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Total Renal Care Reports 2nd Quarter Earnings and Charges

TORRANCE, Calif., Aug. 10 /PRNewswire/ -- Total Renal Care Holdings, Inc. (NYSE: TRL), the second largest (and largest independent) worldwide provider of integrated dialysis services, today announced revenues, earnings and earnings per share for the second quarter and six months ended June 30, 1999.

On a normalized basis, before the unusual items described below, the Company's revenues were $364 million for the second quarter ended June 30, 1999 and $716.2 million for the six month period ended June 30, 1999. Net income was $16.2 million for the quarter and $36.2 million for the six month period. Earnings per share were $0.20 for the second quarter and $0.44 for the six month period.

The Company, on a normalized basis, had operating income that was $22.0 million below its expectations for the second quarter. $10.5 million of this shortfall reflects lower than expected revenues. During the second quarter, the Company's Berwyn billing office (which bills 45% of the Company's domestic dialysis revenues) had revenues per treatment of $254 compared to $243 for the Company's Tacoma billing office (which bills 55% of the Company's domestic dialysis revenues). This difference primarily reflects Tacoma's historical collection performance and resulted in the $10.5 million shortfall. The Company's operating expenses for the second quarter were $11.5 million higher than projected.

The Company recognized the following unusual items in the second quarter:

-- A $35.0 million charge for accounts receivable at the Company's Tacoma

       billing office that includes a $24.0 million increase in provision for
       doubtful accounts for the second quarter relating to accounts
       receivable greater than six months old, and a $11.0 million increase in
       contractual allowances.
    -- A $16.6 million write-off of minority investments and loans to
       dialysis-related businesses, which is higher than the original
       $10 million estimate in our July 18, 1999 press release.
    -- A $4.5 million charge for the resolution of outstanding vendor claims
       for goods and services provided in earlier periods.  These vendor
       claims were originally estimated in our July 18, 1999 press release at
       between $8-10 million.
    -- A $2.5 million charge for non-recurring expense items including costs
       associated with the now-disposed-of corporate jet and expensing
       capitalized acquisition costs for transactions that will not be
       consummated.
    -- A $13.2 million charge for the under-accrual of accounts payable as of
       March 31, 1999 which will result in a restatement of the Company's
       financial statements for the first quarter of 1999.

"These charges are the result of the strains placed on our financial infrastructure due to our significant historical growth as well as systems conversions during the first half of 1999. We are now completely focused on strengthening our financial infrastructure, internal controls and collection processes in Tacoma," stated George B. DeHuff, III, TRC's interim Chief Executive Officer. "We have seen significant improvements in our collection efforts at our Berwyn billing office throughout 1999 and are implementing similar systems and process improvements in our Tacoma office."

During the first six months of 1999, the Company has added through acquisitions and management agreements over 3,100 patients and 45 dialysis centers, including approximately 2,050 patients in 25 domestic facilities, over 400 patients under management contracts in 3 facilities, and approximately 650 patients in 17 centers internationally. Additionally, the Company has opened 13 owned or managed de novo facilities in 1999 and expects to complete approximately 15 additional facilities by the end of this year. The Company's same-store treatment growth for the second quarter was 7.3%.

"We are pleased with our strategic acquisitions during 1999. We have achieved over 75% of our 1999 acquisition targets and will complete only a limited number of strategic transactions during the remainder of 1999," stated DeHuff. "We are well positioned for long-term growth and will continue to be a leading player in one of the most attractive segments of health care services. Management's focus is on strengthening our financial infrastructure and improving cash collections. After achieving these improvements, we will reassess the pace of our growth strategy."

The Company also announced that it recently obtained waivers of certain covenants in its credit facilities with which the Company would not have been in compliance. Also, the Company's complaint filed against HCFA and its Carrier, Blue Cross/Blue Shield of Florida, Inc. in the U.S. Federal District Court seeking reinstatement of payments to its Florida Lab was dismissed on the basis of failure to first exhaust all administrative remedies. The Company is now expecting a carrier ruling (by approximately November 15, 1999) following its July hearing regarding the first time period reviewed by the carrier (January 1, 1993 through April 30, 1996). Additionally, the Carrier has notified the Company of its overpayment determination with regard to the second time period it reviewed (May 1, 1996 to March 31, 1998). This overpayment determination totaled $14.2 million.

                 Quarter   Quarter   Quarter     Year     Quarter   Quarter
                   End       End       End        End       End       End
                June 30,  Sept. 30,  Dec. 31,  Dec. 31,  March 31, June 30,
                  1998       1998      1998      1998      1999      1999

    Treatments  1,187,000 1,284,000 1,342,000 4,912,000 1,391,0001,467,000
    Patients       33,100    36,400    39,500    39,500    42,100   44,000
    Centers           423       477       508       508       541      564
    Revenue/
     Treatment       $243      $248      $253      $245      $253     $248

Torrance, California based Total Renal Care Holdings, Inc. is the second largest (and largest independent) worldwide provider of integrated dialysis services for patients suffering from chronic kidney failure. The Company owns and operates high-quality, free-standing kidney dialysis centers and home peritoneal dialysis programs in 35 states, as well as Washington, D.C., Puerto Rico, Guam, Argentina and several European countries. It also provides high quality acute hemodialysis services to inpatients at approximately 330 hospitals. As of July 1, 1999, Total Renal Care operated 564 outpatient dialysis facilities serving more than 44,000 patients, including more than 3,700 patients in 46 centers under Total Renal Care management. Total Renal Care also operates ESRD laboratory and pharmacy facilities, as well as vascular access management, transplant services and ESRD clinical research programs.

This release contains forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding potential strengthening of operations and market opportunities and involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the uncertainties associated with governmental regulation, general economic and other market conditions, and the "risk factors" set forth in the Company's filings with the Securities and Exchange Commission, including but not limited to (1) the risks inherent in the Company's growth strategy,(2) possible changes in Medicare and Medicaid reimbursement rates, (3) dependence on physician referrals, (4) risks associated with operations outside the United States, and (5) the amount of leverage the Company has obligations to pay. The forward-looking statements should be considered in light of these risks and uncertainties.

                       TOTAL RENAL CARE HOLDINGS, INC.
                         NORMALIZED INCOME STATEMENT
                          ADJUSTED FOR UNUSUAL ITEMS

                       THREE MONTHS ENDED JUNE 30, 1999
                         (in 000's, except EPS data)

                                 Actual      Adjustments         Normalized

    Net operating revenues        $352,993     $11,000 (a)        $363,993

    Operating expenses:
     Facilities                    248,530      (4,500)(b)         244,030
     General and
      administrative                30,541      (2,500)(c)          28,041
     Provision for doubtful
      accounts                      35,707     (24,000)(a)          11,707
     Depreciation & amortization    27,392              --          27,392
     Write-off of investments       16,600     (16,600)(d)               0

     Total operating expenses      358,770              --         311,170

    Operating income (loss)        (5,777)              --          52,823

    Interest expense                24,370              --          24,370
    Interest income                (1,934)              --         (1,934)

    Pre-Tax income (loss)         (28,213)              --          30,387
    Income taxes (benefit)         (9,699)              --          11,704
    Minority interest                2,521              --           2,521

    Net income (loss)            ($21,035)              --        $ 16,162

    Earnings (loss) per share      ($0.26)              --          $ 0.20

    Shares outstanding              81,149              --          82,160



    (a)  $35,000 adjustment to accounts receivable of which $11,000 is related
         to contractual adjustments and $24,000 is related to an increase in
         the provision for doubtful accounts.

(b) $4,500 related to the reconciliation of vendor claims.

(c) $2,500 is non-recurring operating expenses including expenses

         associated with the now-disposed-of corporate jet and the expensing
         of capitalized acquisition costs for transactions that will not be
         consummated.
    (d)  $16,600 write-off of minority investments and loans in dialysis
         related businesses.

                       TOTAL RENAL CARE HOLDINGS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME

           Three months and Six Months ended June 30, 1999 and 1998

                           Three Months                 Six Months
                        1999           1998          1999         1998

    STATEMENTS OF INCOME
    Net operating
     revenues        $352,993,000   $288,350,000 $705,237,000 $547,099,000
    Operating expenses:
     Facilities       248,530,000    183,324,000 483,763,000   350,319,000
     General and
      administrative   30,541,000     17,605,000  53,278,000    34,515,000
     Provision for
      doubtful accounts35,707,000      7,779,000  46,185,000    14,542,000
     Depreciation and
      amortization     27,392,000     22,805,000  54,417,000    42,399,000
     Write-off of
      investments and
      loans            16,600,000             --  16,600,000            --
     Merger and related
      costs                     --            --           --   79,435,000
    Total operating
     expenses         358,770,000    231,513,000 654,243,000   521,210,000
    Operating income
     (loss)            (5,777,000)    56,837,000  50,994,000    25,889,000
    Interest expense,
     net of capitalized
     interest         (24,370,000)  (16,544,000) (47,137,000) (31,061,000)
    Interest rate swap
     -- early termination
     costs                      --   (9,823,000)           --  (9,823,000)
    Interest income     1,934,000      1,022,000   3,264,000     2,664,000
     Income (loss) before
      income taxes,
      minority interests,
      extraordinary item
      and cumulative effect
      of change in
      accounting
      principle      (28,213,000)     31,492,000   7,121,000  (12,331,000)
    Income taxes      (9,699,000)     12,088,000   3,323,000    12,960,000
     Income (loss)
      before minority
      interests,
      extraordinary
      item and cumulative
      effect of change
      in accounting
      principle       (18,514,000)    19,404,000    3,798,000 (25,291,000)
    Minority interests
     in income of
     consolidated
     subsidiaries       2,521,000      1,565,000   4,839,000     2,958,000
    Income (loss) before
     extraordinary item
     and cumulative
     effect of change
     in accounting
     principle        (21,035,000)    17,839,000  (1,041,000) (28,249,000)
    Extraordinary loss,
     net of tax of
     $6,087,000 and
     $7,688,000                 --     9,932,000          --    12,744,000
    Cumulative effect
     of change in
     accounting principle,
     net of tax
     of $4,300,000              --            --           --    6,896,000
    Net income (loss)$(21,035,000)    $7,907,000 $(1,041,000)$(47,889,000)

    Earnings (loss) per common share:
     Income (loss) before
      extraordinary
      item and cumulative
      effect of change in
      accounting
      principle            $(0.26)         $0.22      $(0.01)      $(0.35)
     Extraordinary loss,
      net of tax                --        (0.12)          --        (0.16)
     Cumulative effect
      of change in
      accounting principle,
      net of tax                --            --           --       (0.09)
     Net income (loss)     $(0.26)         $0.10      $(0.01)      $(0.60)

    Weighted average
     number of common
     shares outstanding 81,148,736    80,714,000   81,125,437   79,692,000

    Earnings (loss) per common
     share -- assuming dilution:
    Income (loss) before
     extraordinary item
     and cumulative effect
     of change in
     accounting principle  $(0.26)        $ 0.22      $(0.01)      $(0.35)
    Extraordinary loss,
     net of tax                --         (0.12)          --        (0.16)
    Cumulative effect
     of change in
     accounting principle,
     net of tax                 --            --           --       (0.09)
    Net income (loss)      $(0.26)         $0.10      $(0.01)      $(0.60)
    Weighted average number
     of common shares
     and equivalents
     outstanding --
     assuming dilution  81,148,736    87,263,000   81,125,437   79,692,000

SOURCE  Total Renal Care Holdings, Inc.

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