Chemed Reports Fourth-Quarter 2014 Results

February 17, 2015 at 4:01 PM EST

CINCINNATI--(BUSINESS WIRE)--Feb. 17, 2015-- 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, reported financial results for its fourth quarter ended December 31, 2014, versus the comparable prior-year period, as follows:

Consolidated operating results:

Revenue increased 8.8% to $379 million
GAAP Diluted EPS increased 33.6% to $1.71
Adjusted Diluted EPS increased 24.1% to $1.80

VITAS segment operating results:

Net Patient Revenue of $274 million, an increase of 7.1%
Average Daily Census (ADC) of 14,838, an increase of 4.6%
Admissions of 16,313, an increase of 5.6%
Net Income, including litigation costs, of $25.5 million, an increase of 22.2%
Adjusted EBITDA of $45.7 million, an increase of 18.4%
Adjusted EBITDA margin of 16.7%, an increase of 159 basis points

Roto-Rooter segment operating results:

Revenue of $105 million, an increase of 13.7%
Net Income of $11.5 million, an increase of 14.5%
Adjusted EBITDA of $21.1 million, an increase of 14.5%
Adjusted EBITDA margin of 20.1%, an increase of 15 basis points

VITAS

Net revenue for VITAS was $274 million in the fourth quarter of 2014, which is an increase of $18.2 million, or 7.1%, when compared to the prior-year period. This revenue increase is comprised of an average Medicare reimbursement rate increase of approximately 1.4%, a 4.6% increase in average daily census, and a favorable comparison relative to the Medicare Cap billing limitation.

In the fourth quarter of 2014, VITAS reversed $0.5 million in estimated Medicare Cap billing limitations. This compares to $3.8 million of Medicare Cap billing limitations recorded in the fourth quarter of 2013. At December 31, 2014, VITAS had 35 Medicare provider numbers with one provider number having an estimated 2015 Medicare Cap billing limitation.

Of VITAS’ 35 unique Medicare provider numbers, 29 provider numbers have a Medicare Cap cushion of 10% or greater for the 2015 Medicare Cap period; two provider numbers have a Medicare Cap cushion between 5% to 10%; three provider numbers have a cap cushion between 0% and 5% and one provider number is in a Medicare Cap billing limitation. VITAS generated an aggregate cap cushion of $276 million during the trailing twelve-month period.

Average revenue per patient per day in the quarter, excluding the impact of Medicare Cap, was $200.62, which is 0.7% above the prior-year period. Routine home care reimbursement and high acuity care averaged $164.58 and $702.86, respectively. During the quarter, high acuity days of care were 6.7% of total days of care, 14 basis points below the prior-year quarter.

The fourth quarter of 2014 gross margin, excluding the impact of Medicare Cap, was 24.3%, which is a 12 basis point increase when compared to the fourth quarter of 2013.

Selling, general and administrative expense was $21.7 million in the fourth quarter of 2014, which is an increase of 3.4% when compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $45.2 million in the quarter, an increase 6.5% over the prior-year period. Adjusted EBITDA margin, excluding the impact from Medicare Cap, was 16.5% in the quarter which is 18 basis points favorable to the prior-year period.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $105 million for the fourth quarter of 2014, an increase of $12.6 million, or 13.7%, over the prior-year quarter.

Roto-Rooter utilizes a universal calendar of four 13-week quarters equating to a 52 week full year reporting period and then accrues for an additional one or two days of operating results in the fourth quarter to equate to a full 365 or 366 day year. In the fourth quarter of 2014, Roto-Rooter had 14 weeks of operating activity during the quarter. This additional week of operating activity, net of the accrued operating results from earlier years, resulted in Roto-Rooter recognizing an incremental $2.8 million of revenue, $0.9 million of Adjusted EBITDA and $0.5 million of net income in the fourth quarter of 2014 when compared to the fourth quarter of 2013.

Roto-Rooter’s gross margin in the quarter was 46.7%, a 59 basis point decline when compared to the fourth quarter of 2013. Adjusted EBITDA in the fourth quarter of 2014 totaled $21.1 million, an increase of 14.5%, and the Adjusted EBITDA margin was 20.1% in the quarter, 15 basis points higher than the prior year.

Chemed Consolidated

As of December 31, 2014, Chemed had total cash and cash equivalents of $14 million and debt of $148 million.

In June 2014Chemed entered into a five-year Amended and Restated Credit Agreement that consisted of a $100 million amortizable term loan and a $350 million revolving credit facility. The interest rate on this facility has a floating rate that is currently LIBOR plus 125 basis points. At December 31, 2014, the Company had approximately $263 million of undrawn borrowing capacity under this credit agreement.

Capital expenditures through December 31, 2014, aggregated $43.6 million and compares to depreciation and amortization during the same period of $33.1 million.

The Company repurchased $110 million of Chemed stock through December 31, 2014. This equates to 1.2 million shares of Chemed stock repurchased during the year at an average cost of $93.01Chemed currently has $11.8 million of authorization remaining under this share repurchase plan.

Guidance for 2015

Full-year 2015 revenue growth for VITAS, prior to Medicare Cap, is estimated to be in the range of 3% to 4%. Admissions in 2015 are estimated to increase 4% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 14% to 15%. Medicare Cap billing limitations for calendar year 2015 are estimated to be $5.5 million.

Roto-Rooter is forecasted to achieve full-year 2015 revenue growth of 3% to 4%. This revenue estimate is based upon increased job pricing of approximately 1%. Adjusted EBITDA margin for 2015 is estimated in the range of 19% to 20%.

Management estimates that full-year 2015 adjusted earnings per diluted share, which excludes non-cash expense for stock options, costs related to litigation and other discrete items, will be in the range of $6.50 to $6.70. This compares to Chemed’s 2014 reported adjusted earnings per diluted share of $6.07.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Wednesday, February 18, 2015, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (877) 280-4958 for U.S. and Canadian participants and (857) 244-7315 for international participants. The participant passcode is 81941669. 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 24 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 35554615. An archived webcast will also be available at www.chemed.com.

Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to over 14,000 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, Adjusted EBITDA and Adjusted Diluted EPS, which are not measures derived in accordance with GAAP and which exclude components that are important to understanding Chemed’s financial performance. In reporting its operating results, Chemed provides EBITDA, Adjusted EBITDA and Adjusted Diluted EPS measures to help investors and others evaluate the Company’s 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 management similarly uses EBITDA, Adjusted EBITDA and Adjusted Diluted EPS to assist it in evaluating the performance of the Company across fiscal periods and in assessing how its performance compares to its peer companies. These measures also help Chemed’s management to estimate the resources required to meet Chemed’s future financial obligations and expenditures. Chemed’s EBITDA, Adjusted EBITDA and Adjusted Diluted EPS should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. We calculated Adjusted EBITDA Margin by dividing Adjusted EBITDA by service revenue and sales. A reconciliation of Chemed’s net income to its EBITDA, Adjusted EBITDA and Adjusted Diluted EPS 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,
		2014			2013			2014			2013
Service revenues and sales		$	379,411		$	348,604		$	1,456,282		$	1,413,329
Cost of services provided and goods sold			263,402			245,958			1,034,673			1,008,808
Selling, general and administrative expenses (aa)			57,232			54,981			220,118			212,518
Depreciation			8,010			7,033			29,881			27,698
Amortization			730			1,192			3,191			4,690
Other operating expenses (bb)			-			-			-			26,221
	Total costs and expenses		329,374			309,164			1,287,863			1,279,935
	Income from operations		50,037			39,440			168,419			133,394
Interest expense			(962	)		(3,744	)		(8,186	)		(15,035	)
Other income--net (cc)			244			2,158			2,521			5,470
	Income before income taxes		49,319			37,854			162,754			123,829
Income taxes			(19,524	)		(14,945	)		(63,437	)		(46,602	)
Net income		$	29,795		$	22,909		$	99,317		$	77,227


Earnings Per Share
	Net income	$	1.77		$	1.31		$	5.79		$	4.24
	Average number of shares outstanding		16,878			17,492			17,165			18,199

Diluted Earnings Per Share
	Net income	$	1.71		$	1.28		$	5.57		$	4.16
	Average number of shares outstanding		17,469			17,899			17,840			18,585


(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
		For the Three Months Ended						For the Years Ended
		December 31,						December 31,
		2014			2013			2014			2013

	SG&A expenses before long-term incentive compensation and the impact of market value gains related to deferred compensation trusts	$	56,241		$	52,205		$	214,431		$	206,235
	Market value gains related to deferred compensation trusts		410			2,636			3,118			4,982
	Long-term incentive compensation		581			140			2,569			1,301
	Total SG&A expenses	$	57,232		$	54,981		$	220,118		$	212,518

(bb) Other operating expenses comprise litigation settlements of the Roto-Rooter segment ($15,721,000) and of the VITAS segment ($10,500,00).

(cc) Other income--net comprises (in thousands):
		For the Three Months Ended						For the Years Ended
		December 31,						December 31,
		2014			2013			2014			2013

	Market value gains related to deferred compensation trusts	$	410		$	2,636		$	3,118		$	4,982
	Loss on disposal of property and equipment		(147	)		(140	)		(640	)		(320	)
	Interest income		(24	)		(318	)		(29	)		847
	Other		5			(20	)		72			(39	)
	Total other income--net	$	244		$	2,158		$	2,521		$	5,470

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET

(in thousands, except per share data)(unaudited)

December 31,

2014

2013

Assets

Current assets

Cash and cash equivalents

14,132

84,418

Accounts receivable less allowances

124,607

91,770

Inventories

6,168

6,703

Current deferred income taxes

15,414

20,257

Prepaid income taxes

2,787

3,690

Prepaid expenses

11,456

17,818

Total current assets

174,564

224,656

Investments of deferred compensation plans held in trust

49,147

42,465

Properties and equipment, at cost less accumulated depreciation

105,336

92,955

Identifiable intangible assets less accumulated amortization

56,027

56,556

Goodwill

466,722

466,871

Other assets

8,136

10,198

Total Assets

859,932

893,701

Liabilities

Current liabilities

Accounts payable

46,849

41,758

Current portion of long-term debt

6,250

183,564

Income taxes

5,818

111

Accrued insurance

40,814

41,859

Accrued compensation

50,718

48,323

Accrued legal

753

23,210

Other current liabilities

24,352

25,161

Total current liabilities

175,554

363,986

Deferred income taxes

29,945

27,301

Long-term debt

141,250

Deferred compensation liabilities

48,684

42,348

Other liabilities

13,143

11,176

Total Liabilities

408,576

444,811

Stockholders' Equity

Capital stock

33,337

32,245

Paid-in capital

538,845

481,011

Retained earnings

771,176

686,114

Treasury stock, at cost

(894,285

)

(752,634

)

Deferred compensation payable in Company stock

2,283

2,154

Total Stockholders' Equity

451,356

448,890

Total Liabilities and Stockholders' Equity

859,932

893,701


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)


						For the Years Ended December 31,
						2014			2013
Cash Flows from Operating Activities
	Net income					$	99,317		$	77,227
	Adjustments to reconcile net income to net cash provided
		by operating activities:
			Depreciation and amortization				33,072			32,388
			Provision for uncollectible accounts receivable				13,173			10,907
			Provision for deferred income taxes				6,978			(6,988	)
			Stock option expense				4,802			6,042
			Amortization of discount on convertible notes				3,392			8,674
			Noncash long-term incentive compensation				2,569			1,301
			Amortization of debt issuance costs				826			1,751
			Changes in operating assets and liabilities, excluding
				amounts acquired in business combinations:
					Increase in accounts receivable		(45,785	)		(9,009	)
					Decrease in inventories		535			355
					Decrease/(increase) in prepaid expenses		6,362			(6,317	)
					Increase/(decrease) in accounts payable and other current liabilities		(25,824	)		40,340
					Increase/(decrease) in income taxes		11,279			(2,461	)
					Increase in other assets		(4,769	)		(6,507	)
					Increase in other liabilities		8,484			6,713
			Excess tax benefit on stock-based compensation				(5,172	)		(3,982	)
			Other sources				1,040			413
				Net cash provided by operating activities			110,279			150,847
Cash Flows from Investing Activities
	Capital expenditures						(43,571	)		(29,324	)
	Business combinations, net of cash acquired						(250	)		(2,257	)
	Other sources						294			235
				Net cash used by investing activities			(43,527	)		(31,346	)
Cash Flows from Financing Activities
	Proceeds from revolving line of credit						386,350			-
	Payments on revolving line of credit						(336,350	)		-
	Payments on other long-term debt						(189,456	)		-
	Purchases of treasury stock						(110,019	)		(92,911	)
	Proceeds from other long-term debt						100,000			-
	Proceeds from exercise of stock options						23,910			17,122
	Dividends paid						(14,255	)		(14,148	)
	Increase/(decrease) in cash overdrafts payable						9,714			(11,415	)
	Capital stock surrendered to pay taxes on stock-based compensation						(7,524	)		(5,348	)
	Retirement of warrants						(2,648	)		-
	Excess tax benefit on stock-based compensation						5,172			3,982
	Debt issuances costs						(914	)		(1,108	)
	Other uses						(1,018	)		(788	)
				Net cash used by financing activities			(137,038	)		(104,614	)
Increase/(Decrease) in Cash and Cash Equivalents							(70,286	)		14,887
Cash and cash equivalents at beginning of year							84,418			69,531
Cash and cash equivalents at end of period						$	14,132		$	84,418


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2014 AND 2013
(in thousands)(unaudited)

											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated
2014
Service revenues and sales		$	274,383		$	105,028		$	-		$	379,411
Cost of services provided and goods sold			207,424			55,978			-			263,402
Selling, general and administrative expenses (a)			21,657			28,140			7,435			57,232
Depreciation			4,892			2,970			148			8,010
Amortization			205			128			397			730
	Total costs and expenses		234,178			87,216			7,980			329,374
	Income/(loss) from operations		40,205			17,812			(7,980	)		50,037
Interest expense (a)			(40	)		(68	)		(854	)		(962	)
Intercompany interest income/(expense)			1,669			802			(2,471	)		-
Other income/(expense)—net			(176	)		10			410			244
	Income/(loss) before income taxes		41,658			18,556			(10,895	)		49,319
Income taxes (a)			(16,116	)		(7,081	)		3,673			(19,524	)
	Net income/(loss)	$	25,542		$	11,475		$	(7,222	)	$	29,795

2013
Service revenues and sales		$	256,218		$	92,386		$	-		$	348,604
Cost of services provided and goods sold			197,265			48,693			-			245,958
Selling, general and administrative expenses (b)			20,948			25,691			8,342			54,981
Depreciation			4,569			2,329			135			7,033
Amortization			538			153			501			1,192
	Total costs and expenses		223,320			76,866			8,978			309,164
	Income/(loss) from operations		32,898			15,520			(8,978	)		39,440
Interest expense (b)			(37	)		(83	)		(3,624	)		(3,744	)
Intercompany interest income/(expense)			1,347			613			(1,960	)		-
Other income/(expense)—net			(441	)		(45	)		2,644			2,158
	Income/(loss) before income taxes		33,767			16,005			(11,918	)		37,854
Income taxes (b)			(12,859	)		(5,980	)		3,894			(14,945	)
	Net income/(loss)	$	20,908		$	10,025		$	(8,024	)	$	22,909

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, 2014 AND 2013
(in thousands)(unaudited)

											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated
2014
Service revenues and sales		$	1,064,205		$	392,077		$	-		$	1,456,282
Cost of services provided and goods sold			825,739			208,934			-			1,034,673
Selling, general and administrative expenses (a)			84,597			106,708			28,813			220,118
Depreciation			18,601			10,702			578			29,881
Amortization			1,034			525			1,632			3,191
	Total costs and expenses		929,971			326,869			31,023			1,287,863
	Income/(loss) from operations		134,234			65,208			(31,023	)		168,419
Interest expense (a)			(207	)		(363	)		(7,616	)		(8,186	)
Intercompany interest income/(expense)			6,189			2,892			(9,081	)		-
Other income/(expense)—net			(753	)		146			3,128			2,521
	Income/(loss) before income taxes		139,463			67,883			(44,592	)		162,754
Income taxes (a)			(53,278	)		(25,808	)		15,649			(63,437	)
	Net income/(loss)	$	86,185		$	42,075		$	(28,943	)	$	99,317

2013
Service revenues and sales		$	1,045,113		$	368,216		$	-		$	1,413,329
Cost of services provided and goods sold			813,600			195,208			-			1,008,808
Selling, general and administrative expenses (b)			82,252			102,592			27,674			212,518
Depreciation			18,149			9,014			535			27,698
Amortization			2,102			607			1,981			4,690
Other operating expenses (b)			10,500			15,721			-			26,221
	Total costs and expenses		926,603			323,142			30,190			1,279,935
	Income/(loss) from operations		118,510			45,074			(30,190	)		133,394
Interest expense (b)			(182	)		(322	)		(14,531	)		(15,035	)
Intercompany interest income/(expense)			4,288			2,055			(6,343	)		-
Other income—net			438			(4	)		5,036			5,470
	Income/(loss) before income taxes		123,054			46,803			(46,028	)		123,829
Income taxes (b)			(46,910	)		(17,560	)		17,868			(46,602	)
	Net income/(loss)	$	76,144		$	29,243		$	(28,160	)	$	77,227

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, 2014 AND 2013
(in thousands)(unaudited)


												Chemed
			VITAS			Roto-Rooter			Corporate			Consolidated
2014
Net income/(loss)			$	25,542		$	11,475		$	(7,222	)	$	29,795
Add/(deduct):
	Interest expense			40			68			854			962
	Income taxes			16,116			7,081			(3,673	)		19,524
	Depreciation			4,892			2,970			148			8,010
	Amortization			205			128			397			730
		EBITDA		46,795			21,722			(9,496	)		59,021
Add/(deduct):
	Intercompany interest expense/(income)			(1,669	)		(802	)		2,471			-
	Interest income			35			(10	)		(1	)		24
	Expenses related to OIG investigation			533			-			-			533
	Acquisition expenses			-			23			-			23
	Expenses related to litigation settlements			-			16			-			16
	Advertising cost adjustment (c)			-			161			-			161
	Stock option expense			-			-			1,372			1,372
	Long-term incentive compensation			-			-			581			581
		Adjusted EBITDA	$	45,694		$	21,110		$	(5,073	)	$	61,731

2013
Net income/(loss)			$	20,908		$	10,025		$	(8,024	)	$	22,909
Add/(deduct):
	Interest expense			37			83			3,624			3,744
	Income taxes			12,859			5,980			(3,894	)		14,945
	Depreciation			4,569			2,329			135			7,033
	Amortization			538			153			501			1,192
		EBITDA		38,911			18,570			(7,658	)		49,823
Add/(deduct):
	Intercompany interest expense/(income)			(1,347	)		(613	)		1,960			-
	Interest income			300			26			(8	)		318
	Expenses related to OIG investigation			705			-			-			705
	Acquisition expenses			20			-			-			20
	Expenses related to litigation settlements			-			274			-			274
	Advertising cost adjustment (c)			-			177			-			177
	Stock option expense			-			-			1,310			1,310
	Long-term incentive compensation			-			-			140			140
	Expenses related to securities litigation			-			-			105			105
		Adjusted EBITDA	$	38,589		$	18,434		$	(4,151	)	$	52,872

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, 2014 AND 2013
(in thousands)(unaudited)


												Chemed
			VITAS			Roto-Rooter			Corporate			Consolidated
2014
Net income/(loss)			$	86,185		$	42,075		$	(28,943	)	$	99,317
Add/(deduct):
	Interest expense			207			363			7,616			8,186
	Income taxes			53,278			25,808			(15,649	)		63,437
	Depreciation			18,601			10,702			578			29,881
	Amortization			1,034			525			1,632			3,191
		EBITDA		159,305			79,473			(34,766	)		204,012
Add/(deduct):
	Intercompany interest expense/(income)			(6,189	)		(2,892	)		9,081			-
	Interest income			78			(39	)		(10	)		29
	Expenses related to OIG investigation			2,141			-			-			2,141
	Net expenses related to litigation settlements			113			7			-			120
	Acquisition expenses			1			23			-			24
	Advertising cost adjustment (c)			-			(1,462	)		-			(1,462	)
	Stock option expense			-			-			4,802			4,802
	Long-term incentive compensation			-			-			2,569			2,569
	Expenses related to securities litigation			-			-			327			327
		Adjusted EBITDA	$	155,449		$	75,110		$	(17,997	)	$	212,562

2013
Net income/(loss)			$	76,144		$	29,243		$	(28,160	)	$	77,227
Add/(deduct):
	Interest expense			182			322			14,531			15,035
	Income taxes			46,910			17,560			(17,868	)		46,602
	Depreciation			18,149			9,014			535			27,698
	Amortization			2,102			607			1,981			4,690
		EBITDA		143,487			56,746			(28,981	)		171,252
Add/(deduct):
	Intercompany interest expense/(income)			(4,288	)		(2,055	)		6,343			-
	Interest income			(750	)		(41	)		(56	)		(847	)
	Expenses related to OIG investigation			2,149			-			-			2,149
	Litigation settlements			10,500			15,721			-			26,221
	Expenses related to litigation settlements			-			1,425			-			1,425
	Acquisition expenses			58			4			-			62
	Advertising cost adjustment (c)			-			(1,166	)		-			(1,166	)
	Expenses of severance arrangement			-			302			-			302
	Stock option expense			-			-			6,042			6,042
	Long-term incentive compensation			-			-			1,301			1,301
	Expenses related to securities litigation			-			-			109			109
		Adjusted EBITDA	$	151,156		$	70,936		$	(15,242	)	$	206,850

The "Footnotes to Financial Statements" are integral parts of this financial information.


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME
(in thousands, except per share data)(unaudited)



		For the Three Months Ended				For the Years Ended
		December 31,				December 31,
		2014		2013		2014		2013
Net income as reported		$	29,795	$	22,909	$	99,317	$	77,227

Add/(deduct) the after-tax:
	Stock option expense		863		820		3,022		3,813
	Long-term incentive compensation		367		88		1,625		822
	Expenses related to OIG investigation		331		438		1,328		1,333
	Acquisition expenses		14		13		15		38
	Net expenses related to litigation settlements		10		166		74		865
	Non-cash expense of change in accounting for convertible debt		-		1,402		2,143		5,448
	Expenses related to securities litigation		-		66		207		69
	Litigation settlements		-		-		-		16,061
	Uncertain tax position adjustments		-		-		-		(1,782	)
	Loss on extinguishment of debt		-		-		-		294
	Expenses of severance arrangements		-		-		-		184

Adjusted net income		$	31,380	$	25,902	$	107,731	$	104,372


Diluted Earnings Per Share As Reported
	Net income	$	1.71	$	1.28	$	5.57	$	4.16
	Average number of shares outstanding		17,469		17,899		17,840		18,585


Adjusted Diluted Earnings Per Share
	Net income	$	1.80	$	1.45	$	6.07	$	5.62
	Adjusted average number of shares outstanding (d)		17,469		17,899		17,738		18,585

The "Footnotes to Financial Statements" are integral parts of this financial information.


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)


				For the Three Months Ended							For the Years Ended
				December 31,							December 31,
OPERATING STATISTICS				2014			2013				2014				2013
	Net revenue ($000) (e)
		Homecare		$	209,633		$	198,325			$	810,413			$	791,735
		Inpatient			25,839			25,788				102,876				104,968
		Continuous care			38,405			35,943				152,206				155,409
			Total before Medicare cap allowance	$	273,877		$	260,056			$	1,065,495			$	1,052,112
		Medicare cap allowance			506			(3,838	)			(1,290	)			(6,999	)
			Total	$	274,383		$	256,218			$	1,064,205			$	1,045,113
	Net revenue as a percent of total before Medicare cap allowance
		Homecare			76.6	%		76.3		%		76.0		%		75.2		%
		Inpatient			9.4			9.9				9.7				10.0
		Continuous care			14.0			13.8				14.3				14.8
			Total before Medicare cap allowance		100.0			100.0				100.0				100.0
		Medicare cap allowance			0.2			(1.5	)			(0.1	)			(0.7	)
			Total		100.2	%		98.5		%		99.9		%		99.3		%
	Average daily census ("ADC") (days)
		Homecare			10,850			10,353				10,634				10,449
		Nursing home			2,995			2,862				2,954				2,911
			Routine homecare		13,845			13,215				13,588				13,360
		Inpatient			427			433				428				438
		Continuous care			566			537				568				585
			Total		14,838			14,185				14,584				14,383

	Total Admissions				16,313			15,445				64,090				62,858
	Total Discharges				16,333			15,396				63,478				62,999
	Average length of stay (days)				82.7			82.6				82.4				81.6
	Median length of stay (days)				15.0			15.0				15.0				15.0
	ADC by major diagnosis
		Neurological			25.4	%		38.9		%		30.1		%		37.7		%
		Cancer			17.2			17.2				17.3				17.1
		Cardio			17.8			14.3				17.0				13.2
		Respiratory			7.8			7.8				7.9				7.6
		Other			31.8			21.8				27.7				24.4
			Total		100.0	%		100.0		%		100.0		%		100.0		%
	Admissions by major diagnosis
		Neurological			13.2	%		21.3		%		18.6		%		20.7		%
		Cancer			33.1			33.8				33.3				33.2
		Cardio			15.2			13.4				14.9				13.1
		Respiratory			9.3			8.7				9.4				9.2
		Other			29.2			22.8				23.8				23.8
			Total		100.0	%		100.0		%		100.0		%		100.0		%
	Direct patient care margins (f)
		Routine homecare			54.9	%		53.8		%		53.8		%		52.6		%
		Inpatient			7.2			5.0				5.8				5.5
		Continuous care			18.2			16.1				17.4				15.9
	Homecare margin drivers (dollars per patient day)
		Labor costs		$	53.06		$	53.85			$	53.99			$	55.17
		Drug costs			6.90			7.54				7.01				7.54
		Home medical equipment			6.41			6.38				6.61				6.61
		Medical supplies			3.10			2.99				3.18				2.97
	Inpatient margin drivers (dollars per patient day)
		Labor costs		$	327.53		$	334.50			$	339.90			$	338.51
	Continuous care margin drivers (dollars per patient day)
		Labor costs		$	582.69		$	589.51			$	585.61			$	591.54
	Bad debt expense as a percent of revenues				1.0	%		0.9		%		1.0		%		0.9		%
	Accounts receivable --
	Days of revenue outstanding- excluding unapplied Medicare payments				38.9			36.5				n.a.				n.a.
	Days of revenue outstanding- including unapplied Medicare payments				33.6			25.9				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, 2014 AND 2013
(unaudited)


(a)	Included in the results of operations 2014 are the following significant credits/(charges) which may not be indicative of ongoing operations
	(in thousands):
			For the Three Months Ended December 31, 2014
			VITAS			Roto-Rooter			Corporate			Consolidated
	Selling, general and administrative expenses:
		Expenses related to OIG investigation	$	(533	)	$	-		$	-		$	(533	)
		Acquisition expenses		-			(23	)		-			(23	)
		Expenses related to litigation settlements		-			(16	)		-			(16	)
		Stock option expense		-			-			(1,372	)		(1,372	)
		Long-term incentive compensation		-			-			(581	)		(581	)
		Pretax impact on earnings		(533	)		(39	)		(1,953	)		(2,525	)
	Income tax benefit on the above			202			15			723			940
		After-tax impact on earnings	$	(331	)	$	(24	)	$	(1,230	)	$	(1,585	)

			For the Year Ended December 31, 2014
			VITAS			Roto-Rooter			Corporate			Consolidated
	Selling, general and administrative expenses:
		Expenses related to OIG investigation	$	(2,141	)	$	-		$	-		$	(2,141	)
		Net expenses related to litigation settlements		(113	)		(7	)		-			(120	)
		Acquisition expenses		(1	)		(23	)		-			(24	)
		Stock option expense		-			-			(4,802	)		(4,802	)
		Long-term incentive compensation		-			-			(2,569	)		(2,569	)
		Expenses related to securities litigation		-			-			(327	)		(327	)
	Interest expense:
		Non-cash expense of change in accounting for convertible debt		-			-			(3,389	)		(3,389	)
		Pretax impact on earnings		(2,255	)		(30	)		(11,087	)		(13,372	)
	Income tax benefit on the above			856			12			4,090			4,958
		After-tax impact on earnings	$	(1,399	)	$	(18	)	$	(6,997	)	$	(8,414	)

(b)	Included in the results of operations 2013 are the following significant credits/(charges) which may not be indicative of ongoing operations
	(in thousands):
			For the Three Months Ended December 31, 2013
			VITAS			Roto-Rooter			Corporate			Consolidated
	Selling, general and administrative expenses:
		Expenses related to OIG investigation	$	(705	)	$	-		$	-		$	(705	)
		Acquisition expenses		(20	)		-			-			(20	)
		Expenses related to litigation settlements		-			(274	)		-			(274	)
		Stock option expense		-			-			(1,310	)		(1,310	)
		Long-term incentive compensation		-			-			(140	)		(140	)
		Expenses related to securities litigation		-			-			(105	)		(105	)
	Interest expense:
		Non-cash expense of change in accounting for convertible debt		-			-			(2,216	)		(2,216	)
		Pretax impact on earnings		(725	)		(274	)		(3,771	)		(4,770	)
	Income tax benefit on the above			274			108			1,395			1,777
		After-tax impact on earnings	$	(451	)	$	(166	)	$	(2,376	)	$	(2,993	)

			For the Year Ended December 31, 2013
			VITAS			Roto-Rooter			Corporate			Consolidated
	Selling, general and administrative expenses:
		Expenses related to OIG investigation	$	(2,149	)	$	-		$	-		$	(2,149	)
		Acquisition expenses		(58	)		(4	)		-			(62	)
		Expenses related to litigation settlements		-			(1,425	)		-			(1,425	)
		Expense of severance arrangement		-			(302	)		-			(302	)
		Stock option expense		-			-			(6,042	)		(6,042	)
		Long-term incentive compensation		-			-			(1,301	)		(1,301	)
		Expenses related to securities litigation		-			-			(109	)		(109	)
	Other operating expenses:
		Litigation settlements		(10,500	)		(15,721	)		-			(26,221	)
	Interest expense:
		Non-cash expense of change in accounting for convertible debt		-			-			(8,613	)		(8,613	)
		Loss on extinguishment of debt		-			-			(465	)		(465	)
		Pretax impact on earnings		(12,707	)		(17,452	)		(16,530	)		(46,689	)
	Income tax benefit on the above			4,828			6,850			7,866			19,544
		After-tax impact on earnings	$	(7,879	)	$	(10,602	)	$	(8,664	)	$	(27,145	)

(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 2014 and 2013, GAAP advertising expense for Roto-Rooter totaled $6,596,000 and $6,518,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the fourth quarters of 2014 and 2013 would total $6,435,000 and $6,341,000, respectively.

		Similarly, for the years ended December 31, 2014 and 2013, GAAP advertising expense for Roto-Rooter totaled $24,804,000 and $24,092,000, 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, 2014 and 2013 would total $26,266,000 and $25,258,000, respectively.

(d)		Adjusted diluted average shares outstanding excludes the estimated dilutive impact of the convertible notes prior to conversion of these notes on May 15, 2014 (impact of 102,000 shares for the year ended December 31, 2014) as this impact was entirely offset upon the exercise of the note hedges on May 15, 2014.

(e)		VITAS has 9 large (greater than 450 ADC), 17 medium (greater than 200 but less than 450 ADC) and 23 small (less than 200 ADC) hospice programs. For the current Medicare cap year there is one program with a cap liability and five programs with Medicare cap cushion of less than 10%.

(f)		Amounts exclude indirect patient care and administrative costs, as well as Medicare Cap billing limitation.

Source: Chemed Corporation

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

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