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DaVita HealthCare Partners Inc. 4th Quarter 2012 Results

Stocks in this article: DVA

Effective income tax rate as compared to the effective income tax rate attributable to DaVita HealthCare Partners Inc. is as follows:

       
Three months ended

Year ended December 31, 2012

December 31, 2012

   

September 30, 2012

   

December 31, 2011

Income from continuing operations before income taxes $ 282,162   $ 271,210   $ 268,771   $ 1,001,304  
Income tax expense $ 97,902   $ 98,647   $ 91,552   $ 359,845  
Effective income tax rate   34.7 %   36.4 %   34.1 %   35.9 %
 
 
Three months ended

Year ended December 31, 2012

December 31, 2012

September 30, 2012

December 31, 2011

Income from continuing operations before income taxes $ 282,162 $ 271,210 $ 268,771 $ 1,001,304
Less: Noncontrolling owners’ income primarily attributable to non-tax paying entities   (28,036 )   (27,954 )   (28,128 )   (105,923 )
Income before income taxes attributable to DaVita HealthCare Partners Inc. $ 254,126   $ 243,256   $ 240,643   $ 895,381  
 
Income tax expense 97,902 98,647 $ 91,552 $ 359,845
Less: Income tax attributable to noncontrolling interests   (75 )   (125 )   (119 )   (703 )
Income tax attributable to DaVita HealthCare Partners Inc. $ 97,827   $ 98,522   $ 91,433   $ 359,142  
 
Effective income tax rate attributable to DaVita HealthCare Partners Inc.   38.5 %   40.5 %   38.0 %   40.1 %
 
 

DAVITA HEALTHCARE PARTNERS INC. RECONCILIATIONS FOR NON-GAAP MEASURES (unaudited) (dollars in thousands)

4. Free cash flow

Free cash flow represents net cash provided by operating activities less distributions to noncontrolling interests and capital expenditures for routine maintenance and information technology. We believe free cash flow is a useful adjunct to cash flow from operating activities and other measurements under GAAP, since free cash flow is a meaningful measure of our ability to fund acquisition and development activities and meet our debt service requirements. In addition, free cash flow excluding distributions to noncontrolling interests provides an investor with an understanding of free cash flows that are attributable to DaVita HealthCare Partners Inc. Free cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities, as an indicator of cash flows or as a measure of liquidity.

       
Three months ended

Year ended December 31, 2012

December 31, 2012

   

September 30, 2012

   

December 31, 2011

Cash provided by operating activities $ 200,235 $ 366,634 $ 150,659 $ 1,100,848
Less: Distributions to noncontrolling interests   (31,526 )   (31,500 )   (33,245 )   (113,504 )
Cash provided by operating activities attributable to DaVita HealthCare Partners Inc. 168,709 335,134 117,414 987,344
Less: Expenditures for routine maintenance and information technology   (86,065 )   (63,718 )   (85,304 )   (271,995 )
Free cash flow $ 82,644   $ 271,416   $ 32,110   $ 715,349  
 
 
Rolling 12-Month Period

December 31, 2012

September 30, 2012

December 31, 2011

Cash provided by operating activities $ 1,100,848 $ 1,051,272 $ 1,180,046
Less: Distributions to noncontrolling interests   (113,504 )   (115,223 )   (100,653 )
Cash provided by operating activities attributable to DaVita HealthCare Partners Inc. 987,344 936,049 1,079,393
Less: Expenditures for routine maintenance and information technology   (271,995 )   (271,234 )   (224,366 )
Free cash flow $ 715,349   $ 664,815   $ 855,027  
 
 

DAVITA HEALTHCARE PARTNERS INC. RECONCILIATIONS FOR NON-GAAP MEASURES (unaudited) (dollars in thousands)

5. Total care dollars under management

In California, as a result of its managed care administrative services agreement with hospitals, HCP does not assume the direct financial risk for institutional (hospital) services, but is responsible for managing the care dollars associated with both the professional (physician) and institutional services being provided for the Per Member Per Month (PMPM) fee attributable to both professional and institutional services. In those cases, HCP recognizes the surplus of institutional revenue less institutional expense as HCP revenue. In addition to revenues recognized for financial reporting purposes, HCP measures its total care dollars under management, which includes the Per Member Per Month (PMPM) fee payable to third parties for institutional (hospital) services where HCP manages the care provided to its members by the hospitals and other institutions, which are not included in GAAP revenues. HCP uses total care dollars under management as a supplement to GAAP revenues as it allows HCP to measure profit margins on a comparable basis across both the global capitation model (where HCP assumes the full financial risk for all services, including institutional services) and the risk sharing models (where HCP operates under managed care administrative services agreements where HCP does not assume the full risk), HCP believes that presenting amounts in this manner is useful because it presents its operations on a unified basis without the complication caused by models that HCP has adopted in its California market as a result of various regulations related to the assumption of institutional risk. Total care dollars under management is not a measure of financial performance computed in accordance with GAAP and should not be considered in isolation or as a substitute for revenues calculated in accordance with GAAP. Total care dollars under management includes PMPM payments to third parties that are not recorded in our accounting records and have not been reviewed and are not otherwise subject to procedures by our independent auditors. The following table reconciles Total Care Dollars Under Management to medical revenues to the periods indicated. “Total Care Dollars Under Management” is a non-GAAP measure.

       

For the period November 1, 2012 through December 31, 2012

Medical revenues $ 453,838
Less: Risk share revenue, net (15,762 )
Add: Institutional capitation amounts   175,651  
Total care dollars under management $ 613,727  




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