XML 94 R16.htm IDEA: XBRL DOCUMENT
v3.19.3

Long-term debt | 9 Months Ended
--- | ---
Sep. 30, 2019
Debt Disclosure [Abstract] |
Long-term debt | Long-term debt Long-term debt was comprised of the following:
|  |  |  |  |  |  | As of September 30, 2019
| September 30, 2019 |  | December 31, 2018 |  | Maturity date |  | Interest rate |  | Estimated fair value(4)
Senior Secured Credit Facilities(1): |  |  |  |  |  |  |  |  |
New Term Loan A | $ | 1,750,000 |  |  | $ |  | 8/12/2024 |  | LIBOR + 1.50% |  | $ | 1,750,000 |
New Term Loan B | 2,750,000 |  |  |  |  |  | 8/12/2026 |  | LIBOR + 2.25% |  | $ | 2,770,625 |
Prior Term Loan A(2) |  |  |  | 675,000 |  |  | 12/24/2019 |  | (3) |  |  | $ | — |
Prior Term Loan A-2(2) |  |  |  | 995,000 |  |  | 12/24/2019 |  | (3) |  |  | $ | — |
Prior Term Loan B |  |  |  | 3,342,500 |  |  | 6/24/2021 |  | (3) |  |  | $ | — |
Prior revolving line of credit(2) |  |  |  | 175,000 |  |  | 12/24/2019 |  | (3) |  |  | $ | — |
Senior Notes: |  |  |  |  |  |  |  |  |
5 1/8% Senior Notes | 1,750,000 |  |  | 1,750,000 |  |  | 7/15/2024 |  | 5.125 | % |  | $ | 1,776,250 |
5% Senior Notes | 1,500,000 |  |  | 1,500,000 |  |  | 5/1/2025 |  | 5.00 | % |  | $ | 1,492,200 |
5 3/4% Senior Notes | — |  |  | 1,250,000 |  |  | 8/15/2022 |  |  |  |  | $ | — |
Acquisition obligations and other notes payable(5) | 181,757 |  |  | 183,979 |  |  | 2019-2027 |  | 5.50 | % |  | $ | 181,757 |
Financing lease obligations(6) | 280,138 |  |  | 282,737 |  |  | 2020-2037 |  | 5.36 | % |  | $ | 280,138 |
Total debt principal outstanding | 8,211,895 |  |  | 10,154,216 |  |  |  |  |  |  |
Discount and deferred financing costs(7) | (75,979 | ) |  | (52,000 | ) |  |  |  |  |  |
| 8,135,916 |  |  | 10,102,216 |  |  |  |  |  |  |
Less current portion | (121,441 | ) |  | (1,929,369 | ) |  |  |  |  |  |
| $ | 8,014,475 |  |  | $ | 8,172,847 |  |  |  |  |  |  |
(1) | As of September 30, 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 September 30, 2019 was 1.50% plus London Interbank Offered Rate (LIBOR) and it matures on August 12, 2024.
(2) | 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.
(3) | 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.
(4) | Fair value estimates are based upon bid and ask quotes 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 condensed consolidated financial statements as of September 30, 2019 at their approximate fair values due to the short-term nature of their settlements.
(5) | 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.
(6) | The interest rate presented for financing lease obligations is their weighted average discount rate.
(7) | As of September 30, 2019, the carrying amount of the Company’s current senior secured credit facilities includes a discount of $6,708 and deferred financing costs of $47,255, and the carrying amount of the Company’s senior notes includes deferred financing costs of $22,016. 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.
Scheduled maturities of long-term debt at September 30, 2019 were as follows:
2019 (remainder of the year) | 29,841 |
2020 | 129,082 |
2021 | 153,120 |
2022 | 168,824 |
2023 | 224,455 |
2024 | 3,171,804 |
Thereafter | 4,334,769 |
The Company closed the DaVita Medical Group (DMG) sale on June 19, 2019 and, as required by 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 nine months ended September 30, 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 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 $10,938 in 2019, $54,688 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. 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 New Credit Agreement contains certain customary affirmative and negative covenants such as various restrictions or limitations on permitted amounts of investments, acquisitions, share repurchases, the 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. In the third quarter of 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 the modified “Dutch auction” tender offer (the Tender Offer) for a total cost of $1,233,886, including fees and expenses, as described in Note 14 to these condensed consolidated financial statements. The remaining 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 first nine months of 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. The Company did not have any regularly scheduled principal payments under its new senior secured credit facilities during the first nine months of 2019. As a result of the transactions described above, the Company recognized debt prepayment, refinancing and redemption charges of $21,242 and $33,402 in the three and nine month periods ended September 30, 2019, respectively, 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. The $21,242 of such charges recognized in the third quarter of 2019 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. The $12,160 of such charges recognized in the second quarter of 2019 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 thereof. As of September 30, 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 $1,000,000 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 the fair values of these cap agreements are reported in other comprehensive income. The amortization of the original cap premium is recognized as a component of debt expense on a straight-line basis over the terms of the cap agreements. These cap agreements do not contain credit-risk contingent features. In August 2019, the Company entered into several forward interest rate cap agreements with a notional amount of $3,500,000 that have the economic effect of capping the Company's maximum exposure to LIBOR variable interest rate changes on specific portions of the Company's floating rate debt (2019 cap agreements). These 2019 cap agreements are designated as cash flow hedges and, as a result, changes in their fair values are reported in other comprehensive income. These 2019 cap agreements do not contain credit-risk contingent features, and become effective on June 30, 2020. The following table summarizes the Company’s interest rate cap agreements outstanding as of September 30, 2019 and December 31, 2018, which are classified in "Other long-term assets" on its consolidated balance sheet:
|  |  |  |  |  |  |  |  | Nine months ended September 30, 2019 |  | Fair value
| Notional amount |  | LIBOR maximum rate |  | Effective date |  | Expiration date |  | Debt expense |  | Recorded OCI loss |  | September 30, 2019 |  | December 31, 2018
2015 cap agreements | $ | 3,500,000 |  |  | 3.50% |  | 6/29/2018 |  | 6/30/2020 |  | $ | 6,428 |  |  | $ | 851 |  |  | $ | — |  |  | $ | 851 |
2019 cap agreements | $ | 3,500,000 |  |  | 2.00% |  | 6/30/2020 |  | 6/30/2024 |  |  |  | $ | 1,393 |  |  | $ | 20,642 |  |  |
The following table summarizes the effects of the Company’s interest rate cap agreements for the three and nine months ended September 30, 2019 and 2018:
|  | Amount of unrecognized (losses) gains in OCI on interest rate cap agreements |  | Income statement location |  | Reclassification from accumulated other comprehensive income into net income
|  | Three months ended September 30, |  | Nine months ended September 30, |  |  | Three months ended September 30, |  | Nine months ended September 30,
Derivatives designated as cash flow hedges |  | 2019 |  | 2018 |  | 2019 |  | 2018 |  |  | 2019 |  | 2018 |  | 2019 |  | 2018
Interest rate cap agreements |  | $ | (1,420 | ) |  | $ | 50 |  |  | $ | (2,244 | ) |  | $ | 1,103 |  |  | Debt expense |  | $ | 2,101 |  |  | $ | 2,163 |  |  | $ | 6,428 |  |  | $ | 6,303 |
Related income tax |  | 360 |  |  | (13 | ) |  | 572 |  |  | (284 | ) |  | Related income tax |  | (532 | ) |  | (557 | ) |  | (1,646 | ) |  | (1,623 | )
Total |  | $ | (1,060 | ) |  | $ | 37 |  |  | $ | (1,672 | ) |  | $ | 819 |  |  |  |  | $ | 1,569 |  |  | $ | 1,606 |  |  | $ | 4,782 |  |  | $ | 4,680 |
See Note 15 to these condensed consolidated financial statements 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 the third quarter of 2019 was 4.30%, based on the current margins in effect for the new Term Loan A and the new Term Loan B as of September 30, 2019, as described above. The Company’s overall weighted average effective interest rate for the three and nine months ended September 30, 2019 was 5.09% and 5.14%, respectively, and as of September 30, 2019 was 4.66%. As of September 30, 2019, the Company’s interest rates are fixed on approximately 44.03% of its total debt. As of September 30, 2019, the Company has an undrawn revolving line of credit under its new senior secured credit facilities of $1,000,000, for which approximately $13,055 was committed for outstanding letters of credit. The Company also has approximately $59,723 of outstanding letters of credit under a separate bilateral secured letter of credit facility.

X
- References No definition available. + Details
Name: | us-gaap_DebtDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for long-term debt. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
Name: | us-gaap_LongTermDebtTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration