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Acquisitions and discontinued operations | 12 Months Ended
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Dec. 31, 2014
Business Combinations [Abstract] |
Acquisitions and discontinued operations |
21. | Acquisitions and discontinued operations
Routine acquisitions During 2014, the Company acquired dialysis-related and other ancillary businesses consisting of 18 dialysis centers in the U.S., 7 dialysis centers outside of the U.S. and other medical businesses for a total of $272,094 in net cash and deferred purchase price and earn-outs of $23,781. During 2013, the Company acquired dialysis-related and other ancillary businesses consisting of 26 dialysis centers in the U.S., 38 dialysis centers outside of the U.S. and other medical businesses for a total of $310,394 in net cash and deferred purchase price of $24,683. During 2012, the Company acquired dialysis-related and other ancillary businesses consisting of 93 dialysis centers in the U.S., 13 dialysis centers outside of the U.S. and other medical businesses for a total of $648,318 in net cash and deferred purchase price of $6,101. 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 2014 acquisitions, certain income tax amounts are pending final evaluation and quantification of any pre-acquisition tax contingencies. The following table summarizes the assets acquired and liabilities assumed in the above described transactions and recognized at their acquisition dates at estimated fair values, as well as the estimated fair value of the noncontrolling interests assumed in these transactions:
|  | Year ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Current assets |  | $ | 915 |  |  | $ | 7,215 |  |  | $ | 18,708 |
Property and equipment |  |  | 5,999 |  |  |  | 23,760 |  |  |  | 41,741 |
Amortizable intangible and other long-term assets |  |  | 95,293 |  |  |  | 80,646 |  |  |  | 90,296 |
Goodwill |  |  | 221,514 |  |  |  | 271,267 |  |  |  | 554,685 |
Long-term deferred income taxes |  |  | — |  |  |  | (5,666 | ) |  |  | (1,838 | )
Noncontrolling interests assumed |  |  | (25,963 | ) |  |  | (22,880 | ) |  |  | (21,962 | )
Liabilities assumed |  |  | (1,883 | ) |  |  | (19,265 | ) |  |  | (27,211 | )
Aggregate purchase cost |  | $ | 295,875 |  |  | $ | 335,077 |  |  | $ | 654,419 |
Amortizable intangible assets acquired during 2014, 2013 and 2012 had weighted-average estimated useful lives of 10, 14 and 17 years, respectively. The majority of the intangibles assets acquired relate to customer relationships and non-compete agreements. The weighted-average amortization period for customer relationships was 10, 17, and 18 years, respectively. The weighted-average amortization period for non-compete agreements was 8, 9, and 8 years, respectively. The total amount of goodwill deductible for tax purposes associated with these acquisitions for 2014, 2013, and 2012 was approximately $175,247, $221,454 and $491,457, respectively. 2012 acquisition of HCP On November 1, 2012, the Company completed the acquisition of HCP pursuant to an Agreement and Plan of Merger dated May 20, 2012, whereby HCP became a wholly-owned subsidiary of the Company. The operating results of HCP are included in the Company’s consolidated financial results from November 1, 2012. The total consideration paid at closing for all of the outstanding common units of HCP was approximately $4,701,231, which consisted of $3,645,759 in cash, net of cash acquired, and 18,760,624 shares of the Company’s common stock valued at approximately $1,055,472. During 2013, the Company paid an additional $5,251 in cash for post-closing working capital adjustments. In addition, the acquisition agreement provides that as further consideration, the Company could have paid the common unit holders of HCP a total of up to an additional $275,000 in cash if certain performance targets were achieved by HCP in 2012 and 2013. These contingent earn-out obligations were settled as discussed below. The following table summarizes the initial assets acquired and liabilities assumed in this transaction and recognized at the acquisition date at their estimated fair values at that date:
Current assets, net of cash acquired |  | $ | 321,235 |
Property and equipment |  |  | 102,382 |
Intangible assets |  |  | 1,882,818 |
Other long-term assets |  |  | 100,143 |
Goodwill |  |  | 3,496,713 |
Current liabilities assumed |  |  | (559,180 | )
Other long-term liabilities |  |  | (169,015 | )
Long-term deferred income taxes |  |  | (184,015 | )
Noncontrolling interests |  |  | (29,850 | )
|  | $ | 4,961,231 |
The initial allocations of purchase price were recorded at the estimated fair values of assets acquired and liabilities assumed based upon the best information available to management. The fair values of property and equipment, intangible assets, and contingent earn-out obligations were estimated by the Company with the assistance of an independent third party. During 2013, the Company completed the final valuations of medical claims reserves, certain noncontrolling interests and certain income tax amounts, including pre-acquisition tax contingencies that were previously unresolved. See below for further details regarding these final adjustments. The amortizable intangible assets acquired in this transaction included $1,453,410 for customer relationships, $170,494 for trade names, $74,650 for non-compete agreements and $184,264 for provider network and practice management tools. See Note 7 to the consolidated financial statements. These amortizable intangible assets and liabilities are scheduled to be amortized on a straight-line method over a weighted-average amortization period of 17.2 years. The weighted-average amortization period for customer relationships is 20.0 years, trade names is 10.6 years, non-compete agreements is 5.7 years, and provider network and practice management tools is 7.0 years. Of the goodwill recognized in this transaction, approximately $2,426,986 is expected to be deductible for tax purposes over the next 14 years, based on actual earn-out payments and assuming all other escrow release conditions are satisfied. Contingent earn-out obligations As a result of HCP achieving certain financial performance targets in 2012, the Company made earn-out payments of $136,954 on April 1, 2013 to the common unit holders of HCP. During 2013, the Company also reached an agreement with the representative of the former owners and option holders of HealthCare Partners Holdings, LLC to settle certain post-closing adjustments, including the 2013 contingent earn-out obligation for $68,750, which resulted in the Company recording a contingent earn-out obligation adjustment of $56,977 in operating income. The Company has several contingent earn-out obligations associated with other acquisitions that could result in the Company paying the former shareholders of those acquired companies a total of up to approximately $134,321 or a portion of that amount if certain EBITDA performance targets and quality margins are met over the next two years, if certain percentages of operating income are met over the next three years or if certain percentages of other annual EBITDA targets are met. As of December 31, 2014, the Company has estimated the fair value of these contingent earn-out obligations to be $39,129. Contingent earn-out obligations will be remeasured to fair value at each reporting date until the contingencies are resolved with changes in the liability due to the re-measurement recorded in earnings. See Note 24 to the consolidated financial statements for further details. Of the total contingent earn-out obligations of $39,129 recognized at December 31, 2014, a total of $15,614 is included in other liabilities and the remaining $23,515 is included in other long-term liabilities in the Company’s consolidated balance sheet. The following is a reconciliation of changes in the contingent earn-out obligations for the year ended December 31, 2014:
Beginning balance, January 1, 2014 |  | $ | 28,058 |
Contingent earn-out obligations associated with acquisitions |  |  | 18,234 |
Remeasurement of fair value |  |  | (4,448 | )
Payments of contingent earn-out obligations |  |  | (2,715 | )
|  | $ | 39,129 |
Discontinued operations Divestiture of HomeChoice Partners, Inc. On February 1, 2013, the Company completed the sale of HomeChoice Partners Inc. (HomeChoice) to BioScrip, Inc. pursuant to a stock purchase agreement (the Agreement) dated December 12, 2012 for $70,000 in cash, subject to various post-closing adjustments, of which the Company receives approximately 90% of the proceeds. The stock purchase agreement also provides that as additional consideration the Company could earn up to a total of 90% of $20,000 if certain performance amounts exceed certain thresholds over the next two years. However, HomeChoice performance amounts did not exceed any of the established thresholds in year one, accordingly, the Company now can only receive up to $9,000 of potential additional consideration under the remaining earn-out period. The Company has not yet assigned any value to this contingent receivable and will only recognize the estimated realizable value of this receivable when it becomes probable and reasonably estimable. The Company recorded a gain of approximately $13,375, net of tax, during 2013, related to this divestiture. The operating results of HomeChoice have been reported as discontinued operations for all periods presented. The results from discontinued operations related to HomeChoice were as follows:
|  | Year ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Net revenues |  |  | — |  |  | $ | 6,351 |  |  | $ | 67,990 |
Loss before income taxes |  |  | — |  |  |  | (223 | ) |  |  | (304 | )
Income tax benefit |  |  | — |  |  |  | (84 | ) |  |  | (82 | )
Loss from discontinued operations |  | $ | — |  |  | $ | (139 | ) |  | $ | (222 | )
Net assets of discontinued operations related to HomeChoice as of February 1, 2013, were as follows:
Current assets |  | $ | 17,039 |
Property and equipment, net |  |  | 2,963 |
Long-term assets |  |  | 28 |
Goodwill |  |  | 31,853 |
Liabilities and noncontrolling interests |  |  | (8,998 | )
Net assets from discontinued operations |  | $ | 42,885 |
Pro forma financial information (unaudited) The following summary, prepared on a pro forma basis, combines the results of operations as if all acquisitions and divestitures in 2014 and 2013 had been consummated as of the beginning of 2013, after including the impact of certain adjustments such as amortization of intangibles, interest expense on acquisition financing and income tax effects.
|  | Year ended December 31, |
|  | 2014 |  |  | 2013 |
|  | (unaudited) |
Pro forma net revenues |  | $ | 12,887,330 |  |  | $ | 12,160,749 |
Pro forma net income attributable to DaVita HealthCare Partners Inc. |  |  | 733,490 |  |  |  | 651,204 |
Pro forma income from continuing operations attributable to DaVita HealthCare Partners Inc. |  |  | 733,490 |  |  |  | 651,204 |
Pro forma basic net income per share attributable to DaVita HealthCare Partners Inc. |  |  | 3.45 |  |  |  | 3.10 |
Pro forma diluted net income per share attributable to DaVita HealthCare Partners Inc. |  |  | 3.38 |  |  |  | 3.03 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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