Improving Health, Health Care and Quality of Life

DaVita 1st Quarter 2008 Results
PRNewswire

EL SEGUNDO, Calif., April 29 /PRNewswire-FirstCall/ DaVita Inc. today announced results for the quarter ended March 31, 2008. Net income for the three months ended March 31, 2008 was $86.9 million, or $0.80 per share, as compared to $76.6 million, or $0.72 per share, for the same period of 2007.

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

  Financial and operating highlights include:
  --  Cash Flow:  For the rolling 12-months ended March 31, 2008 operating
      cash flow was $536 million and free cash flow was $433 million.  For
      the three months ended March 31, 2008 operating cash flow was
      $91 million and free cash flow was $73 million.
  --  Operating Income:  Operating income for the three months ended
      March 31, 2008 was $197 million, as compared to $193 million for the
      same period of 2007.
  --  Volume:  Total treatments for the first quarter of 2008 were 3,934,777
      or 50,837 treatments per day, as compared to 3,700,271 or
      47,807 treatments per day for the first quarter of 2007. Non-acquired
      treatment growth in the quarter was 5.0% over the prior year's first
      quarter.
  --  Effective Tax Rate:  The effective tax rate for the first quarter of
      2008 was 39.0% and we currently project our annual effective tax rate
      for 2008 to be in the range of 39.0% to 40.0%.
  --  Shares Repurchases:  During the first quarter of 2008, we repurchased
      a total of 682,500 shares of our common stock for $32.5 million, or an
      average price of $47.66 per share, pursuant to previously announced
      Board authorizations. From the period April 1, 2008 to April 28, 2008,
      we repurchased an additional 2,120,977 shares of our common stock for
      a total of approximately $103.7 million, or an average price of
      $48.89 per share.
  --  Center Activity:  As of March 31, 2008, we operated or provided
      administrative services at 1,390 outpatient dialysis centers serving
      approximately 107,000 patients, of which 1,366 centers are
      consolidated in our financial statements. During the first quarter of
      2008, we acquired 4 centers, opened 27 new centers, closed one center,
      and provided administrative services to one additional center.


  Outlook

Our operating income guidance for 2008 is still projected to be in the range of $790-850 million. We continue to believe that operating income is more likely to be in the lower end of the range. 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 first quarter ended March 31, 2008 on April 29, 2008 at 4:30 p.m. 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, competition, accounting estimates and the risk factors set forth in the Company's SEC filings, including its Form 10-K for the year ended December 31, 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
                                                           March 31,
                                                      2008          2007

  Net operating revenues                           $1,344,724    $1,278,166

  Operating expenses and charges:
    Patient care costs                                930,209       881,585
    General and administrative                        120,765       113,221
    Depreciation and amortization                      52,811        45,790
    Provision for uncollectible accounts               34,631        33,635
    Minority interests and equity income, net           9,581        10,618
         Total operating expenses and charges       1,147,997     1,084,849

  Operating income                                    196,727       193,317

  Debt expense                                        (59,066)      (68,870)
  Other income                                          4,863         3,195
  Income before income taxes                          142,524       127,642
  Income tax expense                                   55,590        51,060
  Net income                                          $86,934       $76,582

  Earnings per share:
    Basic earnings per share                            $0.81         $0.73
    Diluted earnings per share                          $0.80         $0.72
    Weighted average shares for earnings per share:
      Basic                                       107,367,000   105,013,000
      Diluted                                     108,239,000   106,739,000



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

                                                       Three months ended
                                                            March 31,
                                                       2008          2007
  Cash flows from operating activities:
  Net income                                         $86,934        $76,582
  Adjustments to reconcile net income to cash
   provided by operating activities:
     Depreciation and amortization                    52,811         45,790
     Stock-based compensation expense                  9,548          7,702
     Tax benefits from stock award exercises           2,618          6,307
     Excess tax benefits from stock award exercises   (1,411)        (5,426)
     Deferred income taxes                            (7,439)        (2,194)
     Minority interests in income of consolidated
      subsidiaries                                     9,054         10,828
     Distributions to minority interests             (16,888)       (10,106)
     Equity investment losses (income)                   527           (210)
     Loss on disposal of assets                        1,355          1,552
     Non-cash debt and non-cash rent charges           4,074          6,946
  Changes in operating assets and liabilities,
   net of effect of acquisitions and divestitures:
     Accounts receivable                             (33,168)        25,875
     Inventories                                       3,499         19,667
     Other receivables and other current assets       16,846         (4,471)
     Other long term assets                             (537)        (1,873)
     Accounts payable                                (39,217)       (46,387)
     Accrued compensation and benefits               (47,571)       (33,988)
     Other current liabilities                        (6,500)       (31,636)
     Income taxes                                     56,673         26,389
     Other long-term liabilities                        (184)        (3,316)
         Net cash provided by operating activities    91,024         88,031
  Cash flows from investing activities:
     Additions of property and equipment, net        (64,673)       (49,444)
     Acquisitions and purchases of other ownership
      interests                                       (8,838)          (189)
     Proceeds from divestitures and asset sales           23             98
     Purchase of investments available-for-sale         (839)       (20,960)
     Purchase of investments held-to-maturity           (109)           (15)
     Proceeds from sale of investments
      available-for-sale                               4,955          6,236
     Proceeds from maturities of investments
      held-to-maturity                                    73              -
     Contributions from minority owners                9,759          4,650
     Purchase of intangible assets                       (64)           (55)
         Net cash used in investing activities       (59,713)       (59,679)
  Cash flows from financing activities:
     Borrowings                                    4,050,363      3,898,955
     Payments on long-term debt                   (4,052,066)    (3,894,640)
     Deferred financing costs                           (130)        (4,048)
     Purchase of treasury stock                       (7,144)             -
     Excess tax benefits from stock award
      exercises                                        1,411          5,426
     Stock award exercises and other share
      issuances, net                                   8,525         12,137
       Net cash provided by financing activities         959         17,830
  Net increase in cash and cash equivalents           32,270         46,182
  Cash and cash equivalents at beginning of period   447,046        310,202
  Cash and cash equivalents at end of period        $479,316       $356,384



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

                                                  March 31,     December 31,
                                                    2008            2007
                        ASSETS
  Cash and cash equivalents                       $479,316        $447,046
  Short-term investments                            45,859          40,278
  Accounts receivable, less allowance of
   $205,528 and $195,953                           959,837         927,949
  Inventories                                       76,807          80,173
  Other receivables                                185,238         198,744
  Other current assets                              29,604          34,482
  Deferred income taxes                            241,816         247,578
       Total current assets                      2,018,477       1,976,250
  Property and equipment, net                      954,858         939,326
  Amortizable intangibles, net                     175,161         183,042
  Investments in third-party dialysis businesses    18,568          19,446
  Long-term investments                             12,524          22,562
  Other long-term assets                            35,938          35,401
  Goodwill                                       3,774,906       3,767,933
                                                $6,990,432      $6,943,960

           LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                $211,600        $225,461
  Other liabilities                                479,651         486,151
  Accrued compensation and benefits                288,559         334,961
  Current portion of long-term debt                 35,626          23,431
  Income taxes payable                              55,298          16,492
       Total current liabilities                 1,070,734       1,086,496
  Long-term debt                                 3,669,809       3,683,887
  Other long-term liabilities                       98,286          83,448
  Alliance and product supply agreement, net        39,975          41,307
  Deferred income taxes                            164,026         166,055
  Minority interests (fair value of potential put
   obligations - $316,000 and $330,000)            149,276         150,517
  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
     shares authorized; 134,862,283  shares issued;
     106,806,458 and 107,130,127 shares outstanding)   135            135
    Additional paid-in capital                     723,565        707,080
    Retained earnings                            1,602,224      1,515,290
    Treasury stock, at cost (28,055,825 and
     27,732,156 shares)                           (513,958)      (487,744)
    Accumulated other comprehensive loss           (13,640)        (2,511)
        Total shareholders' equity               1,798,326      1,732,250
                                                $6,990,432     $6,943,960



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

                                                 Three months ended
                                          March 31,  December 31,  March 31,
                                            2008        2007         2007
  Financial Results:
    Net income                             $86.9       $85.7        $76.6
    Diluted earnings per share             $0.80       $0.79        $0.72
    Operating income                      $196.7      $195.3       $193.3
      Operating income margin               14.6%       14.4%        15.1%
    Other comprehensive income
      Unrealized (loss) gain on
       securities, net of tax benefits
       (expense) of $7.1, $4.8,
       and ($0.5)                         $(11.1)      $(7.5)        $0.8

  Business Metrics:
    Volume
      Treatments                       3,934,777   3,983,542    3,700,271
      Number of treatment days              77.4        79.6         77.4
      Treatments per day                  50,837      50,045       47,807
      Per day year over year increase        6.3%        5.6%         5.1%
      Non-acquired growth year over year     5.0%        4.6%         4.0%

    Revenue
      Total operating revenue             $1,345      $1,355       $1,278
      Dialysis revenue per treatment,
       including the lab                 $328.95     $328.11      $337.84
      Per treatment increase (decrease)
       from previous quarter                 0.3%       (1.6%)        1.0%
      Per treatment (decrease) increase
       from previous year                   (2.6%)      (1.9%)        3.5%

    Expenses
    A.  Patient care costs
        Percent of revenue                  69.2%       68.5%        69.0%
        Per treatment                    $236.41     $232.83      $238.25
        Per treatment increase from
         previous quarter                    1.5%        0.5%         1.7%
        Per treatment (decrease) increase
         from previous year                 (0.8%)      (0.7%)        2.0%

    B.  General & administrative expenses
        Percent of revenue                   9.0%       10.0%         8.9%
        Per treatment                     $30.69      $33.89       $30.60
        Per treatment (decrease) increase
         from previous quarter              (9.4%)       8.0%        (8.5%)
        Per treatment increase from
         previous year                       0.3%        1.4%         2.9%

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

    D.  Consolidated effective tax rate     39.0%       37.9%        40.0%



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

                                                 Three months ended
                                          March 31,  December 31,  March 31,
                                            2008        2007         2007
  Cash Flow
    Operating cash flow                    $91.0       $223.3       $88.0
    Operating cash flow, last
     twelve months                        $536.0       $533.0      $631.2

    Free cash flow (1)                     $73.2       $184.6       $61.4
    Free cash flow, last twelve
     months (1)                           $433.1       $421.4      $515.2
    Capital expenditures:
      Development and relocations          $46.1        $60.4       $21.3
      Routine maintenance/IT/other         $18.5        $39.7       $28.1
    Acquisition expenditures                $8.8        $45.3           -

  Accounts Receivable
    Net receivables                         $960         $928        $907
    DSO                                       68           66          66

  Debt/Capital Structure
    Total debt, excluding debt premium
     of $4.3 million                      $3,701       $3,703      $3,750
    Net debt, net of cash, excluding
     debt premium of $4.3 million         $3,222       $3,256      $3,394

    Leverage ratio (see Note 1)             2.94x        2.99x       3.48x

  Clinical (quarterly averages)
    Dialysis adequacy - % of patients
     with Kt/V > 1.2                          95%          94%         93%
    Patients with albumin greater than
     or equal to 3.5                          82%          84%         83%
    Patients with HCT greater than
     or equal to 33                           80%          82%         85%

  (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.



                               DAVITA INC.
                  SUPPLEMENTAL FINANCIAL DATA-continued
                               (unaudited)
                          (dollars in thousands)

  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.

                                                    Rolling 12-months ended
                                                        March 31, 2008
  Net income                                                $392,130
  Income taxes                                               250,274
  Debt expense including the write-off of deferred
   financing costs                                           247,343
  Depreciation and amortization                              200,491
  Minority interests and equity income, net                   44,448
  Valuation gain on Product Supply Agreement                 (55,275)
  Other                                                       (4,743)
  Stock-based compensation expense                            35,995
    "Consolidated EBITDA"                                 $1,110,663

                                                            March 31,
                                                              2008
  Total debt, excluding debt premium of $4.3 million      $3,701,137
  Letters of credit issued                                    41,002
                                                           3,742,139
  Less: cash and cash equivalents                           (479,316)
  Consolidated net debt                                   $3,262,823
  Last twelve months  "Consolidated EBITDA"               $1,110,663
  Leverage ratio                                                2.94x

In accordance with the Company's Credit Agreement, the Company's leverage ratio cannot exceed 5.00 to 1.0 as of March 31, 2008. At that date, the Company's leverage ratio did not exceed 5.00 to 1.0.

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

  1.  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
                                      March 31,    December 31,    March 31,
                                        2008          2007           2007
  Cash  provided by operating
   activities                         $91,024        $223,326       $88,031
  Less:  Expenditures for
   routine maintenance and
   information technology             (17,827)        (38,688)      (26,589)
  Free cash flow                      $73,197        $184,638       $61,442



                                            Rolling 12-Month Period
                                      March 31,    December 31,    March 31,
                                        2008          2007           2007
  Cash provided by operating
   activities                        $536,029        $533,036      $631,166
  Less: Expenditures for
   routine maintenance and
   information technology            (102,901)       (111,663)     (115,994)
  Free cash flow                     $433,128        $421,373      $515,172

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

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SOURCE: DaVita Inc.

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


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