Improving Health, Health Care and Quality of Life

DaVita Inc. Reports 3rd Quarter 2003 Results
PRNewswire-FirstCall
EL SEGUNDO, Calif.

DaVita Inc. , today announced results for the quarter ended September 30, 2003. Net earnings for the three and nine months ended September 30, 2003, excluding after-tax refinancing charges of $10.4 million, were $48.5 million and $123.4 million, or $0.67 and $1.74 per share respectively.

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

Net earnings for the three and nine months ended September 30, 2003, including the refinancing charges were $38.1 million and $113 million, or $0.54 and $1.61 per share, respectively.

  Financial and operating highlights include:
   * Cash Flow:  For the rolling 12 months ended September 30, 2003, before
     considering recoveries of $42 million in 2002 related to prior period
     lab billings, operating cash flow was $300 million and free cash flow
     was $254 million.
   * Operating Income:  Operating income for the three and nine months was
     $95 million and $257 million, respectively, reflecting both favorable
     cost and revenue performance.
   * Volume:  Total treatments for the third quarter were 1,625,058, an
     increase of 7.1% compared to the third quarter of last year.
     Non-acquired treatment growth was 3.8%, with acquisitions contributing
     the additional 3.3% to treatment growth.
   * Revenue per Treatment:  Third quarter dialysis revenue per treatment
     increased to approximately $306.
   * Facility Activity:  As of September 30, 2003, we provided dialysis
     services at 547 outpatient centers serving approximately 47,600
     patients.  Included in this patient and center count are approximately
     3,300 patients in 29 centers under management arrangements.  During the
     third quarter we acquired 3 centers and opened 7 de novo centers.  We
     also closed two centers.

  Recent transactions:
   * On July 15, 2003, we completed a refinancing of our senior credit
     facilities resulting in lower interest rates and modification of
     certain covenants.  Additionally, new borrowings of $200 million were
     used to redeem a portion of our outstanding 7% convertible notes on
     August 15, 2003.
   * On July 15, 2003, we also completed the call of our 5 5/8% convertible
     notes, which were converted into approximately 4.9 million shares.
   * On October 14, 2003 we completed the redemption of the remaining $145
     million of 7% convertible notes for cash except for $526,000 of the
     Notes that were converted into approximately 16,000 shares of stock.
   * During the quarter we repurchased 2.7 million shares at an average
     price of $30.34 per share.

  Outlook:
   * We expect that fourth quarter operating income will be comparable to
     the third quarter. For 2004, we are currently targeting operating
     income to be between $360 and $385 million.

DaVita will be holding a conference call to discuss its third quarter 2003 results on November 3, 2003, at 1:00 PM Eastern Standard 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 quarter ended June 30, 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.

The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

                               DAVITA INC.

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

                                                     September    December
                                                         30,         31,
                                                        2003        2002
                          ASSETS

  Cash and cash equivalents                           $272,109     $96,475
  Accounts receivable, less allowance
   of $50,636 and $48,927                              356,542     344,292
  Inventories                                           25,743      34,929
  Other current assets                                  33,117      28,667
  Deferred income taxes                                 53,065      40,163
      Total current assets                             740,576     544,526
  Property and equipment, net                          321,368     298,475
  Amortizable intangibles, net                          52,978      63,159
  Investments in third-party dialysis businesses         3,064       3,227
  Other long-term assets                                11,561       1,520
  Goodwill                                             908,318     864,786
                                                    $2,037,865  $1,775,693

           LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                     $71,166     $77,890
  Other liabilities                                    127,384     101,389
  Accrued compensation and benefits                    108,076      95,435
  Current portion of long-term debt                     50,224       7,978
  Income taxes payable                                  23,221       9,909
      Total current liabilities                        380,071     292,601

  Long-term debt                                     1,272,648   1,311,252
  Other long-term liabilities                           14,483       9,417
  Deferred income taxes                                 91,103      65,930
  Minority interests                                    28,872      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;
     89,871,303 and 88,874,896 shares issued)               90          89
    Additional paid-in capital                         544,719     519,369
    Retained earnings                                  326,330     213,337
    Treasury stock, at cost (25,628,140
     and 28,216,177 shares)                           (620,451)   (662,531)
      Total shareholders' equity                       250,688      70,264
                                                    $2,037,865  $1,775,693


                               DAVITA INC.

        CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                               (unaudited)
              (dollars in thousands, except per share data)

                                   Three months ended    Nine months ended
                                      September 30,         September 30,
                                     2003       2002       2003       2002

  Net operating revenues          $513,282   $481,194 $1,462,972 $1,351,536
  Operating expenses and charges:
    Dialysis centers and labs      347,895    308,438  1,000,591    900,624
    General and administrative      39,920     37,048    119,290    112,735
    Depreciation and amortization   19,336     16,267     54,702     47,770
    Provision for uncollectible
     accounts                        9,214      8,117     26,231     19,254
    Minority interests and equity
     income, net                     1,706      1,405      4,813      5,704
      Total operating expenses
       and charges                 418,071    371,275  1,205,627  1,086,087

  Operating income                  95,211    109,919    257,345    265,449

  Debt expense                      16,111     19,967     55,062     52,178
  Refinancing charges               17,240                17,240     48,930
  Other income                       1,050        618      2,725      3,505

  Income before income taxes        62,910     90,570    187,768    167,846
  Income tax expense                24,850     36,400     74,775     69,328

  Net earnings                     $38,060    $54,170   $112,993    $98,518


  Comprehensive income             $38,060    $54,170   $112,993    $98,518


  Earnings per share:
    Basic                            $0.58      $0.84      $1.81      $1.30
    Diluted                          $0.54      $0.72      $1.61      $1.20
    Weighted average shares
     for earnings per share:
      Basic                     65,102,965 64,128,489 62,442,042 75,556,960
      Diluted                   76,499,362 82,422,930 78,154,106 94,301,824


                               DAVITA INC.

                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (unaudited)
                          (dollars in thousands)

                                                          Nine months ended
                                                            September 30,
                                                          2003        2002
  Cash flows from operating activities:

  Net earnings                                         $112,993     $98,518
  Adjustments to reconcile net earnings to cash
   provided by operating activities:
    Depreciation and amortization                        54,702      47,770
    Loss (gain) on divestitures                             929      (2,610)
    Deferred income taxes                                12,271      22,574
    Non-cash debt expense                                 2,636       2,375
    Stock options, principally tax benefits              10,240      18,035
    Equity investment income                             (1,331)     (1,465)
    Minority interests in income of consolidated
     subsidiaries                                         6,144       7,171
    Refinancing charges                                  17,240      48,930
    Distributions to minority interests                  (5,560)     (6,572)
  Changes in operating assets and liabilities,
   excluding acquisitions and divestitures:
    Accounts receivable                                  (9,978)    (13,362)
    Inventories                                           9,974      12,506
    Other current assets                                 (4,189)     (7,726)
    Other long-term assets                                3,902         216
    Accounts payable                                     (7,950)      9,787
    Accrued compensation and benefits                    12,959      10,531
    Other current liabilities                            25,832       7,181
    Income taxes                                         13,312      18,743
    Other long-term liabilities                           4,946       3,075
      Net cash provided by operating activities         259,072     275,677
  Cash flows from investing activities:
    Additions of property and equipment, net            (64,031)    (66,999)
    Acquisitions and divestitures, net                  (66,922)    (11,979)
    Investments in affiliates, net                        3,516       3,488
    Intangible assets                                      (540)       (142)
      Net cash used in investing activities            (127,977)    (75,632)
  Cash flows from financing activities:
    Borrowings                                        3,423,511   1,928,326
    Payments on long-term debt                       (3,299,064) (1,426,537)
    Debt redemption premium                              (8,405)    (40,910)
    Deferred financing costs                             (3,445)    (10,794)
    Purchase of treasury stock                          (83,037)   (597,171)
    Proceeds from issuance of common stock               14,979      25,691
      Net cash provided by financing activities          44,539    (121,395)
  Net increase in cash                                  175,634      78,650
  Cash and cash equivalents at beginning of period       96,475      36,711
  Cash and cash equivalents at end of period           $272,109    $115,361


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

                                       Q3 2003   Q2 2003   Q3 2002  YTD 2003
  Financial Results:
    Net earnings excluding refinancing
     charges, prior period               $48.5     $38.5     $37.7    $123.4
    Medicare lab revenue
      Basic EPS                          $0.74     $0.63     $0.59     $1.97
      EPS assuming dilution              $0.67     $0.55     $0.52     $1.74

    Operating income, excluding
     prior period Medicare lab revenue   $95.2     $82.8     $82.7    $257.3
      Operating income margin            18.5%     16.9%     18.2%     17.6%

  Business Metrics:
    Volume
      Treatments                     1,625,058 1,579,580 1,516,840 4,707,669
      Number of treatment days              79        78        79     233.4
      Treatments per day                20,570    20,251    19,201    20,170
      Per day year over year increase     7.1%      6.2%      4.6%      6.1%
      Non-acquired growth                 3.8%      3.4%      3.8%      3.4%

    Revenue, excluding prior period
     Medicare lab revenue
      Revenue                             $513      $490      $454   $1,463

      Dialysis revenue per treatment   $306.20   $301.52   $290.92  $301.47
      Per treatment increase from
       previous quarter                   1.6%      1.8%      0.1%       --
      Per treatment increase from
       prior year                         5.3%      3.8%      3.8%     3.7%

    Expenses
    A. Dialysis centers and lab
        operating expenses
       Percent of revenue                67.8%     68.6%     67.9%    68.4%
       Per treatment                   $214.08   $212.71   $203.34  $212.54
       Per treatment increase
        from previous quarter             0.6%      0.9%      1.4%       --

    B. General & administrative
        expenses
       Percent of revenue                 7.8%      8.7%      8.2%     8.2%
       Per treatment                    $24.57    $26.96    $24.42   $25.34
       Per treatment increase (decrease)
        from previous quarter            (8.9%)    10.1%    (11.5%)      --

    C. Bad debt expense as a percent
        of current-period revenue         1.8%      1.8%      1.9%     1.8%

    D. Consolidated effective tax rate   39.5%     40.0%     40.0%    39.8%


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

                                       Q3 2003   Q2 2003   Q3 2002 YTD 2003
  Cash Flow
    Operating cash flow excluding
     prior period Medicare lab revenue   $99.6     $78.8    $117.3   $259.1
    Free cash flow                       $90.1     $69.3    $106.8   $229.5
    Capital expenditures:
      Development                        $12.9     $10.4     $11.7    $35.2
      Routine maintenance/IT/other        $9.5      $9.5     $10.5    $29.5
    Acquisition expenditures, net        $21.1     $46.0     $10.6    $68.2

  Accounts Receivable
    Net receivables                       $357      $346      $340
    DSO                                     65        66        70

  Debt/Capital Structure
    Total debt                          $1,323    $1,457    $1,322
    Net debt, net of cash               $1,051    $1,141    $1,207
    Leverage ratio - last quarter         2.3x      2.8x      3.0x
     annualized (see Note 1)
    Shares repurchased (in millions)       2.7        --       5.6      2.7
    Average repurchase price            $30.34        --    $21.83   $30.34

  Clinical (quarterly averages)
    Dialysis adequacy - % of patients
     with Kt/V > 1.2                       93%       92%       91%
    Anemia measure - % of patients
     with HCT > 33                         83%       83%       82%

Note 1. Leverage ratio is defined as net debt (total debt net of cash) to operating income excluding depreciation, amortization, minority interests and prior period Medicare lab revenue. The operating income reconciliation is provided below.

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

  1. Net earnings excluding refinancing charges and prior period Medicare
     lab revenue:

                             Q3 2003      Q2 2003      Q3 2002     YTD 2003
  Net earnings               $38,060      $38,520      $54,170     $112,993
  Add back:  Refinancing
   charges                    17,240                                 17,240
  Less:  Prior period
   Medicare lab revenue                                (27,223)
  Related income tax expense  (6,818)                   10,767       (6,818)
                             $48,482      $38,520       37,714     $123,415

  2. Operating income excluding depreciation, amortization, minority
     interests and prior period Medicare lab revenue:

                             Q3 2003      Q2 2003      Q3 2002     YTD 2003
  Operating income           $95,211      $82,800     $109,919     $257,345
  Less:  Prior period
   Medicare lab revenue                                (27,223)
                             $95,211      $82,800      $82,696     $257,345
  Add back: Depreciation
   and amortization           19,336       17,921       16,267       54,702
  Minority interests
   and equity income, net      1,706        1,813        1,405        4,813
                            $116,253     $102,534     $100,368     $316,860

  3. Operating cash flow before prior period Medicare lab revenue:

                                                                Rolling 12-
                                                               month period
                                                                   ended Q3
                             Q3 2003      Q2 2003      Q3 2002         2003
  Cash provided by
   operating activities      $99,645      $78,778     $133,760     $325,390
  Less:  Prior period
   Medicare lab revenue                                (27,223)     (41,555)
  Related income tax expense                            10,767       16,435
                             $99,645      $78,778     $117,304     $300,270

  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 principles in 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 Q3
                          Q3 2003   Q2 2003   Q3 2002   YTD 2003       2003

  Cash provided by
   operating activities   $99,645   $78,778  $133,760   $259,072   $325,390
  Less expenditures for
   routine maintenance
   and information
   technology              (9,533)   (9,513)  (10,489)   (29,536)   (46,241)
  Free cash flow
   (including prior
   years' lab
   recoveries)             90,112    69,265   123,271    229,536    279,149
  Less: Prior period
   Medicare lab revenue                       (27,223)              (41,555)
  Related income tax
   expense                                     10,767                16,435
  Free cash flow before
   prior years' lab
   revenue                $90,112   $69,265  $106,815   $229,536   $254,029
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SOURCE: DaVita Inc.

CONTACT: LeAnne Zumwalt, Investor Relations of DaVita Inc.,
+1-310-536-2420


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