Segment reporting

6 Months Ended

Jun. 30, 2019

Segment reporting

The Company’s business is comprised of its U.S. dialysis and related lab services business, 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.

The Company’s operating segment financial information included in this report is prepared on the internal management reporting basis that the chief operating decision maker uses to allocate resources and assess the financial performance of the Company's 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.

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 June 30,						Six months ended June 30,
	2019			2018			2019			2018
Segment revenues:
U.S. dialysis and related lab services
Patient service revenues:
External sources	$	2,612,200		$	2,612,734		$	5,129,489		$	5,101,899
Intersegment revenues	30,042			20,096			60,462			38,519
U.S. dialysis and related lab services patient service revenues	2,642,242			2,632,830			5,189,951			5,140,418
Provision for uncollectible accounts	(10,249		)	(49,406		)	(15,712		)	(24,208		)
Net U.S. dialysis and related lab services patient service revenues	2,631,993			2,583,424			5,174,239			5,116,210
Other revenues⁽¹⁾:
External sources	5,209			4,919			9,893			10,033
Intersegment revenues	292			—			513			—
Total U.S. dialysis and related lab services revenues	$	2,637,494		$	2,588,343		$	5,184,645		$	5,126,243
Other—Ancillary services and strategic initiatives
Patient service revenues, net	$	121,865		$	105,669		$	239,728		$	207,925
Other external sources	113,680			213,037			222,419			440,748
Intersegment revenues	3,403			9,189			6,739			19,387
Total ancillary services and strategic initiatives revenues	238,948			327,895			468,886			668,060
Total net segment revenues	2,876,442			2,916,238			5,653,531			5,794,303
Elimination of intersegment revenues	(33,737		)	(29,285		)	(67,714		)	(57,906		)
Consolidated revenues	$	2,842,705		$	2,886,953		$	5,585,817		$	5,736,397
Segment operating margin:
U.S. dialysis and related lab services	$	498,957		$	449,443		$	915,939		$	882,822
Other—Ancillary services and strategic initiatives	(15,050		)	2,815			(72,680		)	(4,175		)
Total segment operating margin	483,907			452,258			843,259			878,647
Reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:
Corporate administrative support	(22,021		)	(14,066		)	(40,866		)	(29,769		)
Consolidated operating income	461,886			438,192			802,393			848,878
Debt expense	(131,666		)	(119,692		)	(263,185		)	(233,208		)
Debt prepayment charges	(12,160		)	—			(12,160		)	—
Other income, net	5,643			1,994			12,583			6,576
Consolidated income from continuing operations before income taxes	$	323,703		$	320,494		$	539,631		$	622,246


(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.

A summary of assets by reportable segment was as follows:



	June 30, 2019		December 31, 2018
Segment assets
U.S. dialysis and related lab services (including equity investments of $101,161 and $95,290, respectively)	$	18,352,683	$	12,333,641
Other—Ancillary services and strategic initiatives (including equity investments of $124,516 and $129,321, respectively)	1,578,277		1,387,046
DMG—Held for sale (including equity investments of $0 and $4,833, respectively)	—		5,389,565
Consolidated assets	$	19,930,960	$	19,110,252

Depreciation and amortization expense by reportable segment was as follows:



	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
U.S. dialysis and related lab services	$	144,621	$	138,252	$	285,401	$	273,028
Other—Ancillary services and strategic initiatives	7,621		8,827		15,369		16,850
	$	152,242	$	147,079	$	300,770	$	289,878

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



	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
U.S. dialysis and related lab services	$	149,264	$	197,051	$	319,812	$	388,458
Other—Ancillary services and strategic initiatives	7,062		22,184		15,640		32,172
DMG—Held for sale	18,714		22,299		38,466		53,347
	$	175,040	$	241,534	$	373,918	$	473,977