Yesterday, October 30th, DaVita released its earnings for the 3Q12. The company posted solid third quarter results with earning per share of $1.52. Net income jumped 6.9 percent, from $135.4 million, or $1.42 per share, in the third quarter of 2011 to $144.7 million, or $1.50 a share, during the same time period this year. The company reported an additional $5.4 million after-tax-debt expense, or $0.06 per share, resulting from the potential acquisition of HCP. Operating income for the three and nine months ended September 30, 2012—including related expenses of $78 million—was $909 million, which is up from $801 million in 2011. U.S. treatments for the third quarter were 5,550,645 or 71,162 treatments per day, an increase of 12.3 percent over the third quarter of 2011.
Kent J. Thiry, Chairman and Chief Executive Officer, stated in the third quarter earnings call, that he expected the previously announced acquisition of HealthCare Partners (HCP) to close soon. Once the acquisition is completed and HCP is fully integrated, DaVita’s leverage ratio will be 3.7 times net-debt to EBITDA, which is only marginally above their long-stated preferred leverage range of 3.0 to 3.5. Therefore, they believe that this acquisition represents a “tremendous upside” to shareholder platform without significant changes to the company’s balance sheet. The company has also altered its credit limits and facility agreements to allow an additional borrowing of $3 billion to be used to finance parts of the HCP transaction.
In terms of outlook for 2013, Thiry stated that there are, “ significant number of headwinds and challenges to face on both sides of our enterprise”. More specifically, management is concerned with a potential 2 percent cut to the Medicare reimbursement, which could directly affect the revenues from their dialysis business. In addition, they believe there is some uncertainty around their commercial book of business, as DaVita continues to lose money on Medicare treatments and has been relying on private insurance to make up for the loss. On a positive note, Thiry believes that DaVita’s core kidney care business remains strong and is continuing to make improvements in clinical care—allowing the company to retain a strong market position, steady volume growth and strong stable cash generation.
In terms of guidance for 2013 DaVita updated their operating income to a range of $1.315 billion to $1.33 billion, not including expenses related to the question of HCP. In the reminder of 2012, management expects HPC to contribute $25 million to $30 million per month in operating income once the merger is completed. In addition, 2013 operating cash flow guidance of $1.35 billion to $1.5 billion.