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DaVita Inc. 4th Quarter 2016 Results
Date:2/16/2017

DENVER, Feb. 16, 2017 /PRNewswire/ -- DaVita Inc. (NYSE: DVA) today announced results for the quarter and year ended December 31, 2016.

  • Net income attributable to DaVita Inc. for the quarter and year ended December 31, 2016 was $158 million, or $0.80 per share and $880 million, or $4.29 per share, respectively.
  • Adjusted net income attributable to DaVita Inc. for the quarter and year ended December 31, 2016, excluding the non-GAAP items described below, was $192 million, or $0.98 per share, and $789 million, or $3.85 per share, respectively.
  • Additionally, adjusted net income attributable to DaVita Inc. for the quarter and year ended December 31, 2016, exluding the non-GAAP items described below and further excluding the amortization of intangible assets associated with acquisitions, was $222 million, or $1.13 per share, and $897 million, or $4.38 per share, respectively.
  • Net (loss) income attributable to DaVita Inc. for the quarter and year ended December 31, 2015 was $(6) million, or $(0.03) per share, and $270 million, or $1.25 per share, respectively.
  • Adjusted net income attributable to DaVita Inc. for the quarter and year ended December 31, 2015, excluding the non-GAAP items described below, was $214 million, or $1.01 per share, and $828 million, or $3.83 per share, respectively.
  • Additionally, adjusted net income attributable to DaVita Inc. for the quarter and year ended December 31, 2015, exluding the non-GAAP items described below and further excluding the amortization of intangible assets associated with acquisitions, was $239 million, or $1.12 per share, and $930 million, or $4.30 per share, respectively.
  • The Company's adjusted net income attributable to DaVita Inc., adjusted diluted net income per share, adjusted operating income, adjusted effective income tax rate attributable to DaVita Inc. and free cash flow discussed above and below (collectively its "non-GAAP measures") exclude the effect of certain items that are reconciled to their most comparable GAAP measures at Notes 2, 3, 4 and 5 hereto.

    For the quarter ended December 31, 2016, these non-GAAP measures excluded a goodwill impairment charge related to our vascular access reporting unit and an impairment of a minority equity investment (as discussed below), as well as an additional estimated accrual for damages and liabilities associated with our pharmacy business.

    For the year ended December 31, 2016, these non-GAAP measures excluded the non-GAAP items mentioned above as well as goodwill impairment charges on certain DaVita Medical Group (DMG) reporting units, a gain on changes in ownership interest upon the formation of our Asia Pacific dialysis joint venture (APAC JV), a gain on the sale of a portion of our Tandigm ownership interest, a loss on the sale of our DMG Arizona business, and estimated accruals for damages and liabilities associated with our pharmacy and DMG Nevada hospice businesses.

    For the quarter ended December 31, 2015, these non-GAAP measures excluded estimated goodwill and other intangible asset impairment charges and an estimated accrual for damages and liabilities associated with our pharmacy business. For the year ended December 31, 2015, these non-GAAP measures also excluded the debt redemption charges and a settlement charge related to a private civil suit.Financial and operating highlights include:

  • Cash flow: For the quarter and year ended December 31, 2016, operating cash flow was $482 million and $1.963 billion, respectively, and free cash flow was $329 million and $1.412 billion, respectively. For the definition of free cash flow, see Note 5 to the reconciliation of non-GAAP measures.
  • Operating income and adjusted operating income: Operating income for the quarter ended December 31, 2016 was $381 million, and adjusted operating income for the quarter was $445 million. Operating income for the year ended December 31, 2016 was $1.895 billion, and adjusted operating income for the year was $1.849 billion. In connection with the acquisition of DMG, we recorded receivables against the acquisition escrow balance to offset specific potential tax liabilities. Certain of these potential tax liabilities expired, resulting in the reduction of this asset during the third and fourth quarters of 2016. This negatively impacted operating income by $4 million and $31 million for the quarter and year-ended December 31, 2016, respectively, and is included in our general and administrative expenses. The reduction in operating income was directly offset by a reduction in income tax expense due to the expiration of the corresponding tax liabilities. Operating income for the quarter ended December 31, 2015 was $245 million, and adjusted operating income for the quarter was $474 million. Operating income for the year ended December 31, 2015 was $1.171 billion and adjusted operating income for the year was $1.898 billion.
  • Volume: Total U.S. dialysis treatments for the fourth quarter of 2016 were 6,889,069, or 87,203 treatments per day, representing a per day increase of 3.7% over the fourth quarter of 2015. Normalized non-acquired treatment growth in the fourth quarter of 2016 as compared to the fourth quarter of 2015 was 4.0%. The number of member months for which DMG provided care during the fourth quarter of 2016 was approximately 2.3 million, of which approximately 1.0 million, 1.0 million and 0.3 million related to senior, commercial and Medicaid members, respectively.
  • Goodwill and other asset impairment charges: During the quarter ended December 31, 2016, we determined that circumstances indicated it had become more likely than not that the goodwill of our vascular access reporting unit had become impaired. These circumstances included changes in governmental reimbursement and our expected ability to mitigate them. We have performed the required valuations to estimate the fair value of the net assets and implied goodwill of this reporting unit with the assistance of a third-party valuation firm. Based on this assessment, we recorded a goodwill impairment charge of $28 million, of which $8 million was attributed to noncontrolling interests. In addition, we recognized an income tax benefit of $7 million related to this charge. During the fourth quarter of 2016, we also recognized an impairment charge of $15 million on a minority equity investment within our international business, offset by an income tax benefit of $5 million related to this charge.
  • Effective tax rate: Our effective tax rate was 32.3% and 30.6% for the quarter and year ended December 31, 2016, respectively. The effective tax rate attributable to DaVita Inc. was 36.3% and 34.1% for the quarter and year ended December 31, 2016, respectively. Our effective tax rate for the quarter ended December 31, 2016 was impacted by a non-deductible portion of the estimated accrual associated with our pharmacy business and an adjustment to reduce a receivable associated with the DMG acquisition escrow provision relating to an income tax item. Our effective tax rate for the year ended December 31, 2016 was impacted by the foregoing items as well as partially deductible and non-deductible goodwill impairment charges, the loss on the sale of our DMG Arizona business, a non-deductible portion of the estimated accruals associated with our DMG Nevada hospice and pharmacy businesses, a gain on the APAC JV ownership changes, the adjustments related to the reduction in the receivables associated with the DMG acquisition escrow provision relating to income tax items, and the amount of third-party owners' income attributable to non-tax paying entities. The adjusted effective tax rate attributable to DaVita Inc. for the quarter and year ended December 31, 2016, excluding these items from their respective periods was 36.5% and 38.4%, respectively. The decrease in our adjusted effective tax rate attributable to DaVita Inc. compared to the third quarter of 2016 of 40.0% is due to a decrease in the state tax rate and related true-ups.
  • Center activity: As of December 31, 2016, we provided dialysis services to a total of approximately 203,000 patients at 2,504 outpatient dialysis centers, of which 2,350 centers were located in the United States and 154 centers were located in 11 countries outside of the United States. During the fourth quarter of 2016, we opened a total of 27 new dialysis centers and acquired four dialysis centers in the United States. We also acquired ten dialysis centers and opened five new dialysis centers outside of the United States.
  • Share repurchases: During the quarter ended December 31, 2016, we repurchased a total of 6,718,658 shares of our common stock for $416 million, or an average price of $61.96 per share. During the year ended December 31, 2016, we repurchased 16,649,090 shares of our common stock for $1.1 billion, or an average price of $64.41 per share. We have not repurchased any shares of our common stock subsequent to December 31, 2016. As a result of these transactions, as of February 16, 2017 we have a total of approximately $677 million in outstanding Board repurchase authorizations.
  • Settlement: In the first quarter of 2017, we reached an agreement with the government for $538 million for amounts owed to us for dialysis services provided over several years to patients covered by the Veterans' Administration. This one-time gain, subject to taxes and consideration of noncontrolling interests, is expected to be recognized in the first quarter of 2017 and is excluded from our 2017 adjusted operating income guidance.
  • OutlookThe following forward-looking measures and the underlying assumptions involve significant risks and uncertainties, including those described below, and actual results may vary significantly from these current forward-looking measures. We do not provide guidance for consolidated operating income, Kidney Care operating income or effective tax rate attributable to DaVita Inc. on a GAAP basis nor a reconciliation of those forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures on a forward-looking basis because we are unable to predict certain items contained in the GAAP measures without unreasonable efforts. These non-GAAP financial measures do not include certain items, including the anticipated gain related to the government settlement.

  • We expect our adjusted consolidated operating income guidance for 2017 to be in the range of $1.635 billion to $1.775 billion.
  • We expect our adjusted operating income guidance for Kidney Care for 2017 to be in the range of $1.525 billion to $1.625 billion.
  • We expect our operating income guidance for DMG for 2017 to be in the range of $110 million to $150 million.
  • We expect our consolidated operating cash flow for 2017 to be in the range of $1.750 billion to $1.950 billion, which includes the net benefit of the anticipated VA payment.
  • We expect our 2017 adjusted effective tax rate attributable to DaVita Inc. to be approximately 39.5% to 40.5%.
  • We will be holding a conference call to discuss our results for the fourth quarter ended December 31, 2016 on February 16, 2017 at 5:00 p.m. Eastern Time. To join the conference call, please dial (877) 918-6630 from the U.S. or (517) 308-9087 from outside the U.S. A replay of the conference call will be available on our website at investors.davita.com, for the following 30 days.

    This release contains forward-looking statements within the meaning of the federal securities laws, including without limitation statements related to our guidance and expectations for our 2017 consolidated operating income, our 2017 Kidney Care operating income, DMG's 2017 operating income, our 2017 consolidated operating cash flows, our 2017 effective tax rate attributable to DaVita Inc., the timing of recognition of the government settlement and our estimated charges and accruals. Factors that could impact future results include the uncertainties associated with the risk factors set forth in our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2015, our subsequent quarterly and annual reports, and our current reports on Form 8-K. The forward-looking statements should be considered in light of these risks and uncertainties.

    These risks and uncertainties include, but are not limited to, and are qualified in their entirety by reference to the full text of those risk factors in our SEC filings relating to:

  • the concentration of profits generated by higher-paying commercial payor plans for which there is continued downward pressure on average realized payment rates, and a reduction in the number of patients under such plans, which may result in the loss of revenues or patients, and the extent to which the ongoing implementation of healthcare exchanges or changes in regulations or enforcement of regulations, including but not limited to those regarding the exchanges, results in a reduction in reimbursement rates for our services from and/or the number of patients enrolled in higher-paying commercial plans,
  • a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs,
  • the impact of the Medicare Advantage benchmark structure,
  • risks arising from potential federal and/or state legislation or regulation that could have an adverse effect on our operations and profitability,
  • the impact of the 2016 Congressional and Presidential elections on the current health care marketplace and on our business, including with respect to the future of the Affordable Care Act, the exchanges and many other core aspects of the current health care marketplace,
  • changes in pharmaceutical or anemia management practice patterns, payment policies, or pharmaceutical pricing,
  • legal compliance risks, including our continued compliance with complex government regulations and the provisions of our current corporate integrity agreement and current or potential investigations by various government entities and related government or private-party proceedings, and restrictions on our business and operations required by our corporate integrity agreement and other settlement terms, and the financial impact thereof,
  • continued increased competition from large- and medium-sized dialysis providers that compete directly with us,
  • our ability to maintain contracts with physician medical directors, changing affiliation models for physicians, and the emergence of new models of care introduced by the government or private sector, that may erode our patient base and reimbursement rates, such as accountable care organizations, independent practice associations and integrated delivery systems,
  • our ability to complete acquisitions, mergers or dispositions that we might be considering or announce, or to integrate and successfully operate any business we may acquire or have acquired, including DMG, or to expand our operations and services to markets outside the United States, or to businesses outside of dialysis and DMG's business,
  • the variability of our cash flows,
  • the risk that we might invest material amounts of capital and incur significant costs in connection with the growth and development of our international operations, yet we might not be able to operate them profitably anytime soon, if at all,
  • risks arising from the use of accounting estimates, judgments and interpretations in our financial statements,
  • the risk that laws regulating the corporate practice of medicine could restrict the manner in which DMG conducts its business,
  • the risk that the cost of providing services under DMG's agreements may exceed our compensation,
  • the risk that reductions in reimbursement rates, including Medicare Advantage rates, and future regulations may negatively impact DMG's business, revenue and profitability,
  • the risk that DMG may not be able to successfully establish a presence in new geographic regions or successfully address competitive threats that could reduce its profitability,
  • the risk that a disruption in DMG's healthcare provider networks could have an adverse effect on DMG's business operations and profitability,
  • the risk that reductions in the quality ratings of health maintenance organization plan customers of DMG could have an adverse effect on DMG's business, or
  • the risk that health plans that acquire health maintenance organizations may not be willing to contract with DMG or may be willing to contract only on less favorable terms.
  • We base our forward-looking statements on information currently available to us at the time of this release, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of changes in underlying factors, new information, future events or otherwise.

    This release contains non-GAAP financial measures. For reconciliations of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, see the attached reconciliation schedules. For the reasons stated in the reconciliation schedules, we believe our presentation of non-GAAP financial measures provides useful supplemental information for investors.

    Contact:Jim Gustafson Investor RelationsDaVita Inc.(310) 536-2585

    DAVITA INC.CONSOLIDATED STATEMENTS OF INCOME(unaudited) (dollars in thousands, except per share data) Three months ended December 31,

    Year ended December 31,2016201520162015Patient service revenues

    $ 2,645,520

    $ 2,430,851

    $ 10,354,161

    $ 9,480,279Less: Provision for uncollectible accounts

    (115,165 )

    (113,279 )

    (451,353 )

    (427,860 )Net patient service revenues

    2,530,355

    2,317,572

    9,902,808

    9,052,419Capitated revenues

    864,516

    865,543

    3,518,679

    3,509,095Other revenues

    320,871

    350,474

    1,323,618

    1,220,323Total net revenues

    3,715,742

    3,533,589

    14,745,105

    13,781,837Operating expenses and charges:Patient care costs and other costs

    2,695,749

    2,515,131

    10,646,736

    9,824,834General and administrative

    412,484

    408,882

    1,592,698

    1,452,135Depreciation and amortization

    188,777

    163,330

    720,252

    638,024Provision for uncollectible accounts

    1,821

    2,743

    11,677

    9,240Equity investment income

    (7,925)

    (7,601 )

    (13,044 )

    (18,325 )Goodwill and other asset impairment charges

    43,408

    206,169

    296,408

    210,234Gain on changes in ownership interests, net

    (404,165 )—Settlement charge

    495,000Total operating expenses and charges

    3,334,314

    3,288,654

    12,850,562

    12,611,142Operating income

    381,428

    244,935

    1,894,543

    1,170,695Debt expense

    (104,023 )

    (103,259 )

    (414,382)

    (408,380 )Debt redemption charges

    (48,072 )Other income, net

    667

    4,631

    8,734

    8,893Income before income taxes

    278,072

    146,307

    1,488,895

    723,136Income tax expense

    89,802

    111,833

    455,813

    295,726Net income

    188,270

    34,474

    1,033,082

    427,410Less: Net income attributable to noncontrolling interests

    (30,544 )

    (40,474 )

    (153,208 )

    (157,678 )Net income (loss) attributable to DaVita Inc.

    $ 157,726

    $ (6,000)

    $ 879,874

    $ 269,732Earnings per share:Basic net income (loss) per share attributable to DaVita Inc.

    $ 0.81

    $ (0.03)

    $ 4.36

    $ 1.27Diluted net income (loss) per share attributable to DaVita Inc.

    $ 0.80

    $ (0.03)

    $ 4.29

    $ 1.25Weighted average shares for earnings per share:Basic

    193,999,701

    208,762,717

    201,641,173

    211,867,714Diluted

    196,743,187

    208,762,717

    204,904,656

    216,251,807

    DAVITA INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(unaudited) (dollars in thousands) Three months ended December 31,

    Year ended December 31,2016201520162015Net income

    $ 188,270

    $ 34,474

    $ 1,033,082

    $ 427,410Other comprehensive income (loss), net of tax:Unrealized gains (losses) on interest rate swap and cap agreements:Unrealized gains (losses) on interest rate swap and cap agreements

    4,568

    (2,177)

    (3,670)

    (12,241)Reclassifications of net swap and cap agreements realized losses into net income

    1,265

    739

    2,566

    3,111Unrealized gains (losses) on investments:Unrealized (losses) gains on investments

    (561)

    (45)

    1,427

    (1,413)Reclassification of net investment realized gains into net income

    (279)

    (1)

    (423)

    (377)Unrealized losses on foreign currency translation:Foreign currency translation adjustments

    (45,000)

    (4,007)

    (39,614)

    (23,889)Reclassification of foreign currency translation adjustment realized losses into net income

    2,574

    10,087

    —Other comprehensive loss

    (37,433)

    (5,491)

    (29,627)

    (34,809)Total comprehensive income

    150,837

    28,983

    1,003,455

    392,601Less: Comprehensive income attributable to noncontrolling interests

    (30,527)

    (40,474)

    (153,398)

    (157,678)Comprehensive income (loss) attributable to DaVita Inc.

    $ 120,310

    $ (11,491)

    $ 850,057

    $ 234,923

    DAVITA INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)(dollars in thousands)Year ended December 31,20162015Cash flows from operating activities:Net income

    $ 1,033,082

    $ 427,410Adjustments to reconcile net income to net cash provided by operating activities:Settlement charge

    495,000Settlement payments

    (493,775 )Depreciation and amortization

    720,252

    638,024Debt redemption charges

    48,072Goodwill and other asset impairment charges

    296,408

    210,234Stock-based compensation expense

    38,338

    56,664Tax benefits from stock award exercises

    28,397

    45,749Excess tax benefits from stock award exercises

    (13,251 )

    (28,157 )Deferred income taxes

    52,010

    61,744Equity investment income, net

    17,766

    9,293Gain on changes in ownership interests, net

    (404,165 )

    —Other non-cash charges

    (7,338 )

    44,691Changes in operating assets and liabilities, other than from acquisitions and divestitures:Accounts receivable

    (152,240 )

    (202,867 )Inventories

    22,920

    (48,313 )Other receivables and other current assets

    (54,038 )

    32,761Other long-term assets

    35,893

    3,723Accounts payable

    11,897

    30,998Accrued compensation and benefits

    68,272

    54,950Other current liabilities

    176,494

    113,470Income taxes

    62,230

    24,175Other long-term liabilities

    30,517

    33,354Net cash provided by operating activities

    1,963,444

    1,557,200Cash flows from investing activities:Additions of property and equipment

    (829,095 )

    (707,998 )Acquisitions

    (563,856 )

    (96,469 )Proceeds from asset and business sales

    64,725

    19,715Purchase of investments available for sale

    (13,539 )

    (8,783 )Purchase of investments held-to-maturity

    (1,133,192 )

    (1,709,883 )Proceeds from sale of investments available for sale

    18,963

    2,058Proceeds from investments held-to-maturity

    1,240,502

    1,637,358Purchase of equity investments

    (27,096 )

    (17,911 )Proceeds from sale of equity investments

    40,920

    —Distributions received on equity investments

    129Net cash used in investing activities

    (1,201,668 )

    (881,784 )Cash flows from financing activities:Borrowings

    51,991,490

    54,541,988Payments on long-term debt and other financing costs

    (52,115,932 )

    (53,922,290 )Deferred financing and debt redemption costs

    (188 )

    (76,672 )Purchase of treasury stock

    (1,097,822 )

    (549,935 )Distributions to noncontrolling interests

    (192,401 )

    (174,635 )Stock award exercises and other share issuances, net

    23,543

    26,155Excess tax benefits from stock award exercises

    13,251

    28,157Contributions from noncontrolling interests

    47,590

    54,644Purchase of noncontrolling interests

    (21,512 )

    (66,382 )Net cash used in financing activities

    (1,351,981 )

    (138,970 )Effect of exchange rate changes on cash and cash equivalents

    4,276

    (2,571 )Net (decrease) increase in cash and cash equivalents

    (585,929 )

    533,875Cash and cash equivalents at beginning of the year

    1,499,116

    965,241Cash and cash equivalents at end of the period

    $ 913,187

    $ 1,499,116

    DAVITA INC.CONSOLIDATED BALANCE SHEETS(unaudited) (dollars in thousands, except per share data) December 31,December 31,20162015ASSETSCash and cash equivalents

    $ 913,187

    $ 1,499,116Short-term investments

    310,198

    408,084Accounts receivable, less allowance of $252,056 and $264,144

    1,917,302

    1,724,228Inventories

    164,858

    185,575Other receivables

    453,483

    435,885Other current assets

    210,604

    190,322Income taxes receivable

    10,596

    60,070Total current assets

    3,980,228

    4,503,280Property and equipment, net of accumulated depreciation of $2,832,160 and $2,397,007

    3,175,367

    2,788,740Intangible assets, net of accumulated amortization of $940,731 and $770,691

    1,527,767

    1,687,326Equity investments

    502,389

    78,368Long-term investments

    103,679

    89,122Other long-term assets

    44,510

    73,560Goodwill

    9,407,317

    9,294,479$ 18,741,257

    $ 18,514,875LIABILITIES AND EQUITYAccounts payable

    $ 522,415

    $ 513,950Other liabilities

    856,847

    682,123Accrued compensation and benefits

    815,761

    741,926Medical payables

    336,381

    332,102Current portion of long-term debt

    165,041

    129,037Total current liabilities

    2,696,445

    2,399,138Long-term debt

    8,947,327

    9,001,308Other long-term liabilities

    465,358

    439,229Deferred income taxes

    809,128

    726,962Total liabilities

    12,918,258

    12,566,637Commitments and contingencies:Noncontrolling interests subject to put provisions

    973,258

    864,066Equity:Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued)Common stock ($0.001 par value, 450,000,000 shares authorized; 194,554,491 and 217,120,346 shares issued and 194,554,491 and 209,754,247 shares outstanding, respectively)

    195

    217Additional paid-in capital

    1,027,182

    1,118,326Retained earnings

    3,710,313

    4,356,835Treasury stock (7,366,099 shares at December 31, 2015)

    (544,772)Accumulated other comprehensive loss

    (89,643)

    (59,826)Total DaVita Inc. shareholders' equity

    4,648,047

    4,870,780Noncontrolling interests not subject to put provisions

    201,694

    213,392Total equity

    4,849,741

    5,084,172$ 18,741,257

    $ 18,514,875

    DAVITA INC.SUPPLEMENTAL FINANCIAL DATA(unaudited)(dollars in millions, except for per share and per treatment data)Three months endedDecember 31,2016September 30,2016December 31,2015Year ended

    December 31, 2016

    1. Consolidated Financial Results:Consolidated net revenues

    $ 3,716

    $ 3,731

    $ 3,534

    $ 14,745Operating income

    $ 381

    $ 819

    $ 245

    $ 1,895Adjusted operating income excluding certain items(1)

    $ 445

    $ 472

    $ 474

    $ 1,849Operating income margin

    10.3%

    22.0%

    6.9%

    12.8%Adjusted operating income margin excluding certain items(1) (5)

    12.0%

    12.6%

    13.4%

    12.5%Net income (loss) attributable to DaVita Inc

    $ 158

    $ 571

    $ (6)

    $ 880Adjusted net income attributable to DaVita Inc. excluding certain items(1)

    $ 192

    $ 197

    $ 214

    $ 789Diluted net income (loss) per share attributable to DaVita Inc

    $ 0.80

    $ 2.76

    $ (0.03)

    $ 4.29Adjusted diluted net income per share attributable to DaVita Inc. excluding certain items(1)

    $ 0.98

    $ 0.95

    $ 1.01

    $ 3.852. Consolidated Business Metrics:ExpensesGeneral and administrative expenses as a percent of consolidated net revenues(2)

    11.1%

    10.9%

    11.6%

    10.8%Consolidated effective tax rate

    32.3%

    14.6%

    76.4%

    30.6%Consolidated effective tax rate attributable to DaVita Inc.(1)

    36.3%

    15.4%

    105.7%

    34.1%Adjusted consolidated effective tax rate attributable to DaVita Inc.(1)

    36.5%

    40.0%

    36.0%

    38.4%3. Summary of Division Financial Results:Net revenuesKidney Care:U.S. dialysis and related lab services

    $ 2,323

    $ 2,324

    $ 2,216

    $ 9,138Ancillary services and strategic initiatives, including international dialysis operations:U.S. ancillary services and strategic initiatives

    338

    359

    360

    1,413International dialysis

    58

    53

    38

    208396

    412

    398

    1,621Elimination of intersegment

    (40)

    (33)

    (22)

    (128)Total Kidney Care

    2,679

    2,703

    2,592

    10,631DMG

    1,037

    1,028

    942

    4,114Total net consolidated revenues

    $ 3,716

    $ 3,731

    $ 3,534

    $ 14,745Operating income (loss)Kidney Care:U.S. Dialysis and related lab services

    $ 436

    $ 452

    $ 464

    $ 1,777Other – Ancillary services and strategic initiatives, including international dialysis operations:U.S. ancillary services and strategic initiatives

    (59)

    (6)

    (15)

    (65)International dialysis

    (14)

    368

    (19)

    332(73)

    362

    (34)

    267Corporate support and related long-term incentive compensation

    (1)

    (4)

    (14)Reduction of receivables associated with the DMG acquisition escrow provision

    (4)

    (27)

    (31)Total Kidney Care

    359

    786

    426

    1,999DMG

    22

    33

    (181)

    (104)Total consolidated operating income

    $ 381

    $ 819

    $ 245

    $ 1,895

    DAVITA INC.SUPPLEMENTAL FINANCIAL DATA—continued(unaudited)(dollars in millions, except for per share and per treatment data)Three months endedDecember 31,2016September 30,2016December 31,2015Year ended

    December 31, 2016

    4. Summary of Reportable Segment Financial Results:U.S. Dialysis and Related Lab ServicesRevenue:Patient services revenues

    $ 2,427

    $ 2,429

    $ 2,316

    $ 9,551Provision for uncollectible accounts

    (109)

    (109)

    (104)

    (430)Net patient service operating revenues

    2,318

    2,320

    2,212

    9,121Other revenues

    5

    4

    4

    17Total net operating revenues

    $ 2,323

    $ 2,324

    $ 2,216

    $ 9,138Operating expenses:Patient care costs

    $ 1,568

    $ 1,565

    $ 1,462

    $ 6,145General and administrative

    199

    188

    181

    751Depreciation and amortization

    124

    123

    112

    483Equity investment income

    (4)

    (4)

    (3)

    (18)Total operating expenses

    1,887

    1,872

    1,752

    7,361Segment operating income

    $ 436

    $ 452

    $ 464

    $ 1,777DMGRevenue:DMG capitated revenues

    $ 845

    $ 846

    $ 850

    $ 3,431Patient services revenues

    179

    173

    80

    642Provision for uncollectible accounts

    (6)

    (6)

    (4)

    (20)Net patient service operating revenues

    173

    167

    76

    622Other revenues

    19

    15

    16

    61Total net operating revenues

    $ 1,037

    $ 1,028

    $ 942

    $ 4,114Operating expenses:Patient care costs

    $ 834

    $ 824

    $ 757

    $ 3,291General and administrative

    123

    121

    121

    489Depreciation and amortization

    58

    53

    44

    211Goodwill and other asset impairment charges

    -

    -

    206

    253Gains on changes in ownership interests, net

    -

    -

    -

    (30)Equity investment (income) loss

    -

    (3)

    (5)

    4Total operating expenses

    1,015

    995

    1,123

    4,218Segment operating income (loss)

    $ 22

    $ 33

    $ (181)

    $ (104)Reconciliation for non-GAAP measure:Add:Goodwill and other intangible asset impairment charges

    -

    -

    206

    253DMG Nevada hospice accrual

    -

    -

    -

    16Gain on changes in ownership interests, netGain on sale of Tandigm ownership interest

    -

    -

    -

    (40)Loss on sale of DMG Arizona

    -

    -

    -

    10Adjusted segment operating income(1)

    $ 22

    $ 33

    $ 25

    $ 135

    DAVITA INC.SUPPLEMENTAL FINANCIAL DATA—continued(unaudited)(dollars in millions, except for per share and per treatment data)Three months endedDecember 31,2016September 30,2016December 31,2015Year ended December 31, 20165. U.S. Dialysis and Related Lab Services Business Metrics:VolumeTreatments

    6,889,069

    6,887,992

    6,649,227

    27,162,545Number of treatment days

    79.0

    79.0

    79.1

    313.9Treatments per day

    87,203

    87,190

    84,061

    86,532Per day year over year increase

    3.7%

    4.2%

    3.2%

    4.1%Normalized non-acquired treatment growth year over year

    4.0%

    4.4%

    3.7%

    4.2%Operating revenues before provision for uncollectible accountsDialysis and related lab services revenue per treatment

    $ 352.38

    $ 352.62

    $ 348.26

    $ 351.64Per treatment (decrease) increase from previous quarter

    (0.1%)

    0.5%

    0.1%Per treatment increase from previous year

    1.2%

    1.3%

    0.4%

    1.2%Percent of consolidated net revenues

    61.9%

    61.9%

    62.3%

    61.5%ExpensesPatient care costsPercent of total segment operating net revenues

    67.5%

    67.3%

    66.0%

    67.2%Per treatment

    $ 227.68

    $ 227.16

    $ 219.86

    $ 226.24Per treatment increase (decrease) from previous quarter

    0.2%

    1.1%

    (0.5%)Per treatment increase from previous year

    3.6%

    2.8%

    0.5%

    2.2%General and administrative expensesPercent of total segment operating net revenues

    8.5%

    8.1%

    8.2%

    8.2%Per treatment

    $ 28.82

    $ 27.36

    $ 27.21

    $ 27.63Per treatment increase from previous quarter

    5.3%

    5.5%Per treatment increase (decrease) from previous year

    5.9%

    6.1%

    (8.5%)

    1.3%Accounts receivableNet receivables

    $ 1,358

    $ 1,306

    $ 1,255DSO

    55

    52

    53Provision for uncollectible accounts as a percentage of revenues

    4.5%

    4.5%

    4.5%

    4.5%6. DMG Business Metrics:Capitated membershipTotal members

    749,300

    749,900

    807,400Total member monthsSenior

    913,300

    914,000

    951,500

    3,760,000Commercial

    1,018,400

    1,026,300

    1,109,900

    4,130,800Medicaid

    318,800

    326,500

    367,100

    1,320,800Total member months

    2,250,500

    2,266,800

    2,428,500

    9,211,600Capitated revenues by sourcesSenior revenues

    $ 617

    $ 634

    $ 607

    $ 2,537Commercial revenues

    175

    165

    184

    701Medicaid revenues

    53

    47

    59

    193Total capitated revenues

    $ 845

    $ 846

    $ 850

    $ 3,431

    DAVITA INC.SUPPLEMENTAL FINANCIAL DATA—continued(unaudited)(dollars in millions, except for per share and per treatment data)Three months endedDecember 31,2016September 30,2016December 31,2015Year ended

    December 31, 20166. DMG Business Metrics: (continued)OtherTotal care dollars under management(1)

    $ 1,295

    $ 1,300

    $ 1,213

    $ 5,203Ratio of operating income (loss) to total care dollars under management(1)

    1.7%

    2.5%

    (14.9%)

    (2.0%)Ratio of adjusted operating income to total care dollars under management(1)(6)

    1.7%

    2.5%

    2.1%

    2.6%DMG clinicians

    2,037

    1,996

    1,400IPA primary care physicians

    2,555

    2,570

    2,9377. Cash Flow:Operating cash flow

    $ 482.2

    $ 535.6

    $ 436.7

    $ 1,963.4Operating cash flow, last twelve months

    $ 1,963.4

    $ 1,917.9

    $ 1,557.2Free cash flow(1)

    $ 329.4

    $ 386.3

    $ 256.2

    $ 1,412.3Free cash flow, last twelve months(1)

    $ 1,412.3

    $ 1,339.1

    $ 1,055.5Capital expenditures:Routine maintenance/IT/other

    $ 105.4

    $ 98.5

    $ 131.8

    $ 358.7Development and relocations

    $ 148.5

    $ 118.1

    $ 114.0

    $ 470.4Acquisition expenditures

    $ 66.5

    $ 24.0

    $ 5.8

    $ 563.98. Debt and Capital Structure:Total debt(3)

    $ 9,192

    $ 9,209

    $ 9,226Net debt, net of cash and cash equivalents(3)

    $ 8,279

    $ 8,295

    $ 7,727Leverage ratio (see calculation on page 15)

    3.16x

    2.98x

    2.95xOverall weighted average effective interest rate during the quarter

    4.49%

    4.42%

    4.40%Overall weighted average effective interest rate at end of the quarter

    4.52%

    4.49%

    4.39%Weighted average effective interest rate on the senior secured credit facilities at end of the quarter

    3.68%

    3.61%

    3.50%Fixed and economically fixed interest rates as a percentage of our total debt

    53%

    53%(4)

    61%(4)Fixed and economically fixed interest rates, including our interest rate cap agreements, as a percentage of our total debt

    91%

    91%(4)

    90%(4)

    (1)

    These are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, and for a definition of adjusted amounts, see attached reconciliation schedules.(2)

    Consolidated percentages of revenues are comprised of the dialysis and related lab services business, DMG's business and other ancillary services and strategic initiatives. General and administrative expenses includes certain corporate support and long-term incentive compensation, as well as an adjustment to reduce the receivables associated with the DMG acquisition escrow provision relating to income tax items for the third and fourth quarters of 2016 and year ended December 31, 2016, and the estimated accruals associated with our pharmacy business for the fourth quarters of 2015 and 2016, and the year ended December 31, 2016, and the estimated accrual for the DMG Nevada hospice business for the year ended December 31, 2016.(3)

    The reported balance sheet amounts at December 31, 2016, September 30, 2016, and December 31, 2015, excludes $79.9 million, $83.9 million and $96.0 million, respectively, of a debt discount associated with our Term Loan A, Term Loan B and senior notes, and other deferred financing costs.(4)

    The Term Loan B is subject to a LIBOR floor of 0.75%. At December 31, 2016, the actual LIBOR-based variable component of our interest rate exceeded 0.75% on the Term Loan B, and was subject to LIBOR-based interest rate volatility on the LIBOR variable component of our interest rate on all of the Term Loan B. However, we are limited to a maximum rate of 3.50% on the outstanding principal debt on the Term Loan B as a result of interest rate cap agreements. Actual LIBOR, for the three months ended September 30, 2016 and December 31, 2015 was lower than the embedded LIBOR floor during such periods and the interest rate on the Term Loan B was set at its floor during such periods. The Term Loan A bears interest at LIBOR plus an interest margin of 1.75%. We are limited to a maximum rate of 3.50% on $87.5 million of the Term Loan A as a result of interest rate cap agreements. In addition, the uncapped portion of the Term Loan A, which is subject to the variability of LIBOR, is $775 million.(5)

    Adjusted operating income margin is a calculation of adjusted operating income divided by consolidated net revenues.(6)

    Ratio of adjusted operating income to total care dollars under management is a calculation of adjusted operating income divided by total care dollars under management.

    DAVITA INC.SUPPLEMENTAL FINANCIAL DATA—continued(unaudited)(dollars in thousands)Note 1: Calculation of the Leverage RatioUnder the senior secured credit facilities (Credit Agreement), the leverage ratio is defined as all funded debt plus the face amount of all letters of credit issued, minus cash and cash equivalents, including short-term investments, divided by "Consolidated EBITDA". The leverage ratio determines the interest rate margin payable by the Company for its Term Loan A and revolving line of credit under the Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The following leverage ratio was calculated using "Consolidated EBITDA" as defined in the Credit Agreement. The calculation below is based on the last twelve months of "Consolidated EBITDA", pro forma for routine acquisitions that occurred during the period. The Company's management believes the presentation of "Consolidated EBITDA" is useful to users to enhance their understanding of the Company's leverage ratio under its Credit Agreement. The leverage ratio calculated by the Company is a non-GAAP measure and should not be considered a substitute for debt to net income attributable to DaVita Inc., net income attributable to DaVita Inc. or total debt as determined in accordance with United States generally accepted accounting principles (GAAP). The Company's calculation of its leverage ratio might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures by other companies.


    Year endedDecember 31, 2016Net income attributable to DaVita Inc.

    $ 879,874Income taxes

    455,813Interest expense

    384,946Depreciation and amortization

    720,252Goodwill and other intangible asset impairment charges

    296,408Noncontrolling interests and equity investment income, net

    170,857Stock-settled stock-based compensation

    37,970Gain on changes in ownership interest, net

    (404,165)Other

    43,063"Consolidated EBITDA"

    $ 2,585,018December 31, 2016Total debt, excluding debt discount and other deferred financing costs of $79.9 million

    $ 9,192,229Letters of credit issued

    96,9159,289,144Less: Cash and cash equivalents including short-term investments (excluding DMG's physician owned entities cash)

    (1,107,761)Consolidated net debt

    $ 8,181,383Last twelve months "Consolidated EBITDA"

    $ 2,585,018Leverage ratio

    3.16x

    In accordance with the Credit Agreement, the Company's leverage ratio cannot exceed 4.50 to 1.00 as of December 31, 2016. At that date the Company's leverage ratio did not exceed 4.50 to 1.00.DAVITA INC.RECONCILIATIONS FOR NON-GAAP MEASURES(unaudited)(dollars in thousands except for per share data)Note 2: Adjusted net income and adjusted diluted net income per share attributable to DaVita Inc.We believe that adjusted net income and adjusted diluted net income per share attributable to DaVita Inc., excluding a gain on the APAC JV ownership changes, goodwill and other intangible asset impairment charges, an impairment of a minority equity investment, a gain on the sale of a portion of our Tandigm ownership interest, a loss on the sale of our DMG Arizona business, adjustments to reduce the receivables associated with the DMG acquisition escrow provision relating to income tax items, estimated accruals for damages and liabilities associated with our pharmacy and DMG Nevada hospice businesses, debt redemption charges and a settlement charge related to a private civil suit, net of related tax, enhances a user's understanding of our normal net income attributable to DaVita Inc. and diluted net income per share attributable to DaVita Inc. for these periods by providing a measure that is meaningful because it excludes certain items which we do not believe are indicative of our ordinary results, and accordingly, is comparable to prior periods and indicative of normal net income attributable to DaVita Inc. and diluted net income per share attributable to DaVita Inc. These measures are not measures of financial performance under GAAP and should not be considered as an alternative to net income attributable to DaVita Inc. and diluted net income per share attributable to DaVita Inc.


    Three months endedYear endedDecember 31,2016September 30,2016December 31,2015December 31,2016December 31,2015Net income (loss) attributable to DaVita Inc.

    $ 157,726

    $ 571,332

    $ (6,000)

    $ 879,874

    $ 269,732Gain on APAC JV ownership changes

    -

    (374,374)

    -

    (374,374)

    -Goodwill and other intangible asset impairment charges

    28,415

    -

    206,169

    281,415

    210,234Goodwill impairment charge attributable to noncontrolling interests

    (8,078)

    -

    -

    (8,078)

    -Impairment of minority equity investment

    14,993

    -

    -

    14,993

    -Pharmacy accruals

    15,770

    -

    22,530

    15,770

    22,530Gain on sale of Tandigm ownership interest

    -

    -

    -

    (40,280)

    -Loss on sale of DMG Arizona

    -

    -

    -

    10,489

    -Reduction in the receivables associated with the DMG acquisition escrow provision

    3,894

    27,040

    -

    30,934

    -DMG Nevada hospice accrual

    -

    -

    -

    16,000

    -Debt redemption charges

    -

    -

    -

    -

    48,072Settlement charge

    -

    -

    -

    -

    495,000Related income tax

    (20,686)

    (27,040)

    (8,643)

    (37,312)

    (217,781)Adjusted net income attributable to DaVita Inc.

    $ 192,034

    $ 196,958

    $ 214,056

    $ 789,431

    $ 827,787

    DAVITA INC.RECONCILIATIONS FOR NON-GAAP MEASURES(unaudited)(dollars in thousands except for per share data)Three months endedYear endedDecember 31,2016September 30,2016December 31,2015December 31,2016December 31,2015Diluted net income (loss) per share attributable to DaVita Inc.

    $ 0.80

    $ 2.76

    $ (0.03)

    $ 4.29

    $ 1.25Gain on APAC JV ownership changes

    -

    (1.81)

    -

    (1.82)

    -Goodwill and other intangible asset impairment charges

    0.15

    -

    0.98

    1.37

    0.97Goodwill impairment charge attributable to noncontrolling interests

    (0.04)

    -

    -

    (0.04)

    -Impairment of minority equity investment

    0.08

    -

    -

    0.07

    -Pharmacy accruals

    0.08

    -

    0.10

    0.08

    0.10Gain on sale of Tandigm ownership interest

    -

    -

    -

    (0.20)

    -Loss on sale of DMG Arizona

    -

    -

    -

    0.05

    -Reduction in the receivables associated with the DMG acquisition escrow provision

    0.02

    0.13

    -

    0.15

    -DMG Nevada hospice accrual

    -

    -

    -

    0.08

    -Debt redemption charges

    -

    -

    -

    -

    0.22Settlement charge

    -

    -

    -

    -

    2.29Tax effect of adjustments

    (0.11)

    (0.13)

    (0.04)

    (0.18)

    (1.00)Adjusted diluted net income per share attributable to DaVita Inc.

    $ 0.98

    $ 0.95

    $ 1.01

    $ 3.85

    $ 3.83

    DAVITA INC.RECONCILIATIONS FOR NON-GAAP MEASURES – (continued)(unaudited)(dollars in thousands except for per share data)In addition, we have excluded amortization of intangible assets associated with acquisitions from our adjusted net income attributable to DaVita Inc., net of tax, and from our adjusted diluted net income per share attributable to DaVita Inc. as we believe this presentation enhances a user's understanding of our operating results for these periods by providing a different reflection of the Company's operating performance since it excludes the amortization of intangible assets that relate to the fair value measurement of acquired intangible assets associated with our acquisitions, and accordingly is indicative of consistent adjusted net income excluding amortization of acquired intangibles, attributable to DaVita Inc. and diluted net income per share attributable to DaVita Inc. These measures are not measures of financial performance under GAAP and should not be considered as an alternative to net income attributable to DaVita Inc. and diluted net income per share attributable to DaVita Inc.


    Three months endedYear endedDecember 31,2016September 30,2016December 31,2015December 31,2016December 31,2015Adjusted net income attributable to DaVita Inc.

    $ 192,034

    $ 196,958

    $ 214,056

    $ 789,431

    $ 827,787Add: Amortization of intangible assets associated with acquisitions for the dialysis and ancillary operations

    3,480

    3,588

    3,992

    14,551

    23,185 Amortization of intangible assets associated with acquisitions for the DMG operations

    44,290

    39,303

    35,727

    159,967

    143,354Less: Related income tax

    (17,436)

    (17,156)

    (14,418)

    (66,816)

    (64,001)$ 222,368

    $ 222,693

    $ 239,357

    $ 897,133

    $ 930,325Adjusted diluted net income per share attributable to DaVita Inc

    $ 0.98

    $ 0.95

    $ 1.01

    $ 3.85

    $ 3.83Add:Amortization of intangible assets per share associated with acquisitions for the dialysis and ancillary operations

    0.02

    0.02

    0.02

    0.08

    0.11Amortization of intangible assets per share associated with acquisitions for the DMG operations

    0.22

    0.19

    0.16

    0.78

    0.66Tax effect of adjustments

    (0.09)

    (0.08)

    (0.07)

    (0.33)

    (0.30)$ 1.13

    $ 1.08

    $ 1.12

    $ 4.38

    $ 4.30

    DAVITA INC.RECONCILIATIONS FOR NON-GAAP MEASURES(unaudited)(dollars in thousands)Note 3: Adjusted operating income.Adjusted operating income is defined as operating income before certain items we do not believe are indicative of ordinary results, including a gain on the APAC JV ownership changes, goodwill and other intangible asset impairment charges, an impairment of a minority equity investment, a gain on the sale of a portion of our Tandigm ownership interest, a loss on the sale of our DMG Arizona business, adjustments to reduce the receivables associated with the DMG acquisition escrow provision relating to income tax items, estimated accruals for damages and liabilities associated with our pharmacy and DMG Nevada hospice businesses, and a settlement charge related to a private civil suit.We use adjusted operating income as a measure to assess operating and financial performance. We believe that this measure enhances a user's understanding of the normal operating income and of our consolidated enterprise and of our individual reportable segments. Adjusted operating income is not a measure of financial performance computed in accordance with GAAP and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of adjusted operating income is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. Adjusted operating income may not be indicative of historical operating results, and we do not intend these calculations to be predictive of future results of operations or cash flows.


    Three months endedYear endedDecember 31,2016September 30,2016December 31,2015December 31,2016December 31,2015Consolidated:Operating income

    $ 381,428

    $ 819,156

    $ 244,935

    $ 1,894,543

    $ 1,170,695Gain on APAC JV ownership changes

    -

    (374,374)

    -

    (374,374)

    -Goodwill and other intangible asset impairment charges

    28,415

    -

    206,169

    281,415

    210,234Impairment of minority equity investment

    14,993

    -

    -

    14,993

    -Pharmacy accruals

    15,770

    -

    22,530

    15,770

    22,530Gain on sale of Tandigm ownership interest

    -

    -

    -

    (40,280)

    -Loss on sale of DMG Arizona

    -

    -

    -

    10,489

    -Reduction in the receivables associated with the DMG acquisition escrow provision

    3,894

    27,040

    -

    30,934

    -DMG Nevada hospice accrual

    -

    -

    -

    16,000

    -Settlement charge

    -

    -

    -

    -

    495,000Adjusted operating income

    $ 444,500

    $ 471,822

    $ 473,634

    $ 1,849,490

    $ 1,898,459

    DAVITA INC.RECONCILIATIONS FOR NON-GAAP MEASURES(unaudited)(dollars in thousands)Three months endedYear endedDecember 31,2016September 30,2016December 31,2015December 31,

    2016Kidney Care:U.S. dialysis and related lab services:Segment operating income

    $ 435,581

    $ 452,187

    $ 464,378

    $ 1,777,014Add: Settlement charge

    -

    -

    -

    -Adjusted operating income

    $ 435,581

    $ 452,187

    $ 464,378

    $ 1,777,014Other — Ancillary services and strategic initiatives:U.S. ancillary services and strategic initiativesSegment operating loss

    $ (58,562)

    $ (5,935)

    $ (14,505)

    $ (65,586)Add:Goodwill impairment charge

    28,415

    -

    -

    28,415Pharmacy accruals

    15,770

    -

    22,530

    15,770Adjusted operating loss

    $ (14,377)

    $ (5,935)

    $ 8,025

    $ (21,401)International dialysisSegment operating income

    $ (13,273)

    $ 367,838

    $ (19,243)

    $ 331,910Add:Gain on APAC JV ownership changes

    -

    (374,374)

    -

    (374,374)Impairment of investment

    14,993

    -

    -

    14,993Adjusted operating income (loss)

    $ 1,720

    $ (6,536)

    $ (19,243)

    $ (27,471)Adjusted operating loss

    $ (12,657)

    $ (12,471)

    $ (11,218)

    $ (48,872)Corporate administrative support:Segment operating loss

    $ (4,195)

    $ (28,028)

    $ (4,432)

    $ (44,562)Add: Reduction in the receivables associated with the DMG acquisition escrow provision

    3,894

    27,040

    -

    30,934Adjusted operating loss

    $ (301)

    $ (988)

    $ (4,432)

    $ (13,628)Kidney Care adjusted operating income

    $ 422,623

    $ 438,728

    $ 448,728

    $ 1,714,514DMG:Segment operating income (loss)

    $ 21,877

    $ 33,094

    $ (181,263)

    $ (104,233)Add:Goodwill and other intangible asset impairment charges

    -

    -

    206,169

    253,000Gain on sale of Tandigm ownership interest

    -

    -

    -

    (40,280)Loss on sale of DMG Arizona

    -

    -

    -

    10,489DMG Nevada hospice accrual

    -

    -

    -

    16,000DMG adjusted operating income

    $ 21,877

    $ 33,094

    $ 24,906

    $ 134,976Consolidated adjusted operating income

    $ 444,500

    $ 471,822

    $ 473,634

    $ 1,849,490

    DAVITA INC.RECONCILIATIONS FOR NON-GAAP MEASURES(unaudited)(dollars in thousands)Note 4: Effective income tax rates and adjusted effective income tax rates.We believe that reporting the effective income tax rate attributable to DaVita Inc. as well as the adjusted effective income tax rate attributable to DaVita Inc., excluding a gain on the APAC JV ownership changes, goodwill and other intangible asset impairment charges, an impairment of a minority equity investment, a gain on the sale of a portion of our Tandigm ownership interest, a loss on the sale of our DMG Arizona business, adjustments to reduce the receivables associated with the DMG acquisition escrow provision relating to income tax items, and estimated accruals for damages and liabilities associated with our pharmacy and DMG Nevada hospice businesses, net of tax, enhances a user's understanding of DaVita Inc.'s effective income tax rate and DaVita Inc.'s adjusted effective income tax rate for the periods presented because it excludes noncontrolling owners' income that primarily relates to non-tax paying entities and certain non-deductible charges which we do not believe are indicative of our ordinary results, and, therefore, these adjusted measures are meaningful to a user to fully understand the related income tax effects on DaVita Inc.'s operating results. These are not measures under GAAP and should not be considered as an alternative to the effective income tax rate calculated in accordance with GAAP.Effective income tax rate as compared to the effective income tax rate attributable to DaVita Inc. is as follows:


    Three months endedDecember 31,2016September 30,2016December 31,2015Year endedDecember 31, 2016Income before income taxes

    $ 278,072

    $ 716,451

    $ 146,307

    $ 1,488,895Income tax expense

    $ 89,802

    $ 104,301

    $ 111,833

    $ 455,813Effective income tax rate

    32.3%

    14.6%

    76.4%

    30.6%Three months endedDecember 31,2016September 30,2016December 31,2015Year endedDecember 31, 2016Income before income taxes

    $ 278,072

    $ 716,451

    $ 146,307

    $ 1,488,895Less: Noncontrolling owners' income primarily attributable to non-tax paying entities

    (30,646)

    (40,909)

    (40,587)

    (153,641)Income before income taxes attributable to DaVita Inc

    $ 247,426

    $ 675,542

    $ 105,720

    $ 1,335,254Income tax expense

    $ 89,802

    $ 104,301

    $ 111,833

    $ 455,813Less: Income tax attributable to noncontrolling interests

    (102)

    (91)

    (113)

    (433)Income tax expense attributable to DaVita Inc

    $ 89,700

    $ 104,210

    $ 111,720

    $ 455,380Effective income tax rate attributable to DaVita Inc

    36.3%

    15.4%

    105.7%

    34.1%

    DAVITA INC.RECONCILIATIONS FOR NON-GAAP MEASURES(unaudited)(dollars in thousands)Adjusted effective income tax rate as compared to the adjusted effective income tax rate attributable to DaVita Inc. is as follows:Three months endedDecember 31,2016September 30,2016December 31,2015Year endedDecember 31, 2016Income before income taxes

    $ 278,072

    $ 716,451

    $ 146,307

    $ 1,488,895Add:Goodwill and other intangible asset impairment charges

    28,415

    -

    206,169

    281,415Pharmacy accruals

    15,770

    -

    22,530

    15,770Impairment of minority equity investment

    14,993

    -

    -

    14,993Loss on sale of DMG Arizona

    -

    -

    -

    10,489Reduction in the receivables associated with the DMG a
    '/>"/>

    SOURCE DaVita Inc.
    Copyright©2017 PR Newswire.
    All rights reserved


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