Improving Health, Health Care and Quality of Life

DaVita Inc. Reports 2nd Quarter 2002 Results
PRNewswire-FirstCall
TORRANCE, Calif.

DaVita Inc. , today announced results for the quarter ended June 30, 2002. Continental U.S. EBITDA, excluding accounts receivable recoveries and valuation gains, was $92.7 million for the quarter.

Net earnings for the three and six months ended June 30, 2002 were $8 million and $44 million, or $0.13 and $0.54 per share, respectively. Net earnings, excluding the following three items: cash recoveries, valuation gains of $2.4 million and a $29 million after-tax extraordinary loss related to the early extinguishment of debt, were $35 million and $70 million, or $0.41 and $0.79 per share, respectively.

  Financial and operating highlights include:

  -- For the rolling 12 months ended June 30, 2002 operating cash flow was
     $248 million and free cash flow was $200 million; both exclude
     recoveries and settlements.  Operating cash flow for the quarter was
     $61 million and free cash flow was $43 million.
  -- Total continental U.S. treatments for the second quarter were
     1,486,816.  Both non-acquired and same center treatment growth were
     4.5%.
  -- Second quarter continental U.S. dialysis revenue per treatment
     (excluding lab, management fees and other revenue) was essentially
     flat from the first quarter at $291 and up 5.3% from the second quarter
     of 2001.
  -- The continental EBITDA margin was 21.0%, a 130 basis point decline from
     the prior year quarter as a result of increased costs, primarily labor
     and general and administrative expenses.
  -- Continental U.S. DSO remained at 73 days.
  -- Cash recoveries associated with accounts receivable reserved in 1999
     for the three and six months ended June 30, 2002, were $2 million and
     $4 million, respectively.
  -- On April 26, 2002, we entered into a new senior credit facility.  The
     proceeds were used to pay off all amounts outstanding under the
     existing credit facility, to complete a tender for the Company's
     outstanding $225 million 9 1/4% senior subordinated notes, to purchase
     16.7 million shares of the Company's common stock, through a modified
     Dutch auction tender offer, at $24.00 per share, and to purchase shares
     of the Company's common stock in the open market following the
     completion of the tender.
  -- At June 30, 2002 we operated 493 outpatient centers in the continental
     U.S. serving approximately 44,000 patients.  During the second quarter
     we closed 1 under-performing center and opened 2 denovo centers.
     Included in this patient and center count are approximately
     3,300 patients in 30 centers under management.  Effective June 1, 2002,
     we completed the divestiture of our two remaining non-continental
     units.

DaVita will hold a conference call to discuss its second quarter 2002 results on August 1, 2002 at 1:30 p.m. Eastern. The dial-in number is 800-399-4406. A replay of the conference call will be available on DaVita's official web page, http://www.davita.com/, for the following 30 days.

This release 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 March 31, 2002. The forward-looking statements should be considered in light of these risks and uncertainties.

  These risks include those relating to:

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


                               DAVITA INC.

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


                                                  June 30,     December 31,
                                                    2002           2001
                  ASSETS
  Cash and cash equivalents                      $137,020         $36,711
  Accounts receivable,
   less allowance of $54,765 and $52,475          347,064         333,546
  Inventories                                      31,769          34,901
  Other current assets                             13,852           9,364
  Deferred income taxes                            61,607          60,142
          Total current assets                    591,312         474,664
  Property and equipment, net                     267,335         252,778
  Amortizable intangibles, net                     67,987          73,108
  Investments in third-party dialysis businesses    3,449           4,346
  Other long-term assets                            1,876           2,027
  Goodwill                                        852,691         855,760
                                               $1,784,650      $1,662,683

     LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                $77,374         $74,630
  Other liabilities                                98,739         111,164
  Accrued compensation and benefits                94,880          88,826
  Current portion of long-term debt                 8,299           9,034
  Income taxes payable                             11,036          15,027
          Total current liabilities               290,328         298,681
  Long-term debt                                1,316,153         811,190
  Other long-term liabilities                       6,077           5,012
  Deferred income taxes                            37,045          23,441
  Minority interests                               21,613          20,722
  Shareholders' equity:
      Preferred stock ($0.001 par value;
       5,000,000 shares authorized;
       none issued or outstanding)
      Common stock ($0.001 par value,
       195,000,000 shares authorized;
       88,033,939 and 85,409,037 shares issued)        88              85
      Additional paid-in capital                  507,788         467,904
      Retained earnings                           100,356          56,008
      Treasury stock, at cost
       (20,716,437 and 888,700 shares)           (494,798)        (20,360)
          Total shareholders' equity              113,434         503,637
                                               $1,784,650      $1,662,683


                               DAVITA INC.

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

                                 Three months ended     Six months ended
                                      June 30,              June 30,
                                  2002        2001       2002       2001

  Net operating revenues        $442,677   $400,640    $870,342   $786,857
  Operating expenses:
      Dialysis centers and labs  300,552    271,545     592,186    532,519
      General and administrative  42,024     32,417      78,077     64,230
      Depreciation
       and amortization           15,698     26,624      31,503     52,772
      Provision for
       uncollectible accounts      5,882       (378)     11,137     (8,563)
      Valuation adjustments       (2,390)                (2,390)
          Total
           operating expenses    361,766    330,208     710,513    640,958
  Operating income                80,911     70,432     159,829    145,899
  Other income, net                3,283      1,120       3,848      2,468
  Debt expense                    17,139     18,715      32,211     38,439
  Minority interests in income
   of consolidated subsidiaries   (2,827)    (2,269)     (5,260)    (4,726)
  Income before income taxes
   and extraordinary item         64,228     50,568     126,206    105,202
  Income tax expense              26,500     22,000      52,500     45,700
  Income before
   extraordinary item             37,728     28,568      73,706     59,502
  Extraordinary (loss)/gain
   related to early
   extinguishment of debt,
   net of tax of $19,572 in 2002
   and $652 in 2001              (29,358)       977     (29,358)       977
  Net income                      $8,370    $29,545     $44,348    $60,479

  Basic earnings per common share:
    Income before
     extraordinary item            $0.47      $0.34       $0.91      $0.72
    Extraordinary (loss)/
     gain, net of tax              (0.37)      0.01       (0.36)      0.01
        Net income                 $0.10      $0.35       $0.55      $0.73

  Diluted earnings per common share:
    Income before
     extraordinary item            $0.43      $0.32       $0.83      $0.67
    Extraordinary (loss)/
     gain, net of tax              (0.30)      0.01       (0.29)      0.01
        Net income                 $0.13      $0.33       $0.54      $0.68


                               DAVITA INC.

                       SUPPLEMENTAL FINANCIAL DATA

                                     Q2 2002   Q1 2002   Q2 2001  YTD 2002
  Financial Results:
    Net Earnings, excluding
     extraordinary items,
     recoveries, valuation
     adjustments and goodwill
     amortization (in 000's) (A)   $35,100   $34,600   $29,500     $69,800
      Basic EPS                      $0.44     $0.42     $0.35       $0.86
      EPS assuming dilution          $0.41     $0.39     $0.33       $0.79

    EBITDA, excluding recoveries
     and valuation adjustments
      Consolidated (in 000's)      $92,300   $92,500   $88,100    $184,800
      Continental U.S. (in 000's)  $92,700   $91,900   $88,500    $184,600
      Continental EBITDA margin      21.0%     21.7%     22.3%       21.4%

  Business Metrics (Continental U.S.):
    Category #1 Volume
      Treatments                 1,486,816 1,433,803 1,409,320   2,920,618
      Per day sequential increase     1.6%      0.8%      2.2%          --
      Per day year
       over year increase             5.5%      6.2%      5.5%        5.8%

      Same center growth              4.5%      4.2%      2.8%        4.4%
      Non-acquired growth             4.5%      4.2%      2.8%        4.4%

    Category #2 Revenue, excluding recoveries
      Revenue (in 000's)          $441,000  $424,000  $397,000    $864,000

      Dialysis revenue
       per treatment               $290.52   $290.45   $275.87     $290.49
      Per treatment increase
       from previous quarter            0%      2.6%      0.6%          --
      Per treatment increase
       from prior year                5.3%      5.9%        --        5.6%

    Category #3 Expenses
    A.  Dialysis centers
         and lab operating expenses
        Percent of revenue           67.7%     68.0%     67.5%       67.8%
        Per treatment              $200.46   $201.02   $190.04     $200.73
        Per treatment increase
         (decrease) from
         previous quarter           (0.3%)      3.6%      1.0%          --

    B.  General & administrative
        Percent of revenue            9.5%      8.5%      8.2%        9.0%
        Per treatment               $28.26    $25.14    $23.00      $26.73
        Per treatment increase
         (decrease) from
         previous quarter            12.4%     10.2%    (1.2%)          --

    C.  Bad debt expense
         as a percent of revenue      1.8%      1.8%      2.0%        1.8%

    D.  Consolidated
         effective tax rate          41.2%     42.0%     43.5%       41.6%

    Category #4 Cash Flow (Consolidated, in 000's)
      Operating cash flow          $61,000   $85,000   $77,000    $146,000
      Free cash flow (before
       share repurchase,
       acquisition and
       development spending)       $43,000   $77,000   $68,000    $119,000
      Capital expenditures:
      Development                   $9,300    $8,200    $3,200     $17,500
      Routine
       maintenance/IT/other        $18,400    $8,400    $8,700     $26,800
      Acquisition
       expenditures, net                --    $1,400      $500      $1,400

    Category #5 Accounts Receivable
      Net receivables (in 000's)  $347,000  $337,000  $291,000    $347,000
      DSO                               73        73        68          --

    Category #6 Debt/Capital Structure (Consolidated)
      Total debt (in 000's)     $1,324,000  $800,000  $951,000  $1,324,000
      Net debt,
       net of cash (in 000's)   $1,187,000  $769,000  $865,000  $1,187,000
      LTM leverage ratio              3.2x      2.1x      2.6x        3.2x
      Shares repurchased (in 000's) 16,900     2,900        --      19,800
      Average repurchase price      $24.08    $23.02        --      $23.93

    Category #7 Clinical
      Dialysis adequacy
       - % of patients
       with URR > 65                   89%       88%        --          --
      Dialysis adequacy
       - % of patients
       with Kt/V > 1.2                 92%       92%        --          --
      Anemia measure
       - % of patients
       with HCT > 33                   80%       79%        --          --

   (A)  Effective January 1, 2002 goodwill is no longer amortized in
        accordance with new accounting standards.  Second quarter 2001 net
        earnings and per-share amounts, including goodwill amortization but
        excluding extraordinary items and recoveries, were $23.2 million or
        $0.28 basic EPS and $0.26 diluted EPS.

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SOURCE: DaVita Inc.

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


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