Improving Health, Health Care and Quality of Life

DaVita 4th Quarter 2007 Results
PRNewswire-FirstCall
EL SEGUNDO, Calif.

DaVita Inc. today announced results for the quarter and year ended December 31, 2007. Net income for the three months ended December 31, 2007 was $85.7 million, or $0.79 per share, as compared to $74.1 million, or $0.70 per share, for the same period of 2006.

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

Net income for the year ended December 31, 2007 excluding after-tax gains from insurance settlements, the after-tax valuation gain on the Company's product supply agreement with Gambro Renal Products and after-tax gains on the sale of investment securities was $340.3 million, or $3.17 per share, as compared with $266.5 million or $2.52 per share for the same period of 2006.

  Financial and operating highlights include:

  -- Cash Flow:  For the year ended December 31, 2007 operating cash flow
     was $533 million and free cash flow was $421 million.  For the three
     months ended December 31, 2007 operating cash flow was $223 million and
     free cash flow was $185 million.
  -- Operating Income:  Operating income for the three months ended December
     31, 2007 was $195 million, as compared to $189 million for 2006.
     Operating income for the year ended December 31, 2007 was $862 million
     including pre-tax gains from insurance settlements of $6.8 million, and
     the pre-tax valuation gain on the Company's product supply agreement
     with Gambro Renal Products of $55 million, and was $800 million
     excluding these items, as compared to $701 million for 2006.
  -- Volume:  Total treatments for the fourth quarter of 2007 were 3,983,542
     or 50,045 treatments per day, as compared to 3,723,198 or 47,369
     treatments per day for the fourth quarter of 2006. Non-acquired
     treatment growth in the quarter was 4.6% over the prior year's fourth
     quarter.
  -- Effective Tax Rate:  The annual effective tax rate for the year ended
     December 31, 2007 was 39.2% and was 37.9 % for the three months ended
     December 31, 2007. We currently project our annual effective tax rate
     for 2008 to be in the range of 39.0% to 40.0%.
  -- Center Activity:  As of December 31, 2007, we operated or provided
     administrative services at 1,359 outpatient dialysis centers serving
     approximately 107,000 patients, of which 1,336 centers are consolidated
     in our financial statements. During the fourth quarter of 2007, we
     acquired 6 centers, opened 25 new centers, closed 3 centers and
     discontinued providing administrative services to 20 centers. We also
     acquired a 50% non-controlling ownership interest in 6 centers.


  Outlook

Our operating income guidance for 2008, excluding the impact of any potential Medicare legislation, is still projected to be in the range of $790-850 million; however, we continue to believe that operating income is more likely to be in the lower end of the range for 2008. We are entering into a period of unusual earnings uncertainty. Therefore, the guidance range for 2008 does not capture as high a percentage of the potential outcomes as usual. These projections and the underlying assumptions involve significant risks and uncertainties, including those described below and actual results may vary significantly from these current projections.

DaVita will be holding a conference call to discuss its results for the fourth quarter ended December 31, 2007 on February 13, 2008 at 5PM Eastern Time. 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, including statements related to our 2008 operating results. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, accounting estimates and the risk factors set forth in the Company's SEC filings, including its Form 10-Q for the quarter ended September 30, 2007. The forward-looking statements should be considered in light of these risks and uncertainties.

  These risks and uncertainties include those relating to:

  -- the concentration of profits generated from commercial payor plans,
  -- continued downward pressure on average realized payment rates from
     commercial payors  and possible reductions in government payment rates,
  -- changes in the structure of and payment rates under the Medicare ESRD
     Program which may further reduce Medicare payment rates,
  -- changes in pharmaceutical or anemia management practice patterns,
     payment policies, or pharmaceutical pricing,
  -- our ability to maintain contracts with physician medical directors,
  -- legal compliance risks, including our continued compliance with complex
     government regulations and compliance with the corporate integrity
     agreement applicable to the dialysis centers acquired from Gambro
     Healthcare and assumed in connection with such acquisition, and
  -- the resolution of ongoing investigations by various federal and state
     governmental agencies.


We undertake no obligation to update or revise any forward-looking statements, whether as a result of changes in underlying factors, new information, future events or otherwise.

This release contains non-GAAP financial measures. For reconciliations of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, see the attached reconciliation schedules.

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

                               Three months ended          Year ended
                                   December 31,            December 31,
                                2007         2006        2007        2006
  Net operating revenues    $1,354,869   $1,272,617  $5,264,151 $ 4,880,662
  Operating expenses
   and charges:
    Patient care costs         927,503      872,556   3,590,344   3,390,351
    General and
     administrative            134,987      124,457     491,236     453,516
    Depreciation and
     amortization               51,392       45,209     193,470     173,295
    Provision for
     uncollectible accounts     34,996       32,908     136,682     126,203
    Minority interests
     and equity income, net     10,728        8,976      45,485      35,833
    Valuation gain on
     Alliance and Product
     Supply Agreement                -            -     (55,275)    (37,968)
      Total operating
       expenses and charges  1,159,606    1,084,106   4,401,942   4,141,230

  Operating income             195,263      188,511     862,209     739,432

  Debt expense                 (62,651)     (69,907)   (257,147)   (276,706)
  Other income                   5,329        2,915      22,460      13,033
  Income from continuing
   operations before
   income taxes                137,941      121,519     627,522     475,759
  Income tax expense            52,224       47,390     245,744     186,430
      Income from
       continuing
       operations               85,717       74,129     381,778     289,329
  Discontinued operations
      Gain on disposal of
       discontinued
       operations, net
       of tax                        -            -           -         362
  Net income                   $85,717      $74,129    $381,778    $289,691

  Earnings per share:
    Basic earnings
     per share
     from continuing
     operations                  $0.80        $0.71       $3.61       $2.79
    Basic earnings per share     $0.80        $0.71       $3.61       $2.80
    Diluted earnings per
     share from continuing
     operations                  $0.79        $0.70       $3.55       $2.73
    Diluted earnings per share   $0.79        $0.70       $3.55       $2.74
    Weighted average
     shares for earnings
     per share:
      Basic                106,885,553  104,193,829 105,893,052 103,520,254
      Diluted              108,250,536  106,219,281 107,418,240 105,793,246



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

                                                            Year ended
                                                            December 31,
                                                          2007       2006
  Cash flows from operating activities:
  Net income                                            $381,778   $289,691
  Adjustments to reconcile net income
   to cash provided by operating activities:
    Depreciation and amortization                        193,470    173,295
    Valuation gain on Alliance and
     Product Supply Agreement                            (55,275)   (37,968)
    Stock-based compensation expense                      34,149     26,389
    Tax benefits from stock award exercises               32,788     40,375
    Excess tax benefits from stock award exercises       (25,541)   (37,251)
    Deferred income taxes                                 18,601      2,342
    Minority interests in income of
     consolidated subsidiaries                            46,702     38,141
    Distributions to minority interests                  (48,029)   (32,271)
    Equity investment income                              (1,217)    (2,308)
    (Gain) loss on disposal of discontinued
     operations and other dispositions                    (2,825)       239
    Non-cash debt and non-cash rent charges               12,713     27,736
  Changes in operating assets and liabilities,
   net of effect of acquisitions and divestitures:
    Accounts receivable                                   15,911    (74,737)
    Inventories                                           11,271    (18,587)
    Other receivables and other current assets           (61,049)   (34,044)
    Other long term assets                               (14,528)    (9,791)
    Accounts payable                                      (9,216)    40,712
    Accrued compensation and benefits                      9,691    101,555
    Other current liabilities                                657     88,841
    Income taxes                                         (12,779)   (67,329)
    Other long-term liabilities                            5,764      4,541
      Net cash provided by operating activities          533,036    519,571
  Cash flows from investing activities:
    Additions of property and equipment, net            (272,212)  (262,708)
    Acquisitions and purchases of other
     ownership interests                                (127,094)   (86,504)
    Proceeds from divestitures and asset sales            12,289     22,179
    Purchase of investments available-for-sale           (52,085)    (3,726)
    Purchase of investments held-to-maturity             (23,061)         -
    Proceeds from sale of investments
     available-for-sale                                   32,274      3,030
    Maturities of investments                              4,795          -
    Purchase of a non-controlling ownership
     interest in an unconsolidated joint venture         (17,550)         -
    Contributions from minority owners                    18,463     21,263
    Purchase of intangible assets                         (2,291)    (5,597)
      Net cash used in investing activities             (426,472)  (312,063)
  Cash flows from financing activities:
    Borrowings                                        13,113,640  6,354,784
    Payments on long-term debt                       (13,160,942)(6,761,743)
    Deferred financing costs                              (4,511)        (2)
    Purchase of treasury stock                            (6,350)         -
    Excess tax benefits from stock award exercises        25,541     37,251
    Stock award exercises and other share issuances, net  62,902     40,593
      Net cash provided by (used in)
       financing activities                               30,280   (329,117)
  Net increase (decrease) in cash and cash equivalents   136,844   (121,609)
  Cash and cash equivalents at beginning of period       310,202    431,811
  Cash and cash equivalents at end of period            $447,046   $310,202



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

                                                December 31,    December 31,
                                                    2007            2006
                      ASSETS

  Cash and cash equivalents                      $ 447,046       $310,202
  Short-term investments                            40,278          4,734
  Accounts receivable, less allowance
   of $195,953 and $171,757                        927,949        932,385
  Inventories                                       80,173         89,119
  Other receivables                                198,744        148,842
  Other current assets                              34,482         25,124
  Deferred income taxes                            247,578        199,090
      Total current assets                       1,976,250      1,709,496
  Property and equipment, net                      939,326        849,966
  Amortizable intangibles, net                     183,042        203,721
  Investments in third-party dialysis businesses    19,446          1,813
  Long-term investments                             22,562         13,174
  Other long-term assets                            35,401         45,793
  Goodwill                                       3,767,933      3,667,853
                                                $6,943,960     $6,491,816


         LIABILITIES AND SHAREHOLDERS' EQUITY

  Accounts payable                               $ 225,461       $251,686
  Other liabilities                                486,151        473,219
  Accrued compensation and benefits                334,961        341,766
  Current portion of long-term debt                 23,431         20,871
  Income taxes payable                              16,492         24,630
      Total current liabilities                  1,086,496      1,112,172
  Long-term debt                                 3,683,887      3,730,380
  Other long-term liabilities                       83,448         50,076
  Alliance and product supply agreement, net        41,307        105,263
  Deferred income taxes                            166,055        125,642
  Minority interests                               150,517        122,359
  Commitments and contingencies
  Shareholders' equity:
    Preferred stock ($0.001 par value, 5,000,000
     shares authorized; none issued)
    Common stock ($0.001 par value, 450,000,000
     and 195,000,000 shares authorized;
     134,862,283 shares issued; 107,130,127
     and 104,636,608 shares outstanding)               135            135
    Additional paid-in capital                     707,080        630,091
    Retained earnings                            1,515,290      1,129,621
    Treasury stock, at cost
     (27,732,156 and 30,225,675 shares)           (487,744)      (526,920)
    Accumulated other comprehensive
     (loss) income                                  (2,511)        12,997
      Total shareholders' equity                 1,732,250      1,245,924
                                                $6,943,960     $6,491,816



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

                                        Three months ended       Year ended
                                   Dec. 31, Sept. 30,  Dec. 31,    Dec. 31,
                                    2007      2007       2006        2007

  Financial Results
   excluding gains from insurance
   settlements, the valuation gain
   on the product supply agreement
   and gains on sale of investment
   securities:
    Net income (1)                  $85.7      $89.3      $74.1      $340.3
    Diluted earnings per share      $0.79      $0.83      $0.70       $3.17
    Operating income (1)           $195.3     $205.6     $188.5      $800.2
      Operating income margin       14.4%      15.6%      14.8%       15.2%
    Other comprehensive income
      Unrealized loss on
       securities, net of tax
       benefits of $4.8,
       $5.1, $0.7 and $9.9          $(7.5)     $(8.0)     $(1.1)     $(15.5)


  Business Metrics:
    Volume
      Treatments                3,983,542  3,842,763  3,723,198  15,318,995
      Number of treatment days       79.6       78.0       78.6         313
      Treatments per day           50,045     49,266     47,369      48,942
      Per day year over
       year increase                 5.6%       6.1%       7.0%        5.5%
      Non-acquired growth
       year over year                4.6%       5.2%       5.5%        4.6%

    Revenue
      Total operating revenue      $1,355     $1,318     $1,273      $5,264
      Dialysis revenue per
       treatment, including
       the lab                    $328.11    $333.57    $334.45     $334.26
      Per treatment (decrease)
       increase from previous
       quarter                      (1.6%)     (1.3%)      0.9%           -
      Per treatment (decrease)
       increase from previous year  (1.9%)      0.6%       4.5%        1.2%

    Expenses
    A. Patient care costs
       Percent of revenue           68.5%      67.5%      68.6%       68.2%
       Per treatment              $232.83    $231.67    $234.36     $234.37
       Per treatment increase
        (decrease) from previous
        quarter                      0.5%      (1.4%)      0.3%           -
       Per treatment (decrease)
        increase from previous year (0.7%)     (0.8%)      2.6%        0.2%
       Per treatment (excluding
        gains from insurance
        settlements of $1.76 and
        $0.44 for the third quarter
        and year ended December 31,
        2007, respectively)             -    $233.43          -    $ 234.81

    B. General & administrative
        expenses
       Percent of revenue           10.0%       9.1%       9.8%        9.3%
       Per treatment              $ 33.89     $31.38     $33.43      $32.07
       Per treatment increase
        (decrease) from previous
        quarter                      8.0%      (2.8%)      8.1%           -
       Per treatment increase
        from previous year           1.4%       1.5%      19.9%        2.5%

    C. Bad debt expense as a percent
        of current-period revenue    2.6%       2.6%       2.6%        2.6%

    D. Consolidated effective
        tax rate from continuing
        operations                  37.9%      39.4%      39.0%       39.2%

    Cash Flow
      Operating cash flow          $223.3      $95.8     $190.1      $533.0
      Operating cash flow,
       last twelve months          $533.0     $499.8     $519.6          $-
      Free cash flow (1)           $184.6      $73.5     $158.9      $421.4
      Free cash flow,
       last twelve months (1)      $421.4     $395.6     $410.4          $-

      Capital expenditures:
        Development and
         relocations                $60.4      $48.5      $44.5      $162.3
        Routine maintenance/
         IT/other                   $39.7      $22.6      $32.5      $113.9
      Acquisition expenditures      $45.3      $75.5      $10.9      $127.1

    Accounts Receivable
      Net receivables                $928       $976       $932
      DSO                              66         70         70

    Debt/Capital Structure
      Total debt, excluding
       debt premium of
       $4.5 million                $3,703     $3,701     $3,751
      Net debt, net of cash,
       excluding debt premium of
       $4.5 million                $3,256     $3,309     $3,441
      Leverage ratio (see Note 1)   2.99x      3.10x      3.66x

    Clinical (quarterly averages)
      Dialysis adequacy - % of
       patients with Kt/V > 1.2     94.4%      93.6%      92.9%
      Patients with albumin
       >/= 3.5                      83.7%      82.9%      84.0%
      Patients with HCT
       >/= 33                       82.4%      82.8%      84.7%

  (1)  These are non-GAAP financial measures. For a reconciliation of these
       non-GAAP financial measures to their most comparable measure
       calculated and presented in accordance with GAAP, see attached
       reconciliation schedules.

  Note 1: Calculation of the Leverage Ratio
  Under the Company's current Senior Secured Credit Facilities (Credit
  Agreement), the leverage ratio is defined as all funded debt plus the face
  amount of all letters of credit issued, minus cash and cash equivalents,
  divided by "Consolidated EBITDA". The leverage ratio determines the
  interest rate margin payable by the Company for its term loan A and
  revolving line of credit under the Credit Agreement by establishing the
  margin over the base interest rate (LIBOR) that is applicable. The
  following leverage ratio was calculated using "Consolidated EBITDA" as
  defined in the Credit Agreement.  The calculation below is based on the
  last twelve months of "Consolidated EBITDA", pro forma for the routine
  acquisitions that occurred during the period. The Company's management
  believes that the presentation of "Consolidated EBITDA" is useful to
  investors to enhance their understanding of the Company's leverage ratio
  under its Credit Agreement.


                                                               Year ended
                                                           December 31, 2007

  Net income                                                    $381,778
  Income taxes                                                   245,744
  Debt expense including the write-off of
   deferred financing costs,(excluding other cash
   charges of $180)                                              256,967
  Depreciation and amortization                                  193,470
  Minority interests and equity income, net                       45,485
  Valuation gain on Product Supply Agreement                     (55,275)
  Other                                                             (300)
  Stock-based compensation expense                                34,149

    "Consolidated EBITDA"                                     $1,102,018



                                                              December 31,
                                                                  2007

  Total debt, excluding debt premium of $4.5 million          $3,702,839

  Letters of credit issued                                        41,002
                                                               3,743,841
  Less: cash and cash equivalents                               (447,046)

  Consolidated net debt                                       $3,296,795

  Last twelve months "Consolidated EBITDA"                    $1,102,018

  Leverage ratio                                                   2.99x


  In accordance with the Company's Credit Agreement, the Company's leverage
  ratio cannot exceed 5.25 to 1.0  as of December 31, 2007. At that date,
  the Company's leverage ratio did not exceed 5.25 to 1.0.



                  RECONCILIATIONS FOR NON-GAAP MEASURES
                               (unaudited)
                          (dollars in thousands)

  1. Net income excluding gains from insurance settlements, the valuation
  gain on the product supply agreement and gains on the sale of investment
  securities

  Net income excluding gains from insurance settlements, the valuation gain
  on the product supply agreement and gains on the sale of investment
  securities held by us, excludes certain unusual or non-recurring items in
  order to present a measure of net income that is more reflective of the
  normal day-to-day operations of our business. Gains from insurance
  settlements relates to insurance proceeds from Hurricane Katrina and from
  a fire that destroyed one of our centers. The valuation gains on the
  product supply agreement with Gambro Renal Products reflect non-cash
  items. In 2006, the valuation gain resulted from the modification of the
  product supply agreement, that reduced our required purchase obligations,
  and in 2007, the valuation gain resulted from an additional modification
  of the product supply agreement, which resulted in the termination of our
  obligation to purchase dialysis machines from Gambro Renal Products Inc.
  under that agreement. Gains on the sale of investment securities related
  to the sale of our common stock in NxStage. We believe that the exclusion
  of each of these items enhances a user's understanding of our normal
  operations and performance and that the adjusted amount of net income is
  more comparable to prior periods and therefore more indicative of our
  performance for purposes of period over period comparison. Our management
  eliminates these items when evaluating our operating performance. This
  measure is not a measure of financial performance under United States
  generally accepted accounting principles and should not be considered as
  an alternative to net income.


                              Three months ended            Year ended
                       Dec. 31,  Sept. 30,   Dec. 31,   Dec. 31,   Dec. 31,
                         2007      2007        2006       2007       2006

  Net income           $85,717   $ 94,455    $74,129    $381,778   $289,691
  Less: Gains
         on insurance
         settlements         -     (6,779)         -      (6,779)         -
        Valuation gain       -          -          -     (55,275)   (37,968)
        Gain on the
         sale of
         investment
         securities          -     (1,634)          -      (5,868)         -

  Add: Related
   income tax                -      3,273           -      26,422     14,770
                       $85,717   $ 89,315     $74,129    $340,278   $266,493



  2. Operating income excluding pre-tax gains from insurance settlements,
  and the pre-tax valuation gain on the product supply agreement

  Operating income excluding gains from insurance settlements, and the
  valuation gain on the product supply agreement, excludes certain unusual
  or non-recurring items in order to present a measure of operating income
  that is more reflective of the normal day-to-day operations of our
  business. Gains from insurance settlements relates to insurance proceeds
  from Hurricane Katrina and from a fire that destroyed one of our centers.
  The valuation gains on the product supply agreement with Gambro Renal
  Products reflect non-cash items. In 2006, the valuation gain resulted from
  the modification of the product supply agreement, that reduced our
  required purchase obligations, and in 2007, the valuation gain resulted
  from an additional modification of the product supply agreement, which
  resulted in the termination of our obligation to purchase dialysis
  machines from Gambro Renal Products Inc. under that agreement. We believe
  that the exclusion of each of these items enhances a user's understanding
  of our normal operations and performance and that the adjusted amount of
  operating income is more comparable to prior periods and therefore more
  indicative of our performance for purposes of period over period
  comparison. Our management eliminates these items when evaluating our
  operating performance. This measure is not a measure of financial
  performance under United States generally accepted accounting principles
  and should not be considered as an alternative operating income.



                            Three months ended               Year ended
                     Dec. 31,   Sept. 30,  Dec. 31,     Dec. 31,    Dec. 31,
                      2007       2007        2006         2007       2006

  Operating
   income           $195,263   $212,412    $188,511     $862,209   $739,432
  Less: Gains
        from
        insurance
        settlements        -     (6,779)          -       (6,779)         -

  Valuation gain           -          -           -      (55,275)   (37,968)
                    $195,263   $205,633    $188,511     $800,155   $701,464


  3. Free cash flow

  Free cash flow represents net cash provided by operating activities less
  capital expenditures for routine maintenance and information technology.
  We believe free cash flow is a useful adjunct to cash flow from operating
  activities and other measurements under United States generally accepted
  accounting principles, since free cash flow is a meaningful measure of our
  ability to fund acquisition and development activities and meet our debt
  service requirements. Free cash flow is not a measure of financial
  performance under United States generally accepted accounting principles
  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.



                                           Three months ended
                                December 31,   September 30,  December 31,
                                   2007            2007          2006
  Cash provided by operating
    activities                   $223,326         $95,778      $190,108
  Less: Expenditures for
   routine maintenance and
   information technology         (38,688)        (22,229)      (31,214)

  Free cash flow                 $184,638         $73,549      $158,894



                                         Rolling 12-Month Period
                                December 31,   September 30,  December 31,
                                   2007            2007          2006
  Cash provided by
   operating activities          $533,036        $499,818      $519,571
  Less: Expenditures for
   routine maintenance and
   information technology        (111,663)       (104,189)     (109,131)
  Free cash flow                 $421,373        $395,629      $410,440

First Call Analyst:
FCMN Contact: LeAnne.Zumwalt@davita.com

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SOURCE: DaVita Inc.

CONTACT: LeAnne Zumwalt, Investor Relations of DaVita Inc.,
+1-650-696-8910


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