American Renal Associates Announces Third Quarter 2012 Results

BEVERLY, Mass.--()--American Renal Associates Holdings, Inc., and its subsidiary American Renal Holdings Inc. announced results today for the quarter ended September 30, 2012. Financial and operating highlights include:

  • Revenues – Patient service operating revenues for the three and nine months ended September 30, 2012 were $108.3 million and $307.3 million, respectively, as compared to $92.7 million and $267.0 million, respectively, for the same periods in 2011.
  • Adjusted EBITDA(1)Adjusted EBITDA for the three and nine months ended September 30, 2012 was $20.9 million and $58.5 million, respectively. This compares to Adjusted EBITDA for the three and nine months ended September 30, 2011 of $17.3 million and $48.3 million, respectively.
  • Center Activity - As of September 30, 2012, we provided services at 125 outpatient dialysis centers serving 8,312 patients. During the third quarter of 2012, we opened 7 de novo centers and acquired 1 center.
  • Volume - Total treatments for the third quarter of 2012 were 301,901 or 3,871 treatments per day, representing a per day increase of 17.2% over the third quarter of 2011. Non-acquired treatment growth was 8.5% in the third quarter.

American Renal Associates will hold a conference call to discuss its results for the third quarter ended September 30, 2012 today at 5:00 p.m. Eastern Time. The live call can be accessed by dialing either 1-877-407-8029 or 201-689-8029.

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management’s current expectations, the accuracy of which is necessarily subject to risks and uncertainties. These statements are not historical in nature and use words such as “anticipate”, “estimate”, “expect”, “project”, “intend”, “forecast”, “plan”, “believe”, and other words of similar meaning in connection with any discussion of future operating or financial performance. Many factors may cause actual results to differ materially from anticipated results including product developments, sales efforts, income tax matters, the outcomes of contingencies such as legal proceedings, and other economic, business, competitive and regulatory factors. We undertake no obligation to update our forward-looking statements.

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(1) This press release includes Adjusted EBITDA and Adjusted EBITDA including noncontrolling interests, neither of which are financial measures defined by Generally Accepted Accounting Principles (GAAP). See Reconciliation of Non-GAAP Financial Measures section at the end of this press release for the definitions of these measures as well as their reconciliations to net income.

About American Renal Associates

American Renal Associates Holdings, Inc. is the parent of American Renal Holdings Inc. and American Renal Associates LLC (“ARA”) and is a leading owner and provider of outpatient kidney dialysis facilities operating facilities in partnership with nephrologists throughout the United States. The Company’s unique operating philosophy merges physician autonomy, leading edge patient care and financial partnership between the nephrologists and ARA. Consequently, ARA has become one of the largest providers of outpatient kidney dialysis services in the nation with 125 owned facilities as of September 30, 2012 which are located in 21 states and the District of Columbia. For more information, visit www.americanrenal.com.

American Renal Associates Holdings, Inc.
Consolidated Statements of Income
(unaudited and in thousands)
                 
 
 
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
 
Patient service operating revenues $ 108,288 $ 92,666 $ 307,324 $ 266,975
Provision for uncollectible accounts   (869 )   (1,118 )   (1,747 )   (3,492 )
Net patient service operating revenues 107,419 91,548 305,577 263,483
 
Operating expenses:
Patient care costs 62,245 54,922 179,117 162,497
General and administrative 11,705 9,701 33,623 29,418
Merger related costs - 228 - 450
Depreciation and amortization   5,333       4,509     15,151       13,222  
 
Total operating expenses   79,283     69,360     227,891     205,587  
 
Operating Income 28,136 22,188 77,686 57,896
 
Interest expense, net   (10,247 )   (9,752 )   (30,425 )   (26,376 )
 
Income before income taxes 17,889 12,436 47,261 31,520
 
Income tax expense   2,991     1,038     5,638     1,812  
 
Net income 14,898 11,398 41,623 29,708
 
Less: Net income attributable to noncontrolling interests   (13,169 )   (10,050 )   (35,924 )   (27,186 )
 
Net income attributable to ARAH $ 1,729   $ 1,348   $ 5,699   $ 2,522  
 
 
American Renal Associates Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited and in thousands)
         
 
 
September 30, December 31,
2012 2011
 
Assets
Cash $ 42,775 $ 36,774
Patient accounts receivable, net 55,741 56,027
Income tax receivable 1,322 1,322
Inventories, prepaid expenses and other current assets   17,060   15,101
 
Total current assets 116,898 109,224
 
Property and equipment, net 81,163 72,416
Deferred financing costs, net 4,605 4,962
Intangible assets, net 35,718 35,416
Other long-term assets 2,751 1,734
Goodwill   531,867   504,045
 
Total assets $ 773,002 $ 727,797
 
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses $ 61,194 $ 52,682
Amount due to sellers 675 2,192
Current portion of long-term debt 2,977 2,662
Current portion of capital lease obligations   92   51
 
Total current liabilities 64,938 57,587
 
Long-term debt, less current portion 406,030 391,084
Capital lease obligations, less current portion 153 111
Other long-term liabilities 3,539 3,362
Deferred tax liabilities 16,233 16,233
Noncontrolling interests subject to put provisions 53,119 47,492
Total equity   228,990   211,928
 
Total liabilities & equity $ 773,002 $ 727,797
 
 
American Renal Associates Holdings, Inc.
Supplemental Business Metrics
(unaudited)
                     
Three Months Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
Volume
Treatments 301,901 285,037 260,976 862,580 757,131
Number of treatment days 78 78 79 234 234
Treatments per day 3,871 3,654 3,303 3,686 3,236
Non-acquired growth year over year 8.5 % 9.5 % 16.5 % 9.8 % 16.8 %
 
Revenue
Patient service operating revenues (in thousands) $ 108,288 $ 101,872 $ 92,666 $ 307,324 $ 266,975
Patient service operating revenues per treatment $ 358.69 $ 357.40 $ 355.07 $ 356.28 $ 352.61
Per treatment increase from previous quarter $ 1.29 $ 4.90 $ 0.65 N/A N/A
 
Provision for uncollectible accounts
As a % of patient service operating revenues 0.8 % 0.0 % 1.2 % 0.6 % 1.3 %
 
Expenses
Patient care costs
Amount (in thousands) $ 62,245 $ 58,793 $ 54,922 $ 179,117 $ 162,497
As a % of patient service operating revenues 57.5 % 57.7 % 59.3 % 58.3 % 60.9 %
Per treatment $ 206.18 $ 206.26 $ 210.45 $ 207.65 $ 214.62

Per treatment decrease from previous quarter

$

( 0.08

) $ ( 4.44 ) $ ( 0.28 ) N/A N/A
 
General and administrative expenses
Amount (in thousands) $ 11,705 $ 11,487 $ 9,701 $ 33,623 $ 29,418
As a % of patient service operating revenues 10.8 % 11.3 % 10.5 % 10.9 % 11.0 %
Per treatment $ 38.77 $ 40.30 $ 37.17 $ 38.98 $ 38.85

Per treatment (decrease) increase from previous quarter

$ ( 1.53 ) $ 2.46 $ 0.29 N/A N/A
 
Adjusted EBITDA
Adjusted EBITDA including noncontrolling interests (in thousands) $ 34,028 $ 32,125 $ 27,354 $ 94,454 $ 75,503
Adjusted EBITDA (in thousands) $ 20,859 $ 19,999 $ 17,304 $ 58,530 $ 48,317
 
Accounts receivable DSO (days) 47 49 55 N/A N/A
 
 

American Renal Associates Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures:
(unaudited and in thousands)

To supplement our consolidated financial statements prepared in accordance with GAAP, we use the following measures defined as Non-GAAP measures by the SEC: Adjusted EBITDA (including noncontrolling interests) and Adjusted EBITDA. Adjusted EBITDA is defined as net income attributable to ARAH before income taxes, interest expense, depreciation and amortization, and we further adjust for other non-cash charges and non-recurring charges. We believe this information is useful for evaluating our business and understanding our operating performance in a manner similar to management. We believe Adjusted EBITDA is helpful in highlighting trends because Adjusted EBITDA excludes the results of decisions that are outside the control of operating management and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. In addition, we present Adjusted EBITDA because it is one of the components used in the calculations under the covenants contained in our revolving credit facility. Adjusted EBITDA is not a measure of operating performance computed in accordance with GAAP and should not be considered as a substitute for operating income, net income, cash flows from operations, or other statement of income or cash flow data prepared in conformity with GAAP, or as measures of profitability or liquidity. In addition, Adjusted EBITDA may not be comparable to similarly titled measures for other companies. Adjusted EBITDA may not be indicative of historical operating results, and we do not mean for it to be predictive of future results of operations or cash flows. Adjusted EBITDA has limitations as an analytical tool, and you should not consider this item in isolation, or as a substitute for an analysis of our results as reported under GAAP. Some of these limitations are that Adjusted EBITDA:

• does not include interest expense—as we have borrowed money for general corporate purposes, interest expense is a necessary element of our costs and ability to generate profits and cash flows;

• does not include depreciation and amortization—because construction and operation of our dialysis clinics requires significant capital expenditures, depreciation and amortization are a necessary element of our costs and ability to generate profits;

• does not include stock-based compensation expense;

• does not reflect changes in, or cash requirements for, our working capital needs; and

• does not include certain income tax payments that represent a reduction in cash available to us.

The following table presents the reconciliation from net income to Adjusted EBITDA for the periods indicated:

      Three Months     Three Months     Three Months     Nine Months     Nine Months
Ended Ended Ended Ended Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
Reconciliation of Net income to
Adjusted EBITDA:
 
Net income $ 14,898 $ 14,701 $ 11,398 $ 41,623 $ 29,708
Interest expense, net 10,247 10,183 9,752 30,425 26,376
Income tax expense 2,991 1,677 1,038 5,638 1,812
Depreciation and amortization 5,333 5,040 4,509 15,151 13,222
Merger related costs - - 228 - 450
Stock-based compensation 221 223 257 664 3,419
Management fee   338     301     172     953     516  
Adjusted EBITDA (including noncontrolling interests) $ 34,028 $ 32,125 $ 27,354 $ 94,454 $ 75,503
Less: Net income attributable to noncontrolling interests   (13,169 )   (12,126 )   (10,050 )   (35,924 )   (27,186 )
Adjusted EBITDA $ 20,859   $ 19,999   $ 17,304   $ 58,530   $ 48,317  
 
 

American Renal Associates Holdings, Inc.
Supplemental Information
(unaudited and in thousands)

The following tables present our selected consolidating financial information, for American Renal Associates Holdings, Inc. (ARAH) and American Renal Holdings Inc. (ARH) which you should read in conjunction with our condensed consolidated financials.

      For the Three Months Ended September 30, 2012     For the Three Months Ended September 30, 2011
ARAH     ARH     Total ARAH     ARH     Total
General and administrative $ 12 $ 11,693 $ 11,705 $ - $ 9,701 $ 9,701
Interest expense, net (4,326 ) (5,921 ) (10,247 ) (3,936 ) (5,816 ) (9,752 )
Income tax (benefit) expense (1,735 ) 4,726 2,991 (1,564 ) 2,602 1,038
 
 
For the Nine Months Ended September 30, 2012 For the Nine Months Ended September 30, 2011
ARAH ARH Total ARAH ARH Total
General and administrative $ 84 $ 33,539 $ 33,623 $ - $ 29,418 $ 29,418
Interest expense, net (12,709 ) (17,716 ) (30,425 ) (8,982 ) (17,394 ) (26,376 )
Income tax (benefit) expense (5,118 ) 10,756 5,638 (3,568 ) 5,380 1,812
 
 
As of September 30, 2012 As of December 31, 2011
ARAH ARH Total ARAH ARH Total
Assets
Cash $ 84 $ 42,691 $ 42,775 $ 4,638 $ 32,136 $ 36,774
Deferred financing costs, net 504 4,101 4,605 611 4,351 4,962
Liabilities
Current portion of long-term debt - 2,977 2,977 - 2,662 2,662
Long-term debt, less current portion 154,445 251,585 406,030 141,844 249,240 391,084
 

Contacts

American Renal Associates Holdings, Inc.
Jonathan Wilcox, 978-922-3080 ext. 385
Chief Financial Officer

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Contacts

American Renal Associates Holdings, Inc.
Jonathan Wilcox, 978-922-3080 ext. 385
Chief Financial Officer