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.
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