Improving Health, Health Care and Quality of Life

DaVita Inc. Reports 4th Quarter and Year Ended 2003 Results
EL SEGUNDO, Calif., Feb. 11 /PRNewswire-FirstCall/ -- DaVita Inc.
 (NYSE:   DVA), today announced results for the quarter and year ended December
 31, 2003.  Net earnings for the fourth quarter and the full year, excluding
 refinancing charges and Medicare lab recoveries, were $53.9 million and
 $177.3 million or $0.79 and $2.51 per share, respectively.  However, the
 fourth quarter benefited from a year-to-date reduction in the annualized
 effective tax rate that added $0.02 to fourth quarter earnings per share.
     (Logo:  http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO )
     Net earnings, on a GAAP basis including these items, for the three and
 twelve months ended December 31, 2003, were $62.8 million and $175.8 million,
 or $0.92 and $2.49 per share, respectively.

     Financial and operating highlights include:

     -- Cash Flow:  For the 12 months ended December 31, 2003, operating cash
        flow was $294 million and free cash flow was $249 million.
     -- Operating Income:  Operating income for the three and twelve months
        ended December 31, 2003, excluding Medicare lab recoveries of
        $24 million for prior years' services, was $97 million and
        $355 million, respectively.
     -- Medicare Lab Recoveries:  The fourth quarter results include
        $24 million of additional revenue and pre-tax income from recoveries of
        prior period Medicare billings of our Florida lab, principally
        associated with services provided from 1998 to 2000.  In 2002, we
        recorded Medicare lab recoveries of $59 million for prior years'
        services.  Cumulatively, this brings our Medicare lab recoveries to
        nearly 90% of total disputed billings for the period from 1995 through
        2001.
     -- Volume:  Total treatments for the fourth quarter were 1,666,225, or
        20,959 treatments per day, an increase of 8.5% compared to the fourth
        quarter of last year.  Non-acquired treatment growth was 4.3%.
     -- Effective Tax Rate:  The final effective annual income tax rate for
        2003 was 39.0%, resulting in an effective rate of 37.5% for the fourth
        quarter.
     -- Facility Activity:  As of December 31, 2003, we operate or provide
        administrative services at 566 outpatient dialysis centers serving
        approximately 48,500 patients.  During the fourth quarter we acquired
        11 centers and opened 8 de novo centers.  For the full year, we
        acquired 27 centers, including a controlling interest in two centers in
        which we previously held a minority interest, and opened 30 de novo
        centers.  We also closed five centers.

     Recent transactions:

     -- On October 14, 2003 we completed the redemption of the remaining
        $145 million of 7% convertible notes for cash except for $526,000 of
        notes that were converted into approximately 16,000 shares of stock.
     -- On November 18, 2003, we completed a second refinancing of our senior
        credit facilities resulting in lower interest rates and modification of
        certain covenants.

     Outlook:

     -- Our 2004 operating income outlook is $360 to $385 million.  "While at
        this time, we are not changing our 2004 range, we are entering 2004
        with solid momentum.  As a result, the probability that our performance
        will be at the higher end of this range or exceed the range is greater
        than the probability that we will be at the lower end of the range,"
        Kent Thiry, Chairman and CEO stated.

     DaVita will be holding a conference call to discuss its fourth quarter and
 year ended 2003 results on February 11, 2004, at 1:00 p.m. 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
 charges 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 September 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 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 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 STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                 (dollars in thousands, except per share data)


                               Three months ended          Years ended
                                   December 31,           December 31,
                              2003          2002       2003          2002
     Net operating
      revenues             $553,446     $503,096   $2,016,418   $1,854,632
     Operating expenses
      and charges:
        Patient care costs  359,965      317,061    1,360,556    1,217,685
        General and
         administrative      40,338       41,338      159,628      154,073
        Depreciation and
         amortization        19,985       16,895       74,687       64,665
        Provision for
         uncollectible
         accounts             9,469        7,623       35,700       26,877
        Minority interests
         and equity income,
         net                  2,499        1,802        7,312        7,506
            Total operating
             expenses and
             charges        432,256      384,719    1,637,883    1,470,806

     Operating income       121,190      118,377      378,535      383,826

     Debt expense            11,766       19,458       66,828       71,636
     Refinancing charges      9,261                    26,501       48,930
     Other income               335          492        3,060        3,997

     Income before income
      taxes                 100,498       99,411      288,266      267,257
     Income tax expense      37,700       40,600      112,475      109,928

     Net income             $62,798      $58,811     $175,791     $157,329

     Earnings per share:
         Basic                $0.98        $0.97        $2.79        $2.19

         Diluted              $0.92        $0.81        $2.49        $1.96

     Weighted average
      shares for earnings
      per share:
         Basic           64,253,852   60,773,914   62,897,079   71,831,158

         Diluted         68,440,856   79,098,156   75,840,235   90,480,206

     STATEMENTS OF COMPREHENSIVE INCOME
     Net income             $62,798      $58,811     $175,791     $157,329
     Unrealized loss on
      securities, net of
      tax of $590             (924)                     (924)
     Comprehensive income   $61,874      $58,811     $174,867     $157,329



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


                                                      Years ended December 31,
                                                        2003           2002
     Cash flows from operating activities:
     Net income                                      $175,791       $157,329
     Adjustments to reconcile net income to cash
      provided by operating activities:
        Depreciation and amortization                  74,687         64,665
        Refinancing charges                            26,501         48,930
        Loss (gain) on divestitures                     2,130        (1,151)
        Deferred income taxes                          20,914         62,172
        Non-cash debt expense                           3,124          3,217
        Stock option expense and tax benefits          20,180         22,212
        Equity investment (income)                    (1,596)        (1,791)
        Minority interests in income of consolidated
         subsidiaries                                   8,908          9,299
        Distributions to minority interests           (7,663)        (6,165)
     Changes in operating assets and liabilities,
      net of effect of acquisitions and divestitures:
        Accounts receivable                          (41,369)       (17,699)
        Medicare lab recoveries                      (19,000)
        Inventories                                     3,159          (342)
        Other current assets                         (13,297)       (19,089)
        Other long-term assets                          4,692            527
        Accounts payable                              (6,875)         10,822
        Accrued compensation and benefits               5,821          6,837
        Other current liabilities                       9,958          2,585
        Income taxes                                   17,810        (4,821)
        Other long-term liabilities                     9,773          4,458
          Net cash provided by operating activities   293,648        341,995

     Cash flows from investing activities:
        Additions of property and equipment, net    (100,272)      (102,712)
        Acquisitions and divestitures, net           (97,370)       (18,511)
        Investments in and advances to
         affiliates, net                                4,456          5,064
        Intangible assets                               (790)          (342)
          Net cash used in investing activities     (193,976)      (116,501)

     Cash flows from financing activities:
        Borrowings                                  4,766,276      2,354,105
        Payments on long-term debt                (4,797,994)    (1,855,199)
        Debt redemption premium                      (14,473)       (40,910)
        Deferred financing costs                      (4,193)       (10,812)
        Net proceeds from issuance of common stock     23,056         29,257
        Purchase of treasury shares                 (107,162)      (642,171)
          Net cash used in financing activities     (134,490)      (165,730)

     Net (decrease) increase in cash and cash
      equivalents                                    (34,818)         59,764
     Cash and cash equivalents at beginning of year    96,475         36,711
     Cash and cash equivalents at end of year         $61,657        $96,475


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


                                                            December 31,
                                                        2003           2002
                                  ASSETS
     Cash and cash equivalents                        $61,657        $96,475
     Accounts receivable, less allowance of
      $52,554 and $48,927                             387,933        344,292
     Medicare lab recoveries                           19,000
     Inventories                                       32,853         34,929
     Other current assets                              43,875         28,667
     Deferred income taxes                             59,740         40,163
         Total current assets                         605,058        544,526
     Property and equipment, net                      342,447        298,475
     Amortizable intangibles, net                      49,971         63,159
     Investments in third-party dialysis businesses     3,095          3,227
     Other long-term assets                            10,771          1,520
     Goodwill                                         934,188        864,786
                                                   $1,945,530     $1,775,693

                  LIABILITIES AND SHAREHOLDERS' EQUITY
     Accounts payable                                 $71,868        $77,890
     Other liabilities                                112,654        101,389
     Accrued compensation and benefits                100,909         95,435
     Current portion of long-term debt                 50,557          7,978
     Income taxes payable                              26,832          9,909
         Total current liabilities                    362,820        292,601
     Long-term debt                                 1,117,002      1,311,252
     Other long-term liabilities                       19,310          9,417
     Deferred income taxes                            106,240         65,930
     Minority interests                                33,287         26,229
     Commitments and contingencies
     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; 89,870,803 and 88,874,896
        shares issued)                                     90             89
       Additional paid-in capital                     539,575        519,369
       Retained earnings                              389,128        213,337
       Treasury stock, at cost (25,368,019 and
        28,216,177 shares)                          (620,998)      (662,531)
       Accumulated other comprehensive loss             (924)
         Total shareholders' equity                   306,871         70,264
                                                   $1,945,530     $1,775,693


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

                            Q4 2003      Q3 2003      Q4 2002      YE 2003
     Financial Results:
      Net earnings excluding
       refinancing charges
       and Medicare lab
       recoveries for prior
       years' services        $53.9        $48.5        $33.7       $177.3
        Basic EPS             $0.84        $0.74        $0.55        $2.82
        EPS assuming
         dilution            $0.79*        $0.67        $0.49        $2.51
        *The fourth quarter benefited from a year-to-date reduction in the
          annualized effective tax rate that added $0.02 to fourth quarter
          earnings per share.

      Operating income,
       excluding Medicare
        lab recoveries        $97.2        $95.2        $76.8       $354.5
         Operating income
          margin              18.4%        18.5%        16.6%        17.8%

     Business Metrics:
      Volume
       Treatments         1,666,225    1,625,058    1,537,821    6,373,894
       Number of
        treatment days         79.5           79         79.6        312.9
       Treatments per day    20,959       20,570       19,319       20,370
       Per day year over
        year increase          8.5%         7.1%         3.8%         6.7%
       Non-acquired growth     4.3%         3.8%         2.9%         3.9%

     Revenue
      Total revenue            $553         $513         $503       $2,016
      Less Medicare lab
       recoveries for prior
       years' services        $(24)                     $(41)        $(24)
      Revenue excluding
       Medicare lab
       recoveries              $529         $513         $462       $1,992

      Dialysis revenue per
       treatment            $306.36      $306.20      $291.02      $302.75
      Per treatment increase
       from previous quarter   0.0%         1.6%         0.0%           --
      Per treatment increase
       from prior year         5.3%         5.3%         2.8%         4.1%

     Expenses
     A. Patient care costs
        Percent of revenue    68.0%        67.8%        68.7%        68.3%
        Per treatment       $216.04      $214.08      $206.17      $213.46
        Per treatment
         increase from
         previous quarter      0.9%         0.6%         1.4%           --

     B. General & administrative
         expenses
        Percent of revenue     7.6%         7.8%         9.0%         8.0%
        Per treatment        $24.21       $24.57       $26.88       $25.04
        Per treatment
         (decrease) increase
         from previous
         quarter             (1.5%)       (8.9%)        10.1%           --

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

     D. Consolidated
         effective tax rate   37.5%        39.5%        40.8%        39.0%


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

                            Q4 2003      Q3 2003      Q4 2002      YE 2003
     Cash Flow
       Operating cash flow,
        excluding Medicare
        lab recoveries        $34.6        $99.6        $41.2       $293.6
       Free cash flow,
        excluding Medicare
        lab recoveries        $19.2        $90.1        $24.5       $248.8
       Capital expenditures:
         Development          $22.7        $12.9        $19.6        $57.9
         Routine maintenance
          /IT/other           $15.4         $9.5        $16.7        $44.9
       Acquisition
        expenditures, net     $30.4        $19.9         $6.5        $97.4

     Accounts Receivable
       Net receivables         $388         $357         $344
       DSO                       69           65           70

     Debt/Capital Structure
       Total debt            $1,168       $1,323       $1,319
       Net debt, net of cash $1,106       $1,051       $1,223
       Leverage ratio - last
        quarter annualized
        (see Note 1)           2.3x         2.3x         3.2x
       Shares repurchased
        (in millions)           0.7          2.7          1.9          3.4
       Average repurchase
        price                $34.20       $30.34       $23.80       $31.13

     Clinical (quarterly averages)
       Dialysis adequacy - %
        of patients with
        Kt/V greater than 1.2   93%          93%          92%
       Anemia measure - % of
        patients with
        HCT greater than 33     85%          83%          83%

     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 Medicare lab recoveries:

                            Q4 2003      Q3 2003      Q4 2002      YE 2003
     Net earnings           $62,798      $38,060      $58,811     $175,791
     Add back: Refinancing
      charges                 9,261       17,240                    26,501
     Less: Medicare lab
           recoveries for prior
           years' services (24,000)                  (41,555)     (24,000)
            Related income
             tax expense      5,837      (6,818)       16,435        (981)
                            $53,896      $48,482       33,691     $177,311

     2.Operating income excluding Medicare lab recoveries, and excluding
          depreciation, amortization, and minority interests:

                            Q4 2003      Q3 2003      Q4 2002      YE 2003
     Operating income      $121,190      $95,211     $118,377     $378,535
     Less: Medicare lab
            recoveries for
            prior years'
            services       (24,000)                  (41,555)     (24,000)
                            $97,190      $95,211      $76,822     $354,535
     Add back: Depreciation
                and
                amortization 19,985       19,336       16,895       74,687
               Minority
                interests and
                equity income,
                net           2,499        1,706        1,802        7,312
                           $119,674     $116,253      $95,519     $436,534

     3.Operating cash flow, excluding Medicare lab recoveries collected in the
         period:

                            Q4 2003      Q3 2003      Q4 2002      YE 2003
     Cash provided by
      operating activities  $34,576      $99,645      $66,318     $293,648
     Less: Medicare lab
            recoveries
            collected
            in the period                            (41,555)
             Related income
              tax expense                              16,435
                            $34,576      $99,645      $41,198     $293,648

     4. Free cash flow, excluding Medicare lab recoveries collected in the
         period:
        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.

                            Q4 2003      Q3 2003      Q4 2002      YE 2003
     Cash provided by
      operating activities  $34,576      $99,645      $66,318     $293,648
     Less: Expenditures for
            routine
            maintenance and
            information
            technology     (15,362)      (9,533)     (16,706)     (44,898)
           Medicare lab
            recoveries
            collected in
            the period                               (41,555)
             Related income
              tax expense                              16,435
                            $19,214      $90,112      $24,492     $248,750




SOURCE  DaVita Inc.

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