NOTE 3 — ACQUISITIONS AND DISPOSITIONS
HealthONE Acquisition
During October 2011, we completed the acquisition of the Colorado Health Foundation’s (“Foundation”) approximate 40% remaining ownership interest in the HCA-HealthONE LLC (“HealthONE”) joint venture for $1.450 billion. HealthONE’s assets included seven hospitals and 12 freestanding surgery centers in the Denver area. We accounted for our investment in HealthONE using the equity method through October 2011 with our share of their operations all recorded in the line item “Equity in earnings of affiliates” in our consolidated income statements, and we began consolidating HealthONE’s operations in our consolidated income statements beginning November 2011.
The total cost of the HealthONE acquisition has been allocated to the assets acquired and liabilities assumed based upon their respective fair values in accordance with ASC No. 805, Business Combinations. The purchase price represented a premium over the fair value of the net tangible and identifiable intangible assets acquired due to the value of the expected cash flows and HealthONE’s assembled workforce.
We identified and analyzed the acquired fixed assets, contracts, contractual commitments and legal contingencies to record the fair value of all assets acquired and liabilities assumed, resulting in goodwill of $2.261 billion being recorded as of December 31, 2011. We also recorded a gain of $1.522 billion related to this acquisition due to the remeasurement of our previous equity investment in HealthONE, based upon our acquisition of the Foundation’s ownership interest and the resulting consolidation of the entire enterprise at estimated fair value. During 2012, we recorded final adjustments to the purchase price allocation which resulted in a $30 million increase to noncontrolling interests, a $26 million reduction to property and equipment and a $56 million increase to goodwill. The amount of tax deductible goodwill is $981 million.
A summary of the final purchase price allocation, including assumed liabilities, follows (dollars in millions):
|
Current assets |
$ | 400 | ||
|
Property and equipment |
1,014 | |||
|
Identifiable intangible asset (trade name) |
269 | |||
|
Goodwill |
2,317 | |||
|
Other assets |
7 | |||
|
Liabilities |
152 | |||
|
Noncontrolling interests |
123 | |||
The acquired HealthONE operating results have been included in our consolidated income statements since the acquisition date. The revenues and net income attributable to HCA Holdings, Inc. related to the acquired HealthONE operations for the period from November 1, 2011 through December 31, 2011 were $347 million and $15 million, respectively. The following unaudited pro forma combined summary of operations data gives effect to including the acquired HealthONE operating results in our operating results as if the acquisition had occurred as of January 1, 2011 (dollars in millions):
| Year Ended December 31, 2011 |
||||
|
Pro forma revenues |
$ | 31,383 | ||
|
Pro forma net income attributable to HCA Holdings, Inc. |
2,507 | |||
Pro forma adjustments to net income attributable to HCA Holdings, Inc. include adjustments to record HealthONE’s operating results on a consolidated basis and eliminate the equity method operating results, to record depreciation expense based on the estimated fair value assigned to the long-lived assets acquired, to record interest expense assuming the increase in long-term debt used to fund the acquisition had occurred as of January 1, 2011 and to record the related tax effects. This pro forma result is not necessarily indicative of the actual results of operations that would have occurred if the acquisition had occurred on January 1, 2011.
Other Acquisitions and Dispositions
During 2013, we paid $277 million and recorded goodwill and identifiable intangible assets of $183 million and $113 million, respectively, related to the acquisition of The Outsource Group, which was acquired by our Parallon affiliate and is included in the Corporate and other Group. During 2013, we also paid $146 million and recorded goodwill of $58 million related to the acquisition of three hospitals, and we paid $57 million to acquire nonhospital health care entities. During 2012, we paid $58 million and assumed liabilities of $33 million to acquire a hospital and paid $200 million to acquire other nonhospital health care entities. During 2011, we paid $136 million to acquire a hospital and $96 million to acquire other nonhospital health care entities. Purchase price amounts have been allocated to the related assets acquired and liabilities assumed based upon their respective fair values. The purchase price paid in excess of the fair value of identifiable net assets of these acquired entities aggregated $265 million, $232 million and $68 million in 2013, 2012 and 2011, respectively. The consolidated financial statements include the accounts and operations of the acquired entities subsequent to the respective acquisition dates. The pro forma effects of these acquired entities on our results of operations for periods prior to the respective acquisition dates were not significant.
During 2013, we received proceeds of $33 million and recognized a net pretax loss of $10 million ($7 million after tax) related to the sale of a hospital facility in the American Group and other real estate investments. During 2012, we received proceeds of $30 million and recognized a net pretax gain of $15 million ($9 million after tax) related to the sales of real estate investments. During 2011, we received proceeds of $281 million and recognized a net pretax gain of $142 million ($80 million after tax) related to the sales of a hospital facility in the National Group and our investment in a hospital joint venture.