Company Announces CEO Plans to Retire by the
End of 2020
American Renal Associates Holdings, Inc. (NYSE: ARA) (the
“Company”), a leading kidney care and dialysis provider focused on
partnering with local nephrologists, today announced financial and
operating results for the quarter and year ended December 31,
2019.
The Company also announced that Joseph (Joe) Carlucci has
communicated his intention to retire as Chief Executive Officer of
the Company by the end of 2020. The Board of Directors will
initiate a process to identify a successor for Mr. Carlucci and
will immediately engage an executive search firm to support the
search. Mr. Carlucci plans to continue as CEO and Chairman until
his successor has started and will assist in ensuring a smooth
transition.
“After a 42-year career in the healthcare industry, I am
announcing my intention to retire in 2020. Co-founding ARA
approximately two decades ago has been the highlight of my career,
and it has been a tremendous privilege to lead this organization
and our exceptional team ever since. Today, we provide high
quality, clinically integrated care to more than 17,300 patients in
partnership with 400 physicians in 246 dialysis clinics across 27
states, and I am so proud of the growth we’ve achieved,” Carlucci
said. “Now is the right time for a new leader who can build on our
established foundation and further realize ARA’s growth
opportunities in a way that still prioritizes our Core Values.”
Steven Silver, Senior Managing Director of Centerbridge
Partners, L.P., and Member of the Company’s Board of Directors,
said: “On behalf of the Board, I would like to personally thank and
commend Joe for his leadership. Among his many accomplishments
during his long and distinguished career, Joe co-founded ARA and
pioneered the physician partnership model within the dialysis
sector, establishing the Company as a differentiated
physician-driven organization focused on excellent patient care. We
are grateful to Joe that he will continue in his role as CEO and
Chairman while we work to identify a successor to lead ARA’s next
phase of growth and value creation.”
Fourth Quarter 2019 Highlights (all percentage changes
compare Q4 2019 to Q4 2018 unless noted):
Certain metrics, including those expressed on an adjusted basis,
are Non-GAAP financial measures (See “Use of Non-GAAP Financial
Measures” and the reconciliation tables further below).
- Patient service operating revenues decreased 0.8% to $206.1
million;
- Net income attributable to American Renal Associates Holdings,
Inc. was $0.1 million, as compared to a net loss of $0.6 million in
Q4 2018;
- Adjusted EBITDA less noncontrolling interests (“Adjusted
EBITDA-NCI”) was $23.0 million, as compared to $24.7 million in Q4
2018;
- Adjusted net income attributable to American Renal Associates
Holdings, Inc. was $6.5 million, or $0.19 per share, for Q4
2019;
- Total dialysis treatments increased 4.8%, of which 3.2% was
non-acquired growth. Normalized total treatment growth was 6.0%,
and normalized non-acquired treatment growth was 4.4%; and
- As of December 31, 2019, the Company operated 246 outpatient
dialysis clinics serving more than 17,300 patients.
Carlucci said, “We are pleased that ARA achieved our 2019
guidance. We remain encouraged by our treatment growth performance,
with the fourth quarter and fiscal year 2019 normalized total
treatment growth of 6.0% and 7.3%, respectively. These volume
trends continue to demonstrate that more patients continue to
choose ARA to receive high quality dialysis care.”
Carlucci added, “As indicated in our outlook for 2020, we expect
to achieve year-over-year growth in Adjusted EBITDA-NCI despite an
anticipated reduction in Calcimimetic reimbursement. We will
continue to remain focused on improving our operating efficiency
and strengthening our balance sheet, while strategically capturing
the growth and development opportunities that remain ahead.”
Financial and operating highlights include:
Revenue: Patient service operating revenues for the
fourth quarter of 2019 were $206.1 million, a decrease of 0.8%, as
compared to $207.8 million for the prior-year period, which was
primarily due to declines in commercial treatment rates, partially
offset by an increase of 4.8% in the number of dialysis treatments.
Patient service operating revenues for the year ended December 31,
2019 were $822.5 million, an increase of 2.1%, as compared to
$805.8 million for the prior-year period, which was primarily due
to an increase of 6.5% in the number of dialysis treatments,
partially offset by adverse changes in commercial treatment
rates.
Treatment Volume: Total dialysis treatments for the
fourth quarter of 2019 were 628,817, representing an increase of
4.8% over the fourth quarter of 2018. Non-acquired treatment growth
was 3.2%, and acquired treatment growth was 1.6% for the fourth
quarter of 2019. Normalized total treatment growth was 6.0%, and
non-acquired treatment growth was 4.4%, as compared to the fourth
quarter of 2018. Total dialysis treatments for the year ended
December 31, 2019 were 2,460,710, representing an increase of 6.5%
over the prior-year period. Non-acquired treatment growth was 4.5%,
and acquired treatment growth was 2.0% for the year ended December
31, 2019. Normalized total treatment growth was 7.3%, and
non-acquired treatment growth was 5.3%, as compared to the
prior-year period.
Clinic Activity: As of December 31, 2019, the Company
provided services at 246 outpatient dialysis clinics serving 17,306
patients. During the year ended December 31, 2019, we opened seven
de novo clinics, two of which were opened in the fourth quarter,
acquired two clinics, and sold four clinics.
Net income, Net income attributable to noncontrolling
interests, Net income (loss) attributable to American Renal
Associates Holdings, Inc., Adjusted EBITDA and Adjusted
EBITDA-NCI:
(Unaudited)
Three Months Ended December
31,
Increase (Decrease)
(in thousands)
2019
2018
Amount
Percentage Change
Net income
$
9,123
$
11,174
$
(2,051
)
(18.4
)%
Net income attributable to noncontrolling
interests
(9,033
)
(11,746
)
$
2,713
23.1
%
Net income (loss) attributable to American
Renal Associates Holdings, Inc.
$
90
$
(572
)
$
662
NM*
Non-GAAP financial measures**:
Adjusted EBITDA
$
32,012
$
36,454
$
(4,442
)
(12.2
)%
Adjusted EBITDA-NCI
$
22,979
$
24,708
$
(1,729
)
(7.0
)%
(Unaudited)
Year Ended December
31,
Increase (Decrease)
(in thousands)
2019
2018
Amount
Percentage Change
Net income
$
26,145
$
22,467
$
3,678
16.4
%
Net income attributable to noncontrolling
interests
(39,935
)
(51,234
)
$
11,299
22.1
%
Net loss attributable to American Renal
Associates Holdings, Inc.
$
(13,790
)
$
(28,767
)
$
14,977
NM*
Non-GAAP financial measures**:
Adjusted EBITDA
$
127,549
$
141,254
$
(13,705
)
(9.7
)%
Adjusted EBITDA-NCI
$
87,614
$
90,020
$
(2,406
)
(2.7
)%
_______________________________________________________
*
Not Meaningful
**
See “Reconciliation of Non-GAAP Financial
Measures.”
Operating Expenses: Patient care costs for the fourth
quarter of 2019 were $154.4 million, or 74.9% of patient service
operating revenues, as compared to $148.5 million, or 71.5% of
patient service operating revenues, in the prior-year period.
General and administrative expenses were $22.8 million, or 11.1% of
patient service operating revenues, as compared to $25.0 million,
or 12.0% of patient service operating revenues, in the prior-year
period.
Patient care costs for the year ended December 31, 2019 were
$610.2 million, or 74.2% of patient service operating revenues, as
compared to $570.0 million, or 70.7% of patient service operating
revenues, in the prior-year period. General and administrative
expenses during the year ended December 31, 2019 were $91.1
million, or 11.1% of patient service operating revenues, as
compared to $101.1 million, or 12.5% of patient service operating
revenues, in the prior-year period.
Cash Flow: Cash provided by operating activities for the
fourth quarter of 2019 was $3.7 million, as compared to $22.5
million in the prior-year period. Adjusted cash used in operating
activities less distributions to noncontrolling interests (see
“Reconciliation of Non-GAAP Financial Measures”) for the fourth
quarter of 2019 was $19.0 million, as compared to adjusted cash
provided by operating activities less distributions to
noncontrolling interests of $6.7 million in the prior-year period.
Total capital expenditures for the fourth quarter of 2019 were $5.2
million, as compared to $15.9 million in the prior-year period.
Capital expenditures for the three months ended December 31, 2019
included $2.6 million for expansions and new clinic development, as
compared to $13.2 million in the prior-year period, and $2.7
million for other capital expenditures, similar to the prior-year
period.
Cash provided by operating activities for the year ended
December 31, 2019 was $38.8 million, as compared to $106.4 million
in the prior-year period. Adjusted cash used in operating
activities less distributions to noncontrolling interests (see
“Reconciliation of Non-GAAP Financial Measures”) for the year ended
December 31, 2019 was $24.2 million, as compared to adjusted cash
provided by operating activities of $36.3 million in the prior-year
period. Total capital expenditures for the year ended December 31,
2019 were $23.1 million, as compared to $45.0 million in the
prior-year period. Capital expenditures for the year ended December
31, 2019 included $16.5 million for expansions and new clinic
development, as compared to $33.3 million in the prior-year period,
and $6.6 million for other capital expenditures, as compared to
$11.7 million in the prior-year period.
Balance Sheet: At December 31, 2019, the Company’s
balance sheet included consolidated cash of $34.5 million and
consolidated debt of $587.6 million, including the current portion
of long-term debt. Excluding clinic-level debt not guaranteed by
the Company and clinic-level cash not owned by the Company,
Adjusted owned net debt (see “Reconciliation of Non-GAAP Financial
Measures”) was $515.2 million at December 31, 2019, as compared to
$470.9 million at December 31, 2018. Adjusted owned net debt to
last twelve months Adjusted EBITDA-NCI leverage ratio was 5.9x at
December 31, 2019. As of December 31, 2019, net patient accounts
receivable was $102.2 million.
Outlook for 2020 Adjusted EBITDA-NCI:
The Company expects 2020 Adjusted EBITDA-NCI to be in a range of
$90 million and $95 million. The 2020 Adjusted EBITDA-NCI range is
consistent with the Company’s preliminary outlook first established
in September 2019. The Company expects its 2020 normalized total
treatment growth to be in a range of 4.5% and 5.0%, and expects its
2020 revenue per treatment (“RPT”) to be in a range of flat to down
1% as compared to 2019 RPT of $334. The Company expects its
leverage ratio (defined below) to improve by between 0.3x and 0.6x
by year-end 2020, as compared to 5.9x at December 31, 2019. The
Company’s 2020 Adjusted EBITDA-NCI outlook excludes any potential
adverse financial impact resulting from the coronavirus (COVID-19)
outbreak.
The Company is not providing a quantitative reconciliation of
our Non-GAAP outlook to the corresponding GAAP information because
the GAAP measures that we exclude from our Non-GAAP outlook are not
available without unreasonable effort on a forward-looking basis
due to their unpredictability, high variability, complexity and low
visibility. These excluded GAAP measures include noncontrolling
interests, interest expense, income taxes, certain legal and other
matters, and other charges. We expect the variability of these
charges to have a potentially unpredictable, and potentially
significant, impact on our future GAAP financial results.
Please see the “Forward-Looking Statements” section of this
release for a discussion of certain risks to our outlook.
Conference Call
American Renal Associates Holdings, Inc. will hold a conference
call to discuss this release on Monday, March 16, 2020, at 5:00
p.m. Eastern time. Investors will have the opportunity to listen to
the conference call by dialing (877) 407-8029, or for international
callers (201) 689-8029, or may listen over the Internet by going to
the Investor Relations section at www.ir.americanrenal.com. For
those who cannot listen to the live broadcast, a replay will be
available and can be accessed by dialing (877) 660-6853, or for
international callers (201) 612-7415. The conference ID for the
live call and the replay is 13697054.
About American Renal Associates
American Renal Associates (“ARA”) is a leading provider of
outpatient dialysis services in the United States. As of December
31, 2019, ARA operated 246 dialysis clinic locations in 27 states
and the District of Columbia serving more than 17,300 patients with
end stage renal disease. ARA operates principally through a
physician partnership model, in which it partners with
approximately 400 local nephrologists to develop, own and operate
dialysis clinics. ARA’s Core Values emphasize taking good care of
patients, providing physicians with clinical autonomy and
operational support, hiring and retaining the best possible staff
and providing comprehensive management services. For more
information about American Renal Associates, visit
www.americanrenal.com.
Forward-Looking Statements
Statements in this press release that are “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements regarding our outlook for
Adjusted EBITDA-NCI, are based upon currently available
information, operating plans and projections about future events
and trends. Terminology such as “anticipate,” “believe,”
“contemplate,” “estimate,” “expect,” “forecast,” “intend,” “may,”
“objective,” “outlook,” “plan,” “potential,” “project,” “seek,”
“should,” “strategy,” “target” or “will” or variations of such
words or similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain such terms.
Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially
from those predicted in such forward-looking statements. Such risks
and uncertainties include, among others, the effect of the
restatement of our previously issued financial results and the
related securities and derivative litigation and related matters;
our ability to remediate material weaknesses in our internal
controls over financial reporting; continuing decline in the number
of patients with commercial insurance, including as a result of
changes to the healthcare exchanges or changes in regulations or
enforcement of regulations regarding the healthcare exchanges and
challenges from commercial payors or any regulatory or other
changes leading to changes in the ability of patients with
commercial insurance coverage to receive charitable premium
support; decline in commercial payor reimbursement rates, including
with respect to Medicare Advantage plans; the ultimate resolution
of the Centers for Medicare and Medicaid Services Interim Final
Rule published December 14, 2016 related to dialysis facilities
Conditions for Coverage (CMS 3337-IFC), including an issuance of a
different but related Final Rule; reduction of government-based
payor reimbursement rates or insufficient rate increases or
adjustments that do not cover all of our operating costs; our
ability to successfully develop de novo clinics, acquire existing
clinics and attract new nephrologist partners; our ability to
compete effectively in the dialysis services industry; the
performance of our joint venture subsidiaries and their ability to
make distributions to us; changes to the Medicare end-stage renal
disease (“ESRD”) program that could affect reimbursement rates and
evaluation criteria, as well as changes in Medicaid or other
non-Medicare government programs or payment rates, including the
ESRD prospective payment rate system final rule for 2020 issued
October 31, 2019; federal or state healthcare laws that could
adversely affect us; our ability to comply with all of the complex
federal, state and local government regulations that apply to our
business, including those in connection with federal and state
anti-kickback laws and state laws prohibiting the corporate
practice of medicine or fee-splitting; heightened federal and state
investigations and enforcement efforts; the impact of the SEC
investigation; changes in the availability and cost of
erythropoietin-stimulating agents and other pharmaceuticals used in
our business; changes in the reimbursement rates of the
calcimimetics pharmaceutical class reimbursed under the Medicare
Transitional Drug Add-on Payment Adjustment; development of new
technologies or government regulation that could decrease the need
for dialysis services or decrease our in-center patient population;
our ability to timely and accurately bill for our services and meet
payor billing requirements; claims and losses relating to
malpractice, professional liability and other matters; the
sufficiency of our insurance coverage for those claims and rising
insurances costs, and negative publicity or reputational damage
arising from such matters; loss of any members of our senior
management; damage to our reputation or our brand and our ability
to maintain brand recognition; our ability to maintain
relationships with our medical directors and renew our medical
director agreements; shortages of qualified skilled clinical
personnel, or higher than normal turnover rates; competition and
consolidation in the dialysis services industry; deterioration in
economic conditions, particularly in states where we operate a
large number of clinics, or disruptions in the financial markets or
the effects of natural or other disasters, public health crises or
adverse weather events; the participation of our physician partners
in material strategic and operating decisions and our ability to
favorably resolve any disputes; our ability to honor obligations
under the joint venture operating agreements with our physician
partners were they to exercise certain put rights and other rights;
unauthorized disclosure of personally identifiable, protected
health or other sensitive or confidential information; our ability
to meet our obligations and comply with restrictions under our
substantial level of indebtedness; and the ability of our principal
stockholder, whose interests may conflict with yours, to strongly
influence or effectively control our corporate decisions.
For additional information and other factors that could cause
ARA’s actual results to materially differ from those set forth
herein, please see ARA’s filings with the SEC. Investors are
cautioned not to place undue reliance on any such forward-looking
statements, which speak only as of the date they are made. ARA
undertakes no obligation to update any forward-looking statement,
whether as a result of new information, future events or
otherwise.
Use of Non-GAAP Financial Measures
In addition to the results prepared in accordance with generally
accepted accounting principles in the United States (“GAAP”)
provided throughout this press release, the Company has presented
the following Non-GAAP financial measures: Adjusted EBITDA,
Adjusted EBITDA less noncontrolling interests, Adjusted net income
attributable to American Renal Associates Holdings, Inc., Adjusted
cash provided by operating activities and Adjusted owned net debt,
which exclude various items detailed in the attached
“Reconciliation of Non-GAAP Financial Measures.”
These Non-GAAP financial measures are not intended to replace
financial performance and liquidity measures determined in
accordance with GAAP. Rather, they are presented as supplemental
measures of the Company's performance and liquidity that management
believes may enhance the evaluation of the Company's ongoing
operating results. Please see “Reconciliation of Non-GAAP Financial
Measures” for additional reasons why these measures are
provided.
American Renal Associates
Holdings, Inc. and Subsidiaries Consolidated Statements of
Operations (Unaudited) (dollars in thousands, except for share
data)
Three Months Ended December
31,
Year Ended December
31,
2019
2018
2019
2018
Patient service operating revenues
$
206,079
$
207,806
$
822,522
$
805,776
Operating expenses:
Patient care costs
154,394
148,525
610,179
570,009
General and administrative
22,772
24,981
91,081
101,101
Transaction-related costs
—
—
—
856
Gain on business interruption
insurance
—
(375
)
—
(375
)
Depreciation, amortization and
impairment
13,180
10,342
43,765
39,802
Certain legal and other matters
2,518
1,384
25,824
39,061
Total operating expenses
192,864
184,857
770,849
750,454
Operating income
13,215
22,949
51,673
55,322
Interest expense, net
(11,054
)
(8,797
)
(43,587
)
(32,632
)
Change in fair value of income tax
receivable agreement
(1,127
)
5,438
221
2,673
Income before income taxes
1,034
19,590
8,307
25,363
Income tax (benefit) expense
(8,089
)
8,416
(17,838
)
2,896
Net income
9,123
11,174
26,145
22,467
Less: Net income attributable to
noncontrolling interests
(9,033
)
(11,746
)
(39,935
)
(51,234
)
Net income (loss) attributable to American
Renal Associates Holdings, Inc.
90
(572
)
(13,790
)
(28,767
)
Less: Change in the difference between the
redemption value and estimated fair value for accounting purposes
of the related noncontrolling interests
(7,122
)
(1,235
)
(7,999
)
(2,566
)
Net loss attributable to common
shareholders
$
(7,032
)
$
(1,807
)
$
(21,789
)
$
(31,333
)
Loss per share:
Basic
$
(0.22
)
$
(0.06
)
$
(0.68
)
$
(0.98
)
Diluted
$
(0.22
)
$
(0.06
)
$
(0.68
)
$
(0.98
)
Weighted-average number of common shares
outstanding:
Basic
32,351,067
32,104,263
32,274,570
31,965,844
Diluted
32,351,067
32,104,263
32,274,570
31,965,844
American Renal Associates
Holdings, Inc. and Subsidiaries Consolidated Balance Sheets
(dollars in thousands, except for share data)
Assets
December 31, 2019
December 31, 2018
Cash
$
34,494
$
55,200
Accounts receivable, less allowance for
doubtful accounts of $1,258 and $3,270 at December 31, 2019 and
2018, respectively
102,150
99,526
Inventories
7,752
11,433
Prepaid expenses and other current
assets
22,268
28,127
Income tax receivable
3,251
—
Current assets held for sale
50,099
577
Total current assets
220,014
194,863
Property and equipment, net of accumulated
depreciation
151,175
180,268
Operating lease right-of-use assets
133,899
—
Intangible assets, net of accumulated
amortization
24,486
24,628
Other long-term assets
18,608
14,745
Goodwill
538,609
571,339
Total assets
$
1,086,791
$
985,843
Liabilities and Equity
Accounts payable
$
49,539
$
59,082
Accrued compensation and benefits
37,196
34,587
Accrued expenses and other current
liabilities
37,593
61,116
Current portion of long-term debt
38,779
42,855
Current portion of operating lease
liabilities
22,061
—
Current liabilities held for sale
5,767
—
Total current liabilities
190,935
197,640
Long-term debt, less current portion
548,835
517,511
Long-term operating lease liabilities,
less current portion
123,792
—
Income tax receivable agreement
payable
3,000
3,700
Other long-term liabilities
6,501
24,813
Deferred tax liabilities
2,706
3,169
Total liabilities
875,769
746,833
Commitments and contingencies
Noncontrolling interests subject to put
provisions
126,483
129,099
Equity
Preferred stock, $0.01 par value;
1,000,000 shares authorized; none issued
Common stock, $0.01 par value; 300,000,000
shares authorized; 32,976,416 and 32,603,846 issued and outstanding
at December 31, 2019 and December 31, 2018, respectively
197
196
Additional paid-in capital
100,744
105,715
Receivable from noncontrolling
interests
(531
)
(506
)
Accumulated deficit
(178,241
)
(164,451
)
Accumulated other comprehensive (loss)
income, net of tax
(1,619
)
76
Total American Renal Associates Holdings,
Inc. deficit
(79,450
)
(58,970
)
Noncontrolling interests not subject to
put provisions
163,989
168,881
Total equity
84,539
109,911
Total liabilities and equity
$
1,086,791
$
985,843
American Renal Associates
Holdings, Inc. and Subsidiaries Consolidated Statements of Cash
Flows (Unaudited) (dollars in thousands)
Three Months Ended December
31,
Year Ended December
31,
Operating activities
2019
2018
2019
2018
Net income
$
9,123
$
11,174
$
26,145
$
22,467
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation, amortization and
impairment
13,180
10,342
43,765
39,802
Amortization of discounts, fees and
deferred financing costs
747
597
2,825
1,981
Stock-based compensation
1,515
1,547
4,745
5,721
Deferred taxes
(5,371
)
8,234
121
2,350
Change in fair value of income tax
receivable agreement
1,127
(5,438
)
(221
)
(2,673
)
Loss (gain) on disposal of assets, net
1,210
(1
)
529
80
Other non-cash charges, net
313
(299
)
317
119
Change in operating assets and
liabilities, net of acquisitions:
Accounts receivable
1,208
(847
)
(2,624
)
13,118
Inventories
126
(5,083
)
3,659
(6,799
)
Prepaid expenses and other current
assets
2,285
(9,601
)
2,072
(2,340
)
Other assets
(10,009
)
1,579
(5,377
)
(5,712
)
Right-of-use assets and operating lease
liabilities
353
—
(2,067
)
—
Accounts payable
(8,515
)
5,059
(9,543
)
25,661
Accrued compensation and benefits
(446
)
(71
)
2,609
5,602
Accrued expenses and other liabilities
(3,128
)
5,341
(28,134
)
7,027
Cash provided by operating activities
3,718
22,533
38,821
106,404
Investing activities
Purchases of property, equipment and
intangible assets
(5,217
)
(15,886
)
(23,122
)
(44,960
)
Proceeds from asset sales
3,100
—
9,400
2,502
Cash paid for acquisitions
—
(388
)
(6,590
)
(388
)
Cash used in investing activities
(2,117
)
(16,274
)
(20,312
)
(42,846
)
Financing activities
Proceeds from term loans, net of discounts
and fees
4,912
29,813
78,299
82,389
Payments on long-term debt
(13,086
)
(30,525
)
(54,069
)
(90,428
)
Dividends and dividend equivalents
paid
(6
)
(12
)
(50
)
(332
)
Proceeds from exercise of stock
options
(43
)
241
10
1,398
Repurchase of vested restricted stock
awards withheld on net share settlement
(6
)
—
(368
)
(421
)
Common stock repurchases for tax
withholdings of net settlement equity awards
—
(417
)
—
(417
)
Distributions to noncontrolling
interests
(22,738
)
(15,829
)
(62,987
)
(70,960
)
Contributions from noncontrolling
interests
3,665
4,094
8,349
7,739
Purchases of noncontrolling interests
5
(337
)
(8,499
)
(9,066
)
Proceeds from sales of additional
noncontrolling interests
—
51
—
229
Cash used in financing activities
(27,297
)
(12,921
)
(39,315
)
(79,869
)
Decrease in cash and restricted cash
(25,696
)
(6,662
)
(20,806
)
(16,311
)
Cash and restricted cash at beginning of
period
60,190
61,962
55,300
71,611
Cash and restricted cash at end of
period
$
34,494
$
55,300
$
34,494
$
55,300
Supplemental Disclosure of Cash Flow
Information
Cash paid for income taxes
$
1,154
$
483
$
2,159
$
2,635
Cash paid for interest
8,732
8,283
34,152
30,504
American Renal Associates
Holdings, Inc. and Subsidiaries Unaudited GAAP, Non-GAAP, and Other
Supplemental Business Metrics (dollars in thousands, except per
treatment amounts)
Three Months Ended
Year Ended
December 31, 2019
September 30, 2019
December 31, 2018
December 31, 2019
December 31, 2018
Dialysis Clinic Activity:
Number of clinics (as of end of
period)
246
244
241
246
241
Number of de novo clinics opened (during
period)
2
1
5
7
13
Number of acquired clinics (during
period)
—
—
1
2
1
Sold or merged clinics (during period)
—
(2
)
—
(4
)
(1
)
Patients and Treatment Volume:
Patients (as of end of period)
17,306
17,159
16,543
17,306
16,543
Number of treatments
628,817
625,684
600,190
2,460,710
2,311,037
Number of treatment days
79
79
79
313
313
Treatments per day
7,960
7,920
7,597
7,862
7,384
Sources of treatment growth (year over
year % change):
Non-acquired growth
3.2
%
5.8
%
4.9
%
4.5
%
4.4
%
Normalized non-acquired growth
4.4
%
5.7
%
4.5
%
5.3
%
5.0
%
Acquired growth
1.6
%
2.3
%
1.2
%
2.0
%
1.1
%
Total treatment growth
4.8
%
8.1
%
6.1
%
6.5
%
5.5
%
Normalized Total treatment growth
6.0
%
7.9
%
5.6
%
7.3
%
6.1
%
Revenue:
Patient service operating revenues
$
206,079
$
211,429
$
207,806
$
822,522
$
805,776
Patient service operating revenues per
treatment
$
328
$
338
$
346
$
334
$
349
Expenses:
Patient care costs
Amount
$
154,394
$
154,588
$
148,525
$
610,179
$
570,009
As a % of patient service operating
revenues
74.9
%
73.1
%
71.5
%
74.2
%
70.7
%
Per treatment
$
246
$
247
$
247
$
248
$
247
General and administrative expenses
Amount
$
22,772
$
18,783
$
24,981
$
91,081
$
101,101
As a % of patient service operating
revenues
11.1
%
8.9
%
12.0
%
11.1
%
12.5
%
Per treatment
$
36
$
30
$
42
$
37
$
44
Adjusted general and administrative
expenses(1)
Amount
$
21,653
$
19,930
$
24,981
$
91,166
$
101,362
As a % of patient service operating
revenues
10.5
%
9.4
%
12.0
%
11.1
%
12.6
%
Per treatment
$
34
$
32
$
42
$
37
$
44
Accounts receivable DSO (days)
46
45
44
45
45
Adjusted EBITDA*
Adjusted EBITDA including noncontrolling
interests
$
32,012
$
38,705
$
36,454
$
127,549
$
141,254
Adjusted EBITDA-NCI
$
22,979
$
26,455
$
24,708
$
87,614
$
90,020
Clinical (quarterly averages):
Dialysis adequacy - % of patients with
Kt/V > 1.2
99
%
98
%
98
%
98
%
98
%
Vascular access - % long-term catheter
use
13
%
13
%
12
%
13
%
12
%
*
See “Reconciliation of Non-GAAP Financial
Measures.”
(1)
Adjusted general and administrative
expenses per treatment during the three months ended December 31,
2019 is adjusted for the loss on sale or closure of clinics of $1.1
million. Adjusted general and administrative expenses per treatment
during the three months ended September 30, 2019 is adjusted for a
$0.8 million reduction of bonus compensation for certain executives
repaid in respect of prior years in light of the restatement (the
“Restatement”) of certain of our prior financial statements and
other financial information in our Annual Report on Form 10-K, a
$0.3 million gain on sale of clinics and approximately $0.1 million
of severance expense adjustments. Adjusted general and
administrative expenses per treatment during the year ended
December 31, 2019 is adjusted for $0.4 million of severance
expense, $0.3 million of loss on sale or closure of clinics, and
the $0.8 million reduction of bonus compensation for certain
executives noted above. Adjusted general and administrative
expenses per treatment during the year ended December 31, 2018 is
adjusted for $0.3 million of gain on the sale of clinics.
American Renal Associates
Holdings, Inc. and Subsidiaries Net Loss per Share Reconciliation
(Unaudited) (dollars in thousands, except per share data)
Three Months Ended December
31,
Year Ended December
31,
2019
2018
2019
2018
Basic
Net income (loss) attributable to American
Renal Associates Holdings, Inc.
$
90
$
(572
)
$
(13,790
)
$
(28,767
)
Change in the difference between the
redemption value and estimated fair value for accounting purposes
of the related noncontrolling interests
(7,122
)
(1,235
)
(7,999
)
(2,566
)
Net loss attributable to common
shareholders
$
(7,032
)
$
(1,807
)
$
(21,789
)
$
(31,333
)
Weighted-average common shares
outstanding
32,351,067
32,104,263
32,274,570
31,965,844
Weighted-average common shares
outstanding, assuming dilution
32,351,067
32,104,263
32,274,570
31,965,844
Loss per share, basic and diluted
$
(0.22
)
$
(0.06
)
$
(0.68
)
$
(0.98
)
Outstanding options and restricted stock
excluded as impact would be anti-dilutive
3,123,815
3,430,056
2,986,656
3,442,048
American Renal Associates Holdings, Inc. and
Subsidiaries Reconciliation of Non-GAAP Financial Measures
(Unaudited) (dollars in thousands)
We use Adjusted EBITDA and Adjusted EBITDA-NCI to track our
performance. “Adjusted EBITDA” is defined as net income before
stock-based compensation and associated payroll taxes,
depreciation, amortization and impairment, interest expense, net,
income taxes and other non-income-based tax, transaction-related
costs, change in fair value of income tax receivable agreement,
certain legal and other matters, executive and management severance
costs and loss (gain) on sale or closure of clinics. “Adjusted
EBITDA-NCI” is defined as Adjusted EBITDA less net income
attributable to noncontrolling interests. We believe Adjusted
EBITDA and Adjusted EBITDA-NCI provide information useful for
evaluating our business and a further understanding of our results
of operations from management’s perspective. We believe Adjusted
EBITDA is helpful in highlighting trends because Adjusted EBITDA
excludes certain expenses that can differ significantly from
company to company depending on, among other things, long-term
strategic decisions regarding capital structure and investments,
and the tax jurisdictions in which companies operate, or that we
believe do not reflect our core business operations. We believe
Adjusted EBITDA-NCI is helpful in highlighting the amount of
Adjusted EBITDA that is available to us after reflecting the
interests of our joint venture partners. Adjusted EBITDA and
Adjusted EBITDA-NCI are not measures 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 operations or cash flow data
prepared in conformity with GAAP, or as measures of profitability
or liquidity. In addition, Adjusted EBITDA and Adjusted EBITDA-NCI
may not be comparable to similarly titled measures of other
companies and differ from the calculation of “Consolidated EBITDA”
under our credit agreement. Adjusted EBITDA and Adjusted EBITDA-NCI
may not be indicative of historical operating results, and we do
not mean for these items to be predictive of future results of
operations or cash flows. Adjusted EBITDA and Adjusted EBITDA-NCI
have limitations as analytical tools, and they should not be
considered in isolation, or as substitutes for an analysis of our
results as reported under GAAP. Some of these limitations are that
Adjusted EBITDA and Adjusted EBITDA-NCI:
- do not include stock-based compensation expense and associated
payroll taxes;
- do not include depreciation, amortization and
impairment—because construction and operation of our dialysis
clinics requires significant capital expenditures, depreciation and
amortization are a necessary element of our costs and our ability
to generate profits;
- do not include interest expense—as we have borrowed money for
general corporate and facility purposes, interest expense is a
necessary element of our costs and ability to generate profits and
cash flows;
- do not include income tax expense or benefits and other
non-income-based taxes;
- do not include transaction-related costs;
- do not include change in fair value of income tax receivable
agreement;
- do not include costs related to certain legal and other
matters;
- do not include executive and management severance costs;
and
- do not reflect the loss (gain) on sale or closure of
clinics.
In addition, Adjusted EBITDA is not adjusted for the portion of
earnings that we distribute to our joint venture partners.
We use Adjusted net income (loss) attributable to American Renal
Associates Holdings, Inc. because it is a useful measure to
evaluate our performance by excluding the impact of certain items
that we believe are not related to our normal business operations
and/or are a result of changes in our liabilities from period to
period. See the notes to the tables below for further explanation
of the exclusion of certain items. By excluding these items, we
believe Adjusted net income (loss) allows us and investors to
evaluate our net income on a more consistent basis. “Adjusted net
income (loss) attributable to American Renal Associates Holdings,
Inc.” is defined as Net income (loss) attributable to American
Renal Associates Holdings, Inc. plus or minus, as applicable,
certain legal and other matters costs, executive and management
severance costs, (gain) loss on sale or closure of assets, bonus
compensation reduction, change in fair value of income tax
receivable agreement, tax valuation allowance, and accounting
changes in fair value of non-controlling interest puts, net of
taxes. We use the Adjusted weighted average number of diluted
shares to calculate Adjusted net income (loss) attributable to
American Renal Associates Holdings, Inc. per share.
We use Adjusted cash (used in) provided by operating activities
less distributions to NCI because it is a useful measure to
evaluate the cash flow that is available to the Company for
investment in property, plant and equipment, debt service, growth
and other general corporate purposes. “Adjusted cash (used in)
provided by operating activities less distributions to NCI” is
defined as cash provided by operating activities plus
transaction-related costs less distributions to noncontrolling
interests.
We use Adjusted owned net debt because we believe it is a useful
metric to evaluate the Company’s share of interests in the cash on
our consolidated balance sheet and the debt of the Company.
“Adjusted owned net debt” is defined as debt (other than
clinic-level debt) plus clinic-level debt guaranteed by our wholly
owned subsidiaries less unamortized debt discounts and fees less
cash (other than clinic-level cash) less the Company’s pro rata
interest in clinic-level cash.
The following table presents the reconciliation from net income
to Adjusted EBITDA and Adjusted EBITDA-NCI for the periods
indicated:
(Unaudited)
Reconciliation of Net income to
Adjusted EBITDA
Three Months Ended December
31,
Year Ended December
31,
2019
2018
2019
2018
Net income
$
9,123
$
11,174
$
26,145
$
22,467
Stock-based compensation and associated
payroll taxes
1,529
1,575
4,806
5,931
Depreciation, amortization and
impairment
13,180
10,342
43,765
39,802
Interest expense, net
11,054
8,797
43,587
32,632
Income tax (benefit) expense and other
non-income based tax
(7,638
)
8,620
(17,180
)
3,439
Transaction-related costs
—
—
—
856
Change in fair value of income tax
receivable agreement
1,127
(5,438
)
(221
)
(2,673
)
Certain legal and other matters(1)
2,518
1,384
25,824
39,061
Executive and management severance
costs
—
—
480
—
Loss (gain) on sale or closure of
clinics
1,119
—
343
(261
)
Adjusted EBITDA (including noncontrolling
interests)
$
32,012
$
36,454
$
127,549
$
141,254
Less: Net income attributable to
noncontrolling interests
(9,033
)
(11,746
)
(39,935
)
(51,234
)
Adjusted EBITDA-NCI
$
22,979
$
24,708
$
87,614
$
90,020
__________________________________
(1)
Certain legal and other matters include
legal fees and other expenses associated with matters that we
believe do not reflect our core business operations, including, but
not limited to, our handling of, and response to the following: the
United litigation and settlement; the Restatement and the related
SEC investigation and Audit Committee review; the securities and
derivative litigation related to the foregoing; our internal review
and analysis of factual and legal issues relating to the
aforementioned matters; and legal fees and other expenses relating
to matters that we believe do not reflect our core business
operations.
The following table presents the reconciliation from Net (loss)
income attributable to American Renal Associates Holdings, Inc. to
Adjusted net (loss) income attributable to American Renal
Associates Holdings, Inc. for the periods indicated:
Reconciliation of Net (Loss)
Income Attributable to American Renal Associates Holdings, Inc. to
Adjusted Net (Loss) Income Attributable to American Renal
Associates Holdings, Inc.:
(dollars in thousands, except per share
data)
(Unaudited)
Three Months Ended
Year Ended
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
December 31, 2019
Net (loss) income attributable to American
Renal Associates Holdings, Inc.
$
(10,479
)
$
(8,178
)
$
4,777
$
90
$
(13,790
)
Change in the difference between the
redemption value and estimated fair value for accounting purposes
of the related noncontrolling interests(1)
(741
)
1,025
(1,161
)
(7,122
)
(7,999
)
Net (loss) income attributable to common
shareholders
$
(11,220
)
$
(7,153
)
$
3,616
$
(7,032
)
$
(21,789
)
Adjustments:
Certain legal and other matters(2)
$
5,291
$
8,381
$
9,634
$
2,518
$
25,824
Executive and management severance
costs
212
243
25
—
480
(Gain) loss on sale or closure of
clinics
(512
)
—
(264
)
1,119
343
Bonus compensation reduction(3)
—
—
(808
)
—
(808
)
Impairment for held for sale assets
—
270
675
4,225
$
5,170
Total pre-tax adjustments
$
4,991
$
8,894
$
9,262
$
7,862
$
31,009
Tax effect
1,298
2,312
2,408
2,044
8,062
Net taxable adjustments
$
3,693
$
6,582
$
6,854
$
5,818
$
22,947
Change in fair value of income tax
receivable agreement
(1,682
)
304
30
1,127
(221
)
Tax valuation allowance(4)
—
—
—
(515
)
(515
)
Change in the difference between the
redemption value and estimated fair value for accounting purposes
of the related noncontrolling interests(1)
(741
)
1,025
(1,161
)
(7,122
)
(7,999
)
Total adjustments, net
$
2,752
$
5,861
$
8,045
$
13,552
$
30,210
Adjusted net (loss) income attributable to
American Renal Associates Holdings, Inc.
$
(8,468
)
$
(1,292
)
$
11,661
$
6,520
$
8,421
Basic shares outstanding
32,187,715
32,275,807
32,281,818
32,351,067
32,248,791
Adjusted effect of dilutive stock
options
—
—
1,336,905
1,447,887
696,198
Adjusted weighted average number of
diluted shares used to compute adjusted net (loss) income
attributable to American Renal Associates Holdings, Inc. per
share
32,187,715
32,275,807
33,618,723
33,798,954
32,944,989
Adjusted net (loss) income attributable
to American Renal Associates Holdings, Inc. per share
$
(0.26
)
$
(0.04
)
$
0.35
$
0.19
$
0.26
________________________
(1)
Changes in fair values of contractual
noncontrolling interest put provisions are related to certain put
rights that were accelerated as a result of the IPO.
(2)
Certain legal and other matters include
legal fees and other expenses associated with matters that we
believe do not reflect our core business operations, including, but
not limited to, our handling of, and response to the following: the
United litigation and settlement; the Restatement and related SEC
investigation and Audit Committee review; the securities and
derivative litigation related to the foregoing; our internal review
and analysis of factual and legal issues relating to the
aforementioned matters; and legal fees and other expenses relating
to matters that we believe do not reflect our core business
operations.
(3)
Reduction of bonus compensation related to
prior years as reflected in the Consolidated Statements of
Operations for the three months ended September 30, 2019 for
certain executives in light of the Restatement.
(4)
Represents a decrease to the Company's
established valuation allowance for certain tax items that began
expiring in 2019.
American Renal Associates
Holdings, Inc. and Subsidiaries Unaudited Supplemental Cash Flow
Information (dollars in thousands)
Three Months Ended December
31,
Year Ended December
31,
2019
2018
2019
2018
Cash provided by operating
activities
$
3,718
$
22,533
$
38,821
$
106,404
Plus:
Transaction-related costs(1)
—
—
—
856
Adjusted cash provided by operating
activities
$
3,718
$
22,533
$
38,821
$
107,260
Distributions to noncontrolling
interests
(22,738
)
(15,829
)
(62,987
)
(70,960
)
Adjusted cash (used in) provided by
operating activities less distributions to NCI
$
(19,020
)
$
6,704
$
(24,166
)
$
36,300
Capital expenditure breakdown:
Development capital expenditures
$
2,564
$
13,166
$
16,531
$
33,309
Other capital expenditures
2,653
2,720
6,591
11,651
Total capital expenditures
$
5,217
$
15,886
$
23,122
$
44,960
_________________________
(1)
For the year ended December 31, 2018,
transaction-related costs represent costs associated with our
registration statement and the secondary offering that was
withdrawn in March 2018. These costs include legal, accounting,
valuation and other professional or consulting fees.
American Renal Associates
Holdings, Inc. and Subsidiaries Unaudited Supplemental Leverage
Statistics (dollars in thousands)
As of December 31,
2019
Total ARA
ARA “Owned”
Cash (other than clinic-level cash)
$
10,869
$
10,869
Clinic-level cash
23,625
12,716
Total cash
$
34,494
$
23,585
Debt (other than clinic-level debt)
$
493,500
$
493,500
Clinic-level debt
106,610
57,591
Unamortized debt discounts and fees
(12,496
)
(12,352
)
Total debt
$
587,614
$
538,739
Adjusted owned net debt (total debt -
total cash)
$
515,154
Adjusted EBITDA-NCI, LTM
$
87,614
Leverage ratio (2)
5.9x
_________________________
(2)
Leverage ratio is calculated as follows:
Adjusted owned net debt divided by Adjusted EBITDA -NCI, last
twelve months.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200316005658/en/
Investor Contact: Darren Lehrich Telephone:
(978)-522-6063; Email: dlehrich@americanrenal.com
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