NONCONTROLLING INTERESTS SUBJECT TO PUT PROVISIONS

3 Months Ended

Mar. 31, 2020

Temporary Equity Disclosure [Abstract]

NONCONTROLLING INTERESTS SUBJECT TO PUT PROVISIONS

The Company is party to agreements which contain put provisions which require the Company to purchase a portion or all of the noncontrolling interests held by third parties in certain of its consolidated subsidiaries. These put provisions are exercisable at the third-party owners’ discretion either within specified periods or, in certain cases, upon the occurrence of specific events, including the sale of all or substantially all of the Company’s assets, closure of the clinic, change of control, departure of key executives, third-party members’ death, disability, bankruptcy, retirement, or if third-party members are dissolved and other events, which could accelerate vesting of the put. The Company has evaluated the applicable terms and determined that none of the put rights are mandatorily redeemable. Some of these put rights accelerated as a result of the Company’s IPO. If the remaining unexercised put rights were exercised, the Company would be required to purchase all or a portion of the third-party owners’ noncontrolling interests at the estimated fair value as defined within the put provisions. The majority of the noncontrolling interests subject to put provisions are reported at the greater of the carrying value or estimated

fair value for accounting purposes, while some of the noncontrolling interests subject to put provisions is stated at the contractual estimated fair value, as outlined in each specific put provision (“redemption value”). The put rights of such noncontrolling interest holders were determined based on inputs that are not readily available in public markets or able to be derived from information available in publicly quoted markets. As such, the Company categorized the put options of the noncontrolling interest holders as Level 3.

The fair value of the noncontrolling interests subject to these put provisions is estimated using the Income, Market and Asset Based approaches. The fair value derived from the methods used is evaluated and weighted, as appropriate, considering the reasonableness of the range of values indicated. Under the Income approach, fair value may be determined by utilizing a Weighted Average Cost of Capital (14.50% - 20.00%) to discount the expected cash flows to a single present value amount using current expectations about those future amounts. Under the Market approach, fair value may be determined by reference to multiples of market-comparable companies or transactions, including revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”). The estimated fair values of the interests subject to these put provisions can fluctuate, and the implicit multiples at which these obligations may be settled may vary depending upon market conditions and access to the credit and capital markets, which can impact the level of competition for dialysis and non-dialysis related businesses and the economic performance of these businesses.

The Company’s computation of the difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests as of March 31, 2020 and December 31, 2019 is set forth below:



	March 31, 2020		December 31, 2019
Redemption value	$	17,303	$	17,303
Estimated fair values for accounting purposes	1,389		1,647
Difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests	$	15,914	$	15,656

In addition, the tables below set forth a reconciliation of noncontrolling interests subject to put provisions:



	March 31, 2020		December 31, 2019
Noncontrolling interests subject to put provisions stated at estimated fair value for accounting purposes	$	111,823	$	110,827
Difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests	15,914		15,656
Noncontrolling interests subject to put provisions stated at maximum redemption value	$	127,737	$	126,483



	Three Months Ended March 31,
	2020		2019
Change in estimated fair value for accounting purposes	$	3,586	$	412
Change in the difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests	258		741
Total change in fair value of noncontrolling interests subject to put provisions stated at maximum redemption	$	3,844	$	1,153