Improving Health, Health Care and Quality of Life

DaVita 3rd Quarter 2006 Results
PRNewswire-FirstCall
EL SEGUNDO, Calif.

DaVita Inc. , today announced results for the quarter ended September 30, 2006. Income from continuing operations for the three and nine months ended September 30, 2006 excluding the valuation gain on the Company's Product Supply Agreement with Gambro Renal Products, was $69.9 million and $192.0 million, or $0.66 and $1.82 per share, respectively, as compared with $50.9 million and $151.0 million or $0.49 and $1.45 per share, respectively, for the same periods of 2005. Income from continuing operations for the three and nine months ended September 30, 2006 included incremental after-tax stock-based compensation expense of $4.1 million and $10.1 million or $0.04 and $0.09 per share, respectively, related to SFAS No. 123®.

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Income from continuing operations for the three and nine months ended September 30, 2006, including the valuation gain on the Product Supply Agreement was $93.1 million and $215.2 million, or $0.88 and $2.04 per share, respectively.

Net income for the three and nine months ended September 30, 2006 including discontinued operations and the valuation gain on the Product Supply Agreement was $94.9 million and $215.6 million, or $0.90 and $2.04 per share, respectively.

  Financial and operating highlights include:

  * Cash Flow:  For the rolling 12-months ended September 30, 2006 operating
    cash flow was $598 million and free cash flow was $488 million, in each
    case excluding an $85 million income tax payment associated with the
    divestiture of centers in conjunction with the Gambro Healthcare
    acquisition.  Including these items, operating cash flow for the rolling
    12-months was $513 million and free cash flow was $403 million.
    Operating cash flow for the three months ended September 30, 2006 was
    $97 million and free cash flow was $67 million.
  * Operating Income:  Operating income for the three months and nine months
    ended September 30, 2006, excluding the pre-tax valuation gain on the
    Product Supply Agreement of $38 million, was $179 million and
    $513 million, respectively.
  * Volume:  Total treatments for the third quarter were 3,668,999 or
    46,443 treatments per day, as compared to 3,602,567 or 46,187 treatments
    per day for the second quarter of 2006. Non-acquired treatment growth in
    the quarter was 4.2% over the prior year's third quarter.
  * Center Activity:  As of September 30, 2006, we operated or provided
    administrative services at 1,269 outpatient centers serving
    approximately 101,000 patients.  During the third quarter of 2006, we
    acquired 5 centers, opened 13 new centers and closed 4 centers.
  * Effective Tax Rate: The effective annual income tax rate for 2006 is
    currently expected to be approximately 39.25%. We currently expect the
    annual effective tax rate for 2007 to be approximately 40%.

  Outlook

We are revising the lower end of our 2006 operating income projection, therefore our new guidance for operating income is $690-$700 million excluding the valuation gain on the Product Supply Agreement. Our 2007 operating income is currently projected to be in the range of $680-$750 million. These projections and the underlying assumptions involve significant risks and uncertainties, including those described below and actual results may vary significantly from these current projections.

DaVita will be holding a conference call to discuss its results for the third quarter ended September 30, 2006 on November 1, 2006 at 12PM noon 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 and 2007 operating results. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, accounting estimates and the risk factors set forth in the Company's SEC filings, including its Form 10-Q for the quarter ended June 30, 2006. The forward- looking statements should be considered in light of these risks and uncertainties.

  These risks and uncertainties include those relating to:

  * the concentration of profits generated from commercial payor plans,
  * 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 subpoenas from the U.S. Attorney's Office for the Eastern
    District of Missouri and DVA Renal Healthcare's (formerly known as
    Gambro Healthcare, Inc.) compliance with its corporate integrity
    agreement,
  * our ability to complete and integrate acquisitions of businesses, and
  * the successful integration of DVA Renal 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      Nine months ended
                                  September 30,           September 30,
                              2006         2005        2006          2005
  Net operating revenues   $1,237,041    $644,892   $3,608,045    $1,840,603
  Operating expenses and
   charges:
    Patient care costs        857,049     435,212     2,517,795    1,235,952
    General and
     administrative           113,447      60,820       329,059      174,939
    Depreciation and
     amortization              44,478      25,410       128,086       74,188
    Provision for
     uncollectible accounts    31,985      11,462        93,295       32,751
    Minority interests
     and equity income, net    10,956       6,690        26,857       16,184
    Valuation gain on
     Product Supply
      Agreement              (37,968)          --      (37,968)           --
       Total operating
        expenses and
        charges             1,019,947     539,594     3,057,124    1,534,014

  Operating income            217,094     105,298       550,921      306,589

  Debt expense               (67,904)     (24,284)     (206,799)    (66,700)
  Swap valuation (loss) gain               (1,718)                     4,543
  Refinancing charges                                                (6,872)
  Other income                  3,271        2,059        10,118       5,741
  Income from continuing
   operations before income
   taxes                      152,461       81,355       354,240     243,301
  Income tax expense           59,370       30,441       139,040      92,290
      Income from continuing
       operations              93,091       50,914       215,200     151,011
  Discontinued operations
    Income from operations
     of discontinued operations,
     net of tax                              4,303                    13,483
    Gain on disposal of
     discontinued operations,
     net of tax                 1,765                        362

  Net income                  $94,856      $55,217      $215,562    $164,494

  Earnings per share:
    Basic earnings per
     share from
     continuing
     operations                 $0.90        $0.50         $2.08       $1.50
  Basic earnings per share      $0.91        $0.55         $2.09       $1.64
  Diluted earnings per share
   from continuing operations   $0.88        $0.49         $2.04       $1.45
  Diluted earnings per share    $0.90        $0.53         $2.04       $1.58

  Weighted average shares for earnings per share:
    Basic                 103,784,510  101,307,461   103,295,407 100,399,902
    Diluted               105,923,976  104,371,789   105,643,406 103,803,975


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

                                                  Nine months ended
                                                    September 30,
                                               2006                2005
  Cash flows from operating activities:
  Net income                                $215,562            $164,494
  Adjustments to reconcile net income
   to cash provided by operating
   activities:
    Depreciation and amortization             128,086             77,080
    Valuation gain on Product
     Supply Agreement                         (37,968)                --
    Stock-based compensation expense           18,896              2,601
    Tax benefits from stock option
     exercises                                 29,261             34,420
    Excess tax benefits from
     stock-based compensation                (27,146)                 --
    Deferred income taxes                       1,249            (8,950)
    Minority interests in income
     of consolidated subsidiaries              28,812             18,225
    Distributions to minority interests      (25,552)           (12,261)
    Equity investment income                  (1,955)              (822)
    Loss (gain) on disposal of
     discontinued operations
     and other dispositions                       508            (2,213)
    Non-cash debt and other expenses           13,562              2,397
    Refinancing charges                            --              6,872
    Swap valuation gain                            --            (4,543)
  Changes in operating assets and
   liabilities, net of effect of
   acquisitions and divestitures:
    Accounts receivable                      (46,135)           (31,284)
    Inventories                              (29,118)            (2,670)
    Other receivables and other
     current assets                          (18,155)           (12,699)
    Other long term assets                    (5,329)            (2,134)
    Accounts payable                           16,557              2,753
    Accrued compensation and benefits          67,889             27,366
    Other current liabilities                  63,643             27,279
    Income taxes                             (65,924)             19,670
    Other long-term liabilities                 2,720            (3,371)
      Net cash provided by operating
       activities                             329,463            302,210
  Cash flows from investing activities:
    Additions of property
     and equipment, net                     (181,425)           (97,529)
    Acquisitions and purchases
     of other ownership interests            (75,580)          (132,440)
    Proceeds from divestitures
     and asset sales                           21,348              2,327
    Investments in and
     advances to affiliates, net               14,605             14,294
  Intangible assets                           (5,749)              (779)
      Net cash used in investing
       activities                           (226,801)          (214,127)
  Cash flows from financing activities:
    Borrowings                              4,493,339          1,742,433
    Payments on long-term debt            (4,826,163)        (1,753,351)
    Deferred financing costs                      296           (30,561)
    Excess tax benefits from
     stock-based compensation                  27,146                 --
    Stock option exercises and
     other share issuances, net                31,187             38,613
       Net cash used in financing
        activities                          (274,195)            (2,866)
  Net (decrease) increase in cash and
   cash equivalents                         (171,533)             85,217
  Cash and cash equivalents at
   beginning of period                        431,811            251,979
  Cash and cash equivalents at end
   of period                                 $260,278           $337,196


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

                                                September 30,   December 31,
                                                    2006           2005
                         ASSETS
  Cash and cash equivalents                       $260,278       $431,811
  Accounts receivable,
   less allowance of $161,361 and $138,598         902,745        853,560
  Inventories                                       99,336         69,130
  Other receivables                                129,795        116,620
  Other current assets                              22,232         38,463
  Deferred income taxes                            198,372        144,824
      Total current assets                       1,612,758      1,654,408
  Property and equipment, net                      813,055        750,078
  Amortizable intangibles, net                     214,494        235,944
  Investments in third-party dialysis businesses     2,179          3,181
  Other long-term assets                            44,289         41,768
  Goodwill                                       3,657,355      3,594,383
                                                $6,344,130     $6,279,762

              LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                $227,650       $212,049
  Other liabilities                                448,021        381,964
  Accrued compensation and benefits                302,011        231,994
  Current portion of long-term debt                  6,640         71,767
  Income taxes payable                              26,035         91,959
      Total current liabilities                  1,010,357        989,733
  Long-term debt                                 3,818,111      4,085,435
  Other long-term liabilities                       27,650         26,416
  Alliance and product supply
   agreement and other intangibles, net            108,270        163,431
  Deferred income taxes                            121,208         75,499
  Minority interests                               111,722         88,639
  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                   615,939        569,751
      Retained earnings                          1,055,492        839,930
      Treasury stock, at cost
       (30,909,676 and 32,927,026 shares)        (538,845)      (574,013)
      Accumulated other comprehensive income        14,091         14,806
         Total shareholders' equity              1,146,812        850,609
                                                $6,344,130     $6,279,762



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

                             Q3 2006    Q2 2006     Q3 2005     Nine months
                                                                   ended
                                                               September 30,
                                                                   2006
  Financial Results
   excluding the valuation
   gain on the Product Supply
   Agreement for the quarter
   and the nine months ended
   September 30, 2006:
    Income from
     continuing
     operations (1)          $69.9        $64.3      $50.9         $192.0
    Net income (1)           $71.7        $63.2      $55.2         $192.4
    Diluted earnings per
     share from continuing
     operations              $0.66        $0.61      $0.49          $1.82
    Diluted earnings per
     share                   $0.68        $0.60      $0.53          $1.82
    Operating income (1)    $179.1       $171.8     $105.3         $513.0
      Operating income
       margin                14.5%        14.2%      16.3%          14.2%
    Other comprehensive
     income
      Unrealized (loss)
       gain on securities,
       net of tax (expense)
       benefit of $6.6,
       ($2.2), ($7.9)
       and $.5             ($10.3)         $3.4      $12.3          ($.7)

  Business Metrics:
   Volume
    Treatments           3,668,999    3,602,567  1,928,684     10,772,598
    Number of
     treatment days           79.0         78.0       79.0          234.0
    Treatments per day      46,443       46,187     24,414         46,037
    Per day year-over-year
     increase                90.2%        94.0%      13.4%          94.2%
    Non-acquired growth
     year-over-year           4.2%         4.1%      5.2%            4.4%

   Revenue
    Total operating
     revenue                $1,237       $1,208      $645          $3,608
    Dialysis revenue
     per treatment         $320.90      $318.80   $317.03         $318.83
    Per treatment
     increase from
     previous quarter        0.66%        0.66%      1.1%              --
    Per treatment increase
     from previous year       1.2%         1.7%     0.68%            1.4%

   Expenses
   A. Patient care costs
      Percent of revenue     69.3%        69.8%     67.6%           69.8%
      Per treatment        $233.59      $233.99   $225.65         $233.72
      Per treatment
       (decrease)
       increase from
       previous quarter    (0.17%)        0.18%      1.4%              --
      Per treatment
       increase from
       previous year          3.5%         5.1%      2.2%            4.9%

   B. General &
       administrative
       expenses
      Percent of revenue      9.2%         9.2%      9.4%            9.1%
      Per treatment         $30.92       $30.93    $31.53          $30.55
      Per treatment
       (decrease)
       increase from
       previous quarter    (0.03%)         4.0%    (2.2%)              --
      Per treatment
       (decrease) increase
       from previous year   (1.9%)       (4.1%)      5.9%          (3.1%)

   C. Bad debt expense
       as a percent of
       current-period
       revenue                2.6%         2.6%      1.8%            2.6%


   D. Consolidated
       effective tax
       rate from
       continuing
       operations            38.9%        39.5%     37.5%           39.3%

  (1)  These are non-GAAP financial measures. For a reconciliation of these
  non-GAAP financial measures to their most comparable measure calculated
  and presented in accordance with GAAP, see attached reconciliation
  schedules.


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


                             Q3 2006    Q2 2006     Q3 2005      Nine months
                                                                    ended
                                                                  September
                                                                   30, 2006
  Cash Flow
    Operating cash flow       $96.9      $256.1      $84.6          $329.5
    Operating cash flow,
     excluding the income
     tax payment on divested
     centers                  $96.9      $256.1      $84.6          $414.8
    Operating cash flow
     last twelve months      $512.8      $500.5     $389.6              --
    Operating cash flow,
     excluding the income
     tax payment on divested
     centers last twelve
     months                  $598.1      $585.8     $389.6              --

    Free cash flow            $67.4      $227.5      $75.0          $251.5
    Free cash flow,
     excluding the
     income tax payment
     on divested centers      $67.4      $227.5      $75.0          $336.9
    Free cash flow last
     twelve months           $403.2      $410.7     $342.8              --
    Free cash flow,
     excluding the income
     tax payment on
     divested centers last
     twelve months           $488.5      $496.1     $342.8              --

    Capital expenditures:
       Development and
        relocations           $35.1       $37.3      $24.9           $98.7
       Routine maintenance/
        IT/other              $31.5       $30.1      $11.4           $83.3
    Acquisition expenditures   $6.0       $46.7      $48.5           $75.6

  Accounts Receivable
      Net receivables          $903        $859       $493
      DSO                        70          67         70

  Debt/Capital Structure
      Total debt             $3,825      $3,944     $1,365
      Net debt, net
       of cash               $3,564      $3,605     $1,028
      Leverage ratio
       (see Note 1)           3.96x       4.07x         --

  Clinical (quarterly averages)
     Dialysis
     adequacy - % of patients
     with Kt/V > 1.2            93%         93%        94%
    Patients with
     albumin > /= 3.5 - 84%    83.7%       83.5%      82.9%


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

  Note 1: Calculation of the Leverage Ratio

Under the Company's current credit agreement (Credit Agreement), the leverage ratio is defined as all funded debt plus the face amount of all letters of credit issued, minus cash and cash equivalents, divided by "Consolidated EBITDA". The leverage ratio determines the interest rate margin payable by the Company under the Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The following leverage ratio was calculated using "Consolidated EBITDA" as defined in the Credit Agreement. The calculation below is based on the last twelve-months of Consolidated "EBITDA", pro forma for the routine acquisitions that occurred during the period. The Company's management believes that the presentation of "Consolidated EBITDA" is useful to investors to enhance their understanding of the Company's leverage ratio under its Credit Agreement.

                                                 Rolling 12-months ended
                                                    September 30, 2006
  Income from continuing operations                      $271,611
  Income taxes                                            170,425
  Debt expense                                            279,685
  Depreciation and amortization                           170,734
  Minority interests and equity income, net                32,762
  Valuation gain on Product Supply Agreement             (37,968)
  Swap valuation gain                                         (5)
  Refinancing charges                                       1,298
  Other                                                     5,060
  Stock-based compensation expense                         18,896

    "Consolidated EBITDA"                                $912,498

                                                       September 30,
                                                           2006
  Total debt                                           $3,824,751
  Letters of credit issued                                 49,353
                                                        3,874,104
  Less: cash and cash equivalents                       (260,278)
  Consolidated net debt                                $3,613,826
  Last twelve months "Consolidated EBITDA"               $912,498
  Leverage ratio                                            3.96x

In accordance with the Company's Credit Agreement, the Company's leverage ratio can not exceed 6.0 to 1.0 as of September 30, 2006. At that date, the Company's leverage ratio did not exceed 6.0 to 1.0.

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

  1. Income from continuing operations and net income excluding the
  valuation gain on the Product Supply Agreement:

  We believe that income from continuing operations and net income excluding
  the valuation gain on the Product Supply Agreement enhances a user's
  understanding of our normal income from continuing operations and net
  income for these periods by providing a measure that is more meaningful
  because it excludes a non-recurring non-cash item that resulted from an
  amendment of the Product Supply Agreement and accordingly is more
  comparable to prior periods and indicative of consistent income from
  continuing operations and net income. This measure is not a measure of
  financial performance under United States generally accepted accounting
  principles and should not be considered as an alternative to income from
  continuing operations and net income.

                            Q3 2006     Q2 2006    Q3 2005     Nine months
                                                                  ended
                                                                September
                                                                 30, 2006
  Income from
   continuing operations    $93,091    $64,329      $50,914     $ 215,200
  Less:  Valuation gain    (37,968)         --           --      (37,968)
  Add:  Related income tax   14,770         --           --        14,770
                            $69,893    $64,329      $50,914     $ 192,002
  Net income                $94,856    $63,237      $55,217     $ 215,562
  Less:  Valuation gain    (37,968)         --           --      (37,968)
  Add:  Related income tax   14,770         --           --        14,770
                            $71,658    $63,237      $55,217     $ 192,364

  2. Operating income excluding the pre-tax valuation gain on the Product
  Supply Agreement:

  We believe that operating income excluding the valuation gain on the
  Product Supply Agreement enhances a user's understanding of our normal
  operating income for these periods by providing a measure that is more
  meaningful because it excludes a non-recurring non-cash item that resulted
  from an amendment of the Product Supply Agreement and accordingly is more
  comparable to prior periods and indicative of consistent operating income
  items. This measure is not a measure of financial performance under United
  States generally accepted accounting principles and should not be
  considered as an alternative to operating income.

                          Q3 2006      Q2 2006      Q3 2005      Nine months
                                                                   ended
                                                                 September
                                                                  30, 2006
  Operating income       $217,094     $171,752     $105,298       $550,921
  Less:  Valuation gain  (37,968)           --           --       (37,968)
                         $179,126     $171,752     $105,298       $512,953

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

  3. Operating cash flow, excluding the income tax payment on divested
  centers:

  We believe that operating cash flow excluding the income tax payment on
  divested centers enhances a user's understanding of our normal operating
  cash flows for these periods by providing a measure that is more
  meaningful because it excludes non-recurring transactions that can cause
  unusual fluctuations in our operating cash flows and accordingly is more
  comparable to prior periods and indicative of consistent operating cash
  flow items.  This measure is not a measure of financial performance under
  United States generally accepted accounting principles and should not be
  considered as an alternative to cash flows from operating, investing or
  financing activities, as an indicator of cash flows or as a measure of
  liquidity.


                                          Nine months ended
                                             September 30,
                    Q3 2006       Q2 2006        2006          Q3 2005

  Cash provided by
   operating
   activities      $96,937      $256,090       $329,463       $84,609
  Income tax
   payment on
   divested centers     --            --         85,328            --
                   $96,937      $256,090       $414,791       $84,609


                                       Rolling 12-Month Period
                                Q3 2006       Q2 2006         Q3 2005
  Cash provided by operating
   activities                  $512,807      $500,479        $389,551
  Income tax payment
   on divested centers           85,328        85,328              --
                               $598,135      $585,807       $ 389,551


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

  4. Free cash flow and free cash flow, excluding the income tax payment on
  divested centers:

  Free cash flow represents net cash provided by operating activities less
  expenditures for routine maintenance and information technology.  We
  believe free cash flow is a useful adjunct to cash flow from operating
  activities and other measurements under United States generally accepted
  accounting principles, since 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 United States generally accepted accounting principles and should
  not be considered as an alternative to cash flows from operating,
  investing or financing activities, as an indicator of cash flows or as a
  measure of liquidity.

                                           Nine months
                                              ended
                                          September 30,
                     Q3 2006     Q2 2006      2006        Q3 2005
  Cash provided
   by operating
   activities        $96,937     $256,090   $329,463       $84,609
  Less: Expenditures
   for routine
   maintenance and
   information
   technology
                    (29,551)     (28,640)   (77,917)       (9,656)
  Free cash flow     $67,386     $227,450   $251,546       $74,953
  Income tax payment
   on divested centers    --           --     85,328            --
                     $67,386     $227,450   $336,874      $ 74,953


                                           Rolling 12-Month Period
                                      Q3 2006     Q2 2006       Q3 2005
  Cash provided by operating
   activities                         $512,807    $500,479      $389,551
  Less: Expenditures for routine
   maintenance and
   information technology            (109,652)    (89,757)      (46,787)
  Free cash flow                      $403,155    $410,722      $342,764
   Income tax payment on
    divested centers                    85,328      85,328            --
                                      $488,483    $496,050      $342,764

FCMN Contact: LeAnne.Zumwalt@davita.com
Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com

SOURCE: DaVita Inc.

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


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2000 16th Street
Denver, CO 80202
(303) 876-7527