DAVITA INC. [DVA] Filings

10-Q 1 dva-20240630.htm 10-Q dva-20240630

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, 2024


☐			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 August 2, 2024, the number of shares of the registrant’s common stock outstanding was approximately 83.9 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, 2024 and

June 30, 2023

Consolidated Statements of Comprehensive Income for the three and six months ended

June 30, 2024 and June 30, 2023

Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023

Consolidated Statements of Cash Flow for the six months ended June 30, 2024 and

June 30, 2023

Consolidated Statements of Equity for the three and six months ended June 30, 2024 and

June 30, 2023

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 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signature

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,
	2024		2023		2024		2023
Dialysis patient service revenues	$	3,061,102	$	2,890,685	$	6,002,634	$	5,650,719
Other revenues	125,620		109,684		254,643		222,349
Total revenues	3,186,722		3,000,369		6,257,277		5,873,068
Operating expenses:
Patient care costs	2,142,299		2,055,844		4,221,275		4,114,033
General and administrative	367,845		364,016		730,325		695,630
Depreciation and amortization	175,661		183,672		362,744		361,743
Equity investment income, net	(5,481)		(8,454)		(12,163)		(15,274)
Gain on changes in ownership interest	—		—		(35,147)		—

Total operating expenses	2,680,324		2,595,078		5,267,034		5,156,132
Operating income	506,398		405,291		990,243		716,936
Debt expense	(97,747)		(103,507)		(197,165)		(204,281)
Debt prepayment, extinguishment and modification costs	(9,732)		(7,962)		(9,732)		(7,962)
Other (loss) income, net	(27,479)		1,373		(40,120)		5,125
Income before income taxes	371,440		295,195		743,226		509,818
Income tax expense	71,688		48,818		137,494		92,773


Net income	299,752		246,377		605,732		417,045
Less: Net income attributable to noncontrolling interests	(77,076)		(67,686)		(143,407)		(122,807)
Net income attributable to DaVita Inc.	$	222,676	$	178,691	$	462,325	$	294,238

Earnings per share attributable to DaVita Inc.:

Basic net income	$	2.56	$	1.96	$	5.29	$	3.24

Diluted net income	$	2.50	$	1.91	$	5.15	$	3.17

Weighted average shares for earnings per share:
Basic shares	86,899		90,984		87,337		90,742
Diluted shares	88,950		93,418		89,749		92,952

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,
	2024		2023		2024		2023
Net income	$	299,752	$	246,377	$	605,732	$	417,045
Other comprehensive (loss) income, net of tax:
Unrealized gains on interest rate cap agreements:
Unrealized gains	5,919		24,849		19,236		21,310
Reclassifications of net realized gains into net income	(22,041)		(18,956)		(43,669)		(34,698)
Unrealized (losses) gains on foreign currency translation:	(78,853)		41,961		(118,573)		75,522
Other comprehensive (loss) income	(94,975)		47,854		(143,006)		62,134
Total comprehensive income	204,777		294,231		462,726		479,179
Less: Comprehensive income attributable to noncontrolling interests	(77,076)		(67,686)		(143,407)		(122,807)
Comprehensive income attributable to DaVita Inc.	$	127,701	$	226,545	$	319,319	$	356,372

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

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


	June 30, 2024		December 31, 2023
ASSETS
Cash and cash equivalents	$	416,493	$	380,063
Restricted cash and equivalents	86,753		84,571
Short-term investments	20,693		11,610
Accounts receivable	2,303,119		1,986,856
Inventories	126,765		143,105
Other receivables	420,623		422,669
Prepaid and other current assets	83,106		102,645
Income tax receivable	9,373		6,387
Total current assets	3,466,925		3,137,906
Property and equipment, net of accumulated depreciation of $6,058,826 and $5,759,514, respectively	2,982,222		3,073,533
Operating lease right-of-use assets	2,457,565		2,501,364
Intangible assets, net of accumulated amortization of $38,752 and $38,445, respectively	191,483		203,224
Equity method and other investments	453,709		545,848
Long-term investments	31,779		47,890
Other long-term assets	240,490		271,253
Goodwill	7,201,399		7,112,560
	$	17,025,572	$	16,893,578
LIABILITIES AND EQUITY
Accounts payable	$	493,534	$	514,533
Other liabilities	888,358		828,878
Accrued compensation and benefits	644,865		752,598
Current portion of operating lease liabilities	404,820		394,399
Current portion of long-term debt	537,991		123,299
Income tax payable	25,222		28,507
Total current liabilities	2,994,790		2,642,214
Long-term operating lease liabilities	2,281,372		2,330,389
Long-term debt	8,451,562		8,268,334
Other long-term liabilities	179,010		183,074
Deferred income taxes	693,982		726,217
Total liabilities	14,600,716		14,150,228
Commitments and contingencies
Noncontrolling interests subject to put provisions	1,574,840		1,499,288
Equity:
Preferred stock ($0.001 par value, 5,000 shares authorized; none issued)	—		—
Common stock ($0.001 par value, 450,000 shares authorized; 89,855 and 85,081 shares issued and outstanding at June 30, 2024, respectively, and 88,824 shares issued and outstanding at December 31, 2023)	90		89
Additional paid-in capital	383,235		509,804
Retained earnings	1,060,613		598,288
Treasury stock (4,774 and zero shares, respectively)	(615,948)		—
Accumulated other comprehensive loss	(195,090)		(52,084)
Total DaVita Inc. shareholders' equity	632,900		1,056,097
Noncontrolling interests not subject to put provisions	217,116		187,965
Total equity	850,016		1,244,062
	$	17,025,572	$	16,893,578

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)


	Six months ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	605,732	$	417,045
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	362,744		361,743
Loss on extinguishment of debt	2,445		7,132

Stock-based compensation expense	48,832		55,197
Deferred income taxes	(28,643)		(16,178)
Equity investment loss, net	54,748		14,571
Gain on changes in ownership interest	(35,147)		—
Other non-cash losses and (gains), net	16,570		(5,160)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	(193,093)		141,503
Inventories	22,422		(116)
Other current assets	(13,898)		33,182
Other long-term assets	(3,367)		(607)
Accounts payable	(38,998)		(40,615)
Accrued compensation and benefits	(122,817)		(68,800)
Other current liabilities	1,219		17,242
Income taxes	(8,097)		5,200
Other long-term liabilities	(6,642)		(8,675)
Net cash provided by operating activities	664,010		912,664
Cash flows from investing activities:
Additions of property and equipment	(245,740)		(272,204)
Acquisitions	(157,783)		(2,575)
Proceeds from asset and business sales	12,779		21,198
Purchase of debt investments held-to-maturity	(309)		(30,419)
Purchase of other debt and equity investments	(3,411)		(6,366)
Proceeds from debt investments held-to-maturity	7,082		94,414
Proceeds from sale of other debt and equity investments	4,564		3,873


Purchase of equity method investments	(700)		(273,336)
Distributions from equity method investments	6,554		1,758
Net cash used in investing activities	(376,964)		(463,657)
Cash flows from financing activities:
Borrowings	3,275,533		2,136,873
Payments on long-term debt	(2,661,145)		(2,347,120)
Deferred and debt related financing costs	(19,993)		(45,009)
Purchase of treasury stock	(612,614)		—
Distributions to noncontrolling interests	(107,210)		(124,178)
Net payments related to stock purchases and awards	(86,277)		(43,612)
Contributions from noncontrolling interests	7,621		6,946
Proceeds from sales of additional noncontrolling interests	860		50,962
Purchases of noncontrolling interests	(40,751)		(7,610)
Net cash used in financing activities	(243,976)		(372,748)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(4,458)		6,922
Net increase in cash, cash equivalents and restricted cash	38,612		83,181
Cash, cash equivalents and restricted cash at beginning of the year	464,634		338,989
Cash, cash equivalents and restricted cash at end of the period	$	503,246	$	422,170

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(dollars and shares in thousands)


	Three months ended June 30, 2024
	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, 2024	$	1,503,474	89,822	$	90	$	428,202	$	837,937	(2,119)	$	(240,117)	$	(100,115)	$	925,997	$	206,516
Comprehensive income:
Net income	57,867							222,676							222,676		19,209

Other comprehensive loss													(94,975)		(94,975)

Stock award plan			33			(3,067)									(3,067)
Stock-settled stock-based compensation expense						23,714									23,714
Changes in noncontrolling interest from:
Distributions	(20,153)																(9,709)
Contributions	3,001																895
Acquisitions and divestitures						491									491		205
Partial purchases	(35,272)					(182)									(182)
Fair value remeasurements	65,923					(65,923)									(65,923)

Purchase of treasury stock										(2,655)	(375,831)				(375,831)

Balance at June 30, 2024	$	1,574,840	89,855	$	90	$	383,235	$	1,060,613	(4,774)	$	(615,948)	$	(195,090)	$	632,900	$	217,116


	Six months ended June 30, 2024
	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, 2023	$	1,499,288	88,824	$	89	$	509,804	$	598,288	—	$	—	$	(52,084)	$	1,056,097	$	187,965
Comprehensive income:
Net income	102,058							462,325							462,325		41,349
Other comprehensive loss													(143,006)		(143,006)

Stock award plan			1,031	1		(93,699)									(93,698)
Stock-settled stock-based compensation expense						46,763									46,763
Changes in noncontrolling interest from:
Distributions	(73,081)																(34,129)
Contributions	6,128																1,493
Acquisitions and divestitures						491									491		20,438
Partial purchases	(36,499)					(3,178)									(3,178)
Fair value remeasurements	76,946					(76,946)									(76,946)

Purchase of treasury stock										(4,774)	(615,948)				(615,948)


Balance at June 30, 2024	$	1,574,840	89,855	$	90	$	383,235	$	1,060,613	(4,774)	$	(615,948)	$	(195,090)	$	632,900	$	217,116


	Three months ended June 30, 2023
	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, 2023	$	1,398,829	90,650	$	91	$	590,251	$	290,034	—	$	—	$	(54,906)	$	825,470	$	194,403
Comprehensive income:
Net income	50,259							178,691							178,691		17,427

Other comprehensive loss													47,854		47,854

Stock award plan			621			(39,080)									(39,080)
Stock-settled stock-based compensation expense						28,661									28,661
Changes in noncontrolling interest from:
Distributions	(45,724)																(23,617)
Contributions	1,861																360
Acquisitions and divestitures						54									54		58
Partial purchases	(700)					(5,182)									(5,182)		(5)
Fair value remeasurements	19,024					(19,024)									(19,024)



Balance at June 30, 2023	$	1,423,549	91,271	$	91	$	555,680	$	468,725	—	$	—	$	(7,052)	$	1,017,444	$	188,626


	Six months ended June 30, 2023
	Non- controlling interests subject to put provisions		DaVita Inc. Shareholders’ 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, 2022	$	1,348,908	90,411	$	90	$	606,935	$	174,487	—	$	—	$	(69,186)	$	712,326	$	163,566
Comprehensive income:
Net income	86,951							294,238							294,238		35,856

Other comprehensive income													62,134		62,134

Stock award plan			860	1		(48,603)									(48,602)
Stock-settled stock-based compensation expense						53,508									53,508
Changes in noncontrolling interest from:
Distributions	(81,274)																(42,904)
Contributions	5,609																1,337
Acquisitions and divestitures						13,077									13,077		30,776
Partial purchases	(700)					(5,182)									(5,182)		(5)
Fair value remeasurements	64,055					(64,055)									(64,055)



Balance at June 30, 2023	$	1,423,549	91,271	$	91	$	555,680	$	468,725	—	$	—	$	(7,052)	$	1,017,444	$	188,626

See notes to condensed consolidated financial statements.

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, 2023 (2023 10-K). Prior period classifications conform to the current period presentation.

2. Revenue recognition

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


	Three months ended June 30, 2024						Three months ended June 30, 2023
	U.S. dialysis		Other — Ancillary services		Consolidated		U.S. dialysis		Other — Ancillary services		Consolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage	$	1,587,198	$		$	1,587,198	$	1,539,639	$		$	1,539,639
Medicaid and Managed Medicaid	214,951				214,951		216,014				216,014
Other government	80,338		176,524		256,862		92,525		125,964		218,489
Commercial	952,625		62,391		1,015,016		876,033		60,871		936,904
Other revenues:
Medicare and Medicare Advantage			97,433		97,433				87,236		87,236
Medicaid and Managed Medicaid			445		445				396		396
Commercial			10,200		10,200				3,619		3,619
Other(1)	5,898		15,467		21,365		6,404		13,437		19,841
Eliminations of intersegment revenues	(12,925)		(3,823)		(16,748)		(20,361)		(1,408)		(21,769)
Total	$	2,828,085	$	358,637	$	3,186,722	$	2,710,254	$	290,115	$	3,000,369

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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


	Six months ended June 30, 2024						Six months ended June 30, 2023
	U.S. dialysis		Other - Ancillary services		Consolidated		U.S. dialysis		Other - Ancillary services		Consolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage	$	3,118,696	$		$	3,118,696	$	3,022,405	$		$	3,022,405
Medicaid and Managed Medicaid	425,075				425,075		421,790				421,790
Other government	162,924		322,309		485,233		174,570		247,550		422,120
Commercial	1,878,455		132,564		2,011,019		1,711,427		115,387		1,826,814
Other revenues:
Medicare and Medicare Advantage			200,542		200,542				180,475		180,475
Medicaid and Managed Medicaid			841		841				965		965
Commercial			17,140		17,140				4,825		4,825
Other(1)	12,021		30,669		42,690		12,583		26,275		38,858
Eliminations of intersegment revenues	(37,389)		(6,570)		(43,959)		(42,410)		(2,774)		(45,184)
Total	$	5,559,782	$	697,495	$	6,257,277	$	5,300,365	$	572,703	$	5,873,068

(1) Consists primarily of management service fees in the Company's U.S. dialysis business and research fees, management fees, and other non-patient service revenues in the Other - ancillary services businesses.

There are significant uncertainties associated with estimating revenue, many of which take several years to resolve. These estimates are subject to ongoing insurance coverage changes, geographic coverage differences, differing interpretations of contract coverage and other payor issues, as well as patient issues, including determination of applicable primary and secondary coverage, changes in patient insurance coverage and coordination of benefits. As these estimates are refined over time, both positive and negative adjustments to revenue are recognized in the current period.

Dialysis patient service revenues. Revenues are recognized based on the Company’s estimate of the transaction price the Company expects to collect as a result of satisfying its performance obligations. Dialysis patient service revenues are recognized in the period services are provided based on these estimates. Revenues consist primarily of payments from government and commercial health plans for dialysis services provided to patients.

Other revenues. Other revenues consist of revenues earned by the Company's non-dialysis ancillary services as well as fees for management and administrative services to outpatient dialysis businesses that the Company does not consolidate. Other revenues are estimated and recognized in the period the performance obligation is met, subject to applicable measurement constraints. The Company's integrated kidney care (IKC) revenues include revenues earned under risk-based arrangements, including value-based care (VBC) arrangements. Under its VBC arrangements, the Company assumes full or shared financial risk for the total medical cost of care for patients below or above a benchmark. The benchmarks against which the Company incurs profit or loss on these contracts are typically based on the underlying premiums paid to the insuring entity (the Company's counterparty), with adjustments where applicable, or on trended or adjusted medical cost targets.

For its IKC business, the Company recognized revenues for performance obligations satisfied in previous years of $31,309 and $23,303 during the six months ended June 30, 2024 and 2023, respectively. The delay in recognition of these amounts resulted predominantly from measurement limitations and recognition constraints on the Company's VBC contracts with health plans, many of which are complex and relatively new arrangements. The Company's revenue recognition for its government Comprehensive Kidney Care Contracting (CKCC) program also remains constrained for plan year 2023.

Measurements of revenue for the Company's IKC risk-based arrangements are complex, sensitive to a number of key inputs, and require meaningful estimates for a number of factors, including but not limited to member alignment data, third-party medical claims expense, outcomes on various quality metrics, and ultimate risk adjustment factor (RAF) scores. Information and other measurement limitations on these factors may constrain revenue recognition for a risk-based arrangement until a period after the Company's performance obligations have been met.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

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 June 30,				Six months ended June 30,
	2024		2023		2024		2023


Net income attributable to DaVita Inc.	$	222,676	$	178,691	$	462,325	$	294,238

Weighted average shares outstanding:
Basic shares	86,899		90,984		87,337		90,742
Assumed incremental from stock plans	2,051		2,434		2,412		2,210
Diluted shares	88,950		93,418		89,749		92,952



Basic net income per share attributable to DaVita Inc.	$	2.56	$	1.96	$	5.29	$	3.24



Diluted net income per share attributable to DaVita Inc.	$	2.50	$	1.91	$	5.15	$	3.17

Anti-dilutive stock-settled awards excluded from calculation(1)	4		280		197		787

(1)Shares associated with stock awards excluded from the diluted denominator calculation because they were anti-dilutive under the treasury stock method.

4. Short-term and long-term investments

The Company’s short-term and long-term investments, consisting of debt instruments classified as held-to-maturity and equity investments with readily determinable fair values or redemption values, were as follows:


	June 30, 2024						December 31, 2023
	Debt securities		Equity securities		Total		Debt securities		Equity securities		Total
Certificates of deposit and other time deposits	$	15,293	$	—	$	15,293	$	22,109	$	—	$	22,109
Investments in mutual funds and common stocks	—		37,179		37,179		—		37,391		37,391
	$	15,293	$	37,179	$	52,472	$	22,109	$	37,391	$	59,500
Short-term investments	$	15,293	$	5,400	$	20,693	$	7,110	$	4,500	$	11,610
Long-term investments	—		31,779		31,779		14,999		32,891		47,890
	$	15,293	$	37,179	$	52,472	$	22,109	$	37,391	$	59,500

Debt securities. The Company's short-term debt investments are principally bank certificates of deposit with contractual maturities longer than three months but shorter than one year. The Company's long-term debt investments are bank time deposits with contractual maturities longer than one year. These debt securities are accounted for as held-to-maturity and recorded at amortized cost, which approximated their fair values at June 30, 2024 and December 31, 2023.

Equity securities. Substantially all of the Company's short-term and long-term equity investments are held within a trust to fund existing obligations associated with the Company’s non-qualified deferred compensation plans.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

5. Goodwill

Changes in the carrying value of goodwill by reportable segment were as follows:


	U.S. dialysis		Other — Ancillary services		Consolidated
Balance at December 31, 2022	$	6,416,825	$	659,785	$	7,076,610
Acquisitions	—		25,723		25,723

Impairment charges	—		(26,083)		(26,083)
Foreign currency and other adjustments	—		36,310		36,310
Balance at December 31, 2023	6,416,825		695,735		7,112,560

Acquisitions	102,082		35,735		137,817
Divestitures	(1,687)		—		(1,687)
Foreign currency and other adjustments	—		(47,291)		(47,291)
Balance at June 30, 2024	$	6,517,220	$	684,179	$	7,201,399

Balance at June 30, 2024:
Goodwill	$	6,517,220	$	829,684	$	7,346,904
Accumulated impairment charges	—		(145,505)		(145,505)
	$	6,517,220	$	684,179	$	7,201,399

The Company did not recognize any goodwill impairment charges during the six months ended June 30, 2024 or the six months ended June 30, 2023.

The Company performed various annual impairment assessments during the six months ended June 30, 2024, with no impairment indicated. None of the Company's various reporting units were considered at risk of significant goodwill impairment as of June 30, 2024.

6. Equity method and other investments

The Company maintains equity method and other minor investments in the private securities of certain other healthcare and healthcare-related businesses as follows:


	June 30, 2024		December 31, 2023
Mozarc Medical Holding LLC	$	265,303	$	324,711
APAC joint venture	67,241		98,865
Other equity method partnerships	104,355		107,282
Adjusted cost method and other investments	16,810		14,990
	$	453,709	$	545,848

During the six months ended June 30, 2024 and 2023 the Company recognized equity investment income of $12,163 and $15,274, respectively, from its equity method investments in nonconsolidated dialysis partnerships. The Company also recognized equity investment losses from other equity method investments of $(54,633) and $(15,568) in other (loss) income, net during the six months ended June 30, 2024 and 2023, respectively.

See Note 8 to the Company's consolidated financial statements included in the 2023 10-K for further description of the Company's equity method investments.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

7. Long-term debt

Long-term debt comprised the following:


						As of June 30, 2024
	June 30, 2024		December 31, 2023		Maturity date	Interest rate		Estimated fair value(1)
Senior Secured Credit Facilities:
Term Loan A-1	$	1,218,750	$	1,234,375	(2)	Base +1.75%(3)		$	1,212,656
Term Loan B-1	949,819		2,603,786		8/12/2026	Base +1.75%(3)		$	949,819
Extended Term Loan B-1	1,640,251				5/9/2031	SOFR + 2.00%		$	1,636,150
Revolving line of credit	260,000		—		(2)	Base +1.75%(3)		$	260,000
Senior Notes:
4.625% Senior Notes	2,750,000		2,750,000		6/1/2030	4.625	%	$	2,488,750
3.75% Senior Notes	1,500,000		1,500,000		2/15/2031	3.75	%	$	1,280,625
Acquisition obligations and other notes payable(4)	92,129		102,328		2024-2036	6.73	%	$	92,129
Financing lease obligations(5)	244,262		255,491		2025-2040	4.63	%
CHC temporary funding assistance(6)	392,984					—	%	$	392,984
Total debt principal outstanding	9,048,195		8,445,980
Discount, premium and deferred financing costs(7)	(58,642)		(54,347)
	8,989,553		8,391,633
Less current portion	(537,991)		(123,299)
	$	8,451,562	$	8,268,334

(1)For the Company's senior secured credit facilities, fair value estimates are based on bid and ask quotes, a level 2 input. For the Company's senior notes, fair value estimates are based on market level 1 inputs. For acquisition obligations and other notes payable, the carrying values presented here approximate their estimated fair values, based on estimates of their present values typically using level 2 interest rate inputs. For the CHC temporary funding assistance, the carrying value presented here approximates the estimated fair value based on the short-term nature of settlement.

(2)Outstanding Term Loan A-1 and the Revolving line of credit balances are due on April 28, 2028, unless any of Term Loan B-1 remains outstanding 91 days prior to the Term Loan B-1 maturity date, in which case the outstanding Term Loan A-1 and the Revolving line of credit balances become due at that 91 day date (May 13, 2026).

(3)The Company's senior secured credit facilities bear interest at Term SOFR, plus an interest rate margin, with certain portions also subject to a credit spread adjustment (CSA). Term SOFR plus CSA is referred to as "Base" in the table above. The Term Loan A-1 and revolving line of credit bear a CSA of 0.10%. As of June 30, 2024, the CSA for all tranches outstanding on the Company's Term Loan B-1 was 0.11%.

(4)The interest rate presented for acquisition obligations and other notes payable is their weighted average interest rate based on the current fixed and variable interest rate components in effect as of June 30, 2024.

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

(6)The Change Healthcare (CHC) temporary funding assistance, as described below, is interest-free and amounts provided under this program are subject to repayment within 45 business days from a future date to be mutually agreed to by the parties. The balance is included in the Company's current portion of long-term debt as of June 30, 2024.

(7)As of June 30, 2024, the carrying amount of the Company's senior secured credit facilities has been reduced by a discount of $9,433 and deferred financing costs of $31,257, and the carrying amount of the Company's senior notes has been reduced by deferred financing costs of $29,136 and increased by a debt premium of $11,184. As of December 31, 2023, the carrying amount of the Company's senior secured credit facilities was reduced by a discount of $2,487 and deferred financing costs of $32,498, and the carrying amount of the Company's senior notes was reduced by deferred financing costs of $31,491 and increased by a debt premium of $12,129.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

Scheduled maturities of long-term debt at June 30, 2024 were as follows:


2024 (remainder of the year)	$	465,033
2025	$	147,057
2026	$	1,040,219
2027	$	134,619
2028	$	1,295,333
2029	$	41,171
Thereafter	$	5,924,763

On May 9, 2024 (Fourth Amendment Effective Date), the Company entered into the Fourth Amendment (the Fourth Amendment) to its senior secured credit agreement dated as of August 12, 2019 (as amended, restated, supplemented or otherwise modified from time to time, including by the Fourth Amendment, the Credit Agreement). The Fourth Amendment modifies the Credit Agreement to, among other things, extend the maturity date for a portion of its Term Loan B-1 in the aggregate principal amount of $911,598 and extend an additional incremental principal amount of $728,653 (together, referred to as the Extended Term Loan B-1). The Company used the incremental proceeds from the Extended Term Loan B-1 to prepay a proportionate amount of the principal balance still outstanding on its Term Loan B-1.

The Extended Term Loan B-1 bears interest at the Company’s option, based on (i) the Base Rate (as defined below) plus the Applicable Margin (as defined below), or (ii) the forward-looking term rate based on the secured overnight financing rate that is published by CME Group Benchmark Administration Limited (Term SOFR) plus the Applicable Margin. The “Base Rate” is defined as the highest of (i) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 0.50%, (ii) the prime commercial lending rate of Wells Fargo as established from time to time and (iii) Term SOFR for an interest period of one month plus 1.00%; provided that if Term SOFR or the Base Rate is less than 0.00% such rate shall be deemed to be 0.00% for purposes of the Credit Agreement. The “Applicable Margin” for the Extended Term Loan B-1 is 2.00% in the case of Term SOFR loans, and 1.00% in the case of Base Rate loans. The Extended Term Loan B-1 requires quarterly principal payments beginning on December 31, 2024 of 0.25% of the aggregate principal amount of the Extended Term Loan B-1 outstanding on the Fourth Amendment Effective Date, with the balance due on May 9, 2031.

Borrowings under the Company's senior secured credit facilities are guaranteed and secured by substantially all of DaVita Inc.'s and certain of the Company’s domestic subsidiaries' assets and rank senior to all unsecured indebtedness. Borrowings under the Term Loan A-1, Term Loan B-1, Extended Term Loan B-1 and revolving line of credit rank equal in priority for that security and related subsidiary guarantees. The Credit Agreement contains certain customary affirmative and negative covenants such as various restrictions or limitations on permitted amounts of investments (including acquisitions), share repurchases, payment of dividends, and redemptions and incurrence of other indebtedness. Many of these restrictions and limitations will not apply as long as the Company’s leverage ratio calculated in accordance with the Credit Agreement is below 4.00:1.00. In addition, the Credit Agreement requires compliance with a maximum leverage ratio covenant, tested quarterly, of 5.00:1.00 through June 30, 2026 and 4.50:1.00 thereafter (subject to an increase to 5.00:1.00 during the four fiscal quarters following a material acquisition).

In addition to the prepayment of Term Loan B-1, as described above, during the first six months of 2024, the Company made regularly scheduled principal payments under its senior secured credit facilities totaling $15,625 on Term Loan A-1 and $13,716 on Term Loan B-1.

As a result of the transaction described above, the Company recognized debt prepayment, extinguishment and modification costs of $9,732 in the second quarter of 2024 comprised partially of fees incurred for this transaction and partially of deferred financing costs and original issue discount written off for the portion of debt considered extinguished and reborrowed as a result of the Fourth Amendment. For the portion of the debt that was considered extinguished and reborrowed, the Company recognized constructive financing cash outflows and financing cash inflows on the statement of cash flows of $6,302 and $728,653 for the Extended Term Loan B-1, respectively, and constructive financing cash outflows of $722,351 for the prepayment of a portion of Term Loan B-1, even though no funds were actually paid or received. Another $13,282 of the debt considered extinguished related to the Extended Term Loan B-1 represented a non-cash financing activity.

On March 1, 2024, Change Healthcare (CHC), a subsidiary of UnitedHealth Group launched a temporary assistance

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

funding program (CHC Funding) to help bridge the gap in short-term cash flow needs for providers impacted by the disruption of CHC's services. Under the program, CHC provides funding to providers for amounts that would otherwise have been received (with certain limitations), but for the disruption in processing electronic claims as a result of the outage. Amounts provided under this program are subject to repayment within 45 business days from a future date to be mutually agreed to by CHC and the Company.

CHC has restored the majority of claims submission functionality and the Company has resumed submission of most of its commercial claims through CHC's platform, although the Company continues to experience payment collection delays. As of June 30, 2024, the remaining CHC Funding amount outstanding was $392,984.

The Company's 2019 interest rate cap agreements expired on June 30, 2024 and a portion of the Company's 2023 cap agreements became effective on or prior to June 30, 2024, as detailed in the table below. As of June 30, 2024, the effective portion of the Company's 2023 interest rate cap agreements have the economic effect of capping the Company's maximum exposure to SOFR variable interest rate changes on equivalent amounts of the Company's floating rate debt, including all of Term Loan B-1, Extended Term Loan B-1, and a portion of Term Loan A-1. The remaining $308,820 outstanding principal balance of Term Loan A-1 and $260,000 balance outstanding on the revolving line of credit are subject to SOFR-based interest rate volatility. These cap agreements are designated as cash flow hedges and, as a result, changes in their fair values are reported in other comprehensive income. The original premiums paid for the caps are amortized to debt expense on a straight-line basis over the term of each cap agreement starting from its effective date. These cap agreements do not contain credit risk-contingent features.

In the second quarter of 2024 the Company entered into several forward interest rate cap agreements, described below, that have the economic effect of capping the Company's exposure to SOFR variable interest rate changes on specific portions of the Company's floating rate debt (2024 cap agreements). These 2024 cap agreements are designated as cash flow hedges and, as a result, changes in their fair values will be reported in other comprehensive income. These 2024 cap agreements do not contain credit-risk contingent features and become effective and expire as described in the table below.

The following table summarizes the Company’s interest rate cap agreements outstanding as of June 30, 2024:


Year cap agreements executed	Notional amount		SOFR maximum rate	Approximate effective date	Notional reduction or contractual maturity date At December 31 unless noted
					2024(1)		2025		2026		2027
2019	$	3,500,000	2.00%	6/30/2020	$	3,500,000
2023	$	1,000,000	3.75%	6/30/2024	$	500,000	$	500,000
2023	$	1,000,000	4.00%(2)	6/30/2024	$	250,000	$	750,000
2023	$	1,000,000	4.75%(3)	6/30/2024	$	250,000	$	750,000
2023	$	500,000	5.00%(4)	6/30/2024					$	500,000
2023	$	250,000	4.50%	12/31/2024			$	250,000
2023	$	750,000	4.00%	12/31/2024