-----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, IigrTR6URLDKalwql5GUp7so7/TGsXLL2Cb+nNuFeHTKRJ8yhIQdp272a9/BrhDr yUsxMbHN8M6fMvmmObqFHw== 0001157523-07-010466.txt : 20071031 0001157523-07-010466.hdr.sgml : 20071030 20071031115028 ACCESSION NUMBER: 0001157523-07-010466 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20071030 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20071031 DATE AS OF CHANGE: 20071031 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: 071201700 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 a5532318.txt CHEMED CORPORATION 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 30, 2007 CHEMED CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-8351 31-0791746 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification 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) Page 1 of 2 Item 2.02 Results of Operations and Financial Condition On October 30, 2007 Chemed Corporation issued a press release announcing its financial results for the quarter ended September 30, 2007. A copy of the release is furnished herewith as Exhibit 99. Item 9.01 Financial Statements and Exhibits d) Exhibit (99) Registrant's press release dated October 30, 2007 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 31, 2007 By: /s/ Arthur V. Tucker, Jr. ---------------- ----------------------------- Arthur V. Tucker, Jr. Vice President and Controller Page 2 of 2 EX-99 2 a5532318ex99.txt EXHIBIT 99 Exhibit 99 Chemed Reports Third-Quarter 2007 Results CINCINNATI--(BUSINESS WIRE)--Oct. 30, 2007--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, 2007, versus the comparable prior-year period, as follows: Consolidated operating results from Continuing Operations: -- Revenue increased 7.4% to $273 million -- Diluted EPS from Continuing Operations of $.69 -- Adjusted diluted EPS from Continuing Operations, which excludes early extinguishment of debt and certain other items, of $.74 VITAS segment operating results from Continuing Operations: -- Net Patient Revenue of $188 million, up 7.5% -- Average Daily Census (ADC) of 11,529 up 4.6% -- Admissions of 13,436, an increase of 5.9% -- Average Length of Stay in the quarter of 76.7 days -- Net income of $13.9 million -- Adjusted EBITDA of $24.6 million Roto-Rooter segment operating results: -- Revenue of $84 million, an increase of 7.2% -- Job count of 198,354 -- Net Income of $8.9 million -- Adjusted EBITDA of $15.4 million VITAS VITAS generated 13,436 admissions in the quarter, which represents an increase of 5.9% over the prior year. Discharges totaled 13,403, an increase of 7.0%, and ADC in the quarter increased 4.6% to 11,529. VITAS' Average Length of Stay (ALOS) for patients discharged in the quarter was 76.7 days. This compares to an ALOS of 76.6 days in the second quarter of 2007 and 71.0 days in the third quarter of 2006. Median Length of Stay (MLOS) was 14 days. Net revenue for VITAS was $188 million in the third quarter of 2007, which is an increase of 7.5% over the prior-year period. This revenue growth was the result of increased ADC combined with the 2007 Medicare price increase, partially offset by the continued shift in revenue mix to routine home care. Routine homecare revenue increased 9.1% in the quarter and inpatient and continuous care declined 0.4%. The routine home care per diem averaged $141 and inpatient/continuous care per diem averaged $609 in the third quarter of 2007. Income from continuing operations for the third quarter of 2007 was $13.9 million, an increase of 32.8%. VITAS did not have any billing restrictions related to Medicare Cap for its third-quarter 2007 operating activity. As of September 30, 2007, VITAS has not accrued any Medicare billing restrictions for the 2007 cap year. The ability for VITAS to bill Medicare for 100% of the care provided to terminally ill patients is a result of improved admissions metrics, relatively low MLOS and the continued combination of various hospice provider numbers. All of VITAS' hospice programs currently have a cap cushion greater than 10% through the first eleven months of the 2007 cap year with the exception of two programs. These programs have a cap cushion of 3% and 6%, respectively. VITAS has received notice from its fiscal intermediary for all of VITAS' Medicare provider numbers related to the 2006 Medicare Cap calculation. The fiscal intermediary determines Medicare Cap based upon a retrospective review of individual hospice programs admissions and billing activities. This look back measures Medicare Cap for the revenue period November 1, 2005, through October 31, 2006, and admissions for the period September 29, 2005, through September 28, 2006. As part of this measurement, the fiscal intermediary also prorates Medicare Cap for any Medicare decedents who received hospice care from more than one provider during the decedent's lifespan. This information is not available to VITAS and can only be measured by the fiscal intermediary upon the death of the Medicare beneficiary. Based upon this retrospective review by the fiscal intermediary, VITAS has over accrued its 2006 Medicare Cap liability by $1.2 million. VITAS' Phoenix program, which was discontinued in December 2006, was over accrued by $1.9 million. This over accrual was partially offset by a $0.7 million under accrual in 2006 for Medicare Cap liability in three programs. These adjustments are recorded in the company's third-quarter 2007 operating results. VITAS measures its Medicare Cap cushion, or Medicare Cap liability, on a program-by-program basis. Cap Cushion is defined as the difference between the maximum Medicare billing potential and actual Medicare billings in a hospice program for a Medicare Cap year. Of the 36 programs VITAS had in place for a full 2006 government fiscal year, 31 programs, or 86%, received favorable 2006 adjustments to their Medicare Cap Cushion totaling $18 million. VITAS had 5 programs that had either overestimated Cap Cushion, or underestimated Cap liability, totaling $1.3 million. VITAS had aggregate Cap Cushion in excess of $200 million at the end of the 2006 fiscal Medicare Cap year. Gross margin in the quarter, excluding the impact of Medicare Cap, was 21.7%, which is a 182 basis point improvement over the prior-year quarter. Of this margin expansion, approximately 126 basis points are a result of VITAS' improving labor productivity. The remaining 56 basis points are the result of $1.0 million of expenses that had been historically charged to cost of services that were centralized and are now classified as selling, general and administrative expense. VITAS had selling, general and administrative expense of $15.7 million in the third quarter of 2007. This is an increase of 14.9% over the prior year. Adjusting for the reclassification of expenses noted above, third-quarter 2007 selling, general and administrative expense increased 7.1% over the prior-year period and declined 3.7% sequentially. Roto-Rooter Roto-Rooter's plumbing and drain cleaning business generated sales of $84 million for the third quarter of 2007, 7.2% higher than the $78 million reported in the comparable prior-year quarter. Net income for the quarter was $8.9 million, an increase of 5.1% over the prior year. The prior-year quarter included $0.9 million of tax benefits related to earlier periods. Excluding this third-quarter 2006 tax benefit, net income in the third quarter of 2007 increased 17.9%. Adjusted EBITDA in the third quarter of 2007 totaled $15.4 million, an increase of 19.4% over the third quarter of 2006 and equated to an adjusted EBITDA margin of 18.3%, an increase of 188 basis points over the prior-year period. Job count in the third quarter of 2007 was essentially equal to the prior-year period. Total residential jobs increased 2.8% and consisted of residential plumbing jobs increasing 9.6% and residential drain cleaning jobs declining 0.4%, when compared to the third quarter of 2006. Residential jobs represent approximately 70% of total job count. Total commercial jobs declined 6.0% with commercial plumbing job count declining 1.0% and commercial drain cleaning decreasing 8.2%, over the prior-year quarter. A significant portion of the commercial job count decline is attributed to the continued elimination of low revenue, low margin commercial business. This mix shift has favorably impacted the average revenue per commercial job, which increased 11.7% in the third quarter of 2007 and has increased 11.9% on a year-to-date basis. Guidance for 2007 VITAS is estimated to generate full-year revenue growth from continuing operations, prior to Medicare Cap, of 8% to 9%. Admissions are estimated to increase 5%, increased ADC of 7.0% to 7.5% and adjusted EBITDA margins, prior to Medicare Cap, of 13.5% to 14.5%. This guidance assumes the hospice industry receives a full Medicare basket price increase of 3.3% in the fourth quarter of 2007. Full-year 2007 Medicare contractual billing limitations, including $0.7 million of 2006 retrospective adjustment recorded in the third quarter of 2007, is estimated at $2.0 million. Roto-Rooter is estimated to generate an 8.5% to 9.0% increase in revenue in 2007, job count growth between 1.0% and 1.2% and adjusted EBITDA margin in the range of 19.5% to 20.0%. Based upon these factors, an effective tax rate of 38.7% and an average diluted share count for the second half of 2007 of 24.5 million, our estimate is that full-year 2007 earnings per diluted share from continuing operations, excluding early extinguishment of debt, expense for stock options and other charges or credits not indicative of ongoing operations, will be in the range of $3.10 to $3.20. Conference Call Chemed will host a conference call and webcast at 10 a.m., ET, on Wednesday, October 31, 2007, to discuss the company's quarterly results and provide an update on its business. The dial-in number for the conference call is (866) 202-3109 for U.S. and Canadian participants and (617) 213-8844 for international participants. The participant passcode is 78362358. 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 40847992. An archived webcast will also be available at www.chemed.com and will remain available for 14 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 11,000 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 Indonesia, Singapore, Japan, and the Philippines. 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) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 2007 2006 (cc) 2007 2006 (cc) --------- --------- --------- --------- Continuing Operations (aa) Service revenues and sales $272,503 $253,695 $814,329 $746,684 --------- --------- --------- --------- Cost of services provided and goods sold 192,882 185,399 569,845 540,537 Selling, general and administrative expenses (aa) 42,526 39,139 136,686 116,214 Depreciation 5,220 4,171 14,897 12,385 Amortization 1,292 1,355 3,901 3,968 Other operating expense/(income)(aa) - 272 (1,138) 272 --------- --------- --------- --------- Total costs and expenses 241,920 230,336 724,191 673,376 --------- --------- --------- --------- Income from operations 30,583 23,359 90,138 73,308 Interest expense (2,515) (4,081) (9,657) (13,726) Loss from impairment of investment (aa) - (1,445) - (1,445) Loss on extinguishment of debt (aa) (83) - (13,798) (430) Other income--net 11 715 3,068 2,734 --------- --------- --------- --------- Income before income taxes 27,996 18,548 69,751 60,441 Income taxes (aa) (11,080) (5,673) (27,181) (21,978) --------- --------- --------- --------- Income from continuing operations 16,916 12,875 42,570 38,463 Discontinued Operations (bb) 1,201 (4,914) 1,201 (5,445) --------- --------- --------- --------- Net Income $ 18,117 $ 7,961 $ 43,771 $ 33,018 ========= ========= ========= ========= Earnings Per Share Income from continuing operations $ 0.71 $ 0.49 $ 1.72 $ 1.47 ========= ========= ========= ========= Net income $ 0.76 $ 0.30 $ 1.77 $ 1.26 ========= ========= ========= ========= Average number of shares outstanding 23,933 26,190 24,711 26,147 ========= ========= ========= ========= Diluted Earnings Per Share Income from continuing operations $ 0.69 $ 0.48 $ 1.69 $ 1.44 ========= ========= ========= ========= Net income $ 0.74 $ 0.30 $ 1.73 $ 1.23 ========= ========= ========= ========= Average number of shares outstanding 24,466 26,633 25,249 26,750 ========= ========= ========= ========= - -------------------------------- (aa)Amounts include 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, ------------------- ------------------- 2007 2006 2007 2006 --------- --------- --------- --------- Selling, general and administrative expenses Stock option expense $ (1,592) $ (597) $ (3,074) $ (615) Costs associated with OIG investigation (48) (344) (188) (818) Long-term incentive compensation - - (7,067) - Other - - 467 - Other expenses -- net Gain on sale of property - - 1,138 - Costs related to class action litigation - (272) - (272) Loss from impairment of investment - (1,445) - (1,445) Loss on extinguishment of debt (83) - (13,798) (430) --------- --------- --------- --------- Pretax impact on earnings (1,723) (2,658) (22,522) (3,580) Income tax benefit/(charge) on the above 630 979 8,268 1,322 Income tax benefit from finalizing prior years' returns - 1,791 - 1,791 -------- --------- --------- --------- Aftertax impact on earnings $ (1,093) $ 112 $(14,254) $ (467) ========= ========= ========= ========= (bb)Discontinued operations for 2006 include the following (in thousands): Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 2007 2006 2007 2006 --------- --------- --------- --------- Accrual adjustments (2007) and operating results (2006) of VITAS' Phoenix operations, discontinued in November 2006 $ 1,201 $ (2,688) $ 1,201 $ (3,219) Accrual adjustments for expenses related to the sale of Patient Care in 2002 - (1,466) - (1,466) Accrual adjustments for expenses related to the sale of DuBois Chemicals in 1991 - (760) - (760) --------- --------- --------- --------- Total discontinued operations $ 1,201 $ (4,914) $ 1,201 $ (5,445) ========= ========= ========= ========= (cc) Reclassified to conform to 2007 presentation. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (in thousands, except per share data)(unaudited) September 30, -------------------- 2007 2006 (cc) ---------- --------- Assets Current assets Cash and cash equivalents $ 16,730 $ 5,414 Accounts receivable less allowances 81,718 103,048 Inventories 6,824 6,381 Current deferred income taxes 20,344 22,230 Prepaid income taxes - 5,812 Current assets of discontinued operations - 4,425 Prepaid expenses and other current assets 6,983 5,842 ---------- --------- Total current assets 132,599 153,152 Investments of deferred compensation plans held in trust 28,824 24,278 Notes receivable 14,701 12,500 Properties and equipment, at cost less accumulated depreciation 73,285 68,366 Identifiable intangible assets less accumulated amortization 66,186 69,880 Goodwill 436,262 432,907 Noncurrent assets of discontinued operations - 5,980 Other assets 16,382 19,458 ---------- --------- Total Assets $ 768,239 $786,521 ========== ========= Liabilities Current liabilities Accounts payable $ 46,389 $ 45,521 Current portion of long-term debt 10,161 207 Income taxes 9,854 4,743 Accrued insurance 37,725 40,504 Accrued compensation 37,147 32,128 Current liabilities of discontinued operations - 8,808 Other current liabilities 20,972 20,371 ---------- --------- Total current liabilities 162,248 152,282 Deferred income taxes 3,370 25,140 Long-term debt 224,735 165,796 Deferred compensation liabilities 28,407 23,932 Other liabilities 5,818 3,929 ---------- --------- Total Liabilities 424,578 371,079 ---------- --------- Stockholders' Equity Capital stock 29,206 28,810 Paid-in capital 264,374 250,373 Retained earnings 259,578 199,467 Treasury stock, at cost (211,959) (65,555) Deferred compensation payable in Company stock 2,462 2,402 Notes receivable for shares sold - (55) ---------- --------- Total Stockholders' Equity 343,661 415,442 ---------- --------- Total Liabilities and Stockholders' Equity $ 768,239 $786,521 ========== ========= Book Value Per Share $ 14.36 $ 15.89 ========== ========= - -------------------------------------------------- (cc) Reclassified to conform to 2007 presentation. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (unaudited) Nine Months Ended September 30, -------------------- 2007 2006 (cc) ---------- --------- Cash Flows from Operating Activities Net income $ 43,771 $ 33,018 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,798 16,353 Write off unamortized debt issuance costs 7,235 430 Noncash long-term incentive compensation 6,154 - Provision for uncollectible accounts receivable 6,025 5,938 Provision for deferred income taxes (1,388) 2,896 Discontinued operations (1,201) 5,445 Amortization of debt issuance costs 970 1,325 Loss on asset impairment - 1,445 Changes in operating assets and liabilities, excluding amounts acquired in business combinations: Decrease/(increase) in accounts receivable 4,819 (20,256) Decrease/(increase) in inventories (246) 118 Decrease in prepaid expenses and other current assets 2,964 2,673 Decrease in accounts payable and other current liabilities (9,896) (21,323) Increase in income taxes 11,825 9,087 Increase in other assets (3,109) (248) Increase in other liabilities 3,908 2,390 Excess tax benefit on share-based compensation (2,506) (4,943) Other sources 2,020 1,373 ---------- --------- Net cash provided by continuing operations 90,143 35,721 Net cash used by discontinued operations - 4,932 ---------- --------- Net cash provided by operating activities 90,143 40,653 ---------- --------- Cash Flows from Investing Activities Capital expenditures (20,145) (15,955) Net uses from disposals of discontinued operations (6,121) (3,360) Proceeds from sales of property and equipment 3,072 287 Business combinations, net of cash acquired (1,079) (1,489) Other uses (1,415) (805) ---------- --------- Net cash used by investing activities (25,688) (21,322) ---------- --------- Cash Flows from Financing Activities Proceeds from issuance of long-term debt 300,000 - Repayment of long-term debt (215,644) (84,500) Purchases of treasury stock (130,873) (8,253) Purchases of note hedges (55,093) - Proceeds from issuance of warrants 27,614 - Debt issuance costs (6,887) (154) Dividends paid (4,441) (4,739) Increase in cash overdraft payable 2,554 2,145 Excess tax benefit on share-based compensation 2,506 4,943 Issuance of capital stock 2,429 3,854 Net increase in revolving line of credit - 15,400 Other sources 836 254 ---------- --------- Net cash used by financing activities (76,999) (71,050) ---------- --------- Decrease in Cash and Cash Equivalents (12,544) (51,719) Cash and cash equivalents at beginning of year 29,274 57,133 ---------- --------- Cash and cash equivalents at end of period $ 16,730 $ 5,414 ========== ========= - -------------------------------------------------- (cc) Reclassified to conform to 2007 presentation. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2007 - ------------------------- Service revenues and sales $188,474 $ 84,029 $ - $ 272,503 --------- ----------- --------- ------------ Cost of services provided and goods sold 148,225 44,657 - 192,882 Selling, general and administrative expenses (a) 15,651 22,831 4,044 42,526 Depreciation 3,063 2,080 77 5,220 Amortization 996 13 283 1,292 --------- ----------- --------- ------------ Total costs and expenses 167,935 69,581 4,404 241,920 --------- ----------- --------- ------------ Income/(loss) from operations 20,539 14,448 (4,404) 30,583 Interest expense (36) (317) (2,162) (2,515) Intercompany interest income/(expense) 1,909 1,337 (3,246) - Loss on extinguishment of debt (a) - - (83) (83) Other income--net (3) (342) 356 11 --------- ----------- --------- ------------ Income/(loss) before income taxes 22,409 15,126 (9,539) 27,996 Income taxes (a) (8,488) (6,184) 3,592 (11,080) --------- ----------- --------- ------------ Income/(loss) from continuing operations 13,921 8,942 (5,947) 16,916 Discontinued operations 1,201 - - 1,201 --------- ----------- --------- ------------ Net income/(loss) $ 15,122 $ 8,942 $ (5,947) $ 18,117 ========= =========== ========= ============ 2006 - ------------------------- Service revenues and sales $175,289 $ 78,406 $ - $ 253,695 --------- ----------- --------- ------------ Cost of services provided and goods sold 142,620 42,779 - 185,399 Selling, general and administrative expenses (b) 13,618 22,376 3,145 39,139 Depreciation 2,188 1,900 83 4,171 Amortization 984 16 355 1,355 Other operating expense/(income) (b) 272 - - 272 --------- ----------- --------- ------------ Total costs and expenses 159,682 67,071 3,583 230,336 --------- ----------- --------- ------------ Income/(loss) from operations 15,607 11,335 (3,583) 23,359 Interest expense (87) 1 (3,995) (4,081) Intercompany interest income/(expense) 1,397 1,088 (2,485) - Loss from impairment of investment (b) - - (1,445) (1,445) Other income--net 5 179 531 715 --------- ----------- --------- ------------ Income/(loss) before income taxes 16,922 12,603 (10,977) 18,548 Income taxes (b) (6,436) (4,094) 4,857 (5,673) --------- ----------- --------- ------------ Income/(loss) from continuing operations 10,486 8,509 (6,120) 12,875 Discontinued operations (2,688) - (2,226) (4,914) --------- ----------- --------- ------------ Net income/(loss) $ 7,798 $ 8,509 $ (8,346) $ 7,961 ========= =========== ========= ============ The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated --------- ----------- --------- ------------ 2007 - ------------------------- Service revenues and sales $558,224 $ 256,105 $ - $ 814,329 --------- ----------- --------- ------------ Cost of services provided and goods sold 434,959 134,886 - 569,845 Selling, general and administrative expenses (a) 47,815 70,782 18,089 136,686 Depreciation 8,377 6,290 230 14,897 Amortization 2,988 41 872 3,901 Other operating expense/(income) (a) - - (1,138) (1,138) --------- ----------- --------- ------------ Total costs and expenses 494,139 211,999 18,053 724,191 --------- ----------- --------- ------------ Income/(loss) from operations 64,085 44,106 (18,053) 90,138 Interest expense (103) (496) (9,058) (9,657) Intercompany interest income/(expense) 5,352 3,676 (9,028) - Loss on extinguishment of debt (a) - - (13,798) (13,798) Other income--net (34) 626 2,476 3,068 --------- ----------- --------- ------------ Income/(loss) before income taxes 69,300 47,912 (47,461) 69,751 Income taxes (a) (26,238) (18,789) 17,846 (27,181) --------- ----------- --------- ------------ Income/(loss) from continuing operations 43,062 29,123 (29,615) 42,570 Discontinued operations 1,201 - - 1,201 --------- ----------- --------- ------------ Net income/(loss) $ 44,263 $ 29,123 $(29,615) $ 43,771 ========= =========== ========= ============ 2006 - ------------------------- Service revenues and sales $512,873 $ 233,811 $ - $ 746,684 --------- ----------- --------- ------------ Cost of services provided and goods sold 412,913 127,624 - 540,537 Selling, general and administrative expenses (b) 40,535 67,150 8,529 116,214 Depreciation 6,332 5,783 270 12,385 Amortization 2,952 56 960 3,968 Other operating expense/(income) (b) 272 - - 272 --------- ----------- --------- ------------ Total costs and expenses 463,004 200,613 9,759 673,376 --------- ----------- --------- ------------ Income/(loss) from operations 49,869 33,198 (9,759) 73,308 Interest expense (156) (281) (13,289) (13,726) Intercompany interest income/(expense) 3,746 2,889 (6,635) - Loss from impairment of investment (b) - - (1,445) (1,445) Loss on extinguishment of debt (b) - - (430) (430) Other income--net 62 452 2,220 2,734 --------- ----------- --------- ------------ Income/(loss) before income taxes 53,521 36,258 (29,338) 60,441 Income taxes (b) (20,248) (13,545) 11,815 (21,978) --------- ----------- --------- ------------ Income/(loss) from continuing operations 33,273 22,713 (17,523) 38,463 Discontinued operations (3,219) - (2,226) (5,445) --------- ----------- --------- ------------ Net income/(loss) $ 30,054 $ 22,713 $(19,749) $ 33,018 ========= =========== ========= ============ 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, 2007 AND 2006 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated -------- ----------- --------- ------------ 2007 - -------------------------- Net income/(loss) $15,122 $ 8,942 $ (5,947) $ 18,117 Add/(deduct): Discontinued operations (1,201) - - (1,201) Interest expense 36 317 2,162 2,515 Income taxes 8,488 6,184 (3,592) 11,080 Depreciation 3,063 2,080 77 5,220 Amortization 996 13 283 1,292 -------- ----------- --------- ------------ EBITDA 26,504 17,536 (7,017) 37,023 Add/(deduct): Stock option expense - - 1,592 1,592 Legal expenses of OIG investigation 48 - - 48 Loss on extinguishment of debt - - 83 83 Advertising cost adjustment (c) - (535) - (535) Interest income (11) (247) (639) (897) Intercompany interest (income)/expense (1,909) (1,337) 3,246 - -------- ----------- --------- ------------ Adjusted EBITDA $24,632 $ 15,417 $ (2,735) $ 37,314 ======== =========== ========= ============ 2006 - -------------------------- Net income/(loss) $ 7,798 $ 8,509 $ (8,346) $ 7,961 Add/(deduct): Discontinued operations 2,688 - 2,226 4,914 Interest expense 87 (1) 3,995 4,081 Income taxes 6,436 4,094 (4,857) 5,673 Depreciation 2,188 1,900 83 4,171 Amortization 984 16 355 1,355 -------- ----------- --------- ------------ EBITDA 20,181 14,518 (6,544) 28,155 Add/(deduct): Loss from impairment of investment - - 1,445 1,445 Lawsuit settlement 272 - - 272 Stock option expense - - 597 597 Legal expenses of OIG investigation 344 - - 344 Advertising cost adjustment (c) - (491) - (491) Interest income (24) (29) (373) (426) Intercompany interest (income)/expense (1,397) (1,088) 2,485 - -------- ----------- --------- ------------ Adjusted EBITDA $19,376 $ 12,910 $ (2,390) $ 29,896 ======== =========== ========= ============ 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, 2007 AND 2006 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated -------- ----------- --------- ------------ 2007 - -------------------------- Net income/(loss) $44,263 $ 29,123 $(29,615) $ 43,771 Add/(deduct): Discontinued operations (1,201) - - (1,201) Interest expense 103 496 9,058 9,657 Income taxes 26,238 18,789 (17,846) 27,181 Depreciation 8,377 6,290 230 14,897 Amortization 2,988 41 872 3,901 -------- ----------- --------- ------------ EBITDA 80,768 54,739 (37,301) 98,206 Add/(deduct): Long-term incentive compensation - - 7,067 7,067 Stock option expense - - 3,074 3,074 Legal expenses of OIG investigation 188 - - 188 Gain on sale of property - - (1,138) (1,138) Other - - (467) (467) Loss on extinguishment of debt - - 13,798 13,798 Advertising cost adjustment (c) - (931) - (931) Interest income (90) (358) (2,160) (2,608) Intercompany interest (income)/expense (5,352) (3,676) 9,028 - -------- ----------- --------- ------------ Adjusted EBITDA $75,514 $ 49,774 $ (8,099) $ 117,189 ======== =========== ========= ============ 2006 - -------------------------- Net income/(loss) $30,054 $ 22,713 $(19,749) $ 33,018 Add/(deduct): Discontinued operations 3,219 - 2,226 5,445 Interest expense 156 281 13,289 13,726 Income taxes 20,248 13,545 (11,815) 21,978 Depreciation 6,332 5,783 270 12,385 Amortization 2,952 56 960 3,968 -------- ----------- --------- ------------ EBITDA 62,961 42,378 (14,819) 90,520 Add/(deduct): Loss from impairment of investment - - 1,445 1,445 Lawsuit settlement 272 - - 272 Stock option expense - - 615 615 Legal expenses of OIG investigation 818 - - 818 Loss on extinguishment of debt - - 430 430 Advertising cost adjustment (c) - (1,072) - (1,072) Interest income (100) (69) (1,808) (1,977) Intercompany interest (income)/expense (3,746) (2,889) 6,635 - -------- ----------- --------- ------------ Adjusted EBITDA $60,205 $ 38,348 $ (7,502) $ 91,051 ======== =========== ========= ============ The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES RECONCILIATION OF ADJUSTED NET INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (in thousands, except per share data)(unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2007 2006 2007 2006 --------- -------- -------- -------- Net income/(loss) as reported $ 18,117 $ 7,961 $43,771 $33,018 Add/(deduct): Discontinued operations (1,201) 4,914 (1,201) 5,445 Aftertax loss on impairment of investment - 918 - 918 Aftertax Lawsuit settlement - 169 - 169 Prior-period tax adjustments - (1,791) - (1,791) Aftertax cost of long-term incentive compensation - - 4,427 - Aftertax stock option expense 1,011 379 1,952 391 Aftertax cost of legal expenses of OIG investigation 30 213 117 507 Aftertax other - - (296) - Gain on sale of property - - (724) - Aftertax cost of loss on extinguishment of debt 52 - 8,778 273 --------- -------- -------- -------- Adjusted income from continuing operations $ 18,009 $12,763 $56,824 $38,930 ========= ======== ======== ======== Earnings/(Loss) Per Share As Reported Net income/(loss) $ 0.76 $ 0.30 $ 1.77 $ 1.26 ========= ======== ======== ======== Average number of shares outstanding 23,933 26,190 24,711 26,147 ========= ======== ======== ======== Diluted Earnings/(Loss) Per Share As Reported Net income/(loss) $ 0.74 $ 0.30 $ 1.73 $ 1.23 ========= ======== ======== ======== Average number of shares outstanding 24,466 26,633 25,249 26,750 ========= ======== ======== ======== Adjusted Earnings Per Share Income from continuing operations $ 0.75 $ 0.49 $ 2.30 $ 1.49 ========= ======== ======== ======== Average number of shares outstanding 23,933 26,190 24,711 26,147 ========= ======== ======== ======== Adjusted Diluted Earnings Per Share Income from continuing operations $ 0.74 $ 0.48 $ 2.25 $ 1.46 ========= ======== ======== ======== Average number of shares outstanding 24,466 26,633 25,249 26,750 ========= ======== ======== ======== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES OPERATING STATISTICS FOR VITAS SEGMENT FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 2007 2006 (f ) 2007 2006 (f ) --------- --------- --------- --------- OPERATING STATISTICS Net revenue ($000) (d) Homecare $137,406 $125,930 $403,748 $359,930 Inpatient 22,861 21,830 69,068 66,566 Continuous care 28,921 30,140 85,650 89,587 --------- --------- --------- --------- Total before Medicare cap allowance 189,188 177,900 558,466 516,083 Medicare cap allowance (714) (2,611) (242) (3,210) --------- --------- --------- --------- Total $188,474 $175,289 $558,224 $512,873 ========= ========= ========= ========= Net revenue as a percent of total before Medicare cap allowance Homecare 72.6 % 70.8 % 72.3 % 69.7 % Inpatient 12.1 12.3 12.4 12.9 Continuous care 15.3 16.9 15.3 17.4 --------- --------- --------- --------- Total before Medicare cap allowance 100.0 100.0 100.0 100.0 Medicare cap allowance (0.4) (1.5) (0.0) (0.6) --------- --------- --------- --------- Total 99.6 % 98.5 % 100.0 % 99.4 % ========= ========= ========= ========= Average daily census ("ADC") (days) Homecare 7,039 6,480 6,914 6,231 Nursing home 3,567 3,587 3,572 3,479 --------- --------- --------- --------- Routine homecare 10,606 10,067 10,486 9,710 Inpatient 412 400 417 411 Continuous care 511 553 512 553 --------- --------- --------- --------- Total 11,529 11,020 11,415 10,674 ========= ========= ========= ========= Total Admissions 13,436 12,686 41,204 39,446 Total Discharges 13,403 12,524 40,823 38,352 Average length of stay (days) 76.7 71.0 76.7 70.5 Median length of stay (days) 14.0 14.0 13.0 13.0 ADC by major diagnosis Neurological 32.8 % 33.6 % 33.1 % 33.4 % Cancer 20.3 20.1 19.9 20.1 Cardio 14.2 14.7 14.5 14.9 Respiratory 6.8 6.9 6.9 7.1 Other 25.9 24.7 25.6 24.5 --------- --------- --------- --------- Total 100.0 % 100.0 % 100.0 % 100.0 % ========= ========= ========= ========= Admissions by major diagnosis Neurological 18.2 % 19.3 % 18.5 % 19.9 % Cancer 37.5 37.0 35.9 35.4 Cardio 12.1 12.4 12.8 13.2 Respiratory 7.1 6.7 7.6 7.2 Other 25.1 24.6 25.2 24.3 --------- --------- --------- --------- Total 100.0 % 100.0 % 100.0 % 100.0 % ========= ========= ========= ========= Direct patient care margins (e) Routine homecare 51.0 % 49.1 % 50.9 % 48.8 % Inpatient 15.9 16.5 18.3 20.2 Continuous care 16.9 17.5 18.2 18.7 Homecare margin drivers (dollars per patient day) Labor costs $ 48.86 $ 48.28 $ 48.98 $ 49.25 Drug costs 7.88 8.46 7.95 8.10 Home medical equipment 5.65 5.66 5.73 5.57 Medical supplies 2.22 2.21 2.16 2.14 Inpatient margin drivers (dollars per patient day) Labor costs $ 274.64 $ 269.72 $ 263.11 $ 258.48 Continuous care margin drivers (dollars per patient day) Labor costs $ 490.94 $ 467.64 $ 479.83 $ 461.89 Bad debt expense as a percent of revenues 0.9 % 0.9 % 0.9 0.9 % Accounts receivable -- days of revenue N.A. N.A. outstanding 39.6 42.1 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, 2007 AND 2006 (unaudited) (a)Included in the results of operations for the three and nine months ended September 30, 2007 are the following significant credits/(charges) which may not be indicative of on going operations (in thousands): Three Months Ended September 30, 2007 -------------------------------------- VITAS Corporate Consolidated -------------- --------- ------------- Selling, general and administrative expenses Costs associated with OIG investigation $ (48) $ - $ (48) Stock option expense - (1,592) (1,592) Loss on extinguishment of debt - (83) (83) -------------- --------- ------------ Pretax impact on earnings (48) (1,675) (1,723) Income tax benefit/(charge) on the above 18 612 630 -------------- --------- ------------ Aftertax impact on earnings $ (30) $ (1,063) $ (1,093) ============== ========= ============ Nine Months Ended September 30, 2007 ---------------------------------------- VITAS Corporate Consolidated -------------- --------- -------------- Selling, general and administrative expenses Long-term incentive compensation $ - $ (7,067) $ (7,067) Costs associated with OIG investigation (188) - (188) Stock option expense - (3,074) (3,074) Other - 467 467 Other operating expenses/(income) Gain on sale of property - 1,138 1,138 Loss on extinguishment of debt - (13,798) (13,798) -------------- --------- ------------ Pretax impact on earnings (188) (22,334) (22,522) Income tax benefit/(charge) on the above 71 8,197 8,268 -------------- --------- ------------ Aftertax impact on earnings $ (117) $(14,137) $ (14,254) ============== ========= ============ (b)Included in the results of operations for the three and nine months ended September 30, 2006 are the following significant credits/(charges) which may not be indicative of on going operations (in thousands): Three Months Ended September 30, 2006 -------------------------------------------- VITAS Roto-Rooter Corporate Consolidated -------- ------------ --------- ------------ Selling, general and administrative expenses Costs associated with OIG investigation $ (344) $ - $ - $ (344) Stock option expense - - (597) (597) Other operating expenses/(income) Lawsuit settlement (272) - - (272) Loss on impairment of investment - - (1,445) (1,445) -------- ----------- --------- ------------ Pretax impact on earnings (616) - (2,042) (2,658) Income tax benefit on the above 234 - 745 979 Income tax benefit from finalizing prior years' returns - 927 864 1,791 -------- ----------- --------- ------------ Aftertax impact on earnings $ (382) $ 927 $ (433) $ 112 ======== =========== ========= ============ Nine Months Ended September 30, 2006 -------------------------------------------- VITAS Roto-Rooter Corporate Consolidated -------- ------------ --------- ------------ Selling, general and administrative expenses Costs associated with OIG investigation $ (818) $ - $ - $ (818) Stock option expense - - (615) (615) Other operating expenses/(income) Lawsuit settlement (272) - - (272) Loss on impairment of investment - - (1,445) (1,445) Loss on extinguishment of debt - - (430) (430) -------- ----------- --------- ------------ Pretax impact on earnings (1,090) - (2,490) (3,580) 414 - 908 1,322 Income tax benefit on the above - 927 864 1,791 -------- ----------- --------- ------------ Aftertax impact on earnings $ (676) $ 927 $ (718) $ (467) ======== =========== ========= ============ (c) 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 2007 and 2006, GAAP advertising expense for Roto-Rooter totaled $5,008,000 and $4,646,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the third quarters of 2007 and 2006 would total $5,543,000 and $5,137,000, respectively. For the nine months ended September 30, 2007 and 2006, GAAP advertising expense for Roto-Rooter totaled $15,650,000 and $13,984,000, 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, 2007 and 2006 would total $16,581,000 and $15,056,000, respectively. (d) VITAS has 6 large (greater than 450 ADC), 15 medium (greater than 200 but less than 450 ADC) and 22 small (less than 200 ADC) hospice programs. There are two programs with Medicare cap cushion of less than 10% for the 2007 measurement period. (e) Amounts exclude indirect patient care and administrative costs, as well as Medicare Cap billing limitation. (f) Reclassified for operations discontinued in November 2006. CONTACT: Chemed Corporation David P. Williams, 513-762-6901 -----END PRIVACY-ENHANCED MESSAGE-----