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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):
August 1, 2007
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 August 1, 2007 Chemed Corporation issued a press release
announcing its financial results for the quarter ended June 30, 2007. A copy of
the release is furnished herewith as Exhibit 99.
Item 9.01 Financial Statements and Exhibits
d) Exhibit
(99) Registrant's press release dated August 1, 2007
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: August 1, 2007 By: /s/ Arthur V. Tucker, Jr.
---------------- --------------------------
Arthur V. Tucker, Jr.
Vice President and Controller
Page 2 of 2
Exhibit 99
Chemed Reports Second-Quarter 2007 Results
-- Full year 2007 guidance increased
CINCINNATI--(BUSINESS WIRE)--Aug. 1, 2007--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, 2007, versus the comparable
prior-year period, as follows:
Consolidated operating results from Continuing Operations:
-- Revenue increased 9.0% to $271 million
-- Diluted EPS from Continuing Operations of $.38
-- Adjusted diluted EPS from Continuing Operations, which
excludes early extinguishments of debt and certain other
items, of $.79
VITAS segment operating results from Continuing Operations:
-- Net Patient Revenue of $186 million, up 8.3%
-- Average Daily Census (ADC) of 11,406, up 6.6%
-- Admissions of 13,658, an increase of 5.2%
-- Average Length of Stay in the quarter of 76.6 days
-- Net income of $14.2 million
-- Adjusted EBITDA of $24.9 million
Roto-Rooter segment operating results:
-- Revenue of $86 million, an increase of 10.5%
-- Job count of 201,939 up 1.6%
-- Net Income of $10.7 million
-- Adjusted EBITDA of $18.1 million
VITAS
VITAS generated 13,658 admissions in the quarter, which represents
an increase of 5.2% over the prior year. Discharges totaled 13,359, an
increase of 6.6%, and ADC in the quarter increased 6.6% to 11,406.
VITAS' Average Length of Stay (ALOS) for patients discharged in the
quarter was 76.6 days and Median Length of Stay (MLOS) was 13 days.
This compares to an ALOS of 76.9 days in the first quarter of 2007 and
68.0 days in the second quarter of 2006.
VITAS recorded net revenue of $186 million in the second quarter
of 2007, which was an increase of 8.3% over the prior-year period. The
revenue growth generated from the increase in ADC combined with the
Medicare price increase was partially offset by the continued shift in
revenue mix to routine home care. Routine homecare revenue increased
11.6% in the quarter. This revenue growth was partially offset by a
modest decline in the higher acuity inpatient and continuous care
revenue of 0.9% in the quarter. Net income from continuing operations
for the second quarter was $14.2 million, an increase of 16.9%.
VITAS did not record any billing restrictions related to Medicare
Cap in the second quarter of 2007. As of June 30, 2007, VITAS has not
accrued any Medicare billing restrictions for the 2007 cap year. The
ability for VITAS to bill Medicare for 100% of the care provided to
terminally ill patients is a result of improved admissions metrics,
relatively low MLOS and the continued combination of various hospice
provider numbers.
All of VITAS' hospice programs currently have a cap cushion
greater than 10% on a trailing twelve-month basis, with the exception
of two programs. These two programs have a cap cushion of 5% and 8%,
respectively. The same analysis through the first eight months of the
2007 cap year results in all of VITAS' Medicare provider numbers
having a cap cushion greater than 10% with the exception of two
programs. These programs have cap cushion of 7% and 8%, respectively.
Gross margin in the quarter was 22.1%, which is a 180 basis point
improvement over the prior year quarter. Approximately 90 basis points
of this improvement is a result of VITAS managing labor costs to more
historical levels. The remaining 90 basis points of this improvement
is the result of $1.6 million of expenses that had been historically
charged to cost of services and are now expensed into central support.
Effective October 1, 2006, management realigned certain processes and
expenses related to hospice program support. These processes and
related expenses were centralized effective the beginning of the
fourth quarter of 2006 and are now incurred and controlled at VITAS
corporate and classified as selling, general and administrative
expense. In the second quarter of 2006, approximately $1.6 million of
this type of expense was classified as cost of services. These
expenses were charged to central support in the second quarter of
2007.
Central support costs for VITAS, which are classified as selling,
general and administrative expenses in the Consolidating Statement of
Income, totaled $16.3 million, which is an increase of 18.7% over the
prior year. Adjusting for the reclassification of expenses noted
above, second-quarter 2007 central support costs increased 6.3% over
the prior year.
Roto-Rooter
Roto-Rooter's plumbing and drain cleaning business generated sales
of $86 million for the second quarter of 2007, 10.5% higher than the
$78 million reported in the comparable prior-year quarter. Net income
for the quarter was $10.7 million, an increase of 53% over the prior
year. Adjusted EBITDA in the second quarter of 2007 totaled $18.1
million, an increase of 42% over the second quarter of 2006 and
equated to an adjusted EBITDA margin of 21.1%, an increase of 469
basis points over the prior-year period.
Job count in the second quarter of 2007 increased 1.6% over the
prior-year period. Residential jobs increased 6.0% and commercial jobs
decreased 7.4%. Residential plumbing jobs increased 14.7% and
residential drain cleaning jobs expanded 2.2% when compared to the
second quarter of 2006. Residential jobs represent approximately 70%
of total job count. Commercial plumbing job count decreased 3.8% and
commercial drain cleaning decreased 8.7% over the prior-year quarter.
Guidance for 2007
VITAS is estimated to generate full-year revenue growth from
continuing operations, prior to Medicare Cap, of 9% to 11%. This range
is a 100 basis point decrease from the previous guidance to reflect
the revenue mix shift to routine home care noted earlier. Admissions
are estimated to increase 4% to 6%, increased ADC of 8% to 10% and
adjusted EBITDA margins, prior to Medicare Cap, of 13.5% to 14.5%.
This guidance assumes the hospice industry receives a full Medicare
basket price increase of 3.3% in the fourth quarter of 2007. Full-year
2007 Medicare contractual billing limitations are estimated at $2.5
million.
Roto-Rooter is estimated to generate an 8.5% to 9.5% increase in
revenue in 2007, job count growth between 0.5% and 1.5% and adjusted
EBITDA margin in the range of 19.0% to 20.0%.
Based upon these factors, an effective tax rate of 38.5% and an
average diluted share count for the second half of 2007 of 24.5
million, our estimate is that full-year 2007 earnings per diluted
share from continuing operations, excluding early extinguishment of
debt, expense for stock options and other long-term incentive
compensation, gain on sale of building, or any other charges or
credits not indicative of ongoing operations, will be in the range of
$3.10 to $3.20.
Conference Call
Chemed will host a conference call and webcast at 10 a.m., ET, on
Thursday, August 2, 2007, to discuss the company's quarterly results
and provide an update on its business. The dial-in number for the
conference call is (800) 573-4842 for U.S. and Canadian participants
and (617) 224-4327 for international participants. The participant
passcode is 85108295. 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 41816435. 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, 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,
------------------- -------------------
2007 2006 (cc) 2007 2006 (cc)
--------- --------- --------- ---------
Continuing Operations
Service revenues and sales$271,387 $249,068 $541,826 $492,989
--------- --------- --------- ---------
Cost of services provided
and goods sold 188,716 179,103 376,963 355,138
Selling, general and
administrative expenses
(aa) 46,090 38,621 94,160 77,075
Depreciation 4,962 4,082 9,677 8,214
Amortization 1,294 1,317 2,609 2,613
Other operating
expense/(income)(aa) - - (1,138) -
--------- --------- --------- ---------
Total costs and
expenses 241,062 223,123 482,271 443,040
--------- --------- --------- ---------
Income from operations 30,325 25,945 59,555 49,949
Interest expense (3,400) (4,300) (7,142) (9,645)
Loss on extinguishment of
debt (aa) (13,715) - (13,715) (430)
Other income--net 2,188 524 3,057 2,019
--------- --------- --------- ---------
Income before income
taxes 15,398 22,169 41,755 41,893
Income taxes (5,965) (8,619) (16,101) (16,305)
--------- --------- --------- ---------
Income from continuing
operations 9,433 13,550 25,654 25,588
Discontinued Operations (bb) - (708) - (531)
--------- --------- --------- ---------
Net Income $ 9,433 $ 12,842 $ 25,654 $ 25,057
========= ========= ========= =========
Earnings Per Share (aa)
Income from continuing
operations $ 0.38 $ 0.52 $ 1.02 $ 0.98
========= ========= ========= =========
Net income $ 0.38 $ 0.49 $ 1.02 $ 0.96
========= ========= ========= =========
Average number of shares
outstanding 24,506 26,201 25,108 26,123
========= ========= ========= =========
Diluted Earnings Per Share
(aa)
Income from continuing
operations $ 0.38 $ 0.50 $ 1.00 $ 0.95
========= ========= ========= =========
Net income $ 0.38 $ 0.48 $ 1.00 $ 0.93
========= ========= ========= =========
Average number of shares
outstanding 25,080 26,846 25,684 26,815
========= ========= ========= =========
- -------------------------------
(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,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Selling, general and
administrative expenses
Long-term incentive
compensation $ (1,620) $ - $ (7,067) $ -
Stock option
expense (897) (18) (1,482) (18)
Legal costs
associated with OIG
investigation (74) (342) (140) (474)
Other - - 467 -
Other operating
expense/(income)
Gain on sale of
property - - 1,138 -
Loss on extinguishment
of debt (13,715) - (13,715) (430)
--------- --------- --------- ---------
Pretax impact on
earnings (16,306) (360) (20,799) (922)
Income tax benefit on
the above 5,951 136 7,638 343
--------- --------- --------- ---------
Aftertax impact
on earnings $(10,355) $ (224) $(13,161) $ (579)
========= ========= ========= =========
(bb) Discontinued operations represents the results of operations of
VITAS' Phoenix operation
(cc) Reclassified to conform to 2007 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
June 30,
--------------------
2007 2006 (cc)
---------- ---------
Assets
Current assets
Cash and cash equivalents $ 7,469 $ 6,816
Accounts receivable less allowances 99,867 93,003
Inventories 6,752 6,210
Current deferred income taxes 19,828 21,110
Prepaid income taxes 2,604 11,983
Current assets of discontinued
operations - 3,555
Prepaid expenses and other current
assets 8,570 9,254
---------- ---------
Total current assets 145,090 151,931
Investments of deferred compensation plans
held in trust 29,360 23,731
Other investments - 1,445
Note receivable 14,701 12,500
Properties and equipment, at cost less
accumulated depreciation 72,428 65,979
Identifiable intangible assets less
accumulated amortization 67,195 70,880
Goodwill 435,209 432,717
Noncurrent assets of discontinued
operations - 7,513
Other assets 15,549 20,693
---------- ---------
Total Assets $ 779,532 $787,389
========== =========
Liabilities
Current liabilities
Accounts payable $ 46,366 $ 48,330
Current portion of long-term debt 10,162 207
Income taxes 837 4,409
Accrued insurance 37,084 39,310
Accrued compensation 33,046 27,840
Current liabilities of discontinued
operations - 5,443
Other current liabilities 20,638 26,702
---------- ---------
Total current liabilities 148,133 152,241
Deferred income taxes 3,846 26,418
Long-term debt 268,035 169,397
Deferred compensation liabilities 28,912 23,503
Other liabilities 5,945 3,440
---------- ---------
Total Liabilities 454,871 374,999
---------- ---------
Stockholders' Equity
Capital stock 29,193 28,812
Paid-in capital 261,951 249,461
Retained earnings 242,905 193,089
Treasury stock, at cost (211,836) (61,340)
Deferred compensation payable in Company
stock 2,448 2,422
Notes receivable for shares sold - (54)
---------- ---------
Total Stockholders' Equity 324,661 412,390
---------- ---------
Total Liabilities and
Stockholders' Equity $ 779,532 $787,389
========== =========
Book Value Per Share $ 13.58 $ 15.71
========== =========
- --------------------------------------------------
(cc) Reclassified to conform to 2007 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
Six Months Ended June 30,
-------------------------
2007 2006 (bb)
--------------- ---------
Cash Flows from Operating Activities
Net income $ 25,654 $ 25,057
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 12,286 10,827
Write-off of unamortized debt
issuance costs 7,153 430
Noncash long-term incentive
compensation 6,154 -
Provision for uncollectible
accounts receivable 4,009 3,962
Amortization of debt issuance
costs 751 882
Provision for deferred income
taxes 376 4,679
Discontinued operations - 531
Changes in operating assets and
liabilities, excluding amounts
acquired in business
combinations:
Increase in accounts
receivable (11,308) (5,924)
Decrease/(increase) in
inventories (174) 289
Decrease in prepaid
expenses and other
current assets 1,377 514
Decrease in accounts payable
and other current
liabilities (14,838) (18,089)
Increase in income taxes 69 1,932
Increase in other assets (3,932) (2,892)
Increase in other
liabilities 4,540 1,973
Excess tax benefit on share-based
compensation (2,370) (4,941)
Other uses 477 551
--------------- ---------
Net cash provided by
continuing operations 30,224 19,781
Net cash provided by
discontinued operations - 3,704
--------------- ---------
Net cash provided by
operating activities 30,224 23,485
--------------- ---------
Cash Flows from Investing Activities
Capital expenditures (13,908) (9,222)
Net uses from the sale of discontinued
operations (5,905) (2,990)
Proceeds from sales of property and
equipment 3,003 161
Business combinations, net of cash
acquired (62) (814)
Other uses (564) (610)
--------------- ---------
Net cash used by investing
activities (17,436) (13,475)
--------------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 300,000 -
Repayment of long-term debt (185,643) (84,499)
Purchases of treasury stock (130,748) (3,992)
Purchase of note hedges (54,939) -
Proceeds from issuance of warrants 27,614 -
Net increase in revolving line of credit 13,300 19,000
Debt issuance costs (6,395) (154)
Dividends paid (2,997) (3,156)
Excess tax benefit on share-based
compensation 2,370 4,941
Issuance of capital stock 2,069 3,849
Increase in cash overdrafts payable 166 3,397
Other sources 610 287
--------------- ---------
Net cash used by financing
activities (34,593) (60,327)
--------------- ---------
Decrease in Cash and Cash Equivalents (21,805) (50,317)
Cash and cash equivalents at beginning of
year 29,274 57,133
--------------- ---------
Cash and cash equivalents at end of period $ 7,469 $ 6,816
=============== =========
(bb) Reclassified for operations discontinued in November 2006.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2007
- -------------------------
Service revenues and
sales $185,701 $85,686 $ - $271,387
--------- ----------- --------- ------------
Cost of services
provided and goods sold 144,639 44,077 - 188,716
Selling, general and
administrative expenses
(a) 16,260 24,191 5,639 46,090
Depreciation 2,776 2,109 77 4,962
Amortization 996 13 285 1,294
--------- ----------- --------- ------------
Total costs and
expenses 164,671 70,390 6,001 241,062
--------- ----------- --------- ------------
Income/(loss) from
operations 21,030 15,296 (6,001) 30,325
Interest expense (31) (96) (3,273) (3,400)
Intercompany interest
income/(expense) 1,731 1,183 (2,914) -
Loss on extinguishment
of debt (a) - - (13,715) (13,715)
Other income--net 57 796 1,335 2,188
--------- ----------- --------- ------------
Income/(loss) before
income taxes 22,787 17,179 (24,568) 15,398
Income taxes (8,633) (6,484) 9,152 (5,965)
--------- ----------- --------- ------------
Net income/(loss) $ 14,154 $10,695 $(15,416) $ 9,433
========= =========== ========= ============
2006
- -------------------------
Service revenues and
sales $171,527 $77,541 $ - $249,068
--------- ----------- --------- ------------
Cost of services
provided and goods sold 136,697 42,406 - 179,103
Selling, general and
administrative expenses 13,702 22,232 2,687 38,621
Depreciation 2,087 1,914 81 4,082
Amortization 984 20 313 1,317
--------- ----------- --------- ------------
Total costs and
expenses 153,470 66,572 3,081 223,123
--------- ----------- --------- ------------
Income/(loss) from
operations 18,057 10,969 (3,081) 25,945
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 19,459 11,720 (9,010) 22,169
Income taxes (7,352) (4,717) 3,450 (8,619)
--------- ----------- --------- ------------
Income/(loss) from
continuing operations 12,107 7,003 (5,560) 13,550
Discontinued operations (708) - - (708)
--------- ----------- --------- ------------
Net income/(loss) $ 11,399 $ 7,003 $ (5,560) $ 12,842
========= =========== ========= ============
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, 2007 AND 2006
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2007
- -------------------------
Service revenues and
sales $369,750 $172,076 $ - $541,826
--------- ----------- --------- ------------
Cost of services
provided and goods sold 286,734 90,229 - 376,963
Selling, general and
administrative expenses
(a) 32,164 47,951 14,045 94,160
Depreciation 5,314 4,210 153 9,677
Amortization 1,992 28 589 2,609
Other operating
expense/(income) (a) - - (1,138) (1,138)
--------- ----------- --------- ------------
Total costs and
expenses 326,204 142,418 13,649 482,271
--------- ----------- --------- ------------
Income/(loss) from
operations 43,546 29,658 (13,649) 59,555
Interest expense (67) (179) (6,896) (7,142)
Intercompany interest
income/(expense) 3,443 2,339 (5,782) -
Loss on extinguishment
of debt (a) - - (13,715) (13,715)
Other income--net (31) 968 2,120 3,057
--------- ----------- --------- ------------
Income/(loss) before
income taxes 46,891 32,786 (37,922) 41,755
Income taxes (17,750) (12,605) 14,254 (16,101)
--------- ----------- --------- ------------
Net income/(loss) $ 29,141 $ 20,181 $(23,668) $ 25,654
========= =========== ========= ============
2006
- -------------------------
Service revenues and
sales $337,584 $155,405 $ - $492,989
--------- ----------- --------- ------------
Cost of services
provided and goods sold 270,293 84,845 - 355,138
Selling, general and
administrative expenses 26,917 44,774 5,384 77,075
Depreciation 4,144 3,883 187 8,214
Amortization 1,968 40 605 2,613
--------- ----------- --------- ------------
Total costs and
expenses 303,322 133,542 6,176 443,040
--------- ----------- --------- ------------
Income/(loss) from
operations 34,262 21,863 (6,176) 49,949
Interest expense (69) (282) (9,294) (9,645)
Intercompany interest
income/(expense) 2,349 1,801 (4,150) -
Loss on extinguishment
of debt (b) - - (430) (430)
Other income--net 57 273 1,689 2,019
--------- ----------- --------- ------------
Income/(loss) before
income taxes 36,599 23,655 (18,361) 41,893
Income taxes (13,812) (9,451) 6,958 (16,305)
--------- ----------- --------- ------------
Income/(loss) from
continuing operations 22,787 14,204 (11,403) 25,588
Discontinued operations (531) - - (531)
--------- ----------- --------- ------------
Net income/(loss) $ 22,256 $ 14,204 $(11,403) $ 25,057
========= =========== ========= ============
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, 2007 AND 2006
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
-------- ----------- --------- ------------
2007
- --------------------------
Net income/(loss) $14,154 $10,695 $(15,416) $ 9,433
Add/(deduct):
Interest expense 31 96 3,273 3,400
Income taxes 8,633 6,484 (9,152) 5,965
Depreciation 2,776 2,109 77 4,962
Amortization 996 13 285 1,294
-------- ----------- --------- ------------
EBITDA 26,590 19,397 (20,933) 25,054
Add/(deduct):
Long-term incentive
compensation - - 1,620 1,620
Stock option expense - - 897 897
Legal expenses of OIG
investigation 74 - - 74
Loss on extinguishment
of debt - - 13,715 13,715
Advertising cost
adjustment (c) - (99) - (99)
Interest income (66) (52) (826) (944)
Intercompany interest
(income)/expense (1,731) (1,183) 2,914 -
-------- ----------- --------- ------------
Adjusted EBITDA $24,867 $18,063 $ (2,613) $40,317
======== =========== ========= ============
2006
- --------------------------
Net income/(loss) $11,399 $ 7,003 $ (5,560) $12,842
Add/(deduct):
Discontinued operations 708 - - 708
Interest expense 38 109 4,153 4,300
Income taxes 7,352 4,717 (3,450) 8,619
Depreciation 2,087 1,914 81 4,082
Amortization 984 20 313 1,317
-------- ----------- --------- ------------
EBITDA 22,568 13,763 (4,463) 31,868
Add/(deduct):
Stock option expense - - 18 18
Legal expenses of OIG
investigation 342 - - 342
Advertising cost
adjustment (c) - (87) - (87)
Interest income (35) (17) (527) (579)
Intercompany interest
(income)/expense (1,395) (949) 2,344 -
-------- ----------- --------- ------------
Adjusted EBITDA $21,480 $12,710 $ (2,628) $31,562
======== =========== ========= ============
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, 2007 AND 2006
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
-------- ----------- --------- ------------
2007
- --------------------------
Net income/(loss) $29,141 $20,181 $(23,668) $25,654
Add/(deduct):
Discontinued operations - - - -
Interest expense 67 179 6,896 7,142
Income taxes 17,750 12,605 (14,254) 16,101
Depreciation 5,314 4,210 153 9,677
Amortization 1,992 28 589 2,609
-------- ----------- --------- ------------
EBITDA 54,264 37,203 (30,284) 61,183
Add/(deduct):
Long-term incentive
compensation - - 7,067 7,067
Stock option expense - - 1,482 1,482
Legal expenses of OIG
investigation 140 - - 140
Gain on sale of property - - (1,138) (1,138)
Other - - (467) (467)
Loss on extinguishment
of debt - - 13,715 13,715
Advertising cost
adjustment (c) - (396) - (396)
Interest income (79) (111) (1,521) (1,711)
Intercompany interest
(income)/expense (3,443) (2,339) 5,782 -
-------- ----------- --------- ------------
Adjusted EBITDA $50,882 $34,357 $ (5,364) $79,875
======== =========== ========= ============
2006
- --------------------------
Net income/(loss) $22,256 $14,204 $(11,403) $25,057
Add/(deduct):
Discontinued operations 531 - - 531
Interest expense 69 282 9,294 9,645
Income taxes 13,812 9,451 (6,958) 16,305
Depreciation 4,144 3,883 187 8,214
Amortization 1,968 40 605 2,613
-------- ----------- --------- ------------
EBITDA 42,780 27,860 (8,275) 62,365
Add/(deduct):
Stock option expense - - 18 18
Legal expenses of OIG
investigation 474 - - 474
Loss on extinguishment
of debt - - 430 430
Advertising cost
adjustment (c) - (581) - (581)
Interest income (76) (40) (1,435) (1,551)
Intercompany interest
(income)/expense (2,349) (1,801) 4,150 -
-------- ----------- --------- ------------
Adjusted EBITDA $40,829 $25,438 $ (5,112) $61,155
======== =========== ========= ============
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, 2007 AND 2006
(in thousands, except per share data)(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2007 2006 2007 2006
---------- ------- -------- -------
Net income/(loss) as reported $ 9,433 $12,842 $25,654 $25,057
Add/(deduct):
Discontinued operations - 708 - 531
Aftertax cost of long-term
incentive compensation 1,013 - 4,427 -
Aftertax stock option expense 570 12 941 12
Aftertax cost of legal expenses
of OIG investigation 46 212 87 294
Aftertax other - - (296) -
Gain on sale of property - - (724)
Aftertax cost of loss on
extinguishment of debt 8,726 - 8,726 273
---------- ------- -------- -------
Adjusted income from continuing
operations $19,788 $13,774 $38,815 $26,167
========== ======= ======== =======
Earnings/(Loss) Per Share As
Reported
Net income/(loss) $ 0.38 $ 0.49 $ 1.02 $ 0.96
========== ======= ======== =======
Average number of shares
outstanding 24,506 26,201 25,108 26,123
========== ======= ======== =======
Diluted Earnings/(Loss) Per Share
As Reported
Net income/(loss) $ 0.38 $ 0.48 $ 1.00 $ 0.93
========== ======= ======== =======
Average number of shares
outstanding 25,080 26,846 25,684 26,815
========== ======= ======== =======
Adjusted Earnings Per Share
Income from continuing
operations $ 0.81 $ 0.53 $ 1.55 $ 1.00
========== ======= ======== =======
Average number of shares
outstanding 24,506 26,201 25,108 26,123
========== ======= ======== =======
Adjusted Diluted Earnings Per
Share
Income from continuing
operations $ 0.79 $ 0.51 $ 1.51 $ 0.98
========== ======= ======== =======
Average number of shares
outstanding 25,080 26,846 25,684 26,815
========== ======= ======== =======
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, 2007 AND 2006
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2007 2006 (f) 2007 2006 (f)
--------- --------- -------- ---------
OPERATING STATISTICS
Net revenue ($000) (d)
Homecare $134,794 $120,768 $266,341 $234,000
Inpatient 22,745 21,720 46,207 44,736
Continuous care 28,162 29,638 56,730 59,447
--------- --------- --------- ---------
Total before Medicare cap
allowance 185,701 172,126 369,278 338,183
Medicare cap allowance - (599) 472 (599)
--------- --------- --------- ---------
Total $185,701 $171,527 $369,750 $337,584
========= ========= ========= =========
Net revenue as a percent of
total before Medicare cap
allowance
Homecare 72.6 % 70.2 % 72.0 % 69.2 %
Inpatient 12.2 12.6 12.5 13.2
Continuous care 15.2 17.2 15.4 17.6
--------- --------- --------- ---------
Total before Medicare cap
allowance 100.0 100.0 99.9 100.0
Medicare cap allowance - (0.3) 0.1 (0.2)
--------- --------- --------- ---------
Total 100.0 % 99.7 % 100.0 % 99.8 %
========= ========= ========= =========
Average daily census ("ADC")
(days)
Homecare 6,915 6,275 6,851 6,104
Nursing home 3,574 3,488 3,574 3,424
--------- --------- --------- ---------
Routine homecare 10,489 9,763 10,425 9,528
Inpatient 413 404 419 417
Continuous care 504 537 514 553
--------- --------- --------- ---------
Total 11,406 10,704 11,358 10,498
========= ========= ========= =========
Total Admissions 13,658 12,987 27,768 26,760
Total Discharges 13,359 12,528 27,416 25,825
Average length of stay
(days) 76.6 68.0 76.8 70.3
Median length of stay (days) 13.0 13.0 13.0 13.0
ADC by major diagnosis
Neurological 33.0 % 33.1 % 33.2 % 33.1 %
Cancer 19.7 20.0 19.7 20.2
Cardio 14.6 15.0 14.6 14.9
Respiratory 6.9 7.2 6.9 7.2
Other 25.8 24.7 25.6 24.6
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Admissions by major
diagnosis
Neurological 18.0 % 19.6 % 18.6 % 20.1 %
Cancer 35.9 35.0 35.0 34.4
Cardio 12.9 13.2 13.1 13.6
Respiratory 7.7 7.0 7.8 7.5
Other 25.5 25.2 25.5 24.4
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Direct patient care margins
(e)
Routine homecare 51.1 % 49.5 % 50.9 % 48.6 %
Inpatient 18.9 20.9 19.5 22.0
Continuous care 17.7 20.3 18.9 19.3
Homecare margin drivers
(dollars per patient day)
Labor costs $ 48.96 $ 48.31 $ 49.04 $ 49.77
Drug costs 7.82 8.39 7.99 7.90
Home medical equipment 5.78 5.51 5.77 5.52
Medical supplies 2.11 2.11 2.14 2.10
Inpatient margin drivers
(dollars per patient day)
Labor costs $ 262.37 $ 258.32 $ 257.35 $ 252.87
Continuous care margin
drivers (dollars per
patient day)
Labor costs $ 484.13 $ 463.62 $ 474.21 $ 458.96
Bad debt expense as a
percent of revenues 0.9 % 0.9 % 0.9 % 0.9 %
Accounts receivable -- days
of revenue outstanding 37.5 40.1 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, 2007 AND 2006
(unaudited)
(a) Included in the results of operations for the three and six months
ended June 30, 2007 are the following significant
credits/(charges) which may not be indicative of on going
operations (in thousands):
Three Months Ended June 30, 2007
--------------------------------
VITAS Corporate Consolidated
--------- --------- ------------
Selling, general and
administrative expenses
Long-term incentive
compensation $ - $ (1,620) $ (1,620)
Costs associated with OIG
investigation (74) - (74)
Stock option expense - (897) (897)
Loss on extinguishment of debt - (13,715) (13,715)
--------- --------- ------------
Pretax impact on
earnings (74) (16,232) (16,306)
Income tax benefit/(charge) on
the above 28 5,923 5,951
--------- --------- ------------
Aftertax impact on
earnings $ (46) $(10,309) $(10,355)
========= ========= ============
Six Months Ended June 30, 2007
--------------------------------
VITAS Corporate Consolidated
--------- --------- ------------
Selling, general and
administrative expenses
Long-term incentive
compensation $ - $ (7,067) $ (7,067)
Costs associated with OIG
investigation (140) - (140)
Stock option expense - (1,482) (1,482)
Other - 467 467
Other operating
expenses/(income)
Gain on sale of property - 1,138 1,138
Loss on extinguishment of debt - (13,715) (13,715)
--------- --------- ------------
Pretax impact on
earnings (140) (20,659) (20,799)
Income tax benefit/(charge) on
the above 53 7,585 7,638
--------- --------- ------------
Aftertax impact on
earnings $ (87) $(13,074) $(13,161)
========= ========= ============
(b) 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
--------------------------------
VITAS 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
--------------------------------
VITAS 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)
========= ========= ============
(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 2007 and 2006,
GAAP advertising expense for Roto-Rooter totaled $5,449,000 and
$4,914,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the second quarters of 2007 and 2006
would total $5,548,000 and $5,001,000, respectively. For the six
months ended June 30, 2007 and 2006, GAAP advertising expense for
Roto-Rooter totaled $10,642,000 and $9,338,000, respectively. If
the expense of the telephone directories were spread over the
periods they are in circulation, advertising expense for the six
months ended June 30, 2007 and 2006 would total $11,038,000 and
$9,919,000, respectively.
(d)VITAS has 6 large (greater than 450 ADC), 15 medium (greater than
200 but less than 450 ADC) and 23 small (less than 200 ADC)
hospice programs. There are two programs with Medicare cap
cushion of less than 10% for the 2007 measurement period.
(e)Amounts exclude indirect patient care and administrative costs, as
well as Medicare Cap billing limitation.
(f)Reclassified for operations discontinued in November 2006.
CONTACT: Chemed Corporation
David P. Williams, 513-762-6901