Acquisition: As previously announced on May 21, 2012, we entered into a definitive merger agreement to acquire HealthCare Partners (HCP), the country’s largest operator of medical groups and physician networks. The total purchase price to be paid by DaVita Inc. will consist of $3.66 billion in cash and approximately 9.38 million shares of DaVita common stock, subject to post-close adjustments. In addition to the total merger consideration payable at close, DaVita will pay to the owners of HCP a total of up to $275 million of additional cash consideration in the form of two separate earn-out payments if certain financial performance targets are achieved by HCP in 2012 and 2013. We still expect the transaction to close early in the fourth quarter of this year.
Legal Proceeding Contingency Accrual: As previously announced on July 3, 2012, we reached an agreement in principle to settle all allegations relating to claims arising out of the previously disclosed litigation filed in 2002 in the U.S. District Court in the Eastern District of Texas (Settlement). In connection with the Settlement we accrued a pre-tax charge of approximately $78 million in the second quarter of 2012 that consists of $55 million for the settlement plus attorney fees and other related expenses. We expect that the Settlement will resolve federal program claims regarding Epogen that were or could have been raised in the complaint relating to historical Epogen practices dating back to 1997. The Settlement is subject to certain conditions, such as court approval. Until the conditions and documentation are completed, there can be no assurance that this matter will in fact be resolved pursuant to the terms of the Settlement.
Center Activity: As of June 30, 2012, we operated or provided administrative services at 1,884 outpatient dialysis centers located in the United States serving approximately 149,000 patients and 19 outpatient dialysis centers serving approximately 1,000 patients that are located in four countries outside of the United States. During the second quarter of 2012, we acquired 33 centers and opened a total of 14 centers located in the United States. In addition, we also acquired and opened a total of four centers outside of the United States.
Outlook
We are raising our operating income guidance for 2012 to now be in the range of $1,275 million to $1,325 million. Our previous operating income guidance for 2012 was in the range of $1,230 million to $1,310 million. These projections exclude any operating results associated with the proposed acquisition of HealthCare Partners as well as the legal proceeding contingency accrual and related expenses of $78 million. We also still expect our operating cash flows for 2012 to be in the range of $950 million to $1,050 million. These projections and the underlying assumptions involve significant risks and uncertainties, including those described below, and actual results may vary significantly from these current projections.
We will be holding a conference call to discuss our results for the second quarter ended June 30, 2012 on August 1, 2012 at 5:00 p.m. Eastern Time. The dial in number is (800) 399-4406. A replay of the conference call will be available on DaVita’s official web page,
www.davita.com, for the following 30 days.
