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 $9,400 in transaction and integration costs during the nine months ended September 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	$	24,525
Property and equipment	36,295
Amortizable intangible and other long-term assets	11,547
Goodwill	298,358
Current liabilities	(8,684		)
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 $298,358.

Other routine acquisitions

During the nine months ended September 30, 2017, the Company acquired dialysis and other businesses consisting of 21 dialysis centers located in the U.S., 63 dialysis centers located outside the U.S., and eight other medical businesses, including Magan Medical Clinic, Inc. (Magan), as discussed below, for a total of $364,975 in net cash, $13,290 in deferred purchase price obligations, $19,411 in earn-outs and liabilities assumed, and $17,233 in non-cash gains, primarily recognized as a result of the Magan acquisition. 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.

Effective July 1, 2017, the Company's DMG business acquired Magan. As part of the Magan acquisition, the Company acquired 100% ownership of a DMG-Magan joint venture of which the Company previously owned only a noncontrolling 50% interest. As a result, the Company recognized a non-cash gain on DMG's previously held 50% interest in this joint venture based on its fair value at the time of the acquisition.

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	$	11,548
Property and equipment	28,384
Amortizable intangible and other long-term assets	18,403
Non-amortizable intangibles	31,983
Goodwill	389,517
Current liabilities	(20,628		)
Long-term liabilities	(8,223		)
Noncontrolling interests	(36,075		)
	$	414,909

Amortizable intangible assets acquired during the first nine months of 2017 had weighted-average estimated useful lives of approximately five years. The majority of the intangible assets acquired during the first nine months of 2017 relate to non-compete agreements. The total estimated amount of goodwill deductible for tax purposes associated with these acquisitions was approximately $227,762.

Pro forma financial information

The following summary, prepared on a pro forma basis, combines the results of operations as if the acquisitions through September 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 September 30,					Nine months ended September 30,
	2017			2016		2017		2016
	(unaudited)
Pro forma net revenues	$	3,925,402		$	3,844,174	$	11,638,894	$	11,467,643
Pro forma net (loss) income attributable to DaVita Inc.	$	(214,156	)	$	572,873	$	360,679	$	728,759
Pro forma basic net (loss) income per share attributable to DaVita Inc.	$	(1.13	)	$	2.81	$	1.89	$	3.57
Pro forma diluted net (loss) income per share attributable to DaVita Inc.	$	(1.13	)	$	2.77	$	1.86	$	3.51

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 $13,524 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 remeasurement recorded in earnings. See Note 17 to these condensed consolidated financial statements for further details. As of September 30, 2017, the Company has estimated the fair value of these contingent earn-out obligations to be $8,955, of which a total of $1,674 is included in other liabilities and the remaining $7,281 is included in other long-term liabilities in the Company’s consolidated balance sheet.

The following is a reconciliation of changes in liabilities for contingent earn-out obligations:



	For the nine months ended September 30, 2017
Beginning balance, January 1, 2017	$	9,977
Contingent earn-out obligations associated with acquisitions	4,110
Remeasurement of fair value for contingent earn-out obligations	(1,072		)
Payments on contingent earn-out obligations	(4,060		)
	$	8,955