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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
February 21, 2006
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-8351 31-0791746
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) Number)
2600 Chemed Center, 255 East 5th Street, Cincinnati, OH 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(513) 762-6900
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2 below):
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
230.425)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under Exchange
Act (17 CFR 230.425)
[_] Pre-commencement communications pursuant to Rule 13e-4 (c) under Exchange
Act (17 CFR 230.425)
Page 1 of 3
Item 2.02 Results of Operations and Financial Condition
On February 21, 2006 Chemed Corporation issued a press release
announcing its financial results for the quarter ended December
31, 2005. A copy of the release is furnished herewith as Exhibit
99.
Item 8.01 Other Events
Like other large California employers, the Company's VITAS
subsidiary faces allegations of purported class-wide wage and
hour violations. It is party to a class action lawsuit filed in
the Superior Court of California, Los Angeles County, in April of
2004 by Ann Marie Costa, Ana Jimenez, Mariea Ruteaya and Gracetta
Wilson. This case alleges failure to pay overtime wages for hours
worked "off the clock" in administrative tasks, including
voicemail retrieval, time entry, travel to and from work, and
pager response. This case also alleges VITAS failed to provide
meal and break periods to a purported class of California nurses,
home health aides and licensed clinical social workers. The case
also seeks payment of penalties, interest, and Plaintiffs'
attorney fees. VITAS contested these allegations.
Plaintiff moved for class certification, and VITAS opposed this
motion. We have reached an agreement, which is subject to court
approval, with the Plaintiff class in order to avoid the
uncertainty of litigation and the related diversion of resources
and personnel. We had accrued a pretax liability of $2.3 million
on our opening balance sheet for this case. At that time, this
represented our best estimate of our exposure in the matter. As a
result of the tentative resolution, we recorded a pretax charge
of $17.4 million ($10.8 million aftertax), representing the
portion of this settlement not accounted for on Vitas' opening
balance sheet. These amounts are inclusive of Plaintiffs' class
attorneys' fees and the costs of settlement administration.
Item 9.01 Financial Statements and Exhibits
c) Exhibit
(99) Registrant's press release dated February 21, 2006
Page 2 of 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CHEMED CORPORATION
Dated: February 21, 2006 By: /s/ Arthur V. Tucker, Jr.
------------------ --------------------------
Arthur V. Tucker, Jr.
Vice President and Controller
Page 3 of 3
Exhibit 99
Chemed Reports Fourth-Quarter 2005 Results; Diluted EPS From
Continuing Operations of $.15; Adjusted Pro Forma Diluted EPS
From Continuing Operations of $.61
CINCINNATI--(BUSINESS WIRE)--Feb. 21, 2006--Chemed Corporation (Chemed)
(NYSE:CHE), which operates VITAS Healthcare Corporation (VITAS), the nation's
largest provider of end-of-life care, and Roto-Rooter, the nation's largest
commercial and residential plumbing and drain cleaning services provider, today
reported financial results for its fourth quarter ended December 31, 2005,
versus the comparable prior-year period, as follows:
Consolidated Operating Results from Continuing Operations
-- Consolidated Revenue increased 16% to $248 million
-- Diluted EPS from Continuing Operations of $.15
-- Adjusted Pro Forma Diluted EPS from Continuing Operations of $.61
after excluding settlement of the California wage and hour class
action, LTIP and certain other items
VITAS generated record operating results
-- Quarterly Net Patient Revenue of $169 million, up 19%
-- Average Daily Census (ADC) of 10,412, up 14%
-- Adjusted EBITDA of $24.7 million, an increase of 21%
Roto-Rooter segment reported record Revenue and Adjusted EBITDA
-- Revenue of $79 million, an increase of 10%
-- Adjusted EBITDA of $14.5 million, an increase of 21%
"VITAS continues to generate excellent census and admissions growth, with
fourth-quarter ADC totaling 10,412, up 14%, and admissions in the quarter of
12,487, an increase of 8% over the prior-year quarter. Net income for VITAS in
the quarter was $2.5 million. After excluding the aftertax cost of the class
action litigation in California, LTIP and OIG investigation, VITAS' net income
of $13.8 million increased 29% when compared to the prior-year adjusted pro
forma net income. VITAS had a fourth-quarter adjusted EBITDA margin of 14.6%,"
stated Kevin McNamara, Chemed president and chief executive officer.
"The litigation settlement involved a wage-hour class action case pending
against VITAS in California. This case was filed in April 2004, shortly after
completion of the VITAS acquisition. We accrued a pretax liability of $2.3
million and accounted for this issue as an assumed liability on our opening
balance sheet. Since the establishment of this accrual, there has been a
significant increase in litigation, high settlements and unfavorable verdicts
against companies involving wage-hour claims in California. Recognizing this
legal climate, we have reached a tentative agreement to resolve this matter.
Generally Accepted Accounting Principles (GAAP) do not allow for a period of
more than 12-months post acquisition to finalize the quantification of existing
contingencies on the opening balance sheet of an acquisition. As a result,
VITAS' fourth-quarter operating results include an aftertax charge of $10.8
million representing the portion of this preliminary settlement not accounted
for on VITAS' opening balance sheet.
"Roto-Rooter also reported solid financial operating results. For the
fourth quarter of 2005, Roto-Rooter had revenue of $79 million, an increase of
10%. Adjusted EBITDA was $14.5 million, an increase of 21% at a margin of
18.3%."
VITAS
"VITAS generated revenue growth of 18.8% over the prior-year period and
5.4% sequentially," stated David Williams, Chemed chief financial officer.
"Gross margins were 22.9% in the fourth quarter of 2005, a decrease of 60 basis
points when compared to the prior-year quarter. The fourth-quarter 2005 gross
margin includes $1.6 million in start-up losses, which is $0.1 million higher
than the $1.5 million in losses from programs classified as new starts in the
prior-year period. Central support costs for VITAS, which are classified as
selling, general and administrative expenses in the Consolidating Statement of
Income, totaled $14.1 million, including $0.1 million in OIG legal expenses.
Excluding the OIG expenses, central support costs increased 7.8% when compared
to the prior-year quarter and increased 2.5% sequentially."
VITAS' ADC in the fourth quarter of 2005 was 10,412. This compares to an
ADC of 9,134 in the comparable prior-year period, an increase of 14.0% and 1.5%
sequential growth. Admissions totaled 12,487, an increase of 8.0% over the
fourth quarter of 2004. The Average Length of Stay (ALOS) for patients
discharged in the quarter was 70.0 days and compares to 66.5 days in the third
quarter of 2005 and 64.1 days in the fourth quarter of 2004.
"VITAS continues to generate strong internal growth," said Williams.
"Internal growth, which excludes 2004 and 2005 acquisitions, generated revenue,
ADC and admissions increases of 16.0%, 10.7% and 6.2%, respectively, over the
prior-year quarter.
"Our mix of revenue at VITAS was relatively stable," Williams added.
"Routine home care represented 69.3% of revenue, a 10 basis point decline over
the prior-year quarter and a 50 basis point decline sequentially. Our inpatient
revenue aggregated 13.5% and continuous care was 17.2% of total revenue in the
fourth quarter of 2005.
"All of our base and new start programs are estimated to have Medicare cap
cushion for the 2005 measurement period which ended on October 31, 2005," stated
Williams. "As previously discussed, we have been closely monitoring Medicare cap
limitations at our Phoenix acquisition. Phoenix has an estimated Medicare cap
liability of $2.4 million as of October 31, 2005. This includes $700 thousand
for future Medicare adjustments related to individual patient cap allocations
between provider numbers. The final Medicare cap liability for this period may
not be known for several years.
"The potential of reaching cap in the initial year of acquisition was
identified during our due diligence of Phoenix. Since this cap limitation
relates to patients admitted into the program prior to acquisition, the
estimated cap accrual has been accounted for as a contingent liability assumed
at acquisition and is not reflected in the Consolidated Statement of Income.
VITAS anticipates creating cap cushion in the Phoenix program in 2006 by
increasing admissions of patients requiring in-patient and continuous care.
Based upon current admission and discharge trends, we have not accrued for any
Medicare billing limitations in any of our programs, including Phoenix, in the
fourth quarter of 2005 for the 2006 measurement period."
Roto-Rooter Segment
Roto-Rooter's plumbing and drain cleaning business generated sales of $79
million for the fourth quarter of 2005, 10.5% higher than the $72 million
reported in the comparable prior-year quarter. Net income for the quarter was
$7.1 million, including favorable prior-year tax adjustments and aftertax LTIP
expense. Net income in the fourth quarter of 2004 was $3.3 million, including
the $1.9 million aftertax cost of settling the Madison County class action
litigation. Excluding these items, adjusted net income in the fourth quarter of
2005 was $7.2 million, an increase of 37%. Adjusted EBITDA in the fourth quarter
of 2005 totaled $14.5 million, an increase of 21.4% over the fourth quarter of
2004. Adjusted EBITDA margin in the fourth quarter of 2005 was 18.3%, a 160
basis point increase over the prior-year period.
"Job count in the fourth quarter of 2005 increased 3.9% over the prior year
period," stated Williams. "Commercial plumbing and drain cleaning job count
increased 10.7% and 5.5%, respectively, over the prior-year quarter. Residential
plumbing jobs increased 6.2% but were partially offset by a 0.2% decline in
residential drain cleaning jobs during the quarter. A commercial job will
typically average approximately 34% more revenue than a residential job.
Accordingly, this continued shift of job mix has a positive impact on aggregate
revenue."
Guidance for 2006
"Going into 2006," Williams stated, "we anticipate VITAS to generate a
revenue increase of 15% to 18%, increased admissions of 7% to 9% and continued
expansion of EBITDA margins through the leveraging of central support costs.
This should result in VITAS increasing its adjusted EBITDA margin approximately
60 to 80 basis points.
"Roto-Rooter is estimated to generate a 5% to 6% increase in revenue in
2006, with adjusted EBITDA margins averaging between 16% and 17%.
"Based upon these factors and an average diluted share count of 27.0
million, our expectation is that full-year 2006 earnings per diluted share from
continuing operations, excluding any charges or credits not indicative of
ongoing operations as well as excluding any expense for stock options required
under SFAS 123R, will be in the range of $2.20 to $2.35."
Conference Call
Chemed will host a conference call and webcast at 11 a.m., EST, on
Wednesday, February 22, 2006, to discuss the company's quarterly results and
provide an update on its business. The dial-in number for the conference call is
800-320-2978 for U.S. and Canadian participants and 617-614-4923 for
international participants. The participant passcode is 19933824. A live webcast
of the call can be accessed on Chemed's website at www.chemed.com by clicking on
Investor Relations Home.
A taped replay of the conference call will be available beginning
approximately two hours after the call's conclusion. It can be accessed by
dialing 888-286-8010 for U.S. and Canadian callers and 617-801-6888 for
international callers and will be available for one week following the live
call. The replay passcode is 63663450. An archived webcast will also be
available at www.chemed.com and will remain available for 30 days following the
live call.
Chemed Corporation operates in the healthcare field through its VITAS
Healthcare Corporation subsidiary. VITAS provides daily hospice services to over
10,000 patients with severe, life-limiting illnesses. This type of care is
focused on making the terminally ill patient's final days as comfortable and
pain-free as possible.
Chemed operates in the residential and commercial plumbing and drain
cleaning industry under the brand name Roto-Rooter. Roto-Rooter provides
plumbing and drain service through company-owned branches, independent
contractors and franchisees in the United States and Canada. Roto-Rooter also
has licensed master franchisees in China/Hong Kong, Indonesia, Singapore, Japan,
Mexico, the Philippines and the United Kingdom.
This press release contains information about Chemed's EBITDA and Adjusted
EBITDA, which are not measures derived in accordance with generally accepted
accounting principles and which exclude components that are important to
understanding Chemed's financial performance. Chemed provides EBITDA and
Adjusted EBITDA to help investors and others evaluate its operating results,
compare its operating performance with that of similar companies that have
different capital structures and evaluate its ability to meet its future debt
service, capital expenditures and working capital requirements. Chemed's EBITDA
and Adjusted EBITDA should not be considered in isolation or as a substitute for
comparable measures calculated and presented in accordance with GAAP. A
reconciliation of Chemed's net income to its Adjusted EBITDA is presented in the
tables following the text of this press release.
Forward-Looking Statements
Certain statements contained in this press release and the accompanying
tables are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope,"
"anticipate," "plan" and similar expressions identify forward-looking
statements, which speak only as of the date the statement was made. Chemed does
not undertake and specifically disclaims any obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. These statements are based on current expectations
and assumptions and involve various risks and uncertainties, which could cause
Chemed's actual results to differ from those expressed in such forward-looking
statements. These risks and uncertainties arise from, among other things,
possible changes in regulations governing the hospice care or plumbing and drain
cleaning industries; periodic changes in reimbursement levels and procedures
under Medicare and Medicaid programs; difficulties predicting patient length of
stay and estimating potential Medicare reimbursement obligations; challenges
inherent in Chemed's growth strategy; the current shortage of qualified nurses,
other healthcare professionals and licensed plumbing and drain cleaning
technicians; Chemed's dependence on patient referral sources; and other factors
detailed under the caption "Description of Business by Segment" or "Risk
Factors" in Chemed's most recent report on form 10-Q or 10-K and its other
filings with the Securities and Exchange Commission. You are cautioned not to
place undue reliance on such forward-looking statements and there are no
assurances that the matters contained in such statements will be achieved.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
For the For the
Three Months Ended Years Ended
December 31, December 31,
------------------- --------------------
2005 2004 2005 2004
--------- --------- --------- ----------
Continuing Operations
Service revenues and sales $248,203 $213,981 $926,477 $ 735,341
--------- --------- --------- ----------
Cost of services provided and
goods sold (aa) 172,540 146,029 651,841 507,078
Selling, general and
administrative expenses (aa) 39,850 40,226 151,670 138,285
Depreciation 4,245 4,774 16,179 14,542
Amortization 1,651 517 5,322 3,779
Other expenses--net (aa) 19,721 6,355 22,081 13,551
--------- --------- --------- ----------
Total costs and expenses 238,007 197,901 847,093 677,235
--------- --------- --------- ----------
Income from operations 10,196 16,080 79,384 58,106
Interest expense (5,243) (5,971) (21,264) (21,158)
Loss on extinguishment of
debt (aa) - - (3,971) (3,330)
Other income--net 490 1,505 3,134 3,469
--------- --------- --------- ----------
Income before income taxes 5,443 11,614 57,283 37,087
Income taxes (aa) (1,386) (4,236) (19,578) (13,796)
Equity in loss of affiliate
(VITAS) (aa) - - - (4,105)
--------- --------- --------- ----------
Income from continuing
operations 4,057 7,378 37,705 19,186
Discontinued Operations (bb) 127 8,314 (1,888) 8,326
--------- --------- --------- ----------
Net Income $ 4,184 $ 15,692 $ 35,817 $ 27,512
========= ========= ========= ==========
Earnings Per Share
Income from continuing
operations (aa) $ 0.16 $ 0.30 $ 1.48 $ 0.80
========= ========= ========= ==========
Net Income $ 0.16 $ 0.63 $ 1.40 $ 1.14
========= ========= ========= ==========
Average number of shares
outstanding 25,858 24,994 25,552 24,120
========= ========= ========= ==========
Diluted Earnings Per Share
Income from continuing
operations (aa) $ 0.15 $ 0.29 $ 1.43 $ 0.78
========= ========= ========= ==========
Net Income $ 0.16 $ 0.61 $ 1.36 $ 1.12
========= ========= ========= ==========
Average number of shares
outstanding 26,590 25,672 26,299 24,636
========= ========= ========= ==========
(aa) Included in the results of operations are the following significant
credits/(charges) which may not be indicative of ongoing operations (in
thousands):
For the For the
Three Months Ended Years Ended
December 31, December 31,
------------------- --------------------
2005 2004 2005 2004
--------- --------- --------- ----------
Cost of services provided and
goods sold
Favorable adjustment to
casualty insurance
accruals related to
prior years' experience $ - $ - $ 1,663 $ -
Selling, general and
administrative expenses
Costs associated with OIG
investigation (73) - (637) -
Other expenses -- net
Long-term incentive
compensation (2,531) - (5,477) (8,783)
Adjustments to
transaction-related costs
of the VITAS acquisition 160 (2,029) 961 (442)
Costs related to class
action litigation (17,350) (3,135) (17,350) (3,135)
Professional fees incurred
for debt registration
statement - (1,191) - (1,191)
Cost of accelerating
vesting of stock options - - (215) -
Loss on extinguishment of
debt - - (3,971) (3,330)
--------- --------- --------- ----------
Pretax impact on
earnings (19,794) (6,355) (25,026) (16,881)
Income tax benefit/(charge)
on the above 7,565 2,557 9,753 6,568
Income tax benefit from
finalizing prior years'
returns 174 600 1,961 1,620
Equity in loss of affiliate
(VITAS) is attributable to
transaction-related
expenses incurred by VITAS
prior to its acquisition by
Chemed - - - (4,105)
--------- --------- --------- ----------
Aftertax impact on
earnings $(12,055) $ (3,198) $(13,312) $ (12,798)
========= ========= ========= ==========
(bb) Discontinued operations include primarily Service America, discontinued in
December 2004.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
December 31,
----------------------
2005 2004
---------- ----------
Assets
Current assets
Cash and cash equivalents $ 57,133 $ 71,448
Accounts receivable less allowances 95,063 64,663
Inventories 6,499 7,019
Prepaid income taxes 9,096 -
Current deferred income taxes 26,691 31,250
Current assets of discontinued
operations - 13,397
Prepaid expenses and other current
assets 9,768 9,842
---------- ----------
Total current assets 204,250 197,619
Investments of deferred compensation
plans held in trust 21,105 18,317
Other investments 1,445 1,445
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 65,449 55,796
Identifiable intangible assets less
accumulated amortization 75,358 76,924
Goodwill 433,756 432,732
Noncurrent assets of discontinued
operations - 5,705
Other assets 21,222 24,528
---------- ----------
Total Assets $ 835,085 $ 825,566
========== ==========
Liabilities
Current liabilities
Accounts payable $ 43,626 $ 37,777
Current portion of long-term debt 1,045 12,185
Income taxes 3,916 10,944
Accrued insurance 38,894 26,350
Accrued salaries and wages 19,952 17,030
Current liabilities of discontinued
operations - 22,117
Other current liabilities 61,462 42,777
---------- ----------
Total current liabilities 168,895 169,180
Deferred income taxes 22,304 16,814
Long-term debt 234,058 279,510
Deferred compensation liabilities 21,275 18,311
Noncurrent liabilities of discontinued
operations - 811
Other liabilities 4,378 8,848
---------- ----------
Total Liabilities 450,910 493,474
---------- ----------
Stockholders' Equity
Capital stock 28,374 13,491
Paid-in capital 237,917 212,691
Retained earnings 171,188 141,542
Treasury stock, at cost (52,127) (33,873)
Unearned compensation (3,007) (3,590)
Deferred compensation payable in
Company stock 2,379 2,375
Notes receivable for shares sold (549) (544)
---------- ----------
Total Stockholders'
Equity 384,175 332,092
---------- ----------
Total Liabilities and
Stockholders' Equity $ 835,085 $ 825,566
========== ==========
Book Value Per Share $ 14.79 $ 13.27 (cc)
========== ==========
(cc) Adjusted for 2-for-1 stock split in May 2005.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
For the Years Ended
December 31,
---------------------
2005 2004
---------- ----------
Cash Flows from Operating Activities
Net income $ 35,817 $ 27,512
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,501 18,321
Provision for uncollectible accounts
receivable 7,224 6,155
Write off unamortized debt issuance costs 2,871 -
Noncash long-term incentive compensation 4,813 4,988
Discontinued operations 1,888 (8,326)
Provision for deferred income taxes (3,682) 5,002
Amortization of debt issuance costs 1,834 1,861
Equity in loss of affiliate - 4,105
Changes in operating assets and
liabilities, excluding amounts acquired
in business combinations:
Increase in accounts receivable (37,753) (6,534)
Decrease/(increase) in inventories 520 (986)
Decrease in prepaid expenses and other
current assets 76 11,659
Increase/(decrease) in accounts
payable and other current liabilities 33,036 (2,497)
Increase in income taxes 14,112 21,374
Decrease/(increase) in other assets (2,003) 5,607
Decrease in other liabilities (1,142) (627)
Noncash expense of internally financed
ESOPs 1,060 1,894
Other sources/(uses) 1,400 (1,044)
---------- ----------
Net cash provided by continuing
operations 81,572 88,464
Net cash provided/(used) by discontinued
operations (1,559) 4,426
---------- ----------
Net cash provided by operating activities 80,013 92,890
---------- ----------
Cash Flows from Investing Activities
Capital expenditures (25,956) (18,290)
Net uses from disposals of discontinued
operations (9,367) (759)
Business combinations, net of cash acquired (6,207) (344,727)
Proceeds from sales of property and equipment 157 772
Return of merger deposit - 10,000
Other uses (369) (205)
---------- ----------
Net cash used by investing activities (41,742) (353,209)
---------- ----------
Cash Flows from Financing Activities
Repayment of long-term debt (141,592) (96,940)
Proceeds from issuance of long-term debt 85,000 295,000
Increase in cash overdraft payable 6,752 1,265
Issuance of capital stock, net of issuance
costs 12,327 98,823
Dividends paid (6,172) (5,718)
Purchases of treasury stock (7,401) (2,654)
Debt issuance costs (1,755) (14,447)
Repayment of stock subscriptions note
receivable - 8,053
Redemption of convertible trust preferred
securities - (2,735)
Other sources 255 432
---------- ----------
Net cash provided/(used) by financing
activities (52,586) 281,079
---------- ----------
Increase/(Decrease) in Cash and Cash Equivalents (14,315) 20,760
Cash and cash equivalents at beginning of year 71,448 50,688
---------- ----------
Cash and cash equivalents at end of year $ 57,133 $ 71,448
========== ==========
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
2005
- ---------------------
Service revenues and
sales $ 168,994 $ 79,209 $ - $ 248,203
----------- ----------- ----------- -------------
Cost of services
provided and goods
sold 130,271 42,269 - 172,540
Selling, general and
administrative
expenses (a) 14,097 24,097 1,656 39,850
Depreciation 2,108 2,032 105 4,245
Amortization 1,384 20 247 1,651
Other expenses (a) 18,150 449 1,122 19,721
----------- ----------- ----------- -------------
Total costs and
expenses 166,010 68,867 3,130 238,007
----------- ----------- ----------- -------------
Income/(loss)
from operations 2,984 10,342 (3,130) 10,196
Interest expense (49) (155) (5,039) (5,243)
Intercompany interest
income/(expense) 785 731 (1,516) -
Other income--net 49 38 403 490
----------- ----------- ----------- -------------
Income/(loss)
before income
taxes 3,769 10,956 (9,282) 5,443
Income taxes (a) (1,264) (3,886) 3,764 (1,386)
----------- ----------- ----------- -------------
Income/(loss) from
continuing
operations 2,505 7,070 (5,518) 4,057
Discontinued
operations - - 127 127
----------- ----------- ----------- -------------
Net
income/(loss) $ 2,505 $ 7,070 $ (5,391) $ 4,184
=========== =========== =========== =============
2004
- ---------------------
Service revenues and
sales $ 142,277 $ 71,704 $ - $ 213,981
----------- ----------- ----------- -------------
Cost of services
provided and goods
sold 108,830 37,199 - 146,029
Selling, general and
administrative
expenses 13,006 24,770 2,450 40,226
Depreciation 2,634 2,082 58 4,774
Amortization 354 (37) 200 517
Other expenses (b) 1,680 3,135 1,540 6,355
----------- ----------- ----------- -------------
Total costs and
expenses 126,504 67,149 4,248 197,901
----------- ----------- ----------- -------------
Income/(loss)
from operations 15,773 4,555 (4,248) 16,080
Interest expense (38) (104) (5,829) (5,971)
Intercompany interest
income/(expense) 339 341 (680) -
Other income--net 127 674 704 1,505
----------- ----------- ----------- -------------
Income/(loss)
before income
taxes 16,201 5,466 (10,053) 11,614
Income taxes (b) (6,541) (2,125) 4,430 (4,236)
----------- ----------- ----------- -------------
Income/(loss) from
continuing
operations 9,660 3,341 (5,623) 7,378
Discontinued
operations - - 8,314 8,314
----------- ----------- ----------- -------------
Net
income/(loss) $ 9,660 $ 3,341 $ 2,691 $ 15,692
=========== =========== =========== =============
The "Footnotes to Financial Statements" are integral parts of this financial
information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
2005
- ---------------------
Service revenues and
sales $ 629,140 $ 297,337 $ - $ 926,477
----------- ----------- ----------- -------------
Cost of services
provided and goods
sold (c) 491,974 159,867 - 651,841
Selling, general and
administrative
expenses (c) 54,806 88,046 8,818 151,670
Depreciation 7,585 8,271 323 16,179
Amortization 4,347 90 885 5,322
Other expenses (c) 19,031 1,001 2,049 22,081
----------- ----------- ----------- -------------
Total costs and
expenses 577,743 257,275 12,075 847,093
----------- ----------- ----------- -------------
Income/(loss)
from operations 51,397 40,062 (12,075) 79,384
Interest expense (153) (563) (20,548) (21,264)
Intercompany interest
income/(expense) 2,554 2,236 (4,790) -
Loss on
extinguishment of
debt (c) - - (3,971) (3,971)
Other income--net 183 860 2,091 3,134
----------- ----------- ----------- -------------
Income/(loss)
before income
taxes 53,981 42,595 (39,293) 57,283
Income taxes (c) (20,394) (15,635) 16,451 (19,578)
----------- ----------- ----------- -------------
Income/(loss) from
continuing
operations 33,587 26,960 (22,842) 37,705
Discontinued
operations - - (1,888) (1,888)
----------- ----------- ----------- -------------
Net
income/(loss) $ 33,587 $ 26,960 $ (24,730) $ 35,817
=========== =========== =========== =============
2004
- ---------------------
Service revenues and
sales $ 458,730 $ 276,611 $ - $ 735,341
----------- ----------- ----------- -------------
Cost of services
provided and goods
sold 356,801 150,277 - 507,078
Selling, general and
administrative
expenses 42,946 85,636 9,703 138,285
Depreciation 5,712 8,583 247 14,542
Amortization 3,349 119 311 3,779
Other expenses (d) 1,680 4,693 7,178 13,551
----------- ----------- ----------- -------------
Total costs and
expenses 410,488 249,308 17,439 677,235
----------- ----------- ----------- -------------
Income/(loss)
from operations 48,242 27,303 (17,439) 58,106
Interest expense (128) (206) (20,824) (21,158)
Intercompany interest
income/(expense) 759 1,041 (1,800) -
Loss on
extinguishment of
debt (d) - - (3,330) (3,330)
Other income--net 296 1,268 1,905 3,469
----------- ----------- ----------- -------------
Income/(loss)
before income
taxes 49,169 29,406 (41,488) 37,087
Income taxes (d) (20,030) (10,611) 16,845 (13,796)
Equity in loss of
VITAS (d) - - (4,105) (4,105)
----------- ----------- ----------- -------------
Income/(loss) from
continuing
operations 29,139 18,795 (28,748) 19,186
Discontinued
operations - - 8,326 8,326
----------- ----------- ----------- -------------
Net
income/(loss) $ 29,139 $ 18,795 $ (20,422) $ 27,512
=========== =========== =========== =============
The "Footnotes to Financial Statements" are integral parts of this financial
information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
2005
- ---------------------
Net income/(loss) $ 2,505 $ 7,070 $ (5,391) $ 4,184
Add/(deduct):
Discontinued
operations - - (127) (127)
Interest expense 49 155 5,039 5,243
Income taxes 1,264 3,886 (3,764) 1,386
Depreciation 2,108 2,032 105 4,245
Amortization 1,384 20 247 1,651
----------- ----------- ----------- -------------
EBITDA 7,310 13,163 (3,891) 16,582
Add/(deduct):
Long-term incentive
compensation (f) 800 449 1,282 2,531
Lawsuit settlement 17,350 - - 17,350
Legal expenses of
OIG investigation 73 - - 73
VITAS transaction
expense adjustment - - (160) (160)
Advertising cost
adjustment (e) - 1,660 - 1,660
Interest income (57) (38) (671) (766)
Intercompany
interest
income/(expense) (785) (731) 1,516 -
----------- ----------- ----------- -------------
Adjusted EBITDA $ 24,691 $ 14,503 $ (1,924) $ 37,270
=========== =========== =========== =============
2004
- ---------------------
Net income/(loss) $ 9,660 $ 3,341 $ 2,691 $ 15,692
Add/(deduct):
Discontinued
operations - - (8,314) (8,314)
Interest expense 38 104 5,829 5,971
Income taxes 6,541 2,125 (4,430) 4,236
Depreciation 2,634 2,082 58 4,774
Amortization 354 (37) 200 517
----------- ----------- ----------- -------------
EBITDA 19,227 7,615 (3,966) 22,876
Add/(deduct):
Lawsuit settlement - 3,135 - 3,135
Debt registration
expenses - - 1,191 1,191
VITAS transaction
expense adjustment 1,680 - 349 2,029
Advertising cost
adjustment (e) - 1,571 - 1,571
Interest income (142) (31) (233) (406)
Intercompany
interest
income/(expense) (339) (341) 680 -
----------- ----------- ----------- -------------
Adjusted EBITDA $ 20,426 $ 11,949 $ (1,979) $ 30,396
=========== =========== =========== =============
The "Footnotes to Financial Statements" are integral parts of this financial
information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
2005
- ---------------------
Net income/(loss) $ 33,587 $ 26,960 $ (24,730) $ 35,817
Add/(deduct):
Discontinued
operations - - 1,888 1,888
Interest expense 153 563 20,548 21,264
Income taxes 20,394 15,635 (16,451) 19,578
Depreciation 7,585 8,271 323 16,179
Amortization 4,347 90 885 5,322
----------- ----------- ----------- -------------
EBITDA 66,066 51,519 (17,537) 100,048
Add/(deduct):
Long-term incentive
compensation (f) 1,681 1,001 3,010 5,692
Lawsuit settlement 17,350 - - 17,350
Prior-period
insurance
adjustment - (1,663) - (1,663)
Legal expenses of
OIG investigation 637 - - 637
VITAS transaction
expense adjustment - - (961) (961)
Advertising cost
adjustment (e) - 691 - 691
Interest income (249) (156) (1,805) (2,210)
Intercompany
interest
income/(expense) (2,554) (2,236) 4,790 -
Loss on
extinguishment of
debt - - 3,971 3,971
----------- ----------- ----------- -------------
Adjusted EBITDA $ 82,931 $ 49,156 $ (8,532) $ 123,555
=========== =========== =========== =============
2004
- ---------------------
Net income/(loss) $ 29,139 $ 18,795 $ (20,422) $ 27,512
Add/(deduct):
Discontinued
operations - - (8,326) (8,326)
Interest expense 128 206 20,824 21,158
Income taxes 20,030 10,611 (16,845) 13,796
Depreciation 5,712 8,583 247 14,542
Amortization 3,349 119 311 3,779
----------- ----------- ----------- -------------
EBITDA 58,358 38,314 (24,211) 72,461
Add/(deduct):
Long-term incentive
compensation - 1,558 7,225 8,783
Lawsuit settlement - 3,135 - 3,135
Debt registration
expenses - - 1,191 1,191
VITAS transaction
expense adjustment 1,680 - (1,238) 442
Advertising cost
adjustment (e) - 528 - 528
Interest income (332) (139) (1,403) (1,874)
Intercompany
interest
income/(expense) (759) (1,041) 1,800 -
Equity in loss of
VITAS - - 4,105 4,105
Loss on
extinguishment of
debt - - 3,330 3,330
----------- ----------- ----------- -------------
Adjusted EBITDA $ 58,947 $ 42,355 $ (9,201) $ 92,101
=========== =========== =========== =============
The "Footnotes to Financial Statements" are integral parts of this financial
information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF NET INCOME TO ADJUSTED PRO FORMA INCOME
FROM CONTINUING OPERATIONS
FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2005 AND 2004
(in thousands, except per share data)(unaudited)
For the For the
Three Months Ended Years Ended
December 31, December 31,
------------------- --------------------
2005 2004 2005 2004
--------- --------- --------- ----------
Net income as reported $ 4,184 $ 15,692 $ 35,817 $ 27,512
Add/(deduct):
Pro forma VITAS net income
contribution for the
period (g) - (4) - 2,987
Pro forma financing costs
related to acquisition of
VITAS (h) - - - (2,211)
Pro forma elimination of
VITAS transaction expense
adjustment - 1,174 - 222
Pro forma elimination of
equity in loss of
VITAS (i) - - - 4,105
--------- --------- --------- ----------
Pro forma net income 4,184 16,862 35,817 32,615
Add/(deduct):
Discontinued operations (127) (8,314) 1,888 (8,326)
Prior-period tax
adjustments (174) (600) (1,961) (1,620)
Aftertax prior-period
insurance adjustment - - (1,014) -
Aftertax cost of long-term
incentive compensation (f) 1,587 - 3,571 5,437
Aftertax cost of legal
expenses of OIG
investigation 45 - 397 -
Aftertax VITAS transaction
expense adjustment (160) - (961) -
Aftertax cost of lawsuit
settlement 10,757 1,897 10,757 1,897
Aftertax cost of debt
registration expenses - 727 - 727
Aftertax cost of loss on
extinguishment of debt - - 2,523 2,030
--------- --------- --------- ----------
Adjusted pro forma income from
continuing operations $ 16,112 $ 10,572 $ 51,017 $ 32,760
========= ========= ========= ==========
Earnings Per Share As Reported
Net income $ 0.16 $ 0.63 $ 1.40 $ 1.14
========= ========= ========= ==========
Average number of shares
outstanding 25,858 24,994 25,552 24,120
========= ========= ========= ==========
Diluted Earnings Per Share As
Reported
Net income $ 0.16 $ 0.61 $ 1.36 $ 1.12
========= ========= ========= ==========
Average number of shares
outstanding 26,590 25,672 26,299 24,636
========= ========= ========= ==========
Adjusted Pro Forma Earnings
Per Share
Income from continuing
operations $ 0.62 $ 0.42 $ 2.00 $ 1.30
========= ========= ========= ==========
Average number of shares
outstanding 25,858 24,994 25,552 25,218
========= ========= ========= ==========
Adjusted Pro Forma Diluted
Earnings Per Share
Income from continuing
operations $ 0.61 $ 0.41 $ 1.94 $ 1.27
========= ========= ========= ==========
Average number of shares
outstanding 26,590 25,672 26,299 25,734
========= ========= ========= ==========
The "Footnotes to Financial Statements" are integral parts of this financial
information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
(in thousands, except per share data) (unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
2005
- ---------------------
Service revenues and
sales $ 168,994 $ 79,209 $ - $ 248,203
----------- ----------- ----------- -------------
Cost of services
provided and goods
sold 130,271 42,269 - 172,540
Selling, general and
administrative
expenses (a) 14,097 24,097 1,656 39,850
Depreciation 2,108 2,032 105 4,245
Amortization 1,384 20 247 1,651
Other expenses (a) 18,150 449 1,122 19,721
----------- ----------- ----------- -------------
Total costs and
expenses 166,010 68,867 3,130 238,007
----------- ----------- ----------- -------------
Income/(loss)
from operations 2,984 10,342 (3,130) 10,196
Interest expense (49) (155) (5,039) (5,243)
Intercompany interest
income/(expense) 785 731 (1,516) -
Other income--net 49 38 403 490
----------- ----------- ----------- -------------
Income/(loss)
before income
taxes 3,769 10,956 (9,282) 5,443
Income taxes (a) (1,264) (3,886) 3,764 (1,386)
----------- ----------- ----------- -------------
Income/(loss) from
continuing
operations 2,505 7,070 (5,518) 4,057
Discontinued
operations - - 127 127
----------- ----------- ----------- -------------
Net
income/(loss) $ 2,505 $ 7,070 $ (5,391) $ 4,184
=========== =========== =========== =============
Earnings Per Share
Continuing
operations $ 0.16
=============
Net income $ 0.16
=============
Average number
of shares
outstanding 25,858
=============
Diluted Earnings Per
Share
Continuing
operations $ 0.15
=============
Net income $ 0.16
=============
Average number
of shares
outstanding 26,590
=============
2004 (j)
- ---------------------
Service revenues and
sales $ 142,277 $ 71,704 $ - $ 213,981
----------- ----------- ----------- -------------
Cost of services
provided and goods
sold 108,830 37,199 - 146,029
Selling, general and
administrative
expenses 13,006 24,770 2,450 40,226
Depreciation 2,634 2,082 58 4,774
Amortization 358 (37) 200 521
Other expenses (b) - 3,135 1,191 4,326
----------- ----------- ----------- -------------
Total costs and
expenses 124,828 67,149 3,899 195,876
----------- ----------- ----------- -------------
Income/(loss)
from operations 17,449 4,555 (3,899) 18,105
Interest expense (38) (104) (5,829) (5,971)
Intercompany interest
income/(expense) 339 341 (680) -
Other income--net 127 674 704 1,505
----------- ----------- ----------- -------------
Income/(loss)
before income
taxes 17,877 5,466 (9,704) 13,639
Income taxes (b) (7,213) (2,125) 4,247 (5,091)
----------- ----------- ----------- -------------
Income/(loss) from
continuing
operations 10,664 3,341 (5,457) 8,548
Discontinued
operations - - 8,314 8,314
----------- ----------- ----------- -------------
Net
income/(loss) $ 10,664 $ 3,341 $ 2,857 $ 16,862
=========== =========== =========== =============
Earnings Per Share
Continuing
operations $ 0.34
=============
Net income $ 0.67
=============
Average number
of shares
outstanding 24,994
=============
Diluted Earnings Per
Share
Continuing
operations $ 0.33
=============
Net income $ 0.66
=============
Average number
of shares
outstanding 25,672
=============
The "Footnotes to Financial Statements" are integral parts of this financial
information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONSOLIDATING STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(in thousands, except per share data) (unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
2005
- ---------------------
Service revenues and
sales $ 629,140 $ 297,337 $ - $ 926,477
----------- ----------- ----------- -------------
Cost of services
provided and goods
sold (c) 491,974 159,867 - 651,841
Selling, general and
administrative
expenses (c) 54,806 88,046 8,818 151,670
Depreciation 7,585 8,271 323 16,179
Amortization 4,347 90 885 5,322
Other expenses (c) 19,031 1,001 2,049 22,081
----------- ----------- ----------- -------------
Total costs and
expenses 577,743 257,275 12,075 847,093
----------- ----------- ----------- -------------
Income/(loss)
from operations 51,397 40,062 (12,075) 79,384
Interest expense (153) (563) (20,548) (21,264)
Intercompany interest
income/(expense) 2,554 2,236 (4,790) -
Loss on
extinguishment of
debt (c) - - (3,971) (3,971)
Other income--net 183 860 2,091 3,134
----------- ----------- ----------- -------------
Income/(loss)
before income
taxes 53,981 42,595 (39,293) 57,283
Income taxes (c) (20,394) (15,635) 16,451 (19,578)
----------- ----------- ----------- -------------
Income/(loss) from
continuing
operations 33,587 26,960 (22,842) 37,705
Discontinued
operations - - (1,888) (1,888)
----------- ----------- ----------- -------------
Net
income/(loss) $ 33,587 $ 26,960 $ (24,730) $ 35,817
=========== =========== =========== =============
Earnings Per Share
Continuing
operations $ 1.48
=============
Net income $ 1.40
=============
Average number
of shares
outstanding 25,552
=============
Diluted Earnings Per
Share
Continuing
operations $ 1.43
=============
Net income $ 1.36
=============
Average number
of shares
outstanding 26,299
=============
2004 (j)
- ---------------------
Service revenues and
sales $ 531,600 $ 276,611 $ - $ 808,211
----------- ----------- ----------- -------------
Cost of services
provided and goods
sold 415,649 150,277 - 565,926
Selling, general and
administrative
expenses 51,271 85,636 9,564 146,471
Depreciation 6,192 8,583 247 15,022
Amortization 3,957 119 311 4,387
Other expenses (d) - 4,693 8,416 13,109
----------- ----------- ----------- -------------
Total costs and
expenses 477,069 249,308 18,538 744,915
----------- ----------- ----------- -------------
Income/(loss)
from operations 54,531 27,303 (18,538) 63,296
Interest expense (128) (206) (24,226) (24,560)
Intercompany interest
income/(expense) 759 1,041 (1,800) -
Loss on
extinguishment of
debt (d) - - (3,330) (3,330)
Other income--net 337 1,268 1,905 3,510
----------- ----------- ----------- -------------
Income/(loss)
before income
taxes 55,499 29,406 (45,989) 38,916
Income taxes (d) (22,447) (10,611) 18,431 (14,627)
----------- ----------- ----------- -------------
Income/(loss) from
continuing
operations 33,052 18,795 (27,558) 24,289
Discontinued
operations - - 8,326 8,326
----------- ----------- ----------- -------------
Net
income/(loss) $ 33,052 $ 18,795 $ (19,232) $ 32,615
=========== =========== =========== =============
Earnings Per Share
Continuing
operations $ 0.96
=============
Net income $ 1.29
=============
Average number
of shares
outstanding 25,218
=============
Diluted Earnings Per
Share
Continuing
operations $ 0.94
=============
Net income $ 1.27
=============
Average number
of shares
outstanding 25,734
=============
The "Footnotes to Financial Statements" are integral parts of this financial
information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
2005
- ---------------------
Net income/(loss) $ 2,505 $ 7,070 $ (5,391) $ 4,184
Add/(deduct):
Discontinued
operations - - (127) (127)
Interest expense 49 155 5,039 5,243
Income taxes 1,264 3,886 (3,764) 1,386
Depreciation 2,108 2,032 105 4,245
Amortization 1,384 20 247 1,651
----------- ----------- ----------- -------------
EBITDA 7,310 13,163 (3,891) 16,582
Add/(deduct):
Long-term incentive
compensation (f) 800 449 1,282 2,531
Lawsuit settlement 17,350 - - 17,350
Legal expenses of
OIG investigation 73 - - 73
VITAS transaction
expense adjustment - - (160) (160)
Advertising cost
adjustment (e) - 1,660 - 1,660
Interest income (57) (38) (671) (766)
Intercompany
interest
income/(expense) (785) (731) 1,516 -
----------- ----------- ----------- -------------
Adjusted EBITDA $ 24,691 $ 14,503 $ (1,924) $ 37,270
=========== =========== =========== =============
2004 (j)
- ---------------------
Pro forma net
income/(loss) $ 10,664 $ 3,341 $ 2,857 $ 16,862
Add/(deduct):
Discontinued
operations - - (8,314) (8,314)
Interest expense 38 104 5,829 5,971
Income taxes 7,213 2,125 (4,247) 5,091
Depreciation 2,634 2,082 58 4,774
Amortization 358 (37) 200 521
----------- ----------- ----------- -------------
Pro forma EBITDA 20,907 7,615 (3,617) 24,905
Add/(deduct):
Lawsuit settlement - 3,135 - 3,135
Legal expenses of
OIG investigation - - 1,191 1,191
Advertising cost
adjustment (e) - 1,571 - 1,571
Interest income (142) (31) (233) (406)
Intercompany
interest
income/(expense) (339) (341) 680 -
----------- ----------- ----------- -------------
Pro forma
adjusted
EBITDA $ 20,426 $ 11,949 $ (1,979) $ 30,396
=========== =========== =========== =============
The "Footnotes to Financial Statements" are integral parts of this financial
information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONSOLIDATING SUMMARY OF EBITDA
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
2005
- ---------------------
Net income/(loss) $ 33,587 $ 26,960 $ (24,730) $ 35,817
Add/(deduct):
Discontinued
operations - - 1,888 1,888
Interest expense 153 563 20,548 21,264
Income taxes 20,394 15,635 (16,451) 19,578
Depreciation 7,585 8,271 323 16,179
Amortization 4,347 90 885 5,322
----------- ----------- ----------- -------------
EBITDA 66,066 51,519 (17,537) 100,048
Add/(deduct):
Long-term incentive
compensation (f) 1,681 1,001 3,010 5,692
Lawsuit settlement 17,350 - - 17,350
Prior-period
insurance
adjustment - (1,663) - (1,663)
Legal expenses of
OIG investigation 637 - - 637
VITAS transaction
expense adjustment - - (961) (961)
Advertising cost
adjustment (e) - 691 - 691
Interest income (249) (156) (1,805) (2,210)
Intercompany
interest
income/(expense) (2,554) (2,236) 4,790 -
Loss on
extinguishment of
debt - - 3,971 3,971
----------- ----------- ----------- -------------
Adjusted EBITDA $ 82,931 $ 49,156 $ (8,532) $ 123,555
=========== =========== =========== =============
2004 (j)
- ---------------------
Pro forma net
income/(loss) $ 33,052 $ 18,795 $ (19,232) $ 32,615
Add/(deduct):
Discontinued
operations - - (8,326) (8,326)
Interest expense 128 206 24,226 24,560
Income taxes 22,447 10,611 (18,431) 14,627
Depreciation 6,192 8,583 247 15,022
Amortization 3,957 119 311 4,387
----------- ----------- ----------- -------------
Pro forma EBITDA 65,776 38,314 (21,205) 82,885
Add/(deduct):
Long-term incentive
compensation - 1,558 7,225 8,783
Lawsuit settlement - 3,135 - 3,135
Debt registration
expenses - - 1,191 1,191
Advertising cost
adjustment (e) - 528 - 528
Interest income (373) (139) (1,403) (1,915)
Intercompany
interest
income/(expense) (759) (1,041) 1,800 -
Loss on
extinguishment of
debt - - 3,330 3,330
----------- ----------- ----------- -------------
Pro forma
adjusted
EBITDA $ 64,644 $ 42,355 $ (9,062) $ 97,937
=========== =========== =========== =============
The "Footnotes to Financial Statements" are integral parts of this financial
information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
FOOTNOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2005 AND 2004
(unaudited)
(a) Included in the results of operations for the three months ended December
31, 2005 are the following significant credits/(charges) which may not be
indicative of on going operations (in thousands):
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
Selling, general
and
administrative
expenses
Costs associated
with OIG
investigation $ (73) $ - $ - $ (73)
Other expenses --
net
Long-term
incentive
compensation (800) (449) (1,282) (2,531)
Adjustments to
transaction-
related costs
of the VITAS
acquisition - - 160 160
Costs related to
class action
litigation (17,350) - - (17,350)
----------- ----------- ----------- -------------
Pretax impact
on earnings (18,223) (449) (1,122) (19,794)
Income tax benefit
on the above 6,925 172 468 7,565
Income tax benefit
from finalizing
prior years'
returns - 174 - 174
----------- ----------- ----------- -------------
Aftertax
impact on
earnings $ (11,298) $ (103) $ (654) $ (12,055)
=========== =========== =========== =============
(b) Included in the results of operations for the three months ended December
31, 2004 are the following significant credits/(charges) which may not be
indicative of on going operations (in thousands):
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
Other expenses --
net
Adjustments to
transaction-
related costs
of the VITAS
acquisition $ (1,680) $ - $ (349) $ (2,029)
Costs related to
class action
litigation - (3,135) - (3,135)
Professional fees
incurred for
debt
registration
statement - - (1,191) (1,191)
----------- ----------- ----------- -------------
Pretax impact
on earnings (1,680) (3,135) (1,540) (6,355)
Income tax benefit
on the above 672 1,238 647 2,557
Income tax benefit
from finalizing
prior years'
returns - - 600 600
----------- ----------- ----------- -------------
Aftertax
impact on
earnings $ (1,008) $ (1,897) $ (293) $ (3,198)
=========== =========== =========== =============
(c) Included in the results of operations for the year ended December 31, 2005
are the following significant credits/(charges) which may not be indicative
of on going operations (in thousands):
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
Cost of services
provided and
goods sold
Favorable
adjustment to
casualty
insurance
accruals related
to prior years'
experience $ - $ 1,663 $ - $ 1,663
Selling, general
and
administrative
expenses
Costs associated
with OIG
investigation (637) - - (637)
Other expenses --
net
Long-term
incentive
compensation (1,681) (1,001) (2,795) (5,477)
Adjustments to
transaction-
related costs
of the VITAS
acquisition - - 961 961
Cost of
accelerating
vesting of stock
options - - (215) (215)
Costs related to
class action
litigation (17,350) - - (17,350)
Loss on
extinguishment of
debt - - (3,971) (3,971)
----------- ----------- ----------- -------------
Pretax impact
on earnings (19,668) 662 (6,020) (25,026)
Income tax benefit
on the above 7,471 (265) 2,547 9,753
Income tax benefit
from finalizing
prior years'
returns - 1,126 835 1,961
----------- ----------- ----------- -------------
Aftertax
impact on
earnings $ (12,197) $ 1,523 $ (2,638) $ (13,312)
=========== =========== =========== =============
(d) Included in the results of operations for the year ended December 31, 2004
are the following significant credits/(charges) which may not be indicative
of on going operations (in thousands):
VITAS Roto-Rooter Corporate Consolidated
----------- ----------- ----------- -------------
Other expenses --
net
Long-term
incentive
compensation $ - $ (1,558) $ (7,225) $ (8,783)
Adjustments to
transaction-
related costs
of the VITAS
acquisition (1,680) - 1,238 (442)
Costs related to
class action
litigation - (3,135) - (3,135)
Professional fees
incurred for
debt
registration
statement (1,191) (1,191)
Loss on
extinguishment of
debt - - (3,330) (3,330)
----------- ----------- ----------- -------------
Pretax impact
on earnings (1,680) (4,693) (10,508) (16,881)
Income tax benefit
on the above 672 1,814 4,082 6,568
Income tax benefit
from finalizing
prior years'
returns - 630 990 1,620
Equity in loss of
affiliate (VITAS)
is attributable
to transaction-
related expenses
incurred by VITAS
prior to its
acquisition by
Chemed - - (4,105) (4,105)
----------- ----------- ----------- -------------
Aftertax
impact on
earnings $ (1,008) $ (2,249) $ (9,541) $ (12,798)
=========== =========== =========== =============
(e) Under Generally Accepted Accounting Principles ("GAAP"), the Roto-Rooter
segment expenses all advertising, including the cost of telephone
directories, immediately upon the initial release of the advertising.
Telephone directories are generally in circulation 12 months. If a
directory is in circulation for a time period greater or less than 12
months, the publisher adjusts the directory billing for the change in
billing period. The timing of when a telephone directory is published can
and does fluctuate significantly on a quarterly basis. This "direct
expensing" results in significant fluctuations in quarterly advertising
expense. In the fourth quarters of 2005 and 2004, GAAP advertising expense
for Roto-Rooter totaled $6,378,000 and $6,417,000, respectively. If the
expense of the telephone directories were spread over the periods they are
in circulation, advertising expense for the fourth quarters of 2005 and
2004 would total $4,718,000 and $4,846,000, respectively. For the years
ended December 31, 2005 and 2004, GAAP advertising expense for Roto-Rooter
totaled $19,063,000 and $18,587,000, respectively. If the expense of the
telephone directories were spread over the periods they are in circulation,
advertising expense for the years ended December 31, 2005 and 2004, would
total $18,372,000 and $18,059,000, respectively.
(f) For the year ended December 31, 2005, amounts include costs related to
accelerating the vesting of stock options in addition to payouts under the
Company's LTIP.
(g) Amounts represent the additional net income VITAS would contribute assuming
the acquisition were completed on January 1 of the respective years
(excluding Chemed management fees).
(h) Amount represents the additional financing costs, including a loss on early
extinguishment of debt in 2004, that would have been incurred assuming the
financing were completed on January 1, 2004.
(i) Amount represents the impact of eliminating the Company's prior investments
in VITAS, assuming the acquisition of VITAS were completed on January 1,
2004.
(j) Pro forma amounts for 2004 for VITAS and Corporate assume the Company's
acquisition of VITAS and its financing (including the retirement of
existing debt) were completed as of January 1, 2004, on the same terms and
conditions as completed on February 24, 2004.
CONTACT: Chemed Corporation
David P. Williams, 513-762-6901