DaVita (DVA) 8-K DAVITA 4th QUARTER 2005 RESULTS

Exhibit 99.1

Contact:	LeAnne Zumwalt
	Investor Relations
	DaVita Inc.
	(650) 696-8910

DAVITA 4th QUARTER 2005 RESULTS

El Segundo, California, February 15, 2006 – DaVita Inc. (NYSE: DVA), today announced results for the quarter and year ended December 31, 2005. Income from continuing operations for the three months and year ended December 31, 2005, was $56.4 million and $207.4 million, or $0.54 and $1.99 per share, respectively.

On October 5, 2005, we completed our acquisition of Gambro Healthcare. The operating results of Gambro Healthcare are included in our operating results effective October 1, 2005. The operating results of the historical DaVita centers divested in connection with the acquisition are reflected as discontinued operations in our consolidated financial statements for all periods presented. Net income, including discontinued operations was $64.1 million and $228.6 million, or $0.61 and $2.20 per share, respectively.

Financial and operating highlights include:

• Cash Flow: Operating cash flow for the three months ended December 31, 2005 was $183 million and free cash flow was $152 million. For the year ended December 31, 2005 operating cash flow was $441 million and free cash flow was $378 million, excluding the tax benefit from stock option exercises and the after-tax benefit of Medicare lab recoveries related to prior years’ services. Including those items, the year ended operating cash flow was $486 million and free cash flow was $422 million.

• Operating Income: Operating income for the three months and year ended December 31, 2005, was $158.8 million and $465.4 million, respectively

• Volume: Total treatments for the fourth quarter were 3,498,231 or 44,281 treatments per day. The acquisition of Gambro Healthcare contributed 1,528,295 total treatments. Non-acquired treatment growth in the quarter was 2.8%, which was negatively impacted by the closure of 8 centers due to hurricane Katrina.

• Debt Expense: The increase in debt expense in the fourth quarter was due to the additional borrowings to fund the Gambro Healthcare acquisition, $2.8 million of non-cash deferred financing cost amortization and a $2.8 million interest payment to Gambro, Inc. as part of the purchase.

• Effective Tax Rate: The effective annual income tax rate for 2005 was 37.4%. We expect the annual effective tax rate for 2006 to be within a range of 39% - 40%.

• Center Activity: As of December 31, 2005, we operated or provided administrative services at 1,233 outpatient centers serving approximately 96,000 patients. During the fourth quarter, the

acquisition of Gambro Healthcare resulted in a net increase of 492 centers after divestitures, and we opened 13 new centers and acquired 12 independent centers. Additionally, we closed or indefinitely shut down 8 centers related to hurricane Katrina.

Outlook

We are revising our 2006 operating income guidance. Operating income is now projected to be in the $630-700 million range before the impact of FASB No. 123R related to stock option expensing. Our previous guidance was for operating income to be in the $600 – 670 million range. These projections and the underlying assumptions involve significant risks and uncertainties, including those described below and actual results may vary significantly from these current projections.

DaVita will be holding a conference call to discuss its fourth quarter and year end results for 2005 on February 15, 2006, 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, including statements related to our 2006 operating results. 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, 2005. 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 preferred provider organizations (PPO) and private indemnity patients,

• possible reductions in private and government payment rates,

• changes in pharmaceutical practice patterns, payment policies, or pharmaceutical pricing,

• our ability to maintain contracts with physician medical directors,

• legal compliance risks, including our continued compliance with complex government regulations and the ongoing review by the U.S. Attorney’s Office for the Eastern District of Pennsylvania and the OIG, the subpoena from the U.S. Attorney’s Office for the Eastern District of New York, the subpoena from the U.S. Attorney’s Office for the Eastern District of Missouri and Gambro Healthcare’s compliance with its corporate integrity agreement, and

• our ability to integrate the acquisition of Gambro Healthcare, including its billing and collection operations.

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

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

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars in thousands, except per share data)

	Three months ended December 31,						Years ended December 31,
	2005			2004			2005			2004
Net operating revenues	$	1,133,315		$	583,932		$	2,973,918		$	2,177,330
Operating expenses and charges:
Patient care costs		799,291			396,745			2,035,243			1,470,175
General and administrative		97,524			53,151			272,463			192,082
Depreciation and amortization		42,648			22,228			116,836			82,912
Provision for uncollectible accounts		29,165			10,421			61,916			38,786
Minority interests and equity income, net		5,905			3,297			22,089			12,249
Total operating expenses and charges		974,533			485,842			2,508,547			1,796,204
Operating income		158,782			98,090			465,371			381,126
Debt expense		(72,886	)		(15,777	)		(139,586	)		(52,411	)
Swap valuation gain		5						4,548
Refinancing charges		(1,298	)					(8,170	)
Other income, net		3,193			1,040			8,934			4,125
Income from continuing operations before income taxes		87,796			83,353			331,097			332,840
Income tax expense		31,385			31,086			123,675			128,332
Income from continuing operations		56,411			52,267			207,422			204,508
Discontinued operations
(Loss) income from operations of discontinued operations, net of tax		(326	)		4,335			13,157			17,746
Gain on disposal of discontinued operations, net of tax		8,064						8,064
Net income	$	64,149		$	56,602		$	228,643		$	222,254
Earnings per share:
Basic earnings per share from continuing operations	$	0.55		$	0.53		$	2.06		$	2.07
Basic earnings per share	$	0.63		$	0.58		$	2.27		$	2.25
Diluted earnings per share from continuing operations	$	0.54		$	0.51		$	1.99		$	1.99
Diluted earnings per share	$	0.61		$	0.56		$	2.20		$	2.16
Weighted average shares for earnings per share:
Basic		101,838,000			97,984,000			100,762,000			98,727,000
Diluted		104,888,000			101,777,000			104,068,000			102,861,000

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DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

	Years ended December 31,
	2005			2004
Cash flows from operating activities:
Net income	$	228,643		$	222,254
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		119,719			86,666
Stock options, principally tax benefits		41,837			42,770
Deferred income taxes		(63,357	)		29,115
Minority interests in income of consolidated subsidiaries		24,714			15,135
Distributions to minority interests		(16,246	)		(10,461	)
Equity investment income		(1,406	)		(1,441	)
Loss on other divestitures		921			764
Gain on discontinued operations		(16,777	)
Non-cash debt expense		5,157			2,088
Refinancing charges		8,170
Swap valuation gains		(4,548	)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable and other receivables		(62,021	)		(59,263	)
Medicare lab recoveries					19,000
Inventories		11,980			4,257
Other current assets		1,893			(381	)
Other long term assets		(2,039	)		3,345
Accounts payable		28,869			17,764
Accrued compensation and benefits		21,664			32,899
Other current liabilities		72,615			42,784
Income taxes		90,958			(25,995	)
Other long-term liabilities		(5,192	)		(1,355	)
Net cash provided by operating activities		485,554			419,945
Cash flows from investing activities:
Additions of property and equipment, net		(161,365	)		(128,328	)
Acquisitions		(3,196,395	)		(266,265	)
Proceeds from divestitures		297,784			1,223
Investments in and advances to affiliates, net		15,364			14,344
Intangible assets		(751	)		(635	)
Net cash used in investing activities		(3,045,363	)		(379,661	)
Cash flows from financing activities:
Borrowings		6,832,557			4,444,160
Payments on long-term debt		(4,058,951	)		(4,236,861	)
Deferred financing costs		(77,884	)		(4,153	)
Purchase of treasury stock					(96,540	)
Stock option exercises		43,919			43,432
Net cash provided by financing activities		2,739,641			150,038
Net increase in cash and cash equivalents		179,832			190,322
Cash and cash equivalents at beginning of period		251,979			61,657
Cash and cash equivalents at end of period	$	431,811		$	251,979

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DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except per share data)

	December 31,
	2005			2004
ASSETS
Cash and cash equivalents	$	431,811		$	251,979
Accounts receivable, less allowance of $138,598 and $58,166		853,560			453,295
Inventories		69,130			31,843
Other receivables		116,620			47,219
Other current assets		38,463			5,791
Deferred income taxes		144,824			78,593
Total current assets		1,654,408			868,720
Property and equipment, net		750,078			412,064
Amortizable intangibles, net		235,944			60,719
Investments in third-party dialysis businesses		3,181			3,332
Other long-term assets		41,768			10,898
Goodwill		3,594,383			1,156,226
	$	6,279,762		$	2,511,959
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	212,049		$	96,231
Other liabilities		381,964			157,214
Accrued compensation and benefits		231,994			133,919
Current portion of long-term debt		71,767			53,364
Income taxes payable		91,959			1,007
Total current liabilities		989,733			441,735
Long-term debt		4,085,435			1,322,468
Other long-term liabilities		26,416			22,570
Gambro AB Supply Agreement and other intangibles, net		163,431
Deferred income taxes		75,499			148,859
Minority interests		88,639			53,193
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 shares issued)		135			135
Additional paid-in capital		569,751			542,714
Retained earnings		839,930			611,287
Treasury stock, at cost (32,927,026 and 36,295,339 shares)		(574,013	)		(632,732	)
Accumulated comprehensive income valuations		14,806			1,730
Total shareholders’ equity		850,609			523,134
	$	6,279,762		$	2,511,959

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DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

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

	Three months ended									Year ended December 31, 2005
	December 31, 2005			September 30, 2005			December 31, 2004
Financial Results:
Net income	$	64.1		$	55.2		$	56.6		$	228.6
Income from continuing operations	$	56.4		$	50.9		$	52.3		$	207.4
Income from continuing operations, excluding Medicare lab prior years’ recoveries	$	56.4		$	50.2		$	52.3		$	205.1
Diluted earnings per share	$	0.61		$	0.53		$	0.56		$	2.20
Diluted earnings per share from continuing operations	$	0.54		$	0.49		$	0.51		$	1.99
Diluted earnings per share from continuing operations, excluding Medicare lab recoveries	$	0.54		$	0.48		$	0.51		$	1.97
Operating income, excluding Medicare lab prior years’ recoveries	$	158.8		$	104.2		$	98.1		$	461.6
Operating income margin, excluding Medicare lab prior years’ recoveries		14.0	%		16.2	%		16.8	%		15.5	%
Other comprehensive income
Unrealized gain on securities, net of tax expense of $2.4, $5.7, $1.3, and $10.7	$	3.8		$	11.1		$	2.1		$	16.8
Business Metrics:
Volume
Treatments		3,498,231			1,928,684			1,786,860			9,044,967
Number of treatment days		79.0			79.0			79.0			313.0
Treatments per day		44,281			24,414			22,617			28,898
Per day year over year increase		95.8	%		13.4	%		14.5	%		36.2	%
Non-acquired growth		2.8	%		—			—			—
Revenue
Total operating revenue	$	1,133		$	645		$	584		$	2,974
Medicare lab prior years’ recoveries		—		$	1			—		$	4
Total operating revenue, excluding Medicare lab prior years’ recoveries	$	1,133		$	644		$	584		$	2,970
Dialysis revenue per treatment	$	310.62		$	317.03		$	312.34		$	312.87
Per treatment (decrease) increase from previous quarter		(2.0	%)		1.1	%		(0.8	%)		—
Per treatment (decrease) increase from previous year		(.6	%)		0.7	%		1.5	%		—
Expenses
A.     Patient care costs
Percent of revenue		70.5	%		67.6	%		67.9	%		68.5	%
Per treatment	$	228.48		$	225.65		$	222.05		$	225.01
Per treatment increase from previous quarter		1.3	%		1.4	%		0.5	%		—
Per treatment increase from previous year		2.9	%		2.2	%		2.7	%		1.8	%
B.     General & administrative expenses
Percent of revenue		8.6	%		9.4	%		9.1	%		9.2	%
Per treatment	$	27.88		$	31.53		$	29.75		$	30.12
Per treatment (decrease) from previous quarter		(11.6	%)		(2.2	%)		—			—
Per treatment (decrease) increase from previous year		(6.3	%)		5.9	%		15.8	%		4.3	%
C.     Bad debt expense as a percent of current-period revenue		2.6	%		1.8	%		1.8	%		2.1	%
D.     Consolidated effective tax rate from continuing operations		35.7	%		37.5	%		37.4	%		37.4	%

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DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

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

	Three months ended								Year ended December 31, 2005
	December 31, 2005			September 30, 2005			December 31, 2004
Cash Flow
Operating cash flow	$	183.3		$	84.6		$	87.3	$	485.6
Operating cash flow, excluding Medicare lab prior years’ recoveries and tax benefit from stock option exercises	$	177.8		$	75.3		$	70.0	$	441.4
Free cash flow	$	151.6		$	75.0		$	72.5	$	421.9
Free cash flow, excluding Medicare lab prior years’ recoveries and tax benefit from stock option exercises	$	146.1		$	65.6		$	55.1	$	377.8
Capital expenditures:
Development	$	27.8		$	24.9		$	25.0	$	93.0
Routine maintenance/IT/other	$	32.3		$	11.4		$	14.9	$	70.0
Acquisition expenditures	$	3,066.3		$	46.1		$	19.8	$	3,196.4
Accounts Receivable
Net receivables	$	854		$	493		$	453
DSO		71			69			69
Debt/Capital Structure
Total debt	$	4,157		$	1,365		$	1,376
Net debt, net of cash	$	3,725		$	1,028		$	1,124
Leverage ratio – (see Note 1)		4.45x
Shares repurchased (in millions)								.03
Average share price							$	30.14
Clinical (quarterly averages)
Dialysis adequacy - % of patients with Kt/V > 1.2		94	%		94	%
Patients with arteriovenous fistulas		45	%		46	%

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DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

(dollars in thousands)

Note 1: Calculation of the Leverage Ratio

Under the Company’s credit agreement that was effective on October 5, 2005, the leverage ratio is defined as all funded debt plus the face amount of all letters of credit issued, minus cash and cash equivalents, divided by consolidated “EBITDA”. The leverage ratio determines the interest rate margin payable by the Company under the Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The following Leverage Ratio was calculated using “Consolidated EBITDA” as defined in the Credit Agreement, except that pro forma incremental “EBITDA” relating to routine acquisitions is included in the calculation of “EBITDA” under the Credit Agreement. Such calculation is based on the last twelve-months of Consolidated “EBITDA”, pro forma for the Gambro Healthcare acquisition and related divestitures.

	December 31, 2005
Income from continuing operations	$	230,296
Debt expense		272,311
Refinancing charges		8,170
Income taxes		137,589
Depreciation and amortization		169,183
Minority interests and equity income, net		26,012
Swap valuation gain		(4,548	)
Stock compensation expense		8,614
“Consolidated EBITDA” as materially defined in the credit agreement	$	847,627
	December 31, 2005
Total debt	$	4,157,209
Letters of credit issued		48,404
		4,205,613
Less: cash and cash equivalents		(431,811	)
Consolidated net debt	$	3,773,802
Last twelve months “Consolidated EBITDA” as materially defined in the credit agreement	$	847,627
Leverage ratio		4.45x

In accordance with the Company’s Credit Agreement, the Company’s leverage ratio can not currently exceed 6.25 to 1.0. As of December 31, 2005, the Company was in compliance with its Credit Agreement.

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DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

1. Income from continuing operations, excluding Medicare lab recoveries related to prior years’ services:

	Three months ended									Year ended December 31, 2005
	December 31, 2005			September 30, 2005			December 31, 2004
Net income	$	64,149		$	55,217		$	56,602		$	228,643
Discontinued operations		(7,738	)		(4,303	)		(4,335	)		(21,221	)
Income from continuing operations		56,411			50,914			52,267			207,422
Less: Medicare lab recoveries related to prior years’ services					(1,131	)					(3,771	)
Related income tax expense					440						1,467
Income from continuing operations, excluding Medicare lab recoveries related to prior years’ services	$	56,411		$	50,223		$	52,267		$	205,118

2. Operating income, excluding Medicare lab recoveries related to prior years’ services:

	Three months ended							Year ended December 31, 2005
	December 31, 2005		September 30, 2005			December 31, 2004
Operating income	$	158,782	$	105,298		$	98,090	$	465,371
Less: Medicare lab recoveries related to prior years’ services				(1,131	)				(3,771	)
	$	158,782	$	104,167		$	98,090	$	461,600

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

	Three months ended									Year ended
	December 31, 2005			September 30, 2005			December 31, 2004			December 31, 2005			December 31, 2004
Cash provided by operating activities	$	183,344		$	84,609		$	87,341		$	485,554		$	419,945
Less: Medicare lab recoveries related to prior years’ services		(1,131	)					(8,293	)		(3,771	)		(27,293	)
Related income tax expense		440						3,234			1,467			10,644
Operating cash flow, excluding Medicare lab recoveries related to prior years’ services		182,653			84,609			82,282			483,250			403,296
Less: Tax benefit from stock option exercises		(4,816	)		(9,313	)		(12,305	)		(41,837	)		(42,770	)
	$	177,837		$	75,296		$	69,977		$	441,413		$	360,526

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DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

4. Free cash flow and 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.

	Three months ended									Year ended
	December 31, 2005			September 30, 2005			December 31, 2004			December 31, 2005			December 31, 2004
Cash provided by operating activities	$	183,344		$	84,609		$	87,341		$	485,554		$	419,945
Less: Expenditures for routine maintenance and information technology		(31,735	)		(9,656	)		(14,883	)		(63,639	)		(46,554	)
Free cash flow		151,609			74,953			72,458			421,915			373,391
Less: Medicare lab recoveries related to prior years’ services		(1,131	)					(8,293	)		(3,771	)		(27,293	)
Related income tax expense		440						3,234			1,467			10,644
Free cash flow, excluding Medicare lab recoveries related to prior years’ services		150,918			74,953			67,399			419,611			356,742
Less: Tax benefit from stock option exercises		(4,816	)		(9,313	)		(12,305	)		(41,837	)		(42,770	)
	$	146,102		$	65,640		$	55,094		$	377,774		$	313,972

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