EX-99 2 a5610198ex99.htm EXHIBIT 99

Exhibit 99

Chemed Reports Fourth-Quarter 2007 Results

CINCINNATI--(BUSINESS WIRE)--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, 2007, versus the comparable prior-year period, as follows:

Consolidated operating results from Continuing Operations:

  • Revenue increased 5.1% to $286 million
  • Diluted EPS from Continuing Operations of $.83
  • Diluted EPS from Continuing Operations, excluding special items, of $.92
  • Full-year diluted EPS from Continuing Operations, excluding special items, of $3.16

VITAS segment operating results from Continuing Operations:

  • Net Patient Revenue of $197 million, up 5.9%
  • Average Daily Census (ADC) of 11,660, up 4.3%
  • Admissions of 13,594, an increase of 2.3%
  • Average Length of Stay in the quarter of 75.7 days
  • Net income of $16.8 million
  • Adjusted EBITDA of $28.4 million

Roto-Rooter segment operating results:

  • Revenue of $89 million, an increase of 3.3%
  • Job count of 204,875
  • Net Income of $9.7 million
  • Adjusted EBITDA of $19.0 million

VITAS

VITAS generated 13,594 admissions in the quarter, which represents an increase of 2.3% over the prior year. Discharges totaled 13,700, an increase of 3.8%, and ADC in the quarter increased 4.3%, to 11,660. VITAS’ Average Length of Stay (ALOS) for patients discharged in the quarter was 75.7 days. This compares to an ALOS of 76.7 days in the third quarter of 2007 and is equal to the ALOS in the fourth quarter of 2006. Median Length of Stay (MLOS) was 14 days.

Net revenue for VITAS was $197 million in the fourth quarter of 2007, which is an increase of 5.9% over the prior-year period. This revenue growth was the result of increased ADC of 4.3%, a Medicare price increase of approximately 3%, partially offset by the continued shift in revenue mix from high acuity care to routine home care.

In the fourth quarter of 2006, high acuity days-of-care was 8.68% of total days-of-care. High acuity days-of-care averaged 8.39% in the first quarter of 2007, 8.04% in the second quarter, 8.01% in the third quarter and 7.97% in the fourth quarter of 2007.

This mix shift from high acuity care to routine home care negatively impacted revenue growth by $3.8 million in the quarter. Routine home care reimbursement and high acuity care averaged $144.97 and $632.49, respectively, per patient per day in the fourth quarter of 2007. Any shift in revenue mix will have a noticeable impact on overall revenue given the significant disparity in reimbursement. However, given the relatively low profitability margin on high acuity care, this mix shift had minimal impact on gross profit and net income.

VITAS did not have any billing restrictions related to Medicare Cap for its fourth-quarter 2007 operating activity. As of December 31, 2007, VITAS has not accrued any Medicare billing restrictions for the 2008 or 2007 Cap years.

VITAS measures its Medicare Cap cushion, or Medicare Cap liability, on a program-by-program basis. Of VITAS' 37 unique Medicare provider numbers, 29 provider numbers, or 78%, have a Cap cushion greater than 20% on a trailing twelve-month basis, four provider numbers are between 15% and 20%, one is between 10% and 15%, and three provider numbers have Cap cushion ranging between 4% and 9%. VITAS had aggregate Cap cushion in excess of $219 million on a trailing twelve-month basis.

Gross margin in the fourth quarter of 2007 was 23.2%. This is a 70 basis point improvement over the prior-year quarter. Selling, general and administrative expense was $17.3 million in the fourth quarter of 2007, which is an increase of 5.2% over the prior year. Adjusted EBITDA totaled $28.4 million, an increase of 11% over the prior year and equates to an adjusted EBITDA margin of 14.4%, an increase of 63 basis points over the fourth quarter of 2006.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $89 million for the fourth quarter of 2007, 3.3% higher than the $86 million reported in the comparable prior-year quarter. Net income for the quarter was $9.7 million. The fourth quarter net income includes a $1.9 million pretax and $1.2 million aftertax charge for a tentative settlement of a class action lawsuit that alleged wage and hour violations in California. This suit claimed Roto-Rooter failed to provide meal and break time as well as credit for work time beginning from the first call to dispatch rather than arrival at the day’s first assignment. Excluding this tentative settlement, net income in the fourth quarter of 2007 increased 12%. Adjusted EBITDA in the fourth quarter of 2007 totaled $19.0 million, an increase of 10.5% over the fourth quarter of 2006 and equated to an adjusted EBITDA margin of 21.5%, an increase of 140 basis points over the prior-year period.

Job count in the fourth quarter of 2007 declined 2.8% when compared to the prior-year period, and increased 3.3% sequentially. Total residential jobs declined 0.8% and consisted of residential plumbing jobs increasing 4.5% and residential drain cleaning jobs declining 3.1%, when compared to the fourth quarter of 2006. Residential jobs represent approximately 70% of total job count.

Total commercial jobs declined 7.3% with commercial plumbing job count declining 1.6% and commercial drain cleaning decreasing 10.0%, over the prior-year quarter. A significant portion of the commercial job count decline is attributed to the elimination of low revenue, low margin commercial business. This mix shift has favorably impacted the average revenue per commercial job, which increased 8.0% in the fourth quarter of 2007 and has increased 10.6% on a year-to-date basis.

Guidance for 2008

VITAS is estimated to generate full-year revenue growth from continuing operations, prior to Medicare Cap, of 7.0% to 8.0%. Admissions are estimated to increase 4.0% to 5.0% and adjusted EBITDA margin, prior to Medicare Cap, of 14.2% to 15.0%. This guidance assumes the hospice industry receives a full Medicare basket price increase of 3.0% in the fourth quarter of 2008. Full calendar year 2008 Medicare contractual billing limitations are estimated at $5.0 million.

Roto-Rooter is estimated to generate a 6.0% to 8.0% increase in revenue in 2008, job count growth from flat to 1.0% and adjusted EBITDA margin in the range of 19.5% to 20.5%.

Based upon these factors, an effective tax rate of 38.5% and an average diluted share count for 2008 of 24.55 million shares, our estimate is that full-year 2008 earnings per diluted share from continuing operations, excluding noncash expenses for stock options and charges or credits not indicative of ongoing operations, will be in the range of $3.60 to $3.70.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Friday, February 22, 2008, to discuss the company's quarterly results and provide an update on its business. The dial-in number for the conference call is (800) 265-0241 for U.S. and Canadian participants and (617) 847-8704 for international participants. The participant passcode is 41680742. 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 32730528. 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 11,500 patients with severe, life-limiting illnesses. This type of care is focused on making the terminally ill patient's final days as comfortable and pain-free as possible.

Chemed operates in the residential and commercial 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)
             

For the Three Months
Ended

For the Years
Ended

December 31, December 31,
2007 2006 2007 2006
Continuing Operations
Service revenues and sales $ 285,729   $

271,903

  $ 1,100,058   $ 1,018,587  
Cost of services provided and goods sold 197,221 189,586 767,066 730,123
Selling, general and administrative expenses (aa) 47,374 44,969 184,060 161,183
Depreciation 5,221 4,390 20,118 16,775
Amortization 1,369 1,287 5,270 5,255
Other operating expenses--net (aa)   1,927     -     789     272  

Total costs and expenses

  253,112     240,232     977,303     913,608  
Income from operations 32,617 31,671 122,755 104,979
Interest expense (1,587 ) (3,742 ) (11,244 ) (17,468 )
Loss on extinguishment of debt (aa) - - (13,798 ) (430 )
Loss from impairment of investment (aa) - - - (1,445 )
Other income--net   1,057     1,914     4,125     4,648  
Income before income taxes 32,087 29,843 101,838 90,284
Income taxes (aa)   (11,882 )   (10,584 )   (39,063 )   (32,562 )
Income from continuing operations 20,205 19,259 62,775 57,722
Discontinued Operations (bb)   -     (1,626 )   1,201     (7,071 )
Net Income $ 20,205   $ 17,633   $ 63,976   $ 50,651  
 
Earnings Per Share
Income from continuing operations $ 0.84   $ 0.74   $ 2.56   $ 2.21  
Net Income $ 0.84   $ 0.68   $ 2.61   $ 1.94  
Average number of shares outstanding   23,959     26,030     24,520     26,118  
Diluted Earnings Per Share
Income from continuing operations $ 0.83   $ 0.73   $ 2.50   $ 2.16  
Net Income $ 0.83   $ 0.67   $ 2.55   $ 1.90  
Average number of shares outstanding   24,460     26,411     25,077     26,669  
     

 

   

 

   
 
(aa)

Included in the consolidated statement of income are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

 

For the Three Months
Ended

For the Years
Ended

December 31, December 31,
2007 2006 2007 2006
Continuing Operations
Selling, general and administrative expenses
Stock option expense $ (1,591 ) $ (596 ) $ (4,665 ) $ (1,211 )
Costs associated with OIG investigation (39 ) (250 ) (227 ) (1,068 )
Long-term incentive compensation - - (7,067 ) -
Other - 467 467 467
Other operating expenses -- net
Costs related to litigation settlements (1,927 ) - (1,927 ) (272 )
Gain on sale of property - - 1,138

       -

Loss from impairment of investment - - - (1,445 )
Loss on extinguishment of debt   -     -     (13,798 )   (430 )
Pretax impact on earnings (3,557 ) (379 ) (26,079 ) (3,959 )
Income tax benefit on the above 1,355 142 9,623 1,464
Income tax benefit from finalizing prior years' returns   -     324     -     2,115  
Aftertax impact on continuing operations $ (2,202 ) $ 87   $ (16,456 ) $ (380 )
 
(bb) Discontinued operations include (in thousands):
 

For the Three Months
Ended

For the Years
Ended

December 31, December 31,
2007   2006   2007   2006
VITAS' Phoenix operation, discontinued in 2006 $ - $ (1,653 ) $ 1,201 $ (4,872 )
Patient Care, discontinued in 2002 - 53 - (1,426 )
Service America, discontinued in 2004 - (25 ) - (32 )
Adjustments related to other discontinued operations   -     (1 )   -     (741 )
Total discontinued operations $ -   $ (1,626 ) $ 1,201   $ (7,071 )

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
               
 
December 31,
2007 2006
Assets
Current assets
Cash and cash equivalents $ 4,988 $ 29,274
Accounts receivable less allowances 103,113 93,086
Inventories 6,596 6,578
Current deferred income taxes 14,212 17,789
Current assets of discontinued operations - 5,418
Prepaid expenses and other current assets   10,496     9,968  
Total current assets 139,405 162,113
Investments of deferred compensation plans held in trust 29,417 25,713
Notes receivable 9,701 14,701
Properties and equipment, at cost less accumulated depreciation 74,513 70,140
Identifiable intangible assets less accumulated amortization 65,177 69,215
Goodwill

438,689

435,050
Noncurrent assets of discontinued operations - 287
Other assets   15,411     16,068  
Total Assets $

772,313

  $ 793,287  
 
 
Liabilities
Current liabilities
Accounts payable $

48,111

$ 49,744
Current portion of long-term debt 10,162 209
Income taxes 4,221 6,765
Accrued insurance 36,337 38,457
Accrued compensation 40,072 35,990
Current liabilities of discontinued operations - 12,215
Other current liabilities   13,929     22,684  
Total current liabilities

152,832

166,064
Deferred income taxes 5,802 26,301
Long-term debt 214,669 150,331
Deferred compensation liabilities 29,149 25,514
Other liabilities   5,512     3,716  
Total Liabilities  

407,964

    371,926  
Stockholders' Equity
Capital stock 29,261 28,850
Paid-in capital 267,312 252,639
Retained earnings 278,336 215,517
Treasury stock, at cost (213,041 ) (78,064 )
Deferred compensation payable in Company stock   2,481     2,419  
Total Stockholders' Equity   364,349     421,361  
Total Liabilities and Stockholders' Equity $

772,313

  $ 793,287  
 
Book Value Per Share $ 15.21   $ 16.32  

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
         
For the Years Ended
December 31,
2007 2006
Cash Flows from Operating Activities
Net income $ 63,976 $ 50,651

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 25,388 22,030
Provision for uncollectible accounts receivable 8,373 8,169
Provision for deferred income taxes 8,113 7,408
Write off unamortized debt issuance costs 7,235 430
Noncash portion of long-term incentive compensation 6,154 -
Discontinued operations (1,201 ) 7,071
Amortization of debt issuance costs 1,186 1,774
Loss on impairment of investment - 1,445
Noncash long-term incentive compensation - -

Changes in operating assets and liabilities, excluding amounts acquired in business combinations:

Increase in accounts receivable (18,416 ) (12,527 )
Decrease/(increase) in inventories (18 ) (78 )

Decrease/(increase) in prepaid expenses and other current assets

(549 ) (2,188 )
Increase/(decrease) in accounts payable and other current liabilities
(8,299 ) (13,017 )
Increase in income taxes 6,321 18,726
Increase in other assets (3,655 ) (722 )
Increase/(decrease) in other liabilities 4,426 3,788
Excess tax benefit on share-based compensation (3,091 ) (5,600 )
Noncash expense of internally financed ESOPs - -
Other sources/(uses)   3,641     2,109  
Net cash provided by continuing operations 99,584 89,469
Net cash provided/(used) by discontinued operations   -     9,120  
Net cash provided by operating activities   99,584     98,589  
Cash Flows from Investing Activities
Capital expenditures (26,640 ) (21,987 )
Net uses from disposals of discontinued operations (5,402 ) (922 )
Proceeds from sales of property and equipment 3,104 347
Business combinations, net of cash acquired (1,079 ) (4,145 )
Other uses (1,701 ) (1,025 )
Net cash used by investing activities   (31,718 )   (27,732 )
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 300,000 -
Repayment of long-term debt (225,709 ) (84,563 )
Purchases of treasury stock (131,704 ) (19,885 )
Purchase of note hedges (55,100 ) -
Proceeds from issuance of warrants 27,614 -
Excess tax benefit on share-based compensation 3,091 5,600
Debt issuance costs (6,949 ) (154 )
Dividends paid (5,888 ) (6,322 )
Proceeds from exercise of stock options 2,467 3,861
Increase in cash overdraft payable (919 ) 2,571
Other sources   945     176  
Net cash used by financing activities   (92,152 )   (98,716 )
Decrease in Cash and Cash Equivalents (24,286 ) (27,859 )
Cash and cash equivalents at beginning of year   29,274     57,133  
Cash and cash equivalents at end of year $ 4,988   $ 29,274  

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2007 AND 2006
(in thousands)(unaudited)
           
 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2007      
Service revenues and sales $ 197,202   $ 88,527   $ -   $ 285,729  
Cost of services provided and goods sold 151,476 45,745 - 197,221
Selling, general and administrative expenses (a) 17,288 25,484 4,602 47,374
Depreciation 3,069 2,075 77 5,221
Amortization 996 13 360 1,369
Other operating expense (a)   -     1,927     -     1,927  
Total costs and expenses   172,829     75,244     5,039     253,112  
Income/(loss) from operations 24,373 13,283 (5,039 ) 32,617
Interest expense (43 ) 1 (1,545 ) (1,587 )
Intercompany interest income/(expense) 1,902 1,317 (3,219 ) -
Other income—net   23     194     840     1,057  
Income/(loss) before income taxes 26,255 14,795 (8,963 ) 32,087
Income taxes (a)   (9,484 )   (5,067 )   2,669     (11,882 )
Net income/(loss) $ 16,771   $ 9,728   $ (6,294 ) $ 20,205  
 
2006      
Service revenues and sales $ 186,219   $ 85,684   $ -   $ 271,903  
Cost of services provided and goods sold 144,347 45,239 - 189,586
Selling, general and administrative expenses (b) 16,426 25,345 3,198 44,969
Depreciation 2,421 1,882 87 4,390
Amortization   964     16     307     1,287  
Total costs and expenses   164,158     72,482     3,592     240,232  
Income/(loss) from operations 22,061 13,202 (3,592 ) 31,671
Interest expense (35 ) (87 ) (3,620 ) (3,742 )
Intercompany interest income/(expense) 1,583 1,108 (2,691 ) -
Other income—net   (7 )   721     1,200     1,914  
Income/(loss) before income taxes 23,602 14,944 (8,703 ) 29,843
Income taxes (b)   (8,457 )   (5,203 )   3,076     (10,584 )
Income/(loss) from continuing operations 15,145 9,741 (5,627 ) 19,259
Discontinued operations   (1,653 )   -     27     (1,626 )
Net income/(loss) $ 13,492   $ 9,741   $ (5,600 ) $ 17,633  
 
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, 2007 AND 2006
(in thousands)(unaudited)
 
 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2007      
Service revenues and sales $ 755,426   $ 344,632   $ -   $ 1,100,058  
Cost of services provided and goods sold 586,435 180,631 - 767,066
Selling, general and administrative expenses (a) 65,103 96,266 22,691 184,060
Depreciation 11,446 8,365 307 20,118
Amortization 3,984 54 1,232 5,270
Other operating expense/(income) (a)   -     1,927     (1,138 )   789  
Total costs and expenses   666,968     287,243     23,092     977,303  
Income/(loss) from operations 88,458 57,389 (23,092 ) 122,755
Interest expense (146 ) (495 ) (10,603 ) (11,244 )
Intercompany interest income/(expense) 7,254 4,993 (12,247 ) -
Loss on extinguishment of debt (a) - - (13,798 ) (13,798 )
Other income—net   (11 )   820     3,316     4,125  
Income/(loss) before income taxes 95,555 62,707 (56,424 ) 101,838
Income taxes (a)   (35,722 )   (23,856 )   20,515     (39,063 )
Income/(loss) from continuing operations 59,833 38,851 (35,909 ) 62,775
Discontinued operations   1,201     -     -     1,201  
Net income/(loss) $ 61,034   $ 38,851   $ (35,909 ) $ 63,976  
 
2006      
Service revenues and sales $ 699,092   $ 319,495   $ -   $ 1,018,587  
Cost of services provided and goods sold 557,260 172,863 - 730,123
Selling, general and administrative expenses (b) 56,961 92,495 11,727 161,183
Depreciation 8,753 7,665 357 16,775
Amortization 3,916 72 1,267 5,255
Other operating expense (b)   272     -     -     272  
Total costs and expenses   627,162     273,095     13,351     913,608  
Income/(loss) from operations 71,930 46,400 (13,351 ) 104,979
Interest expense (191 ) (368 ) (16,909 ) (17,468 )
Intercompany interest income/(expense) 5,329 3,997 (9,326 ) -
Loss on extinguishment of debt (b) - - (430 ) (430 )
Loss from impairment of investment (b) - - (1,445 ) (1,445 )
Other income—net   55     1,173     3,420     4,648  
Income/(loss) before income taxes 77,123 51,202 (38,041 ) 90,284
Income taxes (b)   (28,705 )   (18,748 )   14,891     (32,562 )
Income/(loss) from continuing operations 48,418 32,454 (23,150 ) 57,722
Discontinued operations   (4,872 )   -     (2,199 )   (7,071 )
Net income/(loss) $ 43,546   $ 32,454   $ (25,349 ) $ 50,651  
 
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, 2007 AND 2006
(in thousands)(unaudited)
               
 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2007            
Net income/(loss) $ 16,771 $ 9,728 $ (6,294 ) $ 20,205
Add/(deduct):
Interest expense 43 (1 ) 1,545 1,587
Income taxes 9,484 5,067 (2,669 ) 11,882
Depreciation 3,069 2,075 77 5,221
Amortization   996     13     360     1,369  
EBITDA 30,363 16,882 (6,981 ) 40,264
Add/(deduct):
Lawsuit settlement - 1,927 - 1,927
Stock option expense - - 1,591 1,591
Legal expenses of OIG investigation 39 - - 39
Advertising cost adjustment (c) - 1,532 - 1,532
Interest income (61 ) (19 ) (616 ) (696 )
Intercompany interest (income)/expense   (1,902 )   (1,317 )   3,219     -  
Adjusted EBITDA $ 28,439   $ 19,005   $ (2,787 ) $ 44,657  
 
2006            
Net income/(loss) $ 13,492 $ 9,741 $ (5,600 ) $ 17,633
Add/(deduct):
Discontinued operations 1,653 - (27 ) 1,626
Interest expense 35 87 3,620 3,742
Income taxes 8,457 5,203 (3,076 ) 10,584
Depreciation 2,421 1,882 87 4,390
Amortization   964     16     307     1,287  
EBITDA 27,022 16,929 (4,689 ) 39,262
Add/(deduct):
Stock option expense - - 596 596
Legal expenses of OIG investigation 250 - - 250
Other - - (467 ) (467 )
Advertising cost adjustment (c) - 1,395 - 1,395
Interest income (14 ) (16 ) (684 ) (714 )
Intercompany interest (income)/expense   (1,583 )   (1,108 )   2,691     -  
Adjusted EBITDA $ 25,675   $ 17,200   $ (2,553 ) $ 40,322  
 
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, 2007 AND 2006
(in thousands)(unaudited)
 
 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2007            
Net income/(loss) $ 61,034 $ 38,851 $ (35,909 ) $ 63,976
Add/(deduct):
Discontinued operations (1,201 ) - - (1,201 )
Interest expense 146 495 10,603 11,244
Income taxes 35,722 23,856 (20,515 ) 39,063
Depreciation 11,446 8,365 307 20,118
Amortization   3,984     54     1,232     5,270  
EBITDA 111,131 71,621 (44,282 ) 138,470
Add/(deduct):
Long-term incentive compensation - - 7,067 7,067
Lawsuit settlement - 1,927 - 1,927
Stock option expense - - 4,665 4,665
Legal expenses of OIG investigation 227 - - 227
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) - 601 - 601
Interest income (151 ) (377 ) (2,776 ) (3,304 )
Intercompany interest (income)/expense   (7,254 )   (4,993 )   12,247     -  
Adjusted EBITDA $ 103,953   $ 68,779   $ (10,886 ) $ 161,846  
 
2006            
Net income/(loss) $ 43,546 $ 32,454 $ (25,349 ) $ 50,651
Add/(deduct):
Discontinued operations 4,872 - 2,199 7,071
Interest expense 191 368 16,909 17,468
Income taxes 28,705 18,748 (14,891 ) 32,562
Depreciation 8,753 7,665 357 16,775
Amortization   3,916     72     1,267     5,255  
EBITDA 89,983 59,307 (19,508 ) 129,782
Add/(deduct):
Loss from impairment of investment - - 1,445 1,445
Lawsuit settlement 272 - - 272
Stock option expense - - 1,211 1,211
Legal expenses of OIG investigation 1,068 - - 1,068
Other - - (467 ) (467 )
Loss on extinguishment of debt - - 430 430
Advertising cost adjustment (c) - 323 - 323
Interest income (114 ) (85 ) (2,492 ) (2,691 )
Intercompany interest (income)/expense   (5,329 )   (3,997 )   9,326     -  
Adjusted EBITDA $ 85,880   $ 55,548   $ (10,055 ) $ 131,373  
 
The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(in thousands, except per share data)(unaudited)
               
 
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
Net income as reported $ 20,205 $ 17,633 $ 63,976 $ 50,651
Add/(deduct):
Discontinued operations - 1,626 (1,201 ) 7,071
Aftertax loss on impairment of investment - - - 918
Aftertax costs related to litigation settlements 1,168 - 1,168 169
Prior-period tax adjustments - (324 ) - (2,115 )
Aftertax cost of long-term incentive compensation - - 4,427 -
Aftertax stock option expense 1,010 378 2,962 769
Aftertax cost of legal expenses of OIG investigation 24 155 141 662
Aftertax other - (296 ) (296 ) (296 )
Aftertax gain on sale of property . - - (724 )
Aftertax cost of loss on extinguishment of debt   -   -     8,778     273  
Adjusted income from continuing operations $ 22,407 $ 19,172   $ 79,231   $ 58,102  
Earnings Per Share As Reported
Net income $ 0.84 $ 0.68   $ 2.61   $ 1.94  
Average number of shares outstanding   23,959   26,030     24,520     26,118  
Diluted Earnings Per Share As Reported
Net income $ 0.83 $ 0.67   $ 2.55   $ 1.90  
Average number of shares outstanding   24,460   26,411     25,077     26,669  
Adjusted Earnings Per Share
Income from continuing operations $ 0.94 $ 0.74   $ 3.23   $ 2.22  
Average number of shares outstanding   23,959   26,030     24,520     26,118  
Adjusted Diluted Earnings Per Share
Income from continuing operations $ 0.92 $ 0.73   $ 3.16   $ 2.18  
Average number of shares outstanding   24,460   26,411     25,077     26,669  
 
The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

(unaudited)
           
 

Three Months Ended
December 31,

Years Ended
December 31,

2007 2006 2007 2006
OPERATING STATISTICS
Net revenue ($000) (d)
Homecare $ 143,125 $ 132,082 $ 546,872 $ 492,012
Inpatient 23,927 23,316 92,995 89,882
Continuous care   30,150   31,509     115,801     121,096  
Total before Medicare cap allowance $ 197,202 $ 186,907 $ 755,668 $ 702,990
Medicare cap allowance   -   (688 )   (242 )   (3,898 )
Total $ 197,202 $ 186,219   $ 755,426   $ 699,092  
Net revenue as a percent of total before Medicare cap allowance
 
Homecare 72.6 % 70.6 % 72.4 % 70.0 %
Inpatient 12.1 12.5 12.3 12.8
Continuous care   15.3   16.9     15.3     17.2  
Total before Medicare cap allowance 100.0 100.0 100.0 100.0
Medicare cap allowance   -   (0.4 )   -     (0.6 )
Total   100.0 %   99.6   %   100.0   %   99.4   %
Average daily census ("ADC") (days)
Homecare 7,121 6,636 6,966 6,333
Nursing home   3,610   3,567     3,581     3,501  
Routine homecare 10,731 10,203 10,547 9,834
Inpatient 417 411 417 411
Continuous care   512   560     513     555  
Total   11,660   11,174     11,477     10,800  
 
Total Admissions 13,594 13,291 54,798 52,736
Total Discharges 13,700 13,199 54,530 51,552
Average length of stay (days) 75.7 75.7 76.5 71.9
Median length of stay (days) 14.0 14.0 13.0 13.0
ADC by major diagnosis
Neurological 32.8 % 33.7 % 33.1 % 33.4 %
Cancer 20.4 19.7 20.1 20.2
Cardio 13.5 14.7 14.1 14.8
Respiratory 6.8 7.0 6.8 7.1
Other   26.5   24.9     25.9     24.5  
Total   100.0 %   100.0   %   100.0   %   100.0   %
Admissions by major diagnosis
Neurological 18.5 % 19.8 % 18.5 % 19.8 %
Cancer 36.6 35.3 36.1 35.5
Cardio 11.9 12.7 12.6 13.1
Respiratory 7.3 7.2 7.5 7.3
Other   25.7   25.0     25.3     24.3  
Total   100.0 %   100.0   %   100.0   %   100.0   %
Direct patient care margins (e)
Routine homecare 51.6 % 49.7 % 51.1 % 49.0 %
Inpatient 18.8 19.4 18.4 20.0
Continuous care 17.6 17.0 18.0 18.2
Homecare margin drivers
(dollars per patient day)
Labor costs $ 49.59 $ 49.72 $ 49.14 $ 49.38
Drug costs 7.73 8.17 7.90 8.12
Home medical equipment 5.91 5.81 5.78 5.63
Medical supplies 2.49 2.28 2.25 2.17
Inpatient margin drivers
(dollars per patient day)
Labor costs $ 272.46 $ 261.55 $ 265.47 $ 259.25
Continuous care margin drivers
(dollars per patient day)
Labor costs $ 506.72 $ 486.46 $ 486.90 $ 468.13
Bad debt expense as a percent of revenues 1.0 % 1.0 % 0.9

%

0.9 %
Accounts receivable --
days of revenue outstanding 43.4 38.7 N.A. N.A.
 
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, 2007 AND 2006
(unaudited)
                   
 
(a)

Included in the results of operations for the three months and years ended December 31, 2007 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

 
Three Months Ended December 31, 2007
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses
Costs associated with OIG investigation $ (39 ) $ - $ - $ (39 )
Stock option expense - - (1,591 ) (1,591 )
Other operating expense - net
Costs related to litigation settlement  

-

    (1,927 )   -     (1,927 )
Pretax impact on earnings (39 ) (1,927 ) (1,591 ) (3,557 )
Income tax benefit/(charge) on the above   15     759     581     1,355  
Aftertax impact on earnings $ (24 ) $ (1,168 ) $ (1,010 ) $ (2,202 )
 
Year Ended December 31, 2007
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses
Long-term incentive compensation $ - $ - $ (7,067 ) $ (7,067 )
Costs associated with OIG investigation (227 ) - - (227 )
Stock option expense - - (4,665 ) (4,665 )
Other - - 467 467
Other operating expense/(income)
Costs related to litigation settlement

-

(1,927 )

     -

(1,927 )
Gain on sale of property - - 1,138 1,138
Loss on extinguishment of debt   -     -     (13,798 )   (13,798 )
Pretax impact on earnings (227 ) (1,927 ) (23,925 ) (26,079 )
Income tax benefit/(charge) on the above   86     759     8,778     9,623  
Aftertax impact on earnings $ (141 ) $ (1,168 ) $ (15,147 ) $ (16,456 )
 
(b)

Included in the results of operations for the three months and years ended December 31, 2006 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

 
Three Months Ended December 31, 2006  
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses
Costs associated with OIG investigation $ (250 ) $ - $ - $ (250 )
Stock option expense - - (596 ) (596 )
Other   -     -     467     467  
Pretax impact on earnings (250 ) - (129 ) (379 )
Income tax benefit on the above 95

        -

47 142
Income tax benefit from finalizing prior years' returns   -     324     -     324  
Aftertax impact on earnings $ (155 ) $ 324   $ (82 ) $ 87  
 
Year Ended December 31, 2006
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses
Costs associated with OIG investigation $ (1,068 ) $ - $ - $ (1,068 )
Stock option expense - - (1,211 ) (1,211 )
Other - - 467 467
Other operating expense
Costs related to litigation settlement (272 ) - - (272 )
Loss from impairment of investment - - (1,445 ) (1,445 )
Loss on extinguishment of debt   -     -     (430 )   (430 )
Pretax impact on earnings (1,340 ) - (2,619 ) (3,959 )
Income tax benefit on the above 509 - 955 1,464
Income tax benefit from finalizing prior years' returns   -     1,251     864     2,115  
Aftertax impact on earnings $ (831 ) $ 1,251   $ (800 ) $ (380 )
 
 
 
 
(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 fourth quarters of 2007 and 2006, GAAP advertising expense for Roto-Rooter totaled $7,330,000 and $6,579,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the fourth quarters of 2007 and 2006 would total $5,798,000 and $5,184,000, respectively. For the years ended December 31, 2007 and 2006, GAAP advertising expense for Roto-Rooter totaled $22,980,000 and $20,563,000, 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, 2007 and 2006 would total 22,379,000 and $20,240,000, 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 continuing at December 31, 2007 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.

CONTACT:
Chemed Corporation
David P. Williams, 513-762-6901