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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 June 30, 2023
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
logoa33.jpg
DAVITA INC.
Delaware 51-0354549
(State of incorporation) (I.R.S. Employer Identification No.)
2000 16th Street
Denver,CO80202
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 DVANYSE
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 filerAccelerated 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 August 1, 2023, the number of shares of the registrant’s common stock outstanding was approximately 91.3 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 3.
Item 4.
Item 5.
Item 6. 
  

i



DAVITA INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars and shares in thousands, except per share data)


Three months ended June 30,Six months ended June 30,
 2023202220232022
Dialysis patient service revenues$2,890,685 $2,810,099 $5,650,719 $5,526,380 
Other revenues109,684 116,658 222,349 217,932 
Total revenues3,000,369 2,926,757 5,873,068 5,744,312 
Operating expenses:    
Patient care costs2,055,844 2,016,788 4,114,033 4,035,317 
General and administrative364,016 315,219 695,630 610,039 
Depreciation and amortization183,672 171,176 361,743 344,120 
Equity investment income, net(8,454)(9,141)(15,274)(16,187)
Total operating expenses2,595,078 2,494,042 5,156,132 4,973,289 
Operating income405,291 432,715 716,936 771,023 
Debt expense(103,507)(82,586)(204,281)(156,377)
Debt prepayment and refinancing charges(7,962) (7,962) 
Other income (loss), net1,373 (1,284)5,125 (3,070)
Income before income taxes295,195 348,845 509,818 611,576 
Income tax expense48,818 64,229 92,773 121,242 
Net income246,377 284,616 417,045 490,334 
Less: Net income attributable to noncontrolling interests(67,686)(59,807)(122,807)(103,403)
Net income attributable to DaVita Inc.$178,691 $224,809 $294,238 $386,931 
Earnings per share attributable to DaVita Inc.:  
Basic net income$1.96 $2.38 $3.24 $4.06 
Diluted net income$1.91 $2.30 $3.17 $3.90 
Weighted average shares for earnings per share:
Basic shares90,984 94,457 90,742 95,382 
Diluted shares93,418 97,772 92,952 99,121 
See notes to condensed consolidated financial statements.
1


DAVITA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)
Three months ended June 30,Six months ended June 30,
 2023202220232022
Net income$246,377 $284,616 $417,045 $490,334 
Other comprehensive income (loss), net of tax:  
Unrealized gains on interest rate cap agreements:  
Unrealized gains24,849 13,217 21,310 54,349 
Reclassifications of net realized (gains) losses into net income(18,956)1,033 (34,698)2,066 
Unrealized gains (losses) on foreign currency translation:41,961 (91,176)75,522 (28,964)
Other comprehensive income (loss)47,854 (76,926)62,134 27,451 
Total comprehensive income294,231 207,690 479,179 517,785 
Less: Comprehensive income attributable to noncontrolling interests(67,686)(59,807)(122,807)(103,403)
Comprehensive income attributable to DaVita Inc.$226,545 $147,883 $356,372 $414,382 
 See notes to condensed consolidated financial statements.

2


DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars and shares in thousands, except per share data)
June 30, 2023December 31, 2022
ASSETS  
Cash and cash equivalents$327,443 $244,086 
Restricted cash and equivalents94,727 94,903 
Short-term investments12,484 77,693 
Accounts receivable2,009,692 2,132,070 
Inventories110,299 109,122 
Other receivables354,921 413,976 
Prepaid and other current assets90,061 78,839 
Income tax receivable2,341 4,603 
Total current assets3,001,968 3,155,292 
Property and equipment, net of accumulated depreciation of $5,503,439 and $5,265,372, respectively
3,158,450 3,256,397 
Operating lease right-of-use assets2,547,053 2,666,242 
Intangible assets, net of accumulated amortization of $39,766 and $49,772, respectively
191,849 182,687 
Equity method and other investments593,269 231,108 
Long-term investments46,005 44,329 
Other long-term assets314,009 315,587 
Goodwill7,106,242 7,076,610 
 $16,958,845 $16,928,252 
LIABILITIES AND EQUITY  
Accounts payable$427,894 $479,780 
Other liabilities817,608 802,469 
Accrued compensation and benefits630,289 692,654 
Current portion of operating lease liabilities394,465 395,401 
Current portion of long-term debt101,113 231,404 
Income tax payable32,049 18,039 
Total current liabilities2,403,418 2,619,747 
Long-term operating lease liabilities2,384,471 2,503,068 
Long-term debt8,598,162 8,692,617 
Other long-term liabilities183,137 105,233 
Deferred income taxes760,038 782,787 
Total liabilities14,329,226 14,703,452 
Commitments and contingencies
Noncontrolling interests subject to put provisions1,423,549 1,348,908 
Equity:  
Preferred stock ($0.001 par value, 5,000 shares authorized; none issued)
  
Common stock ($0.001 par value, 450,000 shares authorized; 91,271 and 90,411 shares issued
 and outstanding at June 30, 2023 and December 31, 2022, respectively)
91 90 
Additional paid-in capital555,680 606,935 
Retained earnings468,725 174,487 
Accumulated other comprehensive loss(7,052)(69,186)
Total DaVita Inc. shareholders' equity1,017,444 712,326 
Noncontrolling interests not subject to put provisions188,626 163,566 
Total equity1,206,070 875,892 
 $16,958,845 $16,928,252 
See notes to condensed consolidated financial statements.
3


DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
(dollars in thousands)
Six months ended June 30,
 20232022
Cash flows from operating activities:  
Net income$417,045 $490,334 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation and amortization361,743 344,120 
Debt prepayment and refinancing charges7,132  
Stock-based compensation expense55,197 50,109 
Deferred income taxes(16,178)9,069 
Equity investment loss, net14,571 90 
Other non-cash charges, net(5,160)(32,858)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable141,503 (132,043)
Inventories(116)(1,927)
Other receivables and prepaid and other current assets33,182 (61,811)
Other long-term assets(607)(49,093)
Accounts payable(40,615)24,517 
Accrued compensation and benefits(68,800)(102,513)
Other current liabilities17,242 42,517 
Income taxes5,200 (63,638)
Other long-term liabilities(8,675)(6,557)
Net cash provided by operating activities912,664 510,316 
Cash flows from investing activities: 
Additions of property and equipment(272,204)(265,461)
Acquisitions(2,575)(9,491)
Proceeds from asset and business sales21,198 114,829 
Purchase of debt investments held-to-maturity(30,419)(89,530)
Purchase of other debt and equity investments(6,366)(3,010)
Proceeds from debt investments held-to-maturity94,414 8,415 
Proceeds from sale of other debt and equity investments3,873 3,775 
Purchase of equity method investments(273,336)(23,806)
Distributions from equity method investments1,758 1,047 
Net cash used in investing activities(463,657)(263,232)
Cash flows from financing activities:
Borrowings2,136,873 1,182,911 
Payments on long-term debt(2,347,120)(841,687)
Deferred and debt related financing costs(45,009) 
Purchase of treasury stock (617,432)
Distributions to noncontrolling interests(124,178)(118,315)
Net payments related to stock purchases and awards(43,612)(47,866)
Contributions from noncontrolling interests6,946 9,116 
Proceeds from sales of additional noncontrolling interests50,962 3,673 
Purchases of noncontrolling interests(7,610)(15,365)
Net cash used in financing activities(372,748)(444,965)
Effect of exchange rate changes on cash, cash equivalents and restricted cash6,922 (1,342)
Net increase (decrease) in cash, cash equivalents and restricted cash83,181 (199,223)
Cash, cash equivalents and restricted cash at beginning of the year338,989 554,960 
Cash, cash equivalents and restricted cash at end of the period$422,170 $355,737 
See notes to condensed consolidated financial statements.
4


DAVITA INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
(dollars and shares in thousands)
Three months ended June 30, 2023
 Non-
controlling
interests
subject to
put provisions
DaVita Inc. Shareholders’ EquityNon-
controlling
interests not
subject to
put provisions
 Common stockAdditional
paid-in
capital
Retained
earnings
Treasury stockAccumulated
other
comprehensive
loss
 SharesAmountSharesAmountTotal
Balance at March 31, 2023$1,398,829 90,650 $91 $590,251 $290,034  $ $(54,906)$825,470 $194,403 
Comprehensive income:
Net income50,259 178,691 178,691 17,427 
Other comprehensive income47,854 47,854 
Stock award plan621 (39,080)(39,080)
Stock-settled stock-based
 compensation expense
28,661 28,661 
Changes in noncontrolling
 interest from:
Distributions(45,724)(23,617)
Contributions1,861 360 
Acquisitions and divestitures54 54 58 
Partial purchases(700)(5,182)(5,182)(5)
Fair value remeasurements19,024 (19,024)(19,024)
Balance at June 30, 2023$1,423,549 91,271 $91 $555,680 $468,725  $ $(7,052)$1,017,444 $188,626 
Six months ended June 30, 2023
 Non-
controlling
interests
subject to
put provisions
DaVita Inc. Shareholders’ EquityNon-
controlling
interests not
subject to
put provisions
 Common stockAdditional
paid-in
capital
Retained
earnings
Treasury stockAccumulated
other
comprehensive
loss
 SharesAmountSharesAmountTotal
Balance at December 31, 2022$1,348,908 90,411 $90 $606,935 $174,487  $ $(69,186)$712,326 $163,566 
Comprehensive income:
Net income86,951 294,238 294,238 35,856 
Other comprehensive income62,134 62,134 
Stock award plan860 1 (48,603)(48,602)
Stock-settled stock-based
 compensation expense
53,508 53,508 
Changes in noncontrolling
 interest from:
Distributions(81,274)(42,904)
Contributions5,609 1,337 
Acquisitions and divestitures13,077 13,077 30,776 
Partial purchases(700)(5,182)(5,182)(5)
Fair value remeasurements64,055 (64,055)(64,055)
Balance at June 30, 2023$1,423,549 91,271 $91 $555,680 $468,725  $ $(7,052)$1,017,444 $188,626 
See notes to condensed consolidated financial statements.
5


Three months ended June 30, 2022
 Non-
controlling
interests
subject to
put provisions
DaVita Inc. Shareholders’ EquityNon-
controlling
interests not
subject to
put provisions
 Common stockAdditional
paid-in
capital
Retained
earnings
Treasury stockAccumulated
other
comprehensive
loss
 
 SharesAmountSharesAmountTotal
Balance at March 31, 2022$1,390,757 97,342 $97 $595,403 $516,459 (2,104)$(233,318)$(34,870)$843,771 $174,552 
Comprehensive income:
Net income45,571 224,809 224,809 14,236 
Other comprehensive loss(76,926)(76,926)
Stock award plan8371(50,885)(50,884)
Stock-settled stock-based
 compensation expense
25,590 25,590 
Changes in noncontrolling
 interest from:
Distributions(34,378)(18,485)
Contributions4,107 80 
Acquisitions and divestitures(29)56 56 
Partial purchases(10,596)(1,496)(1,496)
Fair value remeasurements(9,604)9,604 9,604 
Other(7)7 
Purchase of treasury stock(3,869)(369,740)(369,740)
Balance at June 30, 2022$1,385,821 98,179 $98 $578,272 $741,268 (5,973)$(603,058)$(111,796)$604,784 $170,390 
    

Six months ended June 30, 2022
 Non-
controlling
interests
subject to
put provisions
DaVita Inc. Shareholders’ EquityNon-
controlling
interests not
subject to
put provisions
 Common stockAdditional
paid-in
capital
Retained
earnings
Treasury stockAccumulated
other
comprehensive
loss
 
 SharesAmountSharesAmountTotal
Balance at December 31, 2021$1,434,832 97,289 $97 $540,321 $354,337  $ $(139,247)$755,508 $180,640 
Comprehensive income:
Net income73,952 386,931 386,931 29,451 
Other comprehensive income27,451 27,451 
Stock award plan8901(54,373)(54,372)
Stock-settled stock-based
 compensation expense
50,216 50,216 
Changes in noncontrolling
 interest from:
Distributions(77,259)(41,056)
Contributions7,304 1,812 
Acquisitions and divestitures2,392 939 939 
Partial purchases(11,418)(3,270)(3,270)
Fair value remeasurements(44,439)44,439 44,439 
Other457 (457)
Purchase of treasury stock(5,973)(603,058)(603,058)
Balance at June 30, 2022$1,385,821 98,179 $98 $578,272 $741,268 (5,973)$(603,058)$(111,796)$604,784 $170,390 
    

See notes to condensed consolidated financial statements.
6


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. 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 revenues, expenses, assets, liabilities, contingencies and noncontrolling interests subject to put provisions. The most significant estimates and assumptions underlying these financial statements and accompanying notes generally involve revenue recognition and accounts receivable, certain fair value estimates, accounting for income taxes and loss contingencies. The results of operations reflected in these interim financial statements may not necessarily be indicative of annual operating results. 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, 2022 (2022 10-K). Prior period classifications conform to the current period 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 tables summarize the Company's segment revenues by primary payor source:
Three months ended June 30, 2023Three months ended June 30, 2022
U.S. dialysisOther — Ancillary servicesConsolidatedU.S. dialysisOther — Ancillary servicesConsolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage$1,539,639 $1,539,639 $1,529,534 $1,529,534 
Medicaid and Managed Medicaid216,014 216,014 186,873 186,873 
Other government92,525 $125,964 218,489 86,079 $116,653 202,732 
Commercial876,033 60,871 936,904 854,662 55,708 910,370 
Other revenues:
Medicare and Medicare Advantage87,236 87,236 93,262 93,262 
Medicaid and Managed Medicaid396 396 232 232 
Commercial3,619 3,619 8,207 8,207 
Other(1)
6,404 13,437 19,841 6,092 8,844 14,936 
Eliminations of intersegment revenues(20,361)(1,408)(21,769)(19,389)(19,389)
Total$2,710,254 $290,115 $3,000,369 $2,643,851 $282,906 $2,926,757 
(1)    Other primarily consists of management service fees earned in the respective Company line of business as well as other non-patient service revenue from the Company's U.S. integrated kidney care (IKC) and other ancillary services and international operations.
7


DAVITA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
(unaudited)
(dollars and shares in thousands, except per share data)

Six months ended June 30, 2023Six months ended June 30, 2022
U.S. dialysisOther — Ancillary servicesConsolidatedU.S. dialysisOther — Ancillary servicesConsolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage$3,022,405 $3,022,405 $2,993,621 $2,993,621 
Medicaid and Managed Medicaid421,790 421,790 376,528 376,528 
Other government174,570 $247,550 422,120 166,879 $233,548 400,427 
Commercial1,711,427 115,387 1,826,814 1,689,240 108,132 1,797,372 
Other revenues:
Medicare and Medicare Advantage180,475 180,475 176,859 176,859 
Medicaid and Managed Medicaid965 965 769 769 
Commercial4,825 4,825 9,546 9,546 
Other(1)
12,583 26,275 38,858 12,068 18,680 30,748 
Eliminations of intersegment revenues(42,410)(2,774)(45,184)(41,558)(41,558)
Total$5,300,365 $572,703 $5,873,068 $5,196,778 $547,534 $5,744,312 
(1)    Other primarily consists of management service fees earned in the respective Company line of business as well as other non-patient service revenue from the Company's U.S. integrated kidney care (IKC) and other ancillary services and international operations.
There are significant uncertainties associated with estimating revenue, many of which 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 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.
Dialysis 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 patient service revenues are recognized in the period services are provided based on these estimates. Revenues consist primarily of payments from government and commercial health plans for dialysis services provided to patients. The Company maintains a usual and customary fee schedule for its 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 revenues earned by the Company's non-dialysis ancillary services as well as fees for management and administrative services to outpatient dialysis businesses that the Company does not consolidate. Other revenues are estimated in the period services are provided. The Company's integrated kidney care (IKC) revenues include revenues earned under risk-based arrangements, including value-based care (VBC) arrangements. Under its VBC arrangements, the Company assumes full or shared financial risk for the total medical cost of care for patients below or above a benchmark. The benchmarks against which the Company incurs profit or loss on these contracts are typically based on the underlying premiums paid to the insuring entity (the Company's counterparty), with adjustments where applicable, or on trended or adjusted medical cost targets.
3.    Earnings per share
Basic earnings per share is calculated by dividing net income attributable to the Company by the weighted average number of common shares outstanding. Weighted average common shares outstanding include restricted stock unit awards 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 as computed under the treasury stock method.
8


DAVITA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
(unaudited)
(dollars and shares in thousands, except per share data)

The reconciliations of the numerators and denominators used to calculate basic and diluted earnings per share were as follows:
Three months ended June 30,Six months ended June 30,
 2023202220232022
Net income attributable to DaVita Inc.$178,691 $224,809 $294,238 $386,931 
Weighted average shares outstanding:
Basic shares90,984 94,457 90,742 95,382 
Assumed incremental from stock plans2,434 3,315 2,210 3,739 
Diluted shares93,418 97,772 92,952 99,121 
Basic net income per share attributable to DaVita Inc.$1.96 $2.38 $3.24 $4.06 
Diluted net income per share attributable to DaVita Inc.$1.91 $2.30 $3.17 $3.90 
Anti-dilutive stock-settled awards excluded from calculation(1)
280 1,201 787 686 
(1)Shares associated with stock awards excluded from the diluted denominator calculation because they were anti-dilutive under the treasury stock method.
4.     Short-term and long-term investments
The Company’s short-term and long-term debt and equity investments, consisting of debt instruments classified as held-to-maturity and equity investments with readily determinable fair values or redemption values, were as follows:
 June 30, 2023December 31, 2022
Debt
securities
Equity
securities
TotalDebt
securities
Equity
securities
Total
Certificates of deposit and other time deposits$20,426 $ $20,426 $82,879 $ $82,879 
Investments in mutual funds and common stocks 38,063 38,063  39,143 39,143 
 $20,426 $38,063 $58,489 $82,879 $39,143 $122,022 
Short-term investments$5,419 $7,065 $12,484 $67,872 $9,821 $77,693 
Long-term investments15,007 30,998 46,005 15,007 29,322 44,329 
 $20,426 $38,063 $58,489 $82,879 $39,143 $122,022 
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. The Company's long-term debt investments are bank time deposits with contractual maturities longer than one year. These debt securities are accounted for as held-to-maturity and recorded at amortized cost, which approximated their fair values at June 30, 2023 and December 31, 2022.
Equity securities. The Company holds certain equity investments that have readily determinable fair values from public markets. The Company's remaining short-term and long-term equity investments are held within a trust to fund existing obligations associated with the Company’s non-qualified deferred compensation plans.
9


DAVITA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
(unaudited)
(dollars and shares in thousands, except per share data)

5.     Goodwill
Changes in the carrying value of goodwill by reportable segment were as follows:
U.S. dialysisOther — Ancillary servicesConsolidated
Balance at December 31, 2021$6,400,162 $646,079 $7,046,241 
Acquisitions16,750 32,297 49,047 
Divestitures(87)(3,263)(3,350)
Foreign currency and other adjustments (15,328)(15,328)
Balance at December 31, 2022$6,416,825 $659,785 $7,076,610 
Acquisitions 690 690 
Foreign currency and other adjustments 28,942 28,942 
Balance at June 30, 2023$6,416,825 $689,417 $7,106,242 
Balance at June 30, 2023:
Goodwill$6,416,825 $810,632 $7,227,457 
Accumulated impairment charges (121,215)(121,215)
$6,416,825 $689,417 $7,106,242 
The Company did not recognize any goodwill impairment charges during the six months ended June 30, 2023 and 2022.
The Company's operations continue to be impacted by the effects of the coronavirus (COVID-19) pandemic. While the Company does not currently expect a material adverse impact to its business as a result of the ongoing COVID-19 pandemic, there can be no assurance that the magnitude of the cumulative impacts of the pandemic, including certain conditions and developments in the U.S. and global economies, labor market conditions, inflation and monetary policies that may have been intensified by the pandemic, will not have a material adverse impact on one or more of the Company's businesses.
Developments, events, changes in operating performance and other changes in key circumstances since the dates of the Company’s last annual goodwill impairment assessments have not 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 June 30, 2023. Except for the Company's Germany kidney care reporting unit as described further in Note 10 to the Company's consolidated financial statements included in the 2022 10-K, none of the Company's various other reporting units were considered at risk of significant goodwill impairment as of June 30, 2023. 
6.    Equity method and other investments
The Company maintains equity method and other minor investments in the private securities of certain other healthcare and healthcare-related businesses, comprised as follows:
June 30, 2023December 31, 2022
Mozarc Medical Holdings LLC$359,757 
APAC joint venture101,200 $99,141 
Other equity method partnerships118,467 116,403 
Adjusted cost method and other investments13,845 15,564 
$593,269 $231,108 
During the six months ended June 30, 2023 and 2022 the Company recognized equity investment income of $15,274 and $16,187, respectively, from its equity method investments in nonconsolidated dialysis partnerships. The Company also recognized equity investment losses from other equity method investments of $15,568 and $1,538 in other (loss) income during the six months ended June 30, 2023 and 2022, respectively.
On May 25, 2022, the Company entered into an agreement with Medtronic, Inc. and one of its subsidiaries (collectively, Medtronic) to form a new, independent kidney care-focused medical device company (Mozarc Medical Holding
10


DAVITA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
(unaudited)
(dollars and shares in thousands, except per share data)

LLC, or Mozarc) via a deconsolidating partial interest sale from Medtronic to the Company, which closed effective April 1, 2023. The Company holds a 50% voting equity interest in Mozarc and Medtronic holds the other 50% voting equity interest. The Company does not maintain a controlling financial interest in Mozarc and therefore accounts for this investment on the equity method, with equity method income or loss recognized in Other income (loss), net, on a one-month lag.
At the closing, the Company made an estimated purchase price payment, including certain transaction cost adjustments, to Medtronic of $44,651, subject to certain customary post-closing adjustments, and contributed certain other non-cash assets to Mozarc with an estimated value of $14,000. In addition, the Company agreed to pay Medtronic additional consideration of up to $300,000 if certain regulatory, commercial and financial milestones are achieved between 2024 and 2028. At close, the Company and Medtronic also each contributed an additional $224,415 in cash to Mozarc to fund its development initiatives.
The Company’s investment in Mozarc was recorded at an initial estimate of $371,026, which represents the sum of the cash amounts paid and contributed for the Company’s investment in Mozarc, the estimated fair value of the non-cash assets contributed, the estimated fair value of the Company’s contingent consideration payable to Medtronic for its interest in Mozarc of $86,300, and direct costs incurred to complete this transaction. The foregoing estimates are based upon the best information available to management but remain subject to change based on finalization of post-closing purchase price adjustments yet to be completed between the parties and finalization of related third-party valuation reports. As of June 30, 2023, the book value of the Company's contingent consideration payable to Medtronic approximates its estimated fair value.
The recorded value of the Company's equity method investment in Mozarc, and its prospective equity method income (or loss) from that investment, remain subject to finalization of fair value estimates for the following based on third-party valuation reports: the Company's non-cash assets contributed to Mozarc, the Company's contingent consideration payable to Medtronic, and valuation of Mozarc's underlying net assets, including its intangible assets, fixed assets, leases and certain working capital items, some of which are pending final quantification for certain post-closing purchase price adjustments.
See Note 9 to the Company's consolidated financial statements included in the 2022 10-K for further description of the Company's other equity method investments.
7.     Long-term debt
Long-term debt was comprised of the following:
As of June 30, 2023
June 30,
2023
December 31, 2022Maturity dateInterest rate
Estimated fair value(1)
Senior Secured Credit Facilities:  
Term Loan A-1$1,250,000 $ 
(2)
SOFR+CSA+2.00%$1,237,500 
Term Loan B-12,617,501 2,660,831 8/12/2026SOFR+CSA+1.75%$2,578,239 
New Revolving line of credit285,000  
(2)
SOFR+CSA+2.00%$285,000 
Prior Term Loan A 1,498,438 8/12/2024
(3)
$ 
Prior Revolving line of credit 165,000 8/12/2024
(3)
$ 
Senior Notes:
4.625% Senior Notes2,750,000 2,750,000 6/1/20304.625 %$2,358,125 
3.75% Senior Notes1,500,000 1,500,000 2/15/20313.75 %$1,201,875 
Acquisition obligations and other notes payable(4)
99,904 120,562 2023-20366.81 %$99,904 
Financing lease obligations(5)
257,423 273,688 2024-20394.50 %
Total debt principal outstanding8,759,828 8,968,519 
Discount, premium and deferred financing costs(6)
(60,553)(44,498)
 8,699,275 8,924,021 
Less current portion(101,113)(231,404)
 $8,598,162 $8,692,617 
(1)For the Company's senior secured credit facilities and senior notes, fair value estimates are based upon bid and ask quotes, typically a level 2 input. For acquisition obligations and other notes payable, the carrying values presented approximate their estimated fair values, based on estimates of their present values using level 2 interest rate inputs.
11


DAVITA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
(unaudited)
(dollars and shares in thousands, except per share data)

(2)Outstanding Term Loan A-1 and the new Revolving line of credit balances are due on April 28, 2028, unless any of Term Loan B-1 remains outstanding 91 days prior to the Term Loan B-1 maturity date, in which case the outstanding Term Loan A-1 and the new Revolving line of credit balances become due at that 91 day date (May 13, 2026).
(3)At March 31, 2023, the interest rate on the Company's then-existing credit facilities was LIBOR plus an interest rate margin in effect of 1.75% for the prior Term Loan A and prior revolving line of credit.
(4)The interest rate presented for acquisition obligations and other notes payable is their weighted average interest rate based on the current fixed and variable interest rate components in effect as of June 30, 2023.
(5)Financing lease obligations are measured at their approximate present values at inception. The interest rate presented is the weighted average discount rate embedded in financing leases outstanding.
(6)As of June 30, 2023, the carrying amount of the Company's senior secured credit facilities have been reduced by a discount of $2,961 and deferred financing costs of $36,819, and the carrying amount of the Company's senior notes have been reduced by deferred financing costs of $33,847 and increased by a debt premium of $13,074. As of December 31, 2022, the carrying amount of the Company's senior secured credit facilities were reduced by a discount of $3,497 and deferred financing costs of $18,816, and the carrying amount of the Company's senior notes were reduced by deferred financing costs of $36,203 and increased by a debt premium of $14,018.
Scheduled maturities of long-term debt at June 30, 2023 were as follows:
2023 (remainder of the year)$52,244 
2024$115,626 
2025$129,805 
2026$2,660,615 
2027$113,373 
2028$1,298,981 
Thereafter$4,389,184 
On April 3, 2023, the Company entered into the Second Amendment (the Second Amendment) to its senior secured credit agreement (the Credit Agreement). The Second Amendment modifies the Credit Agreement to, among other things, transition the interest pricing on Term Loan B-1 from LIBOR + 1.75% to a forward-looking term rate (Term SOFR) based on the Secured Overnight Financing Rate (SOFR) + 1.75% plus an additional credit spread adjustment (CSA), provided that this adjusted rate shall never be less than 0.00%, as well as to update the successor interest rate provisions in the Credit Agreement with respect to Term Loan B-1. As of June 30, 2023, the CSA for all tranches outstanding on the Company's Term Loan B-1 was 0.11%. The Company adopted Accounting Standards Update (ASU) No. 2020-04 and ASU No. 2022-06 regarding reference rate reform during the second quarter and applied one of their practical expedients to treat the amendment of Term Loan B-1 as a non-substantial modification.
On April 28, 2023 (Third Amendment Effective Date), the Company entered into the Third Amendment (the Third Amendment, and together with the Second Amendment, the Amendments) to the Credit Agreement. The Third Amendment modifies the Credit Agreement to, among other things, refinance its Term Loan A and revolving line of credit with a secured Term Loan A-1 facility in the aggregate principal amount of $1,250,000 and a secured revolving line of credit in the aggregate principal amount of up to $1,500,000 (the foregoing referred to as the new Term Loan A-1 and new revolving line of credit, respectively).
The new Term Loan A-1 and new revolving line of credit initially bear interest at Term SOFR, plus a CSA of 0.10% and an interest rate margin of 2.00%, which is subject to adjustment depending upon the Company's leverage ratio under the Credit Agreement, as amended, and which can range from 1.25% to 2.25%, provided that this adjusted rate shall never be less than 0.0%. The new Term Loan A-1 requires amortizing quarterly principal payments beginning on September 30, 2023 of $7,813 per quarter for the first four payments, $15,625 per quarter for the fifth through sixteenth payments, $23,438 per quarter for the seventeenth through nineteenth payments, with the balance due on April 28, 2028. The new revolving line of credit has a five-year term. However, under the Third Amendment, Term Loan A-1 and the new revolving line of credit become due if any of Term Loan B-1 remains outstanding 91 days prior to the Term Loan B-1 maturity date, in which case the Term Loan A-1 balance and any outstanding balance on the new revolving line of credit become due at that 91 day date (May 13, 2026).
12


DAVITA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
(unaudited)
(dollars and shares in thousands, except per share data)

Borrowings under the Company's senior secured credit facilities are guaranteed and secured by substantially all of DaVita Inc.'s and certain of the Company’s domestic subsidiaries' assets and rank senior to all unsecured indebtedness. Borrowings under the new Term Loan A-1, Term Loan B-1 and new revolving line of credit rank equal in priority for that security and related subsidiary guarantees under the facility's terms. The Credit Agreement, as amended, contains certain customary affirmative and negative covenants such as various restrictions or limitations on permitted amounts of investments (including acquisitions), share repurchases, 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 Amendments is below 4.00:1.00. In addition, the Amendments require compliance with a maximum leverage ratio covenant, tested quarterly, of 5.00:1.00 through June 30, 2026 and 4.50:1.00 thereafter.
In the second quarter of 2023, the Company used a portion of the proceeds from the new Term Loan A-1 and initial borrowing of $400,000 on the new revolving line of credit to pay off the remaining principal balance outstanding and accrued interest and fees on its prior Term Loan A and prior revolving line of credit in the amount of $1,602,199. The remaining borrowings added cash to the balance sheet for general corporate purposes.
In addition to the prepayments described above, during the first six months of 2023, the Company made regularly scheduled and other principal payments under its senior secured credit facilities totaling $54,011 on its prior Term Loan A and $43,330 on Term Loan B-1.
As a result of the transactions described above, the Company recognized debt prepayment and refinancing charges of $7,962 in the second quarter of 2023 comprised partially of fees incurred for this transaction and partially of deferred financing costs written off for the portion of debt considered extinguished and reborrowed as a result of the repayment of all principal balances outstanding on the Company's prior Term Loan A and prior revolving line of credit. For the portion of the debt that was considered extinguished and reborrowed, the Company recognized constructive financing cash outflows and financing cash inflows on the statement of cash flows of $434,393 and $150,000 for the Term Loan A and prior revolving line of credit, respectively, even though no funds were actually paid or received. Another $715,019 of the debt considered extinguished in this refinancing represented a non-cash financing activity.
After June 30, 2023, the Company's 2019 interest rate cap agreements described below have the economic effect of capping the Company's maximum exposure to SOFR variable interest rate changes on equivalent amounts of the Company's floating rate debt, including all of Term Loan B-1 and a portion of new Term Loan A-1. The remaining $367,501 outstanding principal balance of new Term Loan A-1 and the $285,000 balance outstanding on the revolving line of credit are subject to SOFR-based interest rate volatility. These cap agreements are designated as cash flow hedges and, as a result, changes in their fair values are reported in other comprehensive income. The original premiums paid for the caps are amortized to debt expense on a straight-line basis over the term of each cap agreement starting from its effective date. These cap agreements do not contain credit risk-contingent features.
In the second quarter of 2023 the Company entered into several forward interest rate cap agreements, described below, that have the economic effect of capping the Company's exposure to SOFR variable interest rate changes on specific portions of the Company's floating rate debt (2023 cap agreements). These 2023 cap agreements are designated as cash flow hedges and, as a result, changes in their fair values will be reported in other comprehensive income. These 2023 cap agreements have notional amounts that amortize downward over time, do not contain credit-risk contingent features, and become effective and expire as described in the table below.
Finally, during and as of the end of the second quarter, the Company transitioned the variable rate base on its senior secured credit facilities and related hedging interest rate caps from LIBOR to SOFR. This transition involved a SOFR-to-LIBOR rate mismatch between this debt and the 2019 interest rate caps for a portion of this quarter, but the Company’s interest rate hedges remained highly effective throughout the transition and thereafter.
This transition was accomplished through the Amendments to the Credit Agreement for the Company's senior secured credit facility debt and, for the Company's 2019 interest rate caps outstanding, through the the International Swaps and Derivatives Association (ISDA)'s Interbank Offered Rate (IBOR) Fallbacks Supplement and IBOR Fallbacks Protocol which were established in anticipation of the cessation of LIBOR. That ISDA protocol incorporated fallbacks for derivatives linked to LIBOR which facilitated their transition to a replacement reference rate. The Company has adhered to this ISDA protocol and as of June 30, 2023 has transitioned all of its LIBOR-based derivative exposure to SOFR.
13


DAVITA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
(unaudited)
(dollars and shares in thousands, except per share data)

The following table summarizes the Company’s interest rate cap agreements outstanding as of June 30, 2023 and December 31, 2022, which are classified in other long-term assets on its consolidated balance sheet: 
 Six months ended
June 30, 2023
Fair value
Notional amount
Variable rate maximum(1)
Effective dateExpiration dateDebt expense (offset)Recorded OCI gainJune 30,
2023
December 31, 2022
2019 cap agreements$3,500,000 2.00%6/30/20206/30/2024$(46,232)$24,215 $114,983 $139,755 
2023 cap agreements$200,000 3.75%6/28/202412/31/2025$671 $1,862 
2023 cap agreements$1,000,000 
4.00%(2)
6/28/202412/31/2025$1,119 $10,356 
2023 cap agreements$800,000 3.75%6/30/202412/31/2025$2,388 $7,353 
(1)The Company's cap agreements have the effect of capping SOFR-based variable rate payments made by the Company.
(2)Effective January 1, 2025, the maximum rate of 4.00% decreases to 3.75% for these interest rate caps.
See Note 10 for further details on amounts reclassified from accumulated other comprehensive loss and recorded as debt expense (offset) related to the Company’s interest rate cap agreements for the three and six months ended June 30, 2023 and 2022.
As a result of the variable rate cap from the Company's 2019 interest rate cap agreements, the Company’s weighted average effective interest rate on its senior secured credit facilities at the end of the second quarter of 2023 was 4.90%, based on the current margins in effect for its senior secured credit facilities as of June 30, 2023, as detailed in the table above.
The Company’s weighted average effective interest rate on all debt, including the effect of interest rate caps and amortization of debt discount, for the three and six months ended June 30, 2023 was 4.67% and 4.61% and as of June 30, 2023 was 4.66%.
As of June 30, 2023, the Company’s interest rates were fixed and economically fixed on approximately 52% and 92% of its total debt, respectively.
As of June 30, 2023, the Company had $1,215,000 available and $285,000 drawn on its $1,500,000 revolving line of credit under its senior secured credit facilities. Credit available under this revolving line of credit is reduced by the amount of any letters of credit outstanding under the facility, of which there were none as of June 30, 2023. The Company also had letters of credit of approximately $151,395 outstanding under a separate bilateral secured letter of credit facility as of June 30, 2023.
8.    Commitments and 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 (which frequently arise from qui tam suits) and audits (including, without limitation, investigations or other actions resulting from its obligation to self-report suspected violations of law) and other legal proceedings, including, without limitation, those described below. 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 June 30, 2023 and December 31, 2022, 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
14


DAVITA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
(unaudited)
(dollars and shares in thousands, except per share data)

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.
Certain Governmental Inquiries and Related Proceedings
2016 U.S. Attorney Texas Investigation: In February 2016, 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 conducted 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. After its investigation, the government and the named states declined to intervene in the matter, and on April 5, 2023, the U.S. District Court, Northern District of Texas, entered an order unsealing the complaint in the matter of U.S. ex rel. Grenon v. DaVita Rx, LLC et al. The complaint was not served on the Company. On May 31, 2023, the private party relator filed a notice of voluntary dismissal of all claims. On June 1, 2023, the U.S. District Court for the Northern District of Texas dismissed the matter without prejudice.
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. 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, May 2019, and July 2021, the Company received a CID pursuant to the FCA from the U.S. Attorney's Office relating to this investigation. In May 2020, the Company sold its interest in Lifeline, but the Company retained certain liabilities of the Lifeline business, including those related to this investigation. The Company is continuing to cooperate with the government in this investigation.
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 its five-year Corporate Integrity Agreement, the term of which expired October 22, 2019. In November 2022, the Company learned that, on April 1, 2022, the U.S. Attorney’s Office for the District of New Jersey notified the U.S. District Court for the District of New Jersey of its decision not to elect to intervene in the matter of U.S. ex rel. Doe v. DaVita Inc. and filed a Stipulation of Dismissal. On April 13, 2022, the U.S. District Court for the District of New Jersey dismissed the case without prejudice. On October 12, 2022, the U.S. Attorney’s Office for the Eastern District of Pennsylvania notified the U.S. District Court, Eastern District of Pennsylvania, of its decision not to elect to intervene at this time in the matter of U.S. ex rel. Bayne v. DaVita Inc., et al. The court then unsealed an amended complaint, which alleges violations of federal and state False Claims Acts, by order dated October 14, 2022. In May 2023, the private party relator served the Company with a second amended complaint. On July 14, 2023, the Company filed a motion to dismiss the second amended complaint.
2020 California Department of Insurance Investigation: In April 2020, the California Department of Insurance (CDI) sent the Company an Investigative Subpoena relating to an investigation being conducted by that office. CDI issued a superseding subpoena in September 2020 and an additional subpoena in September 2021. Those subpoenas request 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 continuing to cooperate with CDI in this investigation.
2023 District of Columbia Office of Attorney General Investigation: In January 2023, the Office of the Attorney General for the District of Columbia issued a CID to the Company in