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): May 03, 2005 CHEMED CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-8351 31-0791746 (State or other jurisdiction (Commission File (I.R.S. Employer of incorporation) Number) Identification 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)Item 2.02 Results of Operations and Financial Condition On May 3, 2005 Chemed Corporation issued a press release announcing its financial results for the quarter ended March 31, 2005. 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 May 3, 2005 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: May 4, 2005 By: /s/ Arthur V. Tucker, Jr. ----------------------------- Arthur V. Tucker, Jr. Vice President and Controller
Exhibit 99 Chemed Corporation Reports 2005 First-Quarter Results From Continuing Operations; Consolidated Diluted EPS of $.61; Adjusted Pro Forma Diluted EPS of $.79 CINCINNATI--(BUSINESS WIRE)--May 3, 2005--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, 2005, versus the comparable prior-year period, as follows: -- Operating Results in Accordance with Generally Accepted Accounting Principles (GAAP) -- Consolidated Revenue increased 82% to $219 million -- Diluted EPS from Continuing Operations of $.61 -- Pro Forma Adjusted Consolidated Operating Results (Non GAAP) -- Adjusted Diluted EPS from Continuing Operations of $.79 -- Adjusted EBITDA from Continuing Operations of $27.0 million -- VITAS generated record revenue and ADC levels -- Quarterly Net Patient Revenue of $146 million, up 18% -- Average Daily Census (ADC) of 9,523, up 18% -- Net income of $9.4 million, up 67% over prior period Pro Forma Net Income -- Pro Forma Adjusted EBITDA (Non GAAP) of $17.6 million, an increase of 56% -- Roto-Rooter segment reported increased Revenue, Net Income and Adjusted EBITDA -- Revenue of $73 million, an increase of 5% -- Net Income of $7.1 million -- Adjusted EBITDA (Non GAAP) of $11.8 million, an increase of 12% "The first quarter of 2005 operating results are consistent with the momentum we developed in the prior year," stated Kevin McNamara, Chemed president and chief executive officer. "VITAS generated excellent census and admissions growth, with first quarter ADC totaling 9,523, up 18%, and admissions in the quarter of 12,948, an increase of 6% over the prior year quarter and 12% sequentially. Our average length-of-stay for discharges (ALOS) was 66.2 days. During the quarter, we completed the Pittsburgh acquisition and currently have nine programs classified as new starts in various stages of development. "Roto-Rooter also had good financial operating results. For the first quarter of 2005, Roto-Rooter had revenue of $73 million and net income of $7.1 million. Adjusted EBITDA was $11.8 million at a margin of 16.2%." "The first quarter of 2005 includes several items that should be taken into consideration when evaluating our operating results," said David Williams, Chemed's chief financial officer. "These items include expenses from the early extinguishment of Chemed's $110 million floating rate notes, restructuring the Company's credit agreements, a favorable adjustment to casualty insurance accruals related to prior years' experience, long-term incentive payment (LTIP) compensation and a noncash charge related to accelerating the vesting of stock options." For a detailed presentation of Chemed's operating results, reconciling items and related definitions and components, please refer to the attached schedules. VITAS The merger of VITAS was completed on February 24, 2004. Prior to that date the Company accounted for its 37% ownership of VITAS under the equity method of accounting. As a result, under GAAP, only a portion of VITAS' operating results is fully consolidated into Chemed's first quarter 2004 results. In the first quarter of 2005, VITAS had net patient revenue of $146 million and net income of $9.4 million. Adjusted EBITDA was $17.6 million at a margin of 12.1%. VITAS generated revenue growth of 17.8% over the prior year period and 2.6% sequentially. Gross margins were 21.1% in the first quarter of 2005, an improvement of 120 basis points when compared to the prior year quarter. The first quarter 2005 gross margin includes $1.2 million in start-up losses, which is essentially flat with 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 Statement of Operations, totaled $13.1 million, which is a decline of 1.4% from the prior year quarter and up 91 basis points sequentially. VITAS' ADC in the first quarter of 2005 was 9,523. This compares to an ADC of 8,097 in the comparable prior year period, an increase of 17.6% and 4.3% sequential growth. The month of March 2005 had an ADC of 9,667. ALOS for patients discharged in the quarter was 66.2 days and compares to 64.1 days in the fourth quarter of 2004 and 55.7 days in the first quarter of 2004. ALOS is calculated from the patients discharged in the period. Only one of our programs has an ALOS that exceeds 100 days and this program maintains a current cap cushion of approximately 12%. "We continue to see strong ADC and admissions growth," said Williams. "The ADC in our 24 base programs, which excludes acquisitions and new starts, averaged 377 patients per program. ADC growth in these established programs was 11.9% over the prior year quarter and 1.2% sequentially. Admissions for the established programs totaled 12,252, which was an increase of 0.5% over the prior year quarter and 10.4% sequentially. "Our mix of revenue at VITAS was relatively stable this quarter," Williams added. "Routine home care aggregated 69.1% of revenue, an increase of 220 basis points over the prior year quarter and a 30 basis point decline on a sequential basis. Our inpatient revenue aggregated 14.3% of total revenue and continuous care was 16.6% of revenue in the first quarter of 2005." Roto-Rooter Segment Roto-Rooter's plumbing and drain cleaning business generated sales of $73 million for the first quarter of 2005, 4.9% higher than the $69 million reported in the comparable prior-year quarter. Net income for the quarter was $7.1 million, including $1.0 million of aftertax benefit from favorable experience and adjustments in estimated insurance accruals for claims incurred in prior periods. Adjusted EBITDA in the first quarter of 2005 totaled $11.8 million, an increase of 12.4% over the first quarter of 2004. Adjusted EBITDA margin in the first quarter of 2005 was 16.2% and compares to Adjusted EBITDA margin of 15.2% in the prior year period. "Job count in aggregate declined a modest 1.0% from the prior-year period," stated Williams. "However, commercial plumbing and drain cleaning job count increased 7.4% and 2.3%, respectively, over the prior year quarter. Residential plumbing jobs increased 3.1% but were offset by a 5.2% decline in residential drain cleaning jobs in the quarter. A commercial job will typically average approximately 34% more revenue than a residential job. Accordingly, this type of demand mix shift will have a positive impact on revenue." Consolidated Financial Position "Our balance sheet is in excellent condition," Williams stated. "As of March 31, 2005, we had $8.6 million in cash and cash equivalents. This cash balance is net of the approximately $55 million used to redeem the floating rate notes. In addition, the first quarter of 2005 ended on a Thursday, one day prior to receiving our scheduled Medicare billing payment. This payment, received on April 1, 2005, totaled $19.6 million. Net cash provided from continuing operations was $5.0 million and capital expenditures totaled $6.2 million in the first quarter of 2005." Guidance for 2005 "Looking ahead into 2005," Williams stated, "we anticipate VITAS to increase revenue in the range of 16% to 18% in 2005 with margins increasing modestly from the 2004 levels. This operating margin expansion will be generated from leveraging central support costs. Roto-Rooter is estimated to generate a 5% to 7% increase in revenue with margins that approximate those generated in 2004. Our consolidated effective tax rate was unusually high in the first quarter of 2005 due to the earnings mix and state and local tax impact of the unusual items noted earlier. The 2005 consolidated full year 2005 income tax rate is estimated to be 39.5% to 40.0%. "Based upon these factors, and a current diluted share count of 13.0 million, our expectation is that earnings per diluted share for 2005, excluding the early extinguishment of debt and other items noted earlier, will be in the range of $3.40 to $3.50." Conference Call Chemed will hold a conference call to discuss first quarter results Wednesday, May 4, 2005, at 11 a.m. EDT. The dial-in number for the conference call is 800-510-9834 for U.S. and Canadian participants and 617-614-3669 for international participants. The participant passcode is 41187439. A live webcast of the call can be accessed on Chemed's website at www.chemed.com by clicking on "Investor Relations Home" and then on "Featured Event: Web Cast-Live Q1 2005 Chemed Corporation Conference Call." An archived webcast will also be available at www.chemed.com and will remain available for 14 days following the live call. A taped replay of the conference call will be available 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. The replay passcode is 87752802. The telephone replay will be available for one week following the live call. Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to approximately 9,500 patients with severe, life-limiting illnesses. This type of care is focused on making the terminally ill patient's final days as comfortable and pain-free as possible. Chemed operates in the residential and commercial plumbing and drain cleaning industry under the brand name Roto-Rooter. Roto-Rooter provides plumbing and drain service through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in China/Hong Kong, Indonesia, Singapore, Japan, Mexico, the Philippines and the United Kingdom. This press release contains information about Chemed's EBITDA and Adjusted EBITDA, which are not measures derived in accordance with generally accepted accounting principles, and which excludes 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 OPERATIONS (in thousands, except per share data)(unaudited) Three Months Ended March 31, ----------------------------- 2005 2004 (bb) ------------- ------------- Continuing Operations Service revenues and sales $ 218,637 $ 120,340 ------------- ------------- Cost of services provided and goods sold (aa) 152,952 78,849 Selling, general and administrative expenses 36,595 28,212 Depreciation 3,920 3,061 Amortization 1,192 461 Other expenses (aa) 1,324 8,783 ------------- ------------- Total costs and expenses 195,983 119,366 ------------- ------------- Income from operations 22,654 974 Interest expense (5,835) (2,900) Loss on extinguishment of debt (aa) (3,971) (3,330) Other income--net 727 1,479 ------------- ------------- Income/(loss) before income taxes 13,575 (3,777) Income taxes (5,670) 626 Equity in loss of affiliate (aa) - (4,105) ------------- ------------- Income/(loss) from continuing operations 7,905 (7,256) Discontinued Operations (bb) 211 146 ------------- ------------- Net Income/(Loss) $ 8,116 $ (7,110) ============= ============= Earnings/(Loss) Per Share (aa) Income/(loss) from continuing operations $ 0.63 $ (0.66) ============= ============= Net income/(loss) $ 0.65 $ (0.65) ============= ============= Average number of shares outstanding 12,576 10,912 ============= ============= Diluted Earnings/(Loss) Per Share (aa) Income/(loss) from continuing operations $ 0.61 $ (0.66) ============= ============= Net income/(loss) $ 0.63 $ (0.65) ============= ============= Average number of shares outstanding 12,955 10,912 ============= ============= - --------------------------------------- (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, ----------------------------- 2005 2004 ------------- ------------- Cost of services provided and goods sold Favorable adjustment to casualty insurance accruals related to prior years' experience $ 1,663 $ - Other expenses Long-term incentive compensation (1,109) (8,783) Cost of accelerating vesting of stock options (215) - Loss on extinguishment of debt (3,971) (3,330) ------------- ------------- Pretax impact on earnings (3,632) (12,113) Income tax benefit on the above 1,291 4,226 Equity in loss of affiliate attributable to transaction- related expenses incurred by VITAS prior to its acquisition by Chemed - (4,105) ------------- ------------- Aftertax impact on earnings $ (2,341) $ (11,992) ============= ============= Impact on earnings per share $ (0.19) $ (1.10) ============= ============= Impact on diluted earnings per share $ (0.18) $ (1.10) ============= ============= (bb) Results of operations for 2004 have been restated for operations discontinued in December 2004. Discontinued operations for both periods comprise solely the results of operations of the Service America segment. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (in thousands, except per share data)(unaudited) March 31, ----------------------- 2005 2004 (cc) ----------- ----------- Assets Current assets Cash and cash equivalents $ 8,557 $ 43,036 Accounts receivable less allowances 81,880 65,446 Inventories 7,012 6,031 Current deferred income taxes 33,559 26,103 Prepaid income taxes - 12,756 Current assets of discontinued operations 15,162 15,608 Prepaid expenses and other current assets 8,461 16,008 ----------- ----------- Total current assets 154,631 184,988 Investments of deferred compensation plans held in trust 19,415 18,904 Other investments 1,445 1,445 Note receivable 12,500 12,500 Properties and equipment, at cost less accumulated depreciation 58,172 52,275 Identifiable intangible assets less accumulated amortization 75,904 25,235 Goodwill 436,820 452,705 Noncurrent assets of discontinued operations 5,717 10,688 Other assets 22,519 31,217 ----------- ----------- Total Assets $ 787,123 $ 789,957 =========== =========== Liabilities Current liabilities Accounts payable $ 40,470 $ 38,317 Current portion of long-term debt 1,277 5,634 Income taxes 16,529 3,660 Accrued insurance 26,087 18,154 Accrued salaries and wages 22,656 18,344 Current liabilities of discontinued operations 21,929 20,637 Other current liabilities 32,253 38,688 ----------- ----------- Total current liabilities 161,201 143,434 Deferred income taxes 17,395 1,258 Convertible junior subordinated debentures - 14,001 Other long-term debt 234,738 315,800 Deferred compensation liabilities 19,357 19,121 Noncurrent liabilities of discontinued operations 802 615 Other liabilities 8,062 9,069 ----------- ----------- Total Liabilities 441,555 503,298 ----------- ----------- Stockholders' Equity Capital stock 13,662 13,056 Paid-in capital 222,062 195,609 Retained earnings 148,141 111,428 Treasury stock, at cost (36,241) (32,741) Unearned compensation (3,836) (2,480) Deferred compensation payable in Company stock 2,318 2,324 Notes receivable for shares sold (538) (537) ----------- ----------- Total Stockholders' Equity 345,568 286,659 ----------- ----------- Total Liabilities and Stockholders' Equity $ 787,123 $ 789,957 =========== =========== Book Value Per Share $ 27.32 $ 23.58 =========== =========== (cc) Reclassified for operations discontinued in 2004. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)(unaudited) Three Months Ended March 31, ------------------------ 2005 2004 (cc) ----------- ----------- Cash Flows from Operating Activities Net income/(loss) $ 8,116 $ (7,110) Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities: Depreciation and amortization 5,112 3,522 Write-off of unamortized debt issuance costs 2,871 - Provision for deferred income taxes (1,892) (1,341) Provision for uncollectible accounts receivable 1,530 883 Noncash long-term incentive compensation 948 5,808 Amortization of debt issuance costs 522 - Discontinued operations (211) (146) Equity in loss of affiliate - 4,105 Changes in operating assets and liabilities, excluding amounts acquired in business combinations: Increase in accounts receivable (18,747) (4,170) Decrease/(increase) in inventories 7 (20) Decrease in prepaid expenses and other current assets 1,381 7,250 Decrease in accounts payable and other current liabilities (1,785) (20,550) Increase in income taxes 7,484 848 Decrease/(increase) in other assets (882) 358 Increase in other liabilities 635 1,317 Noncash expense of internally financed ESOPs 286 474 Other uses (419) (991) ----------- ----------- Net cash provided/(used) by continuing operations 4,956 (9,763) Net cash provided/(used) by discontinued operations (1,081) 1,330 ----------- ----------- Net cash provided/(used) by operating activities 3,875 (8,433) ----------- ----------- Cash Flows from Investing Activities Capital expenditures (6,201) (1,653) Business combinations, net of cash acquired (4,401) (324,075) Net uses from discontinued operations (817) (448) Proceeds from sales of property and equipment 36 166 Return of merger deposit - 10,000 Other uses (136) (105) ----------- ----------- Net cash used by investing activities (11,519) (316,115) ----------- ----------- Cash Flows from Financing Activities Repayment of long-term debt (140,680) (92,178) Proceeds from issuance of long-term debt 85,000 295,000 Issuance of capital stock, net of costs 4,208 97,234 Debt issuance costs (1,555) (13,095) Dividends paid (1,517) (1,209) Purchases of treasury stock (833) (2,202) Net increase in revolving line of credit - 25,000 Repayment of stock subscription note receivable - 8,053 Other sources 130 293 ----------- ----------- Net cash provided/(used) by financing activities (55,247) 316,896 ----------- ----------- Decrease in Cash and Cash Equivalents (62,891) (7,652) Cash and cash equivalents at beginning of year 71,448 50,688 ----------- ----------- Cash and cash equivalents at end of period $ 8,557 $ 43,036 =========== =========== (cc) Reclassified for operations discontinued in December 2004. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (in thousands)(unaudited) Chemed Roto- Consol- VITAS Rooter Corporate idated --------- --------- --------- --------- 2005 - ------------------------ Service revenues and sales $145,990 $ 72,647 $ - $218,637 --------- --------- --------- --------- Cost of services provided and goods sold 115,220 37,732 (a) - 152,952 Selling, general and administrative expenses 13,124 21,150 2,321 36,595 Depreciation 1,785 2,062 73 3,920 Amortization 995 26 171 1,192 Other expenses 293 (b) 248 (b) 783 (b) 1,324 --------- --------- --------- --------- Total costs and expenses 131,417 61,218 3,348 195,983 --------- --------- --------- --------- Income/(loss) from operations 14,573 11,429 (3,348) 22,654 Interest expense (38) (182) (5,615) (5,835) Intercompany interest income/(expense) 509 424 (933) - Loss on extinguishment of debt - - (3,971)(c) (3,971) Other income--net 108 296 323 727 --------- --------- --------- --------- Income/(loss) before income taxes 15,152 11,967 (13,544) 13,575 Income taxes (5,783) (4,822) 4,935 (5,670) --------- --------- --------- --------- Income/(loss) from continuing operations 9,369 7,145 (8,609) 7,905 Discontinued operations - - 211 211 --------- --------- --------- --------- Net income/(loss) $ 9,369 $ 7,145 $ (8,398) $ 8,116 ========= ========= ========= ========= 2004 - ------------------------ Service revenues and sales $ 51,112 $ 69,228 $ - $120,340 --------- --------- --------- --------- Cost of services provided and goods sold 40,486 38,363 - 78,849 Selling, general and administrative expenses 4,989 20,947 2,276 28,212 Depreciation 748 2,246 67 3,061 Amortization 402 59 - 461 Other expenses - 1,558 (b) 7,225 (b) 8,783 --------- --------- --------- --------- Total costs and expenses 46,625 63,173 9,568 119,366 --------- --------- --------- --------- Income/(loss) from operations 4,487 6,055 (9,568) 974 Interest expense (28) (26) (2,846) (2,900) Intercompany interest income/(expense) - 184 (184) - Loss on extinguishment of debt - - (3,330)(c) (3,330) Other income--net 31 818 630 1,479 --------- --------- --------- --------- Income/(loss) before income taxes 4,490 7,031 (15,298) (3,777) Income taxes (1,893) (2,794) 5,313 626 Equity in loss of VITAS - - (4,105)(d) (4,105) --------- --------- --------- --------- Income/(loss) from continuing operations 2,597 4,237 (14,090) (7,256) Discontinued operations - - 146 146 --------- --------- --------- --------- Net income/(loss) $ 2,597 $ 4,237 $(13,944) $ (7,110) ========= ========= ========= ========= The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (in thousands, except per share data) (unaudited) Chemed Roto- Consol- VITAS Rooter Corporate idated --------- --------- --------- --------- 2005 - ------------------------ Service revenues and sales $145,990 $ 72,647 $ - $218,637 --------- --------- --------- --------- Cost of services provided and goods sold 115,220 37,732 (a) - 152,952 Selling, general and administrative expenses 13,124 21,150 2,321 36,595 Depreciation 1,785 2,062 73 3,920 Amortization 995 26 171 1,192 Other expenses 293 (b) 248 (b) 783 (b) 1,324 --------- --------- --------- --------- Total costs and expenses 131,417 61,218 3,348 195,983 --------- --------- --------- --------- Income/(loss) from operations 14,573 11,429 (3,348) 22,654 Interest expense (38) (182) (5,615) (5,835) Intercompany interest income/(expense) 509 424 (933) - Loss on extinguishment of debt - - (3,971)(c) (3,971) Other income--net 108 296 323 727 --------- --------- --------- --------- Income/(loss) before income taxes 15,152 11,967 (13,544) 13,575 Income taxes (5,783) (4,822) 4,935 (5,670) --------- --------- --------- --------- Income/(loss) from continuing operations 9,369 7,145 (8,609) 7,905 Discontinued operations - - 211 211 --------- --------- --------- --------- Net income/(loss) $ 9,369 $ 7,145 $ (8,398) $ 8,116 ========= ========= ========= ========= Earnings Per Share Continuing operations $ 0.63 ========= Net income $ 0.65 ========= Average number of shares outstanding 12,576 ========= Diluted Earnings Per Share Continuing operations $ 0.61 ========= Net income $ 0.63 ========= Average number of shares outstanding 12,955 ========= 2004 (e) - ------------------------ Service revenues and sales $123,982 $ 69,228 $ - $193,210 --------- --------- --------- --------- Cost of services provided and goods sold 99,334 38,363 - 137,697 Selling, general and administrative expenses 13,314 20,947 2,137 36,398 Depreciation 982 2,246 67 3,295 Amortization 1,095 59 - 1,154 Other expenses - 1,558 (b) 7,225 (b) 8,783 --------- --------- --------- --------- Total costs and expenses 114,725 63,173 9,429 187,327 --------- --------- --------- --------- Income/(loss) from operations 9,257 6,055 (9,429) 5,883 Interest expense (28) (26) (6,248) (6,302) Intercompany interest income/(expense) - 184 (184) - Loss on extinguishment of debt - - (3,330)(c) (3,330) Other income--net 72 818 630 1,520 --------- --------- --------- --------- Income/(loss) before income taxes 9,301 7,031 (18,561) (2,229) Income taxes (3,701) (2,794) 6,447 (48) --------- --------- --------- --------- Income/(loss) from continuing operations 5,600 4,237 (12,114) (2,277) Discontinued operations - - 146 146 --------- --------- --------- --------- Net income/(loss) $ 5,600 $ 4,237 $(11,968) $ (2,131) ========= ========= ========= ========= Earnings/(Loss) Per Share Continuing operations $ (0.19) ========= Net income $ (0.18) ========= Average number of shares outstanding 12,099 ========= Diluted Earnings/(Loss) Per Share Continuing operations $ (0.19) ========= Net income $ (0.18) ========= Average number of shares outstanding 12,099 ========= 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, 2005 AND 2004 (in thousands)(unaudited) Chemed Roto- Consol- VITAS Rooter Corporate idated ----------- ----------- ----------- ----------- 2005 - ---------------------- Net income/(loss) $ 9,369 $ 7,145 $ (8,398) $ 8,116 Add/(deduct): Discontinued operations - - (211) (211) Interest expense 38 182 5,615 5,835 Income taxes 5,783 4,822 (4,935) 5,670 Depreciation 1,785 2,062 73 3,920 Amortization 995 26 171 1,192 ------------ ----------- ----------- ----------- EBITDA 17,970 14,237 (7,685) 24,522 Add/(deduct): Long-term incentive compensation (k) 293 248 783 1,324 Prior-period insurance adjustment - (1,663) - (1,663) Advertising cost adjustment (g) - (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 $ 17,628 $ 11,804 $ (2,481) $ 26,951 ============ =========== =========== =========== 2004 - ---------------------- Net income/(loss) $ 2,597 $ 4,237 $ (13,944) $ (7,110) Add/(deduct): Discontinued operations - - (146) (146) Interest expense 28 26 2,846 2,900 Income taxes 1,893 2,794 (5,313) (626) Depreciation 748 2,246 67 3,061 Amortization 402 59 - 461 ------------ ----------- ----------- ----------- EBITDA 5,668 9,362 (16,490) (1,460) Add/(deduct): Long-term incentive compensation - 1,558 7,225 8,783 Advertising cost adjustment (g) - (193) - (193) Interest income (31) (38) (439) (508) Intercompany interest income/(expense) - (184) 184 - Equity in loss of VITAS - - 4,105 4,105 Loss on extinguishment of debt - - 3,330 3,330 ------------ ----------- ----------- ----------- Adjusted EBITDA $ 5,637 $ 10,505 $ (2,085) $ 14,057 ============ =========== =========== =========== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONSOLIDATING SUMMARY OF EBITDA FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (in thousands)(unaudited) Chemed Roto- Corporate Consol- VITAS (f) Rooter (f) idated ----------- ----------- ----------- ----------- 2005 - ---------------------- Net income/(loss) $ 9,369 $ 7,145 $ (8,398) $ 8,116 Add/(deduct): Discontinued operations - - (211) (211) Interest expense 38 182 5,615 5,835 Income taxes 5,783 4,822 (4,935) 5,670 Depreciation 1,785 2,062 73 3,920 Amortization 995 26 171 1,192 ------------ ----------- ----------- ----------- EBITDA 17,970 14,237 (7,685) 24,522 Add/(deduct): Long-term incentive compensation (k) 293 248 783 1,324 Prior-period insurance adjustment - (1,663) - (1,663) Advertising cost adjustment (g) - (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 $ 17,628 $ 11,804 $ (2,481) $ 26,951 ============ =========== =========== =========== 2004 - ---------------------- Pro forma net income/(loss) $ 5,600 $ 4,237 $ (11,968) $ (2,131) Add/(deduct): Discontinued operations - - (146) (146) Interest expense 28 26 6,248 6,302 Income taxes 3,701 2,794 (6,447) 48 Depreciation 982 2,246 67 3,295 Amortization 1,095 59 - 1,154 ------------ ----------- ----------- ----------- Pro forma EBITDA 11,406 9,362 (12,246) 8,522 Add/(deduct): Long-term incentive compensation - 1,558 7,225 8,783 Advertising cost adjustment (g) - (193) - (193) Interest income (72) (38) (439) (549) Intercompany interest income/(expense) - (184) 184 - Loss on extinguishment of debt - - 3,330 3,330 ------------ ----------- ----------- ----------- Pro forma adjusted EBITDA $ 11,334 $ 10,505 $ (1,946) $ 19,893 ============ =========== =========== =========== The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES RECONCILIATION OF PRO FORMA ADJUSTED NET INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (in thousands, except per share data)(unaudited) Three Months Ended March 31, ------------------------ 2005 2004 ----------- ----------- Net income/(loss) as reported $ 8,116 $ (7,110) Add/(deduct): Pro forma VITAS net income contribution for the period (h) - 3,085 Pro forma financing costs related to acquisition of VITAS (i) - (2,211) Pro forma elimination of equity in loss of VITAS (j) - 4,105 ----------- ----------- Pro forma net income/(loss) 8,116 (2,131) Add/(deduct): Discontinued operations (211) (146) Aftertax prior-period insurance adjustment (1,014) - Aftertax cost of long-term incentive compensation (k) 832 5,723 Aftertax cost of loss on extinguishment of debt 2,523 2,164 ----------- ----------- Adjusted pro forma income from continuing operations $ 10,246 $ 5,610 =========== =========== Earnings/(Loss) Per Share As Reported Net income/(loss) $ 0.65 $ (0.65) =========== =========== Average number of shares outstanding 12,576 10,912 =========== =========== Diluted Earnings/(Loss) Per Share As Reported Net income/(loss) $ 0.63 $ (0.65) =========== =========== Average number of shares outstanding 12,955 10,912 =========== =========== Adjusted Pro Forma Earnings Per Share Income from continuing operations $ 0.81 $ 0.46 =========== =========== Average number of shares outstanding 12,576 12,099 =========== =========== Adjusted Pro Forma Diluted Earnings Per Share Income from continuing operations $ 0.79 $ 0.46 =========== =========== Average number of shares outstanding 12,955 12,099 =========== =========== 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, 2005 AND 2004 (unaudited) (a) Amount includes a favorable adjustment to casualty insurance accruals related to prior quarters' experience of $1,663,000 ($1,014,000 aftertax). (b) For the first quarter of 2005, amounts include payouts under the Company's Executive Long-Term Incentive Plan of $568,000 ($360,000 aftertax) for Corporate, $293,000 ($182,000 aftertax) for VITAS and $248,000 ($153,000 aftertax) for Roto-Rooter. In addition, the amount for Corporate includes $215,000 ($137,000 aftertax) related to accelerating the vesting of stock options. For the first quarter of 2004, amounts include payouts under the Company's Executive Long-Term Incentive Plan of $7,225,000 ($4,455,000 aftertax) for Corporate and $1,558,000 ($982,000 aftertax) for Roto-Rooter. For pro forma financial statements, all of the foregoing apply. (c) For the first quarter of 2005, amount represents the prepayment penalty and write-off of debt issuance costs related to the early extinguishment and refinancing of certain portions of the Company's debt ($2,523,000 aftertax). For the first quarter of 2004, amount represents the prepayment penalty incurred on the early extinguishment of the Company's debt ($2,164,000 aftertax). (d) Amount includes the Company's aftertax share of VITAS' charges related to the Company's acquisition of VITAS in the first quarter of 2004 prior to the acquisition date. These charges comprise transaction-related expenses that reduced the Company's equity in the earnings/(loss) of VITAS by $4,621,000 during the first quarter of 2004. (e) The pro forma statement of operations for 2004 assumes the Company's acquisition of VITAS and its financing (including the retirement of existing debt) were completed as of January 1, 2004, on the same terms and conditions as completed on February 24, 2004. (f) Pro forma amounts for VITAS and Corporate assume the acquisition of VITAS and the related financing were both completed on January 1, 2004. (g) 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 2005 and 2004, GAAP advertising expense for Roto-Rooter totaled $3,251,000 and $3,375,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the first quarters of 2005 and 2004 would total $3,804,000 and $3,568,000, respectively. (h) Amount represents the additional net income VITAS would contribute assuming the acquisition were completed on January 1 of the respective years (excluding Chemed management fees). (i) Amounts represent the additional financing costs, including a loss on early extinguishment of debt in 2003, that would have been incurred assuming the financing were completed on January 1 of the respective years. (j) Amounts represent the impact of eliminating the Company's prior investments in VITAS, assuming the acquisition of VITAS were completed on January 1 of the respective years. (k) For the first quarter of 2005, amount includes costs related to accelerating the vesting of stock options in addition to payouts under the Company's Executive Long-Term Incentive Plan. CONTACT: Chemed Corporation David P. Williams, 513-762-6901