Acquisitions and divestitures

Acquisition of Renal Ventures

On May 1, 2017, the Company completed its acquisition of 100% of the equity of Colorado-based Renal Ventures Management, LLC (Renal Ventures) for approximately $361,563 in net cash, subject to certain post-closing adjustments. Renal Ventures operated 36 operating dialysis centers, one uncertified dialysis center and one home program that provided services to approximately 2,600 patients in six states. As a part of this transaction, the Company was required to divest three Renal Ventures outpatient dialysis centers, and three outpatient dialysis centers and one uncertified dialysis center of the Company for approximately $21,219 in net cash. The Company also incurred approximately $4,600 in transaction and integration costs during the six months ended June 30, 2017 associated with the acquisition that are included in general and administrative expenses.

The initial purchase price allocation for the Renal Ventures acquisition 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. In particular, certain working capital items, income tax amounts and the fair value of intangibles and fixed assets are pending final audit, issuance of final tax returns and valuation reports.

The following table summarizes the assets acquired and liabilities assumed in the transactions and recognized at the acquisition date at estimated fair values:



Current assets	$	24,529
Property and equipment	36,295
Amortizable intangible and other long-term assets	11,547
Goodwill	296,582
Current liabilities	(6,912		)
Long-term liabilities	(478		)
	$	361,563

The amortizable intangible assets acquired relate to non-compete agreements having a weighted-average useful life of five years. The total estimated amount of goodwill deductible for tax purposes associated with this acquisition was approximately $296,582.

Other routine acquisitions

During the six months ended June 30, 2017, the Company acquired dialysis and other businesses consisting of 20 dialysis centers located in the U.S., 55 dialysis centers located outside the U.S., and five other medical businesses for a total of $258,276 in net cash, $3,823 in deferred purchase price obligations, and $8,787 in earn-outs and liabilities assumed. The assets and liabilities for these acquisitions were recorded at their estimated fair values at the dates of the acquisitions and are included in the Company’s condensed consolidated financial statements, as are their operating results, from the designated effective dates of the acquisitions.

The initial purchase price allocations for these transactions have been recorded at estimated fair values based on the best information available to management and will be finalized when certain information arranged to be obtained has been received. In particular, certain income tax amounts are pending final evaluation and quantification of pre-acquisition tax contingencies and filing of final tax returns. In addition, valuation of medical claims liabilities, certain working capital items, and the fair value of fixed assets and intangibles are pending final audits and related valuation reports.

The following table summarizes the assets acquired and liabilities assumed in these transactions and recognized at their acquisition dates at estimated fair values:



Current assets	$	7,439
Property and equipment	13,278
Amortizable intangible and other long-term assets	14,180
Non-amortizable intangibles	4,833
Goodwill	276,182
Current liabilities	(6,467		)
Long-term liabilities	(2,484		)
Noncontrolling interests	(36,075		)
	$	270,886

Amortizable intangible assets acquired during the first six months of 2017 had weighted-average estimated useful lives of approximately five years. The majority of the intangible assets acquired during the first six months of 2017 relate to non-compete agreements having a weighted-average useful life and amortization period of five years. The total estimated amount of goodwill deductible for tax purposes associated with these acquisitions was approximately $207,080.

Pro forma financial information

The following summary, prepared on a pro forma basis, combines the results of operations as if the acquisitions through June 30, 2017 had been consummated as of the beginning of 2017 and 2016, after including the impact of certain adjustments such as amortization of intangibles and income tax effects.



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
	(unaudited)
Pro forma net revenues	$	3,900,750	$	3,820,558	$	7,678,519	$	7,576,206
Pro forma net income attributable to DaVita Inc.	128,654		58,996		579,906		160,709
Pro forma basic net income per share attributable to DaVita Inc.	0.67		0.29		3.02		0.79
Pro forma diluted net income per share attributable to DaVita Inc.	0.66		0.28		2.98		0.77

Contingent earn-out obligations

The Company has several contingent earn-out obligations associated with acquisitions that could result in the Company paying the former owners of acquired companies a total of up to $16,684 if certain EBITDA, operating income performance targets or quality margins are met primarily over the next one to six years.

Contingent earn-out obligations are remeasured at 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 17 to these condensed consolidated financial statements for further details. As of June 30, 2017, the Company has estimated the fair value of these contingent earn-out obligations to be $11,674, of which a total of $4,666 is included in other liabilities and the remaining $7,008 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 six months ended June 30, 2017:



Beginning balance, January 1, 2017	$	9,977
Contingent earn-out obligations associated with acquisitions	3,849
Remeasurement of fair value for contingent earn-out obligations	415
Payments on contingent earn-out obligations	(2,567		)
	$	11,674