Improving Health, Health Care and Quality of Life

DaVita 4th Quarter 2006 Results
PRNewswire-FirstCall
EL SEGUNDO, Calif.

DaVita Inc. , today announced results for the quarter and year ended December 31, 2006. Income from continuing operations for the three months ended December 31, 2006 was $74.1 million, or $0.70 per share, as compared with $56.4 million, or $0.54 per share, for the same period of 2005. Income from continuing operations for the three months ended December 31, 2006 included incremental after-tax stock-based compensation expense of $4.5 million, or $0.04 per share, related to SFAS No. 123®.

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

Income from continuing operations for the year ended December 31, 2006, excluding the valuation gain on the Company's Product Supply Agreement with Gambro Renal Products was $266.1 million, or $2.52 per share, as compared to income from continuing operations of $207.4 million, or $1.99 per share, for the same period of 2005. Income from continuing operations for the year ended December 31, 2006 included incremental after-tax stock-based compensation expense of $14.2 million or $0.12 per share, related to SFAS No. 123®.

Income from continuing operations for the year ended December 31, 2006, including the valuation gain on the Product Supply Agreement was $289.3 million, or $2.73 per share.

  Financial and operating highlights include:
  -- Cash Flow:  For the year ended December 31, 2006 operating cash flow
     was $605 million and free cash flow was $496 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 this item, operating cash flow for the year
     ended December 31, 2006 was $520 million and free cash flow was
     $410 million.

  -- Operating Income:  Operating income for the three months ended
     December 31, 2006 was $189 million.  Operating income for the year
     ended December 31, 2006, excluding the pre-tax valuation gain on the
     Product Supply Agreement of approximately $38 million, was
     $701 million.

  -- Volume:  Total treatments for the fourth quarter of 2006 were 3,723,198
     or 47,369 treatments per day. Non-acquired treatment growth in the
     quarter was 5.5% over the prior year's fourth quarter.

  -- Center Activity:  As of December 31, 2006, we operated or provided
     administrative services at 1,300 outpatient dialysis centers serving
     approximately 103,000 patients, which includes 34 third-party owned
     centers serving approximately 2,850 patients.  During the fourth
     quarter of 2006 we acquired 7 centers, including two centers in which
     we previously held a minority interest, opened 26 new centers, provided
     administrative services to one additional center and closed one center.

  -- Effective Tax Rate: The effective annual income tax rate for 2006 from
     continuing operations was 39.2%. We currently expect the annual
     effective tax rate for 2007 to be in the range of 39.5% - 40.0%.

  Outlook

We are revising our 2007 operating income guidance: Operating income is now projected to be in the range of $700-$760 million. Our previous guidance was for operating income 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 fourth quarter and year ended December 31, 2006 on February 14, 2007 at 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 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 September 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 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 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          Year ended
                              December 31,            December 31,
                           2006        2005         2006         2005
  Net operating
   revenues           $1,272,617   $1,133,315   $4,880,662   $2,973,918
  Operating expenses
   and charges:
    Patient care
     costs               872,556      799,291    3,390,351    2,035,243
    General and
     administrative      124,457       97,524      453,516      272,463
    Depreciation and
     amortization         45,209       42,648      173,295      116,836
    Provision for
     uncollectible
     accounts             32,908       29,165      126,203       61,916
    Minority interests
     and equity income,
     net                   8,976        5,905       35,833       22,089
    Valuation gain on
     Product Supply
     Agreement                --           --     (37,968)           --
       Total operating
        expenses and
        charges        1,084,106      974,533    4,141,230    2,508,547

  Operating income       188,511      158,782      739,432      465,371

  Debt expense          (69,907)     (72,886)    (276,706)    (139,586)
  Swap valuation gain         --            5           --        4,548
  Refinancing charges         --      (1,298)           --      (8,170)
  Other income             2,915        3,193       13,033        8,934
  Income from
   continuing operations
   before income taxes   121,519       87,796      475,759      331,097
  Income tax expense      47,390       31,385      186,430      123,675
      Income from
       continuing
       operations         74,129       56,411      289,329      207,422
  Discontinued operations
    (Loss) income from
     operations of
     discontinued
     operations, net of
     tax                      --        (326)           --       13,157
    Gain on disposal
     of discontinued
     operations, net
     of tax                   --       8,064           362        8,064
  Net income             $74,129     $64,149      $289,691     $228,643

  Earnings per share:
  Basic earnings per
   share from continuing
   operations              $0.71       $0.55         $2.79        $2.06
  Basic earnings per
   share                   $0.71       $0.63         $2.80        $2.27
  Diluted earnings per
   share from continuing
   operations              $0.70       $0.54         $2.73        $1.99
  Diluted earnings per
   share                   $0.70       $0.61         $2.74        $2.20

  Weighted average shares
   for earnings per share:
     Basic          104,194,000  101,838,000   103,520,000  100,762,000
     Diluted        106,219,000  104,888,000   105,793,000  104,068,000


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

                                                         Year ended
                                                        December 31,
                                                    2006           2005
  Cash flows from operating activities:
  Net income                                      $289,691       $228,643
  Adjustments to reconcile net income to
   cash provided by operating activities:
    Depreciation and amortization                  173,295        119,719
    Valuation gain on Product Supply Agreement    (37,968)             --
    Stock-based compensation expense                26,389          3,353
    Tax benefits from stock award exercises         40,375         38,484
    Excess tax benefits from stock-based
     compensation                                 (37,251)             --
    Deferred income taxes                            2,342       (63,357)
    Minority interests in income of consolidated
     subsidiaries                                   38,141         24,714
    Distributions to minority interests           (32,271)       (16,246)
    Equity investment income                       (2,308)        (1,406)
    Loss (gain) on disposal of discontinued
     operations and other dispositions                 239       (15,856)
    Non-cash debt and non-cash rent charges         27,736          5,157
    Refinancing charges                                 --          8,170
    Swap valuation gain                                 --        (4,548)
  Changes in operating assets and liabilities,
   net of effect of acquisitions and divestitures:
    Accounts receivable                           (74,737)       (62,021)
    Inventories                                   (18,587)         11,980
    Other receivables and other current assets    (34,044)          1,893
    Other long term assets                         (9,791)        (2,039)
    Accounts payable                                40,712         28,869
    Accrued compensation and benefits              101,555         21,664
    Other current liabilities                       88,841         72,615
    Income taxes                                  (67,329)         90,958
    Other long-term liabilities                      4,541        (5,192)
      Net cash provided by operating activities    519,571        485,554
  Cash flows from investing activities:
    Additions of property and equipment, net     (262,708)      (161,365)
    Acquisitions and purchases of other ownership
     interests                                    (86,504)    (3,202,404)
    Proceeds from divestitures and asset sales      22,179        298,849
    Investments in and advances to affiliates,
     net                                            20,567         20,308
    Purchase of intangible assets                  (5,597)          (751)
      Net cash used in investing activities      (312,063)    (3,045,363)
  Cash flows from financing activities:
    Borrowings                                   6,354,784      6,832,557
    Payments on long-term debt                 (6,761,743)    (4,058,951)
    Deferred financing costs                           (2)       (77,884)
    Excess tax benefits from stock-based
     compensation                                   37,251             --
    Stock option exercises and other share
     issuances, net                                 40,593         43,919
      Net cash (used in) provided by financing
       activities                                (329,117)      2,739,641
  Net (decrease) increase in cash and cash
   equivalents                                   (121,609)        179,832
  Cash and cash equivalents at beginning of
   period                                          431,811        251,979
  Cash and cash equivalents at end of period      $310,202       $431,811


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

                                                December 31,   December 31,
                                                     2006         2005

                             ASSETS
  Cash and cash equivalents                       $310,202       $431,811

  Accounts receivable, less allowance
   of $171,757 and $138,598                        932,385        853,560
  Inventories                                       89,119         69,130
  Other receivables                                148,842        116,620
  Other current assets                              29,858         38,463
  Deferred income taxes                            199,090        144,824
      Total current assets                       1,709,496      1,654,408
  Property and equipment, net                      849,966        750,078
  Amortizable intangibles, net                     203,721        235,944
  Investments in third-party dialysis businesses     1,813          3,181
  Other long-term assets                            58,967         41,768
  Goodwill                                       3,667,853      3,594,383
                                                $6,491,816     $6,279,762

           LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                                $251,686       $212,049
  Other liabilities                                473,219        381,964
  Accrued compensation and benefits                341,766        231,994
  Current portion of long-term debt                 20,871         71,767
  Income taxes payable                              24,630         91,959
      Total current liabilities                  1,112,172        989,733
  Long-term debt                                 3,730,380      4,085,435
  Other long-term liabilities                       50,076         26,416
  Alliance and product supply agreement
   and other intangibles, net                      105,263        163,431
  Deferred income taxes                            125,642         75,499
  Minority interests                               122,359         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                       630,091        569,751
  Retained earnings                              1,129,621        839,930
  Treasury stock, at cost
   (30,225,675 and 32,927,026 shares)            (526,920)      (574,013)
  Accumulated other comprehensive income            12,997         14,806
      Total shareholders' equity                 1,245,924        850,609
                                                $6,491,816     $6,279,762


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


                                  Three months ended            Year ended
                              December    September    December    December
                                  31,        30,          31,         31,
                                 2006       2006         2005        2006
  Financial Results excluding
   the valuation gain on the
   Product Supply Agreement
   for the third quarter of
   2006 and for the year ended
   December 31, 2006:
    Income from continuing
     operations (1)              $74.1        $69.9       $56.4     $266.1
    Net income (1)               $74.1        $71.7       $64.1     $266.5
    Diluted earnings per share
     from continuing operations  $0.70        $0.66       $0.54      $2.52
    Diluted earnings per share   $0.70        $0.68       $0.61      $2.52
    Operating income (1)        $188.5       $179.1      $158.8     $701.5
      Operating income margin    14.8%        14.5%       14.0%      14.4%
    Other comprehensive income
      Unrealized (loss) gain
       on securities, net of
       tax (expense) benefit
       of $0.7, $6.6,
       ($2.4) and $1.2          ($1.1)      ($10.3)        $3.8     ($1.8)

  Business Metrics:
    Volume
      Treatments             3,723,198    3,668,999   3,498,231 14,495,796
      Number of treatment
       days                       78.6         79.0        79.0      312.6
      Treatments per day        47,369       46,443      44,281     46,372
      Per day year-over-year
       increase                   7.0%        90.2%       95.8%      60.5%
      Non-acquired growth
       year-over-year             5.5%         4.2%        2.8%       4.8%

    Revenue
      Total operating revenue   $1,273       $1,237     $1,133      $4,881
      Dialysis revenue per
       treatment, including
       the lab                 $334.45      $331.48    $319.98     $330.44
      Per treatment increase
       (decrease) from
        previous quarter          0.9%        0.7%      (2.1%)          --
      Per treatment increase
       (decrease) from previous
        year                      4.5%        1.4%      (0.8%)        2.4%

    Expenses
    A. Patient care costs
       Percent of revenue        68.6%       69.3%       70.5%       69.5%
       Per treatment           $234.36     $233.59     $228.48     $233.89
       Per treatment increase
        (decrease) from
        previous quarter          0.3%     (0.17%)        1.3%          --
       Per treatment increase
        from previous year        2.6%        3.5%        2.9%        3.9%

    B. General & administrative
        expenses
       Percent of revenue         9.8%        9.2%        8.6%        9.3%
       Per treatment            $33.43      $30.92      $27.88      $31.29
       Per treatment increase
        (decrease) from
        previous quarter          8.1%     (0.03%)     (11.6%)          --
       Per treatment increase
        (decrease) from previous
        year                     19.9%      (1.9%)      (6.3%)         3.9%

    C. Bad debt expense as
        a percent of
        current-period revenue    2.6%        2.6%        2.6%         2.6%
    D. Consolidated effective
        tax rate from continuing
        operations               39.0%       38.9%       35.7%        39.2%

(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)

                                  Three months ended            Year ended
                              December    September    December    December
                                  31,        30,          31,         31,
                                 2006       2006         2005        2006
  Cash Flow
    Operating cash flow         $190.1     $96.9       $183.3       $519.6
    Operating cash flow,
     excluding the income tax
     payment on divested
     centers (1)                $190.1     $96.9       $183.3       $604.9
    Operating cash flow last
     twelve months              $519.6    $512.8       $485.6           --
    Operating cash flow,
     excluding the income
     tax payment on divested
     centers last
     twelve months (1)          $604.9    $598.1       $485.6           --

    Free cash flow (1)          $158.9     $67.4       $151.6       $410.4
    Free cash flow, excluding
     the income tax payment on
     divested centers (1)       $158.9     $67.4       $151.6       $495.8
    Free cash flow last
     twelve months (1)          $410.4    $403.2       $421.9           --
    Free cash flow, excluding
     the income tax payment
     on divested centers last
     twelve months (1)          $495.8    $488.5       $421.9           --

    Capital expenditures:
      Development and
       relocations               $44.5     $35.1        $27.8       $143.3
      Routine
       maintenance/IT/other      $32.5     $31.5        $32.3       $115.8
    Acquisition expenditures     $10.9      $6.0     $3,072.3        $86.5

  Accounts Receivable
    Net receivables               $932      $903         $854
    DSO                             70        70           71

  Debt/Capital Structure
    Total debt                  $3,751    $3,825       $4,157
    Net debt, net of cash       $3,441    $3,564       $3,725
    Leverage ratio
     (see Note 1)                3.66x     3.96x        4.45x

   Clinical (quarterly averages)
     Dialysis adequacy - % of
      patients with Kt/V > 1.2     93%       93%          94%
    Patients with
     albumin >/= 3.5 - 84%         84%       84%          82%




(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 thousands)

  Note 1: Calculation of the Leverage Ratio

Under the Company's current Senior Secured Credit Facilities (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.

                                                  Year ended
                                              December 31, 2006
  Income from continuing operations               $289,329
  Income taxes                                     186,430
  Debt expense                                     276,706
  Depreciation and amortization                    173,295
  Minority interests and equity income, net         35,833
  Valuation gain on Product Supply Agreement      (37,968)
  Other                                              2,622
  Stock-based compensation expense                  26,389
    "Consolidated EBITDA"                         $952,636

                                                 December 31,
                                                    2006
  Total debt                                    $3,751,251
  Letters of credit issued                          50,131
                                                 3,801,382
  Less: cash and cash equivalents                (310,202)
  Consolidated net debt                         $3,491,180
  Last twelve months "Consolidated EBITDA"        $952,636
  Leverage ratio                                     3.66x

In accordance with the Company's Credit Agreement, the Company's leverage ratio cannot exceed 6.0 to 1.0 as of December 31, 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 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 income from
  continuing operations and net income.

                                  Three months ended            Year ended
                              December    September    December    December
                                  31,        30,          31,         31,
                                 2006       2006         2005        2006
  Income from continuing
   operations                 $74,129      $93,091      $56,411   $289,329
  Less:  Valuation gain            --     (37,968)           --   (37,968)
  Add:  Related income tax         --       14,770           --     14,770
                              $74,129      $69,893      $56,411   $266,131

  Net income                  $74,129      $94,856      $64,149   $289,691
  Less:  Valuation gain            --     (37,968)           --   (37,968)
  Add:  Related income tax         --       14,770           --     14,770
                              $74,129      $71,658      $64,149  $ 266,493

  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.

                                  Three months ended            Year ended
                              December    September    December    December
                                  31,        30,          31,         31,
                                 2006       2006         2005        2006
  Operating income             $188,511   $217,094     $158,782   $739,432
  Less:  Valuation gain              --   (37,968)           --   (37,968)
                               $188,511   $179,126     $158,782  $ 701,464

                  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.


                                  Three months ended            Year ended
                              December    September    December    December
                                  31,        30,          31,         31,
                                 2006       2006         2005        2006
  Cash provided by operating
   activities                 $190,108    $96,937     $183,344     $519,571
  Income tax payment on
   divested centers                 --         --           --       85,328
                              $190,108    $96,937     $183,344     $604,899


                         Rolling 12-Month Period
                               December 31,   September 30,   December 31,
                                  2006         2006             2005
  Cash provided by
   operating activities        $519,571       $512,807        $485,554
  Income tax payment on
   divested centers              85,328         85,328              --
                               $604,899       $598,135        $485,554


                  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
  capital expenditures for routine maintenance and information technology.
  We believe free cash flow and free cash flow excluding the income tax
  payment on divested centers are useful adjuncts to cash flow from
  operating activities and other measurements under United States generally
  accepted accounting principles, since free cash flow is a meaningful
  measure of our ability to fund acquisition and development activities and
  meet our debt service requirements and because free cash flow excluding
  the income tax payment on divested centers excludes a non-recurring
  transaction that can cause unusual fluctuations in our free cash flows and
  accordingly is more comparable to prior periods and indicative of
  consistent free cash items.  Free cash flow and free cash flow excluding
  the income tax payment on divested centers are not measures 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.


                                        Three months ended
                             December 31,   September 30,   December 31,
                                2006           2006             2005
  Cash  provided by
   operating activities       $190,108       $96,937         $183,344
  Less:  Expenditures for
   routine maintenance and
   information technology     (31,214)      (29,551)         (31,735)
  Free cash flow              $158,894       $67,386         $151,609


                          Rolling 12-Month Period
                               December 31,   September 30,   December 31,
                                  2006         2006             2005
  Cash provided by operating
   activities                  $519,571      $512,807         $485,554
  Less: Expenditures for
   routine maintenance and
   information  technology    (109,131)     (109,652)         (63,639)
  Free cash flow               $410,440      $403,155         $421,915
   Income tax payment on
    divested centers             85,328        85,328               --
                               $495,768      $488,483         $421,915

First Call Analyst:
FCMN Contact: LeAnne.Zumwalt@davita.com

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SOURCE: DaVita Inc.

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


Contact Investor Relations

For media inquiries, please contact:

Media Kit

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