DAVITA INC. [DVA] Filings

10-Q 1 dva-20220630.htm 10-Q dva-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 1-14106

DAVITA INC.


Delaware						51-0354549
(State of incorporation)						(I.R.S. Employer Identification No.)


2000 16th Street
Denver,	CO	80202

Telephone number (720) 631-2100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading symbol(s):

Name of each exchange on which registered:

Common Stock, $0.001 par value

DVA

NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

As of July 29, 2022, the number of shares of the registrant’s common stock outstanding was approximately 91.3 million shares.

DAVITA INC.

INDEX

Page No.

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements:

Consolidated Statements of Income for the three and six months ended June 30, 2022 and June 30, 2021

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and June 30, 2021

Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

Consolidated Statements of Cash Flow for the six months ended June 30 , 2022 and June 30 , 2021

Consolidated Statements of Equity for the three and six months ended June 30, 2022 and June 30, 2021

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.

Exhibits

Signature

Note: Items 3, 4 and 5 of Part II are omitted because they are not applicable.

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars and shares in thousands, except per share data)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Dialysis patient service revenues	$	2,810,099	$	2,817,957	$	5,526,380	$	5,532,544
Other revenues	116,658		98,553		217,932		203,967
Total revenues	2,926,757		2,916,510		5,744,312		5,736,511
Operating expenses:
Patient care costs	2,016,788		1,965,277		4,035,317		3,903,607
General and administrative	315,219		298,091		610,039		579,517
Depreciation and amortization	171,176		169,689		344,120		335,390
Equity investment income, net	(9,141)		(7,023)		(16,187)		(15,081)


Total operating expenses	2,494,042		2,426,034		4,973,289		4,803,433
Operating income	432,715		490,476		771,023		933,078
Debt expense	(82,586)		(73,324)		(156,377)		(140,338)

Other (loss) income, net	(1,284)		15,188		(3,070)		16,356
Income before income taxes	348,845		432,340		611,576		809,096
Income tax expense	64,229		81,309		121,242		166,520


Net income	284,616		351,031		490,334		642,576
Less: Net income attributable to noncontrolling interests	(59,807)		(57,211)		(103,403)		(111,353)
Net income attributable to DaVita Inc.	$	224,809	$	293,820	$	386,931	$	531,223

Earnings per share attributable to DaVita Inc.:

Basic net income	$	2.38	$	2.76	$	4.06	$	4.94

Diluted net income	$	2.30	$	2.64	$	3.90	$	4.72

Weighted average shares for earnings per share:
Basic shares	94,457		106,364		95,382		107,606
Diluted shares	97,772		111,423		99,121		112,555

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(dollars in thousands)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net income	$	284,616	$	351,031	$	490,334	$	642,576
Other comprehensive (loss) income, net of tax:
Unrealized gains (losses) on interest rate cap agreements:
Unrealized gains (losses)	13,217		(2,059)		54,349		2,823
Reclassifications of net realized losses into net income	1,033		1,033		2,066		2,066
Unrealized (losses) gains on foreign currency translation:	(91,176)		57,910		(28,964)		(4,634)
Other comprehensive (loss) income	(76,926)		56,884		27,451		255
Total comprehensive income	207,690		407,915		517,785		642,831
Less: Comprehensive income attributable to noncontrolling interests	(59,807)		(57,211)		(103,403)		(111,353)
Comprehensive income attributable to DaVita Inc.	$	147,883	$	350,704	$	414,382	$	531,478

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars and shares in thousands, except per share data)


	June 30, 2022		December 31, 2021
ASSETS
Cash and cash equivalents	$	262,605	$	461,900
Restricted cash and equivalents	93,132		93,060
Short-term investments	100,489		22,310
Accounts receivable	2,093,830		1,957,583
Inventories	109,522		107,428
Other receivables	502,921		427,321
Prepaid and other current assets	63,539		72,517
Income tax receivable	38,070		25,604
Total current assets	3,264,108		3,167,723
Property and equipment, net of accumulated depreciation of $4,989,142 and $4,763,135, respectively	3,304,596		3,479,972
Operating lease right-of-use assets	2,771,757		2,824,787
Intangible assets, net of accumulated amortization of $44,985 and $60,730, respectively	184,740		177,693
Equity method and other investments	253,457		238,881
Long-term investments	44,562		49,514
Other long-term assets	257,577		136,677
Goodwill	7,019,778		7,046,241
	$	17,100,575	$	17,121,488
LIABILITIES AND EQUITY
Accounts payable	$	402,308	$	402,049
Other liabilities	752,717		709,345
Accrued compensation and benefits	559,791		659,960
Current portion of operating lease liabilities	398,421		394,357
Current portion of long-term debt	197,510		179,030
Income tax payable	—		53,792
Total current liabilities	2,310,747		2,398,533
Long-term operating lease liabilities	2,606,391		2,672,713
Long-term debt	9,064,916		8,729,150
Other long-term liabilities	105,137		119,158
Deferred income taxes	852,389		830,954
Total liabilities	14,939,580		14,750,508
Commitments and contingencies
Noncontrolling interests subject to put provisions	1,385,821		1,434,832
Equity:
Preferred stock ($0.001 par value, 5,000 shares authorized; none issued)	—		—
Common stock ($0.001 par value, 450,000 shares authorized; 98,179 and 92,206 shares issued and outstanding at June 30, 2022, respectively, and 97,289 shares issued and outstanding at December 31, 2021)	98		97
Additional paid-in capital	578,272		540,321
Retained earnings	741,268		354,337
Treasury stock (5,973 and zero shares, respectively)	(603,058)		—
Accumulated other comprehensive loss	(111,796)		(139,247)
Total DaVita Inc. shareholders' equity	604,784		755,508
Noncontrolling interests not subject to put provisions	170,390		180,640
Total equity	775,174		936,148
	$	17,100,575	$	17,121,488

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited)

(dollars in thousands)


	Six months ended June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	490,334	$	642,576
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	344,120		335,390


Stock-based compensation expense	50,109		51,717
Deferred income taxes	9,069		40,685
Equity investment loss (income), net	90		(2,764)

Other non-cash charges, net	(32,858)		1,274
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	(132,043)		(117,171)
Inventories	(1,927)		(3,270)
Other receivables and prepaid and other current assets	(61,811)		14,465
Other long-term assets	(49,093)		(13,706)
Accounts payable	24,517		(47,390)
Accrued compensation and benefits	(102,513)		(90,381)
Other current liabilities	42,517		25,090
Income taxes	(63,638)		10,753
Other long-term liabilities	(6,557)		(13,232)
Net cash provided by operating activities	510,316		834,036
Cash flows from investing activities:
Additions of property and equipment	(265,461)		(294,438)
Acquisitions	(9,491)		(23,890)
Proceeds from asset and business sales	114,829		29,774
Purchase of debt investments held-to-maturity	(89,530)		(7,923)
Purchase of other debt and equity investments	(3,010)		(2,164)
Proceeds from debt investments held-to-maturity	8,415		7,923
Proceeds from sale of other debt and equity investments	3,775		11,908

Purchase of equity method investments	(23,806)		(6,029)
Distributions from equity method investments	1,047		1,140
Net cash used in investing activities	(263,232)		(283,699)
Cash flows from financing activities:
Borrowings	1,182,911		1,611,086
Payments on long-term debt	(841,687)		(754,407)
Deferred financing and debt redemption costs	—		(9,089)
Purchase of treasury stock	(617,432)		(560,507)
Distributions to noncontrolling interests	(118,315)		(99,362)
Net payments related to stock purchases and awards	(47,866)		(43,605)
Contributions from noncontrolling interests	9,116		15,925
Proceeds from sales of additional noncontrolling interests	3,673		—
Purchases of noncontrolling interests	(15,365)		(4,493)
Net cash (used in) provided by financing activities	(444,965)		155,548
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,342)		(1,197)
Net (decrease) increase in cash, cash equivalents and restricted cash	(199,223)		704,688
Cash, cash equivalents and restricted cash at beginning of the year	554,960		501,790
Cash, cash equivalents and restricted cash at end of the period	$	355,737	$	1,206,478

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(dollars and shares in thousands)


	Three months ended June 30, 2022
	Non- controlling interests subject to put provisions		DaVita Inc. Shareholders’ Equity														Non- controlling interests not subject to put provisions

			Common stock			Additional paid-in capital		Retained earnings		Treasury stock			Accumulated other comprehensive loss
			Shares	Amount						Shares	Amount				Total
Balance at March 31, 2022	$	1,390,757	97,342	$	97	$	595,403	$	516,459	(2,104)	$	(233,318)	$	(34,870)	$	843,771	$	174,552
Comprehensive income:
Net income	45,571							224,809							224,809		14,236

Other comprehensive loss													(76,926)		(76,926)

Stock award plan			837	1		(50,885)									(50,884)
Stock-settled stock-based compensation expense						25,590									25,590
Changes in noncontrolling interest from:
Distributions	(34,378)																(18,485)
Contributions	4,107																80
Acquisitions and divestitures	(29)					56									56
Partial purchases	(10,596)					(1,496)									(1,496)
Fair value remeasurements	(9,604)					9,604									9,604
Other	(7)																7
Purchase of treasury stock										(3,869)	(369,740)				(369,740)
Balance at June 30, 2022	$	1,385,821	98,179	$	98	$	578,272	$	741,268	(5,973)	$	(603,058)	$	(111,796)	$	604,784	$	170,390


	Six months ended June 30, 2022
	Non- controlling interests subject to put provisions		DaVita Inc. Shareholders’ Equity														Non- controlling interests not subject to put provisions

			Common stock			Additional paid-in capital		Retained earnings		Treasury stock			Accumulated other comprehensive loss
			Shares	Amount						Shares	Amount				Total
Balance at December 31, 2021	$	1,434,832	97,289	$	97	$	540,321	$	354,337	—	$	—	$	(139,247)	$	755,508	$	180,640
Comprehensive income:
Net income	73,952							386,931							386,931		29,451

Other comprehensive income													27,451		27,451

Stock award plan			890	1		(54,373)									(54,372)
Stock-settled stock-based compensation expense						50,216									50,216
Changes in noncontrolling interest from:
Distributions	(77,259)																(41,056)
Contributions	7,304																1,812
Acquisitions and divestitures	2,392					939									939
Partial purchases	(11,418)					(3,270)									(3,270)
Fair value remeasurements	(44,439)					44,439									44,439
Other	457																(457)
Purchase of treasury stock										(5,973)	(603,058)				(603,058)
Balance at June 30, 2022	$	1,385,821	98,179	$	98	$	578,272	$	741,268	(5,973)	$	(603,058)	$	(111,796)	$	604,784	$	170,390

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(dollars and shares in thousands)


	Three months ended June 30, 2021
	Non- controlling interests subject to put provisions		DaVita Inc. Shareholders’ Equity														Non- controlling interests not subject to put provisions

			Common stock			Additional paid-in capital		Retained earnings		Treasury stock			Accumulated other comprehensive loss
			Shares	Amount						Shares	Amount				Total
Balance at March 31, 2021	$	1,349,160	110,027	$	110	$	603,172	$	1,089,940	(2,949)	$	(322,333)	$	(122,783)	$	1,248,106	$	185,109
Comprehensive income:
Net income	44,992							293,820							293,820		12,219
Other comprehensive income													56,884		56,884

Stock award plans			617	1		(44,907)									(44,906)
Stock-settled stock-based compensation expense						26,958									26,958
Changes in noncontrolling interest from:
Distributions	(29,983)																(15,512)
Contributions	3,094																2,142
Acquisitions and divestitures																	1,249
Partial purchases	(351)					(2,886)									(2,886)		(161)
Fair value remeasurements	59,299					(59,299)									(59,299)
Purchase of treasury stock										(2,070)	(240,897)				(240,897)


Balance at June 30, 2021	$	1,426,211	110,644	$	111	$	523,038	$	1,383,760	(5,019)	$	(563,230)	$	(65,899)	$	1,277,780	$	185,046


	Six months ended June 30, 2021
	Non- controlling interests subject to put provisions		DaVita Inc. Shareholders’ Equity														Non- controlling interests not subject to put provisions

			Common stock			Additional paid-in capital		Retained earnings		Treasury stock			Accumulated other comprehensive loss
			Shares	Amount						Shares	Amount				Total
Balance at December 31, 2020	$	1,330,028	109,933	$	110	$	597,073	$	852,537	—	$	—	$	(66,154)	$	1,383,566	$	183,186
Comprehensive income:
Net income	80,592							531,223							531,223		30,761
Other comprehensive income													255		255

Stock award plans			711	1		(51,177)									(51,176)
Stock-settled stock-based compensation expense						50,513									50,513
Changes in noncontrolling interest from:
Distributions	(64,242)																(35,120)
Contributions	10,789																5,136
Acquisitions and divestitures																	1,249
Partial purchases	(552)					(3,775)									(3,775)		(166)
Fair value remeasurements	69,596					(69,596)									(69,596)
Purchase of treasury stock										(5,019)	(563,230)				(563,230)


Balance at June 30, 2021	$	1,426,211	110,644	$	111	$	523,038	$	1,383,760	(5,019)	$	(563,230)	$	(65,899)	$	1,277,780	$	185,046

See notes to condensed consolidated financial statements.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars and shares in thousands, except per share data)

Unless otherwise indicated in this Quarterly Report on Form 10-Q, "the Company", "we", "us", "our" and similar terms refer to DaVita Inc. and its consolidated subsidiaries.

1. Condensed consolidated interim financial statements

The unaudited condensed consolidated interim financial statements included in this report are prepared by the Company. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations are reflected in these condensed consolidated interim financial statements. All significant intercompany accounts and transactions have been eliminated. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, contingencies and noncontrolling interests subject to put provisions. The most significant estimates and assumptions underlying these financial statements and accompanying notes generally involve revenue recognition and accounts receivable, certain fair value estimates, accounting for income taxes and loss contingencies. The results of operations reflected in these interim financial statements may not necessarily be indicative of annual operating results. These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (2021 10-K). Prior period classifications conform to the current period presentation. The Company has evaluated subsequent events through the date these condensed consolidated interim financial statements were issued and has included all necessary adjustments and disclosures.

2. Revenue recognition

The following tables summarize the Company's segment revenues by primary payor source:


	Three months ended June 30, 2022						Three months ended June 30, 2021
	U.S. dialysis		Other — Ancillary services		Consolidated		U.S. dialysis		Other — Ancillary services		Consolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage	$	1,529,534	$		$	1,529,534	$	1,562,164	$		$	1,562,164
Medicaid and Managed Medicaid	186,873				186,873		194,641				194,641
Other government	86,079		116,653		202,732		82,317		118,464		200,781
Commercial	854,662		55,708		910,370		830,801		50,817		881,618
Other revenues:
Medicare and Medicare Advantage			93,262		93,262				80,211		80,211
Medicaid and Managed Medicaid			232		232				305		305
Commercial			8,207		8,207				1,189		1,189
Other(1)	6,092		8,844		14,936		6,415		10,503		16,918
Eliminations of intersegment revenues	(19,389)				(19,389)		(21,317)		—		(21,317)
Total	$	2,643,851	$	282,906	$	2,926,757	$	2,655,021	$	261,489	$	2,916,510

(1)Other primarily consists of management service fees earned in the respective Company line of business as well as other non-patient service revenue from the Company's U.S. ancillary services and international operations.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)


	Six months ended June 30, 2022						Six months ended June 30, 2021
	U.S. dialysis		Other - Ancillary services		Consolidated		U.S. dialysis		Other - Ancillary services		Consolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage	$	2,993,621	$		$	2,993,621	$	3,042,461	$		$	3,042,461
Medicaid and Managed Medicaid	376,528				376,528		381,884				381,884
Other government	166,879		233,548		400,427		162,501		225,293		387,794
Commercial	1,689,240		108,132		1,797,372		1,666,280		102,315		1,768,595
Other revenues:
Medicare and Medicare Advantage			176,859		176,859				165,807		165,807
Medicaid and Managed Medicaid			769		769				605		605
Commercial			9,546		9,546				7,223		7,223
Other(1)	12,068		18,680		30,748		13,091		21,665		34,756
Eliminations of intersegment revenues	(41,558)				(41,558)		(48,320)		(4,294)		(52,614)
Total	$	5,196,778	$	547,534	$	5,744,312	$	5,217,897	$	518,614	$	5,736,511