2013 Q4 Form 10-K Financial Statement

#000119312514062565 Filed on February 21, 2014

View on sec.gov

Income Statement

Concept 2013 Q4 2012 Q4 2012 Q3
Revenue $3.063B $2.478B $1.946B
YoY Change 23.62% 49.1% 10.7%
Cost Of Revenue $2.128B $1.708B $1.327B
YoY Change 24.61% 46.34% 11.58%
Gross Profit $935.4M $770.4M $618.5M
YoY Change 21.42% 55.57% 8.85%
Gross Profit Margin 30.54% 31.09% 31.78%
Selling, General & Admin $320.0M $274.6M $199.3M
YoY Change 16.53% 183.68% 8.02%
% of Gross Profit 34.21% 35.64% 32.22%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $138.7M $109.5M $80.60M
YoY Change 26.67% 50.0% 18.88%
% of Gross Profit 14.83% 14.21% 13.03%
Operating Expenses $459.5M $383.9M $279.4M
YoY Change 19.69% 129.47% 10.83%
Operating Profit $484.2M $388.1M $340.9M
YoY Change 24.77% 17.69% 7.06%
Interest Expense -$99.30M -$98.80M -$67.40M
YoY Change 0.51% 65.77% 15.81%
% of Operating Profit -20.51% -25.46% -19.77%
Other Income/Expense, Net $3.500M $1.000M $819.0K
YoY Change 250.0% 25.0% 2.38%
Pretax Income $380.0M $282.2M $271.2M
YoY Change 34.68% 4.98% 4.98%
Income Tax $135.7M $97.90M $98.65M
% Of Pretax Income 35.71% 34.7% 36.37%
Net Earnings $212.3M $155.8M $144.7M
YoY Change 36.22% 5.21% 6.91%
Net Earnings / Revenue 6.93% 6.29% 7.44%
Basic Earnings Per Share $1.01 $0.77 $0.76
Diluted Earnings Per Share $0.99 $0.75 $0.75
COMMON SHARES
Basic Shares Outstanding 212.7M shares 95.40M shares 190.0M shares
Diluted Shares Outstanding 193.3M shares

Balance Sheet

Concept 2013 Q4 2012 Q4 2012 Q3
SHORT-TERM ASSETS
Cash & Short-Term Investments $971.3M $541.0M $388.0M
YoY Change 79.53% 31.63% -31.45%
Cash & Equivalents $946.2M $533.7M $382.2M
Short-Term Investments $25.02M $7.000M $6.000M
Other Short-Term Assets $176.4M $201.6M $46.99M
YoY Change -12.48% 308.46% -85.5%
Inventory $88.81M $78.13M $78.32M
Prepaid Expenses $93.88M $75.85M
Receivables $1.485B $1.424B $1.248B
Other Receivables $349.1M $321.0M $241.0M
Total Short-Term Assets $3.472B $2.887B $2.326B
YoY Change 20.27% 25.89% -1.87%
LONG-TERM ASSETS
Property, Plant & Equipment $2.189B $1.872B $1.655B
YoY Change 16.93% 30.69% 23.85%
Goodwill $9.213B $8.953B $5.325B
YoY Change 2.91% 80.97%
Intangibles $2.024B $2.128B $177.5M
YoY Change -4.87% 1234.32%
Long-Term Investments $120.0M $94.00M $42.00M
YoY Change 27.66% 154.05% 7.69%
Other Assets $79.60M $79.85M $30.56M
YoY Change -0.32% 133.28% -4.51%
Total Long-Term Assets $13.63B $13.13B $8.498B
YoY Change 3.8% 98.58% 34.11%
TOTAL ASSETS
Total Short-Term Assets $3.472B $2.887B $2.326B
Total Long-Term Assets $13.63B $13.13B $8.498B
Total Assets $17.10B $16.01B $10.82B
YoY Change 6.77% 79.86% 24.32%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $435.5M $414.1M $272.6M
YoY Change 5.15% 42.98% 5.26%
Accrued Expenses $772.0M $567.0M $529.0M
YoY Change 36.16% -7.95% 14.5%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00 $0.00
YoY Change
Long-Term Debt Due $274.7M $228.0M $117.8M
YoY Change 20.48% 161.03% 43.68%
Total Short-Term Liabilities $2.462B $2.016B $1.337B
YoY Change 22.1% 73.12% 10.85%
LONG-TERM LIABILITIES
Long-Term Debt $8.141B $8.327B $5.621B
YoY Change -2.23% 88.49% 27.25%
Other Long-Term Liabilities $380.3M $443.7M $145.2M
YoY Change -14.29% 236.15% -6.89%
Total Long-Term Liabilities $380.3M $443.7M $5.766B
YoY Change -14.29% -90.25% 26.09%
TOTAL LIABILITIES
Total Short-Term Liabilities $2.462B $2.016B $1.337B
Total Long-Term Liabilities $380.3M $443.7M $5.766B
Total Liabilities $11.80B $11.52B $7.604B
YoY Change 2.42% 87.04% 13.37%
SHAREHOLDERS EQUITY
Retained Earnings $3.364B $3.732B $3.576B
YoY Change -9.86% 16.77%
Common Stock $213.0K $270.0K $135.0K
YoY Change -21.11% 100.0%
Preferred Stock
YoY Change
Treasury Stock (at cost) $1.162B $1.564B
YoY Change -28.77%
Treasury Stock Shares 0.000 shares 58.73M shares 39.52M shares
Shareholders Equity $4.432B $3.763B $2.537B
YoY Change
Total Liabilities & Shareholders Equity $17.10B $16.01B $10.82B
YoY Change 6.77% 79.86% 24.32%

Cashflow Statement

Concept 2013 Q4 2012 Q4 2012 Q3
OPERATING ACTIVITIES
Net Income $212.3M $155.8M $144.7M
YoY Change 36.22% 5.21% 6.91%
Depreciation, Depletion And Amortization $138.7M $109.5M $80.60M
YoY Change 26.67% 50.0% 18.88%
Cash From Operating Activities $354.1M $200.2M $366.6M
YoY Change 76.87% 32.93% -25.97%
INVESTING ACTIVITIES
Capital Expenditures -$218.1M -$171.2M -$128.4M
YoY Change 27.39% 15.44% 32.37%
Acquisitions
YoY Change
Other Investing Activities -$81.70M -$3.875B -$71.10M
YoY Change -97.89% 3183.47% -90.23%
Cash From Investing Activities -$299.8M -$4.046B -$199.6M
YoY Change -92.59% 1419.8% -75.79%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -78.80M 3.998B -58.50M
YoY Change -101.97% -12632.6% -141.61%
NET CHANGE
Cash From Operating Activities 354.1M 200.2M 366.6M
Cash From Investing Activities -299.8M -4.046B -199.6M
Cash From Financing Activities -78.80M 3.998B -58.50M
Net Change In Cash -24.50M 152.4M 108.5M
YoY Change -116.08% -203.32% -157.53%
FREE CASH FLOW
Cash From Operating Activities $354.1M $200.2M $366.6M
Capital Expenditures -$218.1M -$171.2M -$128.4M
Free Cash Flow $572.2M $371.4M $495.0M
YoY Change 54.07% 24.26% -16.41%

Facts In Submission

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CY2013Q4 us-gaap Deferred Tax Liabilities
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CY2013Q4 us-gaap Assets
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CY2013Q4 dva Number Of Entities That Third Parties Held Non Controlling Ownership
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CY2013Q4 dva Percentage Of Accounts Receivable Six Months Or More Past Due
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CY2013Q4 dva Finite Lived Intangible Liabilities Net
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CY2013Q4 dva Alliance And Product Supply Agreement Net
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CY2013Q4 dva Amortized Intangible Liabilities Accumulated Amortization
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CY2013Q4 dva Funds On Deposit With Third Parties
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CY2011 us-gaap Effective Income Tax Rate Reconciliation At Federal Statutory Income Tax Rate
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CY2011 us-gaap Effective Income Tax Rate Reconciliation Minority Interest Income Expense
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CY2011 us-gaap Effective Income Tax Rate Continuing Operations
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CY2011 us-gaap Treasury Stock Acquired Average Cost Per Share
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CY2011 us-gaap Effective Income Tax Rate Reconciliation Change In Deferred Tax Assets Valuation Allowance
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CY2011 us-gaap Income Loss From Continuing Operations Per Basic Share
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2.62
CY2011 us-gaap Effective Income Tax Rate Reconciliation State And Local Income Taxes
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0.041 pure
CY2011 us-gaap Income Loss From Continuing Operations Per Diluted Share
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2.57
CY2011 us-gaap Stock Repurchased During Period Shares
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CY2011 us-gaap Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount
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CY2011 us-gaap Weighted Average Number Of Shares Outstanding Basic
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CY2011 us-gaap Income Loss From Discontinued Operations Net Of Tax Per Diluted Share
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CY2011 us-gaap Income Loss From Equity Method Investments
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CY2011 us-gaap Payments To Acquire Property Plant And Equipment
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CY2011 us-gaap Discontinued Operation Gain Loss On Disposal Of Discontinued Operation Net Of Tax
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CY2011 us-gaap Payments To Acquire Businesses And Interest In Affiliates
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CY2011 us-gaap Payments To Acquire Held To Maturity Securities
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CY2011 us-gaap Minority Interest Change In Redemption Value
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CY2011 us-gaap Income Taxes Paid
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CY2011 us-gaap Profit Loss
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CY2011 us-gaap Discontinued Operation Income Loss From Discontinued Operation During Phase Out Period Net Of Tax
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CY2011 us-gaap Net Income Loss Attributable To Parent Diluted
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CY2011 us-gaap Net Income Loss Available To Common Stockholders Basic
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CY2011 us-gaap Income Loss From Discontinued Operations Net Of Tax
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CY2011 us-gaap Interest Paid
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CY2011 us-gaap Health Care Organization Other Revenue
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CY2011 us-gaap Health Care Organization Patient Service Revenue Less Provision For Bad Debts
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CY2011 us-gaap Comprehensive Income Net Of Tax
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CY2011 us-gaap Increase Decrease In Other Noncurrent Assets
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CY2011 us-gaap Operating Income Loss
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CY2011 us-gaap Income Loss From Continuing Operations
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CY2011 us-gaap Payments For Repurchase Of Common Stock
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CY2011 us-gaap Income Loss From Continuing Operations Including Portion Attributable To Noncontrolling Interest
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591313000
CY2011 us-gaap Employee Service Share Based Compensation Tax Benefit Realized From Exercise Of Stock Options
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38199000
CY2011 us-gaap Net Income Loss
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478001000
CY2011 us-gaap Increase Decrease In Inventories
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CY2011 us-gaap Employee Service Share Based Compensation Tax Benefit From Compensation Expense
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CY2011 us-gaap Deferred Income Tax Expense Benefit
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53438000
CY2011 us-gaap Costs And Expenses
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CY2011 us-gaap Comprehensive Income Net Of Tax Attributable To Noncontrolling Interest
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CY2011 us-gaap Increase Decrease In Employee Related Liabilities
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77074000
CY2011 us-gaap General And Administrative Expense
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684715000
CY2011 us-gaap Net Cash Provided By Used In Financing Activities
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CY2011 us-gaap Deferred Tax Expense From Stock Options Exercised
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38199000
CY2011 us-gaap Share Based Compensation
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48718000
CY2011 us-gaap Provision For Doubtful Accounts
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3309000
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323348000
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264225000
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606651000
CY2011 us-gaap Cash And Cash Equivalents Period Increase Decrease
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47695000
CY2011 us-gaap Current State And Local Tax Expense Benefit
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42191000
CY2011 us-gaap Operating Leases Rent Expense Net
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295099
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1149000
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5443000
CY2011 us-gaap Current Federal Tax Expense Benefit
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202733000
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227667000
CY2011 us-gaap Income Tax Expense Benefit
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325292000
CY2011 us-gaap Proceeds From Sale Of Productive Assets
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75183000
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98235000
CY2011 us-gaap Increase Decrease In Accrued Income Taxes Payable
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77418000
CY2011 us-gaap Increase Decrease In Accounts Payable
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84400000
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11061000
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9687000
CY2011 us-gaap Proceeds From Stock Options Exercised
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11316000
CY2011 us-gaap Discontinued Operation Tax Effect Of Income Loss From Disposal Of Discontinued Operation
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CY2011 us-gaap Deferred State And Local Income Tax Expense Benefit
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7140000
CY2011 us-gaap Depreciation Depletion And Amortization
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247966000
CY2011 us-gaap Amortization Of Financing Costs
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13423000
CY2011 us-gaap Proceeds From Issuance Of Long Term Debt
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20834000
CY2011 us-gaap Goodwill Impairment Loss
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24000000
CY2011 us-gaap Amortization Of Intangible Assets
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21589000
CY2011 us-gaap Current Income Tax Expense Benefit
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244924000
CY2011 us-gaap Allocated Share Based Compensation Expense
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48718000
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CY2013 dei Trading Symbol
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DVA
CY2013 dei Entity Registrant Name
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DAVITA HEALTHCARE PARTNERS INC.
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10-K
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CY2013 us-gaap Significant Supply Commitment Description
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Certain consolidated joint ventures are contractually scheduled to dissolve after terms ranging from ten to fifty years.
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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
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<div> <p style="MARGIN-BOTTOM: 0px; MARGIN-LEFT: 2%; MARGIN-TOP: 18px"> <font style="FONT-FAMILY: Times New Roman" size="2"><i>Use of estimates</i></font></p> <p style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 6px; TEXT-INDENT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, contingencies and noncontrolling interests subject to put provisions. Although actual results in subsequent periods will differ from these estimates, such estimates are developed based on the best information available to management and management&#x2019;s best judgments at the time made. All significant assumptions and estimates underlying the amounts reported in the financial statements and accompanying notes are regularly reviewed and updated when necessary. Changes in estimates are reflected in the financial statements based upon on-going actual experience trends, or subsequent settlements and realizations depending on the nature and predictability of the estimates and contingencies. Interim changes in estimates related to annual operating costs are applied prospectively within annual periods.</font></p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 12px; MARGIN-TOP: 0px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px; TEXT-INDENT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">The most significant assumptions and estimates underlying these financial statements and accompanying notes involve revenue recognition and accounts receivable, contingencies, impairments of long-lived assets including goodwill, valuation adjustments, accounting for income taxes, quarterly, annual and long-term variable compensation accruals, consolidation of variable interest entities, purchase accounting valuation estimates, other fair value estimates, stock-based compensation and medical liability claims. Specific estimating risks and contingencies are further addressed within these notes to the consolidated financial statements.</font></p> </div>
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<div> <table style="BORDER-COLLAPSE:COLLAPSE" border="0" cellpadding="0" cellspacing="0" width="100%"> <tr> <td width="4%" valign="top" align="left"><font style="font-family:Times New Roman" size="2"><b>17.</b></font></td> <td align="left" valign="top"><font style="font-family:Times New Roman" size="2"><b>Contingencies</b></font></td> </tr> </table> <p style="margin-top:6px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2">The majority of the Company&#x2019;s revenues are from government programs and may be subject to adjustment as a result of: (i)&#xA0;examination by government agencies or contractors, for which the resolution of any matters raised may take extended periods of time to finalize; (ii)&#xA0;differing interpretations of government regulations by different Medicare contractors or regulatory authorities; (iii)&#xA0;differing opinions regarding a patient&#x2019;s medical diagnosis or the medical necessity of services provided; and (iv)&#xA0;retroactive applications or interpretations of governmental requirements. In addition, the Company&#x2019;s revenues from commercial payors may be subject to adjustment as a result of potential claims for refunds, as a result of government actions or as a result of other claims by commercial payors.</font></p> <p style="margin-top:18px;margin-bottom:0px; margin-left:2%"> <font style="font-family:Times New Roman" size="2"><b><i>Inquiries by the Federal Government and Certain Related Civil Proceedings</i></b></font></p> <p style="margin-top:6px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2"><u>Vainer Private Civil Suit:</u> In December 2008, the Company received a subpoena for documents from the OIG relating to the pharmaceutical products Zemplar, Hectorol, Venofer, Ferrlecit and EPO, as well as other related matters. The subpoena covered the period from January 2003 to December 2008. The Company has been in contact with the U.S. Attorney&#x2019;s Office for the Northern District of Georgia and the U.S. Department of Justice in Washington, DC since November 2008 relating to this matter, and has been advised that this was a civil inquiry. On June&#xA0;17, 2009, the Company learned that the allegations underlying this inquiry were made as part of a civil complaint filed by individuals and brought pursuant to the <i>qui tam</i> provisions of the federal False Claims Act. On April&#xA0;1, 2011, the U.S. District Court for the Northern District of Georgia ordered the case to be unsealed. At that time, the Department of Justice and U.S. Attorney&#x2019;s Office filed a notice of declination stating that the federal government would not be intervening and not pursuing the relators&#x2019; allegation in litigation. On July&#xA0;25, 2011, the relators, Daniel Barbir and Dr.&#xA0;Alon Vainer, filed their amended complaint in the U.S. District Court for the Northern District of Georgia, purportedly on behalf of the federal government. The allegations in the complaint relate to the Company&#x2019;s drug administration practices for the Company&#x2019;s dialysis operations for Vitamin D and iron agents for a period from 2003 through 2010. The complaint seeks monetary damages and civil penalties as well as costs and expenses. The Company is vigorously defending this matter and intends to continue to do so. The Company can make no assurances as to the time or resources that will be needed to devote to this litigation or its final outcome.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2"><u>2010 U.S. Attorney Physician Relationship Investigation</u>: In May 2010, the Company received a subpoena from the OIG&#x2019;s office in Dallas, Texas. The civil subpoena covers the period from January 2005 to May 2010, and seeks production of a wide range of documents relating to the Company&#x2019;s dialysis operations, including documents related to, among other things, financial relationships with physicians and joint ventures, and whether those relationships and joint ventures comply with the federal anti-kickback statute and the False Claims Act. The Company has been advised by the attorneys conducting this civil investigation that they believe that some or all of the Company&#x2019;s joint ventures do not comply with the anti-kickback statute and the False Claims Act. The Company disagrees that its joint venture structure generally, which the Company believes is widely used in the dialysis industry and other segments of the healthcare industry substantially in the form that the Company uses it, violates the federal anti-kickback statute or the False Claims Act. As to individual transactions, the Company made significant effort to ensure that its joint venture structures and process complied with the rules, but the Company is talking with the government about addressing its concerns. The focus of this investigation overlaps substantially with the 2011 U.S. Attorney Physician Relationship Investigation described below. The Company has agreed to a framework for a global resolution with the United States Attorney&#x2019;s Office for the District of Colorado, the Civil Division of the United States Department of Justice and the Office of the Inspector General for both the 2010 and the 2011 U.S. Attorney Physician Relationship Investigations.&#xA0;The final settlement remains subject to negotiation of specific terms.&#xA0;The settlement will include the payment of approximately $389,000, entry into a corporate integrity agreement, the appointment of an independent compliance monitor, and the imposition of certain other business restrictions related to a subset of the Company&#x2019;s joint venture arrangements. Under the terms of the framework for resolution, the Company has agreed to unwind a limited subset of joint ventures that were created through partial divestiture to nephrologists, and agreed not to enter into this type of partial divestiture joint venture with nephrologists in the future. In 2013, the Company accrued an estimated loss contingency reserve of $397,000 related to this matter. The final settlement remains subject to negotiation of specific terms and will continue to require management&#x2019;s attention and significant legal expense. The Company can make no assurances as to the final outcome.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2"><u>2011 U.S. Attorney Physician Relationship Investigation</u>: In August 2011, the Company announced it had learned that the U.S. Attorney&#x2019;s Office for the District of Colorado would be investigating certain activities of its dialysis business in connection with information being provided to a grand jury. This investigation relates to the Company&#x2019;s relationships with physicians, including its joint ventures, and whether those relationships and joint ventures comply with the federal anti-kickback statute, and overlaps substantially with the 2010 U.S. Attorney Physician Relationship Investigation described above. As noted above, the Company has agreed to a framework for a global resolution with the United States Attorney&#x2019;s Office for the District of Colorado, the Civil Division of the United States Department of Justice and the Office of the Inspector General for both the 2010 and the 2011 U.S. Attorney Physician Relationship Investigations.&#xA0;The final settlement remains subject to negotiation of specific terms and will continue to require management&#x2019;s attention and significant legal expense. The Company can make no assurances as to the final outcome.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2"><u>2011 U.S. Attorney Medicaid Investigation:</u> In October 2011, the Company announced that it would be receiving a request for documents, which could include an administrative subpoena from the Office of Inspector General for the U.S. Department of Health and Human Services. Subsequent to the Company&#x2019;s announcement of this 2011 U.S. Attorney Medicaid Investigation, the Company received a request for documents in connection with the inquiry by the U.S. Attorney&#x2019;s Office for the Eastern District of New York. The request relates to payments for infusion drugs covered by Medicaid composite payments for dialysis. The Company believes this inquiry is civil in nature. The Company does not know the time period or scope. The Company understands that certain other providers that operate dialysis clinics in New York may be receiving or have received a similar request for documents. The Company is cooperating with the government and is producing the requested documents.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2"><u>Swoben Private Civil Suit</u>:&#xA0;In April 2013, the Company&#x2019;s HealthCare Partners (HCP) subsidiary was served with a civil complaint filed by a former employee of SCAN Health Plan (SCAN), a health maintenance organization (HMO). On July&#xA0;13, 2009, pursuant to the <i>qui tam</i> provisions of the federal False Claims Act and the California False Claims Act, James M. Swoben, as relator, filed a <i>qui tam</i> action in the United States District Court for the Central District of California purportedly on behalf of the United States of America and the State of California against SCAN, and certain other defendants whose identities were under seal. The allegations in the complaint relate to alleged overpayments received from government healthcare programs. In or about August 2012, SCAN entered into a settlement agreement with the United States of America and the State of California. The United States and the State of California partially intervened in the action for the purpose of settlement with and dismissal of the action against SCAN.&#xA0;In or about November 2011, the relator filed his Third Amended Complaint under seal alleging violations&#xA0;of the federal False Claims Act and the California False Claims Act, which named additional defendants, including HCP and certain health insurance companies (the defendant HMOs). The allegations in the complaint against HCP relate to patient diagnosis coding to determine reimbursement in the Medicare Advantage program, referred to as Hierarchical Condition Coding (HCC) and Risk Adjustment Factor (RAF) scores.&#xA0;The complaint sought monetary damages and civil penalties as well as costs and expenses. The United States Department of Justice reviewed these allegations and in January 2013 declined to intervene in the case. On June&#xA0;26, 2013, HCP and the defendant HMOs filed their respective motions to dismiss the Third Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b), challenging the legal sufficiency of the claims asserted in the complaint. On July&#xA0;30, 2013, the court granted HCP&#x2019;s motion and dismissed with prejudice all of the claims in the Third Amended Complaint and judgment was entered in September 2013. The court specifically determined that further amendments to the complaint would be futile because, in part, the allegations were publicly disclosed in reports and other sources relating to audits conducted by the Centers of Medicare&#xA0;&amp; Medicaid Services. In October 2013, the plaintiff appealed to the United States Court of Appeals for the Ninth Circuit and the court&#x2019;s disposition of the appeal is pending.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2">Except for the private civil complaints filed by the relators as described above, to the Company&#x2019;s knowledge, no proceedings have been initiated against the Company at this time in connection with any of the inquiries by the federal government. Although the Company cannot predict whether or when proceedings might be initiated or when these matters may be resolved, it is not unusual for inquiries such as these to continue for a considerable period of time through the various phases of document and witness requests and on-going discussions with regulators. Responding to the subpoenas or inquiries and defending the Company in the relator proceedings will continue to require management&#x2019;s attention and significant legal expense. Any negative findings in the inquiries or relator proceedings could result in substantial financial penalties or awards against the Company, exclusion from future participation in the Medicare and Medicaid programs and, to the extent criminal proceedings may be initiated against the Company, possible criminal penalties. At this time, the Company cannot predict the ultimate outcome of these inquiries, or the potential outcome of the relators&#x2019; claims (except as described above), or the potential range of damages, if any.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2"><u>Haverhill Retirement System Shareholder Derivative Civil Suit</u>: On May&#xA0;17, 2013, Haverhill Retirement System (Haverhill), a shareholder of the Company, filed a shareholder derivative lawsuit in the U.S. District Court for the District of Colorado against the directors of the Company and against the Company, as nominal defendant. The complaint alleges, among other things, that the Company&#x2019;s directors breached fiduciary duties to the Company relating to the inquiries by the federal government described above, the Vainer <i>qui tam</i> private civil suit described above and the Woodard <i>qui tam</i> private civil suit for which the Company previously announced a settlement in July 2012. On January&#xA0;7, 2014, the court consolidated the Haverhill action and the Clark action described below and appointed Haverhill lead plaintiff. The consolidated action is captioned <u>In re DaVita HealthCare Partners, Inc. Derivative Litigation</u> and will be referred to as such going forward.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2"><u>Clark Shareholder Derivative Civil Suit</u>: As the Company previously disclosed, on August&#xA0;7, 2012, a shareholder derivative lawsuit was filed in the U.S. District Court for the District of Colorado against certain of the Company&#x2019;s current and former directors and executives and against the Company, as nominal defendant. The complaint alleged, among other things, that such officers and directors breached fiduciary duties to the Company relating to substantially the same matters that are now the subject of the Haverhill shareholder derivative civil suit described above.&#xA0;As the Company also previously disclosed, on October&#xA0;19, 2012, the court ordered that the Clark case be administratively closed, subject to being reopened upon a showing of good cause by any party. As described above, the court granted Haverhill&#x2019;s motion consolidating the actions and appointed Haverhill lead plaintiff. The consolidated action is captioned <u>In re DaVita HealthCare Partners, Inc. Derivative Litigation</u> and will be referred to as such going forward.</font></p> <p style="margin-top:18px;margin-bottom:0px; margin-left:2%"> <font style="font-family:Times New Roman" size="2"><i>Other</i></font></p> <p style="margin-top:6px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2">The Company has received several notices of claims from commercial payors and other third parties related to historical billing practices and claims against DVA Renal Healthcare (formerly known as Gambro Healthcare), a subsidiary of the Company, related to historical Gambro Healthcare billing practices and other matters covered by its 2004 settlement agreement with the Department of Justice and certain agencies of the U.S. government. The Company has received no further indication that any of these claims are active, and some of them may be barred by applicable statutes of limitations. To the extent any of these claims might proceed, the Company intends to defend against them vigorously; however, the Company may not be successful and these claims may lead to litigation and any such litigation may be resolved unfavorably. At this time, the Company cannot predict the ultimate outcome of these matters or the potential range of damages, if any.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2">A wage and hour claim, which has been styled as a class action, is pending against the Company in the Superior Court of California. The Company was served with the complaint in this lawsuit in April 2008, and it has been amended since that time. The complaint, as amended, alleges that the Company failed to provide meal periods, failed to pay compensation in lieu of providing rest or meal periods, failed to pay overtime, and failed to comply with certain other California Labor Code requirements. In September 2011, the court denied the plaintiffs&#x2019; motion for class certification. Plaintiffs appealed that decision. In January 2013, the Court of Appeals affirmed the trial court&#x2019;s decision on some claims, but remanded the case to the trial court for clarification of its decision on one of the claims. The Company has reached an agreement with the plaintiffs to settle the claim that was remanded to the trial court, and the court has preliminarily approved that settlement. The amount of the settlement is not material to the Company&#x2019;s consolidated financial statements. The Company intends to continue to vigorously defend against the remaining claims. Any potential settlement of the remaining claims is not anticipated to be material to the Company&#x2019;s consolidated financial statements.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2">In October&#xA0;2007, the Company was contacted by the Attorney General&#x2019;s Office for the State of Nevada. The Attorney General&#x2019;s Office informed the Company that it was conducting a civil and criminal investigation of the Company&#x2019;s operations in Nevada and that the investigation related to the billing of pharmaceuticals by the Company&#x2019;s dialysis business, including EPO. In February&#xA0;2008, the Attorney General&#x2019;s Office informed the Company that the civil and criminal investigation had been discontinued. The Attorney General&#x2019;s Office further advised the Company that Nevada Medicaid intended to conduct audits of end stage renal disease (ESRD) dialysis providers in Nevada and that such audits would relate to the issues that were the subject of the investigation. To the Company&#x2019;s knowledge, no court proceedings have been initiated against the Company at this time. Any negative audit findings could result in a substantial repayment by the Company. At this time, the Company cannot predict the ultimate outcome of this matter or the potential range of damages, if any.</font></p> <p style="margin-top:12px;margin-bottom:0px; text-indent:4%"> <font style="font-family:Times New Roman" size="2">In addition to the foregoing, the Company is subject to claims and suits, including from time to time, contractual disputes and professional and general liability claims, as well as audits and investigations by various government entities, in the ordinary course of business. The Company believes that the ultimate resolution of any such pending proceedings, whether the underlying claims are covered by insurance or not, will not have a material adverse effect on its financial condition, results of operations or cash flows.</font></p> </div>
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