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Stock-based compensation and shareholders' equity | 12 Months Ended
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Dec. 31, 2013
Stock-based compensation and shareholders' equity |
19. | Stock-based compensation and shareholders’ equity
Stock split In the third quarter of 2013, the Board of Directors approved a two-for-one stock split of the Company’s common stock in the form of a stock dividend payable on September 6, 2013 to stockholders of record on August 23, 2013. The Company’s common stock began trading on a post-split basis on September 9, 2013. All share and per share data for all periods presented have been adjusted to reflect the effects of the stock split. Stock-based compensation The Company’s stock-based compensation awards are measured at their estimated fair values on the date of grant if settled in shares or at their estimated fair values at the end of each reporting period if settled in cash. The value of stock-based awards so measured is recognized as compensation expense on a cumulative straight-line basis over the vesting terms of the awards, adjusted for expected forfeitures. Stock-based compensation to be settled in shares is recorded to the Company’s shareholders’ equity, while stock-based compensation to be settled in cash is recorded to a liability. Shares issued upon exercise of stock awards are generally issued from shares held in treasury, if available, otherwise from authorized but not yet issued. Stock-based compensation plans On June 17, 2013, the stockholders of the Company approved an amendment to the DaVita HealthCare Partners Inc. 2011 Incentive Award Plan to increase the number of shares of common stock available for issuance under the Plan by 17,000,000 shares. On June 11, 2012, the Company’s stockholders approved an amendment to the Company’s 2011 Incentive Award Plan (the 2011 Plan) to increase the number of shares of common stock available for issuance under the plan by 9,000,000 shares and to increase the amount by which share reserves under the plan are reduced by grants of full value share awards to 3.5 times from 3.0 times the number of shares subject to the award. On June 6, 2011 the Company’s stockholders approved the Company’s 2011 Incentive Award Plan, which constituted an amendment and restatement of the Company’s 2002 Equity Compensation Plan (the 2002 Plan, and jointly the Plan). The Company’s 2011 Incentive Award 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, and is designed to enable the Company to grant equity and cash awards that qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. 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 Plan at a ratio of 3.0:1, which was changed to 3.5:1 by the June 11, 2012 amendment. The Company’s nonqualified stock appreciation rights and stock units awarded under the Plan generally vest over 48 to 60 months from the date of grant. At December 31, 2013, there were 12,956,094 stock-settled stock appreciation rights, 80,000 cash-settled stock appreciation rights, 966,596 stock-settled stock units and 7,734 cash-settled stock units outstanding, and 36,087,383 shares available for future grants, under the Plan. 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 and stock-settled stock unit awards is as follows:
|  | Year ended December 31, 2013 |
|  | 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 |  |  | 13,530,642 |  |  | $ | 37.33 |  |  |  |  |  |  |  | 1,165,054 |  |  |  |  |
Granted |  |  | 3,458,325 |  |  |  | 59.38 |  |  |  |  |  |  |  | 42,651 |  |  |  |  |
Exercised |  |  | (3,178,297 | ) |  |  | 27.45 |  |  |  |  |  |  |  | (172,260 | ) |  |  |  |
Cancelled |  |  | (854,576 | ) |  |  | 40.30 |  |  |  |  |  |  |  | (68,849 | ) |  |  |  |
Outstanding at end of period |  |  | 12,956,094 |  |  | $ | 45.44 |  |  |  | 2.8 |  |  |  | 966,596 |  |  |  | 1.4 |
Exercisable at end of period |  |  | 3,539,501 |  |  | $ | 31.98 |  |  |  | 1.4 |  |  |  | 5,302 |  |  |  | 0.5 |
Weighted-average fair value of grants in 2013 |  | $ | 13.47 |  |  |  |  |  |  |  |  |  |  | $ | 58.90 |  |  |  |  |
Weighted-average fair value of grants in 2012 |  | $ | 11.28 |  |  |  |  |  |  |  |  |  |  | $ | 54.85 |  |  |  |  |
Weighted-average fair value of grants in 2011 |  | $ | 10.97 |  |  |  |  |  |  |  |  |  |  | $ | 42.64 |  |  |  |  |
Range of SSAR base prices |  | Awards outstanding |  |  | Weighted average exercise price |  |  | Awards exercisable |  |  | Weighted average exercise price |
$20.00–$30.00 |  |  | 1,080,160 |  |  |  | 23.44 |  |  |  | 1,055,863 |  |  |  | 23.32 |
$30.01–$40.00 |  |  | 2,524,525 |  |  |  | 33.28 |  |  |  | 1,733,104 |  |  |  | 32.67 |
$40.01–$50.00 |  |  | 4,186,568 |  |  |  | 42.97 |  |  |  | 746,597 |  |  |  | 42.50 |
$50.01–$60.00 |  |  | 4,815,641 |  |  |  | 57.51 |  |  |  | 3,937 |  |  |  | 54.17 |
$60.01–$70.00 |  |  | 349,200 |  |  |  | 64.55 |  |  |  | — |  |  |  | — |
Total |  |  | 12,956,094 |  |  | $ | 45.44 |  |  |  | 3,539,501 |  |  | $ | 31.98 |
The Company also granted 40,000 cash-settled stock appreciation rights at a weighted average base price of $60.40. Liability-classified awards contributed $338, $175 and $0 to stock-based compensation expense for the years ended December 31, 2013, 2012 and 2011, respectively. As of December 31, 2013 the Company had 87,734 liability-classified share awards outstanding, 16,875 of which were vested, and a total stock-based liability balance of $513. For the years ended December 31, 2013, 2012, and 2011, the aggregate intrinsic value of stock-based awards exercised was $120,775, $228,698 and $98,235, respectively. At December 31, 2013, the aggregate intrinsic value of stock awards outstanding was $295,443 and the aggregate intrinsic value of stock awards exercisable was $111,823. 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. The following assumptions were used in estimating these values and determining the related stock-based compensation 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 stock-settled stock appreciation rights awards granted in the periods indicated is as follows:
|  | Year ended December 31, |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Expected term |  |  | 4.1 years |  |  |  | 3.7 years |  |  |  | 4.2 years |
Expected volatility |  |  | 27.2 | % |  |  | 28 | % |  |  | 30 | %
Expected dividend yield |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | %
Risk-free interest rate |  |  | 0.7 | % |  |  | 0.6 | % |  |  | 1.6 | %
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. 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 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 the fair market value on the first day of the purchase right period or 85% of the 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. Payroll withholdings and lump-sum payments related to the plan, included in accrued compensation and benefits and used to purchase the Company’s common stock for 2013, 2012 and 2011 participation periods, were $12,817, $8,322 and $5,889, respectively. Shares purchased pursuant to the plan’s 2013, 2012 and 2011 participation periods were 237,961, 202,658 and 182,706, respectively. At December 31, 2013, there were 1,134,375 shares remaining available for future grants under this plan. The fair value of employees’ 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 2013, 2012 and 2011, respectively: expected volatility of 28%, 26% and 22%; risk-free interest rate of 0.2%, 0.1% and 0.5%, and no dividends. Using these assumptions, the weighted average estimated fair value of these purchase rights was $14.24, $10.05 and $8.60 for 2013, 2012 and 2011, respectively. Stock-based compensation expense and proceeds For the years ended December 31, 2013, 2012 and 2011, the Company recognized $59,998, $45,384 and $48,718, respectively, in stock-based compensation expense for stock appreciation rights, stock options, stock units and discounted employee stock plan purchases, which is primarily included in general and administrative expenses. The estimated tax benefits recorded for this stock-based compensation in 2013, 2012 and 2011 were $22,187, $16,874 and $18,424, respectively. As of December 31, 2013, there was $89,419 of total estimated unrecognized compensation cost related to nonvested stock-based compensation arrangements under the Company’s equity compensation and stock purchase plans. The Company expects to recognize this cost over a weighted average remaining period of 1.3 years. For the years ended December 31, 2013, 2012 and 2011, the Company received $46,898, $88,964 and $38,199, respectively, in actual tax benefits upon the exercise of stock awards. As a result of the Company issuing SSARs, beginning in 2013, the Company no longer has stock options outstanding and did not receive cash proceeds from stock option exercises during the year ended December 31, 2013. During the years ended December 31, 2012 and 2011, the Company received $2,175 and $5,443, respectively, in cash proceeds from legacy stock option exercises. Stock repurchases During 2013 and 2012, the Company did not repurchase any of its common stock. In 2011, the Company repurchased a total of 7,589,372 shares of its common stock for $323,348, or an average price of $42.61 per share, pursuant to previously announced authorizations by the Board of Directors. As of December 31, 2013, the total outstanding authorization for share repurchases was approximately $358,200. The Company has not repurchased any additional shares of its common stock from January 1, 2014 through February 21, 2014. This stock repurchase program has no expiration date. 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 of Directors and granting the Board of Directors the authority to issue up to five million 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 that, 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 HealthCare Partners Inc.’s ownership interest in consolidated subsidiaries The effects of changes in DaVita HealthCare Partners Inc.’s ownership interest on the Company’s equity are as follows:
|  | Year ended December 31, |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Net income attributable to DaVita HealthCare Partners Inc. |  | $ | 633,446 |  |  | $ | 536,017 |  |  | $ | 478,001 |
(Decrease) increase in paid-in capital for sales of noncontrolling interest |  |  | (1,442 | ) |  |  | 1,064 |  |  |  | (1,299 | )
Decrease in paid-in capital for the purchase of a noncontrolling interest |  |  | (3,119 | ) |  |  | (20,694 | ) |  |  | (9,486 | )
Net transfer to noncontrolling interests |  |  | (4,561 | ) |  |  | (19,630 | ) |  |  | (10,785 | )
Change from net income attributable to DaVita HealthCare Partners Inc. and transfers to noncontrolling interests |  | $ | 628,885 |  |  | $ | 516,387 |  |  | $ | 467,216 |
During 2013, the company acquired additional ownership interests in several existing majority-owned joint ventures for $3,569 in cash and deferred purchase price of $209. In addition in 2012 and 2011, the Company also acquired additional ownership interests in several existing majority-owned joint ventures for $26,761 and $13,689, respectively.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.29-31) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 4.E) -URI http://asc.fasb.org/extlink&oid=27010918&loc=d3e74512-122707 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SAB TOPIC 4.C) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187143-122770 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Article 4 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section C Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(d),(e)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Preferred Stock -URI http://asc.fasb.org/extlink&oid=6521494 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph d -Article 4 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 + Details
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