Improving Health, Health Care and Quality of Life

DaVita 4th Quarter 2005 Results
PRNewswire-FirstCall
EL SEGUNDO, Calif.

DaVita Inc. , 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.

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

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           Years ended
                               Dec. 31,                  Dec. 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


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


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


                                                           Dec. 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


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

                                 Three months ended             Year ended
                          Dec. 31,    Sept. 30,     Dec. 31,     Dec. 31,
                            2005         2005         2004        2005
  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%


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

                                Three months ended            Year ended
                         Dec. 31,     Sept. 30,     Dec. 31,     Dec. 31,
                           2005        2005          2004          2005
  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%


                               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.

                                                                 Dec. 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



                                                                 Dec. 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.


                               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
                         Dec. 31,    Sept. 30,      Dec. 31,    Dec. 31,
                           2005         2005         2004        2005
  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
                         Dec. 31,    Sept. 30,      Dec. 31,    Dec. 31,
                          2005         2005           2004        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
                Dec. 31,    Sept. 30,    Dec. 31,   Dec. 31,   Dec. 31,
                  2005        2005         2004       2005       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


                               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
               Dec. 31,    Sept. 30,     Dec. 31,    Dec. 31,   Dec. 31,
                 2005        2005         2004        2005        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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SOURCE: DaVita Inc.

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


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