Chemed Reports Second-Quarter 2014 Results

July 23, 2014 at 4:02 PM EDT

CINCINNATI--(BUSINESS WIRE)--Jul. 23, 2014-- 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 second quarter ended June 30, 2014, versus the comparable prior-year period, as follows:

Consolidated operating results:

Revenue increased 0.8% to $360 million
GAAP Diluted EPS increased 76.6% to $1.36
Adjusted Diluted EPS increased 4.2% to $1.50

VITAS segment operating results:

Net Patient Revenue of $264 million, an increase of 0.2%
Average Daily Census (ADC) of 14,536, a decrease of 1.0%
Admissions of 15,771, an increase of 0.3%
Net Income, including litigation costs, of $20.9 million, an increase of 2.0%
Adjusted EBITDA of $37.5 million, a decrease of 0.5%
Adjusted EBITDA margin of 14.2%, a decrease of 10 basis points

Roto-Rooter segment operating results:

Revenue of $96.2 million, an increase of 2.7%
Net Income of $10.7 million
Adjusted EBITDA of $19.1 million, an increase of 0.9%
Adjusted EBITDA margin of 19.8%, a decrease of 35 basis points

VITAS

Net revenue for VITAS was $264 million in the second quarter of 2014, which is an increase of $0.5 million, or 0.2%, when compared to the prior-year period. This revenue increase consists of a Medicare reimbursement rate increase of 1.4%, offset by a 1.0% decline in average daily census.

In the second quarter of 2014, VITAS recorded $0.1 million in estimated Medicare Cap billing limitations. VITAS has 38 unique Medicare provider numbers. At June 30, 2014, VITAS had two programs with an estimated 2014 Medicare Cap billing limitation.

Of the 36 remaining Medicare provider numbers, 33 provider numbers have a Medicare Cap cushion of 10% or greater for the 2014 Medicare Cap period; two provider numbers have a Medicare Cap cushion of 5% to 10%; and one provider number has a cap cushion between 0% and 5%. VITAS generated an aggregate cap cushion of $248 million during the trailing twelve-month period.

Average revenue per patient per day in the quarter, excluding the impact of Medicare Cap, was $199.70, which is 0.9% above the prior-year period. Routine home care reimbursement and high acuity care averaged $162.71 and $699.97, respectively. During the quarter, high acuity days of care were 6.9% of total days of care, 4 basis points below the prior-year quarter.

The second quarter of 2014 gross margin, excluding the impact of Medicare Cap, was 22.1%, which is a 9 basis point decline when compared to the second quarter of 2013.

Selling, general and administrative expense was $21.0 million in the second quarter of 2014, which is a decrease of 0.3% when compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $37.6 million in the quarter, a decrease of 2.4% over the prior-year period. Adjusted EBITDA margin, excluding the impact from Medicare Cap, was 14.2% in the quarter which is 33 basis points below the prior-year period.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $96.2 million for the second quarter of 2014, an increase of 2.7% over the prior-year quarter.

Roto-Rooter’s gross margin in the quarter was 46.8%, a 29 basis point decline when compared to the second quarter of 2013. Adjusted EBITDA in the second quarter of 2014 totaled $19.1 million, an increase of 0.9%, and the Adjusted EBITDA margin was 19.8% in the quarter, a decrease of 35 basis points.

Chemed Consolidated

As of June 30, 2014, Chemed had total cash and cash equivalents of $28 million and debt of $160 million.

In June 2014Chemed entered into a five-year Amended and Restated Credit Agreement that consists 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 June 30, 2014, the Company had approximately $253 million of undrawn borrowing capacity under this credit agreement.

Capital expenditures through June 30, 2014, aggregated $19.5 million and compares to depreciation and amortization during the same period of $16.2 million.

The Company repurchased $25.5 million of Chemed stock during the quarter. This equates to 300,000 of Chemed shares repurchased at an average cost of $85.04Chemed currently has $63.3 million of authorization remaining under this share repurchase plan.

Guidance for 2014

VITAS revenue growth was constrained in the first half of 2014. This is primarily the result of the 2.0% Medicare rate cut implemented in the second quarter of 2013 as well as mix shift from high acuity care to routine home care. These factors negatively impacted revenue comparisons in the first half of 2014.

Full-year 2014 revenue growth for VITAS, prior to Medicare Cap, is estimated to be in the range of 1% to 2%. Admissions in 2014 are estimated to increase 2% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 14.5% to 15.0%. Medicare Cap is estimated to be $3.7 million in 2014.

Roto-Rooter is forecasted to achieve full-year 2014 revenue growth of 3% to 4%. This revenue estimate is based upon increased job pricing of approximately 2.0%. Adjusted EBITDA margin for 2014 is estimated in the range of 19.5% to 20.0%.

Management estimates that full-year 2014 earnings per diluted share, excluding non-cash expense for stock options, the non-cash interest expense related to the accounting for convertible debt, litigation and other discrete items, will be in the range of $5.90 to $6.10. This compares to Chemed’s 2013 reported adjusted earnings per diluted share of $5.62.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Thursday, July 24th, 2014, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (800) 901-5213 for U.S. and Canadian participants and (617) 786-2962 for international participants. The participant passcode is 55015302. 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 85516221. 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)


				Three Months Ended June 30,						Six Months Ended June 30,
				2014			2013			2014			2013
Service revenues and sales				$	360,182		$	357,198		$	718,482		$	723,839
Cost of services provided and goods sold					257,007			255,359			514,826			519,666
Selling, general and administrative expenses (aa)					53,649			53,107			109,320			108,667
Depreciation					7,272			6,899			14,421			13,694
Amortization					735			1,181			1,744			2,308
Other operating expenses (bb)					-			14,760			-			14,760
	Total costs and expenses				318,663			331,306			640,311			659,095
	Income from operations				41,519			25,892			78,171			64,744
Interest expense					(2,429	)		(3,697	)		(6,244	)		(7,791	)
Other income--net (cc)					756			1,696			1,572			3,402
	Income before income taxes				39,846			23,891			73,499			60,355
Income taxes					(15,483	)		(9,283	)		(28,562	)		(23,469	)
Net income				$	24,363		$	14,608		$	44,937		$	36,886


Earnings Per Share
	Net income			$	1.41		$	0.79		$	2.59		$	1.99
	Average number of shares outstanding				17,236			18,606			17,374			18,564

Diluted Earnings Per Share
	Net income			$	1.36		$	0.77		$	2.48		$	1.94
	Average number of shares outstanding				17,880			18,966			18,097			18,980



(aa)	Selling, general and administrative ("SG&A") expenses comprise (in thousands):

				Three Months Ended June 30,						Six Months Ended June 30,
				2014			2013			2014			2013


		SG&A expenses before long-term incentive compensation and the impact of market gains related to deferred compensation plans		$	52,386		$	51,550		$	106,522		$	105,026
		Market value gains related to deferred compensation plans (cc)			650			1,063			1,812			2,535
		Long-term incentive compensation			613			494			986			1,106
			Total SG&A expenses	$	53,649		$	53,107		$	109,320		$	108,667

(bb)	Other operating expenses comprise a litigation settlement in June 2013.

(cc)	Other income--net comprises (in thousands):
				Three Months Ended June 30,						Six Months Ended June 30,
				2014			2013			2014			2013
		Market value gains related to deferred compensation plans		$	650		$	1,063		$	1,812		$	2,535
		Loss on disposal of property and equipment			(48	)		(1	)		(326	)		(79	)
		Interest income			58			670			8			973
		Other			96			(36	)		78			(27	)
			Total other income--net	$	756		$	1,696		$	1,572		$	3,402

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET

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

June 30,

2014

2013

Assets

Current assets

Cash and cash equivalents

27,913

113,047

Accounts receivable less allowances

92,152

76,356

Inventories

6,856

6,156

Current deferred income taxes

13,459

19,322

Prepaid income taxes

4,001

4,911

Prepaid expenses

21,119

13,518

Total current assets

165,500

233,310

Investments of deferred compensation plans held in trust

47,314

40,583

Properties and equipment, at cost less accumulated depreciation

97,206

90,229

Identifiable intangible assets less accumulated amortization

56,288

57,348

Goodwill

466,867

466,271

Other assets

8,420

11,137

Total Assets

841,595

898,878

Liabilities

Current liabilities

Accounts payable

35,013

35,921

Current portion of long-term debt

5,000

179,154

Income taxes

6,029

4,561

Accrued insurance

40,164

42,616

Accrued compensation

42,527

42,156

Accrued legal

7,429

16,209

Other current liabilities

20,511

17,631

Total current liabilities

156,673

338,248

Deferred income taxes

27,270

27,981

Long-term debt

155,000

Deferred compensation liabilities

46,917

39,660

Other liabilities

11,251

11,702

Total Liabilities

397,111

417,591

Stockholders' Equity

Capital stock

32,980

32,075

Paid-in capital

511,794

466,980

Retained earnings

724,295

653,146

Treasury stock, at cost

(826,802

)

(673,008

)

Deferred compensation payable in Company stock

2,217

2,094

Total Stockholders' Equity

444,484

481,287

Total Liabilities and Stockholders' Equity

841,595

898,878

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


					Six Months Ended June 30,
					2014			2013
Cash Flows from Operating Activities
	Net income				$	44,937		$	36,886
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				16,165			16,002
		Provision for uncollectible accounts receivable				6,449			5,432
		Provision for deferred income taxes				6,180			(5,375	)
		Amortization of discount on convertible notes				3,392			4,264
		Stock option expense				2,453			3,103
		Noncash long-term incentive compensation				986			1,106
		Amortization of debt issuance costs				564			1,097
		Changes in operating assets and liabilities, excluding amounts acquired in business combinations:
				Decrease/(increase) in accounts receivable		(6,782	)		11,745
				Decrease/(increase) in inventories		(153	)		902
				Increase in prepaid expenses		(3,301	)		(2,017	)
				Increase/(decrease) in accounts payable and other current liabilities		(33,584	)		14,721
				Increase/(decrease) in income taxes		7,224			(409	)
				Increase in other assets		(2,748	)		(4,914	)
				Increase in other liabilities		4,644			4,401
		Excess tax benefit on share-based compensation				(1,866	)		(2,478	)
		Other sources				553			200
			Net cash provided by operating activities			45,113			84,666
Cash Flows from Investing Activities
	Capital expenditures					(19,454	)		(12,200	)
	Business combinations, net of cash acquired					(250	)		(1,501	)
	Other sources					192			101
			Net cash used by investing activities			(19,512	)		(13,600	)
Cash Flows from Financing Activities
	Repayment of convertible notes					(186,956	)		-
	Proceeds from issuance of term loan					100,000			-
	Net increase in revolving line of credit					60,000			-
	Purchases of treasury stock					(58,493	)		(18,448	)
	Proceeds from exercise of stock options					16,092			12,558
	Dividends paid					(6,757	)		(6,775	)
	Capital stock surrendered to pay taxes on stock-based compensation					(3,543	)		(4,269	)
	Retirement of warrants					(2,645	)		-
	Excess tax benefit on share-based compensation					1,866			2,478
	Debt issuances costs					(939	)		(1,104	)
	Decrease in cash overdrafts payable					(479	)		(11,608	)
	Other uses					(252	)		(382	)
			Net cash used by financing activities			(82,106	)		(27,550	)
Increase/(Decrease) in Cash and Cash Equivalents						(56,505	)		43,516
Cash and cash equivalents at beginning of year						84,418			69,531
Cash and cash equivalents at end of period					$	27,913		$	113,047

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND 2013
(in thousands)(unaudited)

											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated
2014
Service revenues and sales		$	264,026		$	96,156		$	-		$	360,182
Cost of services provided and goods sold			205,818			51,189			-			257,007
Selling, general and administrative expenses (a)			21,002			25,705			6,942			53,649
Depreciation			4,564			2,561			147			7,272
Amortization			205			137			393			735
	Total costs and expenses		231,589			79,592			7,482			318,663
	Income/(loss) from operations		32,437			16,564			(7,482	)		41,519
Interest expense (a)			(57	)		(111	)		(2,261	)		(2,429	)
Intercompany interest income/(expense)			1,517			680			(2,197	)		-
Other income/(expense)—net			(95	)		198			653			756
	Income/(loss) before income taxes		33,802			17,331			(11,287	)		39,846
Income taxes (a)			(12,910	)		(6,612	)		4,039			(15,483	)
	Net income/(loss)	$	20,892		$	10,719		$	(7,248	)	$	24,363

2013
Service revenues and sales		$	263,568		$	93,630		$	-		$	357,198
Cost of services provided and goods sold			205,788			49,571			-			255,359
Selling, general and administrative expenses (b)			21,063			25,230			6,814			53,107
Depreciation			4,520			2,246			133			6,899
Amortization			536			149			496			1,181
Other operating expenses (b)			-			14,760			-			14,760
	Total costs and expenses		231,907			91,956			7,443			331,306
	Income/(loss) from operations		31,661			1,674			(7,443	)		25,892
Interest expense (b)			(51	)		(97	)		(3,549	)		(3,697	)
Intercompany interest income/(expense)			866			436			(1,302	)		-
Other income/(expense)—net			585			34			1,077			1,696
	Income/(loss) before income taxes		33,061			2,047			(11,217	)		23,891
Income taxes (b)			(12,576	)		(633	)		3,926			(9,283	)
	Net income/(loss)	$	20,485		$	1,414		$	(7,291	)	$	14,608

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

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(in thousands)(unaudited)

											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated
2014
Service revenues and sales		$	524,438		$	194,044		$	-		$	718,482
Cost of services provided and goods sold			411,210			103,616			-			514,826
Selling, general and administrative expenses (a)			42,716			52,887			13,717			109,320
Depreciation			9,178			4,961			282			14,421
Amortization			624			282			838			1,744
	Total costs and expenses		463,728			161,746			14,837			640,311
	Income/(loss) from operations		60,710			32,298			(14,837	)		78,171
Interest expense (a)			(112	)		(208	)		(5,924	)		(6,244	)
Intercompany interest income/(expense)			2,860			1,330			(4,190	)		-
Other income/(expense)—net			(388	)		139			1,821			1,572
	Income/(loss) before income taxes		63,070			33,559			(23,130	)		73,499
Income taxes (a)			(24,019	)		(12,808	)		8,265			(28,562	)
	Net income/(loss)	$	39,051		$	20,751		$	(14,865	)	$	44,937

2013
Service revenues and sales		$	534,895		$	188,944		$	-		$	723,839
Cost of services provided and goods sold			418,949			100,717			-			519,666
Selling, general and administrative expenses (c)			42,667			51,892			14,108			108,667
Depreciation			9,033			4,394			267			13,694
Amortization			1,026			303			979			2,308
Other operating expenses (c)			-			14,760			-			14,760
	Total costs and expenses		471,675			172,066			15,354			659,095
	Income/(loss) from operations		63,220			16,878			(15,354	)		64,744
Interest expense (c)			(97	)		(156	)		(7,538	)		(7,791	)
Intercompany interest income/(expense)			1,709			864			(2,573	)		-
Other income/(expense)—net			805			34			2,563			3,402
	Income/(loss) before income taxes		65,637			17,620			(22,902	)		60,355
Income taxes (c)			(25,009	)		(6,582	)		8,122			(23,469	)
	Net income/(loss)	$	40,628		$	11,038		$	(14,780	)	$	36,886

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 JUNE 30, 2014 AND 2013
(in thousands)(unaudited)


												Chemed
			VITAS			Roto-Rooter			Corporate			Consolidated
2014
Net income/(loss)			$	20,892		$	10,719		$	(7,248	)	$	24,363
Add/(deduct):
	Interest expense			57			111			2,261			2,429
	Income taxes			12,910			6,612			(4,039	)		15,483
	Depreciation			4,564			2,561			147			7,272
	Amortization			205			137			393			735
		EBITDA		38,628			20,140			(8,486	)		50,282
Add/(deduct):
	Intercompany interest expense/(income)			(1,517	)		(680	)		2,197			-
	Interest income			(43	)		(12	)		(3	)		(58	)
	Expenses related to OIG investigation			410			-			-			410
	Advertising cost adjustment (c)			-			(399	)		-			(399	)
	Expenses related to litigation settlements			-			32			-			32
	Stock option expense			-			-			1,144			1,144
	Long-term incentive compensation			-			-			613			613
	Expenses related to securities litigation			-			-			189			189
		Adjusted EBITDA	$	37,478		$	19,081		$	(4,346	)	$	52,213

2013
Net income/(loss)			$	20,485		$	1,414		$	(7,291	)	$	14,608
Add/(deduct):
	Interest expense			51			97			3,549			3,697
	Income taxes			12,576			633			(3,926	)		9,283
	Depreciation			4,520			2,246			133			6,899
	Amortization			536			149			496			1,181
		EBITDA		38,168			4,539			(7,039	)		35,668
Add/(deduct):
	Intercompany interest expense/(income)			(866	)		(436	)		1,302			-
	Interest income			(642	)		(14	)		(14	)		(670	)
	Expenses related to OIG investigation			996			-			-			996
	Acquisition expenses			19			1			-			20
	Litigation settlement			-			14,760			-			14,760
	Expenses related to litigation settlements			-			567			-			567
	Advertising cost adjustment (c)			-			(505	)		-			(505	)
	Stock option expense			-			-			1,612			1,612
	Long-term incentive compensation			-			-			494			494
	Expenses related to securities litigation			-			-			1			1
		Adjusted EBITDA	$	37,675		$	18,912		$	(3,644	)	$	52,943

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

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(in thousands)(unaudited)


												Chemed
			VITAS			Roto-Rooter			Corporate			Consolidated
2014
Net income/(loss)			$	39,051		$	20,751		$	(14,865	)	$	44,937
Add/(deduct):
	Interest expense			112			208			5,924			6,244
	Income taxes			24,019			12,808			(8,265	)		28,562
	Depreciation			9,178			4,961			282			14,421
	Amortization			624			282			838			1,744
		EBITDA		72,984			39,010			(16,086	)		95,908
Add/(deduct):
	Intercompany interest expense/(income)			(2,860	)		(1,330	)		4,190			-
	Interest income			20			(19	)		(9	)		(8	)
	Expenses related to OIG investigation			1,158			-			-			1,158
	Expenses related to litigation settlements			113			225			-			338
	Acquisition expenses			1			-			-			1
	Advertising cost adjustment (d)			-			(1,140	)		-			(1,140	)
	Stock option expense			-			-			2,453			2,453
	Long-term incentive compensation			-			-			986			986
	Expenses related to securities litigation			-			-			189			189
		Adjusted EBITDA	$	71,416		$	36,746		$	(8,277	)	$	99,885

2013
Net income/(loss)			$	40,628		$	11,038		$	(14,780	)	$	36,886
Add/(deduct):
	Interest expense			97			156			7,538			7,791
	Income taxes			25,009			6,582			(8,122	)		23,469
	Depreciation			9,033			4,394			267			13,694
	Amortization			1,026			303			979			2,308
		EBITDA		75,793			22,473			(14,118	)		84,148
Add/(deduct):
	Intercompany interest expense/(income)			(1,709	)		(864	)		2,573			-
	Interest income			(888	)		(56	)		(29	)		(973	)
	Expenses related to OIG investigation			2,035			-			-			2,035
	Acquisition expenses			20			1			-			21
	Litigation settlement			-			14,760			-			14,760
	Expenses related to litigation settlements			-			708			-			708
	Advertising cost adjustment (d)			-			(974	)		-			(974	)
	Cost of severance arrangements			-			302			-			302
	Stock option expense			-			-			3,103			3,103
	Long-term incentive compensation			-			-			1,106			1,106
	Expenses related to securities litigation			-			-			3			3
		Adjusted EBITDA	$	75,251		$	36,350		$	(7,362	)	$	104,239

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)




		Three Months Ended June 30,				Six Months Ended June 30,
		2014		2013		2014		2013
Net income as reported		$	24,363	$	14,608	$	44,937	$	36,886

Add/(deduct) after-tax cost of:
	Stock option expense		722		1,020		1,544		1,963
	Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes		714		1,348		2,143		2,671
	Long-term incentive compensation		388		313		624		700
	Expenses of OIG investigation		254		618		718		1,262
	Expenses related to securities litigation		119		1		119		2
	Expenses related to litigation settlements		20		344		207		430
	Litigation settlement		-		8,967		-		8,967
	Acquisition expenses		-		13		1		13
	Loss on extinguishment of debt		-		-		-		294
	Severance arrangements		-		-		-		184

Adjusted net income		$	26,580	$	27,232	$	50,293	$	53,372


Diluted Earnings Per Share As Reported
	Net income	$	1.36	$	0.77	$	2.48	$	1.94
	Average number of shares outstanding		17,880		18,966		18,097		18,980


Adjusted Diluted Earnings Per Share
	Adjusted net income	$	1.50	$	1.44	$	2.81	$	2.81
	Adjusted average number of shares outstanding (e)		17,759		18,966		17,895		18,980

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 SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(unaudited)

				Three Months Ended June 30,								Six Months Ended June 30,
OPERATING STATISTICS				2014				2013				2014			2013
	Net revenue ($000) (f)
		Homecare		$	200,418			$	200,273			$	395,815		$	396,934
		Inpatient			26,032				25,889				52,025			54,357
		Continuous care			37,719				38,261				75,894			83,586
			Total before Medicare cap allowance	$	264,169			$	264,423			$	523,734		$	534,877
		Medicare cap allowance			(143	)			(855	)			704			18
			Total	$	264,026			$	263,568			$	524,438		$	534,895
	Net revenue as a percent of total before Medicare cap allowance
		Homecare			75.9		%		75.7		%		75.6	%		74.2	%
		Inpatient			9.8				9.8				9.9			10.2
		Continuous care			14.3				14.5				14.5			15.6
			Total before Medicare cap allowance		100.0				100.0				100.0			100.0
		Medicare cap allowance			(0.1	)			(0.3	)			0.1			-
			Total		99.9		%		99.7		%		100.1	%		100.0	%
	Average daily census ("ADC") (days)
		Homecare			10,546				10,719				10,511			10,538
		Nursing home			2,989				2,943				2,909			2,936
			Routine homecare		13,535				13,662				13,420			13,474
		Inpatient			433				434				435			451
		Continuous care			568				583				572			631
			Total		14,536				14,679				14,427			14,556

	Total Admissions				15,771				15,721				32,124			32,858
	Total Discharges				15,673				15,763				31,678			32,622
	Average length of stay (days)				82.4				84.8				81.7			80.9
	Median length of stay (days)				16.0				16.0				15.0			14.0
	ADC by major diagnosis
		Neurological			41.2		%		35.5		%		40.9	%		35.1	%
		Cancer			17.3				16.9				17.4			16.9
		Cardio			15.7				12.5				15.4			12.0
		Respiratory			7.7				7.5				7.8			7.3
		Other			18.1				27.6				18.5			28.7
			Total		100.0		%		100.0		%		100.0	%		100.0	%
	Admissions by major diagnosis
		Neurological			21.6		%		20.1		%		22.0	%		19.8	%
		Cancer			33.4				33.6				33.1			32.3
		Cardio			15.3				13.2				14.6			12.5
		Respiratory			9.6				9.1				9.8			9.4
		Other			20.1				24.0				20.5			26.0
			Total		100.0		%		100.0		%		100.0	%		100.0	%
	Direct patient care margins (g)
		Routine homecare			53.4		%		52.3		%		53.2	%		52.1	%
		Inpatient			6.9				3.6				5.6			7.4
		Continuous care			17.5				14.6				17.0			16.3
	Homecare margin drivers (dollars per patient day)
		Labor costs		$	53.89			$	55.04			$	54.65		$	56.09
		Drug costs			7.26				7.55				7.25			7.56
		Home medical equipment			6.76				6.56				6.69			6.70
		Medical supplies			3.17				3.13				3.20			3.03
	Inpatient margin drivers (dollars per patient day)
		Labor costs		$	337.30			$	346.46			$	343.50		$	333.15
	Continuous care margin drivers (dollars per patient day)
		Labor costs		$	581.00			$	595.29			$	587.40		$	591.24
	Bad debt expense as a percent of revenues				1.0		%		0.8		%		1.0	%		0.8	%
	Accounts receivable --
	Days of revenue outstanding- excluding unapplied Medicare payments				36.6				36.8				n.a.			n.a.
	Days of revenue outstanding- including unapplied Medicare payments				24.4				20.5				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 AND SIX MONTHS ENDED JUNE 30, 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):
				Three Months Ended June 30, 2014
				VITAS			Roto-Rooter			Corporate			Consolidated
	Selling, general and administrative expenses:
		Expenses related to OIG investigation		$	(410	)	$	-		$	-		$	(410	)
		Expenses related to litigation settlements			-			(32	)		-			(32	)
		Stock option expense			-			-			(1,144	)		(1,144	)
		Long-term incentive compensation			-			-			(613	)		(613	)
		Expenses related to securities litigation			-			-			(189	)		(189	)
	Interest expense:
		Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes			-			-			(1,130	)		(1,130	)
			Pretax impact on earnings		(410	)		(32	)		(3,076	)		(3,518	)
	Income tax benefit on the above				156			12			1,133			1,301
			After-tax impact on earnings	$	(254	)	$	(20	)	$	(1,943	)	$	(2,217	)

				Six Months Ended June 30, 2014
				VITAS			Roto-Rooter			Corporate			Consolidated
	Selling, general and administrative expenses:
		Expenses related to OIG investigation		$	(1,158	)	$	-		$	-		$	(1,158	)
		Expenses related to litigation settlements			(113	)		(225	)		-			(338	)
		Acquisition expenses			(1	)		-			-			(1	)
		Stock option expense			-			-			(2,453	)		(2,453	)
		Long-term incentive compensation			-			-			(986	)		(986	)
		Expenses related to securities litigation			-			-			(189	)		(189	)
	Interest expense:
		Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes			-			-			(3,389	)		(3,389	)
			Pretax impact on earnings		(1,272	)		(225	)		(7,017	)		(8,514	)
	Income tax benefit on the above				483			88			2,587			3,158
			After-tax impact on earnings	$	(789	)	$	(137	)	$	(4,430	)	$	(5,356	)

(b)	Included in the results of operations for the three months ended June 30, 2013 are the following significant credits/(charges) which may not be indicative of ongoing operation (in thousands):

				Three Months Ended June 30, 2013
				VITAS			Roto-Rooter			Corporate			Consolidated
	Selling, general and administrative expenses:
		Expenses related to OIG investigation		$	(996	)	$	-		$	-		$	(996	)
		Acquisition expenses			(19	)		(1	)		-			(20	)
		Expenses related to litigation settlements			-			(567	)		-			(567	)
		Stock option expense			-			-			(1,612	)		(1,612	)
		Long-term incentive compensation			-			-			(494	)		(494	)
		Expenses related to securities litigation			-			-			(1	)		(1	)
	Other operating expenses:
		Litigation settlement			-			(14,760	)		-			(14,760	)
	Interest expense:
		Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes			-			-			(2,132	)		(2,132	)
			Pretax impact on earnings		(1,015	)		(15,328	)		(4,239	)		(20,582	)
	Income tax benefit on the above				385			6,016			1,557			7,958
			After-tax impact on earnings	$	(630	)	$	(9,312	)	$	(2,682	)	$	(12,624	)

(c)	Included in the results of operations for the six months ended June 30, 2013 are the following significant credits/(charges) which may not be indicative of ongoing (in thousands):

				Six Months Ended June 30, 2013
				VITAS			Roto-Rooter			Corporate			Consolidated
	Selling, general and administrative expenses:
		Expenses related to OIG investigation		$	(2,035	)	$	-		$	-		$	(2,035	)
		Acquisition expenses			(20	)		(1	)		-			(21	)
		Expenses related to litigation settlements			-			(708	)		-			(708	)
		Costs of severance arrangements			-			(302	)		-			(302	)
		Stock option expense			-			-			(3,103	)		(3,103	)
		Long-term incentive compensation			-			-			(1,106	)		(1,106	)
		Expenses related to securities litigation			-			-			(3	)		(3	)
	Other operating expenses:
		Litigation settlement			-			(14,760	)		-			(14,760	)
	Interest expense:
		Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes			-			-			(4,223	)		(4,223	)
		Loss on extinguishment of debt			-			-			(465	)		(465	)
			Pretax impact on earnings		(2,055	)		(15,771	)		(8,900	)		(26,726	)
	Income tax benefit on the above				781			6,189			3,270			10,240
			After-tax impact on earnings	$	(1,274	)	$	(9,582	)	$	(5,630	)	$	(16,486	)

(d)		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 second quarters of 2014 and 2013, GAAP advertising expense for Roto-Rooter totaled $6,087,000 and $6,094,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the second quarters of 2014 and 2013 would total $6,486,000 and $6,599,000, respectively.

		Similarly, for the first six months of 2014 and 2013, GAAP advertising expense for Roto-Rooter totaled $12,602,000 and $11,798,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the first six months of 2014 and 2013 would total $13,742,000 and $12,772,000, respectively

(e)		Adjusted diluted average shares outstanding excludes the estimated dilutive impact of the convertible notes prior to conversion of these notes on May 15, 2014 (121,000 shares for the three months ended June 30, 2014 and 202,000 shares for the six months ended June 30, 2014) as this impact was entirely offset upon the exercise of the note hedges on May 15, 2014.

(f)		VITAS has nine large (greater than 450 ADC), 16 medium (greater than 200 but less than 450 ADC) and 27 small (less than 200 ADC) hospice programs. Of VITAS' 38 unique Medicare provider numbers, 33 provider numbers have a Medicare cap cushion of 10% or greater during the first nine months of the current cap year; two provider numbers have a Medicare cap cushion between 5% and 10%; and one provider number has a cap cushion between 0% and 5%. There are two program with a cap liability in the current cap year.

(g)		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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