-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EJSIaez1AS0h99+iiBpHeWtmoaoTA77uh3TUYKi9yoCvYQm1qbFFZLgbI2CRHcAK GMApkiWI30bIvP8+viZXog== 0001157523-05-002321.txt : 20050309 0001157523-05-002321.hdr.sgml : 20050309 20050309130729 ACCESSION NUMBER: 0001157523-05-002321 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050308 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050309 DATE AS OF CHANGE: 20050309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEMED CORP CENTRAL INDEX KEY: 0000019584 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS REPAIR SERVICES [7600] IRS NUMBER: 310791746 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08351 FILM NUMBER: 05668739 BUSINESS ADDRESS: STREET 1: 2600 CHEMED CTR STREET 2: 255 E FIFTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: (513)762-6900 MAIL ADDRESS: STREET 1: 2600 CHEMED CTR STREET 2: 255 E FIFTH STREET CITY: CINCINNATI STATE: OH ZIP: 45202 FORMER COMPANY: FORMER CONFORMED NAME: ROTO-ROOTER INC DATE OF NAME CHANGE: 20030613 FORMER COMPANY: FORMER CONFORMED NAME: CHEMED CORP DATE OF NAME CHANGE: 19920703 8-K 1 a4838390.txt CHEMED CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): March 08, 2005 CHEMED CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-8351 31-0791746 (State or other (Commission File Number) (I.R.S. Employer jurisdiction of Identification incorporation) Number) 2600 Chemed Center, 255 East 5th Street, Cincinnati, OH 45202 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (513) 762-6900 Page 1 of 2 Item 2.02 Results of Operations and Financial Condition On March 8, 2005 Chemed Corporation issued a press release announcing its financial results for the year ended December 31, 2004. A copy of the release is furnished herewith as Exhibit 99.1. Item 9.01 Financial Statements and Exhibits c) Exhibit (99.1) Registrant's press release dated March 8, 2005 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CHEMED CORPORATION Dated: March 9, 2005 By: /s/ Arthur V. Tucker, Jr. -------------- -------------------------- Arthur V. Tucker, Jr. Vice President and Controller Page 2 of 2 EX-99.1 2 a4838390ex991.txt EXHIBIT 99.1 Exhibit 99.1 Chemed Corporation Reports 2004 Fourth-Quarter Results: Diluted EPS of $1.22; Diluted EPS from Continuing Operations of $.57; Adjusted Diluted EPS from Continuing Operations of $.82 CINCINNATI--(BUSINESS WIRE)--March 8, 2005--Chemed Corporation (Chemed) (NYSE:CHE), which operates VITAS Healthcare Corporation (VITAS), the nation's largest provider of end-of-life care, and Roto-Rooter, the nation's largest commercial and residential plumbing and drain cleaning services provider, today reported financial results for its fourth quarter ended December 31, 2004, versus the comparable prior-year period, as follows: Operating Results in Accordance with Generally Accepted Accounting Principles (GAAP): -- Consolidated Revenue increased 214% to $214 million -- Diluted EPS of $1.22 -- VITAS EBITDA of $19.2 million -- Roto-Rooter EBITDA of $7.6 million Pro Forma Adjusted Consolidated Operating Results (Non GAAP): -- Pro Forma Adjusted Diluted EPS from Continuing Operations of $.82 -- Pro Forma Adjusted EBITDA from Continuing Operations of $30.2 million VITAS generated record revenue and ADC levels: -- Quarterly Net Patient Revenue of $142 million, up 18% -- Average Daily Census (ADC) of 9,134, up 14% -- Pro forma net income of $10.7 million, up 56% -- Adjusted EBITDA (Non GAAP) of $20.4 million, an increase of 49% Roto-Rooter segment reported increased Revenue and Adjusted EBITDA: -- Revenue of $71.7 million, an increase of 5.3% -- Adjusted EBITDA (Non GAAP) of $11.9 million, an increase of 45% "The fourth quarter showed exceptional strength in both of our businesses," stated Kevin McNamara, Chemed president and chief executive officer. "VITAS generated excellent census and admissions growth, with fourth quarter ADC totaling 9,134 and average length-of-stay for discharges (LOS) during the period of 64.1 days. During the quarter, we completed the Phoenix acquisition and currently have eleven new starts in various stages of development. "Roto-Rooter also had good financial operating results. For the fourth quarter of 2004, Roto-Rooter had net income of $3.3 million. This includes an estimated $1.9 million after-tax cost for the anticipated settlement of our Madison County, Ill., class action litigation." "Our fourth quarter GAAP financial statements include a number of items that need to be considered when evaluating our operating results," said David Williams, Chemed's chief financial officer. "These items include costs related to the registration of Chemed's $110 million floating rate notes, VITAS merger related transaction costs and final valuation adjustments, direct expensing of telephone directory costs, and the estimated settlement expense of the Madison County class action litigation." For a detailed presentation of Chemed's operating results, 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 GAAP, only a portion of VITAS' operating results are fully consolidated into Chemed's first quarter of 2004 results. For the 2004 fourth quarter, VITAS had net patient revenue of $142.3 million and pro forma net income of $10.7 million. Adjusted EBITDA was $20.4 million. VITAS generated revenue growth of 18.0% over the prior year period and 5.3% sequentially. Gross margins were 23.5% in the fourth quarter of 2004, an improvement of 50 basis points when compared to the prior year quarter. The fourth quarter 2004 gross margin includes $1.5 million in start-up losses, which is an incremental $1.0 million over the prior-year period. The incremental portion of these losses negatively impacted fourth quarter 2004 margins by 70 basis points. Central support costs for VITAS, which are classified as selling, general and administrative expenses in the VITAS Pro Forma Quarterly Statement of Income, totaled $13.0 million which is a decline of 7.8% from the prior year quarter and up 2.8% sequentially. VITAS' ADC in the fourth quarter of 2004 was 9,134. This compares to an ADC of 7,979 in the comparable prior year period, an increase of 14% and 2.1% sequential growth. LOS per patient was 64.1 days for the quarter and compares to 60.8 days in the third quarter of 2004 and 59.0 days in the fourth quarter of 2003. Our established programs, which exclude start-up programs, had a range of LOS from 40.5 days to 112.6 days in the fourth quarter of 2004. "We continue to see strong organic ADC growth across all levels of VITAS," said McNamara. "The ADC in our 22 base programs now average 401 patients per program. In our large programs, those with an average-daily-census in excess of 450, ADC growth was 11.5% over the prior year quarter and was flat sequentially. Our small and medium programs generated ADC growth of 16.5% over the prior year and 3.2% sequentially." "Our mix of revenue at VITAS was relatively stable this quarter," Williams stated. "Routine home care aggregated 69.4% of revenue, an increase of 60 basis points over the prior year quarter and a 40 basis point decline on a sequential basis. Our inpatient revenue aggregated 13.5% of total revenue and continuous care was 17.1% of revenue in the fourth quarter of 2004." Roto-Rooter Segment Roto-Rooter's plumbing and drain cleaning business generated sales of $71.7 million for the fourth quarter of 2004, 5.3% higher than the $68.1 million reported in the comparable prior-year quarter. Net income for the quarter, including $1.9 million of after-tax expense for the anticipated settlement of our Madison County class action litigation, totaled $3.3 million. Adjusted EBITDA in the fourth quarter of 2004 totaled $11.9 million, an increase of 45% over the fourth quarter of 2003. "There are several factors contributing to the improvement in the plumbing and drain cleaning segment," stated McNamara. "Job count was basically flat in the fourth quarter, increasing a modest 0.3% over the prior-year period. However, commercial demand remains strong with job count increasing 3.7% over the prior year quarter. On a full year basis, job count increased 1.1%, with commercial demand growing 3.3% and residential job count demand increasing 0.2% over the prior year. Our expense control at the field level resulted in a fourth quarter 2004 gross profit margin of 48.1%, which is 484 basis points above the fourth quarter of 2003 and 267 basis points above the third quarter of 2004." Consolidated Financial Position "Our balance sheet is in excellent condition," Williams stated. "As of December 31, 2004, we had over $71 million in cash and cash equivalents. In February 2005, we restructured our debt. Effective February 18, 2005, Chemed redeemed the $110 million of floating rate notes that had a current interest rate of LIBOR plus 4%. On February 24, 2005, we amended and restated Chemed's bank credit facility. Terms of this amended facility increased the aggregate amount of term loan from a current balance of $30.5 million to $85 million at a rate of LIBOR plus 2.0%. The revolving credit facility was increased from $100 million to $175 million at a current rate of LIBOR plus 2.5%. The end result of this refinancing was to de-leverage our balance sheet by approximately $55 million, reduce aggregate interest expense and expand Chemed's access to capital for acquisitions and other corporate purposes." Guidance for 2005 "Looking ahead into 2005," Williams stated, "we anticipate VITAS to increase revenue in the range of 16% to 18% in 2005 with margins increasing modestly from the 2004 levels. This operating margin expansion will be generated from leveraging our central support costs. Roto-Rooter is estimated to generate a 5% to 7% increase in revenue with margins that approximate those generated in 2004. Debt refinancing will favorably impact interest expense in 2005, although this will be partially offset by an increase in the LIBOR rate. "Based upon these factors, and a current diluted share count of 12.9 million, our expectation is that earnings per diluted share for 2005, excluding costs associated with the early extinguishment of debt, will be in the range of $3.30 to $3.50." Conference Call Chemed will hold a conference call to discuss fourth quarter results Wednesday, March 9, 2005, at 11:00 a.m. EST. 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 live webcast of the call can be accessed on Chemed's website at www.chemed.com by clicking on "Investor Relations Home" and then on "Featured Event: Web Cast-Live Q4 2004 Chemed Corporation Earnings Conference Call." An archived webcast will also be available at www.chemed.com and will remain available for 14 days following the live call. 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 4165174. The telephone replay will be available for one week following the live call. Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to approximately 9,000 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 plumbing and drain cleaning industry under the brand name Roto-Rooter. 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. This press release contains information about Chemed's adjusted EBITDA, which is not a measure derived in accordance with generally accepted accounting principles, and which excludes components that are important to understanding Chemed's financial performance. Chemed provides adjusted EBITDA to help investors and others evaluate its operating results, compare its operating performance with that of similar companies that have different capital structures and evaluate its ability to meet its future debt service, capital expenditures and working capital requirements. Chemed's adjusted EBITDA should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. A reconciliation of Chemed's net income to its adjusted EBITDA is presented in the tables following the text of this press release. 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 and drain cleaning 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 OPERATIONS (in thousands, except per share data)(unaudited) For the For the Three Months Ended Years Ended December 31, December 31, ------------------- ------------------- 2004 2003 2004 2003 --------- --------- --------- --------- Continuing Operations Service revenues and sales $213,981 $ 68,117 $735,341 $260,776 -------- -------- -------- -------- Cost of services provided and goods sold 146,029 38,638 507,078 146,818 Selling, general and administrative expenses (aa) 40,226 26,405 138,285 95,363 Depreciation 4,774 2,353 14,542 9,519 Amortization 517 122 3,779 302 Other expenses (aa) 6,355 - 13,551 - -------- -------- -------- -------- Total costs and expenses 197,901 67,518 677,235 252,002 -------- -------- -------- -------- Income from operations 16,080 599 58,106 8,774 Interest expense (5,971) (776) (21,158) (3,177) Loss on extinguishment of debt (aa) - - (3,330) - Other income--net (aa) 1,505 1,355 3,469 10,849 -------- -------- -------- -------- Income before income taxes 11,614 1,178 37,087 16,446 Income taxes (aa) (4,236) (557) (13,796) (6,180) Equity in earnings/(loss) of affiliate (aa) - 922 (4,105) 922 -------- -------- -------- -------- Income from continuing operations 7,378 1,543 19,186 11,188 Discontinued Operations (bb) 8,314 (14,748) 8,326 (14,623) -------- -------- -------- -------- Net Income/(Loss) $ 15,692 $(13,205) $ 27,512 $ (3,435) ======== ======== ======== ======== Earnings/(Loss) Per Share Income from continuing operations (aa) $ 0.59 $ 0.16 $ 1.59 $ 1.13 ======== ======== ======== ======== Net Income/(Loss) $ 1.26 $ (1.33) $ 2.28 $ (0.35) ======== ======== ======== ======== Average number of shares outstanding 12,497 9,954 12,060 9,924 ======== ======== ======== ======== Diluted Earnings/(Loss) Per Share Income from continuing operations (aa) $ 0.57 $ 0.15 $ 1.56 $ 1.12 ======== ======== ======== ======== Net Income/(Loss) $ 1.22 $ (1.32) $ 2.23 $ (0.35) ======== ======== ======== ======== Average number of shares outstanding 12,836 10,000 12,318 9,954 ========= ========= ========= ======== ---------------------------------------- (aa) Included in the results of operations are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands, except per share data): For the For the Three Months Ended Years Ended December 31, December 31, ------------------- ------------------- 2004 2003 2004 2003 --------- --------- --------- --------- Selling, general and administrative expenses Corporate severance charges $ - $ - $ - $ (3,627) Other expenses Costs related to class action litigation (3,135) - (3,135) - Transaction-related costs of the VITAS acquisition (2,029) - (442) - Professional fees incurred for debt registration statement (1,191) - (1,191) - Long-term incentive compensation - - (8,783) - Loss on extinguishment of debt Prepayment penalty for extinguishment of debt - - (3,330) - Other income--net Capital gains on disposal of investments - - - 5,390 --------- --------- --------- --------- Pretax impact on income (6,355) - (16,881) 1,763 Income tax benefit/(provision) on the above 2,557 - 6,568 (770) Adjustments of income taxes related to prior-year issues 600 - 1,620 - Equity in loss of affiliate atttributable to transaction-related expenses incurred by VITAS prior to its acquisition by Chemed - - (4,105) - --------- --------- --------- --------- Aftertax impact on income $ (3,198) $ - $(12,798) $ 993 ========= ========= ========= ========= Impact on earnings per share $ (0.26) $ - $ (1.06) $ 0.10 Impact on diluted earnings per share (0.25) - (1.04) 0.10 (bb) Discontinued operations include Service America, discontinued in the fourth quarter of 2004, and accrual adjustments related to operations discontinued in prior years. CHEMED CORPORATION CONSOLIDATED BALANCE SHEET (in thousands, except per share data)(unaudited) December 31, -------------------- 2004 2003(cc) --------- ---------- Assets Current assets Cash and cash equivalents $ 71,448 $ 50,688 Accounts receivable less allowances 64,663 14,351 Inventories 7,019 6,011 Current deferred income taxes 31,250 8,430 Current assets of discontinued operations 13,397 15,583 Prepaid expenses and other current assets 9,842 6,411 -------- --------- Total current assets 197,619 101,474 Investments of deferred compensation plans held in trust 18,317 17,391 Other investments 1,445 25,081 Note receivable 12,500 12,500 Properties and equipment, at cost less accumulated depreciation 55,796 31,440 Identifiable intangible assets less accumulated amortization 76,924 592 Goodwill 432,732 105,335 Noncurrent assets of discontinued operations 5,705 10,954 Other assets 24,528 23,691 -------- --------- Total Assets $825,566 $ 328,458 ======== ========= Liabilities Current liabilities Accounts payable $ 37,777 $ 6,081 Current portion of long-term debt 13,580 193 Income taxes 10,944 6,633 Accrued insurance 26,350 14,382 Accrued salaries and wages 17,030 1,210 Current liabilities of discontinued operations 22,117 21,131 Other current liabilities 42,777 19,066 -------- --------- Total current liabilities 170,575 68,696 Deferred income taxes 16,814 - Long-term debt 278,115 25,931 Convertible junior subordinated debentures - 14,126 Deferred compensation liabilities 18,311 17,380 Noncurrent liabilities of discontinued operations 811 417 Other liabilities 8,848 9,215 -------- --------- Total Liabilities 493,474 135,765 -------- --------- Stockholders' Equity Capital stock 13,491 13,453 Paid-in capital 212,691 170,501 Retained earnings 141,542 119,746 Treasury stock, at cost (33,873) (109,427) Unearned compensation (3,590) (2,954) Deferred compensation payable in Company stock 2,375 2,308 Notes receivable for shares sold (544) (934) -------- --------- Total Stockholders' Equity 332,092 192,693 -------- --------- Total Liabilities and Stockholders' Equity $825,566 $ 328,458 ======== ========= Book Value Per Share $ 26.55 $ 19.38 ======== ========= (cc) Reclassified to conform to 2004 presentation CHEMED CORPORATION CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ---------- ------------- ---------- ------------ 2004 - ------------------ Service revenues and sales $ 142,277 $ 71,704 $ - $ 213,981 --------- --------- --------- --------- Cost of services provided and goods sold 108,830 37,199 - 146,029 Selling, general and administrative expenses 13,006 24,770 2,450 40,226 Depreciation 2,634 2,082 58 4,774 Amortization 354 (37) 200 517 Other expenses 1,680 (a) 3,135 (a) 1,540 (a) 6,355 --------- --------- --------- --------- Total costs and expenses 126,504 67,149 4,248 197,901 --------- --------- --------- --------- Income/(loss) from operations 15,773 4,555 (4,248) 16,080 Interest expense (38) (104) (5,829) (5,971) Intercompany interest income/(expense) 339 341 (680) - Loss on extinguishment of debt - - - - Other income--net 127 674 704 1,505 --------- --------- --------- --------- Income/(loss) before income taxes 16,201 5,466 (10,053) 11,614 Income taxes (6,541) (2,125) 4,430 (e) (4,236) Equity in earnings of VITAS - - - - --------- --------- --------- --------- Income/(loss) from continuing operations 9,660 3,341 (5,623) 7,378 Discontinued operations - - 8,314 8,314 --------- --------- --------- --------- Net income $ 9,660 $ 3,341 $ 2,691 $ 15,692 ========= ========= ========= ========= 2003 - ------------------ Service revenues and sales $ - $ 68,117 $ - $ 68,117 --------- --------- --------- --------- Cost of services provided and goods sold - 38,638 - 38,638 Selling, general and administrative expenses - 24,573 1,832 26,405 Depreciation - 2,279 74 2,353 Amortization - 122 - 122 --------- --------- --------- --------- Total costs and expenses - 65,612 1,906 67,518 --------- --------- --------- --------- Income/(loss) from operations - 2,505 (1,906) 599 Interest expense - (22) (754) (776) Intercompany interest income/(expense) - 181 (181) - Other income--net - 735 620 1,355 --------- --------- --------- --------- Income/(loss) before income taxes - 3,399 (2,221) 1,178 Income taxes - (1,324) 767 (557) Equity in earnings of VITAS - - 922 922 --------- --------- --------- --------- Income/(loss) from continuing operations - 2,075 (532) 1,543 Discontinued operations - - (14,748) (14,748) --------- --------- --------- --------- Net income/ (loss) $ - $ 2,075 $ (15,280) $ (13,205) ========= ========= ========= ========= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ---------- ------------- ---------- ------------ 2004 - ------------------ Service revenues and sales $ 458,730 $ 276,611 $ - $ 735,341 --------- --------- --------- --------- Cost of services provided and goods sold 356,801 150,277 - 507,078 Selling, general and administrative expenses 42,946 85,636 9,703 138,285 Depreciation 5,712 8,583 247 14,542 Amortization 3,349 119 311 3,779 Other expenses 1,680 (a) 4,693 (a) 7,178 (a) 13,551 --------- --------- --------- --------- Total costs and expenses 410,488 249,308 17,439 677,235 --------- --------- --------- --------- Income/(loss) from operations 48,242 27,303 (17,439) 58,106 Interest expense (128) (206) (20,824) (21,158) Intercompany interest income/(expense) 759 1,041 (1,800) - Loss on extinguishment of debt - - (3,330)(b) (3,330) Other income--net 296 1,268 1,905 3,469 --------- --------- --------- --------- Income/(loss) before income taxes 49,169 29,406 (41,488) 37,087 Income taxes (20,030) (10,611)(e) 16,845 (e) (13,796) Equity in loss of VITAS - - (4,105)(f) (4,105) --------- --------- --------- --------- Income/(loss) from continuing operations 29,139 18,795 (28,748) 19,186 Discontinued operations - - 8,326 8,326 --------- --------- --------- --------- Net income/ (loss) $ 29,139 $ 18,795 $ (20,422) $ 27,512 ========= ========= ========= ========= 2003 - ------------------ Service revenues and sales $ - $ 260,776 $ - $ 260,776 --------- --------- --------- --------- Cost of services provided and goods sold - 146,818 - 146,818 Selling, general and administrative expenses - 85,114 10,249 (c) 95,363 Depreciation - 9,179 340 9,519 Amortization - 302 - 302 --------- --------- --------- --------- Total costs and expenses - 241,413 10,589 252,002 --------- --------- --------- --------- Income/(loss) from operations - 19,363 (10,589) 8,774 Interest expense - (170) (3,007) (3,177) Intercompany interest income/(expense) - 595 (595) - Other income--net - 1,442 9,407 (d) 10,849 --------- --------- --------- --------- Income/(loss) before income taxes - 21,230 (4,784) 16,446 Income taxes - (8,054) 1,874 (6,180) Equity in earnings of VITAS - - 922 922 --------- --------- --------- --------- Income/(loss) from continuing operations - 13,176 (1,988) 11,188 Discontinued operations - - (14,623) (14,623) --------- --------- --------- --------- Net income/ (loss) $ - $ 13,176 $ (16,611) $ (3,435) ========= ========= ========= ========= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003 (in thousands, except per share data) (unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ---------- ------------- ------------- ------------ 2004 (g) - ------------------- Service revenues and sales $ 142,277 $ 71,704 $ - $ 213,981 --------- --------- --------- --------- Cost of services provided and goods sold 108,830 37,199 - 146,029 Selling, general and administrative expenses 13,006 24,770 2,450 40,226 Depreciation 2,123 2,082 58 4,263 Amortization 869 (37) 200 1,032 Other expenses - 3,135 (a) 1,191 (a) 4,326 --------- --------- --------- --------- Total costs and expenses 124,828 67,149 3,899 195,876 --------- --------- --------- --------- Income/(loss) from operations 17,449 4,555 (3,899) 18,105 Interest expense (38) (104) (5,829) (5,971) Intercompany interest income/(expense) 339 341 (680) - Loss on extinguishment of debt - - - - Other income--net 127 674 704 1,505 --------- --------- --------- --------- Income/(loss) before income taxes 17,877 5,466 (9,704) 13,639 Income taxes (7,213) (2,125) 4,247 (e) (5,091) --------- --------- --------- --------- Income/(loss) from continuing operations 10,664 3,341 (5,457) 8,548 Discontinued operations - - 8,314 8,314 --------- --------- --------- --------- Net income $ 10,664 $ 3,341 $ 2,857 $ 16,862 ========= ========= ========= ========= Earnings Per Share Continuing operations $ 0.68 ========= Net income $ 1.35 ========= Average number of shares outstanding 12,497 ========= Diluted Earnings Per Share Continuing operations $ 0.67 ========= Net income $ 1.31 ========= Average number of shares outstanding 12,836 ========= 2003 (h) - ------------------- Service revenues and sales $ 121,062 $ 68,117 $ - $ 189,179 --------- --------- --------- --------- Cost of services provided and goods sold 93,214 38,638 - 131,852 Selling, general and administrative expenses 14,103 24,573 1,697 40,373 Depreciation 1,275 2,279 74 3,628 Amortization 1,061 122 - 1,183 --------- --------- --------- --------- Total costs and expenses 109,653 65,612 1,771 177,036 --------- --------- --------- --------- Income/(loss) from operations 11,409 2,505 (1,771) 12,143 Interest expense - (22) (4,226) (4,248) Intercompany interest income/(expense) - 181 (181) - Loss on extinguishment of debt - - - - Other income--net 163 735 620 1,518 --------- --------- --------- --------- Income/(loss) before income taxes 11,572 3,399 (5,558) 9,413 Income taxes (4,728) (1,324) 1,926 (4,126) --------- --------- --------- --------- Income/(loss) from continuing operations 6,844 2,075 (3,632) 5,287 Discontinued operations - - (14,748) (14,748) --------- --------- --------- --------- Net income/ (loss) $ 6,844 $ 2,075 $ (18,380) $ (9,461) ========= ========= ========= ========= Earnings/(Loss) Per Share Continuing operations $ 0.44 ========= Net loss $ (0.79) ========= Average number of shares outstanding 11,954 ========= Diluted Earnings/(Loss) Per Share Continuing operations $ 0.44 ========= Net loss $ (0.79) ========= Average number of shares outstanding 12,000 ========= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (in thousands, except per share data) (unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ---------- ------------- ------------- ------------ 2004 (g) - ------------------- Service revenues and sales $ 531,600 $ 276,611 $ - $ 808,211 --------- --------- --------- --------- Cost of services provided and goods sold 415,649 150,277 - 565,926 Selling, general and administrative expenses 51,271 85,636 9,564 146,471 Depreciation 6,192 8,583 247 15,022 Amortization 3,957 119 311 4,387 Other expenses - 4,693 (a) 8,416 (a) 13,109 --------- --------- --------- --------- Total costs and expenses 477,069 249,308 18,538 744,915 --------- --------- --------- --------- Income/(loss) from operations 54,531 27,303 (18,538) 63,296 Interest expense (128) (206) (24,226) (24,560) Intercompany interest income/(expense) 759 1,041 (1,800) - Loss on extinguishment of debt - - (3,330)(b) (3,330) Other income--net 337 1,268 1,905 3,510 --------- --------- --------- --------- Income/(loss) before income taxes 55,499 29,406 (45,989) 38,916 Income taxes (22,447) (10,611)(e) 18,431 (e) (14,627) --------- --------- --------- --------- Income/(loss) from continuing operations 33,052 18,795 (27,558) 24,289 Discontinued operations - - 8,326 8,326 --------- --------- --------- --------- Net income/ (loss) $ 33,052 $ 18,795 $ (19,232) $ 32,615 ========= ========= ========= ========= Earnings Per Share Continuing operations $ 1.93 ========= Net income $ 2.59 ========= Average number of shares outstanding 12,609 ========= Diluted Earnings Per Share Continuing operations $ 1.89 ========= Net income $ 2.53 ========= Average number of shares outstanding 12,867 ========= 2003 (h) - ------------------- Service revenues and sales $ 441,017 $ 260,776 $ - $ 701,793 --------- --------- --------- --------- Cost of services provided and goods sold 345,189 146,818 - 492,007 Selling, general and administrative expenses 53,526 85,114 9,708 (c) 148,348 Depreciation 5,100 9,179 340 14,619 Amortization 4,185 302 - 4,487 --------- --------- --------- --------- Total costs and expenses 408,000 241,413 10,048 659,461 --------- --------- --------- --------- Income/(loss) from operations 33,017 19,363 (10,048) 42,332 Interest expense - (170) (23,337) (23,507) Intercompany interest income/(expense) - 595 (595) - Loss on extinguishment of debt - - (3,330)(b) (3,330) Other income--net 684 1,442 5,767 (d) 7,893 --------- --------- --------- --------- Income/(loss) before income taxes 33,701 21,230 (31,543) 23,388 Income taxes (13,543) (8,054) 10,788 (10,809) --------- --------- --------- --------- Income/(loss) from continuing operations 20,158 13,176 (20,755) 12,579 Discontinued operations - - (14,623) (14,623) --------- --------- --------- --------- Net income/ (loss) $ 20,158 $ 13,176 $ (35,378) $ (2,044) ========= ========= ========= ========= Earnings/(Loss) Per Share Continuing operations $ 1.05 ========= Net loss $ (0.17) ========= Average number of shares outstanding 11,924 ========= Diluted Earnings/(Loss) Per Share Continuing operations $ 1.05 ========= Net loss $ (0.17) ========= Average number of shares outstanding 11,954 ========= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION VITAS PRO FORMA QUARTERLY STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (in thousands) (unaudited) First Second Third Fourth Full Quarter Quarter Quarter Quarter Year --------- --------- --------- --------- --------- 2004 (g) - --------------------- Service revenues and sales $123,982 $130,240 $135,101 $142,277 $531,600 -------- -------- -------- -------- -------- Cost of services provided and goods sold 99,334 101,790 105,695 108,830 415,649 Selling, general and administrative expenses 13,385 12,227 12,653 13,006 51,271 Depreciation 982 1,270 1,306 2,634 6,192 Amortization 1,024 1,324 1,251 358 3,957 Long-term incentive costs - - - - - -------- -------- -------- -------- -------- Total costs and expenses 114,725 116,611 120,905 124,828 477,069 -------- -------- -------- -------- -------- Income from operations 9,257 13,629 14,196 17,449 54,531 Interest expense (28) (30) (32) (38) (128) Intercompany interest income/(expense) - 131 289 339 759 Loss on extinguishment of debt - - - - - Other income--net 72 45 93 127 337 -------- -------- -------- -------- -------- Income before income taxes 9,301 13,775 14,546 17,877 55,499 Income taxes (3,701) (5,647) (5,886) (7,213) (22,447) -------- -------- -------- -------- -------- Net income $ 5,600 $ 8,128 $ 8,660 $ 10,664 $ 33,052 ======== ======== ======== ======== ======== 2003 (h) - --------------------- Service revenues and sales $100,182 $106,245 $113,528 $121,062 $441,017 -------- -------- -------- -------- -------- Cost of services provided and goods sold 80,919 82,684 88,372 93,214 345,189 Selling, general and administrative expenses 11,714 13,686 14,023 14,103 53,526 Depreciation 1,318 1,373 1,134 1,275 5,100 Amortization 1,041 1,042 1,041 1,061 4,185 Long-term incentive costs - - - - - -------- -------- -------- -------- -------- Total costs and expenses 94,992 98,785 104,570 109,653 408,000 -------- -------- -------- -------- -------- Income from operations 5,190 7,460 8,958 11,409 33,017 Interest expense - - - - - Intercompany interest income/(expense) - - - - - Loss on extinguishment of debt - - - - - Other income--net 150 203 168 163 684 -------- -------- -------- -------- -------- Income before income taxes 5,340 7,663 9,126 11,572 33,701 Income taxes (2,132) (3,069) (3,614) (4,728) (13,543) -------- -------- -------- -------- -------- Net income $ 3,208 $ 4,594 $ 5,512 $ 6,844 $ 20,158 ======== ======== ======== ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION CONSOLIDATING SUMMARY OF EBITDA FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ---------- ----------- ----------- ------------ 2004 - ---------------------- Net income $ 9,660 $ 3,341 $ 2,691 $ 15,692 Add/(deduct): Discontinued operations - - (8,314) (8,314) Interest expense 38 104 5,829 5,971 Income taxes 6,541 2,125 (4,430) 4,236 Depreciation 2,634 2,082 58 4,774 Amortization 354 (37) 200 517 -------- -------- -------- -------- EBITDA 19,227 7,615 (3,966) 22,876 Add/(deduct): Long-term incentive compensation - - - - Lawsuit settlement - 3,135 - 3,135 Debt registration expenses - - 1,191 1,191 Advertising cost adjustment (j) - 1,571 - 1,571 Interest income (142) (31) (434) (607) Intercompany interest income/(expense) (339) (341) 680 - Loss on extinguishment of debt - - - - VITAS transaction costs and adjustments 1,680 - 349 2,029 Equity in earnings of VITAS - - - - -------- -------- -------- -------- Adjusted EBITDA $ 20,426 $ 11,949 $ (2,180) $ 30,195 ======== ======== ======== ======== 2003 - ----------------------- Net income/(loss) $ - $ 2,075 $(15,280) $(13,205) Add/(deduct): Discontinued operations - - 14,748 14,748 Interest expense - 22 754 776 Income taxes - 1,324 (768) 556 Depreciation - 2,279 74 2,353 Amortization - 122 - 122 -------- -------- -------- -------- EBITDA - 5,822 (472) 5,350 Add/(deduct): Severance charges - - - - Advertising cost adjustment (j) - 2,689 - 2,689 Interest income - (92) (365) (457) Intercompany interest income/(expense) - (181) 181 - Dividend income from VITAS - - - - Equity in earnings of VITAS - - (922) (922) Gains on sales of investments - - - - -------- -------- -------- -------- Adjusted EBITDA $ - $ 8,238 $ (1,578) $ 6,660 ======== ======== ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION CONSOLIDATING SUMMARY OF EBITDA FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ---------- ----------- ----------- ------------ 2004 - ---------------------- Net income/(loss) $ 29,139 $ 18,795 $(20,422) $ 27,512 Add/(deduct): Discontinued operations - - (8,326) (8,326) Interest expense 128 206 20,824 21,158 Income taxes 20,030 10,611 (16,845) 13,796 Depreciation 5,712 8,583 247 14,542 Amortization 3,349 119 311 3,779 -------- -------- -------- -------- EBITDA 58,358 38,314 (24,211) 72,461 Add/(deduct): Long-term incentive compensation - 1,558 7,225 8,783 Lawsuit settlement - 3,135 - 3,135 Debt registration expenses - - 1,191 1,191 Advertising cost adjustment (j) - 528 - 528 Interest income (332) (139) (1,403) (1,874) Intercompany interest income/(expense) (759) (1,041) 1,800 - Loss on extinguishment of debt - - 3,330 3,330 VITAS transaction costs and adjustments 1,680 - (1,238) 442 Equity in loss of VITAS - - 4,105 4,105 -------- -------- -------- -------- Adjusted EBITDA $ 58,947 $ 42,355 $ (9,201) $ 92,101 ======== ======== ======== ======== 2003 - ----------------------- Net income/(loss) $ - $ 13,176 $(16,611) $ (3,435) Add/(deduct): Discontinued operations - - 14,623 14,623 Interest expense - 170 3,007 3,177 Income taxes - 8,054 (1,874) 6,180 Depreciation - 9,179 340 9,519 Amortization - 302 - 302 -------- -------- -------- -------- EBITDA - 30,881 (515) 30,366 Add/(deduct): Severance charges - - 3,627 3,627 Advertising cost adjustment (j) - 829 - 829 Interest income - (268) (1,592) (1,860) Intercompany interest income/(expense) - (595) 595 - Dividend income from VITAS - - (1,532) (1,532) Equity in earnings of VITAS - - (922) (922) Gains on sales of investments - - (5,390) (5,390) -------- -------- -------- -------- Adjusted EBITDA $ - $ 30,847 $ (5,729) $ 25,118 ======== ======== ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION PRO FORMA CONSOLIDATING SUMMARY OF EBITDA FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003 (in thousands)(unaudited) Chemed VITAS (i) Roto-Rooter Corporate (i) Consolidated --------- ----------- ------------- ------------ 2004 - ---------------------- Pro forma net income $ 10,664 $ 3,341 $ 2,857 $ 16,862 Add/(deduct): Discontinued operations - - (8,314) (8,314) Interest expense 38 104 5,829 5,971 Income taxes 7,213 2,125 (4,247) 5,091 Depreciation 2,123 2,082 58 4,263 Amortization 869 (37) 200 1,032 -------- -------- -------- -------- Pro forma EBITDA 20,907 7,615 (3,617) 24,905 Add/(deduct): Long-term incentive compensation - - - - Lawsuit settlement - 3,135 - 3,135 Debt registration expenses - - 1,191 1,191 Advertising cost adjustment (j) - 1,571 - 1,571 Interest income (142) (31) (434) (607) Intercompany interest income/(expense) (339) (341) 680 - Loss on extinguishment of debt - - - - -------- -------- -------- -------- Pro forma adjusted EBITDA $ 20,426 $ 11,949 $ (2,180) $ 30,195 ======== ======== ======== ======== 2003 - ---------------------- Pro forma net income/(loss) $ 6,844 $ 2,075 $(18,380) $ (9,461) Add/(deduct): Discontinued operations - - 14,748 14,748 Interest expense - 22 4,226 4,248 Income taxes 4,728 1,324 (1,926) 4,126 Depreciation 1,275 2,279 74 3,628 Amortization 1,061 122 - 1,183 -------- -------- -------- -------- Pro forma EBITDA 13,908 5,822 (1,258) 18,472 Add/(deduct): Severance charges - - - - Advertising cost adjustment (j) - 2,689 - 2,689 Interest income (163) (92) (365) (620) Intercompany interest income/(expense) - (181) 181 - Gains on sales of investments - - - - Loss on extinguishment of debt - - - - -------- -------- -------- -------- Pro forma adjusted EBITDA $ 13,745 $ 8,238 $ (1,442) $ 20,541 ======== ======== ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION PRO FORMA CONSOLIDATING SUMMARY OF EBITDA FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (in thousands)(unaudited) Chemed VITAS (i) Roto-Rooter Corporate (i) Consolidated --------- ----------- ------------- ------------ 2004 - ---------------------- Pro forma net income/(loss) $ 33,052 $ 18,795 $(19,232) $ 32,615 Add/(deduct): Discontinued operations - - (8,326) (8,326) Interest expense 128 206 24,226 24,560 Income taxes 22,447 10,611 (18,431) 14,627 Depreciation 6,192 8,583 247 15,022 Amortization 3,957 119 311 4,387 -------- -------- -------- -------- Pro forma EBITDA 65,776 38,314 (21,205) 82,885 Add/(deduct): Long-term incentive compensation - 1,558 7,225 8,783 Lawsuit settlement - 3,135 - 3,135 Debt registration expenses - - 1,191 1,191 Advertising cost adjustment (j) - 528 - 528 Interest income (373) (139) (1,403) (1,915) Intercompany interest income/(expense) (759) (1,041) 1,800 - Loss on extinguishment of debt - - 3,330 3,330 -------- -------- -------- -------- Pro forma adjusted EBITDA $ 64,644 $ 42,355 $ (9,062) $ 97,937 ======== ======== ======== ======== 2003 - ---------------------- Pro forma net income/(loss) $ 20,158 $ 13,176 $(35,378) $ (2,044) Add/(deduct): Discontinued operations - - 14,623 14,623 Interest expense - 170 23,337 23,507 Income taxes 13,543 8,054 (10,788) 10,809 Depreciation 5,100 9,179 340 14,619 Amortization 4,185 302 - 4,487 -------- -------- -------- -------- Pro forma EBITDA 42,986 30,881 (7,866) 66,001 Add/(deduct): Severance charges - - 3,627 3,627 Advertising cost adjustment (j) - 829 - 829 Interest income (684) (268) (1,330) (2,282) Intercompany interest income/(expense) - (595) 595 - Gains on sales of investments - - (3,544) (3,544) Loss on extinguishment of debt - - 3,330 3,330 -------- -------- -------- -------- Pro forma adjusted EBITDA $ 42,302 $ 30,847 $ (5,188) $ 67,961 ======== ======== ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION VITAS PRO FORMA QUARTERLY SUMMARY OF EBITDA FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (in thousands) (unaudited) First Second Third Fourth Full 2004 (g) Quarter Quarter Quarter Quarter Year - ------------------------- -------- -------- -------- -------- -------- Pro forma net income $ 5,600 $ 8,128 $ 8,660 $10,664 $33,052 Add/(deduct): Interest expense 28 30 32 38 128 Income taxes 3,701 5,647 5,886 7,213 22,447 Depreciation 982 1,270 1,306 2,634 6,192 Amortization 1,024 1,324 1,251 358 3,957 ------- ------- ------- ------- ------- Pro forma EBITDA 11,335 16,399 17,135 20,907 65,776 Add/(deduct): Interest income (72) (65) (94) (142) (373) Intercompany interest income/(expense) - (131) (289) (339) (759) ------- ------- ------- ------- ------- Pro forma adjusted EBITDA $11,263 $16,203 $16,752 $20,426 $64,644 ======= ======= ======= ======= ======= 2003 (h) - ------------------------ Pro forma net income $ 3,208 $ 4,594 $ 5,512 $ 6,844 $20,158 Add/(deduct): Interest expense - - - - - Income taxes 2,132 3,069 3,614 4,728 13,543 Depreciation 1,318 1,373 1,134 1,275 5,100 Amortization 1,041 1,042 1,041 1,061 4,185 ------- ------- ------- ------- ------- Pro forma EBITDA 7,699 10,078 11,301 13,908 42,986 Add/(deduct): Interest income (150) (203) (168) (163) (684) Intercompany interest income/(expense) - - - - - ------- ------- ------- ------- ------- Pro forma adjusted EBITDA $ 7,549 $ 9,875 $11,133 $13,745 $42,302 ======= ======= ======= ======= ======= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION RECONCILIATION OF PRO FORMA ADJUSTED NET INCOME FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2004 AND 2003 (in thousands, except per share data)(unaudited) For the For the Three Months Ended Years Ended December 31, December 31, ------------------- ------------------- 2004 2003 2004 2003 --------- --------- --------- --------- Net income/(loss) as reported $ 15,692 $(13,205) $ 27,512 $ (3,435) Add/(deduct): Pro forma VITAS net income contribution for the period (k) - 6,923 2,987 20,477 Pro forma prior-period VITAS intangibles amortization (4) - - - Pro forma financing costs related to acquisition of VITAS (l) - (2,257) (2,211) (13,215) Pro forma loss on extinguishment of debt (l) - - - (2,164) Pro forma elimination of VITAS transaction costs and adjustments 1,174 - 222 - Pro forma elimination of equity in income of VITAS (m) - (922) 4,105 (922) Pro forma elimination of gain on redemption of VITAS preferred stock (m) - - - (1,200) Pro forma elimination of preferred dividend income from VITAS (m) - - - (1,585) -------- -------- -------- -------- Pro forma net income/(loss) 16,862 (9,461) 32,615 (2,044) Add/(deduct): Discontinued operations (8,314) 14,748 (8,326) 14,623 Prior-period tax adjustments and settlements (600) - (1,620) - Severance charges - - - 2,358 Capital gains - - - (3,351) Aftertax cost of long-term incentive payout - - 5,437 - Aftertax cost of lawsuit settlement 1,897 - 1,897 - Aftertax cost of debt registration expenses 727 - 727 - Aftertax cost of loss on extinguishment of debt - - 2,030 2,164 -------- -------- -------- -------- Adjusted pro forma income from continuing operations $ 10,572 $ 5,287 $ 32,760 $ 13,750 ======== ======== ======== ======== Earnings/(Loss) Per Share As Reported Net income/(loss) $ 1.26 $ (1.33) $ 2.28 $ (0.35) ======== ======== ======== ======== Average number of shares outstanding 12,497 9,954 12,060 9,924 ======== ======== ======== ======== Diluted Earnings/(Loss) Per Share As Reported Net income/(loss) $ 1.22 $ (1.32) $ 2.23 $ (0.35) ======== ======== ======== ======== Average number of shares outstanding 12,836 10,000 12,318 9,954 ======== ======== ======== ======== Adjusted Pro Forma Earnings Per Share Income from continuing operations $ 0.85 $ 0.44 $ 2.60 $ 1.15 ======== ======== ======== ======== Average number of shares outstanding 12,497 11,954 12,609 11,924 ======== ======== ======== ======== Adjusted Pro Forma Diluted Earnings Per Share Income from continuing operations $ 0.82 $ 0.44 $ 2.55 $ 1.15 ======== ======== ======== ======== Average number of shares outstanding 12,836 12,000 12,867 11,954 ======== ======== ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION FOOTNOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2004 AND 2003 (unaudited) (a) For the fourth quarter of 2004, amounts include settlement of a lawsuit for Roto-Rooter of $3,135,000 ($1,897,000 aftertax), expenses related to Corporate debt registration of $1,191,000 ($727,000 aftertax) and additional VITAS transaction costs and adjustments of $1,680,000 ($1,008,000 aftertax) for VITAS and $349,000 ($166,000 aftertax) for Corporate. For the year 2004, all of the foregoing apply except that the Corporate adjustment to VITAS transaction costs amounts to an annual net credit of $1,238,000 ($786,000 aftertax). In addition, the annual amount includes payouts under the Company's 2002 Executive Long-term Incentive Plan in the first quarter of 2004 of $7,225,000 ($4,455,000 aftertax) for Corporate and $1,558,000 ($982,000 aftertax) for Roto-Rooter. For pro forma financial statements, all of the foregoing apply except for amounts related to VITAS transaction expenses and adjustments. (b) Amount represents the prepayment penalty incurred on the early extinguishment of the Company's debt ($2,030,000 aftertax) in the first quarter of 2004. For pro forma financial statements, the aftertax amount is $2,164,000 for 2003. (c) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax) for severance charges in the first quarter of 2003. (d) Amount includes a pretax gain of $3,544,000 ($2,151,000 aftertax) from the sales of investments in the first quarter of 2003 and a pretax gain of $1,846,000 ($1,200,000 aftertax) from the redemption of VITAS preferred stock in the third quarter of 2003. (e) Amounts include favorable prior-period tax adjustments and tax settlements. For the fourth quarter of 2004, the aftertax benefit received from these adjustments was $600,000 for Corporate. For the year 2004, the aftertax benefit received from these adjustments was $990,000 for Corporate and $630,000 for Roto-Rooter. (f) 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. These charges comprise transaction-related expenses that reduced the Company's equity in the earnings/(loss) of VITAS by $4,621,000 during 2004. (g) 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. (h) 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. (i) Pro forma amounts for VITAS and Corporate assume the acquisition of VITAS and the related financing were both completed on January 1 of the respective years. (j) Under Generally Accepted Accounting Principles ("GAAP"), the Roto-Rooter segment expenses all advertising, including the cost of telephone directories, immediately upon the initial release of the advertising. Telephone directories are generally in circulation 12 months. If a directory is in circulation for a time period greater or less than 12 months, the publisher adjusts the directory billing for the change in billing period. The timing of when a telephone directory is published can and does fluctuate significantly on a quarterly basis. This "direct expensing" results in significant fluctuations in quarterly advertising expense. In the fourth quarters of 2004 and 2003, GAAP advertising expense for Roto-Rooter totaled $6,417,000 and $6,859,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the fourth quarters of 2004 and 2003 would total $4,846,000 and $4,170,000, respectively. For the years 2004 and 2003, GAAP advertising expense for Roto-Rooter totaled $18,587,000 and $16,361,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the years 2004 and 2003 would total $18,059,000 and $15,532,000, respectively. (k) Amount represents the additional net income VITAS would contribute assuming the acquisition were completed on January 1 of the respective years (excluding Chemed management fees). (l) Amounts represent the additional financing costs, including a loss on early extinguishment of debt in 2003, that would have been incurred assuming the financing were completed on January 1 of the respective years. (m) Amounts represent the impact of eliminating the Company's prior investments in VITAS, assuming the acquisition of VITAS were completed on January 1 of the respective years. CONTACT: Chemed Corporation David P. Williams, (513) 762-6901 -----END PRIVACY-ENHANCED MESSAGE-----