EX-99 2 a5085601ex99.txt EXHIBIT 99 Exhibit 99 Chemed Reports Fourth-Quarter 2005 Results; Diluted EPS From Continuing Operations of $.15; Adjusted Pro Forma Diluted EPS From Continuing Operations of $.61 CINCINNATI--(BUSINESS WIRE)--Feb. 21, 2006--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, 2005, versus the comparable prior-year period, as follows: Consolidated Operating Results from Continuing Operations -- Consolidated Revenue increased 16% to $248 million -- Diluted EPS from Continuing Operations of $.15 -- Adjusted Pro Forma Diluted EPS from Continuing Operations of $.61 after excluding settlement of the California wage and hour class action, LTIP and certain other items VITAS generated record operating results -- Quarterly Net Patient Revenue of $169 million, up 19% -- Average Daily Census (ADC) of 10,412, up 14% -- Adjusted EBITDA of $24.7 million, an increase of 21% Roto-Rooter segment reported record Revenue and Adjusted EBITDA -- Revenue of $79 million, an increase of 10% -- Adjusted EBITDA of $14.5 million, an increase of 21% "VITAS continues to generate excellent census and admissions growth, with fourth-quarter ADC totaling 10,412, up 14%, and admissions in the quarter of 12,487, an increase of 8% over the prior-year quarter. Net income for VITAS in the quarter was $2.5 million. After excluding the aftertax cost of the class action litigation in California, LTIP and OIG investigation, VITAS' net income of $13.8 million increased 29% when compared to the prior-year adjusted pro forma net income. VITAS had a fourth-quarter adjusted EBITDA margin of 14.6%," stated Kevin McNamara, Chemed president and chief executive officer. "The litigation settlement involved a wage-hour class action case pending against VITAS in California. This case was filed in April 2004, shortly after completion of the VITAS acquisition. We accrued a pretax liability of $2.3 million and accounted for this issue as an assumed liability on our opening balance sheet. Since the establishment of this accrual, there has been a significant increase in litigation, high settlements and unfavorable verdicts against companies involving wage-hour claims in California. Recognizing this legal climate, we have reached a tentative agreement to resolve this matter. Generally Accepted Accounting Principles (GAAP) do not allow for a period of more than 12-months post acquisition to finalize the quantification of existing contingencies on the opening balance sheet of an acquisition. As a result, VITAS' fourth-quarter operating results include an aftertax charge of $10.8 million representing the portion of this preliminary settlement not accounted for on VITAS' opening balance sheet. "Roto-Rooter also reported solid financial operating results. For the fourth quarter of 2005, Roto-Rooter had revenue of $79 million, an increase of 10%. Adjusted EBITDA was $14.5 million, an increase of 21% at a margin of 18.3%." VITAS "VITAS generated revenue growth of 18.8% over the prior-year period and 5.4% sequentially," stated David Williams, Chemed chief financial officer. "Gross margins were 22.9% in the fourth quarter of 2005, a decrease of 60 basis points when compared to the prior-year quarter. The fourth-quarter 2005 gross margin includes $1.6 million in start-up losses, which is $0.1 million higher than the $1.5 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 Consolidating Statement of Income, totaled $14.1 million, including $0.1 million in OIG legal expenses. Excluding the OIG expenses, central support costs increased 7.8% when compared to the prior-year quarter and increased 2.5% sequentially." VITAS' ADC in the fourth quarter of 2005 was 10,412. This compares to an ADC of 9,134 in the comparable prior-year period, an increase of 14.0% and 1.5% sequential growth. Admissions totaled 12,487, an increase of 8.0% over the fourth quarter of 2004. The Average Length of Stay (ALOS) for patients discharged in the quarter was 70.0 days and compares to 66.5 days in the third quarter of 2005 and 64.1 days in the fourth 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 16.0%, 10.7% and 6.2%, respectively, over the prior-year quarter. "Our mix of revenue at VITAS was relatively stable," Williams added. "Routine home care represented 69.3% of revenue, a 10 basis point decline over the prior-year quarter and a 50 basis point decline sequentially. Our inpatient revenue aggregated 13.5% and continuous care was 17.2% of total revenue in the fourth quarter of 2005. "All of our base and new start programs are estimated to have Medicare cap cushion for the 2005 measurement period which ended on October 31, 2005," stated Williams. "As previously discussed, we have been closely monitoring Medicare cap limitations at our Phoenix acquisition. Phoenix has an estimated Medicare cap liability of $2.4 million as of October 31, 2005. This includes $700 thousand for future Medicare adjustments related to individual patient cap allocations between provider numbers. The final Medicare cap liability for this period may not be known for several years. "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 in 2006 by increasing admissions of patients requiring in-patient and continuous care. Based upon current admission and discharge trends, we have not accrued for any Medicare billing limitations in any of our programs, including Phoenix, in the fourth quarter of 2005 for the 2006 measurement period." Roto-Rooter Segment Roto-Rooter's plumbing and drain cleaning business generated sales of $79 million for the fourth quarter of 2005, 10.5% higher than the $72 million reported in the comparable prior-year quarter. Net income for the quarter was $7.1 million, including favorable prior-year tax adjustments and aftertax LTIP expense. Net income in the fourth quarter of 2004 was $3.3 million, including the $1.9 million aftertax cost of settling the Madison County class action litigation. Excluding these items, adjusted net income in the fourth quarter of 2005 was $7.2 million, an increase of 37%. Adjusted EBITDA in the fourth quarter of 2005 totaled $14.5 million, an increase of 21.4% over the fourth quarter of 2004. Adjusted EBITDA margin in the fourth quarter of 2005 was 18.3%, a 160 basis point increase over the prior-year period. "Job count in the fourth quarter of 2005 increased 3.9% over the prior year period," stated Williams. "Commercial plumbing and drain cleaning job count increased 10.7% and 5.5%, respectively, over the prior-year quarter. Residential plumbing jobs increased 6.2% but were partially offset by a 0.2% 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 2006 "Going into 2006," Williams stated, "we anticipate VITAS to generate a revenue increase of 15% to 18%, increased admissions of 7% to 9% and continued expansion of EBITDA margins through the leveraging of central support costs. This should result in VITAS increasing its adjusted EBITDA margin approximately 60 to 80 basis points. "Roto-Rooter is estimated to generate a 5% to 6% increase in revenue in 2006, with adjusted EBITDA margins averaging between 16% and 17%. "Based upon these factors and an average diluted share count of 27.0 million, our expectation is that full-year 2006 earnings per diluted share from continuing operations, excluding any charges or credits not indicative of ongoing operations as well as excluding any expense for stock options required under SFAS 123R, will be in the range of $2.20 to $2.35." Conference Call Chemed will host a conference call and webcast at 11 a.m., EST, on Wednesday, February 22, 2006, to discuss the company's quarterly results and provide an update on its business. The dial-in number for the conference call is 800-320-2978 for U.S. and Canadian participants and 617-614-4923 for international participants. The participant passcode is 19933824. 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 63663450. 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 over 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 AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share data)(unaudited) For the For the Three Months Ended Years Ended December 31, December 31, ------------------- -------------------- 2005 2004 2005 2004 --------- --------- --------- ---------- Continuing Operations Service revenues and sales $248,203 $213,981 $926,477 $ 735,341 --------- --------- --------- ---------- Cost of services provided and goods sold (aa) 172,540 146,029 651,841 507,078 Selling, general and administrative expenses (aa) 39,850 40,226 151,670 138,285 Depreciation 4,245 4,774 16,179 14,542 Amortization 1,651 517 5,322 3,779 Other expenses--net (aa) 19,721 6,355 22,081 13,551 --------- --------- --------- ---------- Total costs and expenses 238,007 197,901 847,093 677,235 --------- --------- --------- ---------- Income from operations 10,196 16,080 79,384 58,106 Interest expense (5,243) (5,971) (21,264) (21,158) Loss on extinguishment of debt (aa) - - (3,971) (3,330) Other income--net 490 1,505 3,134 3,469 --------- --------- --------- ---------- Income before income taxes 5,443 11,614 57,283 37,087 Income taxes (aa) (1,386) (4,236) (19,578) (13,796) Equity in loss of affiliate (VITAS) (aa) - - - (4,105) --------- --------- --------- ---------- Income from continuing operations 4,057 7,378 37,705 19,186 Discontinued Operations (bb) 127 8,314 (1,888) 8,326 --------- --------- --------- ---------- Net Income $ 4,184 $ 15,692 $ 35,817 $ 27,512 ========= ========= ========= ========== Earnings Per Share Income from continuing operations (aa) $ 0.16 $ 0.30 $ 1.48 $ 0.80 ========= ========= ========= ========== Net Income $ 0.16 $ 0.63 $ 1.40 $ 1.14 ========= ========= ========= ========== Average number of shares outstanding 25,858 24,994 25,552 24,120 ========= ========= ========= ========== Diluted Earnings Per Share Income from continuing operations (aa) $ 0.15 $ 0.29 $ 1.43 $ 0.78 ========= ========= ========= ========== Net Income $ 0.16 $ 0.61 $ 1.36 $ 1.12 ========= ========= ========= ========== Average number of shares outstanding 26,590 25,672 26,299 24,636 ========= ========= ========= ========== (aa) Included in the results of operations are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands): For the For the Three Months Ended Years Ended December 31, December 31, ------------------- -------------------- 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 (73) - (637) - Other expenses -- net Long-term incentive compensation (2,531) - (5,477) (8,783) Adjustments to transaction-related costs of the VITAS acquisition 160 (2,029) 961 (442) Costs related to class action litigation (17,350) (3,135) (17,350) (3,135) Professional fees incurred for debt registration statement - (1,191) - (1,191) Cost of accelerating vesting of stock options - - (215) - Loss on extinguishment of debt - - (3,971) (3,330) --------- --------- --------- ---------- Pretax impact on earnings (19,794) (6,355) (25,026) (16,881) Income tax benefit/(charge) on the above 7,565 2,557 9,753 6,568 Income tax benefit from finalizing prior years' returns 174 600 1,961 1,620 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 $(12,055) $ (3,198) $(13,312) $ (12,798) ========= ========= ========= ========== (bb) Discontinued operations include primarily Service America, discontinued in December 2004. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (in thousands, except per share data)(unaudited) December 31, ---------------------- 2005 2004 ---------- ---------- Assets Current assets Cash and cash equivalents $ 57,133 $ 71,448 Accounts receivable less allowances 95,063 64,663 Inventories 6,499 7,019 Prepaid income taxes 9,096 - Current deferred income taxes 26,691 31,250 Current assets of discontinued operations - 13,397 Prepaid expenses and other current assets 9,768 9,842 ---------- ---------- Total current assets 204,250 197,619 Investments of deferred compensation plans held in trust 21,105 18,317 Other investments 1,445 1,445 Note receivable 12,500 12,500 Properties and equipment, at cost less accumulated depreciation 65,449 55,796 Identifiable intangible assets less accumulated amortization 75,358 76,924 Goodwill 433,756 432,732 Noncurrent assets of discontinued operations - 5,705 Other assets 21,222 24,528 ---------- ---------- Total Assets $ 835,085 $ 825,566 ========== ========== Liabilities Current liabilities Accounts payable $ 43,626 $ 37,777 Current portion of long-term debt 1,045 12,185 Income taxes 3,916 10,944 Accrued insurance 38,894 26,350 Accrued salaries and wages 19,952 17,030 Current liabilities of discontinued operations - 22,117 Other current liabilities 61,462 42,777 ---------- ---------- Total current liabilities 168,895 169,180 Deferred income taxes 22,304 16,814 Long-term debt 234,058 279,510 Deferred compensation liabilities 21,275 18,311 Noncurrent liabilities of discontinued operations - 811 Other liabilities 4,378 8,848 ---------- ---------- Total Liabilities 450,910 493,474 ---------- ---------- Stockholders' Equity Capital stock 28,374 13,491 Paid-in capital 237,917 212,691 Retained earnings 171,188 141,542 Treasury stock, at cost (52,127) (33,873) Unearned compensation (3,007) (3,590) Deferred compensation payable in Company stock 2,379 2,375 Notes receivable for shares sold (549) (544) ---------- ---------- Total Stockholders' Equity 384,175 332,092 ---------- ---------- Total Liabilities and Stockholders' Equity $ 835,085 $ 825,566 ========== ========== Book Value Per Share $ 14.79 $ 13.27 (cc) ========== ========== (cc) Adjusted for 2-for-1 stock split in May 2005. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)(unaudited) For the Years Ended December 31, --------------------- 2005 2004 ---------- ---------- Cash Flows from Operating Activities Net income $ 35,817 $ 27,512 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,501 18,321 Provision for uncollectible accounts receivable 7,224 6,155 Write off unamortized debt issuance costs 2,871 - Noncash long-term incentive compensation 4,813 4,988 Discontinued operations 1,888 (8,326) Provision for deferred income taxes (3,682) 5,002 Amortization of debt issuance costs 1,834 1,861 Equity in loss of affiliate - 4,105 Changes in operating assets and liabilities, excluding amounts acquired in business combinations: Increase in accounts receivable (37,753) (6,534) Decrease/(increase) in inventories 520 (986) Decrease in prepaid expenses and other current assets 76 11,659 Increase/(decrease) in accounts payable and other current liabilities 33,036 (2,497) Increase in income taxes 14,112 21,374 Decrease/(increase) in other assets (2,003) 5,607 Decrease in other liabilities (1,142) (627) Noncash expense of internally financed ESOPs 1,060 1,894 Other sources/(uses) 1,400 (1,044) ---------- ---------- Net cash provided by continuing operations 81,572 88,464 Net cash provided/(used) by discontinued operations (1,559) 4,426 ---------- ---------- Net cash provided by operating activities 80,013 92,890 ---------- ---------- Cash Flows from Investing Activities Capital expenditures (25,956) (18,290) Net uses from disposals of discontinued operations (9,367) (759) Business combinations, net of cash acquired (6,207) (344,727) Proceeds from sales of property and equipment 157 772 Return of merger deposit - 10,000 Other uses (369) (205) ---------- ---------- Net cash used by investing activities (41,742) (353,209) ---------- ---------- Cash Flows from Financing Activities Repayment of long-term debt (141,592) (96,940) Proceeds from issuance of long-term debt 85,000 295,000 Increase in cash overdraft payable 6,752 1,265 Issuance of capital stock, net of issuance costs 12,327 98,823 Dividends paid (6,172) (5,718) Purchases of treasury stock (7,401) (2,654) Debt issuance costs (1,755) (14,447) Repayment of stock subscriptions note receivable - 8,053 Redemption of convertible trust preferred securities - (2,735) Other sources 255 432 ---------- ---------- Net cash provided/(used) by financing activities (52,586) 281,079 ---------- ---------- Increase/(Decrease) in Cash and Cash Equivalents (14,315) 20,760 Cash and cash equivalents at beginning of year 71,448 50,688 ---------- ---------- Cash and cash equivalents at end of year $ 57,133 $ 71,448 ========== ========== CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- 2005 --------------------- Service revenues and sales $ 168,994 $ 79,209 $ - $ 248,203 ----------- ----------- ----------- ------------- Cost of services provided and goods sold 130,271 42,269 - 172,540 Selling, general and administrative expenses (a) 14,097 24,097 1,656 39,850 Depreciation 2,108 2,032 105 4,245 Amortization 1,384 20 247 1,651 Other expenses (a) 18,150 449 1,122 19,721 ----------- ----------- ----------- ------------- Total costs and expenses 166,010 68,867 3,130 238,007 ----------- ----------- ----------- ------------- Income/(loss) from operations 2,984 10,342 (3,130) 10,196 Interest expense (49) (155) (5,039) (5,243) Intercompany interest income/(expense) 785 731 (1,516) - Other income--net 49 38 403 490 ----------- ----------- ----------- ------------- Income/(loss) before income taxes 3,769 10,956 (9,282) 5,443 Income taxes (a) (1,264) (3,886) 3,764 (1,386) ----------- ----------- ----------- ------------- Income/(loss) from continuing operations 2,505 7,070 (5,518) 4,057 Discontinued operations - - 127 127 ----------- ----------- ----------- ------------- Net income/(loss) $ 2,505 $ 7,070 $ (5,391) $ 4,184 =========== =========== =========== ============= 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 (b) 1,680 3,135 1,540 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) - Other income--net 127 674 704 1,505 ----------- ----------- ----------- ------------- Income/(loss) before income taxes 16,201 5,466 (10,053) 11,614 Income taxes (b) (6,541) (2,125) 4,430 (4,236) ----------- ----------- ----------- ------------- Income/(loss) from continuing operations 9,660 3,341 (5,623) 7,378 Discontinued operations - - 8,314 8,314 ----------- ----------- ----------- ------------- Net income/(loss) $ 9,660 $ 3,341 $ 2,691 $ 15,692 =========== =========== =========== ============= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- 2005 --------------------- Service revenues and sales $ 629,140 $ 297,337 $ - $ 926,477 ----------- ----------- ----------- ------------- Cost of services provided and goods sold (c) 491,974 159,867 - 651,841 Selling, general and administrative expenses (c) 54,806 88,046 8,818 151,670 Depreciation 7,585 8,271 323 16,179 Amortization 4,347 90 885 5,322 Other expenses (c) 19,031 1,001 2,049 22,081 ----------- ----------- ----------- ------------- Total costs and expenses 577,743 257,275 12,075 847,093 ----------- ----------- ----------- ------------- Income/(loss) from operations 51,397 40,062 (12,075) 79,384 Interest expense (153) (563) (20,548) (21,264) Intercompany interest income/(expense) 2,554 2,236 (4,790) - Loss on extinguishment of debt (c) - - (3,971) (3,971) Other income--net 183 860 2,091 3,134 ----------- ----------- ----------- ------------- Income/(loss) before income taxes 53,981 42,595 (39,293) 57,283 Income taxes (c) (20,394) (15,635) 16,451 (19,578) ----------- ----------- ----------- ------------- Income/(loss) from continuing operations 33,587 26,960 (22,842) 37,705 Discontinued operations - - (1,888) (1,888) ----------- ----------- ----------- ------------- Net income/(loss) $ 33,587 $ 26,960 $ (24,730) $ 35,817 =========== =========== =========== ============= 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 (d) 1,680 4,693 7,178 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 (d) - - (3,330) (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 (d) (20,030) (10,611) 16,845 (13,796) Equity in loss of VITAS (d) - - (4,105) (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 =========== =========== =========== ============= 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 DECEMBER 31, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- 2005 --------------------- Net income/(loss) $ 2,505 $ 7,070 $ (5,391) $ 4,184 Add/(deduct): Discontinued operations - - (127) (127) Interest expense 49 155 5,039 5,243 Income taxes 1,264 3,886 (3,764) 1,386 Depreciation 2,108 2,032 105 4,245 Amortization 1,384 20 247 1,651 ----------- ----------- ----------- ------------- EBITDA 7,310 13,163 (3,891) 16,582 Add/(deduct): Long-term incentive compensation (f) 800 449 1,282 2,531 Lawsuit settlement 17,350 - - 17,350 Legal expenses of OIG investigation 73 - - 73 VITAS transaction expense adjustment - - (160) (160) Advertising cost adjustment (e) - 1,660 - 1,660 Interest income (57) (38) (671) (766) Intercompany interest income/(expense) (785) (731) 1,516 - ----------- ----------- ----------- ------------- Adjusted EBITDA $ 24,691 $ 14,503 $ (1,924) $ 37,270 =========== =========== =========== ============= 2004 --------------------- Net income/(loss) $ 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): Lawsuit settlement - 3,135 - 3,135 Debt registration expenses - - 1,191 1,191 VITAS transaction expense adjustment 1,680 - 349 2,029 Advertising cost adjustment (e) - 1,571 - 1,571 Interest income (142) (31) (233) (406) Intercompany interest income/(expense) (339) (341) 680 - ----------- ----------- ----------- ------------- Adjusted EBITDA $ 20,426 $ 11,949 $ (1,979) $ 30,396 =========== =========== =========== ============= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING SUMMARY OF EBITDA FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- 2005 --------------------- Net income/(loss) $ 33,587 $ 26,960 $ (24,730) $ 35,817 Add/(deduct): Discontinued operations - - 1,888 1,888 Interest expense 153 563 20,548 21,264 Income taxes 20,394 15,635 (16,451) 19,578 Depreciation 7,585 8,271 323 16,179 Amortization 4,347 90 885 5,322 ----------- ----------- ----------- ------------- EBITDA 66,066 51,519 (17,537) 100,048 Add/(deduct): Long-term incentive compensation (f) 1,681 1,001 3,010 5,692 Lawsuit settlement 17,350 - - 17,350 Prior-period insurance adjustment - (1,663) - (1,663) Legal expenses of OIG investigation 637 - - 637 VITAS transaction expense adjustment - - (961) (961) Advertising cost adjustment (e) - 691 - 691 Interest income (249) (156) (1,805) (2,210) Intercompany interest income/(expense) (2,554) (2,236) 4,790 - Loss on extinguishment of debt - - 3,971 3,971 ----------- ----------- ----------- ------------- Adjusted EBITDA $ 82,931 $ 49,156 $ (8,532) $ 123,555 =========== =========== =========== ============= 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 VITAS transaction expense adjustment 1,680 - (1,238) 442 Advertising cost adjustment (e) - 528 - 528 Interest income (332) (139) (1,403) (1,874) Intercompany interest income/(expense) (759) (1,041) 1,800 - Equity in loss of VITAS - - 4,105 4,105 Loss on extinguishment of debt - - 3,330 3,330 ----------- ----------- ----------- ------------- Adjusted EBITDA $ 58,947 $ 42,355 $ (9,201) $ 92,101 =========== =========== =========== ============= 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 MONTHS AND YEARS ENDED DECEMBER 31, 2005 AND 2004 (in thousands, except per share data)(unaudited) For the For the Three Months Ended Years Ended December 31, December 31, ------------------- -------------------- 2005 2004 2005 2004 --------- --------- --------- ---------- Net income as reported $ 4,184 $ 15,692 $ 35,817 $ 27,512 Add/(deduct): Pro forma VITAS net income contribution for the period (g) - (4) - 2,987 Pro forma financing costs related to acquisition of VITAS (h) - - - (2,211) Pro forma elimination of VITAS transaction expense adjustment - 1,174 - 222 Pro forma elimination of equity in loss of VITAS (i) - - - 4,105 --------- --------- --------- ---------- Pro forma net income 4,184 16,862 35,817 32,615 Add/(deduct): Discontinued operations (127) (8,314) 1,888 (8,326) Prior-period tax adjustments (174) (600) (1,961) (1,620) Aftertax prior-period insurance adjustment - - (1,014) - Aftertax cost of long-term incentive compensation (f) 1,587 - 3,571 5,437 Aftertax cost of legal expenses of OIG investigation 45 - 397 - Aftertax VITAS transaction expense adjustment (160) - (961) - Aftertax cost of lawsuit settlement 10,757 1,897 10,757 1,897 Aftertax cost of debt registration expenses - 727 - 727 Aftertax cost of loss on extinguishment of debt - - 2,523 2,030 --------- --------- --------- ---------- Adjusted pro forma income from continuing operations $ 16,112 $ 10,572 $ 51,017 $ 32,760 ========= ========= ========= ========== Earnings Per Share As Reported Net income $ 0.16 $ 0.63 $ 1.40 $ 1.14 ========= ========= ========= ========== Average number of shares outstanding 25,858 24,994 25,552 24,120 ========= ========= ========= ========== Diluted Earnings Per Share As Reported Net income $ 0.16 $ 0.61 $ 1.36 $ 1.12 ========= ========= ========= ========== Average number of shares outstanding 26,590 25,672 26,299 24,636 ========= ========= ========= ========== Adjusted Pro Forma Earnings Per Share Income from continuing operations $ 0.62 $ 0.42 $ 2.00 $ 1.30 ========= ========= ========= ========== Average number of shares outstanding 25,858 24,994 25,552 25,218 ========= ========= ========= ========== Adjusted Pro Forma Diluted Earnings Per Share Income from continuing operations $ 0.61 $ 0.41 $ 1.94 $ 1.27 ========= ========= ========= ========== Average number of shares outstanding 26,590 25,672 26,299 25,734 ========= ========= ========= ========== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004 (in thousands, except per share data) (unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- 2005 --------------------- Service revenues and sales $ 168,994 $ 79,209 $ - $ 248,203 ----------- ----------- ----------- ------------- Cost of services provided and goods sold 130,271 42,269 - 172,540 Selling, general and administrative expenses (a) 14,097 24,097 1,656 39,850 Depreciation 2,108 2,032 105 4,245 Amortization 1,384 20 247 1,651 Other expenses (a) 18,150 449 1,122 19,721 ----------- ----------- ----------- ------------- Total costs and expenses 166,010 68,867 3,130 238,007 ----------- ----------- ----------- ------------- Income/(loss) from operations 2,984 10,342 (3,130) 10,196 Interest expense (49) (155) (5,039) (5,243) Intercompany interest income/(expense) 785 731 (1,516) - Other income--net 49 38 403 490 ----------- ----------- ----------- ------------- Income/(loss) before income taxes 3,769 10,956 (9,282) 5,443 Income taxes (a) (1,264) (3,886) 3,764 (1,386) ----------- ----------- ----------- ------------- Income/(loss) from continuing operations 2,505 7,070 (5,518) 4,057 Discontinued operations - - 127 127 ----------- ----------- ----------- ------------- Net income/(loss) $ 2,505 $ 7,070 $ (5,391) $ 4,184 =========== =========== =========== ============= Earnings Per Share Continuing operations $ 0.16 ============= Net income $ 0.16 ============= Average number of shares outstanding 25,858 ============= Diluted Earnings Per Share Continuing operations $ 0.15 ============= Net income $ 0.16 ============= Average number of shares outstanding 26,590 ============= 2004 (j) --------------------- 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 358 (37) 200 521 Other expenses (b) - 3,135 1,191 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) - Other income--net 127 674 704 1,505 ----------- ----------- ----------- ------------- Income/(loss) before income taxes 17,877 5,466 (9,704) 13,639 Income taxes (b) (7,213) (2,125) 4,247 (5,091) ----------- ----------- ----------- ------------- Income/(loss) from continuing operations 10,664 3,341 (5,457) 8,548 Discontinued operations - - 8,314 8,314 ----------- ----------- ----------- ------------- Net income/(loss) $ 10,664 $ 3,341 $ 2,857 $ 16,862 =========== =========== =========== ============= Earnings Per Share Continuing operations $ 0.34 ============= Net income $ 0.67 ============= Average number of shares outstanding 24,994 ============= Diluted Earnings Per Share Continuing operations $ 0.33 ============= Net income $ 0.66 ============= Average number of shares outstanding 25,672 ============= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONSOLIDATING STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 (in thousands, except per share data) (unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- 2005 --------------------- Service revenues and sales $ 629,140 $ 297,337 $ - $ 926,477 ----------- ----------- ----------- ------------- Cost of services provided and goods sold (c) 491,974 159,867 - 651,841 Selling, general and administrative expenses (c) 54,806 88,046 8,818 151,670 Depreciation 7,585 8,271 323 16,179 Amortization 4,347 90 885 5,322 Other expenses (c) 19,031 1,001 2,049 22,081 ----------- ----------- ----------- ------------- Total costs and expenses 577,743 257,275 12,075 847,093 ----------- ----------- ----------- ------------- Income/(loss) from operations 51,397 40,062 (12,075) 79,384 Interest expense (153) (563) (20,548) (21,264) Intercompany interest income/(expense) 2,554 2,236 (4,790) - Loss on extinguishment of debt (c) - - (3,971) (3,971) Other income--net 183 860 2,091 3,134 ----------- ----------- ----------- ------------- Income/(loss) before income taxes 53,981 42,595 (39,293) 57,283 Income taxes (c) (20,394) (15,635) 16,451 (19,578) ----------- ----------- ----------- ------------- Income/(loss) from continuing operations 33,587 26,960 (22,842) 37,705 Discontinued operations - - (1,888) (1,888) ----------- ----------- ----------- ------------- Net income/(loss) $ 33,587 $ 26,960 $ (24,730) $ 35,817 =========== =========== =========== ============= Earnings Per Share Continuing operations $ 1.48 ============= Net income $ 1.40 ============= Average number of shares outstanding 25,552 ============= Diluted Earnings Per Share Continuing operations $ 1.43 ============= Net income $ 1.36 ============= Average number of shares outstanding 26,299 ============= 2004 (j) --------------------- 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 (d) - 4,693 8,416 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 (d) - - (3,330) (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 (d) (22,447) (10,611) 18,431 (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 $ 0.96 ============= Net income $ 1.29 ============= Average number of shares outstanding 25,218 ============= Diluted Earnings Per Share Continuing operations $ 0.94 ============= Net income $ 1.27 ============= Average number of shares outstanding 25,734 ============= 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 DECEMBER 31, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- 2005 --------------------- Net income/(loss) $ 2,505 $ 7,070 $ (5,391) $ 4,184 Add/(deduct): Discontinued operations - - (127) (127) Interest expense 49 155 5,039 5,243 Income taxes 1,264 3,886 (3,764) 1,386 Depreciation 2,108 2,032 105 4,245 Amortization 1,384 20 247 1,651 ----------- ----------- ----------- ------------- EBITDA 7,310 13,163 (3,891) 16,582 Add/(deduct): Long-term incentive compensation (f) 800 449 1,282 2,531 Lawsuit settlement 17,350 - - 17,350 Legal expenses of OIG investigation 73 - - 73 VITAS transaction expense adjustment - - (160) (160) Advertising cost adjustment (e) - 1,660 - 1,660 Interest income (57) (38) (671) (766) Intercompany interest income/(expense) (785) (731) 1,516 - ----------- ----------- ----------- ------------- Adjusted EBITDA $ 24,691 $ 14,503 $ (1,924) $ 37,270 =========== =========== =========== ============= 2004 (j) --------------------- Pro forma net income/(loss) $ 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 2,634 2,082 58 4,774 Amortization 358 (37) 200 521 ----------- ----------- ----------- ------------- Pro forma EBITDA 20,907 7,615 (3,617) 24,905 Add/(deduct): Lawsuit settlement - 3,135 - 3,135 Legal expenses of OIG investigation - - 1,191 1,191 Advertising cost adjustment (e) - 1,571 - 1,571 Interest income (142) (31) (233) (406) Intercompany interest income/(expense) (339) (341) 680 - ----------- ----------- ----------- ------------- Pro forma adjusted EBITDA $ 20,426 $ 11,949 $ (1,979) $ 30,396 =========== =========== =========== ============= 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 YEARS ENDED DECEMBER 31, 2005 AND 2004 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- 2005 --------------------- Net income/(loss) $ 33,587 $ 26,960 $ (24,730) $ 35,817 Add/(deduct): Discontinued operations - - 1,888 1,888 Interest expense 153 563 20,548 21,264 Income taxes 20,394 15,635 (16,451) 19,578 Depreciation 7,585 8,271 323 16,179 Amortization 4,347 90 885 5,322 ----------- ----------- ----------- ------------- EBITDA 66,066 51,519 (17,537) 100,048 Add/(deduct): Long-term incentive compensation (f) 1,681 1,001 3,010 5,692 Lawsuit settlement 17,350 - - 17,350 Prior-period insurance adjustment - (1,663) - (1,663) Legal expenses of OIG investigation 637 - - 637 VITAS transaction expense adjustment - - (961) (961) Advertising cost adjustment (e) - 691 - 691 Interest income (249) (156) (1,805) (2,210) Intercompany interest income/(expense) (2,554) (2,236) 4,790 - Loss on extinguishment of debt - - 3,971 3,971 ----------- ----------- ----------- ------------- Adjusted EBITDA $ 82,931 $ 49,156 $ (8,532) $ 123,555 =========== =========== =========== ============= 2004 (j) --------------------- 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 (e) - 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 =========== =========== =========== ============= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES FOOTNOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2005 AND 2004 (unaudited) (a) Included in the results of operations for the three months ended December 31, 2005 are the following significant credits/(charges) which may not be indicative of on going operations (in thousands): VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- Selling, general and administrative expenses Costs associated with OIG investigation $ (73) $ - $ - $ (73) Other expenses -- net Long-term incentive compensation (800) (449) (1,282) (2,531) Adjustments to transaction- related costs of the VITAS acquisition - - 160 160 Costs related to class action litigation (17,350) - - (17,350) ----------- ----------- ----------- ------------- Pretax impact on earnings (18,223) (449) (1,122) (19,794) Income tax benefit on the above 6,925 172 468 7,565 Income tax benefit from finalizing prior years' returns - 174 - 174 ----------- ----------- ----------- ------------- Aftertax impact on earnings $ (11,298) $ (103) $ (654) $ (12,055) =========== =========== =========== ============= (b) Included in the results of operations for the three months ended December 31, 2004 are the following significant credits/(charges) which may not be indicative of on going operations (in thousands): VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- Other expenses -- net Adjustments to transaction- related costs of the VITAS acquisition $ (1,680) $ - $ (349) $ (2,029) Costs related to class action litigation - (3,135) - (3,135) Professional fees incurred for debt registration statement - - (1,191) (1,191) ----------- ----------- ----------- ------------- Pretax impact on earnings (1,680) (3,135) (1,540) (6,355) Income tax benefit on the above 672 1,238 647 2,557 Income tax benefit from finalizing prior years' returns - - 600 600 ----------- ----------- ----------- ------------- Aftertax impact on earnings $ (1,008) $ (1,897) $ (293) $ (3,198) =========== =========== =========== ============= (c) Included in the results of operations for the year ended December 31, 2005 are the following significant credits/(charges) which may not be indicative of on going operations (in thousands): VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- Cost of services provided and goods sold Favorable adjustment to casualty insurance accruals related to prior years' experience $ - $ 1,663 $ - $ 1,663 Selling, general and administrative expenses Costs associated with OIG investigation (637) - - (637) Other expenses -- net Long-term incentive compensation (1,681) (1,001) (2,795) (5,477) Adjustments to transaction- related costs of the VITAS acquisition - - 961 961 Cost of accelerating vesting of stock options - - (215) (215) Costs related to class action litigation (17,350) - - (17,350) Loss on extinguishment of debt - - (3,971) (3,971) ----------- ----------- ----------- ------------- Pretax impact on earnings (19,668) 662 (6,020) (25,026) Income tax benefit on the above 7,471 (265) 2,547 9,753 Income tax benefit from finalizing prior years' returns - 1,126 835 1,961 ----------- ----------- ----------- ------------- Aftertax impact on earnings $ (12,197) $ 1,523 $ (2,638) $ (13,312) =========== =========== =========== ============= (d) Included in the results of operations for the year ended December 31, 2004 are the following significant credits/(charges) which may not be indicative of on going operations (in thousands): VITAS Roto-Rooter Corporate Consolidated ----------- ----------- ----------- ------------- Other expenses -- net Long-term incentive compensation $ - $ (1,558) $ (7,225) $ (8,783) Adjustments to transaction- related costs of the VITAS acquisition (1,680) - 1,238 (442) Costs related to class action litigation - (3,135) - (3,135) Professional fees incurred for debt registration statement (1,191) (1,191) Loss on extinguishment of debt - - (3,330) (3,330) ----------- ----------- ----------- ------------- Pretax impact on earnings (1,680) (4,693) (10,508) (16,881) Income tax benefit on the above 672 1,814 4,082 6,568 Income tax benefit from finalizing prior years' returns - 630 990 1,620 Equity in loss of affiliate (VITAS) is attributable to transaction- related expenses incurred by VITAS prior to its acquisition by Chemed - - (4,105) (4,105) ----------- ----------- ----------- ------------- Aftertax impact on earnings $ (1,008) $ (2,249) $ (9,541) $ (12,798) =========== =========== =========== ============= (e) 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 2005 and 2004, GAAP advertising expense for Roto-Rooter totaled $6,378,000 and $6,417,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the fourth quarters of 2005 and 2004 would total $4,718,000 and $4,846,000, respectively. For the years ended December 31, 2005 and 2004, GAAP advertising expense for Roto-Rooter totaled $19,063,000 and $18,587,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the years ended December 31, 2005 and 2004, would total $18,372,000 and $18,059,000, respectively. (f) For the year ended December 31, 2005, amounts include costs related to accelerating the vesting of stock options in addition to payouts under the Company's LTIP. (g) 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). (h) 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. (i) Amount represents the impact of eliminating the Company's prior investments in VITAS, assuming the acquisition of VITAS were completed on January 1, 2004. (j) 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