Exhibit 99
Chemed Reports Record Fourth-Quarter and Full-Year 2006 Results; VITAS and
Roto-Rooter Segments Report Record Revenue and Profitability
CINCINNATI--(BUSINESS WIRE)--Feb. 20, 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 fourth quarter ended December 31, 2006, versus the comparable
prior-year period, as follows:
Consolidated operating results from Continuing Operations:
-- Revenue increased 10.6% to $272 million
-- Diluted EPS from Continuing Operations of $.73
VITAS segment operating results from Continuing Operations:
-- Net Patient Revenue of $186 million, up 11.8%
-- Average Daily Census (ADC) of 11,174, up 9.4%
-- Admissions of 13,291, an increase of 7.4%
-- Average Length of Stay in the quarter was 75.7 days
-- Net income of $15.1 million, an increase of 397%
-- Adjusted EBITDA of $25.7 million, an increase of 5.4%
Roto-Rooter segment operating results:
-- Revenue of $86 million, an increase of 8.2%
-- Job count of 210,839, up 0.5%
-- Net Income of $9.7 million, up 32.3%
-- Adjusted EBITDA of $17.2 million, an increase of 18.4%
In the fourth quarter of 2006, VITAS recorded a Medicare
contractual billing adjustment (Medicare Cap), which netted to $0.7
million. Two programs recorded an estimated Medicare Cap billing
limitation of approximately $1.1 million, which was partially offset
by reversing a portion of the estimated 2005 Medicare Cap accrued in
the third quarter. These are the same two hospice programs noted in
the third quarter of 2006.
The third-quarter 2006 Medicare Cap accrual included $1.0 million
for programs with potential prior-year billing limitations resulting
from the Fiscal Intermediary reallocating admissions for deceased
Medicare patients who received hospice care from multiple providers.
VITAS has received notice from its Fiscal Intermediary that only one
program had a retroactive Medicare liability of $0.5 million. This
program is one of the two programs with a fourth-quarter 2006 billing
limitation. The remaining portion of the prior-year billing limitation
accrual was reversed in the fourth quarter of 2006.
With the exception of the two programs noted above, all of VITAS'
Medicare provider numbers have a calculated cap cushion of greater
than ten percent on a trailing twelve-month basis. VITAS defines cap
cushion as the difference between the maximum Medicare billing
potential based upon total first-time Medicare hospice admissions less
the actual Medicare billings in a program. Billing limitations are
calculated on a twelve-month basis ending October 31.
Typically, VITAS hospice programs with the lowest median length of
stay (MLOS) also have the largest cap cushion. 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 reasonable 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 optimizing
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 the program
remains in a Medicare Cap situation.
VITAS
VITAS generated net revenue of $186 million in the fourth quarter
of 2006, which was an increase of 11.8% over the prior-year period.
Net income from continuing operations for the fourth quarter was $15.1
million. Medicare Cap accruals negatively impacted revenue by $0.7
million and reduced net income by $0.4 million. ADC increased 9.4% to
11,174 and admissions increased 7.4% to 13,291.
Gross margins in the quarter, before the impact of Medicare Cap,
were 22.8%. This compares to 22.9% in the prior-year quarter. This 10
basis point decline in margin is primarily a result of VITAS carrying
more field staffing relative to ADC than the prior year, substantially
offset by a realignment of certain expenses incurred between cost of
services and central support.
Staffing levels had been running at a level above normal relative
to ADC prior to the fourth quarter. Given the inherent difficulty in
hiring and retaining qualified healthcare professionals, management
elected to retain current field-based personnel and to allow normal
attrition and overall growth in ADC to adjust staffing ratios and
related gross margins to more historical levels. This approach
resulted in December 2006 gross margins improving 350 basis points
over the October 2006 gross margin.
Effective October 1, 2006, management realigned certain
field-based processes and expenses related to hospice program support
such as recruiting and information technology. These processes and
related expenses were centralized effective the beginning of the
fourth quarter and are now incurred and controlled at VITAS corporate
and classified as selling, general and administrative expenses. This
resulted in approximately $1.8 million of fourth-quarter 2006 expense
being reclassified from cost of services that positively impacted
gross margins by 95 basis points.
Central support costs for VITAS, which are classified as selling,
general and administrative expenses in the Consolidating Statement of
Income, totaled $16.4 million, which is an increase of 18.1% over the
prior year and 20.6% sequentially. Adjusting for the reclassification
of expenses noted above, fourth-quarter 2006 central support costs
increased 5.4% over the prior year and 7.6% sequentially.
VITAS' average length of stay (ALOS) for patients discharged in
the quarter was 75.7 days and median length of stay (MLOS) was 14
days. This compares to an ALOS of 71.0 days in the third quarter of
2006 and 70.0 days in the fourth quarter of 2005.
Roto-Rooter
Roto-Rooter's plumbing and drain cleaning business generated sales
of $86 million for the fourth quarter of 2006, 8.2% higher than the
$79 million reported in the comparable prior-year quarter. Net income
for the quarter was $9.7 million, an increase of 32.3% over the prior
year. Adjusted EBITDA in the fourth quarter of 2006 totaled $17.2
million, an increase of 18.4% over the fourth quarter of 2005 and
equated to an adjusted EBITDA margin of 20.1%, an increase of 173
basis points over the prior-year period.
Job count in the fourth quarter of 2006 increased 0.5% over the
prior-year period. Commercial jobs decreased 4.8% and residential jobs
increased 3.1%. Commercial plumbing job count decreased 5.4% and
commercial drain cleaning decreased 4.1% over the prior-year quarter.
Residential plumbing jobs increased 4.2% and residential drain
cleaning jobs expanded 2.5% when compared to the fourth quarter of
2005. For the full-year 2006, commercial jobs decreased 0.3% and
residential jobs increased 1.1%.
Guidance for 2007
VITAS is estimated to generate full-year revenue growth from
continuing operations, prior to Medicare Cap, of 11% to 13%, increased
admissions of 5% to 7%, increased ADC of 8% to 10% and adjusted EBITDA
margins, prior to Medicare Cap, of 13% to 14%. This guidance assumes a
Medicare price increase that will average 3.8% in the first three
quarters of 2007 and that hospice receives a full Medicare basket
price increase of 3.5% in the fourth quarter of 2007.
Full-year Medicare contractual billing limitations are estimated
at $10 million. Two programs are currently at cap. In addition, VITAS
is closely monitoring three additional programs that have greater than
10% cap cushion on a trailing twelve-month basis but less than 10% cap
cushion based upon the first two months of the Medicare cap year
commencing November 1, 2006.
Roto-Rooter is estimated to generate a 7% to 8% increase in
revenue in 2007, job count growth between 0.5% and 1.0% and adjusted
EBITDA margins approximating 17%.
Based upon these factors, an effective tax rate of 39% and average
diluted share count of 26.1 million, our estimate is that full-year
2007 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 $2.45 to
$2.60.
Conference Call
Chemed will host a conference call and webcast at 11 a.m., EST, on
Wednesday, February 21, 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) 510-0178 for U.S. and Canadian
participants and (617) 614-3450 for international participants. The
participant passcode is 19818676. 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 44173260. 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)
For the Three
Months Ended For the Years Ended
December 31, December 31,
------------------- ---------------------
2006 2005 (aa) 2006 2005 (aa)
--------- --------------------- ---------
Continuing Operations
Service revenues and sales $271,903 $245,739 $1,018,587 $915,970
--------- --------- ----------- ---------
Cost of services provided
and goods sold (bb) 189,586 170,598 730,123 644,476
Selling, general and
administrative expenses
(bb) 44,969 42,356 161,183 157,262
Depreciation 4,390 4,231 16,775 16,150
Amortization 1,287 1,251 5,255 4,922
Other expenses--net (bb) - 17,192 272 16,391
--------- --------- ----------- ---------
Total costs and
expenses 240,232 235,628 913,608 839,201
--------- --------- ----------- ---------
Income from operations 31,671 10,111 104,979 76,769
Interest expense (3,742) (5,243) (17,468) (21,264)
Loss from impairment of
investment (bb) - - (1,445) -
Loss on extinguishment of
debt (bb) - - (430) (3,971)
Other income--net 1,914 479 4,648 3,122
--------- --------- ----------- ---------
Income before income
taxes 29,843 5,347 90,284 54,656
Income taxes (bb) (10,584) (1,347) (32,562) (18,428)
--------- --------- ----------- ---------
Income from continuing
operations 19,259 4,000 57,722 36,228
Discontinued Operations (bb) (1,626) 184 (7,071) (411)
--------- --------- ----------- ---------
Net Income $ 17,633 $ 4,184 $ 50,651 $ 35,817
========= ========= =========== =========
Earnings Per Share
Income from continuing
operations (bb) $ 0.74 $ 0.15 $ 2.21 $ 1.42
========= ========= =========== =========
Net Income $ 0.68 $ 0.16 $ 1.94 $ 1.40
========= ========= =========== =========
Average number of shares
outstanding 26,030 25,858 26,118 25,552
========= ========= =========== =========
Diluted Earnings Per Share
Income from continuing
operations (bb) $ 0.73 $ 0.15 $ 2.16 $ 1.38
========= ========= =========== =========
Net Income $ 0.67 $ 0.16 $ 1.90 $ 1.36
========= ========= =========== =========
Average number of shares
outstanding 26,411 26,590 26,669 26,299
========= ========= =========== =========
- -----------------------------
(aa)Amounts for 2005 have been reclassified for operations
discontinued in 2006.
(bb)Included in the consolidated statement of income are the
following significant credits/(charges) which may not be
indicative of ongoing operations (in thousands):
For the Three
Months Ended For the Years Ended
December 31, December 31,
------------------- ---------------------
2006 2005 2006 2005
--------- --------- ----------- ---------
Continuing Operations
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 (596) - (1,211) (215)
Costs associated with
OIG investigation (250) (73) (1,068) (637)
Long-term incentive
compensation - (2,531) - (5,477)
Other 467 - 467 -
Other expenses -- net
Adjustments to
transaction-related
costs of the VITAS
acquisition - 158 - 959
Costs related to class
action litigation - (17,350) (272) (17,350)
Loss from impairment of
investment - - (1,445) -
Loss on
extinguishment of
debt - - (430) (3,971)
--------- --------- ----------- ---------
Pretax impact on
earnings (379) (19,796) (3,959) (25,028)
Income tax
benefit/(charge) on the
above 142 7,565 1,464 9,753
Income tax benefit from
finalizing prior years'
returns 324 174 2,115 1,961
--------- --------- ----------- ---------
Aftertax impact on
continuing operations$ 87 $(12,057) $ (380) $(13,314)
========= ========= =========== =========
Discontinued Operations
VITAS' Phoenix
operation, discontinued
in 2006 $ (1,653) $ 57 $ (4,872) $ 1,477
Patient Care,
discontinued in 2002 53 - (1,426) -
Service America,
discontinued in 2004 (25) 202 (32) (1,813)
Adjustments related to
other discontinued
operations (1) (75) (741) (75)
--------- --------- ----------- ---------
Total discontinued
operations $ (1,626) $ 184 $ (7,071) $ (411)
========= ========= =========== =========
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
December 31,
-------------------
2006 2005 (cc)
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 29,274 $ 57,133
Accounts receivable less allowances 93,086 91,094
Inventories 6,578 6,499
Prepaid income taxes - 8,151
Current deferred income taxes 17,789 26,727
Current assets of discontinued operations 5,418 5,189
Prepaid expenses and other current assets 9,968 9,767
--------- ---------
Total current assets 162,113 204,560
Investments of deferred compensation plans
held in trust 25,713 21,105
Other investments - 1,445
Note receivable 14,701 12,500
Properties and equipment, at cost less
accumulated depreciation 70,140 65,155
Identifiable intangible assets less
accumulated amortization 69,215 72,888
Goodwill 435,050 432,596
Noncurrent assets of discontinued operations 287 7,632
Other assets 16,068 21,222
--------- ---------
Total Assets $793,287 $839,103
========= =========
Liabilities
Current liabilities
Accounts payable $ 49,744 $ 43,437
Current portion of long-term debt 209 1,045
Income taxes 6,765 4,189
Accrued insurance 38,457 38,409
Accrued compensation 35,990 32,963
Current liabilities of discontinued
operations 12,215 3,339
Other current liabilities 22,684 45,823
--------- ---------
Total current liabilities 166,064 169,205
Deferred income taxes 26,301 26,012
Long-term debt 150,331 234,058
Deferred compensation liabilities 25,514 21,275
Noncurrent liabilities of discontinued
operations - 4
Other liabilities 3,716 4,374
--------- ---------
Total Liabilities 371,926 454,928
--------- ---------
Stockholders' Equity
Capital stock 28,850 28,374
Paid-in capital 252,639 234,910
Retained earnings 215,517 171,188
Treasury stock, at cost (78,064) (52,127)
Deferred compensation payable in Company
stock 2,419 2,379
Notes receivable for shares sold - (549)
--------- ---------
Total Stockholders' Equity 421,361 384,175
--------- ---------
Total Liabilities and Stockholders'
Equity $793,287 $839,103
========= =========
Book Value Per Share $ 16.32 $ 14.79
========= =========
- ---------------------------------------------------
(cc)Amounts for 2005 have been reclassified for operations
discontinued in 2006.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
For the Years Ended
December 31,
--------------------
2006 2005
--------- ----------
Cash Flows from Operating Activities
Net income $ 50,651 $ 35,817
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 22,030 21,072
Provision for uncollectible accounts
receivable 8,169 7,126
Provision for deferred income taxes 7,408 (5,055)
Discontinued operations 7,071 411
Amortization of debt issuance costs 1,774 1,834
Loss on impairment of investment 1,445 -
Write off unamortized debt issuance costs 430 2,871
Noncash long-term incentive compensation - 4,813
Changes in operating assets and liabilities,
excluding amounts acquired in business
combinations:
Increase in accounts receivable (12,527) (34,145)
Decrease/(increase) in inventories (78) 520
Decrease/(increase) in prepaid expenses
and other current assets (2,188) 76
Increase/(decrease) in accounts payable
and other current liabilities (13,017) 32,431
Increase in income taxes 18,726 15,359
Increase in other assets (722) (2,003)
Increase/(decrease) in other liabilities 3,788 (1,146)
Excess tax benefit on share-based
compensation (5,600) -
Noncash expense of internally financed ESOPs - 1,060
Other sources/(uses) 2,109 912
--------- ----------
Net cash provided by continuing operations 89,469 81,953
Net cash provided/(used) by discontinued
operations 9,120 (1,940)
--------- ----------
Net cash provided by operating activities 98,589 80,013
--------- ----------
Cash Flows from Investing Activities
Capital expenditures (21,987) (25,734)
Business combinations, net of cash acquired (4,145) (6,165)
Net uses from disposals of discontinued
operations (922) (9,367)
Proceeds from sales of property and equipment 347 157
Other uses (1,025) (633)
--------- ----------
Net cash used by investing activities (27,732) (41,742)
--------- ----------
Cash Flows from Financing Activities
Repayment of long-term debt (84,563) (141,592)
Purchases of treasury stock (19,885) (7,401)
Dividends paid (6,322) (6,172)
Proceeds from exercise of stock options 3,861 12,327
Excess tax benefit on share-based compensation 5,600 -
Increase in cash overdraft payable 2,571 6,752
Debt issuance costs (154) (1,755)
Proceeds from issuance of long-term debt - 85,000
Other sources 176 255
--------- ----------
Net cash used by financing activities (98,716) (52,586)
--------- ----------
Decrease in Cash and Cash Equivalents (27,859) (14,315)
Cash and cash equivalents at beginning of year 57,133 71,448
--------- ----------
Cash and cash equivalents at end of year $ 29,274 $ 57,133
========= ==========
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ------------ ---------- -------------
2006
- ----------------------
Service revenues and
sales $186,219 $85,684 $ - $271,903
--------- ------------ ---------- -------------
Cost of services
provided and goods
sold 144,347 45,239 - 189,586
Selling, general and
administrative
expenses (a) 16,426 25,345 3,198 44,969
Depreciation 2,421 1,882 87 4,390
Amortization 964 16 307 1,287
--------- ------------ ---------- -------------
Total costs and
expenses 164,158 72,482 3,592 240,232
--------- ------------ ---------- -------------
Income/(loss) from
operations 22,061 13,202 (3,592) 31,671
Interest expense (35) (87) (3,620) (3,742)
Intercompany interest
income/(expense) 1,583 1,108 (2,691) -
Other income--net (7) 721 1,200 1,914
--------- ------------ ---------- -------------
Income/(loss) before
income taxes 23,602 14,944 (8,703) 29,843
Income taxes (a) (8,457) (5,203) 3,076 (10,584)
--------- ------------ ---------- -------------
Income/(loss) from
continuing operations 15,145 9,741 (5,627) 19,259
Discontinued
operations (1,653) - 27 (1,626)
--------- ------------ ---------- -------------
Net income/(loss) $ 13,492 $ 9,741 $ (5,600) $ 17,633
========= ============ ========== =============
2005
- ----------------------
Service revenues and
sales $166,530 $79,209 $ - $245,739
--------- ------------ ---------- -------------
Cost of services
provided and goods
sold 128,329 42,269 - 170,598
Selling, general and
administrative
expenses 13,904 24,076 4,376 42,356
Depreciation 2,095 2,032 104 4,231
Amortization 984 20 247 1,251
Other expenses (b) 17,350 - (158) 17,192
--------- ------------ ---------- -------------
Total costs and
expenses 162,662 68,397 4,569 235,628
--------- ------------ ---------- -------------
Income/(loss) from
operations 3,868 10,812 (4,569) 10,111
Interest expense (49) (155) (5,039) (5,243)
Intercompany interest
income/(expense) 785 731 (1,516) -
Other income--net 38 38 403 479
--------- ------------ ---------- -------------
Income/(loss) before
income taxes 4,642 11,426 (10,721) 5,347
Income taxes (1,593) (4,065) 4,311 (1,347)
--------- ------------ ---------- -------------
Income/(loss) from
continuing operations 3,049 7,361 (6,410) 4,000
Discontinued
operations 57 - 127 184
--------- ------------ ---------- -------------
Net income/(loss) $ 3,106 $ 7,361 $ (6,283) $ 4,184
========= ============ ========== =============
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ------------ ---------- -------------
2006
- ----------------------
Service revenues and
sales $699,092 $319,495 $ - $1,018,587
--------- ------------ ---------- -------------
Cost of services
provided and goods
sold 557,260 172,863 - 730,123
Selling, general and
administrative
expenses (a) 56,961 92,495 11,727 161,183
Depreciation 8,753 7,665 357 16,775
Amortization 3,916 72 1,267 5,255
Other expenses - net
(a) 272 - - 272
--------- ------------ ---------- -------------
Total costs and
expenses 627,162 273,095 13,351 913,608
--------- ------------ ---------- -------------
Income/(loss) from
operations 71,930 46,400 (13,351) 104,979
Interest expense (191) (368) (16,909) (17,468)
Intercompany interest
income/(expense) 5,329 3,997 (9,326) -
Loss from impairment of
investment (a) - - (1,445) (1,445)
Loss on extinguishment
of debt - - (430) (430)
Other income--net 55 1,173 3,420 4,648
--------- ------------ ---------- -------------
Income/(loss) before
income taxes 77,123 51,202 (38,041) 90,284
Income taxes (a) (28,705) (18,748) 14,891 (32,562)
--------- ------------ ---------- -------------
Income/(loss) from
continuing operations 48,418 32,454 (23,150) 57,722
Discontinued
operations (4,872) - (2,199) (7,071)
--------- ------------ ---------- -------------
Net income/(loss) $ 43,546 $ 32,454 $(25,349) $ 50,651
========= ============ ========== =============
2005
- ----------------------
Service revenues and
sales $618,633 $297,337 $ - $ 915,970
--------- ------------ ---------- -------------
Cost of services
provided and goods
sold (b) 484,609 159,867 - 644,476
Selling, general and
administrative
expenses (b) 54,141 87,968 15,153 157,262
Depreciation 7,557 8,271 322 16,150
Amortization 3,947 90 885 4,922
Other expenses - net
(b) 17,350 - (959) 16,391
--------- ------------ ---------- -------------
Total costs and
expenses 567,604 256,196 15,401 839,201
--------- ------------ ---------- -------------
Income/(loss) from
operations 51,029 41,141 (15,401) 76,769
Interest expense (153) (563) (20,548) (21,264)
Intercompany interest
income/(expense) 2,554 2,236 (4,790) -
Loss on extinguishment
of debt (b) - - (3,971) (3,971)
Other income--net 172 860 2,090 3,122
--------- ------------ ---------- -------------
Income/(loss) before
income taxes 53,602 43,674 (42,620) 54,656
Income taxes (b) (20,097) (16,048) 17,717 (18,428)
--------- ------------ ---------- -------------
Income/(loss) from
continuing operations 33,505 27,626 (24,903) 36,228
Discontinued
operations 1,477 - (1,888) (411)
--------- ------------ ---------- -------------
Net income/(loss) $ 34,982 $ 27,626 $(26,791) $ 35,817
========= ============ ========== =============
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 DECEMBER 31, 2006 AND 2005
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
-------- ------------ ---------- -------------
2006
- -----------------------
Net income/(loss) $13,492 $ 9,741 $(5,600) $17,633
Add/(deduct):
Discontinued
operations 1,653 - (27) 1,626
Interest expense 35 87 3,620 3,742
Income taxes 8,457 5,203 (3,076) 10,584
Depreciation 2,421 1,882 87 4,390
Amortization 964 16 307 1,287
-------- ------------ ---------- -------------
EBITDA 27,022 16,929 (4,689) 39,262
Add/(deduct):
Legal expenses of
OIG investigation 250 - - 250
Stock option expense - - 596 596
Advertising cost
adjustment (c) - 1,395 - 1,395
Interest income (14) (16) (684) (714)
Intercompany
interest
income/(expense) (1,583) (1,108) 2,691 -
Other - - (467) (467)
-------- ------------ ---------- -------------
Adjusted EBITDA $25,675 $17,200 $(2,553) $40,322
======== ============ ========== =============
2005
- -----------------------
Net income/(loss) $ 3,106 $ 7,361 $(6,283) $ 4,184
Add/(deduct):
Discontinued
operations (57) - (127) (184)
Interest expense 49 155 5,039 5,243
Income taxes 1,593 4,065 (4,311) 1,347
Depreciation 2,095 2,032 104 4,231
Amortization 984 20 247 1,251
-------- ------------ ---------- -------------
EBITDA 7,770 13,633 (5,331) 16,072
Add/(deduct):
Long-term incentive
compensation - - 2,531 2,531
Lawsuit settlement 17,350 - - 17,350
Prior-period
insurance
adjustment - - - -
Legal expenses of
OIG Investigation 73 - - 73
VITAS transaction
expense adjustment - - (158) (158)
Advertising cost
adjustment (c) - 1,660 - 1,660
Interest income (45) (38) (671) (754)
Intercompany
interest
income/(expense) (785) (731) 1,516 -
-------- ------------ ---------- -------------
Adjusted EBITDA $24,363 $14,524 $(2,113) $36,774
======== ============ ========== =============
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
-------- ------------ ---------- -------------
2006
- -----------------------
Net income/(loss) $43,546 $32,454 $(25,349) $ 50,651
Add/(deduct):
Discontinued
operations 4,872 - 2,199 7,071
Interest expense 191 368 16,909 17,468
Income taxes 28,705 18,748 (14,891) 32,562
Depreciation 8,753 7,665 357 16,775
Amortization 3,916 72 1,267 5,255
-------- ------------ ---------- -------------
EBITDA 89,983 59,307 (19,508) 129,782
Add/(deduct):
Loss from impairment
of investment - - 1,445 1,445
Lawsuit settlement 272 - - 272
Legal expenses of
OIG investigation 1,068 - - 1,068
Stock option expense - - 1,211 1,211
Advertising cost
adjustment (c) - 323 - 323
Interest income (114) (85) (2,492) (2,691)
Intercompany
interest
income/(expense) (5,329) (3,997) 9,326 -
Other - - (467) (467)
Loss on
extinguishment of
debt - - 430 430
-------- ------------ ---------- -------------
Adjusted EBITDA $85,880 $55,548 $(10,055) $131,373
======== ============ ========== =============
2005
- -----------------------
Net income/(loss) $34,982 $27,626 $(26,791) $ 35,817
Add/(deduct):
Discontinued
operations (1,477) - 1,888 411
Interest expense 153 563 20,548 21,264
Income taxes 20,097 16,048 (17,717) 18,428
Depreciation 7,557 8,271 322 16,150
Amortization 3,947 90 885 4,922
-------- ------------ ---------- -------------
EBITDA 65,259 52,598 (20,865) 96,992
Add/(deduct):
Long-term incentive
compensation - - 5,692 5,692
Lawsuit settlement 17,350 - - 17,350
Prior-period
insurance
adjustment - (1,663) - (1,663)
Legal expenses of
OIG Investigation 637 - - 637
VITAS transaction
expense adjustment (959) (959)
Advertising cost
adjustment (c) - 691 - 691
Interest income (237) (156) (1,805) (2,198)
Intercompany
interest
income/(expense) (2,554) (2,236) 4,790 -
Loss on
extinguishment of
debt - - 3,971 3,971
-------- ------------ ---------- -------------
Adjusted EBITDA $80,455 $49,234 $ (9,176) $120,513
======== ============ ========== =============
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME
FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2006 AND 2005
(in thousands, except per share data)(unaudited)
Three Months Ended Years Ended
December 31, December 31,
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Net income/(loss) as reported $17,633 $ 4,184 $50,651 $35,817
Add/(deduct):
Discontinued operations 1,626 (184) 7,071 411
Aftertax loss on impairment of
investment - - 918 -
Aftertax lawsuit settlement - 10,757 169 10,757
Prior-period tax adjustments (324) (174) (2,115) (1,961)
Aftertax prior period
insurance adjustment - - - (1,014)
Aftertax cost of long-term
incentive compensation - 1,587 - 3,434
Aftertax cost of legal
expenses of OIG investigation 155 45 662 397
Aftertax stock option expense 378 - 769 137
Aftertax VITAS transaction
expense adjustment - (158) - (959)
Aftertax other (296) - (296) -
Aftertax cost of loss on
extinguishment of debt - - 273 2,523
--------- -------- -------- --------
Adjusted income from continuing
operations $19,172 $16,057 $58,102 $49,542
========= ======== ======== ========
Earnings/(Loss) Per Share As
Reported
Net income/(loss) $ 0.68 $ 0.16 $ 1.94 $ 1.40
========= ======== ======== ========
Average number of shares
outstanding 26,030 25,858 26,118 25,552
========= ======== ======== ========
Diluted Earnings/(Loss) Per Share
As Reported
Net income/(loss) $ 0.67 $ 0.16 $ 1.90 $ 1.36
========= ======== ======== ========
Average number of shares
outstanding 26,411 26,590 26,669 26,299
========= ======== ======== ========
Adjusted Earnings Per Share
Income from continuing
operations $ 0.74 $ 0.62 $ 2.22 $ 1.94
========= ======== ======== ========
Average number of shares
outstanding 26,030 25,858 26,118 25,552
========= ======== ======== ========
Adjusted Diluted Earnings Per
Share
Income from continuing
operations $ 0.73 $ 0.60 $ 2.18 $ 1.88
========= ======== ======== ========
Average number of shares
outstanding 26,411 26,590 26,669 26,299
========= ======== ======== ========
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2006 AND 2005
(unaudited)
Three Months Ended Years Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
OPERATING STATISTICS
Net revenue ($000) (d)
Homecare $132,082 $114,805 $492,012 $426,380
Inpatient 23,316 22,713 89,882 85,836
Continuous care 31,509 29,012 121,096 106,417
--------- --------- --------- ---------
Total before Medicare
cap allowance 186,907 166,530 702,990 618,633
Medicare cap allowance (688) - (3,898) -
--------- --------- --------- ---------
Total $186,219 $166,530 $699,092 $618,633
========= ========= ========= =========
Net revenue as a percent of
total before Medicare cap
allowance
Homecare 70.6 % 69.0 % 70.0 % 68.9 %
Inpatient 12.5 13.6 12.8 13.9
Continuous care 16.9 17.4 17.2 17.2
--------- --------- -------- ---------
Total before Medicare
cap allowance 100.0 100.0 100.0 100.0
Medicare cap allowance (0.4) - (0.6) -
--------- --------- --------- ---------
Total 99.6 % 100.0 % 99.4 % 100.0 %
========= ========= ========= =========
Average daily census
("ADC") (days)
Homecare 6,636 5,834 6,333 5,578
Nursing home 3,567 3,413 3,501 3,308
--------- --------- --------- ---------
Routine homecare 10,203 9,247 9,834 8,886
Inpatient 411 419 411 407
Continuous care 560 544 555 513
--------- --------- --------- ---------
Total 11,174 10,210 10,800 9,806
========= ========= ========= =========
Total Admissions 13,291 12,380 52,736 49,985
Total Discharges 13,199 12,482 51,552 48,876
Average length of stay
(days) 75.7 70.0 71.9 67.4
Median length of stay
(days) 14.0 13.0 13.0 12.0
ADC by major diagnosis
Neurological 33.7 % 32.5 % 33.4 % 32.1 %
Cancer 19.7 21.0 20.2 21.3
Cardio 14.7 14.9 14.8 15.0
Respiratory 7.0 7.0 7.1 7.1
Other 24.9 24.6 24.5 24.5
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Admissions by major
diagnosis
Neurological 19.8 % 19.3 % 19.8 % 18.9 %
Cancer 35.3 37.5 35.5 36.8
Cardio 12.7 12.4 13.1 13.2
Respiratory 7.2 6.7 7.3 7.1
Other 25.0 24.1 24.3 24.0
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Direct patient care margins
(e)
Routine homecare 49.7 % 50.9 % 49.0 % 50.2 %
Inpatient 19.4 23.6 20.0 22.7
Continuous care 17.0 20.4 18.2 18.9
Homecare margin drivers
(dollars per patient day)
Labor costs $ 49.72 $ 47.15 $ 49.38 $ 46.12
Drug costs 8.17 7.25 8.12 7.55
Home medical equipment 5.81 5.44 5.63 5.47
Medical supplies 2.28 2.11 2.17 2.15
Inpatient margin drivers
(dollars per patient day)
Labor costs $ 261.55 $ 239.50 $ 259.25 $ 240.89
Continuous care margin
drivers (dollars per
patient day)
Labor costs $ 486.46 $ 442.28 $ 468.13 $ 441.95
Bad debt expense as a
percent of revenues 1.0 % 0.9 % 0.9 % 0.9 %
Accounts receivable --
days of revenue
outstanding 38.7 41.8 N/A N/A
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
FOOTNOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2006 AND 2005
(unaudited)
(a)Included in the results of operations for the three months and
years ended December 31, 2006 are the following significant
credits/(charges) which may not be indicative of ongoing
operations (in thousands):
Three Months Ended December 31, 2006
-----------------------------------------------
VITAS Roto-Rooter Corporate Consolidated
--------- ------------ ---------- -------------
Selling, general
and
administrative
expenses
Costs associated
with OIG
investigation $ (250) $ - $ - $ (250)
Stock option
expense - - (596) (596)
Other - - 467 467
--------- ------------ ---------- -------------
Pretax impact on
earnings (250) - (129) (379)
Income tax benefit
on the above 95 47 142
Income tax benefit
from finalizing
prior years'
returns - 324 - 324
--------- ------------ ---------- -------------
Aftertax impact
on earnings $ (155) $ 324 $ (82) $ 87
========= ============ ========== =============
Year Ended December 31, 2006
-----------------------------------------------
VITAS Roto-Rooter Corporate Consolidated
--------- ------------ ---------- -------------
Selling, general
and
administrative
expenses
Costs associated
with OIG
investigation $ (1,068) $ - $ - $ (1,068)
Stock option
expense - - (1,211) (1,211)
Other - - 467 467
Other expenses
- net
Lawsuit
settlement (272) - - (272)
Loss from
impairment of
investment - - (1,445) (1,445)
Loss on
extinguishment of
debt - - (430) (430)
--------- ------------ ---------- -------------
Pretax impact on
earnings (1,340) - (2,619) (3,959)
Income tax benefit
on the above 509 - 955 1,464
Income tax benefit
from finalizing
prior years'
returns - 1,251 864 2,115
--------- ------------ ---------- -------------
Aftertax impact
on earnings $ (831) $1,251 $ (800) $ (380)
========= ============ ========== =============
(b)Included in the results of operations for the three months and
years ended December 31, 2005 are the following significant
credits/(charges) which may not be indicative of ongoing
operations (in thousands):
Three Months Ended December 31, 2005
-----------------------------------------------
VITAS Roto-Rooter Corporate Consolidated
--------- ------------ ---------- -------------
Selling, general
and
administrative
expenses
Long-term
incentive
compensation $ - $ - $(2,531) $ (2,531)
Costs associated
with OIG
investigation (73) - - (73)
Other expenses
- net
Adjustments to
transaction-
related costs of
the VITAS
acquisition - - 158 158
Lawsuit
settlement (17,350) - - (17,350)
--------- ------------ ---------- -------------
Pretax impact on
earnings (17,423) - (2,373) (19,796)
Income tax benefit
on the above 6,621 - 944 7,565
Income tax benefit
from finalizing
prior years'
returns - 174 - 174
--------- ------------ ---------- -------------
Aftertax impact
on earnings $(10,802) $ 174 $(1,429) $(12,057)
========= ============ ========== =============
Year Ended December 31, 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 - - (5,477) (5,477)
Costs associated
with OIG
investigation (637) - - (637)
Stock option
expense - - (215) (215)
Other expenses
- net
Adjustments to
transaction-
related costs of
the VITAS
acquisition - - 959 959
Lawsuit
settlement (17,350) (17,350)
Loss on
extinguishment of
debt - - (3,971) (3,971)
--------- ------------ ---------- -------------
Pretax impact on
earnings (17,987) 1,663 (8,704) (25,028)
Income tax benefit
on the above 6,833 (649) 3,569 9,753
Income tax benefit
from finalizing
prior years'
returns - 1,126 835 1,961
--------- ------------ ---------- -------------
Aftertax impact
on earnings $(11,154) $2,140 $(4,300) $(13,314)
========= ============ ========== =============
(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 fourth quarters of 2006 and 2005,
GAAP advertising expense for Roto-Rooter totaled $6,579,000 and
$6,378,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the fourth quarters of 2006 and 2005
would total $5,184,000 and $4,718,000, respectively. For the
years ended December 31, 2006 and 2005, GAAP advertising expense
for Roto-Rooter totaled $20,563,000 and $19,063,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the years ended December 31, 2006 and 2005 would
total $20,240,000 and $18,372,000, respectively.
(d)VITAS has 6 large (greater than 450 ADC), 15 medium (greater than
200 but less than 450 ADC) and 20 small (less than 200 ADC)
hospice programs. As of December 31, 2006, there were 2 programs
with a Medicare Cap liability. There were no other programs with
less than 10% cap cushion measured for the period from January 1,
2006 through December 31, 2006.
(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