EXHIBIT 99
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CHEMED CORPORATION AND
SUBSIDIARY COMPANIES
Index
Page No.
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet -
March 31, 2007 and December 31, 2006 2
Unaudited Consolidated Statement of Income -
Three months ended March 31, 2007 and 2006 3
Unaudited Consolidated Statement of Cash Flows -
Three months ended March 31, 2007 and 2006 4
Notes to Unaudited Financial Statements 5
1
Exhibit 99
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(in thousands except share and per share data)
March 31, December 31,
2007 2006
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ASSETS
Current assets
Cash and cash equivalents $ 30,137 $ 29,274
Accounts receivable less allowances of $10,392
(2006 - $10,180) 85,211 93,086
Inventories 6,752 6,578
Current deferred income taxes 21,595 17,789
Current assets of discontinued operations - 5,418
Prepaid expenses and other current assets 9,110 9,968
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Total current assets 152,805 162,113
Investments of deferred compensation plans held in trust 27,736 25,713
Note receivable 14,701 14,701
Properties and equipment, at cost, less accumulated
depreciation of $80,233 (2006 - $77,107) 69,295 70,140
Identifiable intangible assets less accumulated
amortization of $14,211 (2006 - $13,201) 68,205 69,215
Goodwill 435,040 435,050
Noncurrent assets of discontinued operations - 287
Other assets 16,194 16,068
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Total Assets $ 783,976 $ 793,287
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LIABILITIES
Current liabilities
Accounts payable $ 55,272 $ 49,744
Current portion of long-term debt 164 209
Income taxes 9,410 6,765
Accrued insurance 39,889 38,457
Accrued compensation 29,110 35,990
Current liabilities of discontinued operations - 12,215
Other current liabilities 26,653 22,684
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Total current liabilities 160,498 166,064
Deferred income taxes 24,970 26,301
Long-term debt 150,235 150,331
Deferred compensation liabilities 27,157 25,514
Other liabilities 5,382 3,716
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Total liabilities 368,242 371,926
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STOCKHOLDERS' EQUITY
Capital stock - authorized 80,000,000 shares $1 par; issued
29,035,918 shares (2006 - 28,849,918 shares) 29,036 28,850
Paid-in capital 260,641 252,639
Retained earnings 234,914 215,517
Treasury stock - 3,735,608 shares (2006 - 3,023,635 shares),
at cost (111,293) (78,064)
Deferred compensation payable in Company stock 2,436 2,419
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Total Stockholders' Equity 415,734 421,361
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Total Liabilities and Stockholders' Equity $ 783,976 $ 793,287
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See accompanying notes to unaudited financial statements.
2
Exhibit 99
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Three Months Ended March 31,
-----------------------------
2007 2006
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Continuing operations
Service revenues and sales $ 270,439 $ 243,921
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Cost of services provided and goods sold
(excluding depreciation) 188,247 176,035
Selling, general and administrative expenses 48,070 38,454
Depreciation 4,715 4,132
Amortization 1,315 1,296
Other operating income (1,138) -
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Total costs and expenses 241,209 219,917
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Income from operations 29,230 24,004
Interest expense (3,742) (5,345)
Loss on extinguishment of debt - (430)
Other income--net 869 1,495
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Income before income taxes 26,357 19,724
Income taxes (10,136) (7,686)
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Income from continuing operations 16,221 12,038
Discontinued operations, net of income taxes - 177
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Net income $ 16,221 $ 12,215
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Earnings Per Share
Income from continuing operations $ 0.63 $ 0.46
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Net income $ 0.63 $ 0.47
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Average number of shares outstanding 25,716 26,044
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Diluted Earnings Per Share
Income from continuing operations $ 0.62 $ 0.45
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Net income $ 0.62 $ 0.46
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Average number of shares outstanding 26,162 26,723
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Cash Dividends Per Share $ 0.06 $ 0.06
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See accompanying notes to unaudited financial statements.
3
Exhibit 99
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
------------------------------
2007 2006
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Cash Flows from Operating Activities
Net income $ 16,221 $ 12,215
Adjustments to reconcile net income to net cash provided/
(used) by operating activities:
Depreciation and amortization 6,030 5,428
Noncash long-term incentive compensation 4,719 -
Provision for uncollectible accounts receivable 2,084 2,012
Amortization of debt issuance costs 455 444
Provision for deferred income taxes (345) (1,292)
Write off of unamortized debt issuance costs - 430
Discontinued operations - (177)
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations
Decrease in accounts receivable 5,275 19,638
Increase in inventories (174) (225)
Decrease in prepaid expenses and other current
assets 858 901
Decrease in accounts payable and other current
liabilities (9,091) (13,460)
Increase in income taxes 9,538 8,704
Increase in other assets (2,102) (1,917)
Increase in other liabilities 2,218 1,051
Excess tax benefit on share-based compensation (611) (3,289)
Other uses (375) (49)
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Net cash provided by continuing operations 34,700 30,414
Net cash provided by discontinued operations - 2,326
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Net cash provided by operating activities 34,700 32,740
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Cash Flows from Investing Activities
Capital expenditures (5,764) (3,852)
Net uses from the sale of discontinued operations (3,876) (1,684)
Proceeds from sales of property and equipment 2,975 65
Business combinations, net of cash acquired (62) (384)
Other uses (299) (305)
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Net cash used by investing activities (7,026) (6,160)
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Cash Flows from Financing Activities
Purchases of treasury stock (24,199) (2,318)
Increase in cash overdrafts payable (1,608) 786
Dividends paid (1,555) (1,572)
Excess tax benefit on share-based compensation 611 3,289
Repayment of long-term debt (141) (84,497)
Issuance of capital stock, net of costs 130 2,360
Net increase in revolving line of credit - 44,000
Debt issuance costs - (150)
Other sources/(uses) (49) 57
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Net cash used by financing activities (26,811) (38,045)
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Increase/(Decrease) in Cash and Cash Equivalents 863 (11,465)
Cash and cash equivalents at beginning of year 29,274 57,133
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Cash and cash equivalents at end of period $ 30,137 $ 45,668
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See accompanying notes to unaudited financial statements.
4
Exhibit 99
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements
1. Basis of Presentation
As used herein, the terms "We," "Company" and "Chemed" refer to Chemed
Corporation or Chemed Corporation and its consolidated subsidiaries.
We have prepared the accompanying unaudited consolidated financial
statements of Chemed in accordance with Rule 10-01 of SEC Regulation S-X.
Consequently, we have omitted certain disclosures required under generally
accepted accounting principles in the United States for complete financial
statements. However, in our opinion, the financial statements presented
herein contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly our financial position, results of
operations and cash flows. These financial statements are prepared on the
same basis as and should be read in conjunction with the Consolidated
Financial Statements and related notes included in our Annual Report on
Form 10-K for the year ended December 31, 2006. Certain 2006 amounts have
been reclassified to conform with current period presentation in the
balance sheet and statement of income primarily related to the presentation
of the discontinued operations of our Phoenix hospice program.
2. Capital Stock Transactions
In July 2006, we announced a $50 million on-going stock repurchase
program. Our previous stock repurchase program, approved in February 2000,
had remaining authorization of $8 million. For the three months ended March
31, 2007 we repurchased 626,079 shares at a weighted average cost of $46.76
per share. There were no shares repurchased during the three months ended
March 31, 2006.
On May 15, 2006, our shareholders approved an amendment to our
Certificate of Incorporation increasing the number of authorized shares of
capital stock from 40 million shares to 80 million shares.
3. Revenue Recognition
Both the VITAS segment and Roto-Rooter segment recognize service
revenues and sales when the earnings process has been completed. Generally,
this occurs when services are provided or products are delivered. VITAS
recognizes revenue at the estimated realizable amount due from third-party
payers. Medicare payments are subject to certain caps, as described further
below.
We actively monitor each of our hospice programs, by provider number,
as to their specific admission, discharge rate and median length of stay
data in an attempt to determine whether they are likely to exceed the
annual per-beneficiary Medicare cap ("Medicare cap"). Should we determine
that revenues for a program are likely to exceed the Medicare cap based on
projected trends, we attempt to institute corrective action to influence
the patient mix or to increase patient admissions. However, should we
project our corrective action will not prevent that program from exceeding
its Medicare cap, we estimate the amount of revenue recognized during the
period that will require repayment to the Federal government under the
Medicare cap and record the amount as a reduction to patient revenue. The
Medicare cap measurement period is from September 29 through September 28
of the following year for admissions and from November 1 through October 31
of the following year for revenue. As of the date of this filing for the
2007 measurement period, no programs have a required Medicare billing
reduction. Our current estimates for the projected full year 2007
measurement period anticipate no programs with a Medicare cap billing
limitation. Therefore, no revenue reduction for Medicare cap has been
recorded for the quarter ended March 31, 2007. Additionally, we recorded
approximately $472,000 in November and December 2006 related to estimated
billing limitations for the 2007 measurement period. That amount was
reversed during the first quarter of 2007.
5
Exhibit 99
4. Segments
Service revenues and sales and aftertax earnings by business segment
are as follows (in thousands):
Three months ended
March 31,
------------------------------
2007 2006
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Service Revenues and Sales
--------------------------
VITAS $ 184,049 $ 166,057
Roto-Rooter 86,390 77,864
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Total $ 270,439 $ 243,921
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Aftertax Earnings
-----------------
VITAS $ 14,987 $ 10,680
Roto-Rooter 9,486 7,201
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Total 24,473 17,881
Corporate (8,252) (5,843)
Discontinued operations - 177
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Net income $ 16,221 $ 12,215
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5. Patient Care Notes Receivable
We have notes receivable of $14.7 million from Patient Care, Inc.
related to our sale of this subsidiary in 2002. In February 2007, the
parties amended the terms of the promissory notes receivable. The amended
notes are due October 2009. The interest on the notes receivable is the
higher of Patient Care's current floating rate plus 2% or 11.5% per year.
Interest payments are due quarterly. As of March 31, 2007, Patient Care is
current on all interest payments related to these notes.
6. Earnings per Share
Earnings per share are computed using the weighted average number of
shares of capital stock outstanding. Earnings and diluted earnings per
share for 2007 and 2006 are computed as follows (in thousands, except per
share data):
Income from Continuing Operations Net Income
-------------------------------------- --------------------------------------
For the Three Months Ended Earnings Earnings
March 31, Income Shares per Share Income Shares per Share
------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
2007
Earnings $ 16,221 25,716 $ 0.63 $ 16,221 25,716 $ 0.63
============ ============
Dilutive stock options - 386 - 386
Nonvested stock awards - 60 - 60
------------ ------------ ------------ ------------
Diluted earnings $ 16,221 26,162 $ 0.62 $ 16,221 26,162 $ 0.62
============ ============ ============ ============ ============ ============
2006
Earnings $ 12,038 26,044 $ 0.46 $ 12,215 26,044 $ 0.47
============ ============
Dilutive stock options - 590 - 590
Nonvested stock awards - 89 - 89
------------ ------------ ------------ ------------
Diluted earnings $ 12,038 26,723 $ 0.45 $ 12,215 26,723 $ 0.46
============ ============ ============ ============ ============ ============
7. Other Operating Income
During the first quarter of 2007, we completed the sale of
Roto-Rooter's call center in Florida. The proceeds from the sale were
approximately $3.0 million, which resulted in a pretax gain of $1.1
million. The gain was recorded in other income from operations in the
accompanying consolidated statement of income.
6
Exhibit 99
8. Other Income -- Net
Other income -- net comprises the following (in thousands):
Three months ended
March 31,
------------------------------
2007 2006
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Interest income $ 767 $ 973
(Loss)/gain on trading investments
of employee benefit trust
212 493
Other - net (110) 29
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Total other income $ 869 $ 1,495
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9. Other Current Liabilities
Other current liabilities as of March 31, 2007 and December 31, 2006
consist of the following (in thousands):
2007 2006
-------------- --------------
Accrued legal settlements $ 1,859 $ 1,889
Accrued divestiture expenses 2,618 2,612
Accrued Medicare cap estimate 9,503 3,373
Other 12,673 14,810
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Total other current liabilities $ 26,653 $ 22,684
============== ==============
Accrued Medicare cap as of March 31, 2007 includes $6.6 million related
to our Phoenix program that was sold in November 2006. This amount was
recorded in current liabilities from discontinued operations as of December
31, 2006.
10. 2002 Executive Long-Term Incentive Plan
In February 2007, we met the cumulative earnings target specified in
the 2002 Long-Term Incentive Plan (LTIP) and on March 9, 2007, the
Compensation/Incentive Committee of the Board of Directors approved a stock
grant of 100,000 shares and the related allocation to participants. The
pre-tax cost of the stock grant was $5.4 million and is included in
selling, general and administrative expenses in the accompanying
consolidated statement of income. No market price components of the LTIP
were reached during the three months ended March 31, 2007 or 2006.
11. Long-term Debt and Extinguishment of Debt
On March 31, 2006, we repaid in full our $84.4 million term loan with
JPMorgan Chase Bank. The term loan was paid with $40.4 million of cash on
hand and the remainder with a draw on our revolving credit facility. At
that time, we also amended the $175 million revolving credit facility with
JPMorgan Chase Bank to reduce the commitment and annual fees and to reduce
the floating interest rate by approximately 50 basis points. The interest
rate of the amended revolving credit agreement is LIBOR plus 1.25%. The
amended revolving credit facility also includes an "accordion" feature that
allows us the opportunity to expand the facility by $50 million. In
connection with the repayment of the term loan, we recorded a write-off of
unamortized debt issuance costs of $430,000.
We are in compliance with all debt covenants as of March 31, 2007. We
have issued $33.3 million in standby letters of credit as of March 31, 2007
mainly for insurance purposes. Issued letters of credit reduce our
available credit under the revolving credit agreement. As of March 31,
2007, the Company has approximately $141.7 million of unused lines of
credit available and eligible to be drawn down under its revolving credit
facility, excluding the accordion feature.
See Note 19 for discussion of significant changes to our capitalization
structure subsequent to March 31, 2007.
12. Loans Receivable from Independent Contractors
The Roto-Rooter segment sublicenses with approximately sixty-one
independent contractors to operate certain plumbing repair and drain
cleaning businesses in lesser-populated areas of the United States and
Canada. As of March 31, 2007, we had notes receivable from its independent
contractors totaling $1.8 million (December 31, 2006-$1.9 million). In most
cases these loans are fully or partially secured by equipment owned by the
contractor. The interest rates on the loans range from 5% to 8% per annum
and the remaining terms of the loans range from two months to 5.4 years at
March 31, 2007. During the quarter ended March 31, 2007, we recorded
revenues of $5.4 million (2006-$5.0 million) and pretax profits of $2.5
million (2006-$2.0 million) from our independent contractors.
7
Exhibit 99
We have adopted the provisions of Financial Accounting Standards Board
("FASB") Interpretation No. 46R "Consolidation of Variable Interest
Entities--an interpretation of Accounting Research Bulletin No. 51
(revised)" ("FIN 46R") relative to our contractual relationships with the
independent contractors. FIN 46R requires the primary beneficiary of a
Variable Interest Entity ("VIE") to consolidate the accounts of the VIE. We
have evaluated our relationships with our independent contractors based
upon guidance provided in FIN 46R and have concluded that some of the
contractors who have loans payable to us may be VIE's. We believe
consolidation, if required, of the accounts of any VIE's for which we might
be the primary beneficiary would not materially impact our financial
position, results of operations or cash flows.
13. Pension and Retirement Plans
All of the Company's plans that provide retirement and similar benefits
are defined contribution plans. Expenses for the Company's pension and
profit-sharing plans, ESOP's, excess benefit plans and other similar plans
were $3.6 million and $2.4 million for the three months ended March 31,
2007 and 2006, respectively.
14. Litigation
Like other large California employers, our VITAS subsidiary faces
allegations of purported class-wide wage and hour violations. It was party
to a class action lawsuit filed in the Superior Court of California, Los
Angeles County, in April of 2004 by Ann Marie Costa, Ana Jimenez, Mariea
Ruteaya and Gracetta Wilson ("Costa"). This case alleged failure to pay
overtime wages for hours worked "off the clock" on administrative tasks,
including voicemail retrieval, time entry, travel to and from work, and
pager response. This case also alleged VITAS failed to provide meal and
break periods to a purported class of California nurses, home health aides
and licensed clinical social workers. The case also sought payment of
penalties, interest, and Plaintiffs' attorney fees. VITAS contested these
allegations. During 2006, we reached a tentative settlement and on June 26,
2006, the court granted final approval of the settlement ($19.9 million).
VITAS is party to a class action lawsuit filed in the Superior Court of
California, Los Angeles County, in September 2006 by Bernadette Santos,
Keith Knoche and Joyce White ("Santos"). This case, filed by the Costa case
Plaintiffs' counsel, makes similar allegations of failure to pay overtime
and failure to provide meal and rest periods to a purported class of
California admissions nurses, chaplains and sales representatives. The case
likewise seeks payment of penalties, interest and Plaintiffs' attorney
fees. VITAS contests these allegations. The lawsuit is in its early stage
and we are unable to estimate our potential liability, if any, with respect
to these allegations.
Regardless of outcome, defense of litigation adversely affects us
through defense costs, diversion of our time and related publicity. In the
normal course of business, we are a party to various claims and legal
proceedings. We record a reserve for these matters when an adverse outcome
is probable and the amount of the potential liability is reasonably
estimable.
15. OIG Investigation
On April 7, 2005, we announced the Office of Inspector General ("OIG")
for the Department of Health and Human Services served VITAS with civil
subpoenas relating to VITAS' alleged failure to appropriately bill Medicare
and Medicaid for hospice services. As part of this investigation, the OIG
selected medical records for 320 past and current patients from VITAS'
three largest programs for review. It also sought policies and procedures
dating back to 1998 covering admissions, certifications, recertifications
and discharges. During the third quarter of 2005 and again in May 2006, the
OIG requested additional information from us. A qui tam complaint has been
filed in U.S. District Court for the Southern District of Florida. We are
conferring with the U.S. Attorney regarding our defenses to the complaint
allegations. The U.S. Attorney has not decided whether to intervene in the
qui tam action. We have incurred pretax expense related to complying with
OIG requests and defending the litigation of $66,000 and $132,000 for the
three months ended March 31, 2007 and 2006, respectively.
The government continues to investigate the complaint's allegations,
against which VITAS is presently defending. We are unable to predict the
outcome of this matter or the impact, if any, that the investigation may
have on the business, results of operations, liquidity or capital
resources. Regardless of outcome, responding to the subpoenas and defending
the litigation can adversely affect us through defense costs, diversion of
our time and related publicity.
8
Exhibit 99
16. Related Party Agreement
In October 2004, VITAS entered into a pharmacy services agreement
("Agreement") with Omnicare, Inc. ("OCR") whereby OCR will provide
specified pharmacy services for VITAS and its hospice patients in
geographical areas served by both VITAS and OCR. The Agreement has an
initial term of three years that renews automatically thereafter for
one-year terms. Either party may cancel the Agreement at the end of any
term by giving written notice at least 90 days prior to the end of said
term. In June 2004, VITAS entered into a pharmacy services agreement with
excelleRx. The agreement has a one-year term and automatically renews
unless either party provides a 90-day written termination notice.
Subsequent to June 2004, OCR acquired excelleRx. Under both agreements,
VITAS made purchases of $8.2 million and $6.7 for three months ended March
31, 2007 and 2006, respectively and has accounts payable of $3.6 million at
March 31, 2007. Mr. E. L. Hutton is non-executive Chairman of the Board and
a director of the Company and OCR. Mr. Joel F. Gemunder, President and
Chief Executive Officer of OCR, Mr. Charles H. Erhart, Jr. and Ms. Sandra
Laney are directors of both OCR and the Company. Mr. Kevin J. McNamara,
President, Chief Executive Officer and a director of the Company, is a
director emeritus of OCR. We believe that the terms of these agreements are
no less favorable to VITAS than we could negotiate with an unrelated party.
17. Cash Overdrafts Payable
Included in accounts payable at March 31, 2007 are cash overdrafts
payable of $9.0 million (December 31, 2006 - $10.6 million).
18. Uncertain Tax Positions
On January 1, 2007, we adopted FASB Interpretation No. 48 (FIN 48),
"Accounting for Uncertainty in Income Taxes - an Interpretation of FASB
Statement 109", which prescribes a comprehensive model for how to
recognize, measure, present and disclose in financial statements uncertain
tax positions taken or expected to be taken on a tax return. Upon adoption
of FIN 48, the financial statements reflect expected future tax
consequences of such uncertain positions assuming the taxing authorities'
full knowledge of the position and all relevant facts. FIN 48 also revises
disclosure requirements and introduces an annual, tabular roll-forward of
the unrecognized tax benefits.
The cumulative effect upon adoption of FIN 48 was to reduce our accrual
for uncertain tax positions by approximately $4.7 million, which has been
recorded in retained earnings as of January 1, 2007 in the accompanying
consolidated balance sheet. After adoption, we had approximately $1.2
million in unrecognized tax benefits. The majority of this amount would
affect our effective tax rate, if recognized in a future period. The years
ended December 31, 2003 and forward remain open for review for Federal
income tax purposes at Chemed and Roto-Rooter. For VITAS, fiscal years
beginning after February 24, 2004 (the date of acquisition) remain open for
review for Federal income tax purposes. The earliest open year relating to
any of our material state jurisdictions is the fiscal year ended December
31, 2002. During the next twelve months, we anticipate that the amount of
unrecognized tax benefits will decrease by approximately $150,000 to
$200,000 in total due to normal quarterly provisions and releases upon
expiration of certain statutes of limitation.
As permitted by FIN 48, we reclassified interest related to our
accrual for uncertain tax positions to separate interest accounts. We
believe this change in accounting method is preferable as it more
accurately classifies the impact of interest in our consolidated balance
sheet and consolidated statement of income. As of March 31, 2007, we have
approximately $166,000 accrued in interest related to uncertain tax
positions. These accruals are included in other current liabilities in the
accompanying consolidated balance sheet. For the three months ended March
31, 2007, we have recorded approximately $14,000 for interest related to
uncertain tax positions in interest expense in the accompanying
consolidated statement of income.
19. Subsequent Events
On April 4, 2007, we issued a contingent bond redemption notice
regarding the $150 million, 8 3/4% senior notes due in 2011. The redemption
is being made pursuant to the terms of the indenture dated February 24,
2004 at a redemption price of 104.375% of the principal amount plus accrued
but unpaid interest. This redemption notice was contingent upon the
completion of the new credit facility discussed in the next paragraph. The
senior notes are redeemable on or after May 4, 2007. We expect to write-off
approximately $4.8 million in deferred debt costs related to the senior
notes. We will also incur a $6.5 million charge related to the 4.375%
premium to be paid upon redemption. These amounts will be recorded in the
second quarter of 2007.
On May 2, 2007, we entered into a new senior secured credit facility
with JPMorgan Chase Bank (the "2007 Facility") to replace our existing
credit facility. The 2007 Facility includes a $100 million term loan, a
$175 million revolving credit facility and a $100 million expansion
feature. The facility has a 5-year maturity with principal payments on the
term loan due quarterly and on the revolving credit facility due at
maturity. Interest is payable quarterly at a floating rate equal to our
choice of various indexes plus a specified margin based on our leverage
ratio. The interest rate at the inception of the agreement is LIBOR plus
0.875%. In connection with replacing our existing credit facility, we will
write-off approximately $2.3 million in the second quarter of 2007 related
to deferred debt costs.
9
Exhibit 99
On April 26, 2007, our Board of Directors authorized a $150 million
stock repurchase program. Our $50 million stock repurchase program,
authorized in July 2006, has approximately $13.6 million remaining as of
March 31, 2007.
20. Recent Accounting Statements
In February 2007, the FASB issued Statement No. 159, "The Fair Value
Option for Financial Assets and Financial Liabilities" ("SFAS 159"), which
permits an entity to measure certain financial assets and financial
liabilities at fair value. Entities that elect the fair value option will
report unrealized gains and losses in earnings at each reporting date. The
fair value option may be elected on an instrument-by-instrument basis, with
a few exceptions, as long as it is applied to the entire instrument. The
fair value election is irrevocable unless a new election date occurs. SFAS
159 is effective as of the beginning of the first fiscal year that begins
after November 15, 2007. We are currently evaluating the impact SFAS 159
will have on our financial condition and results of operations, if any.
In September 2006, the FASB issued Statement No. 157, "Fair Value
Measurements" ("SFAS 157"), which addresses how companies should measure
fair value when they are required to use a fair value measure for
recognition or disclosure purposes under generally accepted accounting
principles (GAAP). It sets a common definition of fair value to be used
throughout GAAP. The new standard is designed to make the measurement of
fair value more consistent and comparable and improve disclosures about
those measures. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007. We are currently
evaluating the impact SFAS 157 will have on our financial condition and
results of operations.
10
Exhibit 99
21. Guarantor Subsidiaries -Subsequent Event
Our 1.875% Senior Convertible Notes issued on May 14, 2007, as
described in our Form 10-Q filing for the quarter ended June 30, 2007, are
fully and unconditionally guaranteed on an unsecured, joint and severally
liable basis by certain of our 100% owned subsidiaries. The equity method
has been used with respect to the parent company's (Chemed) investment in
subsidiaries. No consolidating adjustments column is presented for the
condensed consolidating statement of cash flow since there were no
significant consolidating adjustments for the periods presented. The
following unaudited, condensed, consolidating financial data presents the
composition of the parent company, the guarantor subsidiaries and the
non-guarantor subsidiaries as of March 31, 2007 and December 31, 2006 and
for the periods ended March 31, 2007 and 2006 (in thousands):
Condensed Consolidating Balance Sheet
-------------------------------------
Non-
March 31, 2007 Guarantor Guarantor Consolidating
- -------------- Parent Subsidiaries Subsidiaries Adjustments Consolidated
------------- ------------- ------------- ------------- -------------
ASSETS
Cash and cash equivalents $ 25,767 $ (1,543) $ 5,913 $ - $ 30,137
Accounts receivable, less allowances 1,891 82,744 576 - 85,211
Intercompany receivables 59,884 - - (59,884) -
Inventories - 6,174 578 - 6,752
Current deferred income taxes 1,504 19,905 186 - 21,595
Prepaid expenses and other current assets 798 8,227 85 - 9,110
------------- ------------- ------------- ------------- -------------
Total current assets 89,844 115,507 7,338 (59,884) 152,805
------------- ------------- ------------- ------------- -------------
Investments of deferred compensation plans held
in trust 12,918 14,818 - - 27,736
Note receivable 14,701 - - - 14,701
Properties and equipment, at cost, less
accumulated depreciation 4,548 62,961 1,786 - 69,295
Identifiable intangible assets less accumulated
amortization - 68,204 1 - 68,205
Goodwill - 430,681 4,359 - 435,040
Other assets 12,833 2,654 707 - 16,194
Investments in subsidiaries 454,592 9,415 - (464,007) -
------------- ------------- ------------- ------------- -------------
Total assets $ 589,436 $ 704,240 $ 14,191 $ (523,891) $ 783,976
============= ============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 6,244 $ 48,531 $ 497 $ - $ 55,272
Intercompany payables - 57,829 2,055 (59,884) -
Current portion of long-term debt - 164 - - 164
Income taxes (1,884) 10,426 868 - 9,410
Accrued insurance 2,824 37,065 - - 39,889
Accrued salaries and wages 1,222 27,336 552 - 29,110
Other current liabilities 6,351 20,074 228 - 26,653
Deferred income taxes (7,381) 31,945 406 - 24,970
Long-term debt 150,000 235 - - 150,235
Deferred compensation liabilities 13,048 14,109 - - 27,157
Other liabilities 3,278 1,934 170 - 5,382
Stockholders' equity 415,734 454,592 9,415 (464,007) 415,734
------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders' equity $ 589,436 $ 704,240 $ 14,191 $ (523,891) $ 783,976
============= ============= ============= ============= =============
11
Exhibit 99
Non-
December 31, 2006 Guarantor Guarantor Consolidating
- ----------------- Parent Subsidiaries Subsidiaries Adjustments Consolidated
------------- ------------- ------------- ------------- -------------
ASSETS
Cash and cash equivalents $ 25,258 $ (1,314) $ 5,330 $ - $ 29,274
Accounts receivable, less allowances 1,547 91,065 474 - 93,086
Intercompany receivables 84,784 - - (84,784) -
Inventories - 6,169 409 - 6,578
Current deferred income taxes (117) 17,591 315 - 17,789
Current assets of discontinued operations - 5,418 - - 5,418
Prepaid expenses and other current assets 809 9,087 72 - 9,968
------------- ------------- ------------- ------------- -------------
Total current assets 112,281 128,016 6,600 (84,784) 162,113
------------- ------------- ------------- ------------- -------------
Investments of deferred compensation plans held
in trust 12,214 13,499 - - 25,713
Note receivable 14,701 - - - 14,701
Properties and equipment, at cost, less
accumulated depreciation 6,412 62,023 1,705 - 70,140
Identifiable intangible assets less
accumulated amortization - 69,213 2 - 69,215
Goodwill - 430,671 4,379 - 435,050
Noncurrent assets of discontinued operations - 287 - - 287
Other assets 12,845 2,514 709 - 16,068
Investments in subsidiaries 430,399 8,628 - (439,027) -
------------- ------------- ------------- ------------- -------------
Total assets $ 588,852 $ 714,851 $ 13,395 $ (523,811) $ 793,287
============= ============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ (189) $ 49,502 $ 431 $ - $ 49,744
Intercompany payables - 84,036 748 (84,784) -
Current portion of long-term debt - 209 - - 209
Income taxes (5,906) 11,680 991 - 6,765
Accrued insurance 2,938 35,519 - - 38,457
Accrued salaries and wages 2,530 32,731 729 - 35,990
Current liabilities of discontinued
operations - 12,215 - - 12,215
Other current liabilities 9,568 11,715 1,401 - 22,684
Deferred income taxes (6,946) 32,780 467 - 26,301
Long-term debt 150,000 331 - - 150,331
Deferred compensation liabilities 12,247 13,267 - - 25,514
Other liabilities 3,249 467 - - 3,716
Stockholders' equity 421,361 430,399 8,628 (439,027) 421,361
------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders' equity $ 588,852 $ 714,851 $ 13,395 $ (523,811) $ 793,287
============= ============= ============= ============= =============
12
Exhibit 99
Non-
For the period ended March 31, 2007 Guarantor Guarantor Consolidating
- ----------------------------------- Parent Subsidiaries Subsidiaries Adjustments Consolidated
------------- ------------- ------------- ------------- -------------
Net sales and service revenues $ - $ 264,295 $ 6,144 $ - $ 270,439
------------- ------------- ------------- ------------- -------------
Cost of services provided and goods sold - 185,105 3,142 - 188,247
Selling, general and administrative
expenses 5,645 41,204 1,221 - 48,070
Depreciation 122 4,448 145 - 4,715
Amortization 305 1,010 - - 1,315
Other income - net (1,138) - - - (1,138)
------------- ------------- ------------- ------------- -------------
Total costs and expenses 4,934 231,767 4,508 - 241,209
------------- ------------- ------------- ------------- -------------
Income/(loss) from operations (4,934) 32,528 1,636 - 29,230
Interest expense (3,623) (119) - - (3,742)
Other income/(expense) - net 5,106 (4,284) 47 - 869
------------- ------------- ------------- ------------- -------------
Income/(loss) before income taxes (3,451) 28,125 1,683 - 26,357
Income tax (provision)/ benefit 1,351 (10,789) (698) - (10,136)
Equity in net income of subsidiaries 18,321 985 - (19,306) -
------------- ------------- ------------- ------------- -------------
Net income $ 16,221 $ 18,321 $ 985 $ (19,306) $ 16,221
============= ============= ============= ============= =============
Non-
For the period ended March 31, 2006 Guarantor Guarantor Consolidating
- ----------------------------------- Parent Subsidiaries Subsidiaries Adjustments Consolidated
------------- ------------- ------------- ------------- -------------
Continuing Operations
Net sales and service revenues $ - $ 239,142 $ 4,779 $ - $ 243,921
------------- ------------- ------------- ------------- -------------
Cost of services provided and goods sold - 173,581 2,454 - 176,035
Selling, general and administrative
expenses 2,549 34,820 1,085 - 38,454
Depreciation 136 3,855 141 - 4,132
Amortization 292 1,003 1 - 1,296
------------- ------------- ------------- ------------- -------------
Total costs and expenses 2,977 213,259 3,681 - 219,917
------------- ------------- ------------- ------------- -------------
Income/(loss) from operations (2,977) 25,883 1,098 - 24,004
Interest expense (5,141) (184) (20) - (5,345)
Loss on extinguishment of debt (430) - - - (430)
Other income/(expense) - net 5,702 (4,222) 15 - 1,495
------------- ------------- ------------- ------------- -------------
Income/(loss) before income taxes (2,846) 21,477 1,093 - 19,724
Income tax (provision)/ benefit 1,051 (8,260) (477) - (7,686)
Equity in net income of subsidiaries 14,010 616 - (14,626) -
------------- ------------- ------------- ------------- -------------
Income from continuing operations 12,215 13,833 616 (14,626) 12,038
Discontinued Operations - 177 - - 177
------------- ------------- ------------- ------------- -------------
Net income $ 12,215 $ 14,010 $ 616 $ (14,626) $ 12,215
============= ============= ============= ============= =============
13
Exhibit 99
For the period ended March 31, 2007
- ----------------------------------- Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Consolidated
------------- ------------- ------------- -------------
Cash Flow from Operating Activities:
- -------------------------------------
Net cash provided/(used) by operating activities $ (2,304) $ 37,437 $ (433) $ 34,700
------------- ------------- ------------- -------------
Cash Flow from Investing Activities:
- -------------------------------------
Capital expenditures (68) (5,459) (237) (5,764)
Business combinations, net of cash acquired - (62) - (62)
Net payments from sale of discontinued operations (137) (3,739) - (3,876)
Proceeds from sale of property and equipment 2,962 10 3 2,975
Other uses - net (232) (67) - (299)
------------- ------------- ------------- -------------
Net cash provided/ (used) by investing activities 2,525 (9,317) (234) (7,026)
------------- ------------- ------------- -------------
Cash Flow from Financing Activities:
- -------------------------------------
Increase/(decrease) in cash overdrafts payable 394 (2,002) - (1,608)
Change in intercompany accounts 24,899 (26,206) 1,307 -
Dividends paid to shareholders (1,555) - - (1,555)
Purchases of treasury stock (24,199) - - (24,199)
Proceeds from exercise of stock options 130 - - 130
Realized excess tax benefit on share based compensation 611 - - 611
Repayment of long-term debt - (141) - (141)
Other sources and uses - net 8 - (57) (49)
------------- ------------- ------------- -------------
Net cash provided/ (used) by financing activities 288 (28,349) 1,250 (26,811)
------------- ------------- ------------- -------------
Net increase/(decrease) in cash and cash equivalents 509 (229) 583 863
Cash and cash equivalents at beginning of year 25,258 (1,314) 5,330 29,274
------------- ------------- ------------- -------------
Cash and cash equivalents at end of period $ 25,767 $ (1,543) $ 5,913 $ 30,137
============= ============= ============= =============
14
Exhibit 99
For the period ended March 31, 2006
- ----------------------------------- Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Consolidated
------------- ------------- ------------- -------------
Cash Flow from Operating Activities:
- -------------------------------------
Net cash provided/(used) by operating activities $ (20,447) $ 52,636 $ 551 $ 32,740
------------- ------------- ------------- -------------
Cash Flow from Investing Activities:
- -------------------------------------
Capital expenditures (51) (3,635) (166) (3,852)
Business combinations, net of cash acquired - (384) - (384)
Net payments from sale of discontinued operations (1,684) - - (1,684)
Proceeds from sale of property and equipment 31 34 - 65
Other uses - net (157) (148) - (305)
------------- ------------- ------------- -------------
Net cash used by investing activities (1,861) (4,133) (166) (6,160)
------------- ------------- ------------- -------------
Cash Flow from Financing Activities:
- -------------------------------------
Increase/(decrease) in cash overdrafts payable (226) 1,012 - 786
Change in intercompany accounts 48,633 (48,680) 47 -
Dividends paid to shareholders (1,572) - - (1,572)
Purchases of treasury stock (2,318) - - (2,318)
Proceeds from exercise of stock options 2,360 - - 2,360
Realized excess tax benefit on share based compensation 3,289 - - 3,289
Net increase in revolving credit facility 44,000 - - 44,000
Debt issuance costs (150) - - (150)
Repayment of long-term debt (84,363) (134) - (84,497)
Other sources - net 26 31 - 57
------------- ------------- ------------- -------------
Net cash provided/ (used) by financing activities 9,679 (47,771) 47 (38,045)
------------- ------------- ------------- -------------
Net increase/(decrease) in cash and cash equivalents (12,629) 732 432 (11,465)
Cash and cash equivalents at beginning of year 54,871 (1,419) 3,681 57,133
------------- ------------- ------------- -------------
Cash and cash equivalents at end of period $ 42,242 $ (687) $ 4,113 $ 45,668
============= ============= ============= =============
15
Exhibit 99
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Chemed Corporation
---------------------------------------
(Registrant)
Dated: May 2, 2007 By: Kevin J. McNamara
--------------------- ---------------------------------------
Kevin J. McNamara
(President and Chief Executive Officer)
Dated: May 2, 2007 By: David P. Williams
--------------------- ---------------------------------------
David P. Williams
(Vice President and Chief Financial
Officer)
Dated: May 2, 2007 By: Arthur V. Tucker, Jr.
--------------------- ---------------------------------------
Arthur V. Tucker, Jr.
(Vice President and Controller)
16