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Acquisitions and Divestitures | 12 Months Ended
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Dec. 31, 2016
Business Combinations [Abstract] |
Acquisitions and divestitures |
21. | Acquisitions and divestitures
Change in ownership interests in Asia Pacific joint venture On August 1, 2016, the Company consummated an agreement with Khazanah Nasional Berhad (Khazanah) and Mitsui and Co., Ltd (Mitsui) whereby Khazanah and Mitsui subscribed to invest a total of $300,000 over three years in exchange for a 40% total equity interest in the Company’s APAC JV. Khazanah and Mitsui each made related initial investments of $50,000 in this business on August 1, 2016. Based on the governance structure and voting rights put in place upon the formation of the APAC JV, certain key decisions affecting the JV’s operations are no longer at the unilateral discretion of the Company, but rather are shared with the noncontrolling investors. As a result, the Company deconsolidated its Asia Pacific dialysis business in the third quarter and recognized a non-cash non-taxable gain of $374,374 on its retained investment, net of contingent obligations. This retained interest was adjusted to the Company’s proportionate share of the estimated fair value of the business, as implied by the Khazanah and Mitsui investment and adjusted for certain time value of money and uncertainty discounts. Subsequent to the deconsolidation, the Company’s retained interest in the APAC JV is accounted for under the equity method. The calculation of the Company’s non-cash gain on its retained investment in the APAC JV is based upon the best information available to management and will be finalized when certain information arranged to be obtained has been received, including issuance of the final valuation report by an independent third party and certain post-closing adjustments subject to audit of the APAC JV’s financial statements. Sales of Tandigm Health and DMG Arizona ownership interests Effective June 30, 2016, the Company sold a portion of DMG’s ownership interest in the Tandigm Health (Tandigm) joint venture, reducing its ownership from fifty percent to nineteen percent and resulting in a gain of $40,280. In addition, on June 1, 2016, the Company sold its DMG Arizona business, resulting in a loss of $10,489. Acquisition of TEC On March 1, 2016, the Company completed its acquisition of The Everett Clinic (TEC) pursuant to an agreement and plan of merger dated November 23, 2015, whereby TEC became a 100% consolidated subsidiary of DMG. TEC has 500 providers in primary and specialty care locations throughout Snohomish County, Washington who care for more than 315,000 patients. The total consideration paid at closing for all outstanding common units of TEC was approximately $393,687, net of cash acquired, plus the assumption of certain liabilities totaling approximately $7,284. The initial purchase price allocation for the acquisition of TEC is recorded at estimated fair values based upon the best information available to management and will be finalized when certain information arranged to be obtained has been received. The fair values of property and equipment and intangible assets were valued by an independent third party and are pending issuance of the final valuation report. Certain income tax amounts are pending issuance of final tax returns. The following table summarizes the assets acquired and liabilities assumed in this transaction and recognized at the acquisition date at their estimated fair values:
Current assets, net of cash acquired |  | $ | 91,591 |
Property and equipment |  |  | 108,533 |
Covenant not-to-compete |  |  | 3,200 |
Amortizable intangible and other long-term assets |  |  | 30,850 |
Goodwill |  |  | 244,502 |
Liabilities assumed |  |  | (50,940 | )
Long-term deferred income taxes |  |  | (16,880 | )
Noncontrolling interests |  |  | (9,885 | )
|  | $ | 400,971 |
Amortizable intangible assets acquired in this acquisition have a weighted average estimated useful life of six years. None of the goodwill recognized in this acquisition is expected to be deductible for tax purposes. The noncontrolling interests assumed as part of the acquisition are stated at estimated fair value based on the estimated fair value of the underlying assets and liabilities of each non-wholly-owned entity. The operating results of TEC are included in the Company’s consolidated financial statements from March 1, 2016. Other routine acquisitions During 2016, the Company acquired eight dialysis centers in the U.S., 21 dialysis centers outside the U.S., and other medical businesses for a total of $170,169 in net cash, earn-outs of $1,511, and deferred purchase price and liabilities assumed of $18,373. During 2015, the Company acquired dialysis-related and other ancillary businesses consisting of six dialysis centers in the U.S., 21 dialysis centers outside the U.S., three vascular access centers, and other medical businesses for a total of $96,469 in net cash and deferred purchase price and earn-outs of $8,395. During 2014, the Company acquired dialysis-related and other ancillary businesses consisting of 18 dialysis centers in the U.S., seven dialysis centers outside the U.S. and other medical businesses for a total of $272,094 in net cash and deferred purchase price of $23,781. 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 2016 acquisitions, certain income tax amounts are pending final evaluation and quantification of any pre-acquisition tax contingencies. In addition, valuation of medical claims liabilities and certain other working capital items relating to several of these acquisitions are pending final quantification. The following table summarizes the assets acquired and liabilities assumed in 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, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Current assets |  | $ | 3,996 |  |  | $ | 3,843 |  |  | $ | 915 |
Property and equipment |  |  | 9,407 |  |  |  | 12,436 |  |  |  | 5,999 |
Customer relationships |  |  | — |  |  |  | — |  |  |  | 74,515 |
Non-compete agreements |  |  | 5,395 |  |  |  | 8,959 |  |  |  | 16,585 |
Amortizable intangible and other long-term assets |  |  | 986 |  |  |  | 4,345 |  |  |  | 4,193 |
Goodwill |  |  | 203,326 |  |  |  | 97,093 |  |  |  | 221,514 |
Long-term deferred income taxes |  |  | 597 |  |  |  | (1,467 | ) |  |  | — |
Noncontrolling interests assumed |  |  | (30,337 | ) |  |  | (18,905 | ) |  |  | (25,963 | )
Liabilities assumed |  |  | (3,317 | ) |  |  | (1,440 | ) |  |  | (1,883 | )
Aggregate purchase cost |  | $ | 190,053 |  |  | $ | 104,864 |  |  | $ | 295,875 |
Amortizable intangible assets acquired during 2016, 2015 and 2014 had weighted-average estimated useful lives of seven, eight and ten years, respectively. The majority of the intangible assets acquired relate to non-compete agreements and customer relationships. The weighted-average amortization period for customer relationships was ten years for 2014. The weighted-average amortization period for non-compete agreements was seven years for 2016, and eight years for both 2015 and 2014. The total amount of goodwill deductible for tax purposes associated with these acquisitions for 2016, 2015, and 2014 was approximately $173,718, $73,733 and $175,247, respectively. Other pending transactions On August 9, 2016, the Company entered into an amendment to its agreement to acquire Colorado-based Renal Ventures Limited, LLC (Renal Ventures). As a result of the amended agreement, the Company will acquire a 100 percent interest in all 38 outpatient dialysis centers owned by Renal Ventures, including one new center under construction, and a fifty-one percent interest in one vascular access clinic. The purchase price will be approximately $360,000 in cash, subject to, among other things, adjustments for certain items such as working capital. The transaction is subject to approval by the Federal Trade Commission (FTC), including Hart-Scott-Rodino antitrust clearance. The Company anticipates that it will be required by the FTC to divest some outpatient dialysis centers as a condition of the transaction. The Company expects the transaction to close in mid 2017. Pro forma financial information (unaudited) The following summary, prepared on a pro forma basis, combines the results of operations as if all acquisitions in 2016 and 2015 had been consummated as of the beginning of 2015, including the impact of certain adjustments such as amortization of intangibles, interest expense on acquisition financing and income tax effects.
|  | Year ended December 31, |
|  | 2016 |  |  | 2015 |
|  | (unaudited) |
Pro forma net revenues |  | $ | 14,875,592 |  |  | $ | 14,342,138 |
Pro forma net income attributable to DaVita Inc. |  |  | 884,284 |  |  |  | 280,124 |
Pro forma basic net income per share attributable to DaVita Inc. |  |  | 4.39 |  |  |  | 1.32 |
Pro forma diluted net income per share attributable to DaVita Inc. |  |  | 4.32 |  |  |  | 1.30 |
Contingent earn-out obligations The Company has several contingent earn-out obligations associated with acquisitions that could result in the Company paying the former shareholders of acquired companies a total of up to approximately $19,557 if certain EBITDA, operating income performance targets or quality margins are met over the next one to eight years. Contingent earn-out obligations are remeasured to fair value at each reporting date until the contingencies are resolved with changes in the liability due to the remeasurement recorded in earnings. See Note 24 to these consolidated financial statements for further details. As of December 31, 2016, the Company has estimated the fair value of these contingent earn-out obligations to be $9,977, of which a total of $7,217 is included in other liabilities and the remaining $2,760 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, 2016:
Beginning balance January 1, 2016 |  | $ | 34,135 |
Contingent earn-out obligations associated with acquisitions |  |  | 1,511 |
Remeasurement of fair value |  |  | (4,132 | )
Payments of contingent earn-out obligations |  |  | (21,537 | )
|  | $ | 9,977 |

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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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