Davita Inc. Reports Operating Results (10-Q)

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Nov 06, 2009
Davita Inc. (DVA, Financial) filed Quarterly Report for the period ended 2009-09-30.

DaVita Inc. is one of the largest providers of high-quality dialysis and related services for patients suffering from chronic kidney failure also known as end stage renal disease. The company provides dialysis and ancillary services through a network of outpatient dialysis facilities. Davita Inc. has a market cap of $6.06 billion; its shares were traded at around $58.3 with a P/E ratio of 15.5 and P/S ratio of 1.1. Davita Inc. had an annual average earning growth of 24.1% over the past 10 years. GuruFocus rated Davita Inc. the business predictability rank of 5-star.

Highlight of Business Operations:

Consolidated net operating revenues for the third quarter of 2009 increased by approximately $55 million, or approximately 3.6%, as compared to the second quarter of 2009. The increase in consolidated net operating revenues was primarily due to an increase in Dialysis and Related Lab Services net revenues of approximately $50 million, principally due to an increase in the number of treatments as a result of an additional treatment day in the third quarter of 2009 and non-acquired treatment growth, as well as an increase in the average dialysis revenue per treatment. The increase in consolidated net revenues was also due to an increase of approximately $5 million in the Ancillary Services and Strategic Initiatives net revenues primarily from growth in our pharmacy business.

Consolidated net operating revenues for the third quarter of 2009 increased by approximately $127 million, or approximately 8.8%, as compared to the third quarter of 2008. The increase in consolidated net operating revenues was primarily due to an increase in Dialysis and Related Lab Services net revenues of approximately $113 million, principally due to an increase in the number of treatments from non-acquired treatment growth in existing and new centers and growth through acquisitions, as well as an increase in the average dialysis revenue per treatment. The increase in consolidated net revenues was also due to an increase of approximately $14 million in the Ancillary Services and Strategic Initiatives net revenues primarily from growth in our pharmacy business.

The increase in consolidated net operating revenues of approximately $342 million, or approximately 8.1%, for the nine months ended September 30, 2009, as compared to the same period in 2008, was primarily due to an increase in Dialysis and Related Lab Services net revenues of approximately $283 million, or 6.7%, which was primarily due to an increase in the number of dialysis treatments from non-acquired treatment growth in existing and new centers and growth through acquisitions, and an increase in the average dialysis revenue per treatment, with the balance of the increase in revenues of approximately $59 million, or 1.4%, from the Ancillary Services and Strategic Initiatives, primarily due to growth in our pharmacy business, as well as, to a lesser extent, growth in HomeChoice Partners and VillageHealth.

Dialysis and Related Lab Services net operating revenues for the third quarter of 2009 increased by approximately $50 million, or approximately 3.5%, as compared with the second quarter of 2009. The increase in net operating revenues was primarily due to an increase in the number of treatment days in the third quarter of 2009 and non-acquired treatment growth at existing and new centers, as well as an increase of approximately $3 in our average dialysis revenue per treatment. The increase in the average dialysis revenue per treatment was primarily due to an increase in the intensities of physician-prescribed pharmaceuticals, an increase in our non-government payment rates and an increase in our reimbursement rates for, average sale price, or ASP, associated with EPO, partially offset by changes in the mix of our non-government payors.

General and administrative expenses. Dialysis and Related Lab Services general and administrative expenses for the third quarter of 2009 decreased in absolute dollars by approximately $0.5 million from the second quarter of 2009. The decrease in the third quarter of 2009 as compared to the second quarter of 2009 was primarily due to the timing of certain expenditures such as professional fees and certain cost control initiatives. In absolute dollars, general and administrative expenses increased by approximately $4.0 million and $19.8 million in the third quarter of 2009 and for the nine months ended September 30, 2009, respectively, as compared to the same periods in 2008. The increases were primarily due to higher labor and benefit costs, and in addition, the nine months ended September 30, 2009 included an increase in our professional fees for legal and compliance initiatives.

Dialysis and Related Lab Services operating income for the third quarter of 2009 increased by approximately $10 million, as compared to the second quarter of 2009. The increase in operating income was primarily attributable to an increase in revenue as a result of an additional treatment day in the third quarter of 2009 and from non-acquired treatment growth, as well as an increase in the average dialysis revenue per treatment of approximately $3 primarily from an increase in the intensities of physician-prescribed pharmaceuticals, an increase in our non-government payment rates and an increase in our reimbursement rates for ASP associated with EPO, partially offset by changes in the mix of our non-government payors. Operating income also increased as a result of cost control initiatives and continued improved productivity, partially offset by higher workers compensation costs, increases in our pharmaceuticals costs and higher center level settlement and impairment charges.

Read the The complete ReportDVA is in the portfolios of Lee Ainslie of Maverick Capital, Andreas Halvorsen of Viking Global Investors LP, Edward Owens of Vanguard Health Care Fund.