DaVita (DVA) 8-K DAVITA 2nd QUARTER 2006 RESULTS

Exhibit 99.1

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

DAVITA 2nd QUARTER 2006 RESULTS

El Segundo, California, August 2, 2006 – DaVita Inc. (NYSE: DVA), today announced results for the quarter ended June 30, 2006. Income from continuing operations for the three and six months ended June 30, 2006, was $64.3 million and $122.1 million, or $0.61 and $1.16 per share, respectively, as compared with $48.1 million and $100.1 million or $0.46 and $0.97 per share, respectively, for the same periods of 2005.

Income from continuing operations for the three and six months ended June 30, 2006 included incremental after-tax stock-based compensation expense of $2.8 million and $5.6 million or $0.02 and $0.05 per share, respectively, related to SFAS No. 123(R). Net income including discontinued operations for the three and six months ended June 30, 2006 was $63.2 million and $120.7 million or $0.60 and $1.14 per share, respectively.

Financial and operating highlights include:

• Cash Flow:  Operating cash flow for the three months ended June 30, 2006 was $256 million and free cash flow was $227 million. For the rolling 12-months ended June 30, 2006 operating cash flow was $572 million and free cash flow was $482 million, in each case excluding the tax benefit from stock option exercises and 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 $500 million and free cash flow was $411 million.

• Operating Income:  Operating income for the three months and six months ended June 30, 2006, was $172 million and $334 million, respectively.

• Volume:  Total treatments for the second quarter were 3,602,567 or 46,187 treatments per day, as compared to 3,501,032 or 45,468 treatments per day for the first quarter of 2006. Non-acquired treatment growth in the quarter was 4.1% over the prior year’s quarter.

• Center Activity:  As of June 30, 2006, we operated or provided administrative services at 1,255 outpatient centers serving approximately 100,000 patients. During the second quarter of 2006 we acquired 8 centers, including one center where we previously provided management services, opened 10 new centers and closed 3 centers.

Outlook

We are revising our 2006 operating income guidance; operating income is now expected to be in the $670-700 million range. Our previous guidance was for operating income to be in the $600-680 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 results for the second quarter ended June 30, 2006 on August 2, 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 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 March 31, 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 preferred provider organizations 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 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 June 30,						Six months ended June 30,
	2006			2005			2006			2005
Net operating revenues	$	1,207,816		$	617,085		$	2,371,004		$	1,195,711
Operating expenses and charges:
Patient care costs		842,973			413,225			1,660,746			800,740
General and administrative		111,444			59,856			215,612			114,119
Depreciation and amortization		41,717			24,933			83,608			48,778
Provision for uncollectible accounts		31,230			10,964			61,310			21,289
Minority interests and equity income, net		8,700			5,676			15,901			9,494
Total operating expenses and charges		1,036,064			514,654			2,037,177			994,420
Operating income		171,752			102,431			333,827			201,291
Debt expense		(68,436	)		(24,885	)		(138,895	)		(42,416	)
Swap valuation (loss) gain					(2,131	)					6,261
Refinancing charges											(6,872	)
Other income		2,973			2,065			6,847			3,682
Income from continuing operations before income taxes		106,289			77,480			201,779			161,946
Income tax expense		41,960			29,353			79,670			61,849
Income from continuing operations		64,329			48,127			122,109			100,097
Discontinued operations
Income from operations of discontinued operations, net of tax					4,816						9,180
Loss on disposal of discontinued operations, net of tax		(1,092	)					(1,403	)
Net income	$	63,237		$	52,943		$	120,706		$	109,277
Earnings per share:
Basic earnings per share from continuing operations	$	0.62		$	0.48		$	1.18		$	1.00
Basic earnings per share	$	0.61		$	0.53		$	1.17		$	1.09
Diluted earnings per share from continuing operations	$	0.61		$	0.46		$	1.16		$	0.97
Diluted earnings per share	$	0.60		$	0.51		$	1.14		$	1.06
Weighted average shares for earnings per share:
Basic		103,479,062			100,476,587			103,046,461			99,939,222
Diluted		105,645,208			103,845,030			105,486,027			103,512,444

3

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

	Six months ended June 30,
	2006			2005
Cash flows from operating activities:
Net income	$	120,706		$	109,277
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		83,608			50,708
Stock-based compensation expense		11,455			1,862
Tax benefits from stock option exercises		1,574			25,846
Deferred income taxes		(20,980	)		(11,433	)
Minority interests in income of consolidated subsidiaries		17,360			10,652
Distributions to minority interests		(13,357	)		(7,970	)
Equity investment income		(1,459	)		(511	)
Gain on other dispositions		(360	)		(400	)
Loss on disposal of discontinued operations		787			—
Non-cash debt and other expenses		8,880			1,505
Refinancing charges		—			6,872
Swap valuation gain		—			(6,261	)
Excess tax benefits from stock-based compensation		(22,054	)		—
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable		(2,555	)		(15,546	)
Inventories		(23,282	)		(2,528	)
Other receivables and other current assets		(15,522	)		(12,185	)
Other long term assets		(1,040	)		(94	)
Accounts payable		(20,997	)		5,054
Accrued compensation and benefits		60,829			18,314
Other current liabilities		70,714			41,028
Income taxes		(24,701	)		1,221
Other long-term liabilities		2,920			2,190
Net cash provided by operating activities		232,526			217,601
Cash flows from investing activities:
Additions of property and equipment, net		(115,362	)		(65,905	)
Acquisitions and purchases of other ownership interests		(69,578	)		(88,683	)
Proceeds from divestitures and asset sales		21,098			—
Investments in and advances to affiliates, net		9,981			8,721
Intangible assets		(5,630	)		(780	)
Net cash used in investing activities		(159,491	)		(146,647	)
Cash flows from financing activities:
Borrowings		2,925,838			1,742,232
Payments on long-term debt		(3,139,358	)		(1,752,197	)
Deferred financing costs		(2	)		(29,979	)
Excess tax benefits from stock-based compensation		22,054			—
Stock option exercises and other share issuances, net		25,941			29,772
Net cash used in financing activities		(165,527	)		(10,172	)
Net (decrease) increase in cash and cash equivalents		(92,492	)		60,782
Cash and cash equivalents at beginning of period		431,811			251,979
Cash and cash equivalents at end of period	$	339,319		$	312,761

4

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except per share data)

	June 30, 2006			December 31, 2005
ASSETS
Cash and cash equivalents	$	339,319		$	431,811
Accounts receivable, less allowance of $159,745 and $138,598		859,165			853,560
Inventories		93,362			69,130
Other receivables		135,731			116,620
Other current assets		24,620			38,463
Deferred income taxes		177,426			144,824
Total current assets		1,629,623			1,654,408
Property and equipment, net		787,378			750,078
Amortizable intangibles, net		224,769			235,944
Investments in third-party dialysis businesses		1,936			3,181
Other long-term assets		57,562			41,768
Goodwill		3,640,143			3,594,383
	$	6,341,411		$	6,279,762
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	190,096		$	212,049
Other liabilities		449,599			381,964
Accrued compensation and benefits		291,140			231,994
Current portion of long-term debt		5,008			71,767
Income taxes payable		45,204			91,959
Total current liabilities		981,047			989,733
Long-term debt		3,939,047			4,085,435
Other long-term liabilities		27,287			26,416
Alliance and product supply agreement and other intangibles, net		149,943			163,431
Deferred income taxes		93,251			75,499
Minority interests		107,992			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		602,952			569,751
Retained earnings		960,636			839,930
Treasury stock, at cost (31,280,720 and 32,927,026 shares)		(545,313	)		(574,013	)
Accumulated comprehensive income valuations		24,434			14,806
Total shareholders’ equity		1,042,844			850,609
	$	6,341,411		$	6,279,762

5

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

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

	Q2 2006			Q1 2006			Q2 2005			Six months ended June 30, 2006
Financial Results:
Income from continuing operations	$	64.3		$	57.8		$	48.1		$	122.1
Net income	$	63.2		$	57.5		$	52.9		$	120.7
Diluted earnings per share from continuing operations	$	0.61		$	0.55		$	0.46		$	1.16
Diluted earnings per share	$	0.60		$	0.55		$	0.51		$	1.14
Operating income	$	171.8		$	162.1		$	102.4		$	333.8
Operating income margin		14.2	%		13.9	%		16.6	%		14.1	%
Other comprehensive income
Unrealized gain (loss) on securities, net of tax (expense) benefit of ($2.2), ($3.9), $5.7 and ($6.1)	$	3.4		$	6.2		$	(9.0	)	$	9.6
Business Metrics:
Volume
Treatments		3,602,567			3,501,032			1,856,522			7,103,599
Number of treatment days		78.0			77.0			78.0			155.0
Treatments per day		46,187			45,468			23,802			45,830
Per day year over year increase		94.0	%		98.7	%		15.5	%		96.3	%
Non-acquired growth year over year		4.1	%		4.6	%		5.5	%		4.3	%
Revenue
Total operating revenue	$	1,208		$	1,163		$	617		$	2,371
Dialysis revenue per treatment	$	318.80		$	316.70		$	313.49		$	317.77
Per treatment increase from previous quarter		0.66	%		2.0	%		0.43	%		—
Per treatment increase from previous year		1.7	%		1.5	%		0.35	%		1.6	%
Expenses
A.      Patient care costs
Percent of revenue		69.8	%		70.3	%		67.3	%		70.0	%
Per treatment	$	233.99		$	233.58		$	222.58		$	233.79
Per treatment increase from previous quarter		0.18	%		2.2	%		1.2	%		—
Per treatment increase from previous year		5.1	%		6.2	%		0.77	%		5.6	%
B.      General & administrative expenses
Percent of revenue		9.2	%		9.0	%		9.7	%		9.1	%
Per treatment	$	30.93		$	29.75		$	32.24		$	30.35
Per treatment increase from previous quarter		4.0	%		6.7	%		4.7	%		—
Per treatment (decrease) increase from previous year		(4.1	%)		(3.4	%)		13.3	%		(3.8	%)
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		39.5	%		39.5	%		38.0	%		39.5	%

6

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

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

	Q2 2006			Q1 2006			Q2 2005			Six months ended June 30, 2006
Cash Flow
Operating cash flow	$	256.1		$	(23.6	)	$	106.2		$	232.5
Operating cash flow, excluding tax benefit from stock option exercises and the income tax payment on divested centers	$	255.5		$	60.8		$	95.4		$	316.3
Free cash flow	$	227.5		$	(43.3	)	$	91.6		$	184.2
Free cash flow, excluding tax benefit from stock option exercises and the income tax payment on divested centers	$	226.9		$	41.1		$	80.8		$	267.9
Capital expenditures:
Development and relocations	$	37.3		$	26.3		$	22.2		$	63.6
Routine maintenance/IT/other	$	30.1		$	21.7		$	18.6		$	51.8
Acquisition expenditures	$	46.7		$	22.8		$	83.9		$	69.6
Accounts Receivable
Net receivables	$	859		$	859		$	478
DSO		67			69			70
Debt/Capital Structure
Total debt	$	3,944		$	4,045		$	1,366
Net debt, net of cash	$	3,605		$	3,765		$	1,053
Leverage ratio (see Note 1)		4.07x			4.29x			—
Clinical (quarterly averages)
Dialysis adequacy - % of patients with Kt/V > 1.2		93	%		93	%		94	%
Patients with arteriovenous fistula		50	%		49	%		45	%

7

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 DVA Renal Healthcare acquisition and related divestitures as well as other routine acquisitions. 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 June 30, 2006
Income from continuing operations	$	240,668
Income taxes		155,083
Debt expense		279,739
Depreciation and amortization		169,106
Minority interests and equity income, net		29,433
Swap valuation losses		1,713
Refinancing charges		1,298
Other		7,788
Stock-based compensation expense		13,259
“Consolidated EBITDA”	$	898,087
	June 30, 2006
Total debt	$	3,944,055
Letters of credit issued		50,345
		3,994,400
Less: cash and cash equivalents		(339,319	)
Consolidated net debt	$	3,655,081
Last twelve months “Consolidated EBITDA”	$	898,087
Leverage ratio		4.07x

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

8

DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES

(unaudited)

(dollars in thousands)

1. Operating cash flow, excluding tax benefit from stock option exercises and income tax payment on divested centers:

We believe that operating cash flow excluding tax benefit from stock option exercises and 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 is comparable to prior periods and indicative of consistent operating cash flow items, and because it excludes certain non-recurring transactions that can cause unusual fluctuations in our operating cash flows. 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.

	Q2 2006			Q1 2006			Six months ended June 30, 2006			Q2 2005			Rolling 12- Month Period ended Q2 2006
Cash (used in) provided by operating activities	$	256,090		$	(23,564	)	$	232,526		$	106,195		$	500,479
Less: Tax benefit from stock option exercises		(591	)		(983	)		(1,574	)		(10,753	)		(14,212	)
Income tax payment on divested centers		—			85,328			85,328			—			85,328
	$	255,499		$	60,781		$	316,280		$	95,442		$	571,595

2. Free cash flow and free cash flow, excluding tax benefit from stock option exercises and 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.

	Q2 2006			Q1 2006			Six months ended June 30, 2006			Q2 2005			Rolling 12- Month Period ended Q2 2006
Cash (used in) provided by operating activities	$	256,090		$	(23,564	)	$	232,526		$	106,195		$	500,479
Less: Expenditures for routine maintenance and information technology		(28,640	)		(19,726	)		(48,366	)		(14,614	)		(89,757	)
Free cash flow	$	227,450		$	(43,290	)	$	184,160		$	91,581		$	410,722
Less: Tax benefit from stock option exercises		(591	)		(983	)		(1,574	)		(10,753	)		(14,212	)
Income tax payments on divested centers		—			85,328			85,328			—			85,328
	$	226,859		$	41,055		$	267,914		$	80,828		$	481,838

9