Exhibit 99
Chemed Reports Third-Quarter 2006 Results
CINCINNATI--(BUSINESS WIRE)--Oct. 26, 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 third quarter ended September 30, 2006,
versus the comparable prior-year period, as follows:
Consolidated operating results from Continuing Operations:
-- Revenue increased 8.5% to $253 million
-- Diluted EPS from Continuing Operations of $.38
-- Adjusted diluted EPS from Continuing Operations, excluding certain
items, of $.48
VITAS segment operating results:
-- Net Patient Revenue of $175 million, up 9.0%, including $5.5 million
of Medicare Cap accrual
-- Average Daily Census (ADC) of 11,213, up 9.3%
-- Admissions of 12,753, an increase of 3.1%
-- Average Length of Stay in the quarter was 71.0 days
-- Net income of $7.8 million, a decline of 33.1%
-- Adjusted EBITDA of $19.4 million, a decline of 6.1%
Roto-Rooter segment operating results:
-- Revenue of $78 million, an increase of 7.5%
-- Job count of 198,394, up 0.4%
-- Net Income of $8.5 million, up 20.2%
-- Adjusted EBITDA of $12.9 million, an increase of 11.4%
In the third quarter of 2006, VITAS recorded a Medicare contractual billing
adjustment (Medicare Cap). This accrual reduced revenues by $5.5 million and
negatively impacted diluted EPS in the quarter by $0.13 per share.
Medicare Cap is currently impacting three hospice programs in the third
quarter of 2006. The Phoenix program, acquired in December 2004, recorded an
estimated Medicare Cap billing limitation of $2.9 million. The remaining two
programs recorded $1.6 million of Medicare Cap in the third quarter of 2006.
The third-quarter 2006 Medicare Cap accrual includes an additional $1.0
million for estimated prior-year billing limitations resulting from the Fiscal
Intermediary reallocating admissions for deceased Medicare patients who received
hospice care from multiple providers. Of this prior-year billing, $0.5 million
is for one of the programs noted above and $0.5 million is estimated for a
program not anticipated to have a billing restriction in calendar year 2006.
VITAS is in the process of exiting the hospice market in Phoenix, Arizona.
VITAS has been successful in growing admissions of terminally ill patients who
reside primarily in assisted living settings within the Phoenix community.
Patients residing in these types of facilities tend to exit curative care and
enter into hospice early on into their terminal illness diagnosis. The current
Medicare hospice reimbursement program limits payment for hospice care when a
significant portion of the patient census enters into hospice in the early stage
of their terminal diagnosis. Although VITAS, on average, has relatively short
average and median lengths of stay in the majority of its programs, each program
is measured separately and cannot be considered in the aggregate of its hospice
programs under common control and ownership.
The Phoenix program had an average daily census of approximately 200
patients in the third quarter of 2006. Revenue and operating losses for Phoenix
in the third quarter of 2006 were a negative $0.5 million and $4.8 million,
respectively. Included in this operating loss is a $2.4 million charge for asset
impairment. On a year-to-date basis, revenue and operating losses aggregated
$2.5 million and $5.8 million, respectively, including $4.6 million of revenue
reduction for Medicare billing limitations and $2.4 million for asset
impairment.
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 14 days or less. MLOS means that half of all
patients admitted to VITAS are discharged in 14 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 first-time
Medicare hospice admissions and the actual Medicare billings in a program.
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 having Medicare
billing limitations. To the extent the program has a predictable level of high
acuity patient admissions, the program's patient mix has a high probability of
being rebalanced and continuing 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 increased potential of being in a Medicare contractual billing
limitation situation. The Company believes its relatively low MLOS in the
majority of 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 9.0% over the prior-year period. Net
income for the quarter was $7.8 million. Medicare cap accruals negatively
impacted revenue by $5.5 million and reduced net income by $3.5 million. ADC
increased 9.3% to 11,213 and admissions increased 3.1% to 12,753.
Admissions for VITAS have been abnormally low in the second and third
quarters of 2006. This has resulted in a slowing of overall ADC growth over the
past six months. The lower than anticipated ADC growth negatively impacted gross
margins in the quarter. Routine home care direct gross margins, before the
reduction in revenue from contractual billing limitations, were 49.1%, a decline
of 130 basis points over the prior year. Continuous care direct gross margins
were 17.5%, a decline of 60 basis points when compared to the prior year and
inpatient direct care margins were 16.5% in the quarter, which are 480 basis
points below the prior-year period. These margin declines are primarily the
result of increased manpower and labor capacity relative to ADC. Given the
inherent difficulty in hiring and retaining qualified healthcare professionals,
management continued to build manpower in anticipation of an increase in
admissions and overall census in the majority of its programs in the fourth
quarter of 2006.
Central support costs for VITAS, which are classified as selling, general
and administrative expenses in the Consolidating Statement of Income, totaled
$13.6 million, including $0.3 million in OIG investigation legal expenses.
Excluding the OIG expense, central support costs decreased 172 basis points when
compared to the prior-year quarter and decreased 66 basis points sequentially.
VITAS' average length of stay (ALOS) for patients discharged in the quarter
was 71.0 days and median length of stay was 14 days. This compares to an ALOS of
68.0 days in the second quarter of 2006 and 66.5 days in the third quarter of
2005.
Roto-Rooter
Roto-Rooter's plumbing and drain cleaning business generated sales of $78
million for the third quarter of 2006, 7.5% higher than the $73 million reported
in the comparable prior-year quarter. Net income for the quarter was $8.5
million, an increase of 20.2% over the prior year. Adjusted EBITDA in the third
quarter of 2006 totaled $12.9 million, an increase of 11.4% over the third
quarter of 2005 and an adjusted EBITDA margin of 16.5%, an increase of 57 basis
points over the prior-year period.
Job count in the third quarter of 2006 decreased 0.4% over the prior-year
period. Commercial plumbing job count decreased 2.7% and commercial drain
cleaning decreased 2.6% over the prior-year quarter. Residential plumbing jobs
increased 0.7% and residential drain cleaning jobs expanded 0.7% when compared
to the third quarter of 2005. Overall, commercial jobs decreased 2.6% and
residential jobs increased 0.7%. Year to date, commercial jobs increased 1.3%
and residential jobs increased 0.5%.
Guidance for 2006
VITAS is estimated to generate full-year revenue growth from continuing
operations, prior to Medicare Cap, of 14.0% to 14.5%, increased admissions of
5.0% to 5.5%, increased ADC of 10.0% to 11.0% and adjusted EBITDA margins, prior
to Medicare Cap, of 12.9% to 13.2%. This guidance assumes a Medicare price
increase that will average 3.8% in the fourth quarter of 2006.
Full-year Medicare contractual billing limitations, excluding Phoenix,
which is anticipated to be classified as a discontinued operation in the fourth
quarter of 2006, are estimated to range from $5.7 million to $8.6 million, which
equates to revenue reduction of 80 to 120 basis points.
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
expense for stock options, will be in the range of $2.00 to $2.10. This earnings
per share guidance includes $.13 to $.20 for the after-tax impact of Medicare
Cap related to continuing operations.
Conference Call
Chemed will host a conference call and webcast at 11 a.m., ET, on Friday,
October 27, 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)
314-4865 for U.S. and Canadian participants and (617) 213-8050 for international
participants. The participant passcode is 37819056. 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 21945810. 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 Nine Months Ended
September 30, September 30,
-------------------- -------------------
2006 2005 2006 2005
---------- --------- --------- ---------
Continuing Operations (aa)
Service revenues and
sales $253,202 $233,328 $749,223 $678,274
---------- --------- --------- ---------
Cost of services provided
and goods sold (bb) 187,190 165,229 546,012 479,301
Selling, general and
administrative expenses
(bb) 39,160 38,423 116,279 114,981
Depreciation 4,200 4,086 12,465 11,934
Amortization 1,421 1,248 4,234 3,671
Other expenses -- net
(bb) 2,692 (130) 2,692 (801)
---------- --------- --------- ---------
Total costs and expenses 234,663 208,856 681,682 609,086
---------- --------- --------- ---------
Income from operations 18,539 24,472 67,541 69,188
Interest expense (4,081) (5,147) (13,726) (16,021)
Loss from impairment of
investment (1,445) - (1,445) -
Loss on extinguishment of
debt - - (430) (3,971)
Other income--net 715 1,317 2,734 2,644
---------- --------- --------- ---------
Income before income
taxes 13,728 20,642 54,674 51,840
Income taxes (3,541) (6,010) (19,430) (18,192)
---------- --------- --------- ---------
Income from continuing
operations 10,187 14,632 35,244 33,648
Discontinued Operations (cc) (2,226) - (2,226) (2,015)
---------- --------- --------- ---------
Net Income $ 7,961 $ 14,632 $ 33,018 $ 31,633
========== ========= ========= =========
Earnings Per Share
Income from continuing
operations $ 0.39 $ 0.57 $ 1.35 $ 1.32
========== ========= ========= =========
Net income $ 0.30 $ 0.57 $ 1.26 $ 1.24
========== ========= ========= =========
Average number of shares
outstanding 26,190 25,719 26,147 25,453
========== ========= ========= =========
Diluted Earnings Per Share
Income from continuing
operations $ 0.38 $ 0.55 $ 1.32 $ 1.28
========== ========= ========= =========
Net income $ 0.30 $ 0.55 $ 1.23 $ 1.21
========== ========= ========= =========
Average number of shares
outstanding 26,633 26,401 26,750 26,202
========== ========= ========= =========
- --------------------------------
(aa) Amounts include the operating results of the VITAS Phoenix
business, which will be sold or closed in the next several
months (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
2006 2005 2006 2005
---------- --------- --------- ---------
Service revenues $ (493) $ 2,436 $ 2,539 $ 8,043
Income/(loss) before
income taxes (2,401) 592 (3,348) 2,530
Income/(loss) from
continuing operations (1,333) 336 (1,864) 1,420
Service revenues include Medicare cap reductions of
$2,891,000 and $4,632,000, respectively, for the three- and
nine-month periods ended September 30, 2006. The above
income/(loss) amounts exclude the asset impairment charges
related to VITAS Phoenix, shown in note (bb), below.
(bb) Amounts include the following significant credits/(charges) which
may not be indicative of ongoing operations (in thousands):
Three Months Ended Nine Months Ended
September 30, September 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
Stock option expense (597) - (615) (215)
Costs associated with
OIG investigation (344) (310) (818) (564)
Long-term incentive
compensation - - - (2,946)
Other expenses -- net
Asset impairment
charges related to
selling or closing
VITAS' Phoenix
operation (2,419) - (2,419) -
Costs related to class
action litigation (273) - (273) -
Adjustments to
transaction-related
costs of the VITAS
acquisition - 130 - 801
Loss from impairment of
investment (1,445) - (1,445) -
Loss on extinguishment of
debt - - (430) (3,971)
---------- --------- --------- ---------
Pretax impact on
earnings (5,078) (180) (6,000) (5,232)
Income tax
benefit/(charge) on the
above 2,044 118 2,387 2,188
Income tax benefit from
finalizing prior years'
returns 1,791 1,787 1,791 1,787
---------- --------- --------- ---------
Aftertax impact on
earnings $ (1,243) $ 1,725 $ (1,822) $ (1,257)
========== ========= ========= =========
(cc) Discontinued operations for 2006 included accrual adjustments for
expenses related to the sale of Patient Care in 2002
($1,466,000) and DuBois Chemicals in 1991 ($760,000). For 2005,
discontinued operations represent the results of operations and
loss on disposal of Service America.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
September 30,
-------------------
2006 2005 (cc)
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 5,414 $ 37,575
Accounts receivable less allowances 104,240 84,472
Inventories 6,381 7,252
Current deferred income taxes 25,461 21,486
Prepaid income taxes 5,642 8,112
Current assets of discontinued operations - 3,112
Prepaid expenses and other current assets 5,844 7,186
--------- ---------
Total current assets 152,982 169,195
Investments of deferred compensation plans held
in trust 24,278 21,072
Other investments - 1,445
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 68,616 62,687
Identifiable intangible assets less accumulated
amortization 69,880 73,892
Goodwill 434,066 434,559
Noncurrent assets of discontinued operations - 287
Other assets 19,459 22,111
--------- ---------
Total Assets $781,781 $797,748
========= =========
Liabilities
Current liabilities
Accounts payable $ 45,745 $ 45,401
Current portion of long-term debt 207 1,123
Income taxes 4,903 5,830
Accrued insurance 41,368 28,634
Accrued compensation 32,429 28,988
Current liabilities of discontinued
operations - 6,301
Other current liabilities 27,460 24,270
--------- ---------
Total current liabilities 152,112 140,547
Deferred income taxes 20,570 18,880
Long-term debt 165,796 234,327
Deferred compensation liabilities 23,932 20,991
Noncurrent liabilities of discontinued
operations - 411
Other liabilities 3,929 7,044
--------- ---------
Total Liabilities 366,339 422,200
--------- ---------
Stockholders' Equity
Capital stock 28,810 28,021
Paid-in capital 250,373 223,114
Retained earnings 199,467 168,564
Treasury stock, at cost (65,555) (45,757)
Unearned compensation - (202)
Deferred compensation payable in Company stock 2,402 2,354
Notes receivable for shares sold (55) (546)
--------- ---------
Total Stockholders' Equity 415,442 375,548
--------- ---------
Total Liabilities and Stockholders'
Equity $781,781 $797,748
========= =========
Book Value Per Share $ 15.89 $ 14.58
========= =========
- ---------------------------------------------------
(cc) Reclassified to conform to 2006 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
--------------------
2006 2005
--------- ----------
Cash Flows from Operating Activities
Net income $ 33,018 $ 31,633
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,699 15,605
Provision for uncollectible accounts
receivable 6,003 5,352
Losses on asset impairments 3,864 -
Discontinued operations 2,226 2,015
Amortization of debt issuance costs 1,325 1,395
Provision for deferred income taxes (1,233) (1,176)
Write off unamortized debt issuance costs 430 2,871
Noncash long-term incentive compensation - 2,574
Changes in operating assets and
liabilities, excluding amounts acquired
in business combinations:
Increase in accounts receivable (17,545) (25,264)
Decrease/(increase) in inventories 118 (233)
Decrease in prepaid expenses and other
current assets 2,673 2,656
Decrease in accounts payable and other
current liabilities (16,147) (3,584)
Increase in income taxes 10,636 11,827
Increase in other assets (248) (2,876)
Increase in other liabilities 2,403 1,464
Excess tax benefit on share-based
compensation (4,943) -
Noncash expense of internally financed
ESOP - 858
Other sources 1,374 479
--------- ----------
Net cash provided by continuing
operations 40,653 45,596
Net cash used by discontinued operations - (1,559)
--------- ----------
Net cash provided by operating
activities 40,653 44,037
--------- ----------
Cash Flows from Investing Activities
Capital expenditures (16,207) (18,874)
Net uses from disposals of discontinued
operations (3,360) (7,145)
Business combinations, net of cash acquired (1,489) (5,680)
Proceeds from sales of property and equipment 287 125
Other uses (553) (232)
--------- ----------
Net cash used by investing activities (21,322) (31,806)
--------- ----------
Cash Flows from Financing Activities
Repayment of long-term debt (84,500) (141,245)
Net increase in revolving line of credit 15,400 -
Purchases of treasury stock (8,253) (4,390)
Excess tax benefit on share-based compensation 4,943 -
Dividends paid (4,739) (4,611)
Issuance of capital stock, net of issuance
costs 3,854 10,009
Increase in cash overdraft payable 2,145 10,684
Debt issuance costs (154) (1,755)
Proceeds from issuance of long-term debt - 85,000
Other sources 254 204
--------- ----------
Net cash used by financing activities (71,050) (46,104)
--------- ----------
Decreasein Cash and Cash Equivalents (51,719) (33,873)
Cash and cash equivalents at beginning of year 57,133 71,448
--------- ----------
Cash and cash equivalents at end of period $ 5,414 $ 37,575
========= ==========
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ------------ ---------- --------------
2006
- ---------------------
Service revenues and
sales $174,795 $ 78,407 $ - $ 253,202
--------- ------------ ---------- --------------
Cost of services
provided and goods
sold 144,410 42,780 - 187,190
Selling, general and
administrative
expenses(a) 13,639 22,376 3,145 39,160
Depreciation 2,217 1,900 83 4,200
Amortization 1,050 16 355 1,421
Other expenses -
net(a) 2,692 - - 2,692
--------- ------------ ---------- --------------
Total costs and
expenses 164,008 67,072 3,583 234,663
--------- ------------ ---------- --------------
Income/(loss) from
operations 10,787 11,335 (3,583) 18,539
Interest expense (87) 1 (3,995) (4,081)
Intercompany interest
income/(expense) 1,397 1,088 (2,485) -
Loss from impairment
of investment(a) - - (1,445) (1,445)
Other income--net 5 179 531 715
--------- ------------ ---------- --------------
Income/(loss)
before income
taxes 12,102 12,603 (10,977) 13,728
Income taxes(a) (4,304) (4,094) 4,857 (3,541)
--------- ------------ ---------- --------------
Income/(loss) from
continuing
operations 7,798 8,509 (6,120) 10,187
Discontinued
operations - - (2,226) (2,226)
--------- ------------ ---------- --------------
Net income/(loss) $ 7,798 $ 8,509 $ (8,346) $ 7,961
========= ============ ========== ==============
2005
- ---------------------
Service revenues and
sales $160,408 $ 72,920 $ - $ 233,328
--------- ------------ ---------- --------------
Cost of services
provided and goods
sold 125,629 39,600 - 165,229
Selling, general and
administrative
expenses(b) 13,837 21,738 2,848 38,423
Depreciation 1,922 2,091 73 4,086
Amortization 984 21 243 1,248
Other expenses -
net(b) - - (130) (130)
--------- ------------ ---------- --------------
Total costs and
expenses 142,372 63,450 3,034 208,856
--------- ------------ ---------- --------------
Income/(loss) from
operations 18,036 9,470 (3,034) 24,472
Interest expense (33) (129) (4,985) (5,147)
Intercompany interest
income/(expense) 579 565 (1,144) -
Other income--net 12 380 925 1,317
--------- ------------ ---------- --------------
Income/(loss)
before income
taxes 18,594 10,286 (8,238) 20,642
Income taxes(b) (6,931) (3,206) 4,127 (6,010)
--------- ------------ ---------- --------------
Net income/(loss) $ 11,663 $ 7,080 $ (4,111) $ 14,632
========= ============ ========== ==============
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ------------ ---------- --------------
2006
- ---------------------
Service revenues and
sales $515,411 $ 233,812 $ - $ 749,223
--------- ------------ ---------- --------------
Cost of services
provided and goods
sold 418,387 127,625 - 546,012
Selling, general and
administrative
expenses(a) 40,600 67,150 8,529 116,279
Depreciation 6,412 5,783 270 12,465
Amortization 3,218 56 960 4,234
Other expenses -
net(a) 2,692 - - 2,692
--------- ------------ ---------- --------------
Total costs and
expenses 471,309 200,614 9,759 681,682
--------- ------------ ---------- --------------
Income/(loss) from
operations 44,102 33,198 (9,759) 67,541
Interest expense (156) (281) (13,289) (13,726)
Intercompany interest
income/(expense) 3,746 2,889 (6,635) -
Loss from impairment
of investment(a) - - (1,445) (1,445)
Loss on extinguishment
of debt - - (430) (430)
Other income--net 62 452 2,220 2,734
--------- ------------ ---------- --------------
Income/(loss) before
income taxes 47,754 36,258 (29,338) 54,674
Income taxes(a) (17,700) (13,545) 11,815 (19,430)
--------- ------------ ---------- --------------
Income/(loss) from
continuing
operations 30,054 22,713 (17,523) 35,244
Discontinued
operations - - (2,226) (2,226)
--------- ------------ ---------- --------------
Net income/(loss) $ 30,054 $ 22,713 $ (19,749) $ 33,018
========= ============ ========== ==============
2005
- ---------------------
Service revenues and
sales $460,146 $ 218,128 $ - $ 678,274
--------- ------------ ---------- --------------
Cost of services
provided and goods
sold(b) 361,703 117,598 - 479,301
Selling, general and
administrative
expenses(b) 40,312 63,892 10,777 114,981
Depreciation 5,477 6,239 218 11,934
Amortization 2,963 70 638 3,671
Other expenses -
net(b) - - (801) (801)
--------- ------------ ---------- --------------
Total costs and
expenses 410,455 187,799 10,832 609,086
--------- ------------ ---------- --------------
Income/(loss) from
operations 49,691 30,329 (10,832) 69,188
Interest expense (104) (408) (15,509) (16,021)
Intercompany interest
income/(expense) 1,769 1,505 (3,274) -
Loss on extinguishment
of debt(b) - - (3,971) (3,971)
Other income--net 134 822 1,688 2,644
--------- ------------ ---------- --------------
Income/(loss) before
income taxes 51,490 32,248 (31,898) 51,840
Income taxes(b) (19,614) (11,983) 13,405 (18,192)
--------- ------------ ---------- --------------
Income/(loss) from
continuing
operations 31,876 20,265 (18,493) 33,648
Discontinued
operations - - (2,015) (2,015)
--------- ------------ ---------- --------------
Net income/(loss) $ 31,876 $ 20,265 $ (20,508) $ 31,633
========= ============ ========== ==============
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 SEPTEMBER 30, 2006 AND 2005
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
-------- ------------ ---------- --------------
2006
- -----------------------
Net income/(loss) $ 7,798 $ 8,509 $ (8,346) $ 7,961
Add/(deduct):
Discontinued
operations - - 2,226 2,226
Interest expense 87 (1) 3,995 4,081
Income taxes 4,304 4,094 (4,857) 3,541
Depreciation 2,217 1,900 83 4,200
Amortization 1,050 16 355 1,421
-------- ------------ ---------- --------------
EBITDA 15,456 14,518 (6,544) 23,430
Add/(deduct):
EBITDA of VITAS'
Phoenix operation 2,306 - - 2,306
Asset impairment -
VITAS' Phoenix
operation 2,419 - - 2,419
Loss from
impairment of
investment - - 1,445 1,445
Lawsuit settlement 273 - - 273
Legal expenses of
OIG investigation 344 - - 344
Stock option
expense - - 597 597
Advertising cost
adjustment (c) - (491) - (491)
Interest income (24) (29) (373) (426)
Intercompany
interest
income/(expense) (1,397) (1,088) 2,485 -
-------- ------------ ---------- --------------
Adjusted EBITDA $19,377 $ 12,910 $ (2,390) $ 29,897
======== ============ ========== ==============
2005
- -----------------------
Net income/(loss) $11,663 $ 7,080 $ (4,111) $ 14,632
Add/(deduct):
Interest expense 33 129 4,985 5,147
Income taxes 6,931 3,206 (4,127) 6,010
Depreciation 1,922 2,091 73 4,086
Amortization 984 21 243 1,248
-------- ------------ ---------- --------------
EBITDA 21,533 12,527 (2,937) 31,123
Add/(deduct):
EBITDA of VITAS'
Phoenix operation (601) - - (601)
Legal expenses of
OIG Investigation 310 - - 310
VITAS transaction
expense adjustment - - (130) (130)
Advertising cost
adjustment (c) - (340) - (340)
Interest income (33) (30) (469) (532)
Intercompany
interest
income/(expense) (579) (565) 1,144 -
-------- ------------ ---------- --------------
Adjusted EBITDA $20,630 $ 11,592 $ (2,392) $ 29,830
======== ============ ========== ==============
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
-------- ------------ ---------- -------------
2006
- ------------------------
Net income/(loss) $30,054 $ 22,713 $ (19,749) $ 33,018
Add/(deduct):
Discontinued
operations - - 2,226 2,226
Interest expense 156 281 13,289 13,726
Income taxes 17,700 13,545 (11,815) 19,430
Depreciation 6,412 5,783 270 12,465
Amortization 3,218 56 960 4,234
-------- ------------ ---------- -------------
EBITDA 57,540 42,378 (14,819) 85,099
Add/(deduct):
EBITDA of VITAS'
Phoenix operation 3,001 - - 3,001
Asset impairment -
VITAS' Phoenix
operation 2,419 - - 2,419
Loss from impairment
of investment - - 1,445 1,445
Lawsuit settlement 273 - - 273
Legal expenses of OIG
investigation 818 - - 818
Stock option expense - - 615 615
Advertising cost
adjustment (c) - (1,072) - (1,072)
Interest income (100) (69) (1,808) (1,977)
Intercompany interest
income/(expense) (3,746) (2,889) 6,635 -
Loss on extinguishment
of debt - - 430 430
-------- ------------ ---------- -------------
Adjusted EBITDA $60,205 $ 38,348 $ (7,502) $ 91,051
======== ============ ========== =============
2005
- ------------------------
Net income/(loss) $31,876 $ 20,265 $ (20,508) $ 31,633
Add/(deduct):
Discontinued
operations - - 2,015 2,015
Interest expense 104 408 15,509 16,021
Income taxes 19,614 11,983 (13,405) 18,192
Depreciation 5,477 6,239 218 11,934
Amortization 2,963 70 638 3,671
-------- ------------ ---------- -------------
EBITDA 60,034 38,965 (15,533) 83,466
Add/(deduct):
EBITDA of VITAS'
Phoenix operation (2,545) - - (2,545)
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 564 - - 564
VITAS transaction
expense adjustment - - (801) (801)
Advertising cost
adjustment (c) - (969) - (969)
Interest income (192) (118) (1,134) (1,444)
Intercompany interest
income/(expense) (1,769) (1,505) 3,274 -
Loss on extinguishment
of debt - - 3,971 3,971
-------- ------------ ---------- -------------
Adjusted EBITDA $56,092 $ 34,710 $ (7,062) $ 83,740
======== ============ ========== =============
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 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(in thousands, except per share data)(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Net income/(loss) as reported $ 7,961 $14,632 $33,018 $31,633
Add/(deduct):
Discontinued operations 2,226 - 2,226 2,015
Net (income)/loss of VITAS'
Phoenix operation 1,333 (336) 1,864 (1,420)
Asset impairment VITAS' Phoenix
Operation 1,355 - 1,355 -
Loss on impairment of
investment 918 - 918 -
Lawsuit settlement 169 - 169 -
Prior-period tax adjustments (1,791) (1,787) (1,791) (1,787)
Aftertax prior period insurance
adjustment - - - (1,014)
Aftertax cost of long-term
incentive compensation - - - 1,847
Aftertax cost of legal expenses
of OIG investigation 213 192 507 352
Aftertax stock option expense 379 - 391 137
Aftertax VITAS transaction
expense adjustment - (130) - (801)
Aftertax cost of loss on
extinguishment of debt - - 273 2,523
--------- -------- -------- --------
Adjusted income from continuing
operations $12,763 $12,571 $38,930 $33,485
========= ======== ======== ========
Earnings/(Loss) Per Share As
Reported
Net income/(loss) $ 0.30 $ 0.57 $ 1.26 $ 1.24
========= ======== ======== ========
Average number of shares
outstanding 26,190 25,719 26,147 25,453
========= ======== ======== ========
Diluted Earnings/(Loss) Per Share
As Reported
Net income/(loss) $ 0.30 $ 0.55 $ 1.23 $ 1.21
========= ======== ======== ========
Average number of shares
outstanding 26,633 26,401 26,750 26,202
========= ======== ======== ========
Adjusted Earnings Per Share
Income from continuing
operations $ 0.49 $ 0.49 $ 1.49 $ 1.32
========= ======== ======== ========
Average number of shares
outstanding 26,190 25,719 26,147 25,453
========= ======== ======== ========
Adjusted Diluted Earnings Per
Share
Income from continuing
operations $ 0.48 $ 0.48 $ 1.46 $ 1.28
========= ======== ======== ========
Average number of shares
outstanding 26,633 26,401 26,750 26,202
========= ======== ======== ========
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 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
OPERATING STATISTICS
Net revenue ($000) (d)
Homecare $128,268 $111,959 $366,888 $319,441
Inpatient 21,890 21,321 66,779 63,300
Continuous care 30,140 27,128 89,587 77,405
--------- --------- --------- ---------
Total before Medicare
cap allowance 180,298 160,408 523,254 460,146
Medicare cap allowance (5,503) - (7,843) -
--------- --------- --------- ---------
Total $174,795 $160,408 $515,411 $460,146
========= ========= ========= =========
Net revenue as a percent of
total before Medicare cap
allowance
Homecare 71.2 % 69.8 % 70.1 % 69.4 %
Inpatient 12.1 13.3 12.8 13.8
Continuous care 16.7 16.9 17.1 16.8
--------- --------- -------- ---------
Total before Medicare
cap allowance 100.0 100.0 100.0 100.0
Medicare cap allowance (3.1) - (1.5) -
--------- --------- --------- ---------
Total 96.9 % 100.0 % 98.5 % 100.0 %
========= ========= ========= =========
Average daily census
("ADC") (days)
Homecare 6,670 5,972 6,419 5,719
Nursing home 3,590 3,366 3,484 3,276
--------- --------- --------- ---------
Routine homecare 10,260 9,338 9,903 8,995
Inpatient 401 404 413 404
Continuous care 552 517 553 502
--------- --------- --------- ---------
Total 11,213 10,259 10,869 9,901
========= ========= ========= =========
Total Admissions 12,753 12,375 39,718 37,969
Total Discharges 12,621 12,025 38,640 36,766
Average length of stay
(days) 71.0 66.5 70.5 66.8
Median length of stay
(days) 14.0 13.0 13.0 12.0
ADC by major diagnosis
Neurological 33.6 % 32.1 % 33.4 % 32.0 %
Cancer 20.1 21.3 20.1 21.4
Cardio 14.7 14.9 14.9 15.1
Respiratory 6.9 7.1 7.1 7.1
Other 24.7 24.6 24.5 24.4
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Admissions by major
diagnosis
Neurological 19.3 % 18.0 % 19.9 % 18.8 %
Cancer 37.0 38.3 35.4 36.6
Cardio 12.4 12.4 13.2 13.5
Respiratory 6.7 6.3 7.2 7.2
Other 24.6 25.0 24.3 23.9
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Direct patient care
margins(e)
Routine homecare 49.1 % 50.4 % 48.8 % 49.9 %
Inpatient 16.5 21.3 20.2 22.4
Continuous care 17.5 18.1 18.7 18.4
Homecare margin drivers
(dollars per patient day)
Labor costs $ 48.21 $ 45.04 $ 49.15 $ 45.58
Drug costs 8.46 7.66 8.12 7.71
Home medical equipment 5.66 5.45 5.58 5.48
Medical supplies 2.21 2.23 2.15 2.18
Inpatient margin drivers
(dollars per patient day)
Labor costs $ 269.72 $ 242.70 $ 257.82 $ 240.61
Continuous care margin
drivers (dollars per
patient day)
Labor costs $ 467.65 $ 447.99 $ 461.89 $ 441.83
Bad debt expense as a
percent of revenues 0.9 % 0.9 % 0.9 % 0.9 %
Accounts receivable --
days of revenue
outstanding 42.1 42.1 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 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(unaudited)
(a) Included in the results of operations for the three and nine
months ended September 30, 2006 are the following significant
credits/(charges) which may not be indicative of ongoing
operations (in thousands):
Three Months Ended September 30, 2006
----------------------------------------------
VITAS Roto-Rooter Corporate Consolidated
-------- ------------ ---------- -------------
Selling, general
and administrative
expenses
Costs associated
with OIG
investigation $ (344) $ - $ - $ (344)
Stock option
expense - - (597) (597)
Other expenses -
net
Asset impairment
- VITAS' Phoenix
operation (2,419) - - (2,419)
Lawsuit
settlement (273) - - (273)
Loss from
impairment of
investment - - (1,445) (1,445)
-------- ------------ ---------- -------------
Pretax impact on
earnings (3,036) - (2,042) (5,078)
Income tax benefit
on the above 1,299 927 1,609 3,835
-------- ------------ ---------- -------------
Aftertax impact
on earnings $(1,737) $ 927 $ (433) $ (1,243)
======== ============ ========== =============
Nine Months Ended September 30, 2006
----------------------------------------------
VITAS Roto-Rooter Corporate Consolidated
-------- ------------ ---------- -------------
Selling, general
and administrative
expenses
Costs associated
with OIG
investigation $ (818) $ - $ - $ (818)
Stock option
expense - - (615) (615)
Other expenses -
net
Asset impairment
- VITAS' Phoenix
operation (2,419) - - (2,419)
Lawsuit
settlement (273) - - (273)
Loss from
impairment of
investment - - (1,445) (1,445)
Loss on
extinguishment of
debt - - (430) (430)
-------- ------------ ---------- -------------
Pretax impact on
earnings (3,510) - (2,490) (6,000)
Income tax benefit
on the above 1,479 927 1,772 4,178
-------- ------------ ---------- -------------
Aftertax impact
on earnings $(2,031) $ 927 $ (718) $ (1,822)
======== ============ ========== =============
(b) Included in the results of operations for the three and nine
months ended September 30, 2005 are the following significant
credits/(charges) which may not be indicative of ongoing
operations (in thousands):
Three Months Ended September 30, 2005
----------------------------------------------
VITAS Roto-Rooter Corporate Consolidated
-------- ------------ ---------- -------------
Selling, general
and administrative
expenses
Costs associated
with OIG
investigation $ (310) $ - $ - $ (310)
Adjustments to
transaction-
related costs of
the VITAS
acquisition - - 130 130
-------- ------------ ---------- -------------
Pretax impact on
earnings (310) - 130 (180)
Income tax benefit
on the above 118 952 835 1,905
-------- ------------ ---------- -------------
Aftertax impact
on earnings $ (192) $ 952 $ 965 $ 1,725
======== ============ ========== =============
Nine Months Ended September 30, 2005
----------------------------------------------
VITAS Roto-Rooter Corporate Consolidated
-------- ------------ ---------- -------------
Cost of services
provided and goods
sold
Favorable
adjustment to
casualty
insurance
accruals related
to prior years'
experience $ - $ 1,663 $ - $ 1,663
Selling, general
and administrative
expenses
Long-term
incentive
compensation - - (2,946) (2,946)
Costs associated
with OIG
investigation (564) - - (564)
Stock option
expense - - (215) (215)
Adjustments to
transaction-
related costs of
the VITAS
acquisition - - 801 801
Loss on
extinguishment of
debt - - (3,971) (3,971)
-------- ------------ ---------- -------------
Pretax impact on
earnings (564) 1,663 (6,331) (5,232)
Income tax benefit
on the above 212 303 3,460 3,975
-------- ------------ ---------- -------------
Aftertax impact
on earnings $ (352) $ 1,966 $ (2,871) $ (1,257)
======== ============ ========== =============
(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 third quarters of 2006 and 2005,
GAAP advertising expense for Roto-Rooter totaled $4,646,000 and
$4,362,000, respectively. If the expense of the telephone
directories were spread over the periods they are in
circulation, advertising expense for the third quarters of 2006
and 2005 would total $5,137,000 and $4,702,000, respectively.
For the nine months ended September 30, 2006 and 2005, GAAP
advertising expense for Roto-Rooter totaled $13,984,000 and
$12,685,000, respectively. If the expense of the telephone
directories were spread over the periods they are in
circulation, advertising expense for the first nine months of
2006 and 2005 would total $15,056,000 and $13,654,000,
respectively.
(d) VITAS has 6 large (greater than 450 ADC), 15 medium (greater than
200 but less than 450 ADC) and 21 small (less than 200 ADC)
hospice programs. There are three programs with estimated
Medicare Cap billing limitations for the 2006 measurement
period. There is one other program with Medicare Cap cushion of
less than 10% for the 2006 measurement period. No other programs
have an estimated Medicare Cap cushion of less than 10% for the
2006 measurement period
(e) Amounts exclude indirect patient care and administrative costs,
as well as Medicare Cap billing limitation.
CONTACT: Chemed Corporation
David P. Williams, 513-762-6901