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):
August 3, 2004
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-8351 31-0791746
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) 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
Page 1 of 2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
c) Exhibits
(99.1) Registrant's press release dated August 3, 2004.
(99.2) Registrant's earnings report dated August 3, 2004.
Item 12. Results of Operations and Financial Condition
On August 3, 2004, Chemed Corporation issued a press release
announcing its financial results for the second quarter ended June
30, 2004. A copy of the release is furnished herewith as Exhibit
99.1.
A copy of the registrant's earnings report for the second quarter
ended June 30, 2004 is filed herewith as Exhibit 99.2.
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: August 3, 2004 By: /s/ Arthur V. Tucker, Jr.
-----------------------------
Arthur V. Tucker, Jr.
Vice President and Controller
Page 2 of 2
EXHIBIT 99.1
Chemed Corporation Reports 2004 Second-Quarter Results;
Consolidated Diluted EPS of $.66;
Proforma Consolidated Diluted EPS of $.60
CINCINNATI--(BUSINESS WIRE)--Aug. 3, 2004--Chemed Corporation
("Chemed") (NYSE:CHE), which operates the nation's largest provider of
end-of-life care under the VITAS Healthcare Corporation (VITAS) brand
and commercial and residential plumbing and drain cleaning services
provider under the Roto-Rooter brand (Roto-Rooter), today reported
financial results for its second quarter ended June 30, 2004, versus
the comparable prior-year period as follows:
-- Consolidated Operating Results (GAAP)
-- Revenue increased 170% to $209.0 million
-- Diluted EPS of $.66
-- Adjusted Proforma Consolidated Operating Results (Non GAAP)
-- Diluted EPS of $.60
-- Adjusted EBITDA of $24.5 million
-- VITAS generated record revenue and ADC levels
-- Quarterly Net Patient Revenue of $130.2 million, up 23%
-- Average Daily Census (ADC) of 8,581, up 19%
-- Net Income of $7.9 million, up 81%
-- Adjusted EBITDA of $16.3 million, an increase of 65%
-- Adjusted EBITDA margin of 12.5%
-- Roto-Rooter segment reported increased Revenue, Net Income and
Adjusted EBITDA
-- Revenue increased 7%
-- Net Income of $5.2 million, an increase of 33%
-- Adjusted EBITDA of $10.4 million
"The second quarter of 2004 represented our first full quarter of
owning 100% of VITAS," said Kevin J. McNamara, Chemed president and
chief executive officer. "The expansion of the VITAS business model
continues to exceed our expectations. New starts have been accelerated
and we continue to explore opportunities in terms of strategic
acquisitions. This quarter includes $1.9 million in revenue and $1.0
million in pretax losses from our eight start-up sites. This compares
to $0.4 million in revenue and $0.3 million operating losses in the
prior year quarter. In addition, the VITAS operating infrastructure
continues to show scalability and leverage as we look to expand our
geographic coverage."
"The second quarter of 2004 operating results are largely devoid
of the merger complexity that was contained in the first quarter of
2004. This results in more clarity and understanding of the
fundamental performance of Chemed and its individual business
segments," said David Williams, Chemed's chief financial officer. "To
that end, we have further refined our reported operating segments to
provide additional clarity. Chemed corporate support has been
separated from these operating segments to assist in this analysis. We
do caution everyone to carefully review the unusual issues relating to
the refinancing and merger of VITAS in the first quarter of 2004 when
reviewing our year-to-date results."
For a detailed presentation of reconciling items and related
definitions and components, please refer to the attached schedules.
VITAS
The merger of VITAS was completed on February 24, 2004. Prior to
that date the Company accounted for its 37% ownership of VITAS under
the equity method of accounting. As a result, under generally accepted
accounting principles (GAAP), only a portion of VITAS' operating
results are fully consolidated into Chemed's first quarter of 2004
results.
VITAS had net patient revenue of $130.2 million, income from
operations of $13.3 million, net income of $7.9 million and Adjusted
EBITDA of $16.3 million in the second quarter of 2004.
VITAS generated revenue growth of 22.6% over the prior year
period. Gross margins remained relatively flat at 21.8% in the second
quarter of 2004 as compared to 22.2% in the prior year quarter. The
second quarter 2004 gross margin includes an incremental $0.7 million
in start-up losses over the prior-year period which negatively
impacted margins 50 basis points. Central support costs for VITAS,
which are included as selling, general and administrative expenses in
our statement of operations, declined 8.1%. On a proforma basis, VITAS
increased net income 81% over the prior-year quarter.
VITAS' average daily census (ADC) in the second quarter of 2004
was 8,581. This compares to an ADC of 7,198 in the comparable prior
year period, an increase of 19% and 6% sequential growth. Average
length-of-stay (LOS) per patient was 59.9 days for the quarter and
compares to 55.4 days in the second quarter of 2003. The median LOS
was 12.0 days for both periods.
"We continue to see strong organic ADC growth across all levels of
VITAS," said McNamara. "The ADC in our 22 base programs now exceeds an
average of 375 patients per program. In our large programs, those with
an average-daily-census in excess of 450, ADC growth was 16% for the
quarter."
"The second quarter demonstrated the scalability and leverage that
can be derived from VITAS' business model," Williams stated. "Even
with revenue growth of almost 23%, VITAS successfully eliminated a
number of private company expenses and maintained minimal expense
growth in the core central support costs. This resulted in a
sequential decline in these operating expenses of $0.9 million, or
6.1%."
Roto-Rooter Segment
Roto-Rooter's plumbing and drain cleaning business generated sales
of $68.9 million for the second quarter of 2004, 6.7% higher than the
$64.6 million reported in the comparable prior-year quarter. Net
income for the quarter totaled $5.2 million, an increase of 33% over
the prior year quarter. Adjusted EBITDA in the second quarter of 2004
totaled $10.4 million, an increase of 33% over the Adjusted EBITDA of
$7.8 million generated in the second quarter of 2003.
"There are several factors contributing to the improvement in the
plumbing and drain cleaning segment," stated McNamara. "We were able
to successfully pass through modest price increases in many of our
markets in 2004. In addition, job count increased 1.6% in the second
quarter of 2004 over the prior-year period. We continue to see a
firming of demand in the majority of our markets and specifically
increased demand in commercial and residential plumbing. Our expense
control at the field level resulted in a second quarter 2004 gross
profit margin of 44.4%, which is 40 basis points above the second
quarter of 2003."
Consolidated Financial Position
"Our cash position is solid," Williams stated. "As of June 30,
2004, we have over $52 million in cash and approximately $69 million
of unused lines of credit under our Credit Facility. In addition, we
have federal tax refunds in excess of $15 million relating to the
deductibility of stock option buy-outs at the VITAS level that should
be received by the fourth quarter of 2004."
Guidance for the Remainder of the Year
"Looking ahead into the second half of 2004," Williams stated, "we
anticipate sequential consolidated revenue in the third quarter to be
modestly above the second quarter due to seasonality factors within
Roto-Rooter. Roto-Rooter is estimated to generate a 3% to 4%
sequential decline in revenue in the third quarter and 6% to 7%
sequential revenue growth in the fourth quarter, which is consistent
with historical seasonality over the past several years.
"VITAS has generated exceptional organic growth in the first half
of 2004. Generally, this indicates a near-term flattening of census
growth in the following one to two quarters. We are very optimistic as
to the long-term sustainable trend line improvements in ADC, revenue,
EBITDA margins and earnings per share. However, we should keep in
perspective the reasonable fluctuations in growth patterns that will
occur quarter to quarter. Capacity growth will be based upon our
trailing ADC trends. We continue to grow staffing within all of our
programs to ensure our ability to accept all hospice appropriate
patients within a community. We anticipate fluctuations in margins
quarter to quarter as capacity and central support resources are grown
at a more predictable and methodical rate than our ADC.
"Accordingly, we conservatively estimate third quarter and fourth
quarter sequential ADC growth of 2.5% to 3.0% and 2.0% to 2.5%,
respectively. This conservative growth estimate should result in an
ADC in excess of 9,100 in the fourth quarter of 2004. We are
anticipating an average Medicare reimbursement rate increase of 3%
effective October 1, 2004.
"Based upon these factors, and a diluted share count of 12.7
million, our expectation is that earnings per diluted share for the
third quarter will be between $.56 and $.60 and the fourth quarter
will be in the range of $.68 to $.72."
Conference Call
Chemed will hold a conference call to discuss second quarter
results Wednesday, August 4, 2004, at 11:00 a.m. EDT. The dial-in
number for the conference call is 800-945-0061 for U.S. and Canadian
participants and 706-679-7146 for international participants. A taped
replay of the conference call will be available approximately two
hours after the call's conclusion. It can be accessed by dialing
800-642-1687 for U.S. and Canadian callers and 706-645-9291 for
international callers. The conference identification number is
8344100. The telephone replay will be available for one week following
the live call.
The conference call will be available live via webcast at Chemed's
Web site at www.Chemed.com by clicking on "Investor Relations Home"
and then on "Featured Event: Web Cast-Live Q2 2004 Chemed Corporation
Conference Call." An online replay will be available at www.Chemed.com
beginning approximately two hours after the completion of the live
call and will remain available for 14 days.
Chemed Corporation operates in the healthcare field through its
VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice
services to over 8,500 patients with severe, life-limiting illnesses.
This type of care is focused on making the terminally ill patient's
final days as comfortable and pain-free as possible.
Chemed operates in the residential and commercial
repair-and-maintenance-service industry under the brand names
Roto-Rooter and Service America. Roto-Rooter provides plumbing and
drain service through Company-owned branches, independent contractors
and franchisees in the United States and Canada. Roto-Rooter also has
licensed master franchisees in China/Hong Kong, Indonesia, Singapore,
Japan, Mexico, the Philippines and the United Kingdom. Operating in
Florida and Arizona, Service America furnishes residential and
commercial appliance and heating and air conditioning repair and
maintenance services.
This press release contains information about Chemed's adjusted
EBITDA, which is not a measure derived in accordance with generally
accepted accounting principles (GAAP), and which excludes components
that are important to understanding Chemed's financial performance.
Chemed provides 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 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, plumbing, drain cleaning and
HVAC 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
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------- --------------------
2004 2003 2004 2003
-------- ------- -------- --------
Service revenues
and sales $208,994 $77,271 $340,042 $154,916
-------- ------- -------- --------
Cost of services
provided and goods
sold 147,206 45,611 233,430 91,763
Selling, general
and administrative
expenses 37,913 25,090 68,936 51,147(d)
Depreciation 4,570 2,990 8,159 6,042
Long-term incentive
compensation - - 9,058(a) -
-------- ------- -------- --------
Total costs and
expenses 189,689 73,691 319,583 148,952
-------- ------- -------- --------
Income from
operations 19,305 3,580 20,459 5,964
Interest expense (6,206) (867) (9,111) (1,674)
Loss on
extinguishment
of debt - - (3,330)(b) -
Other income--net 231 2,455 1,810 6,717(e)
-------- ------- -------- --------
Income before
income taxes 13,330 5,168 9,828(a,b) 11,007
Income taxes (5,833) (1,868) (5,336) (4,150)
Equity in
income/(loss) of
affiliate (VITAS) 821(c) - (3,284)(c) -
-------- ------- -------- --------
Net Income $ 8,318(c) $ 3,300 $ 1,208(c) $ 6,857(d,e)
======== ======= ======== ========
Earnings Per
Share
Net income $ 0.67(c) $ 0.33 $ 0.10(c) $ 0.69(d,e)
======== ======= ======== ========
Average number
of shares
outstanding 12,325 9,908 11,619 9,899
======== ======= ======== ========
Diluted
Earnings Per
Share
Net income $ 0.66(c) $ 0.33 $ 0.10(c) $ 0.69(d,e)
======== ======= ======== ========
Average number
of shares
outstanding 12,677 9,942 11,848 9,922
======== ======= ======== ========
(a) Amounts include a pretax charge of $9,058,000 ($5,894,000 aftertax
or $.51 per share and $.50 per diluted share) for payouts under
the Company's 2002 Executive Long-Term Incentive Plan in the first
quarter of 2004.
(b) Amounts include a pretax charge of $3,330,000 ($2,164,000 aftertax
or $.19 per share and $.18 per diluted share) from the early
extinguishment of debt in the first quarter of 2004.
(c) Amounts include the Company's aftertax share of VITAS' charges
related to the Company's acquisition of VITAS in the first quarter
of 2004, prior to the acquisition date. The accruals for
transaction costs were adjusted in the second quarter of 2004,
based on changed facts and circumstances. Of the total adjustment,
37% (less deferred income taxes) was credited to the Company's
equity in the earnings of VITAS and 63% was credited to goodwill.
These charges comprise debt and transaction-related expenses that
reduced the Company's equity in the earnings/(loss) of VITAS by
$3,800,000 ($.33 per share and $.32 per diluted share) during the
first six months of 2004.
(d) Amounts include a pretax charge of $3,627,000 ($2,358,000 aftertax
or $.24 per share) from severance charges in the first quarter of
2003.
(e) Amounts for 2003 include a pretax gain of $3,544,000 ($2,151,000
aftertax or $.22 per share) from the sales of investments.
CHEMED CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
June 30,
---------------------
2004 2003
---------- ----------
Assets
Current assets
Cash and cash equivalents $ 52,644 $ 45,342
Accounts receivable less allowances 59,032 13,381
Inventories 8,336 8,699
Statutory deposits 8,418 10,095
Prepaid income taxes 14,730 4,837
Current deferred income taxes 24,368 9,224
Prepaid expenses and other
current assets 10,277 6,955
---------- ----------
Total current assets 177,805 98,533
Investments of deferred compensation plans
held in trust 19,623 16,411
Other investments 1,445 32,789
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 62,601 46,906
Identifiable intangible assets less
accumulated amortization 24,392 2,599
Goodwill less accumulated amortization 450,988 112,903
Other assets 26,497 19,004
---------- ----------
Total Assets $775,851 $ 341,645
========== ==========
Liabilities
Current liabilities
Accounts payable $ 43,143 $ 6,976
Current portion of long-term debt 5,552 473
Income taxes 259 428
Deferred contract revenue 16,060 16,795
Accrued insurance 21,366 16,442
Other current liabilities 56,351 19,630
---------- ----------
Total current liabilities 142,731 60,744
Long-term debt 289,551 25,715
Convertible junior subordinated debentures - 14,186
Deferred compensation liabilities 19,622 16,395
Other liabilities 19,362 21,234
---------- ----------
Total Liabilities 471,266 138,274
---------- ----------
Stockholders' Equity
Capital stock 13,406 13,451
Paid-in capital 207,916 169,402
Retained earnings 118,248 132,422
Treasury stock, at cost (32,702) (110,681)
Unearned compensation (4,081) (3,824)
Deferred compensation payable in
Company stock 2,337 2,310
Notes receivable for shares sold (539) (926)
Accumulated other comprehensive income - 1,217
---------- ----------
Total Stockholders' Equity 304,585 203,371
---------- ----------
Total Liabilities and
Stockholders' Equity $775,851 $ 341,645
========== ==========
Book Value Per Share $ 24.49 $ 20.60
========== ==========
CHEMED CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004
- ----------------
Service revenues
and sales $130,240 $ 68,895 $ 9,859 $ - $208,994
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 101,790 38,281 7,135 - 147,206
Selling, general
and
administrative
expenses 13,329 19,997 2,354 2,233 37,913
Depreciation 1,861 2,174 472 63 4,570
-------- -------- ------- -------- --------
Total costs
and expenses 116,980 60,452 9,961 2,296 189,689
-------- -------- ------- -------- --------
Income/(loss)
from
operations 13,260 8,443 (102) (2,296) 19,305
Interest expense (30) (33) (3) (6,140) (6,206)
Other income--net 176 57 82 (84) 231
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes 13,406 8,467 (23) (8,520) 13,330
Income taxes (5,499) (3,317) 5 2,978 (5,833)
Equity in
earnings of
Vitas - - - 821(a) 821(a)
-------- -------- ------- -------- --------
Net
income/(loss) $ 7,907 $ 5,150 $ (18) $ (4,721) $ 8,318
======== ======== ======= ======== ========
2003
- ----------------
Service revenues
and sales $ - $ 64,592 $12,679 $ - $ 77,271
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold - 36,158 9,453 - 45,611
Selling, general
and
administrative
expenses - 20,854 2,595 1,641 25,090
Depreciation - 2,292 606 92 2,990
-------- -------- ------- -------- --------
Total costs
and expenses - 59,304 12,654 1,733 73,691
-------- -------- ------- -------- --------
Income/(loss)
from
operations - 5,288 25 (1,733) 3,580
Interest expense - (86) (9) (772) (867)
Other income--net - 1,026 122 1,307 2,455
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes - 6,228 138 (1,198) 5,168
Income taxes - (2,346) (89) 567 (1,868)
-------- -------- ------- -------- --------
Net
income/(loss) $ - $ 3,882 $ 49 $ (631) $ 3,300
======== ======== ======= ======== ========
(a) Amount includes the Company's aftertax share of VITAS' charges
related to the Company's acquisition of VITAS in the first quarter
of 2004, prior to the acquisition date. The accruals for
transaction costs were adjusted in the second quarter of 2004,
based on changed facts and circumstances. Of the total adjustment,
37% (less deferred income taxes) was credited to the Company's
equity in the earnings of VITAS and 63% was credited to goodwill.
CHEMED CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004
- --------------
Service
revenues
and sales $181,352 $138,122 $20,568 $ - $340,042
-------- -------- ------- -------- --------
Cost of
services
provided and
goods sold 142,276 76,644 14,510 - 233,430
Selling,
general
and
administrative
expenses 18,720 41,002 4,719 4,495 68,936
Depreciation 2,609 4,420 1,001 129 8,159
Long-term
incentive
costs - 1,558(a) 275(a) 7,225(a) 9,058
-------- -------- ------- -------- --------
Total costs
and
expenses 163,605 123,624 20,505 11,849 319,583
-------- -------- ------- -------- --------
Income/(loss)
from
operations 17,747 14,498 63 (11,849) 20,459
Interest
expense (58) (59) (7) (8,987) (9,111)
Loss on
extinguishment
of debt - - - (3,330)(b) (3,330)(b)
Other income
--net 207 1,059 181 363 1,810
-------- -------- ------- -------- --------
Income/
(loss)
before
income
taxes 17,896 15,498 237 (23,803) 9,828
Income taxes (7,392) (6,111) (118) 8,285 (5,336)
Equity in loss
of Vitas - - - (3,284)(c) (3,284)(c)
-------- -------- ------- -------- --------
Net
income/
(loss) $ 10,504 $ 9,387 $ 119 $(18,802) $ 1,208
======== ======== ======= ======== ========
2003
- --------------
Service
revenues
and sales $ - $129,317 $25,599 $ - $154,916
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold - 72,597 19,166 - 91,763
Selling, general
and
administrative
expenses - 39,297 5,087 6,763(d) 51,147(d)
Depreciation - 4,624 1,240 178 6,042
-------- -------- ------- -------- --------
Total costs
and
expenses - 116,518 25,493 6,941 148,952
-------- -------- ------- -------- --------
Income/
(loss)
from
operations - 12,799 106 (6,941) 5,964
Interest
expense - (115) (20) (1,539) (1,674)
Other income
--net - 652 206 5,859(e) 6,717(e)
-------- -------- ------- -------- --------
Income/
(loss)
before
income
taxes - 13,336 292 (2,621) 11,007
Income taxes - (5,023) (189) 1,062 (4,150)
-------- -------- ------- -------- --------
Net
income/
(loss) $ - $ 8,313 $ 103 $ (1,559) $ 6,857
======== ======== ======= ======== ========
(a) Amounts represent payouts under the Company's 2002 Executive
Long-term Incentive Plan in the first quarter of 2004. The
aftertax cost of these charges was $4,742,000 for Corporate,
$982,000 for Roto-Rooter and $170,000 for Service America.
(b) Amount represents the prepayment penalty incurred on the early
extinguishment of the Company's debt ($2,164,000 aftertax) in the
first quarter of 2004.
(c) Amount includes the Company's aftertax share of VITAS' charges
related to the Company's acquisition of VITAS in the first quarter
of 2004, prior to the acquisition date. The accruals for
transaction costs were adjusted in the second quarter of 2004,
based on changed facts and circumstances. Of the total adjustment,
37% (less deferred income taxes) was credited to the Company's
equity in the earnings of VITAS and 63% was credited to goodwill.
These charges comprise debt and transaction-related expenses that
reduced the Company's equity in the earnings/(loss) of VITAS by
$3,800,000 ($.33 per share and $.32 per diluted share) during the
first six months of 2004.
(d) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax)
for severance in the first quarter of 2003.
(e) Amount includes a pretax gain of $3,544,000 ($2,151,000 aftertax)
from the sales of investments in the first quarter of 2003.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands, except per share data) (unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004(a)
- ----------------
Service revenues
and sales $130,240 $ 68,895 $ 9,859 $ - $208,994
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 101,790 38,281 7,135 - 147,206
Selling, general
and
administrative
expenses 13,329 19,997 2,354 2,233 37,913
Depreciation 1,861 2,174 472 63 4,570
-------- -------- ------- -------- --------
Total costs
and expenses 116,980(c) 60,452 9,961 2,296 189,689
-------- -------- ------- -------- --------
Income/(loss)
from
operations 13,260 8,443 (102) (2,296) 19,305
Interest expense (30) (33) (3) (6,140) (6,206)
Other income--
net 176 57 82 (84) 231
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes 13,406 8,467 (23) (8,520) 13,330
Income taxes (5,499) (3,317) 5 2,978 (5,833)
-------- -------- ------- -------- --------
Net
income/
(loss) $ 7,907 $ 5,150 $ (18) $ (5,542) $ 7,497
======== ======== ======= ======== ========
Earnings Per
Share
Net Income $ 0.61
========
Average
Shares
Outstanding 12,325
========
Diluted Earnings
Per Share
Net Income $ 0.60
========
Average
Shares
Outstanding 12,677
========
2003(b)
- ----------------
Service revenues
and sales $106,245 $ 64,592 $12,679 $ - $183,516
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 82,684 36,158 9,453 - 128,295
Selling, general
and
administrative
expenses 14,504 20,854 2,595 1,506 39,459
Depreciation 1,983 2,292 606 92 4,973
-------- -------- ------- -------- --------
Total costs
and expenses 99,171(c) 59,304 12,654 1,598 172,727
-------- -------- ------- -------- --------
Income/(loss)
from
operations 7,074 5,288 25 (1,598) 10,789
Interest expense - (86) (9) (6,342) (6,437)
Other income--
net 203 1,026 122 595 1,946
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes 7,277 6,228 138 (7,345) 6,298
Income taxes (2,912) (2,346) (89) 2,546 (2,801)
-------- -------- ------- -------- --------
Net income/
(loss) $ 4,365 $ 3,882 $ 49 $ (4,799) $ 3,497
======== ======== ======= ======== ========
Earnings Per
Share
Net Income $ 0.29
========
Average
Shares
Outstanding 11,908
========
Diluted Earnings
Per Share
Net Income $ 0.29
========
Average
Shares
Outstanding 11,942
========
(a) The pro forma statement of operations for 2004 assumes the
Company's acquisition of VITAS and its financing (including the
retirement of existing debt) were completed as of January 1, 2004,
on the same terms and conditions as completed on February 24,
2004.
(b) The pro forma statement of operations for 2003 assumes the
Company's acquisition of VITAS and its financing (including the
retirement of existing debt) were completed as of January 1, 2003,
on the same terms and conditions as completed on February 24,
2004.
(c) Operating expenses for VITAS for 2004 and 2003 include additional
amortization and depreciation expense resulting from purchase
accounting adjustments to VITAS' assets in the amount of
$1,313,000 in each period.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands, except per share data) (unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004(a)
- --------------
Service
revenues
and sales $254,222 $138,122 $20,568 $ - $412,912
-------- -------- ------- -------- --------
Cost of
services
provided and
goods sold 201,124 76,644 14,510 - 292,278
Selling,
general
and
administrative
expenses 27,521 41,002 4,719 4,356 77,598
Depreciation 3,737 4,420 1,001 129 9,287
Long-term
incentive
costs - 1,558(d) 275(d) 7,225(d) 9,058(d)
-------- -------- ------- -------- --------
Total costs
and
expenses 232,382(c) 123,624 20,505 11,710 388,221
-------- -------- ------- -------- --------
Income/
(loss)
from
operations 21,840 14,498 63 (11,710) 24,691
Interest
expense (58) (59) (7) (12,389) (12,513)
Loss on
extinguishment
of debt - - - (3,330)(e) (3,330)(e)
Other income--
net 248 1,059 181 363 1,851
-------- -------- ------- -------- --------
Income/
(loss)
before
income
taxes 22,030 15,498 237 (27,066) 10,699
Income taxes (8,924) (6,111) (118) 9,419 (5,734)
-------- -------- ------- -------- --------
Net
income/
(loss) $ 13,106 $ 9,387 $ 119 $(17,647) $ 4,965
======== ======== ======= ======== ========
Earnings Per
Share
Net Income $ 0.41
========
Average
Shares
Outstanding 12,168
========
Diluted Earnings
Per Share
Net Income $ 0.40
========
Average
Shares
Outstanding 12,397
========
2003(b)
- --------------
Service
revenues
and sales $206,427 $129,317 $25,599 $ - $361,343
-------- -------- ------- -------- --------
Cost of
services
provided and
goods sold 163,603 72,597 19,166 - 255,366
Selling,
general
and
administrative
expenses 27,037 39,297 5,087 6,493(f) 77,914(f)
Depreciation 3,911 4,624 1,240 178 9,953
-------- -------- ------- -------- --------
Total costs
and
expenses 194,551(c) 116,518 25,493 6,671 343,233
-------- -------- ------- -------- --------
Income/(loss)
from
operations 11,876 12,799 106 (6,671) 18,110
Interest
expense - (115) (20) (12,592) (12,727)
Loss on
extinguishment
of debt - - - (3,330)(e) (3,330)(e)
Other income--
net 353 652 206 4,435(g) 5,646(g)
-------- -------- ------- -------- --------
Income/
(loss)
before
income
taxes 12,229 13,336 292 (18,158) 7,699
Income taxes (4,885) (5,023) (189) 6,154 (3,943)
-------- -------- ------- -------- --------
Net income/
(loss) $ 7,344 $ 8,313 $ 103 $(12,004) $ 3,756
======== ======== ======= ======== ========
Earnings Per
Share
Net Income $ 0.32
========
Average
Shares
Outstanding 11,899
========
Diluted Earnings
Per Share
Net Income $ 0.32
========
Average
Shares
Outstanding 11,922
========
(a) The pro forma statement of operations for 2004 assumes the
Company's acquisition of VITAS and its financing (including the
retirement of existing debt) were completed as of January 1, 2004,
on the same terms and conditions as completed on February 24,
2004.
(b) The pro forma statement of operations for 2003 assumes the
Company's acquisition of VITAS and its financing (including the
retirement of existing debt) were completed as of January 1, 2003,
on the same terms and conditions as completed on February 24,
2004.
(c) Operating expenses for VITAS for 2004 and 2003 include additional
amortization and depreciation expense resulting from purchase
accounting adjustments to VITAS' assets in the amount of
$2,625,000 in each period.
(d) Amounts represent payouts under the Company's 2002 Executive
Long-term Incentive Plan in the first quarter of 2004. The
aftertax cost of these charges was $4,742,000 for Corporate,
$982,000 for Roto-Rooter and $170,000 for Service America.
(e) Amount represents the prepayment penalty incurred on the early
extinguishment of the Company's debt ($2,164,000 aftertax) in the
first quarter of 2004.
(f) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax)
for severance charges in the first quarter of 2003.
(g) Amount includes a pretax gain of $3,544,000 ($2,151,000 aftertax)
from the sales of investments in the first quarter of 2003.
CHEMED CORPORATION
CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004
- ----------------
Net income/
(loss) $ 7,907 $ 5,150 $ (18) $ (4,721) $ 8,318
Add/(deduct):
Interest expense 30 33 3 6,140 6,206
Income taxes 5,499 3,317 (5) (2,978) 5,833
Depreciation and
amortization 2,971 2,240 473 62 5,746
-------- -------- ------- -------- --------
EBITDA 16,407 10,740 453 (1,497) 26,103
Add/(deduct):
Advertising cost
adjustment(a) - (273) - - (273)
Interest income (65) (27) (74) (386) (552)
Equity in earnings
of Vitas - - - (821) (821)
-------- -------- ------- -------- --------
Adjusted
EBITDA $ 16,342 $ 10,440 $ 379 $ (2,704) $ 24,457
======== ======== ======= ======== ========
2003
- ----------------
Net income/
(loss) $ - $ 3,882 $ 49 $ (631) $ 3,300
Add/(deduct):
Interest expense - 86 9 772 867
Income taxes - 2,346 89 (567) 1,868
Depreciation and
amortization - 2,353 714 98 3,165
-------- -------- ------- -------- --------
EBITDA - 8,667 861 (328) 9,200
Add/(deduct):
Advertising cost
adjustment(a) - (781) - - (781)
Interest income - (60) (90) (553) (703)
Dividend income
from Vitas - - - (712) (712)
-------- -------- ------- -------- --------
Adjusted
EBITDA $ - $ 7,826 $ 771 $ (1,593) $ 7,004
======== ======== ======= ======== ========
(a) 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 second quarters of 2004 and 2003, GAAP advertising
expense for Roto-Rooter totaled $4,152,000 and $2,967,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the second quarters of 2004 and 2003 would total
$4,425,000 and $3,748,000, respectively.
CHEMED CORPORATION
CONSOLIDATING SUMMARY OF EBITDA
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004
- ----------------
Net income/
(loss) $ 10,504 $ 9,387 $ 119 $(18,802) $ 1,208
Add/(deduct):
Interest expense 58 59 7 8,987 9,111
Income taxes 7,392 6,111 118 (8,285) 5,336
Depreciation and
amortization 4,042 4,545 1,001 135 9,723
-------- -------- ------- -------- --------
EBITDA 21,996 20,102 1,245 (17,965) 25,378
Add/(deduct):
Long-term
incentive
compensation - 1,558 275 7,225 9,058
Advertising cost
adjustment(a) - (466) - - (466)
Interest income (96) (64) (118) (834) (1,112)
Loss on
extinguishment
of debt - - - 3,330 3,330
Equity in loss
of Vitas - - - 3,284 3,284
-------- -------- ------- -------- --------
Adjusted
EBITDA $ 21,900 $ 21,130 $ 1,402 $ (4,960) $ 39,472
======== ======== ======= ======== ========
2003
- ----------------
Net income/
(loss) $ - $ 8,313 $ 103 $ (1,559) $ 6,857
Add/(deduct):
Interest expense - 115 20 1,539 1,674
Income taxes - 5,023 189 (1,062) 4,150
Depreciation and
amortization - 4,744 1,465 190 6,399
-------- -------- ------- -------- --------
EBITDA - 18,195 1,777 (892) 19,080
Add/(deduct):
Severance
charges - 3,627 - - 3,627
Advertising cost
adjustment(a) - (2,326) - - (2,326)
Interest income - (132) (185) (1,201) (1,518)
Dividend income
from Vitas - - - (1,424) (1,424)
Gains on sales
of investments - - - (3,544) (3,544)
-------- -------- ------- -------- --------
Adjusted
EBITDA $ - $ 19,364 $ 1,592 $ (7,061) $ 13,895
======== ======== ======= ======== ========
(a) Under Generally Accepted Accounting Principles ("GAAP"), the Roto-
Rooter segment expenses all advertising, including the cost of
telephone directories, immediately upon the initial release of the
advertising. Telephone directories are generally in circulation 12
months. If a directory is in circulation for a time period greater
or less than 12 months, the publisher adjusts the directory
billing for the change in billing period. The timing of when a
telephone directory is published can and does fluctuate
significantly on a quarterly basis. This "direct expensing"
results in significant fluctuations in quarterly advertising
expense. In the first six months of 2004 and 2003, GAAP
advertising expense for Roto-Rooter totaled $8,130,000 and
$5,051,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the first six months of 2004 and 2003
would total $8,596,000 and $7,377,000, respectively.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Consoli-
Vitas(a) Rooter America Corporate(a) dated
-------- -------- ------- --------- --------
2004
- ----------------
Pro forma net
income/(loss) $ 7,907 $ 5,150 $ (18) $ (5,542) $ 7,497
Add/(deduct):
Interest expense 30 33 3 6,140 6,206
Income taxes 5,499 3,317 (5) (2,978) 5,833
Depreciation and
amortization 2,971 2,240 473 62 5,746
-------- -------- ------- -------- --------
Pro forma
EBITDA 16,407 10,740 453 (2,318) 25,282
Add/(deduct):
Advertising cost
adjustment(b) - (273) - - (273)
Interest income (65) (27) (74) (386) (552)
-------- -------- ------- -------- --------
Pro forma
adjusted
EBITDA $ 16,342 $ 10,440 $ 379 $ (2,704) $ 24,457
======== ======== ======= ======== ========
2003
- ----------------
Pro forma net
income/(loss) $ 4,365 $ 3,882 $ 49 $ (4,799) $ 3,497
Add/(deduct):
Interest expense - 86 9 6,342 6,437
Income taxes 2,912 2,346 89 (2,546) 2,801
Depreciation and
amortization 2,803 2,353 714 98 5,968
-------- -------- ------- -------- --------
Pro forma
EBITDA 10,080 8,667 861 (905) 18,703
Add/(deduct):
Advertising cost
adjustment(b) - (781) - - (781)
Interest income (203) (60) (90) (553) (906)
Dividend income
from Vitas - - - (712) (712)
-------- -------- ------- -------- --------
Pro forma
adjusted
EBITDA $ 9,877 $ 7,826 $ 771 $ (2,170) $ 16,304
======== ======== ======= ======== ========
(a) Pro forma amounts for VITAS and Corporate assume the acquisition
of VITAS and the related financing were both completed on January
1 of the respective years.
(b) 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 second quarters of 2004 and 2003, GAAP advertising
expense for Roto-Rooter totaled $4,152,000 and $2,967,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the second quarters of 2004 and 2003 would total
$4,425,000 and $3,748,000, respectively.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING SUMMARY OF EBITDA
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Consoli-
Vitas(a) Rooter America Corporate(a) dated
-------- -------- ------- --------- --------
2004
- ----------------
Pro forma net
income/(loss) $ 13,106 $ 9,387 $ 119 $(17,647) $ 4,965
Add/(deduct):
Interest expense 58 59 7 12,389 12,513
Income taxes 8,924 6,111 118 (9,419) 5,734
Depreciation and
amortization 5,650 4,545 1,001 135 11,331
-------- -------- ------- -------- --------
Pro forma
EBITDA 27,738 20,102 1,245 (14,542) 34,543
Add/(deduct):
Long-term
incentive
compensation - 1,558 275 7,225 9,058
Advertising cost
adjustment(b) - (466) - - (466)
Interest income (137) (64) (118) (834) (1,153)
Loss on
extinguishment
of debt - - - 3,330 3,330
-------- -------- ------- -------- --------
Pro forma
adjusted
EBITDA $ 27,601 $ 21,130 $ 1,402 $ (4,821) $ 45,312
======== ======== ======= ======== ========
2003
- ----------------
Pro forma net
income/(loss) $ 7,344 $ 8,313 $ 103 $(12,004) $ 3,756
Add/(deduct):
Interest expense - 115 20 12,592 12,727
Income taxes 4,885 5,023 189 (6,154) 3,943
Depreciation and
amortization 5,550 4,744 1,465 190 11,949
-------- -------- ------- -------- --------
Pro forma
EBITDA 17,779 18,195 1,777 (5,376) 32,375
Add/(deduct):
Severance
charges - 3,627 - - 3,627
Advertising cost
adjustment(b) - (2,326) - - (2,326)
Interest income (353) (132) (185) (1,201) (1,871)
Dividend income
from Vitas - - - (1,424) (1,424)
Gains on sales
of investments - - - (3,544) (3,544)
Loss on
extinguishment
of debt - - - 3,330 3,330
-------- -------- ------- -------- --------
Pro forma
adjusted
EBITDA $ 17,426 $ 19,364 $ 1,592 $ (8,215) $ 30,167
======== ======== ======= ======== ========
(a) Pro forma amounts for VITAS and Corporate assume the acquisition
of VITAS and the related financing were both completed on January
1 of the respective years.
(b) Under Generally Accepted Accounting Principles ("GAAP"), the Roto-
Rooter segment expenses all advertising, including the cost of
telephone directories, immediately upon the initial release of the
advertising. Telephone directories are generally in circulation 12
months. If a directory is in circulation for a time period greater
or less than 12 months, the publisher adjusts the directory
billing for the change in billing period. The timing of when a
telephone directory is published can and does fluctuate
significantly on a quarterly basis. This "direct expensing"
results in significant fluctuations in quarterly advertising
expense. In the first six months of 2004 and 2003, GAAP
advertising expense for Roto-Rooter totaled $8,130,000 and
$5,051,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the first six months of 2004 and 2003
would total $8,596,000 and $7,377,000, respectively.
CHEMED CORPORATION
RECONCILIATION OF PRO FORMA ADJUSTED NET INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands, except per share data)(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income as reported $ 8,318 $ 3,300 $ 1,208 $ 6,857
Add/(deduct):
Pro forma Vitas net income
contribution for the
period(a) - 4,445 2,684 7,504
Pro forma financing costs
related to acquisition of
Vitas(b) - (3,620) (2,211) (7,184)
Pro forma loss on
extinguishment of debt in
2003(b) - - - (2,164)
Pro forma elimination of
equity in (earnings)/loss
of Vitas in 2004(c) (821) - 3,284 -
Pro forma elimination of
preferred dividend income
from Vitas in 2003(c) - (628) - (1,257)
-------- -------- -------- --------
Pro forma net income 7,497 3,497 4,965 3,756
Add/(deduct):
Aftertax cost of long-term
incentive payout in 2004 - - 5,894 -
Aftertax cost of loss on
extinguishment of debt - - 2,164 2,164
-------- -------- -------- --------
Adjusted pro forma net income $ 7,497 $ 3,497 $ 13,023 $ 5,920
======== ======== ======== ========
Earnings Per Share As
Reported
Net income $ 0.67 $ 0.33 $ 0.10 $ 0.69
======== ======== ======== ========
Average number of shares
outstanding 12,325 9,908 11,619 9,899
======== ======== ======== ========
Diluted Earnings Per Share As
Reported
Net income $ 0.66 $ 0.33 $ 0.10 $ 0.69
======== ======== ======== ========
Average number of shares
outstanding 12,677 9,942 11,848 9,922
======== ======== ======== ========
Adjusted Pro Forma Earnings
Per Share
Net income $ 0.61 $ 0.29 $ 1.07 $ 0.50
======== ======== ======== ========
Average number of shares
outstanding 12,325 11,908 12,168 11,899
======== ======== ======== ========
Adjusted Pro Forma Diluted
Earnings Per Share
Net income $ 0.60 $ 0.29 $ 1.05 $ 0.50
======== ======== ======== ========
Diluted average number
of shares outstanding 12,677 11,942 12,397 11,922
======== ======== ======== ========
(a) Amounts represent the additional net income VITAS would contribute
assuming the acquisition were completed on January 1 of the
respective years (excluding Chemed management fees).
(b) Amounts represent the additional financing costs, including a loss
on early extinguishment of debt in 2003, that would have been
incurred assuming the financing were completed on January 1 of the
respective years.
(c) Amounts represent the impact of eliminating the Company's prior
investments in VITAS, assuming the acquisition of VITAS were
completed on January 1 of the respective years.
CONTACT: Chemed Corporation
David P. Williams, 513-762-6901
EXHIBIT 99.2
Chemed Corporation Reports 2004 Second-Quarter Results;
Consolidated Diluted EPS of $.66
CINCINNATI, August 3, 2004--Chemed Corporation ("Chemed") (NYSE:CHE), which
operates the nation's largest provider of end-of-life care under the VITAS
Healthcare Corporation (VITAS) brand and commercial and residential plumbing and
drain cleaning services provider under the Roto-Rooter brand (Roto-Rooter),
today reported financial results for its second quarter ended June 30, 2004,
versus the comparable prior-year period as follows:
o Consolidated Operating Results (GAAP)
o Revenue increased 170% to $209.0 million
o Diluted EPS of $.66
o VITAS generated record revenue and ADC levels
o Quarterly Net Patient Revenue of $130.2 million, up 23%
o Average Daily Census (ADC) of 8,581, up 19%
o Net Income of $7.9 million, up 81%
o Roto-Rooter segment reported increased Revenue and Net Income
o Revenue increased 7%
o Net Income of $5.2 million, an increase of 33%
"The second quarter of 2004 represented our first full quarter of owning 100% of
VITAS," said Kevin J. McNamara, Chemed president and chief executive officer.
"The expansion of the VITAS business model continues to exceed our expectations.
New starts have been accelerated and we continue to explore opportunities in
terms of strategic acquisitions. This quarter includes $1.9 million in revenue
and $1.0 million in pretax losses from our eight start-up sites. This compares
to $0.4 million in revenue and $0.3 million operating losses in the prior year
quarter. In addition, the VITAS operating infrastructure continues to show
scalability and leverage as we look to expand our geographic coverage."
"The second quarter of 2004 operating results are largely devoid of the merger
complexity that was contained in the first quarter of 2004. This results in more
clarity and understanding of the fundamental performance of Chemed and its
individual business segments," said David Williams, Chemed's chief financial
officer. "To that end, we have further refined our reported operating segments
to provide additional clarity. Chemed corporate support has been separated from
these operating segments to assist in this analysis. We do caution everyone to
carefully review the unusual issues relating to the refinancing and merger of
VITAS in the first quarter of 2004 when reviewing our year-to-date results."
For a detailed presentation of reconciling items and related definitions and
components, please refer to the attached schedules.
VITAS
-----
The merger of VITAS was completed on February 24, 2004. Prior to that date the
Company accounted for its 37% ownership of VITAS under the equity method of
accounting. As a result, under generally accepted accounting principles (GAAP),
only a portion of VITAS' operating results are fully consolidated into Chemed's
first quarter of 2004 results.
VITAS had net patient revenue of $130.2 million, income from operations of $13.3
million and net income of $7.9 million in the second quarter of 2004.
VITAS generated revenue growth of 22.6% over the prior year period. Gross
margins remained relatively flat at 21.8% in the second quarter of 2004 as
compared to 22.2% in the prior year quarter. The second quarter 2004 gross
margin includes an incremental $0.7 million in start-up losses over the
prior-year period which negatively impacted margins 50 basis points. Central
support costs for VITAS, which are included as selling, general and
administrative expenses in our statement of operations, declined 8.1%. On a
proforma basis, VITAS increased net income 81% over the prior-year quarter.
VITAS' average daily census (ADC) in the second quarter of 2004 was 8,581. This
compares to an ADC of 7,198 in the comparable prior year period, an increase of
19% and 6% sequential growth. Average length-of-stay (LOS) per patient was 59.9
days for the quarter and compares to 55.4 days in the second quarter of 2003.
The median LOS was 12.0 days for both periods.
"We continue to see strong organic ADC growth across all levels of VITAS," said
McNamara. "The ADC in our 22 base programs now exceeds an average of 375
patients per program. In our large programs, those with an average-daily-census
in excess of 450, ADC growth was 16% for the quarter."
"The second quarter demonstrated the scalability and leverage that can be
derived from VITAS' business model," Williams stated. "Even with revenue growth
of almost 23%, VITAS successfully eliminated a number of private company
expenses and maintained minimal expense growth in the core central support
costs. This resulted in a sequential decline in these operating expenses of $0.9
million, or 6.1%."
Roto-Rooter Segment
-------------------
Roto-Rooter's plumbing and drain cleaning business generated sales of $68.9
million for the second quarter of 2004, 6.7% higher than the $64.6 million
reported in the comparable prior-year quarter. Net income for the quarter
totaled $5.2 million, an increase of 33% over the prior year quarter.
"There are several factors contributing to the improvement in the plumbing and
drain cleaning segment," stated McNamara. "We were able to successfully pass
through modest price increases in many of our markets in 2004. In addition, job
count increased 1.6% in the second quarter of 2004 over the prior-year period.
We continue to see a firming of demand in the majority of our markets and
specifically increased demand in commercial and residential plumbing. Our
expense control at the field level resulted in a second quarter 2004 gross
profit margin of 44.4%, which is 40 basis points above the second quarter of
2003."
Consolidated Financial Position
-------------------------------
"Our cash position is solid," Williams stated. "As of June 30, 2004, we have
over $52 million in cash and approximately $69 million of unused lines of credit
under our Credit Facility. In addition, we have federal tax refunds in excess of
$15 million relating to the deductibility of stock option buy-outs at the VITAS
level that should be received by the fourth quarter of 2004."
Guidance for the Remainder of the Year
--------------------------------------
"Looking ahead into the second half of 2004," Williams stated, "we anticipate
sequential consolidated revenue in the third quarter to be modestly above the
second quarter due to seasonality factors within Roto-Rooter. Roto-Rooter is
estimated to generate a 3% to 4% sequential decline in revenue in the third
quarter and 6% to 7% sequential revenue growth in the fourth quarter, which is
consistent with historical seasonality over the past several years.
"VITAS has generated exceptional organic growth in the first half of 2004.
Generally, this indicates a near-term flattening of census growth in the
following one to two quarters. We are very optimistic as to the long-term
sustainable trend line improvements in ADC, revenue, EBITDA margins and earnings
per share. However, we should keep in perspective the reasonable fluctuations in
growth patterns that will occur quarter to quarter. Capacity growth will be
based upon our trailing ADC trends. We continue to grow staffing within all of
our programs to ensure our ability to accept all hospice appropriate patients
within a community. We anticipate fluctuations in margins quarter to quarter as
capacity and central support resources are grown at a more predictable and
methodical rate than our ADC.
"Accordingly, we conservatively estimate third quarter and fourth quarter
sequential ADC growth of 2.5% to 3.0% and 2.0% to 2.5%, respectively. This
conservative growth estimate should result in an ADC in excess of 9,100 in the
fourth quarter of 2004. We are anticipating an average Medicare reimbursement
rate increase of 3% effective October 1, 2004.
"Based upon these factors, and a diluted share count of 12.7 million, our
expectation is that earnings per diluted share for the third quarter will be
between $.56 and $.60 and the fourth quarter will be in the range of $.68 to
$.72."
Conference Call
---------------
Chemed will hold a conference call to discuss second quarter results Wednesday,
August 4, 2004, at 11:00 a.m. EDT. The dial-in number for the conference call is
800-945-0061 for U.S. and Canadian participants and 706-679-7146 for
international participants. A taped replay of the conference call will be
available approximately two hours after the call's conclusion. It can be
accessed by dialing 800-642-1687 for U.S. and Canadian callers and 706-645-9291
for international callers. The conference identification number is 8344100. The
telephone replay will be available for one week following the live call.
The conference call will be available live via webcast at Chemed's Web site at
www.Chemed.com by clicking on "Investor Relations Home" and then on "Featured
Event: Web Cast-Live Q2 2004 Chemed Corporation Conference Call." An online
replay will be available at www.Chemed.com beginning approximately two hours
after the completion of the live call and will remain available for 14 days.
Chemed Corporation operates in the healthcare field through its VITAS Healthcare
Corporation subsidiary. VITAS provides daily hospice services to over 8,500
patients with severe, life-limiting illnesses. This type of care is focused on
making the terminally ill patient's final days as comfortable and pain-free as
possible.
Chemed operates in the residential and commercial repair-and-maintenance-service
industry under the brand names Roto-Rooter and Service America. Roto-Rooter
provides plumbing and drain service through Company-owned branches, independent
contractors and franchisees in the United States and Canada. Roto-Rooter also
has licensed master franchisees in China/Hong Kong, Indonesia, Singapore, Japan,
Mexico, the Philippines and the United Kingdom. Operating in Florida and
Arizona, Service America furnishes residential and commercial appliance and
heating and air conditioning repair and maintenance services.
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, plumbing, drain
cleaning and HVAC 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
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------- --------------------
2004 2003 2004 2003
-------- ------- -------- --------
Service revenues
and sales $208,994 $77,271 $340,042 $154,916
-------- ------- -------- --------
Cost of services
provided and goods
sold 147,206 45,611 233,430 91,763
Selling, general
and administrative
expenses 37,913 25,090 68,936 51,147(d)
Depreciation 4,570 2,990 8,159 6,042
Long-term incentive
compensation - - 9,058(a) -
-------- ------- -------- --------
Total costs and
expenses 189,689 73,691 319,583 148,952
-------- ------- -------- --------
Income from
operations 19,305 3,580 20,459 5,964
Interest expense (6,206) (867) (9,111) (1,674)
Loss on
extinguishment
of debt - - (3,330)(b) -
Other income--net 231 2,455 1,810 6,717(e)
-------- ------- -------- --------
Income before
income taxes 13,330 5,168 9,828(a,b) 11,007
Income taxes (5,833) (1,868) (5,336) (4,150)
Equity in
income/(loss) of
affiliate (VITAS) 821(c) - (3,284)(c) -
-------- ------- -------- --------
Net Income $ 8,318(c) $ 3,300 $ 1,208(c) $ 6,857(d,e)
======== ======= ======== ========
Earnings Per
Share
Net income $ 0.67(c) $ 0.33 $ 0.10(c) $ 0.69(d,e)
======== ======= ======== ========
Average number
of shares
outstanding 12,325 9,908 11,619 9,899
======== ======= ======== ========
Diluted
Earnings Per
Share
Net income $ 0.66(c) $ 0.33 $ 0.10(c) $ 0.69(d,e)
======== ======= ======== ========
Average number
of shares
outstanding 12,677 9,942 11,848 9,922
======== ======= ======== ========
(a) Amounts include a pretax charge of $9,058,000 ($5,894,000 aftertax
or $.51 per share and $.50 per diluted share) for payouts under
the Company's 2002 Executive Long-Term Incentive Plan in the first
quarter of 2004.
(b) Amounts include a pretax charge of $3,330,000 ($2,164,000 aftertax
or $.19 per share and $.18 per diluted share) from the early
extinguishment of debt in the first quarter of 2004.
(c) Amounts include the Company's aftertax share of VITAS' charges
related to the Company's acquisition of VITAS in the first quarter
of 2004, prior to the acquisition date. The accruals for
transaction costs were adjusted in the second quarter of 2004,
based on changed facts and circumstances. Of the total adjustment,
37% (less deferred income taxes) was credited to the Company's
equity in the earnings of VITAS and 63% was credited to goodwill.
These charges comprise debt and transaction-related expenses that
reduced the Company's equity in the earnings/(loss) of VITAS by
$3,800,000 ($.33 per share and $.32 per diluted share) during the
first six months of 2004.
(d) Amounts include a pretax charge of $3,627,000 ($2,358,000 aftertax
or $.24 per share) from severance charges in the first quarter of
2003.
(e) Amounts for 2003 include a pretax gain of $3,544,000 ($2,151,000
aftertax or $.22 per share) from the sales of investments.
CHEMED CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
June 30,
---------------------
2004 2003
---------- ----------
Assets
Current assets
Cash and cash equivalents $ 52,644 $ 45,342
Accounts receivable less allowances 59,032 13,381
Inventories 8,336 8,699
Statutory deposits 8,418 10,095
Prepaid income taxes 14,730 4,837
Current deferred income taxes 24,368 9,224
Prepaid expenses and other
current assets 10,277 6,955
---------- ----------
Total current assets 177,805 98,533
Investments of deferred compensation plans
held in trust 19,623 16,411
Other investments 1,445 32,789
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 62,601 46,906
Identifiable intangible assets less
accumulated amortization 24,392 2,599
Goodwill less accumulated amortization 450,988 112,903
Other assets 26,497 19,004
---------- ----------
Total Assets $775,851 $ 341,645
========== ==========
Liabilities
Current liabilities
Accounts payable $ 43,143 $ 6,976
Current portion of long-term debt 5,552 473
Income taxes 259 428
Deferred contract revenue 16,060 16,795
Accrued insurance 21,366 16,442
Other current liabilities 56,351 19,630
---------- ----------
Total current liabilities 142,731 60,744
Long-term debt 289,551 25,715
Convertible junior subordinated debentures - 14,186
Deferred compensation liabilities 19,622 16,395
Other liabilities 19,362 21,234
---------- ----------
Total Liabilities 471,266 138,274
---------- ----------
Stockholders' Equity
Capital stock 13,406 13,451
Paid-in capital 207,916 169,402
Retained earnings 118,248 132,422
Treasury stock, at cost (32,702) (110,681)
Unearned compensation (4,081) (3,824)
Deferred compensation payable in
Company stock 2,337 2,310
Notes receivable for shares sold (539) (926)
Accumulated other comprehensive income - 1,217
---------- ----------
Total Stockholders' Equity 304,585 203,371
---------- ----------
Total Liabilities and
Stockholders' Equity $775,851 $ 341,645
========== ==========
Book Value Per Share $ 24.49 $ 20.60
========== ==========
CHEMED CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004
- ----------------
Service revenues
and sales $130,240 $ 68,895 $ 9,859 $ - $208,994
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 101,790 38,281 7,135 - 147,206
Selling, general
and
administrative
expenses 13,329 19,997 2,354 2,233 37,913
Depreciation 1,861 2,174 472 63 4,570
-------- -------- ------- -------- --------
Total costs
and expenses 116,980 60,452 9,961 2,296 189,689
-------- -------- ------- -------- --------
Income/(loss)
from
operations 13,260 8,443 (102) (2,296) 19,305
Interest expense (30) (33) (3) (6,140) (6,206)
Other income--net 176 57 82 (84) 231
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes 13,406 8,467 (23) (8,520) 13,330
Income taxes (5,499) (3,317) 5 2,978 (5,833)
Equity in
earnings of
Vitas - - - 821(a) 821(a)
-------- -------- ------- -------- --------
Net
income/(loss) $ 7,907 $ 5,150 $ (18) $ (4,721) $ 8,318
======== ======== ======= ======== ========
2003
- ----------------
Service revenues
and sales $ - $ 64,592 $12,679 $ - $ 77,271
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold - 36,158 9,453 - 45,611
Selling, general
and
administrative
expenses - 20,854 2,595 1,641 25,090
Depreciation - 2,292 606 92 2,990
-------- -------- ------- -------- --------
Total costs
and expenses - 59,304 12,654 1,733 73,691
-------- -------- ------- -------- --------
Income/(loss)
from
operations - 5,288 25 (1,733) 3,580
Interest expense - (86) (9) (772) (867)
Other income--net - 1,026 122 1,307 2,455
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes - 6,228 138 (1,198) 5,168
Income taxes - (2,346) (89) 567 (1,868)
-------- -------- ------- -------- --------
Net
income/(loss) $ - $ 3,882 $ 49 $ (631) $ 3,300
======== ======== ======= ======== ========
(a) Amount includes the Company's aftertax share of VITAS' charges
related to the Company's acquisition of VITAS in the first quarter
of 2004, prior to the acquisition date. The accruals for
transaction costs were adjusted in the second quarter of 2004,
based on changed facts and circumstances. Of the total adjustment,
37% (less deferred income taxes) was credited to the Company's
equity in the earnings of VITAS and 63% was credited to goodwill.
CHEMED CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004
- --------------
Service
revenues
and sales $181,352 $138,122 $20,568 $ - $340,042
-------- -------- ------- -------- --------
Cost of
services
provided and
goods sold 142,276 76,644 14,510 - 233,430
Selling,
general
and
administrative
expenses 18,720 41,002 4,719 4,495 68,936
Depreciation 2,609 4,420 1,001 129 8,159
Long-term
incentive
costs - 1,558(a) 275(a) 7,225(a) 9,058
-------- -------- ------- -------- --------
Total costs
and
expenses 163,605 123,624 20,505 11,849 319,583
-------- -------- ------- -------- --------
Income/(loss)
from
operations 17,747 14,498 63 (11,849) 20,459
Interest
expense (58) (59) (7) (8,987) (9,111)
Loss on
extinguishment
of debt - - - (3,330)(b) (3,330)(b)
Other income
--net 207 1,059 181 363 1,810
-------- -------- ------- -------- --------
Income/
(loss)
before
income
taxes 17,896 15,498 237 (23,803) 9,828
Income taxes (7,392) (6,111) (118) 8,285 (5,336)
Equity in loss
of Vitas - - - (3,284)(c) (3,284)(c)
-------- -------- ------- -------- --------
Net
income/
(loss) $ 10,504 $ 9,387 $ 119 $(18,802) $ 1,208
======== ======== ======= ======== ========
2003
- --------------
Service
revenues
and sales $ - $129,317 $25,599 $ - $154,916
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold - 72,597 19,166 - 91,763
Selling, general
and
administrative
expenses - 39,297 5,087 6,763(d) 51,147(d)
Depreciation - 4,624 1,240 178 6,042
-------- -------- ------- -------- --------
Total costs
and
expenses - 116,518 25,493 6,941 148,952
-------- -------- ------- -------- --------
Income/
(loss)
from
operations - 12,799 106 (6,941) 5,964
Interest
expense - (115) (20) (1,539) (1,674)
Other income
--net - 652 206 5,859(e) 6,717(e)
-------- -------- ------- -------- --------
Income/
(loss)
before
income
taxes - 13,336 292 (2,621) 11,007
Income taxes - (5,023) (189) 1,062 (4,150)
-------- -------- ------- -------- --------
Net
income/
(loss) $ - $ 8,313 $ 103 $ (1,559) $ 6,857
======== ======== ======= ======== ========
(a) Amounts represent payouts under the Company's 2002 Executive
Long-term Incentive Plan in the first quarter of 2004. The
aftertax cost of these charges was $4,742,000 for Corporate,
$982,000 for Roto-Rooter and $170,000 for Service America.
(b) Amount represents the prepayment penalty incurred on the early
extinguishment of the Company's debt ($2,164,000 aftertax) in the
first quarter of 2004.
(c) Amount includes the Company's aftertax share of VITAS' charges
related to the Company's acquisition of VITAS in the first quarter
of 2004, prior to the acquisition date. The accruals for
transaction costs were adjusted in the second quarter of 2004,
based on changed facts and circumstances. Of the total adjustment,
37% (less deferred income taxes) was credited to the Company's
equity in the earnings of VITAS and 63% was credited to goodwill.
These charges comprise debt and transaction-related expenses that
reduced the Company's equity in the earnings/(loss) of VITAS by
$3,800,000 ($.33 per share and $.32 per diluted share) during the
first six months of 2004.
(d) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax)
for severance in the first quarter of 2003.
(e) Amount includes a pretax gain of $3,544,000 ($2,151,000 aftertax)
from the sales of investments in the first quarter of 2003.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands, except per share data) (unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004(a)
- ----------------
Service revenues
and sales $130,240 $ 68,895 $ 9,859 $ - $208,994
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 101,790 38,281 7,135 - 147,206
Selling, general
and
administrative
expenses 13,329 19,997 2,354 2,233 37,913
Depreciation 1,861 2,174 472 63 4,570
-------- -------- ------- -------- --------
Total costs
and expenses 116,980(c) 60,452 9,961 2,296 189,689
-------- -------- ------- -------- --------
Income/(loss)
from
operations 13,260 8,443 (102) (2,296) 19,305
Interest expense (30) (33) (3) (6,140) (6,206)
Other income--
net 176 57 82 (84) 231
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes 13,406 8,467 (23) (8,520) 13,330
Income taxes (5,499) (3,317) 5 2,978 (5,833)
-------- -------- ------- -------- --------
Net
income/
(loss) $ 7,907 $ 5,150 $ (18) $ (5,542) $ 7,497
======== ======== ======= ======== ========
Earnings Per
Share
Net Income $ 0.61
========
Average
Shares
Outstanding 12,325
========
Diluted Earnings
Per Share
Net Income $ 0.60
========
Average
Shares
Outstanding 12,677
========
2003(b)
- ----------------
Service revenues
and sales $106,245 $ 64,592 $12,679 $ - $183,516
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 82,684 36,158 9,453 - 128,295
Selling, general
and
administrative
expenses 14,504 20,854 2,595 1,506 39,459
Depreciation 1,983 2,292 606 92 4,973
-------- -------- ------- -------- --------
Total costs
and expenses 99,171(c) 59,304 12,654 1,598 172,727
-------- -------- ------- -------- --------
Income/(loss)
from
operations 7,074 5,288 25 (1,598) 10,789
Interest expense - (86) (9) (6,342) (6,437)
Other income--
net 203 1,026 122 595 1,946
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes 7,277 6,228 138 (7,345) 6,298
Income taxes (2,912) (2,346) (89) 2,546 (2,801)
-------- -------- ------- -------- --------
Net income/
(loss) $ 4,365 $ 3,882 $ 49 $ (4,799) $ 3,497
======== ======== ======= ======== ========
Earnings Per
Share
Net Income $ 0.29
========
Average
Shares
Outstanding 11,908
========
Diluted Earnings
Per Share
Net Income $ 0.29
========
Average
Shares
Outstanding 11,942
========
(a) The pro forma statement of operations for 2004 assumes the
Company's acquisition of VITAS and its financing (including the
retirement of existing debt) were completed as of January 1, 2004,
on the same terms and conditions as completed on February 24,
2004.
(b) The pro forma statement of operations for 2003 assumes the
Company's acquisition of VITAS and its financing (including the
retirement of existing debt) were completed as of January 1, 2003,
on the same terms and conditions as completed on February 24,
2004.
(c) Operating expenses for VITAS for 2004 and 2003 include additional
amortization and depreciation expense resulting from purchase
accounting adjustments to VITAS' assets in the amount of
$1,313,000 in each period.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(in thousands, except per share data) (unaudited)
Chemed
Roto- Service Consoli-
Vitas Rooter America Corporate dated
-------- -------- ------- --------- --------
2004(a)
- --------------
Service
revenues
and sales $254,222 $138,122 $20,568 $ - $412,912
-------- -------- ------- -------- --------
Cost of
services
provided and
goods sold 201,124 76,644 14,510 - 292,278
Selling,
general
and
administrative
expenses 27,521 41,002 4,719 4,356 77,598
Depreciation 3,737 4,420 1,001 129 9,287
Long-term
incentive
costs - 1,558(d) 275(d) 7,225(d) 9,058(d)
-------- -------- ------- -------- --------
Total costs
and
expenses 232,382(c) 123,624 20,505 11,710 388,221
-------- -------- ------- -------- --------
Income/
(loss)
from
operations 21,840 14,498 63 (11,710) 24,691
Interest
expense (58) (59) (7) (12,389) (12,513)
Loss on
extinguishment
of debt - - - (3,330)(e) (3,330)(e)
Other income--
net 248 1,059 181 363 1,851
-------- -------- ------- -------- --------
Income/
(loss)
before
income
taxes 22,030 15,498 237 (27,066) 10,699
Income taxes (8,924) (6,111) (118) 9,419 (5,734)
-------- -------- ------- -------- --------
Net
income/
(loss) $ 13,106 $ 9,387 $ 119 $(17,647) $ 4,965
======== ======== ======= ======== ========
Earnings Per
Share
Net Income $ 0.41
========
Average
Shares
Outstanding 12,168
========
Diluted Earnings
Per Share
Net Income $ 0.40
========
Average
Shares
Outstanding 12,397
========
2003(b)
- --------------
Service
revenues
and sales $206,427 $129,317 $25,599 $ - $361,343
-------- -------- ------- -------- --------
Cost of
services
provided and
goods sold 163,603 72,597 19,166 - 255,366
Selling,
general
and
administrative
expenses 27,037 39,297 5,087 6,493(f) 77,914(f)
Depreciation 3,911 4,624 1,240 178 9,953
-------- -------- ------- -------- --------
Total costs
and
expenses 194,551(c) 116,518 25,493 6,671 343,233
-------- -------- ------- -------- --------
Income/(loss)
from
operations 11,876 12,799 106 (6,671) 18,110
Interest
expense - (115) (20) (12,592) (12,727)
Loss on
extinguishment
of debt - - - (3,330)(e) (3,330)(e)
Other income--
net 353 652 206 4,435(g) 5,646(g)
-------- -------- ------- -------- --------
Income/
(loss)
before
income
taxes 12,229 13,336 292 (18,158) 7,699
Income taxes (4,885) (5,023) (189) 6,154 (3,943)
-------- -------- ------- -------- --------
Net income/
(loss) $ 7,344 $ 8,313 $ 103 $(12,004) $ 3,756
======== ======== ======= ======== ========
Earnings Per
Share
Net Income $ 0.32
========
Average
Shares
Outstanding 11,899
========
Diluted Earnings
Per Share
Net Income $ 0.32
========
Average
Shares
Outstanding 11,922
========
(a) The pro forma statement of operations for 2004 assumes the
Company's acquisition of VITAS and its financing (including the
retirement of existing debt) were completed as of January 1, 2004,
on the same terms and conditions as completed on February 24,
2004.
(b) The pro forma statement of operations for 2003 assumes the
Company's acquisition of VITAS and its financing (including the
retirement of existing debt) were completed as of January 1, 2003,
on the same terms and conditions as completed on February 24,
2004.
(c) Operating expenses for VITAS for 2004 and 2003 include additional
amortization and depreciation expense resulting from purchase
accounting adjustments to VITAS' assets in the amount of
$2,625,000 in each period.
(d) Amounts represent payouts under the Company's 2002 Executive
Long-term Incentive Plan in the first quarter of 2004. The
aftertax cost of these charges was $4,742,000 for Corporate,
$982,000 for Roto-Rooter and $170,000 for Service America.
(e) Amount represents the prepayment penalty incurred on the early
extinguishment of the Company's debt ($2,164,000 aftertax) in the
first quarter of 2004.
(f) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax)
for severance charges in the first quarter of 2003.
(g) Amount includes a pretax gain of $3,544,000 ($2,151,000 aftertax)
from the sales of investments in the first quarter of 2003.