PR Newswire | Oct 29, 2020 04:01PM EDT

10/29 15:01 CDT

DaVita Inc. 3rd Quarter 2020 Results DENVER, Oct. 29, 2020

DENVER, Oct. 29, 2020 /PRNewswire/ -- DaVita Inc. (NYSE: DVA) announced financial and operating results for the third quarter ended September 30, 2020. During the quarter, notwithstanding the challenges of responding to COVID-19, the Company delivered strong financial and operating results, and continued its focus on patient care and the safety of its patients, caregivers, teammates, and physician partners.

"I am proud of the hard work and dedication of our 65,000 teammates in delivering essential, life-preserving care to our patients," said Javier Rodriguez, CEO of DaVita Inc. "Due to their efforts, we have been able to sustain continuity of care despite the disruption caused by the pandemic, while maintaining our strategic focus on leading the transformation of kidney care."

Financial results for the quarter ended September 30, 2020:

* Consolidated revenues of $2.924 billion. * Operating income of $438 million or 15.0% operating margin. * Diluted earnings per share from continuing operations of $1.28 and adjusted diluted earnings per share from continuing operations of $1.80. * Operating cash flow from continuing operations of $483 million and free cash flow from continuing operations of $287 million. * Refinanced $1.5 billion of 5% senior notes with $1.5 billion of new 3.75% senior notes in August. * Deployed proceeds from issuance of $1.75 billion of 4.625% senior notes in June to redeem $1.75 billion of 5.125% senior notes in July. * Repurchased 8,231,679 shares of our common stock at an average cost of $88.13 per share, including 7,981,679 shares purchased in a "modified" Dutch auction tender offer in September.

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Net incomeattributable (dollars in millions, except per share data)to DaVitaInc.:

Net income from $ 159 $ 150 $ 590 $ 465 continuing operations

Diluted per $ 1.28 $ 0.99 $ 4.72 $ 2.87 share

Adjusted net income from continuing $ 223 $ 232 $ 697 $ 588 operations^ (1)

Diluted per share $ 1.80 $ 1.53 $ 5.58 $ 3.64 adjusted^(1)

Net income $ 159 $ 143 $ 600 $ 566

Diluted per $ 1.28 $ 0.95 $ 4.80 $ 3.50 share

________________________

For definitions of non-GAAP financial measures, see the note titled "Note(1)on Non-GAAP Financial Measures" and related reconciliations beginning on page 15.

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Amount Margin Amount Margin Amount Margin Amount Margin

Operating (dollars in millions)income:

Operating $ 438 15.0 % $ 378 13.0 % $ 1,313 15.2 % $ 1,181 13.9 % income

Adjusted operating $ 438 15.0 % $ 462 15.9 % $ 1,364 15.8 % $ 1,306 15.4 % income^ (1)(2)

________________________

For definitions of non-GAAP financial measures, see the note titled "Note(1) on Non-GAAP Financial Measures" and related reconciliations beginning on page 15.

(2) Adjusted operating income margin is adjusted operating income divided by consolidated revenues.

U.S. dialysis metrics:

Volume: Total U.S. dialysis treatments for the third quarter of 2020 were 7,656,173, or an average of 96,914 treatments per day, representing a per day decrease of 0.2% compared to the third quarter of 2019. Normalized non-acquired treatment growth in the third quarter of 2020 compared to the third quarter of 2019 was 0.6%.

Three months ended Nine months ended Quarter September 30, June 30, September 30, September 30, Year to date change 2020 2020 2020 2019 change

Per treatmentmetrics:

Revenue $ 349.63 $ 352.26 $ (2.63) $ 349.82 $ 349.26 $ 0.56

Patient care $ 232.57 $ 238.02 $ (5.45) $ 235.97 $ 239.90 $ (3.93)costs

General and $ 39.62 $ 27.78 $ 11.84 $ 31.56 $ 28.80 $ 2.76administrative

Primary drivers of the changes in the table above were as follows:

Revenue:The quarter change was primarily due to a decrease in commercial revenue per treatment, unfavorable changes in government payor mix and a decline in calcimimetics revenue per treatment, partially offset by increases in inpatient dialysis service revenue and Medicare rates due to the temporary suspension of Medicare sequestration. The year to date change was primarily due to favorable changes in government and commercial revenue per treatment, including an increase in Medicare rates due to the base rate increase in 2020 and the temporary suspension of Medicare sequestration, and an increase in inpatient dialysis services revenue, partially offset by a decline in calcimimetics revenue per treatment.

Patient care costs:The quarter change was primarily due to decreases in COVID-19-related costs, including compensation expense, and pharmaceutical intensity, partially offset by increases in health benefit expenses and other direct dialysis center operating expenses. The year to date change was primarily due to decreases in pharmaceutical unit costs, other direct dialysis center operating expenses, and health benefit expenses, partially offset by an increase in labor costs and COVID-19-related costs, including compensation expense.

General and administrative: The quarter change was primarily due to increases in advocacy costs, as described below, contributions to our charitable foundation and compensation expense. The year to date change was primarily due to increases in advocacy costs, as described below, contributions to our charitable foundation and compensation expense including costs related to COVID-19. These increases were partially offset by decreases in travel expenses, long-term incentive compensation expense and health benefit expenses.

Certain items impacting the quarter:

Share repurchases: The following table summarizes our common stock repurchases during the three months ended September 30, 2020.

Three months ended September 30, 2020

Shares Amount paid Average paid

repurchased (in millions) per share

Tender offer^(1) 7,981,679 $ 704 $ 88.22

Open market repurchases 250,000 21 85.04

8,231,679 $ 725 $ 88.13

________________________

The aggregate amount paid for shares repurchased pursuant to our tender(1) offer during the three months ended September 30, 2020 includes the clearing price of $88.00 per share plus related fees and expenses of $1.8 million.

Subsequent to September 30, 2020 through October 28, 2020, we repurchased 1,827,836 shares of our common stock for $161 million at an average cost of $87.96 per share.

Debt transactions: In August 2020, we issued $1.5 billion in aggregate principal amount of 3.75% senior notes due 2031 and used the net proceeds from these 3.75% senior notes, together with cash on hand, to redeem in full all $1.5 billion in aggregate principal amount of our outstanding 5% senior notes due 2025, including payment of accrued interest and a redemption premium. We also redeemed in full our $1.75 billion in aggregate principal amount of our outstanding 5.125% senior notes due 2024, including payment of accrued interest and a redemption premium, in July 2020 with the proceeds from our $1.75 billion in aggregate principal amount of 4.625% senior notes due 2030 issued in June 2020, together with cash on hand.

Advocacy costs: During the three months ended September 30, 2020, we incurred advocacy costs of approximately $66 million to counter union policy efforts, including a California ballot initiative. These costs are included in the U.S. dialysis segment's general and administrative expenses.

Financial and operating metrics:

Three months ended Rolling twelve months ended

September 30, September 30,

2020 2019 2020 2019

Cash flow: (dollars in millions)

Operating cash flow $ 483 $ 641 $ 2,175 $ 1,781

Operating cash flow from $ 483 $ 648 $ 2,172 $ 1,602 continuing operations

Free cash flow from continuing $ 287 $ 437 $ 1,393 $ 722 operations ^(1)

________________________

For definitions of non-GAAP financial measures, see the note titled "Note(1) on Non-GAAP Financial Measures" and related reconciliations beginning on page 15.

Three months ended Nine months ended

September 30, 2020 September 30, 2020

Effective income tax rate on:

Income from continuing operations 23.2 % 24.3 %

Income from continuing operations 29.2 % 28.9 % attributable to DaVita Inc.^(1)

Adjusted income from continuing operations attributable to DaVita Inc.^ 28.0 % 28.2 % (1)

________________________

For definitions of non-GAAP financial measures, see the note titled "Note(1) on Non-GAAP Financial Measures" and related reconciliations beginning on page 15.

Center activity: As of September 30, 2020, we provided dialysis services to a total of approximately 238,200 patients at 3,100 outpatient dialysis centers, of which 2,809 centers were located in the United States and 291 centers were located in nine countries outside of the United States. During the third quarter of 2020, we opened a total of 17 new dialysis centers, acquired five dialysis centers and closed eight dialysis centers in the United States. We also acquired eleven dialysis centers, opened one new dialysis center and sold or closed eight dialysis centers outside of the United States during the third quarter of 2020.

Outlook:

The following forward-looking measures and the underlying assumptions involve significant known and unknown risks and uncertainties, including those described below, and actual results may vary materially from these forward-looking measures. In particular, the widespread impact of the COVID-19 pandemic continues to generate significant risk and uncertainty, and as a result, our future results could vary materially from the guidance provided below. We do not provide guidance for diluted net income from continuing operations per share attributable to DaVita Inc., effective income tax rate on income from continuing operations or free cash flow from continuing operations on a basis consistent with United States generally accepted accounting principles (GAAP) nor a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures on a forward-looking basis because we are unable to predict certain items contained in the GAAP measures without unreasonable efforts. These non-GAAP financial measures do not include certain items, including loss on changes in ownership interests, accruals for legal matters, refinancing charges and foreign currency fluctuations, which may be significant. The guidance for our effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. also excludes the amount of third party owners' income and related taxes attributable to non-tax paying entities.

Current 2020 guidance Prior 2020 guidance

Low High Low High

(dollars in millions, except per share data)

Revenue $ 11,500 $ 11,600 $ 11,500 $ 11,700

Adjusted operating income margin 15.3 % 15.6 % 14.0 % 14.75 %

Effective income tax rate onadjusted income from continuing 28.0 % 29.5 % 28.0 % 29.5 %operations attributable toDaVita Inc.

Adjusted diluted net income fromcontinuing operations per share $ 7.35 $ 7.60 $ 6.25 $ 6.75attributable to DaVita Inc.

Capital expenditures from $ 650 $ 690 $ 700 $ 750continuing operations

Free cash flow from continuing $ 1,100 $ 1,250 $ 800 $ 1,000operations

We will be holding a conference call to discuss our results for the third quarter ended September 30, 2020, on October 29, 2020, at 5:00 p.m. Eastern Time. To join the conference call, please dial (877) 918-6630 from the U.S. or (517) 308-9042 from outside the U.S., and provide the operator the password 'Earnings'. A replay of the conference call will be available on our website at investors.davita.com for the following 30 days.

DaVita Inc. and its representatives may from time to time make written and oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), including statements in this release, filings with the Securities and Exchange Commission ("SEC"), reports to stockholders and in meetings with investors and analysts. All statements in this release, during the related presentation or other meetings, other than statements of historical fact, are forward-looking statements and as such are intended to be covered by the safe harbor for "forward-looking statements" provided by the PSLRA. These forward-looking statements could include, among other things, DaVita's response to and the expected future impacts of COVID-19, including statements about our balance sheet and liquidity, our expenses, revenues, billings and collections and future results, potential need, ability or willingness to use any funds under the CARES Act or other government programs, availability or cost of supplies, treatment volumes, mix expectation, such as the percentage or number of patients under commercial insurance, and overall impact on our patients, as well as other statements regarding our future operations, financial condition and prospects, government and commercial payment rates, our ongoing stock repurchase program, and statements related to our guidance and expectations for future periods and the assumptions underlying any such projections. Without limiting the foregoing, statements including the words "expect," "intend," "will," "could," "plan," "anticipate," "believe," and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on DaVita's current expectations and are based solely on information available as of the date of this release. DaVita undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of changed circumstances, new information, future events or otherwise, except as may be required by law. Actual future events and results could differ materially from any forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. These risks and uncertainties include, among other things:

* the continuing impact of the dynamic and evolving COVID-19 pandemic, including, without limitation, on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition and results of operations, the government's response to the COVID-19 pandemic, and the consequences of an extended economic downturn resulting from the impacts of COVID-19, such as a potential negative impact on our commercial mix, any of which may also have the effect of heightening many of the other risks and uncertainties discussed below; * our need, ability and willingness to utilize any funds received under the CARES Act or other government programs, and the consequences of our decisions with respect thereto; * the concentration of profits generated by higher-paying commercial payor plans for which there is continued downward pressure on average realized payment rates, and a reduction in the number or percentage of our patients under such plans, including without limitation as a result of restrictions or prohibitions on the use and/or availability of charitable premium assistance, which may result in the loss of revenues or patients, or our making incorrect assumptions about how our patients will respond to any change in financial assistance from charitable organizations; * noncompliance by us or our business associates with any privacy or security laws or any security breach by us or a third party involving the misappropriation, loss or other unauthorized use or disclosure of confidential information; * the extent to which the ongoing implementation of healthcare reform, or changes in or new legislation, regulations or guidance, enforcement thereof or related litigation, result in a reduction in coverage or reimbursement rates for our services, a reduction in the number of patients enrolled in higher-paying commercial plans or that are enrolled in or select Medicare Advantage plans, or other material impacts to our business; or our making incorrect assumptions about how our patients will respond to any such developments; * a reduction in government payment rates under the Medicare program or other government-based programs and the impact of the Medicare Advantage benchmark structure; * risks arising from potential and proposed federal and/or state legislation, regulation, ballot, executive action or other initiatives, including such initiatives related to healthcare and/or labor matters, such as AB290 and Proposition 23 in California; * the impact of the upcoming election cycle, the political environment and related developments on the current healthcare marketplace and on our business, including with respect to the future of the Affordable Care Act, the exchanges and many other core aspects of the current healthcare marketplace, as well as the composition of the U.S. Supreme Court; * our ability to successfully implement our strategy with respect to home-based dialysis, including maintaining our existing business and further developing our capabilities in a complex and highly regulated environment; * changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to calcimimetics; * legal and compliance risks, such as our continued compliance with complex government regulations; * continued increased competition from dialysis providers and others, and other potential marketplace changes; * our ability to maintain contracts with physician medical directors, changing affiliation models for physicians, and the emergence of new models of care introduced by the government or private sector that may erode our patient base and reimbursement rates, such as accountable care organizations, independent practice associations and integrated delivery systems; * our ability to complete acquisitions, mergers or dispositions that we might announce or be considering, on terms favorable to us or at all, or to integrate and successfully operate any business we may acquire or have acquired, or to successfully expand our operations and services in markets outside the United States, or to businesses outside of dialysis; * uncertainties related to potential payments and/or adjustments under certain provisions of the equity purchase agreement for the sale of our DaVita Medical Group (DMG) business, such as post-closing adjustments and indemnification obligations; * the variability of our cash flows, including without limitation any extended billing or collections cycles; the risk that we may not be able to generate or access sufficient cash in the future to service our indebtedness or to fund our other liquidity needs; and the risk that we may not be able to refinance our indebtedness as it becomes due, on terms favorable to us or at all; * factors that may impact our ability to repurchase stock under our stock repurchase program and the timing of any such stock repurchases, as well as our use of a considerable amount of available funds to repurchase stock; * risks arising from the use of accounting estimates, judgments and interpretations in our financial statements; * impairment of our goodwill, investments or other assets; and * uncertainties associated with the other risk factors set forth in DaVita Inc.'s Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and the risks and uncertainties discussed in any subsequent reports that DaVita has filed or furnished with the SEC from time to time.

The financial information presented in this release is unaudited and is subject to change as a result of subsequent events or adjustments, if any, arising prior to the filing of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

Contact: Jim Gustafson

Investor Relations

DaVita Inc.

(310) 536-2585

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars in thousands, except per share data)

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Dialysispatient $ 2,781,650 $ 2,777,192 $ 8,253,128 $ 8,130,697servicerevenues

Other revenues 142,416 126,886 392,154 359,198

Total revenues 2,924,066 2,904,078 8,645,282 8,489,895

Operatingexpenses andcharges:

Patient care 1,971,719 1,991,172 5,931,732 5,913,860costs

General and 363,280 298,736 943,065 824,887administrative

Depreciationand 156,894 155,915 468,949 456,685amortization

Equityinvestment (5,496) (3,936) (27,681) (11,158)income

Loss onchanges in - - 16,252 -ownershipinterest, net

Goodwillimpairment - 83,855 - 124,892charges

Totaloperating 2,486,397 2,525,742 7,332,317 7,309,166expenses andcharges

Operating 437,669 378,336 1,312,965 1,180,729income

Debt expense (73,658) (88,589) (243,642) (351,774)

Debtprepayment,refinancing (86,074) (21,242) (89,022) (33,402)and redemptioncharges

Other income, 5,395 5,280 10,590 17,863net

Income fromcontinuingoperations 283,332 273,785 990,891 813,416before incometaxes

Income tax 65,792 65,254 240,564 197,938expense

Net incomefrom 217,540 208,531 750,327 615,478continuingoperations

Net (loss)income fromdiscontinued - (6,843) 9,980 102,854operations,net of tax

Net income 217,540 201,688 760,307 718,332

Less: Netincomeattributable (58,866) (58,418) (160,438) (152,222)tononcontrollinginterests

Net incomeattributable $ 158,674 $ 143,270 $ 599,869 $ 566,110to DaVita Inc.

Earnings pershareattributableto DaVitaInc.:

Basic netincome fromcontinuing $ 1.31 $ 1.00 $ 4.81 $ 2.88operations pershare

Basic netincome per $ 1.31 $ 0.95 $ 4.89 $ 3.51share

Diluted netincome fromcontinuing $ 1.28 $ 0.99 $ 4.72 $ 2.87operations pershare

Diluted netincome per $ 1.28 $ 0.95 $ 4.80 $ 3.50share

Weightedaverage sharesfor earningsper share:

Basic 120,905,038 150,675,465 122,582,099 161,147,122

Diluted 123,953,879 151,295,950 124,927,380 161,636,011

Amountsattributableto DaVitaInc.:

Net incomefrom $ 158,674 $ 150,113 $ 589,889 $ 464,590continuingoperations

Net (loss)income from - (6,843) 9,980 101,520discontinuedoperations

Net incomeattributable $ 158,674 $ 143,270 $ 599,869 $ 566,110to DaVita Inc.

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(dollars in thousands)

Three months ended Nine months ended

September 30, September 30,

2020 2019 2020 2019

Net income $ 217,540 $ 201,688 $ 760,307 $ 718,332

Other comprehensive income(loss), net of tax:

Unrealized losses on interestrate cap agreements:

Unrealized losses (1,628) (1,060) (16,470) (1,672)

Reclassifications of net 1,034 1,569 4,280 4,782realized losses into net income

Unrealized gains (losses) onforeign currency translation:

Foreign currency translation 13,171 (44,502) (62,842) (45,790)adjustments

Other comprehensive income 12,577 (43,993) (75,032) (42,680)(loss)

Total comprehensive income 230,117 157,695 685,275 675,652

Less: Comprehensive incomeattributable to noncontrolling (58,866) (58,418) (160,438) (152,222)interests

Comprehensive income $ 171,251 $ 99,277 $ 524,837 $ 523,430attributable to DaVita Inc.

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

Nine months ended September 30,

2020 2019

Cash flows from operating activities:

Net income $ 760,307 $ 718,332

Adjustments to reconcile net income to net cashprovided by operating activities:

Depreciation and amortization 468,949 456,685

Debt prepayment, refinancing and redemption 86,957 33,402charges

Impairment charges - 124,892

Stock-based compensation expense 67,217 47,811

Deferred income taxes 191,783 72,590

Equity investment income, net 3,026 5,131

Loss on sales of business interests, net 16,252 23,022

Other non-cash charges, net (7,980) 24,291

Changes in operating assets and liabilities,net of effect of acquisitions and divestitures:

Accounts receivable (12,405) (182,684)

Inventories (8,445) 9,519

Other receivables and other current assets (62,025) 51,319

Other long-term assets (1,853) 2,324

Accounts payable 445 (106,662)

Accrued compensation and benefits (12,124) (57,930)

Other current liabilities 123,833 140,046

Income taxes (100,160) 57,279

Other long-term liabilities (19,547) (27,542)

Net cash provided by operating activities 1,494,230 1,391,825

Cash flows from investing activities:

Additions of property and equipment (449,896) (547,183)

Acquisitions (112,597) (77,348)

Proceeds from asset and business sales 83,339 3,863,619

Purchase of debt investments held-to-maturity (147,829) (98,322)

Purchase of other debt and equity investments (3,388) (5,160)

Proceeds from debt investments held-to-maturity 148,341 -

Proceeds from sale of other debt and equity 3,434 5,893investments

Purchase of equity method investments (9,613) (8,770)

Distributions from equity method investments 902 1,296

Net cash (used in) provided by investing (487,307) 3,134,025activities

Cash flows from financing activities:

Borrowings 3,826,484 38,519,991

Payments on long-term debt (3,927,411) (40,485,415)

Deferred financing and debt redemption costs (105,705) (84,588)

Purchase of treasury stock (1,025,878) (1,837,022)

Distributions to noncontrolling interests (179,098) (157,170)

Stock award exercises and other share 3,838 7,333issuances, net

Contributions from noncontrolling interests 32,854 44,095

Purchases of noncontrolling interests (6,782) (10,988)

Net cash used in financing activities (1,381,698) (4,003,764)

Effect of exchange rate changes on cash, cash (16,606) (4,178)equivalents and restricted cash

Net increase in cash, cash equivalents and (391,381) 517,908restricted cash

Less: Net decrease in cash, cash equivalentsand restricted cash from discontinued - (423,813)operations

Net (decrease) increase in cash, cashequivalents and restricted cash from continuing (391,381) 941,721operations

Cash, cash equivalents and restricted cash of 1,208,718 415,420continuing operations at beginning of the year

Cash, cash equivalents and restricted cash of $ 817,337 $ 1,357,141continuing operations at end of the period

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except share data)

September 30, December 31,

2020 2019

ASSETS

Cash and cash equivalents $ 710,514 $ 1,102,372

Restricted cash and equivalents 106,823 106,346

Short-term investments 19,360 11,572

Accounts receivable 1,804,390 1,795,598

Inventories 106,254 97,949

Other receivables 548,381 489,695

Prepaid and other current assets 58,512 66,866

Income tax receivable 75,441 19,772

Total current assets 3,429,675 3,690,170

Property and equipment, net of accumulateddepreciation of $4,368,659 and $3,969,566, 3,417,919 3,473,384respectively

Operating lease right-of-use assets 2,834,163 2,830,047

Intangible assets, net of accumulated amortization 118,078 135,684of $75,727 and $81,922, respectively

Equity method and other investments 252,483 241,983

Long-term investments 29,867 36,519

Other long-term assets 96,110 115,972

Goodwill 6,868,377 6,787,635

$ 17,046,672 $ 17,311,394

LIABILITIES AND EQUITY

Accounts payable $ 388,504 $ 403,840

Other liabilities 879,792 756,174

Accrued compensation and benefits 701,968 695,052

Current portion of operating lease liabilities 365,190 343,912

Current portion of long-term debt 163,787 130,708

Income tax payable - 42,412

Total current liabilities 2,499,241 2,372,098

Long-term operating lease liabilities 2,710,550 2,723,800

Long-term debt 7,866,545 7,977,526

Other long-term liabilities 147,371 160,809

Deferred income taxes 765,691 577,543

Total liabilities 13,989,398 13,811,776

Commitments and contingencies

Noncontrolling interests subject to put provisions 1,303,934 1,180,376

Equity:

Preferred stock ($0.001 par value, 5,000,000 - -shares authorized; none issued)

Common stock ($0.001 par value, 450,000,000 sharesauthorized; 126,065,294 and 113,781,317 sharesissued and outstanding at September 30, 2020, 126 126respectively, and 125,842,853 shares issued andoutstanding at December 31, 2019)

Additional paid-in capital 694,132 749,043

Retained earnings 2,031,607 1,431,738

Treasury stock (12,283,977 and zero shares, (1,028,578) -respectively)

Accumulated other comprehensive loss (122,530) (47,498)

Total DaVita Inc. shareholders' equity 1,574,757 2,133,409

Noncontrolling interests not subject to put 178,583 185,833provisions

Total equity 1,753,340 2,319,242

$ 17,046,672 $ 17,311,394

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

(dollars in millions, except for per share and per treatment data)

Three months ended Nine months

ended September 30, June 30, September 30, September 30, 2020 2020 2019 2020

1. Consolidated businessmetrics:

Operating income margin 15.0 % 14.2 % 13.0 % 15.2 %

Adjusted operatingincome margin excluding 15.0 % 16.0 % 15.9 % 15.8 %certain items^(1)(3)

General andadministrative expensesas a percent of 12.4 % 11.0 % 10.3 % 10.9 %consolidated revenues^(2)

Effective income taxrate on income from 23.2 % 24.6 % 23.8 % 24.3 %continuing operations

Effective income taxrate on income fromcontinuing 29.2 % 29.2 % 30.3 % 28.9 %operations attributableto DaVita Inc.^(1)

Effective income taxrate on adjusted incomefrom 28.0 % 28.0 % 27.6 % 28.2 %continuing operationsattributable to DaVitaInc.^(1)

2. Summary of financialresults:

Revenues:

U.S. dialysis patient $ 2,694 $ 2,675 $ 2,691 $ 7,986services and other

Other-Ancillary services

U.S. other 125 116 118 365

International dialysispatient service and 147 129 131 412other

271 245 248 777

Eliminations (41) (40) (36) (117)

Total consolidated $ 2,924 $ 2,880 $ 2,904 $ 8,645revenues

Operating income (loss):

U.S. dialysis $ 471 $ 523 $ 501 $ 1,485

Other-Ancillary services

U.S. (14) (41) (15) (74)

International^(4) 7 1 (83) 25

(7) (40) (98) (49)

Corporate administrative (26) (73) (25) (123)support expenses

Total consolidated $ 438 $ 410 $ 378 $ 1,313operating income

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA - continued

(unaudited)

(dollars in millions, except for per share and per treatment data)

Three months ended Nine months

ended September 30, June 30, September 30, September 30, 2020 2020 2019 2020

3. Summary ofreportable segmentfinancial results:

U.S. dialysis

Revenue:

Dialysis patient $ 2,677 $ 2,667 $ 2,681 $ 7,955service revenues

Other revenues 17 8 10 31

Total operating 2,694 2,675 2,691 7,986revenues

Operating expenses:

Patient care costs 1,781 1,802 1,813 5,366

General and 303 210 235 718administrative

Depreciation and 148 148 148 443amortization

Equity investment (9) (8) (5) (25)income

Total operating 2,224 2,152 2,191 6,501expenses

Segment operating $ 471 $ 523 $ 501 $ 1,485income

4. U.S. dialysisbusiness metrics:

Volume:

Treatments 7,656,173 7,570,908 7,673,191 22,740,403

Number of treatment 79.0 78.0 79.0 234.6days

Average treatments per 96,914 97,063 97,129 96,933day

Per day year over year (0.2) % 0.7 % 2.7 % 0.7 %(decrease) increase

Normalizednon-acquired treatment 0.6 % 1.6 % 2.2 %growth year over year^(5)

Operating netrevenues:

Average patientservice revenue per $ 349.63 $ 352.26 $ 349.41 $ 349.82treatment

Expenses:

Patient care costs per $ 232.57 $ 238.02 $ 236.32 $ 235.97treatment

General andadministrative $ 39.62 $ 27.78 $ 30.63 $ 31.56expenses per treatment

Accounts receivable:

Receivables $ 1,670 $ 1,649 $ 1,719

DSO 58 57 60

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA - continued

(unaudited)

(dollars in millions, except for per share and per treatment data)

Three months ended Nine months

ended September 30, June 30, September 30, September 30, 2020 2020 2019 2020

5. Cash flow:

Operating cash flow $ 483 $ 651 $ 641 $ 1,494

Operating cash flow from $ 483 $ 651 $ 648 $ 1,494continuing operations

Operating cash flow fromcontinuing operations, $ 2,172 $ 2,337 $ 1,602last twelve months

Free cash flow fromcontinuing operations^ $ 287 $ 507 $ 437 $ 977(1)

Free cash flow fromcontinuing operations, $ 1,393 $ 1,543 $ 722last twelve months^(1)

Capital expendituresfrom continuingoperations:

Routine maintenance/IT/ $ 84 $ 74 $ 84 $ 239other

Development and $ 75 $ 63 $ 90 $ 211relocations

Acquisition expenditures $ 68 $ 10 $ 11 $ 113

Proceeds from sale ofself-developed $ 11 $ 42 $ 12 $ 79properties

6. Debt and capitalstructure:

Total debt^(6) $ 8,111 $ 9,886 $ 8,212

Net debt, net of cash $ 7,401 $ 6,957 $ 6,959and cash equivalents^(6)

Leverage ratio (see 2.96x 3.66x 3.21xcalculation on page 14)

Weighted averageeffective interest rate:

During the quarter 3.31 % 3.64 % 5.09 %

At end of the quarter 3.11 % 3.65 % 4.66 %

On the senior securedcredit facilities at end 2.11 % 2.10 % 4.30 %of the quarter

Debt with fixed andcapped rates as apercentage of totaldebt:

Debt with rates fixed by 45 % 54 % 44 %its terms

Debt with rates fixed byits terms or capped by 88 % 90 % 86 %cap agreements

Amount spent on share $ 725 $ - $ 1,748 $ 1,029repurchases

Number of shares 8,231,679 - 30,591,750 12,283,977repurchased

Certain columns, rows or percentages may not sum or recalculate due to the useof rounded numbers.

_________________

These are non-GAAP financial measures. For a reconciliation of these(1) non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, and for a definition of adjusted amounts, see attached reconciliation schedules.

General and administrative expenses includes certain corporate support,(2) long-term incentive compensation, accruals for legal matters, advocacy costs and charitable contributions.

(3) Adjusted operating income margin is adjusted operating income divided by consolidated revenues.

The reported operating income (loss) for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, include foreign(4) currency (losses) gains of approximately $(2.9), $(3.7) and $2.9, respectively, and approximately $3.1 for the nine months ended September 30, 2020.

Normalized non-acquired treatment growth reflects year over year growth in(5) treatment volume, adjusted to exclude acquisitions and other similar transactions, and further adjusted to normalize for the number and mix of treatment days in a given quarter versus the prior year quarter.

The debt amounts as of September 30, 2020, June 30, 2020 and September 30, 2019 presented exclude approximately $80.9, $85.1 and $76.0, respectively,(6) of debt discount and other deferred financing costs related to our senior secured credit facilities and senior notes in effect or outstanding at that time.

DAVITA INC.SUPPLEMENTAL FINANCIAL DATA-continued(unaudited)(dollars in thousands)

Note 1: Calculation of the Leverage Ratio

Under our senior secured credit facilities (the "Credit Agreement") dated August 12, 2019, the leverage ratio is defined as (a) all funded debt plus the face amount of all letters of credit issued, minus unrestricted cash and cash equivalents (including short-term investments) not to exceed $750,000 divided by (b) "Consolidated EBITDA." The leverage ratio determines the interest rate margin payable by the Company for its Term Loan A and revolving line of credit under the Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The calculation below is based on the last twelve months of "Consolidated EBITDA," as of the end of the reported period and pro forma for acquisitions or divestitures that occurred during the period, and "Consolidated net debt" at the end of the reported period, each as defined in the Credit Agreement. The Company's management believes the presentation of "Consolidated EBITDA" is useful to investors to enhance their understanding of the Company's leverage ratio under its Credit Agreement. The leverage ratio calculated by the Company is a non-GAAP measure and should not be considered a substitute for the ratio of total debt to operating income, determined in accordance with GAAP. The Company's calculation of its leverage ratio might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures of other companies.

Rolling twelve months ended

September 30, June 30, September 30,

2020 2020 2019

Net income attributable to DaVita $ 832,131 $ 823,570 $ 624,922Inc. from continuing operations ^(1)

Income taxes 322,254 321,716 249,686

Interest expense 297,145 307,509 437,513

Depreciation and amortization 627,416 626,436 611,841

Impairment charges - 83,855 124,892

Noncontrolling interests and equity 226,307 221,002 210,641investment income, net

Stock-settled stock-based 86,417 80,228 56,784compensation

Debt prepayment, refinancing and 89,022 24,190 33,402redemption charges

Loss (gain) on changes in ownership 16,252 16,252 (28,152)interest, net

Other 18,421 10,264 24,088

"Consolidated EBITDA" $ 2,515,365 $ 2,515,022 $ 2,345,617

September 30, June 30, September 30,

2020 2020 2019

Total debt, excluding debt discountand other deferred financing costs^ $ 8,111,276 $ 9,886,314 $ 8,211,895(2)

Letters of credit issued 64,634 57,452 72,777

8,175,910 9,943,766 8,284,672

Less: Cash and cash equivalents (718,726) (750,000) (750,000)including short-term investments^(3)

Consolidated net debt $ 7,457,184 $ 9,193,766 $ 7,534,672

Last twelve months "Consolidated $ 2,515,365 $ 2,515,022 $ 2,345,617EBITDA"

Leverage ratio 2.96x 3.66x 3.21x

Maximum leverage ratio permitted 5.00x 5.00x 5.00xunder the Credit Agreement

________________________

The net income measure presented is our net income from continuing operations attributable to DaVita Inc., since the Credit Agreement requires(1) divestitures to be reflected on a pro forma basis for our leverage ratio calculation, and this measure of net income already excludes our discontinued operations divested.

The debt amounts as of September 30, 2020, June 30, 2020 and September 30, 2019 presented exclude approximately $80,945, $85,080 and $75,979,(2) respectively, of debt discount and other deferred financing costs related to our senior secured credit facilities and senior notes in effect at that time.

This excludes amounts not readily convertible to cash related to the Company's non-qualified deferred compensation plans for all periods(3) presented. The Credit Agreement limits the amount deducted for cash and cash equivalents, including short-term investments, to the lesser of all unrestricted cash and cash equivalents of the Company or $750,000.

DAVITA INC.RECONCILIATIONS FOR NON-GAAP MEASURES(unaudited)

Note on Non-GAAP Financial Measures

As used in this press release, the term "adjusted" refers to non-GAAP measures as follows, each as reconciled to its most comparable GAAP measure as presented in the non-GAAP reconciliations in the notes to this press release: (i) for income measures, the term "adjusted" refers to operating performance measures that exclude certain items such as impairment charges, (gain) loss on ownership changes, restructuring charges, debt prepayment and refinancing charges and gains and charges associated with settlements; and (ii) the term "effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc." represents the Company's effective tax rate excluding applicable non-GAAP items and noncontrolling owners' income, which primarily relates to non-tax paying entities.

These non-GAAP or "adjusted" measures are presented because management believes these measures are useful adjuncts to GAAP results. However, these non-GAAP measures should not be considered alternatives to the corresponding measures determined under GAAP.

Specifically, management uses adjusted operating income, adjusted net income from continuing operations attributable to DaVita Inc. and adjusted diluted net income from continuing operations per share attributable to DaVita Inc. to compare and evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe these non-GAAP measures also are useful to investors and analysts in evaluating our performance over time and relative to competitors, as well as in analyzing the underlying trends in our business. Furthermore, we believe these presentations enhance a user's understanding of our normal consolidated operating income by excluding certain items which we do not believe are indicative of our ordinary results of operations. As a result, adjusting for these amounts allows for comparison to our normalized prior period results.

In addition, the effective income tax rate on income from continuing operations attributable to DaVita Inc. excludes noncontrolling owners' income, which primarily relates to non-tax paying entities.

The effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. excludes noncontrolling owners' income and certain non-deductible and other charges which we do not believe are indicative of our ordinary results. Accordingly, we believe these adjusted effective income tax rates are useful to management, investors and analysts in evaluating our performance and establishing expectations for income taxes incurred on our ordinary results attributable to DaVita Inc.

Finally, under our definition, free cash flow from continuing operations represents net cash provided by operating activities from continuing operations less distributions to noncontrolling interests and all capital expenditures (including development capital expenditures, routine maintenance and information technology); plus contributions from noncontrolling interests and sale leaseback proceeds. Management uses this measure to assess our ability to fund acquisitions and meet our debt service obligations and we believe this measure is equally useful to investors and analysts as an adjunct to cash flows from operating activities from continuing operations and other measures under GAAP.

It is important to bear in mind that these non-GAAP "adjusted" measures are not measures of financial performance or liquidity under GAAP and should not be considered in isolation from, nor as substitutes for, their most comparable GAAP measures.

The following Notes 2 through 5 provide reconciliations of the non-GAAP financial measures presented in this press release to their most comparable GAAP measures.

DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES - continued

(unaudited)

(dollars in thousands, except for per share data)

Note 2: Adjusted net income from continuing operations and adjusted dilutednet income from continuing operations per share attributable to DaVita Inc.

Three months ended

September 30, 2020 June 30, 2020 September 30, 2019

Dollars Per share Dollars Per share Dollars Per share

Net income fromcontinuingoperations $ 158,674 $ 1.28 $ 201,602 $ 1.62 $ 150,113 $ 0.99attributable toDaVita Inc.

Operatingcharges:

Goodwillimpairment - - - - 83,855 0.55charges

Loss on changesin ownership - - 16,252 0.13 - -interests, net

General andadministrative:

Accruals for - - 35,000 0.28 - -legal matters

Debtprepayment,refinancing and 86,074 0.69 - - 21,242 0.14redemptioncharges

Related income (21,476) (0.17) (10,988) (0.09) (23,236) (0.15)tax

Adjusted netincome fromcontinuing $ 223,272 $ 1.80 $ 241,866 $ 1.95 $ 231,974 $ 1.53operationsattributable toDaVita Inc.

Certain columns or rows may not sum or recalculate due to the use of roundednumbers.

Nine months ended

September 30, 2020 September 30, 2019

Dollars Per share Dollars Per share

Net income from continuingoperations attributable to DaVita $ 589,889 $ 4.72 $ 464,590 $ 2.87Inc.

Operating charges:

Goodwill impairment charges - - 124,892 0.77

Loss on changes in ownership 16,252 0.13 - -interests, net

General and administrative:

Accruals for legal matters 35,000 0.28 - -

Debt prepayment, refinancing and 89,022 0.71 33,402 0.21redemption charges

Related income tax (33,200) (0.27) (35,231) (0.22)

Adjusted net income from continuingoperations attributable to DaVita $ 696,963 $ 5.58 $ 587,653 $ 3.64Inc.

Certain columns or rows may not sum or recalculate due to the use of roundednumbers.

DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES - continued

(unaudited)

(dollars in thousands, except for per share data)

Note 3: Adjusted operating income

Three months ended Nine months ended

September 30, June 30, September 30, September 30, September 30,

2020 2020 2019 2020 2019

Consolidated:

Operating income $ 437,669 $ 409,920 $ 378,336 $ 1,312,965 $ 1,180,729

Operatingcharges:

Goodwillimpairment - - 83,855 - 124,892charges

Loss on changesin ownership - 16,252 - 16,252 -interests, net

General andadministrative:

Accruals for - 35,000 - 35,000 -legal matters

Adjusted $ 437,669 $ 461,172 $ 462,191 $ 1,364,217 $ 1,305,621operating income

Three months ended Nine months ended

September 30, June 30, September 30, September 30, September 30,

2020 2020 2019 2020 2019

Consolidated:

U.S. dialysis:

Segment $ 470,596 $ 522,630 $ 500,742 $ 1,484,833 $ 1,416,680operating income

Other -Ancillaryservices:

U.S.

Segment (13,912) (40,991) (14,928) (74,273) (45,498)operating loss

Loss on changesin ownership - 16,252 - 16,252 -interests, net

Adjusted (13,912) (24,739) (14,928) (58,021) (45,498)operating loss

International

Segmentoperating income 6,826 1,370 (82,797) 24,919 (124,906)(loss)

Goodwillimpairment - - 83,855 - 124,892charges

Adjustedoperating income 6,826 1,370 1,058 24,919 (14)(loss)

Adjusted Other -Ancillary (7,086) (23,370) (13,870) (33,102) (45,513)servicesoperating loss

Corporateadministrativesupportexpenses:

Segment expenses (25,841) (73,088) (24,681) (122,514) (65,546)

Accruals for - 35,000 - 35,000 -legal matters

AdjustedCorporate (25,841) (38,088) (24,681) (87,513) (65,547)administrativesupport expenses

Adjusted $ 437,669 $ 461,172 $ 462,191 $ 1,364,217 $ 1,305,621operating income

Certain columns or rows may not sum or recalculate due to the use of roundednumbers.

DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES - continued

(unaudited)

(dollars in thousands)

Note 4: Effective income tax rates on income from continuing operationsattributable to DaVita Inc.

Three months ended Nine months

ended September 30, June 30, September 30, September 30, 2020 2020 2019 2020

Income from continuingoperations before $ 283,332 $ 338,084 $ 273,785 $ 990,891income taxes

Less: Noncontrollingowners' incomeprimarily attributable (59,216) (53,335) (58,502) (160,923)to non-tax payingentities

Income from continuingoperations beforeincome taxes $ 224,116 $ 284,749 $ 215,283 $ 829,968attributable to DaVitaInc.

Income tax expense for $ 65,792 $ 83,212 $ 65,254 $ 240,564continuing operations

Less: Income taxattributable to (350) (65) (84) (485)noncontrollinginterests

Income tax expense fromcontinuing operations $ 65,442 $ 83,147 $ 65,170 $ 240,079attributable to DaVitaInc.

Effective income taxrate on income fromcontinuing operations 29.2 % 29.2 % 30.3 % 28.9 %attributable to DaVitaInc.

The effective income tax rate on adjusted income from continuing operations attributable to DaVita Inc. is computed as follows:

Three months ended Nine months

ended September 30, June 30, September 30, September 2020 2020 2019 30,

2020

Income from continuingoperations before income $ 283,332 $ 338,084 $ 273,785 $ 990,891taxes

Operating charges:

Goodwill impairment - - 83,855 -charges

Loss on changes in - 16,252 - 16,252ownership interests, net

General andadministrative:

Accruals for legal - 35,000 - 35,000matters

Debt prepayment,refinancing and 86,074 - 21,242 89,022redemption charges

Noncontrolling owners'income primarily (59,216) (53,335) (58,502) (160,923)attributable to non-taxpaying entities

Adjusted income fromcontinuing operationsbefore income taxes $ 310,190 $ 336,001 $ 320,380 $ 970,242attributable to DaVitaInc.

Income tax expense $ 65,792 $ 83,212 $ 65,254 $ 240,564

Add income tax relatedto:

Operating charges:

Goodwill impairment - - 17,768 -charges

Loss on changes in - 2,255 - 2,255ownership interests, net

General andadministrative:

Accruals for legal - 8,733 - 8,733matters

Debt prepayment,refinancing and 21,476 - 5,468 22,212redemption charges

Less income tax relatedto:

Noncontrolling interests (350) (65) (84) (485)

Income tax on adjustedincome from continuing $ 86,918 $ 94,135 $ 88,406 $ 273,279operations attributableto DaVita Inc.

Effective income tax rateon adjusted income fromcontinuing operations 28.0 % 28.0 % 27.6 % 28.2 %attributable to DaVitaInc.

Certain columns, rows or percentages may not sum or recalculate due to the useof rounded numbers.

DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES - continued

(unaudited)

(dollars in thousands)

Note 5: Free cash flow from continuing operations

Three months ended Nine months

ended September 30, June 30, September 30, September 30, 2020 2020 2019 2020

Net cash provided bycontinuing operating $ 482,727 $ 651,122 $ 647,553 $ 1,494,230activities

Less: Distributions to (60,545) (60,422) (61,456) (179,098)noncontrolling interests

Plus: Contributions from 12,272 11,195 12,814 32,854noncontrolling interests

Cash provided bycontinuing operating 434,454 601,895 598,911 1,347,986activities attributableto DaVita Inc.

Less: Expenditures forroutine maintenance and (83,507) (74,196) (83,513) (239,317)information technology

Less: Expenditures for (74,722) (62,529) (89,752) (210,579)development

Plus: Proceeds from saleof self-developed 10,530 41,574 11,616 79,307properties

Free cash flow from $ 286,755 $ 506,744 $ 437,262 $ 977,397continuing operations

Rolling twelve months ended

September 30, June 30, September 30,

2020 2020 2019

Net cash provided by continuing $ 2,172,131 $ 2,336,957 $ 1,602,098operating activities

Less: Distributions to (255,051) (255,962) (213,938)noncontrolling interests

Plus: Contributions from 46,076 46,618 53,227noncontrolling interests

Cash provided by continuingoperating activities attributable to 1,963,156 2,127,613 1,441,387DaVita Inc.

Less: Expenditures for routinemaintenance and information (369,560) (369,566) (363,946)technology

Less: Expenditures for development (299,699) (314,729) (406,309)

Plus: Proceeds from sale of 98,672 99,758 51,058self-developed properties

Free cash flow from continuing $ 1,392,569 $ 1,543,076 $ 722,190operations

Certain columns or rows may not sum or recalculate due to the use of roundednumbers.

View original content to download multimedia: http://www.prnewswire.com/news-releases/davita-inc-3rd-quarter-2020-results-301163382.html

SOURCE DaVita Inc.