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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2003

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 0-27640

RENAL CARE GROUP, INC.

(Exact name of registrant as specified in its charter)

|                                |  |                                     
|------------------------------- |  | ------------------------------------
|Delaware                        |  | 62-1622383                          
|(State or other jurisdiction of |  | (I.R.S. Employer Identification No.)
|incorporation or organization)  |  |                                     

2525 West End Avenue, Suite 600, Nashville, Tennessee 37203
(Address of principal executive offices) (Zip code)
Registrants telephone number, including area code: (615) 345-5500

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days). Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes x No o

Indicate the number of shares outstanding of each of the issuers classes
of common stock as of the latest practicable date.

|                             |  |                           
|---------------------------- |  | --------------------------
|Class                        |  | Outstanding at May 9, 2003
|                             |  |                           
|Common Stock, $.01 par value |  | 48,260,146                





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TABLE OF CONTENTS



|                                            |                                                                                                |                                                      |  |  |  |  |  | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION             
|                                            | ITEM 1. FINANCIAL STATEMENTS                                                                  
|                                            |                                                                                                | Condensed Consolidated Balance Sheets               
|                                            |                                                                                                | Condensed Consolidated Income Statements            
|                                            |                                                                                                | Condensed Consolidated Statements of Cash Flows     
|                                            |                                                                                                | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                            | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|                                            | ITEM 4. CONTROLS AND PROCEDURES                                                               
|PART II  OTHER INFORMATION                
|                                            | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                                     
|SIGNATURE                                  
|EX-10.37.2 AMENDED LONG TERM INCENTIVE PLAN
|EX-10.67 SUPPLEMENTAL BENEFIT PLAN         
|EX-10.68 PLAN AGREEMENT                    
|EX-10.69 PLAN AGREEMENT                    
|EX-99.1  906 CERTIFICATION                 



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RENAL CARE GROUP, INC.

INDEX

|                                                                                              |                                                                                                                  |  |          |    | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- |  | -------- | -- | 
|                                                                                              |                                                                                                                  |  | Page No.
|                                                                                              |                                                                                                                  |  |         
|PART I  FINANCIAL INFORMATION                                                                |                                                                                                                  |  |          |   
|Item 1. Financial Statements                                                                  |                                                                                                                  |  |          |   
|                                                                                              | Condensed Consolidated Balance Sheets -
December 31, 2002 and March 31, 2003 (unaudited)                         |  |          | 1  | 
|                                                                                              | Condensed Consolidated Income Statements  (unaudited)
For the three months ended March 31, 2002 and 2003        |  |          | 2  | 
|                                                                                              | Condensed Consolidated Statements of Cash Flows  (unaudited)
For the three months ended March 31, 2002 and 2003 |  |          | 3  | 
|                                                                                              | Notes to Condensed Consolidated Financial Statements  (unaudited)                                               |  |          | 4  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations |                                                                                                                  |  | 8        |   
|                                                                                              | Risk Factors                                                                                                     |  |          | 11 | 
|Item 4. Controls and Procedures                                                               |                                                                                                                  |  | 18       |   
|PART II  OTHER INFORMATION                                                                   |                                                                                                                  |  |          |   
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                  |  | 19       |   

Note: Item 3 of Part I, and Items 1, 2, 3, 4, and 5 of Part II are omitted
because they are not applicable





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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

RENAL CARE GROUP, INC.




Condensed Consolidated Balance Sheets
(in thousands, except per share data)

|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |             |         |  
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ------- | ------------ | ------- | --------- | ------- | ----------- | ------- | -
|                                           |                                                                                                                                                |                                                    |         | December 31, |         | March 31,
|                                           |                                                                                                                                                |                                                    |         | 2002         |         | 2003     
|                                           |                                                                                                                                                |                                                    |         |              |         |          
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         | (unaudited)
|ASSETS                                     |                                                                                                                                                |                                                    |         |              |         |           |         |            
|Current assets:                            |                                                                                                                                                |                                                    |         |              |         |           |         |            
|                                           | Cash and cash equivalents                                                                                                                      |                                                    | $       | 38,359       |         |           | $       | 44,115      |        
|                                           | Accounts receivable, net                                                                                                                       |                                                    |         | 152,440      |         |           |         | 160,418     |        
|                                           | Inventories                                                                                                                                    |                                                    |         | 23,336       |         |           |         | 16,884      |        
|                                           | Prepaid expenses and other current assets                                                                                                      |                                                    |         | 19,486       |         |           |         | 14,090      |        
|                                           | Deferred income taxes                                                                                                                          |                                                    |         | 12,240       |         |           |         | 12,240      |        
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |            
|Total current assets                       |                                                                                                                                                |                                                    | 245,861 |              |         |           | 247,747 |            
|Property, plant and equipment, net         |                                                                                                                                                |                                                    | 202,972 |              |         |           | 209,436 |            
|Intangible assets, net                     |                                                                                                                                                |                                                    | 12,110  |              |         |           | 11,596  |            
|Other assets                               |                                                                                                                                                |                                                    | 3,514   |              |         |           | 3,369   |            
|Goodwill                                   |                                                                                                                                                |                                                    | 275,666 |              |         |           | 275,573 |            
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |            
|Total assets                               |                                                                                                                                                | $                                                  | 740,123 |              |         | $         | 747,721 |            
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |            
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                                                                                                                                |                                                    |         |              |         |           |         |            
|Current liabilities:                       |                                                                                                                                                |                                                    |         |              |         |           |         |            
|                                           | Accounts payable and accrued expenses                                                                                                          |                                                    | $       | 101,213      |         |           | $       | 89,299      |        
|                                           | Due to third-party payors                                                                                                                      |                                                    |         | 32,611       |         |           |         | 39,640      |        
|                                           | Income taxes payable                                                                                                                           |                                                    |         | 1,423        |         |           |         | 3,919       |        
|                                           | Current portion of long-term debt                                                                                                              |                                                    |         | 133          |         |           |         | 139         |        
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |            
|Total current liabilities                  |                                                                                                                                                |                                                    | 135,380 |              |         |           | 132,997 |            
|Long-term debt, net of current portion     |                                                                                                                                                |                                                    | 10,161  |              |         |           | 2,735   |            
|Deferred income taxes                      |                                                                                                                                                |                                                    | 19,288  |              |         |           | 19,288  |            
|Minority interest                          |                                                                                                                                                |                                                    | 31,406  |              |         |           | 28,094  |            
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |            
|Total liabilities                          |                                                                                                                                                |                                                    | 196,235 |              |         |           | 183,114 |            
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |            
|Commitments and contingencies              |                                                                                                                                                |                                                    |         |              |         |           |         |            
|                                          
|Stockholders equity:                      |                                                                                                                                                |                                                    |         |              |         |           |         |            
|                                           | Preferred stock, $0.01 par value, 10,000 shares authorized,
none issued                                                                        |                                                    |         |             |         |           |         |            |        
|                                           | Common stock, $0.01 par value, 90,000 shares authorized,
51,176 and 51,310 shares issued at December 31, 2002
and March 31, 2003, respectively |                                                    |         | 512          |         |           |         | 513         |        
|                                           | Treasury stock, 2,983 and 3,135 shares of common stock at                                                                                      |                                                    |         |              |         |           |         |             |        
|                                           |                                                                                                                                                | December 31, 2002 and March 31, 2003, respectively |         |              | (93,953 | )         |         |             | (98,333 | )
|                                           | Additional paid-in capital                                                                                                                     |                                                    |         | 309,355      |         |           |         | 312,701     |        
|                                           | Retained earnings                                                                                                                              |                                                    |         | 327,974      |         |           |         | 349,726     |        
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |            
|Total stockholders equity                 |                                                                                                                                                |                                                    | 543,888 |              |         |           | 564,607 |            
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |            
|Total liabilities and stockholders equity |                                                                                                                                                | $                                                  | 740,123 |              |         | $         | 747,721 |            
|                                           |                                                                                                                                                |                                                    |         |              |         |           |         |            

See accompanying notes to condensed consolidated financial statements.

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RENAL CARE GROUP, INC.




Condensed Consolidated Income Statements
(in thousands, except per share data)
(unaudited)

|                                                 |                                     |   |                    |         |      |   |         |         | 
|------------------------------------------------ | ----------------------------------- | - | ------------------ | ------- | ---- | - | ------- | ------- | 
|                                                 |                                     |   | Three Months Ended
|                                                 |                                     |   | March 31,         
|                                                 |                                     |   |                   
|                                                 |                                     |   | 2002               |         | 2003
|                                                 |                                     |   |                    |         |     
|Net revenue                                      |                                     | $ | 206,678            |         |      | $ | 242,143 |        
|Operating costs and expenses:                    |                                     |   |                    |         |      |   |         |        
|                                                 | Patient care costs                  |   |                    | 134,712 |      |   |         | 157,477 | 
|                                                 | General and administrative expenses |   |                    | 17,560  |      |   |         | 26,288  | 
|                                                 | Provision for doubtful accounts     |   |                    | 5,484   |      |   |         | 6,412   | 
|                                                 | Depreciation and amortization       |   |                    | 9,362   |      |   |         | 10,298  | 
|                                                 |                                     |   |                    |         |      |   |         |        
|Total operating costs and expenses               |                                     |   | 167,118            |         |      |   | 200,475 |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Income from operations                           |                                     |   | 39,560             |         |      |   | 41,668  |        
|Interest expense, net                            |                                     |   | 173                |         |      |   | 285     |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Income before minority interest and income taxes |                                     |   | 39,387             |         |      |   | 41,383  |        
|Minority interest                                |                                     |   | 4,710              |         |      |   | 6,308   |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Income before income taxes                       |                                     |   | 34,677             |         |      |   | 35,075  |        
|Provision for income taxes                       |                                     |   | 13,184             |         |      |   | 13,323  |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Net income                                       |                                     | $ | 21,493             |         |      | $ | 21,752  |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Net income per share:                            |                                     |   |                    |         |      |   |         |        
|                                                 | Basic                               |   | $                  | 0.43    |      |   | $       | 0.45    | 
|                                                 |                                     |   |                    |         |      |   |         |        
|                                                 | Diluted                             |   | $                  | 0.42    |      |   | $       | 0.44    | 
|                                                 |                                     |   |                    |         |      |   |         |        
|Weighted average shares outstanding:             |                                     |   |                    |         |      |   |         |        
|                                                 | Basic                               |   |                    | 49,426  |      |   |         | 48,182  | 
|                                                 |                                     |   |                    |         |      |   |         |        
|                                                 | Diluted                             |   |                    | 51,222  |      |   |         | 49,430  | 
|                                                 |                                     |   |                    |         |      |   |         |        

See accompanying notes to condensed consolidated financial statements.

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RENAL CARE GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

|                                                                                  |                                                                               |                                           |         |                    |         |      |         |        |         |  
|--------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ----------------------------------------- | ------- | ------------------ | ------- | ---- | ------- | ------ | ------- | -
|                                                                                  |                                                                               |                                           |         | Three Months Ended
|                                                                                  |                                                                               |                                           |         | March 31,         
|                                                                                  |                                                                               |                                           |         |                   
|                                                                                  |                                                                               |                                           |         | 2002               |         | 2003
|                                                                                  |                                                                               |                                           |         |                    |         |     
|OPERATING ACTIVITIES                                                              |                                                                               |                                           |         |                    |         |      |         |       
|Net income                                                                        |                                                                               | $                                         | 21,493  |                    |         | $    | 21,752  |       
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                               |                                           |         |                    |         |      |         |       
|                                                                                  | Depreciation and amortization                                                 |                                           |         | 9,362              |         |      |         | 10,298 |        
|                                                                                  | Loss on disposal of property and equipment                                    |                                           |         |                   |         |      |         | 136    |        
|                                                                                  | Distributions to minority shareholders                                        |                                           |         | (2,818             | )       |      |         | (9,620 | )      
|                                                                                  | Income applicable to minority interest                                        |                                           |         | 4,710              |         |      |         | 6,308  |        
|                                                                                  | Changes in operating assets and liabilities, net of effects from acquisitions |                                           |         | 12,459             |         |      |         | 3,306  |        
|                                                                                  |                                                                               |                                           |         |                    |         |      |         |       
|                                                                                  |                                                                               | Net cash provided by operating activities |         |                    | 45,206  |      |         |        | 32,180  |  
|INVESTING ACTIVITIES                                                              |                                                                               |                                           |         |                    |         |      |         |       
|Purchases of property and equipment                                               |                                                                               |                                           | (13,001 | )                  |         |      | (17,896 | )     
|Cash paid for acquisitions, net of cash acquired                                  |                                                                               |                                           | (2,676  | )                  |         |      |        |       
|Change in other assets                                                            |                                                                               |                                           | (1,048  | )                  |         |      | 225     |       
|                                                                                  |                                                                               |                                           |         |                    |         |      |         |       
|                                                                                  |                                                                               | Net cash used in investing activities     |         |                    | (16,725 | )    |         |        | (17,671 | )
|FINANCING ACTIVITIES                                                              |                                                                               |                                           |         |                    |         |      |         |       
|Net payments of debt                                                              |                                                                               |                                           | (152    | )                  |         |      | (7,420  | )     
|Net proceeds from issuance of common stock                                        |                                                                               |                                           | 5,181   |                    |         |      | 3,047   |       
|Investment by joint venture partner                                               |                                                                               |                                           | 2,896   |                    |         |      |        |       
|Repurchase of treasury shares                                                     |                                                                               |                                           | (8,309  | )                  |         |      | (4,380  | )     
|                                                                                  |                                                                               |                                           |         |                    |         |      |         |       
|                                                                                  |                                                                               | Net cash used in financing activities     |         |                    | (384    | )    |         |        | (8,753  | )
|                                                                                  |                                                                               |                                           |         |                    |         |      |         |       
|Increase in cash and cash equivalents                                             |                                                                               |                                           | 28,097  |                    |         |      | 5,756   |       
|Cash and cash equivalents at beginning of period                                  |                                                                               |                                           | 27,423  |                    |         |      | 38,359  |       
|                                                                                  |                                                                               |                                           |         |                    |         |      |         |       
|Cash and cash equivalents at end of period                                        |                                                                               | $                                         | 55,520  |                    |         | $    | 44,115  |       
|                                                                                  |                                                                               |                                           |         |                    |         |      |         |       

See accompanying notes to condensed consolidated financial statements.

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RENAL CARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(dollars in thousands, except per share data)
(unaudited)

1. Basis of Presentation

Overview

Renal Care Group, Inc. provides dialysis services to patients with chronic
kidney failure, also known as end-stage renal disease (ESRD). As of March 31,
2003, the Company provided dialysis and ancillary services to over 20,600
patients through more than 270 owned outpatient dialysis centers in 27 states,
in addition to providing acute dialysis services at approximately 120
hospitals.

Renal Care Groups net revenue has been derived primarily from the
following sources:



| |  |  | outpatient hemodialysis services;                                                                                          
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | ancillary services associated with dialysis, primarily
the administration of erythropoietin (also known as Epogen® or
EPO);
|
| |  |  | home dialysis services;                                                                                                    
|
| |  |  | inpatient hemodialysis services provided to acute care hospitals and skilled nursing facilities;                           
|
| |  |  | laboratory services; and                                                                                                   
|
| |  |  | management contracts with hospital-based and medical university dialysis programs.                                         

Most patients with end-stage renal disease receive three dialysis
treatments each week in an outpatient setting. Reimbursement for these
services is provided primarily by the Medicare ESRD program based on rates
established by the Centers for Medicare and Medicaid Services (CMS). For the
three months ended March 31, 2003, approximately 56% of the Companys net
revenue was derived from reimbursement under the Medicare and Medicaid
programs. Medicare reimbursement is subject to rate and other legislative
changes by Congress and periodic changes in regulations, including changes that
may reduce payments under the ESRD program. Neither Congress nor CMS approved
an increase in the composite rate for either 2002 or 2003.

The Medicare composite rate applies to a designated group of outpatient
dialysis services, including the dialysis treatment, supplies used for the
treatment, certain laboratory tests and medications, and most of the home
dialysis services provided by Renal Care Group. The Company receives separate
reimbursement outside the composite rate for some other services, laboratory
tests and drugs, including specific drugs such as EPO and some
physician-ordered tests provided to dialysis patients.

If a patient has private health insurance, that patients treatment is
typically reimbursed at rates significantly higher than Medicare during the
first 30 months of care. After that period Medicare becomes the primary payor.
Reimbursement for dialysis services provided pursuant to a hospital contract is
negotiated with the individual hospital and is usually higher than the Medicare
composite rate. Because dialysis is a life-sustaining therapy to treat a
chronic disease, utilization is predictable and is not subject to seasonal
fluctuations.

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Renal Care Group derives a significant portion of its net revenue and net
income from the administration of EPO. EPO is manufactured by a single
company, Amgen Inc. In April 2002, Amgen implemented its third EPO price
increase of 3.9% in as many years. Because the Company was already under
contract with Amgen through 2002, this price increase did not affect its
results of operations during 2002. Key components of the 2002 pricing formula
were maintained in the Companys 2003 contract with Amgen. Therefore, while
the 2002 price increases will have an adverse affect on the Companys 2003
results of operations, the Company believes it should be able to mitigate a
substantial portion of the increase.

Interim Financial Statements

In the opinion of management, the information contained in this quarterly
report on Form 10-Q reflects all adjustments necessary to make the results of
operations for the interim periods a fair representation of such operations.
All such adjustments are of a normal recurring nature. Operating results for
interim periods are not necessarily indicative of results that may be expected
for the year as a whole. The Company suggests that persons read these financial
statements in conjunction with the consolidated financial statements and the
related notes thereto included in the Companys Form 10-K, as filed with the
SEC on March 18, 2003.

2.     Reclassifications

Certain prior period balances have been reclassified to conform to the
current period presentation. These reclassifications had no effect on the
results of operations as previously reported.

3.     Net Income per Share

The following table sets forth the computation of basic and diluted net
income per share (shares in thousands):

|                     |                                                                                                         |               |      |                              |       |      |      |        |       | 
|-------------------- | ------------------------------------------------------------------------------------------------------- | ------------- | ---- | ---------------------------- | ----- | ---- | ---- | ------ | ----- | 
|                     |                                                                                                         |               |      | Three Months Ended March 31,
|                     |                                                                                                         |               |      |                             
|                     |                                                                                                         |               |      | 2002                         |       | 2003
|                     |                                                                                                         |               |      |                              |       |     
|Numerator:           |                                                                                                         |               |      |                              |       |      |      |       
|                     | Numerator for basic and diluted net income per
share  net income                                       |               | $    | 21,493                       |       |      | $    | 21,752 |      
|                     |                                                                                                         |               |      |                              |       |      |      |       
|Denominator:         |                                                                                                         |               |      |                              |       |      |      |       
|                     | Denominator for basic net income per share 
weighted-average shares                                    |               |      | 49,426                       |       |      |      | 48,182 |      
|                     | Effect of dilutive securities:                                                                          |               |      |                              |       |      |      |        |      
|                     |                                                                                                         | Stock options |      |                              | 1,700 |      |      |        | 1,248 | 
|                     |                                                                                                         | Warrants      |      |                              | 96    |      |      |        |      | 
|                     |                                                                                                         |               |      |                              |       |      |      |       
|                     | Denominator for diluted net income per share 
adjusted weighted-average shares and assumed
conversions |               |      | 51,222                       |       |      |      | 49,430 |      
|                     |                                                                                                         |               |      |                              |       |      |      |       
|Net income per share
|Basic                |                                                                                                         | $             | 0.43 |                              |       | $    | 0.45 |       
|                     |                                                                                                         |               |      |                              |       |      |      |       
|                     |                                                                                                         | Diluted       |      | $                            | 0.42  |      |      | $      | 0.44  | 
|                     |                                                                                                         |               |      |                              |       |      |      |       

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4.     Stock-Based Compensation

The Company accounts for stock-based compensation to employees and
directors using the intrinsic value method in accordance with the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. In accordance with that opinion, the
Company recognizes no compensation expense when it grants fixed options to
employees and directors, because the exercise price of the stock options equals
or exceeds the market price of the underlying stock on the dates of grant.
Option grants to medical directors and non-vested stock grants are expensed at
the dates of grant over their vesting period.

The following table represents the pro forma effect on net income and net
income per share as if the Company had applied the fair value based method and
recognition provisions of Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, (SFAS No. 123) to stock-based
compensation to employees and directors:

|                                                                                                                           |                      |   |                              |      |      |   |        |      | 
|-------------------------------------------------------------------------------------------------------------------------- | -------------------- | - | ---------------------------- | ---- | ---- | - | ------ | ---- | 
|                                                                                                                           |                      |   | Three Months Ended March 31,
|                                                                                                                           |                      |   |                             
|                                                                                                                           |                      |   | 2002                         |      | 2003
|                                                                                                                           |                      |   |                              |      |     
|Net income, as reported                                                                                                    |                      | $ | 21,493                       |      |      | $ | 21,752 |     
|Add: stock-based compensation expense,
net of related tax effects, included in the
determination of net income as reported |                      |   | 95                           |      |      |   | 61     |     
|Less: stock-based compensation expense,
net of related tax effects, determined by the
fair value based method              |                      |   | (1,840                       | )    |      |   | (2,487 | )   
|                                                                                                                           |                      |   |                              |      |      |   |        |     
|Pro forma net income                                                                                                       |                      | $ | 19,748                       |      |      | $ | 19,326 |     
|                                                                                                                           |                      |   |                              |      |      |   |        |     
|Net income per share:                                                                                                      |                      |   |                              |      |      |   |        |     
|                                                                                                                           | Basic, as reported   |   | $                            | 0.43 |      |   | $      | 0.45 | 
|                                                                                                                           |                      |   |                              |      |      |   |        |     
|                                                                                                                           | Basic, pro forma     |   | $                            | 0.40 |      |   | $      | 0.40 | 
|                                                                                                                           |                      |   |                              |      |      |   |        |     
|                                                                                                                           | Diluted, as reported |   | $                            | 0.42 |      |   | $      | 0.44 | 
|                                                                                                                           |                      |   |                              |      |      |   |        |     
|                                                                                                                           | Diluted, pro forma   |   | $                            | 0.39 |      |   | $      | 0.39 | 
|                                                                                                                           |                      |   |                              |      |      |   |        |     

The effects of applying SFAS No. 123 for providing pro forma disclosures
is not likely to be representative of the effects on reported net income for
future periods.

5.     Contingencies

On August 30, 2000, 19 patients were hospitalized and one patient died
shortly after becoming ill while receiving treatment at one of the Companys
dialysis centers in Youngstown, Ohio. One of the 19 hospitalized patients also
died some time later. In March 2001, one of the affected patients sued the
Company in Mahoning County, Ohio for injuries related to the August 30, 2000
illnesses. Additional suits have been filed, and as of March 31, 2003, a total
of 11 suits were pending. The suits allege negligence, medical malpractice and
product liability. Additional defendants are named in each of the suits.
Additional defendants in some of the suits include the water system vendors who
installed and maintained the water system in the dialysis center. Renal Care
Group has denied the allegations and has filed cross-claims against the water
system vendors. Renal Care Group intends to pursue these cross-claims
vigorously. Management believes that Renal Care Groups insurance should be
adequate to cover these illnesses and does not anticipate a material adverse
effect on the Companys consolidated financial position or results of
operations.

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Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations governing the Medicare and
Medicaid programs. The Company is not aware of any pending or threatened
investigations involving allegations of potential noncompliance with applicable
laws or regulations. While no regulatory inquiries have been made, compliance
with such laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties, and exclusion from the Medicare and Medicaid programs.

The Company is involved in other litigation and regulatory investigations
arising in the ordinary course of business. In the opinion of management, after
consultation with legal counsel, the Company believes these matters will be
resolved without material adverse effect on the Companys consolidated
financial position or results of operations.

The Company generally engages practicing board-certified or board-eligible
nephrologists to serve as medical directors for its centers. Medical directors
are responsible for the administration and monitoring of the Companys patient
care policies, including patient education, administration of dialysis
treatment, development programs and assessment of all patients. The Company
pays medical director fees that are consistent with the fair market value of
the required supervisory services. Such medical director agreements typically
have a term of seven years with a three-year renewal option.

6.     Defined Benefit Plan

Effective January 29, 2003, the Company implemented a retirement benefit
plan for Sam A. Brooks, the Companys former Chairman, Chief Executive Officer
and President. Mr. Brooks died March 20, 2003. The plan provides that the
Company will make ten annual payments of $650 each to Mr. Brooks or his
beneficiary, beginning in 2004 or a month after the date of his death. As a
result, the Company recorded a $5,376 charge representing the pre-tax net
present value of such payments and $54 of interest expense during the first
quarter of 2003.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Results of Operations

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2003

Net Revenue.Net revenue increased from $206.7 million for the three
months ended March 31, 2002 to $242.1 million for the three months ended March
31, 2003, an increase of $35.5 million, or 17.2%. This increase resulted
primarily from a 10.8% increase in the number of treatments performed by Renal
Care Group from 707,483 in the 2002 period to 783,841 in the 2003 period. This
growth in treatments is the result of the acquisition and development of
various dialysis facilities and a 5.5% increase in same-market treatments for
2003 over 2002. In addition, average net revenue per dialysis treatment
increased 6.2% from $290 in 2002 to $308 in 2003. The increase in revenue per
treatment was largely due to a rate increase to private payors that Renal Care
Group implemented in the fourth quarter of 2002 and, to a lesser extent, an
increase in utilization of certain ancillary drugs. Management believes that
the Company will face reductions in reimbursement rates from state Medicaid
programs in 2003 and 2004 and that the Company may face reductions in rates
from commercial insurers or resistance to rate increases from commercial
insurers in 2003 and 2004.

Patient Care Costs.Patient care costs consist of costs directly related
to the care of patients, including direct labor, drugs and other medical
supplies, and operational costs of facilities. Patient care costs increased
from $134.7 million for the three months ended March 31, 2002, to $157.5
million for the three months ended March 31, 2003, an increase of 16.9%. This
increase was due principally to the increase in the number of treatments
performed during the period, which was reflected in corresponding increases in
the use of labor, drugs and supplies. Patient care costs as a percentage of net
revenue decreased slightly from 65.2% in the 2002 period to 65.0% in the 2003
period. Patient care costs per treatment increased 5.8% from $190 in the 2002
period to $201 in the 2003 period. The increase in patient care costs per
treatment was due to increases in the price of EPO, increases in the cost of
insurance, increases in self-insurance accruals and the increase in utilization
of certain ancillary drugs. Management believes that the Company will face
increases in the cost of EPO, insurance and self-insurance, and labor
throughout 2003.

General and Administrative Expenses.General and administrative expenses
include corporate office costs and other costs not directly related to the care
of patients, including facility administration, accounting, billing and
information systems. General and administrative expenses increased from $17.6
million for the three months ended March 31, 2002 to $26.3 million for the
three months ended March 31, 2003, an increase of 49.7%. This increase is
primarily attributable to a $5.4 million charge recorded in the first quarter
of 2003 related to a supplemental retirement benefit plan for the Companys
former Chairman, Chief Executive Officer and President that was adopted in
January 2003. General and administrative expenses as a percentage of net
revenue increased from 8.5% in 2002 to 10.9% in 2003. The retirement package
charge represents approximately 220 basis points of the increase in general and
administrative expenses as a percentage of net revenue.

Provision for Doubtful Accounts.Management determines the provision for
doubtful accounts as a function of payor mix, billing practices and other
factors. Renal Care Group reserves for doubtful accounts in the period when the
revenue is recognized based on managements estimate of the net collectibility
of the accounts receivable. Management estimates the net collectibility of
accounts receivable based upon a variety of factors. These factors include, but
are not limited to, analyzing revenues generated from payor sources, performing
subsequent collection testing and regularly reviewing detailed accounts
receivable agings. Management makes
adjustments to the allowance for doubtful accounts as necessary based on the
results of managements reviews of the net collectibility

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of accounts
receivable. The provision for doubtful accounts increased from $5.5 million for
the three months ended March 31, 2002 to $6.4 million for the three months
ended March 31, 2003, an increase of $928,000, or 16.9%. The provision for
doubtful accounts as a percentage of net revenue decreased slightly from 2.7%
in 2002 to 2.6% in 2003.

Depreciation and Amortization.Depreciation and amortization increased
from $9.4 million for the three months ended March 31, 2002 to $10.3 million
for the three months ended March 31, 2003, an increase of 10.0%. This increase
was due to openings of new dialysis facilities, normal replacement costs of
dialysis facilities and equipment, purchases of information systems and the
amortization of separately identifiable intangible assets associated with
acquisitions. Depreciation and amortization as a percentage of net revenue
decreased slightly from 4.5% in 2002 to 4.3% in 2003.

Income from Operations.Income from operations increased from $39.6
million for the three months ended March 31, 2002 to $41.7 million for the
three months ended March 31, 2003, an increase of 5.3%. Income from operations
as a percentage of net revenue decreased from 19.1% in the 2002 period to 17.2%
in the 2003 period principally as a result of the adoption of the retirement
package for the former Chairman, Chief Executive Officer and President, which
was partially offset by operational improvements described above.

Interest Expense, Net.Interest expense increased from $173,000 for the
three months ended March 31, 2002 to $285,000 for the three months ended March
31, 2003. This increase was due to higher average borrowings outstanding
during the quarter.

Minority Interest.Minority interest represents the proportionate equity
interest of other partners in the Companys consolidated entities that are not
wholly-owned, the financial results of which entities are included in the
Companys consolidated results. Minority interest as a percentage of net
revenue increased from 2.3% in 2002 to 2.6% in 2003. This increase was the
result of continued financial improvements of Renal Care Groups larger joint
ventures, primarily those in Ohio, Oregon and Washington, as well as an
increase in the number of facilities operated as joint ventures.

Provision for Income Taxes. Income tax expense increased from $13.2
million for the three months ended March 31, 2002 to $13.3 million for the
three months ended March 31, 2003, an increase of $139,000 or 1.1%. The
increase is a result of the increase in pre-tax earnings described above. The
Companys effective tax rate of the Company remained consistent at 38.0% in the
2002 and 2003 periods.

Net Income. Net income increased from $21.5 million for the three months
ended March 31, 2002 to $21.8 million for the three months ended March 31,
2003, an increase of $259,000 or 1.2%. The increase is a result of the items
discussed above.

Liquidity and Capital Resources

Renal Care Group requires capital primarily to acquire and develop
dialysis centers, to purchase property and equipment for existing centers, to
repurchase shares of its common stock and to finance working capital needs. At
March 31, 2003, the Companys working capital was $114.8 million, cash and cash
equivalents were $44.1 million, and the Companys current ratio was
approximately 1.9 to 1.

Net cash provided by operating activities was $32.2 million for the three
months ended March 31, 2003. Cash provided by operating activities consists of
net income before depreciation and amortization expense, adjusted for changes
in components of working capital, primarily accounts receivable, offset by
distributions to our minority interest partners of $9.6 million. Net cash used
in investing activities was $17.7 million for the three months ended

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March 31, 2003. Cash used in investing activities consisted primarily of $17.9
million of purchases of property and equipment. Net cash used in financing
activities was $8.8 million for the three months ended March 31, 2003. Cash
used in financing activities primarily reflects net payments of debt of $7.4
million and repurchases of Renal Care Group common stock of $4.4 million both
of which were offset by $3.0 million in net proceeds from the issuance of
common stock as options were exercised and from shares purchased under the
Companys employee stock purchase plan.

In July 2002, Renal Care Group entered into two credit agreements with a
group of banks totaling $150.0 million consisting of a $100.0 million Second
Amended and Restated Loan Agreement (the Multi-Year Facility) and a $50.0
million Loan Agreement (the 364-day Facility). The Multi-Year Facility has a
final maturity of July 1, 2005 and the 364-day Facility has a final maturity of
June 30, 2003. The Multi-Year Facility replaced the Companys First Amended
and Restated Loan Agreement. Borrowings under the credit agreements may be
used for acquisitions, capital expenditures, working capital and general
corporate purposes. No more than $25.0 million of either credit agreement may
be used for any single acquisition without the consent of the lenders. These
variable rate debt instruments carry a degree of interest rate risk.
Specifically, variable rate debt may result in higher costs to the Company if
interest rates rise.

Each of Renal Care Groups wholly-owned subsidiaries has guaranteed all of
Renal Care Groups obligations under the loan agreements. Further, Renal Care
Groups obligations under the loan agreements, and the obligations of each of
its subsidiaries under its guaranty, are secured by a pledge of the equity
interests held by Renal Care Group in each of the subsidiaries. Financial
covenants are customary based on the amount and duration of these commitments.

A significant component of Renal Care Groups growth strategy is the
acquisition and development of dialysis facilities. There can be no assurance
that Renal Care Group will be able to identify suitable acquisition candidates
or to close acquisition transactions with them on acceptable terms. Management
believes that existing cash and funds from operations, together with funds
available under existing credit facilities, will be sufficient to meet Renal
Care Groups acquisition, expansion, capital expenditure and working capital
needs for the foreseeable future. However, in order to finance certain large
strategic acquisition opportunities, Renal Care Group may need to incur
additional short and long-term bank indebtedness or to issue equity or debt
securities. The availability and terms of any future financing will depend on
market and other conditions. There can be no assurance that any additional
financing, if required, will be available on terms acceptable to Renal Care
Group.

Capital expenditures of between $65.0 million and $75.0 million, primarily
for equipment replacement, expansion of existing dialysis facilities and
construction of de novo facilities are planned in 2003. The Company has made
capital expenditures of $17.9 million through March 31, 2003. The Company
expects that remaining capital expenditures in 2003 will be funded with cash
provided by operating activities and the Companys existing credit facilities.
Management believes that capital resources available to Renal Care Group will
be sufficient to meet the needs of its business, both on a short- and long-term
basis.

Management, from time to time, determines the appropriateness of
repurchasing Renal Care Group common stock in accordance with a repurchase plan
initially authorized by the Board of Directors in October 2000. In November
2002, the Company announced that its Board of Directors had approved an
increase in the repurchase plan to allow the purchase of up to a total of
$200.0 million in Company stock. In the first quarter of 2003, the Company
repurchased 152,000 shares of common stock for $4.4 million. As of March 31,
2003, the Company had repurchased 3.1 million shares under the plan for a total
of $98.3 million.

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Critical Accounting Policies

The Securities and Exchange Commission issued a financial reporting
release, FR-60, Cautionary Advice Regarding Disclosure About Critical
Accounting Policies. In accordance with that release, management has
identified accounting policies that it considers critical to the business of
Renal Care Group. Those policies include net revenue and contractual
provisions, provision for doubtful accounts, self-insurance accruals, and
impairment of long-lived assets and long-lived assets to be disposed of. These
policies were identified as critical based on their importance to the
consolidated financial statements as well as on the degrees of subjectivity and
complexity involved in these policies. There have been no changes in Renal Care
Groups critical accounting policies or in the application of those policies
from those described in the annual report on Form 10-K as filed with the SEC on
March 18, 2003.

RISK FACTORS

You should carefully consider the risks described below before investing
in Renal Care Group. The risks and uncertainties described beloware notthe
only ones facing Renal Care Group. Other risks and uncertainties that we have
not predicted or assessed may also adversely affect us.

If any of the following risks occurs, our earnings, financial condition or
business could be materially harmed, and the trading price of our common stock
could decline, resulting in the loss of all or part of your investment.

If Congress or CMS Changes the Medicare or Medicaid Programs for Dialysis, Then
Our Revenue and Earnings Could Decrease

If the government changes the Medicare, Medicaid or similar government
programs or the rates those programs pay for our services, then our revenue and
earnings may decline. We estimate that approximately 49% of our net revenue
for 2001, 50% of our net revenue for 2002 and 49% of our net revenue for the
three months ended March 31, 2003 consisted of reimbursements from Medicare,
including the administration of EPO to treat anemia. We also estimate that
approximately 6% of our net revenue for 2001, 7% of our net revenue for 2002
and 7% of our net revenue for the three months ended March 31, 2003 consisted
of reimbursements from Medicaid or comparable state programs. Any of the
following actions in connection with government programs could cause our
revenue and earnings to decline:



| |  |  | a reduction of the amount paid to us under government
programs;                                                                                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | an increase in the costs associated with performing our
services that are subject to inflation, such as labor and
supply costs, without a corresponding increase in reimbursement
rates;
|
| |  |  | the inclusion of some or all ancillary services, for
which we are now reimbursed separately, in the flat composite
rate for a dialysis treatment; or                                    
|
| |  |  | changes in laws, or the interpretations of laws, which
could cause us to modify our operations.                                                                                         

Specifically, Congress and CMS have proposed reviewing and potentially
recalculating the average wholesale prices of some drugs, including some of the
drugs that we bill for outside of the flat composite rate. CMS has indicated
that it believes the average wholesale prices on which it currently bases
reimbursement are too high
and that Medicare reimbursement for these drugs is, therefore, too high.
Because we are unable to

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predict accurately whether reimbursement will be
changed and, if so, by how much, we are unable to quantify what the net effect
of changes in reimbursement for these drugs would have on our revenue and
earnings.

If States Lower Medicaid Reimbursement, Then We Would be Less Profitable

The Medicaid programs in some of the states in which we operate reimburse
us at rates higher than those paid by Medicare. Some of these programs, like
Washingtons, have approved reductions in reimbursement. Other programs, like
Wisconsins, have proposed reductions or have announced that they are
considering reductions. In addition, a number of the states where we operate
are experiencing budget shortfalls, and some of these states may consider
reducing Medicaid reimbursement or changing their Medicaid programs to cut
costs. If all of the states in which we operate that have Medicaid rates that
are higher than Medicare rates were to reduce their rates for all of our
services to Medicare rates and if we are unable to mitigate any of the effect
of those reductions, then our earnings per share could be adversely affected by
between $0.10 and $0.15 per share. We are unable to predict whether and, if
so, when any reductions in Medicaid reimbursement might occur and what their
precise effect will be.

If Reimbursement for EPO Decreases,
Then We Could be Less Profitable

If government or private payors decrease reimbursement rates for EPO, for
which we are currently reimbursed separately outside of the flat composite
rate, then our revenue and earnings will decline. EPO is a bio-engineered
hormone that is used to treat anemia. Revenues from the administration of EPO
were approximately 25% of our net revenue for 2001, 23% of our net revenue for
2002, and 24% of our net revenue for the three months ended March 31, 2003.
Most of our payments for EPO come from government programs. For the three
months ended March 31, 2003, Medicare and Medicaid reimbursement represented
approximately 56% of the total revenue we derived from EPO. A reduction in the
reimbursement rate for EPO could materially and adversely affect our revenue
and earnings.

If Amgen Raises the Price for EPO or if EPO Becomes in Short Supply, Then We
Could be Less Profitable

EPO is produced by a single manufacturer, Amgen Inc., and there are no
substitute products currently marketed to dialysis providers in the United
States. In April 2002, Amgen announced a 3.9% increase in the price of EPO.
This price increase did not affect our earnings in 2002 because our contract
with Amgen had pricing protection through 2002, but has adversely affected our
earnings in the first quarter of 2003 and will continue to adversely affect us
throughout 2003. If Amgen imposes additional EPO price increases or if Amgen
or other factors interrupt the supply of EPO, then our revenue and earnings
will decline.

If Amgen Markets Aranesp for ESRD
Patients, Then We Could be Less Profitable

Amgen has developed and obtained FDA approval for a new drug to treat
anemia marketed as Aranesp® (darbepoetin alfa). Aranesp® is a longer acting
form of bio-engineered protein that, like EPO, can be used to treat anemia.
EPO is usually administered in conjunction with each dialysis treatment.
Aranesp® can remain effective for between two and three weeks. If Amgen markets
Aranesp® for the treatment of dialysis patients, then our earnings could be
materially and adversely affected by either of the following factors:



| |  |  | Our margins realized from the administration of Aranesp® could be
lower than the margins realized on the administration of EPO; or                        
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Physicians could decide to administer Aranesp® in their offices, and
we would not recognize revenue or profit from the administration of EPO
or Aranesp® .

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If Payments by Private Insurers, Hospitals or Managed Care Organizations
Decrease, Then Our Revenue and Earnings Could Decrease

If private insurers, managed care organizations or hospitals reduce their
rates or if we experience a significant shift in our revenue mix toward
additional Medicare or Medicaid reimbursement, then our revenue and earnings
will decline. We estimate that approximately 45% of our net revenue for 2001,
43% of our net revenue for 2002 and 44% of our net revenue for the three months
ended March 31, 2003 were derived from sources other than Medicare and
Medicaid. In general, payments we receive from private insurers and hospitals
for our services are at rates significantly higher than the Medicare or
Medicaid rates. Payments we receive from managed care organizations are also at
rates higher than Medicare and Medicaid rates but lower than those paid by
private insurers. In addition, we have been able to implement annual price
increases for these private payors that we have not been able to implement for
federal programs. Management believes that health insurance pricing is
cyclical and that we may be at or near the top of the cycle so that our ability
to raise rates to private insurers and managed care companies could be more
limited in the future than we have experienced recently. As a result, any of
the following events could have a material adverse effect on our revenue and
earnings:



| |  |  | any number of economic or demographic factors could cause
private insurers, hospitals or managed care companies to reduce
the rates they pay us or to refuse to pay price increases or
work to reduce the rate of our price increases;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a portion of our business that is currently reimbursed by
private insurers or hospitals may become reimbursed by managed
care organizations, which generally have lower rates for our
services; or                                    
|
| |  |  | the scope of coverage by Medicare or Medicaid under the
flat composite rate could expand and, as a result, reduce the
extent of our services being reimbursed at the higher
private-insurance rates.                                  

If Local Physicians Stop Sending Patients to Our Centers or Were Prohibited
From Doing so for Regulatory Reasons, Then Our Revenue and Earnings Would
Decline

Our dialysis centers depend on local nephrologists sending patients to the
centers. Typically, one or a few physicians patients make up all or a
significant portion of the patient base at each of our dialysis centers, and
the loss of the patient base of one or more of these physicians could have a
material adverse effect on the operations of that center. The loss of the
patient base of a significant number of local physicians could cause our
revenue and earnings to decline. In many instances, the primary referral
sources for our centers are physicians who also serve as medical directors of
our centers and may be shareholders. If the medical director relationship or
stock ownership were found to violate applicable federal or state law,
including fraud and abuse laws and laws prohibiting self-referrals, then the
physicians acting as medical directors or owning our stock could be forced to
stop referring patients to our centers. Further, we may not be able to renew
or renegotiate our medical director agreements successfully, which could result
in a loss of patients since dialysis patients are typically treated at a center
where their physician or a member of his or her practice group serves as
medical director. We believe that our future success will depend in part on
our ability to attract and retain qualified physicians to serve as medical
directors of our dialysis centers.

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If Our Business Is Alleged or Found To Violate Heath Care or Other Applicable
Laws, Our Revenue and Earnings Could Decrease

We are subject to extensive federal, state and local regulation. The laws
that apply to our operations include, but are not limited to, the following:



| |  |  | fraud and abuse prohibitions under state and federal health care laws;                                                                                                                                                                 
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | prohibitions and limitations on patient referrals;                                                                                                                                                                                     
|
| |  |  | billing and reimbursement rules, including false claims
prohibitions under health care reimbursement laws;                                                                                                                             
|
| |  |  | rules regarding the collection, use, storage and
disclosure of patient health information, including the federal
Health Insurance Portability and Accountability Act of 1996,
referred to as HIPAA, and state law equivalents of HIPAA;
|
| |  |  | facility licensure;                                                                                                                                                                                                                    
|
| |  |  | health and safety requirements;                                                                                                                                                                                                        
|
| |  |  | environmental compliance; and                                                                                                                                                                                                          
|
| |  |  | medical and toxic waste disposal.                                                                                                                                                                                                      

Much of the regulation of our business, particularly in the areas of fraud
and abuse and patient referral, is complex and open to differing
interpretations. Due to the broad application of the statutory provisions and
the absence in many instances of regulations or court decisions addressing the
specific arrangements by which we conduct our business, including our
arrangements with medical directors, physician stockholders and physician joint
venture partners, governmental agencies could challenge some of our practices
under these laws.

New regulations governing electronic transactions and the collection, use,
storage, and disclosure of health information impose significant administrative
and financial obligations on our business. If, after the required compliance
date, we are found to have violated these regulations, we could be subject to:



| |  |  | criminal or civil penalties, including significant fines;                                       
| | - |  | ------------------------------------------------------------------------------------------------
|
| |  |  | claims by people who believe their health information has been improperly used or disclosed; and
|
| |  |  | administrative penalties by payors.                                                             

Government investigations of health care providers, including dialysis
providers, have continued to increase. We have been the subject of
investigations in the past, and the government may investigate our business in
the future. One of our competitors, DaVita, Inc., has announced that it is the
subject of an investigation by the U.S. Attorney for the Eastern District of
Pennsylvania, and another competitor, Gambro Healthcare, Inc., has announced
that it is the subject of an investigation by the U.S. Attorneys Office in St.
Louis, Missouri. If any of our operations are found to violate applicable
laws, we may be subject to severe sanctions, or we could be required to alter
or discontinue the challenged conduct or both. If we are required to

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alter our
practices, we may not be able to do so successfully. If any of these events
occurs, our revenue and earnings could decline.

Changes In the Health Care Delivery, Financing or Reimbursement Systems Could
Adversely Affect Our Business

The health care industry in the United States may be entering a period of
change and uncertainty. Health care organizations, public or private, may
dramatically change the way they operate and pay for services. Our business is
designed to function within the current health care financing and reimbursement
system. During the past several years, the health care industry has been
subject to increasing levels of government regulation of, among other things,
reimbursement rates and relationships with referring physicians. In addition,
proposals to reform the health care system have been considered by Congress.
In light of the continued increases in the cost of health care and the current
economic weakness, there may be new proposals to change the health care system
and control costs. These proposals, if enacted, could further increase the
governments oversight role and involvement in health care, lower reimbursement
rates and otherwise change the operating environment for health care companies.
We cannot predict the likelihood of those events or what impact they may have
on our business.

The Dialysis Business Is Highly Competitive. If We Do Not Compete Effectively
in Our Markets, Then We Could Lose Market Share and Our Rate of Growth Could
Slow

The dialysis industry is largely consolidated, and the consolidation trend
continues as large providers acquire smaller providers. There is a small
number of large dialysis companies that compete for the acquisition of
outpatient dialysis centers and the development of relationships with referring
physicians. Two of our major competitors are part of larger companies that
also manufacture dialysis equipment, which allows them to benefit from lower
equipment costs. Several of our competitors, including these equipment
manufacturers, are significantly larger than we are and have greater financial
resources and more established operations. We cannot assure you that we will
be able to compete effectively with any of our competitors.

If We Lose Any of Our Executive Officers, or Are Unable To Attract and Retain
Qualified Nurses and Medical Directors, Then Our Ability To Run Our Business
Could be Adversely Affected, and Our Revenue and Earnings Could Decline

We depend on the services of our executive officers William P. Johnston,
our Chairman, Gary A. Brukardt, our President and Chief Executive Officer,
Raymond Hakim, M.D., Ph.D. and R. Dirk Allison, each an Executive Vice
President and Douglas B. Chappell, our General Counsel. Mr.
Brukardt and Dr. Hakim have each been with Renal Care Group since its formation. The
services of our executive officers would be difficult to replace. We recently
selected Mr. Johnston as our Chairman and Mr. Brukardt as our President and
Chief Executive Officer, and we cannot predict what impact the loss of Mr.
Brooks, our previous Chairman, President and Chief Executive Officer and the
appointment of Mr. Johnston and Mr. Brukardt in these positions will have on
Renal Care Group.

If We are Unable to Make Acquisitions in the Future, Then Our Rate of Growth
Will Slow

Much of our historical growth has come from acquisitions. Although we
intend to continue to pursue growth through the acquisition of dialysis
centers, we may be unable to identify and complete suitable acquisitions at
prices we are willing to pay, or we may be unable to obtain the necessary
financing. Further, due to the increased size of our Company since its
formation, the amount that acquired businesses contribute to our revenue and
profits will continue to be smaller on a percentage basis. Also, as a result
of consolidation in the dialysis industry, the four

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largest providers of
outpatient dialysis services own approximately 65% of the outpatient dialysis
facilities in the United States. We compete with these other companies to
identify and complete suitable acquisitions. We expect this competition to
intensify in light of the smaller pool of available acquisition candidates and
other market forces. As a result, we believe it will be more difficult for us
to acquire suitable companies on
favorable terms. Further, the businesses we acquire may not perform well
enough to justify our investment. If we are unable to make additional
acquisitions on suitable terms, then we may not meet our growth expectations.

If We Complete Future Acquisitions, We May Dilute Existing Stockholders by
Issuing More of Our Common Stock or We May Incur Expenses Related to Debt and
Goodwill, Which Could Reduce Our Earnings

We may issue equity securities in future acquisitions that could be
dilutive to our shareholders. We also may incur additional debt in future
acquisitions. Interest expense on debt incurred to fund our acquisitions may
significantly reduce our profitability. While goodwill and other intangible
assets with indefinite lives are not amortized to expense under generally
accepted accounting principles, we are required to review all of these assets
at regular intervals for impairment and to charge an appropriate amount to
expense when impairment is identified. If impairment is identified and we are
required to write off a significant portion of our intangible assets at one
time, then there could be a material adverse impact on our stock price.

If We Fail to Integrate Acquired
Companies, Then We Will be Less Profitable

We have grown significantly by acquisitions of other dialysis providers
since our formation. We intend to pursue acquisitions of more dialysis
businesses in the future. We are unable to predict the number and size of any
future acquisitions. We face significant challenges in integrating an acquired
companys management and other personnel, clinical operations, and financial
and operating systems with ours, often without the benefit of continued
services from key personnel of the acquired company. We face these challenges
particularly in larger acquisitions. We may be unable to integrate the
businesses we acquire successfully or to achieve anticipated benefits from an
acquisition in a timely manner, which could lead to substantial costs and
delays or other operational, technical or financial problems, including
diverting managements attention from our existing business. Any of these
results could damage our profitability and our prospects for future growth.

If Acquired Businesses Have Unknown
Liabilities, Then We Could be Exposed to
Liabilities That Could Harm Our Business and Profitability

Businesses we acquire may have unknown or contingent liabilities,
including liabilities for failure to comply with health care laws. Although we
generally attempt to identify practices that may give rise to unknown or
contingent liabilities and conform them to our standards after the acquisition,
private plaintiffs or governmental agencies may still assert claims. Even
though we generally seek to obtain indemnification from the sellers of
businesses we buy, unknown and contingent liabilities may not be covered by
indemnification or may exceed contractual limits or the financial capacity of
the indemnifying party.

If Our Costs of Insurance and Claims Increase, Then Our Earnings Could Decrease

Renal Care Group currently maintains programs of general and professional
liability insurance and directors and officers insurance with significant
deductible or self-insured retention amounts on each claim. In addition, we
generally self-insure our employee health plan and workers compensation
program, while maintaining excess insurance for some very large claims. We
have accepted higher deductibles and self-insurance exposure in each of the
last several years to offset part of the increases in premiums for the
programs. These deductibles and premiums increased substantially in 2002 and
2003. Our earnings could be materially and adversely affected by any of the
following:

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| |  |  | further increases in premiums, deductible and self-insurance
retentions;                                                   
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | increases in the number of liability claims against us or the cost of
settling or trying cases related to those claims; and
|
| |  |  | an inability to obtain one or more types of insurance on acceptable
terms.                                                 

If Our Board of Directors Does Not Approve an Acquisition or Change in Control
of Renal Care Group, Then Our Shareholders May Not Realize the Full Value of
Their Stock

Our certificate of incorporation and bylaws contain a number of provisions
that may delay, deter or inhibit a future acquisition or change in control of
Renal Care Group that is not first approved by our board of directors. This
could occur even if our shareholders receive an attractive offer for their
shares or if a substantial number or even a majority of our shareholders
believe the takeover is in their best interest. These provisions are intended
to encourage any person interested in acquiring Renal Care Group to negotiate
with and obtain approval from our board of directors before pursuing a
transaction. Provisions that could delay, deter or inhibit a future
acquisition or change in control of Renal Care Group include the following:



| |  |  | a staggered board of directors that would require two annual
meetings to replace a majority of the board of directors;                                                                                         
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | restrictions on calling special meetings at which an
acquisition or change in control might be brought to a vote of the
shareholders;                                                                          
|
| |  |  | blank check preferred stock that may be issued by our board of
directors without shareholder approval and that may be
substantially dilutive or contain preferences or rights
objectionable to an acquiror; and
|
| |  |  | a poison pill that would substantially dilute the interest
sought by an acquiror.                                                                                                                              

These provisions could also discourage bids for our common stock at a
premium and cause the market price of our common stock to decline.

Our Stock Price Is Volatile and as a Result, the Value of Your Investment May
Go Down for Reasons Unrelated To the Performance of Our Business

Our common stock is traded on the New York Stock Exchange. The market
price of our common stock has been volatile, ranging from a low closing price
of $28.05 per share to a high closing price of $31.60 per share during the
three months ended March 31, 2003. The market price for our common stock could
fluctuate substantially based on a variety of factors, including the following:



| |  |  | future announcements concerning us, our competitors or the health care market;
| | - |  | ------------------------------------------------------------------------------
|
| |  |  | the threat of litigation or government investigation;                         
|
| |  |  | changes in government regulations; and                                        
|
| |  |  | changes in earnings estimates by analysts.                                    

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Furthermore, stock prices for many companies fluctuate widely for reasons
that may be unrelated to their operating results. These fluctuations, coupled
with changes in demand or reimbursement levels for our services and general
economic, political and market conditions, could cause the market price of our
common stock to decline.

Forward Looking Statements

Some of the information in this quarterly report on Form 10-Q represents
forward-looking statements that involve substantial risks and uncertainties.
You can identify these statements by forward-looking words such as may,
will, expect, anticipate, believe, intend, estimate and continue
or similar words. You should read statements that contain these words carefully
for the following reasons:



| |  |  | the statements discuss our future expectations;                                             
| | - |  | --------------------------------------------------------------------------------------------
|
| |  |  | the statements contain projections of our future earnings or of our financial condition; and
|
| |  |  | the statements state other forward-looking information.                                   

We believe it is important to communicate our expectations to our
investors. There may, however, be events in the future that we are not
accurately able to predict or over which we have no control. The risk factors
listed above, as well as any cautionary language in or incorporated by
reference into this quarterly report on Form 10-Q, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. The SEC
allows us to incorporate by reference the information we file with them,
which means we can disclose important information to you by referring you to
those documents. Before you invest in our common stock, you should be aware
that the occurrence of any of the events described in the above risk factors,
elsewhere in or incorporated by reference into this quarterly report on Form
10-Q and other events that we have not predicted or assessed could have a
material adverse effect on our earnings, financial condition and business. If
the events described above or other unpredicted events occur, then the trading
price of our common stock could decline and you may lose all or part of your
investment.




ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The chief executive officer and chief financial officer of the Company
have evaluated Renal Care Groups disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934, as amended), within 90 days prior to the filing of this quarterly report
and concluded, as of the date of that evaluation, that Renal Care Group
maintains disclosure controls and procedures that provide reasonable assurance
that information required to be disclosed in Renal Care Groups reports under
the Exchange Act is recorded, processed, summarized and reported within the
periods specified in the SECs rules and forms.

Changes in Internal Controls

There have been no significant changes in the Companys internal controls
or other factors that could significantly affect these controls subsequent to
the date last evaluated.

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PART II  OTHER INFORMATION




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

|    |  |                                  |  |                                                                                        
|--- |  | -------------------------------- |  | ---------------------------------------------------------------------------------------
|(a) |  | Exhibits:                        |  |                                                                                        
|    |  |                                  |  |                                                                                        
|    |  | 10.37.2                          |  | Amended and Restated Renal Care Group, Inc. 1999 Long-Term
Incentive Plan              
|    |  | 10.67                            |  | Renal Care Group, Inc. Supplemental Benefit Plan                                       
|    |  | 10.68                            |  | Plan Agreement dated February 25, 2003 between
Renal Care Group, Inc. and Sam A. Brooks
|    |  | 10.69                            |  | Form of Indemnity Agreement between the Company
and directors and certain officers     
|    |  | 99.1                             |  | Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                
|    |  |                                  |  |                                                                                        
|(b) |  | Reports on Form 8-K              |  |                                                                                        
|    |  |                                  |  |                                                                                        
|    |  | Form 8-K filed January 16, 2003  |  |                                                                                        
|    |  | Form 8-K filed January 31, 2003  |  |                                                                                        
|    |  | Form 8-K filed February 27, 2003 |  |                                                                                        
|    |  | Form 8-K filed March 24, 2003    |  |                                                                                        

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|             |  |                                      |  |                                                                                                                                                       
|------------ |  | ------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|             |  | RENAL CARE GROUP, INC.  (Registrant)
|            
|May 15, 2003 |  | BY:                                  |  | /s/ R. Dirk AllisonR. Dirk Allison
Executive Vice President,
Chief Financial Officer, and Principal
Financial Officer and Principal
Accounting Officer

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CERTIFICATION

I, Gary Brukardt, President and Chief Executive Officer of Renal Care
Group, Inc., certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Renal
Care Group, Inc. (the registrant);                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:                                                                                                     



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
|
| | (b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | (c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent function):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
|
| | (b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        

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|6. |  | The registrants other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |                                                                     
|------------------ |  | --------------------------------------------------------------------
|Date: May 15, 2003 |  | /s/ Gary BrukardtGary Brukardt
President and Chief Executive Officer

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CERTIFICATION

I, R. Dirk Allison, Executive Vice President and Chief Financial Officer of
Renal Care Group, Inc., certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Renal
Care Group, Inc. (the registrant);                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:                                                                                                     



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
|
| | (b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | (c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent function):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
|
| | (b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        

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|6. |  | The registrants other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |                                                                                        
|------------------ |  | ---------------------------------------------------------------------------------------
|Date: May 15, 2003 |  | /s/ R. Dirk AllisonR. Dirk Allison
Executive Vice President and
Chief Financial Officer

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RENAL CARE GROUP, INC.

EXHIBIT INDEX

|                       |  |                                                                                        
|---------------------- |  | ---------------------------------------------------------------------------------------
|Number and             |  |                                                                                        
|Description of Exhibit |  |                                                                                        
|                       |  |                                                                                        
|10.37.2                |  | Amended and Restated Renal Care Group, Inc. 1999 Long-Term Incentive Plan              
|10.67                  |  | Renal Care Group, Inc. Supplemental Benefit Plan                                       
|10.68                  |  | Plan Agreement dated February 25, 2003 between Renal Care Group, Inc. and Sam A. Brooks
|10.69                  |  | Form of Indemnity Agreement between the Company and directors and certain officers     
|99.1                   |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                

25