The Company is releasing this information to provide investors with updated financial information in conjunction with its anticipated modified “Dutch auction” tender offer for up to $1.2 billion of its common stock at a price per share not less than $53.50 nor greater than $61.50. The tender offer will commence today and will expire at 12:00 midnight, New York City time, at the end of the day on August 16, 2019, unless extended by the Company or otherwise terminated, and will be conditioned upon successful completion of a bank financing on terms reasonably satisfactory to the Company as well as certain other conditions detailed in the tender offer documents to be filed with the Securities and Exchange Commission (“SEC”) today.
The aforementioned bank financing is expected to consist of the following:
- $1.0 billion secured revolving loan facility;
- $1.75 billion secured term loan A facility with a delayed draw feature; and
- $2.5 billion secured term loan B facility.
The Company expects to use proceeds from the bank financing to repay amounts outstanding under the Company’s current credit facility, call the Company’s outstanding 5.75% Senior Notes due 2022 (the “Senior Notes”), fund the tender offer, and add cash to the balance sheet for potential future share repurchases, acquisitions, and other general corporate purposes. This press release does not constitute a call notice for the Senior Notes. The Company expects the call notice for the Senior Notes to be issued following completion of the bank financing.
Preliminary Second Quarter Financial and Operating Results
DaVita expects operating income for the second quarter of 2019 to be between $460 million and $465 million. Included in this operating income is the Company’s expectation of approximately $40 million in operating income attributable to calcimimetics.
In the Company’s U.S. dialysis and related lab services segment, the Company expects to report:
- Second quarter non-acquired treatment growth of 2.1%, with 7,520,587 treatments during the quarter.
- Revenue per treatment of approximately $350, an increase of approximately $1.60 from the first quarter of 2019 driven by fluctuations in quarterly revenue, partially offset by a decline in revenue from calcimimetics.
- Cost per treatment decrease of approximately $9 from the first quarter of 2019, driven primarily by reduced calcimimetics expense and reduced labor and benefit expense due to strong productivity.
From the date of the Company’s last earnings call on May 7, 2019, through July 17, 2019, the Company repurchased a total of 6,274,181 shares of its common stock for approximately $350 million at an average cost of $55.78 per share. Effective as of July 17, 2019, the Company’s Board of Directors terminated the remaining share repurchase authorization and approved a new share repurchase authorization of $2.0 billion. This new share repurchase authorization has no expiration date.
Updated 2019 Outlook
The Company is updating its adjusted operating income (a non-GAAP financial measure) guidance for fiscal year 2019 to a range of $1.64 billion to $1.70 billion. The Company’s prior guidance for adjusted operating income for fiscal year 2019 was $1.54 billion to $1.64 billion.
The substantial majority of the increase in the adjusted operating income guidance is a result of the Company’s improved expectation of profit from calcimimetics, which is not expected to recur in 2020, and the remainder is from the ongoing operating performance.
We do not provide guidance for consolidated operating income on a GAAP basis nor a reconciliation of this forward-looking non-GAAP financial measure to the most directly comparable GAAP financial measure on a forward-looking basis because we are unable to predict certain items contained in the GAAP measure without unreasonable efforts. This non-GAAP financial measure does not include certain items, including goodwill impairment charges and foreign currency fluctuations, any of which may be significant.
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