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1.	Condensed consolidated interim financial statements

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.

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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. 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 fees for management and administrative support services 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 non-dialysis joint ventures in which the Company owns a noncontrolling interest.

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.

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

	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 calculations because they are anti-dilutive under the treasury stock method.

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4.	Short-term and long-term investments

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

	March 31, 2020												December 31, 2019
	Debt securities				Equity securities				Total				Debt securities				Equity securities				Total
Certificates of deposit and other time deposits	$	8,190			$	—			$	8,190			$	8,140			$	—			$	8,140
Investments in mutual funds and common stock	—				35,843				35,843				—				39,951				39,951
	$	8,190			$	35,843			$	44,033			$	8,140			$	39,951			$	48,091
Short-term investments	$	8,190			$	1,186			$	9,376			$	8,140			$	3,432			$	11,572
Long-term investments	—				34,657				34,657				—				36,519				36,519
	$	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 approximated their fair values at March 31, 2020 and December 31, 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 three months ended March 31, 2020, the Company recognized pre-tax net losses of $3,407 in other (loss) income associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of $293 and a net increase in unrealized losses of $3,700. During the three months ended March 31, 2019, the Company recognized pre-tax net gains of $1,893 in other (loss) income associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of $170 and a net increase in unrealized gains of $1,723.

5.	Equity method and other investments

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:

	March 31, 2020				December 31, 2019
APAC joint venture	$	123,696			$	116,924
Other equity method partnerships	114,355				114,611
Adjusted cost method investments	16,448				10,448
	$	254,499			$	241,983

During the three months ended March 31, 2020 and 2019, the Company recognized equity investment income of $17,843 and $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), which is 75%-owned by the Company and 25%-owned by its other noncontrolling investor. As described in Note 9 to the Company's consolidated financial statements included in the 10-K, the Company does not consolidate the APAC JV.

The Company's other equity method investments include legal entities over which the Company has significant influence but in which it does not 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 no meaningful impairments or other valuation adjustments recognized on these investments.

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6.	Goodwill

Changes in goodwill by reportable segments were as follows:

	U.S. dialysis				Other - Ancillary services				Consolidated
Balance at December 31, 2018	$	6,275,004			$	566,956			$	6,841,960
Acquisitions	18,089				72,137				90,226
Impairment charges	—				(124,892		)		(124,892		)
Foreign currency and other adjustments	(5,993		)		(13,666		)		(19,659		)
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
Goodwill	$	6,288,390			$	638,117			$	6,926,507
Accumulated impairment charges	—				(148,484		)		(148,484		)
	$	6,288,390			$	489,633			$	6,778,023

During the three months ended March 31, 2020, the Company did not recognize any goodwill impairment 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.

Developments, events, changes in operating performance and other changes in 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 March 31, 2020. Except as described in Note 10 to the 10-K, none 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.

7.	Income taxes

As of 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 $68,602, of which $64,356 would impact the Company's effective tax rate if recognized. The total balance increased $388 from the December 31, 2019 balance of $68,214.

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8.	Long-term debt

Long-term debt was comprised of the following: 

											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)	Fair value estimates are based upon bid and ask quotes for the Company's senior secured credit facilities and senior notes, typically a level 2 input. The carrying values of acquisition obligations and other notes payable presented here approximate their estimated fair values, based on estimates of their current present values using level 2 interest rate inputs.

(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.

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

(5)

As of 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 senior secured credit facilities and senior notes include a discount of $6,457 and deferred financing costs of $45,444; and deferred financing costs of $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. No 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

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these charges primarily represent fees incurred on this transaction, as well as the write off and capitalization of deferred financing costs associated with the portion of debt considered extinguished. For the portion of the Term Loan B debt that was 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 received. Another $55,895 of the debt considered extinguished in this refinancing represented a non-cash financing activity.

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

As of 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 Term Loan B-1 and a portion of the Term Loan A. The remaining $1,464,392 outstanding principal balance of the Term Loan A and 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 March 31, 2020 and December 31, 2019, which are classified in "Other long-term assets" on its consolidated balance sheet: 

											Three months ended March 31, 2020								Fair value
	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		$	2,163			$	—			$	—			$	—
2019 cap agreements	$	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 months ended March 31, 2020 and 2019:

		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 March 31,										Three months ended March 31,
Derivatives designated as cash flow hedges		2020				2019						2020				2019
Interest rate cap agreements		$	(17,346	)		$	(781	)		Debt expense		$	2,163			$	2,163
Related income tax		4,328				201				Related income tax		(540		)		(557		)
Total		$	(13,018	)		$	(580	)				$	1,623			$	1,606

See Note 14 to these condensed consolidated financial statements for further details on amounts recorded and reclassified from accumulated other comprehensive loss.

The Company’s weighted average effective interest rate on the senior secured credit facilities at the end of the first quarter of 2020 was 2.78%, based on the current margins in effect for the Term Loan A, Term Loan B-1 and revolving line of credit as of 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%.

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

As of March 31, 2020, the Company had $500,000 drawn on its $1,000,000 revolving line of credit under its senior secured credit facilities. The Company also has approximately $57,705 of outstanding letters of credit under a separate bilateral secured letter of credit facility.

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.

As of March 31, 2020 and December 31, 2019, assets recorded under finance leases were $257,750 and $247,246, respectively, and accumulated amortization associated with finance leases was $33,318 and $27,193, respectively, included in property and equipment, net, on the Company's consolidated balance sheet.

The components of lease expense were as follows:

Lease cost		Three months ended March 31, 2020				Three months ended March 31, 2019
Operating lease cost(1):
Fixed lease expense		$	134,733			$	128,110
Variable lease expense		30,059				28,571
Financing lease cost:
Amortization of leased assets		6,077				5,826
Interest on lease liabilities		3,603				3,775
Net lease cost		$	174,472			$	166,282

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

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		March 31, 2020
Weighted average remaining lease term (years):
Operating leases		8.9
Finance leases		10.2
Weighted average discount rate:
Operating leases		4.0	%
Finance leases		5.3	%

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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

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 March 31, 2020 and December 31, 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 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 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)

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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 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 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. 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 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 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.

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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

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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 three 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 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 10 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.

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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 $9,460.

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 business, corporate administrative support, and ancillary 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 three months ended March 31, 2020, the Company granted 950 restricted and performance stock units with an aggregate grant-date fair value of $72,648 and a weighted-average expected life of approximately 3.5 years and 2,765 stock-settled stock appreciation rights with an aggregate grant-date fair value of $73,833 and a weighted-average expected life of approximately 4.8 years.

For the three months ended March 31, 2020 and 2019, the Company recognized $25,594 and $13,107, respectively, in total LTIP expense, of which $19,870 and $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 three months ended March 31, 2020 and 2019 was $2,584 and $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 no 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 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 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.

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13.	Share repurchases

The following table summarizes the Company's repurchases of its common stock during the three months ended 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			—			$	—			$	—

The Company did not repurchase any shares subsequent to March 31, 2020 through May 4, 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 and approved a new share repurchase authorization of $2,000,000. As of May 4, 2020, the Company had a total of $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.

14.	Accumulated other comprehensive 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	)

The reclassification of net cap realized losses into income are recorded as debt expense in the corresponding consolidated statements of income. See Note 8 to these condensed consolidated financial statements for further details.

15.	Acquisitions and divestitures

During the three months ended March 31, 2020, the Company acquired dialysis businesses consisting of two dialysis centers located in the U.S. and 22 dialysis centers located outside the U.S. for a total of $34,107 in net cash, $875 in deferred purchase price obligations, and $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.

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.

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

Current assets	$	7,412
Property and equipment	8,892
Intangible and other long-term assets	6,107
Goodwill	26,770
Deferred income taxes	1,513
Current liabilities	(10,705		)
	$	39,989

 Amortizable intangible assets acquired during the three months ended March 31, 2020 primarily represent non-compete agreements which had weighted-average estimated useful lives of approximately four years. The total estimated amount of goodwill deductible for tax purposes associated with these acquisitions was approximately $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 $31,723 if certain performance targets or quality margins are met primarily over the next one year to five years. As of March 31, 2020, the estimated fair values of these contingent earn-out obligations is $22,386, of which $4,579 is included in other current liabilities and the remaining $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 three months ended March 31, 2020:

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

DaVita Medical Group

On June 19, 2019, the Company completed the sale of its DaVita Medical Group (DMG) business to 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 recorded a preliminary estimated pre-tax net loss of approximately $23,022 on the sale of its DMG business in 2019. This preliminary net loss was 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 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. During the three months ended March 31, 2020, the Company recognized $9,980 in additional tax benefits under the Coronavirus Aid, Relief, and 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

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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 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:

	Three months ended March 31,
	2020				2019
Net cash provided by operating activities from discontinued operations	$	—			$	68,240
Net cash used in investing activities from discontinued operations	$	—			$	(22,809	)

17.	Variable interest entities (VIEs)

At March 31, 2020, these condensed consolidated financial statements include total assets of VIEs of $320,505 and total liabilities and noncontrolling interests of VIEs to 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.

18.	Fair values of financial instruments

The Company measures the fair value of certain assets, liabilities and noncontrolling interests subject to put provisions (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 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

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For reconciliations of changes in contingent earn-out obligations and noncontrolling interests subject to put provisions during the three months ended March 31, 2020, see Note 15 and the consolidated statement of equity, respectively.

Investments in equity securities represent investments in various open-ended registered investment companies (mutual funds) and common stock and are recorded at fair value estimated based on reported market prices or redemption prices, as applicable. See Note 4 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 8 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 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 15 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 17 to the Company's consolidated financial statements included in the 10-K for further 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 8 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 financial instruments other than debt and lease liabilities are presented in these condensed consolidated financial statements at March 31, 2020 at their approximate fair values due to the short-term nature of their settlements.

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. See Note 25 to the Company's consolidated financial statements included in the 10-K for further description of how the Company determines and measures results for its operating segments.

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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 March 31,
	2020				2019
Segment revenues:
U.S. dialysis
Dialysis patient service revenues:
External sources	$	2,579,240			$	2,511,826
Intersegment revenues	31,941				30,420
U.S. dialysis patient service revenues	2,611,181				2,542,246
Other revenues(1):
External sources	5,141				4,684
Intersegment revenues	301				221
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	122,815				108,739
Intersegment revenues	4,152				3,336
Total ancillary services revenues	261,008				229,938
Total net segment revenues	2,877,631				2,777,089
Elimination of intersegment revenues	(36,394		)		(33,977		)
Consolidated revenues	$	2,841,237			$	2,743,112
Segment operating margin (loss):
U.S. dialysis	$	491,607			$	416,981
Other—Ancillary services	(2,646		)		(57,630		)
Total segment operating margin	488,961				359,351
Reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:
Corporate administrative support	(23,585		)		(18,844		)
Consolidated operating income	465,376				340,507
Debt expense	(88,603		)		(131,519		)
Debt refinancing charges	(2,948		)		—
Other income, net	(4,350		)		6,940
Consolidated income from continuing operations before income taxes	$	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.

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A summary of assets by reportable segment was as follows:

	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 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:

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 March 31,
	2020				2019
Net income attributable to DaVita Inc.	$	239,593			$	149,289
Changes in paid-in capital for:
Purchases of noncontrolling interests	(445		)		(2,206		)
Net transfers to noncontrolling interests	(445		)		(2,206		)
Net income attributable to DaVita Inc., net of transfers to noncontrolling interests	$	239,148			$	147,083

21.	New accounting standards

New standards recently adopted

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 amend the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments and off-balance sheet credit exposures. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. The amendments in this ASU became effective for the Company beginning on January 1, 2020 and were applied using a modified retrospective basis. The adoption of ASU No. 2016-13 did not have a material impact on the Company's consolidated financial statements.

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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 became effective for the Company beginning on January 1, 2020 and were applied on a prospective basis. The adoption of this ASU did not 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.

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 its $5,500,000 senior secured credit agreement (the New Credit 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

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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 New Credit Agreement.

Condensed Consolidating Statements of Operations

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		197,283				156,860				41,428				(267,615		)		127,956
Total net revenues		197,283				1,886,600				1,092,305				(334,951		)		2,841,237
Operating expenses		154,651				1,640,821				915,340				(334,951		)		2,375,861
Operating income		42,632				245,779				176,965				—				465,376
Debt expense		(91,362		)		(59,093		)		(11,337		)		70,241				(91,551		)
Other income (loss), net		62,453				805				2,633				(70,241		)		(4,350		)
Income tax expense		3,424				80,975				7,161				—				91,560
Equity earnings in subsidiaries		229,294				98,795				—				(328,089		)		—
Net income from continuing operations		239,593				205,311				161,100				(328,089		)		277,915
Net income from discontinued operations, net of tax		—				—				9,980				—				9,980
Net income		239,593				205,311				171,080				(328,089		)		287,895
Less: Net income attributable to noncontrolling interests		—				—				—				(48,302		)		(48,302		)
Net income attributable to DaVita Inc.		$	239,593			$	205,311			$	171,080			$	(376,391	)		$	239,593

For the three months ended March 31, 2019		DaVita Inc.				Guarantor subsidiaries				Non- Guarantor subsidiaries				Consolidating adjustments				Consolidated total
Patient service revenues		$	—			$	1,706,593			$	986,373			$	(63,277	)		$	2,629,689
Other revenues		188,836				146,117				34,909				(256,439		)		113,423
Total net revenues		188,836				1,852,710				1,021,282				(319,716		)		2,743,112
Operating expenses and charges		143,659				1,634,285				944,377				(319,716		)		2,402,605
Operating income		45,177				218,425				76,905				—				340,507
Debt expense		(133,595		)		(50,650		)		(12,549		)		65,275				(131,519		)
Other income, net		110,198				648				11,060				(114,966		)		6,940
Income tax expense		7,026				44,027				5,693				—				56,746
Equity earnings in subsidiaries		134,535				64,375				—				(198,910		)		—
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		—				—				—				(40,198		)		(40,198		)
Net income attributable to DaVita Inc.		$	149,289			$	188,771			$	50,337			$	(239,108	)		$	149,289

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Condensed Consolidating Statements of Comprehensive Income

For the three months ended March 31, 2020		DaVita Inc.				Guarantor subsidiaries				Non- Guarantor subsidiaries				Consolidating adjustments				Consolidated total
Net income		$	239,593			$	205,311			$	171,080			$	(328,089	)		$	287,895
Other comprehensive loss		(11,395		)		—				(81,632		)		—				(93,027		)
Total comprehensive income		228,198				205,311				89,448				(328,089		)		194,868
Less: Comprehensive income attributable to noncontrolling interest		—				—				—				(48,302		)		(48,302		)
Comprehensive income attributable to DaVita Inc.		$	228,198			$	205,311			$	89,448			$	(376,391	)		$	146,566

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

Condensed Consolidating Balance Sheets

As of March 31, 2020		DaVita Inc.				Guarantor subsidiaries				Non- Guarantor subsidiaries				Consolidating adjustments				Consolidated total
Cash and cash equivalents		$	1,075,965			$	411			$	305,388			$	—			$	1,381,764
Restricted cash and equivalents		14,540				—				92,184				—				106,724
Accounts receivable, net		—				1,184,686				635,446				—				1,820,132
Other current assets		86,786				556,210				100,357				(28,034		)		715,319
Total current assets		1,177,291				1,741,307				1,133,375				(28,034		)		4,023,939
Property and equipment, net		555,409				1,555,662				1,336,966				(2,614		)		3,445,423
Operating lease right-of-use assets		107,620				1,643,765				1,114,378				(17,987		)		2,847,776
Intangible assets, net		340				28,766				88,847				—				117,953
Investments in and advances to affiliates, net		10,961,209				7,869,131				3,099,564				(21,929,904		)		—
Other long-term assets and investments		85,777				130,528				187,405				(20,524		)		383,186
Goodwill		—				4,812,207				1,965,816				—				6,778,023
Total assets		$	12,887,646			$	17,781,366			$	8,926,351			$	(21,999,063	)		$	17,596,300
Current liabilities		$	365,783			$	1,172,340			$	683,608			$	(985	)		$	2,220,746
Intercompany liabilities, net		1,534,892				3,099,564				2,693,572				(7,328,028		)		—
Long-term operating leases liabilities		133,926				1,554,717				1,062,852				(17,125		)		2,734,370
Long-term debt and other long-term liabilities		8,209,577				786,685				334,591				(51,049		)		9,279,804
Noncontrolling interests subject to put provisions		695,622				—				—				532,414				1,228,036
Total DaVita Inc. shareholders' equity		1,947,846				11,168,060				3,433,816				(14,601,876		)		1,947,846
Noncontrolling interests not subject to put provisions		—				—				717,912				(532,414		)		185,498
Total equity		1,947,846				11,168,060				4,151,728				(15,134,290		)		2,133,344
Total liabilities and equity		$	12,887,646			$	17,781,366			$	8,926,351			$	(21,999,063	)		$	17,596,300

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As of December 31, 2019		DaVita Inc.				Guarantor subsidiaries				Non- Guarantor subsidiaries				Consolidating adjustments				Consolidated total
Cash and cash equivalents		$	758,241			$	532			$	343,599			$	—			$	1,102,372
Restricted cash and equivalents		14,499				—				91,847				—				106,346
Accounts receivable, net		—				1,189,301				606,297				—				1,795,598
Other current assets		76,787				548,553				102,410				(41,896		)		685,854
Total current assets		849,527				1,738,386				1,144,153				(41,896		)		3,690,170
Property and equipment, net		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		362				31,569				103,753				—				135,684
Investments in and advances to affiliates, net		10,813,991				7,611,402				3,051,208				(21,476,601		)		—
Other long-term assets and investments		102,779				133,698				176,315				(18,318		)		394,474
Goodwill		—				4,812,972				1,974,663				—				6,787,635
Total assets		$	12,420,006			$	17,573,589			$	8,879,187			$	(21,561,388	)		$	17,311,394
Current liabilities		$	379,286			$	1,327,378			$	666,470			$	(1,036	)		$	2,372,098
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		7,741,725				674,558				364,102				(64,507		)		8,715,878
Noncontrolling interests subject to put provisions		647,600				—				—				532,776				1,180,376
Total DaVita Inc. shareholders' equity		2,133,409				10,952,669				3,475,710				(14,428,379		)		2,133,409
Noncontrolling interests not subject to put provisions		—				—				718,609				(532,776		)		185,833
Total equity		2,133,409				10,952,669				4,194,319				(14,961,155		)		2,319,242
Total liabilities and equity		$	12,420,006			$	17,573,589			$	8,879,187			$	(21,561,388	)		$	17,311,394

 

 

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Condensed Consolidating Statements of Cash Flows

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		$	239,593			$	205,311			$	171,080			$	(328,089	)		$	287,895
Changes in operating assets and liabilities and non-cash items included in net income		(182,332		)		(71,454		)		(1,817		)		328,089				72,486
Net cash provided by operating activities		57,261				133,857				169,263				—				360,381
Cash flows used in investing activities:
Additions of property and equipment		(52,714		)		(41,144		)		(61,084		)		—				(154,942		)
Acquisitions		—				(984		)		(33,123		)		—				(34,107		)
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		481,856				(2,462		)		(13,557		)		—				465,837
Intercompany borrowings (payments)		153,029				(95,857		)		(57,172		)		—				—
Other items		(322,119		)		2,018				(48,744		)		—				(368,845		)
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		—				—				(14,978		)		—				(14,978		)
Net increase (decrease) in cash, cash equivalents and restricted cash		317,765				(121		)		(37,874		)		—				279,770
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year		772,740				532				435,446				—				1,208,718
Cash, cash equivalents and restricted cash of continuing operations at end of the period		$	1,090,505			$	411			$	397,572			$	—			$	1,488,488

 

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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		$	149,289			$	188,771			$	50,337			$	(198,910	)		$	189,487
Changes in operating assets and liabilities and non-cash items included in net income		(124,409		)		(289,332		)		166,648				198,910				(48,183		)
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		(38,942		)		(76,529		)		(83,407		)		—				(198,878		)
Acquisitions		—				—				(11,274		)		—				(11,274		)
Proceeds from asset and business sales		—				2,270				11,633				—				13,903
Proceeds (purchases) from investment sales and other items, net		1,804				(3,878		)		(2,035		)		—				(4,109		)
Net cash used in investing activities		(37,138		)		(78,137		)		(85,083		)		—				(200,358		)
Cash flows provided by financing activities:
Long-term debt and related financing costs, net		365,133				(2,364		)		(5,572		)		—				357,197
Intercompany (payments) borrowings		(220,697		)		188,870				31,827				—				—
Other items		1,517				(8,427		)		(25,336		)		—				(32,246		)
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		—				—				(921		)		—				(921		)
Net increase (decrease) in cash, cash equivalents and restricted cash		133,695				(619		)		131,900				—				264,976
Less: Net increase in cash, cash equivalents and restricted cash from discontinued operations		—				—				118,962				—				118,962
Net increase (decrease) in cash, cash equivalents and restricted cash from continuing operations		133,695				(619		)		12,938				—				146,014
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year		61,658				13,280				340,482				—				415,420
Cash, cash equivalents and restricted cash of continuing operations at end of the period		$	195,353			$	12,661			$	353,420			$	—			$	561,434

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23.	Recent and subsequent events

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 exposed to and will continue to be impacted by the effects of the 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.

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.

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•

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, 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 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;

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•	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, 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; and

•	uncertainties associated with the other risk factors set forth in DaVita Inc.'s Annual Report on Form 10-K for the year ended December 31, 2019 and this Quarterly Report on Form 10-Q, and the risks and uncertainties discussed in any subsequent reports that DaVita has filed or furnished with the Securities and Exchange Commission from time to time.

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

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(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.

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(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.

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(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.

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(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.

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(1)	Represents dialysis centers for which we manage or provide administrative services 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.

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(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.

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•

We may observe a negative impact on revenue and 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 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 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 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 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.

•

We may have increased costs and 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, material negative impact on our brand, increased litigation, compliance or regulatory investigations, teammate unrest, work stoppages or

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•

The COVID-19 pandemic and efforts to contain the virus have led to global economic deterioration and 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 pandemic subsides, and in the event such a reduction occurs, it would have a material adverse impact on our business, results of operations, financial condition and cash flows.

•

If general economic conditions continue to 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.

•

Our need, ability and willingness to use and retain any funds from the 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 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 impact of any such legislation on our competitors, all will depend, among other things, on the magnitude, timing and nature of COVID-19’s impact on the Company as well as the requirements of any such programs, which are uncertain. In addition, while we are declining the government funding from the Provider Relief Fund under the CARES Act, there can be no assurance that we will be able to continue to forego the receipt of financial or other assistance under the CARES Act or similar subsequent legislation or that similar assistance will be available from the government if we have a 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.

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