DaVita (DVA) 8-K DAVITA INC. REPORTS 4th QUARTER AND YEAR ENDED 2004 RESULTS

Exhibit 99.1

Contact:	LeAnne Zumwalt
	Investor Relations
	DaVita Inc.
	310 536-2420

DAVITA INC. REPORTS 4th QUARTER AND YEAR ENDED 2004 RESULTS

El Segundo, California, February 8, 2005 – DaVita Inc. (NYSE: DVA), today announced results for the quarter and year ended December 31, 2004. Net income for the three months ended December 31, 2004, was $56.6 million and $0.56 per share. Net income for the year ended December 31, 2004, was $217.2 million, and $2.11 per share, excluding after-tax Medicare lab recoveries of $5.1 million.

Net income for the year ended December 31, 2004 including the lab recoveries (GAAP basis), was $222.3 million and $2.16 per share.

Financial and operating highlights include:

• Cash Flow: Cash flow for the 12 months ended December 31, 2004, was our strongest ever with operating cash flow and free cash flow of $361 million and $314 million, excluding the tax benefit from stock option exercises and the after-tax benefit of prior years’ Medicare lab recoveries. Including those items, 12-month operating cash flow was $420 million.

• Operating Income: Operating income for the three months was $105.2 million. Operating income for the year ended December 31, 2004 was $401.8 million, excluding Medicare lab recoveries of $8.3 million for prior years’ services.

• Volume: Total treatments for the fourth quarter were 1,895,952 or 23,999 treatments per day, an increase of 14.5% per day compared to the fourth quarter of last year. Total treatments for 2004 were 7,062,424 or 22,528 treatments per day, representing an increase of 10.6% per day as compared to 2003. Non-acquired treatment growth was 6.0% and 5.0% for the fourth quarter and full year 2004, respectively.

• Effective Tax Rate: The final effective annual income tax rate for 2004 was 38.6%. The fourth quarter benefited from a year-to-date reduction in the annualized effective tax rate that added $0.01 to fourth quarter earnings per share. At this time, the effective tax rate for 2005 is projected to be at a comparable level.

• Center Activity: As of December 31, 2004, we operated or provided administrative services at 658 outpatient centers serving approximately 54,000 patients. During the fourth quarter we acquired 6 centers, opened 19 de novo centers and provided administrative services to 2 additional centers. We also closed 4 centers and terminated one administrative services agreement.

Outlook

Our previous 2005 operating income guidance was for operating income to improve from 0 to 6% over the 2004 operating income performance. Our new 2005 operating income guidance is for operating income to be up 2 to 6% over 2004, exclusive of the effects of the proposed Gambro Healthcare acquisition and related debt financing, as well as the anticipated expensing of stock options in accordance with FASB No. 123R. In connection with the Gambro acquisition the Company will be assessing financing alternatives, which could include closing some or all of the financing in advance of the closing of the acquisition. At this time, we expect the Gambro acquisition together with related debt financing to be dilutive to EPS in the first year, neutral in the second year and accretive thereafter.

DaVita will be holding a conference call to discuss its fourth quarter and year ended results for 2004 on February 9, 2005, at 12:00 PM Eastern Time. The dial in number is 800-399-4406. A replay of the conference call will be available on DaVita’s official web page,www.davita.com, for the following 30 days.

This release contains forward–looking statements. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, acquisitions and the risk factors set forth in the Company’s SEC filings, including its Form 10-Q for the quarter ended September 30, 2004. The forward-looking statements should be considered in light of these risks and uncertainties.

These risks and uncertainties include those relating to:

• the concentration of profits generated from PPO and private indemnity patients,

• possible reductions in private and government reimbursement rates,

• changes in pharmaceutical practice patterns or reimbursement policies,

• the Company’s ability to maintain contracts with physician medical directors,

• legal compliance risks, including our continued compliance with complex government regulations and the ongoing review by the U.S. Attorney’s Office for the Eastern District of Pennsylvania, and the HHS Office of the Inspector General and the recently announced subpoena from the U.S. Attorney’s Office for the Eastern District of New York, and

• the consummation of the Gambro acquisition, terms of the related financing, and subsequent integration of the business.

This Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars in thousands, except per share data)

	Three months ended December 31,				Years ended December 31,
	2004		2003		2004		2003
Net operating revenues	$	616,003	$	553,446	$	2,298,595	$	2,016,418
Operating expenses and charges:
Patient care costs		419,593		359,965		1,555,070		1,360,556
General and administrative		53,151		40,338		192,082		159,628
Depreciation and amortization		23,212		19,985		86,666		74,687
Provision for uncollectible accounts		10,996		9,469		40,960		35,700
Minority interests and equity income, net		3,880		2,499		13,694		7,312
Total operating expenses and charges		510,832		432,256		1,888,472		1,637,883
Operating income		105,171		121,190		410,123		378,535
Debt expense		15,777		11,766		52,412		66,828
Refinancing Charges				9,261				26,501
Other income		1,053		335		4,173		3,060
Income before income taxes		90,447		100,498		361,884		288,266
Income tax expense		33,845		37,700		139,630		112,475
Net income	$	56,602	$	62,798	$	222,254	$	175,791
Earnings per share:
Basic	$	0.58	$	0.65	$	2.25	$	1.86
Diluted	$	0.56	$	0.61	$	2.16	$	1.66
Weighted average shares for earnings per share:
Basic		97,984,401		96,380,778		98,726,674		94,345,618
Diluted		101,777,418		102,661,284		102,861,044		113,760,352

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DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

	Years ended December 31,
	2004			2003
Cash flows from operating activities:
Net income	$	222,254		$	175,791
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		86,666			74,687
Stock options, principally tax benefits		42,770			20,180
Deferred income taxes		29,115			20,914
Minority interests in income of consolidated subsidiaries		15,135			8,908
Distributions to minority interests		(10,461	)		(7,663	)
Equity investment income		(1,441	)		(1,596	)
Loss on divestitures		764			2,130
Non-cash debt expense		2,088			3,124
Refinancing charges					26,501
Changes in operating assets and liabilities, other than from acquisitions and divestitures:
Accounts receivable		(61,424	)		(41,369	)
Medicare lab recoveries		19,000			(19,000	)
Inventories		4,257			3,159
Other current assets		1,780			(13,297	)
Other long-term assets		3,345			4,692
Accounts payable		17,764			(6,875	)
Accrued compensation and benefits		32,899			5,821
Other current liabilities		42,784			9,958
Income taxes		(25,995	)		17,810
Other long-term liabilities		(1,355	)		9,773
Net cash provided by operating activities		419,945			293,648
Cash flows from investing activities:
Additions of property and equipment, net		(128,328	)		(100,272	)
Acquisitions and divestitures, net		(265,042	)		(97,370	)
Investments in and advances to affiliates, net		14,344			4,456
Intangible assets		(635	)		(790	)
Net cash used in investing activities		(379,661	)		(193,976	)
Cash flows from financing activities:
Borrowings		4,444,160			4,766,276
Payments on long-term debt		(4,236,861	)		(4,797,994	)
Debt redemption premium					(14,473	)
Deferred financing costs		(4,153	)		(4,193	)
Purchase of treasury stock		(96,540	)		(107,162	)
Stock option exercises		43,432			23,056
Net cash provided by (used in) financing activities		150,038			(134,490	)
Net increase (decrease) in cash and cash equivalents		190,322			(34,818	)
Cash and cash equivalents at beginning of period		61,657			96,475
Cash and cash equivalents at end of period	$	251,979		$	61,657

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DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except per share data)

	December 31,
	2004			2003
ASSETS
Cash and cash equivalents	$	251,979		$	61,657
Accounts receivable, less allowance of $58,166 and $52,554		462,095			387,933
Medicare lab recoveries					19,000
Inventories		31,843			32,853
Other current assets		44,210			43,875
Deferred income taxes		78,593			59,740
Total current assets		868,720			605,058
Property and equipment, net		412,064			342,447
Amortizable intangibles, net		60,719			49,971
Investments in third-party dialysis businesses		3,332			3,095
Other long-term assets		10,898			10,771
Goodwill		1,156,226			934,188
	$	2,511,959		$	1,945,530
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	96,231		$	71,868
Other liabilities		157,214			112,654
Accrued compensation and benefits		133,919			100,909
Current portion of long-term debt		53,364			50,557
Income taxes payable		1,007			26,832
Total current liabilities		441,735			362,820
Long-term debt		1,322,468			1,117,002
Other long-term liabilities		22,570			19,310
Deferred income taxes		148,859			106,240
Minority interests		53,193			33,287
Commitments and contingencies
Shareholders’ equity:
Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued)
Common stock ($0.001 par value, 195,000,000 shares authorized; 134,862,283 and 134,806,205 shares issued)		135			135
Additional paid-in capital		542,714			539,575
Retained earnings		611,287			389,083
Treasury stock, at cost (36,295,339 and 38,052,028 shares)		(632,732	)		(620,998	)
Accumulated comprehensive income valuations		1,730			(924	)
Total shareholders’ equity		523,134			306,871
	$	2,511,959		$	1,945,530

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DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

(dollars in millions, except for per share and per treatment data)

	Q4 2004			Q3 2004			YE 2004			YE 2003
Financial Results:
Net income excluding Medicare lab recoveries for prior years’ services and refinancing charges.	$	56.6		$	55.3		$	217.2		$	177.3
Basic EPS	$	.58		$	.56		$	2.20		$	1.88
EPS assuming dilution	$	.56	*	$	.54		$	2.11		$	1.67
Operating income, excluding Medicare lab recoveries	$	105.2		$	103.4		$	401.8		$	354.5
Operating income margin		17.1	%		17.6	%		17.5	%		17.8	%
Other comprehensive income
Unrealized gain (loss) on securities, net of tax (expense) benefit of $(1.3), $1.6, $(1.7) and $0.6	$	2.1		$	(2.5	)	$	2.7		$	(0.9	)
Business Metrics:
Volume
Treatments		1,895,952			1,804,534			7,062,424			6,373,894
Number of treatment days		79.0			79.0			313.5			312.9
Treatments per day		23,999			22,842			22,528			20,370
Per day year over year increase		14.5	%		11.0	%		10.6	%		6.7	%
Non-acquired growth		6.0	%		4.8	%		5.0	%		3.9	%
Revenue
Total operating revenue	$	616		$	596		$	2,299		$	2,016
Less Medicare lab recoveries for prior years’ services				$	8		$	8		$	24
Revenue excluding Medicare lab recoveries	$	616		$	587		$	2,290		$	1,992
Dialysis revenue per treatment	$	311.22		$	313.60		$	311.86		$	302.75
Per treatment change from previous quarter		(0.8	)%		0.7	%		—			—
Per treatment change from prior year		1.6	%		2.4	%		3.0	%		4.1	%
Expenses
A.     Patient care costs
Percent of revenue, excluding Medicare lab recoveries		68.1	%		67.6	%		67.9	%		68.3	%
Per treatment	$	221.31		$	219.95		$	220.19		$	213.46
Per treatment change from previous quarter		0.6	%		0.0	%		—			—
Per treatment change from previous year		2.4	%		2.7	%		3.2	%		5.3	%
B.     General & administrative expenses
Percent of revenue, excluding Medicare lab recoveries		8.6	%		8.6	%		8.4	%		8.0	%
Per treatment	$	28.03		$	28.04		$	27.20		$	25.04
Per treatment change from previous quarter		0.0	%		4.5	%		—			—
Per treatment change from previous year		15.8	%		14.1	%		8.6	%		(3.8	)%
C.     Bad debt expense as a percent of current-period revenue		1.8	%		1.8	%		1.8	%		1.8	%
D.     Consolidated effective tax rate		37.4	%		39.0	%		38.6	%		39.0	%

* Earnings per share benefited from a year-to-date reduction in the annualized tax rate that added $0.01 to the fourth quarter of 2004.

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DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

(dollars in millions, except for per share and per treatment data)

	Q4 2004			Q3 2004			YE 2004		YE 2003
Cash Flow
Operating cash flow, excluding Medicare lab recoveries	$	82.3		$	115.9		$	403.3	$	293.6
Operating cash flow, excluding Medicare lab recoveries and tax benefit from stock option exercises	$	70.0		$	110.4		$	360.5	$	273.5
Free cash flow, excluding Medicare lab recoveries	$	67.4		$	104.9		$	356.7	$	248.8
Free cash flow, excluding Medicare lab recoveries and tax benefit from stock option exercises	$	55.1		$	99.5		$	314.0	$	228.6
Capital expenditures:
Development	$	25.0		$	22.8		$	82.9	$	57.9
Routine maintenance/IT/other	$	14.9		$	11.0		$	46.6	$	44.9
Acquisition expenditures, net	$	19.8		$	213.5		$	265.0	$	97.4
Accounts Receivable
Net receivables	$	462		$	435
DSO		70			68
Debt/Capital Structure
Total debt	$	1,376		$	1,388
Net debt, net of cash balance	$	1,124		$	1,161
Leverage ratio – last quarter annualized (see Note 1)		2.1x			2.2x
Share repurchases (in millions)		.3			3.1			3.4		5.2
Average repurchase price	$	30.14		$	28.69		$	28.82	$	20.76
Clinical (quarterly averages)
Dialysis adequacy - % of patients with Kt/V > 1.2		94	%		94	%
Anemia measure - % of patients with HCT > 33		86	%		87	%

Note 1. Leverage ratio is defined as net debt (total debt net of cash) to operating income excluding Medicare lab recoveries, depreciation, amortization, and minority interests. The operating income reconciliation is provided below.

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DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

1. Net income excluding Medicare lab recoveries and refinancing charges:

	Q4 2004		Q3 2004			YE 2004			YE 2003
Net income	$	56,602	$	60,386		$	222,254		$	175,791
Less: Medicare lab recoveries for prior years’ services				(8,293	)		(8,293	)		(24,000	)
Add back: Refinancing charges										26,501
Related income tax expense				3,234			3,234			(981	)
	$	56,602	$	55,327		$	217,195		$	177,311

2. Operating income excluding Medicare lab recoveries, and excluding depreciation, amortization, and minority interests (used to calculate leverage ratio):

	Q4 2004		Q3 2004			YE 2004			YE 2003
Operating income	$	105,171	$	111,652		$	410,123		$	378,535
Less: Medicare lab recoveries for prior years’ services				(8,293	)		(8,293	)		(24,000	)
		105,171		103,359			401,830			354,535
Add back: Depreciation and amortization		23,212		22,257			86,666			74,687
Minority interests and equity income, net		3,880		3,593			13,694			7,312
	$	132,263	$	129,209		$	502,190		$	436,534

3. Operating cash flow, excluding Medicare lab recoveries related to prior years’ services, and tax benefit from stock option exercises:

	Q4 2004			Q3 2004			YE 2004			YE 2003
Cash provided by operating activities	$	87,341		$	115,852		$	419,945		$	293,648
Less: Medicare lab recoveries for prior years’ services		(8,293	)					(27,293	)
Related income tax expense		3,234						10,644
Operating cash flow, excluding Medicare lab recoveries	$	82,282		$	115,852		$	403,296		$	293,648
Less: Tax benefit from stock option exercises		(12,305	)		(5,417	)		(42,770	)		(20,180	)
	$	69,977		$	110,435		$	360,526		$	273,468

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DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

(dollars in thousands)

4. Free cash flow, excluding Medicare lab recoveries related to prior years’ services, and tax benefit from stock option exercises:

Free cash flow represents net cash provided by operating activities less non-development capital expenditures. We believe free cash flow is a useful adjunct to cash flow from operating activities and other measurements under generally accepted accounting principles in the United States since it is a meaningful measure of our ability to fund acquisition and development activities and meet our debt service requirements. Free cash flow is not a measure of financial performance under generally accepted accounting principles in the United States and should not be considered as an alternative to cash flows from operating, investing or financing activities, as an indicator of cash flows, or as a measure of liquidity.

	Q4 2004			Q3 2004			YE 2004			YE 2003
Cash provided by operating activities	$	87,341		$	115,852		$	419,945		$	293,648
Less: Expenditures for routine maintenance and information technology		(14,883	)		(10,956	)		(46,554	)		(44,898	)
Free cash flow	$	72,458		$	104,896		$	373,391		$	248,750
Medicare lab recoveries related to prior years’ services		(8,293	)					(27,293	)
Related income tax expense		3,234						10,644
Free cash flow, excluding Medicare lab recoveries	$	67,399		$	104,896		$	356,742		$	248,750
Less: Tax benefit from stock option exercises		(12,305	)		(5,417	)		(42,770	)		(20,180	)
	$	55,094		$	99,479		$	313,972		$	228,570

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