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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):
July 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 July 25, 2006 Chemed Corporation issued a press release announcing
its financial results for the quarter ended June 30, 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 July 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: July 26, 2006 By: /s/ Arthur V. Tucker, Jr.
-------------- -------------------------
Arthur V. Tucker, Jr.
Vice President and Controller
Page 2 of 2
Exhibit 99
Chemed Reports Second-Quarter 2006 Results;
Diluted EPS from Continuing Operations of $.48, up 14%
CINCINNATI--(BUSINESS WIRE)--July 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 second quarter ended June 30, 2006, versus the comparable
prior-year period, as follows:
Consolidated operating results from Continuing Operations:
-- Revenue increased 10% to $250 million
-- Diluted EPS from Continuing Operations of $.48
-- Adjusted diluted EPS from Continuing Operations, excluding
certain items, of $.49
VITAS segment operating results:
-- Net Patient Revenue of $172 million, up 12%, including $2.3
million of Medicare Cap accrual
-- Average Daily Census (ADC) of 10,904, up 10%
-- Admissions of 13,069, an increase of 3.3%
-- Average Length of Stay in the quarter was 68.0 days
-- Net income of $11.4 million, up 7.5%
-- Adjusted EBITDA of $20.4 million, an increase of 3.4%
-- Adjusted EBITDA margin of 11.8%
Roto-Rooter segment operating results:
-- Revenue of $78 million, an increase of 7%
-- Job count of 198,708, up 0.6%
-- Net Income of $7.0 million, up 19.2%
-- Adjusted EBITDA of $12.7 million, an increase of 13%
-- Adjusted EBITDA margin of 16.4%
In the second quarter of 2006, VITAS recorded a Medicare
contractual billing adjustment (Medicare Cap). This accrual reduced
revenues by $2.3 million and negatively impacted diluted EPS in the
quarter by $0.05 per share.
Medicare Cap affected two hospice programs in the second quarter
of 2006. The Phoenix program, acquired in December 2004, recorded an
estimated Medicare Cap billing limitation of $1.7 million. A second
program, with an average daily census of approximately 250, recorded
$600,000 of Medicare Cap.
The Phoenix program is estimated to have a calendar year 2006
aggregate Medicare Cap liability ranging from $2.5 million to $4.0
million. The majority of VITAS' Phoenix patients are referred from
assisted living facilities (ALF), which typically have longer lengths
of stay. VITAS has been unable to generate a sustainable level of high
acuity patients from other referral sources adequate to offset the ALF
lengths of stay. The Company anticipates Phoenix will continue to have
a Medicare Cap liability in 2007 ranging from $1.5 million to $3.0
million. This will make the Phoenix program breakeven to a modest loss
in 2007.
The other program with a second-quarter 2006 Medicare Cap accrual
of $600,000 is not anticipated to require additional cap accrual in
the second half of 2006. This forecast is based upon improving metrics
from management's efforts to rebalance patient mix in the second half
of the year. Including the Medicare Cap, this program is forecasted to
generate $3.0 million in operating profit in 2006.
A third hospice program is forecasted to reach a Medicare billing
limitation in the third quarter of 2006. This third program, with an
ADC of slightly less than 300, is estimated to have a Medicare billing
limitation ranging from $1.0 million to $1.5 million for the full-year
2006, with the majority of this liability being incurred in the third
quarter. Assuming the Medicare Cap accrual is at the high end of the
range, this program is estimated to generate $2.5 million in operating
profit in 2006.
Historically, VITAS' operating model has been able to avoid any
Medicare billing limitations. This had been achieved by admitting a
significant number of high acuity patients, those patients in the
later stage of their terminal illness. High acuity intakes are
reflected in VITAS' overall median length of stay (MLOS), which is
typically 13 days or less. MLOS means that half of all patients
admitted to VITAS are discharged in 13 days or less of entering the
program. This compares to the National Hospice and Palliative Care
Organization's (NHPCO) industry MLOS estimate of 22 days.
Typically, VITAS hospice programs with the lowest MLOS also have
the highest percentage of cap cushion. VITAS defines cap cushion as
the difference between the maximum Medicare billing potential based
upon total admissions and the actual billings in a program.
At the end of the second quarter of 2006, VITAS had 5 programs
with an ADC greater than 450 and representing 42% of total ADC. All of
these programs had an MLOS of 13 days or less.
VITAS has 17 programs with ADC from 200 to 450. These programs
represent 49% of total ADC. Three of these programs are forecasted to
have Medicare Cap limitations in 2006 and were discussed
earlier. Of the remaining 14 programs, 8 have an MLOS of 13 days or
less and 5 programs have an MLOS between 13 and 18 days. One program
has an MLOS of 26 days, an average length of stay of 75 days and an
estimated full-year cap cushion of over 50% and is in the process of
expanding its inpatient capacity.
VITAS has 20 programs with an average daily census of less than
200 patients. Nine of these programs are start-ups and make up 1% of
average daily census. The remaining 11 programs represent 8% of total
average daily census and have median lengths of stay ranging from 7 to
20 days.
In most of VITAS' base programs, the MLOS, average daily census,
admissions and discharges are relatively stable and predictable
quarter to quarter. However, programs experiencing exceptionally
strong growth rates are inherently more volatile and will have
significant fluctuations in these metrics. This volatility increases
the potential for a sudden shift in metrics in any given quarter. A
severe decline in admissions and/or discharges could result in the
program having a less optimal patient mix and potentially have
Medicare billing limitations. To the extent the program has a
predictable level of high acuity patient admissions, the program's
patient mix can be rebalanced and continue to contractually bill
Medicare for 100% of services provided. From a business model
perspective, hospice programs that are slightly above or below the
Medicare Cap are essentially maximizing revenue, profitability and
operating margin for that program.
Given the industry trend to longer lengths of stay, it is highly
probable that VITAS' hospice programs will continue to expand Medicare
billings on a per patient basis. As this trend of revenue growth
continues, certain hospice programs have greater potential of being in
a Medicare contractual billing limitation situation. The Company
believes its relatively low MLOS in its hospice programs provides a
competitive advantage to minimize the financial impact of Medicare Cap
as well as limit the duration of time the program remains in a
Medicare Cap situation.
VITAS
VITAS generated net revenue growth of 12.0% over the prior-year
period. Net income for the quarter was $11.4 million, an increase of
8% over the prior-year period. ADC increased 10% to 10,904 and
admissions increased 3.3% to 13,069. Routine home care direct gross
margins, before the reduction in revenue from contractual billing
limitations, were 49.6%, up 20 basis points over the prior year and
increased 210 basis points sequentially. Continuous care direct gross
margins were 20.3%, an increase of 80 basis points when compared to
the prior year and 200 basis points sequentially. Inpatient direct
care margins were 21.0% in the quarter, which is 200 basis points
below the prior-year period and 210 basis points below the first
quarter of 2006. June 2006 occupancy was abnormally low, resulting in
occupancy in the full quarter of 79.5%. VITAS targets occupancy rates
to be at 80% or higher.
Central support costs for VITAS, which are classified as selling,
general and administrative expenses in the Consolidating Statement of
Income, totaled $13.7 million, including $0.3 million in OIG
investigation legal expenses. Excluding the OIG expense, central
support costs increased 1.4% when compared to the prior-year quarter
and increased 2.1% sequentially. Adjusted EBITDA was $20.4 million in
the quarter, an increase of 3.4% over the prior year.
VITAS' Average Length of Stay (ALOS) for patients discharged in
the quarter was 68.0 days and our median length of stay was 13 days.
This compares to an ALOS of 72.4 days in the first quarter of 2006 and
66.8 days in the second quarter of 2005.
Roto-Rooter Segment
Roto-Rooter's plumbing and drain cleaning business generated sales
of $78 million for the second quarter of 2006, 6.9% higher than the
$73 million reported in the comparable prior-year quarter. Net income
for the quarter was $7.0 million, an increase of 19% over the prior
year. Adjusted EBITDA in the second quarter of 2006 totaled $12.7
million, an increase of 12.5% over the second quarter of 2005 and an
adjusted EBITDA margin of 16.4%, an increase of 80 basis points over
the prior-year period.
Job count in the second quarter of 2006 increased 0.6% over the
prior-year period. Commercial plumbing job count increased 4.2% and
commercial drain cleaning increased 1.6% over the prior-year quarter.
Residential plumbing jobs decreased 1.3% and residential drain
cleaning jobs expanded 0.1% when compared to the second quarter of
2005. Overall, commercial jobs increased 2.4% and residential jobs
declined 0.3%. This is a favorable shift in job mix since a commercial
job will typically average significantly 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 full-year revenue growth of 13.0%
to 15.5%, increased admissions of 5.0% to 6.0% and adjusted EBITDA
margins of 12.5% to 13.0%. This guidance assumes a Medicare price
increase that will blend to 3.5% in the fourth quarter of 2006 and
includes an estimated full-year Medicare contractual billing
limitation between $4.0 million and $6.1 million.
Roto-Rooter is estimated to generate a 6.0% to 7.0% increase in
revenue in 2006, job count growth between 0.5% and 1.0% and adjusted
EBITDA margins averaging between 16.5% and 17.0%.
Based upon these factors, an effective tax rate of 39% and average
diluted share count of 26.7 million in the second half of 2006, our
expectation is that full-year 2006 earnings per diluted share from
continuing operations, excluding any charges or credits not indicative
of ongoing operations and excluding $.03 expense for stock options
required under SFAS 123R, will be in the range of $2.13 to $2.25.
Conference Call
Chemed will host a conference call and webcast at 11 a.m., ET, on
Wednesday, July 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 (866) 543-6411 for U.S. and Canadian participants
and (617) 213-8900 for international participants. The participant
pass code is 58893678. 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 78981828. An
archived webcast will also be available at www.chemed.com and will
remain available for 14 days following the live call.
Chemed Corporation operates in the healthcare field through its
VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice
services to over 11,000 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, Mexico and the Philippines.
This press release contains information about Chemed's EBITDA and
Adjusted EBITDA, which are not measures derived in accordance with
generally accepted accounting principles and which exclude components
that are important to understanding Chemed's financial performance.
Chemed provides EBITDA and Adjusted EBITDA to help investors and
others evaluate its operating results, compare its operating
performance with that of similar companies that have different capital
structures and evaluate its ability to meet its future debt service,
capital expenditures and working capital requirements. Chemed's EBITDA
and Adjusted EBITDA should not be considered in isolation or as a
substitute for comparable measures calculated and presented in
accordance with GAAP. A reconciliation of Chemed's net income to its
Adjusted EBITDA is presented in the tables following the text of this
press release.
Forward-Looking Statements
Certain statements contained in this press release and the
accompanying tables are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The
words "believe," "expect," "hope," "anticipate," "plan" and similar
expressions identify forward-looking statements, which speak only as
of the date the statement was made. Chemed does not undertake and
specifically disclaims any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. These statements are based on current
expectations and assumptions and involve various risks and
uncertainties, which could cause Chemed's actual results to differ
from those expressed in such forward-looking statements. These risks
and uncertainties arise from, among other things, possible changes in
regulations governing the hospice care or plumbing and drain cleaning
industries; periodic changes in reimbursement levels and procedures
under Medicare and Medicaid programs; difficulties predicting patient
length of stay and estimating potential Medicare reimbursement
obligations; challenges inherent in Chemed's growth strategy; the
current shortage of qualified nurses, other healthcare professionals
and licensed plumbing and drain cleaning technicians; Chemed's
dependence on patient referral sources; and other factors detailed
under the caption "Description of Business by Segment" or "Risk
Factors" in Chemed's most recent report on form 10-Q or 10-K and its
other filings with the Securities and Exchange Commission. You are
cautioned not to place undue reliance on such forward-looking
statements and there are no assurances that the matters contained in
such statements will be achieved.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 (cc) 2006 2005 (cc)
--------- --------- --------- ---------
Continuing Operations
Service revenues and sales $249,783 $226,309 $496,021 $444,946
--------- --------- --------- ---------
Cost of services provided and
goods sold (aa) 180,925 161,120 358,822 314,072
Selling, general and
administrative expenses (aa) 38,644 37,968 77,119 75,887
Depreciation 4,117 3,928 8,265 7,848
Amortization 1,417 1,231 2,813 2,423
--------- --------- --------- ---------
Total costs and expenses 225,103 204,247 447,019 400,230
--------- --------- --------- ---------
Income from operations 24,680 22,062 49,002 44,716
Interest expense (4,300) (5,039) (9,645) (10,874)
Loss on extinguishment of
debt - - (430) (3,971)
Other income--net 524 600 2,019 1,327
--------- --------- --------- ---------
Income before income taxes 20,904 17,623 40,946 31,198
Income taxes (8,062) (6,512) (15,889) (12,182)
--------- --------- --------- ---------
Income from continuing
operations 12,842 11,111 25,057 19,016
Discontinued Operations (bb) - (2,226) - (2,015)
--------- --------- --------- ---------
Net Income $ 12,842 $ 8,885 $ 25,057 $ 17,001
========= ========= ========= =========
Earnings Per Share (aa)
Income from continuing
operations $ 0.49 $ 0.44 $ 0.96 $ 0.75
========= ========= ========= =========
Net income $ 0.49 $ 0.35 $ 0.96 $ 0.67
========= ========= ========= =========
Average number of shares
outstanding 26,201 25,489 26,123 25,319
========= ========= ========= =========
Diluted Earnings Per Share
(aa)
Income from continuing
operations $ 0.48 $ 0.42 $ 0.93 $ 0.73
========= ========= ========= =========
Net income $ 0.48 $ 0.34 $ 0.93 $ 0.65
========= ========= ========= =========
Average number of shares
outstanding 26,846 26,214 26,815 26,059
========= ========= ========= =========
- -------------------------------
(aa) Included in the results of operations are the following
significant credits/(charges) which may not be indicative
of ongoing operations (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 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
Legal costs associated
with OIG
investigation (342) (254) (474) (254)
Long-term incentive
compensation - (1,837) - (2,946)
Stock option expense (18) - (18) (215)
Adjustments to
transaction-related
costs of the VITAS
acquisition - 671 - 671
Loss on extinguishment
of debt - - (430) (3,971)
--------- --------- --------- ---------
Pretax impact on
earnings (360) (1,420) (922) (5,052)
Income tax
benefit/(charge) on the
above 136 779 343 2,070
--------- --------- --------- ---------
Aftertax impact
on earnings $ (224) $ (641) $ (579) $ (2,982)
========= ========= ========= =========
(bb) Discontinued operations represents the results of operations
and loss on disposal of Service America.
(cc) Reclassified to conform to 2006 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
June 30,
-------------------
2006 2005 (cc)
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 6,816 $ 17,870
Accounts receivable less allowances 94,833 84,973
Inventories 6,210 7,309
Current deferred income taxes 21,871 20,687
Prepaid income taxes 12,709 8,360
Current assets of discontinued
operations - 4,656
Prepaid expenses and other current assets 9,255 9,499
--------- ---------
Total current assets 151,694 153,354
Investments of deferred compensation plans
held in trust 23,731 19,610
Other investments 1,445 1,445
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 66,474 59,432
Identifiable intangible assets less
accumulated amortization 73,150 74,896
Goodwill 433,877 437,738
Noncurrent assets of discontinued
operations - 681
Other assets 20,692 22,571
--------- ---------
Total Assets $783,563 $782,227
========= =========
Liabilities
Current liabilities
Accounts payable $ 48,591 $ 39,899
Current portion of long-term debt 207 1,176
Income taxes 4,172 6,922
Accrued insurance 40,049 27,392
Accrued compensation 28,071 31,100
Current liabilities of discontinued
operations - 7,605
Other current liabilities 30,914 29,184
--------- ---------
Total current liabilities 152,004 143,278
Deferred income taxes 22,829 17,630
Long-term debt 169,397 234,541
Deferred compensation liabilities 23,503 19,555
Noncurrent liabilities of discontinued
operations - 779
Other liabilities 3,441 7,456
--------- ---------
Total Liabilities 371,174 423,239
--------- ---------
Stockholders' Equity
Capital stock 28,812 27,897
Paid-in capital 249,460 218,876
Retained earnings 193,089 155,484
Treasury stock, at cost (61,340) (44,572)
Unearned compensation - (488)
Deferred compensation payable in Company
stock 2,422 2,333
Notes receivable for shares sold (54) (542)
--------- ---------
Total Stockholders' Equity 412,389 358,988
--------- ---------
Total Liabilities and
Stockholders' Equity $783,563 $782,227
========= =========
Book Value Per Share $ 15.71 $ 13.99
========= =========
- ----------------------------------------------------
(cc) Reclassified to conform to 2006 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands) (unaudited)
Six Months Ended
June 30,
--------------------
2006 2005
--------- ----------
Cash Flows from Operating Activities
Net income $ 25,057 $ 17,001
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,078 10,271
Provision for uncollectible accounts
receivable 4,005 3,343
Provision for deferred income taxes 4,001 (2,206)
Amortization of debt issuance costs 882 962
Write off unamortized debt issuance costs 430 2,871
Noncash long-term incentive compensation - 2,574
Discontinued operations - 2,015
Changes in operating assets and
liabilities, excluding amounts acquired
in business combinations
Increase in accounts receivable (3,828) (23,653)
Decrease/(increase) in inventories 289 (290)
Decrease in prepaid expenses and
other current assets 513 343
Decrease in accounts payable and
other current liabilities (15,949) (2,673)
Increase in income taxes 2,189 7,859
Decrease in other assets (2,892) (1,328)
Increase in other liabilities 1,972 390
Excess tax benefit on share-based
compensation (4,941) -
Noncash expense of internally financed
ESOPs - 572
Other sources 679 676
--------- ----------
Net cash provided by continuing
operations 23,485 18,727
Net cash used by discontinued
operations - (1,559)
--------- ----------
Net cash provided by operating
activities 23,485 17,168
--------- ----------
Cash Flows from Investing Activities
Capital expenditures (9,474) (11,455)
Net uses from the sale of discontinued
operations (2,990) (5,478)
Business combinations, net of cash acquired (814) (5,495)
Proceeds from sales of property and equipment 161 96
Other uses (358) (107)
--------- ----------
Net cash used by investing activities (13,475) (22,439)
--------- ----------
Cash Flows from Financing Activities
Repayment of long-term debt (84,499) (140,978)
Net increase in revolving line of credit 19,000 -
Excess tax benefit on share-based compensation 4,941 -
Issuance of capital stock, net of costs 3,849 8,766
Purchases of treasury stock (3,992) (3,574)
Dividends paid (3,156) (3,060)
Increase in cash overdrafts payable 3,397 7,347
Debt issuance costs (154) (1,755)
Proceeds from long-term debt - 85,000
Other sources/(uses) 287 (53)
--------- ----------
Net cash used by financing activities (60,327) (48,307)
--------- ----------
Decrease in Cash and Cash Equivalents (50,317) (53,578)
Cash and cash equivalents at beginning of year 57,133 71,448
--------- ----------
Cash and cash equivalents at end of period $ 6,816 $ 17,870
========= ==========
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005
(in thousands)(unaudited)
Roto- Chemed
VITAS Rooter Corporate Consolidated
--------- -------- ---------- -------------
2006
- ---------------------------
Service revenues and sales $ 172,242 $ 77,541 $ - $ 249,783
--------- -------- ---------- -------------
Cost of services provided
and goods sold 138,519 42,406 - 180,925
Selling, general and
administrative expenses (a) 13,725 22,232 2,687 38,644
Depreciation 2,122 1,914 81 4,117
Amortization 1,084 20 313 1,417
--------- -------- ---------- -------------
Total costs and expenses 155,450 66,572 3,081 225,103
--------- -------- ---------- -------------
Income/(loss) from
operations 16,792 10,969 (3,081) 24,680
Interest expense (38) (109) (4,153) (4,300)
Intercompany interest
income/(expense) 1,395 949 (2,344) -
Other income--net 45 (89) 568 524
--------- -------- ---------- -------------
Income/(loss) before
income taxes 18,194 11,720 (9,010) 20,904
Income taxes (a) (6,795) (4,717) 3,450 (8,062)
--------- -------- ---------- -------------
Net income/(loss) $ 11,399 $ 7,003 $ (5,560) $ 12,842
========= ======== ========== =============
2005
- ---------------------------
Service revenues and sales $ 153,748 $ 72,561 $ - $ 226,309
--------- -------- ---------- -------------
Cost of services provided
and goods sold 120,854 40,266 - 161,120
Selling, general and
administrative expenses (b) 13,446 21,024 3,498 37,968
Depreciation 1,770 2,086 72 3,928
Amortization 984 23 224 1,231
--------- -------- ---------- -------------
Total costs and expenses 137,054 63,399 3,794 204,247
--------- -------- ---------- -------------
Income/(loss) from
operations 16,694 9,162 (3,794) 22,062
Interest expense (33) (97) (4,909) (5,039)
Intercompany interest
income/(expense) 681 516 (1,197) -
Other income--net 14 146 440 600
--------- -------- ---------- -------------
Income/(loss) before
income taxes 17,356 9,727 (9,460) 17,623
Income taxes (b) (6,753) (3,852) 4,093 (6,512)
--------- -------- ---------- -------------
Income/(loss) from
continuing operations 10,603 5,875 (5,367) 11,111
Discontinued operations - - (2,226) (2,226)
--------- -------- ---------- -------------
Net income/(loss) $ 10,603 $ 5,875 $ (7,593) $ 8,885
========= ======== ========== =============
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, 2006 AND 2005
(in thousands)(unaudited)
Roto- Chemed
VITAS Rooter Corporate Consolidated
--------- -------- ---------- -------------
2006
- ---------------------------
Service revenues and sales $ 340,616 $155,405 $ - $ 496,021
--------- -------- ---------- -------------
Cost of services provided
and goods sold 273,977 84,845 - 358,822
Selling, general and
administrative expenses (a) 26,961 44,774 5,384 77,119
Depreciation 4,195 3,883 187 8,265
Amortization 2,168 40 605 2,813
--------- -------- ---------- -------------
Total costs and expenses 307,301 133,542 6,176 447,019
--------- -------- ---------- -------------
Income/(loss) from
operations 33,315 21,863 (6,176) 49,002
Interest expense (69) (282) (9,294) (9,645)
Intercompany interest
income/(expense) 2,349 1,801 (4,150) -
Loss on extinguishment of
debt (a) - - (430) (430)
Other income--net 57 273 1,689 2,019
--------- -------- ---------- -------------
Income/(loss) before
income taxes 35,652 23,655 (18,361) 40,946
Income taxes (a) (13,396) (9,451) 6,958 (15,889)
--------- -------- ---------- -------------
Net income/(loss) $ 22,256 $ 14,204 $ (11,403) $ 25,057
========= ======== ========== =============
2005
- ---------------------------
Service revenues and sales $ 299,738 $145,208 $ - $ 444,946
--------- -------- ---------- -------------
Cost of services provided
and goods sold (b) 236,074 77,998 - 314,072
Selling, general and
administrative expenses (b) 26,475 42,154 7,258 75,887
Depreciation 3,555 4,148 145 7,848
Amortization 1,979 49 395 2,423
--------- -------- ---------- -------------
Total costs and expenses 268,083 124,349 7,798 400,230
--------- -------- ---------- -------------
Income/(loss) from
operations 31,655 20,859 (7,798) 44,716
Interest expense (71) (279) (10,524) (10,874)
Intercompany interest
income/(expense) 1,190 940 (2,130) -
Loss on extinguishment of
debt (b) - - (3,971) (3,971)
Other income--net 122 442 763 1,327
--------- -------- ---------- -------------
Income/(loss) before
income taxes 32,896 21,962 (23,660) 31,198
Income taxes (b) (12,683) (8,777) 9,278 (12,182)
--------- -------- ---------- -------------
Income/(loss) from
continuing operations 20,213 13,185 (14,382) 19,016
Discontinued operations - - (2,015) (2,015)
--------- -------- ---------- -------------
Net income/(loss) $ 20,213 $ 13,185 $ (16,397) $ 17,001
========= ======== ========== =============
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, 2006 AND 2005
(in thousands)(unaudited)
Roto- Chemed
VITAS Rooter Corporate Consolidated
--------- -------- ---------- -------------
2006
- ---------------------------
Net income/(loss) $ 11,399 $ 7,003 $ (5,560) $ 12,842
Add/(deduct):
Interest expense 38 109 4,153 4,300
Income taxes 6,795 4,717 (3,450) 8,062
Depreciation 2,122 1,914 81 4,117
Amortization 1,084 20 313 1,417
--------- -------- ---------- -------------
EBITDA 21,438 13,763 (4,463) 30,738
Add/(deduct):
Legal expenses of
OIG investigation 342 - - 342
Stock option expense - - 18 18
Advertising cost
adjustment (c) - (87) - (87)
Interest income (35) (17) (527) (579)
Intercompany
interest
income/(expense) (1,395) (949) 2,344 -
--------- -------- ---------- -------------
Adjusted EBITDA $ 20,350 $12,710 $ (2,628) $ 30,432
========= ======== ========== =============
2005
- ---------------------------
Net income/(loss) $ 10,603 $ 5,875 $ (7,593) $ 8,885
Add/(deduct):
Discontinued
operations - - 2,226 2,226
Interest expense 33 97 4,909 5,039
Income taxes 6,753 3,852 (4,093) 6,512
Depreciation 1,770 2,086 72 3,928
Amortization 984 23 224 1,231
--------- -------- ---------- -------------
EBITDA 20,143 11,933 (4,255) 27,821
Add/(deduct):
Long-term incentive
compensation - - 1,837 1,837
Legal expenses of
OIG Investigation 254 - - 254
VITAS transaction
expense adjustment - - (671) (671)
Advertising cost
adjustment (c) - (76) - (76)
Interest income (33) (47) (182) (262)
Intercompany
interest
income/(expense) (681) (516) 1,197 -
--------- -------- ---------- -------------
Adjusted EBITDA $ 19,683 $11,294 $ (2,074) $ 28,903
========= ======== ========== =============
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, 2006 AND 2005
(in thousands)(unaudited)
Roto- Chemed
VITAS Rooter Corporate Consolidated
--------- -------- ---------- -------------
2006
- ---------------------------
Net income/(loss) $ 22,256 $14,204 $ (11,403) $ 25,057
Add/(deduct):
Interest expense 69 282 9,294 9,645
Income taxes 13,396 9,451 (6,958) 15,889
Depreciation 4,195 3,883 187 8,265
Amortization 2,168 40 605 2,813
--------- -------- ---------- -------------
EBITDA 42,084 27,860 (8,275) 61,669
Add/(deduct):
Legal expenses of
OIG investigation 474 - - 474
Stock option expense - - 18 18
Advertising cost
adjustment (c) - (581) - (581)
Interest income (76) (40) (1,435) (1,551)
Intercompany
interest
income/(expense) (2,349) (1,801) 4,150 -
Loss on
extinguishment of
debt - - 430 430
--------- -------- ---------- -------------
Adjusted EBITDA $ 40,133 $25,438 $ (5,112) $ 60,459
========= ======== ========== =============
2005
- ---------------------------
Net income/(loss) $ 20,213 $13,185 $ (16,397) $ 17,001
Add/(deduct):
Discontinued
operations - - 2,015 2,015
Interest expense 71 279 10,524 10,874
Income taxes 12,683 8,777 (9,278) 12,182
Depreciation 3,555 4,148 145 7,848
Amortization 1,979 49 395 2,423
--------- -------- ---------- -------------
EBITDA 38,501 26,438 (12,596) 52,343
Add/(deduct):
Long-term incentive
compensation - - 2,946 2,946
Stock option expense - - 215 215
Prior-period
insurance
adjustment - (1,663) - (1,663)
Legal expenses of
OIG Investigation 254 - - 254
VITAS transaction
expense adjustment (671) (671)
Advertising cost
adjustment (c) - (629) - (629)
Interest income (159) (88) (665) (912)
Intercompany
interest
income/(expense) (1,190) (940) 2,130 -
Loss on
extinguishment of
debt - - 3,971 3,971
--------- -------- ---------- -------------
Adjusted EBITDA $ 37,406 $23,118 $ (4,670) $ 55,854
========= ======== ========== =============
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 AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(in thousands, except per share data)(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Net income/(loss) as reported $ 12,842 $ 8,885 $25,057 $17,001
Add/(deduct):
Discontinued operations - 2,226 - 2,015
Aftertax prior period
insurance adjustment - - - (1,014)
Aftertax cost of long-term
incentive compensation (d) - 1,152 - 1,847
Aftertax cost of legal
expenses of OIG
investigation 212 160 294 160
Aftertax stock option
expense 12 - 12 137
Afertax VITAS transaction
expense adjustment - (671) - (671)
Aftertax cost of loss on
extinguishment of debt - - 273 2,523
--------- -------- -------- --------
Adjusted income from continuing
operations $ 13,066 $11,752 $25,636 $21,998
========= ======== ======== ========
Earnings/(Loss) Per Share As
Reported
Net income/(loss) $ 0.49 $ 0.35 $ 0.96 $ 0.67
========= ======== ======== ========
Average number of shares
outstanding 26,201 25,489 26,123 25,319
========= ======== ======== ========
Diluted Earnings/(Loss) Per Share
As Reported
Net income/(loss) $ 0.48 $ 0.34 $ 0.93 $ 0.65
========= ======== ======== ========
Average number of shares
outstanding 26,846 26,214 26,815 26,059
========= ======== ======== ========
Adjusted Earnings Per Share
Income from continuing
operations $ 0.50 $ 0.46 $ 0.98 $ 0.87
========= ======== ======== ========
Average number of shares
outstanding 26,201 25,489 26,123 25,319
========= ======== ======== ========
Adjusted Diluted Earnings Per
Share
Income from continuing
operations $ 0.49 $ 0.45 $ 0.96 $ 0.84
========= ======== ======== ========
Average number of shares
outstanding 26,846 26,214 26,815 26,059
========= ======== ======== ========
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, 2006 AND 2005
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
OPERATING STATISTICS
Net revenue ($000)
Homecare $123,162 $106,610 $238,620 $207,482
Inpatient 21,782 21,131 44,889 41,979
Continuous care 29,638 26,007 59,447 50,277
--------- --------- --------- ---------
Total before
Medicare cap
allowance 174,582 153,748 342,956 299,738
Medicare cap
allowance (2,340) - (2,340) -
--------- --------- --------- ---------
Total $172,242 $153,748 $340,616 $299,738
========= ========= ========= =========
Net revenue as a percent
of total
before Medicare cap
allowance
Homecare 70.5 % 69.4 % 69.6 % 69.2 %
Inpatient 12.5 13.7 13.1 14.0
Continuous care 17.0 16.9 17.3 16.8
--------- --------- -------- ---------
Total before
Medicare cap
allowance 100.0 100.0 100.0 100.0
Medicare cap
allowance (1.3) - (0.7) -
--------- --------- --------- ---------
Total 98.7 % 100.0 % 99.3 % 100.0 %
========= ========= ========= =========
Average daily census
("ADC") (days)
Homecare 6,469 5,750 6,292 5,589
Nursing home 3,493 3,260 3,429 3,230
--------- --------- --------- ---------
Routine homecare 9,962 9,010 9,721 8,819
Inpatient 406 406 419 405
Continuous care 536 497 553 495
--------- --------- --------- ---------
Total 10,904 9,913 10,693 9,719
========= ========= ========= =========
Total Admissions 13,069 12,646 26,965 25,594
Total Discharges 12,603 12,153 26,015 24,741
Average length of stay
(days) 68.0 (d) 66.8 70.3 66.4
Median length of stay
(days) 13.0 12.0 13.0 12.0
ADC by major diagnosis
Neurological 33.1 % 32.0 % 33.1 % 31.4 %
Cancer 20.0 21.4 20.2 22.3
Cardio 15.0 15.2 14.9 14.8
Respiratory 7.2 7.2 7.2 7.2
Other 24.7 24.2 24.6 24.3
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Admissions by major
diagnosis
Neurological 19.6 % 18.7 % 20.1 % 19.2 %
Cancer 35.0 36.6 34.4 35.5
Cardio 13.2 13.8 13.6 14.0
Respiratory 7.0 6.9 7.5 7.6
Other 25.2 24.0 24.4 23.7
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Direct patient care
margins (e)
Routine homecare 49.6 % 49.4 % 48.6 % 49.6 %
Inpatient 21.0 23.0 22.1 22.9
Continuous care 20.3 19.5 19.3 18.5
Homecare margin drivers
(dollars per patient day)
Labor costs $ 48.15 $ 46.01 $ 49.65 $ 45.86
Drug costs 8.42 7.94 7.94 7.72
Home medical
equipment 5.52 5.53 5.54 5.50
Medical supplies 2.11 2.14 2.13 2.15
Inpatient margin drivers
(dollars per patient day)
Labor costs $ 257.69 $ 240.76 $ 252.04 $ 239.55
Continuous care margin
drivers
(dollars per patient day)
Labor costs $ 463.62 $ 443.83 $ 458.96 $ 438.56
Bad debt expense as a
percent of revenues 0.9 % 0.9 % 0.9 % 0.9 %
Accounts receivable --
days of revenue
outstanding 40.1 43.8 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, 2006 AND 2005
(unaudited)
(a) Included in the results of operations for the three and six months
ended June 30, 2006 are the following significant
credits/(charges) which may not be indicative of on going
operations (in thousands):
Three Months Ended June 30, 2006
----------------------------------------
Roto-
VITAS Rooter Corporate Consolidated
------ -------- ---------- -------------
Selling, general and
administrative expenses
Costs associated with
OIG investigation $(342) $ - $ - $ (342)
Stock option expense - - (18) (18)
------ -------- ---------- -------------
Pretax impact on
earnings (342) - (18) (360)
Income tax benefit on the
above 130 - 6 136
------ -------- ---------- -------------
Aftertax impact on
earnings $(212) $ - $ (12) $ (224)
====== ======== ========== =============
Six Months Ended June 30, 2006
----------------------------------------
Roto-
VITAS Rooter Corporate Consolidated
------ -------- ---------- -------------
Selling, general and
administrative expenses
Costs associated with
OIG investigation $(474) $ - $ - $ (474)
Stock option expense - - (18) (18)
Loss on extinguishment of
debt - - (430) (430)
------ -------- ---------- -------------
Pretax impact on
earnings (474) - (448) (922)
Income tax benefit on the
above 180 - 163 343
------ -------- ---------- -------------
Aftertax impact on
earnings $(294) $ - $ (285) $ (579)
====== ======== ========== =============
(b) Included in the results of operations for the three and six months
ended June 30, 2005 are the following significant
credits/(charges) which may not be indicative of on going
operations (in thousands):
Three Months Ended June 30, 2005
----------------------------------------
Roto-
VITAS Rooter Corporate Consolidated
------ -------- ---------- -------------
Selling, general and
administrative expenses
Long-term incentive
compensation $ - $ - $ (1,837) $ (1,837)
Costs associated with
OIG investigation (254) - - (254)
Adjustments to
transaction-related
costs of the VITAS
acquisition - - 671 671
------ -------- ---------- -------------
Pretax impact on
earnings (254) - (1,166) (1,420)
Income tax benefit on the
above 94 - 685 779
------ -------- ---------- -------------
Aftertax impact on
earnings $(160) $ - $ (481) $ (641)
====== ======== ========== =============
Six Months Ended June 30, 2005
----------------------------------------
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 - - (2,946) (2,946)
Costs associated with
OIG investigation (254) - - (254)
Stock option expense - - (215) (215)
Adjustments to
transaction-related
costs
of the VITAS
acquisition - - 671 671
Loss on extinguishment of
debt - - (3,971) (3,971)
------ -------- ---------- -------------
Pretax impact on
earnings (254) 1,663 (6,461) (5,052)
Income tax benefit on the
above 94 (649) 2,625 2,070
------ -------- ---------- -------------
Aftertax impact on
earnings $(160) $ 1,014 $ (3,836) $ (2,982)
====== ======== ========== =============
(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 second quarters of 2006 and 2005,
GAAP advertising expense for Roto-Rooter totaled $4,914,000 and
$4,491,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the second quarters of 2006 and 2005
would total $5,001,000 and $4,567,000, respectively. For the six
months ended June 30, 2006 and 2005, GAAP advertising expense for
Roto-Rooter totaled $9,338,000 and $8,323,000, 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 2006 and 2005 would total $9,919,000 and
$8,952,000, respectively.
(d) VITAS has 5 large (greater than 450 ADC), 17 medium (greater than
200 but less than 450 ADC) and 20 small (less than 200 ADC)
hospice programs.
(e) Amounts exclude medicare cap allowance and indirect patient care
and administrative costs.
CONTACT: Chemed Corporation
David P. Williams, 513-762-6901