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xbrli:shares xbrli:pure iso4217:USD xbrli:shares dva:clinic dva:segment



 
 
 
 
 
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, 2020
or
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
 
 
 
 
 
https://cdn.kscope.io/1fd70fceda3833ce4a78125593c66d04-logoa32.jpg
DAVITA INC.
Delaware
 
51-0354549
(State of incorporation)
 
(I.R.S. Employer Identification No.)
2000 16th Street
Denver,
CO
80202
Telephone number (720631-2100
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 October 28, 2020, the number of shares of the Registrant’s common stock outstanding was approximately 112.0 million shares.
 
 
 
 
 




DAVITA INC.
INDEX

 
 
 
 
Page No.
 
 
PART I. FINANCIAL INFORMATION
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
Item 3.
 
 
Item 4.
 
 
 
 
 
 
 
 
 
PART II. OTHER INFORMATION
 
 
Item 1.
 
 
Item 1A.
 
 
Item 2.
 
 
Item 6.
 
 
 
 
 
 
Note: Items 3, 4 and 5 of Part II are omitted because they are not applicable.
 

i




DAVITA INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands, except per share data)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2020
 
2019
 
2020
 
2019
Dialysis patient service revenues
$
2,781,650

 
$
2,777,192

 
$
8,253,128

 
$
8,130,697

Other revenues
142,416

 
126,886

 
392,154

 
359,198

Total revenues
2,924,066

 
2,904,078

 
8,645,282

 
8,489,895

Operating expenses and charges:
 

 
 

 
 

 
 

Patient care costs
1,971,719

 
1,991,172

 
5,931,732

 
5,913,860

General and administrative
363,280

 
298,736

 
943,065

 
824,887

Depreciation and amortization
156,894

 
155,915

 
468,949

 
456,685

Equity investment income
(5,496
)
 
(3,936
)
 
(27,681
)
 
(11,158
)
Loss on changes in ownership interest, net

 

 
16,252

 

Goodwill impairment charges

 
83,855

 

 
124,892

Total operating expenses and charges
2,486,397

 
2,525,742

 
7,332,317

 
7,309,166

Operating income
437,669

 
378,336

 
1,312,965

 
1,180,729

Debt expense
(73,658
)
 
(88,589
)
 
(243,642
)
 
(351,774
)
Debt prepayment, refinancing and redemption charges
(86,074
)
 
(21,242
)
 
(89,022
)
 
(33,402
)
Other income, net
5,395

 
5,280

 
10,590

 
17,863

Income from continuing operations before income taxes
283,332

 
273,785

 
990,891

 
813,416

Income tax expense
65,792

 
65,254

 
240,564

 
197,938

Net income from continuing operations
217,540

 
208,531

 
750,327

 
615,478

Net (loss) income from discontinued operations, net of tax

 
(6,843
)
 
9,980

 
102,854

Net income
217,540

 
201,688

 
760,307

 
718,332

Less: Net income attributable to noncontrolling interests
(58,866
)
 
(58,418
)
 
(160,438
)
 
(152,222
)
Net income attributable to DaVita Inc.
$
158,674

 
$
143,270

 
$
599,869

 
$
566,110

 
 
 
 
 
 
 
 
Earnings per share attributable to DaVita Inc.:
 

 
 

 
 

 
 

Basic net income from continuing operations per share
$
1.31

 
$
1.00

 
$
4.81

 
$
2.88

Basic net income per share
$
1.31

 
$
0.95

 
$
4.89

 
$
3.51

Diluted net income from continuing operations per share
$
1.28

 
$
0.99

 
$
4.72

 
$
2.87

Diluted net income per share
$
1.28

 
$
0.95

 
$
4.80

 
$
3.50

 
 
 
 
 
 
 
 
Weighted average shares for earnings per share:
 
 
 
 
 

 
 

Basic
120,905,038

 
150,675,465

 
122,582,099

 
161,147,122

Diluted
123,953,879

 
151,295,950

 
124,927,380

 
161,636,011

 
 
 
 
 
 
 
 
Amounts attributable to DaVita Inc.:
 
 
 
 
 
 
 
Net income from continuing operations
$
158,674

 
$
150,113

 
$
589,889

 
$
464,590

Net (loss) income from discontinued operations

 
(6,843
)
 
9,980

 
101,520

Net income attributable to DaVita Inc.
$
158,674

 
$
143,270

 
$
599,869

 
$
566,110

 
See notes to condensed consolidated financial statements.

1



DAVITA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2020
 
2019
 
2020
 
2019
Net income
$
217,540

 
$
201,688

 
$
760,307

 
$
718,332

Other comprehensive income (loss), net of tax:
 

 
 

 
 

 
 

Unrealized losses on interest rate cap agreements:
 

 
 

 
 

 
 

Unrealized losses
(1,628
)
 
(1,060
)
 
(16,470
)
 
(1,672
)
Reclassifications of net realized losses into net income
1,034

 
1,569

 
4,280

 
4,782

Unrealized gains (losses) on foreign currency translation:
 
 
 

 
 
 
 

Foreign currency translation adjustments
13,171

 
(44,502
)
 
(62,842
)
 
(45,790
)
Other comprehensive income (loss)
12,577

 
(43,993
)
 
(75,032
)
 
(42,680
)
Total comprehensive income
230,117

 
157,695

 
685,275

 
675,652

Less: Comprehensive income attributable to noncontrolling interests
(58,866
)
 
(58,418
)
 
(160,438
)
 
(152,222
)
Comprehensive income attributable to DaVita Inc.
$
171,251

 
$
99,277

 
$
524,837

 
$
523,430

 See notes to condensed consolidated financial statements.


2



DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
 
September 30, 2020
 
December 31, 2019
ASSETS
 

 
 

Cash and cash equivalents
$
710,514

 
$
1,102,372

Restricted cash and equivalents
106,823

 
106,346

Short-term investments
19,360

 
11,572

Accounts receivable
1,804,390

 
1,795,598

Inventories
106,254

 
97,949

Other receivables
548,381

 
489,695

Prepaid and other current assets
58,512

 
66,866

Income tax receivable
75,441

 
19,772

Total current assets
3,429,675

 
3,690,170

Property and equipment, net of accumulated depreciation of $4,368,659 and $3,969,566,
respectively
3,417,919

 
3,473,384

Operating lease right-of-use assets
2,834,163

 
2,830,047

Intangible assets, net of accumulated amortization of $75,727 and $81,922, respectively
118,078

 
135,684

Equity method and other investments
252,483

 
241,983

Long-term investments
29,867

 
36,519

Other long-term assets
96,110

 
115,972

Goodwill
6,868,377

 
6,787,635

 
$
17,046,672

 
$
17,311,394

LIABILITIES AND EQUITY
 

 
 

Accounts payable
$
388,504

 
$
403,840

Other liabilities
879,792

 
756,174

Accrued compensation and benefits
701,968

 
695,052

Current portion of operating lease liabilities
365,190

 
343,912

Current portion of long-term debt
163,787

 
130,708

Income tax payable

 
42,412

Total current liabilities
2,499,241

 
2,372,098

Long-term operating lease liabilities
2,710,550

 
2,723,800

Long-term debt
7,866,545

 
7,977,526

Other long-term liabilities
147,371

 
160,809

Deferred income taxes
765,691

 
577,543

Total liabilities
13,989,398

 
13,811,776

Commitments and contingencies
 
 
 
Noncontrolling interests subject to put provisions
1,303,934

 
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; 126,065,294 and
113,781,317 shares issued and outstanding at September 30, 2020, respectively, and
125,842,853 shares issued and outstanding at December 31, 2019)
126

 
126

Additional paid-in capital
694,132

 
749,043

Retained earnings
2,031,607

 
1,431,738

Treasury stock (12,283,977 and zero shares, respectively)
(1,028,578
)
 

Accumulated other comprehensive loss
(122,530
)
 
(47,498
)
Total DaVita Inc. shareholders' equity
1,574,757

 
2,133,409

Noncontrolling interests not subject to put provisions
178,583

 
185,833

Total equity
1,753,340

 
2,319,242

 
$
17,046,672

 
$
17,311,394

See notes to condensed consolidated financial statements.

3



DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
 
Nine months ended September 30,
 
2020
 
2019
Cash flows from operating activities:
 

 
 

Net income
$
760,307

 
$
718,332

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Depreciation and amortization
468,949

 
456,685

Debt prepayment, refinancing and redemption charges
86,957

 
33,402

Impairment charges

 
124,892

Stock-based compensation expense
67,217

 
47,811

Deferred income taxes
191,783

 
72,590

Equity investment income, net
3,026

 
5,131

Loss on sales of business interests, net
16,252

 
23,022

Other non-cash charges, net
(7,980
)
 
24,291

Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
 
 
 
Accounts receivable
(12,405
)
 
(182,684
)
Inventories
(8,445
)
 
9,519

Other receivables and other current assets
(62,025
)
 
51,319

Other long-term assets
(1,853
)
 
2,324

Accounts payable
445

 
(106,662
)
Accrued compensation and benefits
(12,124
)
 
(57,930
)
Other current liabilities
123,833

 
140,046

Income taxes
(100,160
)
 
57,279

Other long-term liabilities
(19,547
)
 
(27,542
)
Net cash provided by operating activities
1,494,230

 
1,391,825

Cash flows from investing activities:
 
 
 

Additions of property and equipment
(449,896
)
 
(547,183
)
Acquisitions
(112,597
)
 
(77,348
)
Proceeds from asset and business sales
83,339

 
3,863,619

Purchase of debt investments held-to-maturity
(147,829
)
 
(98,322
)
Purchase of other debt and equity investments
(3,388
)
 
(5,160
)
Proceeds from debt investments held-to-maturity
148,341

 

Proceeds from sale of other debt and equity investments
3,434

 
5,893

Purchase of equity method investments
(9,613
)
 
(8,770
)
Distributions from equity method investments
902

 
1,296

Net cash (used in) provided by investing activities
(487,307
)
 
3,134,025

Cash flows from financing activities:
 
 
 
Borrowings
3,826,484

 
38,519,991

Payments on long-term debt
(3,927,411
)
 
(40,485,415
)
Deferred financing and debt redemption costs
(105,705
)
 
(84,588
)
Purchase of treasury stock
(1,025,878
)
 
(1,837,022
)
Distributions to noncontrolling interests
(179,098
)
 
(157,170
)
Stock award exercises and other share issuances, net
3,838

 
7,333

Contributions from noncontrolling interests
32,854

 
44,095

Purchases of noncontrolling interests
(6,782
)
 
(10,988
)
Net cash used in financing activities
(1,381,698
)
 
(4,003,764
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(16,606
)
 
(4,178
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(391,381
)
 
517,908

Less: Net decrease in cash, cash equivalents and restricted cash from discontinued operations

 
(423,813
)
Net (decrease) increase in cash, cash equivalents and restricted cash from continuing operations
(391,381
)
 
941,721

Cash, cash equivalents and restricted cash of continuing operations at beginning of the year
1,208,718

 
415,420

Cash, cash equivalents and restricted cash of continuing operations at end of the period
$
817,337

 
$
1,357,141

See notes to condensed consolidated financial statements.

4



DAVITA INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
(dollars and shares in thousands)
 
Three months ended September 30, 2020
 
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, 2020
$
1,241,937

 
126,037

 
$
126

 
$
719,102

 
$
1,872,933

 
(4,052
)
 
$
(303,139
)
 
$
(135,107
)
 
$
2,153,915

 
$
179,902

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
40,854

 
 
 
 
 
 
 
158,674

 
 
 
 
 
 
 
158,674

 
18,012

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12,577

 
12,577

 
 
Stock unit shares issued
 
 
5

 
 
 
10

 
 
 
 
 
 
 
 
 
10

 
 
Stock appreciation rights shares
issued
 
 
23

 
 
 
(944
)
 
 
 
 
 
 
 
 
 
(944
)
 
 
Stock-settled stock-based
compensation expense
 
 
 
 
 
 
24,913

 
 
 
 
 
 
 
 
 
24,913

 
 
Changes in noncontrolling
interest from:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
Distributions
(38,154
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(22,391
)
Contributions
10,348

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,924

Acquisitions and divestitures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,136

Fair value remeasurements
48,949

 
 
 
 
 
(48,949
)
 
 
 
 
 
 
 
 
 
(48,949
)
 
 
Purchase of treasury stock
 
 
 
 
 
 
 
 
 
 
(8,232
)
 
(725,439
)
 
 
 
(725,439
)
 
 
Balance at September 30, 2020
$
1,303,934

 
126,065

 
$
126

 
$
694,132

 
$
2,031,607

 
(12,284
)
 
$
(1,028,578
)
 
$
(122,530
)
 
$
1,574,757

 
$
178,583


 
Nine months ended September 30, 2020
 
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 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
107,737

 
 
 
 
 
 
 
599,869

 
 
 
 
 
 
 
599,869

 
52,701

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(75,032
)
 
(75,032
)
 
 
Stock unit shares issued
 
 
166

 
 
 
(7,141
)
 
 
 
 
 
 
 
 
 
(7,141
)
 
 
Stock appreciation rights shares
issued
 
 
56

 
 
 
(2,004
)
 
 
 
 
 
 
 
 
 
(2,004
)
 
 
Stock-settled stock-based
compensation expense
 
 
 
 
 
 
66,591

 
 
 
 
 
 
 
 
 
66,591

 
 
Changes in noncontrolling
interest from:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
Distributions
(115,289
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(63,809
)
Contributions
24,443

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,411

Acquisitions and divestitures
(3,214
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(247
)
Partial purchases
(6,673
)
 
 
 
 
 
4,197

 
 
 
 
 
 
 
 
 
4,197

 
(4,306
)
Fair value remeasurements
116,554

 
 
 
 
 
(116,554
)
 
 
 
 
 
 
 
 
 
(116,554
)
 
 
Purchase of treasury stock
 
 
 
 
 
 
 
 
 
 
(12,284
)
 
(1,028,578
)
 
 
 
(1,028,578
)
 
 
Balance at September 30, 2020
$
1,303,934

 
126,065

 
$
126

 
$
694,132

 
$
2,031,607

 
(12,284
)
 
$
(1,028,578
)
 
$
(122,530
)
 
$
1,574,757

 
$
178,583



5



 
Three 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 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

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
38,778

 
 
 
 
 
 
 
143,270

 
 
 
 
 
 
 
143,270

 
19,640

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(43,993
)
 
(43,993
)
 
 
Stock unit shares issued
 
 
8

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Stock-settled stock-based
compensation expense
 
 
 
 
 
 
18,724

 
 
 
 
 
 
 
 
 
18,724

 
 
Changes in noncontrolling interest
from:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions
(37,868
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(23,588
)
Contributions
8,946

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,868

Acquisitions and divestitures
(91
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10

Partial purchases
8

 
 
 
 
 
(202
)
 
 
 
 
 
 
 
 
 
(202
)
 
246

Fair value remeasurements
100,553

 
 
 
 
 
(100,553
)
 
 
 
 
 
 
 
 
 
(100,553
)
 
 
Purchase of treasury stock
 
 
 
 
 
 
 
 
 
 
(30,592
)
 
(1,747,968
)
 
 
 
(1,747,968
)
 
 
Balance at September 30, 2019
$
1,296,059

 
166,541

 
$
167

 
$
906,990

 
$
3,349,180

 
(32,652
)
 
$
(1,860,157
)
 
$