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Actionable news in DVA: DAVITA HEALTHCARE PARTNERS Inc,

Davita Healthcare Partners Inc

The following excerpt is from the company's SEC filing.

(310) 536-2585

DaVita HealthCare Partners Inc. 3rd Quarter 2015 Results

Denver, Colorado, November 3, 2015 DaVita HealthCare Partners Inc. (NYSE: DVA) today announced results for the quarter ended September 30, 2015. Net income attributable to DaVita HealthCare Partners Inc. for the three months ended September 30, 2015 was $216 million, or $1.00 per share.

Adjusted net income attributable to DaVita HealthCare Partners Inc. for the nine months ended September 30, 2015 was $610 million, or $2.80 per share, excluding after-tax debt redemption charges, after-tax settlement charge related to t he Vainer suit and a related tax adjustment. Net income attributable to DaVita HealthCare Partners Inc. for the nine months ended September 30, 2015 including these items was $276 million, or $1.27 per share.

Adjusted net income attributable to DaVita HealthCare Partners Inc. for the three months ended September 30, 2014 was $195 million, or $0.90 per share, excluding an after-tax loss contingency accrual related to the 2010 and 2011 U.S. Attorney physician relationship investigations. Adjusted net income attributable to DaVita HealthCare Partners Inc. for the nine months ended September 30, 2014 was $584 million, or $2.69 per share, excluding after-tax debt redemption and refinancing charges, and an after-tax loss contingency accrual as discussed above. Net income attributable to DaVita HealthCare Partners Inc. for the three and nine months ended September 30, 2014 including these items was $184 million and $515 million, or $0.85 and $2.38 per share, respectively.

See schedules of reconciliations of non-GAAP measures.

Financial and operating highlights include:

Cash Flow:

For the rolling twelve months ended September 30, 2015, operating cash flow was $1.051 billion and free cash flow was $602 million. For the three and nine months ended September 30, 2015, operating cash flow was $679 million and $1.121 billion, respectively, and free cash flow was $557 million and $799 million, respectively. Operating cash flow and free cash flow for the nine months ended and rolling twelve months ended September 30, 2015 were negatively impacted by approximately $304 million of after-tax payments made during the second quarter of 2015 in connection with the settlement of the Vainer suit. In addition, the rolling twelve months ended September 30, 2015 was negatively impacted by approximately $269 million of after-tax payments made in connection with the settlement of the 2010 and 2011 U.S. Attorney physician relationship investigations. Excluding these items, operating cash flow for the nine months ended and the rolling twelve months ended September 30, 2015 would have been $1.424 billion and $1.623 billion, respectively.

Operating Income and Adjusted Operating Income:

Operating income for the three months ended September 30, 2015 was $509 million. Adjusted operating income for the nine months ended September 30, 2015 was $1.421 billion, excluding a settlement charge of $495 million related to the Vainer suit. Operating income for the nine months ended September 30, 2015, including this item was $926 million.

For the quarter ended September 30, 2015, we recognized a net benefit of approximately $22 million in our HCP segment, related to the recognition of certain risk sharing settlements. In addition, we reserved $23 million for refunds of prior period reimbursements in our pharmacy business.

Adjusted operating income for the three and nine months ended September 30, 2014 was $455 million and $1.380 billion, respectively, excluding a loss contingency accrual related to the 2010 and 2011 U.S. Attorney physician relationship investigations. Operating income for the three and nine months ended September 30, 2014 including this item was $438 million and $1.363 billion, respectively.

Adjusted Diluted Net Income Per Share:

Adjusted net income attributable to DaVita HealthCare Partners Inc. for the three months ended September 30, 2015, excluding the amortization of intangible assets associated with acquisitions, net of tax, was $241 million and adjusted diluted net income per share was $1.12. Adjusted net income attributable to DaVita HealthCare Partners Inc. for the nine months ended September 30, 2015, as adjusted to exclude additional certain other non-GAAP measures was $687 million, and adjusted diluted net income per share was $3.16.

Adjusted net income attributable to DaVita HealthCare Partners Inc. for the three months ended September 30, 2014, as adjusted to further exclude certain items was $220 million, and adjusted diluted net income per share was $1.01. Adjusted net income attributable to DaVita HealthCare Partners Inc. for the nine months ended September 30, 2014, as adjusted to exclude additional certain other non-GAAP measures was $659 million, and adjusted diluted net income per share was $3.04.

See schedules of reconciliations of non-GAAP measures.

Volume:

Total U.S. dialysis treatments for the third quarter of 2015 were 6,611,799, or 83,694 treatments per day, representing a per day increase of 4.2% over the third quarter of 2014. Non-acquired treatment growth and normalized non-acquired treatment growth in the third quarter of 2015 were 4.0% and 3.5%, respectively.

The number of member months for which HCP provided capitated care during the third quarter of 2015 specifically related to its legacy markets was approximately 2.4 million, which was flat compared to the third quarter of 2014, inclusive of growth contributed from acquisitions.

Effective Tax Rate:

Our effective tax rate was 36.0% and 31.9% for the three and nine months ended September 30, 2015, respectively. This effective tax rate is impacted by the amount of third party owners income attributable to non-tax paying entities. The effective tax rate attributable to DaVita HealthCare Partners Inc. was 40.5% and 39.9% for the three and nine months ended September 30, 2015, respectively. The adjusted effective tax rate attributable to DaVita HealthCare Partners Inc. excluding the Vainer suit settlement charge was 39.2% for the nine months ended September 30, 2015.

We currently expect our 2015 effective tax rate attributable to DaVita HealthCare Partners Inc. to be approximately 39.0% to 40.0%, excluding the Vainer suit settlement charge.

Center Activity:

As of September 30, 2015, we provided dialysis services to a total of approximately 187,000 patients at 2,329 outpatient dialysis centers, of which 2,225 centers are located in the United States and 104 centers are located in ten countries outside of the United States. During the third quarter of 2015, we acquired five dialysis centers, opened a total of 15 new dialysis centers, and closed five dialysis centers in the United States. We also acquired six, and opened two new dialysis centers outside of the United States.

Share Repurchases:

During the three months ended September 30, 2015, we repurchased a total of 4,555,868 shares of our common stock for $341 million, or an average price of $74.76 per share. During the nine months ended September 30, 2015, we repurchased 5,623,007 shares of our common stock for $425 million, or an average price of $75.53 per share. We also repurchased 2,200 shares of our common stock for $0.2 million, or an average price of $71.01 per share, of our common stock subsequent to September 30, 2015. As a result of these transactions we now have a total of approximately $659 million remaining under our current board authorization for share repurchases.

Outlook

We are updating our consolidated operating income for 2015 to now be in the range of $1.870 billion to $1.915 billion.

Our previous consolidated operating income guidance for 2015 was in the range of $1.825 billion to $1.925 billion.

We are also updating our operating income for Kidney Care for 2015 to now be in the range of $1.630 billion to $1.655 billion.

Our previous operating income guidance for Kidney Care for 2015 was in the range of $1.600 billion to $1.650 billion.

We are updating our operating income for HCP for 2015 to now be in the range of $240 million to $260 million.

Our previous operating income guidance for HCP for 2015 was in the range of $225 million to $275 million.

We are updating our consolidated operating cash flows for 2015 to now be in the range of $1.675 billion to $1.775 billion.

Our previous consolidated operating cash flow for 2015 was in the range of $1.600 billion to $1.750 billion.

The above projected ranges exclude the Vainer suit settlement charge and the corresponding settlement payments made in 2015.

These projections and the underlying assumptions involve significant risks and uncertainties, including those described below, and actual results may vary significantly from these current projections.

We will be holding a conference call to discuss our results for the third quarter ended September 30, 2015 on November 3, 2015 at 5:00 p.m. Eastern Time. To join the conference call, please dial (888) 282-0359 from the U.S. or (312) 470-7167 from outside the U.S. A replay of the conference call will be available on our website at

investors.davitahealthcarepartners.com

, for the following 30 days.

This release contains forward-looking statements within the meaning of the federal securities laws, including statements related to our guidance and expectations for our 2015 consolidated operating income, our 2015 Kidney Care operating income, HCPs 2015 operating income, our 2015 consolidated operating cash flows and our 2015 effective tax rate attributable to DaVita HealthCare Partners Inc. 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, 2014, 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,

a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs,

the impact of the Center for Medicare and Medicaid Services (CMS) 2015 Medicare Advantage benchmark structure,

risks arising from potential federal and/or state legislation that could have an adverse effect on our operations and profitability,

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 including compliance with 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, or to businesses outside of dialysis and HealthCare Partners (HCP) business,

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 HCP, or to expand our operations and services to markets outside the United States,

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,

loss of key HCP employees...


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