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Davita Inc. Reports Operating Results (10-Q)

August 03, 2012 | About:
10qk

10qk

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Davita Inc. (DVA) filed Quarterly Report for the period ended 2012-06-30.

Davita Inc. has a market cap of $9.27 billion; its shares were traded at around $99.29 with a P/E ratio of 17.4 and P/S ratio of 1.3. Davita Inc. had an annual average earning growth of 17.8% over the past 10 years. GuruFocus rated Davita Inc. the business predictability rank of 3.5-star.

Highlight of Business Operations:

Consolidated operating revenues for the six months ended June 30, 2012 increased by approximately $592 million, or approximately 17.9%, as compared to the same period in 2011. The increase in consolidated operating revenues was primarily due to an increase in dialysis and related lab services operating revenues of approximately $496 million, principally due to strong volume growth from additional treatments from non-acquired treatment growth in existing and new centers and growth through acquisitions, and as a result of one additional treatment day for the six months ended June 30, 2012. The increase in consolidated operating revenues was also due to an increase of approximately $4 in the average dialysis revenue per treatment, as described below, and from an increase of approximately $102 million in the ancillary services and strategic initiatives revenues primarily from growth in our pharmacy services.

Consolidated operating income for the six months ended June 30, 2012 increased by approximately $87 million, or approximately 18.0%, as compared to the same period in 2011, including the legal proceeding contingency accrual and related expenses of $78 million for the six months ended June 30, 2012 and the $24 million goodwill impairment charge for the six months ended June 30, 2011. Excluding these items from their respective periods, adjusted consolidated operating income would have increased by $141 million. The increase in adjusted operating income was primarily due to strong volume growth from additional treatments as a result of non-acquired growth in existing and new centers, growth through acquisitions and as a result of one additional treatment day for the six months ended June 30, 2012, as well as from an increase in the average dialysis revenue per treatment of approximately $4, as described below. In addition, consolidated operating income also increased as a result of overall lower pharmaceutical costs mainly from a decline in the intensities of physician-prescribed pharmaceuticals, lower accruals for self-insurance reserves and improvements in productivity. Consolidated operating income for the six months ended June 30, 2012 was negatively impacted by higher labor and related payroll taxes, higher benefit costs, an increase in our professional fees for legal and compliance matters, an increase in our other direct operating expenses associated with our dialysis centers, an increase in acquisition-related expenses and an increase in the operating losses associated with our ancillary services and strategic initiatives.

Dialysis and related lab services operating revenues for the six months ended June 30, 2012, increased by approximately $496 million, or approximately 16.1%, in the first quarter of 2012, as compared to the same period in 2011. The increase in operating revenues in the first six months of 2012 was principally due to strong volume growth from additional treatments of approximately 15.0%, and an increase in the average dialysis revenue per treatment of approximately $4, or approximately 1.0%. The increase in the number of treatments was primarily attributable to non-acquired treatment growth at existing and new centers and growth through acquisitions and as a result of one additional treatment day for the six months ended June 30, 2012. The increase in the average dialysis revenue per treatment was primarily due to an increase in our Medicare reimbursements, an increase in some of our commercial payment rates, partially offset by a decline in our commercial payor mix and a decline in the intensities of physician-prescribed pharmaceuticals.

Dialysis and related lab services operating income for the six months ended June 30, 2012 increased by approximately $101 million, or approximately 18.7%, as compared to the same period in 2011, including the legal proceeding contingency accrual and related expenses of $78 million, as discussed above. Excluding this item, dialysis and related lab services adjusted operating income would have increased by $179 million. The increase in adjusted operating income was primarily attributable to strong volume growth in revenue from additional treatments as a result of non-acquired treatment growth and growth through acquisitions and as a result of one additional treatment day for the six months ended June 30, 2012. In addition, operating income also increased as a result of an increase in the average dialysis revenue per treatment of approximately $4, as described above. Dialysis and related lab services was also impacted by the same additional factors discussed above for the second quarter of 2012 as compared to the second quarter of 2011.

Cash flow from operations during the six months ended June 30, 2012 was $534 million, compared to $534 million for the six months ended June 30, 2011. Cash flows from operations in 2012 benefited from improved cash collections, an increase in cash earnings and the timing of certain working capital items, but was offset by an increase in income tax payments. Non-operating cash outflows for the six months ended June 30, 2012 included capital asset expenditures of $251 million, including $129 million for new center developments and relocations and $122 million for maintenance and information technology. In addition, we spent $347 million for acquisitions. We paid distributions to noncontrolling interests of $50 million. Non-operating cash outflows for the first six months of 2011 included capital asset expenditures of $155 million, including $67 million for new

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