011
December 31,2010
December 31,2011
December 31,2010
Diluted net income per share attributable to DaVita Inc. $ 1.56 $ 1.42 $ 0.70 $ 4.96 $ 3.94 Discontinued operations 0.01 0.03 - 0.04 (0.01 ) Rounding 0.01 - - (0.01 ) - Diluted income from continuing operations per share attributable to DaVita Inc. 1.58 1.45 0.70 4.99 3.93 Add: Non-cash goodwill impairment charge - - - 0.15 - Add: Debt refinancing and redemption charges - - 0.43 - 0.44 $ 1.58 $ 1.45 $ 1.13 $ 5.14 $ 4.37 DAVITA INC. RECONCILIATIONS FOR NON-GAAP MEASURES (unaudited) (dollars in thousands)2. Operating income excluding a pre-tax non-cash goodwill impairment charge.
We believe that operating income excluding a pre-tax non-cash goodwill impairment charge enhances a user’s understanding of our normal operating income for these periods by providing a measure that is more meaningful because it excludes a non-cash goodwill impairment charge that resulted from a decrease in the implied fair value of goodwill below its carrying amount associated with our infusion therapy business during the second quarter of 2011 and accordingly, is more comparable to prior periods and indicative of consistent operating income. This measure is not a measure of financial performance under GAAP and should not be considered as an alternative to operating income.
Operating income excluding a pre-tax non-cash goodwill impairment charge: Three months ended Year ended December 31,2011
September 30,2011
December 31,2010
December 31,2011
December 31,2010
Operating income $ 330,112 $ 318,712 $ 255,258 $ 1,130,782 $ 996,560 Add: Non-cash goodwill impairment charge - - - 24,000 - $ 330,112 $ 318,712 $ 255,258 $ 1,154,782 $ 996,560 DAVITA INC. RECONCILIATIONS FOR NON-GAAP MEASURES (unaudited) (dollars in thousands)3. Effective Income Tax Rates.
We believe that reporting the effective income tax rate attributable to DaVita Inc. enhances an investor’s understanding of DaVita’s effective income tax rate for the periods presented because it excludes noncontrolling owners’ income that primarily relates to non-tax paying entities and accordingly is more comparable to prior periods presentations regarding DaVita’s effective income tax rate and is more meaningful to an investor to fully understand the related income tax effects on DaVita Inc.’s operating results. This is not a measure under GAAP and should not be considered as an alternative to the effective income tax rate calculated in accordance with GAAP.
Effective income tax rate as compared to the effective income tax rate attributable to DaVita Inc. is as follows:
Three months endedYear ended December 31, 2011
December 31,2011
September 30,2011
December 31,2010
Income from continuing operations before income taxes $ 269,149 $ 258,662 $ 132,215 $ 892,674 Income tax expense $ 91,710 $ 94,204 $ 39,863 $ 315,744 Effective income tax rate 34.1 % 36.4 % 30.2 % 35.4 % Three months endedYear ended December 31, 2011
December 31,2011
September 30,2011
December 31,2010
Income from continuing operations before income taxes $ 269,149 $ 258,662 $ 132,215 $ 892,674 Less: Noncontrolling owners’ income primarily attributable to non-tax paying entities (28,128 ) (26,604 ) (23,602 ) (96,049 ) Income before income taxes attributable to DaVita Inc. $ 241,021 $ 232,058 $ 108,613 $ 796,625 Income tax expense 91,710 94,204 $ 39,863 $ 315,744 Less income tax attributable to noncontrolling interests (119 ) (119 ) (177 ) (655 ) Income tax attributable to DaVita Inc. $ 91,591 $ 94,085 $ 39,686 $ 315,089 Effective income tax rate attributable to DaVita Inc. 38.0 % 40.5 % 36.5 % 39.6 % DAVITA INC. RECONCILIATIONS FOR NON-GAAP MEASURES (unaudited) (dollars in thousands)4. Free cash flow.
Free cash flow represents net cash provided by operating activities less income distributions to noncontrolling interests and 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 GAAP, since free cash flow is a meaningful measure of our ability to fund acquisition and development activities and meet our debt service requirements. In addition, free cash flow excluding income distributions to noncontrolling interests provides an investor with an understanding of free cash flows that are attributable to DaVita Inc. Free cash flow is not a measure of financial performance under GAAP 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.
Three months endedYear ended December 31, 2011
December 31,2011
September 30,2011
December 31,2010
Cash provided by operating activities $ 150,659 $ 495,194 $ 120,551 $ 1,180,046 Less: Income distributions to noncontrolling interests (33,245 ) (20,985 ) (22,479 ) (100,653 ) Cash provided by operating activities attributable to DaVita Inc. 117,414 474,209 98,072 1,079,393 Less: Expenditures for routine maintenance and information technology (85,304 ) (51,107 ) (60,798 ) (224,366 ) Free cash flow $ 32,110 $ 423,102 $ 37,274 $ 855,027 Rolling 12-Month PeriodDecember 31,2011
September 30,2011
December 31,2010
Cash provided by operating activities $ 1,180,046 $ 1,149,938 $ 839,683 Less: Income distributions to noncontrolling interests (100,653 ) (89,887 ) (83,591 ) Cash provided by operating activities attributable to DaVita Inc. 1,079,393 1,060,051 756,092 Less: Expenditures for routine maintenance and information technology (224,366 ) (199,860 ) (156,228 ) Free cash flow $ 855,027 $ 860,191 $ 599,864
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