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3 Beyond-the-Numbers Takeaways

http://www.fool.com/investing/general/2012/08/06/3-beyond-the-numbers-takeaways.aspx

Keith Speights
August 6, 2012

If you only looked at the numbers with no context, you might be disappointed with the second-quarter earnings for dialysis services provider DaVita (NYSE: DVA  ) . The company announced earnings per share of $0.99, down from $1.03 in the same quarter last year.

As Foolish investors know, though, there is more to analyzing a company and its stock than just looking at the numbers. Here are three takeaways from DaVita's latest earnings results that go beyond the numbers.

1. There can be gaps when depending only on GAAP.
Any financial website you look to for DaVita's year-on-year earnings results will correctly show a 4.7% decrease. The company did indeed experience a decline in earnings following Generally Accepted Accounting Principles (GAAP). What GAAP doesn't address, however, is the "why" behind the numbers.

In DaVita's case, the lower earnings were due to a one-time event. The company accrued $78 million in connection with a settlement of litigation related to alleged false Epogen claims. In his comments during the earnings conference call, DaVita CEO Kent Thiry stated that the company didn't believe that any actual wrongdoing was committed but that "sometimes agreements like this are in your best interest."

DaVita's earnings excluding one-time events were nearly 25% higher than in the same quarter last year.

2. Growing pains can accompany growth.
DaVita received $4 million in revenue during the quarter from its international services. However, the company lost $12 million from those operations and expects to lose over $30 million for the full year. These losses primarily reflect higher legal and professional fee expenses related to its international expansion.

The company is new to the international market. Its first real efforts began only in the fourth quarter of 2011, starting with 11 dialysis centers in three countries -- Germany, India, and Singapore. DaVita's international presence now includes Malaysia and Saudi Arabia. It plans to begin operating in China later this year.

According to U.S. Renal Data Systems, the prevalence of end stage renal disease (ESRD), which requires regular dialysis, is growing annually in virtually every country reporting data. While DaVita could encounter more losses with its international efforts in the near-term, the opportunities look promising over the long run.

3. The future looks good.
DaVita raised the low end of its operating income guidance for 2012 by $45 million. The company sees good days ahead, and they're not alone. Warren Buffett's Berkshire Hathaway (NYSE: BRK-B