Improving Health, Health Care and Quality of Life

Davita Inc. Reports 1st Quarter 2003 Results
PRNewswire-FirstCall
TORRANCE, Calif.

DaVita Inc. , today announced results for the quarter ended March 31, 2003. Net income for the three months ended March 31, 2003 was $36 million or $0.52 per share, compared with $36 million or $0.40 per share for the same period of 2002.

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

  Financial and operating highlights include:
  --  For the rolling 12 months ended March 31, 2003 operating cash flow was
      $302 million and free cash flow was $244 million.  These cash flow
      numbers exclude prior period lab receipts, accounts receivable
      recoveries and valuation adjustments.  Operating cash flow for the
      quarter ended March 31, 2003 was $81 million and free cash flow was
      $70 million.
  --  Operating income for the quarter was $79 million.
  --  EBITDA and EBITDA margin for the quarter were $98 million and 21.3%,
      respectively.
  --  Total treatments for the first quarter were 1,503,031 up 4.8% over the
      prior year's quarter.  Non-acquired treatment growth was 3.3%, with
      acquisitions contributing the additional 1.5% to treatment growth.
  --  First quarter dialysis revenue per treatment was $296, compared to
      $291 in the fourth quarter, an increase of 1.8%.
  --  DSO for the first quarter decreased by one day during the quarter to
      69 days.
  --  As of March 31, 2003, we operated 523 outpatient centers serving
      approximately 45,000 patients.  During the first quarter we acquired a
      controlling interest in two centers in which we previously had
      minority ownership and opened seven de novo centers.  We also closed
      one center.  Included in this patient and center count are
      approximately 3,300 patients in 30 centers under management.

Our 2003 EBITDA guidance remains at $380 million to $400 million. This guidance implies Generally Accepted Accounting Principles (GAAP) operating income of $300 million to $320 million for 2003.

DaVita will be holding a conference call to discuss its first quarter 2003 results on May 5, 2003, at 1:30 PM Eastern Daylight 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-K for the year ended December 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 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.

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

                                                 March 31,     December 31,
                                                   2003             2002
                    ASSETS
  Cash and cash equivalents                       $304,994        $96,475
  Accounts receivable, less allowance
   of $48,743 and $48,927                          346,145        344,292
  Inventories                                       25,465         34,929
  Other current assets                              24,049         28,667
  Deferred income taxes                             41,773         40,163
      Total current assets                         742,426        544,526
  Property and equipment, net                      305,742        298,475
  Amortizable intangibles, net                      60,080         63,159
  Investments in third-party dialysis businesses     3,368          3,227
  Other long-term assets                             2,609          1,520
  Goodwill                                         865,449        864,786
                                                $1,979,674     $1,775,693


     LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                 $71,295        $77,890
  Other liabilities                                113,505        101,389
  Accrued compensation and benefits                 82,391         95,435
  Current portion of long-term debt                 43,908          7,978
  Income taxes payable                              26,550          9,909
      Total current liabilities                    337,649        292,601
  Long-term debt                                 1,420,585      1,311,252
  Other long-term liabilities                       10,346          9,417
  Deferred income taxes                             72,381         65,930
  Minority interests                                27,156         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; 89,162,390 and 88,874,896
     shares issued)                                     89             89
    Additional paid-in capital                     523,572        519,369
    Retained earnings                              249,750        213,337
    Treasury stock, at cost (28,187,326 and
     28,216,177 shares)                           (661,854)      (662,531)
      Total shareholders' equity                   111,557         70,264
                                                $1,979,674     $1,775,693



                               DAVITA INC.

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


                                                     Three months ended
                                                          March 31,
                                                    2003           2002

  Net operating revenues                          $459,807       $427,665
  Operating expenses and charges:
    Dialysis centers and labs                      316,710        291,634
    General and administrative                      36,787         36,053
    Depreciation and amortization                   17,445         15,805
    Provision for uncollectible accounts             8,237          5,255
    Minority interests and equity income, net        1,294          2,135
      Total operating expenses and charges         380,473        350,882

  Operating income                                  79,334         76,783

  Debt expense                                      19,456         15,072
  Other income, net                                    785            267
  Income before income taxes                        60,663         61,978
  Income tax expense                                24,250         26,000
  Net income                                       $36,413        $35,978


  Comprehensive income                             $36,413        $35,978


  Earnings per share:
    Basic                                            $0.60          $0.43
    Diluted                                          $0.52          $0.40


  Weighted average shares for earnings
   per share:
    Basic                                       60,905,056     82,967,141
    Diluted                                     78,772,410    102,246,452



                               DAVITA INC.

             UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (dollars in thousands)

                                                     Three months ended
                                                          March 31,
                                                    2003            2002
  Cash flows from operating activities:
    Net income                                     $36,413        $35,978
    Adjustments to reconcile net income
     to cash provided by operating activities:
      Depreciation and amortization                 17,445         15,805
      Loss (gain) on divestitures                      119           (458)
      Deferred income taxes                          4,841          7,861
      Non-cash debt expense                            840            634
      Stock options, principally tax benefits        1,378          8,931
      Equity investment income                       (519)           (298)
      Minority interests in income of
       consolidated subsidiaries                     1,813          2,433
      Distributions to minority interests          (2,465)         (1,501)
    Changes in operating assets and liabilities,
     excluding acquisitions and divestitures:
      Accounts receivable                            (676)        (11,163)
      Inventories                                    9,543          6,726
      Other current assets                           4,721         (2,840)
      Other long-term assets                       (2,457)
      Accounts payable                             (6,674)          8,969
      Accrued compensation and benefits           (13,075)         (2,617)
      Other current liabilities                     11,952         15,050
      Income taxes                                  16,641            261
      Other long-term liabilities                      809           (287)
        Net cash provided by
         operating activities                       80,649         83,484

  Cash flows from investing activities:
      Additions of property and equipment, net    (21,708)        (16,115)
      Acquisitions and divestitures, net             (718)         (1,379)
      Investments in affiliates, net                 1,931            499
      Intangible assets                              (300)
         Net cash used in investing activities    (20,795)        (16,995)

  Cash flows from financing activities:
      Borrowings                                   623,822        335,883
      Payments on long-term debt                 (478,659)       (355,803)
      Deferred financing costs                                        (57)
      Purchase of treasury stock                                  (67,877)
      Proceeds from issuance of common stock         3,502         16,351
         Net cash provided by (used in)
          financing activities                     148,665        (71,503)

  Net increase (decrease) in cash                  208,519         (5,014)
  Cash and cash equivalents at
   beginning of period                              96,475         36,711
  Cash and cash equivalents at end of period      $304,994        $31,697



                               DAVITA INC.

                       SUPPLEMENTAL FINANCIAL DATA

                                  Q1 2003         Q4 2002       Q1 2002
  Financial Results:
    Net earnings, excluding
     prior period Medicare
     lab revenue,
     extraordinary items,
     recoveries, and
     valuation adjustments
     (in 000's)                   $36,400         $34,600       $34,600
      Basic EPS                     $0.60           $0.57         $0.42
      EPS assuming dilution         $0.52           $0.50         $0.39

    EBITDA, excluding prior
     period Medicare lab
     revenue, recoveries
     and valuation adjustments
      Consolidated (in 000's)     $98,000         $97,000       $92,500
      Continental
       U.S (in 000's).            $98,000         $97,000       $91,900
      Continental EBITDA margin     21.3%           21.0%         21.7%

  Business Metrics
   (Continental U.S.):
    Volume
      Treatments                1,503,031       1,537,821     1,433,803
      Number of treatment days       76.4            79.6          76.4
      Treatments per day           19,673          19,319        18,767
      Per day year over
       year increase                 4.8%            3.8%          6.2%
      Same center growth             3.1%            2.9%          4.2%
      Non-acquired growth            3.3%            2.9%          4.2%

    Revenue, excluding prior
     period Medicare lab revenue
     and recoveries of $41,555
     in Q4 2002
      Revenue (in 000's)         $460,000        $462,000      $424,000

      Dialysis revenue
       per treatment              $296.31         $291.02       $290.45
      Per treatment increase
       from previous quarter         1.8%            0.0%          2.6%
      Per treatment increase
       from prior year               2.0%            2.8%          5.9%

    Expenses, excluding prior
     period Medicare lab
     revenue and recoveries
    A. Dialysis centers and
        lab operating expenses
        Percent of revenue          68.9%           68.7%         68.0%
       Per treatment              $210.71         $206.17       $201.02
       Per treatment increase
        from previous quarter        2.2%            1.4%          3.6%

    B. General & administrative
        expenses
       Percent of revenue            8.0%            8.5%          8.5%
       Per treatment               $24.48          $25.57        $25.14
       Per treatment increase
        (decrease) from
        previous quarter             (4.3%)          4.7%         10.2%

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

    D. Consolidated effective
        tax rate                    40.0%           40.8%         42.0%



                               DAVITA INC.


                  SUPPLEMENTAL FINANCIAL DATA, CONTINUED

                                  Q1 2003         Q4 2002       Q1 2002
    Cash Flow (Consolidated,
     including prior period
     recoveries, in 000's)
      Operating cash flow         $81,000         $66,000       $83,000
      Free cash flow (before
       share repurchase,
       acquisition and
       development spending)      $70,000         $49,000       $74,000
      Capital expenditures:
        Development               $11,900         $19,600        $7,600
        Routine maintenance/
         IT/other                 $10,500         $16,700        $9,100
      Acquisition expenditures,
       net                           $700          $6,500        $1,400

    Accounts Receivable
      Net receivables
       (in 000's)                $346,000        $344,000      $337,000
      DSO                              69              70            73

    Debt/Capital Structure
     (Consolidated)
      Total debt (in 000's)    $1,464,000      $1,319,000      $800,000
      Net debt, net of cash
       (in 000's)              $1,159,000      $1,223,000      $769,000
      LQA net leverage ratio         3.0x            3.1x          2.1x
      Shares repurchased
       (in 000's)                      --           1,900         2,900
      Average repurchase price         --          $23.80        $23.02

    Clinical
      Dialysis adequacy - %
       of patients with
       URR > 65                       89%             88%           88%
      Dialysis adequacy - %
       of patients with
       Kt/V > 1.2                     92%             92%           92%
      Anemia measure - % of
       patients with HCT > 33         83%             83%           79%



                               DAVITA INC.

                  RECONCILIATIONS FOR NON-GAAP MEASURES

                         Rolling
                        12-month
                         period
                          ended
                         Q1 2003      Q1 2003       Q4 2002       Q1 2002
                                       (dollars in thousands)
  1. Operating cash
      flow excluding
      lab and accounts
      receivable
      recoveries
      related to
      prior years'
      services and
      free cash flow:
     Cash provided
      by operating
      activities        $339,160       $80,649      $66,318       $83,484
     Exclusions:
       Prior period
        lab receipts     (58,778)                   (41,555)
       Impairments
        and valuations
        adjustments         (380)                     2,010
       Accounts
        receivable
        recoveries        (2,938)                      (510)       (2,254)
                         (62,096)                   (40,055)       (2,254)
       Related income
        tax expense       24,559                     15,842           891
     Exclusions, net
      of tax             (37,537)                   (24,213)       (1,363)
     Operating cash
      flow excluding
      lab and accounts
      receivable
      recoveries
      related to
      prior years'
      services           301,623        80,649       42,105        82,121
     Less expenditures
      for routine
      maintenance and
      information
      technology         (57,337)      (10,490)     (16,706)       (9,090)
     Free cash flow     $244,286       $70,159      $25,399       $73,031

  2. Net income,
      excluding
      impairments,
      prior period
      lab receipts
      and accounts
      receivable
      recoveries:
     Net income                        $36,413      $58,811       $35,978
     Less exclusions,
      net of tax                                    (24,213)       (1,363)
                                       $36,413      $34,598       $34,615

  3. EBITDA, excluding
      impairments,
      prior period lab
      receipts and
      accounts receivable
      recoveries:
     Operating income                  $79,334     $118,377       $76,783
     Additions:
       Depreciation                     14,946       14,385        13,295
       Amortization                      2,499        2,510         2,510
       Minority
        interests and
        equity income,
        net                              1,294        1,802         2,135
     EBITDA                             98,073      137,074        94,723
     Exclusions:
       Prior period lab
        receipts                                    (41,555)
       Impairments and
        valuations
        adjustments                                   2,010
       Accounts
        receivable
        recoveries                                     (510)       (2,254)
                                                    (40,055)       (2,254)
                                       $98,073      $97,019       $92,469

  4. Last quarter
      annualized (LQA)
      net leverage ratio:
     EBITDA, excluding
      impairments, prior
      period lab receipts
      and accounts
      receivable
      recoveries                       $98,073      $97,019       $92,469
                                       x     4      x     4       x     4
     Annualized EBITDA,
      less exclusions                 $392,292     $388,076      $369,876
     Net debt, net
     of cash                        $1,159,000   $1,223,000      $769,000
     Annualized EBITDA,
      less exclusions
      divided by net
      debt, net of
      cash                               2.95x        3.15x         2.08x
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SOURCE: DaVita Inc.

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


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