Improving Health, Health Care and Quality of Life

DaVita Inc. Reports 3rd Quarter 2002 Results
PRNewswire-FirstCall
TORRANCE, Calif.

DaVita Inc. , today announced results for the quarter ended September 30, 2002. EBITDA, excluding prior period laboratory receipts and accounts receivable recoveries, was $99.8 million for the quarter. EBITDA for the quarter included current period Medicare laboratory revenue of $5.4 million.

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

Net earnings for the three and nine months ended September 30, 2002 were $54 million and $99 million, or $0.72 and $1.20 per share, respectively. Net earnings for the quarter, excluding the prior period Medicare laboratory receipts and accounts receivable recoveries totaling $28 million, were $37 million or $0.51 per share. Net earnings for the nine months, excluding prior period lab receipts and accounts receivable recoveries totaling $32 million, valuation gains of $2.4 million and a $29 million after-tax extraordinary loss related to the early extinguishment of debt, were $107 million or $1.29 per share.

  Financial and operating highlights include:

  -- For the rolling 12 months ended September 30, 2002 operating cash flow
     was $280 million and free cash flow was $230 million.  Operating cash
     flow for the quarter was $119 million and free cash flow was $110
     million.  These cash flow numbers exclude prior period lab receipts and
     accounts receivable recoveries.
  -- Total treatments for the third quarter were 1,516,840.  Non-acquired
     same center treatment growth was 3.8%.
  -- Third quarter dialysis revenue per treatment (excluding lab, management
     fees and other revenue) was essentially flat from the second quarter at
     $291 and up 3.8% from the third quarter of 2001.
  -- The Company began recognizing current-period Medicare lab revenue in
     the third quarter of 2002, which amounted to $5.4 million.  During the
     third quarter, the Medicare carrier began paying claims from the
     Company's lab for the first time in more than four years.
  -- EBITDA margin, excluding all prior-period recoveries, was 22.0%.
     EBITDA margin improved 100 basis points from the second quarter
     primarily as a result of the recognition of current period Medicare
     laboratory revenue.
  -- DSO improved 3 days from the second quarter to 70 days.
  -- Third quarter prior-period recoveries included $27 million associated
     with Medicare lab claims and $0.5 million in cash recoveries associated
     with accounts receivable reserved in 1999.
  -- Based on recent communications with the Medicare carrier, the Company
     expects to receive, over the next few months, additional payments of
     $20 million or more related to prior years' Medicare lab claims.  The
     revenue associated with these recoveries will be recognized as the
     payments are received.
  -- As of September 30, 2002, we operated 504 outpatient centers serving
     approximately 44,000 patients.  During the third quarter we closed 1
     under-performing center, acquired 6 centers and opened 7 de novo
     centers.  Included in this patient and center count are approximately
     3,300 patients in 29 centers under management.

Since the Company is now recognizing Medicare laboratory revenue, we are raising our 2002 EBITDA guidance to $380 million to $386 million. Correspondingly, our 2003 EBITDA guidance has been increased to $380 million to $400 million.

DaVita will be holding an investor meeting on November 6, 2002, at the New York Palace Hotel. The event will begin at 9:30 AM Eastern Standard Time. Kent Thiry, Chairman and CEO, and Rich Whitney, CFO, will discuss the Company's financial results for the quarter ended September 30, 2002 followed by a presentation on the state of the Company.

Please join us in person at the New York Palace Hotel located at 455 Madison Avenue @50th Street. If you are unable to attend you can participate in both presentations via conference call at 800-399-4406. A replay of both presentations will be available on DaVita's official web page, 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 June 30, 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)


                                               September 30,  December 31,
                                                   2002            2001
                         ASSETS
  Cash and cash equivalents                       $115,361        $36,711
  Accounts receivable, less allowance of
   $50,165 and $52,475                             339,955        333,546
  Inventories                                       21,931         34,901
  Other current assets                              17,068          9,364
  Deferred income taxes                             63,741         60,142

     Total current assets                          558,056        474,664

  Property and equipment, net                      278,761         52,778
  Amortizable intangibles, net                      65,635         73,108
  Investments in third-party dialysis businesses     3,266          4,346
  Other long-term assets                             1,831          2,027
  Goodwill                                         860,425        855,760

                                                $1,767,974     $1,662,683

          LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                 $77,846        $74,630
  Other liabilities                                106,456        111,164
  Accrued compensation and benefits                 99,070         88,826
  Current portion of long-term debt                  8,166          9,034
  Income taxes payable                              33,473         15,027

     Total current liabilities                     325,011        298,681

  Long-term debt                                 1,313,847        811,190
  Other long-term liabilities                        8,034          5,012
  Deferred income taxes                             49,910         23,441
  Minority interests                                22,462         20,722
  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; 88,314,176 and 85,409,037
    shares issued)                                      88             85
   Additional paid-in capital                      511,627        467,904
   Retained earnings                               154,526         56,008
   Treasury stock, at cost (26,325,677 and
    888,700 shares)                              (617,531)       (20,360)

     Total shareholders' equity                     48,710        503,637

                                                $1,767,974     $1,662,683


                               DAVITA INC.

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


                          Three months ended          Nine months ended
                             September 30,              September 30,
                          2002          2001         2002         2001

  Net operating
   revenues             $481,194      $434,239   $1,351,536    $1,221,096
  Operating expenses:
   Dialysis centers
    and labs             308,438       277,252      900,624       809,771
   General and
    administrative        37,048        31,150      115,125        95,380
   Depreciation and
    amortization          16,267        26,281       47,770        79,053
   Provision for
    uncollectible
    accounts               8,117         2,689       19,254       (5,874)
   Impairments and
    valuation adjustments                           (2,390)

     Total operating
      expenses           369,870       337,372    1,080,383       978,330

  Operating income       111,324        96,867      271,153       242,766
  Other income, net        1,124         1,856        4,972         4,324
  Debt expense            19,967        18,319       52,178        56,758
  Minority interests in
   income of consolidated
   subsidiaries          (1,911)       (2,126)      (7,171)       (6,852)

  Income before income
   taxes and extraordinary
   item                   90,570        78,278      216,776       183,480
  Income tax expense      36,400        34,000       88,900        79,700

  Income before
   extraordinary item     54,170        44,278      127,876       103,780
  Extraordinary (loss)
   gain related to early
   extinguishment of debt,
   net of tax of $19,572
   in 2002 and $652 in
   2001                                            (29,358)           977

  Net income             $54,170       $44,278      $98,518      $104,757


  Basic earnings per share:
   Income before
    extraordinary item     $0.84         $0.52        $1.69         $1.25
   Extraordinary (loss)
    gain, net of tax                                 (0.39)          0.01

   Net income              $0.84         $0.52        $1.30         $1.26


  Diluted earnings per share:
   Income before
    extraordinary item     $0.72         $0.47        $1.51         $1.15
   Extraordinary (loss)
    gain, net of tax                                 (0.31)          0.01

   Net income              $0.72         $0.47        $1.20         $1.16


                               DAVITA INC.

                       SUPPLEMENTAL FINANCIAL DATA


                         Q3 2002       Q2 2002      Q3 2001      YTD 2002
  Financial Results:
   Net earnings,
    excluding prior
    period Medicare lab
    revenue, extraordinary
    items, recoveries,
    valuation adjustments
    and goodwill
    amortization
    (in 000's) (1)       $37,400       $35,100      $34,300      $107,100
     Basic EPS             $0.58         $0.44        $0.41         $1.42
     EPS assuming
      dilution             $0.51         $0.41        $0.38         $1.29

   EBITDA, excluding
    prior period Medicare
    lab revenue, recoveries
    and valuation adjustments
     Consolidated
      (in 000's)         $99,800       $92,300      $96,000      $284,600
     Continental U.S
      (in 000's).        $99,800       $92,700      $95,600      $284,400
     Continental EBITDA
      margin               22.0%         21.0%        23.4%         21.6%

  Business Metrics (Continental U.S.):
   Category #1 Volume
     Treatments        1,516,840     1,486,816    1,432,453     4,437,459
     Per day sequential
      increase              0.7%          1.6%         1.6%            --
     Per day year over
      year increase         4.6%          5.5%         7.6%          5.4%

     Same center growth
      (year over year)      3.7%          4.5%         4.1%          4.2%
     Non-acquired growth
      (year over year)      3.8%          4.5%         4.1%          4.2%

   Category #2 Revenue,
    excluding prior period
    Medicare lab revenue
    and recoveries
     Revenue
      (in 000's)        $454,000      $441,000     $408,000    $1,318,000

     Dialysis revenue
      per treatment      $290.92       $290.52      $280.16       $290.63
     Per treatment
      increase from
      previous quarter      0.1%          0.0%         1.6%            --
     Per treatment
      increase from prior
      year                  3.8%          5.3%         7.6%          5.0%

   Category #3 Expenses
    A. Dialysis centers
       and lab operating
       expenses
     Percent of revenue    67.9%         67.7%        67.1%         67.9%
     Per treatment       $203.34       $200.46      $191.13       $201.64
     Per treatment
      increase (decrease)
      from previous
      quarter               1.4%        (0.3%)         0.6%            --

    B. General &
       administrative
     Percent of revenue     8.2%          9.5%         7.6%          8.7%
     Per treatment        $24.42        $28.26       $21.75        $25.94
     Per treatment
      increase (decrease)
      from previous
      quarter            (13.6%)         12.4%       (5.4%)            --

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

    D. Consolidated
       effective tax
       rate                40.0%         41.2%        43.4%         41.0%

   Category #4, Cash Flow
    (Consolidated,
    including prior period
    recoveries, in 000's)
     Operating cash
      flow              $136,000       $61,000     $112,000      $282,000
     Free cash flow
      (before share
      repurchase,
      acquisition and
      development
      spending)         $127,000       $43,000     $104,000      $246,000
     Capital expenditures:
      Development        $11,700        $8,100       $4,800       $27,400
      Routine
       maintenance/IT/
       other             $10,500       $19,600       $7,200       $39,200
     Acquisition
      expenditures, net  $10,600            --      $15,500       $12,000

   Category #5 Accounts
    Receivable
     Net receivables
      (in 000's)        $340,000      $347,000     $309,000      $340,000
     DSO                      70            73           71            --

   Category #6 Debt/
    Capital Structure
    (Consolidated)
     Total debt
      (in 000's)      $1,322,000    $1,324,000     $820,000    $1,322,000
     Net debt, net
      of cash
      (in 000's)      $1,207,000    $1,187,000     $775,000    $1,207,000
     LTM net leverage
      ratio                 3.2x          3.2x         2.1x          3.2x
     Shares
      repurchased
      (in 000's)           5,600        16,900           --        25,400
     Average repurchase
      price               $21.88        $24.08           --        $23.48

   Category #7 Clinical
     Dialysis adequacy
      - % of patients
      with URR > 65          88%           89%           --            --
     Dialysis adequacy
      - % of patients
      with Kt/V > 1.2        91%           92%           --            --
     Anemia measure
      - % of patients
      with HCT > 33          81%           80%           --            --

  (1)Effective January 1, 2002 goodwill is no longer amortized in
      accordance with new accounting standards.Third quarter 2001 net
      earnings and per-share amounts, including goodwill amortization but
      excluding extraordinary items and recoveries, were $28 million or
      $0.33 basic EPS and$0.31 diluted EPS.

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SOURCE: DaVita, Inc.

CONTACT: LeAnne Zumwalt, Investor Relations of DaVita Inc.,
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