DaVita (DVA) 8-K DAVITA 1st QUARTER 2006 RESULTS

Exhibit 99.1

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

DAVITA 1st QUARTER 2006 RESULTS

El Segundo, California, May 3, 2006 – DaVita Inc. (NYSE: DVA), today announced results for the quarter ended March 31, 2006. Net income for the three months ended March 31, 2006, was $57.5 million or $0.55 per share.

Net income for the three months ended March 31, 2006 included after-tax stock-based compensation expense of $2.8 million or $0.025 per share as a result of implementing SFAS No. 123(R).

Financial and operating highlights include:

• Cash Flow: For the rolling 12-months ended March 31, 2006 operating cash flow was $412 million and free cash flow was $336 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. Operating cash flow for the three months ended March 31, 2006 was $61 million and free cash flow was $41 million, in each case excluding the tax benefit from stock option exercises and the $85 million income tax payment.

• Operating Income: Operating income for the three months ended March 31, 2006, was $162 million, as compared to $159 million for the fourth quarter of 2005.

• Volume: Total treatments for the three months ended March 31, 2006 were 3,501,032 or 45,468 treatments per day, as compared to 3,498,231 or 44,281 treatments per day for the fourth quarter of 2005. Non-acquired treatment growth in the quarter was 4.6%.

• Center Activity: As of March 31, 2006, we operated or provided administrative services at 1,241 outpatient centers serving approximately 98,000 patients. During the first quarter of 2006 we acquired 6 centers, opened 6 new centers, and provided administrative services to 2 additional centers. We also completed the divestiture of 3 centers related to the Gambro Healthcare acquisition and closed 3 centers.

Outlook

Our operating income guidance for 2006 is projected to be in the $600-680 million range after the impact of FASB No. 123R related to stock option expensing. 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 first quarter ended March 31, 2006 on May 3, 2006 at 10:00 AM 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-K for the year ended December 31, 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 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 March 31,
	2006			2005
Net operating revenues	$	1,163,188		$	578,626
Operating expenses and charges:
Patient care costs		817,773			387,515
General and administrative		104,168			54,263
Depreciation and amortization		41,891			23,845
Provision for uncollectible accounts		30,080			10,325
Minority interests and equity income, net		7,201			3,818
Total operating expenses and charges		1,001,113			479,766
Operating income		162,075			98,860
Debt expense		(70,459	)		(17,531	)
Swap valuation gain					8,392
Refinancing charges					(6,872	)
Other income, net		3,874			1,617
Income from continuing operations before income taxes		95,490			84,466
Income tax expense		37,710			32,496
Income from continuing operations		57,780			51,970
Discontinued operations
Income from operations of discontinued operations, net of tax					4,364
Loss on disposal of discontinued operations, net of tax		(311	)
Net income	$	57,469		$	56,334
Earnings per share:
Basic earnings per share from continuing operations	$	0.56		$	0.52
Basic earnings per share	$	0.56		$	0.57
Diluted earnings per share from continuing operations	$	0.55		$	0.50
Diluted earnings per share	$	0.55		$	0.55
Weighted average shares for earnings per share:
Basic		102,581,455			99,399,612
Diluted		105,388,419			103,150,299

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DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

	Three months ended March 31,
	2006				2005
Cash flows from operating activities:
Net income	$	57,469			$	56,334
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Depreciation and amortization		41,891				24,848
Stock-based compensation expense		5,692				841
Tax benefits from stock option exercises		983				15,093
Deferred income taxes		(2,425	)			(5,814	)
Minority interests in income of consolidated subsidiaries		8,104				4,410
Distributions to minority interests		(5,180	)			(3,518	)
Equity investment income		(903	)			(394	)
Loss (gain) on other divestitures		298				(193	)
Gain on disposal of discontinued operations		(961	)			—
Non-cash debt and other expenses		5,321				625
Refinancing charges		—				6,872
Swap valuation gain		—				(8,392	)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable		(5,558	)			(10,188	)
Inventories		(18,911	)			(2,820	)
Other receivables and other current assets		(17,850	)			(989	)
Other long term assets		(1,210	)			385
Accounts payable		(32,723	)			(4,865	)
Accrued compensation and benefits		5,223				5,421
Other current liabilities		(1,350	)			9,088
Income taxes		(63,828	)			28,500
Other long-term liabilities		2,354				(3,838	)
Net cash (used in) provided by operating activities		(23,564	)			111,406
Cash flows from investing activities:
Additions of property and equipment, net		(47,991	)			(25,625	)
Acquisitions		(22,845	)			(4,798	)
Proceeds from divestitures		17,734				2,297
Investments in and advances to affiliates, net		2,635				2,677
Intangible assets		(5,015	)			(395	)
Net cash used in investing activities		(55,482	)	��		(25,844	)
Cash flows from financing activities:
Borrowings		785,231				1,741,183
Payments on long-term debt		(898,443	)			(1,748,663	)
Deferred financing costs		(2	)			(29,213	)
Excess tax benefits from stock-based compensation		18,532				—
Stock option exercises and other share issuances, net		21,063				17,031
Net cash used in financing activities		(73,619	)			(19,662	)
Net (decrease) increase in cash and cash equivalents		(152,665	)			65,900
Cash and cash equivalents at beginning of period		431,811				251,979
Cash and cash equivalents at end of period	$	279,146			$	317,879

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DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except per share data)

	March 31, 2006			December 31, 2005
ASSETS
Cash and cash equivalents	$	279,146		$	431,811
Accounts receivable, less allowance of $144,968 and $138,598		859,138			853,560
Inventories		88,255			69,130
Other receivables		135,974			116,620
Other current assets		22,622			38,463
Deferred income taxes		152,304			144,824
Total current assets		1,537,439			1,654,408
Property and equipment, net		759,853			750,078
Amortizable intangibles, net		230,981			235,944
Investments in third-party dialysis businesses		3,028			3,181
Other long-term assets		52,752			41,768
Goodwill		3,605,401			3,594,383
	$	6,189,454		$	6,279,762
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	178,298		$	212,049
Other liabilities		381,193			381,964
Accrued compensation and benefits		236,266			231,994
Current portion of long-term debt		5,237			71,767
Income taxes payable		28,131			91,959
Total current liabilities		829,125			989,733
Long-term debt		4,039,333			4,085,435
Other long-term liabilities		26,367			26,416
Alliance and product supply agreement and other intangibles, net		153,995			163,431
Deferred income taxes		84,500			75,499
Minority interests		93,602			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		594,285			569,751
Retained earnings		897,399			839,930
Treasury stock, at cost (31,566,292 and 32,927,026 shares)		(550,291	)		(574,013	)
Accumulated comprehensive income valuations		21,004			14,806
Total shareholders’ equity		962,532			850,609
	$	6,189,454		$	6,279,762

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DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

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

	Three months ended
	March 31, 2006			December 31, 2005			March 31, 2005
Financial Results:
Net income	$	57.5		$	64.1		$	56.3
Income from continuing operations	$	57.8		$	56.4		$	52.0
Diluted earnings per share	$	0.55		$	0.61		$	0.55
Diluted earnings per share from continuing operations	$	0.55		$	0.54		$	0.50
Operating income	$	162.1		$	158.8		$	98.9
Operating income margin		13.9	%		14.0	%		17.1	%
Other comprehensive income
Unrealized gain on securities, net of tax expense of $3.9, $2.4, and $6.9	$	6.2		$	3.8		$	10.9
Business Metrics:
Volume
Treatments		3,501,032			3,498,231			1,761,530
Number of treatment days		77.0			79.0			77.0
Treatments per day		45,468			44,281			22,877
Per day year over year increase		98.7	%		95.8	%		13.6	%
Non-acquired growth		4.6	%		2.8	%		5.6	%
Revenue
Total operating revenue	$	1,163		$	1,133		$	579
Dialysis revenue per treatment	$	316.70		$	310.62		$	312.14
Per treatment increase (decrease) from previous quarter		2.0	%		(2.0	%)		—
Per treatment increase (decrease) from previous year		1.5	%		(0.6	%)		0.2	%
Expenses
A.      Patient care costs
Percent of revenue		70.3	%		70.5	%		67.0	%
Per treatment	$	233.58		$	228.48		$	219.99
Per treatment increase (decrease) from previous quarter		2.2	%		1.3	%		(0.9	%)
Per treatment increase from previous year		6.2	%		2.9	%		0.1	%
B.      General & administrative expenses
Percent of revenue		9.0	%		8.6	%		9.4	%
Per treatment	$	29.75		$	27.88		$	30.80
Per treatment increase (decrease) from previous quarter		6.7	%		(11.6	%)		3.5	%
Per treatment (decrease) increase from previous year		(3.4	%)		(6.3	%)		12.8	%
C.      Bad debt expense as a percent of current-period revenue		2.6	%		2.6	%		1.8	%
D.      Consolidated effective tax rate from continuing operations		39.5	%		35.7	%		38.5	%

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DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

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

	Three months ended
	March 31, 2006			December 31, 2005			March 31, 2005
Cash Flow
Operating cash flow	$	(23.6	)	$	183.3		$	111.4
Operating cash flow, excluding tax benefit from stock option exercises and the income tax payment on divested centers	$	60.8		$	179.3		$	96.3
Free cash flow	$	(43.3	)	$	151.6		$	103.8
Free cash flow, excluding tax benefit from stock option exercises and the income tax payment on divested centers	$	41.1		$	147.5		$	88.7
Capital expenditures:
Development	$	26.3		$	27.8		$	18.1
Routine maintenance/IT/other	$	21.7		$	32.3		$	7.6
Acquisition expenditures	$	22.8		$	3,072.3		$	4.8
Accounts Receivable
Net receivables	$	859		$	854		$	464
DSO		69			71			71
Debt/Capital Structure
Total debt	$	4,045		$	4,157		$	1,368
Net debt, net of cash and cash equivalents	$	3,765		$	3,725		$	1,050
Leverage ratio – (see Note 1)		4.29	x		4.45	x		—
Clinical (quarterly averages)
Dialysis adequacy - % of patients with Kt/V > 1.2		93	%		94	%		94	%
Patients with arteriovenous fistulas		49	%		45	%		43	%

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DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA—continued

(unaudited)

(dollars in thousands)

Note 1: Calculation of the Leverage Ratio

Under the Company’s 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, except that pro forma incremental “EBITDA” relating to routine acquisitions that occurred during the current quarter, which is included in the calculation of “EBITDA” under the Credit Agreement, is excluded from the calculation below. The calculation below is based on the last twelve-months of Consolidated “EBITDA”, pro forma for the DVA Renal Healthcare acquisition and related divestitures. 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 March 31, 2006
Income from continuing operations	$	242,118
Income taxes		154,341
Debt expense		278,671
Depreciation and amortization		171,781
Minority interests and equity income, net		28,030
Swap valuation losses		3,896
Refinancing charges		2,276
Other		1,298
Stock-based compensation expense		7,497
“Consolidated EBITDA” calculated as described above	$	889,908
	March 31, 2006
Total debt	$	4,044,570
Letters of credit issued		50,345
		4,094,915
Less: cash and cash equivalents		(279,146	)
Consolidated net debt	$	3,815,769
Last twelve months “Consolidated EBITDA” calculated as described above	$	889,908
Leverage ratio		4.29	x

In accordance with the Company’s Credit Agreement, the Company’s leverage ratio can not exceed 6.25 to 1.0 as of March 31, 2006. At that date, the Company’s leverage ratio did not exceed 6.25 to 1.0.

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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 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.

	Three months ended									Rolling 12-months ended March 31, 2006
	March 31, 2006			December 31, 2005			March 31, 2005
Cash (used in) provided by operating activities	$	(23,564	)	$	183,344		$	111,406		$	350,584
Less: Tax benefit from stock option exercises		(983	)		(4,064	)		(15,093	)		(24,374	)
Income tax payment on divested centers		85,328									85,328
	$	60,781		$	179,280		$	96,313		$	411,538

2. Free cash flow and free cash flow, excluding tax benefit from stock option exercises and income tax 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 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 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									Rolling 12-months ended March 31, 2006
	March 31, 2006			December 31, 2005			March 31, 2005
Cash (used in) provided by operating activities	$	(23,564	)	$	183,344		$	111,406		$	350,584
Less: Expenditures for routine maintenance and information technology		(19,726	)		(31,735	)		(7,634	)		(75,731	)
Free cash flow		(43,290	)		151,609			103,772			274,853
Less: Tax benefit from stock option exercises		(983	)		(4,064	)		(15,093	)		(24,374	)
Income tax payments on divested centers		85,328									85,328
	$	41,055		$	147,545		$	88,679		$	335,807

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