Improving Health, Health Care and Quality of Life

DaVita inc. Reports 4th Quarter and Year End 2002 Results
PRNewswire-FirstCall
TORRANCE, Calif.

DaVita Inc. , today announced results for the quarter and year ended December 31, 2002. EBITDA, excluding impairments, prior period Medicare laboratory receipts and accounts receivable recoveries, was $97 million for the quarter. Our fourth quarter EBITDA guidance was $95 million to $100 million. EBITDA for the twelve months ended December 31, 2002 was $392 million, again excluding cash recoveries and impairments.

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

Net earnings for the three months ended December 31, 2002 were $59 million, or $0.81 per share. Net earnings for the quarter excluding impairments and lab and accounts receivable recoveries related to prior years' services, representing a total of $24 million of additional after-tax income, were $35 million or $0.50 per share.

Net earnings for the full year ended December 31, 2002 were $157 million, or $1.96 per share. Net earnings for the year before the extraordinary loss of $29 million for early extinguishment of debt, and excluding impairments and lab and accounts receivable recoveries related to prior years' services totaling $39 million of additional after-tax income, were $148 million or $1.85 per share.

  Financial and operating highlights include:
  -- For the 12 months ended December 31, 2002 operating cash flow was $303
     million and free cash flow was $247 million.  Operating cash flow for
     the quarter was $42 million and free cash flow was $25 million.  The
     fourth quarter and full year cash flow numbers exclude lab and accounts
     receivable recoveries related to prior years' services.
  -- Total treatments for the fourth quarter were 1,537,821.  Non-acquired
     same center treatment growth was 2.9%.
  -- Fourth quarter dialysis revenue per treatment (excluding lab,
     management fees and other revenue) was essentially flat from the third
     quarter at $291 and up 2.8% from the fourth quarter of 2001.
  -- DSO for the fourth quarter remained steady at 70 days.
  -- Fourth quarter prior-period recoveries included $42 million associated
     with Medicare lab claims.
  -- As of December 31, 2002, we operated 515 outpatient centers serving
     approximately 45,000 patients.  During the fourth quarter we acquired
     four centers and opened eight de novo centers.  We also closed one
     center, that did not have enough private patients to cover the Medicare
     reimbursement deficit.  Included in this patient and center count are
     approximately 3,400 patients in 30 centers under management.

  Our 2003 EBITDA guidance remains at $380 million to $400 million.

DaVita will be holding a conference call to discuss its fourth quarter and year end 2002 results on February 14, 2003, at 1:30 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 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 September 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 mix and 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
              (dollars in thousands, except per share data)

                                                         December 31,
                                                    2002           2001
                          ASSETS
  Cash and cash equivalents                        $96,475        $36,711
  Accounts receivable, less allowance
   of $48,927 and $52,475                          344,292        333,546
  Inventories                                       34,929         34,901
  Other current assets                              28,667          9,364
  Deferred income taxes                             40,163         60,142
      Total current assets                         544,526        474,664
  Property and equipment, net                      298,475        252,778
  Amortizable intangibles, net                      63,159         73,108
  Investments in third-party dialysis businesses     3,227          4,346
  Other long-term assets                             1,520          2,027
  Goodwill                                         864,786        855,760
                                                $1,775,693     $1,662,683

             LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                 $77,890        $74,630
  Other liabilities                                101,389        111,164
  Accrued compensation and benefits                 95,435         88,826
  Current portion of long-term debt                  7,978          9,034
  Income taxes payable                               9,909         15,027
      Total current liabilities                    292,601        298,681
  Long-term debt                                 1,311,252        811,190
  Other long-term liabilities                        9,417          5,012
  Deferred income taxes                             65,930         23,441
  Minority interests                                26,229         20,722
  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; 88,874,896 and
     85,409,037 shares issued)                          89             85
    Additional paid-in capital                     519,369        467,904
    Retained earnings                              213,337         56,008
    Treasury stock, at cost (28,216,177 and
     888,700 shares)                              (662,531)       (20,360)
      Total shareholders' equity                    70,264        503,637
                                                $1,775,693     $1,662,683


                               DAVITA INC.

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

                             Three months ended         Years ended
                                December 31,           December 31,
                             2002        2001         2002         2001

  Net operating
   revenues             $503,096      $429,657  $ 1,854,632    $1,650,753
  Operating expenses:
    Dialysis centers
     and labs            317,061       290,881    1,217,685     1,100,652
    General and
     administrative       39,328        33,814      154,453       129,194
    Depreciation and
     amortization         16,895        26,156       64,665       105,209
    Provision for
     uncollectible
     accounts              7,623         3,580       26,877       (2,294)
    Impairments and
     valuation adjustments 2,010                      (380)
      Total operating
       expenses          382,917       354,431    1,463,300     1,332,761

  Operating income       120,179        75,226      391,332       317,992
  Other income, net          818           320        5,790         4,644
  Debt expense            19,458        15,680       71,636        72,438
  Minority interests
   in income of
   consolidated
   subsidiaries          (2,128)       (2,408)      (9,299)       (9,260)
    Income before income
     taxes and
     extraordinary
     items                99,411        57,458      316,187       240,938
  Income tax expense      40,600        24,900      129,500       104,600
    Income before
     extraordinary items  58,811        32,558      186,687       136,338
  Extraordinary (loss)
   gain related to
   early extinguishments
   of debt, net of tax
   of $19,572 in 2002 and
   $(652) in 2001                                  (29,358)           977
   Net income            $58,811       $32,558     $157,329      $137,315

  Basic earnings per
   common share:
    Income before
     extraordinary items   $0.97         $0.38        $2.60         $1.63
    Extraordinary (loss)
     gain, net of tax                                (0.41)          0.01
    Net income             $0.97         $0.38        $2.19         $1.64


  Diluted earnings per common share:
    Income before
     extraordinary items   $0.81         $0.36        $2.28         $1.51
    Extraordinary (loss)
     gain, net of tax                                (0.32)          0.01
    Net income             $0.81         $0.36        $1.96         $1.52


                               DAVITA INC.

                       SUPPLEMENTAL FINANCIAL DATA

                         Q4 2002       Q3 2002       Q4 2001       YE 2002
  Financial Results:
  Net earnings, excluding
   prior period Medicare lab
   revenue, extraordinary
   items, recoveries, valuation
   adjustments and goodwill
   amortization
   (in 000's) (A)        $34,600       $37,400      $35,700      $147,700
    Basic EPS              $0.57         $0.58        $0.42         $2.06
    EPS assuming dilution  $0.50         $0.51        $0.39         $1.85

  EBITDA, excluding prior
   period Medicare lab
   revenue, recoveries and
   valuation adjustments
    Consolidated
     (in 000's)          $97,000       $99,800      $96,300      $391,600
    Continental U.S.
     (in 000's).         $97,000       $99,800      $96,000      $391,500
    Continental EBITDA
     margin                21.0%         22.0%        22.5%         21.9%

  Business Metrics (Continental U.S.):
   Category #1 Volume
    Treatments         1,537,821     1,516,840    1,481,958     5,975,280
    Number of treatment
     days                   79.6            79         79.6           313
    Treatments per day    19,319        19,201       18,618        19,090
    Per day year over
     year increase          3.8%          4.6%         8.4%          5.0%
    Same center growth
     (year over year)       2.9%          3.7%         4.6%          3.9%
    Non-acquired growth
     (year over year)       2.9%          3.8%         4.6%          3.9%

   Category #2 Revenue,
    excluding prior period
    Medicare lab revenue
    and recoveries
    Revenue (in 000's)  $462,000      $454,000     $426,000    $1,790,000

    Dialysis revenue
     per treatment       $291.02       $290.92      $283.19       $290.73
    Per treatment
     increase from
     previous quarter       0.0%          0.1%         1.1%            --
    Per treatment
     increase from
     prior year             2.8%          3.8%         6.3%          4.4%

   Category #3 Expenses
   A. Dialysis centers
       and lab operating
       expenses
      Percent of revenue   68.7%         67.9%        67.5%         67.7%
      Per treatment      $206.17       $203.34      $194.03       $202.79
      Per treatment
       increase (decrease)
       from previous
       quarter              1.4%          1.4%         1.5%            --

   B. General &
       administrative
       expenses
      Percent of revenue    8.5%          8.2%         7.9%          8.6%
      Per treatment       $25.57        $24.42       $22.82        $25.85
      Per treatment
       increase (decrease)
       from previous
       quarter              4.7%       (13.6%)         4.9%            --

   C. Bad debt expense
       as a percent of
       current-period
       revenue              1.8%          1.9%         2.0%          1.8%

   D. Consolidated
       effective tax rate  40.8%         40.0%        43.3%         41.0%

  Category #4, Cash Flow
   (Consolidated, including
   prior period recoveries,
   in 000's)
    Operating cash flow  $66,000      $134,000      $23,000      $342,000
    Free cash flow (before
     share repurchase,
     acquisition and
     development
     spending)           $49,000      $124,000       $9,000      $286,000
    Capital expenditures:
      Development        $19,600       $11,700       $7,400       $47,000
      Routine
       maintenance/IT/
       other             $16,700       $10,500      $14,500       $55,900
    Acquisition
     expenditures, net    $6,500       $10,600           --       $18,500

  Category #5 Accounts Receivable
    Net receivables
     (in 000's)         $344,000      $340,000     $325,000      $344,000
    DSO                       70            70           72            70

  Category #6 Debt/Capital
   Structure (Consolidated)
    Total debt
     (in 000's)       $1,319,000    $1,322,000     $820,000    $1,319,000
    Net debt, net of
     cash (in 000's)  $1,223,000    $1,207,000     $784,000    $1,223,000
    LTM net leverage
     ratio                  3.1x          3.2x         3.2x          3.1x
    Shares repurchased
     (in 000's)            1,900         5,600          800        27,300
    Average repurchase
     price                $23.80        $21.88       $23.43        $23.50

  Category #7 Clinical
    Dialysis adequacy - %
     of patients with
     URR > 65                88%           88%          87%
    Dialysis adequacy - %
     of patients with
     Kt/V > 1.2              92%           91%          90%
    Anemia measure - %
     of patients with
     HCT > 33                83%           81%          79%


  (A) Effective January 1, 2002 goodwill is no longer amortized in
  accordance with new accounting standards.  Fourth quarter 2001 net
  earnings and per-share amounts, including goodwill amortization but
  excluding extraordinary items and recoveries, were $30 million or
  $0.35 basic EPS and $0.33 diluted EPS.


                               DAVITA INC.

                  RECONCILIATIONS FOR NON-GAAP MEASURES

                                                  Q4 2002        YE 2002
                                                  (dollars in thousands)
  EBITDA, excluding impairments, prior period
   lab receipts and accounts receivable
   recoveries:
  Operating income                                $120,179       $391,332
  Depreciation and amortization                     16,895         64,665
  EBITDA                                           137,074        455,997
  Other exclusions:
    Prior period lab receipts                     (41,555)       (58,778)
    Impairments and valuations adjustments           2,010          (380)
    Accounts receivable recoveries                   (510)        (5,192)
                                                  (40,055)       (64,350)
                                                   $97,019       $391,647
  Net income, excluding impairments, prior
   period lab receipts and accounts
   receivable recoveries:
  Net income                                       $58,811       $157,329
  Extraordinary loss - extinguishment of debt
  Other exclusions:
    Prior period lab receipts                     (41,555)       (58,778)
    Impairments and valuations adjustments           2,010          (380)
    Accounts receivable recoveries                   (510)        (5,192)
                                                  (40,055)       (64,350)
    Income tax expense                              15,842         25,405
  Other exclusions, net of tax                    (24,213)       (38,945)
                                                   $34,598       $147,742

  Operating cash flow excluding lab and accounts
   receivable related to prior years' services
   and free cash flow:
   Cash provided by operating activities           $66,318       $341,995
  Less other exclusions, net of tax               (24,213)       (38,945)
  Operating cash flow excluding lab and accounts
   receivable related to prior years' services      42,105        303,050
  Less expenditures for routine maintenance and
   information technology                         (16,706)       (55,936)
  Free cash flow                                   $25,399       $247,114
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SOURCE: DaVita Inc.

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


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