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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
October 30, 2007
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-8351 31-0791746
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
2600 Chemed Center, 255 East 5th Street, Cincinnati, OH 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(513) 762-6900
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2 below):
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
230.425)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under Exchange
Act (17 CFR 230.425)
[_] Pre-commencement communications pursuant to Rule 13e-4 (c) under Exchange
Act (17 CFR 230.425)
Page 1 of 2
Item 2.02 Results of Operations and Financial Condition
On October 30, 2007 Chemed Corporation issued a press release announcing
its financial results for the quarter ended September 30, 2007. A copy of the
release is furnished herewith as Exhibit 99.
Item 9.01 Financial Statements and Exhibits
d) Exhibit
(99) Registrant's press release dated October 30, 2007
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CHEMED CORPORATION
Dated: October 31, 2007 By: /s/ Arthur V. Tucker, Jr.
---------------- -----------------------------
Arthur V. Tucker, Jr.
Vice President and Controller
Page 2 of 2
Exhibit 99
Chemed Reports Third-Quarter 2007 Results
CINCINNATI--(BUSINESS WIRE)--Oct. 30, 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 third quarter ended September 30, 2007,
versus the comparable prior-year period, as follows:
Consolidated operating results from Continuing Operations:
-- Revenue increased 7.4% to $273 million
-- Diluted EPS from Continuing Operations of $.69
-- Adjusted diluted EPS from Continuing Operations, which excludes early
extinguishment of debt and certain other items, of $.74
VITAS segment operating results from Continuing Operations:
-- Net Patient Revenue of $188 million, up 7.5%
-- Average Daily Census (ADC) of 11,529 up 4.6%
-- Admissions of 13,436, an increase of 5.9%
-- Average Length of Stay in the quarter of 76.7 days
-- Net income of $13.9 million
-- Adjusted EBITDA of $24.6 million
Roto-Rooter segment operating results:
-- Revenue of $84 million, an increase of 7.2%
-- Job count of 198,354
-- Net Income of $8.9 million
-- Adjusted EBITDA of $15.4 million
VITAS
VITAS generated 13,436 admissions in the quarter, which represents an
increase of 5.9% over the prior year. Discharges totaled 13,403, an increase of
7.0%, and ADC in the quarter increased 4.6% to 11,529. VITAS' Average Length of
Stay (ALOS) for patients discharged in the quarter was 76.7 days. This compares
to an ALOS of 76.6 days in the second quarter of 2007 and 71.0 days in the third
quarter of 2006. Median Length of Stay (MLOS) was 14 days.
Net revenue for VITAS was $188 million in the third quarter of 2007, which
is an increase of 7.5% over the prior-year period. This revenue growth was the
result of increased ADC combined with the 2007 Medicare price increase,
partially offset by the continued shift in revenue mix to routine home care.
Routine homecare revenue increased 9.1% in the quarter and inpatient and
continuous care declined 0.4%. The routine home care per diem averaged $141 and
inpatient/continuous care per diem averaged $609 in the third quarter of 2007.
Income from continuing operations for the third quarter of 2007 was $13.9
million, an increase of 32.8%.
VITAS did not have any billing restrictions related to Medicare Cap for its
third-quarter 2007 operating activity. As of September 30, 2007, VITAS has not
accrued any Medicare billing restrictions for the 2007 cap year. The ability for
VITAS to bill Medicare for 100% of the care provided to terminally ill patients
is a result of improved admissions metrics, relatively low MLOS and the
continued combination of various hospice provider numbers.
All of VITAS' hospice programs currently have a cap cushion greater than
10% through the first eleven months of the 2007 cap year with the exception of
two programs. These programs have a cap cushion of 3% and 6%, respectively.
VITAS has received notice from its fiscal intermediary for all of VITAS'
Medicare provider numbers related to the 2006 Medicare Cap calculation. The
fiscal intermediary determines Medicare Cap based upon a retrospective review of
individual hospice programs admissions and billing activities. This look back
measures Medicare Cap for the revenue period November 1, 2005, through October
31, 2006, and admissions for the period September 29, 2005, through September
28, 2006. As part of this measurement, the fiscal intermediary also prorates
Medicare Cap for any Medicare decedents who received hospice care from more than
one provider during the decedent's lifespan. This information is not available
to VITAS and can only be measured by the fiscal intermediary upon the death of
the Medicare beneficiary.
Based upon this retrospective review by the fiscal intermediary, VITAS has
over accrued its 2006 Medicare Cap liability by $1.2 million. VITAS' Phoenix
program, which was discontinued in December 2006, was over accrued by $1.9
million. This over accrual was partially offset by a $0.7 million under accrual
in 2006 for Medicare Cap liability in three programs. These adjustments are
recorded in the company's third-quarter 2007 operating results.
VITAS measures its Medicare Cap cushion, or Medicare Cap liability, on a
program-by-program basis. Cap Cushion is defined as the difference between the
maximum Medicare billing potential and actual Medicare billings in a hospice
program for a Medicare Cap year. Of the 36 programs VITAS had in place for a
full 2006 government fiscal year, 31 programs, or 86%, received favorable 2006
adjustments to their Medicare Cap Cushion totaling $18 million. VITAS had 5
programs that had either overestimated Cap Cushion, or underestimated Cap
liability, totaling $1.3 million. VITAS had aggregate Cap Cushion in excess of
$200 million at the end of the 2006 fiscal Medicare Cap year.
Gross margin in the quarter, excluding the impact of Medicare Cap, was
21.7%, which is a 182 basis point improvement over the prior-year quarter. Of
this margin expansion, approximately 126 basis points are a result of VITAS'
improving labor productivity. The remaining 56 basis points are the result of
$1.0 million of expenses that had been historically charged to cost of services
that were centralized and are now classified as selling, general and
administrative expense.
VITAS had selling, general and administrative expense of $15.7 million in
the third quarter of 2007. This is an increase of 14.9% over the prior year.
Adjusting for the reclassification of expenses noted above, third-quarter 2007
selling, general and administrative expense increased 7.1% over the prior-year
period and declined 3.7% sequentially.
Roto-Rooter
Roto-Rooter's plumbing and drain cleaning business generated sales of $84
million for the third quarter of 2007, 7.2% higher than the $78 million reported
in the comparable prior-year quarter. Net income for the quarter was $8.9
million, an increase of 5.1% over the prior year. The prior-year quarter
included $0.9 million of tax benefits related to earlier periods. Excluding this
third-quarter 2006 tax benefit, net income in the third quarter of 2007
increased 17.9%. Adjusted EBITDA in the third quarter of 2007 totaled $15.4
million, an increase of 19.4% over the third quarter of 2006 and equated to an
adjusted EBITDA margin of 18.3%, an increase of 188 basis points over the
prior-year period.
Job count in the third quarter of 2007 was essentially equal to the
prior-year period. Total residential jobs increased 2.8% and consisted of
residential plumbing jobs increasing 9.6% and residential drain cleaning jobs
declining 0.4%, when compared to the third quarter of 2006. Residential jobs
represent approximately 70% of total job count. Total commercial jobs declined
6.0% with commercial plumbing job count declining 1.0% and commercial drain
cleaning decreasing 8.2%, over the prior-year quarter. A significant portion of
the commercial job count decline is attributed to the continued elimination of
low revenue, low margin commercial business. This mix shift has favorably
impacted the average revenue per commercial job, which increased 11.7% in the
third quarter of 2007 and has increased 11.9% on a year-to-date basis.
Guidance for 2007
VITAS is estimated to generate full-year revenue growth from continuing
operations, prior to Medicare Cap, of 8% to 9%. Admissions are estimated to
increase 5%, increased ADC of 7.0% to 7.5% and adjusted EBITDA margins, prior to
Medicare Cap, of 13.5% to 14.5%. This guidance assumes the hospice industry
receives a full Medicare basket price increase of 3.3% in the fourth quarter of
2007. Full-year 2007 Medicare contractual billing limitations, including $0.7
million of 2006 retrospective adjustment recorded in the third quarter of 2007,
is estimated at $2.0 million.
Roto-Rooter is estimated to generate an 8.5% to 9.0% increase in revenue in
2007, job count growth between 1.0% and 1.2% and adjusted EBITDA margin in the
range of 19.5% to 20.0%.
Based upon these factors, an effective tax rate of 38.7% and an average
diluted share count for the second half of 2007 of 24.5 million, our estimate is
that full-year 2007 earnings per diluted share from continuing operations,
excluding early extinguishment of debt, expense for stock options and other
charges or credits not indicative of ongoing operations, will be in the range of
$3.10 to $3.20.
Conference Call
Chemed will host a conference call and webcast at 10 a.m., ET, on
Wednesday, October 31, 2007, to discuss the company's quarterly results and
provide an update on its business. The dial-in number for the conference call is
(866) 202-3109 for U.S. and Canadian participants and (617) 213-8844 for
international participants. The participant passcode is 78362358. 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 40847992. An archived webcast will also be
available at www.chemed.com and will remain available for 14 days following the
live call.
Chemed Corporation operates in the healthcare field through its VITAS
Healthcare Corporation subsidiary. VITAS provides daily hospice services to over
11,000 patients with severe, life-limiting illnesses. This type of care is
focused on making the terminally ill patient's final days as comfortable and
pain-free as possible.
Chemed operates in the residential and commercial plumbing and drain
cleaning industry under the brand name Roto-Rooter. Roto-Rooter provides
plumbing and drain service through company-owned branches, independent
contractors and franchisees in the United States and Canada. Roto-Rooter also
has licensed master franchisees in Indonesia, Singapore, Japan, and the
Philippines.
This press release contains information about Chemed's EBITDA and Adjusted
EBITDA, which are not measures derived in accordance with generally accepted
accounting principles and which exclude components that are important to
understanding Chemed's financial performance. Chemed provides EBITDA and
Adjusted EBITDA to help investors and others evaluate its operating results,
compare its operating performance with that of similar companies that have
different capital structures and evaluate its ability to meet its future debt
service, capital expenditures and working capital requirements. Chemed's EBITDA
and Adjusted EBITDA should not be considered in isolation or as a substitute for
comparable measures calculated and presented in accordance with GAAP. A
reconciliation of Chemed's net income to its Adjusted EBITDA is presented in the
tables following the text of this press release.
Forward-Looking Statements
Certain statements contained in this press release and the accompanying
tables are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope,"
"anticipate," "plan" and similar expressions identify forward-looking
statements, which speak only as of the date the statement was made. Chemed does
not undertake and specifically disclaims any obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. These statements are based on current expectations
and assumptions and involve various risks and uncertainties, which could cause
Chemed's actual results to differ from those expressed in such forward-looking
statements. These risks and uncertainties arise from, among other things,
possible changes in regulations governing the hospice care or plumbing and drain
cleaning industries; periodic changes in reimbursement levels and procedures
under Medicare and Medicaid programs; difficulties predicting patient length of
stay and estimating potential Medicare reimbursement obligations; challenges
inherent in Chemed's growth strategy; the current shortage of qualified nurses,
other healthcare professionals and licensed plumbing and drain cleaning
technicians; Chemed's dependence on patient referral sources; and other factors
detailed under the caption "Description of Business by Segment" or "Risk
Factors" in Chemed's most recent report on form 10-Q or 10-K and its other
filings with the Securities and Exchange Commission. You are cautioned not to
place undue reliance on such forward-looking statements and there are no
assurances that the matters contained in such statements will be achieved.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2007 2006 (cc) 2007 2006 (cc)
--------- --------- --------- ---------
Continuing Operations (aa)
Service revenues and sales $272,503 $253,695 $814,329 $746,684
--------- --------- --------- ---------
Cost of services provided and
goods sold 192,882 185,399 569,845 540,537
Selling, general and
administrative expenses (aa) 42,526 39,139 136,686 116,214
Depreciation 5,220 4,171 14,897 12,385
Amortization 1,292 1,355 3,901 3,968
Other operating
expense/(income)(aa) - 272 (1,138) 272
--------- --------- --------- ---------
Total costs and expenses 241,920 230,336 724,191 673,376
--------- --------- --------- ---------
Income from operations 30,583 23,359 90,138 73,308
Interest expense (2,515) (4,081) (9,657) (13,726)
Loss from impairment of
investment (aa) - (1,445) - (1,445)
Loss on extinguishment of
debt (aa) (83) - (13,798) (430)
Other income--net 11 715 3,068 2,734
--------- --------- --------- ---------
Income before income
taxes 27,996 18,548 69,751 60,441
Income taxes (aa) (11,080) (5,673) (27,181) (21,978)
--------- --------- --------- ---------
Income from continuing
operations 16,916 12,875 42,570 38,463
Discontinued Operations (bb) 1,201 (4,914) 1,201 (5,445)
--------- --------- --------- ---------
Net Income $ 18,117 $ 7,961 $ 43,771 $ 33,018
========= ========= ========= =========
Earnings Per Share
Income from continuing
operations $ 0.71 $ 0.49 $ 1.72 $ 1.47
========= ========= ========= =========
Net income $ 0.76 $ 0.30 $ 1.77 $ 1.26
========= ========= ========= =========
Average number of shares
outstanding 23,933 26,190 24,711 26,147
========= ========= ========= =========
Diluted Earnings Per Share
Income from continuing
operations $ 0.69 $ 0.48 $ 1.69 $ 1.44
========= ========= ========= =========
Net income $ 0.74 $ 0.30 $ 1.73 $ 1.23
========= ========= ========= =========
Average number of shares
outstanding 24,466 26,633 25,249 26,750
========= ========= ========= =========
- --------------------------------
(aa)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,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Selling, general and
administrative expenses
Stock option expense $ (1,592) $ (597) $ (3,074) $ (615)
Costs associated with
OIG investigation (48) (344) (188) (818)
Long-term incentive
compensation - - (7,067) -
Other - - 467 -
Other expenses -- net
Gain on sale of
property - - 1,138 -
Costs related to class
action litigation - (272) - (272)
Loss from impairment of
investment - (1,445) - (1,445)
Loss on extinguishment of
debt (83) - (13,798) (430)
--------- --------- --------- ---------
Pretax impact on
earnings (1,723) (2,658) (22,522) (3,580)
Income tax benefit/(charge)
on the above 630 979 8,268 1,322
Income tax benefit from
finalizing prior years'
returns - 1,791 - 1,791
-------- --------- --------- ---------
Aftertax impact on
earnings $ (1,093) $ 112 $(14,254) $ (467)
========= ========= ========= =========
(bb)Discontinued operations for 2006 include the following (in
thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Accrual adjustments (2007)
and operating results (2006)
of VITAS' Phoenix
operations, discontinued in
November 2006 $ 1,201 $ (2,688) $ 1,201 $ (3,219)
Accrual adjustments for
expenses related to the sale
of Patient Care in 2002 - (1,466) - (1,466)
Accrual adjustments for
expenses related to the sale
of DuBois Chemicals in 1991 - (760) - (760)
--------- --------- --------- ---------
Total discontinued
operations $ 1,201 $ (4,914) $ 1,201 $ (5,445)
========= ========= ========= =========
(cc) Reclassified to conform to 2007 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
September 30,
--------------------
2007 2006 (cc)
---------- ---------
Assets
Current assets
Cash and cash equivalents $ 16,730 $ 5,414
Accounts receivable less allowances 81,718 103,048
Inventories 6,824 6,381
Current deferred income taxes 20,344 22,230
Prepaid income taxes - 5,812
Current assets of discontinued
operations - 4,425
Prepaid expenses and other current assets 6,983 5,842
---------- ---------
Total current assets 132,599 153,152
Investments of deferred compensation plans held
in trust 28,824 24,278
Notes receivable 14,701 12,500
Properties and equipment, at cost less
accumulated depreciation 73,285 68,366
Identifiable intangible assets less accumulated
amortization 66,186 69,880
Goodwill 436,262 432,907
Noncurrent assets of discontinued operations - 5,980
Other assets 16,382 19,458
---------- ---------
Total Assets $ 768,239 $786,521
========== =========
Liabilities
Current liabilities
Accounts payable $ 46,389 $ 45,521
Current portion of long-term debt 10,161 207
Income taxes 9,854 4,743
Accrued insurance 37,725 40,504
Accrued compensation 37,147 32,128
Current liabilities of discontinued
operations - 8,808
Other current liabilities 20,972 20,371
---------- ---------
Total current liabilities 162,248 152,282
Deferred income taxes 3,370 25,140
Long-term debt 224,735 165,796
Deferred compensation liabilities 28,407 23,932
Other liabilities 5,818 3,929
---------- ---------
Total Liabilities 424,578 371,079
---------- ---------
Stockholders' Equity
Capital stock 29,206 28,810
Paid-in capital 264,374 250,373
Retained earnings 259,578 199,467
Treasury stock, at cost (211,959) (65,555)
Deferred compensation payable in Company stock 2,462 2,402
Notes receivable for shares sold - (55)
---------- ---------
Total Stockholders' Equity 343,661 415,442
---------- ---------
Total Liabilities and
Stockholders' Equity $ 768,239 $786,521
========== =========
Book Value Per Share $ 14.36 $ 15.89
========== =========
- --------------------------------------------------
(cc) Reclassified to conform to 2007 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands) (unaudited)
Nine Months Ended
September 30,
--------------------
2007 2006 (cc)
---------- ---------
Cash Flows from Operating Activities
Net income $ 43,771 $ 33,018
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 18,798 16,353
Write off unamortized debt issuance costs 7,235 430
Noncash long-term incentive compensation 6,154 -
Provision for uncollectible accounts
receivable 6,025 5,938
Provision for deferred income taxes (1,388) 2,896
Discontinued operations (1,201) 5,445
Amortization of debt issuance costs 970 1,325
Loss on asset impairment - 1,445
Changes in operating assets and liabilities,
excluding amounts acquired in business
combinations:
Decrease/(increase) in accounts
receivable 4,819 (20,256)
Decrease/(increase) in inventories (246) 118
Decrease in prepaid expenses and other
current assets 2,964 2,673
Decrease in accounts payable and other
current liabilities (9,896) (21,323)
Increase in income taxes 11,825 9,087
Increase in other assets (3,109) (248)
Increase in other liabilities 3,908 2,390
Excess tax benefit on share-based
compensation (2,506) (4,943)
Other sources 2,020 1,373
---------- ---------
Net cash provided by continuing operations 90,143 35,721
Net cash used by discontinued operations - 4,932
---------- ---------
Net cash provided by operating activities 90,143 40,653
---------- ---------
Cash Flows from Investing Activities
Capital expenditures (20,145) (15,955)
Net uses from disposals of discontinued
operations (6,121) (3,360)
Proceeds from sales of property and equipment 3,072 287
Business combinations, net of cash acquired (1,079) (1,489)
Other uses (1,415) (805)
---------- ---------
Net cash used by investing activities (25,688) (21,322)
---------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 300,000 -
Repayment of long-term debt (215,644) (84,500)
Purchases of treasury stock (130,873) (8,253)
Purchases of note hedges (55,093) -
Proceeds from issuance of warrants 27,614 -
Debt issuance costs (6,887) (154)
Dividends paid (4,441) (4,739)
Increase in cash overdraft payable 2,554 2,145
Excess tax benefit on share-based compensation 2,506 4,943
Issuance of capital stock 2,429 3,854
Net increase in revolving line of credit - 15,400
Other sources 836 254
---------- ---------
Net cash used by financing activities (76,999) (71,050)
---------- ---------
Decrease in Cash and Cash Equivalents (12,544) (51,719)
Cash and cash equivalents at beginning of year 29,274 57,133
---------- ---------
Cash and cash equivalents at end of period $ 16,730 $ 5,414
========== =========
- --------------------------------------------------
(cc) Reclassified to conform to 2007 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2007
- -------------------------
Service revenues and
sales $188,474 $ 84,029 $ - $ 272,503
--------- ----------- --------- ------------
Cost of services
provided and goods sold 148,225 44,657 - 192,882
Selling, general and
administrative expenses
(a) 15,651 22,831 4,044 42,526
Depreciation 3,063 2,080 77 5,220
Amortization 996 13 283 1,292
--------- ----------- --------- ------------
Total costs and
expenses 167,935 69,581 4,404 241,920
--------- ----------- --------- ------------
Income/(loss) from
operations 20,539 14,448 (4,404) 30,583
Interest expense (36) (317) (2,162) (2,515)
Intercompany interest
income/(expense) 1,909 1,337 (3,246) -
Loss on extinguishment
of debt (a) - - (83) (83)
Other income--net (3) (342) 356 11
--------- ----------- --------- ------------
Income/(loss) before
income taxes 22,409 15,126 (9,539) 27,996
Income taxes (a) (8,488) (6,184) 3,592 (11,080)
--------- ----------- --------- ------------
Income/(loss) from
continuing operations 13,921 8,942 (5,947) 16,916
Discontinued operations 1,201 - - 1,201
--------- ----------- --------- ------------
Net income/(loss) $ 15,122 $ 8,942 $ (5,947) $ 18,117
========= =========== ========= ============
2006
- -------------------------
Service revenues and
sales $175,289 $ 78,406 $ - $ 253,695
--------- ----------- --------- ------------
Cost of services
provided and goods sold 142,620 42,779 - 185,399
Selling, general and
administrative expenses
(b) 13,618 22,376 3,145 39,139
Depreciation 2,188 1,900 83 4,171
Amortization 984 16 355 1,355
Other operating
expense/(income) (b) 272 - - 272
--------- ----------- --------- ------------
Total costs and
expenses 159,682 67,071 3,583 230,336
--------- ----------- --------- ------------
Income/(loss) from
operations 15,607 11,335 (3,583) 23,359
Interest expense (87) 1 (3,995) (4,081)
Intercompany interest
income/(expense) 1,397 1,088 (2,485) -
Loss from impairment of
investment (b) - - (1,445) (1,445)
Other income--net 5 179 531 715
--------- ----------- --------- ------------
Income/(loss) before
income taxes 16,922 12,603 (10,977) 18,548
Income taxes (b) (6,436) (4,094) 4,857 (5,673)
--------- ----------- --------- ------------
Income/(loss) from
continuing operations 10,486 8,509 (6,120) 12,875
Discontinued operations (2,688) - (2,226) (4,914)
--------- ----------- --------- ------------
Net income/(loss) $ 7,798 $ 8,509 $ (8,346) $ 7,961
========= =========== ========= ============
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, 2007 AND 2006
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2007
- -------------------------
Service revenues and
sales $558,224 $ 256,105 $ - $ 814,329
--------- ----------- --------- ------------
Cost of services
provided and goods sold 434,959 134,886 - 569,845
Selling, general and
administrative expenses
(a) 47,815 70,782 18,089 136,686
Depreciation 8,377 6,290 230 14,897
Amortization 2,988 41 872 3,901
Other operating
expense/(income) (a) - - (1,138) (1,138)
--------- ----------- --------- ------------
Total costs and
expenses 494,139 211,999 18,053 724,191
--------- ----------- --------- ------------
Income/(loss) from
operations 64,085 44,106 (18,053) 90,138
Interest expense (103) (496) (9,058) (9,657)
Intercompany interest
income/(expense) 5,352 3,676 (9,028) -
Loss on extinguishment
of debt (a) - - (13,798) (13,798)
Other income--net (34) 626 2,476 3,068
--------- ----------- --------- ------------
Income/(loss) before
income taxes 69,300 47,912 (47,461) 69,751
Income taxes (a) (26,238) (18,789) 17,846 (27,181)
--------- ----------- --------- ------------
Income/(loss) from
continuing operations 43,062 29,123 (29,615) 42,570
Discontinued operations 1,201 - - 1,201
--------- ----------- --------- ------------
Net income/(loss) $ 44,263 $ 29,123 $(29,615) $ 43,771
========= =========== ========= ============
2006
- -------------------------
Service revenues and
sales $512,873 $ 233,811 $ - $ 746,684
--------- ----------- --------- ------------
Cost of services
provided and goods sold 412,913 127,624 - 540,537
Selling, general and
administrative expenses
(b) 40,535 67,150 8,529 116,214
Depreciation 6,332 5,783 270 12,385
Amortization 2,952 56 960 3,968
Other operating
expense/(income) (b) 272 - - 272
--------- ----------- --------- ------------
Total costs and
expenses 463,004 200,613 9,759 673,376
--------- ----------- --------- ------------
Income/(loss) from
operations 49,869 33,198 (9,759) 73,308
Interest expense (156) (281) (13,289) (13,726)
Intercompany interest
income/(expense) 3,746 2,889 (6,635) -
Loss from impairment of
investment (b) - - (1,445) (1,445)
Loss on extinguishment
of debt (b) - - (430) (430)
Other income--net 62 452 2,220 2,734
--------- ----------- --------- ------------
Income/(loss) before
income taxes 53,521 36,258 (29,338) 60,441
Income taxes (b) (20,248) (13,545) 11,815 (21,978)
--------- ----------- --------- ------------
Income/(loss) from
continuing operations 33,273 22,713 (17,523) 38,463
Discontinued operations (3,219) - (2,226) (5,445)
--------- ----------- --------- ------------
Net income/(loss) $ 30,054 $ 22,713 $(19,749) $ 33,018
========= =========== ========= ============
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, 2007 AND 2006
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
-------- ----------- --------- ------------
2007
- --------------------------
Net income/(loss) $15,122 $ 8,942 $ (5,947) $ 18,117
Add/(deduct):
Discontinued
operations (1,201) - - (1,201)
Interest expense 36 317 2,162 2,515
Income taxes 8,488 6,184 (3,592) 11,080
Depreciation 3,063 2,080 77 5,220
Amortization 996 13 283 1,292
-------- ----------- --------- ------------
EBITDA 26,504 17,536 (7,017) 37,023
Add/(deduct):
Stock option
expense - - 1,592 1,592
Legal expenses of
OIG investigation 48 - - 48
Loss on
extinguishment of
debt - - 83 83
Advertising cost
adjustment (c) - (535) - (535)
Interest income (11) (247) (639) (897)
Intercompany
interest
(income)/expense (1,909) (1,337) 3,246 -
-------- ----------- --------- ------------
Adjusted
EBITDA $24,632 $ 15,417 $ (2,735) $ 37,314
======== =========== ========= ============
2006
- --------------------------
Net income/(loss) $ 7,798 $ 8,509 $ (8,346) $ 7,961
Add/(deduct):
Discontinued
operations 2,688 - 2,226 4,914
Interest expense 87 (1) 3,995 4,081
Income taxes 6,436 4,094 (4,857) 5,673
Depreciation 2,188 1,900 83 4,171
Amortization 984 16 355 1,355
-------- ----------- --------- ------------
EBITDA 20,181 14,518 (6,544) 28,155
Add/(deduct):
Loss from
impairment of
investment - - 1,445 1,445
Lawsuit settlement 272 - - 272
Stock option
expense - - 597 597
Legal expenses of
OIG investigation 344 - - 344
Advertising cost
adjustment (c) - (491) - (491)
Interest income (24) (29) (373) (426)
Intercompany
interest
(income)/expense (1,397) (1,088) 2,485 -
-------- ----------- --------- ------------
Adjusted
EBITDA $19,376 $ 12,910 $ (2,390) $ 29,896
======== =========== ========= ============
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, 2007 AND 2006
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
-------- ----------- --------- ------------
2007
- --------------------------
Net income/(loss) $44,263 $ 29,123 $(29,615) $ 43,771
Add/(deduct):
Discontinued
operations (1,201) - - (1,201)
Interest expense 103 496 9,058 9,657
Income taxes 26,238 18,789 (17,846) 27,181
Depreciation 8,377 6,290 230 14,897
Amortization 2,988 41 872 3,901
-------- ----------- --------- ------------
EBITDA 80,768 54,739 (37,301) 98,206
Add/(deduct):
Long-term incentive
compensation - - 7,067 7,067
Stock option expense - - 3,074 3,074
Legal expenses of
OIG investigation 188 - - 188
Gain on sale of
property - - (1,138) (1,138)
Other - - (467) (467)
Loss on
extinguishment of
debt - - 13,798 13,798
Advertising cost
adjustment (c) - (931) - (931)
Interest income (90) (358) (2,160) (2,608)
Intercompany
interest
(income)/expense (5,352) (3,676) 9,028 -
-------- ----------- --------- ------------
Adjusted
EBITDA $75,514 $ 49,774 $ (8,099) $ 117,189
======== =========== ========= ============
2006
- --------------------------
Net income/(loss) $30,054 $ 22,713 $(19,749) $ 33,018
Add/(deduct):
Discontinued
operations 3,219 - 2,226 5,445
Interest expense 156 281 13,289 13,726
Income taxes 20,248 13,545 (11,815) 21,978
Depreciation 6,332 5,783 270 12,385
Amortization 2,952 56 960 3,968
-------- ----------- --------- ------------
EBITDA 62,961 42,378 (14,819) 90,520
Add/(deduct):
Loss from impairment
of investment - - 1,445 1,445
Lawsuit settlement 272 - - 272
Stock option expense - - 615 615
Legal expenses of
OIG investigation 818 - - 818
Loss on
extinguishment of
debt - - 430 430
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 -
-------- ----------- --------- ------------
Adjusted
EBITDA $60,205 $ 38,348 $ (7,502) $ 91,051
======== =========== ========= ============
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, 2007 AND 2006
(in thousands, except per share data)(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2007 2006 2007 2006
--------- -------- -------- --------
Net income/(loss) as reported $ 18,117 $ 7,961 $43,771 $33,018
Add/(deduct):
Discontinued operations (1,201) 4,914 (1,201) 5,445
Aftertax loss on impairment of
investment - 918 - 918
Aftertax Lawsuit settlement - 169 - 169
Prior-period tax adjustments - (1,791) - (1,791)
Aftertax cost of long-term
incentive compensation - - 4,427 -
Aftertax stock option expense 1,011 379 1,952 391
Aftertax cost of legal
expenses of OIG investigation 30 213 117 507
Aftertax other - - (296) -
Gain on sale of property - - (724) -
Aftertax cost of loss on
extinguishment of debt 52 - 8,778 273
--------- -------- -------- --------
Adjusted income from continuing
operations $ 18,009 $12,763 $56,824 $38,930
========= ======== ======== ========
Earnings/(Loss) Per Share As
Reported
Net income/(loss) $ 0.76 $ 0.30 $ 1.77 $ 1.26
========= ======== ======== ========
Average number of shares
outstanding 23,933 26,190 24,711 26,147
========= ======== ======== ========
Diluted Earnings/(Loss) Per
Share As Reported
Net income/(loss) $ 0.74 $ 0.30 $ 1.73 $ 1.23
========= ======== ======== ========
Average number of shares
outstanding 24,466 26,633 25,249 26,750
========= ======== ======== ========
Adjusted Earnings Per Share
Income from continuing
operations $ 0.75 $ 0.49 $ 2.30 $ 1.49
========= ======== ======== ========
Average number of shares
outstanding 23,933 26,190 24,711 26,147
========= ======== ======== ========
Adjusted Diluted Earnings Per
Share
Income from continuing
operations $ 0.74 $ 0.48 $ 2.25 $ 1.46
========= ======== ======== ========
Average number of shares
outstanding 24,466 26,633 25,249 26,750
========= ======== ======== ========
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, 2007 AND 2006
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2007 2006 (f ) 2007 2006 (f )
--------- --------- --------- ---------
OPERATING STATISTICS
Net revenue ($000) (d)
Homecare $137,406 $125,930 $403,748 $359,930
Inpatient 22,861 21,830 69,068 66,566
Continuous care 28,921 30,140 85,650 89,587
--------- --------- --------- ---------
Total before Medicare cap
allowance 189,188 177,900 558,466 516,083
Medicare cap allowance (714) (2,611) (242) (3,210)
--------- --------- --------- ---------
Total $188,474 $175,289 $558,224 $512,873
========= ========= ========= =========
Net revenue as a percent of
total before Medicare cap
allowance
Homecare 72.6 % 70.8 % 72.3 % 69.7 %
Inpatient 12.1 12.3 12.4 12.9
Continuous care 15.3 16.9 15.3 17.4
--------- --------- --------- ---------
Total before Medicare cap
allowance 100.0 100.0 100.0 100.0
Medicare cap allowance (0.4) (1.5) (0.0) (0.6)
--------- --------- --------- ---------
Total 99.6 % 98.5 % 100.0 % 99.4 %
========= ========= ========= =========
Average daily census ("ADC")
(days)
Homecare 7,039 6,480 6,914 6,231
Nursing home 3,567 3,587 3,572 3,479
--------- --------- --------- ---------
Routine homecare 10,606 10,067 10,486 9,710
Inpatient 412 400 417 411
Continuous care 511 553 512 553
--------- --------- --------- ---------
Total 11,529 11,020 11,415 10,674
========= ========= ========= =========
Total Admissions 13,436 12,686 41,204 39,446
Total Discharges 13,403 12,524 40,823 38,352
Average length of stay
(days) 76.7 71.0 76.7 70.5
Median length of stay (days) 14.0 14.0 13.0 13.0
ADC by major diagnosis
Neurological 32.8 % 33.6 % 33.1 % 33.4 %
Cancer 20.3 20.1 19.9 20.1
Cardio 14.2 14.7 14.5 14.9
Respiratory 6.8 6.9 6.9 7.1
Other 25.9 24.7 25.6 24.5
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Admissions by major
diagnosis
Neurological 18.2 % 19.3 % 18.5 % 19.9 %
Cancer 37.5 37.0 35.9 35.4
Cardio 12.1 12.4 12.8 13.2
Respiratory 7.1 6.7 7.6 7.2
Other 25.1 24.6 25.2 24.3
--------- --------- --------- ---------
Total 100.0 % 100.0 % 100.0 % 100.0 %
========= ========= ========= =========
Direct patient care margins
(e)
Routine homecare 51.0 % 49.1 % 50.9 % 48.8 %
Inpatient 15.9 16.5 18.3 20.2
Continuous care 16.9 17.5 18.2 18.7
Homecare margin drivers
(dollars per patient day)
Labor costs $ 48.86 $ 48.28 $ 48.98 $ 49.25
Drug costs 7.88 8.46 7.95 8.10
Home medical equipment 5.65 5.66 5.73 5.57
Medical supplies 2.22 2.21 2.16 2.14
Inpatient margin drivers
(dollars per patient day)
Labor costs $ 274.64 $ 269.72 $ 263.11 $ 258.48
Continuous care margin
drivers
(dollars per patient day)
Labor costs $ 490.94 $ 467.64 $ 479.83 $ 461.89
Bad debt expense as a
percent of revenues 0.9 % 0.9 % 0.9 0.9 %
Accounts receivable --
days of revenue N.A. N.A.
outstanding 39.6 42.1
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, 2007 AND 2006
(unaudited)
(a)Included in the results of operations for the three and nine months
ended September 30, 2007 are the following significant
credits/(charges) which may not be indicative of on going
operations (in thousands):
Three Months Ended September 30, 2007
--------------------------------------
VITAS Corporate Consolidated
-------------- --------- -------------
Selling, general and
administrative expenses
Costs associated with
OIG investigation $ (48) $ - $ (48)
Stock option expense - (1,592) (1,592)
Loss on extinguishment of
debt - (83) (83)
-------------- --------- ------------
Pretax impact on
earnings (48) (1,675) (1,723)
Income tax
benefit/(charge) on the
above 18 612 630
-------------- --------- ------------
Aftertax impact on
earnings $ (30) $ (1,063) $ (1,093)
============== ========= ============
Nine Months Ended September 30, 2007
----------------------------------------
VITAS Corporate Consolidated
-------------- --------- --------------
Selling, general and
administrative expenses
Long-term incentive
compensation $ - $ (7,067) $ (7,067)
Costs associated with
OIG investigation (188) - (188)
Stock option expense - (3,074) (3,074)
Other - 467 467
Other operating
expenses/(income)
Gain on sale of
property - 1,138 1,138
Loss on extinguishment of
debt - (13,798) (13,798)
-------------- --------- ------------
Pretax impact on
earnings (188) (22,334) (22,522)
Income tax
benefit/(charge) on the
above 71 8,197 8,268
-------------- --------- ------------
Aftertax impact on
earnings $ (117) $(14,137) $ (14,254)
============== ========= ============
(b)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 on going
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 operating
expenses/(income)
Lawsuit
settlement (272) - - (272)
Loss on impairment
of investment - - (1,445) (1,445)
-------- ----------- --------- ------------
Pretax impact
on earnings (616) - (2,042) (2,658)
Income tax benefit
on the above 234 - 745 979
Income tax benefit
from finalizing
prior years'
returns - 927 864 1,791
-------- ----------- --------- ------------
Aftertax
impact on
earnings $ (382) $ 927 $ (433) $ 112
======== =========== ========= ============
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 operating
expenses/(income)
Lawsuit
settlement (272) - - (272)
Loss on impairment
of investment - - (1,445) (1,445)
Loss on
extinguishment of
debt - - (430) (430)
-------- ----------- --------- ------------
Pretax impact
on earnings (1,090) - (2,490) (3,580)
414 - 908 1,322
Income tax benefit
on the above - 927 864 1,791
-------- ----------- --------- ------------
Aftertax
impact on
earnings $ (676) $ 927 $ (718) $ (467)
======== =========== ========= ============
(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 2007 and 2006, GAAP
advertising expense for Roto-Rooter totaled $5,008,000 and
$4,646,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the third quarters of 2007 and 2006 would
total $5,543,000 and $5,137,000, respectively. For the nine
months ended September 30, 2007 and 2006, GAAP advertising
expense for Roto-Rooter totaled $15,650,000 and $13,984,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the nine months ended September 30, 2007 and 2006
would total $16,581,000 and $15,056,000, respectively.
(d) VITAS has 6 large (greater than 450 ADC), 15 medium (greater than
200 but less than 450 ADC) and 22 small (less than 200 ADC)
hospice programs. There are two programs with Medicare cap
cushion of less than 10% for the 2007 measurement period.
(e) Amounts exclude indirect patient care and administrative costs, as
well as Medicare Cap billing limitation.
(f) Reclassified for operations discontinued in November 2006.
CONTACT: Chemed Corporation
David P. Williams, 513-762-6901