-----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, KqE7WLo4Qq0mEnkkNaSZ9wZkvMUoEVfYLj3z8BZfDYegD94Z5MLXrEKr9Cal0JL8 J2i9P2tGXqt/3emYnaXAFA== 0001157523-05-009325.txt : 20051027 0001157523-05-009325.hdr.sgml : 20051027 20051027161132 ACCESSION NUMBER: 0001157523-05-009325 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051027 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051027 DATE AS OF CHANGE: 20051027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEMED CORP CENTRAL INDEX KEY: 0000019584 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082] 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: 051160228 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 a5004123.txt CHEMED CORP. 8-K 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): October 27, 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 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below): [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 230.425) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under Exchange Act (17 CFR 230.425) [_] Pre-commencement communications pursuant to Rule 13e-4 (c) under Exchange Act (17 CFR 230.425) Item 2.02 Results of Operations and Financial Condition On October 27, 2005 Chemed Corporation issued a press release announcing its financial results for the quarter ended September 30, 2005. A copy of the release is furnished herewith as Exhibit 99. Item 9.01 Financial Statements and Exhibits c) Exhibit (99) Registrant's press release dated October 27, 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: October 27, 2005 By: /s/ Arthur V. Tucker, Jr. ------------------ -------------------------- Arthur V. Tucker, Jr. Vice President and Controller EX-99 2 a5004123ex99.txt EXHIBIT 99 - PRESS RELEASE Exhibit 99 Chemed Reports Third-Quarter 2005 Results; EPS Guidance for 2005 Increased; VITAS and Roto-Rooter Report Record Earnings CINCINNATI--(BUSINESS WIRE)--Oct. 27, 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 third quarter ended September 30, 2005, versus the comparable prior-year period, as follows: Consolidated Operating Results from Continuing Operations -- Consolidated Revenue increased 16% to $233 million -- Diluted EPS from Continuing Operations of $.55, including $.06 favorable tax adjustments and other items VITAS generated record operating results -- Quarterly Net Patient Revenue of $160 million, up 19% -- Average Daily Census (ADC) of 10,259, up 15% -- Net income of $11.6 million, up 34% over 2004 Pro Forma Net Income -- Adjusted EBITDA of $21.1 million, an increase of 26% Roto-Rooter segment reported increased Revenue, Net Income and Adjusted EBITDA -- Revenue of $73 million, an increase of 9% -- Net income of $7.1 million, an increase of 16% -- Adjusted EBITDA of $11.6 million, an increase of 20% "VITAS continues to generate excellent census and admissions growth, with third-quarter ADC totaling 10,259, up 15%, and admissions in the quarter of 12,375, an increase of 10% over the prior-year quarter. Net income for VITAS in the quarter was $11.6 million, an increase of 34% when compared to the prior-year pro forma net income. Adjusted EBITDA margin increased to 13.1%," stated Kevin McNamara, Chemed president and chief executive officer. "Roto-Rooter also reported solid financial operating results. For the third quarter of 2005, Roto-Rooter had revenue of $73 million, an increase of 9%. Adjusted EBITDA was $11.6 million at a margin of 15.9%, resulting in net income for the quarter of $7.1 million." 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 is fully consolidated into Chemed's first-quarter 2004 results. To facilitate review of Chemed's operating results, pro forma supplemental schedules are included in this earnings release that adjust 2004 assuming Chemed owned 100% of VITAS as of January 1, 2004. "VITAS generated revenue growth of 18.7% over the prior-year period and 4.3% sequentially," stated David Williams, Chemed chief financial officer. "Gross margins were 21.7% in the third quarter of 2005, essentially flat when compared to the prior-year quarter. The third-quarter 2005 gross margin includes $1.7 million in start-up losses, which is $0.3 million higher than the $1.4 million in losses from programs classified as new starts in the prior-year period. Central support costs for VITAS, which are classified as selling, general and administrative expenses in the Statement of Operations, totaled $14.0 million, including $0.3 million in OIG legal expenses. Excluding these OIG expenses, central support costs increased 8.3% when compared to the prior-year quarter and increased 2.6% sequentially." VITAS' ADC in the third quarter of 2005 was 10,259. This compares to an ADC of 8,949 in the comparable prior-year period, an increase of 14.6% and 3.5% sequential growth. Admissions totaled 12,375, an increase of 9.8% over the third quarter of 2004. The Average Length of Stay (ALOS) for patients discharged in the quarter was 66.5 days and compares to 66.9 days in the second quarter of 2005 and 60.8 days in the third quarter of 2004. "VITAS continues to generate strong internal growth," said Williams. "Internal growth, which excludes 2004 and 2005 acquisitions, generated revenue, ADC and admissions increases of 15.4%, 10.7% and 7.3%, respectively, over the prior-year quarter. "Our mix of revenue at VITAS was relatively stable," Williams added. "Routine home care represented 69.8% of revenue, flat over the prior-year quarter and a 50 basis point increase sequentially. Our inpatient revenue aggregated 13.3% and continuous care was 16.9% of total revenue in the third quarter of 2005. "All of our base and new start programs are forecasted to have Medicare cap cushion for the 2005 measurement period which ends on October 31, 2005," stated Williams. "As previously discussed, we have been closely monitoring Medicare cap limitations at our Phoenix acquisition. Phoenix continues to forecast a Medicare cap liability ranging from $1.0 million to $1.5 million as of October 31, 2005, which is consistent with what we reported in the second quarter of 2005. The potential of reaching cap in the initial year of acquisition was identified during our due diligence of Phoenix. Since this cap limitation relates to patients admitted into the program prior to acquisition, the estimated cap accrual has been accounted for as a contingent liability assumed at acquisition and is not reflected in the Consolidated Statement of Income. VITAS anticipates creating cap cushion in the Phoenix program by increasing access to shorter stay patients and broadening access to in patient and continuous care patients. This broad mix of patients is consistent with the clinical model provided by VITAS in its other programs." Roto-Rooter Segment Roto-Rooter's plumbing and drain cleaning business generated sales of $73 million for the third quarter of 2005, 9.2% higher than the $67 million reported in the comparable prior-year quarter. Net income for the quarter was $7.1 million, including $1.0 million of favorable prior-year tax adjustments. The third quarter of 2004 also included favorable tax and other adjustments of $0.8 million. Excluding these favorable adjustments, adjusted net income in the third quarter of 2005 increased 16.5%. Adjusted EBITDA in the third quarter of 2005 totaled $11.6 million, an increase of 20.0% over the third quarter of 2004. Adjusted EBITDA margin in the third quarter of 2005 was 15.9%, a 150 basis point increase over the prior-year period. "Job count in the third quarter of 2005 increased 2.4% over the prior year period," stated Williams. "Commercial plumbing and drain cleaning job count increased 12.0% and 5.5%, respectively, over the prior-year quarter. Residential plumbing jobs increased 6.5% but were offset by a 2.6% decline in residential drain cleaning jobs during the quarter. A commercial job will typically average approximately 34% more revenue than a residential job. Accordingly, this continued shift of job mix has a positive impact on aggregate revenue." Guidance for 2005 "Going into the fourth quarter of 2005," Williams stated, "we anticipate VITAS to continue its expansion of operating margins through the leveraging of central support costs. Roto-Rooter is estimated to generate a 5% to 6% increase in revenue with margins that approximate 50 basis points above those generated in 2004. Our go-forward effective consolidated tax rate should approximate 39.2%. "Based upon these factors and a current diluted share count of 26.4 million, our expectation is that full-year 2005 earnings per diluted share from continuing operations, excluding the early extinguishment of debt and other charges or credits not indicative of ongoing operations, will be in the range of $1.87 to $1.90." Conference Call Chemed will host a conference call and webcast at 11 a.m., EDT, on Friday, October 28, 2005, to discuss the company's quarterly results and provide an update on its business. The dial-in number for the conference call is 800-561-2813 for U.S. and Canadian participants and 617-614-3529 for international participants. The participant passcode is 37179326. A live webcast of the call can be accessed on Chemed's website at www.chemed.com by clicking on Investor Relations Home. A taped replay of the conference call will be available beginning approximately two hours after the call's conclusion. It can be accessed by dialing 888-286-8010 for U.S. and Canadian callers and 617-801-6888 for international callers and will be available for one week following the live call. The replay passcode is 61415963. An archived webcast will also be available at www.chemed.com and will remain available for 30 days following the live call. Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to approximately 10,000 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 EBITDA and Adjusted EBITDA, which are not measures derived in accordance with generally accepted accounting principles and which exclude components that are important to understanding Chemed's financial performance. Chemed provides EBITDA and 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 EBITDA and 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 or 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 INCOME (in thousands, except per share data)(unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 2005 2004 (bb) 2005 2004 (bb) --------- --------- --------- --------- Continuing Operations Service revenues and sales $233,328 $201,885 $678,274 $521,360 -------- -------- -------- -------- Cost of services provided and goods sold(aa) 165,229 142,130 479,301 361,049 Selling, general and administrative expenses(aa) 38,423 35,371 111,820 98,059 Depreciation(aa) 4,086 2,610 11,934 9,768 Amortization(aa) 1,248 1,704 3,671 3,262 Other expenses -- net(aa) (130) (219) 2,360 7,196 -------- -------- -------- -------- Total costs and expenses 208,856 181,596 609,086 479,334 -------- -------- -------- -------- Income from operations 24,472 20,289 69,188 42,026 Interest expense (5,147) (6,083) (16,021) (15,187) Loss on extinguishment of debt - - (3,971) (3,330) Other income--net 1,317 336 2,644 1,964 -------- -------- -------- -------- Income before income taxes 20,642 14,542 51,840 25,473 Income taxes (6,010) (3,805) (18,192) (9,560) Equity in loss of affiliate (VITAS)(aa) - - - (4,105) -------- -------- -------- -------- Income from continuing operations 14,632 10,737 33,648 11,808 Discontinued Operations(bb) - (125) (2,015) 12 -------- -------- -------- -------- Net Income $ 14,632 $ 10,612 $ 31,633 $ 11,820 ======== ======== ======== ======== Earnings Per Share Income from continuing operations $ 0.57 $ 0.43 $ 1.32 $ 0.50 ======== ======== ======== ======== Net income $ 0.57 $ 0.43 $ 1.24 $ 0.50 ======== ======== ======== ======== Average number of shares outstanding 25,719 24,940 25,453 23,808 ======== ======== ======== ======== Diluted Earnings Per Share Income from continuing operations $ 0.55 $ 0.42 $ 1.28 $ 0.49 ======== ======== ======== ======== Net income $ 0.55 $ 0.42 $ 1.21 $ 0.49 ======== ======== ======== ======== Average number of shares outstanding 26,401 25,402 26,202 24,272 ======== ======== ======== ======== - -------------------------------- (aa) Included in the results of operations are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands): Three Months Ended Nine Months Ended September 30, September 30, --------------------------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Cost of services provided and goods sold Favorable adjustment to casualty insurance accruals related to prior years' experience $ - $ - $ 1,663 $ - Selling, general and administrative expenses Costs associated with OIG investigation (310) - (564) - Depreciation Reduction in expense related to revision of purchase price allocation for VITAS - 837 - - Amortization Increase in expense related to revision of purchase price allocation for VITAS - (311) - - Other expenses -- net Long-term incentive compensation - - (2,946) (8,783) Cost of accelerating vesting of stock options - - (215) - Adjustments to transaction- related costs of the VITAS acquisition 130 219 801 1,587 Loss on extinguishment of debt - - (3,971) (3,330) ------- ------- -------- -------- Pretax impact on earnings (180) 745 (5,232) (10,526) Income tax benefit/(charge) on the above 118 (299) 2,188 4,011 Income tax benefit from finalizing prior years' returns 1,787 1,020 1,787 1,020 Prior quarters' impact of adjustment to effective tax rate - 1,098 - - Equity in loss of affiliate (VITAS) is attributable to transaction-related expenses incurred by VITAS prior to its acquisition by Chemed - - - (4,105) ------- ------- -------- -------- Aftertax impact on earnings $ 1,725 $ 2,564 $(1,257) $(9,600) ======= ======= ======== ======== (bb) Results of operations for 2004 have been reclassified for the results of Service America, discontinued in December 2004. Included in discontinued operations for 2005 is an aftertax loss of $2,350,000 resulting from finalizing the disposal of Service America in May 2005. CHEMED CORPORATION CONSOLIDATED BALANCE SHEET (in thousands, except per share data)(unaudited) September 30, -------------------- 2005 2004 (cc) ---------- --------- Assets Current assets Cash and cash equivalents $ 37,575 $ 51,261 Accounts receivable less allowances 84,472 71,920 Inventories 7,252 6,713 Current deferred income taxes 21,486 22,678 Prepaid income taxes 8,112 5,564 Current assets of discontinued operations 3,112 14,253 Prepaid expenses and other current assets 7,186 7,956 -------- -------- Total current assets 169,195 180,345 Investments of deferred compensation plans held in trust 21,072 18,922 Other investments 1,445 1,445 Note receivable 12,500 12,500 Properties and equipment, at cost less accumulated depreciation 62,687 50,118 Identifiable intangible assets less accumulated amortization 73,892 75,828 Goodwill 434,559 407,407 Noncurrent assets of discontinued operations 287 9,791 Other assets 22,111 24,465 -------- -------- Total Assets $797,748 $780,821 ======== ======== Liabilities Current liabilities Accounts payable $ 45,401 $ 38,759 Current portion of long-term debt 1,123 5,401 Income taxes 5,830 4,330 Accrued insurance 28,634 22,406 Accrued salaries and wages 19,563 22,572 Current liabilities of discontinued operations 6,301 22,390 Other current liabilities 33,695 33,044 -------- -------- Total current liabilities 140,547 148,902 Deferred income taxes 18,880 1,075 Long-term debt 234,327 288,311 Deferred compensation liabilities 20,991 18,925 Noncurrent liabilities of discontinued operations 411 482 Other liabilities 7,044 8,231 -------- -------- Total Liabilities 422,200 465,926 -------- -------- Stockholders' Equity Capital stock 28,021 13,437 Paid-in capital 226,275 209,564 Retained earnings 168,564 127,357 Treasury stock, at cost (45,757) (32,984) Unearned compensation (3,363) (4,289) Deferred compensation payable in Company stock 2,354 2,351 Notes receivable for shares sold (546) (541) -------- -------- Total Stockholders' Equity 375,548 314,895 -------- -------- Total Liabilities and Stockholders' Equity $797,748 $780,821 ======== ======== Book Value Per Share $ 14.58 $ 12.63(dd) ======== ======== - --------------------------------------------- (cc) Reclassified for operations discontinued in December 2004. (dd) Adjusted for 2-for-1 stock split in May 2005. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)(unaudited) Nine Months Ended September 30, --------------------- 2005 2004 (cc) ---------- ---------- Cash Flows from Operating Activities Net income/(loss) $ 31,633 $ 11,820 Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities: Depreciation and amortization 15,605 13,030 Provision for uncollectible accounts receivable 5,352 4,543 Write-off of unamortized debt issuance costs 2,871 - Noncash long-term incentive compensation 2,574 4,988 Discontinued operations 2,015 (12) Provision for deferred income taxes (1,176) (874) Amortization of debt issuance costs 1,395 1,457 Equity in loss of affiliate - 4,105 Changes in operating assets and liabilities, excluding amounts acquired in business combinations: Increase in accounts receivable (25,264) (14,328) Increase in inventories (233) (702) Decrease in prepaid expenses and other current assets 2,656 15,302 Decrease in accounts payable and other current liabilities (3,584) (14,080) Increase in income taxes 11,827 9,288 Decrease/(increase) in other assets (2,876) 5,786 Increase in other liabilities 1,464 418 Noncash expense of internally financed ESOPs 858 1,420 Other sources/(uses) 479 (200) --------- --------- Net cash provided by continuing operations 45,596 41,961 Net cash provided/(used) by discontinued operations (1,559) 4,604 --------- --------- Net cash provided by operating activities 44,037 46,565 --------- --------- Cash Flows from Investing Activities Capital expenditures (18,874) (13,108) Net uses from disposals of discontinued operations (7,145) (1,156) Business combinations, net of cash acquired (5,680) (330,881) Proceeds from sales of property and equipment 125 375 Return of merger deposit - 10,000 Other uses (232) (192) --------- --------- Net cash used by investing activities (31,806) (334,962) --------- --------- Cash Flows from Financing Activities Repayment of long-term debt (141,245) (94,686) Proceeds from issuance of long-term debt 85,000 295,000 Increase in cash overdraft payable 10,684 6,920 Issuance of capital stock, net of costs 10,009 97,429 Dividends paid (4,611) (4,210) Purchases of treasury stock (4,390) (2,391) Debt issuance costs (1,755) (14,436) Repayment of stock subscription note receivable - 8,053 Redemption of convertible trust preferred securities - (2,736) Other sources 204 27 --------- --------- Net cash provided/(used) by financing activities (46,104) 288,970 --------- --------- Increase/(decrease) in Cash and Cash Equivalents (33,873) 573 Cash and cash equivalents at beginning of year 71,448 50,688 --------- --------- Cash and cash equivalents at end of period $ 37,575 $ 51,261 ========= ========= (cc) Reclassified for operations discontinued in December 2004. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2005 - -------------------------- Service revenues and sales $160,408 $ 72,920 $ - $233,328 -------- -------- -------- -------- Cost of services provided and goods sold 125,629 39,600 - 165,229 Selling, general and administrative expenses(a) 13,995 21,756 2,672 38,423 Depreciation 1,922 2,091 73 4,086 Amortization 984 21 243 1,248 Other expenses(b) - - (130) (130) -------- -------- -------- -------- Total costs and expenses 142,530 63,468 2,858 208,856 -------- -------- -------- -------- Income/(loss) from operations 17,878 9,452 (2,858) 24,472 Interest expense (33) (129) (4,985) (5,147) Intercompany interest income/(expense) 579 565 (1,144) - Other income--net 12 380 925 1,317 -------- -------- -------- -------- Income/(loss) before income taxes 18,436 10,268 (8,062) 20,642 Income taxes (6,872) (3,199) 4,061 (6,010) -------- -------- -------- -------- Income/(loss) from continuing operations 11,564 7,069 (4,001) 14,632 Discontinued operations - - - - -------- -------- -------- -------- Net income/(loss) $ 11,564 $ 7,069 $ (4,001) $ 14,632 ======== ======== ======== ======== 2004 - -------------------------- Service revenues and sales $135,101 $ 66,784 $ - $201,885 -------- -------- -------- -------- Cost of services provided and goods sold 105,695 36,435 - 142,130 Selling, general and administrative expenses 12,632 19,987 2,752 35,371 Depreciation 469 2,081 60 2,610 Amortization 1,583 31 90 1,704 Other expenses(b) - - (219) (219) -------- -------- -------- -------- Total costs and expenses 120,379 58,534 2,683 181,596 -------- -------- -------- -------- Income/(loss) from operations 14,722 8,250 (2,683) 20,289 Interest expense (32) (43) (6,008) (6,083) Intercompany interest income/(expense) 289 327 (616) - Other income--net 93 (92) 335 336 -------- -------- -------- -------- Income/(loss) before income taxes 15,072 8,442 (8,972) 14,542 Income taxes (6,097) (2,375) 4,667 (3,805) -------- -------- -------- -------- Income/(loss) from continuing operations 8,975 6,067 (4,305) 10,737 Discontinued operations - - (125) (125) -------- -------- -------- -------- Net income/(loss) $ 8,975 $ 6,067 $ (4,430) $ 10,612 ======== ======== ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2005 - -------------------------- Service revenues and sales $460,146 $218,128 $ - $678,274 -------- -------- -------- -------- Cost of services provided and goods sold(c) 361,703 117,598 - 479,301 Selling, general and administrative expenses(a) 40,709 63,949 7,162 111,820 Depreciation 5,477 6,239 218 11,934 Amortization 2,963 70 638 3,671 Other expenses(b) 881 552 927 2,360 -------- -------- -------- -------- Total costs and expenses 411,733 188,408 8,945 609,086 -------- -------- -------- -------- Income/(loss) from operations 48,413 29,720 (8,945) 69,188 Interest expense (104) (408) (15,509) (16,021) Intercompany interest income/(expense) 1,769 1,505 (3,274) - Loss on extinguishment of debt(d) - - (3,971) (3,971) Other income--net 134 822 1,688 2,644 -------- -------- -------- -------- Income/(loss) before income taxes 50,212 31,639 (30,011) 51,840 Income taxes (19,130) (11,749) 12,687 (18,192) -------- -------- -------- -------- Income/(loss) from continuing operations 31,082 19,890 (17,324) 33,648 Discontinued operations - - (2,015) (2,015) -------- -------- -------- -------- Net income/(loss) $ 31,082 $ 19,890 $(19,339) $ 31,633 ======== ======== ======== ======== 2004 - -------------------------- Service revenues and sales $316,453 $204,907 $ - $521,360 -------- -------- -------- -------- Cost of services provided and goods sold 247,971 113,078 - 361,049 Selling, general and administrative expenses 29,940 60,866 7,253 98,059 Depreciation 3,078 6,501 189 9,768 Amortization 2,995 156 111 3,262 Other expenses(b) - 1,558 5,638 7,196 -------- -------- -------- -------- Total costs and expenses 283,984 182,159 13,191 479,334 -------- -------- -------- -------- Income/(loss) from operations 32,469 22,748 (13,191) 42,026 Interest expense (90) (102) (14,995) (15,187) Intercompany interest income/(expense) 420 700 (1,120) - Loss on extinguishment of debt(d) - - (3,330) (3,330) Other income--net 169 594 1,201 1,964 -------- -------- -------- -------- Income/(loss) before income taxes 32,968 23,940 (31,435) 25,473 Income taxes (13,489) (8,486) 12,415 (9,560) Equity in loss of VITAS(e) - - (4,105) (4,105) -------- -------- -------- -------- Income/(loss) from continuing operations 19,479 15,454 (23,125) 11,808 Discontinued operations - - 12 12 -------- -------- -------- -------- Net income/(loss) $ 19,479 $ 15,454 $(23,113) $ 11,820 ======== ======== ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING SUMMARY OF EBITDA FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2005 - -------------------------- Net income/(loss) $11,564 $ 7,069 $(4,001) $14,632 Add/(deduct): Discontinued operations - - - - Interest expense 33 129 4,985 5,147 Income taxes 6,872 3,199 (4,061) 6,010 Depreciation 1,922 2,091 73 4,086 Amortization 984 21 243 1,248 ------- ------- ------- ------- EBITDA 21,375 12,509 (2,761) 31,123 Add/(deduct): Legal expenses of OIG investigation 310 - - 310 VITAS transaction expense adjustment(f) - - (130) (130) Advertising cost adjustment(g) - (340) - (340) Interest income (33) (30) (469) (532) Intercompany interest income/(expense) (579) (565) 1,144 - ------- ------- ------- ------- Adjusted EBITDA $21,073 $11,574 $(2,216) $30,431 ======= ======= ======= ======= 2004 - --------------------------- Net income/(loss) $ 8,975 $ 6,067 $(4,430) $10,612 Add/(deduct): Discontinued operations - - 125 125 Interest expense 32 43 6,008 6,083 Income taxes 6,097 2,375 (4,667) 3,805 Depreciation 469 2,081 60 2,610 Amortization 1,583 31 90 1,704 ------- ------- ------- ------- EBITDA 17,156 10,597 (2,814) 24,939 Add/(deduct): VITAS transaction expense adjustment(f) - - (219) (219) Advertising cost adjustment(g) - (577) - (577) Interest income (94) (44) (336) (474) Intercompany interest income/(expense) (289) (327) 616 - ------- ------- ------- ------- Adjusted EBITDA $16,773 $ 9,649 $(2,753) $23,669 ======= ======= ======= ======= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING SUMMARY OF EBITDA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2005 - -------------------------- Net income/(loss) $31,082 $19,890 $(19,339) $31,633 Add/(deduct): Discontinued operations - - 2,015 2,015 Interest expense 104 408 15,509 16,021 Income taxes 19,130 11,749 (12,687) 18,192 Depreciation 5,477 6,239 218 11,934 Amortization 2,963 70 638 3,671 ------- ------- -------- ------- EBITDA 58,756 38,356 (13,646) 83,466 Add/(deduct): Long-term incentive compensation(h) 881 552 1,728 3,161 Prior-period insurance adjustment - (1,663) - (1,663) Legal expenses of OIG investigation 564 - - 564 VITAS transaction expense adjustment(f) - - (801) (801) Advertising cost adjustment(g) - (969) - (969) Interest income (192) (118) (1,134) (1,444) Intercompany interest income/(expense) (1,769) (1,505) 3,274 - Loss on extinguishment of debt - - 3,971 3,971 ------- ------- -------- ------- Adjusted EBITDA $58,240 $34,653 $ (6,608) $86,285 ======= ======= ======== ======= 2004 - -------------------------- Net income/(loss) $19,479 $15,454 $(23,113) $11,820 Add/(deduct): Discontinued operations - - (12) (12) Interest expense 90 102 14,995 15,187 Income taxes 13,489 8,486 (12,415) 9,560 Depreciation 3,078 6,501 189 9,768 Amortization 2,995 156 111 3,262 ------- ------- -------- ------- EBITDA 39,131 30,699 (20,245) 49,585 Add/(deduct): Long-term incentive compensation - 1,558 7,225 8,783 VITAS transaction expense adjustment(f) - - (1,587) (1,587) Advertising cost adjustment(g) - (1,043) - (1,043) Interest income (190) (108) (1,170) (1,468) Intercompany interest income/(expense) (420) (700) 1,120 - Equity in loss of VITAS - - 4,105 4,105 Loss on extinguishment of debt - - 3,330 3,330 ------- ------- -------- ------- Adjusted EBITDA $38,521 $30,406 $ (7,222) $61,705 ======= ======= ======== ======= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES RECONCILIATION OF NET INCOME TO ADJUSTED PRO FORMA INCOME FROM CONTINUING OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in thousands, except per share data)(unaudited) Three Months Ended Nine Months Ended September 30, September 30, ----------------- ----------------- 2005 2004 2005 2004 -------- -------- -------- -------- Net income as reported $14,632 $10,612 $31,633 $11,820 Add/(deduct): Pro forma VITAS net income contribution for the period(i) - (315) - 2,991 Pro forma financing costs related to acquisition of VITAS(j) - - - (2,211) Pro forma elimination of VITAS transaction expense adjustment(f) - (131) - (952) Pro forma elimination of equity in loss of VITAS(k) - - - 4,105 ------- ------- ------- ------- Pro forma net income 14,632 10,166 31,633 15,753 Add/(deduct): Discontinued operations - 125 2,015 (12) Prior period tax adjustments (1,787) (2,118) (1,787) (1,020) Aftertax prior-period insurance adjustment - - (1,014) - Aftertax cost of long-term incentive compensation(h) - - 1,984 5,437 Aftertax cost of legal expenses of OIG investigation 192 - 352 - Aftertax VITAS transaction expense adjustment(f) (130) - (801) - Aftertax cost of loss on extinguishment of debt - - 2,523 2,030 ------- ------- ------- ------- Adjusted pro forma income from continuing operations $12,907 $ 8,173 $34,905 $22,188 ======= ======= ======= ======= Earnings Per Share As Reported Net income $ 0.57 $ 0.43 $ 1.24 $ 0.50 ======= ======= ======= ======= Average number of shares outstanding 25,719 24,940 25,453 23,808 ======= ======= ======= ======= Diluted Earnings Per Share As Reported Net income $ 0.55 $ 0.42 $ 1.21 $ 0.49 ======= ======= ======= ======= Average number of shares outstanding 26,401 25,402 26,202 24,272 ======= ======= ======= ======= Adjusted Pro Forma Earnings Per Share Income from continuing operations $ 0.50 $ 0.33 $ 1.37 $ 0.90 ======= ======= ======= ======= Average number of shares outstanding 25,719 24,940 25,453 24,596 ======= ======= ======= ======= Adjusted Pro Forma Diluted Earnings Per Share Income from continuing operations $ 0.49 $ 0.32 $ 1.33 $ 0.89 ======= ======= ======= ======= Average number of shares outstanding 26,401 25,402 26,202 25,060 ======= ======= ======= ======= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in thousands, except per share data) (unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2005 - -------------------------- Service revenues and sales $160,408 $72,920 $ - $233,328 -------- ------- -------- -------- Cost of services provided and goods sold 125,629 39,600 - 165,229 Selling, general and administrative expenses(a) 13,995 21,756 2,672 38,423 Depreciation 1,922 2,091 73 4,086 Amortization 984 21 243 1,248 Other expenses(b) - - (130) (130) -------- ------- -------- -------- Total costs and expenses 142,530 63,468 2,858 208,856 -------- ------- -------- -------- Income/(loss) from operations 17,878 9,452 (2,858) 24,472 Interest expense (33) (129) (4,985) (5,147) Intercompany interest income/(expense) 579 565 (1,144) - Other income--net 12 380 925 1,317 -------- ------- -------- -------- Income/(loss) before income taxes 18,436 10,268 (8,062) 20,642 Income taxes (6,872) (3,199) 4,061 (6,010) -------- ------- -------- -------- Income/(loss) from continuing operations 11,564 7,069 (4,001) 14,632 Discontinued operations - - - - -------- ------- -------- -------- Net income/(loss) $ 11,564 $ 7,069 $ (4,001) $ 14,632 ======== ======= ======== ======== Earnings Per Share Continuing operations $ 0.57 ======== Net income $ 0.57 ======== Average number of shares outstanding 25,719 ======== Diluted Earnings Per Share Continuing operations $ 0.55 ======== Net income $ 0.55 ======== Average number of shares outstanding 26,401 ======== 2004 (l) - -------------------------- Service revenues and sales $135,101 $66,784 $ - $201,885 -------- ------- -------- -------- Cost of services provided and goods sold 105,695 36,435 - 142,130 Selling, general and administrative expenses 12,632 19,987 2,752 35,371 Depreciation 1,306 2,081 60 3,447 Amortization 1,272 31 90 1,393 -------- ------- -------- -------- Total costs and expenses 120,905 58,534 2,902 182,341 -------- ------- -------- -------- Income/(loss) from operations 14,196 8,250 (2,902) 19,544 Interest expense (32) (43) (6,008) (6,083) Intercompany interest income/(expense) 289 327 (616) - Other income--net 93 (92) 335 336 -------- ------- -------- -------- Income/(loss) before income taxes 14,546 8,442 (9,191) 13,797 Income taxes (5,886) (2,375) 4,755 (3,506) -------- ------- -------- -------- Income/(loss) from continuing operations 8,660 6,067 (4,436) 10,291 Discontinued operations - - (125) (125) -------- ------- -------- -------- Net income/(loss) $ 8,660 $ 6,067 $ (4,561) $ 10,166 ======== ======= ======== ======== Earnings Per Share Continuing operations $ 0.41 ======== Net income $ 0.41 ======== Average number of shares outstanding 24,940 ======== Diluted Earnings Per Share Continuing operations $ 0.41 ======== Net income $ 0.40 ======== Average number of shares outstanding 25,402 ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in thousands, except per share data) (unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2005 - -------------------------- Service revenues and sales $460,146 $218,128 $ - $678,274 -------- -------- -------- -------- Cost of services provided and goods sold(c) 361,703 117,598 - 479,301 Selling, general and administrative expenses(a) 40,709 63,949 7,162 111,820 Depreciation 5,477 6,239 218 11,934 Amortization 2,963 70 638 3,671 Other expenses(b) 881 552 927 2,360 -------- -------- -------- -------- Total costs and expenses 411,733 188,408 8,945 609,086 -------- -------- -------- -------- Income/(loss) from operations 48,413 29,720 (8,945) 69,188 Interest expense (104) (408) (15,509) (16,021) Intercompany interest income/(expense) 1,769 1,505 (3,274) - Loss on extinguishment of debt(d) - - (3,971) (3,971) Other income--net 134 822 1,688 2,644 -------- -------- -------- -------- Income/(loss) before income taxes 50,212 31,639 (30,011) 51,840 Income taxes (19,130) (11,749) 12,687 (18,192) -------- -------- -------- -------- Income/(loss) from continuing operations 31,082 19,890 (17,324) 33,648 Discontinued operations - - (2,015) (2,015) -------- -------- -------- -------- Net income/(loss) $ 31,082 $ 19,890 $(19,339) $ 31,633 ======== ======== ======== ======== Earnings Per Share Continuing operations $ 1.32 ======== Net income $ 1.24 ======== Average number of shares outstanding 25,453 ======== Diluted Earnings Per Share Continuing operations $ 1.28 ======== Net income $ 1.21 ======== Average number of shares outstanding 26,202 ======== 2004 (l) - -------------------------- Service revenues and sales $389,323 $204,907 $ - $594,230 -------- -------- -------- -------- Cost of services provided and goods sold 306,819 113,078 - 419,897 Selling, general and administrative expenses 38,265 60,866 7,114 106,245 Depreciation 3,558 6,501 189 10,248 Amortization 3,599 156 111 3,866 Other expenses(b) - 1,558 7,225 8,783 -------- -------- -------- -------- Total costs and expenses 352,241 182,159 14,639 549,039 -------- -------- -------- -------- Income/(loss) from operations 37,082 22,748 (14,639) 45,191 Interest expense (90) (102) (18,397) (18,589) Intercompany interest income/(expense) 420 700 (1,120) - Loss on extinguishment of debt(d) - - (3,330) (3,330) Other income--net 210 594 1,201 2,005 -------- -------- -------- -------- Income/(loss) before income taxes 37,622 23,940 (36,285) 25,277 Income taxes (15,234) (8,486) 14,184 (9,536) -------- -------- -------- -------- Income/(loss) from continuing operations 22,388 15,454 (22,101) 15,741 Discontinued operations - - 12 12 -------- -------- -------- -------- Net income/(loss) $ 22,388 $ 15,454 $(22,089) $ 15,753 ======== ======== ======== ======== Earnings Per Share Continuing operations $ 0.64 ======== Net income $ 0.64 ======== Average number of shares outstanding 24,596 ======== Diluted Earnings Per Share Continuing operations $ 0.63 ======== Net income $ 0.63 ======== Average number of shares outstanding 25,060 ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONSOLIDATING SUMMARY OF EBITDA FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2005 - -------------------------- Net income/(loss) $11,564 $ 7,069 $(4,001) $14,632 Add/(deduct): Discontinued operations - - - - Interest expense 33 129 4,985 5,147 Income taxes 6,872 3,199 (4,061) 6,010 Depreciation 1,922 2,091 73 4,086 Amortization 984 21 243 1,248 ------- ------- ------- ------- EBITDA 21,375 12,509 (2,761) 31,123 Add/(deduct): Long-term incentive compensation - - - - Legal expenses of OIG investigation 310 - - 310 VITAS transaction expense adjustment(f) - - (130) (130) Advertising cost adjustment(g) - (340) - (340) Interest income (33) (30) (469) (532) Intercompany interest income/(expense) (579) (565) 1,144 - ------- ------- ------- ------- Adjusted EBITDA $21,073 $11,574 $(2,216) $30,431 ======= ======= ======= ======= 2004 (l) - -------------------------- Pro forma net income/(loss) $ 8,660 $ 6,067 $(4,561) $10,166 Add/(deduct): Discontinued operations - - 125 125 Interest expense 32 43 6,008 6,083 Income taxes 5,886 2,375 (4,755) 3,506 Depreciation 1,306 2,081 60 3,447 Amortization 1,272 31 90 1,393 ------- ------- ------- ------- Pro forma EBITDA 17,156 10,597 (3,033) 24,720 Add/(deduct): Advertising cost adjustment(g) - (577) - (577) Interest income (94) (44) (336) (474) Intercompany interest income/(expense) (289) (327) 616 - ------- ------- ------- ------- Pro forma adjusted EBITDA $16,773 $ 9,649 $(2,753) $23,669 ======= ======= ======= ======= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONSOLIDATING SUMMARY OF EBITDA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2005 - -------------------------- Net income/(loss) $31,082 $19,890 $(19,339) $31,633 Add/(deduct): Discontinued operations - - 2,015 2,015 Interest expense 104 408 15,509 16,021 Income taxes 19,130 11,749 (12,687) 18,192 Depreciation 5,477 6,239 218 11,934 Amortization 2,963 70 638 3,671 ------- ------- -------- ------- EBITDA 58,756 38,356 (13,646) 83,466 Add/(deduct): Long-term incentive compensation(h) 881 552 1,728 3,161 Prior-period insurance adjustment - (1,663) - (1,663) Legal expenses of OIG investigation 564 - - 564 VITAS transaction expense adjustment(f) - - (801) (801) Advertising cost adjustment(g) - (969) - (969) Interest income (192) (118) (1,134) (1,444) Intercompany interest income/(expense) (1,769) (1,505) 3,274 - Loss on extinguishment of debt - - 3,971 3,971 ------- ------- -------- ------- Adjusted EBITDA $58,240 $34,653 $ (6,608) $86,285 ======= ======= ======== ======= 2004 (l) - -------------------------- Pro forma net income/(loss) $22,388 $15,454 $(22,089) $15,753 Add/(deduct): Discontinued operations - - (12) (12) Interest expense 90 102 18,397 18,589 Income taxes 15,234 8,486 (14,184) 9,536 Depreciation 3,558 6,501 189 10,248 Amortization 3,599 156 111 3,866 ------- ------- -------- ------- Pro forma EBITDA 44,869 30,699 (17,588) 57,980 Add/(deduct): Long-term incentive compensation - 1,558 7,225 8,783 Advertising cost adjustment(g) - (1,043) - (1,043) Interest income (231) (108) (1,170) (1,509) Intercompany interest income/(expense) (420) (700) 1,120 - Loss on extinguishment of debt - - 3,330 3,330 ------- ------- -------- ------- Pro forma adjusted EBITDA $44,218 $30,406 $ (7,083) $67,541 ======= ======= ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES FOOTNOTES TO FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (unaudited) (a) For the third quarter and nine months ended September 30, 2005, amounts for VITAS include $310,000 ($192,000 aftertax) and $564,000 ($352,000 aftertax), respectively, for legal expenses incurred in connection with the Office of Inspector General ("OIG") investigation. (b) Other expenses include the following (in thousands): Three Months Ended Nine Months Ended September 30, September 30, ----------------- ----------------- 2005 2004 2005 2004 Pretax cost/(benefit): -------- -------- -------- -------- Long-term incentive plan payout $ - $ - $2,946 $ 8,783 Adjustment of transaction- related expenses of the VITAS acquisition (130) (219) (801) (1,587) Cost of accelerating vesting of stock options - - 215 - ----- ----- ------ ------- Total other expenses $(130) $(219) $2,360 $ 7,196 ===== ===== ====== ======= Aftertax cost/(benefit): Long-term incentive plan payout $ - $ - $1,847 $ 5,437 Adjustment of transaction- related expenses of the VITAS acquisition (130) (131) (801) (952) Cost of accelerating vesting of stock options - - 137 - ----- ----- ------ ------- Total other expenses, net of income taxes $(130) $(131) $1,183 $ 4,485 ===== ===== ====== ======= (c) For the nine months ended September 30, 2005, amount for Roto- Rooter includes a favorable adjustment to casualty insurance related to prior periods' experience of $1,663,000 ($1,014,000 aftertax). (d) For the nine months ended September 30, 2005, amounts include the prepayment penalty and write-off of debt issuance costs related to the early extinguishment and refinancing of certain portions of the Company's debt ($2,523,000 aftertax). For the nine months ended September 30, 2004, amount represents the prepayment penalty incurred on the early extinguishment of the Company's debt ($2,030,000 aftertax). (e) 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 the first quarter of 2004. (f) Amounts represent favorable adjustments to transaction expenses related to the acquisition of VITAS. (g) 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 third quarters of 2005 and 2004, GAAP advertising expense for Roto-Rooter totaled $4,362,000 and $4,040,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the third quarters of 2005 and 2004 would total $4,692,000 and $4,617,000, respectively. For the nine months ended September 30, 2005 and 2004, GAAP advertising expense for Roto-Rooter totaled $12,685,000 and $12,170,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the nine months ended September 30, 2005 and 2004, would total $13,654,000 and $13,213,000, respectively. (h) For the nine months ended September 30, 2005, amounts include costs related to accelerating the vesting of stock options in addition to payouts under the Company's LTIP. (i) Amounts represent the additional net income VITAS would contribute assuming the acquisition were completed on January 1 of the respective years (excluding Chemed management fees). (j) Amount represents the additional financing costs, including a loss on early extinguishment of debt in 2004, that would have been incurred assuming the financing were completed on January 1, 2004. (k) Amount represents the impact of eliminating the Company's prior investments in VITAS, assuming the acquisition of VITAS were completed on January 1, 2004. (l) Pro forma amounts for 2004 for VITAS and Corporate assume 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. CONTACT: Chemed Corporation David P. Williams, 513-762-6901 -----END PRIVACY-ENHANCED MESSAGE-----