UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2019~~March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 1-14106

DAVITA INC.



Delaware		51-0354549
(State of incorporation)		(I.R.S. Employer Identification No.)



2000 16th Street
Denver,	CO	80202

Telephone number (720) 631-2100

Securities registered pursuant to Section 12(b) of the Act:



Title of each class:	Trading symbol(s):	Name of each exchange on which registered:
Common Stock, $0.001 par value	DVA	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

As of ~~November~~May 1, ~~2019,~~2020, the number of shares of the Registrant’s common stock outstanding was approximately ~~129.7~~121.8 million shares.

DAVITA INC.

INDEX



		Page No.
	PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements:
	Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~	1
	Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~	2
	Consolidated Balance Sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019	3
	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~	4
	Consolidated Statements of Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~	5
	Notes to Condensed Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4030
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5844
Item 4.	Controls and Procedures	5844

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	5945
Item 1A.	Risk Factors	5945
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6547
Item 6.	Exhibits	6548
	Signature	6749

Note: Items 3, 4 and 5 of Part II are omitted because they are not applicable.

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars in thousands, except per share data)


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2019			2018			2019			2018			2020			2019
Dialysis and related lab patient service revenues	$	2,781,169		$	2,670,701		$	8,150,386		$	7,980,178
Provision for uncollectible accounts	(3,977		)	(11,977		)	(19,689		)	(35,838		)
Net dialysis and related lab patient service revenues	2,777,192			2,658,724			8,130,697			7,944,340
Dialysis patient service revenues													$	2,713,281		$	2,629,689
Other revenues	126,886			188,606			359,198			639,387			127,956			113,423
Total revenues	2,904,078			2,847,330			8,489,895			8,583,727			2,841,237			2,743,112
Operating expenses and charges:
Patient care costs	1,991,172			2,063,770			5,913,860			6,168,444			1,975,449			1,964,935
General and administrative	298,736			336,299			824,887			866,922			263,576			250,813
Depreciation and amortization	155,915			146,000			456,685			435,878			154,679			148,528
Provision for uncollectible accounts	—			800			—			(7,300		)
Equity investment (income) loss	(3,936		)	3,824			(11,158		)	(6,126		)
Investment and other asset impairments	—			6,093			—			17,338
Equity investment income													(17,843		)	(2,708		)
Goodwill impairment charges	83,855			—			124,892			3,106			—			41,037
Loss (gain) on changes in ownership interest, net	—			1,506			—			(32,451		)
Total operating expenses and charges	2,525,742			2,558,292			7,309,166			7,445,811			2,375,861			2,402,605
Operating income	378,336			289,038			1,180,729			1,137,916			465,376			340,507
Debt expense	(88,589		)	(125,927		)	(351,774		)	(359,135		)	(88,603		)	(131,519		)
Debt prepayment, refinancing and redemption charges	(21,242		)	—			(33,402		)	—
Other income, net	5,280			4,007			17,863			10,583
Debt refinancing charges													(2,948		)	—
Other (loss) income, net													(4,350		)	6,940
Income from continuing operations before income taxes	273,785			167,118			813,416			789,364			369,475			215,928
Income tax expense	65,254			52,047			197,938			206,652			91,560			56,746
Net income from continuing operations	208,531			115,071			615,478			582,712			277,915			159,182
Net (loss) income from discontinued operations, net of tax	(6,843		)	(211,739		)	102,854			(147,829		)
Net income (loss)	201,688			(96,668		)	718,332			434,883
Net income from discontinued operations, net of tax													9,980			30,305
Net income													287,895			189,487
Less: Net income attributable to noncontrolling interests	(58,418		)	(40,128		)	(152,222		)	(125,717		)	(48,302		)	(40,198		)
Net income (loss) attributable to DaVita Inc.	$	143,270		$	(136,796	)	$	566,110		$	309,166
Net income attributable to DaVita Inc.													$	239,593		$	149,289
Earnings per share attributable to DaVita Inc.:
Basic net income from continuing operations per share	$	1.00		$	0.44		$	2.88		$	2.69		$	1.84		$	0.72
Basic net income (loss) per share	$	0.95		$	(0.82	)	$	3.51		$	1.79
Basic net income per share													$	1.92		$	0.90
Diluted net income from continuing operations per share	$	0.99		$	0.44		$	2.87		$	2.66		$	1.81		$	0.72
Diluted net income (loss) per share	$	0.95		$	(0.82	)	$	3.50		$	1.77
Diluted net income per share													$	1.89		$	0.90
Weighted average shares for earnings per share:
Basic	150,675,465			166,770,664			161,147,122			172,403,944			124,901,671			166,387,958
Diluted	151,295,950			167,262,358			161,636,011			174,348,421			126,894,847			166,780,657
Amounts attributable to DaVita Inc.:
Net income from continuing operations	$	150,113		$	73,371		$	464,590		$	463,989		$	229,613		$	120,254
Net (loss) income from discontinued operations	(6,843		)	(210,167		)	101,520			(154,823		)
Net income (loss) attributable to DaVita Inc.	$	143,270		$	(136,796	)	$	566,110		$	309,166
Net income from discontinued operations													9,980			29,035
Net income attributable to DaVita Inc.													$	239,593		$	149,289

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(dollars in thousands)

Three months ended
September 30, Nine months ended
September 30,
2019 2018 2019 2018
Net income (loss) $ 201,688
$ (96,668 ) $ 718,332
$ 434,883
Other comprehensive income (loss), net of tax:

Unrealized (losses) gains on interest rate cap agreements:

Unrealized (losses) gains (1,060 ) 37
(1,672 ) 819
Reclassifications of net realized losses into net income (loss) 1,569
1,606
4,782
4,680
Unrealized losses on foreign currency translation:

Foreign currency translation adjustments (44,502 ) (8,827 ) (45,790 ) (39,475 )
Other comprehensive loss (43,993 ) (7,184 ) (42,680 ) (33,976 )
Total comprehensive income (loss) 157,695
(103,852 ) 675,652
400,907
Less: Comprehensive income attributable to noncontrolling interests (58,418 ) (40,128 ) (152,222 ) (125,717 )
Comprehensive income (loss) attributable to DaVita Inc. $ 99,277
$ (143,980 ) $ 523,430
$ 275,190



	Three months ended March 31,
	2020			2019
Net income	$	287,895		$	189,487
Other comprehensive income, net of tax:
Unrealized losses on interest rate cap agreements:
Unrealized losses	(13,018		)	(580		)
Reclassifications of net realized losses into net income	1,623			1,606
Unrealized losses on foreign currency translation:
Foreign currency translation adjustments	(81,632		)	(13,653		)
Other comprehensive loss	(93,027		)	(12,627		)
Total comprehensive income	194,868			176,860
Less: Comprehensive income attributable to noncontrolling interests	(48,302		)	(40,198		)
Comprehensive income attributable to DaVita Inc.	$	146,566		$	136,662

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except per share data)


	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
ASSETS
Cash and cash equivalents	$	1,253,256		$	323,038		$	1,381,764		$	1,102,372
Restricted cash and equivalents	103,885			92,382			106,724			106,346
Short-term investments	100,713			2,935			9,376			11,572
Accounts receivable, net	1,901,225			1,858,608
Accounts receivable							1,820,132			1,795,598
Inventories	98,641			107,381			95,685			97,949
Other receivables	474,145			469,796			519,081			489,695
Prepaid and other current assets							59,853			66,866
Income tax receivable	16,236			68,614			31,324			19,772
Prepaid and other current assets	50,617			111,840
Current assets held for sale, net	—			5,389,565
Total current assets	3,998,718			8,424,159			4,023,939			3,690,170
Property and equipment, net of accumulated depreciation of $3,792,683 and $3,524,098, respectively	3,419,238			3,393,669
Property and equipment, net of accumulated depreciation of $4,092,166 and $3,969,566, respectively							3,445,423			3,473,384
Operating lease right-of-use assets	2,781,288			—			2,847,776			2,830,047
Intangible assets, net of accumulated amortization of $78,437 and $80,566, respectively	117,666			118,846
Intangible assets, net of accumulated amortization of $84,643 and $81,922, respectively							117,953			135,684
Equity method and other investments	219,386			224,611			254,499			241,983
Long-term investments	35,041			35,424			34,657			36,519
Other long-term assets	114,834			71,583			94,030			115,972
Goodwill	6,765,659			6,841,960			6,778,023			6,787,635
	$	17,451,830		$	19,110,252		$	17,596,300		$	17,311,394
LIABILITIES AND EQUITY
Accounts payable	$	332,136		$	463,270		$	340,092		$	403,840
Other liabilities	716,023			595,850			757,784			756,174
Accrued compensation and benefits	662,826			658,913			596,999			695,052
Current portion of operating lease liabilities	374,214			—			356,033			343,912
Current portion of long-term debt	121,441			1,929,369			146,318			130,708
Current liabilities held for sale	—			1,243,759
Income tax payable							23,520			42,412
Total current liabilities	2,206,640			4,891,161			2,220,746			2,372,098
Long-term operating lease liabilities	2,682,125			—			2,734,370			2,723,800
Long-term debt	8,014,475			8,172,847			8,442,136			7,977,526
Other long-term liabilities	135,087			450,669			161,940			160,809
Deferred income taxes	604,921			562,536			675,728			577,543
Total liabilities	13,643,248			14,077,213			14,234,920			13,811,776
Commitments and contingencies
Noncontrolling interests subject to put provisions	1,296,059			1,124,641			1,228,036			1,180,376
Equity:
Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued)	—			—			—			—
Common stock ($0.001 par value, 450,000,000 shares authorized; 166,540,590 and 166,387,307 shares issued and 133,888,864 and 166,387,307 shares outstanding, respectively)	167			166
Common stock ($0.001 par value, 450,000,000 shares authorized; 125,857,178 and 121,804,880 shares issued and outstanding at March 31, 2020, respectively and 125,842,853 shares issued and outstanding at December 31, 2019)							126			126
Additional paid-in capital	906,990			995,006			720,053			749,043
Retained earnings	3,349,180			2,743,194			1,671,331			1,431,738
Treasury stock (32,651,726 and zero shares, respectively)	(1,860,157		)	—
Treasury stock (4,052,298 and zero shares, respectively)							(303,139		)	—
Accumulated other comprehensive loss	(77,604		)	(34,924		)	(140,525		)	(47,498		)
Total DaVita Inc. shareholders' equity	2,318,576			3,703,442			1,947,846			2,133,409
Noncontrolling interests not subject to put provisions	193,947			204,956			185,498			185,833
Total equity	2,512,523			3,908,398			2,133,344			2,319,242
	$	17,451,830		$	19,110,252		$	17,596,300		$	17,311,394

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)


	Nine months ended September 30,						Three months ended March 31,
	2019			2018			2020			2019
Cash flows from operating activities:
Net income	$	718,332		$	434,883		$	287,895		$	189,487
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	456,685			435,878			154,679			148,528
Impairment charges	124,892			20,444			—			41,037
Debt prepayment, refinancing and redemption charges	33,402			—
Debt refinancing charges							884			—
Stock-based compensation expense	47,811			59,605			19,870			12,110
Deferred income taxes	72,590			200,056			103,301			41,372
Equity investment loss, net	5,131			8,611			(9,482		)	(337		)
Gain (loss) on sales of business interests, net	23,022			(57,547		)
Other non-cash charges, net	24,291			164,856			5,055			1,720
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	(182,684		)	(74,622		)	(32,966		)	(132,292		)
Inventories	9,519			88,355			1,835			3,324
Other receivables and other current assets	51,319			(757		)	(24,965		)	1,199
Other long-term assets	2,324			2,142			2,673			(1,997		)
Accounts payable	(106,662		)	(12,800		)	(24,045		)	(38,537		)
Accrued compensation and benefits	(57,930		)	40,225			(96,428		)	(173,583		)
Other current liabilities	140,046			45,624			3,982			17,236
Income taxes	57,279			21,749			(32,616		)	32,502
Other long-term liabilities	(27,542		)	5,546			709			(465		)
Net cash provided by operating activities	1,391,825			1,382,248			360,381			141,304
Cash flows from investing activities:
Additions of property and equipment	(547,183		)	(705,659		)	(154,942		)	(198,878		)
Acquisitions	(77,348		)	(113,526		)	(34,107		)	(11,274		)
Proceeds from asset and business sales	3,863,619			135,268			31,518			13,903
Purchase of debt investments held-to-maturity							(5,049		)	(209		)
Purchase of other debt and equity investments	(5,160		)	(5,791		)	(2,633		)	(3,290		)
Purchase of investments held-to-maturity	(98,322		)	(3,728		)
Proceeds from debt investments held-to-maturity							5,049			—
Proceeds from sale of other debt and equity investments	5,893			8,783			3,268			3,302
Proceeds from investments held-to-maturity	—			32,628
Purchase of equity investments	(8,770		)	(12,874		)
Distributions received on equity investments	1,296			3,580
Net cash provided by (used in) investing activities	3,134,025			(661,319		)
Purchase of equity method investments							(6,174		)	(4,067		)
Distributions from equity method investments							445			155
Net cash used in investing activities							(162,625		)	(200,358		)
Cash flows from financing activities:
Borrowings	38,519,991			41,674,279			570,779			17,133,464
Payments on long-term debt and other financing costs	(40,570,003		)	(40,828,443		)	(104,942		)	(16,776,267		)
Purchase of treasury stock	(1,837,022		)	(1,161,511		)	(321,798		)	—
Distributions to noncontrolling interests	(157,170		)	(139,673		)	(58,131		)	(44,230		)
Stock award exercises and other share issuances, net	7,333			8,803			2,397			1,517
Contributions from noncontrolling interests	44,095			43,179			9,387			18,947
Proceeds from sales of additional noncontrolling interest	—			15
Purchases of noncontrolling interests	(10,988		)	(19,988		)	(700		)	(8,480		)
Net cash used in financing activities	(4,003,764		)	(423,339		)
Net cash provided by financing activities							96,992			324,951
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(4,178		)	(5,790		)	(14,978		)	(921		)
Net increase in cash, cash equivalents and restricted cash	517,908			291,800			279,770			264,976
Less: Net (decrease) increase in cash, cash equivalents and restricted cash from discontinued operations	(423,813		)	270,565
Less: Net increase in cash, cash equivalents and restricted cash from discontinued operations							—			118,962
Net increase in cash, cash equivalents and restricted cash from continuing operations	941,721			21,235			279,770			146,014
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year	415,420			518,920			1,208,718			415,420
Cash, cash equivalents and restricted cash of continuing operations at end of the period	$	1,357,141		$	540,155
Cash, cash equivalents and restricted cash of continuing operations at end of the year							$	1,488,488		$	561,434

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(dollars and shares in thousands)


	Three months ended September 30, 2019																																Three months ended March 31, 2020
	Non- controlling interests subject to put provisions			DaVita Inc. Shareholders’ Equity																										Non- controlling interests not subject to put provisions			Non- controlling interests subject to put provisions			DaVita Inc. Shareholders’ Equity																					Non- controlling interests not subject to put provisions

					Common stock				Additional paid-in capital			Retained earnings				Treasury stock							Accumulated other comprehensive loss														Common stock					Additional paid-in capital			Retained earnings		Treasury stock					Accumulated other comprehensive loss
				Shares		Amount					Shares					Amount					Total							Shares								Amount				Shares						Amount				Total
Balance at June 30, 2019	$	1,185,733		166,533		$	167	$		989,021			$	3,205,910			(2,060	)		$	(112,189	)			$	(33,611	)		$		4,049,298			$	193,771
Balance at December 31, 2019																																	$	1,180,376		125,843		$	126		$	749,043		$	1,431,738	—		$	—		$	(47,498	)	$	2,133,409		$	185,833
Comprehensive income:
Net income	38,778										143,270															143,270				19,640			32,176											239,593										239,593			16,126
Other comprehensive loss																						(43,993		)		(43,993		)																							(93,027		)	(93,027		)
Stock purchase shares issued																																																						—
Stock unit shares issued				8																						—										8					(75		)											(75		)
Stock-settled SAR shares issued																																				6					(245		)											(245		)
Stock-settled stock-based compensation expense								18,724																		18,724															19,797													19,797
Changes in noncontrolling interest from:
Distributions	(37,868		)																											(23,588		)	(37,566		)																						(20,565		)
Contributions	8,946																													3,868			5,283																								4,104
Acquisitions and divestitures	(91		)																											10
Partial purchases	8							(202		)																(202		)		246			(255		)						(445		)											(445		)
Fair value remeasurements	100,553							(100,553		)																(100,553		)					48,022								(48,022		)											(48,022		)
Purchase of treasury stock															(30,592	)		(1,747,968		)						(1,747,968		)																		(4,052	)	(303,139		)				(303,139		)
Balance at September 30, 2019	$	1,296,059		166,541		$	167	$	906,990		$	3,349,180			(32,652	)		$	(1,860,157	)		$	(77,604	)		$	2,318,576			$	193,947
Balance at March 31, 2020																																	$	1,228,036		125,857		$	126		$	720,053		$	1,671,331	(4,052	)	$	(303,139	)	$	(140,525	)	$	1,947,846		$	185,498

Nine months ended September 30, 2019
Non-
controlling
interests
subject to
put provisions DaVita Inc. Shareholders’ Equity Non-
controlling
interests not
subject to
put provisions

Common stock Additional
paid-in
capital Retained
earnings Treasury stock Accumulated
other
comprehensive
loss
Shares Amount Shares Amount Total
Balance at January 1, 2019 $ 1,124,641
166,387
$ 166
$ 995,006
$ 2,743,194
—
$ —
$ (34,924 ) $ 3,703,442
$ 204,956
Cumulative effect of change
in accounting principle (38 )

39,876

39,876
(6 )
Comprehensive income:
Net income 102,078

566,110

566,110
50,144
Other comprehensive loss

(42,680 ) (42,680 )

Stock unit shares issued

154
1
(3,246 )

(3,245 )

Stock-settled stock-based
compensation expense

47,723

47,723

Changes in noncontrolling interest
from:
Distributions (98,103 )

(59,067 )
Contributions 24,714

19,381
Acquisitions and divestitures 1,782

(1,981 )
Partial purchases (2,240 )

10,732

10,732
(19,480 )
Fair value remeasurements 143,225

(143,225 )

(143,225 )

Purchase of treasury stock

(32,652 ) (1,860,157 )

(1,860,157 )

Balance at September 30, 2019 $ 1,296,059
166,541
$ 167
$ 906,990
$ 3,349,180
(32,652 ) $ (1,860,157 ) $ (77,604 ) $ 2,318,576
$ 193,947

~~See notes to condensed consolidated financial statements.~~

~~DAVITA INC.~~

~~CONSOLIDATED STATEMENTS OF EQUITY - continued~~

~~(unaudited)~~

~~(dollars and shares in thousands)~~

Three months ended September 30, 2018
Non-
controlling
interests
subject to
put provisions DaVita Inc. Shareholders’ Equity Non-
controlling
interests not
subject to
put provisions

Common stock Additional
paid-in
capital Retained
earnings Treasury stock Accumulated
other
comprehensive
loss
Shares Amount Shares Amount Total
Balance at June 30, 2018 $ 1,047,158
182,815
$ 183
$ 1,022,783
$ 4,088,043
(11,995 ) $ (809,900 ) $ (21,925 ) $ 4,279,184
$ 205,323
Comprehensive income:
Net income 25,525

(136,796 )

(136,796 ) 14,603
Other comprehensive loss

(7,184 ) (7,184 )

Stock unit shares issued

8

Stock-settled SAR shares issued

5

(1 )

(1 )

Stock-settled stock-based
compensation expense

39,707

39,707

Changes in noncontrolling interest
from:
Distributions (27,375 )

(18,292 )
Contributions 7,191

4,419
Acquisitions and divestitures 10,597

(9 )
Partial purchases (49 )

(5,285 )

(5,285 ) (1,431 )
Fair value remeasurements 1,365

(1,365 )

(1,365 )

Purchase of treasury stock

(4,849 ) (343,611 )

(343,611 )

Balance at September 30, 2018 $ 1,064,412
182,828
$ 183
$ 1,055,839
$ 3,951,247
(16,844 ) $ (1,153,511 ) $ (29,109 ) $ 3,824,649
$ 204,613


	Nine months ended September 30, 2018																																Three months ended March 31, 2019
	Non- controlling interests subject to put provisions			DaVita Inc. Shareholders’ Equity																										Non- controlling interests not subject to put provisions			Non- controlling interests subject to put provisions			DaVita Inc. Shareholders’ Equity																						Non- controlling interests not subject to put provisions

					Common stock				Additional paid-in capital			Retained earnings				Treasury stock							Accumulated other comprehensive income (loss)														Common stock					Additional paid-in capital			Retained earnings		Treasury stock					Accumulated other comprehensive loss
				Shares		Amount					Shares					Amount					Total							Shares								Amount				Shares						Amount				Total
Balance at January 1, 2018	$	1,011,360		182,462		$	182	$		1,042,899			$	3,633,713			—			$	—				$	13,235			$		4,690,029			$	196,037
Balance at December 31, 2018																																	$	1,124,641		166,387		$	166		$	995,006		$	2,743,194	—		$	—		$	(34,924	)	$	3,703,442		��	$	204,956
Cumulative effect of change in accounting principle											8,368											(8,368		)		—							(38		)									39,876										39,876				(6		)
Comprehensive income:
Net income	77,803										309,166															309,166				47,914			25,389											149,289										149,289				14,809
Other comprehensive loss																						(33,976		)		(33,976		)																							(12,627		)	(12,627		)
Stock unit shares issued				154				(448		)																(448		)								9					(104		)											(104		)
Stock-settled SAR shares issued				212		1		(4,887		)																(4,886		)								—																		—
Stock-settled stock-based compensation expense								59,539																		59,539															12,091													12,091
Changes in noncontrolling interest from:
Distributions	(85,372		)																											(54,301		)	(27,565		)																							(16,665		)
Contributions	26,367																													16,812			6,415																									12,532
Acquisitions and divestitures	11,262							79																		79				(212		)	1,762								—													—				—
Partial purchases	(869		)					(17,482		)																(17,482		)		(1,637		)	(1,967		)						(2,206		)											(2,206		)		(4,307		)
Fair value remeasurements	23,861							(23,861		)																(23,861		)					14,407								(14,407		)											(14,407		)
Purchase of treasury stock															(16,844	)		(1,153,511		)						(1,153,511		)
Balance at September 30, 2018	$	1,064,412		182,828		$	183	$	1,055,839		$	3,951,247			(16,844	)		$	(1,153,511	)		$	(29,109	)		$	3,824,649			$	204,613
Balance at March 31, 2019																																	$	1,143,044		166,396		$	166		$	990,380		$	2,932,359	—		$	—		$	(47,551	)	$	3,875,354			$	211,319

See notes to condensed consolidated financial statements

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars and shares in thousands, except per share data)

Unless otherwise indicated in this Quarterly Report on Form 10-Q "the Company", "we", "us", "our" and similar terms refer to DaVita Inc. and its consolidated subsidiaries.


1.	Condensed consolidated interim financial statements

The unaudited condensed consolidated interim financial statements included in this report are prepared by the ~~Company without audit.~~Company. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations are reflected in these condensed consolidated interim financial statements. All significant intercompany accounts and transactions have been eliminated. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The most significant estimates and assumptions underlying these financial statements and accompanying notes generally involve revenue recognition and accounts receivable, ~~leases,~~ impairments of goodwill, ~~and investments,~~ accounting for income taxes, ~~consolidation of variable interest entities and~~ certain fair value ~~estimates.~~estimates and loss contingencies. The results of operations for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of the operating results for the full year. These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 (10-K). Prior year balances and amounts have been reclassified to conform to the current year presentation. The Company has evaluated subsequent events through the date these condensed consolidated interim financial statements were issued and has included all necessary adjustments and disclosures.


2.	Revenue recognition

The following table summarizes the Company's segment revenues by primary payor source:



	For the three months ended
	March 31, 2020									March 31, 2019
	U.S. dialysis			Other - Ancillary services			Consolidated			U.S. dialysis			Other - Ancillary services			Consolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage	$	1,502,222		$			$	1,502,222		$	1,493,516		$			$	1,493,516
Medicaid and Managed Medicaid	171,467						171,467			154,190						154,190
Other government	111,910			94,574			206,484			106,127			84,475			190,602
Commercial	825,582			39,467			865,049			788,413			33,388			821,801
Other revenues:
Medicare and Medicare Advantage				98,478			98,478						61,700			61,700
Medicaid and Managed Medicaid				366			366						6			6
Commercial				10,521			10,521						32,619			32,619
Other⁽¹⁾	5,442			17,602			23,044			4,905			17,750			22,655
Eliminations of intersegment revenues	(32,242		)	(4,152		)	(36,394		)	(30,641		)	(3,336		)	(33,977		)
Total	$	2,584,381		$	256,856		$	2,841,237		$	2,516,510		$	226,602		$	2,743,112


(1)	Other consists of management service fees earned in the respective Company line of business as well as other revenue from the Company's ancillary services.

The Company’s allowance for doubtful accounts related to performance obligations satisfied in years prior to January 1, 2018 was $4,422 and $8,328 as of March 31, 2020 and December 31, 2019, respectively.

There are significant uncertainties associated with estimating revenue, which generally take several years to resolve. These estimates are subject to ongoing insurance coverage changes, geographic coverage differences, differing interpretations of contract coverage and other payor issues, as well as patient issues including, without limitation, determination of applicable primary and secondary coverage, changes in patient insurance coverage and coordination of benefits. As these estimates are refined over time, both positive and negative adjustments to revenue are recognized in the current period. As a result of changes in these estimates, a reduction in revenue of $4,138 was recognized during the three months ended September 30, 2019 and additional revenue of $35,658 was recognized during the nine months ended September 30, 2019, associated with performance obligations satisfied prior to January 1, 2019. Additional revenue of $1,246 and $77,473 was recognized during the three and nine months ended September 30, 2018, respectively, associated with performance obligations satisfied prior to January 1, 2018, which included a benefit of $36,000 for the nine months ended September 30, 2018 from electing to apply Topic 606, ~~Revenue from Contracts with Customers~~ ~~only to contracts not substantially completed as of January 1, 2018.~~

~~The following table summarizes the Company's segment revenues by primary payor source:~~

For the three months ended
September 30, 2019 September 30, 2018
U.S. dialysis and related lab services Other - Ancillary services and strategic initiatives Consolidated U.S. dialysis and related lab services Other - Ancillary services and strategic initiatives Consolidated
Patient service revenues:
Medicare and Medicare Advantage $ 1,558,890
$ $ 1,558,890
$ 1,513,191
$ $ 1,513,191
Medicaid and Managed Medicaid 176,292

176,292
159,165

159,165
Other government 116,984
90,947
207,931
113,043
80,915
193,958
Commercial 828,953
37,276
866,229
786,470
31,364
817,834
Other revenues:
Medicare and Medicare Advantage

65,759
65,759

130,746
130,746
Medicaid and Managed Medicaid

227
227

12,042
12,042
Commercial

33,503
33,503

20,205
20,205
Other⁽¹⁾
10,308
20,784
31,092
4,932
29,042
33,974
Eliminations of intersegment revenues (32,362 ) (3,483 ) (35,845 ) (25,424 ) (8,361 ) (33,785 )
Total $ 2,659,065
$ 245,013
$ 2,904,078
$ 2,551,377
$ 295,953
$ 2,847,330


~~(1)~~	~~Other consists of management fees and revenue from the Company's ancillary services and strategic initiatives.~~

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

For the nine months ended
September 30, 2019 September 30, 2018
U.S. dialysis and related lab services Other - Ancillary services and strategic initiatives Consolidated U.S. dialysis and related lab services Other - Ancillary services and strategic initiatives Consolidated
Patient service revenues:
Medicare and Medicare Advantage $ 4,572,599
$ $ 4,572,599
$ 4,524,449
$ $ 4,524,449
Medicaid and Managed Medicaid 490,723

490,723
466,948

466,948
Other government 333,675
264,191
597,866
330,500
250,048
580,548
Commercial 2,458,360
103,760
2,562,120
2,366,182
70,156
2,436,338
Other revenues:
Medicare and Medicare Advantage

191,472
191,472

427,532
427,532
Medicaid and Managed Medicaid

327
327

43,991
43,991
Commercial

98,428
98,428

77,633
77,633
Other⁽¹⁾
20,715
59,204
79,919
14,965
103,014
117,979
Eliminations of intersegment revenues (93,337 ) (10,222 ) (103,559 ) (63,943 ) (27,748 ) (91,691 )
Total $ 7,782,735
$ 707,160
$ 8,489,895
$ 7,639,101
$ 944,626
$ 8,583,727


~~(1)~~	~~Other consists of management fees and revenue from the Company's ancillary services and strategic initiatives.~~

Dialysis ~~and related lab~~ patient service revenues. Revenues are recognized based on the Company’s estimate of the transaction price the Company expects to collect as a result of satisfying its performance obligations. Dialysis ~~and related lab services~~ patient service revenues are recognized in the period services are ~~provided.~~provided based on these estimates. Revenues consist primarily of payments from ~~Medicare, Medicaid~~government and commercial health plans for dialysis ~~and related lab~~ services provided to patients. A usual and customary fee schedule is maintained for the Company’s dialysis treatments and related lab services; however, actual collectible revenue is normally recognized at a discount from the fee schedule.

Other revenues. Other revenues consist of ~~the revenues associated with the ancillary services and strategic initiatives,~~fees for management and administrative support services ~~that are~~ provided to outpatient dialysis centers that the Company does not own or in which the Company owns a noncontrolling interest, revenues associated with the Company's non-dialysis ancillary services, and administrative and management support services to certain ~~other~~ non-dialysis joint ventures in which the Company owns a noncontrolling interest.

The Company’s allowance for doubtful accounts related to performance obligations satisfied in years prior to January 1, 2018 was $15,090 and $52,924 as of September 30, 2019 and December 31, 2018, respectively.


3.	Earnings per share

Basic earnings per share is calculated by dividing net income attributable to the Company ~~adjusted for any change in noncontrolling interest redemption rights in excess of fair value,~~ by the weighted average number of common shares ~~outstanding, net of the weighted average shares held in escrow that under certain circumstances may have been returned to the Company.~~outstanding. Weighted average common shares outstanding include ~~vested~~ restricted stock unit awards ~~for which~~that are no longer subject to forfeiture because the recipients have satisfied either the explicit vesting terms or retirement eligibility requirements.

Diluted earnings per share includes the dilutive effect of outstanding stock-settled stock appreciation rights and unvested stock units ~~(under~~as computed under the treasury stock ~~method) as well as the weighted average shares held in escrow that were outstanding during the period.~~

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

method.

The reconciliations of the numerators and denominators used to calculate basic and diluted earnings per share were as follows:

Three months ended
September 30, Nine months ended
September 30,
2019 2018 2019 2018
Numerators:

Net income from continuing operations attributable to DaVita Inc. $ 150,113
$ 73,371
$ 464,590
$ 463,989
Change in noncontrolling interest redemption rights in excess of fair value —
98
—
—
Net income from continuing operations for earnings per share calculation 150,113
73,469
464,590
463,989
Net (loss) income from discontinued operations attributable to DaVita Inc. (6,843 ) (210,167 ) 101,520
(154,823 )
Net income (loss) attributable to DaVita Inc. for earnings per share calculation $ 143,270
$ (136,698 ) $ 566,110
$ 309,166

Basic:
Weighted average shares outstanding during the period 150,675
166,819
161,147
173,875
Weighted average contingently returnable shares held in escrow for the
DaVita HealthCare Partners merger —
(48 ) —
(1,471 )
Weighted average shares for basic earnings per share calculation 150,675
166,771
161,147
172,404

Basic net income (loss) attributable to DaVita Inc. from:
Continuing operations per share $ 1.00
$ 0.44
$ 2.88
$ 2.69
Discontinued operations per share (0.05 ) (1.26 ) 0.63
(0.90 )
Basic net income (loss) per share attributable to DaVita Inc. $ 0.95
$ (0.82 ) $ 3.51
$ 1.79

Diluted:
Weighted average shares outstanding during the period 150,675
166,819
161,147
173,875
Assumed incremental shares from stock plans 621
443
489
473
Weighted average shares for diluted earnings per share calculation 151,296
167,262
161,636
174,348

Diluted net income (loss) attributable to DaVita Inc. from:
Continuing operations per share $ 0.99
$ 0.44
$ 2.87
$ 2.66
Discontinued operations per share (0.04 ) (1.26 ) 0.63
(0.89 )
Diluted net income (loss) per share attributable to DaVita Inc. $ 0.95
$ (0.82 ) $ 3.50
$ 1.77

Anti-dilutive stock-settled awards excluded from calculation⁽¹⁾
7,293
5,281
6,414
4,987



	Three months ended March 31,
	2020		2019

Net income from continuing operations attributable to DaVita Inc.	$	229,613	$	120,254
Net income from discontinued operations attributable to DaVita Inc.	9,980		29,035
Net income attributable to DaVita Inc.	$	239,593	$	149,289

Weighted average shares - basic	124,902		166,388
Assumed incremental shares from stock plans	1,993		393
Weighted average shares - diluted	126,895		166,781

Basic net income attributable to DaVita Inc. from:
Continuing operations per share	$	1.84	$	0.72
Discontinued operations per share	0.08		0.18
Basic net income per share attributable to DaVita Inc.	$	1.92	$	0.90

Diluted net income attributable to DaVita Inc. from:
Continuing operations per share	$	1.81	$	0.72
Discontinued operations per share	0.08		0.18
Diluted net income per share attributable to DaVita Inc.	$	1.89	$	0.90

Anti-dilutive stock-settled awards excluded from calculations⁽¹⁾	3,207		6,150


(1)	Shares associated with stock-settled stock appreciation rights and performance stock units were excluded from the diluted denominator ~~calculation~~calculations because they are anti-dilutive under the treasury stock method.


4.	~~Restricted cash and equivalents~~

The Company had restricted cash and cash equivalents of $103,885 and $92,382 at September 30, 2019 and December 31, 2018, respectively. There has been no material change in the nature of the Company's restricted cash and cash equivalents from that described in Note 4 to the Company's consolidated financial statements included in the 10-K.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)


5.4.	Short-term and long-term investments

The Company’s short-term and long-term debt and equity investments consist of the following:


	September 30, 2019						December 31, 2018						March 31, 2020						December 31, 2019
	Debt securities		Equity securities		Total		Debt securities		Equity securities		Total		Debt securities		Equity securities		Total		Debt securities		Equity securities		Total
Certificates of deposit and other time deposits	$	98,113	$	—	$	98,113	$	2,235	$	—	$	2,235	$	8,190	$	—	$	8,190	$	8,140	$	—	$	8,140
Investments in mutual funds and common stock	—		37,641		37,641		—		36,124		36,124		—		35,843		35,843		—		39,951		39,951
	$	98,113	$	37,641	$	135,754	$	2,235	$	36,124	$	38,359	$	8,190	$	35,843	$	44,033	$	8,140	$	39,951	$	48,091
Short-term investments	$	98,113	$	2,600	$	100,713	$	2,235	$	700	$	2,935	$	8,190	$	1,186	$	9,376	$	8,140	$	3,432	$	11,572
Long-term investments	—		35,041		35,041		—		35,424		35,424		—		34,657		34,657		—		36,519		36,519
	$	98,113	$	37,641	$	135,754	$	2,235	$	36,124	$	38,359	$	8,190	$	35,843	$	44,033	$	8,140	$	39,951	$	48,091

Debt securities: The Company's short-term debt investments are principally bank certificates of deposit with contractual maturities longer than three months but shorter than one year. These debt securities are accounted for as held to maturity and recorded at amortized cost, which ~~approximates~~approximated their fair values at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

Equity securities: The Company's equity investments in mutual funds and common stock are held within a trust to fund existing obligations associated with several of the Company’s non-qualified deferred compensation plans. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company recognized pre-tax net ~~gains~~losses of $3,407 in ~~the~~other (loss) income ~~statement of $2,776~~ associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of ~~$586~~$293 and a net increase in unrealized ~~gains~~losses of ~~$2,190.~~$3,700. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, the Company recognized pre-tax ~~realized~~net gains of $1,893 in ~~the~~other (loss) income ~~statement of $1,597~~ associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of ~~$4,101~~$170 and a net ~~decrease~~increase in unrealized gains of ~~$2,504.~~$1,723.


6.5.	Equity method and other investments

~~Equity investments in nonconsolidated businesses over which the Company maintains significant influence, but which do not have readily determinable fair values, are carried on the equity method.~~

The Company maintains equity method and minor adjusted cost method investments in the private securities of certain other healthcare and healthcare-related businesses. The Company classifies these investments as "Equity method and other investments" on its consolidated balance sheet.

The Company's equity method and other investments were comprised of the following:


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
APAC joint venture	$	118,528	$	129,173	$	123,696	$	116,924
Other equity method partnerships	90,410		83,052		114,355		114,611
Adjusted cost method investments	10,448		12,386		16,448		10,448
	$	219,386	$	224,611	$	254,499	$	241,983

During the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the Company recognized equity investment income of ~~$11,158~~$17,843 and ~~$6,126,~~$2,708, respectively, from equity method investments in nonconsolidated businesses.

Equity investments in nonconsolidated businesses over which the Company maintains significant influence, but which do not have readily determinable fair values, are carried on the equity method. The Company's largest equity method investment is its ownership interest in DaVita Care Pte. Ltd. (the APAC joint venture, or APAC JV)~~. In~~, which is 75%-owned by the ~~third quarter of 2019,~~Company and 25%-owned by its other noncontrolling investor. As described in Note 9 to the ~~investors~~Company's consolidated financial statements included in the ~~APAC JV jointly agreed to a deferral of~~10-K, the ~~capital contributions that were scheduled for~~ ~~August 1, 2019~~ to ~~December 1, 2019. The~~ Company ~~continues to expect the economic interests of the noncontrolling investors in~~does not consolidate the APAC ~~JV to adjust to match their voting interests by December 1, 2019 or shortly thereafter.~~JV.

The Company's other equity method investments include legal entities ~~for~~over which the Company ~~maintains~~has significant influence but in which it does not ~~have~~maintain a controlling financial interest. Almost all of these are U.S. partnerships in the form of limited liability companies. The Company's ownership interests in these partnerships vary, but typically range from 30% to 50%. During the three months ended March 31, 2020 and 2019, there were 0 meaningful impairments or other valuation adjustments recognized on these investments.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

50%. During the nine months ended September 30, 2019, the Company recognized a $1,938 downward valuation adjustment on one of its adjusted cost method investments. During the nine months ended September 30, 2018, there were 0 meaningful impairments or other valuation adjustments recognized on these investments.


7.6.	Goodwill

Changes in goodwill by reportable ~~segment~~segments were as follows:


	U.S. dialysis and related lab services			Other-ancillary services and strategic initiatives			Consolidated total			U.S. dialysis			Other - Ancillary services			Consolidated
Balance at December 31, 2017	$	6,144,761		$	465,518		$	6,610,279
Acquisitions	130,574			147,774			278,348
Divestitures	(331		)	(15,166		)	(15,497		)
Impairment charges	—			(3,106		)	(3,106		)
Foreign currency and other adjustments	—			(28,064		)	(28,064		)
Balance at December 31, 2018	$	6,275,004		$	566,956		$	6,841,960		$	6,275,004		$	566,956		$	6,841,960
Acquisitions	18,089			59,149			77,238			18,089			72,137			90,226
Impairment charges	—			(124,892		)	(124,892		)	—			(124,892		)	(124,892		)
Foreign currency and other adjustments	—			(28,647		)	(28,647		)	(5,993		)	(13,666		)	(19,659		)
Balance at September 30, 2019	$	6,293,093		$	472,566		$	6,765,659
Balance at December 31, 2019										$	6,287,100		$	500,535		$	6,787,635
Acquisitions										2,839			23,931			26,770
Divestitures										(1,549		)	—			(1,549		)
Foreign currency and other adjustments										—			(34,833		)	(34,833		)
Balance at March 31, 2020										$	6,288,390		$	489,633		$	6,778,023

Balance at September 30, 2019
Goodwill	$	6,293,093		$	622,307		$	6,915,400		$	6,288,390		$	638,117		$	6,926,507
Accumulated impairment charges	—			(149,741		)	(149,741		)	—			(148,484		)	(148,484		)
	$	6,293,093		$	472,566		$	6,765,659		$	6,288,390		$	489,633		$	6,778,023

~~The~~During the three months ended March 31, 2020, the Company ~~elected to early adopt ASU No. 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ ~~effective January 1, 2017. The amendments in this ASU simplify the test for~~did not recognize any goodwill impairment ~~by eliminating the second step in the assessment. All goodwill impairment tests performed since adoption were performed under this new guidance.~~charges.

During the three months ended March 31, 2019, the Company recognized a $41,037 goodwill impairment charge in its Germany kidney care business. This charge resulted primarily from a change in relevant discount rates, as well as a decline in current and expected future patient census and an increase in the first quarter of 2019 and expected future costs, principally due to wage increases expected to result from recently announced legislation.

During the three months ended September 30, 2019, the Company completed additional goodwill impairment assessments of reporting units previously disclosed as at-risk of significant goodwill impairment, including its Germany kidney care business. As a result of these assessments, the Company recognized a further goodwill impairment charge of $78,439 in its Germany kidney care business and a $5,416 goodwill impairment charge in its German other health operations. The incremental charge recognized in the Germany kidney care business resulted from changes and developments in the Company's outlook for this business since its last assessment. These primarily concern developments in the business in response to evolving market conditions and changes in the Company's expected timing and ability to mitigate them, which was based on results of in-depth operating and strategic reviews completed by the Company’s new Germany management team during the third quarter.

The impairment charges recognized in the third quarter of 2019 at the Company’s Germany kidney care business and its German other health operations include increases of $16,756 and $1,013, respectively, to the goodwill impairment charges, and reductions to deferred tax expense, related to deferred tax assets that the impairments themselves generated. The result is an $83,855 goodwill impairment charge to operating income and a $17,769 credit to tax expense, for a net $66,086 impact on net income. As of September 30, 2019, the Company's Germany kidney care business and its German other health operations remain at risk of further goodwill impairment.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

~~During the nine months ended September 30, 2019, the Company recognized total goodwill impairment charges of $124,892 consisting of the charges described above.~~

Further changes in expected patient census, increases in operating costs, reductions in reimbursement rates, changes in actual or expected growth rates, or other significant adverse changes in expected future cash flows or valuation assumptions could result in goodwill impairment charges in the future for the following reporting units:

Reporting unit Goodwill balance as of September 30, 2019
Carrying amount
coverage⁽¹⁾
Sensitivities
Operating income⁽²⁾

Discount rate⁽³⁾
Germany Kidney Care $ 287,256
—% (1.3)% (11.0)%
Brazil Kidney Care $ 72,461
4.4% (2.8)% (7.0)%


~~(1)~~	~~Excess of estimated fair value of the reporting unit over its carrying amount as of the latest assessment date.~~


~~(2)~~	~~Potential impact on estimated fair value of a sustained, long-term reduction of 3% in operating income as of the latest assessment date.~~


~~(3)~~	~~Potential impact on estimated fair value of an increase in discount rates of 100 basis points as of the latest assessment date.~~

The Company did not recognize any goodwill impairment charges during the three months ended September 30, 2018 and recognized a goodwill impairment charge of $3,106 at its German other health operations during the nine months ended September 30, 2018.

Except as described above, in Note 11 to the Company's consolidated financial statements included in the 10-K and in Note 7 to the Company’s condensed consolidated financial statements included in subsequent 10-Q filings, NaN of the Company's various other reporting units were considered at risk of significant goodwill impairment as of September 30, 2019. Since the dates of the Company's last annual goodwill impairment assessments there have been certain developments,Developments, events, changes in operating performance and other changes in ~~key~~ circumstances ~~that~~since the dates of the Company’s last annual goodwill impairment assessments have ~~affected the Company's businesses. However, these changes did~~ not ~~cause~~caused management to believe it is more likely than not that the fair values of any of the Company's reporting units would be less than their respective carrying amounts as of ~~September 30, 2019.~~March 31, 2020. Except as described in Note 10 to the 10-K, NaN of the Company's various other reporting units were considered at risk of significant goodwill impairment as of March 31, 2020.

As dialysis treatments are an essential, life-sustaining service for patients who depend on them, the Company's operations have continued and are currently expected to continue during the novel coronavirus (COVID-19) pandemic. However, the ultimate impact of the dynamic and rapidly evolving COVID-19 pandemic on the Company will depend on future developments that are highly uncertain and difficult to predict, including among other things the severity and duration of the pandemic, the impact on our patient population, the pandemic’s impact on the U.S. and global economies and unemployment, and the timing, scope and effectiveness of governmental responses. While the Company does not currently expect a material adverse impact to its business as a result of this public health crisis, there can be no assurance that the COVID-19 pandemic will not have a material adverse impact on one or more of the Company's businesses.


8.7.	Income taxes

As of ~~September 30, 2019,~~March 31, 2020, the Company’s total liability for unrecognized tax benefits relating to tax positions that do not meet the more-likely-than-not threshold was ~~$52,769,~~$68,602, of which ~~$49,926~~$64,356 would impact the Company's effective tax rate if recognized. The total balance increased ~~$12,387~~$388 from the December 31, ~~2018~~2019 balance of ~~$40,382.~~$68,214.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in its income tax expense. At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had approximately ~~$11,292~~$15,249 and ~~$9,019,~~$14,428, respectively, accrued for interest and penalties related to unrecognized tax benefits, net of federal tax benefits.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)


9.8.	Long-term debt

Long-term debt was comprised of the following:

As of September 30, 2019
September 30, 2019 December 31, 2018 Maturity date Interest rate
Estimated fair value⁽⁴⁾
Senior Secured Credit Facilities⁽¹⁾:

New Term Loan A $ 1,750,000
$ 8/12/2024 LIBOR + 1.50% $ 1,750,000
New Term Loan B 2,750,000

8/12/2026 LIBOR + 2.25% $ 2,770,625
Prior Term Loan A⁽²⁾

675,000
12/24/2019
⁽³⁾

$ —
Prior Term Loan A-2⁽²⁾

995,000
12/24/2019
⁽³⁾

$ —
Prior Term Loan B

3,342,500
6/24/2021
⁽³⁾

$ —
Prior revolving line of credit⁽²⁾

175,000
12/24/2019
⁽³⁾

$ —
Senior Notes:
5 1/8% Senior Notes 1,750,000
1,750,000
7/15/2024 5.125 % $ 1,776,250
5% Senior Notes 1,500,000
1,500,000
5/1/2025 5.00 % $ 1,492,200
5 3/4% Senior Notes —
1,250,000
8/15/2022

$ —
Acquisition obligations and other notes payable⁽⁵⁾
181,757
183,979
2019-2027 5.50 % $ 181,757
Financing lease obligations⁽⁶⁾
280,138
282,737
2020-2037 5.36 % $ 280,138
Total debt principal outstanding 8,211,895
10,154,216

Discount and deferred financing costs⁽⁷⁾
(75,979 ) (52,000 )
8,135,916
10,102,216

Less current portion (121,441 ) (1,929,369 )
$ 8,014,475
$ 8,172,847



								As of March 31, 2020
	March 31, 2020			December 31, 2019			Maturity date	Interest rate		Estimated fair value⁽¹⁾
Senior Secured Credit Facilities:
Term Loan A	$	1,728,125		$	1,739,063		8/12/2024	LIBOR + 1.50%		$	1,659,000
Term Loan B-1⁽²⁾	2,736,267			—			8/12/2026	LIBOR + 1.75%		$	2,640,498
Term Loan B⁽²⁾	—			2,743,125			8/12/2026	LIBOR + 2.25%		$	—
Revolving line of credit	500,000			—			8/12/2024	LIBOR + 1.50%		$	500,000
Senior Notes:
5 1/8% Senior Notes	1,750,000			1,750,000			7/15/2024	5.125	%	$	1,743,525
5% Senior Notes	1,500,000			1,500,000			5/1/2025	5.00	%	$	1,497,900
Acquisition obligations and other notes payable⁽³⁾	167,727			180,352			2020-2027	4.71	%	$	167,727
Financing lease obligations⁽⁴⁾	275,092			268,534			2020-2036	5.31	%
Total debt principal outstanding	8,657,211			8,181,074
Discount and deferred financing costs⁽⁵⁾	(68,757		)	(72,840		)
	8,588,454			8,108,234
Less current portion	(146,318		)	(130,708		)
	$	8,442,136		$	7,977,526


(1)	As of September 30, 2019, the Company has an undrawn new revolving line of credit under its new senior secured credit facilities of $1,000,000. The new revolving line of credit interest rate in effect at September 30, 2019 was 1.50% plus London Interbank Offered Rate (LIBOR) and it matures on ~~August 12, 2024~~.


~~(2)~~	On May 6, 2019, the Company entered into an agreement to extend the maturity dates of its then existing Term Loan A, Term Loan A-2 and revolving line of credit under its prior senior secured credit facilities by six months, to ~~December 24, 2019~~.


~~(3)~~	At June 30, 2019, the interest rate on the Company's then existing term loan debt was LIBOR plus interest rate margins in effect of 2.00% for the prior Term Loan A and prior revolving line of credit, 1.00% for the prior Term Loan A-2 and 2.75% for the prior Term Loan B.

~~(4)~~

Fair value estimates are based upon bid and ask quotes for ~~these instruments,~~the Company's senior secured credit facilities and senior notes, typically a level 2 input. The ~~balances~~carrying values of acquisition obligations and other notes payable ~~and financing lease obligations are~~ presented ~~in the condensed consolidated financial statements as of September 30, 2019 at~~here approximate their ~~approximate~~estimated fair values, ~~due to the short-term nature~~based on estimates of their ~~settlements.~~current present values using level 2 interest rate inputs.


~~(5)~~(2)	On February 13, 2020, the Company entered into an amendment to its credit agreement governing its senior secured credit facilities to refinance the Term Loan B with a $2,743,125 secured Term Loan B-1.


(3)	The interest rate presented for acquisition obligations and other notes payable is their weighted average interest rate based on the current interest rate in effect and assuming no changes to the LIBOR based interest rates.


~~(6)~~(4)	Financing lease obligations are measured at their approximate present value at inception. The interest rate presented ~~for financing lease obligations~~ is ~~their~~the weighted average discount ~~rate.~~rate embedded in financing leases outstanding.

~~(7)~~(5)

As of ~~September 30,~~March 31, 2020, the carrying amount of the Company’s senior secured credit facilities and senior notes include a discount of $6,207 and deferred financing costs of $42,420; and deferred financing costs of $20,130, respectively. As of December 31, 2019, the carrying amount of the Company’s ~~current~~ senior secured credit facilities ~~includes~~and senior notes include a discount of ~~$6,708~~$6,457 and deferred financing costs of $47,255, and the carrying amount of the Company’s senior notes includes deferred financing costs of $22,016. As of December 31, 2018, the carrying amount of the Company’s then existing senior secured credit facilities included a discount of $6,104$45,444; and deferred financing costs of ~~$12,580, and the carrying amount of the Company’s senior notes included deferred financing costs of $33,316.~~$20,939, respectively.

Scheduled maturities of long-term debt at March 31, 2020 were as follows:



2020 (remainder of the year)	$	95,359
2021	$	170,056
2022	$	172,376
2023	$	224,727
2024	$	3,671,586
2025	$	61,951
Thereafter	$	4,261,156

On February 13, 2020, the Company entered into an amendment to refinance its senior secured Term Loan B (Repricing Amendment) with a secured Term Loan B-1 that bears interest at a rate equal to LIBOR plus an applicable margin of 1.75% and matures on August 12, 2026. The Repricing Amendment did not change the interest rate on the Term Loan A or the revolving line of credit. NaN additional debt was incurred, nor any additional proceeds received, by the Company in connection with the Repricing Amendment. As a result of this transaction, the Company recognized debt refinancing charges of $2,948 in the three months ended March 31, 2020. The majority of the Company's Term Loan B debt was considered a modification, therefore

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

~~Scheduled maturities of long-term debt at September 30, 2019 were as follows:~~

2019 (remainder of the year) 29,841
2020 129,082
2021 153,120
2022 168,824
2023 224,455
2024 3,171,804
Thereafter 4,334,769

~~The Company closed the DaVita Medical Group (DMG) sale~~these charges primarily represent fees incurred on ~~June 19, 2019~~ and, as required by the terms of its prior senior secured credit agreement, used all of the net proceeds from the sale of DMG to prepay term debt outstanding under that credit agreement. During the nine months ended September 30, 2019, the Company made mandatory principal prepayments of $647,424 on the prior Term Loan A, $995,000 on the prior Term Loan A-2 and $2,823,447 on the prior Term Loan B.

On August 12, 2019, the Company entered into a new $5,500,000 senior secured credit agreement (the New Credit Agreement) consisting of a secured term loan A facility in the aggregate principal amount of $1,750,000 with a delayed draw feature, a secured term loan B facility in the aggregate principal amount of $2,750,000 and a secured revolving line of credit in the aggregate principal amount of $1,000,000 (the foregoing referred as the new Term Loan A, new Term Loan B and new revolving line of credit, respectively). In addition, the Company can increase the existing revolving commitments and enter into one or more incremental term loan facilities in an amount not to exceed the sum of $1,500,000 (less the amount of other permitted indebtedness incurred or issued in reliance on such amount), plus an amount of indebtedness such that the senior secured leverage ratio is not in excess of 3.50:1.00 after giving effect to such borrowings.

The new Term Loan A and new revolving line of credit initially bear interest at LIBOR plus an interest rate margin of 1.50%, which is subject to adjustment depending upon the Company's leverage ratio under the New Credit Agreement and can range from 1.00% to 2.00%. The new Term Loan A requires amortizing quarterly principal payments beginning on December 31, 2019 in annual amounts of $10,938 in 2019, $54,688 in 2020, $87,500 in 2021, $98,437 in 2022, and $142,187 in 2023, with the balance of $1,356,250 due in 2024. The new Term Loan B bears interest at LIBOR plus an interest rate margin of 2.25%. The new Term Loan B requires amortizing quarterly principal payments beginning on December 31, 2019 in annual amounts of $6,875 in 2019, and $27,500 for each year from 2020 through 2025, with the balance of $2,578,125 due in 2026.

The Company's term loans and revolving line of credit under its New Credit Agreement are guaranteed by certain of the Company’s direct and indirect wholly-owned domestic subsidiaries, which hold most of the Company’s domestic assets, and are secured by substantially all of the assets of DaVita Inc. and these guarantors. Contemporaneously with the Company entering into the New Credit Agreement and pursuant to the indentures governing the Company’s senior notes, certain subsidiaries of the Company were released from their guarantees of the Company's senior notes such that, after that release, the remaining subsidiary guarantors of the senior notes were the same subsidiaries guaranteeing the New Credit Agreement. The New Credit Agreement contains certain customary affirmative and negative covenants such as various restrictions or limitations on permitted amounts of investments, acquisitions, share repurchases, the payment of dividends, and redemptions and incurrence of other indebtedness. Many of these restrictions and limitations will not apply as long as the Company’s leverage ratio calculated in accordance with the New Credit Agreement is below 4.00:1.00. In addition, the New Credit Agreement places limitations on the amount of gross revenue from individual immaterial subsidiaries and also requires compliance with a maximum leverage ratio covenant of 5.00:1.00 through 2022 and 4.50:1.00 thereafter.

In the third quarter of 2019, the Company used a portion of the proceeds from the new Term Loan A and new Term Loan B to pay off the remaining principal balances outstanding and accrued interest and fees on its prior Term Loan B and prior revolving line of credit in the amount of $1,153,274; to redeem all of its outstanding 5.75% Senior Notes due in 2022 for an aggregate cash payment consisting of principal; redemption premium and accrued but unpaid interest to the redemption date of $1,267,565; and to repurchase 21,802 shares of common stock under the modified “Dutch auction” tender offer (the Tender Offer) for a total cost of $1,233,886, including fees and expenses, as described in Note 14 to these condensed consolidated financial statements. The remaining debt borrowings added cash to the balance sheet for potential acquisitions, share repurchases and other general corporate purposes.

~~In addition to the prepayments described above, during the first nine months of 2019 the Company made regularly~~

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

scheduled principal payments under its then existing senior secured credit facilities of $27,576 on its prior Term Loan A and $17,500 on its prior Term Loan B. The Company did not have any regularly scheduled principal payments under its new senior secured credit facilities during the first nine months of 2019.

As a result of the transactions described above, the Company recognized debt prepayment, refinancing and redemption charges of $21,242 and $33,402 in the three and nine month periods ended September 30, 2019, respectively, as a result of the repayment of all principal balances outstanding on the Company's prior senior secured credit facilities and the redemption of its 5.75% Senior Notes. The $21,242 of such charges recognized in the third quarter of 2019 represented debt discount and deferred financing cost write-offs associated with the portion of the Company's prior senior secured debt that was paid in full in the third quarter of 2019,this transaction, as well as ~~redemption charges on its 5.75% Senior Notes redeemed in~~ the ~~third quarter~~write off and capitalization of ~~2019. The $12,160 of such charges recognized in the second quarter of 2019 represented accelerated amortization of debt discount and~~ deferred financing costs associated with the portion of debt considered extinguished. For the ~~Company's prior senior secured~~portion of the Term Loan B debt that was ~~mandatorily prepaid~~considered extinguished and reborrowed in this refinancing, the Company recognized $68,842 in constructive financing cash outflows and financing cash inflows on the statement of cash flows, even though no funds were actually paid or ~~shortly after~~received. Another $55,895 of the ~~second quarter~~debt considered extinguished in this refinancing represented a non-cash financing activity.

During the first three months of ~~2019~~2020, the Company made regularly scheduled mandatory principal payments under its senior secured credit facilities totaling $10,938 on Term Loan A and ~~prior extensions thereof.~~$6,858 on Term Loan B-1.

As of ~~September 30, 2019,~~March 31, 2020, the Company maintains several interest rate cap agreements that have the economic effect of capping the Company's maximum exposure to LIBOR variable interest rate changes on specific portions of the Company's floating rate debt, including all of the ~~new~~ Term Loan BB-1 and a portion of the ~~new~~ Term Loan A. The remaining ~~$1,000,000~~$1,464,392 outstanding principal balance of the ~~new~~ Term Loan A isand the revolving line of credit are subject to LIBOR-based interest rate volatility. The cap agreements are designated as cash flow hedges and, as a result, changes in the fair values of these cap agreements are reported in other comprehensive income. The amortization of the original cap premium is recognized as a component of debt expense on a straight-line basis over the terms of the cap agreements. These cap agreements do not contain credit-risk contingent features.

In August 2019, the Company entered into several forward interest rate cap agreements with a notional amount of $3,500,000 that have the economic effect of capping the Company's maximum exposure to LIBOR variable interest rate changes on specific portions of the Company's floating rate debt (2019 cap agreements). These 2019 cap agreements are designated as cash flow hedges and, as a result, changes in their fair values are reported in other comprehensive income. These 2019 cap agreements do not contain credit-risk contingent features, and become effective on June 30, 2020.

The following table summarizes the Company’s interest rate cap agreements outstanding as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, which are classified in "Other long-term assets" on its consolidated balance sheet:


						Nine months ended September 30, 2019				Fair value									Three months ended March 31, 2020				Fair value
	Notional amount		LIBOR maximum rate	Effective date	Expiration date	Debt expense		Recorded OCI loss		September 30, 2019		December 31, 2018		Notional amount		LIBOR maximum rate	Effective date	Expiration date	Debt expense		Recorded OCI loss		March 31, 2020		December 31, 2019
2015 cap agreements	$	3,500,000	3.50%	6/29/2018	6/30/2020	$	6,428	$	851	$	—	$	851	$	3,500,000	3.50%	6/29/2018	6/30/2020	$	2,163	$	—	$	—	$	—
2019 cap agreements	$	3,500,000	2.00%	6/30/2020	6/30/2024			$	1,393	$	20,642			$	3,500,000	2.00%	6/30/2020	6/30/2024			$	17,346	$	7,106	$	24,452

The following table summarizes the effects of the Company’s interest rate cap agreements for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Amount of unrecognized (losses) gains in OCI on interest rate cap agreements												Income statement location		Reclassification from accumulated other comprehensive income into net income																Amount of unrecognized losses in OCI on interest rate cap agreements								Income statement location		Reclassification from accumulated other comprehensive loss into net income
	Three months ended September 30,						Nine months ended September 30,							Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,										Three months ended March 31,
Derivatives designated as cash flow hedges	2019			2018			2019			2018				2019				2018				2019				2018				2020				2019						2020				2019
Interest rate cap agreements	$	(1,420	)	$	50		$	(2,244	)	$	1,103			Debt expense		$	2,101			$	2,163			$	6,428			$	6,303			$	(17,346	)		$	(781	)		Debt expense		$	2,163			$	2,163
Related income tax	360			(13		)	572			(284		)		Related income tax		(532		)		(557		)		(1,646		)		(1,623		)		4,328				201				Related income tax		(540		)		(557		)
Total	$	(1,060	)	$	37		$	(1,672	)	$	819				$	1,569			$	1,606			$	4,782			$	4,680			$	(13,018	)		$	(580	)				$	1,623			$	1,606

See Note 1514 to these condensed consolidated financial statements for further details on amounts recorded and reclassified from accumulated other comprehensive ~~(loss) income.~~loss.

The Company’s weighted average effective interest rate on the senior secured credit facilities at the end of the ~~third~~first quarter of ~~2019~~2020 was ~~4.30%~~2.78%, based on the current margins in effect for the ~~new~~ Term Loan A, ~~and the new~~ Term Loan BB-1 and revolving line of credit as of ~~September 30, 2019,~~March 31, 2020, as described above.

The Company’s overall weighted average effective interest rate for the three months ended March 31, 2020 was 4.35%, and as of March 31, 2020 was 3.75%.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

~~The Company’s overall weighted average effective interest rate for the three and nine months ended September 30, 2019 was 5.09% and 5.14%, respectively, and as of September 30, 2019 was 4.66%.~~

As of ~~September 30, 2019,~~March 31, 2020, the Company’s interest rates are fixed on approximately ~~44.03%~~41.83% of its total debt.

As of ~~September 30, 2019,~~March 31, 2020, the Company ~~has an undrawn~~had $500,000 drawn on its $1,000,000 revolving line of credit under its ~~new~~ senior secured credit ~~facilities of $1,000,000, for which approximately $13,055 was committed for outstanding letters of credit.~~facilities. The Company also has approximately ~~$59,723~~$57,705 of outstanding letters of credit under a separate bilateral secured letter of credit facility.


~~10.~~9.	Leases

The majority of the Company’s facilities are leased under non-cancellable operating leases ranging in terms from five years to fifteen years and which contain renewal options of five years to ten years at the fair rental value at the time of renewal. These renewal options are included in the Company’s determination of the right-of-use assets and related lease liabilities when renewal is considered reasonably certain at the commencement date. Certain of the Company’s leases are subject to periodic consumer price index increases or contain fixed escalation clauses. The Company also leases certain facilities and equipment under finance leases. The Company has elected the practical expedient to not separate lease components from non-lease components related to its real estate financing and operating leases.

Financing and operating right-of-use assets are recognized based on the net present value of lease payments over the lease term at the commencement date. Since most of the Company's leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments.

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, assets recorded under finance leases were ~~$254,967~~$257,750 and ~~$367,164,~~$247,246, respectively, and accumulated amortization associated with finance leases was ~~$21,606~~$33,318 and ~~$131,971,~~$27,193, respectively, included in property and equipment, net, on the Company's consolidated balance sheet.

In certain markets, the Company acquires and develops dialysis centers. Upon completion, the Company sells the center to a third party and leases the space back with the intent of operating the center on a long term basis. Both the sale and leaseback terms are generally market terms. The lease terms are consistent with the Company's other operating leases with the majority of the leases under non-cancellable operating leases ranging in terms from five years to fifteen years and which contain renewal options of five years to ten years at the fair rental value at the time of renewal.

~~The Company adopted Topic 842,~~ ~~Leases~~ beginning on January 1, 2019 through a modified retrospective approach for leases existing at the adoption date with a cumulative effect adjustment. Consequently, financial information was not updated for dates and periods before January 1, 2019.

The components of lease expense were as follows:


Lease cost	Three months ended September 30, 2019		Nine months ended September 30, 2019		Three months ended March 31, 2020		Three months ended March 31, 2019
Operating lease cost⁽¹⁾:
Fixed lease expense	$	133,342	$	392,398	$	134,733	$	128,110
Variable lease expense	30,786		89,264		30,059		28,571
Financing lease cost:
Amortization of leased assets	6,164		17,693		6,077		5,826
Interest on lease liabilities	3,803		11,293		3,603		3,775
Net lease cost	$	174,095	$	510,648	$	174,472	$	166,282


(1)	Includes short-term lease expense and sublease income, which are immaterial.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

Other information related to leases was as follows:



Other information	Three months ended March 31, 2020		Three months ended March 31, 2019
Gains on sale leasebacks, net	$	9,489	$	3,987
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	162,828	$	153,587
Operating cash flows from finance leases	$	5,178	$	5,661
Financing cash flows from finance leases	$	4,180	$	5,344
Net operating lease assets obtained in exchange for new or modified operating lease liabilities	$	101,473	$	45,034



Lease term and discount rate	~~September 30, 2019~~March 31, 2020
Weighted average remaining lease term (years):
Operating leases	~~9.1~~8.9
Finance leases	~~10.5~~10.2
Weighted average discount rate:
Operating leases	~~4.2~~4.0	%
Finance leases	~~5.4~~5.3	%

Other information
Nine months ended
September 30, 2019
Gains on sale leasebacks, net $ 13,903
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 467,338
Operating cash flows from finance leases $ 16,226
Financing cash flows from finance leases $ 21,905
Net operating lease assets obtained in exchange for new or modified
operating lease liabilities $ 299,697

~~Future minimum lease payments under non-cancellable leases as of September 30, 2019 were as follows:~~

Operating leases Finance leases
2019 (remainder of the year) $ 121,795
$ 8,384
2020 497,654
38,411
2021 474,292
33,950
2022 437,481
34,369
2023 390,993
34,511
2024 340,662
34,540
Thereafter 1,433,145
183,786
Total future minimum lease payments $ 3,696,022
$ 367,951
Less portion representing interest (639,683 ) (87,813 )
Present value of lease liabilities $ 3,056,339
$ 280,138

~~Future minimum lease payments under non-cancellable leases as of December 31, 2018 were as follows:~~

Operating leases Capital leases
2019 $ 483,488
$ 36,754
2020 462,154
41,044
2021 432,950
34,026
2022 395,462
33,690
2023 349,649
33,845
Thereafter 1,589,949
194,611
$ 3,713,652
373,970
Less portion representing interest (91,233 )
Total capital lease obligations, including current portion $ 282,737

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

Future minimum lease payments under non-cancellable leases as of March 31, 2020 were as follows:



	Operating leases			Finance leases
2020 (remainder of the year)	$	344,537		$	30,291
2021	505,417			34,177
2022	472,643			34,621
2023	426,485			34,700
2024	372,190			34,725
2025	320,079			34,549
Thereafter	1,248,317			153,800
Total future minimum lease payments	$	3,689,668		$	356,863
Less portion representing interest	(599,265		)	(81,771		)
Present value of lease liabilities	$	3,090,403		$	275,092


~~11.~~10.	Contingencies

The majority of the Company’s revenues are from government programs and may be subject to adjustment as a result of: (i) examination by government agencies or contractors, for which the resolution of any matters raised may take extended periods of time to finalize; (ii) differing interpretations of government regulations by different Medicare contractors or regulatory authorities; (iii) differing opinions regarding a patient’s medical diagnosis or the medical necessity of services provided; and (iv) retroactive applications or interpretations of governmental requirements. In addition, the Company’s revenues from commercial payors may be subject to adjustment as a result of potential claims for refunds, as a result of government actions or as a result of other claims by commercial payors.

The Company operates in a highly regulated industry and is a party to various lawsuits, demands, claims, qui tam suits, governmental investigations and audits (including, without limitation, investigations or other actions resulting from its obligation to self-report suspected violations of law) and other legal proceedings. The Company records accruals for certain legal proceedings and regulatory matters to the extent that the Company determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company’s total recorded accruals with respect to legal proceedings and regulatory matters, net of anticipated third party recoveries, were immaterial. While these accruals reflect the Company’s best estimate of the probable loss for those matters as of the dates of those accruals, the recorded amounts may differ materially from the actual amount of the losses for those matters, and any anticipated third party recoveries for any such losses may not ultimately be recoverable. Additionally, in some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal proceedings and regulatory matters, which also may be impacted by various factors, including, without limitation, that they may involve indeterminate claims for monetary damages or may involve fines, penalties or non-monetary remedies; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; are in the early stages of the proceedings; or may result in a change of business practices. Further, there may be various levels of judicial review available to the Company in connection with any such proceeding.

The following is a description of certain lawsuits, claims, governmental investigations and audits and other legal proceedings to which the Company is subject.

Governmental Inquiries and Certain Related Proceedings

2016 U.S. Attorney Texas Investigation: In ~~early~~ February 2016, ~~the Company announced that its pharmacy services' wholly-owned subsidiary,~~ DaVita Rx, LLC (DaVita Rx), a wholly-owned subsidiary of the Company, received a Civil Investigative Demand (CID) from the U.S. Attorney’s Office, Northern District of Texas. The government is conducting a federal False Claims Act (FCA) investigation concerning allegations that DaVita Rx presented or caused to be presented false claims for payment to the government for prescription medications, as well as an investigation into the Company’s relationships with pharmaceutical manufacturers. The CID covers the period from January 1, 2006 through the present. In connection with the Company’s ongoing efforts working with the government, the Company learned that a qui tam complaint had been filed covering some of the issues in the CID and practices that had been identified by the Company in a self-disclosure filed with the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS)

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

in February 2016. In December 2017, the Company finalized and executed a settlement agreement with the government and relators in the qui tam matter that included total monetary consideration of $63,700, as previously disclosed, of which $41,500 was an incremental cash payment and $22,200 was for amounts previously refunded, and all of which was previously accrued. The government’s investigation into certain of the Company's relationships with pharmaceutical manufacturers is ongoing, and in July 2018 the OIG served the Company with a subpoena seeking additional documents and information relating to those relationships. The Company is continuing to cooperate with the government in this investigation.

2017 U.S. Attorney Massachusetts Investigation: In January 2017, the Company was served with an administrative subpoena for records by the U.S. Attorney’s Office, District of Massachusetts, relating to an investigation into possible federal health care offenses. The subpoena covered the period from January 1, 2007 to the present, and sought documents relevant to charitable patient assistance organizations, particularly the American Kidney Fund (AKF), including documents related to efforts to provide patients with information concerning the availability of charitable assistance. The Department of Justice notified the ~~Court~~court on July 23, 2019 of its decision to elect not to intervene in the matter of U.S. ex rel. David Gonzalez v. DaVita Healthcare Partners, et al. The complaint then was unsealed in the U.S. District Court, District of Massachusetts by order entered on August 1, 2019. The Department of Justice has confirmed that the complaint, which alleges violations of the FCA and various

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

state false claims acts, was the basis of its investigation initiated in January 2017. The Company has not been served with the complaint.

2017 U.S. Attorney Colorado Investigation: In November 2017, the U.S. Attorney’s Office, District of Colorado informed the Company of an investigation it was conducting into possible federal healthcare offenses involving DaVita Kidney Care, as well as several of the Company’s wholly-owned subsidiaries. ~~The~~In addition to DaVita Kidney Care, the matter currently includes an investigation into DaVita Rx, DaVita Laboratory Services, Inc. (DaVita Labs), and RMS Lifeline Inc. (Lifeline). In each of August 2018 and May 2019, the Company received a CID pursuant to the FCA from the U.S. Attorney's Office relating to this investigation. The Company is continuing to cooperate with the government in this investigation.

2018 U.S. Attorney Florida Investigation: In March 2018, DaVita Labs received two CIDs from the U.S. Attorney’s Office, Middle District of Florida that were identical in nature but directed to the two different labs. According to the face of the CIDs, the U.S. Attorney’s Office is conducting an investigation as to whether the Company’s subsidiary submitted claims for blood, urine, and fecal testing, where there were insufficient test validation or stability studies to ensure accurate results, in violation of the FCA. In October 2018, DaVita Labs received a subpoena from the OIG in connection with this matter requesting certain patient records linked to clinical laboratory tests. On September 30, 2019, the U.S. Attorney’s Office notified the U.S. District Court, Middle District of Florida, of its decision not to elect to intervene at this time in the matter of U.S. ex rel. Lorne Holland, et al. v. DaVita Healthcare Partners, Inc., et al. The court then unsealed the complaint, which alleges violations of the FCA, by order dated the same day. In January 2020, the private party relators served the Company and DaVita Labs with an amended complaint. On February 24, 2020, the Company and DaVita Labs filed a motion to dismiss the amended complaint. The Company ~~has not been~~and DaVita Labs dispute these allegations and intend to defend this action accordingly.

2020 U.S. Attorney New Jersey Investigation: In March 2020, the U.S. Attorney’s Office, District of New Jersey served the Company with a subpoena and a CID relating to an investigation being conducted by that office and the U.S. Attorney’s Office, Eastern District of Pennsylvania. The subpoena and CID request information on several topics, including certain of the Company’s joint venture arrangements with physicians and physician groups, medical director agreements, and compliance with the ~~complaint.~~Corporate Integrity Agreement. The Company is cooperating with the government in this investigation.

2020 California Department of Insurance Investigation: In April 2020, the California Department of Insurance sent the Company a Investigative Subpoena relating to an investigation being conducted by that office. The subpoena requests information on a number of topics, including but not limited to the Company’s communications with patients about insurance plans and financial assistance from the American Kidney Fund (AKF), analyses of the potential impact of patients’ decisions to change insurance providers, and documents relating to donations or contributions to the AKF. The Company is cooperating with the California Department of Insurance in this investigation.

* * *

Although the Company cannot predict whether or when proceedings might be initiated or when these matters may be resolved (other than as may be described above), it is not unusual for inquiries such as these to continue for a considerable period of time through the various phases of document and witness requests and on-going discussions with regulators and to develop over the course of time. In addition to the inquiries and proceedings specifically identified above, the Company

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

frequently is subject to other inquiries by state or federal government agencies and/or private civil qui tam complaints filed by relators. Negative findings or terms and conditions that the Company might agree to accept as part of a negotiated resolution of pending or future government inquiries or relator proceedings could result in, among other things, substantial financial penalties or awards against the Company, substantial payments made by the Company, harm to the Company’s reputation, required changes to the Company’s business practices, exclusion from future participation in the Medicare, Medicaid and other federal health care programs and, if criminal proceedings were initiated against the Company, members of its board of directors or management, possible criminal penalties, any of which could have a material adverse effect on the Company.

Shareholder and Derivative Claims

Peace Officers’ Annuity and Benefit Fund of Georgia Securities Class Action Civil Suit: On February 1, 2017, the Peace Officers’ Annuity and Benefit Fund of Georgia filed a putative federal securities class action complaint in the U.S. District Court for the District of Colorado against the Company and certain executives. The complaint covers the time period of August 2015 to October 2016 and alleges, generally, that the Company and its executives violated federal securities laws concerning the Company’s financial results and revenue derived from patients who received charitable premium assistance from an industry-funded non-profit organization. The complaint further alleges that the process by which patients obtained commercial insurance and received charitable premium assistance was improper and "created a false impression of DaVita’s business and operational status and future growth prospects." In November 2017, the court appointed the lead plaintiff and an amended complaint was filed on January 12, 2018. On March 27, 2018, the Company and various individual defendants filed a motion to dismiss. On March 28, 2019, the U.S. District Court for the District of Colorado denied the motion to dismiss. The Company answered the complaint on May 28, 2019. On January 31, 2020, the plaintiffs filed a motion for class certification that the Company intends to oppose. The Company disputes these allegations and intends to defend this action accordingly.

In re DaVita Inc. Stockholder Derivative Litigation: On August 15, 2017, the U.S. District Court for the District of Delaware consolidated 3 previously disclosed shareholder derivative lawsuits: the Blackburn Shareholder action filed on February 10, 2017, the Gabilondo Shareholder action filed on May 30, 2017, and the City of Warren Police and Fire Retirement System Shareholder action filed on June 9, 2017. The complaint covers the time period from 2015 to present and alleges, generally, breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, corporate waste, and misrepresentations and/or failures to disclose certain information in violation of the federal securities laws in connection with an alleged practice to direct patients with government-subsidized health insurance into private health insurance plans to

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

maximize the Company’s profits. An amended complaint was filed in September 2017, and on December 18, 2017, the Company filed a motion to dismiss and a motion to stay proceedings in the alternative. On April 25, 2019, the court denied the Company's motion to dismiss. The Company answered the complaint on May 28, 2019. The Company disputes these allegations and intends to defend this action accordingly.

Other Proceedings

In addition to the foregoing, from time to time the Company is subject to other lawsuits, demands, claims, governmental investigations and audits and legal proceedings that arise due to the nature of its business, including, without limitation, contractual disputes, such as with payors, suppliers and others, employee-related matters and professional and general liability claims. From time to time, the Company also initiates litigation or other legal proceedings as a plaintiff arising out of contracts or other matters.

* * *

Other than as may be described above, the Company cannot predict the ultimate outcomes of the various legal proceedings and regulatory matters to which the Company is or may be subject from time to time, including those described in this Note 1110 to these condensed consolidated financial statements, or the timing of their resolution or the ultimate losses or impact of developments in those matters, which could have a material adverse effect on the Company’s revenues, earnings and cash flows. Further, any legal proceedings or regulatory matters involving the Company, whether meritorious or not, are time consuming, and often require management’s attention and result in significant legal expense, and may result in the diversion of significant operational resources, or otherwise harm the Company’s business, results of operations, financial condition, cash flows or reputation.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)


~~12.~~11.	Other commitments

The Company has certain other potential commitments to provide operating capital to a number of dialysis centers that are wholly-owned by third parties or businesses in which the Company maintains a noncontrolling equity interest as well as to physician-owned vascular access clinics or medical practices that the Company operates under management and administrative services agreements of approximately ~~$6,935.~~$9,460.


~~13.~~12.	Long-term incentive compensation

Long-term incentive program (LTIP) compensation includes both stock-based awards (principally stock-settled stock appreciation rights, restricted stock units, and performance stock units) as well as long-term performance-based cash awards. Long-term incentive compensation expense, which is primarily general and administrative in nature, is attributed to the Company’s U.S. dialysis ~~and related lab services~~ business, corporate administrative support, and ancillary ~~services and strategic initiatives.~~services.

The Company’s stock-based compensation expense for stock-settled awards is measured at the estimated fair value of awards on the date of grant and recognized on a cumulative straight-line basis over the vesting terms of the awards unless the stock awards are based on non-market based performance metrics, in which case expense is adjusted for the expected ultimate shares to be issued as of the end of each reporting period. Stock-based compensation expense for cash-settled awards is based on their estimated fair values as of the end of each reporting period. The expense for all stock-based awards is recognized net of expected forfeitures.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company granted ~~1,921~~950 restricted and performance stock units with an aggregate grant-date fair value of ~~$96,472~~$72,648 and a weighted-average expected life of approximately ~~3.4~~3.5 years and ~~2,390~~2,765 stock-settled stock appreciation rights with an aggregate grant-date fair value of ~~$33,545~~$73,833 and a weighted-average expected life of approximately ~~4.0~~4.8 years.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the Company recognized ~~$82,469~~$25,594 and ~~$74,077,~~$13,107, respectively, in total LTIP expense, of which ~~$43,666~~$19,870 and ~~$60,461,~~$10,301, respectively, represented stock-based compensation expense for stock appreciation rights, restricted stock units, performance stock units and discounted employee stock plan purchases, which are primarily included in general and administrative expense. The estimated tax benefits recorded for stock-based compensation for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 was $2,584 and ~~2018~~$1,495, respectively.

As of March 31, 2020, the Company had $247,420 in total estimated but unrecognized stock-based compensation expense under the Company’s equity compensation and employee stock purchase plans. The Company expects to recognize this expense over a weighted average remaining period of 1.7 years. The Company 0 longer has outstanding long-term performance-based cash awards in its principal U.S. dialysis business as the performance and accrual period for these awards ended December 31, 2019 with a final payout of $66,302 in 2020.

For the three months ended March 31, 2020 and 2019, the Company recognized $199 and $151, respectively, in actual tax benefits upon the settlement of stock awards.

On November 4, 2019, the independent members of the Company’s Board of Directors (Board) approved an award of 2,500 premium-priced stock-settled stock appreciation rights (Premium-Priced Award) to the Company’s Chief Executive Officer (CEO), which award was ~~$6,798~~subject to stockholder approval of a related amendment to the Company's 2011 Incentive Award Plan (2011 Plan). The Company's stockholders approved such amendment to the 2011 Plan on January 23, 2020, authorizing the grant to the Company's CEO. Since stockholder approval occurred in 2020, subsequent to the Board approval, this award had both a service inception and ~~$10,887, respectively.~~grant date of January 23, 2020 for accounting purposes.

The base price of the Premium-Priced Award is $67.80 per share, which is a 20% premium to the clearing price of the Company's 2019 modified Dutch auction tender offer. The award vests 50% on each of November 4, 2022 and November 4, 2023, and expires on November 4, 2024. The award includes a requirement that the CEO hold any shares acquired upon exercise of this award, net of shares used to cover related taxes, until November 4, 2024 (that is, for the full term of the award), subject to lapse of the holding period upon a change in control of the Company or due to the CEO's death or termination due to disability.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

As of September 30, 2019, the Company had $166,502 in total estimated but unrecognized compensation expense for outstanding LTIP awards, including $151,805 related to stock-based compensation arrangements under the Company’s equity compensation and employee stock purchase plans. The Company expects to recognize the performance-based cash component of these LTIP expenses over a weighted average remaining period of 0.6 years and the stock-based component of these LTIP expenses over a weighted average remaining period of 1.6 years.

~~For the nine months ended September 30, 2019 and 2018, the Company recognized $2,791 and $7,919, respectively, in actual tax benefits upon the settlement of stock awards.~~

On November 4, 2019, the independent members of the Company’s Board of Directors (Board) unanimously approved an award of 2,500 premium-priced stock-settled stock appreciation rights (Premium-Priced Award) to the Company’s Chief Executive Officer (CEO), which is subject to stockholder approval of a related amendment to the Company's 2011 Incentive Award Plan.

The base price of the Premium-Priced Award is $67.80 per share, which is a 20% premium to the Tender Offer clearing price. The award vests 50% on each of the third and fourth anniversaries of the date of Board approval and expires after five years. The award includes a holding period requiring that the CEO hold any shares acquired upon exercise until the five-year anniversary of the Board approval, that is, for the full term of the award, subject to lapse of the holding period upon a change in control of the Company or due to Mr. Rodriguez’s death or termination due to disability.


~~14.~~13.	Share repurchases

The following table summarizes the Company's repurchases of its common stock during the three ~~and nine~~ months ended ~~September 30, 2019.~~March 31, 2020 and 2019:



	Three months ended March 31, 2020					Three months ended March 31, 2019
	Shares repurchased	Amount paid		Average paid per share		Shares repurchased	Amount paid		Average paid per share
Open market repurchases	4,052	$	303,139	$	74.81	—	$	—	$	—

Three months ended September 30, 2019 Nine months ended September 30, 2019
Shares repurchased Amount paid Average amount Shares repurchased Amount paid Average amount
Tender Offer⁽¹⁾
21,802
$ 1,233,886
$ 56.60
21,802
$ 1,233,886
$ 56.60
Open market repurchases 8,790
514,082
58.49
10,850
626,271
57.72
30,592
$ 1,747,968
$ 57.14
32,652
$ 1,860,157
$ 56.97


~~(1)~~	~~The amount paid for~~The Company did not repurchase any shares repurchased associated with the Company's Tender Offer during the three and nine months ended September 30, 2019 includes the clearing price of $56.50 per share plus related fees and expenses of $2,074.

~~In addition, the Company also repurchased 4,283 shares of its common stock for $245,544 at an average cost of $57.32 per share,~~ subsequent to ~~September 30, 2019~~March 31, 2020 through ~~November~~May 4, ~~2019.~~

Effective July 17, 2019, the Board terminated all remaining prior share repurchase authorizations available to the Company at that time and approved a new share repurchase authorization of $2,000,000. As of the close of business on November 4, 2019, the Company had repurchased a total of 30,661 of shares of its common stock for $1,753,627 under this repurchase authorization.2020.

Effective as of the close of business on November 4, 2019, the Board terminated all remaining prior share repurchase authorizations available to the Company ~~under the aforementioned July 17, 2019 authorization~~ and approved a new share repurchase authorization of $2,000,000. ~~Accordingly, as~~As of ~~November 6, 2019,~~May 4, 2020, the Company had a total of ~~$2,000,000~~$1,400,356 available under the current repurchase authorization for additional share repurchases. Although this share repurchase authorization does not have an expiration date, the Company remains subject to share repurchase limitations, including under the terms of its current senior secured credit facilities and the indentures governing its senior notes.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~


~~15.~~14.	Accumulated other comprehensive ~~(loss) income~~loss



	For the three months ended March 31, 2020									For the three months ended March 31, 2019
	Interest rate cap agreements			Foreign currency translation adjustments			Accumulated other comprehensive loss			Interest rate cap agreements			Foreign currency translation adjustments			Accumulated other comprehensive loss
Beginning balance	$	(1,433	)	$	(46,065	)	$	(47,498	)	$	(8,961	)	$	(25,963	)	$	(34,924	)
Unrealized losses	(17,346		)	(81,632		)	(98,978		)	(781		)	(13,653		)	(14,434		)
Related income tax	4,328			—			4,328			201			—			201
	(13,018		)	(81,632		)	(94,650		)	(580		)	(13,653		)	(14,233		)
Reclassification into net income	2,163			—			2,163			2,163			—			2,163
Related income tax	(540		)	—			(540		)	(557		)	—			(557		)
	1,623			—			1,623			1,606			—			1,606
Ending balance	$	(12,828	)	$	(127,697	)	$	(140,525	)	$	(7,935	)	$	(39,616	)	$	(47,551	)

For the three months ended September 30, 2019 For the nine months ended September 30, 2019
Interest
rate cap
agreements Foreign
currency
translation
adjustments Accumulated
other
comprehensive
loss Interest
rate cap
agreements Foreign
currency
translation
adjustments Accumulated
other
comprehensive
loss
Beginning balance $ (6,360 ) $ (27,251 ) $ (33,611 ) $ (8,961 ) $ (25,963 ) $ (34,924 )
Unrealized losses (1,420 ) (44,502 ) (45,922 ) (2,244 ) (45,790 ) (48,034 )
Related income tax 360
—
360
572
—
572
(1,060 ) (44,502 ) (45,562 ) (1,672 ) (45,790 ) (47,462 )
Reclassification into net income 2,101
—
2,101
6,428
—
6,428
Related income tax (532 ) —
(532 ) (1,646 ) —
(1,646 )
1,569
—
1,569
4,782
—
4,782
Ending balance $ (5,851 ) $ (71,753 ) $ (77,604 ) $ (5,851 ) $ (71,753 ) $ (77,604 )

For the three months ended September 30, 2018 For the nine months ended September 30, 2018
Interest
rate cap
agreements Foreign
currency
translation
adjustments Accumulated
other
comprehensive
loss Interest
rate cap
agreements Investment
securities Foreign
currency
translation
adjustments Accumulated
other
comprehensive
(loss) income
Beginning balance $ (11,258 ) $ (10,667 ) $ (21,925 ) $ (12,408 ) $ 5,662
$ 19,981
$ 13,235
Cumulative effect of change
in accounting principle⁽¹⁾
—
—
—
(2,706 ) (5,662 ) —
(8,368 )
Unrealized gains (losses) 50
(8,827 ) (8,777 ) 1,103
—
(39,475 ) (38,372 )
Related income tax (13 ) —
(13 ) (284 ) —
—
(284 )
37
(8,827 ) (8,790 ) 819
—
(39,475 ) (38,656 )
Reclassification into net income 2,163
—
2,163
6,303
—
—
6,303
Related income tax (557 ) —
(557 ) (1,623 ) —
—
(1,623 )
1,606
—
1,606
4,680
—
—
4,680
Ending balance $ (9,615 ) $ (19,494 ) $ (29,109 ) $ (9,615 ) $ —
$ (19,494 ) $ (29,109 )


~~(1)~~	Reflects the cumulative effect of a change in accounting principle for ASUs 2016-01 and 2018-03 on classification and measurement of financial instruments and ASU 2018-02 on remeasurement and reclassification of deferred tax effects in accumulated other comprehensive income associated with the Tax Cuts and Jobs Act of 2017.

~~Net~~The reclassification of net cap realized losses ~~reclassified~~ into income are recorded as debt expense in the corresponding consolidated statements of income. See Note 98 to these condensed consolidated financial statements for further details.

Prior to January 1, 2018, unrealized gains and losses on available-for-sale equity securities were recorded to accumulated other comprehensive income and reclassified to other income when realized. Subsequent to January 1, 2018, unrealized gains and losses on investment securities are recorded directly to other income rather than to accumulated other comprehensive income.


~~16.~~15.	Acquisitions and divestitures

~~Routine acquisitions~~

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company acquired dialysis businesses consisting of 72 dialysis centers located in the U.S. and 922 dialysis centers located outside the U.S. for a total of ~~$75,323~~$34,107 in net cash, ~~$529~~$875 in deferred purchase price obligations, and ~~$19,818~~$5,007 in earn-out obligations and assumed liabilities. The assets and liabilities for these acquisitions were recorded at their estimated fair values at the dates of the acquisitions and are included in the Company’s condensed consolidated financial statements, as are their operating results, from the designated effective dates of the acquisitions.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

The initial purchase price allocations for these transactions have been recorded at estimated fair values based on the best information available to management and will be finalized when certain information arranged to be obtained has been received. In particular, certain income tax amounts are pending final evaluation and quantification of pre-acquisition tax contingencies and filing of final tax returns. In addition, valuation of certain working capital items, fixed assets and intangibles are pending final audits and related valuation reports.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

The following table summarizes the assets acquired and liabilities assumed in these transactions at their estimated acquisition date fair values:


Current assets	$	5,238		$	7,412
Property and equipment	3,607			8,892
Intangible and other long-term assets	15,848			6,107
Goodwill	77,238			26,770
Deferred income taxes				1,513
Current liabilities	(3,360		)	(10,705		)
Long-term liabilities	(1,139		)
Noncontrolling interests	(1,762		)
	$	95,670		$	39,989

Amortizable intangible assets acquired during the ~~first nine~~three months ~~of 2019~~ended March 31, 2020 primarily represent non-compete agreements which had weighted-average estimated useful lives of approximately ~~six~~four years. The total estimated amount of goodwill deductible for tax purposes associated with these acquisitions was approximately ~~$75,529.~~$11,241.

Contingent earn-out obligations

The Company has several contingent earn-out obligations associated with acquisitions that could result in the Company paying the former owners of acquired companies a total of up to ~~$35,338~~$31,723 if certain ~~EBITDA, operating income~~ performance targets or quality margins are met primarily over the next one year to five years. As of ~~September 30, 2019,~~March 31, 2020, the estimated fair values of these contingent earn-out obligations is ~~$19,833,~~$22,386, of which ~~$4,401~~$4,579 is included in other current liabilities and the remaining ~~$15,432~~$17,807 is included in other long-term liabilities in the Company’s consolidated balance sheet.

The following is a reconciliation of changes in contingent earn-out obligations for the ~~nine~~three months ended ~~September 30, 2019:~~March 31, 2020:

Beginning balance December 31, 2018 $ 2,608
Contingent earn-out obligations associated with acquisitions 19,731
Remeasurement of fair value for contingent earn-out obligations (2,179 )
Payments on contingent earn-out obligations (327 )
Ending balance September 30, 2019 $ 19,833



Balance at December 31, 2019	$	24,586
Contingent earn-out obligations associated with acquisitions	2,672
Foreign currency translation adjustment for contingent earn-out obligations	(4,874		)
Remeasurement of fair value for contingent earn-out obligations	2
Balance at March 31, 2020	$	22,386

~~17.~~16. ~~Held~~Discontinued operations previously held for sale ~~and discontinued operations~~

DaVita Medical Group

On June 19, 2019, the Company completed the sale of its ~~DMG division~~DaVita Medical Group (DMG) business to ~~Collaborative Care Holdings, LLC (Optum),~~Optum, a subsidiary of UnitedHealth Group Inc., for an aggregate purchase price of $4,340,000, prior to certain closing and post-closing adjustments specified in the related equity purchase agreement dated as of December 5, 2017, as amended as of September 20, 2018 and as of December 11, 2018 (as amended, the equity purchase agreement).

The Company ~~has~~ recorded a preliminary estimated pre-tax net loss of approximately $23,022 on the sale of its DMG ~~division for the nine months ended September 30,~~business in 2019. This preliminary net loss iswas based on initial estimates of the Company's expected aggregate proceeds from the sale, net of transaction costs and obligations, as well as the estimated values of DMG net assets sold as of the closing date. These estimated net proceeds ~~include~~included $4,465,476 in cash received from Optum at closing, or $3,824,509 net of cash and restricted cash included in the DMG net assets sold.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars~~ During the three months ended March 31, 2020, the Company recognized $9,980 in additional tax benefits under the Coronavirus Aid, Relief, and ~~shares in thousands, except per share data)~~

Economic Security (CARES) Act related to its period of DMG ownership, which have been recognized as an adjustment to the Company's loss on sale of the DMG business.

The ultimate net proceeds from the DMG sale, as well as the value of its previously held for sale net assets sold, remain subject to estimate revisions and post-closing adjustments pursuant to the equity purchase agreement, which could be material. The Company continues to work with Optum concerning what, if any, net working capital adjustment or other potential adjustments to the purchase price are appropriate, via the process set forth in the equity purchase agreement. Under the equity purchase agreement, the Company also has certain indemnification obligations that could require payments to the buyer relating

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

to the Company's previous ownership and operation of the DMG business. Potential payments under these provisions, if any, remain subject to significant uncertainties and could have a material adverse effect on the net proceeds ultimately retained by the Company or the total amount of its loss on the sale of this business.

The following table presents the financial results of discontinued operations related to DMG:

Three months ended September 30, Nine months ended September 30,
2019 2018 2019 2018
Revenues $ —
$ 1,252,909
$ 2,713,059
$ 3,733,270
Expenses 1,996
1,260,814
2,541,783
3,679,747
Valuation adjustment —
98,201
—
98,201
(Loss) income from discontinued operations before taxes (1,996 ) (106,106 ) 171,276
(44,678 )
Loss on sale of discontinued operations before taxes —
—
(23,022 ) —
Income tax expense 4,847
105,633
45,400
103,151
Net (loss) income from discontinued operations, net of tax $ (6,843 ) $ (211,739 ) $ 102,854
$ (147,829 )



	Three months ended March 31,
	2020		2019
Revenues	$	—	$	1,382,281
Expenses	—		1,338,153
Income from discontinued operations before taxes	—		44,128
Income tax expense	—		13,823
Gain (loss) on sale of discontinued operations, net of tax	9,980		—
Net income from discontinued operations, net of tax	$	9,980	$	30,305

The following table presents cash flows of discontinued operations related to DMG:


	Nine months ended September 30,						Three months ended March 31,
	2019			2018			2020		2019
Net cash provided by operating activities from discontinued operations	$	97,005		$	208,570		$	—	$	68,240
Net cash used in investing activities from discontinued operations	$	(43,442	)	$	(32,860	)	$	—	$	(22,809	)

~~DMG acquisitions~~

During the period from January 1, 2019 to June 18, 2019 immediately prior to sale, the Company's DMG business acquired 2 medical businesses for a total of $2,025 in cash and deferred purchase price of $212.


~~18.~~17.	Variable interest entities (VIEs)

~~The Company relies on the operating activities~~At March 31, 2020, these condensed consolidated financial statements include total assets of ~~certain legal entities that it does not directly own or control, but over which it has indirect influence~~VIEs of $320,505 and total liabilities and noncontrolling interests of ~~which it is considered the primary beneficiary. These entities are subject~~VIEs to ~~the consolidation guidance applicable to variable interest entities (VIEs).~~

third parties of $234,915. There have been no material changes in the nature of the Company's arrangements with VIEs or its judgments concerning them from those described in Note 23 to the Company's consolidated financial statements included in the 10-K.

At September 30, 2019, these condensed consolidated financial statements include total assets of VIEs of $389,284 and total liabilities and noncontrolling interests of VIEs to third parties of $273,660.


~~19.~~18.	Fair values of financial instruments

The Company measures the fair value of certain assets, liabilities and noncontrolling interests subject to put provisions ~~(temporary~~(redeemable equity interests classified as temporary equity) based upon certain valuation techniques that include observable or unobservable inputs and assumptions that market participants would use in pricing these assets, liabilities, temporary equity and commitments. The Company has also classified certain assets, liabilities and temporary equity that are measured at fair value into the appropriate fair value hierarchy levels as defined by the ~~FASB.~~Financial Accounting Standards Board (FASB).

The following table summarizes the Company’s assets, liabilities and temporary equity that are measured at fair value on a recurring basis as of March 31, 2020:



	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Investments in equity securities	$	35,843	$	35,843	$	—	$	—
Interest rate cap agreements	$	7,106	$	—	$	7,106	$	—
Liabilities
Contingent earn-out obligations	$	22,386	$	—	$	—	$	22,386
Temporary equity
Noncontrolling interests subject to put provisions	$	1,228,036	$	—	$	—	$	1,228,036

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

~~The following table summarizes~~For reconciliations of changes in contingent earn-out obligations and noncontrolling interests subject to put provisions during the ~~Company’s assets, liabilities~~three months ended March 31, 2020, see Note 15 and ~~temporary~~the consolidated statement of equity, ~~that are measured at fair value on a recurring basis as of September 30, 2019:~~

Total Quoted prices in
active markets for
identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable
inputs
(Level 3)
Assets

Investments in equity securities $ 37,641
$ 37,641
$ —
$ —
Interest rate cap agreements $ 20,642
$ —
$ 20,642
$ —
Liabilities

Contingent earn-out obligations $ 19,833
$ —
$ —
$ 19,833
Temporary equity

Noncontrolling interests subject to put provisions $ 1,296,059
$ —
$ —
$ 1,296,059

respectively.

Investments in equity securities represent investments in various open-ended registered investment companies (mutual funds) and common stock and are recorded at ~~estimated~~ fair value estimated based on reported market prices or redemption prices, as applicable. See Note 54 to these condensed consolidated financial statements for further discussion.

Interest rate cap agreements are recorded at fair value estimated from valuation models utilizing the income approach and commonly accepted valuation techniques that use inputs from closing prices for similar assets and liabilities in active markets as well as other relevant observable market inputs at quoted intervals such as current interest rates, forward yield curves, implied volatility and credit default swap pricing. The Company does not believe the ultimate amount that could be realized upon settlement of these interest rate cap agreements would be materially different from the fair value estimates currently reported. See Note 98 to these condensed consolidated financial statements for further discussion.

The estimated fair value measurements of contingent earn-out obligations are primarily based on unobservable inputs, including projected ~~EBITDA.~~earnings before interest, taxes, depreciation, and amortization (EBITDA) and revenue. The estimated fair value of these contingent earn-out obligations is remeasured as of each reporting date and could fluctuate based upon any significant changes in key assumptions, such as changes in the Company's credit risk adjusted rate that is used to discount obligations to present value. See Note 1615 to these condensed consolidated financial statements for further discussion.

The estimated fair value of noncontrolling interests subject to put provisions is based principally on the higher of either estimated liquidation value of net assets or a multiple of earnings for each subject dialysis partnership, based on historical earnings, revenue mix, and other performance indicators that can affect future results. The multiples used for these valuations are derived from observed ownership transactions for dialysis businesses between unrelated parties in the U.S. in recent years, and the specific valuation multiple applied to each dialysis partnership is principally determined by its recent and expected revenue mix and contribution margin. As of March 31, 2020, an increase or decrease in the weighted average multiple used in these valuations of one times EBITDA would change the estimated fair value of these noncontrolling interests by approximately $150,000. See Note 1817 to the Company's consolidated financial statements included in the 10-K for afurther discussion of the Company’s methodology for estimating the fair value of noncontrolling interests subject to put obligations.

The Company's fair value estimates for its senior secured credit facilities and senior notes are based upon bid and ask quotes for these instruments, typically a level 2 input. See Note 98 to these condensed consolidated financial statements for further discussion of the Company's debt.

Other financial instruments consist primarily of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, other accrued liabilities, lease liabilities and debt. The balances of ~~non-debt~~ financial instruments other than debt and lease liabilities are presented in these condensed consolidated financial statements at ~~September 30, 2019~~March 31, 2020 at their approximate fair values due to the short-term nature of their settlements.


~~20.~~19.	Segment reporting

The Company’s operations are comprised of its U.S. dialysis and related lab services business, its various ancillary services and strategic initiatives, including its international operations, and its corporate administrative support.

On June 19, 2019, the Company completed the sale of its DMG division to Optum, a subsidiary of UnitedHealth Group Inc. As a result of this transaction, DMG's results of operations have been reported as discontinued operations for all periods presented.

The Company’s separate operating segments include its U.S. dialysis and related lab services business, each of its ancillary services and strategic initiatives, its kidney care operations in each foreign sovereign jurisdiction, its other health operations in each foreign sovereign jurisdiction, and its equity method investment in the APAC JV. The U.S. dialysis and related lab services business qualifies as a separately reportable segment, and all other ancillary services and strategic initiatives operating segments, including the international operating segments, have been combined and disclosed in the other segments category.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

~~The Company’s operating segment~~ See Note 25 to the Company's consolidated financial ~~information~~statements included in ~~this report is prepared on~~ the ~~internal management reporting basis that~~10-K for further description of how the ~~chief operating decision maker uses to allocate resources~~Company determines and ~~assess the financial performance of the Company's~~measures results for its operating segments. For internal management reporting, segment operations include direct segment operating expenses but generally exclude corporate administrative support costs, which consist primarily of indirect labor, benefits and long-term incentive-based compensation expenses of certain departments which provide support to all of the Company’s various operating lines of business, except to the extent that such costs are charged to and borne by certain ancillary services and strategic initiatives via internal management fees. These corporate administrative support costs are reduced by internal management fees received from the Company’s ancillary lines of business.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

The following is a summary of segment net revenues, segment operating margin (loss), and a reconciliation of segment operating margin to consolidated income before income taxes:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2019			2018			2019			2018			2020			2019
Segment revenues:
U.S. dialysis and related lab services
Patient service revenues:
U.S. dialysis
Dialysis patient service revenues:
External sources	$	2,652,946		$	2,559,345		$	7,782,435		$	7,661,244		$	2,579,240		$	2,511,826
Intersegment revenues	32,150			25,424			92,611			63,943			31,941			30,420
U.S. dialysis and related lab services patient service revenues	2,685,096			2,584,769			7,875,046			7,725,187
Provision for uncollectible accounts	(3,977		)	(12,900		)	(19,689		)	(37,108		)
Net U.S. dialysis and related lab services patient service revenues	2,681,119			2,571,869			7,855,357			7,688,079
U.S. dialysis patient service revenues													2,611,181			2,542,246
Other revenues⁽¹⁾:
External sources	10,096			4,932			19,989			14,965			5,141			4,684
Intersegment revenues	212			—			726			—			301			221
Total U.S. dialysis and related lab services revenues	2,691,427			2,576,801			7,876,072			7,703,044
Other—Ancillary services and strategic initiatives
Patient service revenues, net	128,223			112,279			367,951			320,204
Total U.S. dialysis revenues													2,616,623			2,547,151
Other—Ancillary services
Dialysis patient service revenues, net													134,041			117,863
Other external sources	116,790			183,674			339,209			624,422			122,815			108,739
Intersegment revenues	3,483			8,361			10,222			27,748			4,152			3,336
Total ancillary services and strategic initiatives revenues	248,496			304,314			717,382			972,374
Total ancillary services revenues													261,008			229,938
Total net segment revenues	2,939,923			2,881,115			8,593,454			8,675,418			2,877,631			2,777,089
Elimination of intersegment revenues	(35,845		)	(33,785		)	(103,559		)	(91,691		)	(36,394		)	(33,977		)
Consolidated revenues	$	2,904,078		$	2,847,330		$	8,489,895		$	8,583,727		$	2,841,237		$	2,743,112
Segment operating margin:
U.S. dialysis and related lab services	$	500,742		$	390,006		$	1,416,680		$	1,272,828
Other—Ancillary services and strategic initiatives	(97,725		)	(60,132		)	(170,405		)	(64,307		)
Segment operating margin (loss):
U.S. dialysis													$	491,607		$	416,981
Other—Ancillary services													(2,646		)	(57,630		)
Total segment operating margin	403,017			329,874			1,246,275			1,208,521			488,961			359,351
Reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:
Corporate administrative support	(24,681		)	(40,836		)	(65,546		)	(70,605		)	(23,585		)	(18,844		)
Consolidated operating income	378,336			289,038			1,180,729			1,137,916			465,376			340,507
Debt expense	(88,589		)	(125,927		)	(351,774		)	(359,135		)	(88,603		)	(131,519		)
Debt prepayment, refinancing and redemption charges	(21,242		)	—			(33,402		)	—
Debt refinancing charges													(2,948		)	—
Other income, net	5,280			4,007			17,863			10,583			(4,350		)	6,940
Consolidated income from continuing operations before income taxes	$	273,785		$	167,118		$	813,416		$	789,364		$	369,475		$	215,928


(1)	Includes management fee revenue from providing management and administrative services to dialysis ventures in which the Company owns a noncontrolling equity investment or which are wholly-owned by third parties.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

A summary of assets by reportable segment was as follows:

September 30, 2019 December 31, 2018
Segment assets

U.S. dialysis and related lab services (including equity
investments of $100,815 and $95,290, respectively) $ 15,997,552
$ 12,333,641
Other—Ancillary services and strategic initiatives (including
equity investments of $118,571 and $129,321, respectively) 1,454,278
1,387,046
DMG—Held for sale (including equity investments of $0 and
$4,833, respectively) —
5,389,565
Consolidated assets $ 17,451,830
$ 19,110,252



	March 31, 2020		December 31, 2019
U.S. dialysis (including equity investments of $130,144 and $124,188, respectively)	$	16,075,622	$	15,778,880
Other—Ancillary services (including equity investments of $124,355 and $117,795, respectively)	1,520,678		1,532,514
Consolidated assets	$	17,596,300	$	17,311,394

Depreciation and amortization expense by reportable segment was as follows:

Three months ended
September 30, Nine months ended
September 30,
2019 2018 2019 2018
U.S. dialysis and related lab services $ 147,607
$ 138,669
$ 433,008
$ 411,697
Other—Ancillary services and strategic initiatives
8,308
7,331
23,677
24,181
$ 155,915
$ 146,000
$ 456,685
$ 435,878



	Three months ended March 31,
	2020		2019
U.S. dialysis	$	146,300	$	140,780
Other—Ancillary services	8,379		7,748
	$	154,679	$	148,528

Expenditures for property and equipment by reportable segment were as follows:

Three months ended
September 30, Nine months ended
September 30,
2019 2018 2019 2018
U.S. dialysis and related lab services $ 157,721
$ 214,728
$ 477,533
$ 603,186
Other—Ancillary services and strategic initiatives 15,544
5,019
31,184
37,191
DMG—Held for sale —
11,935
38,466
65,282
$ 173,265
$ 231,682
$ 547,183
$ 705,659



	Three months ended March 31,
	2020		2019
U.S. dialysis	$	148,763	$	170,548
Other—Ancillary services	6,179		8,578
DMG—Discontinued operations	—		19,752
	$	154,942	$	198,878


~~21.~~20.	Changes in DaVita Inc.’s ownership interests in consolidated subsidiaries

The effects of changes in DaVita Inc.’s ownership interests in consolidated subsidiaries on the Company’s consolidated equity were as follows:


	Three months ended September 30,						Nine months ended September 30,					Three months ended March 31,
	2019			2018			2019		2018			2020			2019
Net income (loss) attributable to DaVita Inc.	$	143,270		$	(136,796	)	$	566,110	$	309,166
Net income attributable to DaVita Inc.												$	239,593		$	149,289
Changes in paid-in capital for:
Sales of noncontrolling interests	—			—			—		79
Purchases of noncontrolling interests	(202		)	(5,285		)	10,732		(17,482		)	(445		)	(2,206		)
Net transfers to noncontrolling interests	(202		)	(5,285		)	10,732		(17,403		)	(445		)	(2,206		)
Net income (loss) attributable to DaVita Inc., net of transfers to noncontrolling interests	$	143,068		$	(142,081	)	$	576,842	$	291,763
Net income attributable to DaVita Inc., net of transfers to noncontrolling interests												$	239,148		$	147,083


~~22.~~21.	New accounting standards

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~. The amendments in Topic 842 revise the accounting related to lessee accounting. Under the new guidance, lessees are required to recognize a lease liability and a right-of-use asset for substantially all leases with lease terms in excess of twelve months. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The CompanyNew standards recently adopted ~~Topic 842 beginning on January 1, 2019 through a modified retrospective approach for leases existing at the~~

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

adoption date with a cumulative effect adjustment. The Company elected to apply the package of practical expedients to not recast prior conclusions related to contracts containing leases, lease classification and initial direct costs. Adoption of the new standard resulted in the recording of operating right-of-use assets of $2,783,784, operating lease liabilities of $3,001,354 and an adjustment to retained earnings of $39,876, primarily related to deferred gains on prior sale leaseback transactions as of January 1, 2019. The standard did not materially impact the Company's consolidated net earnings and had 0 impact on cash flows. See Note 10 to these condensed consolidated financial statements for further details.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU ~~change~~amend the ~~approach for recognizing credit losses on financial assets from~~impairment model to utilize an expected loss methodology in place of the incurred loss methodology ~~in current GAAP~~for financial instruments and off-balance sheet credit exposures. The amendment requires entities to consider a ~~methodology that reflects current~~broader range of information to estimate expected credit losses, which ~~requires consideration of a broader range of reasonable and supportable information to inform those credit loss estimates. The current incurred loss model delays~~may result in earlier recognition of credit losses until it is probable that a loss has been incurred, while this ASU’s new current expected credit loss model requires estimation of credit losses expected over the life of the financial asset or group of similar financial assets.losses. The amendments in this ASU ~~are~~became effective for the Company beginning on January 1, 2020 and ~~are to be~~were applied onusing a modified-retrospective approach. The Company is still evaluating certain aspects of this ASU as well as the impacts it may have on its consolidated financial statements when adopted on January 1, 2020.

~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~ The amendments in this ASU better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments in this ASU were effective for the Company on January 1, 2019 and are to be applied prospectively.modified retrospective basis. The adoption of ~~this~~ ASU No. 2016-13 did not have a material impact on the ~~Company’s~~Company's consolidated financial ~~statements when adopted on January 1, 2019.~~statements.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement. The applicable amendments in this ASU remove requirements for disclosures concerning transfers between fair value measurement levels 1, 2 and 3 and disclosures concerning valuation processes for level 3 fair value measurements. The applicable amendments in this ASU also add a requirement to separately disclose the changes in unrealized gains and losses included in other comprehensive income for the reporting period for level 3 items measured at fair value on a recurring basis, and require disclosure of the range and weighted average of significant unobservable inputs used to develop level 3 fair value measurements. The amendments in this ASU ~~are~~became effective for the Company beginning on January 1, 2020 and ~~its new requirements are to be~~were applied on a prospective basis. The adoption of this ASU isdid not ~~expected to~~ have a material impact on the Company’s consolidated financial statements when adopted January 1, 2020.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this ASU as of January 1, 2020, using the prospective transition approach, which allows the Company to change the accounting method without restating prior periods or booking cumulative adjustments. The adoption of ASU No. 2018-15 did not have a material impact on the Company's consolidated financial statements.

New standards not yet adopted

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU No. 2019-12 attempts to simplify aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU No. 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year. Early adoption is permitted for all entities. The Company is currently assessing the effect this guidance may have on its consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU No. 2020-04 provides optional expedients and exceptions for applying U.S. generally accepted accounting principles (GAAP) to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in this ASU were effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently assessing the effect this guidance may have on its consolidated financial statements.


~~23.~~22.	Condensed consolidating financial statements

The following information is presented in accordance with Rule 3-10 of Regulation S-X. The operating and investing activities of the separate legal entities included in the Company’s condensed consolidated financial statements are fully interdependent and integrated. Revenues and operating expenses of the separate legal entities include intercompany charges for management and other administrative services. The Company’s senior notes are guaranteed by a substantial majority of its domestic subsidiaries as measured by revenue, income and assets. The subsidiary guarantors have guaranteed the senior notes on a joint and several basis. However, a subsidiary guarantor will be released from its obligations under its guarantee of the senior notes and the indentures governing the senior notes if, in general, there is a sale or other disposition of all or substantially all of the assets of such subsidiary guarantor, including by merger or consolidation, or a sale or other disposition of all of the equity interests in such subsidiary guarantor held by the Company and its restricted subsidiaries, as defined in the indentures; such subsidiary guarantor is designated by the Company as an unrestricted subsidiary, as defined in the indentures, or otherwise ceases to be a restricted subsidiary of the Company, in each case in accordance with the indentures; or such subsidiary guarantor no longer guarantees any other indebtedness, as defined in the indentures, of the Company or any of its restricted subsidiaries, except for guarantees that are contemporaneously released. The senior notes are not guaranteed by certain of the Company’s domestic subsidiaries, any of the Company’s foreign subsidiaries, or any entities that do not constitute subsidiaries within the meaning of the indentures, such as corporations in which the Company holds capital stock with less than a majority of the voting power, joint ventures and partnerships in which the Company holds less than a majority of the equity or voting interests, non-owned entities and third parties. Contemporaneously with the Company entering into ~~the~~its $5,500,000 senior secured credit agreement (the New Credit ~~Agreement~~Agreement) on August 12, 2019 and pursuant to the indentures governing the Company’s senior notes, certain subsidiaries of the Company were released from their guarantees of the Company's senior notes such that, after that release, the remaining subsidiary guarantors of the senior notes were the same subsidiaries

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

guaranteeing the New Credit Agreement. The following condensed consolidating financial statements have been prepared for all periods presented based on the current subsidiary guarantors and non-guarantors stipulated in the ~~Company's~~ New Credit Agreement.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

Condensed Consolidating Statements of Operations


For the three months ended September 30, 2019	DaVita Inc.			Guarantor subsidiaries			Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
Patient services revenues	$	—		$	1,761,235		$	1,087,531		$	(67,597	)	$	2,781,169
Provision for uncollectible accounts	—			(2,728		)	(1,249		)	—			(3,977		)
Net patient service revenues	—			1,758,507			1,086,282			(67,597		)	2,777,192
For the three months ended March 31, 2020																DaVita Inc.			Guarantor subsidiaries			Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
Patient service revenues																$	—		$	1,729,740		$	1,050,877		$	(67,336	)	$	2,713,281
Other revenues	204,183			140,956			83,860			(302,113		)	126,886			197,283			156,860			41,428			(267,615		)	127,956
Total net revenues	204,183			1,899,463			1,170,142			(369,710		)	2,904,078			197,283			1,886,600			1,092,305			(334,951		)	2,841,237
Operating expenses	11,046			1,823,752			1,060,654			(369,710		)	2,525,742			154,651			1,640,821			915,340			(334,951		)	2,375,861
Operating income	193,137			75,711			109,488			—			378,336			42,632			245,779			176,965			—			465,376
Debt expense	(110,712		)	(43,535		)	(14,206		)	58,622			(109,831		)	(91,362		)	(59,093		)	(11,337		)	70,241			(91,551		)
Other income, net	51,150			2,994			9,758			(58,622		)	5,280
Other income (loss), net																62,453			805			2,633			(70,241		)	(4,350		)
Income tax expense	33,364			28,320			3,570			—			65,254			3,424			80,975			7,161			—			91,560
Equity earnings in subsidiaries	43,059			123,186			—			(166,245		)	—			229,294			98,795			—			(328,089		)	—
Net income from continuing operations	143,270			130,036			101,470			(166,245		)	208,531			239,593			205,311			161,100			(328,089		)	277,915
Net loss from discontinued operations, net of tax	—			—			(6,843		)	—			(6,843		)
Net income from discontinued operations, net of tax																—			—			9,980			—			9,980
Net income	143,270			130,036			94,627			(166,245		)	201,688			239,593			205,311			171,080			(328,089		)	287,895
Less: Net income attributable to noncontrolling interests	—			—			—			(58,418		)	(58,418		)	—			—			—			(48,302		)	(48,302		)
Net income attributable to DaVita Inc.	$	143,270		$	130,036		$	94,627		$	(224,663	)	$	143,270		$	239,593		$	205,311		$	171,080		$	(376,391	)	$	239,593


For the three months ended September 30, 2018	DaVita Inc.			Guarantor subsidiaries			Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
For the three months ended March 31, 2019																DaVita Inc.			Guarantor subsidiaries			Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
Patient service revenues	$	—		$	1,699,109		$	1,028,548		$	(56,956	)	$	2,670,701		$	—		$	1,706,593		$	986,373		$	(63,277	)	$	2,629,689
Provision for uncollectible accounts	—			(9,246		)	(2,731		)	—			(11,977		)
Net patient service revenues	—			1,689,863			1,025,817			(56,956		)	2,658,724
Other revenues	207,968			127,269			136,448			(283,079		)	188,606			188,836			146,117			34,909			(256,439		)	113,423
Total net revenues	207,968			1,817,132			1,162,265			(340,035		)	2,847,330			188,836			1,852,710			1,021,282			(319,716		)	2,743,112
Operating expenses and charges	205,324			1,649,128			1,043,875			(340,035		)	2,558,292			143,659			1,634,285			944,377			(319,716		)	2,402,605
Operating income	2,644			168,004			118,390			—			289,038			45,177			218,425			76,905			—			340,507
Debt expense	(127,353		)	(50,254		)	(10,570		)	62,250			(125,927		)	(133,595		)	(50,650		)	(12,549		)	65,275			(131,519		)
Other income, net	106,148			603			7,719			(110,463		)	4,007			110,198			648			11,060			(114,966		)	6,940
Income tax (benefit) expense	(3,536		)	43,583			12,000			—			52,047
Income tax expense																7,026			44,027			5,693			—			56,746
Equity earnings in subsidiaries	(121,771		)	60,448			—			61,323			—			134,535			64,375			—			(198,910		)	—
Net (loss) income from continuing operations	(136,796		)	135,218			103,539			13,110			115,071
Net loss from discontinued operations, net of tax	—			—			(259,952		)	48,213			(211,739		)
Net (loss) income	(136,796		)	135,218			(156,413		)	61,323			(96,668		)
Net income from continuing operations																149,289			188,771			69,723			(248,601		)	159,182
Net (loss) income from discontinued operations, net of tax																—			—			(19,386		)	49,691			30,305
Net income																149,289			188,771			50,337			(198,910		)	189,487
Less: Net income attributable to noncontrolling interests	—			—			—			(40,128		)	(40,128		)	—			—			—			(40,198		)	(40,198		)
Net (loss) income attributable to DaVita Inc.	$	(136,796	)	$	135,218		$	(156,413	)	$	21,195		$	(136,796	)
Net income attributable to DaVita Inc.																$	149,289		$	188,771		$	50,337		$	(239,108	)	$	149,289

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

For the nine months ended September 30, 2019 DaVita Inc.
Guarantor
subsidiaries

Non-
Guarantor
subsidiaries

Consolidating
adjustments

Consolidated
total
Patient services revenues $ —
$ 5,181,017
$ 3,164,726
$ (195,357 ) $ 8,150,386
Provision for uncollectible accounts —
(13,530 ) (6,159 ) —
(19,689 )
Net patient service revenues —
5,167,487
3,158,567
(195,357 ) 8,130,697
Other revenues 600,318
438,058
130,345
(809,523 ) 359,198
Total net revenues 600,318
5,605,545
3,288,912
(1,004,880 ) 8,489,895
Operating expenses and charges 315,169
5,106,307
2,892,570
(1,004,880 ) 7,309,166
Operating income 285,149
499,238
396,342
—
1,180,729
Debt expense (389,203 ) (145,110 ) (39,807 ) 188,944
(385,176 )
Other income, net 263,407
4,332
31,800
(281,676 ) 17,863
Income tax expense 41,017
122,633
34,288
—
197,938
Equity earnings in subsidiaries 447,774
318,431
—
(766,205 ) —
Net income from continuing operations 566,110
554,258
354,047
(858,937 ) 615,478
Net income from discontinued operations, net of tax —
—
10,122
92,732
102,854
Net income 566,110
554,258
364,169
(766,205 ) 718,332
Less: Net income attributable to noncontrolling interests —
—
—
(152,222 ) (152,222 )
Net income attributable to DaVita Inc. $ 566,110
$ 554,258
$ 364,169
$ (918,427 ) $ 566,110

For the nine months ended September 30, 2018 DaVita Inc.
Guarantor
subsidiaries

Non-
Guarantor
subsidiaries

Consolidating
adjustments

Consolidated
total
Patient services revenues $ —
$ 5,100,487
$ 3,039,056
$ (159,365 ) $ 7,980,178
Provision for uncollectible accounts —
(26,430 ) (9,408 ) —
(35,838 )
Net patient service revenues —
5,074,057
3,029,648
(159,365 ) 7,944,340
Other revenues 608,850
355,055
512,025
(836,543 ) 639,387
Total net revenues 608,850
5,429,112
3,541,673
(995,908 ) 8,583,727
Operating expenses and charges 484,329
4,949,070
3,008,320
(995,908 ) 7,445,811
Operating income 124,521
480,042
533,353
—
1,137,916
Debt expense (362,501 ) (151,373 ) (30,660 ) 185,399
(359,135 )
Other income, net 315,573
2,864
20,981
(328,835 ) 10,583
Income tax expense 24,108
112,193
70,351
—
206,652
Equity earnings in subsidiaries 255,681
328,042
—
(583,723 ) —
Net income from continuing operations 309,166
547,382
453,323
(727,159 ) 582,712
Net loss from discontinued operations, net of tax —
—
(291,265 ) 143,436
(147,829 )
Net income 309,166
547,382
162,058
(583,723 ) 434,883
Less: Net income attributable to noncontrolling interests —
—
—
(125,717 ) (125,717 )
Net income attributable to DaVita Inc. $ 309,166
$ 547,382
$ 162,058
$ (709,440 ) $ 309,166

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

Condensed Consolidating Statements of Comprehensive Income


For the three months ended September 30, 2019	DaVita Inc.		Guarantor subsidiaries		Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
For the three months ended March 31, 2020														DaVita Inc.			Guarantor subsidiaries		Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
Net income	$	143,270	$	130,036	$	94,627		$	(166,245	)	$	201,688		$	239,593		$	205,311	$	171,080		$	(328,089	)	$	287,895
Other comprehensive income (loss)	509		—		(44,502		)	—			(43,993		)
Other comprehensive loss														(11,395		)	—		(81,632		)	—			(93,027		)
Total comprehensive income	143,779		130,036		50,125			(166,245		)	157,695			228,198			205,311		89,448			(328,089		)	194,868
Less: Comprehensive income attributable to noncontrolling interest	—		—		—			(58,418		)	(58,418		)	—			—		—			(48,302		)	(48,302		)
Comprehensive income attributable to DaVita Inc.	$	143,779	$	130,036	$	50,125		$	(224,663	)	$	99,277		$	228,198		$	205,311	$	89,448		$	(376,391	)	$	146,566

For the three months ended September 30, 2018 DaVita Inc. Guarantor
subsidiaries Non-
Guarantor
subsidiaries Consolidating
adjustments Consolidated
total
Net (loss) income $ (136,796 ) $ 135,218
$ (156,413 ) $ 61,323
$ (96,668 )
Other comprehensive income (loss) 1,643
—
(8,827 ) —
(7,184 )
Total comprehensive (loss) income (135,153 ) 135,218
(165,240 ) 61,323
(103,852 )
Less: Comprehensive income attributable to noncontrolling interest —
—
—
(40,128 ) (40,128 )
Comprehensive (loss) income attributable to DaVita Inc. $ (135,153 ) $ 135,218
$ (165,240 ) $ 21,195
$ (143,980 )



For the three months ended March 31, 2019	DaVita Inc.		Guarantor subsidiaries		Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
Net income	$	149,289	$	188,771	$	50,337		$	(198,910	)	$	189,487
Other comprehensive income (loss)	1,026		—		(13,653		)	—			(12,627		)
Total comprehensive income	150,315		188,771		36,684			(198,910		)	176,860
Less: Comprehensive income attributable to noncontrolling interest	—		—		—			(40,198		)	(40,198		)
Comprehensive income attributable to DaVita Inc.	$	150,315	$	188,771	$	36,684		$	(239,108	)	$	136,662

For the nine months ended September 30, 2019 DaVita Inc. Guarantor
subsidiaries Non-
Guarantor
subsidiaries Consolidating
adjustments Consolidated
total
Net income $ 566,110
$ 554,258
$ 364,169
$ (766,205 ) $ 718,332
Other comprehensive income (loss) 3,110
—
(45,790 ) —
(42,680 )
Total comprehensive income 569,220
554,258
318,379
(766,205 ) 675,652
Less: Comprehensive income attributable to noncontrolling interest —
—
—
(152,222 ) (152,222 )
Comprehensive income attributable to DaVita Inc. $ 569,220
$ 554,258
$ 318,379
$ (918,427 ) $ 523,430

For the nine months ended September 30, 2018 DaVita Inc. Guarantor
subsidiaries Non-
Guarantor
subsidiaries Consolidating
adjustments Consolidated
total
Net income $ 309,166
$ 547,382
$ 162,058
$ (583,723 ) $ 434,883
Other comprehensive income (loss) 5,499
—
(39,475 ) —
(33,976 )
Total comprehensive income 314,665
547,382
122,583
(583,723 ) 400,907
Less: Comprehensive income attributable to noncontrolling interest —
—
—
(125,717 ) (125,717 )
Comprehensive income attributable to DaVita Inc. $ 314,665
$ 547,382
$ 122,583
$ (709,440 ) $ 275,190

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

Condensed Consolidating Balance Sheets


As of September 30, 2019	DaVita Inc.		Guarantor subsidiaries		Non- Guarantor subsidiaries		Consolidating adjustments			Consolidated total
As of March 31, 2020												DaVita Inc.		Guarantor subsidiaries		Non- Guarantor subsidiaries		Consolidating adjustments			Consolidated total
Cash and cash equivalents	$	831,514	$	213,635	$	208,107	$	—		$	1,253,256	$	1,075,965	$	411	$	305,388	$	—		$	1,381,764
Restricted cash and equivalents	—		14,444		89,441		—			103,885		14,540		—		92,184		—			106,724
Accounts receivable, net	—		1,221,169		680,056		—			1,901,225		—		1,184,686		635,446		—			1,820,132
Other current assets	161,548		455,616		123,188		—			740,352		86,786		556,210		100,357		(28,034		)	715,319
Total current assets	993,062		1,904,864		1,100,792		—			3,998,718		1,177,291		1,741,307		1,133,375		(28,034		)	4,023,939
Property and equipment, net	515,952		1,576,140		1,327,146		—			3,419,238		555,409		1,555,662		1,336,966		(2,614		)	3,445,423
Operating lease right-of-use assets	103,621		1,592,472		1,085,195		—			2,781,288		107,620		1,643,765		1,114,378		(17,987		)	2,847,776
Intangible assets, net	85		34,493		83,088		—			117,666		340		28,766		88,847		—			117,953
Investments in and advances to affiliates, net	10,465,104		7,110,581		3,074,784		(20,650,469		)	—		10,961,209		7,869,131		3,099,564		(21,929,904		)	—
Other long-term assets and investments	96,953		91,115		181,193		—			369,261		85,777		130,528		187,405		(20,524		)	383,186
Goodwill	—		4,818,001		1,947,658		—			6,765,659		—		4,812,207		1,965,816		—			6,778,023
Total assets	$	12,174,777	$	17,127,666	$	8,799,856	$	(20,650,469	)	$	17,451,830	$	12,887,646	$	17,781,366	$	8,926,351	$	(21,999,063	)	$	17,596,300
Current liabilities	$	313,934	$	1,233,054	$	659,652	$	—		$	2,206,640	$	365,783	$	1,172,340	$	683,608	$	(985	)	$	2,220,746
Intercompany liabilities, net	922,571		3,074,785		2,572,810		(6,570,166		)	—		1,534,892		3,099,564		2,693,572		(7,328,028		)	—
Long-term operating leases liabilities	131,743		1,508,343		1,042,039		—			2,682,125		133,926		1,554,717		1,062,852		(17,125		)	2,734,370
Long-term debt and other long-term liabilities	7,746,653		664,470		343,360		—			8,754,483		8,209,577		786,685		334,591		(51,049		)	9,279,804
Noncontrolling interests subject to put provisions	741,300		—		—		554,759			1,296,059		695,622		—		—		532,414			1,228,036
Total DaVita Inc. shareholders' equity	2,318,576		10,647,014		3,433,289		(14,080,303		)	2,318,576		1,947,846		11,168,060		3,433,816		(14,601,876		)	1,947,846
Noncontrolling interests not subject to put provisions	—		—		748,706		(554,759		)	193,947		—		—		717,912		(532,414		)	185,498
Total equity	2,318,576		10,647,014		4,181,995		(14,635,062		)	2,512,523		1,947,846		11,168,060		4,151,728		(15,134,290		)	2,133,344
Total liabilities and equity	$	12,174,777	$	17,127,666	$	8,799,856	$	(20,650,469	)	$	17,451,830	$	12,887,646	$	17,781,366	$	8,926,351	$	(21,999,063	)	$	17,596,300

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)


As of December 31, 2018	DaVita Inc.		Guarantor subsidiaries		Non- Guarantor subsidiaries		Consolidating adjustments			Consolidated total
As of December 31, 2019												DaVita Inc.		Guarantor subsidiaries		Non- Guarantor subsidiaries		Consolidating adjustments			Consolidated total
Cash and cash equivalents	$	60,653	$	1,232	$	261,153	$	—		$	323,038	$	758,241	$	532	$	343,599	$	—		$	1,102,372
Restricted cash and equivalents	1,005		12,048		79,329		—			92,382		14,499		—		91,847		—			106,346
Accounts receivable, net	—		1,204,122		654,486		—			1,858,608		—		1,189,301		606,297		—			1,795,598
Other current assets	37,185		565,974		157,407		—			760,566		76,787		548,553		102,410		(41,896		)	685,854
Current assets held for sale	—		—		5,389,565		—			5,389,565
Total current assets	98,843		1,783,376		6,541,940		—			8,424,159		849,527		1,738,386		1,144,153		(41,896		)	3,690,170
Property and equipment, net	491,462		1,584,321		1,317,886		—			3,393,669		543,932		1,589,417		1,344,543		(4,508		)	3,473,384
Operating lease right-of-use assets												109,415		1,656,145		1,084,552		(20,065		)	2,830,047
Intangible assets, net	153		42,896		75,797		—			118,846		362		31,569		103,753		—			135,684
Investments in and advances to affiliates, net	13,522,198		6,196,801		2,498,545		(22,217,544		)	—		10,813,991		7,611,402		3,051,208		(21,476,601		)	—
Other long-term assets and investments	53,385		90,037		188,196		—			331,618		102,779		133,698		176,315		(18,318		)	394,474
Goodwill	—		4,806,939		2,035,021		—			6,841,960		—		4,812,972		1,974,663		—			6,787,635
Total assets	$	14,166,041	$	14,504,370	$	12,657,385	$	(22,217,544	)	$	19,110,252	$	12,420,006	$	17,573,589	$	8,879,187	$	(21,561,388	)	$	17,311,394
Current liabilities	$	1,945,943	$	1,217,526	$	483,933	$	—		$	3,647,402	$	379,286	$	1,327,378	$	666,470	$	(1,036	)	$	2,372,098
Current liabilities held for sale	—		—		1,243,759		—			1,243,759
Intercompany liabilities, net	—		2,498,545		6,161,292		(8,659,837		)	—
Intercompany payables												1,381,863		3,051,208		2,615,151		(7,048,222		)	—
Long-term operating lease liabilities												136,123		1,567,776		1,039,145		(19,244		)	2,723,800
Long-term debt and other long-term liabilities	7,918,581		687,443		580,028		—			9,186,052		7,741,725		674,558		364,102		(64,507		)	8,715,878
Noncontrolling interests subject to put provisions	598,075		—		—		526,566			1,124,641		647,600		—		—		532,776			1,180,376
Total DaVita Inc. shareholders' equity	3,703,442		10,100,856		3,456,851		(13,557,707		)	3,703,442		2,133,409		10,952,669		3,475,710		(14,428,379		)	2,133,409
Noncontrolling interests not subject to put provisions	—		—		731,522		(526,566		)	204,956		—		—		718,609		(532,776		)	185,833
Total equity	3,703,442		10,100,856		4,188,373		(14,084,273		)	3,908,398		2,133,409		10,952,669		4,194,319		(14,961,155		)	2,319,242
Total liabilities and equity	$	14,166,041	$	14,504,370	$	12,657,385	$	(22,217,544	)	$	19,110,252	$	12,420,006	$	17,573,589	$	8,879,187	$	(21,561,388	)	$	17,311,394

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

Condensed Consolidating Statements of Cash Flows


For the nine months ended September 30, 2019	DaVita Inc.			Guarantor subsidiaries			Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
For the three months ended March 31, 2020																DaVita Inc.			Guarantor subsidiaries			Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
Cash flows provided by operating activities:
Net income	$	566,110		$	554,258		$	364,169		$	(766,205	)	$	718,332		$	239,593		$	205,311		$	171,080		$	(328,089	)	$	287,895
Changes in operating assets and liabilities and non-cash items included in net income	(336,223		)	(74,600		)	318,111			766,205			673,493			(182,332		)	(71,454		)	(1,817		)	328,089			72,486
Net cash provided by operating activities	229,887			479,658			682,280			—			1,391,825			57,261			133,857			169,263			—			360,381
Cash flows provided by (used in) investing activities:
Cash flows used in investing activities:
Additions of property and equipment	(106,476		)	(218,839		)	(221,868		)	—			(547,183		)	(52,714		)	(41,144		)	(61,084		)	—			(154,942		)
Acquisitions	—			(11,832		)	(65,516		)	—			(77,348		)	—			(984		)	(33,123		)	—			(34,107		)
Proceeds (purchases) from asset and business sales	3,824,516			(244		)	39,347			—			3,863,619
purchases from investment sales and other items, net	(94,322		)	(7,474		)	(3,267		)	—			(105,063		)
Net cash provided by (used in) investing activities	3,623,718			(238,389		)	(251,304		)	—			3,134,025
Cash flows used in financing activities:
Proceeds from asset and business sales																—			4,180			27,338			—			31,518
Proceeds (purchases) from investment sales and other items, net																452			271			(5,817		)	—			(5,094		)
Net cash used in investing activities																(52,262		)	(37,677		)	(72,686		)	—			(162,625		)
Cash flows provided by (used in) financing activities:
Long-term debt and related financing costs, net	(2,028,954		)	(8,025		)	(13,033		)	—			(2,050,012		)	481,856			(2,462		)	(13,557		)	—			465,837
Intercompany borrowings (payments)	785,450			(14,854		)	(770,596		)	—			—			153,029			(95,857		)	(57,172		)	—			—
Other items	(1,840,245		)	(3,591		)	(109,916		)	—			(1,953,752		)	(322,119		)	2,018			(48,744		)	—			(368,845		)
Net cash used in financing activities	(3,083,749		)	(26,470		)	(893,545		)	—			(4,003,764		)
Net cash provided by (used in) financing activities																312,766			(96,301		)	(119,473		)	—			96,992
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			(4,178		)	—			(4,178		)	—			—			(14,978		)	—			(14,978		)
Net increase (decrease) in cash, cash equivalents and restricted cash	769,856			214,799			(466,747		)	—			517,908			317,765			(121		)	(37,874		)	—			279,770
Less: Net decrease in cash, cash equivalents and restricted cash from discontinued operations	—			—			(423,813		)	—			(423,813		)
Net increase (decrease) in cash, cash equivalents and restricted cash from continuing operations	769,856			214,799			(42,934		)	—			941,721
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year	61,658			13,280			340,482			—			415,420			772,740			532			435,446			—			1,208,718
Cash, cash equivalents and restricted cash of continuing operations at end of the period	$	831,514		$	228,079		$	297,548		$	—		$	1,357,141		$	1,090,505		$	411		$	397,572		$	—		$	1,488,488

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)


For the nine months ended September 30, 2018	DaVita Inc.			Guarantor subsidiaries			Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
Cash flows provided by operating activities:
For the three months ended March 31, 2019																DaVita Inc.			Guarantor subsidiaries			Non- Guarantor subsidiaries			Consolidating adjustments			Consolidated total
Cash flows provided by (used in) operating activities:
Net income	$	309,166		$	547,382		$	162,058		$	(583,723	)	$	434,883		$	149,289		$	188,771		$	50,337		$	(198,910	)	$	189,487
Changes in operating assets and liabilities and non-cash items included in net income	(235,558		)	(104,179		)	703,379			583,723			947,365			(124,409		)	(289,332		)	166,648			198,910			(48,183		)
Net cash provided by operating activities	73,608			443,203			865,437			—			1,382,248
Net cash provided by (used in) operating activities																24,880			(100,561		)	216,985			—			141,304
Cash flows used in investing activities:
Additions of property and equipment	(124,585		)	(296,028		)	(285,046		)	—			(705,659		)	(38,942		)	(76,529		)	(83,407		)	—			(198,878		)
Acquisitions	—			(5,646		)	(107,880		)	—			(113,526		)	—			—			(11,274		)	—			(11,274		)
Proceeds from asset and business sales	—			55,035			80,233			—			135,268			—			2,270			11,633			—			13,903
Proceeds (purchases) from investment sales and other items, net	32,345			(2,295		)	(7,452		)	—			22,598			1,804			(3,878		)	(2,035		)	—			(4,109		)
Net cash used in investing activities	(92,240		)	(248,934		)	(320,145		)	—			(661,319		)	(37,138		)	(78,137		)	(85,083		)	—			(200,358		)
Cash flows provided by (used in) financing activities:
Cash flows provided by financing activities:
Long-term debt and related financing costs, net	866,537			(8,601		)	(12,100		)	—			845,836			365,133			(2,364		)	(5,572		)	—			357,197
Intercompany borrowings (payments)	454,410			(174,148		)	(280,262		)	—			—
Intercompany (payments) borrowings																(220,697		)	188,870			31,827			—			—
Other items	(1,154,921		)	(18,713		)	(95,541		)	—			(1,269,175		)	1,517			(8,427		)	(25,336		)	—			(32,246		)
Net cash provided by (used in) financing activities	166,026			(201,462		)	(387,903		)	—			(423,339		)
Net cash provided by financing activities																145,953			178,079			919			—			324,951
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			(5,790		)	—			(5,790		)	—			—			(921		)	—			(921		)
Net increase (decrease) in cash, cash equivalents and restricted cash	147,394			(7,193		)	151,599			—			291,800			133,695			(619		)	131,900			—			264,976
Less: Net increase in cash, cash equivalents and restricted cash from discontinued operations	—			—			270,565			—			270,565			—			—			118,962			—			118,962
Net increase (decrease) in cash, cash equivalents and restricted cash from continuing operations	147,394			(7,193		)	(118,966		)	—			21,235			133,695			(619		)	12,938			—			146,014
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year	150,307			19,963			348,650			—			518,920			61,658			13,280			340,482			—			415,420
Cash, cash equivalents and restricted cash of continuing operations at end of the period	$	297,701		$	12,770		$	229,684		$	—		$	540,155		$	195,353		$	12,661		$	353,420		$	—		$	561,434

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)


~~24.~~23.	~~Supplemental data~~Recent and subsequent events

~~The following information~~In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, and the virus continues to spread throughout the world. As a caregiving organization, the Company is ~~presented as supplemental data as required~~exposed to and will continue to be impacted by the ~~indentures governing~~effects of the ~~Company’s senior notes.~~COVID-19 pandemic. The Company has continued to provide essential, life-sustaining care for its patients during this public health crisis. The Company has also maintained business process continuity during the pandemic by enabling most back office teammates to work remotely, and as of the date of this report has not experienced any material issues in billing or cash collections. This transition combined with the Company's balance sheet has helped the Company to avoid any material deterioration of its liquidity position as a result of the COVID-19 crisis at this time.

~~Prior~~The Company is closely monitoring the impact of the pandemic and the resulting economic downturn on all aspects of its business, including the impact on its patients, teammates, physician partners, suppliers, vendors and other business partners. We expect that the long-term impact of this public health crisis on the Company will be driven primarily by the severity and duration of the pandemic, the impact on our patient population, the pandemic’s impact on the U.S. and global economies and unemployment, and the timing, scope and effectiveness of federal, state and local governmental responses. At this time, the Company cannot reasonably estimate the ultimate impact the COVID-19 pandemic will have on its business, financial condition, results of operations, cash flows and liquidity, but the adverse impact could be material.

Under the CARES Act, in April 2020 the government distributed approximately $250,000 to the ~~DMG sale,~~Company and its joint venture partners from the Public Health and Social Services Emergency Fund. These funds were only to be used for healthcare related expenses or lost revenues attributable to COVID-19. At this time, the Company ~~provided services~~has elected not to ~~certain physician groups within its DMG business which, while consolidated in its~~accept the funds available to it through this government financial ~~statements for financial reporting purposes, were not subsidiaries~~support. The Company’s initial receipt of ~~nor owned by the Company, did not constitute “Subsidiaries” as defined in the indentures governing our outstanding senior notes,~~these payments constitutes a subsequent event and did not guarantee those senior notes. In addition, the Company operated under management agreements with these physician groups pursuant to which it received management fees from these physician groups.

~~From and after June 19, 2019, these physician groups were~~therefore had no ~~longer included in~~effect on the Company's reported financial ~~statements as they were deconsolidated upon~~results or financial condition for the ~~sale of DMG to Optum.~~three months ended March 31, 2020.

~~Condensed Consolidating Statements of Income~~

For the nine months ended September 30, 2019
Consolidated
Total

Physician
Groups

Unrestricted
Subsidiaries

Company and
Restricted Subsidiaries⁽¹⁾
Patient service operating revenues $ 8,150,386
$ —
$ —
$ 8,150,386
Provision for uncollectible accounts (19,689 ) —
—
(19,689 )
Net patient service operating revenues 8,130,697
—
—
8,130,697
Other revenues 359,198
—
—
359,198
Total net operating revenues 8,489,895
—
—
8,489,895
Operating expenses 7,309,166
—
—
7,309,166
Operating income 1,180,729
—
—
1,180,729
Debt expense (385,176 ) —
—
(385,176 )
Other income 17,863
—
—
17,863
Income tax expense 197,938
—
—
197,938
Net income from continuing operations 615,478
—
—
615,478
Net income from discontinued operations, net of tax 102,854
12,706
249
89,899
Net income 718,332
12,706
249
705,377
Less: Net income attributable to noncontrolling interests (152,222 ) (1,255 ) —
(150,967 )
Net income attributable to DaVita Inc. $ 566,110
$ 11,451
$ 249
$ 554,410


~~(1)~~	~~After elimination of the unrestricted subsidiaries and the physician groups.~~

~~Condensed Consolidating Statements of Comprehensive Income~~

For the nine months ended September 30, 2019
Consolidated
Total

Physician
Groups

Unrestricted
Subsidiaries

Company and
Restricted Subsidiaries⁽¹⁾
Net income $ 718,332
$ 12,706
$ 249
$ 705,377
Other comprehensive income (42,680 ) —
—
(42,680 )
Total comprehensive income 675,652
12,706
249
662,697
Less: Comprehensive income attributable to the noncontrolling
interests (152,222 ) (1,255 ) —
(150,967 )
Comprehensive income attributable to DaVita Inc. $ 523,430
$ 11,451
$ 249
$ 511,730


~~(1)~~	~~After elimination of the unrestricted subsidiaries and the physician groups.~~

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

~~Condensed Consolidating Balance Sheets~~

As of September 30, 2019
Consolidated
Total

Physician
Groups

Unrestricted
Subsidiaries

Company and
Restricted Subsidiaries⁽¹⁾
Cash and cash equivalents $ 1,253,256
$ —
$ —
$ 1,253,256
Restricted cash and equivalents 103,885
—
—
103,885
Accounts receivable, net 1,901,225
—
—
1,901,225
Other current assets 740,352
—
—
740,352
Total current assets 3,998,718
—
—
3,998,718
Property and equipment, net 3,419,238
—
—
3,419,238
Operating lease right-of-use assets 2,781,288
—
—
2,781,288
Amortizable intangibles, net 117,666
—
—
117,666
Other long-term assets 369,261
—
—
369,261
Goodwill 6,765,659
—
—
6,765,659
Total assets $ 17,451,830
$ —
$ —
$ 17,451,830
Current liabilities $ 2,206,640
$ —
$ —
$ 2,206,640
Long-term operating leases liabilities 2,682,125
—
—
2,682,125
Long-term debt and other long-term liabilities 8,754,483
—
—
8,754,483
Noncontrolling interests subject to put provisions 1,296,059
—
—
1,296,059
Total DaVita Inc. shareholders’ equity 2,318,576
—
—
2,318,576
Noncontrolling interests not subject to put provisions 193,947
—
—
193,947
Shareholders’ equity 2,512,523
—
—
2,512,523
Total liabilities and shareholder’s equity $ 17,451,830
$ —
$ —
$ 17,451,830


~~(1)~~	~~After elimination of the unrestricted subsidiaries and the physician groups.~~

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

~~Condensed Consolidating Statements of Cash Flows~~

For the nine months ended September 30, 2019
Consolidated
Total

Physician
Groups

Unrestricted
Subsidiaries

Company and
Restricted Subsidiaries⁽¹⁾
Cash flows from operating activities:
Net income $ 718,332
$ 12,706
$ 249
$ 705,377
Changes in operating and intercompany assets and liabilities and
non-cash items included in net income 673,493
(4,607 ) (249 ) 678,349
Net cash provided by operating activities 1,391,825
8,099
—
1,383,726
Cash flows from investing activities:

Additions of property and equipment (547,183 ) (846 ) —
(546,337 )
Acquisitions (77,348 ) —
—
(77,348 )
Proceeds from asset and business sales 3,863,619
—
—
3,863,619
Investments and other items (105,063 ) (1,882 ) —
(103,181 )
Net cash provided by (used in) investing activities 3,134,025
(2,728 ) —
3,136,753
Cash flows from financing activities:

Long-term debt (2,050,012 ) —
—
(2,050,012 )
Intercompany —
(247,175 ) —
247,175
Other items (1,953,752 ) —
—
(1,953,752 )
Net cash used in financing activities (4,003,764 ) (247,175 ) —
(3,756,589 )
Effect of exchange rate changes on cash, cash equivalents and
restricted cash (4,178 ) —
—
(4,178 )
Net increase (decrease) in cash, cash equivalents and restricted cash 517,908
(241,804 ) —
759,712
Less: Net decrease in cash, cash equivalents and restricted cash from discontinued operations (423,813 ) (241,804 ) —
(182,009 )
Net increase in cash, cash equivalents and restricted cash from continuing operations 941,721
—
—
941,721
Cash, cash equivalents and restricted cash of continuing operations
at beginning of the year 415,420
—
—
415,420
Cash, cash equivalents and restricted cash of continuing operations
at end of the period $ 1,357,141
$ —
$ —
$ 1,357,141


~~(1)~~	~~After elimination of the unrestricted subsidiaries and the physician groups.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking statements

This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that are forward-looking statements within the meaning of the federal securities laws. All statements in this report, other than statements of historical fact, are forward-looking ~~statements.~~statements and as such are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, DaVita's response to and the expected future impacts of COVID-19, statements about our balance sheet and liquidity, our expenses, revenues, billings and collections and future results, potential need, ability or willingness to use any funds under the CARES Act or other government programs, availability of supplies, treatment volumes, percentage or number of patients under commercial insurance, and overall impact on our patients, as well as other statements regarding our future operations, financial condition and prospects, government and commercial payment rates, and our stock repurchase program. Without limiting the foregoing, statements including the words "expect," "intend," "will," “could,” "plan," "anticipate," "believe,~~" "forecast," "guidance," "outlook," "goals,~~" and similar expressions are intended to identify forward-looking statements. These forward-looking statements ~~include but~~ are ~~not limited~~based on DaVita's current expectations and are based solely on information available as of the date of this report. DaVita undertakes no obligation to publicly update or revise any forward-looking statements, ~~regarding our~~whether as a result of changed circumstances, new information, future ~~operations, financial condition~~events or otherwise. Actual future events and prospects, such as expectations for operating cash flow, estimated charges and accruals, the development of new dialysis centers and dialysis center acquisitions or other new service offerings, government and commercial payment rates, and our stock repurchase program. Our actual results ~~and other events~~ could differ materially from any forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. These risks and uncertainties include, among other things:

the impact of the dynamic and rapidly evolving COVID-19 pandemic, including, without limitation, on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition and results of operations, the government’s response to the COVID-19 pandemic, and the consequences of an economic downturn resulting from the impacts of COVID-19, any of which may also have the effect of heightening many of the other risks and uncertainties discussed below;

our need, ability and willingness to utilize any funds received under the CARES Act or subsequent legislation, and the consequences of our decisions with respect thereto;

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 or percentage of our patients under such plans, including without limitation as a result of restrictions or prohibitions on the use and/or availability of charitable premium assistance, which may result in the loss of revenues or patients, or our making incorrect assumptions about how our patients will respond to any change in financial assistance from charitable organizations;

noncompliance by us or our business associates with any privacy or security laws or any security breach by us or a third party involving the misappropriation, loss or other unauthorized use or disclosure of confidential information;

the extent to which the ongoing implementation of healthcare reform, or changes in or new legislation, regulations or guidance, enforcement thereof or related litigation, ~~and the extent to which such developments~~ result in a reduction in coverage or reimbursement rates for our services, a reduction in the number of patients enrolled in higher-paying commercial plans, or other material impacts to our business; or our making incorrect assumptions about how our patients will respond to any such developments;

a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs and the impact of the Medicare Advantage benchmark structure;

risks arising from potential and proposed federal and/or state legislation, regulation, ballot, executive action or other initiatives, including such initiatives related to healthcare and/or labor matters;

the impact of the political environment and related developments on the current healthcare 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~~healthcare marketplace;

our ability to successfully implement our strategy with respect to home-based dialysis, including maintaining our existing business and further developing our capabilities in a complex and highly regulated environment;

changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to calcimimetics;

legal and compliance risks, such as our continued compliance with complex government regulations;

continued increased competition from dialysis providers and others, and other potential marketplace changes;

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 announce or be considering, on terms favorable to us or at all, or to integrate and successfully operate any business we may acquire or have acquired, or to successfully expand our operations and services in markets outside the United States, or to businesses outside of dialysis;

uncertainties related to potential payments and/or adjustments under certain provisions of the equity purchase agreement for the sale of our DaVita Medical Group (DMG) business, such as post-closing adjustments and indemnification obligations;

the variability of our cash ~~flows;~~flows, including without limitation any extended billing or collections cycles; the risk that we may not be able to generate or access sufficient cash in the future to service our indebtedness or to fund our other liquidity needs; and the risk that we may not be able to refinance our indebtedness as it becomes due, on terms favorable to us or at all;

factors that may impact our ability to repurchase stock under our stock repurchase program and the timing of any such stock repurchases, as well as our use of a considerable amount of available funds to repurchase stock;

risks arising from the use of accounting estimates, judgments and interpretations in our financial statements;

impairment of our goodwill, investments or other assets;

uncertainties related to our use of the proceeds from the DMG sale transaction and other available funds, including external financing and cash flow from operations, which may be or have been used in ways that we cannot assure will improve our results of operations or enhance the value of our common stock; and

uncertainties associated with the other risk factors set forth in ~~our Quarterly~~DaVita Inc.'s Annual Report on Form ~~10Q~~10-K for the ~~quarter~~year ended ~~June 30,~~December 31, 2019 ~~as updated by Part II, Item 1A. of~~and this Quarterly Report on Form 10-Q, and the ~~other~~ risks and uncertainties discussed in any subsequent reports that ~~we file~~DaVita has filed or ~~furnish~~furnished with the ~~SEC~~Securities and Exchange Commission from time to time.

The forward-looking statements should be considered in light of these risks and uncertainties. All forward-looking statements in this report are based solely on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of changed circumstances, new information, future events or otherwise.

The following should be read in conjunction with our condensed consolidated financial statements.

~~Consolidated results of operations~~Company Overview

~~We operate principally as a U.S.~~Our principal business is to provide dialysis and related lab services ~~business and~~to patients in the United States, which we refer to as our U.S. dialysis business. We also operate ~~other~~ various ancillary services and strategic initiatives including our international operations, ~~and~~which we collectively refer to as our ancillary services, as well as our corporate administrative support. Our U.S. dialysis business is a leading provider of kidney dialysis services in the U.S. for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD).

On June 19, 2019, we completed the sale of our ~~DMG division~~DaVita Medical Group (DMG) business to ~~Collaborative Care Holdings, LLC (Optum),~~Optum, a subsidiary of UnitedHealth Group Inc. As a result of this transaction, DMG's results of operations have been reported as discontinued operations for all periods presented and DMG is not included below in this Management's Discussion and Analysis.

COVID-19 and its impact on our business

As a caregiving organization, we are exposed to and will continue to be impacted by the effects of the COVID-19 pandemic. DaVita’s team of over 65,000 teammates includes, among others, dialysis nurses, patient care technicians, social workers, dieticians and other caregivers who are on the front lines of the ongoing COVID-19 pandemic providing essential, life-sustaining care for our patients. During this time of great challenge, our top priorities continue to be the health, safety and well-being of our patients, teammates and physician partners and helping to ensure that our patients have the ability to maintain continuity of care throughout this crisis, whether in the acute, outpatient or home setting. We have implemented additional protocols in coordination with the Centers for Disease Control and Prevention (CDC) on infection control and clinical best practices in response to COVID-19. In addition, we have been collaborating with the U.S. Department of Health and Human Services (HHS), the Centers for Medicare and Medicaid Services (CMS), the CDC, the American Society of Nephrology, and dialysis providers nationwide to help ensure that the dialysis community is able to support patients nationwide.

We have also maintained business process continuity during the pandemic by enabling most back office teammates to work remotely, and as of the date of this report, we have not experienced any material issues in billing or cash collections. This transition, combined with our balance sheet, has helped us avoid any material deterioration of our liquidity position as a result of the COVID-19 crisis at this time.

We are closely monitoring the long-term impact of the pandemic and the resulting economic downturn on all aspects of our business, including the impact on our patients, teammates, physician partners, suppliers, vendors and business partners. We may have extended, significant additional costs as a result of COVID-19. For example, we may have increased costs and risk associated with a high demand for our skilled clinical personnel. Additionally, the steps we have taken designed to help safely maintain continuity of care for our patients and help protect our caregivers, such as our policies to implement dedicated care shifts for patients with confirmed or suspected COVID-19 and other enhanced clinical practices, have increased, and are expected to continue to increase, our expenses. Our ~~overall~~response to COVID-19 has resulted in higher salary and wage expense, and we are also providing financial ~~performance for~~support to over 50,000 of our teammates to cover costs related to COVID-19. Furthermore, the ~~nine months ended September 30, 2019~~effort needed to procure certain of our equipment and clinical supplies and associated costs have increased. These efforts are part of a wider Prepare, Prevent, Respond protocol that we have implemented in connection with the pandemic, which also includes operational initiatives such as ~~compared~~the redistribution of teammates, machines and supplies across the country as needed and increased investment in and utilization of telehealth capabilities.

We may observe a negative impact on revenue and non-acquired growth from COVID-19 due to ~~the nine months ended September 30, 2018 benefited~~lower treatment volumes, including from the ~~following items:~~

•~~an increase~~impact of changes in ~~operating income due to an increase in our margin on calcimimetics, and~~

•rates of mortality, as well as a decrease in ~~advocacy costs to counter certain union policy initiatives.~~

The following table is a summary of our consolidated operating results for the third quarter of 2019 compared with the prior sequential quarter and the same quarter of 2018, as well as the nine months ended September 30, 2019 compared to the same period in 2018:

Three months ended Nine months ended
September 30,
2019
June 30,
2019
September 30,
2018 September 30,
2019 September 30,
2018
(dollars in millions)
Revenues:
Dialysis and related lab patient
service revenues $ 2,781

$ 2,734

$ 2,671

$ 8,150

$ 7,980

Provision for uncollectible
accounts (4 )
(10 )
(12 )
(20 )
(36 )
Net dialysis and related lab
patient service revenues 2,777

2,724

2,659

8,131

7,944

Other revenues 127

119

189

359

639

Total consolidated revenues 2,904
100 % 2,843
100 % 2,847
100 % 8,490
100 % 8,584
100 %
Operating expenses and charges:

Patient care costs 1,991
69 % 1,958
69 % 2,064
72 % 5,914
70 % 6,168
72 %
General and administrative 299
10 % 275
10 % 336
12 % 825
10 % 867
10 %
Depreciation and amortization 156
5 % 152
5 % 146
5 % 457
5 % 436
5 %
Equity investment (income)
loss (4 ) — % (5 ) —
4
— % (11 ) — % (6 ) — %
Provision for uncollectible
accounts —
— % —
—
1
— % —
— % (7 ) — %
Impairment of other assets —
— % —
— % 6
— % —
— % 17
— %
Goodwill impairment charges 84
3 % —
— % —
— % 125
1 % 3
— %
Loss (gain) on changes in
ownership interests, net —
— % —
— % 2
— % —
— % (32 ) — %
Total operating expenses and
charges 2,526
87 % 2,381
84 % 2,558
90 % 7,309
86 % 7,446
87 %
Operating income $ 378
13 % $ 462
16 % $ 289
10 % $ 1,181
14 % $ 1,138
13 %

~~Certain columns, rows or percentages may not sum or recalculate~~new patient admissions due to the ~~use~~impact of ~~rounded numbers.~~

~~The following table summarizes our consolidated revenues among our reportable segments:~~

Three months ended Nine months ended
September 30, 2019 June 30,
2019 September 30, 2018 September 30, 2019 September 30, 2018
(dollars in millions)
Revenues:
U.S. dialysis and related lab services patient service
revenues $ 2,685
$ 2,642
$ 2,585
$ 7,875
$ 7,725
Provision for uncollectible accounts (4 ) (10 ) (13 ) (20 ) (37 )
U.S. dialysis and related lab services net
patient service revenues 2,681
2,632
2,572
7,855
7,688
Other revenues 10
6
5
21
15
Total net U.S. dialysis and related lab services
revenues 2,691
2,637
2,577
7,876
7,703
Other—Ancillary services and strategic initiatives
other revenues 120
117
192
349
652
Other—Ancillary services and strategic initiatives
patient service revenues, net 128
122
112
368
320
Total net other—ancillary services and
strategic initiatives revenues 248
239
304
717
972
Elimination of intersegment revenues (36 ) (34 ) (34 ) (104 ) (92 )
Consolidated revenues $ 2,904
$ 2,843
$ 2,847
$ 8,490
$ 8,584

~~Certain columns, rows or percentages may not sum or recalculate~~COVID-19 on the chronic kidney disease (CKD) population. Over the longer term, we believe that changes in mortality in both the CKD and ESRD populations due to COVID-19 will depend primarily on the ~~use~~infection rate, case fatality rate and age and health status of ~~rounded numbers.~~

~~The following table summarizes consolidated operating income~~affected patients. At this time we cannot reasonably estimate the magnitude or duration of this impact, due in part to testing and ~~adjusted consolidated operating income:~~

Three months ended Nine months ended
September 30, 2019 June 30,
2019 September 30, 2018 September 30, 2019 September 30, 2018
(dollars in millions)
Operating income (loss):
U.S. dialysis and related lab services $ 501
$ 499
$ 390
$ 1,417
$ 1,273
Other—Ancillary services and strategic initiatives (98 ) (15 ) (60 ) (170 ) (64 )
Corporate administrative support (25 ) (22 ) (41 ) (66 ) (71 )
Total consolidated operating income $ 378
$ 462
$ 289
$ 1,181
$ 1,138
Reconciliation of non-GAAP measures:
Operating expenses:
Goodwill impairment charges $ 84
$ —
$ —
$ 125
$ 3
Impairment of assets —
—
6
—
17
Restructuring charges —
—
11
—
11
Loss (gain) on changes in ownership interests,
net —
—
2
—
(32 )
Equity investment loss:
Loss due to impairments in APAC JV —
—
6
—
6
Adjusted consolidated operating income⁽¹⁾
$ 462
$ 462
$ 314
$ 1,306
$ 1,143

~~Certain columns or rows may not sum or recalculate due~~reporting limitations, but this adverse impact could be material. Because our ESRD patients generally have comorbidities, several of which are risk factors for COVID-19, we believe the mortality rate of infected patients will be higher in the dialysis population than in the general population. In addition, the COVID-19 pandemic and efforts to contain the ~~use of rounded numbers.~~

~~(1)~~

For the periods presented in the table above adjusted operating income is defined as operating income before certain items which we do not believe are indicative of ordinary results, including impairment charges, restructuring charges and net loss (gain) on changes in ownership interests. Adjusted operating income as so defined is a non-GAAP measure and is not intended as a substitute for GAAP operating income. We have presented these adjusted amounts because management believes that these presentations enhance a user’s understanding of our normal consolidated operating income by excluding certain items which we do not believe are indicative of our ordinary results of operations. As a result, adjusting for these amounts allows for comparison to our normalized prior period results.

~~Consolidated revenues~~

~~Consolidated revenues for the third quarter of 2019 increased by approximately $61 million, or 2.1%, as compared~~virus have led to ~~the second quarter of 2019. This increase was driven by an increase in our U.S. dialysis~~global economic deterioration and ~~related lab services revenues of approximately $54 million, primarily due to an increase in treatments, partially offset by a decrease in our average dialysis~~rapid and related lab services net revenue per treatment of less than $1, as described below. Consolidated revenues also benefited from an increase of $9 million in our ancillary services and strategic initiatives revenues, primarily due to an increase in revenues related to our international operations, as described below.

Consolidated revenues for the third quarter of 2019 increased by approximately $57 million, or 2.0%, as compared to the third quarter of 2018. This increase was driven by an increase in our U.S. dialysis and related lab services revenues of approximately $114 million, principally due to an increase in treatments and an increase in our average dialysis and related lab services net revenue per treatment of less than $1, as described below. Consolidated revenues were negatively impacted by a decrease of approximately $56 million in our ancillary services and strategic initiatives revenues, primarily due to our pharmacy distribution ceasing operations, partially offset bysharp increases in ~~revenues from DaVita Integrated Kidney Care (DaVita IKC) and our international operations, as described below.~~

Consolidated revenues for the nine months ended September 30, 2019 decreased by approximately $94 million, or 1.1%, as compared to the nine months ended September 30, 2018. This decrease was driven byunemployment levels, which ultimately could result in a decrease of approximately $255 million in our ancillary services and strategic initiatives revenues, primarily due to our pharmacy distribution ceasing operations, a decrease in revenues at Vively Health (formally known as DaVita Health Solutions) and the salematerially reduced share of our ~~direct primary care business, partially offset~~patients being covered by ~~an increase in revenues from DaVita IKC~~commercial insurance plans, with more patients being covered by lower-paying government insurance programs or being uninsured. These effects may persist after the pandemic subsides, and our international operations, as described below. Consolidated revenues benefited from an increase in our U.S. dialysis and related lab services revenues of approximately $173 million, primarily due to volume growth from additional treatments, partially offset by a decrease in our average dialysis and related lab services net revenue per treatment of approximately $2, as described below.

~~Consolidated operating income~~

Consolidated operating income for the third quarter of 2019, which includes goodwill impairment charges of $84 million at our Germany reporting units, decreased by approximately $84 million as compared to the second quarter of 2019. Excluding this item from the third quarter of 2019, adjusted consolidated operating income for the third quarter of 2019 was relatively flat as compared to the second quarter of 2019 and included an increase in U.S. dialysis and related lab services' operating income of $2 million and a decrease in adjusted operating losses in our ancillary and strategic initiatives of $1 million, offset by an increase in expenses in our corporate administrative support of $3 million, each as further described below.

Consolidated operating income for the third quarter of 2019, which includes goodwill impairment charges of $84 million at our Germany reporting units, increased by approximately $89 million as compared to the third quarter of 2018, which included restructuring charges of $11 million, other asset impairment charges of $6 million, an equity investment loss of $6 million for goodwill impairments at our APAC JV and a net loss on changes in ownership interests of $2 million. Excluding these items from their respective periods, adjusted consolidated operating income for the third quarter of 2019 increased by approximately $148 million primarily due to an increase in our margin on calcimimetics and a decrease in advocacy costs, which were the primary drivers of our increase in operating income in U.S. dialysis and related lab services of approximately $111 million. Adjusted operating income also benefited from a decrease in adjusted operating losses in our ancillary and strategic initiatives of $21 million and a decrease in expenses in our corporate administrative support of $16 million, each as further described below.

Consolidated operating income for the nine months ended September 30, 2019, which includes goodwill impairment charges of $125 million at our Germany reporting units, increased by approximately $43 million as compared to the nine months ended September 30, 2018, which included a net gain on changes in ownership interests of $32 million, other asset impairment charges of $17 million, restructuring charges of $11 million, an equity investment loss of $6 million for goodwill impairments at our APAC JV and a goodwill impairment charge of $3 million. Excluding these items from their respective periods, adjusted consolidated operating income for the nine months ended September 30, 2019 increased by approximately $163 million primarily due to an increase in our margin on calcimimetics and a decrease in advocacy costs, which were the primary drivers of our increase in operating income in U.S. dialysis and related lab services of approximately $144 million. Adjusted operating income also benefited from a decrease in adjusted operating losses in our ancillary and strategic initiatives of $13 million and a decrease in expenses in our corporate administrative support of $5 million, each as further described below.

Currently, the oral and intravenous forms of calcimimetics are separately reimbursed and therefore are not part of the ESRD PPS bundled payment. CMS has had delays in adjusting reimbursement as oral generic products have entered the market lowering the cost of products we acquire. We expect our average revenue per treatment related to these pharmaceuticals to decline in future periods as CMS adjusts the reimbursement amount to more closely match the cost of these pharmaceuticals in accordance with their rules. We therefore do not expect to continue to realize the same level of operating income from calcimimetics beyond 2019.

~~U.S. dialysis and related lab services business~~

~~Results of operations~~

Three months ended Nine months ended
September 30, 2019 June 30,
2019 September 30, 2018 September 30, 2019 September 30, 2018
(dollars in millions, except per treatment data)
Revenues:
U.S. dialysis and related lab services patient
service revenues $ 2,685
$ 2,642
$ 2,585
$ 7,875
$ 7,725
Provision for uncollectible accounts (4 ) (10 ) (13 ) (20 ) (37 )
U.S. dialysis and related lab services net patient
service revenues 2,681
2,632
2,572
7,855
7,688
Other revenues 10
6
5
21
15
Total U.S. dialysis and related lab services revenues 2,691
2,637
2,577
7,876
7,703
Operating expenses:
Patient care costs 1,813
1,785
1,819
5,396
5,408
General and administrative 235
216
233
648
626
Depreciation and amortization 148
145
139
433
412
Equity investment income (5 ) (7 ) (4 ) (17 ) (15 )
Total operating expenses 2,191
2,139
2,187
6,459
6,430
Operating income $ 501
$ 499
$ 390
$ 1,417
$ 1,273
Dialysis treatments 7,673,191
7,520,587
7,377,277
22,491,237
21,882,892
Average dialysis treatments per treatment day 97,129
96,418
94,580
96,281
93,717
Average dialysis and related lab services net revenue
per treatment $ 349.41
$ 349.97
$ 348.62
$ 349.26
$ 351.33

~~Certain columns or rows may not sum or recalculate due to the use of rounded numbers.~~

~~Revenues~~

Dialysis and related lab services’ revenues for the third quarter of 2019 increased by approximately $54 million, or 2.0%, as compared to the second quarter of 2019. This increase in dialysis and related lab services’ revenues was driven by an increase in treatments, principally due to one additional treatment day in the third quarter of 2019 as compared to the second quarter of 2019, and volume growth from acquired and non-acquired treatment growth. This increase in treatments was partially offset by a decrease in our average dialysis and related lab services' net revenue per treatment of less than $1. The decrease in our average net revenue per treatment was primarily attributable to a decrease in our acute services' revenue due to a decline in volume, partially offset by an increase in average net revenue per treatment due to seasonal administration of influenza vaccinations and an increase in volume related to calcimimetics.

Dialysis and related lab services’ revenues for the third quarter of 2019 increased by approximately $114 million, or 4.4%, as compared to the third quarter of 2018. This increase in net revenues was principally driven by an increase in treatments due to one additional treatment day in the third quarter of 2019 as compared to the third quarter of 2018 and volume growth from acquired and non-acquired treatment growth, as well as an increase in our average dialysis and related lab services' net revenue per treatment of less than $1. The increase in net revenue per treatment was primarily driven by an increase in Medicare rates and an increase in acute services' revenue, partially offset by a decrease in calcimimetics revenue due to a decline in rate.

Dialysis and related lab services’ revenues for the nine months ended September 30, 2019 increased by approximately $173 million, or 2.2%, as compared to the nine months ended September 30, 2018. This increase in net revenues was principally due to an increase in treatments driven by volume growth from acquired and non-acquired treatment growth. These increases were partially offset by a decrease in our average dialysis and related lab services' net revenue per treatment of approximately $2. The decrease in net revenue per treatment was driven by a decrease in calcimimetics revenue due to a decline in rate and a $36 million benefit recognized in the nine months ended September 30, 2018 in Medicare bad debt revenue due to a policy election made under the new revenue standard to only apply the new guidance to contracts that were not substantially completed as of January 1, 2018. These decreases in net revenue per treatment were partially offset by an increase in acute services' revenue due to an increase in volume.

~~Operating expenses and charges~~

~~Patient care costs.~~ ~~Dialysis and related lab services’ patient care costs of approximately $236~~per treatment for the third quarter of 2019 decreased by approximately $1 per treatment as compared to the second quarter of 2019. This decrease was primarily related to a decrease in calcimimetics unit costs due to the continued market transition to the oral generic form of the pharmaceutical and a decrease in travel expenses. These decreases were partially offset by increases in benefit costs and in other direct operating expenses associated with our dialysis centers.

Dialysis and related lab services’ patient care costs per treatment for the third quarter of 2019 decreased by approximately $10 per treatment as compared to the third quarter of 2018. This decrease was primarily related to decreases in calcimimetics unit costs due to the transition to the oral generic form of the pharmaceutical, as well as decreases in other pharmaceutical unit costs and labor costs. These decreases were partially offset by an increase in other direct operating expenses associated with our dialysis centers and an increase in benefit costs.

Dialysis and related lab services’ patient care costs per treatment for the nine months ended September 30, 2019 decreased by approximately $7 per treatment as compared to the nine months ended September 30, 2018. This decrease was primarily related to a decrease in calcimimetics unit costs, as described above, and a decrease in other pharmaceutical unit costs and utilization. These decreases were partially offset by increases in benefits costs and other direct operating expenses associated with our dialysis centers.

~~General and administrative expenses.~~ Dialysis and related lab services’ general and administrative expenses for the third quarter of 2019 increased by approximately $19 million as compared to the second quarter of 2019. This increase was primarily related to an increase in long-term incentive compensation expense driven by compensation plans based on operating income performance and an increase in professional fees.

Dialysis and related lab services’ general and administrative expenses for the third quarter of 2019 increased by approximately $2 million as compared to the third quarter of 2018. This increase was primarily due to an increase in long-term incentive compensation expense, as described above, an increase in labor and benefit costs and an increase in professional fees, primarily offset by a decrease in advocacy costs.

Dialysis and related lab services’ general and administrative expenses for the nine months ended September 30, 2019 increased by approximately $22 million as compared to the nine months ended September 30, 2018. This increase was primarily due to increases in labor and benefit costs, long-term incentive compensation expense, as described above, and professional fees. These increases were partially offset by a decrease in advocacy costs andevent such a reduction ~~in asset impairments related to expected center closures.~~

~~Depreciation and amortization.~~ Depreciation and amortization for dialysis and related lab services for the third quarter of 2019 increased approximately $3 million as compared to the second quarter of 2019. This increase was primarily due to an increase in depreciation expense related to increases in information technology and growth in newly developed centers.

Depreciation and amortization for dialysis and related lab services for the third quarter of 2019 increased approximately $9 million as compared to the third quarter of 2018. This increase was primarily due to an increase in depreciation expense related to increases in information technology and growth in newly developed centers and acquired centers, partially offset by a decrease due to a change in estimated useful lives for our dialysis machines.

Depreciation and amortization for dialysis and related lab services for the nine months ended September 30, 2019 increased approximately $21 million as compared to the same period in 2018. The increase was primarily due to the same factors as described above.

~~Equity investment income.~~ Equity investment income for dialysis and related lab services for the third quarter of 2019 decreased approximately $2 million as compared to the second quarter of 2019 primarily due to a decrease in results at our nonconsolidated joint ventures.

Equity investment income for dialysis and related lab services for the third quarter of 2019 increased approximately $1 million as compared to the third quarter of 2018. This increase was primarily due to improved results at our nonconsolidated joint ventures.

Equity investment income for dialysis and related lab services for the nine months ended September 30, 2019 increased approximately $2 million as compared to the same period in 2018 primarily due to improved results at our nonconsolidated joint ventures.

~~Segment operating income~~

Dialysis and related lab services’ operating income for the third quarter of 2019 increased by approximately $2 million as compared to the second quarter of 2019. Operating income increased primarily due to an increase in treatments, as described above, an increase in our margin on calcimimetics due to the continued market transition to the generic form of the pharmaceutical and a decrease in travel expenses. Operating income was negatively impacted by a decrease in our average dialysis and related lab services' net revenue per treatment of less than $1, as described above, as well as increases in other direct operating expenses associated with our dialysis centers, long-term incentive compensation expense, professional fees and benefit costs.

Dialysis and related lab services’ operating income for the third quarter of 2019 increased by approximately $111 million as compared to the third quarter of 2018. This increase in operating income was principally due to an increase in treatments, an increase in our average dialysis and related lab services' net revenue per treatment of less than $1 and an increase in our margin on calcimimetics, as described above. In addition, operating income benefited from decreases in other pharmaceutical unit costs and advocacy costs. Operating income was negatively impacted by increases in other direct operating expenses associated with our dialysis centers, long-term incentive compensation expense, benefit costs and professional fees.

Dialysis and related lab services’ operating income for the nine months ended September 30, 2019 increased by approximately $144 million as compared to the nine months ended September 30, 2018. This increase in operating income was principally due to an increase in treatments and an increase in our margin on calcimimetics, as described above, as w~~ell as~~ decreases in advocacy costs and other pharmaceutical unit costs and utilization. Operating income was negatively impacted by a decrease in our average dialysis and related lab services' net revenue per treatment of approximately $2, as described above, in addition to increases in other direct operating expenses associated with our dialysis centers, labor and benefits costs, long-term compensation expense and professional fees.

~~Other—Ancillary services and strategic initiatives business~~

Our other operations include ancillary services and strategic initiatives which are primarily aligned with our core business of providing dialysis services to our network of patients. As of September 30, 2019, these consisted primarily of disease management services, vascular access services, clinical research programs, physician services, ESRD seamless care organizations and comprehensive care as well as our international operations. These businesses generated approximately $248 million in revenues for the third quarter of 2019, representing approximately 8.4% of our consolidated revenues. We expect to add additional service offerings to our business and pursue additional strategic initiatives in the future as circumstances warrant, which could include healthcare services not related to dialysis.

Any significant change in market conditions or business performance, or in the political, legislative or regulatory environment, may impact the economic viability of any of our ancillary services or strategic initiatives, including our international operations. If any of these businesses are unsuccessful,occurs, we believe that it would have a ~~negative~~material adverse impact on our business, results of operations, ~~and~~ financial condition and cash flows. The global nature of the pandemic may have varying impacts on our ongoing operations outside the United States and our ability to expand our operations into other parts of the world.

We believe the ultimate impact of this public health crisis on the Company will depend on future developments that are highly uncertain and difficult to predict, including among other things the severity and duration of the pandemic, the impact on

our patient population, the pandemic’s impact on the U.S. and global economies and unemployment, and the timing, scope and effectiveness of federal, state and local governmental responses. At this time, we ~~may decide~~cannot reasonably estimate the ultimate impact the COVID-19 pandemic will have on us, but the adverse impact could be material.

A significant initial part of the federal government response to ~~exit such line~~the COVID-19 pandemic is the CARES Act, a $2 trillion economic stimulus package that was signed into law on March 27, 2020. The CARES Act authorizes $100 billion in funding to be distributed to healthcare providers through the federal Public Health and Social Services Emergency Fund (Provider Relief Fund). Under the CARES Act, in April 2020 the government distributed approximately $250 million to the Company and its joint venture partners from the Provider Relief Fund, and these funds were only to be used for healthcare related expenses or lost revenues attributable to COVID-19. At this time, the Company has elected not to accept the funds available to it through this government financial support. Since the Company initially received these payments after March 31, the payments had no impact on our financial condition or results reported for the three months ended March 31, 2020.

The CARES Act also included a provision that suspended the 2% Medicare sequestration from May 1, 2020 through December 31, 2020, and we currently estimate that this suspension will increase our revenues.

For additional information on the potential impact of ~~business. We could incur significant termination costs if we were to exit certain of these lines of business. In addition, we may incur a material write-off or an impairment~~the COVID-19 pandemic on us, see "Part II Item 1A Risk Factors."

Financial Results

The discussion below includes analysis of our ~~investment, including goodwill, in one or more~~financial condition and results of ~~our ancillary services or strategic initiatives.~~operations for the quarter ended March 31, 2020 compared to the quarters ended December 31, 2019 and March 31, 2019.

AsConsolidated results of ~~September 30, 2019, our international dialysis~~ operations ~~provided dialysis and administrative services through a total of 249 outpatient dialysis centers located in nine countries outside of the United States.~~

The following table ~~reflects~~summarizes our revenues, operating income and adjusted operating income by line of business. See the discussion of our results for each line of ~~operations for our ancillary services and strategic initiatives:~~business following this table:

Three months ended Nine months ended
September 30, 2019 June 30,
2019 September 30, 2018 September 30, 2019 September 30, 2018
(dollars in millions)
U.S. revenues:
Other revenues $ 118
$ 114
$ 191
$ 341
$ 649
Total 118
114
191
341
649
International revenues:

Dialysis patient service revenues 128
122
112
368
320
Other revenues 2
3
1
8
3
Total 131
125
113
376
324
Total net revenues $ 248
$ 239
$ 304
$ 717
$ 972
Operating expenses and charges:
Operating and other general expenses $ 262
$ 254
$ 357
$ 763
$ 1,049
Goodwill impairment charges 84
—
—
125
3
Impairment of other assets —
—
6
—
17
Loss (gain) on changes in ownership interests, net —
—
2
—
(32 )
Total operating expenses and charges 346
254
364
888
1,037
Total ancillary services and strategic initiatives
operating loss
$ (98 ) $ (15 ) $ (60 ) $ (170 ) $ (64 )

U.S. operating loss $ (15 ) $ (16 ) $ (50 ) $ (45 ) $ (51 )
Impairment of other assets —
—
6
—
17
Restructuring charges —
—
11
—
11
Loss (gain) on changes in ownership interests, net —
—
2
—
(34 )
Adjusted operating loss⁽¹⁾
$ (15 ) $ (16 ) $ (31 ) $ (45 ) $ (56 )

International operating (loss) income $ (83 ) $ 1
$ (10 ) $ (125 ) $ (13 )
Reconciliation of non-GAAP:
Operating expenses:
Goodwill impairment charges 84
—
—
125
3
Loss on changes in ownership interests, net —
—
—
—
1
Equity investment loss:
Equity investment loss related to APAC JV goodwill
impairment —
—
6
—
6
Adjusted operating income (loss)⁽¹⁾
$ 1
$ 1
$ (4 ) $ —
$ (3 )
Total adjusted ancillary services and strategic
initiatives operating loss⁽¹⁾
$ (14 ) $ (15 ) $ (35 ) $ (46 ) $ (59 )



	Three months ended									Q1 2020 vs. Q4 2019					Q1 2020 vs. Q1 2019
	March 31, 2020			December 31, 2019			March 31, 2019			Amount			Percent		Amount			Percent
	(dollars in millions)
Revenues:
U.S. dialysis	$	2,617		$	2,687		$	2,547		$	(70	)	(2.6	)%	$	70		2.7	%
Other - ancillary services	261			255			230			6			2.4	%	31			13.5	%
Elimination of intersegment revenues	(36		)	(43		)	(34		)	7			16.3	%	(2		)	(5.9	)%
Total consolidated revenues	$	2,841		$	2,899		$	2,743		$	(58	)	(2.0	)%	$	98		3.6	%

Operating income (loss):
U.S. dialysis	$	492		$	508		$	417		$	(16	)	(3.1	)%	$	75		18.0	%
Other - ancillary services	(3		)	(19		)	(58		)	16			84.2	%	55			94.8	%
Corporate administrative support	(24		)	(27		)	(19		)	3			11.1	%	(5		)	(26.3	)%
Operating income	$	465		$	463		$	341		$	2		0.4	%	$	124		36.4	%

Adjusted operating income (loss)⁽¹⁾:
U.S. dialysis	$	492		$	508		$	417		$	(16	)	(3.1	)%	$	75		18.0	%
Other - ancillary services	(3		)	(19		)	(17		)	16			84.2	%	14			82.4	%
Corporate administrative support	(24		)	(27		)	(19		)	3			11.1	%	(5		)	(26.3	)%
Adjusted operating income	$	465		$	463		$	382		$	2		0.4	%	$	83		21.7	%

Certain columns, rows or percentages may not sum or recalculate due to the use of rounded numbers.

(1)

For ~~the periods presented in the table above,~~a reconciliation of adjusted operating ~~loss is defined as operating loss before certain items which we do not believe are indicative~~income (loss) by reportable segment, see "Reconciliations of ordinary results, including the effect of impairment charges, restructuring charges and net loss (gain) on changes in ownership interests. Adjusted operating loss as so defined is a non-GAAP measure and is not intended as a substitute for GAAP operating loss. We have presented these adjusted amounts because management believes that these presentations enhance a user’s understanding of our normal operating income by excluding certain items which we do not believe are indicative of our ordinary results of operations. As a result, adjusting for these amounts allows for comparison to our normal prior period results.Non-GAAP measures" section below.

~~Revenues~~U.S. dialysis business results of operations

~~Revenues from our ancillary services and strategic initiatives~~Revenues:



	Three months ended									Q1 2020 vs. Q4 2019					Q1 2020 vs. Q1 2019
	March 31, 2020			December 31, 2019			March 31, 2019			Amount			Percent		Amount			Percent
	(dollars in millions, except per treatment data)
Total revenues	$	2,617		$	2,687		$	2,547		$	(70	)	(2.6	)%	$	70		2.7	%
Dialysis treatments	7,513,321			7,681,462			7,297,460			(168,141		)	(2.2	)%	215,861			3.0	%
Average treatments per day	96,821			96,744			95,267			77			0.1	%	1,554			1.6	%
Treatment days	77.6			79.4			76.6			(1.8		)	(2.3	)%	1.0			1.3	%
Average patient service revenue per treatment	$	347.54		$	348.31		$	348.37		$	(0.77	)	(0.2	)%	$	(0.83	)	(0.2	)%
Normalized non acquired treatment growth⁽¹⁾	2.3		%	2.1		%	2.4		%				0.2	%				(0.1	)%


(1)	Normalized non-acquired growth reflects year over year growth in treatment volume, adjusted to exclude acquisitions and other similar transactions, further adjusted to normalize for the number and mix of treatment days in a given quarter versus the prior year quarter.

U.S. dialysis revenues in the ~~third~~first quarter of 2020 decreased over the fourth quarter of 2019 ~~increased~~primarily due to a decrease of 2.2% in dialysis treatments and a decrease in our average patient service revenue per treatment. The decrease in our U.S. dialysis treatments was driven by approximately ~~$9 million, or 3.8%,~~1.8 fewer treatment days and the deconsolidation of the two dialysis partnerships described below, partially offset by volume growth from additional treatments due to acquired and non-acquired treatments. Our U.S. dialysis average patient service revenue per treatment was negatively impacted by a Medicare rate decline related to calcimimetics as ~~compared to~~well as a seasonal decrease from co-insurance and deductibles. These decreases in our average patient service revenue per treatment were partially offset by an increase in base Medicare rates in 2020 and seasonally higher inpatient dialysis service revenue.

U.S. dialysis revenues in the ~~second~~first quarter of ~~2019. This increase was~~2020 increased over the first quarter of 2019 primarily due to an increase in ~~revenues related~~dialysis treatments, partially offset by a decrease in our average patient service revenue per treatment. Our U.S. dialysis treatments increased due to ~~our international operations driven by approximately~~volume growth from additional treatments of 3.0% due to acquired and non-acquired treatments and one additional treatment day in the ~~third~~first quarter of ~~2019 as compared to the second quarter of 2019. Revenue also increased due to increases in revenues at DaVita IKC and DaVita Clinical Research,~~2020, partially offset by a decrease in ~~revenues at~~treatments related to the deconsolidation of the two dialysis partnerships described below. Our U.S. dialysis average patient service revenue per treatment was negatively impacted by a Medicare rate decline related to calcimimetics, partially offset by favorable changes in payor rates.

Operating expenses and charges:



	Three months ended									Q1 2020 vs. Q4 2019					Q1 2020 vs. Q1 2019
	March 31, 2020			December 31, 2019			March 31, 2019			Amount			Percent		Amount			Percent
	(dollars in millions, except per treatment data)
Patient care costs	$	1,783		$	1,824		$	1,797		$	(41	)	(2.2	)%	$	(14	)	(0.8	)%
General and administrative	204			209			197			(5		)	(2.4	)%	7			3.6	%
Depreciation and amortization	146			150			141			(4		)	(2.7	)%	5			3.5	%
Equity investment income	(9		)	(5		)	(5		)	(4		)	80.0	%	(4		)	80.0	%
Total operating expenses and charges	$	2,125		$	2,179		$	2,130		$	(54	)	(2.5	)%	$	(5	)	(0.2	)%
Patient care costs per treatment	$	237.35		$	237.44		$	246.29		$	(0.09	)	—	%	$	(8.94	)	(3.6	)%

Certain columns, rows or percentages may not sum or recalculate due to the use of rounded numbers.

Patient care costs. U.S. dialysis patient care costs are those costs directly associated with operating and supporting our ~~ESCO joint ventures.~~dialysis centers and consist principally of labor, benefits, pharmaceuticals, medical supplies and other operating costs of the dialysis centers.

~~Revenues from our ancillary services and strategic initiatives for~~U.S. dialysis patient care costs per treatment in the ~~third~~first quarter of 2020 decreased slightly over the fourth quarter of 2019 ~~decreased by approximately $56 million, or 18.4%, as compared~~primarily related to the third quarter of 2018. This decrease was primarily due to our pharmacy distribution ceasing operations, partially offset by increases in revenues at DaVita IKC, as well as our international operations due to one additional treatment day in the third quarter of 2019 as compared to the third quarter of 2018 and due to acquired and non-acquired treatment growth.

Revenues from our ancillary services and strategic initiatives for the nine months ended September 30, 2019 decreased by approximately $255 million, or 26.2%, as compared to the nine months ended September 30, 2018. This decrease was primarily due to our pharmacy distribution ceasing operations as well as decreases in ~~revenues at Vively Health,~~other direct operating expenses associated with our dialysis centers and ~~our direct primary care business due to the sale of this business in the second quarter of 2018.~~pharmaceutical unit costs. These decreases were partially offset by increases in ~~revenues at DaVita IKC,~~labor and ~~our international operations due to acquired~~benefits costs, payroll taxes and ~~non-acquired~~pharmaceutical intensity.

U.S. dialysis patient care costs per treatment ~~growth.~~

~~Operating and general expenses~~

~~Ancillary services and strategic initiatives' operating and general expenses for~~in the ~~third~~first quarter of 2020 decreased over the first quarter of 2019 ~~increased by $8 million from~~primarily due to a decrease in calcimimetics unit costs as oral generic products entered the ~~second~~market in 2019 lowering the cost of products we acquire, as well as decreases in other pharmaceutical unit costs and other direct operating expenses associated with our dialysis centers.

General and administrative expenses. U.S. dialysis general and administrative expenses in the first quarter of ~~2019. This increase was~~2020 decreased over the fourth quarter of 2019 primarily due to decreases in long-term incentive compensation expense, consulting fees and legal costs. These decreases were partially offset by increases in payroll taxes and labor costs.

U.S. dialysis general and administrative expenses in the first quarter of 2020 increased over the first quarter of 2019 primarily due to increases in long-term incentive compensation expense and consulting fees. These increases were partially offset by decreases in benefit costs and payroll taxes.

Depreciation and amortization. Depreciation and amortization expense is directly impacted by the number of dialysis centers we develop and acquire. U.S. dialysis depreciation and amortization expenses in the first quarter of 2020 decreased over the fourth quarter of 2019 primarily due to certain assets being fully depreciated, partially offset by growth in the number of dialysis centers we operate. U.S. dialysis depreciation and amortization expenses in the first quarter of 2020 increased over the first quarter of 2019 primarily due to growth in the number of dialysis centers we operate.

Equity investment income. U.S. dialysis equity investment income in the first quarter of 2020 increased over the fourth quarter of 2019 primarily due to an increase in ~~expenses associated with~~the profitability at certain joint ventures as well as the deconsolidation of two of our ~~international operations~~near 50%-owned dialysis partnerships at year-end 2019, based on a reassessment of relative rights and ~~an increase~~powers over these partnerships. Our portion of these partnerships' earnings are now recognized in ~~medical costs at DaVita IKC.~~

~~Ancillary services and strategic initiatives' operating and general expenses for~~equity investment income. U.S. dialysis equity investment income in the ~~third~~first quarter of 2020 increased over the first quarter of 2019 ~~decreased by $95 million as compared to the third quarter of 2018. This decrease was~~ primarily due to our pharmacy distribution ceasing operations, decreases in restructuring charges related to our pharmacy business of $11 million, and an equity investment loss of $6 million for goodwill impairments at our APAC JV recognizedthe same reasons described above.

Operating income:



	Three months ended						Q1 2020 vs. Q4 2019					Q1 2020 vs. Q1 2019
	March 31, 2020		December 31, 2019		March 31, 2019		Amount			Percent		Amount		Percent
	(dollars in millions)
Operating income	$	492	$	508	$	417	$	(16	)	(3.1	)%	$	75	18.0	%

U.S. dialysis operating income in the ~~third~~first quarter of ~~2018.~~2020 decreased over the fourth quarter of 2019 primarily due to a decrease in our margin on calcimimetics and a decrease of 2.2% in dialysis treatments, as described above, as well as increases in payroll taxes and pharmaceutical intensity. These decreases to U.S. dialysis operating income were partially offset by an increase in ~~medical costs at DaVita IKC and an increase in expenses associated with~~ our ~~international operations.~~

Ancillary services and strategic initiatives' operating and general expenses for the nine months ended September 30, 2019 decreased by $286 million as compared to the nine months ended September 30, 2018. This decrease was primarily due to our pharmacy distribution ceasing operations, a decrease in expenses related to the sale of our direct primary care business in the second quarter of 2018, a decrease in expenses at DaVita Clinical Research,base Medicare rate, seasonally higher inpatient dialysis service revenue, as well as decreases in ~~restructuring charges related to~~other direct operating expenses associated with our ~~pharmacy business of $11 million,~~dialysis centers, pharmaceutical unit costs, and ~~an equity investment loss of $6 million for goodwill impairments at our APAC JV recognized~~long-term compensation expense.

U.S. dialysis operating income in the ~~nine months ended September 30, 2018. These decreases were~~first quarter of 2020 increased over the first quarter of 2019 primarily due to an increase in dialysis treatments, as described above, favorable changes in payor rates, as well as a decrease in other pharmaceutical unit costs, partially offset by an increase in ~~medical costs at DaVita IKC~~long-term incentive compensation expense.

Other—Ancillary services

Our other operations include ancillary services which are primarily aligned with our core business of providing dialysis services to our network of patients. As of March 31, 2020, these consisted primarily of integrated care and disease management, ESRD seamless care organizations (ESCOs), clinical research programs, vascular access services, physician services, and

comprehensive kidney care, as well as our international operations. These ancillary services, including our international operations, generated approximately $261 million of revenues in the first quarter of 2020, representing approximately 9% of our consolidated revenues. If any of our ancillary services or strategic initiatives, such as our international operations, are unsuccessful, it could have a negative impact on our business, results of operations, financial condition and cash flows, and we may determine to exit that line of business, which could result in significant termination costs. In addition, we have in the past and may in the future incur a material write-off or an impairment of our investment, including goodwill, in one or more of these ancillary services. In that regard, we may in the future incur impairment and restructuring charges.

We expect to add additional service offerings to our business and pursue additional strategic initiatives in the future as circumstances warrant, which could include healthcare services not related to dialysis.

As of March 31, 2020, our international dialysis operations provided dialysis and administrative services through a total of 282 outpatient dialysis centers located in ten countries outside of the United States.

Ancillary services results of operations



	Three months ended									Q1 2020 vs. Q4 2019				Q1 2020 vs. Q1 2019
	March 31, 2020			December 31, 2019			March 31, 2019			Amount		Percent		Amount			Percent
	(dollars in millions)
Revenues:
U.S. ancillary	$	124		$	122		$	109		$	2	1.6	%	$	15		13.8	%
International	137			132			120			5		3.8	%	17			14.2	%
Total ancillary services revenues	$	261		$	255		$	230		$	6	2.4	%	$	31		13.5	%

Operating (loss) income:
U.S. ancillary	$	(19	)	$	(21	)	$	(15	)	$	2	9.5	%	$	(4	)	(26.7	)%
International⁽¹⁾	17			2			(43		)	15		750.0	%	60			139.5	%
Total ancillary services operating loss	$	(3	)	$	(19	)	$	(58	)	$	16	84.2	%	$	55		94.8	%

Adjusted operating (loss) income⁽²⁾:
U.S. ancillary	$	(19	)	$	(21	)	$	(15	)	$	2	9.5	%	$	(4	)	(26.7	)%
International⁽¹⁾	17			2			(2		)	15		750.0	%	19			950.0	%
Total ancillary services adjusted operating loss	$	(3	)	$	(19	)	$	(17	)	$	16	84.2	%	$	14		82.4	%

Certain columns, rows or percentages may not sum or recalculate due to the use of rounded numbers.


(1)	The reported operating income (loss) and adjusted operating income (loss) for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019, include approximately $10 million, $(4) million and $(1) million, respectively, of foreign currency gain (loss).


(2)	For a reconciliation of adjusted operating income (loss) by reportable segment, see "Reconciliations of non-GAAP measures" section below.

Revenues:

U.S. ancillary services revenues for the first quarter of 2020 increased over the fourth quarter of 2019 due to increases in revenues in our physician services and clinical research programs. These increases were partially offset by a decrease in revenues in our vascular access services. In addition, international revenues for the first quarter of 2020 increased over the fourth quarter of 2019 primarily due to acquired treatment growth as we continue to expand internationally.

U.S. ancillary services revenues for the first quarter of 2020 increased over the first quarter of 2019 due to an increase in ~~expenses associated with~~revenues at our integrated care and disease management business primarily due to an increase in special needs plans revenues, as well as increases in revenues in our physician services and clinical research programs. Our international ~~operations.~~revenues for the first quarter of 2020 increased over the first quarter of 2019 primarily due to acquired treatment growth as we continue to expand internationally.

Charges impacting operating loss:

Goodwill impairment ~~charges~~

charges. During the first quarter of 2019, we recognized a ~~$41 million~~ goodwill impairment charge of $41 million in our ~~Germany~~German kidney care business. This charge resulted primarily from a change in relevant discount rates, as well as a decline in then current and expected future patient census and an increase in ~~first quarter~~then current and expected future costs, principally due to wage increases expected to result from recently announced legislation.

~~During the third quarter of 2019, we recognized an incremental goodwill impairment charge of $79 million in our Germany kidney care business and a $5 million~~ goodwill impairment charge in our German other health operations. The incremental charge recognized in the Germany kidney care business resulted from changes and developments in our outlook for this business since our last assessment. These primarily concern developments in the business in response to evolving market conditions and changes in our expected timing and ability to mitigate them.

~~During the nine months ended September 30, 2019, we recognized goodwill impairment charges of $125 million consisting of the charges described above.~~

We did not recognize any goodwill impairment charges during the third quarter of 2018 and recognized a goodwill impairment charge of $3 million at our German other health operations during the nine months ended September 30, 2018.

See further discussion of these impairment charges and our reporting units that remain at risk of goodwill impairment in Note 76 to the condensed consolidated financial statements.

Operating loss and adjusted operating loss:

~~Segment~~U.S. ancillary services operating losses

~~Ancillary services and strategic initiatives' operating loss~~ for the ~~third~~first quarter of ~~2019, which includes goodwill impairment charges of $84 million at our Germany reporting units, increased by approximately $83 million from~~2020 decreased over the ~~second~~fourth quarter of 2019. ~~Excluding this item from the third quarter of 2019, adjusted~~The decrease in U.S. ancillary services operating losses ~~decreased by $1 million, primarily~~was due to ~~an increase~~increases in ~~DaVita Clinical Research~~ operating results for our integrated care and disease management business and our physician services, partially offset by a decrease in operating results at our ESCO joint ventures.

~~Ancillary services and strategic initiatives~~ International operating ~~loss~~income for the ~~third~~first quarter of 2020 increased over the fourth quarter of 2019 ~~which includes goodwill impairment charges of $84 million at our Germany reporting units, increased by approximately $38 million from~~primarily due to favorable foreign exchange rates.

U.S. ancillary services operating losses for the ~~third~~first quarter of ~~2018, which included restructuring charges~~2020 increased over the first quarter of ~~$11 million, other asset impairment charges of $6 million related to our pharmacy business, an equity investment loss of $6 million for goodwill impairments at our APAC JV and a loss on changes~~2019. The increase in ~~ownership interests of $2 million. Excluding these items from their respective periods, adjusted~~U.S. ancillary services operating losses ~~decreased by $21 million,~~was primarily due to a decrease in ~~adjusted~~ operating ~~losses related~~results for our integrated care and disease management business due to ~~our pharmacy business,~~ an increase in ~~international~~medical costs. International operating results and adjusted operating results ~~and an increase in DaVita IKC operating results.~~

~~Ancillary services and strategic initiatives operating loss~~ for the ~~nine months ended September 30,~~first quarter of 2020 increased over the first quarter of 2019 which includes goodwill impairment charges of $125 million at our Germany reporting units, increased by approximately $106 million from the nine months ended September 30, 2018, which included a net gain on changes in ownership interests of $32 million, other asset impairment charges of $17 million, restructuring charges of $11 million, an equity investment loss of $6 million for goodwill impairments at our APAC JV and a goodwill impairment charge of $3 million. Excluding these items from their respective periods, adjusted operating losses decreased by $13 million, primarily due to ~~a decrease~~favorable foreign exchange rates and growth in ~~adjusted operating losses related to~~ our pharmacy business and increases in DaVita IKC and DaVita Clinical Research's operating results. These increases to adjusted operating income were partially offset by decreases in operating results at Vively Health and at our ESCO joint ventures.international business.

~~Corporate-level charges~~

~~Debt expense.~~ Debt expense was $89 million in the third quarter of 2019, $132 million in the second quarter of 2019 and $126 million in the third quarter of 2018. Debt expense in the third quarter of 2019 decreased as compared to the second quarter of 2019 and as compared to the third quarter of 2018 primarily due to a decrease in our average outstanding debt balance and a decrease in our average interest rate.

Debt expense was $352 million for the nine months ended September 30, 2019 as compared to $359 million for the same period in 2018, decreasing by $7 million primarily due to a decrease in our average outstanding debt balance as well as a decrease in our average interest rate.

~~Debt prepayment, refinancing and redemption charges.~~ Debt prepayment, refinancing and redemption charges were $21 million and $33 million in the three and nine months ended September 30, 2019, respectively, as a result of the repayment of all principal balances outstanding on our prior senior secured credit facilities and the redemption of our 5.75% Senior Notes. The $21 million of such charges recognized in the third quarter of 2019 represented debt discount and deferred financing cost write-offs associated with the portion of our prior senior secured debt that was paid in full in the third quarter of 2019, as well as redemption charges on our 5.75% Senior Notes redeemed in the third quarter of 2019. The $12 million of such charges recognized in the second quarter of 2019 represented accelerated amortization of debt discount and deferred financing costs associated with the portion of our prior senior secured debt that was mandatorily prepaid in or shortly after the second quarter of 2019 and prior extensions thereof.

Corporate administrative ~~support.~~ support

Corporate administrative support consists primarily of labor, benefits and long-term incentive compensation expense, as well as professional fees for departments which provide support to all of our various operating lines of ~~business, partially offset by internal management fees charged to~~business. Corporate administrative support expenses are included in general and administrative expenses on our ~~other lines of business for that support.~~consolidated income statement.

Corporate administrative support ~~costs were approximately $25 million~~expenses in the ~~third~~first quarter of 2020 decreased $3 million or 11.1% over the fourth quarter of 2019 ~~$22 million~~primarily due to decreases in ~~the second quarter of 2019~~general and ~~$41 million in the third quarter of 2018.~~administrative expenses and long-term incentive compensation expense. Corporate administrative support ~~costs~~expenses increased $5 million or 26.3% in the ~~third~~first quarter of ~~2019 as compared to~~2020 over the ~~second~~first quarter of 2019 primarily due to an increase in long-term incentive compensation expense, ~~driven~~partially offset by ~~operating income performance. Corporate~~a decrease in general and administrative ~~support costs~~expenses.

Corporate-level charges



	Three months ended									Q1 2020 vs. Q4 2019					Q1 2020 vs. Q1 2019
	March 31, 2020			December 31, 2019			March 31, 2019			Amount			Percent		Amount			Percent
	(dollars in millions)
Debt expense	$	(89	)	$	(92	)	$	(132	)	$	(3	)	(3.3	)%	$	(43	)	(32.6	)%
Debt refinancing charges	$	(3	)	$	—		$	—		$	3				$	3
Other (loss) income	$	(4	)	$	11		$	7		$	(15	)	(136.4	)%	$	(11	)	(157.1	)%
Effective income tax rate	24.8		%	21.4		%	26.3		%				3.4	%				(1.5	)%
Effective income tax rate from continuing operations attributable to DaVita, Inc.⁽¹⁾	28.5		%	25.2		%	32.0		%				3.3	%				(3.5	)%
Net income attributable to noncontrolling interests	$	(48	)	$	(58	)	$	(40	)	$	(10	)	(17.2	)%	$	8		20.0	%


(1)	For a reconciliation of our effective income tax rate from continuing operations attributable to DaVita Inc., see "Reconciliations of non-GAAP measures" section below.

Debt expense

Debt expense in the ~~third~~first quarter of ~~2019~~2020 decreased ~~as compared to~~over the ~~same period~~fourth quarter of ~~2018~~2019 primarily due to a decrease in ~~long-term incentive compensation expense resulting from the adoption of a retirement policy for certain officers~~our overall weighted average effective interest rate on our debt partially offset by an increase in our outstanding debt balance. Our overall weighted average effective interest rate in the ~~third~~first quarter of ~~2018 that increased expense~~2020 was 4.35% compared to 4.55% in ~~that period and a reduction in internal management fees charged to our pharmacy business which ceased operations.~~the fourth quarter

~~Corporate administrative support costs were approximately $66 million in~~of 2019. Debt expense decreased over the ~~nine months ended September 30,~~first quarter of 2019 ~~as compared to $71 million for the same period in 2018. The decrease in corporate administrative support costs was~~ primarily due to a decrease in ~~long-term incentive compensation expense resulting from the adoption of~~our outstanding debt balance and a ~~retirement policy for certain officers~~decrease in our overall weighted average effective interest rate on our debt. Our overall weighted average effective interest rate in the ~~third~~first quarter of ~~2018 that increased expense~~2020 was 4.35% compared to 5.16% in ~~that period and a reduction in internal management fees charged~~the first quarter of 2019. See Note 8 to the condensed consolidated financial statements for further information on components of our ~~pharmacy business which ceased operations.~~debt.

Other ~~income.~~ (loss) income

Other (loss) income consists primarily of interest income on cash and cash equivalents and short- and long-term investments, realized and unrealized gains and losses recognized on investments, and foreign currency transaction gains and losses. Other income ~~was $5 million for~~decreased in the ~~third~~first quarter of 2020 over the fourth quarter of 2019 ~~$6 million for~~primarily due to losses recognized on foreign currency transactions and investments in the ~~second~~first quarter of 2020. Other income decreased in the first quarter of 2020 over the first quarter of 2019 primarily due to losses recognized on foreign currency transactions and ~~$4 million for~~investments in the ~~third~~first quarter of ~~2018.~~ 2020, partially offset by an increase in interest income.

Effective income tax rate

The ~~decrease in other~~effective income tax rate and effective income tax rate from continuing operations attributable to DaVita Inc. increased in the ~~third~~first quarter of ~~2019~~2020 as compared to the ~~second~~fourth quarter of 2019 primarily due to a tax benefit recognized in the fourth quarter of 2019 for a reduction in our estimated blended state tax rate, partially offset by an increase in uncertain tax positions. The effective tax rate decreased in the first quarter of 2020 as compared to the first quarter of 2019 primarily due to the impact of international goodwill impairments and operations reflected in the first quarter of 2019.

Net income attributable to noncontrolling interests

The decrease in net income attributable to noncontrolling interests in the first quarter of 2020 as compared to the fourth quarter of 2019 was primarily due to ~~an increase in foreign currency losses, partially offset by an increase in interest income and a decrease in losses on the sale of investments~~approximately 1.8 fewer treatment days in the ~~third~~first quarter of ~~2019. The increase in other income for~~2020 as well as the ~~third quarter~~deconsolidation of ~~2019 as compared to~~ the ~~third quarter of 2018 was primarily due to an increase in interest income, partially offset by an increase in foreign currency losses.~~

Other income was approximately $18 million in the nine months ended September 30, 2019 as compared to $11 million for the same period in 2018. This increase was primarily due to an increase in interest income.

~~Income taxes.~~ The Company's effective income tax rate for continuing operations was 23.8% for the third quarter of 2019 as compared to 23.5% for the second quarter of 2019 and 31.1% for the third quarter of 2018. The Company's effective income tax rate increased in the third quarter of 2019 as compared to the second quarter of 2019 primarily due to goodwill impairment charges recognized during the third quarter of 2019, and decreased in the third quarter of 2019 as compared to the third quarter of 2018 primarily due to the amount of nondeductible advocacy costs recognized in the third quarter of 2018 that did not recur in the third quarter of 2019.

The Company's effective income tax rate for continuing operations was 24.3% for the nine months ended September 30, 2019 as compared to 26.2% for the nine months ended September 30, 2018. This decrease was primarily due to the amount of nondeductible advocacy costs recognized in the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2019.

~~Noncontrolling interests.~~ Net income attributable to noncontrolling interests was $58 million for the third quarter of 2019 as compared to $54 million for the second quarter of 2019 and $40 million for the third quarter of 2018.two dialysis partnerships described above. The increase in net income attributable to noncontrolling interests in the ~~third~~first quarter of 2020 and the first quarter of 2019 ~~as compared to the second quarter of 2019~~ was primarily due to one additional treatment day in the third quarter of 2019 as compared to the second quarter of 2019 as well as improved operating margin due to calcimimetics which improved earnings in our joint ventures. The increase in net income attributable to noncontrolling interests in the third quarter of 2019 as compared to the third quarter of 2018 was primarily due to improved earnings at certain ~~joint ventures.~~U.S. dialysis partnerships partially offset by the deconsolidation of the two dialysis partnerships described above.

Net income attributable to noncontrolling interests was $152 million in the nine months ended September 30, 2019 as compared to $126 million for the same period in 2018. This increase was primarily due to improved earnings at certain joint ventures.

Accounts ~~receivable.~~ receivable

Our consolidated accounts receivable balances at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, were ~~$1.901~~$1.820 billion and ~~$1.859~~$1.796 billion, respectively, ~~which represented~~representing approximately 6159 days and 6258 days sales outstanding (DSO), respectively, net of allowance for uncollectible accounts. The ~~decrease~~increase in consolidated DSO was primarily due to ~~improved~~normal timing delays in billings and collections related to certain payors. Our DSO calculation is based on the current quarter’s average revenues per day. There were no significant changes ~~during~~in the ~~third~~first quarter of ~~2019~~2020 from the ~~second~~fourth quarter of 2019 in the amount of unreserved accounts receivable over one year old or the amounts pending approval from third-party payors.

Liquidity and capital resources

The following table shows the summary of our major sources and uses of cash, cash equivalents and restricted cash:


	Three months ended						Nine months ended						Three months ended						Q1 2020 vs. Q1 2019
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019⁽¹⁾			Amount			Percent
	(dollars in millions)												(dollars in millions)
Net cash provided by operating activities:
Net income	$	202		$	(97	)	$	718		$	435		$	288		$	189		$	99		52.4	%
Non-cash items	305			466			788			832			274			244			30			12.3	%
Working capital	141			88			(89		)	108			(205		)	(290		)	85			29.3	%
Other	(7		)	—			(25		)	8			3			(2		)	5			250.0	%
	$	641		$	458		$	1,392		$	1,382		$	360		$	141		$	219		155.3	%

Net cash (used in) provided by investing activities:
Net cash used in investing activities:
Capital expenditures:
Routine maintenance/IT/other	$	(84	)	$	(101	)	$	(245	)	$	(316	)	$	(82	)	$	(90	)	$	8		8.9	%
Development and relocations	(90		)	(131		)	(302		)	(390		)	(73		)	(109		)	36			33.0	%
Acquisition expenditures	(11		)	(24		)	(77		)	(114		)	(34		)	(11		)	(23		)	(209.1	)%
Proceeds from sale of self-developed properties	12			7			38			33			27			12			15			125.0	%
DMG sale net proceeds received at closing, net of DMG cash divested	—			—			3,825			—
Other	(96		)	12			(105		)	126			(1		)	(2		)	1			50.0	%
	$	(269	)	$	(237	)	$	3,134		$	(661	)	$	(163	)	$	(200	)	$	37		18.5	%

Net cash used in financing activities:
Debt (payments) issuances, net	$	(886	)	$	274		$	(2,050	)	$	846
Net cash provided by financing activities:
Debt issuances (payments), net													$	466		$	357		$	109		30.5	%
Distributions to noncontrolling interest	(61		)	(46		)	(157		)	(140		)	(58		)	(44		)	(14		)	(31.8	)%
Contributions from noncontrolling interest	13			12			44			43			9			19			(10		)	(52.6	)%
Share repurchases													(322		)	—			(322		)
Other	5			(1		)	(4		)	(10		)	2			(7		)	9			128.6	%
Share repurchases	(1,764		)	(356		)	(1,837		)	(1,162		)
	$	(2,693	)	$	(117	)	$	(4,004	)	$	(423	)	$	97		$	325		$	(228	)	(70.2	)%

Total number of shares repurchased	30,591,750			4,849,051			32,651,726			16,844,067			4,052,298			—			4,052,298

Free cash flow from continuing operations⁽²⁾													$	184		$	(119	)	$	303		254.6	%

Certain columns or rows may not sum or recalculate due to the use of rounded numbers.


(1)	Represents consolidated cash flow activity, including cash flows related to discontinued operations.


(2)	For a reconciliation of our free cash flow from continuing operations, see "Reconciliations of Non-GAAP measures" section below.

Consolidated cash flows

Consolidated cash flows from operating activities during the ~~third~~first quarter of ~~2019~~2020 were ~~$641~~$360 million, all of which ~~$648 million was~~were from continuing operations, compared with consolidated operating cash flows for the ~~third~~first quarter of ~~2018~~2019 of ~~$458~~$141 million, of which ~~$362~~$73 million was from continuing operations. The increase in operating cash ~~flow~~flows from continuing operations was primarily driven by an increase in operating ~~income due to one additional treatment day~~results in the ~~third~~first quarter of 2020 as compared to the first quarter of 2019, as well as the timing of working capital items. Operating cash flows from continuing operations for the first quarter of 2020 were negatively impacted by one additional day in DSO as compared to the ~~third~~first quarter of ~~2018~~2019 which was negatively impacted by a four day increase in DSO in our U.S. dialysis business.

Free cash flow from continuing operations during the first quarter of 2020 increased over the first quarter of 2019 primarily due to an increase in net cash provided in operating activities, as described above, a decrease in capital expenditures for development and ~~decreases~~an increase in ~~pharmaceutical and advocacy costs,~~proceeds from the sale of self-developed properties, partially offset by an increase in ~~tax payments.~~cash outflows for acquisitions and an increase net distributions to non-controlling interest.

On August 12, 2019, we entered into a new senior secured credit agreement as described in Note 9 to the condensed consolidated financial statements. We used the funds from the new senior secured credit facilities to pay off the remaining balances outstanding under our prior senior credit facilities, to redeem our 5.75% Senior Notes due in 2022 and to fund our tender offer (Tender Offer) and additional share repurchases as described in Note 14 to the condensed consolidated financial statements. The remaining debt borrowings added cash to the balance sheet for potential future acquisitions, share repurchases and other general corporate purposes.

Other significant changes in sources and uses of cash included a net ~~payments~~draw on our revolving line of ~~$886~~credit of $500 million ~~towards debt~~and $400 million in the ~~third~~first quarter of ~~2019.~~2020 and 2019, respectively. Net debt payments during the first quarter of 2020 primarily consisted of ~~the~~regularly scheduled mandatory principal ~~prepayments totaling $4,042 million on our term debt~~payments under our ~~prior~~ senior secured credit ~~facility~~facilities totaling approximately $11 million on Term Loan A and ~~the redemption of all of our outstanding 5.75% Senior Notes due in 2022 for an aggregate cash payment consisting of~~$7 million on Term Loan B-1 and additional required principal ~~and redemption premium of $1,262 million, partially offset by the funding of~~

~~our term~~payments under other debt ~~of $4,500 million under our new senior secured credit facility.~~arrangements. In addition, we incurred ~~deferred financing~~refinancing costs related to ~~our new term debt and a cap premium fee for our forward interest rate cap agreements. By comparison,~~ the ~~third quarter~~repricing of ~~2018 included net advances of $274 million, which included a $43 million draw on~~ our ~~prior~~ Term Loan ~~A-2 and net advances~~B-1 of ~~$275 million on our prior revolving line of credit, net of scheduled principal payments on our term debt under our prior senior secured credit facility.~~approximately $3 million. See further discussion in Note 98 to the condensed consolidated financial statements related to debt activities. Cash flows used for share repurchases increased in the ~~third~~first quarter of ~~2019~~2020 as compared to the ~~third~~first quarter of ~~2018 primarily due to the Tender Offer.~~2019.

Consolidated cash flows from operating activities during the nine months ended September 30, 2019 were $1,392 million, of which $1,295 million was from continuing operations, compared with consolidated operating cash flows for the same period in 2018 of $1,382 million, of which $1,174 million was from continuing operations. The increase in cash flow from continuing operations was primarily driven by an increase in operating income due to decreases in pharmaceutical costsDialysis center capacity and ~~advocacy costs, partially offset by funding of our 2018 401(k) match contribution in early 2019 and an increase in tax payments.~~

Other significant changes in sources and uses of cash during the nine months ended September 30, 2019 included the receipt of $4,465 million in preliminary net cash proceeds from Optum at close of the DMG sale in the second quarter of 2019, or $3,825 million net of cash and restricted cash included in DMG net assets sold, and net payments of $2,050 million towards debt in the nine months ended September 30, 2019. Net debt payments primarily consisted of the prepayments of term debt under our prior senior secured credit facility totaling $5,142 million funded primarily by the net proceeds from the DMG sale. In addition, we redeemed our outstanding 5.75% Senior Notes due in 2022 for an aggregate cash payment consisting of principal and redemption premium of $1,262 million, and made scheduled principal payments on our prior term loans. These were partially offset by the funding of our term debt of $4,500 million under our new senior secured credit facility. In addition, we incurred deferred financing costs related to our new term debt and a cap premium fee for our forward interest rate cap agreements. By comparison, the same period in 2018 included net advances of $846 million which included draws on our prior Term Loan A-2 of $995 million and deferred financing costs related to our prior Term Loan A-2, partially offset by scheduled principal payments on our prior term loans and a net reduction on our prior revolving line of credit. See further discussion in Note 9 to the condensed consolidated financial statements related to debt activities. Cash flows used for share repurchases increased in the nine months ended September 30, 2019 as compared to the same period of 2018 primarily due to the Tender Offer.

As of September 30, 2019, we have an undrawn new revolving line of credit under our senior secured credit facilities of $1.0 billion, for which approximately $13 million was committed for outstanding letters of credit. We also have approximately $60 million of outstanding letters of credit under a separate bilateral secured letter of credit facility.

~~See Note 9 to the condensed consolidated financial statements for components of our long-term debt and their interest rates.~~

We believe that our cash flow from operations and other sources of liquidity, including from amounts available under our new credit facilities and our access to the capital markets, will be sufficient to fund our scheduled debt service under the terms of our debt agreements and other obligations for the foreseeable future, including the next 12 months. Our primary recurrent sources of liquidity are cash from operations and cash from borrowings.growth

The table below shows the growth in our dialysis operations by number of dialysis centers owned ~~and operated dialysis centers:~~or operated:

U.S. Dialysis Centers International Dialysis Centers
Three months ended
September 30, Nine months ended
September 30, Three months ended
September 30, Nine months ended
September 30,

2019 2018 2019 2018 2019 2018 2019 2018
Centers at beginning of period 2,723
2,580
2,664
2,510
248
253
241
237
Acquired 2
3
7
5
2
—
9
18
Developed 24
47
84
118
1
—
1
1
Managed and administrative, net⁽¹⁾
—
—
(1 ) —
—
—
—
—
Sold and closed⁽²⁾
(3 ) (1 ) (6 ) (2 ) (1 ) —
(1 ) (2 )
Closed⁽³⁾
(10 ) (4 ) (12 ) (6 ) —
—
—
—
APAC JV operated, net (1 ) (2 ) (1 ) (3 )
Number of centers at end of period 2,736
2,625
2,736
2,625
249
251
249
251



	U.S.				International
	Three months ended March 31,				Three months ended March 31,
	2020		2019		2020		2019
Number of centers operated at beginning of period	2,753		2,664		259		241
Acquired centers	2		2		22		2
Developed centers	22		27		2		—
Net change in non-owned managed or administered centers⁽¹⁾	—		(1	)	—		—
Sold and closed centers⁽²⁾	(2	)	(2	)	—		—
Closed centers⁽³⁾	(3	)	(1	)	(2	)	—
Net change in Asia Pacific joint venture centers					1		—
Number of centers operated at end of period	2,772		2,689		282		243


(1)	Represents dialysis centers ~~that~~for which we manage or provide administrative services ~~for~~ but in which we own a noncontrolling equity interest or which are wholly-owned by third parties.


(2)	Represents dialysis centers that were sold and/or closed for which patients were not retained.


(3)	Represents dialysis centers that were closed for which the majority of patients were retained and transferred to one of our other existing outpatient dialysis centers.

~~Goodwill~~

During the first quarter of 2019, we recognized a $41 million goodwill impairment charge in our German kidney care business. This charge resulted primarily from a change in relevant discount rates, as well as a decline in current and expected future patient census and an increase in first quarter and expected future costs, principally due to wage increases expected to result from recently announced legislation.

During the third quarter of 2019, we recognized an incremental goodwill impairment charge of $79 million in our Germany kidney care business and a $5 million goodwill impairment charge in our German other health operations. The incremental charge recognized in the Germany kidney care business resulted from changes and developments in our outlook for this business since our last assessment. These primarily concern developments in the business in response to evolving market conditions and changes in our expected timing and ability to mitigate them.

~~During the nine months ended September 30, 2019, we recognized goodwill impairment charges of $125 million consisting of the charges described above.~~

~~See further discussion of these impairment charges and our reporting units that remain at risk of goodwill impairment in Note 7 to the condensed consolidated financial statements.~~

~~Long-term incentive program (LTIP) compensation~~

~~During the nine months ended September 30, 2019, we granted 1,920,536~~restricted and performance stock units with an aggregate grant-date fair value of $96 million and a weighted-average expected life of approximately 3.4 years and 2,389,500 stock-settled stock appreciation rights with an aggregate grant-date fair value of $34 million and a weighted-average expected life of approximately 4.0 years.

Long-term incentive compensation expense of $41 million in the third quarter of 2019 increased by approximately $13 million as compared to the second quarter of 2019 primarily due to an increase in the ultimate expected payout of cash-based awards during the third quarter of 2019, which resulted from an increase in expected adjusted operating income for the full year 2019, as well as a full quarter of expense on new stock-based awards in the third quarter of 2019 with only a partial quarter of expense during the second quarter of 2019.

Long-term incentive compensation expense of $41 million in the third quarter of 2019 decreased by approximately $1 million as compared to the third quarter of 2018 primarily due to the adoption of a retirement policy (Rule of 65 policy) during the third quarter of 2018 which resulted in a $14.7 million modification charge and a net acceleration of expense of $8.8 million during the third quarter of 2018, partially offset by an increase in the ultimate expected payout on cash-based awards during the third quarter of 2019, due to an increase in expected adjusted operating income for the full year 2019.

Long-term incentive compensation expense of $82 million for the nine months ended September 30, 2019 increased by approximately $8 million as compared to the nine months ended September 30, 2018. This increase in long-term incentive compensation expense was primarily due to an increase in the ultimate expected payout on cash-based awards during the nine months ended September 30, 2019, which resulted from an increase in expected adjusted operating income for the full year 2019, partially offset by the adoption of the Rule of 65 policy during the nine months ended September 30, 2018 which resulted in a $14.7 million modification charge and a net acceleration of expense of $8.8 million during the nine months ended September 30, 2018.

As of September 30, 2019, there was $167 million in total estimated but unrecognized compensation expense for LTIP awards outstanding, including $152 million related to stock-based compensation arrangements under our equity compensation and employee stock purchase plans. We expect to recognize the performance-based cash component of these LTIP expenses over a weighted average remaining period of 0.6 years and the stock-based component of these LTIP expenses over a weighted average remaining period of 1.6 years.

Stock repurchases

The following table summarizes our repurchases of our common stock during the ~~three~~first quarter of 2020 and ~~nine months ended September 30, 2019.~~2019:

Three months ended September 30, 2019 Nine months ended September 30, 2019
Shares repurchased
Amount paid
(in millions)
Average amount Shares repurchased
Amount paid
(in millions)
Average amount
Tender Offer⁽¹⁾
21,801,975
$ 1,234
$ 56.60
21,801,975
$ 1,234
$ 56.60
Open market repurchases 8,789,775
514
58.49
10,849,751
626
57.72
30,591,750
$ 1,748
$ 57.14
32,651.726
$ 1,860
$ 56.97



	Three months ended March 31, 2020					Three months ended March 31, 2019
	Shares repurchased	Amount paid (in millions)		Average paid per share		Shares repurchased	Amount paid (in millions)		Average paid per share
Open market repurchases	4,052,298	$	303	$	74.81	—	$	—	$	—


~~(1)~~	The amount paid for shares repurchased associated with the Company's Tender Offer during the three and nine months ended September 30, 2019 includes the clearing price of $56.50 per share plus related fees and expenses of $2 million.

See further discussion on our stock repurchases in Note 1413 to the condensed consolidated financial statements.

Available liquidity

As of March 31, 2020, we had $500 million drawn on our $1.0 billion revolving line of credit under our senior secured credit facilities. We also have approximately $58 million of outstanding letters of credit under a separate bilateral secured letter of credit facility.

See Note 8 to the condensed consolidated financial statements ~~which includes discussion~~for components of our ~~$2.0 billion share repurchase authorization that became effective~~long-term debt and their interest rates.

The COVID-19 pandemic and efforts to prevent its spread have dramatically reduced global economic activity and negatively impacted the financial markets. We have maintained business process continuity during the COVID-19 pandemic by enabling most back office teammates to work remotely, and as of the ~~close~~date of this report, we have not experienced any material issues in billing or cash collections. This transition, combined with our balance sheet, has helped us to avoid any material deterioration of our liquidity position as a result of the COVID-19 crisis at this time. In addition, at this time we have elected not to accept the funds available to us under the CARES Act Provider Relief Fund. The ultimate impact of the pandemic will depend on future developments that are highly uncertain and difficult to predict.

We believe that our cash flow from operations and other sources of liquidity, including from amounts available under our senior secured credit facilities and our access to the capital markets, will be sufficient to fund our scheduled debt service under the terms of our debt agreements and other obligations for the foreseeable future, including the next 12 months. Our primary recurrent sources of liquidity are cash from operations and cash from borrowings.

Reconciliations of non-GAAP measures

The following tables provide reconciliations of adjusted operating income to operating income as presented on a U.S. generally accepted accounting principles (GAAP) basis for our U.S. dialysis reportable segment as well as for our U.S. ancillary services, our international business, and for our total ancillary services which combines them and is disclosed as our other segments category. These non-GAAP or “adjusted” measures are presented because management believes these measures are useful adjuncts to, but not alternatives for, our GAAP results.

Specifically, management uses adjusted operating income to compare and evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe this non-GAAP measure is also useful to investors and analysts in evaluating our performance over time and relative to competitors, as well as in analyzing the underlying trends in our business. We also believe this presentation enhances a user's understanding of our normal operating income by excluding certain items which we do not believe are indicative of our ordinary results of operations.

In addition, our effective income tax rate on ~~November 4, 2019.~~income from continuing operations attributable to DaVita Inc. excludes noncontrolling owners' income, which primarily relates to non-tax paying entities. We believe this adjusted effective income tax rate is useful to management, investors and analysts in evaluating our performance and establishing expectations for income taxes incurred on our ordinary results attributable to DaVita Inc.

Finally, our free cash flow from continuing operations represents net cash provided by operating activities from continuing operations less distributions to noncontrolling interests and all capital expenditures (including development capital expenditures, routine maintenance and information technology); plus contributions from noncontrolling interests and sale leaseback proceeds. Management uses this measure to assess our ability to fund acquisitions and meet our debt service obligations and we believe this measure is equally useful to investors and analysts as an adjunct to cash flows from operating activities from continuing operations and other measures under GAAP.

It is important to bear in mind that these non-GAAP “adjusted” measures are not measures of financial performance under GAAP and should not be considered in isolation from, nor as substitutes for, their most comparable GAAP measures.



	Three months ended March 31, 2020
	U.S. dialysis		Ancillary services								Corporate administration
	U.S. dialysis		U.S.			International		Total			Corporate administration			Consolidated
	(dollars in millions)
Operating income (loss)	$	492	$	(19	)	$	17	$	(3	)	$	(24	)	$	465
Adjusted operating income (loss)	$	492	$	(19	)	$	17	$	(3	)	$	(24	)	$	465

Certain columns or rows may not sum or recalculate due to the use of rounded numbers.



	Three months ended December 31, 2019
	U.S. dialysis		Ancillary services								Corporate administration
	U.S. dialysis		U.S.			International		Total			Corporate administration			Consolidated
	(dollars in millions)
Operating income (loss)	$	508	$	(21	)	$	2	$	(19	)	$	(27	)	$	463
Adjusted operating income (loss)	$	508	$	(21	)	$	2	$	(19	)	$	(27	)	$	463

Certain columns or rows may not sum or recalculate due to the use of rounded numbers.



	Three months ended March 31, 2019
	U.S. dialysis		Ancillary services									Corporate administration
	U.S. dialysis		U.S.			International			Total			Corporate administration			Consolidated
	(dollars in millions)
Operating income (loss)	$	417	$	(15	)	$	(43	)	$	(58	)	$	(19	)	$	341
Goodwill impairment	—		—			41			41			—			41
Adjusted operating income (loss)	$	417	$	(15	)	$	(2	)	$	(17	)	$	(19	)	$	382

Certain columns or rows may not sum or recalculate due to the use of rounded numbers.



	Three months ended
	March 31, 2020			December 31, 2019			March 31, 2019
	(dollars in millions)
Income from continuing operations before income taxes	$	369		$	382		$	216
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities	(48		)	(58		)	(39		)
Income from continuing operations before income taxes attributable to DaVita, Inc.	$	321		$	324		$	177
Income tax expense for continuing operations	$	92		$	82		$	57
Less: Income tax attributable to noncontrolling interests	—			—			—
Income tax expense from continuing operations attributable to DaVita, Inc.	$	91		$	82		$	57
Effective income tax rate on income from continuing operations attributable to DaVita, Inc.	28.5		%	25.2		%	32.0		%

Certain columns or rows may not sum or recalculate due to the use of rounded numbers.



	Three months ended March 31,
	2020			2019
	(dollars in millions
Net cash provided by continuing operating activities	$	360		$	73
Less: Distributions to noncontrolling interests	(58		)	(44		)
Plus: Contributions to noncontrolling interests	9			19
Cash provided by continuing operating activities attributable to DaVita Inc.	312			48
Less: Expenditures for routine maintenance and information technology	(82		)	(80		)
Less: Expenditures for development	(73		)	(99		)
Plus: Proceeds from sale of self-developed properties	27			12
Free cash flow from continuing operations	$	184		$	(119	)

Certain columns or rows may not sum or recalculate due to the use of rounded numbers.

Off-balance sheet arrangements and aggregate contractual obligations

In addition to the debt obligations and operating lease ~~obligations~~liabilities reflected on our balance sheet, we have commitments associated with letters of credit, ~~and~~as well as potential obligations associated with our equity investments in nonconsolidated businesses and to dialysis ventures that are wholly-owned by third parties. We have potential obligations to purchase the ~~equity~~noncontrolling interests held by third parties in ~~several~~many of our majority-owned ~~joint ventures~~partnerships and other nonconsolidated entities. These obligations are in the form of put provisions that are exercisable at the third-party owners’ discretion within specified periods as outlined in each specific put provision. If these put provisions were exercised, we would be required to purchase the third-party owners’ equity interests, generally at ~~either~~ the appraised fair market value of the equity interests or in certain cases at a predetermined multiple of earnings or cash flows attributable to the equity interests put to us, ~~which is~~ intended to approximate fair

value. The methodology we use to estimate the fair values of noncontrolling interests subject to put provisions assumes the higher of either a liquidation value of net assets or an average multiple of earnings, based on historical earnings, patient mix and other performance indicators that can affect future results, as well as other factors. The estimated fair values of noncontrolling interests subject to put provisions are a critical accounting estimate that involves significant judgments and assumptions and may not be indicative of the actual values at which the noncontrolling interests may ultimately be settled, which could vary significantly from our current estimates. The estimated fair values of noncontrolling interests subject to put provisions can fluctuate and the implicit multiple of earnings at which these noncontrolling interests obligations may be settled will vary significantly depending upon market conditions including ~~without limitation,~~ potential purchasers’ access to the capital markets, which can impact the level of competition for dialysis and non-dialysis related businesses, the economic performance of these businesses and the restricted marketability of the third-party owners’ equity interests. The amount of noncontrolling interests subject to put provisions that employ a contractually predetermined multiple of earnings rather than fair value are immaterial.

We also have certain other potential commitments to provide operating capital to several dialysis ~~ventures~~businesses that are wholly-owned by third parties or ~~businesses~~ in which we ~~maintain~~own a noncontrolling equity interest as well as to physician-owned vascular access clinics or medical practices that we operate under management and administrative services agreements.

The following is a summary of these off-balance sheet contractual obligations and commitments as of ~~September 30, 2019~~March 31, 2020 (in millions):


	Remainder of 2019		1-3 years		4-5 years		After 5 years		Total		Remainder of 2020		2021-2023		2024-2025		After 5 years		Total
Potential cash requirements under other commitments:
Letters of credit	$	73	$	—	$	—	$	—	$	73	$	58	$	—	$	—	$	—	$	58
Noncontrolling interests subject to put provisions	875		196		106		119		1,296		843		206		113		66		1,228
Non-owned and minority owned put provisions	3		43		—		—		46		73		6		—		—		79
Operating capital advances	—		3		1		3		7		1		3		1		4		9
Purchase commitments	80		1,026		—		—		1,106		289		674		—		—		963
	$	1,031	$	1,268	$	107	$	122	$	2,528	$	1,264	$	889	$	114	$	70	$	2,337

~~See~~For information on the maturities and other terms of our long term debt and lease contracts, see Note 8 and Note 9 ~~and Note 10~~ to the condensed consolidated financial ~~statements for components of our long-term debt and leases and related interest rates.~~statements.

We have an agreement with Fresenius Medical Care (FMC) to purchase a certain amount of dialysis equipment, parts and supplies from FMC through December 31, 2020.

We also have an agreement with Baxter Healthcare Corporation (Baxter) that commits us to purchase a certain amount of hemodialysis and peritoneal dialysis supplies at fixed prices through 2022.

~~Our total expenditures for~~ If we fail to meet the nine months ended September 30, 2019 on such products for FMC was approximately 2.5% and for Baxter was 1.6% of our total U.S. dialysis and related lab services operating costs. The actual amount of such purchases in future years will depend upon a number of factors, including, without limitation,minimum purchase commitments under these contracts during any year, we are required to pay the ~~operating requirements of our centers,~~difference to the ~~number of centers we acquire and growth of our existing centers.~~supplier.

In addition to the commitments listed above, in 2017 we entered into a Sourcing and Supply Agreement with Amgen USA Inc. (Amgen) that expires on December 31, 2022. Under the terms of this agreement, we will purchase EPO in amounts necessary to meet no less than 90% of our requirements for erythropoiesis stimulating agents (ESAs) through the expiration of the contract with Amgen. The actual amount of EPO that we will purchase will depend upon the amount of EPO administered during dialysis as prescribed by physicians and the overall number of patients that we serve.

Settlements of existing income tax liabilities for unrecognized tax benefits of approximately ~~$64~~$84 million, including interest, penalties and other long-term tax liabilities, are excluded from the table above as reasonably reliable estimates of their timing cannot be made.

~~Supplemental Information Concerning Certain Physician Groups and Unrestricted Subsidiaries~~

~~The following information is presented as supplemental data as required by the indentures governing the Company’s senior notes.~~

Prior to the DMG sale, we provided services to certain physician groups within our DMG business which, while consolidated in our financial statements for financial reporting purposes, were not subsidiaries of nor owned by us, did not constitute “Subsidiaries” as defined in the indentures governing our outstanding senior notes, and did not guarantee those senior notes. In addition, we operated under management agreements with these physician groups pursuant to which we received management fees from these physician groups.

From and after September 30, 2019, these physician groups were no longer included in our financial statements as they were deconsolidated with the sale of DMG to Optum. As a result, our consolidated assets, other liabilities, and indebtedness were no longer affected by consolidation of these physician groups. If these physician groups had not been consolidated in our financial statements during 2019, our consolidated net income would have been reduced by approximately $11 million for the nine months ended September 30, 2019. However, our consolidated total net revenues and consolidated operating income would have remained approximately $8.490 billion and $1.181 billion, respectively, since these DMG-related physician groups were all included in discontinued operations during the nine months ended September 30, 2019.

In addition, the DMG business owned a 67% equity interest in California Medical Group Insurance (CMGI), which prior to the sale of DMG was an Unrestricted Subsidiary under the indentures governing our outstanding senior notes, and did not guarantee those senior notes. DMG's equity interest in CMGI was accounted for under the equity method of accounting, meaning that, although CMGI was not consolidated in our financial statements for financial reporting purposes, our

~~consolidated income statement reflected our pro-rata share of CMGI’s net income within net loss from discontinued operations for periods prior to the DMG sale.~~

For the nine months ended September 30, 2019, if DMG's equity investment income attributable to CMGI were excluded, our consolidated net income would be lower by approximately $249 thousand. See Note 24 to the condensed consolidated financial statements for further details.

New Accounting Standards

See discussion of new accounting standards in Note 2221 to the condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest rate sensitivity

~~During~~There has been no material change in the ~~third quarter~~nature of ~~2019, we entered into a new senior secured credit agreement as~~the Company's interest rate risks or foreign currency exchange risks from those described in ~~Note 9 to~~Part II Item 7A of our Annual Report on Form 10-K for the ~~condensed consolidated financial statements.~~ year ended December 31, 2019.

The tables below provide information about our financial instruments that are sensitive to changes in interest ~~rates. The table below presents principal repayments and current weighted average interest~~ rates ~~on our debt obligations~~ as of ~~September 30, 2019. The variable rates presented reflect~~March 31, 2020. For further information on the weighted average LIBOR rates in effect for all debt tranches plus interest rate margins in effect as of September 30, 2019. The new Term Loan A margin in effect at September 30, 2019 is 1.50%, and along with the new revolving line of credit, is subject to adjustment depending upon changes in our leverage ratio. The new Term Loan B bears interest at LIBOR plus an interest rate margin of 2.25%.

Average interest rate
Expected maturity date Fair
Value
2019 2020 2021 2022 2023 2024 Thereafter Total
(dollars in millions)
Long term debt:
Fixed rate $ 11
$ 32
$ 26
$ 29
$ 42
$ 1,777
$ 1,721
$ 3,638
5.11 % $ 3,657
Variable rate $ 19
$ 97
$ 127
$ 140
$ 182
$ 1,395
$ 2,614
$ 4,574
4.31 % $ 4,594

Notional Amount Contract maturity date Fair
Value
2019 2020 2021 2022 2023 Thereafter Receive variable
(dollars in millions)
2015 cap agreements $ 3,500
$ —
$ 3,500
$ —
$ —
$ —
—
LIBOR above 3.5% $ —
2019 cap agreements $ 3,500
$ —
$ —
$ —
$ —
$ —
$ 3,500
LIBOR above 2.0% $ 20.6

~~There has been no material change in the nature~~components of the Company's ~~foreign currency exchange risks described in Item 7A of our~~long-term debt and their interest rates, see Note 8 to the condensed consolidated interim financial statements included in ~~the 10-K for the year ended December 31, 2018.~~this Quarterly Report on Form 10-Q at Part I Item 1.



																	Average interest rate
	Expected maturity date																		Fair Value⁽¹⁾
	2020		2021		2022		2023		2024		2025		Thereafter		Total				Fair Value⁽¹⁾
	(dollars in millions)
Long term debt:
Fixed rate	$	25	$	34	$	34	$	44	$	1,778	$	27	$	1,680	$	3,622	5.08	%	$	3,338
Variable rate	$	70	$	136	$	138	$	181	$	1,894	$	35	$	2,581	$	5,035	2.81	%	$	4,871


(1)	Represents the fair value of the Company’s long-term debt excluding financing leases. See Note 8 to the condensed consolidated financial statements for further details.



	Notional Amount		Contract maturity date															Fair Value
	Notional Amount		2020		2021		2022		2023		2024		2025		Thereafter		Receive variable	Fair Value
	(dollars in millions)
2015 cap agreements	$	3,500	$	3,500	$	—	$	—	$	—	$	—	$	—	$	—	LIBOR above 3.5%	$	—
2019 cap agreements	$	3,500	$	—	$	—	$	—	$	—	$	3,500	$	—	$	—	LIBOR above 2.0%	$	7.1

Item 4. Controls and Procedures

Management has established and maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that it files or submits pursuant to the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures.

At the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures in accordance with the Exchange Act requirements. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective for timely identification and review of material information required to be included in the Company’s Exchange Act reports, including this report. Management recognizes that these controls and procedures can provide only reasonable assurance of desired outcomes, and that estimates and judgments are still inherent in the process of maintaining effective controls and procedures.

~~Beginning January 1, 2019, we adopted FASB Accounting Standards Codification Topic 842,~~ ~~Leases. As a result of adopting this new standard, we implemented new business processes and related control activities in order to maintain appropriate controls over financial reporting.~~ There was no ~~other~~ change in our internal control over financial reporting that was identified during the evaluation that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Part II, Item 1 is incorporated herein by reference to the information set forth under the caption “Contingencies” in Note 1110 to the condensed consolidated financial statements included in this report.

Item 1A. Risk Factors

In addition to the following risk ~~factors~~factor and the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part ~~II,~~I, Item ~~1A. Risk Factors~~1A of our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K (our Form 10-K) for the ~~quarter~~year ended ~~June 30,~~December 31, 2019 ~~(our Q2 Form 10-Q)~~and any subsequent filings with the Securities and Exchange Commission (SEC) made prior to the date hereof, which could materially affect our business, financial condition, results of operations or future results. The risks and uncertainties discussed below, in our Form 10-K and in ~~our Q2 Form 10-Q~~any subsequent filings with the SEC made prior to the date hereof are not the only ones facing our business. ~~Other than~~Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, cash flows, financial condition and/or results of operations. The risk factor below updates, and should be read together with, the risk factors ~~set forth below, there have been no material charges~~disclosed in ~~the risk factors described in~~Part I, Item 1A of our Q2 Form ~~10-Q.~~10-K. Please also read the cautionary notice regarding forward-looking statements in Part I, Item 2 of this Quarterly Report on Form 10-Q under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations."

~~If we fail~~We face various risks related to ~~adhere to all~~the dynamic and rapidly evolving novel coronavirus pandemic, any of ~~the complex government laws, regulations and requirements that apply to our business, we could suffer severe consequences that could~~which may have a material adverse ~~effect~~impact on us.

The novel coronavirus (COVID-19) is impacting the world and our business in many different ways. The ultimate impact of COVID-19 on us will depend on future developments that are highly uncertain and difficult to predict, including among other things, the severity and duration of the pandemic; the impact on our ~~business, results~~patient population; the pandemic’s impact on the U.S. and global economies and unemployment; and the timing, scope and effectiveness of ~~operations, financial condition and cash flows, and~~governmental responses. The impact could ~~materially harm our reputation and stock price.~~

~~We operate~~come in a complex regulatory environment with an extensive and evolving set of federal, state and local government laws, regulations and requirements. These laws, regulations and requirements are promulgated and overseen by a number of different legislative, administrative, regulatory, and quasi-regulatory bodies, each of which may have varying interpretations, judgments or related guidance. As such, we utilize considerable resources on an ongoing basis to monitor, assess and respond to applicable legislative, regulatory and administrative requirements,many forms, including but ~~there is no guarantee that we will be successful in our efforts to adhere to all of these requirements. Laws, regulations and requirements that apply to or impact our business include, but are~~ not limited to:

~~Medicare~~We may observe a negative impact on revenue and ~~Medicaid reimbursement statutes, rules~~non-acquired growth from COVID-19 due to lower treatment volumes, including from the impact of changes in rates of mortality, as well as a decrease in new patient admissions due to the impact of COVID-19 on the chronic kidney disease (CKD) population. Over the longer term, we believe that changes in mortality in both the CKD and ~~regulations (including,~~ESRD populations due to COVID-19 will primarily depend on the infection rate, case fatality rate and age and health status of affected patients. At this time, we cannot reasonably estimate the magnitude or duration of this impact, due in part to testing and reporting limitations, but ~~not limited~~this adverse impact could be material. Because our ESRD patients generally have comorbidities, several of which are risk factors for COVID-19, we believe the mortality rate of infected patients will be higher in the dialysis population than in the general population.

We may have extended, significant additional costs as a result of COVID-19. The steps we have taken designed to ~~manual provisions, local coverage determinations, national coverage determinations, payment schedules~~help safely maintain continuity of care for our patients and ~~agency guidance);~~help protect our caregivers, such as our policies to implement dedicated care shifts for patients with confirmed or suspected COVID-19 and other enhanced clinical practices designed to meet or exceed guidelines from the Centers for Disease Control and Prevention (CDC), have increased, and are expected to continue to increase, our expenses. Our response to COVID-19 has resulted in higher salary and wage expense, and we are also providing financial support to over 50,000 of our teammates to cover costs related to COVID-19 impact under previously announced programs. Additionally, the effort needed to procure certain of our equipment and clinical supplies and associated costs have increased.

~~federal~~We may have increased costs and ~~state anti-kickback laws,~~risk associated with a high demand for our skilled clinical personnel. Historically we have faced costs and difficulties in hiring and retaining nurses and other caregivers due to a nationwide shortage of skilled clinical personnel, and these challenges have been heightened by the increased demand for and demand upon such personnel by the ongoing pandemic. Any staffing, equipment or clinical supply shortages, disruptions or delays could impact our costs and/or our ability to provide dialysis services.

If we experience a failure of the fitness of our clinical laboratory, dialysis centers and related operations and/or other facilities as a result of the COVID-19 pandemic, or another event or occurrence adversely impacts the safety of our caregivers or patients, we could face adverse consequences, including without limitation, ~~any applicable exceptions~~material negative impact on our brand, increased litigation, compliance or regulatory ~~safe harbors thereunder;~~investigations, teammate unrest, work stoppages or

other workforce disruptions. Any legal actions brought by patients, teammates, caregivers or others allegedly exposed to COVID-19 at our facilities or by our caregivers may involve significant demands and require substantial legal defense costs, which may not be adequately covered by our professional and general liability insurance.

The COVID-19 pandemic and efforts to contain the ~~Physician Self-Referral Law (the Stark Law)~~virus have led to global economic deterioration and ~~analogous state self-referral prohibition laws;~~


•	~~the 21~~^st ~~Century Cures Act;~~

~~Federal Acquisition Regulations;~~

rapid and sharp increases in unemployment levels, which ultimately could result in a materially reduced share of our patients being covered by commercial insurance plans, with more patients being covered by lower-paying government insurance programs or being uninsured. These effects may persist after the ~~False Claims Act (FCA)~~pandemic subsides, and ~~associated regulations;~~

~~the Civil Monetary Penalty statute (CMP) and associated regulations;~~

~~the Foreign Corrupt Practices Act (FCPA);~~

~~Medicare provider requirements, including requirements associated with providing and updating certain information about the Medicare entity and its direct and indirect affiliates;~~

~~antitrust and competition laws and regulations; and~~


•	~~federal and state laws regarding the collection, use and disclosure of patient health information (e.g.~~, Health Insurance Portability and Accountability Act of 1996 (HIPAA)) and the storage, handling, shipment, disposal and/or dispensing of pharmaceuticals and blood products and other biological materials.

In addition, on October 9, 2019, the U.S. Department of Health and Human Services, Office of Inspector General (OIG) and the Centers for Medicare & Medicaid Services (CMS) released a pair of proposed rules that, if adopted, would change the Federal Anti-Kickback Statute (AKS), CMP and Stark Law regulations to promote certain value-based and coordinated care arrangements. The proposed rules are subject to a 75-day comment period following publication in the ~~Federal Register and remain subject to change until the publication of any final rules, the date and content of which are currently unknown.~~

~~We are also subject to~~event such a five-year Corporate Integrity Agreement (CIA). The term of the CIA expired on October 22, 2019, and the Company is in the process of working with the independent monitor and OIG to close out the review of the final annual reports by the independent monitor and the Company. The CIA imposed a number of additional requirements upon us and, for our domestic dialysis business, required us to report probable violations of criminal, civil or administrative laws applicable to any federal healthcare program for which penalties, sanctions or exclusions may be authorized under applicable healthcare laws and regulations. We expect to continue to incur costs related to CIA compliance, and until OIG closes out the CIA following review of the aforementioned final annual reports, OIG retains the right to impose penalties, sanctions and other consequences on us under the CIA, including, without limitation, potential exclusion from federal healthcare programs. Any future penalties, sanctions or other consequences under the CIA or otherwise could be more severe in circumstances in which OIG or a similar regulatory authority determines that we have repeatedly failed to comply with applicable laws, regulations or requirements. For additional information regarding our CIA, see the risk factor under the heading "If we fail to comply with our Corporate Integrity Agreement, we could be subject to substantial penalties and exclusion from participation in federal healthcare programs that could have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation" in Part II, Item 1A in our Q2 Form 10-Q.

~~If any of our operations are found to violate these or other laws, regulations or requirements, we could suffer severe consequences that~~reduction occurs, it would have a material adverse ~~effect on our business, results of operations, financial condition and cash flows, and could materially harm our reputation and stock price, including, among others:~~

~~Loss of required certifications or suspension or exclusion from or termination of our participation in government payment programs;~~

~~Refunds of amounts received in violation of law or applicable payment program requirements dating back to the applicable statute of limitation periods;~~

~~Loss of licenses required to operate healthcare facilities or administer pharmaceuticals in the states in which we operate;~~

~~Reductions in payment rates or coverage for dialysis and ancillary services and pharmaceuticals;~~

~~Criminal or civil liability, fines, damages or monetary penalties, which could be material;~~

Enforcement actions, investigations, or audits by governmental agencies and/or state law claims for monetary damages by patients who believe their protected health information (PHI) has been used, disclosed or not properly safeguarded in violation of federal or state patient privacy laws, including, among others, HIPAA and the Privacy Act of 1974;

Mandated changes to our practices or procedures that significantly increase operating expenses that could subject us to ongoing audits and reporting requirements as well as increased scrutiny of our billing and business practices which could lead to potential fines, among other things;

Termination of various relationships and/or contracts related to our business, such as joint venture arrangements, medical director agreements, real estate leases and consulting agreements with physicians; and

~~Harm to our reputation which could negatively~~ impact our business relationships, affect our ability to attract and retain patients, physicians and teammates, affect our ability to obtain financing and decrease access to new business opportunities, among other things.

See Note 11 to the condensed consolidated financial statements included in this report for further details regarding the pending legal proceedings and regulatory matters to which we are or may be subject from time to time, any of which may include allegations of violations of applicable laws, regulations and requirements.

~~Changes in federal and state healthcare legislation or regulations could have a material adverse effect~~ on our business, results of operations, financial condition and cash flows.

~~The extensive federal and state laws, regulations and requirements that govern our business may~~If general economic conditions continue to ~~change~~deteriorate or remain uncertain for an extended period of time, we may incur future charges to recognize impairment in the carrying amount of our goodwill and other intangible assets. We also may experience an increased need for additional liquidity funded by accessing existing credit facilities, raising new debt in the capital markets, or other sources, or may seek to refinance existing debt, which may be more difficult or costly as a result of the pandemic’s impact on capital markets or on us. Furthermore, any extended billing or collection cycles, or deterioration in collectability of accounts receivable, will adversely impact our results of operations and cash flows.

The global nature of the pandemic may have varying impacts on our ongoing operations outside the United States and our ability to expand our operations into other parts of the world.

The nature and scope of the pandemic is rapidly evolving and we cannot predict the nature, timing or extent of potential changes in patient and physician preferences resulting from the COVID-19 pandemic. In addition, the government response to the pandemic has been wide-ranging and will continue to develop over ~~time, and there is no assurance that~~time. As a result, we ~~will~~may not be able to accurately predict the nature, timing or extent of ~~such~~ changes to the extensive set of federal, state and local laws, regulations and requirements that govern our business, or the impact of such changes on the markets in which we conduct business or on the other participants that operate in those markets. We believe that these changes may impact our business in a variety of ways, including among others:

~~For example,~~Our need, ability and willingness to use and retain any funds from the ~~regulatory framework~~government, including any funds received under the recent Coronavirus Aid, Relief, and Economic Security Act (CARES Act) or under any future legislation, the consequences of ~~the Patient Protection and Affordable Care Act~~our decisions with respect thereto, our ability to operate within any restrictions on our business or operations that may be imposed as a condition to participation in any government assistance programs, and the ~~Health Care Reconciliation Act~~impact of ~~2010, as amended (ACA), and other healthcare reforms continues to evolve as a result of executive, legislative, regulatory and administrative developments and judicial proceedings. As~~any such there remains considerable uncertainty surrounding the continued implementation of the ACA and what similar healthcare reform measures or other changes might be enacted at the federal and/or state level. While legislative attempts to completely repeal the ACA have been

unsuccessful to date, there have been multiple attempts to repeal or amend the ACA through legislative action and legal challenges. For example, in December 2017, the Tax Cuts and Jobs Act of 2017 was signed into law which,legislation on our competitors, all will depend, among other things, repealed the penalty under ACA's individual mandate, which had required individuals to pay a fee if they failed to obtain a qualifying health insurance plan. In December 2018, a federal district court in Texas ruled the individual mandate was unconstitutional and inseverable from the ACA. As a result, the court ruled the remaining provisions of the ACA were also invalid, though the court declined to issue a preliminary injunction with respect to the ACA. The district court's ruling has been appealed to the U.S. Court of Appeals for the Fifth Circuit, and the ruling has been stayed pending the outcome of the appeal. On July 9, 2019, the U.S. Court of Appeals for the Fifth Circuit heard oral arguments on the ~~appeal. It remains unclear whether the court's ruling ultimately will be upheld by appellate courts.~~

~~While there may be significant changes to the healthcare environment in the future, including, without limitation, as a result~~magnitude, timing and nature of potential changes to the political environment in connection with the upcoming election year or otherwise, the specific changes and their timing are not yet apparent. Nevertheless, previously enacted reforms and future changes, including among others, any changes in legislation, regulation or market conditions in connection with the upcoming election years, could have a material adverse effect on our business, results of operations, financial condition and cash flows. For example, our revenue levels are sensitive to the percentage of our patients with higher-paying commercial health insurance, and as such, legislative, regulatory or other changes that decrease the accessibility and availability, including the duration, of commercial insurance may have a material adverseCOVID-19’s impact on ~~our business. The ACA's health insurance exchanges, which provide a marketplace for eligible individuals and small employers to purchase health insurance, initially increased~~ the ~~accessibility and availability of commercial insurance. However, certain legislative developments, such~~Company as well as the repeal of the individual mandate described above, have adversely impacted the risk pool in certain exchange markets, and the nature and extent of commercial payor participation in the exchanges has fluctuated as a result. Other proposed legislative developments or administrative decisions, such as moving to a universal health insurance or "single payor" system whereby health insurance is provided to all Americans by the government under government programs, or lowering or eliminating the cost-sharing reduction subsidies under the ACA, could impact the percentage of our patients with higher-paying commercial health insurance, impact the scope of coverage under commercial health plans and increase our expenses, among other things. Although we cannot predict the short- or long-term effects of legislative or regulatory changes or the potential outcome or impact of the upcoming elections, we believe that future market changes could result in more restrictive commercial plans with lower reimbursement rates or higher deductibles and co-payments that patients may not be able to pay. To the extent that changes in statutes, regulations or related guidance or changes in other market conditions result in a reduction in the percentage of our patients with commercial insurance, limit the scope or nature of coverage through the exchanges or other health insurance programs or otherwise reduce reimbursement rates for our services from commercial and/or government payors, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. For additional information on the impact of legislative or regulatory changes on the percentage of our patients with commercial insurance, see the risk factor under the heading "If the number of patients with higher-paying commercial insurance declines, it could have a material adverse effect on our business, results of operations, financial condition and cash flows" in Part II, Item 1A in our Q2 Form 10-Q.

The ACA also added several new tax provisions that, among other things, impose various fees and excise taxes, and limit compensation deductions for health insurance providers and their affiliates. These rules could negatively impact our cash flow and tax liabilities. In addition, the ACA broadened the potential for penalties under the FCA for the knowing and improper retention of overpayments collected from government payors and reduced the timeline to file Medicare claims. Failure to timely identify, quantify and return overpayments may result in significant penalties, which could have a material adverse effect on our business, results of operations, financial condition, cash flows and reputation. Failure to file a claim within the one year window could result in payments denials, adversely affecting our business, results of operations, financial condition and cash flows.

In addition to the ACA, changing legislation has led and may continue to lead to the emergence of new models of care and other initiatives in both the government and private sector. Any failure on our part to adequately implement strategic initiatives to adjust to these marketplace developments could have a material adverse impact on our business. For example, a July 10, 2019 executive order related to kidney care directed CMS to create payment models to evaluate the effects of creating payment incentives for the greater use of home dialysis and kidney transplants for those already on dialysis. CMS subsequently announced the ESRD Treatment Choices (ETC) mandatory payment model, which will be administered through the CMS Innovation Center (CMMI) and is proposed to launch in 50% of dialysis clinics across the country beginning in 2020. Under the proposed rule, which was subject to a comment period that ended in September 2019, CMS would select ESRD facilities and clinicians to participate in the model according to their location in randomly selected geographic areas and would require participation to minimize the potential for selection effect. We are in the early stages of assessing the potential impact of the ETC mandatory payment model, but we believe that if launched as proposed, the ETC model would negatively impact Medicare coverage and/or payment for ESRD claims. With home dialysis as a focus of the ETC model and the industry generally, any failure to adequately implement our growth strategy or offer or build on our abilities to offer home dialysis

options, to the extent such failure results in a significant reduction in the number of our patients, could have a material adverse impact on our business, results of operation, financial condition and cash flows.

In connection with the executive order, CMS also announced the implementation of four voluntary payment models designed to help healthcare providers reduce the cost and improve the quality of care for patients with late-stage chronic kidney disease and ESRD. CMS has stated these payment models are aimed to prevent or delay the need for dialysis and encourage kidney transplantation. These payment models also are currently scheduled to be launched in 2020. In October 2019, CMS released initial guidance around the voluntary payment models, and we expect additional guidance in the coming months. We are in the early stages of evaluating the voluntary payment models.

In addition, CMMI is currently working with various healthcare providers to develop, refine and implement Accountable Care Organizations (ACOs) and other innovative models of care for Medicare and Medicaid beneficiaries, including, without limitation, the Comprehensive ESRD Care Model (CEC Model) (which includes the development of end stage renal disease (ESRD) Seamless Care Organizations), the Duals Demonstration, and other models. We are currently participating in the CEC Model with CMMI, including with organizations in Arizona, Florida, and adjacent markets in New Jersey and Pennsylvania. Our U.S. dialysis business may choose to participate in additional models either as a partner with other providers or independently. Even in areas where we are not directly participating in these or other CMMI models, some of our patients may be assigned to an ACO, another ESRD Care Model, or another program, in which case the quality and cost of care that we furnish will be included in an ACO's, another ESRD Care Model's, or other program's calculations.

In addition to the aforementioned new models of care, federal bipartisan legislation related to full capitation demonstration for ESRD was proposed in late 2017. Legislation, which has yet to secure introduction to the 116th Congress, would build on prior coordinated care models, such as the CEC Model, and would establish a demonstration program for the provision of integrated care to Medicare ESRD patients. We have made and continue to make investments in building our integrated care capabilities, but there can be no assurances that initiatives such as this or similar legislation will be introduced or passed into law. If such legislation is passed, there can be no assurances that we will be able to successfully execute on the required strategic initiatives that would allow us to provide a competitive and successful integrated care program on the broader scale contemplated by this legislation, and in the desired timeframe. Additionally, the ultimate terms and conditionsrequirements of any such potential legislation remain unclear-for example, our costs of care could exceed our associated reimbursement rates under such legislation. The new and evolving landscape for integrated kidney care also has led to opportunities with relative ease of entry for certain smaller and/or non-traditional providers, andprograms, which are uncertain. In addition, while we may be competing for patients in an asymmetrical environment with respect to data and/or regulatory requirements given our status as an ESRD service provider. For additional detail on our evolving competitive environment, seeare declining the ~~risk factor~~government funding from the Provider Relief Fund under the ~~heading~~ "If we are unable to compete successfully, including, without limitation, implementing our growth strategy and/or retaining patients and physicians willing to serve as medical directors, it could materially adversely affect our business, results of operations, financial condition and cash flows" in Part II, Item 1A in our Q2 Form 10-Q. In general, if we are unable to efficiently adjust to these and other new models of care, it may, among other things, erode our patient base or reimbursement rates, which could have a material adverse impact on our business, results of operation, financial condition and cash flows.

There have also been several state initiatives to limit payments to dialysis providers or impose other burdensome operational requirements. For example, on October 24, 2019, the Service Employees International Union - United Healthcare Workers West (SEIU) proposed a California statewide ballot initiative for the November 2020 election that seeks to impose certain regulatory requirements on dialysis clinics, including requirements related to physician staffing levels, clinical reporting, clinical treatment options and the ability to make decisions on closing or reducing services for dialysis clinics. We expect to incur costs in connection with this new proposal, should it become eligible for the November 2020 election, and other potential ballot initiatives-and these costs may be substantial. Similar initiatives were also proposed in Ohio and Arizona in the 2018 election cycle; however, neither of these initiatives met the applicable requirements for inclusion on the state ballot for the November 2018 elections. We may face similar ballot initiatives or other legislation in the future in these or other states.

There have also been rule making and legislative efforts at both the federal and state level concerning charitable premium assistance. In December 2016, CMS published an interim final rule that questioned the use of charitable premium assistance for ESRD patients and would have established new conditions for coverage standards for dialysis facilities. In January 2017, a federal district court in Texas issued a preliminary injunction on CMS' interim final rule and in June 2017, at the request of CMS, the court stayed the proceedings while CMS pursues new rulemaking options. In June 2019, CMS sent to the White House Office of Management and Budget a proposed rule entitled ~~"Conditions for Coverage for End-Stage Renal Disease Facilities-Third Party Payments,"~~ which is expected to be released in 2019. In addition, on October 13, 2019 a California bill (AB 290) was signed into law that limits the amount of reimbursement paid to certain providers for services provided to patients with commercial insurance who receive charitable premium assistance. AB 290 is expected to become effective in July 2020. The American Kidney Fund (AKF), an organization that provides charitable premium assistance,

announced that it will be withdrawing from California at the end of 2019 as a result of the newly signed law. AKF has already ceased taking applications for new patient assistance in California. In the event AB 290 becomes effective and the AKF withdraws from California, we expect an adverse impact on the ability of patients to afford Medicare premiums and Medicare supplemental (Medigap) and commercial coverage, which we expect will in turn result in an adverse impact on our business, results of operations, financial condition and cash flows. In addition, bills similar to AB 290 were recently introduced in Illinois (SB 650) and Oregon (SB 900), but have not been successfully passed to date. If these or similar bills are introduced and implemented in other jurisdictions, and organizations that provide charitable premium assistance in those jurisdictions are similarly impacted, it could in the aggregate have a material adverse impact on our business, results of operations, financial condition and cash flows. For additional information on the impact of decreases to the percentage of our patients with commercial insurance, see the risk factor under the heading "If the number of patients with higher-paying commercial insurance declines, it could have a material adverse effect on our business, results of operations, financial condition and cash flows" in Part II, Item 1A in our Q2 Form 10-Q.

Any law, rule or guidance proposed or issued by CMS or other federal or state regulatory or legislative authorities or others, including, without limitation, any initiatives similar to the proposed legislation and ballot initiatives described above, or other future ballot or other initiatives restricting or prohibiting the ability of patients with access to alternative coverage from selecting a marketplace plan on or off exchange, limiting the amount of revenue that a dialysis provider can retain for caring for patients with commercial insurance, imposing burdensome operational requirements, affecting payments made to providers for services provided to patients who receive charitable premium assistance and/or otherwise restricting or prohibiting the use of charitable premium assistance, could cause us to incur substantial costs to oppose any such proposed measures, impact our dialysis center development plans, and if passed and/or implemented, could adversely impact dialysis centers across the U.S. making certain centers economically unviable, lead to the closure of certain centers, restrict the ability of dialysis patients to obtain and maintain optimal insurance coverage, and in some cases, have a material adverse effect on our business, results of operations, financial condition and cash flows.

We may engage in acquisitions, mergers, joint ventures or dispositions, which may materially affect our results of operations, debt-to-capital ratio, capital expenditures or other aspects of our business, and, under certain circumstances, could have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation.

Our business strategy includes growth through acquisitions of dialysis centers and other businesses, as well as through entry into joint ventures. We may engage in acquisitions, mergers, joint ventures or dispositions or expand into new business lines or models, which may affect our results of operations, debt-to-capital ratio, capital expenditures or other aspects of our business. ThereCARES Act, there can be no assurance that we will be able to ~~identify suitable acquisition targets~~continue to forego the receipt of financial or ~~merger partners~~other assistance under the CARES Act or ~~buyers for dispositions~~similar subsequent legislation or that ~~if identified, we~~similar assistance will be ~~able to agree to terms with merger partners, acquire these targets or make these dispositions on acceptable terms or on~~available from the ~~desired timetable. There can also be no assurance that~~government if we will be successful in completing any acquisitions, mergers or dispositions that we announce, executing new business lines or models or integrating any acquired business into our overall operations. There is no guarantee that we will be able to operate acquired businesses successfully as stand-alone businesses, or that any such acquired business will operate profitably or will not otherwise have a ~~material adverse effect on~~need for such assistance in the future.

State and local shelter in place and social distancing restrictions have required us to significantly increase the use of remote arrangements for our teammates and telehealth technology for our dialysis patients, which broadens our technology footprint for where and how protected health information is used or disclosed, and in turn increases our exposure to the various privacy and information security risks we face such as the risk of "phishing" and other cybersecurity attacks and the risk of unauthorized dissemination of sensitive personal, proprietary or confidential information.

We have worked with certain government agencies and other kidney care providers to respond to the COVID-19 pandemic, including seeking waivers of certain regulatory requirements. For example, as part of our efforts to help cohort patients in line with guidance from the CDC, we have sought waivers of certain regulatory requirements related to the survey and acceleration of new clinics and entered into agreements with other kidney care providers to help ensure that patients can receive dialysis in an outpatient setting rather than a hospital. We operate in a complex and highly-regulated environment, and the novel nature of these arrangements may increase our exposure to legal, regulatory and clinical risks.

Each of the foregoing and other continued disruptions to our business ~~results~~as a result of ~~operations, financial condition and cash flows or materially harm our reputation. Further, we cannot be certain that key talented individuals at~~ the business being acquired will continue to work for us after the acquisition or that they will be able to continue to successfully manage or have adequate resources to successfully operate any acquired business. In addition, certain of our acquired dialysis centers and facilities have been in service for many years, which may result in a higher level of maintenance costs. Further, our facilities, equipment and information technology may need to be improved or renovated to maintain or increase operational efficiency, compete for patients and medical directors, or meet changing regulatory requirements. Increases in maintenance costs and any continued increases in capital expendituresCOVID-19 pandemic could have a material adverse ~~effect~~impact on our patients, teammates, physician partners, suppliers, business, operations, financial condition, results of operations, ~~financial condition~~cash flows, liquidity and ~~cash flows.~~

~~Businesses we acquire may have unknown or contingent liabilities or liabilities that are in excess~~reputation. In addition, the COVID-19 pandemic heightens many of the ~~amounts that we originally estimated,~~other risks and ~~may have other issues, including, without limitation, those related to internal controls over financial reporting or issues that could affect~~uncertainties discussed in our ability to comply with healthcare laws and regulations and other laws applicable to our expanded business, which could harm our reputation. As a result, we cannot make any assurances that the acquisitions we consummate will be successful. Although we generally seek indemnification from the sellers of businesses we acquire for matters that are not properly disclosed to us, we are not always successful. In addition, even in cases where we are able to obtain indemnification, we may discover liabilities greater than the contractual limits, the amounts held in escrow for our benefit (if any), or the financial resources of the indemnifying party. In the event that we are responsible for liabilities substantially in excess of any amounts recovered through rights to indemnification or alternative remedies that might be available to us, or any applicable insurance, we could suffer severe consequences that would have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation.

We have in the past decided, and may in the future decide, to dispose of certain assets or businesses, such as the disposition of our DMG business, which we completed in June 2019. The sale of DMG results in a less diversified portfolio of businesses, and we will have a greater dependency on the performance of our kidney care business for our financial results, which could make us more susceptible to market fluctuations and other adverse events than if we had retained the DMG business.

In addition, under the terms of the equity purchase agreement in connection with the DMG sale agreement, as amended (the "DMG sale agreement") (and subject to the limitations therein), we agreed to certain indemnification obligations. As a result, we may become obligated to make payments to the buyer relating to our previous ownership and operation of the DMG business. Claims giving rise to these potential payments include, without limitation, claims related to breaches of our representations and warranties and covenants, including claims for breaches of our representations and warranties regarding compliance with law, litigation, absence of undisclosed liabilities, employee benefit matters, labor matters, or taxes, among others, and other claims for which we provided the buyer with a special indemnity. Any such post-closing liabilities and required payments under the DMG sale agreement, or otherwise, or in connection with any other past or future disposition of material assets or businesses could individually or in the aggregate have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation. Further, the purchase price in the DMG sale agreement is subject to customary post-closing adjustments, including, without limitation, as a result of certain net working capital adjustments. We are currently engaged with Optum concerning what, if any, net working capital adjustment or other potential adjustments to the purchase price are appropriate, via the process set forth in the DMG sale agreement. Any negative adjustments to the purchase price, including, without limitation, as a result of this ongoing engagement with Optum, could result in a material adverse change in the amount of consideration that we are able to retain.

In connection with the closing of the DMG sale, we entered into a transition services agreement with Optum, whereby we and Optum will provide various transition services to one another for specified periods of time beginning on the closing date and extending for up to two years thereafter. In the course of performing our obligations under the transition services agreement, we will allocate certain of our resources, including without limitation, assets, facilities, equipment and the time and attention of our management and other teammates, for the benefit of the DMG business and not ours, which may negatively impact our business, results of operations and financial condition.

Additionally, joint ventures, including, without limitation, our Asia Pacific joint venture, and minority investments inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks associated with the joint venture or minority investment. In addition, we may be dependent on joint venture partners, controlling shareholders or management who may have business interests, strategies or goals that are inconsistent with ours. Business decisions or other actions or omissions of the joint venture partner, controlling shareholders or management may require us to make capital contributions or necessitate other payments, result in litigation or regulatory action against us, result in reputational harm to us or adversely affect the value of our investment or partnership, among other things. There can be no assurances that these joint ventures and/or minority investments, including, without limitation, our Asia Pacific joint venture, ultimately will be successful.

Form 10‑K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share repurchases

The following table summarizes our repurchases of our common stock during ~~the third quarter of 2019:~~three months ended March 31, 2020:

Period Total number
of shares
purchased Average price
paid per share Total number
of shares
purchased as
part of publicly
announced
plans or programs Approximate
dollar value
of shares
that may yet be purchased under the plans or programs
(in millions)
July 1-31, 2019 4,214,205
$ 56.47
4,214,205
$ 2,000
August 1-31, 2019 21,801,975
56.57
21,801,975
$ 768
September 1-30, 2019 4,575,570
60.47
4,575,570
$ 492
30,591,750
$ 57.14
30,591,750

On July 11, 2018, our Board of Directors approved an additional share repurchase authorization in the amount of approximately $1.39 billion. This share repurchase authorization was in addition to the approximately $110 million remaining at that time under our Board of Directors’ prior share repurchase authorization approved in October 2017.

Effective July 17, 2019, our Board of Directors terminated all remaining prior share repurchase authorizations available to us at that time and approved a new share repurchase authorization of $2.0 billion. As of the close of business on November 4, 2019, we had repurchased a total of 30,660,921 of shares of our common stock for $1.75 billion under this repurchase authorization.



Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions)
January 1-31, 2020	290,904	$	74.92	290,904	$	1,682
February 1-29, 2020	376,186	78.78		376,186	$	1,652
March 1-31, 2020	3,385,208	74.36		3,385,208	$	1,400
	4,052,298	$	74.81	4,052,298

Effective as of the close of business on November 4, 2019, the Board terminated all remaining prior share repurchase authorizations available to us ~~under the aforementioned July 17, 2019 authorization~~ and approved a new share repurchase authorization of $2.0 billion. We are authorized to make purchases from time to time in the open market or in privately negotiated transactions, including without limitation, through accelerated share repurchase transactions, derivative transactions, tender offers, Rule 10b5-1 plans or any combination of the foregoing, depending upon market conditions and other considerations.

As of ~~November 6, 2019,~~May 4, 2020, we had a total of ~~$2.0~~$1.4 billion available under the current repurchase authorization for additional share repurchases. Although this share repurchase authorization does not have an expiration date, we remain subject to share repurchase limitations, including under the terms of the current senior secured credit facilities and the indentures governing our senior notes.

Items 3, 4 and 5 are not applicable

Item 6. Exhibits

~~The information required by this Item is set forth in the Index to Exhibits that precedes the signature page of this Quarterly Report on Form 10-Q.~~

~~INDEX TO EXHIBITS~~



Exhibit
Number

10.1		Credit Agreement, dated August 12, 2019, by and among DaVita Inc., certain subsidiary guarantors party thereto, the lenders party thereto, Credit Agricole Corporate and Investment Bank, JPMorgan Chase Bank, N.A. and MUFG Bank Ltd., as co-syndication agents, Bank of America, N.A., Barclays Bank PLC, Credit Suisse Loan Funding LLC, Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc. and Suntrust Bank, as co-documentation agents, and Wells Fargo Bank, National Association, as administrative agent, collateral agent and swingline lender. (1) Non-Employee Director Compensation Policy. *ü

31.1		Certification of the Chief Executive Officer, dated ~~November 6, 2019,~~May 5, 2020, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ü

31.2		Certification of the Chief Financial Officer, dated ~~November 6, 2019,~~May 5, 2020, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ü

32.1		Certification of the Chief Executive Officer, dated ~~November 6, 2019,~~May 5, 2020, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ü

32.2		Certification of the Chief Financial Officer, dated ~~November 6, 2019,~~May 5, 2020, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ü

101.INS		XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ü

101.SCH		Inline XBRL Taxonomy Extension Schema Document. ü

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document. ü

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document. ü

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document. ü

101.PRE		Inline XBRL Taxonomy Extension Presentation, Linkbase Document. ü

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). ü



*	Management contract or executive compensation plan or arrangement.
ü	Filed or furnished herewith.
~~(1)~~	~~Filed on August 14, 2019 as Exhibit 10.1 to the Company's Current Report on Form 8-K.~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	DAVITA INC.

	BY:		/s/ ~~JAMES K. HILGER~~JOHN D. WINSTEL
			~~James K. Hilger~~John D. Winstel
			Chief Accounting Officer*

Date: ~~November 6, 2019~~May 5, 2020



*	Mr. ~~Hilger~~Winstel has signed both on behalf of the Registrant as a duly authorized officer and as the Registrant’s principal accounting officer.

6749



	Three months ended September 30, 2018
	Non- controlling interests subject to put provisions			DaVita Inc. Shareholders’ Equity																				Non- controlling interests not subject to put provisions
				DaVita Inc. Shareholders’ Equity
				Common stock			Additional paid-in capital			Retained earnings			Treasury stock					Accumulated other comprehensive loss
				Shares	Amount		Additional paid-in capital			Retained earnings			Shares		Amount			Accumulated other comprehensive loss			Total
Balance at June 30, 2018	$	1,047,158		182,815	$	183	$	1,022,783		$	4,088,043		(11,995	)	$	(809,900	)	$	(21,925	)	$	4,279,184		$	205,323
Comprehensive income:
Net income	25,525									(136,796		)									(136,796		)	14,603
Other comprehensive loss																		(7,184		)	(7,184		)
Stock unit shares issued				8
Stock-settled SAR shares issued				5			(1		)												(1		)
Stock-settled stock-based compensation expense							39,707														39,707
Changes in noncontrolling interest from:
Distributions	(27,375		)																					(18,292		)
Contributions	7,191																							4,419
Acquisitions and divestitures	10,597																							(9		)
Partial purchases	(49		)				(5,285		)												(5,285		)	(1,431		)
Fair value remeasurements	1,365						(1,365		)												(1,365		)
Purchase of treasury stock													(4,849	)	(343,611		)				(343,611		)
Balance at September 30, 2018	$	1,064,412		182,828	$	183	$	1,055,839		$	3,951,247		(16,844	)	$	(1,153,511	)	$	(29,109	)	$	3,824,649		$	204,613



	For the nine months ended
	September 30, 2019									September 30, 2018
	U.S. dialysis and related lab services			Other - Ancillary services and strategic initiatives			Consolidated			U.S. dialysis and related lab services			Other - Ancillary services and strategic initiatives			Consolidated
Patient service revenues:
Medicare and Medicare Advantage	$	4,572,599		$			$	4,572,599		$	4,524,449		$			$	4,524,449
Medicaid and Managed Medicaid	490,723						490,723			466,948						466,948
Other government	333,675			264,191			597,866			330,500			250,048			580,548
Commercial	2,458,360			103,760			2,562,120			2,366,182			70,156			2,436,338
Other revenues:
Medicare and Medicare Advantage				191,472			191,472						427,532			427,532
Medicaid and Managed Medicaid				327			327						43,991			43,991
Commercial				98,428			98,428						77,633			77,633
Other⁽¹⁾	20,715			59,204			79,919			14,965			103,014			117,979
Eliminations of intersegment revenues	(93,337		)	(10,222		)	(103,559		)	(63,943		)	(27,748		)	(91,691		)
Total	$	7,782,735		$	707,160		$	8,489,895		$	7,639,101		$	944,626		$	8,583,727



Reporting unit	Goodwill balance as of September 30, 2019		Carrying amount coverage⁽¹⁾	Sensitivities
Reporting unit	Goodwill balance as of September 30, 2019		Carrying amount coverage⁽¹⁾	Operating income⁽²⁾	Discount rate⁽³⁾
Germany Kidney Care	$	287,256	—%	(1.3)%	(11.0)%
Brazil Kidney Care	$	72,461	4.4%	(2.8)%	(7.0)%



2019 (remainder of the year)	29,841
2020	129,082
2021	153,120
2022	168,824
2023	224,455
2024	3,171,804
Thereafter	4,334,769



Other information	Nine months ended September 30, 2019
Gains on sale leasebacks, net	$	13,903
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	467,338
Operating cash flows from finance leases	$	16,226
Financing cash flows from finance leases	$	21,905
Net operating lease assets obtained in exchange for new or modified operating lease liabilities	$	299,697



	Operating leases		Capital leases
2019	$	483,488	$	36,754
2020	462,154		41,044
2021	432,950		34,026
2022	395,462		33,690
2023	349,649		33,845
Thereafter	1,589,949		194,611
	$	3,713,652	373,970
Less portion representing interest			(91,233		)
Total capital lease obligations, including current portion			$	282,737



Beginning balance December 31, 2018	$	2,608
Contingent earn-out obligations associated with acquisitions	19,731
Remeasurement of fair value for contingent earn-out obligations	(2,179		)
Payments on contingent earn-out obligations	(327		)
Ending balance September 30, 2019	$	19,833



	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Investments in equity securities	$	37,641	$	37,641	$	—	$	—
Interest rate cap agreements	$	20,642	$	—	$	20,642	$	—
Liabilities
Contingent earn-out obligations	$	19,833	$	—	$	—	$	19,833
Temporary equity
Noncontrolling interests subject to put provisions	$	1,296,059	$	—	$	—	$	1,296,059



	September 30, 2019		December 31, 2018
Segment assets
U.S. dialysis and related lab services (including equity investments of $100,815 and $95,290, respectively)	$	15,997,552	$	12,333,641
Other—Ancillary services and strategic initiatives (including equity investments of $118,571 and $129,321, respectively)	1,454,278		1,387,046
DMG—Held for sale (including equity investments of $0 and $4,833, respectively)	—		5,389,565
Consolidated assets	$	17,451,830	$	19,110,252



For the nine months ended September 30, 2019	Consolidated Total			Physician Groups			Unrestricted Subsidiaries		Company and Restricted Subsidiaries⁽¹⁾
Patient service operating revenues	$	8,150,386		$	—		$	—	$	8,150,386
Provision for uncollectible accounts	(19,689		)	—			—		(19,689		)
Net patient service operating revenues	8,130,697			—			—		8,130,697
Other revenues	359,198			—			—		359,198
Total net operating revenues	8,489,895			—			—		8,489,895
Operating expenses	7,309,166			—			—		7,309,166
Operating income	1,180,729			—			—		1,180,729
Debt expense	(385,176		)	—			—		(385,176		)
Other income	17,863			—			—		17,863
Income tax expense	197,938			—			—		197,938
Net income from continuing operations	615,478			—			—		615,478
Net income from discontinued operations, net of tax	102,854			12,706			249		89,899
Net income	718,332			12,706			249		705,377
Less: Net income attributable to noncontrolling interests	(152,222		)	(1,255		)	—		(150,967		)
Net income attributable to DaVita Inc.	$	566,110		$	11,451		$	249	$	554,410



	Three months ended															Nine months ended
	September 30, 2019					June 30, 2019					September 30, 2018					September 30, 2019					September 30, 2018
	(dollars in millions)
Revenues:
Dialysis and related lab patient service revenues	$	2,781				$	2,734				$	2,671				$	8,150				$	7,980
Provision for uncollectible accounts	(4		)			(10		)			(12		)			(20		)			(36		)
Net dialysis and related lab patient service revenues	2,777					2,724					2,659					8,131					7,944
Other revenues	127					119					189					359					639
Total consolidated revenues	2,904			100	%	2,843			100	%	2,847			100	%	8,490			100	%	8,584			100	%
Operating expenses and charges:
Patient care costs	1,991			69	%	1,958			69	%	2,064			72	%	5,914			70	%	6,168			72	%
General and administrative	299			10	%	275			10	%	336			12	%	825			10	%	867			10	%
Depreciation and amortization	156			5	%	152			5	%	146			5	%	457			5	%	436			5	%
Equity investment (income) loss	(4		)	—	%	(5		)	—		4			—	%	(11		)	—	%	(6		)	—	%
Provision for uncollectible accounts	—			—	%	—			—		1			—	%	—			—	%	(7		)	—	%
Impairment of other assets	—			—	%	—			—	%	6			—	%	—			—	%	17			—	%
Goodwill impairment charges	84			3	%	—			—	%	—			—	%	125			1	%	3			—	%
Loss (gain) on changes in ownership interests, net	—			—	%	—			—	%	2			—	%	—			—	%	(32		)	—	%
Total operating expenses and charges	2,526			87	%	2,381			84	%	2,558			90	%	7,309			86	%	7,446			87	%
Operating income	$	378		13	%	$	462		16	%	$	289		10	%	$	1,181		14	%	$	1,138		13	%



	U.S. Dialysis Centers								International Dialysis Centers
	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018		2019		2018		2019		2018
Centers at beginning of period	2,723		2,580		2,664		2,510		248		253		241		237
Acquired	2		3		7		5		2		—		9		18
Developed	24		47		84		118		1		—		1		1
Managed and administrative, net⁽¹⁾	—		—		(1	)	—		—		—		—		—
Sold and closed⁽²⁾	(3	)	(1	)	(6	)	(2	)	(1	)	—		(1	)	(2	)
Closed⁽³⁾	(10	)	(4	)	(12	)	(6	)	—		—		—		—
APAC JV operated, net									(1	)	(2	)	(1	)	(3	)
Number of centers at end of period	2,736		2,625		2,736		2,625		249		251		249		251