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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):
April 25, 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 2
Item 2.02 Results of Operations and Financial Condition
On April 25, 2006 Chemed Corporation issued a press
release announcing its financial results for the quarter
ended March 31, 2006. A copy of the release is furnished
herewith as Exhibit 99.
Item 9.01 Financial Statements and Exhibits
c) Exhibit
(99) Registrant's press release dated April 25, 2006
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: April 26, 2006 By: /s/ Arthur V. Tucker, Jr.
-------------- --------------------------
Arthur V. Tucker, Jr.
Vice President and Controller
Page 2 of 2
Exhibit 99
Chemed Reports First-Quarter 2006 Results;
Diluted EPS from Continuing Operations of $.46; Adjusted Diluted EPS
from Continuing Operations of $.47
CINCINNATI--(BUSINESS WIRE)--April 25, 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 first quarter ended March 31, 2006, versus the comparable
prior-year period, as follows:
Consolidated Operating Results from Continuing Operations
-- Consolidated Revenue increased 13% to $246 million
-- Diluted EPS from Continuing Operations of $.46
-- Adjusted Diluted EPS from Continuing Operations of $.47 after
excluding Loss on Extinguishment of Debt and other items
VITAS segment operating results
-- Quarterly Net Patient Revenue of $168 million, up 15%
-- Average Daily Census (ADC) of 10,480, up 10%
-- Admissions of 13,896, an increase of 7.3%
-- Adjusted EBITDA of $19.8 million, an increase of 12%
Roto-Rooter segment reported record Revenue and Adjusted EBITDA
-- Revenue of $78 million, an increase of 7%
-- Job count of 207,018, up 2.0%
-- Adjusted EBITDA of $12.7 million, an increase of 8%
"VITAS generated record admissions in the first quarter of 2006,
increasing 7.3% over the prior-year quarter and 11.3% sequentially,
significantly exceeding our first-quarter 2006 internal business
plan," stated Kevin McNamara, Chemed president and chief executive
officer. "This strong admissions growth resulted in
Average-Daily-Census (ADC) increasing 10% over the prior year.
However, on a sequential basis ADC increased less than 1%.
"The first quarter of the year is typically less predictable in
terms of ADC and revenue. This is due to fluctuations in revenue mix,
the timing of admissions and a seasonal spike in discharges. For
example, January 2006 experienced record admissions of 4,593 patients,
our single highest admissions month ever recorded. This exceeded the
fourth-quarter 2005 average monthly admissions, as well as January
2005 admissions, by 10% and 7%, respectively. However, the timing of
these admissions coupled with an unusually strong seasonal increase in
the discharge rate resulted in a modest decline in our January 2006
ADC when compared to December 2005. In prior years, the February and
March results overcame this typical spike in discharge rates. However,
the timing of our 2006 admissions combined with an unusually long tail
on our seasonal discharge rate resulted in a flat ADC until the later
part of March 2006. The census on March 31, 2006, was 10,819.
"The relatively flat ADC did not provide the opportunity to absorb
the excess patient care capacity generated in the fourth quarter. In
our year-end earnings teleconference, we noted our staffing levels
relative to ADC were out of balance pulling down our operating
margins. We maintained these staffing levels throughout the first
quarter of 2006 given the strength of our admissions and anticipated
growth in ADC.
"The timing of admissions, coupled with the volatility in our
discharge rate, resulted in elevated staffing ratios existing for the
majority of the first quarter. The higher labor costs associated with
these staffing ratios negatively impacted the first quarter of 2006,
generating routine home care direct margins of 47.5% as compared to
49.9% in the prior-year quarter. This negatively impacted our gross
profit by $2.8 million.
"Given the difficulty and cost related to hiring quality
caregivers, I believe we made the correct decision to maintain
staffing levels and allow the ADC to catch up to our current manpower.
This ensures our patients receive quality care and provides VITAS with
immediate capacity to care for the increase in ADC as the discharge
rate returns to a normalized, more predictable level.
"Roto-Rooter continues to generate strong operating results. For
the first quarter of 2006, Roto-Rooter had revenue of $78 million, an
increase of 7%. Adjusted EBITDA was $12.7 million, an increase of 8%
and represents an adjusted EBITDA margin of 16.3%."
VITAS
"VITAS generated revenue growth of 15.3 % over the prior-year
period and a decline of 0.4% sequentially," stated David Williams,
Chemed chief financial officer. "As discussed earlier, this sequential
decline is the result of high admissions which were significantly
offset by our discharge rate. It should be noted the first quarter of
2006 had two less days of care when compared to the fourth quarter of
2005. Gross margins were 19.5% in the first quarter of 2006, a
decrease of 153 basis points when compared to the prior-year quarter.
"This decline in margin is the result of increased staffing levels
in routine home care. Direct home care margins were 47.5% in the first
quarter of 2006, which compares to 49.9% in the prior-year quarter.
The January 2006 routine home care margin was unfavorable to the prior
year month by 330 basis points. In March 2006, this gap had been
reduced to 190 basis points. The first-quarter 2006 gross margin
includes $1.6 million in start-up losses, which is $0.4 million higher
than the 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 $13.2 million, including $0.1 million in OIG
investigation legal expenses. Excluding the OIG expense, central
support costs increased less than 1% when compared to the prior-year
quarter and declined 5.4% sequentially. Adjusted EBITDA was $19.8
million in the quarter, an increase of 11.6% over the prior year. The
adjusted EBITDA margin in the first quarter of 2006 was 11.7%, which
declined 39 basis points when compared to the first quarter of 2005."
VITAS' Average Length of Stay (ALOS) for patients discharged in
the quarter was 72.4 and our median length-of-stay was 12 days. This
compares to 70.0 days in the fourth quarter of 2005 and 66.0 days in
the first quarter of 2005. Total discharges in the period were 13,408,
with 343, or 2.6%, of these patients being discharged for extended
prognosis.
"Our mix of revenue at VITAS shifted slightly to the higher per
diem levels of care during the quarter," Williams added. "Routine home
care represented 68.6% of revenue, a 50 basis point decline over the
prior-year quarter and a 70 basis point decline sequentially. Our
inpatient revenue aggregated 13.7% and continuous care was 17.7% of
total revenue in the first quarter of 2006.
"All of our base and new start programs, including Phoenix, are
estimated to have Medicare cap cushion in excess of 10% for the 2006
measurement period which will end on October 31, 2006," stated
Williams. "Accordingly, based upon current admission and discharge
trends, we have not accrued for any Medicare billing limitations in
any of our programs for the 2006 cap period."
Roto-Rooter Segment
Roto-Rooter's plumbing and drain cleaning business generated sales
of $78 million for the first quarter of 2006, 7.2% higher than the $73
million reported in the comparable prior-year quarter. Net income for
the quarter was $7.2 million and compares to net income of $7.3
million in the prior year. The first-quarter 2005 net income includes
$1.0 million of favorable adjustments of casualty insurance accruals
related to prior years' experience. Excluding this favorable item, net
income in the first quarter of 2006 increased 14% over the prior-year
period. Adjusted EBITDA in the first quarter of 2006 totaled $12.7
million, an increase of 7.7% over the first quarter of 2005 and an
adjusted EBITDA margin of 16.3%, which slightly exceeded the
prior-year period.
"Job count in the first quarter of 2006 increased 2.0% over the
prior-year period," stated Williams. "Commercial plumbing job count
increased 5.7% and commercial drain cleaning increased 4.7% over the
prior-year quarter. Residential plumbing jobs decreased a modest 0.7%
and residential drain cleaning jobs expanded 1.5% when compared to the
first quarter of 2005. Overall, commercial jobs increased 4.4% and
residential jobs increased 0.9%. This is a favorable shift in job mix
since a commercial job will typically average approximately 30% more
revenue than a residential job. Accordingly, this continued shift of
job mix has a positive impact on aggregate revenue."
Guidance for 2006
VITAS is estimated 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, an effective tax rate of 39% 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.
The company adopted FAS 123/R "Shared Base Payment." Adoption of
this standard did not have any impact on current or prior reported
consolidated earnings. However, as a result of this adoption, all
stock based compensation, including amortization of restricted stock
grants and Long Term Incentive Plans, are now expensed at the
Corporate segment. Prior-year segment reporting has been restated to
reclassify stock-based compensation expense from the VITAS and
Roto-Rooter segments to the Corporate segment.
Conference Call
Chemed will host a conference call and webcast at 11 a.m., EDT, on
Wednesday, April 26, 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) 291-9234 for U.S. and Canadian participants
and (617) 614-3923 for international participants. The participant
pass code is 39847851. 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 pass code is 98427460. An
archived webcast will also be available at www.chemed.com and will
remain available for 14 days following the live call.
Chemed Corporation operates in the healthcare field through its
VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice
services to over 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 (GAAP) and which exclude
components that are important to understanding Chemed's financial
performance. Chemed provides EBITDA and Adjusted EBITDA to help
investors and others evaluate its operating results, compare its
operating performance with that of similar companies that have
different capital structures and evaluate its ability to meet its
future debt service, capital expenditures and working capital
requirements. Chemed's EBITDA and Adjusted EBITDA should not be
considered in isolation or as a substitute for comparable measures
calculated and presented in accordance with GAAP. A reconciliation of
Chemed's net income to its Adjusted EBITDA is presented in the tables
following the text of this press release.
Forward-Looking Statements
Certain statements contained in this press release and the
accompanying tables are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The
words "believe," "expect," "hope," "anticipate," "plan" and similar
expressions identify forward-looking statements, which speak only as
of the date the statement was made. Chemed does not undertake and
specifically disclaims any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. These statements are based on current
expectations and assumptions and involve various risks and
uncertainties, which could cause Chemed's actual results to differ
from those expressed in such forward-looking statements. These risks
and uncertainties arise from, among other things, possible changes in
regulations governing the hospice care or plumbing and drain cleaning
industries; periodic changes in reimbursement levels and procedures
under Medicare and Medicaid programs; difficulties predicting patient
length of stay and estimating potential Medicare reimbursement
obligations; challenges inherent in Chemed's growth strategy; the
current shortage of qualified nurses, other healthcare professionals
and licensed plumbing and drain cleaning technicians; Chemed's
dependence on patient referral sources; and other factors detailed
under the caption "Description of Business by Segment" or "Risk
Factors" in Chemed's most recent report on form 10-Q or 10-K and its
other filings with the Securities and Exchange Commission. You are
cautioned not to place undue reliance on such forward-looking
statements and there are no assurances that the matters contained in
such statements will be achieved.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Ended March 31,
-----------------------------
2006 2005 (bb)
-------------- --------------
Continuing Operations
Service revenues and sales $ 246,238 $ 218,637
-------------- --------------
Cost of services provided and
goods sold (aa) 177,897 152,952
Selling, general and
administrative expenses (aa) 38,475 37,919
Depreciation 4,148 3,920
Amortization 1,396 1,192
-------------- --------------
Total costs and expenses 221,916 195,983
-------------- --------------
Income from operations 24,322 22,654
Interest expense (5,345) (5,835)
Loss on extinguishment of
debt (aa) (430) (3,971)
Other income--net 1,495 727
-------------- --------------
Income before income taxes 20,042 13,575
Income taxes (7,827) (5,670)
-------------- --------------
Income from continuing
operations 12,215 7,905
Discontinued Operations - 211
-------------- --------------
Net Income $ 12,215 $ 8,116
============== ==============
Earnings Per Share (aa)
Income from continuing
operations $ 0.47 $ 0.31
============== ==============
Net income $ 0.47 $ 0.32
============== ==============
Average number of shares
outstanding 26,044 25,152
============== ==============
Diluted Earnings Per Share (aa)
Income from continuing
operations $ 0.46 $ 0.31
============== ==============
Net income $ 0.46 $ 0.31
============== ==============
Average number of shares
outstanding 26,723 25,910
============== ==============
---------------------------------------
(aa) Included in the results of operations are the following
significant credits/(charges) which may not be indicative
of ongoing operations (in thousands, except per share data):
Three Months Ended March 31,
-----------------------------
2006 2005
-------------- --------------
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
Long-term incentive
compensation - (1,109)
Cost of accelerating vesting
of stock options - (215)
Expenses associated with OIG
investigation (132) -
Loss on extinguishment of debt (430) (3,971)
-------------- --------------
Pretax impact on earnings (562) (3,632)
Income tax benefit on the above 207 1,291
-------------- --------------
Aftertax impact on earnings $ (355) $ (2,341)
============== ==============
(bb) Reclassified to conform to 2006 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
March 31,
-------------------
2006 2005 (bb)
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 45,668 $ 8,557
Accounts receivable less allowances 71,864 81,880
Inventories 6,724 7,012
Current deferred income taxes 27,753 33,559
Prepaid income taxes 4,867 -
Current assets of discontinued operations - 15,162
Prepaid expenses and other current assets 8,867 8,461
--------- ---------
Total current assets 165,743 154,631
Investments of deferred compensation plans
held in trust 23,287 19,415
Other investments 1,445 1,445
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 65,179 58,172
Identifiable intangible assets less
accumulated amortization 74,254 75,904
Goodwill 433,783 436,820
Noncurrent assets of discontinued
operations - 5,717
Other assets 20,406 22,519
--------- ---------
Total Assets $796,597 $787,123
========= =========
Liabilities
Current liabilities
Accounts payable $ 42,342 $ 40,470
Current portion of long-term debt 207 1,277
Income taxes 4,948 16,529
Accrued insurance 39,254 26,087
Accrued compensation 25,443 28,151
Current liabilities of discontinued
operations - 21,929
Other current liabilities 42,454 26,758
--------- ---------
Total current liabilities 154,648 161,201
Deferred income taxes 22,408 17,395
Long-term debt 194,399 234,738
Deferred compensation liabilities 22,647 19,357
Noncurrent liabilities of discontinued
operations - 802
Other liabilities 3,989 8,062
--------- ---------
Total Liabilities 398,091 441,555
--------- ---------
Stockholders' Equity
Capital stock 28,667 13,662
Paid-in capital 244,101 219,000
Retained earnings 181,831 148,141
Treasury stock, at cost (58,440) (36,241)
Unearned compensation - ESOPs - (774)
Deferred compensation payable in Company
stock 2,401 2,318
Notes receivable for shares sold (54) (538)
--------- ---------
Total Stockholders' Equity 398,506 345,568
--------- ---------
Total Liabilities and
Stockholders' Equity $796,597 $787,123
========= =========
Book Value Per Share $ 15.23 $ 13.66 (cc)
========= =========
----------------------------------------------
(bb) Reclassified to conform to 2006 presentation.
(cc) Adjusted for 2-for-1 stock split in May 2005.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
Three Months Ended
March 31,
---------------------
2006 2005 (bb)
---------- ----------
Cash Flows from Operating Activities
Net income/(loss) $ 12,215 $ 8,116
Adjustments to reconcile net income to net
cash provided/(used) by operating
activities:
Depreciation and amortization 5,544 5,112
Provision for uncollectible accounts
receivable 2,033 1,530
Provision for deferred income taxes (1,242) (1,892)
Amortization of debt issuance costs 444 522
Write-off of unamortized debt issuance
costs 430 2,871
Noncash long-term incentive
compensation - 948
Discontinued operations - (211)
Changes in operating assets and
liabilities, excluding amounts
acquired in business combinations:
Decrease/(increase) in accounts
receivable 21,140 (18,747)
Decrease/(increase) in inventories (225) 7
Decrease in prepaid expenses and
other current assets 901 1,381
Decrease in accounts payable and
other current liabilities (13,207) (9,808)
Increase in income taxes 8,812 7,484
Decrease in other assets (1,917) (882)
Increase in other liabilities 1,050 635
Excess tax benefit on share-based
compensation (3,289) (1,752)
Noncash expense of internally financed
ESOPs - 286
Other sources/(uses) 51 (419)
---------- ----------
Net cash provided/(used) by
continuing operations 32,740 (4,819)
Net cash used by
discontinued operations - (1,081)
---------- ----------
Net cash provided/(used) by operating
activities 32,740 (5,900)
---------- ----------
Cash Flows from Investing Activities
Capital expenditures (3,972) (6,201)
Net uses from discontinued operations (1,684) (817)
Business combinations, net of cash acquired (384) (4,401)
Proceeds from sales of property and
equipment 65 36
Other uses (185) (136)
---------- ----------
Net cash used by investing activities (6,160) (11,519)
---------- ----------
Cash Flows from Financing Activities
Repayment of long-term debt (84,497) (140,680)
Net increase in revolving line of credit 44,000 -
Excess tax benefit on share-based
compensation 3,289 1,752
Issuance of capital stock, net of costs 2,360 4,208
Purchases of treasury stock (2,318) (833)
Dividends paid (1,572) (1,517)
Increase in cash overdrafts payable 786 8,023
Debt issuance costs (150) (1,555)
Proceeds from long-term debt - 85,000
Other sources 57 130
---------- ----------
Net cash provided/(used) by financing
activities (38,045) (45,472)
---------- ----------
Decrease in Cash and Cash Equivalents (11,465) (62,891)
Cash and cash equivalents at beginning of year 57,133 71,448
---------- ----------
Cash and cash equivalents at end of period 45,668 $ 8,557
========== ==========
(bb) Reclassified to conform to 2006 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(in thousands)(unaudited)
Roto- Chemed
VITAS Rooter Corporate Consolidated
--------- --------- --------- ------------
2006
--------------------------
Service revenues and
sales $168,374 $ 77,864 $ - $ 246,238
--------- --------- --------- ------------
Cost of services provided
and goods sold 135,458 42,439 - 177,897
Selling, general and
administrative
expenses (a) 13,236 22,542 2,697 38,475
Depreciation 2,073 1,969 106 4,148
Amortization 1,084 20 292 1,396
--------- --------- --------- ------------
Total costs and
expenses 151,851 66,970 3,095 221,916
--------- --------- --------- ------------
Income/(loss) from
operations 16,523 10,894 (3,095) 24,322
Interest expense (31) (173) (5,141) (5,345)
Intercompany interest
income/(expense) 954 852 (1,806) -
Loss on extinguishment
of debt (a) - - (430) (430)
Other income--net 12 362 1,121 1,495
--------- --------- --------- ------------
Income/(loss) before
income taxes 17,458 11,935 (9,351) 20,042
Income taxes (a) (6,601) (4,734) 3,508 (7,827)
--------- --------- --------- ------------
Net income/(loss) $ 10,857 7,201 (5,843) 12,215
========= ========= ========= ============
2005
--------------------------
Service revenues and
sales $145,990 $ 72,647 $ - $ 218,637
--------- --------- --------- ------------
Cost of services provided
and goods sold (b) 115,220 37,732 - 152,952
Selling, general and
administrative
expenses (b) 13,029 21,130 3,760 37,919
Depreciation 1,785 2,062 73 3,920
Amortization 995 26 171 1,192
--------- --------- --------- ------------
Total costs and
expenses 131,029 60,950 4,004 195,983
--------- --------- --------- ------------
Income/(loss) from
operations 14,961 11,697 (4,004) 22,654
Interest expense (38) (182) (5,615) (5,835)
Intercompany interest
income/(expense) 509 424 (933) -
Loss on extinguishment
of debt (b) - - (3,971) (3,971)
Other income--net 108 296 323 727
--------- --------- --------- ------------
Income/(loss) before
income taxes 15,540 12,235 (14,200) 13,575
Income taxes (b) (5,930) (4,925) 5,185 (5,670)
--------- --------- --------- ------------
Income/(loss) from
continuing operations 9,610 7,310 (9,015) 7,905
Discontinued operations - - 211 211
--------- --------- --------- ------------
Net income/(loss) $ 9,610 $ 7,310 $ (8,804) $ 8,116
========= ========= ========= ============
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 MARCH 31, 2006 AND 2005
(in thousands)(unaudited)
Roto- Chemed
VITAS Rooter Corporate Consolidated
--------- --------- --------- ------------
2006
- ----------------------------
Net income/(loss) $ 10,857 $ 7,201 $ (5,843) $ 12,215
Add/(deduct):
Interest expense 31 173 5,141 5,345
Income taxes 6,601 4,734 (3,508) 7,827
Depreciation 2,073 1,969 106 4,148
Amortization 1,084 20 292 1,396
-------- --------- --------- ------------
EBITDA 20,646 14,097 (3,812) 30,931
Add/(deduct):
Legal expenses of OIG
investigation 132 - - 132
Advertising cost
adjustment (c) - (494) - (494)
Interest income (41) (23) (908) (972)
Intercompany interest
income/(expense) (954) (852) 1,806 -
Loss on extinguishment
of debt - - 430 430
-------- --------- --------- ------------
Adjusted EBITDA $ 19,783 $ 12,728 $ (2,484) $ 30,027
========= ========= ========= ============
2005
- -----------------------------
Net income/(loss) $ 9,610 $ 7,310 $ (8,804) $ 8,116
Add/(deduct):
Discontinued
operations - - (211) (211)
Interest expense 38 182 5,615 5,835
Income taxes 5,930 4,925 (5,185) 5,670
Depreciation 1,785 2,062 73 3,920
Amortization 995 26 171 1,192
-------- --------- --------- ------------
EBITDA 18,358 14,505 (8,341) 24,522
Add/(deduct):
Long-term incentive
compensation - - 1,324 1,324
Prior-period insurance
adjustment - (1,663) - (1,663)
Advertising cost
adjustment (c) - (553) - (553)
Interest income (126) (41) (483) (650)
Intercompany interest
income/(expense) (509) (424) 933 -
Loss on extinguishment
of debt - - 3,971 3,971
-------- --------- --------- ------------
Adjusted EBITDA $ 17,723 $ 11,824 $ (2,596) $ 26,951
========= ========= ========= ============
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(in thousands, except per share data)(unaudited)
2006 2005
-------- --------
Net income/(loss) as reported $12,215 $ 8,116
Add/(deduct):
Discontinued operations - (211)
Aftertax prior period insurance adjustment - (1,014)
Aftertax cost of long-term incentive
compensation (d) - 832
Aftertax cost of legal expenses of OIG
investigation 82 -
Aftertax cost of loss on extinguishment of
debt 273 2,523
-------- --------
Adjusted income from continuing operations $12,570 $10,246
======== ========
Earnings/(Loss) Per Share As Reported
Net income/(loss) $ 0.47 $ 0.32
======== ========
Average number of shares outstanding 26,044 25,152
======== ========
Diluted Earnings/(Loss) Per Share As Reported
Net income/(loss) $ 0.46 $ 0.31
======== ========
Average number of shares outstanding 26,723 25,910
======== ========
Adjusted Earnings Per Share
Income from continuing operations $ 0.48 $ 0.41
======== ========
Average number of shares outstanding 26,044 25,152
======== ========
Adjusted Diluted Earnings Per Share
Income from continuing operations $ 0.47 $ 0.40
======== ========
Average number of shares outstanding 26,723 25,910
======== ========
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 MONTHS ENDED MARCH 31, 2006 AND 2005
(unaudited)
2006 2005
--------- ---------
OPERATING STATISTICS
Net revenue ($000)
Homecare $115,458 $100,872
Inpatient 23,107 20,847
Continuous care 29,809 24,271
--------- ---------
Total $168,374 $145,990
========= =========
Net revenue as a percent of total
Homecare 68.6 % 69.1 %
Inpatient 13.7 14.3
Continuous care 17.7 16.6
--------- ---------
Total 100.0 % 100.0 %
========= =========
Average daily census ("ADC") (days)
Homecare 6,112 5,428
Nursing home 3,366 3,201
--------- ---------
Routine homecare 9,478 8,629
Inpatient 432 402
Continuous care 570 492
--------- ---------
Total 10,480 9,523
========= =========
Total Admissions 13,896 12,948
Average length of stay (days) 72.4 (e) 66.2
Median length of stay (days) 12.0 11.0
ADC by major diagnosis
Neurological 33.1 % 31.7 %
Cancer 20.5 21.5
Cardio 14.8 15.3
Respiratory 7.1 7.1
Other 24.5 24.4
--------- ---------
Total 100.0 % 100.0 %
========= =========
Admissions by major diagnosis
Neurological 20.5 % 19.7 %
Cancer 33.7 34.3
Cardio 13.8 14.0
Respiratory 7.9 8.4
Other 24.1 23.6
--------- ---------
Total 100.0 % 100.0 %
========= =========
Direct patient care margins (f)
Routine homecare 47.5 % 49.9 %
Inpatient 23.1 22.9
Continuous care 18.3 17.5
Homecare margin drivers
(dollars per patient day)
Labor costs $ 51.25 $ 45.71
Drug costs 7.43 7.48
Home medical equipment 5.56 5.47
Medical supplies 2.14 2.15
Inpatient margin drivers
(dollars per patient day)
Labor costs $ 246.67 $ 238.31
Continuous care margin drivers
(dollars per patient day)
Labor costs $ 454.53 $ 433.18
Bad debt expense as a percent of revenues 0.9 % 0.9 %
Accounts receivable --
days of revenue outstanding 39.4 39.5
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 ENDED MARCH 31, 2006 AND 2005
(unaudited)
(a)Included in the results of operations for the three months ended
March 31, 2006 are the following significant credits/(charges)
which may not be indicative of on going operations (in thousands):
Roto-
VITAS Rooter Corporate Consolidated
--------- --------- --------- ------------
Selling, general and
administrative expenses
Costs associated with
OIG investigation $ (132) $ - $ - $ (132)
Loss on extinguishment
of debt - - (430) (430)
--------- --------- --------- ------------
Pretax impact on
earnings (132) - (430) (562)
Income tax benefit on
the above 50 - 157 207
--------- --------- --------- ------------
Aftertax impact on
earnings $ (82) $ - $ (273) $ (355)
========= ========= ========= ============
(b) Included in the results of operations for the three months ended
March 31, 2005 are the following significant credits/(charges)
which may not be indicative of on going operations (in thousands):
Roto-
VITAS 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
Long-term incentive
compensation - - (1,109) (1,109)
Costs related to
accelerating the
vesting of
stock options - - (215) (215)
Loss on extinguishment
of debt - - (3,971) (3,971)
--------- --------- --------- ------------
Pretax impact on
earnings - 1,663 (5,295) (3,632)
Income tax benefit on
the above - (649) 1,940 1,291
--------- --------- --------- ------------
Aftertax impact on
earnings $ - $ 1,014 $ (3,355) $ (2,341)
========= ========= ========= ============
(c) Under Generally Accepted Accounting Principles ("GAAP"), the Roto-
Rooter segment expenses all advertising, including the cost of
telephone directories, immediately upon the initial release of the
advertising. Telephone directories are generally in circulation
12 months. If a directory is in circulation for a time period
greater or less than 12 months, the publisher adjusts the
directory billing for the change in billing period. The timing of
when a telephone directory is published can and does fluctuate
significantly on a quarterly basis. This "direct expensing"
results in significant fluctuations in quarterly advertising
expense. In the first quarters of 2006 and 2005, GAAP advertising
expense for Roto-Rooter totaled $4,424,000 and $3,832,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the first quarters of 2006 and 2005 would total
$4,918,000 and $4,385,000, respectively.
(d) For the three months ended March 31, 2005, amounts include costs
related to accelerating the vesting of stock options in addition
to payouts under the Company's LTIP.
(e) VITAS has five large (greater than 450 ADC), 15 medium (greater
than 200 but less than 450 ADC) and 20 small (less than 200 ADC)
hospice programs. All base and new start programs, including the
Phoenix program, are estimated to have Medicare Cap cushion in
excess of 10% for the 2006 measurement period, which will end on
October 31, 2006.
(f) Amounts exclude indirect patient care and administrative costs.
CONTACT: Chemed Corporation
David P. Williams, 513-762-6901