EX-99.2 3 a4695047ex992.txt EXHIBIT 99.2 EXHIBIT 99.2 Chemed Corporation Reports 2004 Second-Quarter Results; Consolidated Diluted EPS of $.66 CINCINNATI, August 3, 2004--Chemed Corporation ("Chemed") (NYSE:CHE), which operates the nation's largest provider of end-of-life care under the VITAS Healthcare Corporation (VITAS) brand and commercial and residential plumbing and drain cleaning services provider under the Roto-Rooter brand (Roto-Rooter), today reported financial results for its second quarter ended June 30, 2004, versus the comparable prior-year period as follows: o Consolidated Operating Results (GAAP) o Revenue increased 170% to $209.0 million o Diluted EPS of $.66 o VITAS generated record revenue and ADC levels o Quarterly Net Patient Revenue of $130.2 million, up 23% o Average Daily Census (ADC) of 8,581, up 19% o Net Income of $7.9 million, up 81% o Roto-Rooter segment reported increased Revenue and Net Income o Revenue increased 7% o Net Income of $5.2 million, an increase of 33% "The second quarter of 2004 represented our first full quarter of owning 100% of VITAS," said Kevin J. McNamara, Chemed president and chief executive officer. "The expansion of the VITAS business model continues to exceed our expectations. New starts have been accelerated and we continue to explore opportunities in terms of strategic acquisitions. This quarter includes $1.9 million in revenue and $1.0 million in pretax losses from our eight start-up sites. This compares to $0.4 million in revenue and $0.3 million operating losses in the prior year quarter. In addition, the VITAS operating infrastructure continues to show scalability and leverage as we look to expand our geographic coverage." "The second quarter of 2004 operating results are largely devoid of the merger complexity that was contained in the first quarter of 2004. This results in more clarity and understanding of the fundamental performance of Chemed and its individual business segments," said David Williams, Chemed's chief financial officer. "To that end, we have further refined our reported operating segments to provide additional clarity. Chemed corporate support has been separated from these operating segments to assist in this analysis. We do caution everyone to carefully review the unusual issues relating to the refinancing and merger of VITAS in the first quarter of 2004 when reviewing our year-to-date results." For a detailed presentation of reconciling items and related definitions and components, please refer to the attached schedules. VITAS ----- The merger of VITAS was completed on February 24, 2004. Prior to that date the Company accounted for its 37% ownership of VITAS under the equity method of accounting. As a result, under generally accepted accounting principles (GAAP), only a portion of VITAS' operating results are fully consolidated into Chemed's first quarter of 2004 results. VITAS had net patient revenue of $130.2 million, income from operations of $13.3 million and net income of $7.9 million in the second quarter of 2004. VITAS generated revenue growth of 22.6% over the prior year period. Gross margins remained relatively flat at 21.8% in the second quarter of 2004 as compared to 22.2% in the prior year quarter. The second quarter 2004 gross margin includes an incremental $0.7 million in start-up losses over the prior-year period which negatively impacted margins 50 basis points. Central support costs for VITAS, which are included as selling, general and administrative expenses in our statement of operations, declined 8.1%. On a proforma basis, VITAS increased net income 81% over the prior-year quarter. VITAS' average daily census (ADC) in the second quarter of 2004 was 8,581. This compares to an ADC of 7,198 in the comparable prior year period, an increase of 19% and 6% sequential growth. Average length-of-stay (LOS) per patient was 59.9 days for the quarter and compares to 55.4 days in the second quarter of 2003. The median LOS was 12.0 days for both periods. "We continue to see strong organic ADC growth across all levels of VITAS," said McNamara. "The ADC in our 22 base programs now exceeds an average of 375 patients per program. In our large programs, those with an average-daily-census in excess of 450, ADC growth was 16% for the quarter." "The second quarter demonstrated the scalability and leverage that can be derived from VITAS' business model," Williams stated. "Even with revenue growth of almost 23%, VITAS successfully eliminated a number of private company expenses and maintained minimal expense growth in the core central support costs. This resulted in a sequential decline in these operating expenses of $0.9 million, or 6.1%." Roto-Rooter Segment ------------------- Roto-Rooter's plumbing and drain cleaning business generated sales of $68.9 million for the second quarter of 2004, 6.7% higher than the $64.6 million reported in the comparable prior-year quarter. Net income for the quarter totaled $5.2 million, an increase of 33% over the prior year quarter. "There are several factors contributing to the improvement in the plumbing and drain cleaning segment," stated McNamara. "We were able to successfully pass through modest price increases in many of our markets in 2004. In addition, job count increased 1.6% in the second quarter of 2004 over the prior-year period. We continue to see a firming of demand in the majority of our markets and specifically increased demand in commercial and residential plumbing. Our expense control at the field level resulted in a second quarter 2004 gross profit margin of 44.4%, which is 40 basis points above the second quarter of 2003." Consolidated Financial Position ------------------------------- "Our cash position is solid," Williams stated. "As of June 30, 2004, we have over $52 million in cash and approximately $69 million of unused lines of credit under our Credit Facility. In addition, we have federal tax refunds in excess of $15 million relating to the deductibility of stock option buy-outs at the VITAS level that should be received by the fourth quarter of 2004." Guidance for the Remainder of the Year -------------------------------------- "Looking ahead into the second half of 2004," Williams stated, "we anticipate sequential consolidated revenue in the third quarter to be modestly above the second quarter due to seasonality factors within Roto-Rooter. Roto-Rooter is estimated to generate a 3% to 4% sequential decline in revenue in the third quarter and 6% to 7% sequential revenue growth in the fourth quarter, which is consistent with historical seasonality over the past several years. "VITAS has generated exceptional organic growth in the first half of 2004. Generally, this indicates a near-term flattening of census growth in the following one to two quarters. We are very optimistic as to the long-term sustainable trend line improvements in ADC, revenue, EBITDA margins and earnings per share. However, we should keep in perspective the reasonable fluctuations in growth patterns that will occur quarter to quarter. Capacity growth will be based upon our trailing ADC trends. We continue to grow staffing within all of our programs to ensure our ability to accept all hospice appropriate patients within a community. We anticipate fluctuations in margins quarter to quarter as capacity and central support resources are grown at a more predictable and methodical rate than our ADC. "Accordingly, we conservatively estimate third quarter and fourth quarter sequential ADC growth of 2.5% to 3.0% and 2.0% to 2.5%, respectively. This conservative growth estimate should result in an ADC in excess of 9,100 in the fourth quarter of 2004. We are anticipating an average Medicare reimbursement rate increase of 3% effective October 1, 2004. "Based upon these factors, and a diluted share count of 12.7 million, our expectation is that earnings per diluted share for the third quarter will be between $.56 and $.60 and the fourth quarter will be in the range of $.68 to $.72." Conference Call --------------- Chemed will hold a conference call to discuss second quarter results Wednesday, August 4, 2004, at 11:00 a.m. EDT. The dial-in number for the conference call is 800-945-0061 for U.S. and Canadian participants and 706-679-7146 for international participants. A taped replay of the conference call will be available approximately two hours after the call's conclusion. It can be accessed by dialing 800-642-1687 for U.S. and Canadian callers and 706-645-9291 for international callers. The conference identification number is 8344100. The telephone replay will be available for one week following the live call. The conference call will be available live via webcast at Chemed's Web site at www.Chemed.com by clicking on "Investor Relations Home" and then on "Featured Event: Web Cast-Live Q2 2004 Chemed Corporation Conference Call." An online replay will be available at www.Chemed.com beginning approximately two hours after the completion of the live call and will remain available for 14 days. Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to over 8,500 patients with severe, life-limiting illnesses. This type of care is focused on making the terminally ill patient's final days as comfortable and pain-free as possible. Chemed operates in the residential and commercial repair-and-maintenance-service industry under the brand names Roto-Rooter and Service America. Roto-Rooter provides plumbing and drain service through Company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in China/Hong Kong, Indonesia, Singapore, Japan, Mexico, the Philippines and the United Kingdom. Operating in Florida and Arizona, Service America furnishes residential and commercial appliance and heating and air conditioning repair and maintenance services. Forward-Looking Statements -------------------------- Certain statements contained in this press release and the accompanying tables are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope," "anticipate," "plan" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Chemed does not undertake and specifically disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause Chemed's actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties arise from, among other things, possible changes in regulations governing the hospice care, plumbing, drain cleaning and HVAC industries; periodic changes in reimbursement levels and procedures under Medicare and Medicaid programs; difficulties predicting patient length of stay and estimating potential Medicare reimbursement obligations; challenges inherent in Chemed's growth strategy; the current shortage of qualified nurses, other healthcare professionals and licensed plumbing and drain cleaning technicians; Chemed's dependence on patient referral sources; and other factors detailed under the caption "Description of Business by Segment" or "Risk Factors" in Chemed's most recent report on form 10-Q or 10-K and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved. CHEMED CORPORATION CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share data)(unaudited) Three Months Six Months Ended June 30, Ended June 30, ------------------- -------------------- 2004 2003 2004 2003 -------- ------- -------- -------- Service revenues and sales $208,994 $77,271 $340,042 $154,916 -------- ------- -------- -------- Cost of services provided and goods sold 147,206 45,611 233,430 91,763 Selling, general and administrative expenses 37,913 25,090 68,936 51,147(d) Depreciation 4,570 2,990 8,159 6,042 Long-term incentive compensation - - 9,058(a) - -------- ------- -------- -------- Total costs and expenses 189,689 73,691 319,583 148,952 -------- ------- -------- -------- Income from operations 19,305 3,580 20,459 5,964 Interest expense (6,206) (867) (9,111) (1,674) Loss on extinguishment of debt - - (3,330)(b) - Other income--net 231 2,455 1,810 6,717(e) -------- ------- -------- -------- Income before income taxes 13,330 5,168 9,828(a,b) 11,007 Income taxes (5,833) (1,868) (5,336) (4,150) Equity in income/(loss) of affiliate (VITAS) 821(c) - (3,284)(c) - -------- ------- -------- -------- Net Income $ 8,318(c) $ 3,300 $ 1,208(c) $ 6,857(d,e) ======== ======= ======== ======== Earnings Per Share Net income $ 0.67(c) $ 0.33 $ 0.10(c) $ 0.69(d,e) ======== ======= ======== ======== Average number of shares outstanding 12,325 9,908 11,619 9,899 ======== ======= ======== ======== Diluted Earnings Per Share Net income $ 0.66(c) $ 0.33 $ 0.10(c) $ 0.69(d,e) ======== ======= ======== ======== Average number of shares outstanding 12,677 9,942 11,848 9,922 ======== ======= ======== ======== (a) Amounts include a pretax charge of $9,058,000 ($5,894,000 aftertax or $.51 per share and $.50 per diluted share) for payouts under the Company's 2002 Executive Long-Term Incentive Plan in the first quarter of 2004. (b) Amounts include a pretax charge of $3,330,000 ($2,164,000 aftertax or $.19 per share and $.18 per diluted share) from the early extinguishment of debt in the first quarter of 2004. (c) Amounts include the Company's aftertax share of VITAS' charges related to the Company's acquisition of VITAS in the first quarter of 2004, prior to the acquisition date. The accruals for transaction costs were adjusted in the second quarter of 2004, based on changed facts and circumstances. Of the total adjustment, 37% (less deferred income taxes) was credited to the Company's equity in the earnings of VITAS and 63% was credited to goodwill. These charges comprise debt and transaction-related expenses that reduced the Company's equity in the earnings/(loss) of VITAS by $3,800,000 ($.33 per share and $.32 per diluted share) during the first six months of 2004. (d) Amounts include a pretax charge of $3,627,000 ($2,358,000 aftertax or $.24 per share) from severance charges in the first quarter of 2003. (e) Amounts for 2003 include a pretax gain of $3,544,000 ($2,151,000 aftertax or $.22 per share) from the sales of investments. CHEMED CORPORATION CONSOLIDATED BALANCE SHEET (in thousands, except per share data)(unaudited) June 30, --------------------- 2004 2003 ---------- ---------- Assets Current assets Cash and cash equivalents $ 52,644 $ 45,342 Accounts receivable less allowances 59,032 13,381 Inventories 8,336 8,699 Statutory deposits 8,418 10,095 Prepaid income taxes 14,730 4,837 Current deferred income taxes 24,368 9,224 Prepaid expenses and other current assets 10,277 6,955 ---------- ---------- Total current assets 177,805 98,533 Investments of deferred compensation plans held in trust 19,623 16,411 Other investments 1,445 32,789 Note receivable 12,500 12,500 Properties and equipment, at cost less accumulated depreciation 62,601 46,906 Identifiable intangible assets less accumulated amortization 24,392 2,599 Goodwill less accumulated amortization 450,988 112,903 Other assets 26,497 19,004 ---------- ---------- Total Assets $775,851 $ 341,645 ========== ========== Liabilities Current liabilities Accounts payable $ 43,143 $ 6,976 Current portion of long-term debt 5,552 473 Income taxes 259 428 Deferred contract revenue 16,060 16,795 Accrued insurance 21,366 16,442 Other current liabilities 56,351 19,630 ---------- ---------- Total current liabilities 142,731 60,744 Long-term debt 289,551 25,715 Convertible junior subordinated debentures - 14,186 Deferred compensation liabilities 19,622 16,395 Other liabilities 19,362 21,234 ---------- ---------- Total Liabilities 471,266 138,274 ---------- ---------- Stockholders' Equity Capital stock 13,406 13,451 Paid-in capital 207,916 169,402 Retained earnings 118,248 132,422 Treasury stock, at cost (32,702) (110,681) Unearned compensation (4,081) (3,824) Deferred compensation payable in Company stock 2,337 2,310 Notes receivable for shares sold (539) (926) Accumulated other comprehensive income - 1,217 ---------- ---------- Total Stockholders' Equity 304,585 203,371 ---------- ---------- Total Liabilities and Stockholders' Equity $775,851 $ 341,645 ========== ========== Book Value Per Share $ 24.49 $ 20.60 ========== ========== CHEMED CORPORATION CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003 (in thousands)(unaudited) Chemed Roto- Service Consoli- Vitas Rooter America Corporate dated -------- -------- ------- --------- -------- 2004 ---------------- Service revenues and sales $130,240 $ 68,895 $ 9,859 $ - $208,994 -------- -------- ------- -------- -------- Cost of services provided and goods sold 101,790 38,281 7,135 - 147,206 Selling, general and administrative expenses 13,329 19,997 2,354 2,233 37,913 Depreciation 1,861 2,174 472 63 4,570 -------- -------- ------- -------- -------- Total costs and expenses 116,980 60,452 9,961 2,296 189,689 -------- -------- ------- -------- -------- Income/(loss) from operations 13,260 8,443 (102) (2,296) 19,305 Interest expense (30) (33) (3) (6,140) (6,206) Other income--net 176 57 82 (84) 231 -------- -------- ------- -------- -------- Income/(loss) before income taxes 13,406 8,467 (23) (8,520) 13,330 Income taxes (5,499) (3,317) 5 2,978 (5,833) Equity in earnings of Vitas - - - 821(a) 821(a) -------- -------- ------- -------- -------- Net income/(loss) $ 7,907 $ 5,150 $ (18) $ (4,721) $ 8,318 ======== ======== ======= ======== ======== 2003 ---------------- Service revenues and sales $ - $ 64,592 $12,679 $ - $ 77,271 -------- -------- ------- -------- -------- Cost of services provided and goods sold - 36,158 9,453 - 45,611 Selling, general and administrative expenses - 20,854 2,595 1,641 25,090 Depreciation - 2,292 606 92 2,990 -------- -------- ------- -------- -------- Total costs and expenses - 59,304 12,654 1,733 73,691 -------- -------- ------- -------- -------- Income/(loss) from operations - 5,288 25 (1,733) 3,580 Interest expense - (86) (9) (772) (867) Other income--net - 1,026 122 1,307 2,455 -------- -------- ------- -------- -------- Income/(loss) before income taxes - 6,228 138 (1,198) 5,168 Income taxes - (2,346) (89) 567 (1,868) -------- -------- ------- -------- -------- Net income/(loss) $ - $ 3,882 $ 49 $ (631) $ 3,300 ======== ======== ======= ======== ======== (a) Amount includes the Company's aftertax share of VITAS' charges related to the Company's acquisition of VITAS in the first quarter of 2004, prior to the acquisition date. The accruals for transaction costs were adjusted in the second quarter of 2004, based on changed facts and circumstances. Of the total adjustment, 37% (less deferred income taxes) was credited to the Company's equity in the earnings of VITAS and 63% was credited to goodwill. CHEMED CORPORATION CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (in thousands)(unaudited) Chemed Roto- Service Consoli- Vitas Rooter America Corporate dated -------- -------- ------- --------- -------- 2004 -------------- Service revenues and sales $181,352 $138,122 $20,568 $ - $340,042 -------- -------- ------- -------- -------- Cost of services provided and goods sold 142,276 76,644 14,510 - 233,430 Selling, general and administrative expenses 18,720 41,002 4,719 4,495 68,936 Depreciation 2,609 4,420 1,001 129 8,159 Long-term incentive costs - 1,558(a) 275(a) 7,225(a) 9,058 -------- -------- ------- -------- -------- Total costs and expenses 163,605 123,624 20,505 11,849 319,583 -------- -------- ------- -------- -------- Income/(loss) from operations 17,747 14,498 63 (11,849) 20,459 Interest expense (58) (59) (7) (8,987) (9,111) Loss on extinguishment of debt - - - (3,330)(b) (3,330)(b) Other income --net 207 1,059 181 363 1,810 -------- -------- ------- -------- -------- Income/ (loss) before income taxes 17,896 15,498 237 (23,803) 9,828 Income taxes (7,392) (6,111) (118) 8,285 (5,336) Equity in loss of Vitas - - - (3,284)(c) (3,284)(c) -------- -------- ------- -------- -------- Net income/ (loss) $ 10,504 $ 9,387 $ 119 $(18,802) $ 1,208 ======== ======== ======= ======== ======== 2003 -------------- Service revenues and sales $ - $129,317 $25,599 $ - $154,916 -------- -------- ------- -------- -------- Cost of services provided and goods sold - 72,597 19,166 - 91,763 Selling, general and administrative expenses - 39,297 5,087 6,763(d) 51,147(d) Depreciation - 4,624 1,240 178 6,042 -------- -------- ------- -------- -------- Total costs and expenses - 116,518 25,493 6,941 148,952 -------- -------- ------- -------- -------- Income/ (loss) from operations - 12,799 106 (6,941) 5,964 Interest expense - (115) (20) (1,539) (1,674) Other income --net - 652 206 5,859(e) 6,717(e) -------- -------- ------- -------- -------- Income/ (loss) before income taxes - 13,336 292 (2,621) 11,007 Income taxes - (5,023) (189) 1,062 (4,150) -------- -------- ------- -------- -------- Net income/ (loss) $ - $ 8,313 $ 103 $ (1,559) $ 6,857 ======== ======== ======= ======== ======== (a) Amounts represent payouts under the Company's 2002 Executive Long-term Incentive Plan in the first quarter of 2004. The aftertax cost of these charges was $4,742,000 for Corporate, $982,000 for Roto-Rooter and $170,000 for Service America. (b) Amount represents the prepayment penalty incurred on the early extinguishment of the Company's debt ($2,164,000 aftertax) in the first quarter of 2004. (c) Amount includes the Company's aftertax share of VITAS' charges related to the Company's acquisition of VITAS in the first quarter of 2004, prior to the acquisition date. The accruals for transaction costs were adjusted in the second quarter of 2004, based on changed facts and circumstances. Of the total adjustment, 37% (less deferred income taxes) was credited to the Company's equity in the earnings of VITAS and 63% was credited to goodwill. These charges comprise debt and transaction-related expenses that reduced the Company's equity in the earnings/(loss) of VITAS by $3,800,000 ($.33 per share and $.32 per diluted share) during the first six months of 2004. (d) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax) for severance in the first quarter of 2003. (e) Amount includes a pretax gain of $3,544,000 ($2,151,000 aftertax) from the sales of investments in the first quarter of 2003. CHEMED CORPORATION PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003 (in thousands, except per share data) (unaudited) Chemed Roto- Service Consoli- Vitas Rooter America Corporate dated -------- -------- ------- --------- -------- 2004(a) ---------------- Service revenues and sales $130,240 $ 68,895 $ 9,859 $ - $208,994 -------- -------- ------- -------- -------- Cost of services provided and goods sold 101,790 38,281 7,135 - 147,206 Selling, general and administrative expenses 13,329 19,997 2,354 2,233 37,913 Depreciation 1,861 2,174 472 63 4,570 -------- -------- ------- -------- -------- Total costs and expenses 116,980(c) 60,452 9,961 2,296 189,689 -------- -------- ------- -------- -------- Income/(loss) from operations 13,260 8,443 (102) (2,296) 19,305 Interest expense (30) (33) (3) (6,140) (6,206) Other income-- net 176 57 82 (84) 231 -------- -------- ------- -------- -------- Income/(loss) before income taxes 13,406 8,467 (23) (8,520) 13,330 Income taxes (5,499) (3,317) 5 2,978 (5,833) -------- -------- ------- -------- -------- Net income/ (loss) $ 7,907 $ 5,150 $ (18) $ (5,542) $ 7,497 ======== ======== ======= ======== ======== Earnings Per Share Net Income $ 0.61 ======== Average Shares Outstanding 12,325 ======== Diluted Earnings Per Share Net Income $ 0.60 ======== Average Shares Outstanding 12,677 ======== 2003(b) ---------------- Service revenues and sales $106,245 $ 64,592 $12,679 $ - $183,516 -------- -------- ------- -------- -------- Cost of services provided and goods sold 82,684 36,158 9,453 - 128,295 Selling, general and administrative expenses 14,504 20,854 2,595 1,506 39,459 Depreciation 1,983 2,292 606 92 4,973 -------- -------- ------- -------- -------- Total costs and expenses 99,171(c) 59,304 12,654 1,598 172,727 -------- -------- ------- -------- -------- Income/(loss) from operations 7,074 5,288 25 (1,598) 10,789 Interest expense - (86) (9) (6,342) (6,437) Other income-- net 203 1,026 122 595 1,946 -------- -------- ------- -------- -------- Income/(loss) before income taxes 7,277 6,228 138 (7,345) 6,298 Income taxes (2,912) (2,346) (89) 2,546 (2,801) -------- -------- ------- -------- -------- Net income/ (loss) $ 4,365 $ 3,882 $ 49 $ (4,799) $ 3,497 ======== ======== ======= ======== ======== Earnings Per Share Net Income $ 0.29 ======== Average Shares Outstanding 11,908 ======== Diluted Earnings Per Share Net Income $ 0.29 ======== Average Shares Outstanding 11,942 ======== (a) The pro forma statement of operations for 2004 assumes the Company's acquisition of VITAS and its financing (including the retirement of existing debt) were completed as of January 1, 2004, on the same terms and conditions as completed on February 24, 2004. (b) The pro forma statement of operations for 2003 assumes the Company's acquisition of VITAS and its financing (including the retirement of existing debt) were completed as of January 1, 2003, on the same terms and conditions as completed on February 24, 2004. (c) Operating expenses for VITAS for 2004 and 2003 include additional amortization and depreciation expense resulting from purchase accounting adjustments to VITAS' assets in the amount of $1,313,000 in each period. CHEMED CORPORATION PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (in thousands, except per share data) (unaudited) Chemed Roto- Service Consoli- Vitas Rooter America Corporate dated -------- -------- ------- --------- -------- 2004(a) -------------- Service revenues and sales $254,222 $138,122 $20,568 $ - $412,912 -------- -------- ------- -------- -------- Cost of services provided and goods sold 201,124 76,644 14,510 - 292,278 Selling, general and administrative expenses 27,521 41,002 4,719 4,356 77,598 Depreciation 3,737 4,420 1,001 129 9,287 Long-term incentive costs - 1,558(d) 275(d) 7,225(d) 9,058(d) -------- -------- ------- -------- -------- Total costs and expenses 232,382(c) 123,624 20,505 11,710 388,221 -------- -------- ------- -------- -------- Income/ (loss) from operations 21,840 14,498 63 (11,710) 24,691 Interest expense (58) (59) (7) (12,389) (12,513) Loss on extinguishment of debt - - - (3,330)(e) (3,330)(e) Other income-- net 248 1,059 181 363 1,851 -------- -------- ------- -------- -------- Income/ (loss) before income taxes 22,030 15,498 237 (27,066) 10,699 Income taxes (8,924) (6,111) (118) 9,419 (5,734) -------- -------- ------- -------- -------- Net income/ (loss) $ 13,106 $ 9,387 $ 119 $(17,647) $ 4,965 ======== ======== ======= ======== ======== Earnings Per Share Net Income $ 0.41 ======== Average Shares Outstanding 12,168 ======== Diluted Earnings Per Share Net Income $ 0.40 ======== Average Shares Outstanding 12,397 ======== 2003(b) -------------- Service revenues and sales $206,427 $129,317 $25,599 $ - $361,343 -------- -------- ------- -------- -------- Cost of services provided and goods sold 163,603 72,597 19,166 - 255,366 Selling, general and administrative expenses 27,037 39,297 5,087 6,493(f) 77,914(f) Depreciation 3,911 4,624 1,240 178 9,953 -------- -------- ------- -------- -------- Total costs and expenses 194,551(c) 116,518 25,493 6,671 343,233 -------- -------- ------- -------- -------- Income/(loss) from operations 11,876 12,799 106 (6,671) 18,110 Interest expense - (115) (20) (12,592) (12,727) Loss on extinguishment of debt - - - (3,330)(e) (3,330)(e) Other income-- net 353 652 206 4,435(g) 5,646(g) -------- -------- ------- -------- -------- Income/ (loss) before income taxes 12,229 13,336 292 (18,158) 7,699 Income taxes (4,885) (5,023) (189) 6,154 (3,943) -------- -------- ------- -------- -------- Net income/ (loss) $ 7,344 $ 8,313 $ 103 $(12,004) $ 3,756 ======== ======== ======= ======== ======== Earnings Per Share Net Income $ 0.32 ======== Average Shares Outstanding 11,899 ======== Diluted Earnings Per Share Net Income $ 0.32 ======== Average Shares Outstanding 11,922 ======== (a) The pro forma statement of operations for 2004 assumes the Company's acquisition of VITAS and its financing (including the retirement of existing debt) were completed as of January 1, 2004, on the same terms and conditions as completed on February 24, 2004. (b) The pro forma statement of operations for 2003 assumes the Company's acquisition of VITAS and its financing (including the retirement of existing debt) were completed as of January 1, 2003, on the same terms and conditions as completed on February 24, 2004. (c) Operating expenses for VITAS for 2004 and 2003 include additional amortization and depreciation expense resulting from purchase accounting adjustments to VITAS' assets in the amount of $2,625,000 in each period. (d) Amounts represent payouts under the Company's 2002 Executive Long-term Incentive Plan in the first quarter of 2004. The aftertax cost of these charges was $4,742,000 for Corporate, $982,000 for Roto-Rooter and $170,000 for Service America. (e) Amount represents the prepayment penalty incurred on the early extinguishment of the Company's debt ($2,164,000 aftertax) in the first quarter of 2004. (f) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax) for severance charges in the first quarter of 2003. (g) Amount includes a pretax gain of $3,544,000 ($2,151,000 aftertax) from the sales of investments in the first quarter of 2003.