DaVita Reports Strong 1Q Earnings
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DaVita HealthCare Partners Inc.
) reported first-quarter 2013 operating earnings of $1.84 per
share, beating the Zacks Consensus Estimate of $1.78 as well as
$1.50 per share reported in the prior-year quarter. Operating
income amounted to $196.9 million, increasing from $143.8 million
in the year-ago quarter.
Including loss contingency reserve, loss from discontinued
operations and gain from sale of discontinued operations, net
income attributable to DaVita's shareholders amounted to $30.2
million or 28 cents per share, compared with $140.1 million or
$1.46 per share in the year-ago quarter.
Total revenue in the reported quarter increased 53% year over
year to $2.83 billion from $1.85 billion. Top line surpassed the
Zacks Consensus Estimate of $2.82 billion.
Total operating expenses and charges climbed 74% to $2.66 billion
from $1.53 billion in the first quarter of 2012.
DaVita provided administrative services across 2,032 outpatient
dialysis centers, serving approximately 158,600 patients during
the reported quarter. Of these, 41 outpatient dialysis centers
are located in 9 non-U.S. countries. During the reported quarter,
DaVita acquired 8 centers and opened 27 centers in the U.S.
Total U.S. treatments for the reported quarter came in at
approximately 5.63 million or 73,579 treatments per day. This
represents a per day increase of 8% over the year-ago quarter.
Growth of non-acquired treatment in the quarter was 4.3%.
DaVita's effective tax rate was 24.6% in the reported quarter.
The third-party owners' income attributable to non-tax paying
entities impacted the effective tax rate. The effective tax rate
attributable to DaVita shareholders in the reported quarter was
Segment wise, total revenue from the Dialysis and related Lab
Services segment came in at $1.85 billion during the quarter,
against $1.72 billion in the prior-year quarter. Operating income
for the segment plunged 76% year over year to $87 million in the
reported quarter from $359 million in the year-ago quarter.
HealthCare Partners generated revenues of $804 million and
operating income of $110 million in the reported quarter.
Ancillary services and strategic initiatives generated revenues
of $184 million, up from $139 million in the year-ago quarter.
However, the segment recorded an operating loss of $15 million in
the reported quarter, narrower than $18 million incurred in the
DaVita's operating cash flow amounted to $379 million during the
quarter under review. Free cash flow in the reported quarter was
$299 million. Total assets at the end of the reported quarter
were $16.4 billion, up from $16.0 billion as of Dec 31, 2012.
Long-term debt of DaVita inched down to $8.28 billion from $8.33
billion as of Dec 31, 2012. Shareholder equity as of Mar 31, 2013
amounted to $3.96 billion, up from $3.92 billion at 2012 end.
DaVita created a loss contingency reserve of $300 million in the
reported quarter based on its discussions with attorneys from the
United States Attorney's Office for the District of Colorado, the
Civil Division of the United States Department of Justice and the
Office of the Inspector General. The discussions are being held
to resolve the ongoing U.S. Attorney Physician Relationship
Investigations against the company. However, the amount is not
final and can be altered once a final decision is taken.
In Mar 2013, DaVita entered into some interest rate swap
agreements with cumulative notional value of $1.33 billion. These
agreements require monthly interest payment and will expire on
Sep 30, 2016.
In the same month, DaVita also entered several interest rate
forwards swap agreements worth $600 million, effective from Sep
30, 2014. These agreements require quarterly interest payment and
will expire on Sep 30, 2016.
All these agreements will lead to a fixed rate of interest
payment for DaVita, instead of the variable rate paid on its
Additionally, DaVita entered into some interest rate cap
agreements in Mar 2013, which will limit the variable portion of
its interest rate on the term loan B and term loan B-2. These
agreements will also expire on Sep 30, 2016.
The lower end of the operating income guidance for 2013 was
raised to $1.8-$1.9 billion from $1.75-$1.90 billion.
Additionally, DaVita raised the lower end of its operating income
guidance for the dialysis services and related ancillary
businesses for 2013 to $1.40-$1.45 billion from $1.35-$1.45
Operating income from HCP is expected to be $400-$450 million in
2013. The company expects the effective tax rate attributable to
DaVita in the range of 40%-41% for 2013. Operating cash flow
guidance for 2013 was affirmed at $1.35-$1.50 billion.
DaVita currently carries a Zacks Rank #1 (Strong Buy). Other
healthcare companies worth considering are
Addus HomeCare Corporation
) - Zacks Rank #1 (Strong Buy),
) - Zacks Rank #1 (Strong Buy) and
LHC Group, Inc.
) - Zacks Rank #2 (Buy).