Item 16. Form 10-K Summary.

None.

DAVITA INC.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and which includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

During the last fiscal year, the Company conducted an evaluation, under the oversight of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s internal control over financial reporting. This evaluation was completed based on the criteria established in the report titled “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based upon our evaluation under the COSO framework, we have concluded that the Company’s internal control over financial reporting was effective as of December 31, 2019.

The Company’s independent registered public accounting firm, KPMG LLP, has issued an attestation report on the Company’s internal control over financial reporting, which report is included in this Annual Report.

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

DaVita Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of DaVita Inc. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, equity, and cash flow for each of the years in the three‑year period ended December 31, 2019, and the related notes and financial statement Schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 21, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Notes 1 and 14 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of the Financial Accounting Standards Board’s Accounting Standards Codification Topic 842 Leases.

As discussed in Notes 1 and 2 to the consolidated financial statements, the Company changed its method of accounting for revenue recognition as of January 1, 2018 due to the adoption of the Financial Accounting Standards Board’s Accounting Standards Codification Topic 606 Revenue from Contracts with Customers.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

U.S. dialysis revenue recognition

As discussed in Notes 1 and 2 to the consolidated financial statements, the Company recognized $10,531 million in U.S. dialysis patient service revenue for the year ended December 31, 2019. There are significant uncertainties associated with

F-2

estimating revenue, which generally take several years to resolve. As these estimates are refined over time, both positive and negative adjustments are recognized in the current period.

We identified the evaluation of the recognition of the transaction price the Company expects to collect as a result of satisfying its performance obligations related to U.S. dialysis revenue as a critical audit matter because it involves significant estimation requiring complex auditor judgment. The key assumptions and inputs used to estimate the transaction price relate to ongoing insurance coverage changes, differing interpretations of contract coverage, determination of applicable primary and secondary coverage, coordination of benefits, and varying patient characteristics impacting Medicare reimbursements. Changes to the key assumptions and inputs used in the methodology may have a significant effect on the Company’s determination of the estimate.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s U.S. dialysis revenue recognition process, including controls related to the methodology used to estimate the transaction price, and the key assumptions and inputs. We developed an independent estimate of the transaction price based on actual and expected cash collections. We evaluated the Company’s key assumptions and inputs to estimate the transaction price the Company expects to collect as a result of satisfying its performance obligations by comparing key assumptions to historical collection experience, trends of refunds and payor payment adjustments, delays in the Company’s billing and collection process and regulatory compliance matters. Additionally, we compared revenue related to the transaction price estimates recognized in prior periods to actual cash collections related to performance obligations satisfied in prior periods to analyze the Company’s ability to estimate the transaction price the Company expects to collect as a result of satisfying its performance obligations.

Evaluation of the goodwill impairment analyses for the Germany kidney care reporting unit

As discussed in Note 10 to the consolidated financial statements, the Company performed annual and other impairment assessments for their reporting units throughout 2019. As a result of these assessments, the Company recognized goodwill impairment charges totaling $119 million related to its Germany kidney care reporting unit during 2019. The goodwill balance for the Germany kidney care reporting unit as of December 31, 2019 was $295 million.

We identified the evaluation of the goodwill impairment analyses for the Germany kidney care reporting unit as a critical audit matter. The evaluations included assessing the key assumptions used in estimating the fair value of the reporting unit, such as forecasted revenue growth, projected profit margins, discount rates, and revenue and clinical earnings before interest, taxes, depreciation, and amortization (EBITDA) multiples. Evaluation of these key assumptions involved a high degree of subjectivity and auditor judgment as changes to these assumptions could have a significant impact on the goodwill impairment charges recognized.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s goodwill impairment assessment process, including controls over the development of key assumptions as described above. We assessed the Company’s ability to forecast by comparing prior year actual results of the reporting unit to previously forecasted amounts for the reporting unit. We evaluated the Company’s forecasted revenue growth rates and projected profit margins for the reporting unit by comparing the projections to the Company’s underlying business strategies and operating plans for the reporting unit and other industry and market data. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

•	evaluating the revenue growth rates and projected profit margins for the reporting unit by comparing projected rates with comparable companies;

•	comparing the discount rates for the reporting unit to a discount rate range that was independently developed using publicly available market data for comparable companies;

•	evaluating the revenue and clinical EBITDA multiples utilized in the Company’s valuation of the reporting unit by comparing the multiples selected to a range of multiples from comparable transactions; and

•	assessing the valuation methodology used by the Company to estimate the fair value of the reporting unit.

Evaluation of legal proceedings and regulatory matters

As discussed in Notes 1 and 16 to the consolidated financial statements, the Company operates in a highly regulated industry and is a party to various lawsuits, claims, qui tam suits, governmental investigations and audits (including investigations 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.

We identified the evaluation of the recorded amounts or related disclosures for these legal proceedings and regulatory matters as a critical audit matter. A high degree of auditor judgment was required due to the nature of the estimates and assumptions that are part of the Company’s process. Such estimates and assumptions primarily relate to the probability and corresponding estimate of the monetary loss in the event of an unfavorable outcome for the Company.

F-3

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s legal proceedings and regulatory matters process, including controls over the development of significant judgments used to estimate, record, and disclose the Company’s exposure related to legal proceedings and regulatory matters. We tested existing legal proceedings and regulatory matters by 1) reading certain written correspondence received from outside parties, 2) reading certain written responses provided to outside parties, and 3) obtaining invoice and cash payment documentation for a sample of transactions. We read letters received directly from the Company’s external and internal legal counsel that described certain legal proceedings and regulatory matters. We also evaluated the Company’s ability to estimate its monetary losses relating to legal proceedings and regulatory matters by comparing historically recorded liabilities for certain prior legal proceedings and regulatory matters to actual monetary losses incurred upon resolution of such prior legal proceedings and regulatory matters. We involved forensic professionals with specialized skills and knowledge who assisted in evaluating the Company’s compliance hotline records. Additionally, we assessed the population of legal proceedings and regulatory matters, as well as the sufficiency of the recorded amounts or related disclosures 1) by making inquiries of certain key executives and directors and 2) based on information received through procedures described above and through publicly available information about the Company, its competitors, and the industry.

/s/ KPMG LLP

We have served as the Company’s auditor since 2000.

Seattle, Washington

February 21, 2020

F-4

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

DaVita Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited DaVita Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, equity, and cash flow for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement Schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 21, 2020 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Seattle, Washington

February 21, 2020

F-5

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

	Year ended December 31,
	2019				2018				2017
Dialysis patient service revenues	$	10,918,421			$	10,709,981			$	10,093,670
Provision for uncollectible accounts	(21,715		)		(49,587		)		(485,364		)
Net dialysis patient service revenues	10,896,706				10,660,394				9,608,306
Other revenues	491,773				744,457				1,268,328
Total revenues	11,388,479				11,404,851				10,876,634
Operating expenses and charges:
Patient care costs	7,914,485				8,195,513				7,640,005
General and administrative	1,103,312				1,135,454				1,064,026
Depreciation and amortization	615,152				591,035				559,911
Provision for uncollectible accounts	—				(7,300		)		(7,033		)
Equity investment (income) loss	(12,679		)		4,484				8,640
Investment and other asset impairments	—				17,338				295,234
Goodwill impairment charges	124,892				3,106				36,196
Gain on changes in ownership interest, net	—				(60,603		)		(6,273		)
Gain on settlement, net	—				—				(526,827		)
Total operating expenses and charges	9,745,162				9,879,027				9,063,879
Operating income	1,643,317				1,525,824				1,812,755
Debt expense	(443,824		)		(487,435		)		(430,634		)
Debt prepayment, refinancing and redemption charges	(33,402		)		—				—
Other income, net	29,348				10,089				17,665
Income from continuing operations before income taxes	1,195,439				1,048,478				1,399,786
Income tax expense	279,628				258,400				323,859
Net income from continuing operations	915,811				790,078				1,075,927
Net income (loss) from discontinuing operations, net of tax	105,483				(457,038		)		(245,372		)
Net income	1,021,294				333,040				830,555
Less: Net income attributable to noncontrolling interests	(210,313		)		(173,646		)		(166,937		)
Net income attributable to DaVita Inc.	$	810,981			$	159,394			$	663,618
Earnings per share attributable to DaVita Inc.:
Basic net income from continuing operations per share	$	4.61			$	3.66			$	4.78
Basic net income per share	$	5.29			$	0.93			$	3.52
Diluted net income from continuing operations per share	$	4.60			$	3.62			$	4.71
Diluted net income per share	$	5.27			$	0.92			$	3.47
Weighted average shares for earnings per share:
Basic	153,180,908				170,785,999				188,625,559
Diluted	153,812,064				172,364,581				191,348,533
Amounts attributable to DaVita Inc.:
Net income from continuing operations	$	706,832			$	624,321			$	901,277
Net income (loss) from discontinued operations	104,149				(464,927		)		(237,659		)
Net income attributable to DaVita Inc.	$	810,981			$	159,394			$	663,618

See notes to consolidated financial statements.

F-6

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

	Year ended December 31,
	2019				2018				2017
Net income	$	1,021,294			$	333,040			$	830,555
Other comprehensive (loss) income:
Unrealized gains (losses) on interest rate cap agreements, net:
Unrealized gains (losses)	1,151				(133		)		(5,437		)
Reclassification into net income	6,377				6,286				5,058
Unrealized losses on investments, net:
Unrealized losses	—				—				3,705
Reclassification into net income	—				—				(220		)
Unrealized (losses) gains on foreign currency translation:
Foreign currency translation adjustments	(20,102		)		(45,944		)		99,770
Other comprehensive (loss) income	(12,574		)		(39,791		)		102,876
Total comprehensive income	1,008,720				293,249				933,431
Less: Comprehensive income attributable to noncontrolling interests	(210,313		)		(173,646		)		(166,935		)
Comprehensive income attributable to DaVita Inc.	$	798,407			$	119,603			$	766,496

See notes to consolidated financial statements.

F-7

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

	December 31, 2019				December 31, 2018
ASSETS
Cash and cash equivalents	$	1,102,372			$	323,038
Restricted cash and equivalents	106,346				92,382
Short-term investments	11,572				2,935
Accounts receivable, net	1,795,598				1,858,608
Inventories	97,949				107,381
Other receivables	489,695				469,796
Prepaid and other current assets	66,866				111,840
Income tax receivable	19,772				68,614
Current assets held for sale, net	—				5,389,565
Total current assets	3,690,170				8,424,159
Property and equipment, net	3,473,384				3,393,669
Operating lease right-of-use assets	2,830,047				—
Intangible assets, net	135,684				118,846
Equity method and other investments	241,983				224,611
Long-term investments	36,519				35,424
Other long-term assets	115,972				71,583
Goodwill	6,787,635				6,841,960
	$	17,311,394			$	19,110,252
LIABILITIES AND EQUITY
Accounts payable	$	403,840			$	463,270
Other liabilities	756,174				595,850
Accrued compensation and benefits	695,052				658,913
Current portion of operating lease liabilities	343,912				—
Current portion of long-term debt	130,708				1,929,369
Income tax payable	42,412				—
Current liabilities held for sale	—				1,243,759
Total current liabilities	2,372,098				4,891,161
Long-term operating lease liabilities	2,723,800				—
Long-term debt	7,977,526				8,172,847
Other long-term liabilities	160,809				450,669
Deferred income taxes	577,543				562,536
Total liabilities	13,811,776				14,077,213
Commitments and contingencies
Noncontrolling interests subject to put provisions	1,180,376				1,124,641
Equity:
Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued)	—				—
Common stock ($0.001 par value, 450,000,000 shares authorized; 125,842,853 and 166,387,307 shares issued and outstanding at December 31, 2019 and 2018, respectively)	126				166
Additional paid-in capital	749,043				995,006
Retained earnings	1,431,738				2,743,194
Accumulated other comprehensive loss	(47,498		)		(34,924		)
Total DaVita Inc. shareholders' equity	2,133,409				3,703,442
Noncontrolling interests not subject to put provisions	185,833				204,956
Total equity	2,319,242				3,908,398
	$	17,311,394			$	19,110,252

See notes to consolidated financial statements.

F-8

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(dollars in thousands)

	Year ended December 31,
	2019				2018				2017
Cash flows from operating activities:
Net income	$	1,021,294			$	333,040			$	830,555
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	615,152				591,035				777,485
Impairment charges	124,892				61,981				981,589
Valuation adjustment on disposal group	—				316,840				—
Debt prepayment, refinancing and redemption charges	33,402				—				—
Stock-based compensation expense	67,850				73,061				35,092
Deferred income taxes	41,723				273,660				(395,217		)
Equity investment income, net	8,582				26,449				28,925
Loss (gain) on sales of business interests, net	23,022				(85,699		)		(23,402		)
Other non-cash charges, net	49,579				82,374				66,920
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	(79,957		)		(81,176		)		(156,305		)
Inventories	10,158				73,505				(18,625		)
Other receivables and other current assets	2,790				236,995				(111,432		)
Other long-term assets	6,965				3,497				(11,945		)
Accounts payable	(84,539		)		(35,959		)		26,876
Accrued compensation and benefits	(14,697		)		84,165				(78,239		)
Other current liabilities	181,940				(157,462		)		1,908
Income taxes	95,645				(23,635		)		(52,176		)
Other long-term liabilities	(31,446		)		(1,031		)		11,157
Net cash provided by operating activities	2,072,355				1,771,640				1,913,166
Cash flows from investing activities:
Additions of property and equipment	(766,546		)		(987,138		)		(905,250		)
Acquisitions	(100,861		)		(183,156		)		(803,879		)
Proceeds from asset and business sales	3,877,392				150,205				92,336
Purchase of other debt and equity investments	(5,458		)		(8,448		)		(13,117		)
Purchase of investments held-to-maturity	(101,462		)		(5,963		)		(228,990		)
Proceeds from sale of other debt and equity investments	3,676				9,526				6,408
Proceeds from investments held-to-maturity	95,376				34,862				492,470
Purchase of equity investments	(9,366		)		(19,177		)		(4,816		)
Distributions received on equity investments	2,589				3,646				106
Net cash provided by (used in) investing activities	2,995,340				(1,005,643		)		(1,364,732		)
Cash flows from financing activities:
Borrowings	38,525,850				59,934,750				50,991,960
Payments on long-term debt and other financing costs	(40,606,041		)		(59,239,973		)		(50,837,112		)
Purchase of treasury stock	(2,383,816		)		(1,161,511		)		(802,949		)
Distributions to noncontrolling interests	(233,123		)		(196,441		)		(211,467		)
Stock award exercises and other share issuances, net	11,382				13,577				21,252
Contributions from noncontrolling interests	57,317				52,311				74,552
Proceeds from sales of additional noncontrolling interest	—				15				2,864
Purchases of noncontrolling interests	(68,019		)		(28,082		)		(5,357		)
Net cash used in financing activities	(4,696,450		)		(625,354		)		(766,257		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,760		)		(3,350		)		254
Net increase (decrease) in cash, cash equivalents and restricted cash	369,485				137,293				(217,569		)
Less: Net (decrease) increase in cash, cash equivalents and restricted cash from discontinued operations	(423,813		)		240,793				(53,026		)
Net increase (decrease) in cash, cash equivalents and restricted cash from continuing operations	793,298				(103,500		)		(164,543		)
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year	415,420				518,920				683,463
Cash, cash equivalents and restricted cash of continuing operations at end of the year	$	1,208,718			$	415,420			$	518,920

See notes to consolidated financial statements.

F-9

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

(dollars and shares in thousands)

	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 income (loss)
		Shares			Amount						Shares			Amount					Total
Balance at December 31, 2016	$	973,258			194,554			$	195			$	1,027,182			$	3,710,313			—			$	—			$	(89,643	)		$	4,648,047			$	201,694
Comprehensive income:
Net income	103,641															663,618															663,618				63,296
Other comprehensive income																											102,878				102,878				(2		)
Stock purchase shares issued					360							22,131																			22,131
Stock unit shares issued					117							(101		)																	(101		)
Stock-settled SAR shares issued					398							—																			—
Stock-settled stock-based compensation expense												34,981																			34,981
Changes in noncontrolling interest from:
Distributions	(128,853		)																																(82,614		)
Contributions	52,911																																		21,641
Acquisitions and divestitures	43,799											(823		)																	(823		)		(5,770		)
Partial purchases	(397		)									(2,752		)																	(2,752		)		(2,208		)
Fair value remeasurements	(32,999		)									32,999																			32,999
Purchase of treasury stock																				(12,967	)		(810,949		)						(810,949		)
Retirement of treasury stock					(12,967	)		(13		)		(70,718		)		(740,218		)		12,967			810,949
Balance at December 31, 2017	$	1,011,360			182,462			$	182			$	1,042,899			$	3,633,713			—			$	—			$	13,235			$	4,690,029			$	196,037
Cumulative effect of change in accounting principle																8,368											(8,368		)		—
Comprehensive income:
Net income	105,531															159,394															159,394				68,115
Other comprehensive income																											(39,791		)		(39,791		)
Stock purchase shares issued					398							17,398																			17,398
Stock unit shares issued					158							(448		)																	(448		)
Stock-settled SAR shares issued					213			1				(4,887		)																	(4,886		)
Stock-settled stock-based compensation expense												73,081																			73,081
Changes in noncontrolling interest from:
Distributions	(119,173		)																																(77,268		)
Contributions	32,918																																		19,393
Acquisitions and divestitures	79,078											3,546																			3,546				318
Partial purchases	(8,546		)									(17,897		)																	(17,897		)		(1,639		)
Fair value remeasurements	23,473											(23,473		)																	(23,473		)
Purchase of treasury stock																				(16,844	)		(1,153,511		)						(1,153,511		)
Retirement of treasury stock					(16,844	)		(17		)		(95,213		)		(1,058,281		)		16,844			1,153,511								—
Balance at December 31, 2018	$	1,124,641			166,387			$	166			$	995,006			$	2,743,194			—			$	—			$	(34,924	)		$	3,703,442			$	204,956

F-10

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY - continued

(dollars and shares in thousands)

	Non-controlling interests subject to put provisions				DaVita Inc. Shareholders' Equity																														Non-controlling interests not subject to put provisions
								Additional paid-in capital				Retained earnings											Accumulated other comprehensive income (loss)
	Common stock									Treasury stock
	Shares			Amount						Shares			Amount					Total
Cumulative effect of change in accounting principle	(38		)													39,876															39,876				(6		)
Comprehensive income:
Net income	143,413															810,981															810,981				66,900
Other comprehensive income																											(12,574		)		(12,574		)
Stock purchase shares issued					315			1				16,569																			16,570
Stock unit shares issued					160							(3,246		)																	(3,246		)
Stock-settled SAR shares issued					1							(44		)																	(44		)
Stock-settled stock-based compensation expense												67,549																			67,549
Changes in noncontrolling interest from:
Distributions	(155,011		)																																(78,112		)
Contributions	35,572																																		21,745
Acquisitions and divestitures	(6,332		)																																(10,170		)
Partial purchases	(11,394		)									(37,145		)																	(37,145		)		(19,480		)
Fair value remeasurements	49,525											(49,525		)																	(49,525		)
Purchase of treasury stock																				(41,020	)		(2,402,475		)						(2,402,475		)
Retirement of treasury stock					(41,020	)		(41		)		(240,121		)		(2,162,313		)		41,020			2,402,475								—
Balance at December 31, 2019	$	1,180,376			125,843			$	126			$	749,043			$	1,431,738			—			$	—			$	(47,498	)		$	2,133,409			$	185,833

See notes to consolidated financial statements.

F-11

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

1**. Organization and summary of significant accounting policies**

Organization

The Company's operations are comprised of its dialysis and related lab services to patients in the United States (its U.S. dialysis business), its ancillary services and strategic initiatives including its international operations (collectively, its ancillary services), and its corporate administrative support.

The Company’s largest line of business is its U.S. dialysis business, which operates kidney dialysis centers in the U.S. for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD). As of December 31, 2019, the Company operated or provided administrative services through a network of 2,753 U.S. outpatient dialysis centers in 46 states and the District of Columbia, serving a total of approximately 206,900 patients. In addition, as of December 31, 2019, the Company operated or provided administrative services to a total of 259 outpatient dialysis centers serving approximately 28,700 patients located in ten countries outside of the U.S.

On June 19, 2019, the Company completed the sale of its DaVita Medical Group (DMG) business to Collaborative Care Holdings, LLC (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 in these consolidated financial statements. For financial information about the DMG business, see Note 22.

The Company’s U.S. dialysis business qualifies as a separately reportable segment and the Company’s ancillary services, including its international operations, have been combined and disclosed in the other segments category.

Basis of presentation

These consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). The financial statements include DaVita Inc. and its subsidiaries, partnerships and other entities in which it maintains a majority voting or other controlling financial interest (collectively, the Company). All significant intercompany transactions and balances have been eliminated. Equity investments in investees over which the Company only has significant influence are recorded on the equity method, while investments in other equity securities are recorded at fair value or on the adjusted cost method, as applicable. For the Company’s international subsidiaries, local currencies are considered their functional currencies. Translation adjustments result from translating the financial statements of the Company’s international subsidiaries from their functional currencies into the Company’s reporting currency (the U.S. dollar, or USD). Prior year balances and amounts have been reclassified to conform to the current year presentation.

The Company has evaluated subsequent events through the date these consolidated financial statements were issued and has included all necessary adjustments and disclosures.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, contingencies and noncontrolling interests subject to put provisions. Although actual results in subsequent periods will differ from these estimates, such estimates are developed based on the best information available to management and management’s best judgments at the time. All significant assumptions and estimates underlying the amounts reported in the financial statements and accompanying notes are regularly reviewed and updated when necessary. Changes in estimates are reflected in the financial statements based upon on-going actual experience trends or subsequent settlements and realizations depending on the nature and predictability of the estimates and contingencies. Interim changes in estimates related to annual operating costs are applied prospectively within annual periods.

The most significant assumptions and estimates underlying these consolidated financial statements and accompanying notes involve revenue recognition and accounts receivable, contingencies, impairments of goodwill and investments, accounting for income taxes and certain fair value estimates. Specific estimating risks and contingencies are further addressed within these notes to the consolidated financial statements.

Revenues

On January 1, 2018, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 606 Revenue from Contracts with Customers (Topic 606) using the cumulative effect method for those

F-12

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

contracts that were not substantially completed as of January 1, 2018. Results for reporting periods beginning on and after January 1, 2018 are presented under Topic 606, while prior period amounts continue to be presented in accordance with the Company's historical accounting under Revenue Recognition (Topic 605).

The adoption of this new standard primarily changed the Company’s presentation of revenues, provision for uncollectible accounts and allowance for doubtful accounts. Topic 606 requires revenue to be recognized based on the Company’s estimate of the transaction price the Company expects to collect as a result of satisfying its performance obligations. Accordingly, for performance obligations satisfied after the adoption of Topic 606, the Company no longer separately presents a provision for uncollectible accounts on the consolidated income statement and no longer presents the related allowance for doubtful accounts on the consolidated balance sheet. However, as a result of the Company’s election to apply Topic 606 only to contracts not substantially completed as of January 1, 2018, the Company continues to maintain an allowance for doubtful accounts related to performance obligations satisfied prior to the adoption of Topic 606. Net collections or write-offs of accounts receivable generated prior to January 1, 2018, beyond amounts previously reserved thereon, are presented in the provision for uncollectible accounts on the consolidated income statement in accordance with Topic 605.

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.

Revenues associated with Medicare and Medicaid programs are estimated based on: (a) the payment rates that are established by statute or regulation for the portion of payment rates paid by the government payor (e.g., 80% for Medicare patients) and (b) for the portion not paid by the primary government payor, estimates of the amounts ultimately collectible from other government programs providing secondary coverage (e.g., Medicaid secondary coverage), the patient’s commercial health plan secondary coverage, or the patient.

Under Medicare’s bundled payment rate system, services covered by Medicare are subject to estimating risk, whereby reimbursements from Medicare can vary significantly depending upon certain patient characteristics and other variable factors. Even with the bundled payment rate system, Medicare payments for bad debt claims as established by cost reports require evidence of collection efforts. As a result, billing and collection of Medicare bad debt claims can be delayed significantly and final payment is subject to audit. The Company’s revenue recognition is estimated based on its judgment regarding its ability to collect, which depends upon its ability to effectively capture, document and bill for Medicare’s base payment rate as well as these other variable factors.

Medicaid payments, when Medicaid coverage is secondary, can also be difficult to estimate. For many states, Medicaid payment terms and methods differ from Medicare, and may prevent accurate estimation of individual payment amounts prior to billing.

Revenues associated with commercial health plans are estimated based on contractual terms for the patients under healthcare plans with which the Company has formal agreements, non-contracted health plan coverage terms if known, estimated secondary collections, historical collection experience, historical trends of refunds and payor payment adjustments (retractions), inefficiencies in the Company’s billing and collection processes that can result in denied claims for payments, delays in collections due to payor payment inefficiencies, and regulatory compliance matters.

Commercial revenue recognition also involves significant estimating risks. With many larger commercial insurers, the Company has several different contracts and payment arrangements, and these contracts often include only a subset of the Company’s centers. In certain circumstances, it may not be possible to determine which contract, if any, should be applied prior to billing. In addition, for services provided by non-contracted centers, final collection may require specific negotiation of a payment amount, typically at a significant discount from the Company’s usual and customary rates.

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 strategic initiatives, and administrative and management support services to certain non-dialysis joint ventures in which the Company owns a noncontrolling interest. Revenues associated with dialysis management services, disease management services, clinical research programs, physician services, ESRD seamless care

F-13

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

organizations, and comprehensive care are estimated in the period services are provided. Revenues associated with pharmacy services were estimated as prescriptions were filled and shipped to patients. Revenues associated with direct primary care were estimated over the membership period.

Other income

Other income includes interest income on cash and cash equivalents and short- and long-term investments, realized and unrealized gains and losses recognized on investments, and foreign currency transaction gains and losses.

Cash and cash equivalents

Cash equivalents are short-term highly liquid investments with maturities of three months or less at date of purchase.

Restricted cash and equivalents

Restricted cash and cash equivalents are primarily held in trust to satisfy insurer and state regulatory requirements related to the wholly-owned captive insurance companies that bear professional and general liability and workers' compensation risks for the Company.

Investments in debt and equity securities

The Company classifies certain debt securities as held-to-maturity and records them at amortized cost based on the Company’s intentions and strategies concerning those investments. Equity securities that have readily determinable fair values or redemption values are classified as short-term or long-term investments and recorded at estimated fair value with changes in fair value recognized in current earnings.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and consist principally of pharmaceuticals and dialysis-related supplies. Rebates related to inventory purchases are recorded when earned and are based on certain qualification requirements which are dependent on a variety of factors including future pricing levels from the manufacturer and related data submission.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation and amortization and is further reduced by any impairments. Maintenance and repairs are charged to expense as incurred. Depreciation and amortization expenses are computed using the straight-line method over the useful lives of the assets estimated as follows: buildings, 25 years to 40 years; leasehold improvements, the shorter of ten years or the expected lease term; and equipment and information systems, principally three years to 15 years. Disposition gains and losses are included in current operating expenses. Property and equipment assets are reviewed for possible impairment whenever significant events or changes in circumstances indicate that an impairment may have occurred.

Leases

The Company leases substantially all of its U.S. dialysis facilities. The Company categorizes leases with contractual terms longer than twelve months as either operating or finance leases. Finance leases are generally those leases that allow the Company to substantially utilize or pay for the entire asset over its estimated life. All other leases are categorized as operating leases.

Assets acquired under finance leases are recorded on the balance sheet within property and equipment, net and liabilities for finance lease obligations are recorded within long-term debt. Finance lease assets are amortized to depreciation expense on a straight-line basis over the shorter of their estimated useful lives or the lease term.

Rights to use assets under operating leases are recorded on the balance sheet as operating lease right-of-use assets and liabilities for operating lease obligations are recorded as operating lease liabilities. Reductions in the carrying amount of operating lease right-of-use assets are recorded to rent expense over the lease term.

The majority of the Company’s facilities are leased under non-cancellable operating leases ranging in terms from five years to 15 years and which contain renewal options of five years to ten years at the fair rental value at the time of renewal. The

F-14

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Company has elected the practical expedient to not separate lease components from non-lease components for its financing and operating leases.

Amortizable intangibles

Amortizable intangible assets and liabilities include noncompetition agreements and hospital acute services contracts, each of which have finite useful lives. Amortization expense is computed using the straight-line method over the useful lives of the assets estimated as follows: non-competition agreements over three years to ten years, and hospital acute service contracts over the contract period. Amortizable intangible assets are reviewed for possible impairment whenever significant events or changes in circumstances indicate that an impairment may have occurred.

Indefinite-lived intangibles

Indefinite-lived intangible assets include international licenses and accreditations that allow the Company to be reimbursed for providing dialysis services to patients, each of which has an indefinite useful life. Indefinite-lived intangibles are not amortized, but are assessed for impairment at least annually and whenever significant events or changes in circumstances indicate that an impairment may have occurred.

Equity method and other investments

Equity investments that do not have readily determinable fair values are carried on the equity method if the Company maintains significant influence over the investee or on the adjusted cost method if it does not. The adjusted cost method represents the Company's cost for an investment, net of any other-than-temporary impairment, or a subsequent observation of the investment's fair value. The Company classifies its equity and adjusted cost method investments as “Equity method and other investments” on its balance sheet. See Note 9 for further details, including recent changes to the Company's accounting for these investments.

Equity method and other investments are assessed for other-than-temporary impairment when significant events or changes in circumstances indicate that an other-than-temporary impairment may have occurred. An other-than-temporary impairment charge is recorded when the fair value of an investment has fallen below its carrying amount and the shortfall is expected to be indefinitely or permanently unrecoverable.

Goodwill

Goodwill represents the difference between the fair value of businesses acquired and the fair value of the identifiable tangible and intangible net assets acquired. Goodwill is not amortized, but is assessed by individual reporting unit for impairment as circumstances warrant and at least annually. An impairment charge is recognized when and to the extent a reporting unit's carrying amount is determined to exceed its fair value. The Company operates multiple reporting units. See Note 10 for further details.

Self-insurance

The Company predominantly self-insures its professional and general liability and workers' compensation risks through its wholly-owned captive insurance companies, with excess or reinsurance coverage for additional risk. The Company is also predominantly self-insured with respect to employee medical and other health benefits. The Company records insurance liabilities for the professional and general liability, workers’ compensation, and employee health benefit risks that it retains and estimates its liability for those risks using third party actuarial calculations that are based upon historical claims experience and expectations for future claims.

Income taxes

Federal and state income taxes are computed at currently enacted tax rates less tax credits using the asset and liability method. Deferred taxes are adjusted both for items that do not currently have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, changes in the recognition of tax positions and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

F-15

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

The Company uses a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the financial statements. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the financial statements.

Stock-based compensation

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 ultimate number of shares expected 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.

Interest rate cap agreements

The Company often carries a combination of current or forward interest rate caps on portions of its variable rate debt as a means of hedging its exposure to changes in LIBOR interest rates as part of its overall interest rate risk management strategy. These interest rate caps are not held for trading or speculative purposes and are designated as qualifying cash flow hedges. See Note 13 for further details.

Noncontrolling interests

Noncontrolling interests represent third-party equity ownership interests in entities which are consolidated by the Company for financial statement reporting purposes. As of December 31, 2019, third parties held noncontrolling equity interests in 672 consolidated legal entities.

Fair value estimates

The Company relies on fair value measurements and estimates for purposes that require the recording, reassessment, or adjustment of the carrying amounts of certain assets, liabilities, and noncontrolling interests subject to put provisions (redeemable equity interests classified as temporary equity). These purposes can include the accounting for business combination transactions; impairment assessments for goodwill, other intangible assets, or other long-lived assets; recurrent revaluation of investments in debt and equity securities, contingent earn-out obligations, interest rate cap agreements or other derivative instruments, and noncontrolling interests subject to put provisions; and the accounting for equity method and other investments and stock-based compensation, as applicable. The Company has also classified its assets, liabilities and temporary equity into the appropriate fair value hierarchy levels as defined by the FASB. See Note 24 for further details.

New accounting standards

New standards recently adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in Topic 842 revise lessee accounting for leases. Under the new guidance, lessees are required to recognize a lease liability and a right-of-use asset for substantially all leases with lease terms in excess of twelve months. The new lease guidance also simplifies the accounting for sale leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The Company adopted Topic 842 as of January 1, 2019 using a modified retrospective transition approach with a cumulative effect adjustment for leases existing at the adoption date. The Company elected to apply the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. Adoption of Topic 842 as of January 1, 2019 resulted in the recognition of operating right-of-use assets of $2,783,784, operating lease liabilities of $3,001,354 and a cumulative effect adjustment to retained earnings of $39,876, primarily related to deferred gains on prior sale leaseback transactions. Adoption of this new lease guidance did not materially impact the Company's consolidated net earnings and had no impact on cash flows. See Note 14 for further details.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this ASU better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments in this ASU were effective for the Company on January 1, 2019. Adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

F-16

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

New standards not yet 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 change the approach for recognizing credit losses on financial assets from the incurred loss methodology in current U.S. GAAP to a methodology that reflects current expected credit losses, which requires consideration of a broader range of reasonable and supportable information to inform those credit loss estimates. The current incurred loss model delays recognition of credit losses until it is probable that a loss has been incurred, while this ASU’s new current expected credit loss model requires estimation of credit losses expected over the life of the financial asset or group of similar financial assets. The amendments in this ASU are effective for the Company on January 1, 2020 and are to be applied on a modified retrospective approach. The Company has evaluated the impact of this standard on its consolidated financial statements, including accounting policies, processes, and systems, and does not expect the impact to be material.

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 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 are effective for the Company beginning on January 1, 2020 and its new requirements are to be applied on a prospective basis. Adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12*, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes*. ASU 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 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.

2**. Revenue recognition and accounts receivable**

The following table summarizes the Company's segment revenues by primary payor source:

	Year ended December 31, 2019
	U.S. dialysis				Other - Ancillary services				Consolidated
Patient service revenues:
Medicare and Medicare Advantage	$	6,129,697			$				$	6,129,697
Medicaid and Managed Medicaid	669,089								669,089
Other government	446,010				352,765				798,775
Commercial	3,286,089				144,256				3,430,345
Other revenues:
Medicare and Medicare Advantage					264,538				264,538
Medicaid and Managed Medicaid					606				606
Commercial					130,823				130,823
Other**(1)**	32,021				78,940				110,961
Eliminations of intersegment revenues	(132,325		)		(14,030		)		(146,355		)
Total	$	10,430,581			$	957,898			$	11,388,479

(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.

F-17

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

	Year ended December 31, 2018
	U.S. dialysis				Other - Ancillary services				Consolidated
Patient service revenues:
Medicare and Medicare Advantage	$	6,063,891			$				$	6,063,891
Medicaid and Managed Medicaid	628,766								628,766
Other government	446,999				335,594				782,593
Commercial	3,176,413				101,681				3,278,094
Other revenues:
Medicare and Medicare Advantage					492,812				492,812
Medicaid and Managed Medicaid					44,246				44,246
Commercial					90,890				90,890
Other**(1)**	19,880				130,865				150,745
Eliminations of intersegment revenues	(92,950		)		(34,236		)		(127,186		)
Total	$	10,242,999			$	1,161,852			$	11,404,851

(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.

	Year ended December 31, 2017**(1)**
	U.S. dialysis				Other - Ancillary services				Consolidated
Patient service revenues:
Medicare and Medicare Advantage	$	5,253,012			$				$	5,253,012
Medicaid and Managed Medicaid	606,827								606,827
Other government	362,567				259,651				622,218
Commercial	3,117,920				63,505				3,181,425
Other revenues:
Medicare and Medicare Advantage					902,289				902,289
Medicaid and Managed Medicaid					71,426				71,426
Commercial					116,503				116,503
Other**(2)**	19,739				182,974				202,713
Eliminations of intersegment revenues	(55,176		)		(24,603		)		(79,779		)
Total	$	9,304,889			$	1,571,745			$	10,876,634

(1)	As noted above, prior period amounts have not been adjusted under the cumulative effect method. In this table, the Company's U.S. dialysis revenues for the year ended December 31, 2017 has been presented net of the provision for uncollectible accounts of $485,364 to conform to the current period presentation.

(2)	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 prior to the adoption of Topic 606 was $8,328 and $52,924 as of December 31, 2019 and 2018, respectively.

As described in Note 1, there are significant risks 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 determining applicable primary and secondary coverage, changes in patient 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. As a result of these changes in estimates, additional revenue of $37,274 was recognized during the year ended December 31, 2019 associated with performance obligations satisfied prior to January 1, 2019 and additional revenue of $88,495 was recognized during the year ended December 31, 2018 associated with performance obligations satisfied in years prior to the adoption of Topic 606, which

F-18

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

included a benefit of $36,000 from electing to apply Topic 606 only to contracts not substantially completed as of January 1, 2018.

There is no single commercial payor that accounted for more than 10% of total consolidated accounts receivable or consolidated revenues at or for the years ended December 31, 2019 or 2018.

Net dialysis services accounts receivable and other receivables from Medicare, including Medicare-assigned plans, and Medicaid, including managed Medicaid plans, were approximately $1,038,248 and $1,080,561 as of December 31, 2019 and 2018, respectively. Approximately 18% of the Company’s net patient services accounts receivable balances as of both December 31, 2019 and 2018, were more than six months old. There were no significant balances over one year old at December 31, 2019. The Company's accounts receivable are principally due from Medicare and Medicaid programs and commercial insurance plans.

3**. Earnings per share**

Basic earnings per share is calculated by dividing net income attributable to the Company, adjusted for any change in noncontrolling interest redemption rights in excess of fair value, by the weighted average number of common shares outstanding, reduced for 2018 and 2017 by the weighted average shares held in escrow that under certain circumstances may have been returned to the Company. Weighted average common shares outstanding include restricted stock unit awards that are no longer subject to forfeiture because the recipients have satisfied either their 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 (under the treasury stock method) and, for 2018 and 2017, the weighted average contingently returnable shares held in escrow that were outstanding during the period.

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

F-19

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

	Year ended December 31,
	2019				2018				2017
Numerators:
Net income from continuing operations attributable to DaVita Inc.	$	706,832			$	624,321			$	901,277
Net income (loss) from discontinued operations attributable to DaVita Inc.	104,149				(464,927		)		(237,659		)
Net income attributable to DaVita Inc. for earnings per share calculation	$	810,981			$	159,394			$	663,618
Basic:
Weighted average shares outstanding during the period	153,181				171,886				190,820
Weighted average contingently returnable shares previously held in escrow for the DaVita HealthCare Partners merger	—				(1,100		)		(2,194		)
Weighted average shares for basic earnings per share calculation	153,181				170,786				188,626
Basic net income (loss) attributable to DaVita Inc. from:
Continuing operations per share	$	4.61			$	3.66			$	4.78
Discontinued operations per share	0.68				(2.73		)		(1.26		)
Basic net income per share attributable to DaVita Inc.	$	5.29			$	0.93			$	3.52
Diluted:
Weighted average shares outstanding during the period	153,181				171,886				190,820
Assumed incremental shares from stock plans	631				479				529
Weighted average shares for diluted earnings per share calculation	153,812				172,365				$	191,349
Diluted net income (loss) attributable to DaVita Inc. from:
Continuing operations per share	$	4.60			$	3.62			$	4.71
Discontinued operations per share	0.67				(2.70		)		(1.24		)
Diluted net income per share attributable to DaVita Inc.	$	5.27			$	0.92			$	3.47
Anti-dilutive stock-settled awards excluded from calculation(1)	5,936				5,295				4,350

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

4**. Restricted cash and equivalents**

The Company had restricted cash and cash equivalents of $106,346 and $92,382 at December 31, 2019 and 2018, respectively. Approximately $91,847 of the balance at December 31, 2019 represents restricted cash equivalents held in trust to satisfy insurer and state regulatory requirements related to the wholly-owned captive insurance companies that bear professional and general liability and workers' compensation risks for the Company. The remaining restricted cash and cash equivalents held at December 31, 2019 primarily represent cash pledged to third parties in connection with one of the Company's ancillary and strategic initiatives businesses.

5**. Short-term and long-term investments**

The Company adopted ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, and related ASU 2018-03 concerning certain technical corrections and improvements, effective January 1, 2018*.* Under ASU 2016-01 all changes in the fair values of equity securities with readily determinable fair values are to be recognized in current earnings. Adoption of these ASUs, in conjunction with ASU 2018-02, resulted in a cumulative effect of change in accounting principle effective January 1, 2018 which decreased accumulated other comprehensive income and increased retained earnings by $5,662 in after-tax unrealized gains accumulated

F-20

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

in other comprehensive income through December 31, 2017 from equity securities previously classified as available-for-sale investments.

From January 1, 2018, equity securities that have readily determinable fair values or redemption values are recorded at estimated fair value with changes in their value recognized in current earnings within "Other income, net". The Company classifies its debt securities as held-to-maturity and records them at amortized cost based on its intentions and strategy concerning those investments.

The Company classifies these debt and equity investments as "Short-term investments" or "Long-term investments" on its consolidated balance sheet, as applicable, based on the characteristics of the financial instrument or the Company's intentions or expectations for the investment.

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

	December 31, 2019												December 31, 2018
	Debt securities				Equity securities				Total				Debt securities				Equity securities				Total
Certificates of deposit and other time deposits	$	8,140			$	—			$	8,140			$	2,235			$	—			$	2,235
Investments in mutual funds and common stock	—				39,951				39,951				—				36,124				36,124
	$	8,140			$	39,951			$	48,091			$	2,235			$	36,124			$	38,359
Short-term investments	$	8,140			$	3,432			$	11,572			$	2,235			$	700			$	2,935
Long-term investments	—				36,519				36,519				—				35,424				35,424
	$	8,140			$	39,951			$	48,091			$	2,235			$	36,124			$	38,359

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 December 31, 2019 and 2018.

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 2019, the Company recognized pre-tax net gains of $4,383 in other income associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of $1,459 and a net increase in unrealized gains of $2,924. During 2018, the Company recognized pre-tax net losses of $1,208 in other income associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of $4,490 and a net decrease in unrealized gains of $5,698.

6**. Other receivables**

Other receivables were comprised of the following:

	December 31,
	2019				2018
Supplier rebates and non-trade receivables	$	351,650			$	334,156
Medicare bad debt claims	138,045				135,640
	$	489,695			$	469,796

F-21

7**. Property and equipment**

Property and equipment were comprised of the following:

	December 31,
	2019				2018
Land	$	36,480			$	37,384
Buildings	392,256				467,181
Leasehold improvements	3,545,224				3,164,943
Equipment and information systems, including internally developed software	2,880,645				2,586,564
New center and capital asset projects in progress	588,345				661,695
	7,442,950				6,917,767
Less accumulated depreciation	(3,969,566		)		(3,524,098		)
	$	3,473,384			$	3,393,669

Depreciation expense on property and equipment was $600,905, $574,799, and $544,129 for 2019, 2018 and 2017, respectively.

Interest on debt incurred during the development of new centers and other capital asset projects is capitalized as a component of the asset cost based on the respective in-process capital asset balances. Interest capitalized was $27,322, $25,978 and $19,176 for 2019, 2018 and 2017, respectively.

During 2018, the Company recognized asset impairment charges of $17,338 related to the restructuring of its pharmacy business.

8**. Intangibles**

Intangible assets other than goodwill were comprised of the following:

	December 31,
	2019				2018
Noncompetition agreements	$	103,510			$	107,726
Indefinite-lived licenses	90,209				59,885
Other	23,887				31,801
	217,606				199,412
Less accumulated amortization	(81,922		)		(80,566		)
	$	135,684			$	118,846

Amortization expense from amortizable intangible assets other than lease agreements was $14,247, $16,236, and $15,782 for 2019, 2018 and 2017, respectively. Lease agreement intangible assets and liabilities, previously recognized apart from lease right-of-use assets and liabilities prior to adoption of Topic 842, were amortized to rent expense in the amounts of $(296) and $(203) for December 31, 2018 and 2017, respectively.

For the years ended December 31, 2019, 2018 and 2017, the Company recognized no impairment charges on any intangible assets other than goodwill.

Amortizable intangible liabilities as of December 31, 2018 were comprised of lease agreements of $5,930, which were net of accumulated amortization of $4,362. With the adoption of Topic 842 on January 1, 2019, the Company no longer classifies these as intangible assets or intangible liabilities on its balance sheet. See Notes 1 and 14 for further discussion of our adoption of Topic 842.

F-22

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Scheduled amortization charges from amortizable intangible assets and liabilities as of December 31, 2019 were as follows:

	Noncompetition agreements				Other
2020	$	11,470			$	1,779
2021	9,703				1,335
2022	6,141				1,330
2023	3,118				1,294
2024	1,429				1,046
Thereafter	525				6,305
Total	$	32,386			$	13,089

9**. Equity method and other investments**

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.

As described in Note 5 to these consolidated financial statements, effective January 1, 2018, the Company adopted ASU 2016-01 and related ASU 2018-03 concerning recognition and measurement of financial assets and financial liabilities. In adopting ASU 2016-01, the Company elected to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable fair values that do not qualify for the equity method. Under this alternative, unless elected otherwise for a particular investment, the Company initially records such equity investments at cost but remeasures them to fair value through earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment.

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:

	December 31,
	2019				2018
APAC joint venture	$	116,924			$	129,173
Other equity method partnerships	114,611				83,052
Adjusted cost method investments	10,448				12,386
	$	241,983			$	224,611

During 2019, 2018 and 2017, the Company recognized equity investment income (loss) of $12,679, $(4,484) and $(8,640), respectively, from its equity method investments in nonconsolidated businesses.

The Company's largest equity method investment is its ownership interest in DaVita Care Pte. Ltd. (the APAC joint venture, or APAC JV). During the fourth quarter of 2019, one of the third party noncontrolling investors in the APAC JV made its final subscribed capital contribution to the joint venture and the other third party noncontrolling investor elected to exit the joint venture. As a result, the Company now holds a 75% voting and economic interest in the APAC JV and its other noncontrolling investor holds a 25% voting and economic interest in the joint venture. The governance structure and voting rights established for the APAC JV, which remain unchanged since its formation on August 1, 2016, provide that certain key decisions affecting the joint venture’s operations are not subject to the unilateral discretion of the Company but rather are shared with the joint venture's other noncontrolling investor. As a result, the Company does not consolidate the APAC JV.

Prior to the transactions described above and as of December 31, 2018, the Company held a 60% voting interest and a 73.3% economic interest in the APAC JV, while the other two noncontrolling investors collectively held a 40% voting interest and a 26.7% economic interest in the APAC JV.

During the year ended December 31, 2017, the Company recognized a non-cash other-than-temporary impairment charge of $280,066 on its investment in the APAC JV. This charge resulted from changes in then-current expectations for the

F-23

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

joint venture based on continuing market research and assessments by both the Company and the APAC JV concerning the size of the addressable market available to the joint venture at attractive risk-adjusted returns.

The Company's other equity method investments include 20 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%.

There were no significant impairments or other valuation adjustments on the Company's adjusted cost method investments during 2019 or 2018.

10**. Goodwill**

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

	U.S. dialysis				Other - Ancillary services				Consolidated
Balance at December 31, 2017	$	6,144,761			$	465,518			$	6,610,279
Acquisitions	130,574				147,774				278,348
Divestitures	(331		)		(15,166		)		(15,497		)
Impairment charges	—				(3,106		)		(3,106		)
Foreign currency and other adjustments	—				(28,064		)		(28,064		)
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
Goodwill	$	6,287,100			$	653,870			$	6,940,970
Accumulated impairment charges	—				(153,335		)		(153,335		)
	$	6,287,100			$	500,535			$	6,787,635

The Company elected to early adopt ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment effective January 1, 2017. The amendments in this ASU simplify the test for goodwill impairment by eliminating the second step in the assessment. All goodwill impairment tests performed since adoption of this ASU were performed under this new guidance. When performing quantitative goodwill impairment assessments, the Company estimates fair value using either appraisals developed with an independent third party valuation firm which consider both discounted cash flow estimates for the subject business and observed market multiples for similar businesses, or offer prices received for the subject business that would be acceptable to the Company.

Each of the Company’s operating segments described in Note 25 to these consolidated financial statements represents an individual reporting unit for goodwill impairment assessment purposes and each sovereign jurisdiction within the Company’s international operating segments is considered a separate reporting unit.

Within the U.S. dialysis operating segment, the Company considers each of its dialysis centers to constitute an individual business for which discrete financial information is available. However, since these dialysis centers have similar operating and economic characteristics, and the allocation of resources and significant investment decisions concerning these businesses are highly centralized and the benefits broadly distributed, the Company has aggregated these centers and deemed them to constitute a single reporting unit.

The Company has applied a similar aggregation to the vascular access service centers in its vascular access services reporting unit, to the physician practices in its physician services reporting units, and to the dialysis centers and other health operations within each international reporting unit. For the Company’s other operating segments, discrete business components below the operating segment level constitute individual reporting units.

During the three months ended March 31, 2019 and September 30, 2019, the Company recognized goodwill impairment charges of $41,037 and $78,439, respectively, in its Germany kidney care business. The first quarter of 2019 charge resulted primarily from a change in relevant discount rates, as well as a decline in current and expected future patient census and an

F-24

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

increase in first quarter of 2019 and expected future costs, principally due to wage increases expected to result from recently announced legislation. The incremental charge recognized during the third quarter of 2019 resulted from changes and developments in the Company's outlook for this business since its last assessment. These primarily concerned developments in the business in response to evolving market conditions and changes in the Company's expected timing and ability to mitigate them, which was based on results of in-depth operating and strategic reviews completed by the Company’s new Germany management team during the third quarter of 2019. During the year ended December 31, 2019, the Company also recognized a goodwill impairment charge of $5,416 in its German other health operations.

The impairment charges recognized in 2019 at the Company’s Germany kidney care business and its German other health operations include increases of $25,621 and $1,013, respectively, to the goodwill impairment charges, and reductions to deferred tax expense, related to deferred tax assets that the impairments themselves generated. The result was $124,892 in total goodwill impairment charges to operating income and reductions of $26,634 in tax expense, for a net $98,258 impact on net income.

Based on the most recent assessments, the Company determined that further changes in expected patient census, increases in operating costs, reductions in reimbursement rates, changes in actual or expected growth rates, or other significant adverse changes in expected future cash flows or valuation assumptions could result in goodwill impairment charges in the future for the following reporting units, which remain at risk of goodwill impairment as of December 31, 2019:

Reporting unit		Goodwill balance				Carrying amount coverage**(1)**			Sensitivities
Operating income**(2)**			Discount rate**(3)**
Germany kidney care		$	295,151			—	%		(1.3	)%		(11.0	)%
Brazil kidney care		$	88,551			4.4	%		(2.8	)%		(7.0	)%

(1)	Excess of estimated fair value of the reporting unit over its carrying amount as of the latest assessment date.

(2)	Potential impact on estimated fair value of a sustained, long-term reduction of 3% in operating income as of the latest assessment date.

(3)	Potential impact on estimated fair value of an increase in discount rates of 100 basis points as of the latest assessment date.

During the year ended December 31, 2018, the Company recognized a goodwill impairment charge of $3,106 at its German other health operations.

During the year ended December 31, 2017, the Company recognized goodwill impairment charge of $34,696 at its vascular access reporting unit. This charge resulted primarily from changes in future governmental reimbursement rates for this business and the Company’s then-evolving plans and expected ability to mitigate them. As of December 31, 2017, there was no goodwill remaining at the Company's vascular access reporting unit. The Company also recognized a goodwill impairment charge of $1,500 at one of its international reporting units during the year ended December 31, 2017.

Except as described above, none of the Company’s other reporting units were considered at risk of significant goodwill impairment as of December 31, 2019. Since the dates of the Company’s last annual goodwill impairment assessments, there have been certain developments, events, changes in operating performance and other changes in key circumstances that have affected the Company’s businesses. However, these did not cause 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 December 31, 2019.

11**. Other liabilities**

Other liabilities were comprised of the following:

	December 31,
	2019				2018
Payor refunds and retractions	$	377,044			$	302,244
Insurance and self-insurance accruals	58,941				58,569
Accrued interest	54,899				82,827
Accrued non-income tax liabilities	36,285				28,663
Other	229,005				123,547
	$	756,174			$	595,850

F-25

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

12**. Income taxes**

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Income before income taxes from continuing operations consisted of the following:

	Year ended December 31,
	2019				2018				2017
Domestic	$	1,307,299			$	1,083,578			$	1,725,822
International	(111,860		)		(35,100		)		(326,036		)
	$	1,195,439			$	1,048,478			$	1,399,786

Income tax expense for continuing operations consisted of the following:

	Year ended December 31,
	2019				2018				2017
Current:
Federal	$	208,339			$	140,064			$	330,191
State	58,026				32,990				47,228
International	15,545				7,557				3,422
Total current income tax	281,910				180,611				380,841
Deferred:
Federal	44,263				52,034				(98,760		)
State	(25,836		)		21,096				37,347
International	(20,709		)		4,659				4,431
Total deferred income tax	(2,282		)		77,789				(56,982		)
	$	279,628			$	258,400			$	323,859

Income taxes are allocated between continuing and discontinued operations as follows:

	Year ended December 31,
	2019				2018				2017
Continuing operations	$	279,628			$	258,400			$	323,859
Discontinued operations	40,689				99,768				(364,856		)
	$	320,317			$	358,168			$	(40,997	)

F-26

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

The reconciliation between the Company’s effective tax rate from continuing operations and the U.S. federal income tax rate is as follows:

	Year ended December 31,
	2019			2018			2017
Federal income tax rate	21.0	%		21.0	%		35.0	%
State income taxes, net of federal benefit	2.3			4.1			3.7
Change in International valuation allowance	1.3			0.9			0.4
Gain on APAC JV ownership changes	—			—			(0.2	)
Political advocacy costs	0.2			2.3			—
APAC investment impairment	—			—			6.4
Impact of 2017 Tax Act	—			(0.1	)		(20.5	)
Unrecognized tax benefits	2.4			0.2			0.1
Other	1.1			0.8			1.5
Impact of noncontrolling interests primarily attributable to non-tax paying entities	(4.9	)		(4.6	)		(3.3	)
Effective tax rate	23.4	%		24.6	%		23.1	%

On December 22, 2017, the President signed into law tax legislation known as the Tax Cuts and Jobs Act (2017 Tax Act). Consistent with Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 118, the Company completed its analysis of certain aspects of the 2017 Tax Act in 2017 and recorded provisional amounts for those items for which the accounting was not complete as of December 31, 2017. The Company completed its analysis of these provisional items in 2018 and recorded immaterial adjustments to the original estimates.

Deferred tax assets and liabilities arising from temporary differences for continuing operations were as follows:

	December 31,
	2019				2018
Receivables	$	19,095			$	19,327
Accrued liabilities	64,458				106,506
Operating lease liabilities	580,110				—
Net operating loss carryforwards	139,690				117,511
Other	55,108				36,712
Deferred tax assets	858,461				280,056
Valuation allowance	(91,925		)		(70,474		)
Net deferred tax assets	766,536				209,582
Intangible assets	(563,914		)		(555,822		)
Property and equipment	(162,628		)		(118,008		)
Operating lease assets	(527,056		)		—
Investments in partnerships	(64,960		)		(67,354		)
Other	(25,521		)		(30,934		)
Deferred tax liabilities	(1,344,079		)		(772,118		)
Net deferred tax liabilities	$	(577,543	)		$	(562,536	)

At December 31, 2019, the Company had federal net operating loss carryforwards of approximately $111,322 that expire through 2036, although a substantial amount expire by 2028. The Company also had state net operating loss carryforwards of $434,030, some of which have an indefinite life, although a substantial amount expire by 2039 and international net operating loss carryforwards of $224,197, some of which will begin to expire in 2021 though the majority have an indefinite life. We have a state capital loss carryover of $188,823 that expires in 2024. The utilization of a portion of these losses may be limited in future years based on the profitability of certain entities. A valuation allowance is recorded to account for the unrealizable balances in the table above. The net increase of $21,451 in the valuation allowance is primarily due to newly created net operating loss carryforwards in state and foreign jurisdictions that the Company does not anticipate being able to utilize.

F-27

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

The Company's foreign earnings continue to be indefinitely reinvested as of December 31, 2019. As a result of the passage of the 2017 Tax Act, the Company does not expect such earnings to be taxable if remitted.

Unrecognized tax benefits

A reconciliation of the beginning and ending liability for unrecognized tax benefits that do not meet the more-likely-than-not threshold is as follows:

	Year ended December 31,
	2019				2018
Beginning balance	$	40,382			$	32,776
Additions for tax positions related to current year	3,378				6,111
Additions for tax positions related to prior years	24,722				4,134
Reductions related to lapse of applicable statute	(268		)		(338		)
Reductions related to settlements with taxing authorities	—				(2,301		)
Ending balance	$	68,214			$	40,382

As of December 31, 2019, the Company’s total liability for unrecognized tax benefits relating to tax positions that do not meet the more-likely-than-not threshold is $68,214, of which $63,968 would impact the Company’s effective tax rate if recognized. This balance represents an increase of $27,832 from the December 31, 2018 balance of $40,382, primarily due to additions for tax positions related to prior years.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2019 and 2018, the Company had approximately $14,428 and $9,019, respectively, accrued for interest and penalties related to unrecognized tax benefits, net of federal tax benefit.

The Company and its subsidiaries file U.S. federal and state income tax returns and various foreign income tax returns. The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2014 and 2009, respectively. In addition to being under audit in various state and local tax jurisdictions, the Company’s federal tax returns are under audit by the Internal Revenue Service for the years 2014-2017.

F-28

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

13**. Long-term debt**

Long-term debt was comprised of the following:

	December 31,										As of December 31, 2019
	2019				2018				Maturity date		Interest rate			Estimated fair value**(5)**
Senior Secured Credit Facilities(1):
New Term Loan A	$	1,739,063			$	—			8/12/2024		LIBOR + 1.50%			$	1,739,063
New Term Loan B(2)	2,743,125				—				8/12/2026		LIBOR + 2.25%			$	2,770,556
Prior Term Loan A(3)	—				675,000				12/24/2019		(4)			$	—
Prior Term Loan A-2(3)	—				995,000				12/24/2019		(4)			$	—
Prior Term Loan B	—				3,342,500				6/24/2021		(4)			$	—
Prior revolving line of credit(3)	—				175,000				12/24/2019		(4)			$	—
Senior Notes:
5 1/8% Senior Notes	1,750,000				1,750,000				7/15/2024		5.125	%		$	1,789,375
5% Senior Notes	1,500,000				1,500,000				5/1/2025		5.00	%		$	1,538,700
5 3/4% Senior Notes	—				1,250,000				8/15/2022
Acquisition obligations and other notes payable(6)	180,352				183,979				2019-2027		5.35	%		$	180,352
Financing lease obligations(7)	268,534				282,737				2019-2036		5.39	%		$	268,534
Total debt principal outstanding	8,181,074				10,154,216
Discount and deferred financing costs(8)	(72,840		)		(52,000		)
	8,108,234				10,102,216
Less current portion	(130,708		)		(1,929,369		)
	$	7,977,526			$	8,172,847

(1)	As of December 31, 2019, the Company has an undrawn new revolving line of credit under its new senior secured credit facilities of $1,000,000. The new revolving line of credit interest rate in effect at December 31, 2019 was 1.50% plus London Interbank Offered Rate (LIBOR) and it matures on August 12, 2024.

(2)	On February 13, 2020, the Company entered into an amendment to its credit agreement governing its senior secured credit facilities to refinance the new Term Loan B with a $2,743,125 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.

(3)	On May 6, 2019, the Company entered into an agreement to extend the maturity dates of its then existing Term Loan A, Term Loan A-2 and revolving line of credit under its prior senior secured credit facilities by six months, to December 24, 2019.

(4)	At June 30, 2019, the interest rate on the Company's then existing term loan debt was LIBOR plus interest rate margins in effect of 2.00% for the prior Term Loan A and prior revolving line of credit, 1.00% for the prior Term Loan A-2 and 2.75% for the prior Term Loan B.

(5)	Fair value estimates are based upon quoted bid and ask prices for these instruments, typically a level 2 input. The balances of acquisition obligations and other notes payable and financing lease obligations are presented in the consolidated financial statements as of December 31, 2019 at their approximate fair values due to the short-term nature of their settlements.

(6)	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.

(7)	The interest rate presented for financing lease obligations is their weighted average discount rate.

(8)

As of December 31, 2019, the carrying amount of the Company’s current senior secured credit facilities includes a discount of $6,457 and deferred financing costs of $45,444, and the carrying amount of the Company’s senior notes includes deferred financing costs of $20,939. As of December 31, 2018, the carrying amount of the Company’s then existing senior secured credit facilities included a discount of $6,104 and deferred financing costs of $12,580, and the carrying amount of the Company’s senior notes included deferred financing costs of $33,316.

F-29

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Scheduled maturities of long-term debt at December 31, 2019 were as follows:

2020	$	130,708
2021	$	153,110
2022	$	168,951
2023	$	224,437
2024	$	3,172,298
Thereafter	$	4,331,570

The Company completed the sale of its DMG business to Optum on June 19, 2019, and, in accordance with the terms of its prior senior secured credit agreement, used all of the net proceeds from the sale of DMG to prepay term debt outstanding under that credit agreement. During the year ended December 31, 2019, the Company made mandatory principal prepayments of $647,424 on the prior Term Loan A, $995,000 on the prior Term Loan A-2 and $2,823,447 on the prior Term Loan B.

On August 12, 2019, the Company entered into a new $5,500,000 senior secured credit agreement (the New Credit Agreement) consisting of a secured term loan A facility in the aggregate principal amount of $1,750,000 with a delayed draw feature, a secured term loan B facility in the aggregate principal amount of $2,750,000 and a secured revolving line of credit in the aggregate principal amount of $1,000,000 (the foregoing referred to as the new Term Loan A, new Term Loan B and new revolving line of credit, respectively). In addition, the Company can increase the existing revolving commitments and enter into one or more incremental term loan facilities in an amount not to exceed the sum of $1,500,000 (less the amount of other permitted indebtedness incurred or issued in reliance on such amount), plus an amount of indebtedness such that the senior secured leverage ratio is not in excess of 3.50:1.00 after giving effect to such borrowings.

The new Term Loan A and new revolving line of credit initially bear interest at LIBOR plus an interest rate margin of 1.50%, which is subject to adjustment depending upon the Company's leverage ratio under the New Credit Agreement and can range from 1.00% to 2.00%. The new Term Loan A requires amortizing quarterly principal payments beginning on December 31, 2019, in annual amounts of $10,937 in 2019, $54,689 in 2020, $87,500 in 2021, $98,437 in 2022 and $142,187 in 2023, with the balance of $1,356,250 due in 2024. The new Term Loan B bears interest at LIBOR plus an interest rate margin of 2.25%. The new Term Loan B requires amortizing quarterly principal payments beginning on December 31, 2019, in annual amounts of $6,875 in 2019 and $27,500 for each year from 2020 through 2025, with the balance of $2,578,125 due in 2026.

The Company's term loans and revolving line of credit under its New Credit Agreement are guaranteed by certain of the Company’s direct and indirect wholly-owned domestic subsidiaries, which hold most of the Company’s domestic assets, and are secured by substantially all of the assets of DaVita Inc. and these guarantors. Contemporaneous with the Company entering into the New Credit Agreement 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 guaranteeing the New Credit Agreement. The New Credit Agreement contains certain customary affirmative and negative covenants such as various restrictions or limitations on permitted amounts of investments, 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 New Credit Agreement is below 4.00:1.00. In addition, the New Credit Agreement places limitations on the amount of gross revenue from individual immaterial subsidiaries and also requires compliance with a maximum leverage ratio covenant of 5.00:1.00 through 2022 and 4.50:1.00 thereafter.

The senior notes are unsecured obligations, rank equally in right of payment with the Company’s existing and future unsecured senior indebtedness, are guaranteed by certain of the Company’s direct and indirect wholly-owned domestic subsidiaries, and require semi-annual interest payments. The Company may redeem some or all of the senior notes at any time on or after certain specific dates and at certain specific redemption prices as outlined in each senior note agreement. Interest rates on the senior notes are fixed by their terms, and the Company is restricted from paying dividends under the indentures governing its senior notes.

In 2019, the Company used a portion of the proceeds from the new Term Loan A and new Term Loan B to pay off the remaining principal balances outstanding and accrued interest and fees on its prior Term Loan B and prior revolving line of credit in the amount of $1,153,274; to redeem all of its outstanding 5.75% senior notes due in 2022 for an aggregate cash payment consisting of principal, redemption premium and accrued but unpaid interest to the redemption date of $1,267,565; and to repurchase 21,802 shares of common stock under its modified Dutch auction tender offer (Tender Offer) for a total cost of $1,234,154, including fees and expenses, as described in Note 19 of these consolidated financial statements. The remaining

F-30

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

debt borrowings added cash to the balance sheet for potential acquisitions, share repurchases and other general corporate purposes.

In addition to the prepayments described above, during the year ended December 31, 2019, the Company made regularly scheduled principal payments under its then existing senior secured credit facilities of $27,576 on its prior Term Loan A and $17,500 on its prior Term Loan B, as well as $10,937 on its new Term Loan A and $6,875 on its new Term Loan B.

As a result of the transactions described above, the Company recognized debt prepayment, refinancing and redemption charges of $33,402 in the year ended December 31, 2019, as a result of the repayment of all principal balances outstanding on the Company's prior senior secured credit facilities and the redemption of its 5.75% senior notes, of which $21,242 represented debt discount and deferred financing cost write-offs associated with the portion of the Company's prior senior secured debt that was paid in full in the third quarter of 2019 as well as redemption charges on its 5.75% senior notes redeemed in the third quarter of 2019, and $12,160 represented accelerated amortization of debt discount and deferred financing costs associated with the portion of the Company's prior senior secured debt that was mandatorily prepaid in or shortly after the second quarter of 2019 and prior extensions of that debt.

On February 13, 2020, (the “Amendment Date”), the Company entered into an amendment to its credit agreement (the “Repricing Amendment”) governing the senior secured credit facilities to refinance the new Term Loan B with a $2,743,125 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 new Term Loan A or the new revolving line of credit. No additional debt was incurred, nor any proceeds received, by the Company in connection with the Repricing Amendment.

As of December 31, 2019, 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 new Term Loan B and a portion of the new Term Loan A. The remaining $982,188 outstanding principal balance of the new Term Loan A is subject to LIBOR-based interest rate volatility. The cap agreements are designated as cash flow hedges and, as a result, changes in their fair values are reported in other comprehensive income. The amortization of the original cap premium is recognized as a component of debt expense on the interest method 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 December 31, 2019 and December 31, 2018, which are classified in "Other long-term assets" on its consolidated balance sheet:

											Year ended								December 31,
											December 31, 2019								2019				2018
	Notional amount				LIBOR maximum rate		Effective date		Expiration date		Debt expense				Recorded OCI (loss) gain				Fair value
2015 cap agreements	$	3,500,000			3.50%		6/29/2018		6/30/2020		$	8,654			$	(851	)		$	—			$	851
2019 cap agreements	$	3,500,000			2.00%		6/30/2020		6/30/2024						$	2,417			$	24,452

The following table summarizes the effects of the Company’s interest rate cap and swap agreements for the years ended December 31, 2019, 2018 and 2017:

		Amount of unrealized gains (losses) in OCI on interest rate cap and swap agreements												Location of losses		Reclassification from accumulated other comprehensive income into net income
		Year ended December 31,													Year ended December 31,
Derivatives designated as cash flow hedges		2019				2018				2017					2019				2018				2017
Interest rate cap agreements		$	1,566			$	(181	)		$	(8,897	)		Debt expense		$	8,591			$	8,466			$	8,278
Tax (expense) benefit		(415		)		48				3,460				Tax expense		(2,214		)		(2,180		)		(3,220		)
Total		$	1,151			$	(133	)		$	(5,437	)				$	6,377			$	6,286			$	5,058

F-31

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

See Note 20 for further details on amounts recorded and reclassified from accumulated other comprehensive (loss) income.

The Company’s weighted average effective interest rate on the senior secured credit facilities at the end of 2019 was 3.93%, based upon the current margins in effect for the new Term Loan A and the new Term Loan B as of December 31, 2019.

The Company’s overall weighted average effective interest rate during the year ended December 31, 2019 was 5.01% and as of December 31, 2019 was 4.46%.

As of December 31, 2019, the Company’s interest rates were fixed on approximately 44.29% of its total debt.

As of December 31, 2019, the Company had an undrawn revolving line of credit under its new senior secured credit facilities of $1,000,000, of which approximately $13,055 was committed for outstanding letters of credit. The Company also had approximately $59,705 of outstanding letters of credit under a separate bilateral secured letter of credit facility.

Debt expense

Debt expense consisted of interest expense of $419,639, $461,897 and $406,341 and the amortization and accretion of debt discounts and premiums, amortization of deferred financing costs and the amortization of interest rate cap agreements of $24,185, $25,538 and $24,293 for 2019, 2018 and 2017, respectively. These interest expense amounts are net of capitalized interest.

14**. Leases**

The Company leases substantially all of its U.S. dialysis facilities. The majority of the Company’s facilities are leased under non-cancellable operating leases ranging in terms from five years to 15 years and which contain renewal options of five years to ten years at the fair rental value at the time of renewal. These renewal options are included in the Company’s determination of the right-of-use assets and related lease liabilities when renewal is considered reasonably certain at the commencement date. Certain of the Company’s leases are subject to periodic consumer price index increases or contain fixed escalation clauses. The Company also leases certain facilities and equipment under finance leases. The Company has elected the practical expedient to not separate lease components from non-lease components for its financing and operating leases.

Financing and operating right-of-use assets are recognized based on the net present value of lease payments over the lease term at the commencement date. Since most of the Company's leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on information available at the commencement date or remeasurement date in determining the present value of lease payments.

As of December 31, 2019 and December 31, 2018, assets recorded under finance leases were $247,246 and $367,164, respectively, and accumulated amortization associated with finance leases was $27,193 and $131,971, respectively, included in property and equipment, net, on the Company's consolidated balance sheet.

In certain markets, the Company acquires and develops dialysis centers. Upon completion, the Company sells the center to a third party and leases the space back with the intent of operating the center on a long term basis. Both the sale and leaseback terms are generally market terms. The lease terms are consistent with the Company's other operating leases with the majority of the leases under non-cancellable operating leases ranging in terms from five years to 15 years and which contain renewal options of five years to ten years at the fair rental value at the time of renewal.

The Company adopted Topic 842, Leases beginning on January 1, 2019 through a modified retrospective approach for leases existing at the adoption date with a cumulative effect adjustment. Consequently, financial information was not updated for dates and periods before January 1, 2019.

F-32

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

The components of lease expense were as follows:

Lease cost		Year ended December 31, 2019
Operating lease cost(1):
Fixed lease expense		$	526,352
Variable lease expense		119,740
Financing lease cost:
Amortization of leased assets		23,724
Interest on lease liabilities		14,932
Net lease cost		$	684,748

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

Other information related to leases was as follows:

Lease term and discount rate		December 31, 2019
Weighted average remaining lease term (years):
Operating leases		9.0
Finance leases		10.2
Weighted average discount rate:
Operating leases		4.1	%
Finance leases		5.4	%

Other information		Year ended December 31, 2019
Gains on sale leasebacks, net		$	20,833
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	637,655
Operating cash flows for finance leases		$	22,257
Financing cash flows for finance leases		$	25,692
Net operating lease assets obtained in exchange for new or modified operating lease liabilities		$	432,074

Future minimum lease payments under non-cancellable leases as of December 31, 2019 are as follows:

	Operating leases				Finance leases
2020	$	462,131			$	37,624
2021	489,799				33,267
2022	454,753				33,677
2023	409,655				33,825
2024	358,009				33,841
Thereafter	1,510,665				178,434
Total future minimum lease payments	3,685,012				350,668
Less portion representing interest	(617,300		)		(82,134		)
Present value of lease liabilities	$	3,067,712			$	268,534

Rent expense under all operating leases for 2019, 2018, and 2017 was $646,092, $596,117 and $530,748, respectively. Rent expense is recorded on a straight-line basis over the term of the lease, including leases that contain fixed escalation clauses or include abatement provisions. Leasehold improvement incentives are deferred and amortized to rent expense over the term of the lease. Finance lease obligations are included in long-term debt. See Note 13 for further details on long-term debt.

F-33

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

15**. Employee benefit plans**

The Company has a 401(k) retirement savings plan for substantially all of its U.S. employees which has been established pursuant to the applicable provisions of the Internal Revenue Code (IRC). The plan allows for employees to contribute a percentage of their base annual salaries on a tax-deferred basis not to exceed IRC limitations. Beginning in 2018, the Company implemented a 401(k) matching program under which the Company matches 50% of the employee's contribution up to 6% of the employee's salary, subject to certain limitations. The matching contributions are subject to certain eligibility and vesting conditions. For the years ended December 31, 2019 and 2018, the Company accrued matching contributions totaling approximately $64,988 and $67,807, respectively. Prior to 2018, the Company did not provide matching contributions in connection with the 401(k) savings plan.

The Company also maintains a voluntary compensation deferral plan, the Deferred Compensation Plan, as well as other legacy deferral plans. The Deferred Compensation Plan is non-qualified and permits certain employees whose annualized base salary equals or exceeds a minimum annual threshold amount as set by the Company to elect to defer all or a portion of their annual bonus payment and up to 50% of their base salary into a deferral account maintained by the Company. Total contributions to this plan in 2019, 2018 and 2017 were $1,751, $3,090 and $4,497, respectively. Deferred amounts are generally paid out in cash at the participant’s election either in the first or second year following retirement or in a specified future period at least three to four years after the deferral election was effective. During 2019, 2018 and 2017 the Company distributed $2,730, $4,652 and $2,789, respectively, to participants from its deferred compensation plans. Participants are credited with their proportional amount of annual earnings from the plans. The assets of these plans are held in rabbi trusts subject to the claims of the Company’s general creditors in the event of its bankruptcy. As of December 31, 2019 and 2018, the total fair value of assets held in these plans' trusts was $39,527 and $36,124, respectively. The assets of these plans are recorded at fair value with changes in fair value recorded in other comprehensive income prior to 2018 and recognized in "Other income, net" since January 1, 2018. Any fair value changes to the corresponding liability balance are recorded as compensation expense. See Note 5 for further details.

16**. 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 December 31, 2019 and December 31, 2018, 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

F-34

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

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) 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, 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. The Company and DaVita Labs dispute these allegations and intend to defend this action accordingly.

---

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 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.

F-35

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

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. 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. 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.

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 16 to these 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.

17**. Noncontrolling interests subject to put provisions and other commitments**

Noncontrolling interests subject to put provisions

The Company has potential obligations to purchase the equity interests held by third parties in many of its majority-owned dialysis partnerships and other nonconsolidated entities. These noncontrolling interests subject to put provisions constitute redeemable equity interests and are therefore classified as temporary equity and carried at estimated fair value on the Company's balance sheet.

Specifically, these obligations are in the form of put provisions that are exercisable at the third-party owners’ discretion within specified periods outlined in each specific put provision. If these put provisions were exercised, the Company would be required to purchase the third-party owners’ equity interests, generally at the appraised fair market value of the equity interests or in certain cases at a predetermined multiple of earnings or cash flows attributable to the equity interests put to the Company,

F-36

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

intended to approximate fair value. The methodology the Company uses to estimate the fair values of noncontrolling interests subject to put provisions assumes the higher of either a liquidation value of net assets or an average multiple of earnings, based on historical earnings, patient mix and other performance indicators that can affect future results, as well as other factors. The estimated fair values of noncontrolling interests subject to put provisions are a critical accounting estimate that involves significant judgments and assumptions and may not be indicative of the actual values at which the noncontrolling interests may ultimately be settled, which could vary significantly from the Company’s current estimates. The estimated fair values of noncontrolling interests subject to put provisions can fluctuate and the implicit multiple of earnings at which these noncontrolling interests obligations may be settled will vary significantly depending upon market conditions including potential purchasers’ access to the capital markets, which can impact the level of competition for dialysis and non-dialysis related businesses, the economic performance of these businesses and the restricted marketability of the third-party owners’ equity interests. The amount of noncontrolling interests subject to put provisions that employ a contractually predetermined multiple of earnings rather than fair value is immaterial.

The Company has certain other potential commitments to provide operating capital to a number of dialysis businesses that are wholly-owned by third parties or in which the Company owns a noncontrolling equity interest as well as to physician-owned vascular access clinics or medical practices that the Company operates under management and administrative service agreements of approximately $9,669.

Certain consolidated dialysis partnerships are originally contractually scheduled to dissolve after terms ranging from ten years to 50 years. While noncontrolling interests in these limited life entities qualify as mandatorily redeemable financial instruments, they are subject to a classification and measurement scope exception from the accounting guidance generally applicable to other mandatorily redeemable financial instruments. Future distributions upon dissolution of these entities would be valued below the related noncontrolling interest carrying balances in the consolidated balance sheet.

Other commitments

In 2017, the Company entered into a Sourcing and Supply Agreement with Amgen USA Inc. (Amgen) that expires on December 31, 2022. Under the terms of the agreement, the Company will purchase EPO from Amgen in amounts necessary to meet no less than 90% of its requirements for erythropoiesis-stimulating agents (ESAs) through the expiration of the contract. The actual amount of EPO that the Company will purchase will depend upon the amount of EPO administered during dialysis as prescribed by physicians and the overall number of patients that the Company serves.

The Company has an agreement with Fresenius Medical Care (FMC) to purchase a certain amount of dialysis equipment, parts and supplies from FMC, which extends through December 31, 2020. The Company also has agreements with Baxter Healthcare Corporation (Baxter) that commit the Company to purchase certain amounts of dialysis supplies at fixed prices through 2022.

As of December 31, 2019, the remaining minimum purchase commitments under these arrangements was approximately $399,042, $312,119 and $312,101, for the years 2020, 2021 and 2022, respectively. If the Company fails to meet the minimum purchase commitments under these contracts during any year, it is required to pay the difference to the supplier.

Other than the letters of credit disclosed in Note 13 to these consolidated financial statements, and the arrangements as described above, the Company has no off balance sheet financing arrangements as of December 31, 2019.

18**. Long-term incentive compensation**

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) and 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, its corporate administrative support, and its 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 ultimate number of shares expected 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.

F-37

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Stock-based compensation to be settled in shares is recorded to the Company’s shareholders’ contributed capital, while stock-based compensation to be settled in cash is recorded to a liability. Shares issued upon exercise of stock awards are issued from authorized but unissued shares.

Long-term incentive compensation plans

The Company’s 2011 Incentive Award Plan (the 2011 Plan) is the Company’s omnibus equity compensation plan and provides for grants of stock-based awards to employees, directors and other individuals providing services to the Company, except that incentive stock options may only be awarded to employees. The 2011 Plan authorizes the Company to award stock options, stock appreciation rights, restricted stock units, restricted stock, and other stock-based or performance-based awards. The 2011 Plan mandates a maximum award term of five years and stipulates that stock appreciation rights and stock options be granted with prices not less than fair market value on the date of grant. The 2011 Plan also requires that full value share awards such as restricted stock units reduce shares available under the 2011 Plan at a ratio of 3.5:1. The Company’s nonqualified stock appreciation rights and stock units awarded under the 2011 Plan generally vest over 36 months to 48 months from the date of grant. At December 31, 2019, there were 15,547 shares available for future grants under the 2011 Plan. This number of shares available does not reflect reduction for the Premium Priced Award described below, as that Board-approved award remained contingent on stockholder approval of an amendment to the 2011 Plan which did not occur until January 2020.

A combined summary of the status of the Company’s stock-settled awards under the 2011 Plan, including base shares for stock-settled stock appreciation rights (SSARs) and stock-settled stock unit awards is as follows:

	Year ended December 31, 2019
	Stock appreciation rights										Stock units
	Awards				Weighted average exercise price				Weighted average remaining contractual life		Awards				Weighted average remaining contractual life
Outstanding at beginning of year	6,163				$	69.90					1,860
Granted (1) ( 2)	2,389				$	52.45					1,961
Exercised	(20		)		$	64.17					(225		)
Expired	(1,058		)		$	70.97					—
Canceled	(521		)		$	65.23					(436		)
Outstanding at end of period (1)	6,953				$	64.10			3.0		3,160				2.3
Exercisable at end of period	1,254				$	77.68			1.1		—				—
Weighted-average fair value of grants
2019	$	14.04									$	50.58
2018	$	16.24									$	66.23
2017	$	14.51									$	65.73

(1)	Awards granted and outstanding do not reflect the Premium Priced Award described below, as that Board-approved award remained contingent on stockholder approval of an amendment to the 2011 Plan which did not occur until January 2020.

(2)	Includes approximately 8 shares resulting from the payout of the first tranche of fiscal year 2016 PSU grants due to exceeding target payout.

		Awards Outstanding			Weighted average exercise price				Awards exercisable			Weighted average exercise price
Range of SSARs base prices
$50.01–$60.00		2,400			$	52.63			—			$	—
$60.01–$70.00		3,069			$	66.16			186			$	65.92
$70.01–$80.00		925			$	75.28			509			$	75.50
$80.01–$90.00		559			$	83.59			559			$	83.59
Total		6,953			$	64.10			1,254			$	77.68

F-38

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

For the years ended December 31, 2019, 2018, and 2017, the aggregate intrinsic value of stock-based awards exercised was $11,475, $31,045 and $34,895, respectively. At December 31, 2019, the aggregate intrinsic value of stock-based awards outstanding was $319,486 and the aggregate intrinsic value of stock awards exercisable was $1,783.

Estimated fair value of stock-based compensation awards

The Company has estimated the grant-date fair value of stock-settled stock appreciation rights awards using the Black-Scholes-Merton valuation model and stock-settled stock unit awards at intrinsic value on the date of grant, except for portions of the Company’s performance stock unit awards for which a Monte Carlo simulation was used to estimate the grant-date fair value. The following assumptions were used in estimating these values and determining the related stock-based compensation expense attributable to the current period:

Expected term of the awards: The expected term of awards granted represents the period of time that they are expected to remain outstanding from the date of grant. The Company determines the expected term of its stock awards based on its historical experience with similar awards, considering the Company’s historical exercise and post-vesting termination patterns, and the terms expected by peer companies in near industries.

Expected volatility: Expected volatility represents the volatility anticipated over the expected term of the award. The Company determines the expected volatility for its awards based on the volatility of the price of its common stock over the most recent retrospective period commensurate with the expected term of the award, considering the volatility expectations implied by the market price of its exchange-traded options and the volatilities expected by peer companies in near industries.

Expected dividend yield: The Company has not paid dividends on its common stock and does not currently expect to pay dividends during the term of stock awards granted.

Risk-free interest rate: The Company bases the expected risk-free interest rate on the implied yield currently available on stripped interest coupons of U.S. Treasury issues with a remaining term equivalent to the expected term of the award.

A summary of the weighted average valuation inputs described above used for estimating the grant-date fair value of SSAR awards granted in the periods indicated is as follows:

	Year ended December 31,
	2019			2018			2017
Expected term	4.0			4.2			4.2
Expected volatility	29.5	%		23.8	%		23.9	%
Expected dividend yield	—	%		—	%		—	%
Risk-free interest rate	2.2	%		2.9	%		1.7	%

The Company estimates expected forfeitures based upon historical experience with separate groups of employees that have exhibited similar forfeiture behavior in the past. Stock-based compensation expense is recorded only for awards that are expected to vest.

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 2011 Plan. Stockholders approved such amendment to the 2011 Plan on January 23, 2020, authorizing the grant to our CEO. Since stockholder approval occurred in 2020, this award was treated as granted in 2020 for accounting purposes.

The base price of the Premium-Priced Award was $67.80 per share, which was a 20% premium to the clearing price of the Company's recent modified Dutch auction tender offer (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.

Employee stock purchase plan

The Employee Stock Purchase Plan entitles qualifying employees to purchase up to $25 of the Company’s common stock during each calendar year. The amounts used to purchase stock are accumulated through payroll withholdings or through

F-39

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

optional lump sum payments made in advance of the first day of the purchase right period. This compensatory plan allows employees to purchase stock for the lesser of 100% of its fair market value on the first day of the purchase right period or 85% of its fair market value on the last day of the purchase right period. Purchase right periods begin on January 1 and July 1, and end on December 31. Contributions used to purchase the Company’s common stock under this plan for the 2019, 2018 and 2017 participation periods were $16,569, $17,398 and $22,131, respectively. Shares purchased pursuant to the plan’s 2019, 2018 and 2017 participation periods were 315, 398 and 360, respectively. At December 31, 2019, there were 6,411 shares remaining available for future grants under this plan.

The fair value of participants’ purchase rights was estimated as of the beginning dates of the purchase right periods using the Black-Scholes-Merton valuation model with the following weighted average assumptions for purchase right periods in 2019, 2018 and 2017, respectively: expected volatility of 28.8%, 24.2% and 22.7%; risk-free interest rates of 2.6%, 1.9% and 1.3%, and no dividends. Using these assumptions, the weighted average estimated per share fair value of each purchase right was $13.80, $17.45 and $15.19 for 2019, 2018 and 2017, respectively.

Long-term incentive compensation expense and proceeds

For the years ended December 31, 2019, 2018 and 2017, the Company recognized $118,513, $85,759 and $61,978, respectively, in total LTIP expense, of which $63,705, $73,582 and $34,431, respectively, was stock-based compensation expense for stock appreciation rights, stock units and discounted employee stock plan purchases, which are primarily included in general and administrative expenses. The estimated tax benefits recorded for stock-based compensation in 2019, 2018 and 2017 were $9,186, $13,591 and $7,717, respectively. As of December 31, 2019, there was $147,267 of total estimated unrecognized compensation expense for LTIP awards outstanding, including $136,818 related to stock-based compensation arrangements under the Company’s equity compensation and stock purchase plans. The Company expects to recognize the performance-based cash component of this LTIP expense over a weighted average remaining period of 0.6 years and the stock-based component of this LTIP expense over a weighted average remaining period of 1.5 years.

During the year ended December 31, 2018, the Company adopted a retirement policy (Rule of 65 policy). The Rule of 65 policy generally provides that Section 16 officers that are a minimum age of 55 with five years of continuous service with the Company receive certain benefits with respect to their outstanding equity awards upon a qualifying retirement if the sum of their age plus years of service is greater than or equal to 65. These benefits generally include accelerated vesting of restricted stock unit awards, continued vesting of stock-settled stock appreciation rights and performance stock unit awards and an exercise window from the original vest date through the original expiration date regardless of continued employment, with pro rata vesting for a Rule of 65 retirement within one year of the award grant date. The adoption of the Rule of 65 policy resulted in a $14,704 modification charge and a net acceleration of expense of $9,727 during the year ended December 31, 2018 that is included in the expense amounts reported above.

For the years ended December 31, 2019, 2018 and 2017, the Company received $2,251, $7,988 and $13,473, respectively, in actual tax benefits upon the exercise of stock awards. Since the Company issues stock-settled stock appreciation rights rather than stock options, there were no cash proceeds from stock option exercises.

19**. Shareholders’ equity**

Stock repurchases

The following table summarizes our repurchases of our common stock during the years ended December 31, 2019, 2018 and 2017:

	2019											2018											2017
	Shares repurchased			Amount paid				Paid per share				Shares repurchased			Amount paid				Paid per share				Shares repurchased			Amount paid				Paid per share
Tender Offer(1)	21,802			$	1,234,154			$	56.61			—			$	—			$	—			—			$	—			$	—
Open market	19,218			1,168,321				60.79				16,844			1,153,511				68.48				12,967			810,949				62.54
	41,020			$	2,402,475			$	58.57			16,844			$	1,153,511			$	68.48			12,967			$	810,949			$	62.54

(1)	The amount paid for shares repurchased associated with the Company's Tender Offer during the year ended December 31, 2019 includes the clearing price of $56.50 per share plus related fees and expenses of $2,343.

Subsequent to December 31, 2019, the Company has repurchased 291 shares of our common stock for $21,794 at an average cost of $74.92 per share subsequent to December 31, 2019 through February 20, 2020.

F-40

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

On July 11, 2018, the Company's Board approved an additional share repurchase authorization in the amount of approximately $1,389,999. This share repurchase authorization was in addition to the approximately $110,001 remaining at that time under the Board's prior share repurchase authorization approved in October 2017.

Effective July 17, 2019, the Board terminated all remaining prior share repurchase authorizations available to the Company at that time and approved a new share repurchase authorization of $2,000,000.

Effective as of the close of business on November 4, 2019, the Board terminated all remaining prior share repurchase authorizations available to the Company under the aforementioned July 17, 2019 authorization and approved a new share repurchase authorization of $2,000,000. The Company is authorized to make purchases from time to time in the open market or in privately negotiated transactions, including without limitation, through accelerated share repurchase transactions, derivative transactions, tender offers, Rule 10b5-1 plans or any combination of the foregoing, depending upon market conditions and other considerations.

As of February 20, 2020, the Company has a total of $1,681,701 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 the current senior secured credit facilities and the indentures governing the Company's senior notes.

The Company retired all shares held in its treasury effective as of December 31, 2019 and December 31, 2018.

Charter documents & Delaware law

The Company’s charter documents include provisions that may deter hostile takeovers, delay or prevent changes of control or changes in management, or limit the ability of stockholders to approve transactions that they may otherwise determine to be in their best interests. These include provisions prohibiting stockholders from acting by written consent, requiring 90 days advance notice of stockholder proposals or nominations to the Board and granting the Board the authority to issue up to 5,000 shares of preferred stock and to determine the rights and preferences of the preferred stock without the need for further stockholder approval.

The Company is also subject to Section 203 of the Delaware General Corporation Law which, subject to exceptions, would prohibit the Company from engaging in any business combinations with any interested stockholder, as defined in that section, for a period of three years following the date on which that stockholder became an interested stockholder. These restrictions may discourage, delay or prevent a change in the control of the Company.

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 are as follows:

	Year ended December 31,
	2019				2018				2017
Net income attributable to DaVita Inc.	$	810,981			$	159,394			$	663,618
Changes in paid-in capital for:
Sales of noncontrolling interest	—				79				(114		)
Purchase of noncontrolling interests	(37,145		)		(17,897		)		(2,752		)
Net transfer in noncontrolling interests	(37,145		)		(17,818		)		(2,866		)
Net income attributable to DaVita Inc. net of transfers in noncontrolling interests	$	773,836			$	141,576			$	660,752

The Company acquired additional ownership interests in several existing majority-owned partnerships for $68,019, $28,082, and $5,357 in 2019, 2018, and 2017, respectively.

F-41

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

20**. Accumulated other comprehensive (loss) income**

Charges and credits to other comprehensive (loss) income have been as follows:

	Interest rate cap agreements				Investment securities				Foreign currency translation adjustments				Accumulated other comprehensive (loss) income
Balance at December 31, 2016	$	(12,029	)		$	2,175			$	(79,789	)		$	(89,643	)
Unrealized (losses) gains	(8,897		)		5,075				99,770				95,948
Related income tax	3,460				(1,368		)		—				2,092
	(5,437		)		3,707				99,770				98,040
Reclassification of income (loss) into net income	8,278				(360		)		—				7,918
Related income tax	(3,220		)		140				—				(3,080		)
	5,058				(220		)		—				4,838
Balance at December 31, 2017	$	(12,408	)		$	5,662			$	19,981			$	13,235
Cumulative effect of change in accounting principle(1)	(2,706		)		(5,662		)		—				(8,368		)
Unrealized losses	(181		)		—				(45,944		)		(46,125		)
Related income tax	48				—				—				48
	(133		)		—				(45,944		)		(46,077		)
Reclassification of income into net income	8,466				—				—				8,466
Related income tax	(2,180		)		—				—				(2,180		)
	6,286				—				—				6,286
Balance at December 31, 2018	$	(8,961	)		$	—			$	(25,963	)		$	(34,924	)
Unrealized gains (losses)	1,566				—				(20,102		)		(18,536		)
Related income tax	(415		)		—				—				(415		)
	1,151				—				(20,102		)		(18,951		)
Reclassification of income into net income	8,591				—				—				8,591
Related income tax	(2,214		)		—				—				(2,214		)
	6,377				—				—				6,377
Balance at December 31, 2019	$	(1,433	)		$	—			$	(46,065	)		$	(47,498	)

(1)	Reflects the cumulative effect of a change in accounting principle for ASUs 2016-01 and 2018-03 on classification and measurement of financial instruments and ASU 2018-02 on remeasurement and reclassification of deferred tax effects in accumulated other comprehensive income associated with the 2017 Tax Act. See Note 5 for further details.

The reclassification of net cap realized losses into income are recorded as debt expense in the corresponding consolidated statements of income. See Note 13 for further details.

Prior to January 1, 2018, unrealized gains and losses on available-for-sale equity securities were recorded to accumulated other comprehensive income and reclassified to other income when realized. From January 1, 2018, unrealized gains and losses on investment securities are recorded directly to other income rather than to accumulated other comprehensive income.

21**. Acquisitions and divestitures**

Routine acquisitions

During 2019, the Company acquired seven dialysis centers in the U.S. and 16 dialysis centers outside the U.S. for a total of $98,836 in net cash paid, earn-outs of $23,536, and deferred purchase price and liabilities assumed of $4,326. During 2018, the Company acquired 18 dialysis centers in the U.S. and 28 dialysis centers outside the U.S. for a total of $176,161 in net cash, earn-outs of $1,246, and deferred purchase price and liabilities assumed of $34,394. In one of these transactions the Company acquired a controlling interest in a previously nonconsolidated U.S. dialysis partnership for which the Company recognized a non-cash gain of $28,152 on our prior interest upon consolidation. During 2017, the Company acquired 30 dialysis centers in the U.S. and 68 dialysis centers outside the U.S. for a total of $308,550 in net cash, earn-outs of $2,692 and deferred purchase

F-42

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

price of $23,748. The assets and liabilities for all acquisitions were recorded at their estimated fair values at the dates of the acquisitions and are included in the Company’s financial statements and operating results from the effective dates of the acquisitions. For several of the 2019 acquisitions, certain income tax amounts are pending final evaluation and quantification of any pre-acquisition tax contingencies. In addition, valuation of intangibles and certain other working capital items relating to several of these acquisitions are pending final quantification.

The following table summarizes the assets acquired and liabilities assumed in these transactions and recognized at their acquisition dates at estimated fair values, as well as the estimated fair value of noncontrolling interests assumed in these transactions:

	Year ended December 31,
	2019				2018				2017
Current assets	$	6,713			$	23,686			$	14,366
Property and equipment	4,842				11,421				18,192
Amortizable intangible and other long-term assets	1,980				3,079				11,663
Indefinite-lived licenses	31,858				23,656				32,296
Goodwill	90,226				278,348				318,832
Deferred income taxes	—				—				(210		)
Noncontrolling interests assumed	(1,762		)		(80,291		)		(44,303		)
Liabilities assumed	(7,159		)		(19,946		)		(15,846		)
	$	126,698			$	239,953			$	334,990

Amortizable intangible assets acquired during 2019, 2018 and 2017, primarily related to non-compete agreements, had weighted-average estimated useful lives of six years, six years and seven years, respectively. The total amount of goodwill deductible for tax purposes associated with these acquisitions for 2019, 2018, and 2017 was approximately $88,517, $165,013 and $237,363, respectively.

Acquisition of Renal Ventures

On May 1, 2017, the Company completed its acquisition of 100% of the equity of Colorado-based Renal Ventures Management, LLC (Renal Ventures) for approximately $359,913 in net cash. Renal Ventures operated 36 dialysis centers, one uncertified dialysis center and one home program, which provided services to approximately 2,600 patients in six states. As a part of this transaction, the Company was required to divest three Renal Ventures outpatient dialysis centers, and three outpatient dialysis centers and one uncertified dialysis center of the Company, for approximately $21,219 in net cash. The Company also incurred approximately $11,950 in transaction and integration costs during the year ended December 31, 2017 associated with this acquisition that are included in general and administrative expenses.

The purchase price allocation for the Renal Ventures acquisition was finalized in 2018 with no material change to the initial allocation. The following table summarizes the assets acquired and liabilities assumed in this transaction and recognized at the acquisition date at estimated fair values:

Current assets, net of cash acquired	$	22,739
Property and equipment	36,295
Amortizable intangible and other long-term assets	11,547
Goodwill	298,200
Current liabilities	(8,389		)
Long-term liabilities	(479		)
	$	359,913

Amortizable intangible assets acquired, primarily related to non-compete agreements, had weighted-average estimated useful lives of five years. The total estimated amount of goodwill deductible for tax purposes associated with this acquisition was approximately $298,200.

F-43

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Pro forma financial information (unaudited)

The following summary, prepared on a pro forma basis, combines the results of operations as if all acquisitions within continuing operations in 2019 and 2018 had been consummated as of the beginning of 2018, including the impact of certain adjustments such as amortization of intangibles, interest expense on acquisition financing and income tax effects.

	Year ended December 31,
	2019				2018
	(unaudited)
Pro forma total revenues	$	11,416,498			$	11,566,736
Pro forma net income from continuing operations attributable to DaVita Inc.	$	709,631			$	640,112
Pro forma basic net income per share from continuing operations attributable to DaVita Inc.	$	4.63			$	3.75
Pro forma diluted net income per share from continuing operations attributable to DaVita Inc.	$	4.61			$	3.71

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 approximately $33,889 if certain performance targets or quality margins are met over the next one year to five years.

Contingent earn-out obligations are remeasured to fair value at each reporting date until the contingencies are resolved with changes in the liability due to the remeasurement recognized in earnings. See Note 24 for further details. As of December 31, 2019, the Company estimated the fair value of these contingent earn-out obligations to be $24,586, of which a total of $6,712 is included in other current liabilities, and the remaining $17,874 is included in other long-term liabilities in the Company’s consolidated balance sheet.

The following is a reconciliation of changes in liabilities for contingent earn-out obligations for the year ended December 31, 2019:

Balance at December 31, 2017	$	6,388
Contingent earn-out obligations associated with acquisitions	1,246
Remeasurement of fair value	(4,729		)
Payments of contingent earn-out obligations	(297		)
Balance at December 31, 2018	$	2,608
Contingent earn-out obligations associated with acquisitions	23,536
Remeasurement of fair value	(784		)
Payments of contingent earn-out obligations	(774		)
	$	24,586

22**. Discontinued operations previously held for sale**

DaVita Medical Group (DMG)

On June 19, 2019, the Company completed the sale of its 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 is 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 include $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.

F-44

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

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. Under the equity purchase agreement, the Company also has certain indemnification obligations that could require payments to the buyer relating 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:

	Year ended December 31,
	2019				2018				2017
Net revenues	$	2,713,059			$	4,963,792			$	4,676,213
Expenses	2,543,865				4,962,686				4,634,782
Goodwill and other asset impairment charges	—				41,537				651,659
Valuation adjustment on disposal group	—				316,840				—
Income (loss) from discontinued operations before taxes	169,194				(357,271		)		(610,228		)
Loss on sale of discontinued operations before taxes	(23,022		)		—				—
Income tax expense (benefit)	40,689				99,768				(364,856		)
Net income (loss) from discontinued operations, net of tax	$	105,483			(457,038		)		$	(245,372	)

The following table presents cash flows of discontinued operations related to DMG:

	Year ended December 31,
	2019				2018				2017
Net cash provided by operating activities from discontinued operations	$	99,634			$	290,684			$	357,274
Net cash used in investing activities from discontinued operations	$	(43,442	)		$	(57,382	)		$	(232,329	)

DMG acquisitions

During the period from January 1, 2019 to June 18, 2019 immediately prior to the sale, the DMG business acquired two medical businesses for a total of $2,025 in net cash and deferred purchase price of $212. During 2018, the DMG business acquired other medical businesses for a total of $6,995 in net cash, deferred purchase price of $1,142. During 2017, the DMG business acquired other medical businesses for a total of $135,416 in net cash, deferred purchase price of $1,038 and liabilities assumed of $10,145.

23**. Variable interest entities**

The Company manages or maintains an ownership interest in certain legal entities subject to the consolidation guidance applicable to variable interest entities (VIEs). Almost all of these legal entities are either U.S. dialysis partnerships encumbered by guaranteed debt, U.S. dialysis limited partnerships, or other legal entities subject to nominee ownership arrangements.

Under U.S. GAAP, VIEs typically include entities for which (i) the entity’s equity is not sufficient to finance its activities without additional subordinated financial support; (ii) the equity holders as a group lack the power to direct the activities that most significantly influence the entity’s economic performance, the obligation to absorb the entity’s expected losses, or the right to receive the entity’s expected returns; or (iii) the voting rights of some investors are not proportional to their obligations to absorb the entity’s losses.

The substantial majority of VIEs the Company is associated with are U.S. dialysis partnerships which the Company manages and in which it maintains a controlling majority ownership interest. These U.S. dialysis partnerships are considered VIEs because they are either (i) encumbered by debt guaranteed proportionately by the partners that is considered necessary to finance the partnership's activities, or (ii) in the form of limited partnerships for which the limited partners are not considered to have substantive kick-out or participating rights. The Company consolidates virtually all such U.S. dialysis partnerships.

The Company also relies on the operating activities of certain legal entities in which it does not maintain a controlling ownership interest but over which it has indirect influence and of which it is considered the primary beneficiary. These entities are typically subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements

F-45

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

concerning such nominee-owned entities typically include both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. The Company consolidates all of the nominee-owned entities with which it is most closely associated.

At December 31, 2019, these consolidated financial statements include total assets of VIEs of $319,691 and total liabilities and noncontrolling interests of VIEs to third parties of $231,586.

The Company also sponsors certain non-qualified deferred compensation plans whose trusts qualify as VIEs and the Company consolidates these plans as their primary beneficiary. The assets of these plans are recorded in short-term or long-term investments with related liabilities recorded in accrued compensation and benefits and other long-term liabilities. See Note 15 for disclosures concerning the assets of these consolidated non-qualified deferred compensation plans.

24**. Fair values of financial instruments**

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are determined based on the principal or most advantageous market for the item being measured, assume that buyers and sellers are independent, willing and able to transact, and knowledgeable, with access to all information customarily available in such a transaction, and are based on assumptions that market participants would use in pricing the item, not assumptions specific to the reporting entity.

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 FASB.

The following table summarizes the Company’s assets, liabilities and temporary equity measured at fair value on a recurring basis as of December 31, 2019 and 2018:

December 31, 2019	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	$	39,951			$	39,951			$	—			$	—
Interest rate cap agreements	$	24,452			$	—			$	24,452			$	—
Liabilities
Contingent earn-out obligations	$	24,586			$	—			$	—			$	24,586
Temporary equity
Noncontrolling interests subject to put provisions	$	1,180,376			$	—			$	—			$	1,180,376
December 31, 2018
Assets
Investments in equity securities	$	36,124			$	36,124			$	—			$	—
Interest rate cap agreements	$	851			$	—			$	851			$	—
Liabilities
Contingent earn-out obligations	$	2,608			$	—			$	—			$	2,608
Temporary equity
Noncontrolling interests subject to put provisions	$	1,124,641			$	—			$	—			$	1,124,641

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 5 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

F-46

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

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 13 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 credit risk adjusted rate that is used to discount obligations to present value. See Note 21 for further discussion.

See Note 17 for a discussion of the Company’s methodology for estimating the fair values 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 quoted bid and ask prices for these instruments, typically a level 2 input. See Note 13 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 non-debt financial instruments are presented in the consolidated financial statements at December 31, 2019 and 2018 at their approximate fair values due to the short-term nature of their settlements.

25**. 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. See Note 1 "Organization" for a summary description of the Company's businesses.

On June 19, 2019, the Company completed the sale of its DMG business to Optum. As a result of this transaction, DMG's results of operations have been reported as discontinued operations for all periods presented.

The Company’s operating segments have been defined based on the separate financial information that is regularly produced and reviewed by the Company’s chief operating decision maker in making decisions about allocating resources to and assessing the financial performance of the Company’s various operating lines of business. The chief operating decision maker for the Company is its Chief Executive Officer.

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 Asia Pacific joint venture. The U.S. dialysis and related lab services business qualifies as a separately reportable segment, and all other ancillary services and strategic initiatives operating segments, including the international operating segments, have been combined and disclosed in the other segments category.

The Company’s operating segment financial information included in this report is prepared on the internal management reporting basis that the chief operating decision maker uses to allocate resources and assess the financial performance of the Company's operating segments. For internal management reporting, segment operations include direct segment operating expenses but generally exclude corporate administrative support costs, which consist primarily of indirect labor, benefits and long-term incentive compensation expenses of certain departments which provide support to all of the Company’s various operating lines of business, except to the extent that such costs are charged to and borne by certain ancillary services and strategic initiatives via internal management fees. These corporate administrative support costs are reduced by internal management fees received from the Company’s ancillary lines of business.

F-47

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

The following is a summary of segment revenues, segment operating margin (loss), and a reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:

	Year ended December 31,
	2019				2018				2017
Segment revenues:****(1)
U.S. dialysis
Patient service revenues:
External sources	$	10,421,401			$	10,274,046			$	9,767,123
Intersegment revenues	131,199				92,950				55,176
Total U.S. dialysis revenues	10,552,600				10,366,996				9,822,299
Provision for uncollectible accounts	(21,715		)		(50,927		)		(481,973		)
Net U.S. dialysis patient service revenues	10,530,885				10,316,069				9,340,326
Other revenues(2)
External sources	30,895				19,880				19,739
Intersegment revenues	1,126				—				—
Total net U.S. dialysis revenues	$	10,562,906			$	10,335,949			$	9,360,065
Other - Ancillary services
Net patient service revenues	$	497,021			$	437,275			$	323,156
Other external sources	460,877				724,577				1,248,589
Intersegment revenues	14,030				34,236				24,603
Total ancillary services	$	971,928			$	1,196,088			$	1,596,348
Total net segment revenues	11,534,834				11,532,037				10,956,413
Elimination of intersegment revenues	(146,355		)		(127,186		)		(79,779		)
Consolidated revenues	$	11,388,479			$	11,404,851			$	10,876,634
Segment operating margin (loss):
U.S. dialysis	$	1,924,826			$	1,709,721			$	2,297,198
Other - Ancillary services	(189,174		)		(93,789		)		(439,477		)
Total segment margin	1,735,652				1,615,932				1,857,721
Reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:
Corporate administrative support	(92,335		)		(90,108		)		(44,966		)
Consolidated operating income	1,643,317				1,525,824				1,812,755
Debt expense	(443,824		)		(487,435		)		(430,634		)
Debt prepayment, refinancing and redemption charges	(33,402		)		—				—
Other income	29,348				10,089				17,665
Income from continuing operations before income taxes	$	1,195,439			$	1,048,478			$	1,399,786

(1)	On January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) using the cumulative effect method for those contracts that were not substantially completed as of January 1, 2018. See Notes 1 and 2 for further discussion of the Company's adoption of Topic 606.

(2)	Includes management fee revenues from providing management and administrative services to dialysis ventures in which the Company owns a noncontrolling interest or which are wholly-owned by third parties.

F-48

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Depreciation and amortization expense by reportable segment was as follows:

	Year ended December 31,
	2019				2018				2017
U.S. dialysis	$	583,454			$	558,810			$	520,965
Other - Ancillary services	31,698				32,225				38,946
	$	615,152			$	591,035			$	559,911

Summary of assets by reportable segment was as follows:

	Year ended December 31,
	2019				2018
Segment assets
U.S. dialysis (including equity investments of $124,188 and $95,290, respectively)	$	15,778,880			$	12,333,641
Other - Ancillary services(1) (including equity investments of $117,795 and $129,321, respectively)	1,532,514				1,387,046
DMG - Discontinued operations (including equity investments of $0 and $4,833 respectively)	—				5,389,565
Consolidated assets	$	17,311,394			$	19,110,252

(1)	Includes approximately $154,572 and $136,052 in 2019 and 2018, respectively, of net property and equipment related to the Company’s international operations.

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

	Year ended December 31,
	2019				2018				2017
U.S. dialysis	$	681,339			$	856,108			$	769,732
Other - Ancillary services	46,741				45,806				40,377
DMG - Discontinued operations	38,466				85,224				95,141
	$	766,546			$	987,138			$	905,250

26**. Supplemental cash flow information**

The table below provides supplemental cash flow information:

	Year ended December 31,
	2019				2018				2017
Cash paid:
Income taxes, net	$	157,983			$	92,526			$	387,159
Interest	$	473,176			$	488,974			$	424,547
Non-cash investing and financing activities:
Fixed assets under financing lease obligations	$	18,953			$	8,828			$	48,378

F-49

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

27**. Selected quarterly financial data (unaudited)**

	December 31,				September 30,				June 30,				March 31,
2019
Total revenues	$	2,898,584			$	2,904,078			$	2,842,705			$	2,743,112
Operating income	$	462,588			$	378,336			$	461,886			$	340,507
Attributable to DaVita Inc.:
Net income from continuing operations(1)	$	242,242			$	150,113			$	194,223			$	120,254
Net (loss) income from discontinued operations	2,629				(6,843		)		79,328				29,035
Net income	$	244,871			$	143,270			$	273,551			$	149,289
Per share attributable to DaVita Inc.:
Basic net income from continuing operations	$	1.87			$	1.00			$	1.17			$	0.72
Basic net income (loss) from discontinued operations	0.02				(0.05		)		0.47				0.18
Basic net income	$	1.89			$	0.95			$	1.64			$	0.90
Diluted net income from continuing operations	$	1.86			$	0.99			$	1.16			$	0.72
Diluted net income (loss) from discontinued operations	0.02				(0.04		)		0.48				0.18
Diluted net income	$	1.88			$	0.95			$	1.64			$	0.90
2018
Total revenues	$	2,821,124			$	2,847,330			$	2,886,953			$	2,849,444
Operating income	$	387,908			$	289,038			$	438,192			$	410,686
Attributable to DaVita Inc.:
Net income from continuing operations(1)	$	160,332			$	73,371			$	199,603			$	191,015
Net (loss) income from discontinued operations	(310,104		)		(210,167		)		67,673				(12,329		)
Net (loss) income	$	(149,772	)		$	(136,796	)		$	267,276			$	178,686
Per share attributable to DaVita Inc.:
Basic net income from continuing operations	$	0.97			$	0.44			$	1.16			$	1.07
Basic net (loss) income from discontinued operations	(1.87		)		(1.26		)		0.40				(0.07		)
Basic net (loss) income	$	(0.90	)		$	(0.82	)		$	1.56			$	1.00
Diluted net income from continuing operations	$	0.96			$	0.44			$	1.15			$	1.05
Diluted net (loss) income from discontinued operations	(1.86		)		(1.26		)		0.38				(0.07		)
Diluted net (loss) income	$	(0.90	)		$	(0.82	)		$	1.53			$	0.98

(1)	The following table summarizes impairment charges, (gain) loss on changes in ownership interest, restructuring charges, and stock-based compensation modification charges and net acceleration of expense included in operating expenses and charges in 2019 and 2018 by quarter:

	Quarter ended												Quarter ended
	December 31, 2019		September 30, 2019				June 30, 2019		March 31, 2019				December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018
Certain operating expenses and charges:
Impairment charges			$	83,855					$	41,037			$	1,530			$	12,088			$	14,351
(Gain) loss on changes in ownership interest, net													$	(19,437	)		$	1,506			$	(33,957	)
Restructuring charges																	$	11,366
Stock-based compensation modification charges and net acceleration of expense																	$	23,470

F-50

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

28**. 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 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 the New Credit Agreement 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 guaranteeing the New Credit Agreement. The following consolidating statements have been prepared for all periods presented based on the current subsidiary guarantors and non-guarantors stipulated in the Company's New Credit Agreement.

Consolidating Statements of Income

For year ended December 31, 2019		DaVita Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
Dialysis patient service revenues		$	—			$	6,961,825			$	4,226,402			$	(269,806	)		$	10,918,421
Less: Provision for uncollectible accounts		—				(15,296		)		(6,419		)		—				(21,715		)
Net dialysis patient service revenues		—				6,946,529				4,219,983				(269,806		)		10,896,706
Other revenues		804,684				601,394				171,856				(1,086,161		)		491,773
Total revenues		804,684				7,547,923				4,391,839				(1,355,967		)		11,388,479
Operating expenses and charges		642,717				6,631,471				3,826,941				(1,355,967		)		9,745,162
Operating income		161,967				916,452				564,898				—				1,643,317
Debt expense		(482,074		)		(183,272		)		(53,043		)		241,163				(477,226		)
Other income, net		309,623				7,314				46,306				(333,895		)		29,348
Income tax (benefit) expense		(2,616		)		263,563				18,681				—				279,628
Equity earnings in subsidiaries		818,849				429,628				—				(1,248,477		)		—
Net income from continuing operations		810,981				906,559				539,480				(1,341,209		)		915,811
Net income from discontinued operations, net of tax		—				—				12,751				92,732				105,483
Net income		810,981				906,559				552,231				(1,248,477		)		1,021,294
Less: Net income attributable to noncontrolling interests		—				—				—				(210,313		)		(210,313		)
Net income attributable to DaVita Inc.		$	810,981			$	906,559			$	552,231			$	(1,458,790	)		$	810,981

F-51

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Consolidating Statements of Income - (continued)

For year ended December 31, 2018		DaVita Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
Dialysis patient service revenues		$	—			$	6,834,865			$	4,096,666			$	(221,550	)		$	10,709,981
Less: Provision for uncollectible accounts		—				(34,977		)		(14,610		)		—				(49,587		)
Net dialysis patient service revenues		—				6,799,888				4,082,056				(221,550		)		10,660,394
Other revenues		799,230				488,086				558,079				(1,100,938		)		744,457
Total revenues		799,230				7,287,974				4,640,135				(1,322,488		)		11,404,851
Operating expenses and charges		646,640				6,551,328				4,003,547				(1,322,488		)		9,879,027
Operating income		152,590				736,646				636,588				—				1,525,824
Debt expense		(491,749		)		(201,496		)		(43,414		)		249,224				(487,435		)
Other income, net		418,839				3,430				29,132				(441,312		)		10,089
Income tax expense		23,482				155,372				79,546				—				258,400
Equity earnings in subsidiaries		103,196				388,737				—				(491,933		)		—
Net income from continuing operations		159,394				771,945				542,760				(684,021		)		790,078
Net loss from discontinued operations, net of tax		—				—				(649,126		)		192,088				(457,038		)
Net income (loss)		159,394				771,945				(106,366		)		(491,933		)		333,040
Less: Net income attributable to noncontrolling interests		—				—				—				(173,646		)		(173,646		)
Net income (loss) attributable to DaVita Inc.		$	159,394			$	771,945			$	(106,366	)		$	(665,579	)		$	159,394

For year ended December 31, 2017		DaVita Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
Dialysis patient service revenues		$	—			$	6,417,574			$	3,848,172			$	(172,076	)		$	10,093,670
Less: Provision for uncollectible accounts		—				(322,085		)		(170,447		)		7,168				(485,364		)
Net dialysis patient service revenues		—				6,095,489				3,677,725				(164,908		)		9,608,306
Other revenues		793,751				408,460				1,080,832				(1,014,715		)		1,268,328
Total net revenues		793,751				6,503,949				4,758,557				(1,179,623		)		10,876,634
Operating expenses and charges		527,942				5,331,545				4,384,015				(1,179,623		)		9,063,879
Operating income		265,809				1,172,404				374,542				—				1,812,755
Debt expense		(426,149		)		(200,953		)		(43,490		)		239,958				(430,634		)
Other income, net		411,731				5,979				23,657				(423,702		)		17,665
Income tax expense		65,965				210,068				47,826				—				323,859
Equity earnings in subsidiaries		478,192				460,261				—				(938,453		)		—
Net income from continuing operations		663,618				1,227,623				306,883				(1,122,197		)		1,075,927
Net loss from discontinued operations, net of tax		—				—				(429,116		)		183,744				(245,372		)
Net income (loss)		663,618				1,227,623				(122,233		)		(938,453		)		830,555
Less: Net income attributable to noncontrolling interests		—				—				—				(166,937		)		(166,937		)
Net income (loss) attributable to DaVita Inc.		$	663,618			$	1,227,623			$	(122,233	)		$	(1,105,390	)		$	663,618

F-52

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Consolidating Statements of Comprehensive Income

For the year ended December 31, 2019		DaVita Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
Net income		$	810,981			$	906,559			$	552,231			$	(1,248,477	)		$	1,021,294
Other comprehensive income (loss)		7,528				—				(20,102		)		—				(12,574		)
Total comprehensive income		818,509				906,559				532,129				(1,248,477		)		1,008,720
Less: Comprehensive income attributable to noncontrolling interest		—				—				—				(210,313		)		(210,313		)
Comprehensive income attributable to DaVita Inc.		$	818,509			$	906,559			$	532,129			$	(1,458,790	)		$	798,407
For the year ended December 31, 2018
Net income (loss)		$	159,394			$	771,945			$	(106,366	)		$	(491,933	)		$	333,040
Other comprehensive income (loss)		6,153				—				(45,944		)		—				(39,791		)
Total comprehensive income (loss)		165,547				771,945				(152,310		)		(491,933		)		293,249
Less: Comprehensive income attributable to noncontrolling interest		—				—				—				(173,646		)		(173,646		)
Comprehensive income (loss) attributable to DaVita Inc.		$	165,547			$	771,945			$	(152,310	)		$	(665,579	)		$	119,603
For the year ended December 31, 2017
Net income (loss)		$	663,618			$	1,227,623			$	(122,233	)		$	(938,453	)		$	830,555
Other comprehensive income (loss)		3,106				—				99,770				—				102,876
Total comprehensive income (loss)		666,724				1,227,623				(22,463		)		(938,453		)		933,431
Less: Comprehensive income attributable to noncontrolling interest		—				—				—				(166,935		)		(166,935		)
Comprehensive income (loss) attributable to DaVita Inc.		$	666,724			$	1,227,623			$	(22,463	)		$	(1,105,388	)		$	766,496

F-53

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Consolidating Balance Sheets

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

F-54

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Consolidating Balance Sheets - (continued)

As of December 31, 2018		DaVita Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
Cash and cash equivalents		$	60,653			$	1,232			$	261,153			$	—			$	323,038
Restricted cash and equivalents		1,005				12,048				79,329				—				92,382
Accounts receivable, net		—				1,204,122				654,486				—				1,858,608
Other current assets		37,185				565,974				157,407				—				760,566
Current assets held for sale		—				—				5,389,565				—				5,389,565
Total current assets		98,843				1,783,376				6,541,940				—				8,424,159
Property and equipment, net		491,462				1,584,321				1,317,886				—				3,393,669
Intangible assets, net		153				42,896				75,797				—				118,846
Investments in and advances to affiliates, net		13,522,198				6,196,801				2,498,545				(22,217,544		)		—
Other long-term assets and investments		53,385				90,037				188,196				—				331,618
Goodwill		—				4,806,939				2,035,021				—				6,841,960
Total assets		$	14,166,041			$	14,504,370			$	12,657,385			$	(22,217,544	)		$	19,110,252
Current liabilities		$	1,945,943			$	1,217,526			$	483,933			$	—			$	3,647,402
Current liabilities held for sale		—				—				1,243,759				—				1,243,759
Total current liabilities		1,945,943				1,217,526				1,727,692				—				4,891,161
Intercompany payables		—				2,498,545				6,161,292				(8,659,837		)		—
Long-term debt and other long-term liabilities		7,918,581				687,443				580,028				—				9,186,052
Noncontrolling interests subject to put provisions		598,075				—				—				526,566				1,124,641
Total DaVita Inc. shareholders' equity		3,703,442				10,100,856				3,456,851				(13,557,707		)		3,703,442
Noncontrolling interests not subject to put provisions		—				—				731,522				(526,566		)		204,956
Total equity		3,703,442				10,100,856				4,188,373				(14,084,273		)		3,908,398
Total liabilities and equity		$	14,166,041			$	14,504,370			$	12,657,385			$	(22,217,544	)		$	19,110,252

F-55

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Consolidating Statements of Cash Flow

For the year ended December 31, 2019		DaVita Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
Cash flows from operating activities:
Net income		$	810,981			$	906,559			$	552,231			$	(1,248,477	)		$	1,021,294
Changes in operating assets and liabilities and non-cash items included in net income		(602,288		)		(73,356		)		478,228				1,248,477				1,051,061
Net cash provided by operating activities		208,693				833,203				1,030,459				—				2,072,355
Cash flows from investing activities:
Additions of property and equipment, net		(145,378		)		(310,032		)		(311,136		)		—				(766,546		)
Acquisitions		—				(11,851		)		(89,010		)		—				(100,861		)
Proceeds from asset sales, net of cash divested		3,824,516				1,777				51,099				—				3,877,392
Investments and other items		(4,606		)		(6,676		)		(3,363		)		—				(14,645		)
Net cash provided by (used in) investing activities		3,674,532				(326,782		)		(352,410		)		—				2,995,340
Cash flows from financing activities:
Long-term debt and related financing costs, net		(2,052,197		)		(10,481		)		(17,513		)		—				(2,080,191		)
Intercompany borrowing		1,267,138				(455,405		)		(811,733		)		—				—
Other items		(2,387,084		)		(53,283		)		(175,892		)		—				(2,616,259		)
Net cash used in financing activities		(3,172,143		)		(519,169		)		(1,005,138		)		—				(4,696,450		)
Effect of exchange rate changes on cash		—				—				(1,760		)		—				(1,760		)
Net increase (decrease) in cash, cash equivalents and restricted cash		711,082				(12,748		)		(328,849		)		—				369,485
Less: Net increase in cash, cash equivalents and restricted cash from discontinued operations		—				—				(423,813		)		—				(423,813		)
Net increase (decrease) in cash, cash equivalents and restricted cash from continuing operations		711,082				(12,748		)		94,964				—				793,298
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 year		$	772,740			$	532			$	435,446			$	—			$	1,208,718

F-56

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Consolidating Statements of Cash Flow - (continued)

For the year ended December 31, 2018		DaVita Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
Cash flows from operating activities:
Net income		$	159,394			$	771,945			$	(106,366	)		$	(491,933	)		$	333,040
Changes in operating assets and liabilities and non-cash items included in net income		(86,070		)		(150,976		)		1,183,713				491,933				1,438,600
Net cash provided by operating activities		73,324				620,969				1,077,347				—				1,771,640
Cash flows from investing activities:
Additions of property and equipment, net		(175,787		)		(425,008		)		(386,343		)		—				(987,138		)
Acquisitions		—				(42,987		)		(140,169		)		—				(183,156		)
Proceeds from asset and business sales, net of cash divested		—				55,184				95,021				—				150,205
Investments and other items		30,962				(8,286		)		(8,230		)		—				14,446
Net cash used in investing activities		(144,825		)		(421,097		)		(439,721		)		—				(1,005,643		)
Cash flows from financing activities:
Long-term debt and related financing costs, net		725,889				(8,874		)		(22,238		)		—				694,777
Intercompany borrowing		404,897				(168,224		)		(236,673		)		—				—
Other items		(1,147,934		)		(29,457		)		(142,740		)		—				(1,320,131		)
Net cash used in financing activities		(17,148		)		(206,555		)		(401,651		)		—				(625,354		)
Effect of exchange rate changes on cash		—				—				(3,350		)		—				(3,350		)
Net (decrease) increase in cash, cash equivalents and restricted cash		(88,649		)		(6,683		)		232,625				—				137,293
Less: Net decrease in cash, cash equivalents and restricted cash from discontinued operations		—				—				240,793				—				240,793
Net decrease in cash, cash equivalents and restricted cash from continuing operations		(88,649		)		(6,683		)		(8,168		)		—				(103,500		)
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year		150,307				19,963				348,650				—				518,920
Cash, cash equivalents and restricted cash of continuing operations at end of the year		$	61,658			$	13,280			$	340,482			$	—			$	415,420

F-57

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

Consolidating Statements of Cash Flow - (continued)

For the year ended December 31, 2017		DaVita Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
Cash flows from operating activities:
Net income		$	663,618			$	1,227,623			$	(122,233	)		$	(938,453	)		$	830,555
Changes in operating assets and liabilities and non-cash items included in net income		(533,300		)		(739,023		)		1,416,481				938,453				1,082,611
Net cash provided by operating activities		130,318				488,600				1,294,248				—				1,913,166
Cash flows from investing activities:
Additions of property and equipment, net		(155,972		)		(348,292		)		(400,986		)		—				(905,250		)
Acquisitions		—				(528,588		)		(275,291		)		—				(803,879		)
Proceeds from asset sales		—				25,989				66,347				—				92,336
Investments and other items		211,619				(3,526		)		43,968				—				252,061
Net cash provided by (used in) investing activities		55,647				(854,417		)		(565,962		)		—				(1,364,732		)
Cash flows from financing activities:
Long-term debt and related financing costs, net		173,529				(8,186		)		(10,495		)		—				154,848
Intercompany borrowing		22,589				382,452				(405,041		)		—				—
Other items		(781,697		)		(2,205		)		(137,203		)		—				(921,105		)
Net cash (used in) provided by financing activities		(585,579		)		372,061				(552,739		)		—				(766,257		)
Effect of exchange rate changes on cash		—				—				254				—				254
Net (decrease) increase in cash, cash equivalents and restricted cash		(399,614		)		6,244				175,801				—				(217,569		)
Less: Net decrease in cash, cash equivalents and restricted cash from discontinued operations		—				—				(53,026		)		—				(53,026		)
Net (decrease) increase in cash, cash equivalents and restricted cash from continuing operations		(399,614		)		6,244				228,827				—				(164,543		)
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year		549,921				13,719				119,823				—				683,463
Cash, cash equivalents and restricted cash of continuing operations at end of the year		$	150,307			$	19,963			$	348,650			$	—			$	518,920

F-58

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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

29**. Supplemental data under senior note indentures (unaudited)**

The Company previously disclosed certain unaudited supplemental data concerning entities that do not constitute “Subsidiaries” as defined in the indentures governing the Company’s senior notes with its consolidated financial statements, as required by those indentures. As a result of the sale of the DMG business to Optum on June 19, 2019, the Company no longer has subsidiaries large enough to require this additional unaudited supplemental disclosure under the terms of its senior note indentures.

F-59

EXHIBIT INDEX

2.1		Agreement and Plan of Merger, dated as of May 20, 2012, by and among DaVita Inc., Seismic Acquisition LLC, HealthCare Partners Holdings, LLC, and the Member Representative.(25)
2.2		Amendment, dated as of July 6, 2012, to the Agreement and Plan of Merger, dated as of May 20, 2012, by and among DaVita Inc., Seismic Acquisition LLC, HealthCare Partners Holdings, LLC, and the Member Representative.(22)
2.3		Amendment No. 2, dated as of August 30, 2013, to the Agreement and Plan of Merger, dated as of May 20, 2012, by and among DaVita Inc., Seismic Acquisition LLC, HealthCare Partners Holdings, LLC, and the Member Representative.(4)
2.4		Amendment No. 3, dated as of June 22, 2018, to the Agreement and Plan of Merger, dated as of May 20, 2012, by and among DaVita Inc., Seismic Acquisition LLC, HealthCare Partners Holdings, LLC, and the Member Representative.(26)
2.5		Equity Purchase Agreement, dated as of December 5, 2017, by and among DaVita Inc., Collaborative Care Holdings, LLC, and solely with respect to Section 9.3 and Section 9.18 thereto, UnitedHealth Group Incorporated.(2)
2.6		Amendment No. 1 dated as of September 20, 2018, to that certain Equity Purchase Agreement, dated as of December 5, 2017, by and among DaVita, Inc., a Delaware corporation, Collaborative Care Holdings, LLC, a Delaware limited liability company and a wholly owned subsidiary of Optum, Inc., and solely with respect to Section 9.3 and Section 9.18 thereto, UnitedHealth Group Incorporated, a Delaware corporation.(27)
2.7		Second Amendment to Equity Purchase Agreement by and between DaVita, Inc., a Delaware corporation, and Collaborative Care Holdings, LLC, a Delaware limited liability company, dated as of December 11, 2018, amending that certain Equity Purchase Agreement, dated as of December 5, 2017, by and among DaVita, Inc., Collaborative Care Holdings, LLC, and, solely with respect to Section 9.3 and Section 9.18 thereto, UnitedHealth Group Incorporated (as previously amended).(13)
3.1		Restated Certificate of Incorporation of DaVita Inc., as filed with the Secretary of State of Delaware on November 1, 2016.(1)
3.2		Amended and Restated Bylaws for DaVita Inc. dated as of September 7, 2016.(1)
4.1		Indenture, dated June 13, 2014, by and among DaVita Inc., the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee.(23)
4.2		Form of 5.125% Senior Notes due 2024 and related Guarantee (included in Exhibit 4.1).(23)
4.3		Indenture for the 5.000% Senior Notes due 2025, dated April 17, 2015, by and among DaVita Inc., the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee.(19)
4.4		Form of 5.000% Senior Notes due 2025 and related Guarantee (included in Exhibit 4.3).(19)
4.5		Description of Securities.ü
10.1		Sourcing and Supply Agreement between DaVita Inc. and Amgen USA Inc. effective as of January 6, 2017.(6)**

Page 1 of 5

10.2		Credit Agreement, dated August 12, 2019, by and among DaVita Inc., certain subsidiary guarantors party thereto, the lenders party thereto, Credit Agricole Corporate and Investment Bank, JPMorgan Chase Bank, N.A. and MUFG Bank Ltd., as co-syndication agents, Bank of America, N.A., Barclays Bank PLC, Credit Suisse Loan Funding LLC, Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc. and Suntrust Bank, as co-documentation agents, and Wells Fargo Bank, National Association, as administrative agent, collateral agent and swingline lender.(29)
10.3		First Amendment, dated as of February 13, 2020, to that certain Credit Agreement, dated as of August 12, 2019, by and among DaVita Inc., certain subsidiary guarantors party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent, collateral agent and swingline lender.ü
10.4		Corporate Integrity Agreement, dated as of October 22, 2014, by and among the Office of Inspector General of The Department of Health and Human Services and DaVita Inc.(24)
10.5		Form of Non-Competition and Non-Solicitation Agreement, dated as of May 20, 2012, between DaVita Inc. and Dr. Robert Margolis, Dr. William Chin, Dr. Thomas Paulsen, Mr. Zan Calhoun, and Ms. Lori Glisson. (25)
10.6		Employment Agreement, effective July 25, 2008, between DaVita Inc. and Kent J. Thiry.(14)*
10.7		Amendment to Employment Agreement, effective December 31, 2014, by and between DaVita Inc. and Kent. J. Thiry.(4)*
10.8		Amendment Number Two to Employment Agreement, effective August 20, 2018, by and between DaVita Inc. and Kent J. Thiry.(28)*
10.9		Executive Chairman Agreement between Kent J. Thiry and DaVita, Inc., dated as of April 29, 2019.(15)*
10.10		Restricted Stock Units Agreement, effective as of May 15, 2019, by and between DaVita Inc. and Kent Thiry.(30)*
10.11		Performance Stock Units Agreement, effective as of May 15, 2019, by and between DaVita Inc. and Kent Thiry.(30)*
10.12		Employment Agreement, dated as of April 29, 2019, by and between Javier J. Rodriguez and DaVita Inc.(15)*
10.13		Stock Appreciation Rights Agreement, effective November 4, 2019, by and between Javier J. Rodriguez and DaVita Inc.(32)*
10.14		Employment Agreement, effective February 21, 2017, by and between DaVita Inc. and Joel Ackerman.(9)*
10.15		Employment Agreement, effective April 27, 2016, by and between DaVita HealthCare Partners Inc. and Kathleen A. Waters.(6)*
10.16		Employment Agreement, effective September 22, 2005, by and between DaVita Inc. and James Hilger.(8)*
10.17		Amendment to Mr. Hilger’s Employment Agreement, effective December 12, 2008.(17)*
10.18		Second Amendment to Mr. Hilger’s Employment Agreement, effective December 27, 2012.(20)*
10.19		Third Amendment to Employment Agreement, effective December 31, 2014, by and between DaVita Inc. and James Hilger.(4)*
10.20		Transition Agreement, dated as of July 31, 2018, by and between DaVita Inc. and James Hilger.(26)*

Page 2 of 5

10.21		Employment Agreement, effective April 29, 2015, by and between DaVita HealthCare Partners Inc. and Michael Staffieri.*ü
10.22		Consulting Agreement, effective June 15, 2017, by and between DaVita Inc. and Roger J. Valine.(3)*
10.23		Form of Indemnity Agreement.(12)*
10.24		Form of Indemnity Agreement.(7)*
10.25		DaVita Deferred Compensation Plan.(9)*
10.26		DaVita Voluntary Deferral Plan.(5)*
10.27		Deferred Bonus Plan (Prosperity Plan).(16)*
10.28		Amendment No. 1 to Deferred Bonus Plan (Prosperity Plan).(17)*
10.29		Amended and Restated Employee Stock Purchase Plan.(31)*
10.30		DaVita Inc. Severance Plan for Directors and Above.(4)*
10.31		DaVita Inc. Non-Employee Director Compensation Policy. (18)*
10.32		Amended and Restated DaVita Inc. 2011 Incentive Award Plan.(11)*
10.33		Amendment No. 1 to the Amended and Restated DaVita Inc. 2011 Incentive Award Plan.(32)*
10.34		DaVita Inc. Rule of 65 Policy, adopted on August 19, 2018.(28)*
10.35		Form of Stock Appreciation Rights Agreement-Board members (DaVita Inc. 2011 Incentive Award Plan).(26)*
10.36		Form of 2014 Long Term Incentive Program Stock Appreciation Rights Agreement under the DaVita Inc. 2011 Incentive Award Plan and Long-Term Incentive Program.(10)*
10.37		Form of 2014 Long Term Incentive Program Restricted Stock Units Agreement under the DaVita Inc. 2011 Incentive Award Plan and Long-Term Incentive Program.(10)*
10.38		Form of Stock Appreciation Rights Agreement-Board members (DaVita Inc. 2011 Incentive Award Plan).(21)*
10.39		Form of Stock Appreciation Rights Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(20)*
10.40		Form of Restricted Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(21)*
10.41		Form of Long-Term Incentive Program Award Agreement (For 162(m) designated teammates) (DaVita Inc. 2011 Incentive Award Plan).(20)*
10.42		Form of Long-Term Incentive Program Award Agreement (DaVita Inc. 2011 Incentive Award Plan).(20)*
10.43		Form of Restricted Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(30)*
10.44		Form of Performance Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(30)*

Page 3 of 5

10.45		Form of Stock Appreciation Rights Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(30)*
10.46		Form of Restricted Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(30)*
10.47		Form of Performance Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(30)*
10.48		Form of Stock Appreciation Rights Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(30)*
21.1		List of our subsidiaries.ü
23.1		Consent of KPMG LLP, independent registered public accounting firm.ü
24.1		Powers of Attorney with respect to DaVita. (Included on Page S-1).
31.1		Certification of the Chief Executive Officer, dated February 21, 2020, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.ü
31.2		Certification of the Chief Financial Officer, dated February 21, 2020, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.ü
32.1		Certification of the Chief Executive Officer, dated February 21, 2020, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.ü
32.2		Certification of the Chief Financial Officer, dated February 21, 2020, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.ü
101.INS		XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.ü
101.SCH		Inline XBRL Taxonomy Extension Schema Document.ü
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.ü
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.ü
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.ü
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.ü
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).ü

ü	Included in this filing.
*	Management contract or executive compensation plan or arrangement.
**	Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the SEC.

(1)	Filed on November 2, 2016 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.

(2)	Filed on December 6, 2017 as an exhibit to the Company’s Current Report on Form 8-K.

(3)	Filed on November 7, 2017 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.

(4)	Filed on February 22, 2019 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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(5)	Filed on November 8, 2005 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

(6)	Filed on May 2, 2017 as an exhibit to the Company’s Quarterly Report on 10-Q for the quarter ended March 31, 2017.

(7)	Filed on March 3, 2005 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(8)	Filed on August 7, 2006 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2006.

(9)	Filed on February 24, 2017 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

(10)	Filed on November 6, 2014 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.

(11)	Filed on April 28, 2014 as Appendix A to the Company's Definitive Proxy Statement on Schedule 14A.

(12)	Filed on December 20, 2006 as an exhibit to the Company’s Current Report on Form 8-K.

(13)	Filed on December 17, 2018 as an exhibit to the Company’s Current Report on Form 8-K.

(14)	Filed on July 31, 2008 as an exhibit to the Company’s Current Report on Form 8-K.

(15)	Filed on April 29, 2019 as an exhibit to the Company's Current Report on Form 8-K.

(16)	Filed on February 29, 2008 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

(17)	Filed on February 27, 2009 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

(18)	Filed on May 7, 2019 as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

(19)	Filed on April 17, 2015 as an exhibit to the Company’s Current Report on Form 8-K.

(20)	Filed on March 1, 2013 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

(21)	Filed on August 4, 2011 as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.

(22)	Filed on July 9, 2012 as an exhibit to the Company’s Current Report on Form 8-K.

(23)	Filed on June 16, 2014 as an exhibit to the Company's Current Report on Form 8-K.

(24)	Filed on October 23, 2014 as an exhibit to the Company's Current Report on Form 8-K.

(25)	Filed on May 21, 2012 as an exhibit to the Company's Current Report on Form 8-K.

(26)	Filed on August 1, 2018 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.

(27)	Filed on September 24, 2018 as an exhibit to the Company’s Current Report on Form 8-K.

(28)	Filed on August 23, 2018 as an exhibit to the Company’s Current Report on Form 8-K.

(29)	Filed on August 14, 2019 as an exhibit to the Company’s Current Report on Form 8-K.

(30)	Filed on July 22, 2019 as an exhibit to the Company’s Tender Offer Statement on Schedule TO-I.

(31)	Filed on May 10, 2016 as an appendix to the Company's Proxy Statement on DEF 14A.

(32)	Filed on December 6, 2019 as an appendix to the Company's Proxy Statement on DEF 14A.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this Annual Report on Form 10-K to be signed on our behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on February 21, 2020.

DAVITA INC.
By:		/S/ JAVIER J. RODRIGUEZ
		Javier J. Rodriguez Chief Executive Officer

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Javier J. Rodriguez, Joel Ackerman, and Kathleen Waters, and each of them his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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Signature		Title		Date
/S/ JAVIER J. RODRIGUEZ		Chief Executive Officer		February 21, 2020
Javier J. Rodriguez		(Principal Executive Officer)
/S/ JOEL ACKERMAN		Chief Financial Officer and Treasurer		February 21, 2020
Joel Ackerman		(Principal Financial Officer)
/S/ JAMES K. HILGER		Chief Accounting Officer		February 21, 2020
James K. Hilger		(Principal Accounting Officer)
/S/ KENT J. THIRY		Executive Chairman and Director		February 21, 2020
Kent J. Thiry
/S/ PAMELA M. ARWAY		Director		February 21, 2020
Pamela M. Arway
/S/ CHARLES G. BERG		Director		February 21, 2020
Charles G. Berg
/S/ BARBARA J. DESOER		Director		February 21, 2020
Barbara J. Desoer
/S/ PASCAL DESROCHES		Director		February 21, 2020
Pascal Desroches
/S/ PAUL J. DIAZ		Director		February 21, 2020
Paul J. Diaz
/S/ PETER T. GRAUER		Director		February 21, 2020
Peter T. Grauer
/S/ JOHN M. NEHRA		Director		February 21, 2020
John M. Nehra
/S/ WILLIAM L. ROPER		Director		February 21, 2020
William L. Roper
/S/ PHYLLIS R. YALE		Director		February 21, 2020
Phyllis R. Yale

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DAVITA INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

		Balance at beginning of year				Acquisitions				Amounts charged to income				Amounts written off				Balance at end of year
Description
		(in thousands)
Allowance for uncollectible accounts:
Year ended December 31, 2019		$	52,924			$	—			$	21,715			$	66,311			$	8,328
Year ended December 31, 2018		$	218,399			$	—			$	42,287			$	207,762			$	52,924
Year ended December 31, 2017		$	238,897			$	—			$	478,365			$	498,863			$	218,399

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