Improving Health, Health Care and Quality of Life

DaVita Inc. Reports 2nd Quarter 2003 Results
PRNewswire-FirstCall
TORRANCE, Calif.

DaVita Inc. , today announced results for the quarter ended June 30, 2003. Net earnings for the three and six months ended June 30, 2003 were $38.5 million and $74.9 million, or $0.55 and $1.07 per share, respectively.

  (Logo:  http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO )

  Financial and operating highlights include:

  -- For the rolling 12 months ended June 30, 2003, before considering
     recoveries of $59 million in 2002 related to prior years' lab billings,
     operating cash flow was $324 million and free cash flow was
     $277 million.
  -- Operating cash flow for the three and six months ended June 30, 2003
     was $79 million and $159 million, respectively.  Free cash flow for
     the same periods was $69 million and $139 million, respectively.
  -- Operating income for the three and six months was $83 million and
     $162 million, respectively.  Operating income excluding depreciation,
     amortization and minority interests was $103 million and $201 million,
     respectively (previously described as EBITDA).
  -- Total treatments for the second quarter were 1,579,580, an increase
     of 6.2% compared to the second quarter of last year.  Non-acquired
     treatment growth was 3.4%, with acquisitions contributing the
     additional 2.8% to treatment growth.
  -- Second quarter dialysis revenue per treatment was approximately $302,
     compared to $291 in the second quarter of last year, an increase
     of 3.8%.
  -- As of June 30, 2003, we provided dialysis services at 539 outpatient
     centers serving approximately 47,000 patients.  During the second
     quarter we acquired 11 centers and opened eight de novo centers.
     We also closed two centers.  Included in this patient and center
     count are approximately 3,300 patients in 29 centers under management
     arrangements.

  Capital structure:

  -- During the quarter we called our 5 5/8% convertible notes, resulting
     in their conversion into 4.9 million shares of common stock on
     July 15, 2003.
  -- On July 15, 2003 we completed a refinancing of our senior credit
     facilities resulting in lower interest rates, additional borrowing of
     $200 million and modification of certain covenants.
  -- The additional borrowings will be used to redeem a portion of our
     outstanding 7% convertible notes, as previously announced on
     July 16, 2003.

  Guidance:

  -- We are updating our 2003 operating income guidance.  It was $300 to
     $320 million.  It is now $315 to $330 million.
  -- Our current expectation for 2004 is that operating income will be
     relatively flat from 2003.
  -- We have changed our primary guidance metric from EBITDA to operating
     income to simplify compliance with the SEC's new Regulation G.

DaVita will be holding a conference call to discuss its second quarter 2003 results on August 1, 2003, at 1:30 PM Eastern Daylight 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.

This press release includes non-GAAP financial measures, which we believe provide useful information to investors by excluding certain nonrecurring expenses and prior period recoveries and by allowing consistency and comparability in our financial reporting to prior periods for which these non-GAAP measures were previously reported. These measures should be considered in addition to results prepared in accordance with GAAP, but are not a substitute for or superior to GAAP results. Included in this press release is a reconciliation of these non-GAAP measures to the most comparable GAAP financial measures.

This release also contains forward-looking statements. Factors which could impact future results include the uncertainties associated with governmental regulation, general economic and other market conditions, and the risk factors set forth in the Company's SEC filings, including its Form 10-Q for the year ended March 31, 2003. The forward-looking statements should be considered in light of these risks and uncertainties.

  These risks include those relating to:

  -- the concentration of profits generated from PPO and private indemnity
     patients and from ancillary services including the administration of
     pharmaceuticals,
  -- possible reductions in private and government reimbursement rates,
  -- changes in pharmaceutical practice patterns or reimbursement policies,
  -- the Company's ability to maintain contracts with physician medical
     directors, and
  -- legal compliance risks, such as those associated with the ongoing
     review of the Company's Florida laboratory subsidiary by its Medicare
     carrier and the Department of Justice, and the ongoing review by the
     US Attorney's Office and HHS Office of Inspector General in
     Philadelphia.



                               DAVITA INC.
                       CONSOLIDATED BALANCE SHEETS
                               (unaudited)
              (dollars in thousands, except per share data)


                                                  June 30,     December 31,
                                                    2003           2002
                       ASSETS
  Cash and cash equivalents                       $315,606        $96,475
  Accounts receivable, less allowance
   of $49,361 and $48,927                          346,209        344,292
  Inventories                                       30,111         34,929
  Other current assets                              26,275         28,667
  Deferred income taxes                             47,666         40,163
        Total current assets                       765,867        544,526
  Property and equipment, net                      314,374        298,475
  Amortizable intangibles, net                      61,198         63,159
  Investments in third-party dialysis
   businesses                                        3,266          3,227
  Other long-term assets                             2,972          1,520
  Goodwill                                         901,714        864,786
                                                $2,049,391     $1,775,693

        LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                 $83,821        $77,890
  Other liabilities                                115,106        101,389
  Accrued compensation and benefits                 94,812         95,435
  Current portion of long-term debt                 47,314          7,978
  Income taxes payable                              20,486          9,909
        Total current liabilities                  361,539        292,601
  Long-term debt                                 1,409,687      1,311,252
  Other long-term liabilities                       12,914          9,417
  Deferred income taxes                             78,187         65,930
  Minority interests                                28,390         26,229
  Shareholders' equity:
      Preferred stock ($0.001 par value,
       5,000,000 shares authorized; none issued)
      Common stock ($0.001 par value,
       195,000,000 shares authorized;
       89,790,206 and 88,874,896 shares issued)         90             89
  Additional paid-in capital                       532,133        519,369
  Retained earnings                                288,270        213,337
  Treasury stock,
   at cost (28,185,827 and 28,216,177 shares)     (661,819)      (662,531)
  Total shareholders' equity                       158,674         70,264
                                                $2,049,391     $1,775,693



                               DAVITA INC.
                    CONSOLIDATED STATEMENTS OF INCOME
                               (unaudited)
              (dollars in thousands, except per share data)

                                Three months ended       Six months ended
                                     June 30,                June 30,
                               2003          2002       2003          2002

  Net operating revenues     $489,883    $442,677     $949,690     $870,342
  Operating expenses
   and charges:
     Dialysis centers
      and labs                335,986     300,552      652,696      592,186
     General
      and administrative       42,583      39,634       79,370       75,687
     Depreciation
      and amortization         17,921      15,698       35,366       31,503
     Provision for
      uncollectible accounts    8,780       5,882       17,017       11,137
     Minority interests
      and equity income, net    1,813       2,164        3,107        4,299
       Total operating
        expenses and charges  407,083     363,930      787,556      714,812

  Operating income             82,800      78,747      162,134      155,530

  Debt expense                 19,495      17,139       38,951       32,211
  Refinancing charges          48,930      48,930
  Other income                    890       2,620        1,675        2,887
  Income before income taxes   64,195      15,298      124,858       77,276
  Income tax expense           25,675       6,928       49,925       32,928

  Net earnings                $38,520      $8,370      $74,933      $44,348

  Earnings per share:
     Basic                      $0.63       $0.10        $1.23        $0.55
     Diluted                    $0.55       $0.10*       $1.07        $0.52*

  Weighted average shares
   for earnings per share:
     Basic                 61,305,955  79,784,841   61,097,841   81,366,393
     Diluted               79,188,721  83,022,414   78,964,493   89,814,524


* The diluted earnings per share for the three and six months ended June 30, 2002 are restated to reflect the adoption of Statement of Financial Accounting Standards No. 145 Rescission of FASB Standard No. 4, 44, and 64, Amendment of FASB Statement No. 14, and Technical Corrections. Refinancing charges previously classified as an extraordinary item are now included as an ordinary pre-tax income item. As a result of this reclassification, certain convertible subordinated notes are not dilutive in the earnings per share calculations for these periods.

                               DAVITA INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (unaudited)
                          (dollars in thousands)

                                                      Six months ended
                                                          June 30,
                                                    2003            2002
  Cash flows from operating activities:
  Net income                                       $74,933        $44,348
  Adjustments to reconcile net income to cash
   provided by operating activities:
      Depreciation and amortization                 35,366         31,503
      Impairments and valuation adjustments, net                  (2,390)
      Loss (gain) on divestitures                      343          (462)
      Deferred income taxes                          4,754         11,843
      Non-cash debt expense                          1,958          1,526
      Stock options, principally tax benefits        5,699         16,304
      Equity investment income                       (967)          (960)
      Minority interests in income
       of consolidated subsidiaries                  4,074          5,260
      Refinancing charges                           48,930
      Distributions to minority interests           (3,685)        (4,138)
  Changes in operating assets and liabilities,
   excluding acquisitions and divestitures:
      Accounts receivable                            (740)        (20,471)
      Inventories                                    5,327          2,436
      Other current assets                           2,495         (4,533)
      Other long-term assets                       (2,774)            151
      Accounts payable                               5,852          9,315
      Accrued compensation and benefits              (716)          6,367
      Other current liabilities                     13,554          (536)
      Income taxes                                  10,577        (3,694)
      Other long-term liabilities                    3,377          1,118
          Net cash provided
           by operating activities                 159,427        141,917

  Cash flows from investing activities:
      Additions of property and equipment, net    (42,077)       (43,691)
      Acquisitions and divestitures, net          (47,035)        (1,426)
      Investments in affiliates, net                 2,663          1,857
      Intangible assets                                754           (30)
          Net cash used in investing activities   (85,695)       (43,290)

  Cash flows from financing activities:
      Borrowings                                 1,350,195      1,323,335
      Payments on long-term debt               (1,212,574)      (819,107)
      Debt redemption premium                                    (40,910)
      Deferred financing costs                                   (10,781)
      Purchase of treasury stock                                (474,438)
      Proceeds from issuance of common stock         7,778         23,583
          Net cash provided
           by financing activities                 145,399          1,682

   Net increase in cash                            219,131        100,309
   Cash and cash equivalents
    at beginning of period                          96,475         36,711
   Cash and cash equivalents
    at end of period                              $315,606       $137,020


                               DAVITA INC.
                       SUPPLEMENTAL FINANCIAL DATA
    (dollars in millions, except for per share and per treatment data)

                              Q2 2003      Q1 2003      Q2 2002    YTD 2003
  Financial Results:
    Net earnings excluding
     refinancing charges       $38.5        $36.4        $37.7        $74.9
      Basic EPS                $0.63        $0.60        $0.47        $1.23
      EPS assuming dilution    $0.55        $0.52        $0.43        $1.07

    Operating income
      Consolidated             $82.8        $79.3        $78.7       $162.1
      Continental U.S.         $82.8        $79.3        $77.8       $162.1
      Continental operating
       income margin           16.9%        17.3%        17.7%        17.1%

  Business Metrics (Continental U.S.):
    Volume
      Treatments           1,579,580    1,503,031    1,486,816    3,082,611
      Number of
       treatment days             78         76.4           78        154.4
      Treatments per day      20,251       19,673       19,062       19,965
      Per day year
       over year increase       6.2%         4.8%         5.5%         5.5%
      Non-acquired growth       3.4%         3.3%         4.5%         3.5%

    Revenue
      Revenue                   $490         $460         $441         $950

      Dialysis revenue
       per treatment         $301.52      $296.31      $290.52      $298.98
      Per treatment
       increase from
       previous quarter         1.8%         1.8%           0%           --
      Per treatment
       increase from
       prior year               3.8%         2.0%         5.3%         2.9%

    Expenses
    A. Dialysis centers and
        lab operating expenses
       Percent of revenue      68.6%        68.9%        67.7%        68.7%
       Per treatment         $212.71      $210.71      $200.46      $211.74
       Per treatment
        increase (decrease)
        from previous quarter   0.9%         2.2%       (0.3%)           --

    B. General &
        administrative expenses
       Percent of revenue       8.7%         8.0%         9.3%         8.4%
       Per treatment          $26.96       $24.48       $27.59       $25.75
       Per treatment
        increase (decrease)
        from previous quarter  10.1%       (4.3%)         9.7%           --

    C. Bad debt expense
        as a percent of
        current-period revenue  1.8%         1.8%         1.4%         1.8%

    D. Consolidated effective
        tax rate               40.0%        40.0%        41.2%        40.0%


                               DAVITA INC.
                  SUPPLEMENTAL FINANCIAL DATA, CONTINUED
    (dollars in millions, except for per share and per treatment data)

                                   Q2 2003    Q1 2003    Q2 2002   YTD 2003
  Cash Flow
    Operating cash flow              $78.8     $80.6      $58.4    $159.4
    Free cash flow                   $69.3     $70.2      $38.8    $139.4
    Capital expenditures:
      Development                    $10.4     $11.9       $8.1     $22.3
      Routine maintenance/IT/other    $9.5     $10.5      $19.7     $20.0
    Acquisition expenditures, net    $46.0      $0.7         --     $47.0

  Accounts Receivable
    Net receivables                   $346      $346       $347
    DSO                                 66        69         73

  Debt/Capital Structure
   (Consolidated)
    Total debt                      $1,457    $1,464     $1,324
    Net debt, net of cash           $1,141    $1,159     $1,187
    Leverage ratio - last quarter
     annualized (see Note 1)          2.8x      3.0x       3.1x
    Shares repurchased                  --        --     16,900
    Average repurchase price            --        --     $24.08

  Clinical
    Dialysis adequacy
     - % of patients with URR > 65     89%       89%        89%
    Dialysis adequacy
     - % of patients with Kt/V > 1.2   93%       92%        92%
    Anemia measure
     - % of patients with HCT > 33     84%       83%        80%


Note 1. Leverage ratio is defined as net debt (total debt net of cash) to operating income excluding depreciation, amortization and minority interests (previously referred to as EBITDA). The operating income reconciliation is provided below.

                               DAVITA INC.
                  RECONCILIATIONS FOR NON-GAAP MEASURES
                          (dollars in thousands)

                               Q2 2003      Q1 2003      Q2 2002   YTD 2003
  1. Net earnings excluding
      refinancing charges:
     Net earnings               $38,520     $36,413      $8,370    $74,933
     Add back: Refinancing
                charges                                  48,930
               Related income
                tax expense                             (19,572)
                                                         29,358
                                $38,520     $36,413     $37,728    $74,933


                               Q2 2003      Q1 2003      Q2 2002   YTD 2003
  2. Operating income
      excluding depreciation,
      amortization and
      minority interests
      (previously described
      as EBITDA):
     Operating income           $82,800     $79,334     $78,747   $162,134
     Add back: Depreciation and
                amortization     17,921      17,445      15,698     35,366
         Minority interests
          and equity income, net  1,813       1,294       2,164      3,107
                               $102,534     $98,073     $96,609   $200,607


                                                        Rolling
                                                       12-month
                                                     period ended
                                Q2 2003     Q1 2003     Q2 2003
  3. Operating cash flow
      before prior years'
      lab recoveries
     Cash provided by
       operating activities     $78,778     $80,649    $359,505
     Less:  Prior years'
             lab recoveries                            (58,778)
            Related income
             tax expense                                 23,511
                                $78,778     $80,649    $324,238

  4.  Free cash flow

       Free cash flow represents net cash provided by operating activities
       less non-development capital expenditures.We believe free cash flow
       is a useful adjunct to cash flow from operating activities and other
       measurements under generally accepted accounting principles in the
       United States since it is a meaningful measure of our ability to fund
       development activities and meet our debt service requirements.  Free
       cash flow is not a measure of financial performance under generally
       accepted accounting principlesin the United States and should not be
       considered as an alternative to cash flows from operating, investing
       or financing activities as an indicator of cash flows or as a measure
       of liquidity.

                                                                   Rolling
                                                                   12-month
                                                                    period
                                                                    ended
                                Q2 2003     Q1 2003     Q2 2002    Q2 2003
    Cash provided by
     operating activities       $78,778     $80,649     $58,433   $359,505
    Less expenditures
     for routine maintenance
     and information technology  (9,513)    (10,490)    (19,652)   (47,198)
    Free cash flow
     (including prior years'
      lab recoveries)            69,265      70,159      38,781    312,307
    Less:  Prior years'
            lab recoveries                                         (58,778)
              Related income
               tax expense                                          23,511
    Free cash flow
     before prior years'
     lab recoveries             $69,265     $70,159     $38,781   $277,040
Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk, 888-776-6555 or 212-782-2840

SOURCE: DaVita Inc.

CONTACT: LeAnne Zumwalt, Investor Relations of DaVita Inc.,
+1-310-750-2072


Contact Investor Relations

For media inquiries, please contact:

Media Kit

Kate Stabrawa
2000 16th Street
Denver, CO 80202
(303) 876-7527