View:
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 25, 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
Item 2.02 Results of Operations and Financial Condition
On October 25, 2004 Chemed Corporation issued a press release
announcing its financial results for the third quarter ended
September 30, 2004. A copy of the release is furnished herewith
as Exhibit 99.1.
Item 8.01 Other Events
A copy of the registrant's earnings report for the third quarter
ended September 30, 2004 is filed herewith as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits
c) Exhibits
(99.1) Registrant's press release dated
October 25, 2004.
(99.2) Registrant's earnings report dated
October 25, 2004.
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 26, 2004 By: /s/ Arthur V. Tucker, Jr.
-------------------------
Arthur V. Tucker, Jr.
Vice President and Controller
EXHIBIT 99.1
Chemed Corporation Reports 2004 Third-Quarter Results;
Consolidated Diluted EPS of $.84, Adjusted Pro forma Diluted EPS of $.63
CINCINNATI--(BUSINESS WIRE)--Oct. 25, 2004--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, 2004, versus the comparable
prior-year period, as follows:
- -- Consolidated Operating Results (GAAP)
-- Revenue increased 181% to $211.1 million
-- Diluted EPS of $.84
- -- Adjusted Pro forma Consolidated Operating Results (Non-GAAP)
-- Diluted EPS of $.63
-- Adjusted EBITDA of $23.8 million
- -- VITAS generated record Revenue and ADC levels
-- Quarterly Net Patient Revenue of $135.1 million, up 19%
-- Average Daily Census (ADC) of 8,949, up 17%
-- Adjusted EBITDA of $16.8 million, an increase of 50%
-- Adjusted EBITDA margin of 12.4%
-- Adjusted Net Income of $8.7 million, up 49%
- -- Roto-Rooter segment reported increased Revenue, Adjusted
EBITDA and Net Income
-- Revenue increased 5%
-- Adjusted EBITDA of $9.6 million, an increase of 35%
-- Net Income, excluding prior quarters' tax benefits, of $5.2
million, an increase of 87%
"Chemed Corporation continues to generate strong fundamental
performance," stated Kevin McNamara, Chemed president and chief
executive officer. "Our methodical expansion of the VITAS business
model now includes 32 programs in 11 states. ADC for the third quarter
of 2004 was 8,949, an increase of 17.1% over the prior-year quarter
and 4.3% above the second quarter of 2004. This translated into
revenue growth of 19.0% over the prior year and 3.7% over the second
quarter of 2004. We currently have 10 new starts in various stages of
development, including our small acquisition in Atlanta. New starts
generated $1.4 million of operating losses in the quarter, which had a
modest impact on our overall margins.
"In addition, Roto-Rooter continues to show strong earnings
improvements over the prior year. For the third quarter of 2004,
revenue growth aggregated 5.4% and net income, after excluding certain
favorable tax adjustments, increased 87% over the prior year."
"The third quarter of 2004 does contain a number of items that
positively impacted our GAAP operating results," said David Williams,
Chemed's chief financial officer. "These items included reversing out
certain severance accruals related to the VITAS merger, as well as
adjusting year-to-date amortization and depreciation expense as we
finalize valuations for the VITAS transaction. In addition, we have
recently completed a multi-state and local tax planning analysis that
had a favorable impact on our year-to-date effective tax rate. Our
Reconciliation of Pro forma Adjusted Net Income excludes the benefit
of these items that related to prior quarters. This should provide a
more reasonable estimate of our earnings on a go-forward basis. We
continue to caution everyone to carefully review the accounting issues
relating to the refinancing and merger of VITAS into Chemed when
analyzing quarter and year-to-date operating results."
For a detailed presentation of operating results, 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, only a portion of VITAS' operating results is
fully consolidated into Chemed's first quarter of 2004 results.
VITAS had net patient revenue of $135.1 million, pro forma income
from operations of $14.2 million, net income of $8.7 million and
Adjusted EBITDA of $16.8 million in the third quarter of 2004.
VITAS generated revenue growth of 19.0% over the prior-year period
and 3.7% sequentially. Gross margins remained relatively flat at 21.8%
in the third quarter of 2004 as compared to the prior-year quarter.
The third-quarter 2004 gross margin includes $1.4 million in startup
losses, which is an incremental $0.9 million over the prior-year
period. This negatively impacted margins by 104 basis points. Central
support costs for VITAS, which are included as selling, general and
administrative expenses in our Pro forma Quarterly Statement of Net
Income, declined 9.8% from the prior-year quarter and increased 3.5%
sequentially. On a pro forma basis, VITAS increased adjusted net
income 49% as compared to the third quarter of 2003.
VITAS' average daily census (ADC) in the third quarter of 2004 was
8,949. This compares to an ADC of 7,643 in the comparable prior-year
period, an increase of 17% and a 4% increase over the second quarter
of 2004. Average length of stay (LOS) per patient was 60.8 days for
the quarter and compares to 54.7 days in the third quarter of 2003.
Average LOS for all non-startup programs ranged from a low of 35.2
days to a high of 84.5 days in the third quarter of 2004. The median
LOS was 13.0 days in the quarter, an increase of 1.0 days over the
prior year.
"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 397 patients per program. In our large programs, those with
an average daily census in excess of 450, ADC growth was 14% over the
prior-year quarter and increased 2.2% sequentially. Our small and
medium programs generated ADC growth of 20.6% over the prior year and
6.5% sequentially."
"We did see significant mix fluctuations in our revenue components
this quarter," Williams stated. "Routine home care aggregated 69.8% of
revenue, an increase of 130 basis points over the prior-year quarter
and a 150-basis-point increase on a sequential basis. Our inpatient
revenue aggregated 13.6% of total revenue and continuous care was
16.6% of revenue in the third quarter of 2004."
Roto-Rooter Segment
Roto-Rooter's plumbing and drain cleaning business generated sales
of $66.8 million for the third quarter of 2004, 5.4% higher than the
$63.3 million reported in the comparable prior-year quarter. Adjusted
net income for the quarter, excluding favorable tax benefits relating
to prior quarters, totaled $5.2 million, an increase of 87% over the
prior-year quarter. Adjusted EBITDA in the third quarter of 2004
totaled $9.6 million, an increase of 35% over the Adjusted EBITDA of
$7.1 million generated in the third quarter of 2003.
"There are several factors contributing to the improvement in the
plumbing and drain cleaning segment," stated McNamara. "Job count
increased 1.9% in the third quarter of 2004 over the prior-year
period. We continue to see strengthening demand in commercial and
residential plumbing. Our expense control at the field level resulted
in a third-quarter-2004 gross profit margin of 45.4%, which is 160
basis points above the third quarter of 2003."
Consolidated Financial Position
"Our cash position is solid," Williams stated. "As of September
30, 2004, we have over $51 million in cash and approximately $72
million of unused lines of credit under our Credit Facility. In
addition, we have tax refunds in excess of $15 million relating to the
deductibility of stock option buyouts at the VITAS level that should
be received by the end of the year."
Guidance for the Remainder of the Year
"Looking ahead into the fourth quarter of 2004," Williams stated,
"we anticipate sequential consolidated revenue to be materially above
the third quarter due to seasonality factors within Roto-Rooter.
Roto-Rooter is estimated to generate a 5% to 7% sequential revenue
growth in the fourth quarter, which is consistent with historical
seasonality.
"VITAS continues to show consistent ADC growth. The past six
quarters have averaged a sequential quarterly increase in ADC of 345.
If this trend line continues, ADC would approximate 9,300 in the
fourth quarter. We are 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 VITAS will
experience fluctuations in growth patterns and revenue mix quarter to
quarter. 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 actual ADC.
"Based upon these factors and a current diluted share count of
12.7 million, our expectation is that earnings per diluted share for
the fourth quarter will be in the range of $.73 to $.77. We anticipate
providing full-year 2005 guidance when we release our final 2004
operating results."
Conference Call
Chemed will hold a conference call to discuss third quarter
results Tuesday, October 26, 2004, at 11 a.m., ET. 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 live
webcast of the call can be accessed on Chemed's website at
www.chemed.com by clicking on "Investor Relations Home" and then on
"Featured Event: Web Cast - Live! Q3 2004 Chemed Corporation Earnings
Conference Call." An archived webcast will also be available at
www.chemed.com and will remain available for 14 days following the
live call.
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 1034741. The telephone replay will be available for one week
following the live call.
Chemed Corporation operates in the healthcare field through its
VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice
services to approximately 9,000 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
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 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 Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
2004 (a) 2003 (b) 2004 (a) 2003 (b)
-------- ------- -------- --------
Service revenues and sales $211,134 $75,172 $551,176 $230,088
-------- ------- -------- --------
Cost of services provided and
goods sold 149,409 44,215 382,839 135,978
Selling, general and
administrative expenses 38,908 25,607 107,844 76,754
Depreciation 3,002 2,983 11,161 9,025
Long-term incentive
compensation - - 9,058 -
-------- ------- -------- --------
Total costs and expenses 191,319 72,805 510,902 221,757
-------- ------- -------- --------
Income from operations 19,815 2,367 40,274 8,331
Interest expense (6,085) (755) (15,196) (2,429)
Loss on extinguishment of debt - - (3,330) -
Other income--net 398 3,049 2,208 9,766
-------- ------- -------- --------
Income before income taxes 14,128 4,661 23,956 15,668
Income taxes (3,647) (1,748) (8,983) (5,898)
Equity in income/(loss) of
affiliate (VITAS) 131 - (3,153) -
-------- ------- -------- --------
Net Income $ 10,612 $ 2,913 $ 11,820 $ 9,770
======== ======= ======== ========
Earnings Per Share
Net income $ 0.85 $ 0.29 $ 0.99 $ 0.99
======== ======= ======== ========
Average number of shares
outstanding 12,470 9,941 11,904 9,913
======== ======= ======== ========
Diluted Earnings Per Share
Net income $ 0.84 $ 0.29 $ 0.97 $ 0.98
======== ======= ======== ========
Average number of shares
outstanding 12,701 9,988 12,136 9,940
======== ======= ======== ========
- --------------------------------
(a) Results for 2004 include the following adjustments/special items
which increased/(reduced) earnings (in thousands):
Third Nine
Quarter Months
------- --------
Adjustments to revise VITAS purchase
price allocation and related
amortization of assets:
Increase in amortization expense
(included in selling, gen. and
administrative exp.) $ (311) $ -
Reduction in depreciation expense 837 -
Payouts under the Company's long-term
incentive program - (9,058)
Loss on extinguishment of debt - (3,330)
------ --------
Total impact on income before income
taxes 526 (12,388)
Adjustment of income taxes related to the
above (211) 4,751
Tax adjustments resulting from the
finalization of prior-year tax returns in
the third quarter of 2004 1,020 1,020
Tax adjustments from the cumulative
reduction of estimated state and local
tax rates 1,098 -
Equity in the earnings/(loss) of VITAS,
impacted significantly by transaction-
related expenses incurred by VITAS prior
to its merger with Chemed in February
2004 131 (3,153)
------ --------
Total impact on net income $2,564 $ (9,770)
====== ========
These 2004 adjustments/special items increased earnings per share by
$.20 ($.21 on a diluted basis) in the third quarter and reduced
earnings per share by $.82 ($.81 on a diluted basis) in the nine
months.
(b) Results for 2003 include the following adjustments/special items
which increased/(reduced) earnings (in thousands):
Third Nine
Quarter Months
------- -------
Severance charges in March 2003 (included
in selling, gen. and administrative
exp.) $ - $(3,627)
Pretax capital gains from the redemption
of VITAS preferred stock and the sales
of investments (included in other
income) 1,846 5,390
Dividend income from VITAS preferred
stock redeemed in 2003 (included in
other income) 371 1,794
------ -------
Total impact on income before income
taxes 2,217 3,557
Adjustment of income taxes related to the
above (689) (979)
------ -------
Total impact on net income $1,528 $ 2,578
====== =======
These 2003 adjustments/special items increased earnings per share by
$.15 in the third quarter and increased earnings per share by $.26 in
the nine months.
CHEMED CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
September 30,
------------------
2004 2003 (a)
-------- ---------
Assets
Current assets
Cash and cash equivalents $ 51,261 $ 72,607
Accounts receivable less allowances 71,476 13,310
Inventories 8,391 8,548
Statutory deposits 7,924 9,852
Prepaid income taxes 10,493 4,612
Current deferred income taxes 24,247 9,167
Prepaid expenses and other current assets 8,354 6,941
-------- ---------
Total current assets 182,146 125,037
Investments of deferred compensation plans
held in trust 19,302 16,832
Other investments 1,445 5,546
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 58,422 47,456
Identifiable intangible assets less
accumulated amortization 75,828 2,450
Goodwill less accumulated amortization 407,407 113,437
Other assets 24,754 16,908
-------- ---------
Total Assets $781,804 $ 340,166
======== =========
Liabilities
Current liabilities
Accounts payable $ 39,406 $ 5,033
Current portion of long-term debt 5,401 463
Income taxes 401 21
Deferred contract revenue 15,987 16,053
Accrued insurance 23,729 16,844
Other current liabilities 56,368 20,348
-------- ---------
Total current liabilities 141,292 58,762
Long-term debt 288,311 25,635
Mandatorily redeemable convertible preferred
securities of the Chemed Capital Trust - 14,146
Deferred compensation liabilities 19,306 16,824
Other liabilities 18,000 20,315
-------- ---------
Total Liabilities 466,909 135,682
-------- ---------
Stockholders' Equity
Capital stock 13,437 13,452
Paid-in capital 209,564 169,406
Retained earnings 127,357 134,143
Treasury stock, at cost (32,984) (110,492)
Unearned compensation (4,289) (3,389)
Deferred compensation payable in Company stock 2,351 2,294
Notes receivable for shares sold (541) (930)
-------- ---------
Total Stockholders' Equity 314,895 204,484
-------- ---------
Total Liabilities and Stockholders'
Equity $781,804 $ 340,166
======== =========
Book Value Per Share $ 25.25 $ 20.70
======== =========
(a)Reclassified to conform to 2004 presentation
CHEMED CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Corp- Consoli-
VITAS Rooter America orate dated
-------- ------- ------- ------- --------
2004
- ------------------
Service revenues
and sales $135,101 $66,785 $ 9,248 $ - $211,134
-------- ------- ------- ------- --------
Cost of services
provided and
goods sold 105,695 36,433 7,281 - 149,409
Selling, general
and
administrative
expenses 14,215 20,021 1,831 2,841 38,908
Depreciation 469 2,081 392 60 3,002
Long-term
incentive costs - - - - -
-------- ------- ------- ------- --------
Total costs and
expenses 120,379 58,535 9,504 2,901 191,319
-------- ------- ------- ------- --------
Income/(loss)
from operations 14,722 8,250 (256) (2,901) 19,815
Interest expense (32) (43) (2) (6,008) (6,085)
Intercompany
interest income/
(expense) 289 327 39 (655) -
Loss on
extinguishment
of debt - - - - -
Other income--net 93 (92) 24 373 398
-------- ------- ------- ------- --------
Income/(loss)
before income
taxes 15,072 8,442 (195) (9,191) 14,128
Income taxes (6,097) (2,375)(a) 70 4,755(a) (3,647)
Equity in loss of
VITAS - - - 131(b) 131
-------- ------- ------- ------- --------
Net
income/(loss) $ 8,975 $ 6,067 $ (125) $(4,305) $ 10,612
======== ======= ======= ======= ========
2003
- ------------------
Service revenues
and sales $ - $63,342 $11,830 $ - $ 75,172
-------- ------- ------- ------- --------
Cost of services
provided and
goods sold - 35,583 8,632 - 44,215
Selling, general
and
administrative
expenses - 21,424 2,458 1,725 25,607
Depreciation - 2,276 619 88 2,983
-------- ------- ------- ------- --------
Total costs and
expenses - 59,283 11,709 1,813 72,805
-------- ------- ------- ------- --------
Income/(loss)
from operations - 4,059 121 (1,813) 2,367
Interest expense - (33) (8) (714) (755)
Intercompany
interest
income/(expense) - 157 1 (158) -
Other income--net - 312 64 2,673(c) 3,049
-------- ------- ------- ------- --------
Income/(loss)
before income
taxes - 4,495 178 (12) 4,661
Income taxes - (1,707) (114) 73 (1,748)
-------- ------- ------- ------- --------
Net
income/(loss) $ - $ 2,788 $ 64 $ 61 $ 2,913
======== ======= ======= ======= ========
- ------------------
(a) Amounts include favorable adjustments related to finalization of
prior-year tax returns during the third quarter of 2004. The
aftertax benefit received from these adjustments was $390,000 for
Corporate and $630,000 for Roto-Rooter. In addition, amounts
included tax benefits related to prior quarters due to the
Company's adjusting its effective tax rate for state and local
taxes during the third quarter. The aftertax benefit recorded for
these prior-quarter adjustments was $881,000 for Corporate and
$217,000 for Roto-Rooter.
(b) Amount includes the Company's aftertax share of VITAS' charges
related to the Company's acquisition of VITAS prior to the
acquisition date. The accruals for transaction costs were adjusted
in the third 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
transaction-related expenses that increased the Company's equity
in the earnings/(loss) of VITAS by $131,000 during the third
quarter of 2004.
(c) Amount includes a pretax gain of $1,846,000 ($1,200,000 aftertax)
from the redemption of VITAS preferred stock in the third quarter
of 2003.
CHEMED CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Corp- Consoli-
VITAS Rooter America orate dated
-------- -------- ------- -------- --------
2004
- ----------------
Service revenues
and sales $316,453 $204,907 $29,816 $ - $551,176
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 247,971 113,077 21,791 - 382,839
Selling, general
and
administrative
expenses 32,935 61,023 6,550 7,336 107,844
Depreciation 3,078 6,501 1,393 189 11,161
Long-term
incentive costs - 1,558 (a) 275(a) 7,225 (a) 9,058
-------- -------- ------- -------- --------
Total costs and
expenses 283,984 182,159 30,009 14,750 510,902
-------- -------- ------- -------- --------
Income/(loss)
from
operations 32,469 22,748 (193) (14,750) 40,274
Interest expense (90) (102) (9) (14,995) (15,196)
Intercompany
interest
income/
(expense) 420 700 66 (1,186) -
Loss on
extinguishment
of debt - - - (3,330)(b) (3,330)
Other income--
net 169 594 178 1,267 2,208
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes 32,968 23,940 42 (32,994) 23,956
Income taxes (13,489) (8,486)(f) (48) 13,040 (f) (8,983)
Equity in
earnings of
VITAS - - - (3,153)(c) (3,153)
-------- -------- ------- -------- --------
Net income/
(loss) $ 19,479 $ 15,454 $ (6) $(23,107) $11,820
======== ======== ======= ======== ========
2003
- ----------------
Service revenues
and sales $ - $192,659 $37,429 $ - $230,088
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold - 108,180 27,798 - 135,978
Selling, general
and
administrative
expenses - 60,721 7,545 8,488 (d) 76,754
Depreciation - 6,900 1,859 266 9,025
-------- -------- ------- -------- --------
Total costs and
expenses - 175,801 37,202 8,754 221,757
-------- -------- ------- -------- --------
Income/(loss)
from
operations - 16,858 227 (8,754) 8,331
Interest expense - (148) (28) (2,253) (2,429)
Intercompany
interest
income/
(expense) - 414 (17) (397) -
Other income--
net - 707 288 8,771 (e) 9,766
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes - 17,831 470 (2,633) 15,668
Income taxes - (6,730) (303) 1,135 (5,898)
-------- -------- ------- -------- --------
Net income/
(loss) $ - $ 11,101 $ 167 $ (1,498) $ 9,770
======== ======== ======= ======== ========
- ----------------
(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 $4,455,000 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 ($2,030,000 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 and third quarters
of 2004 based on changed facts and circumstances. These charges
comprise transaction-related expenses that increased the Company's
equity in the earnings/(loss) of VITAS by $3,669,000 during the
first nine months of 2004.
(d) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax)
for severance charges 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 and a
pretax gain of $1,846,000 ($1,200,000 aftertax) from the
redemption of VITAS preferred stock in the third quarter of 2003.
(f) Amounts include favorable adjustments related to finalization of
prior-year tax returns during the third quarter of 2004. The
aftertax benefit received from these adjustments was $390,000 for
Corporate and $630,000 for Roto-Rooter.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands, except per share data) (unaudited)
Chemed
Roto- Service Corp- Consol-
VITAS Rooter America orate idated
-------- ------- ------- -------- --------
2004(a)
- ------------------
Service revenues
and sales $135,101 $66,785 $ 9,248 $ - $211,134
-------- ------- ------- -------- --------
Cost of services
provided and
goods sold 105,695 36,433 7,281 - 149,409
Selling, general
and
administrative
expenses 13,904 20,021 1,831 2,841 38,597
Depreciation 1,306 2,081 392 60 3,839
Long-term
incentive costs - - - - -
-------- ------- ------- -------- --------
Total costs and
expenses 120,905 58,535 9,504 2,901 191,845
-------- ------- ------- -------- --------
Income/(loss) from
operations 14,196 8,250 (256) (2,901) 19,289
Interest expense (32) (43) (2) (6,008) (6,085)
Intercompany
interest income/
(expense) 289 327 39 (655) -
Loss on
extinguishment of
debt - - - - -
Other income -- net 93 (92) 24 373 398
-------- ------- ------- -------- --------
Income/(loss)
before income
taxes 14,546 8,442 (195) (9,191) 13,602
Income taxes (5,886) (2,375)(c) 70 4,755(c) (3,436)
-------- ------- ------- -------- --------
Net Income/(Loss) $ 8,660 $ 6,067 $ (125) $ (4,436) $ 10,166
======== ======= ======= ======== ========
Earnings Per Share
Net income $ 0.82
========
Average number of
shares
outstanding 12,470
========
Diluted Earnings
Per Share
Net income $ 0.80
========
Average number of
shares
outstanding 12,701
========
2003(b)
- ------------------
Service revenues
and sales $113,528 $63,342 $11,830 $ - $188,700
-------- ------- ------- -------- --------
Cost of services
provided and
goods sold 88,372 35,583 8,632 - 132,587
Selling, general
and
administrative
expenses 15,064 21,424 2,458 1,590 40,536
Depreciation 634 2,276 619 88 3,617
-------- ------- ------- -------- --------
Total costs and
expenses 104,070 59,283 11,709 1,678 176,740
-------- ------- ------- -------- --------
Income from
operations 9,458 4,059 121 (1,678) 11,960
Interest expense - (33) (8) (6,519) (6,560)
Intercompany
interest
income/(expense) - 157 1 (158) -
Loss on
extinguishment of
debt - - - - -
Other income -- net 168 312 64 2,302(d) 2,846
-------- ------- ------- -------- --------
Income/(loss)
before income
taxes 9,626 4,495 178 (6,053) 8,246
Income taxes (3,819) (1,707) (114) 2,092 (3,548)
-------- ------- ------- -------- --------
Net Income/(Loss) $ 5,807 $ 2,788 $ 64 $ (3,961) $ 4,698
======== ======= ======= ======== ========
Earnings Per Share
Net income $ 0.39
========
Average number of
shares
outstanding 11,941
========
Diluted Earnings
Per Share
Net income $ 0.39
========
Average number of
shares
outstanding 11,988
========
(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) Amounts include favorable adjustments related to finalization of
prior-year tax returns during the third quarter of 2004. The
aftertax benefit received from these adjustments was $390,000 for
Corporate and $630,000 for Roto-Rooter. In addition, amounts
included tax benefits related to prior quarters due to the
Company's adjusting its effective tax rate for state and local
taxes during the third quarter. The aftertax benefit recorded for
these prior-quarter adjustments was $881,000 for Corporate and
$217,000 for Roto-Rooter.
(d) Amount includes a pretax gain of $1,846,000 ($1,200,000 aftertax)
from the redemption of VITAS preferred stock in the third quarter
of 2003.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands, except per share data) (unaudited)
Chemed
Roto- Service Corp- Consoli-
VITAS Rooter America orate dated
-------- -------- ------- -------- --------
2004 (a)
- ----------------
Service revenues
and sales $389,323 $204,907 $29,816 $ - $624,046
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 306,819 113,077 21,791 - 441,687
Selling, general
and
administrative
expenses 41,864 61,023 6,550 7,197 116,634
Depreciation 3,558 6,501 1,393 189 11,641
Long-term
incentive costs - 1,558 (c) 275(c) 7,225 (c) 9,058
-------- -------- ------- -------- --------
Total costs and
expenses 352,241 182,159 30,009 14,611 579,020
-------- -------- ------- -------- --------
Income/(loss)
from
operations 37,082 22,748 (193) (14,611) 45,026
Interest expense (90) (102) (9) (18,397) (18,598)
Intercompany
interest
income/
(expense) 420 700 66 (1,186) -
Loss on
extinguishment
of debt - - - (3,330)(d) (3,330)
Other income--
net 210 594 178 1,267 2,249
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes 37,622 23,940 42 (36,257) 25,347
Income taxes (15,234) (8,486)(e) (48) 14,174 (e) (9,594)
-------- -------- ------- -------- --------
Net
Income/(Loss) $ 22,388 $ 15,454 $ (6) $(22,083) $ 15,753
======== ======== ======= ======== ========
Earnings Per
Share
Net income $ 1.26
========
Average number
of shares
outstanding 12,453
========
Diluted Earnings
Per Share
Net income $ 1.24
========
Average number
of shares
outstanding 12,685
========
2003 (b)
- ----------------
Service revenues
and sales $319,955 $192,659 $37,429 $ - $550,043
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 251,975 108,180 27,798 - 387,953
Selling, general
and
administrative
expenses 42,547 60,721 7,545 8,082(f) 118,895
Depreciation 2,325 6,900 1,859 266 11,350
-------- -------- ------- -------- --------
Total costs and
expenses 296,847 175,801 37,202 8,348 518,198
-------- -------- ------- -------- --------
Income from
operations 23,108 16,858 227 (8,348) 31,845
Interest expense - (148) (28) (19,111) (19,287)
Intercompany
interest
income/
(expense) - 414 (17) (397) -
Loss on
extinguishment
of debt - - - (3,330)(d) (3,330)
Other income--
net 521 707 288 6,977 (g) 8,493
-------- -------- ------- -------- --------
Income/(loss)
before income
taxes 23,629 17,831 470 (24,209) 17,721
Income taxes (9,430) (6,730) (303) 8,244 (8,219)
-------- -------- ------- -------- --------
Net
Income/(Loss) $ 14,199 $ 11,101 $ 167 $(15,965) $ 9,502
======== ======== ======= ======== ========
Earnings Per
Share
Net income $ 0.80
========
Average number
of shares
outstanding 11,913
========
Diluted Earnings
Per Share
Net income $ 0.80
========
Average number
of shares
outstanding 11,940
========
- ----------------
(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) 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 $4,455,000 for Corporate,
$982,000 for Roto-Rooter and $170,000 for Service America.
(d) Amount represents the prepayment penalty incurred on the early
extinguishment of the Company's debt ($2,030,000 aftertax in 2004;
$2,164,000 aftertax in 2003) in the first quarter of 2004.
(e) Amounts include favorable adjustments related to finalization of
prior-year tax returns during the third quarter of 2004. The
aftertax benefit received from these adjustments was $390,000 for
Corporate and $630,000 for Roto-Rooter.
(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 and a
pretax gain of $1,846,000 ($1,200,000 aftertax) from the
redemption of VITAS preferred stock in the third quarter of 2003.
CHEMED CORPORATION
VITAS PRO FORMA QUARTERLY STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands) (unaudited)
Year-to-
First Second Third date
Quarter Quarter Quarter September
-------- -------- -------- --------
2004 (a)
- -------------------------
Service revenues and
sales $123,982 $130,240 $135,101 $389,323
-------- -------- -------- --------
Cost of services
provided and goods sold 99,334 101,790 105,695 306,819
Selling, general and
administrative expenses 13,385 12,227 12,653 38,265
Depreciation 982 1,270 1,306 3,558
Amortization 1,024 1,324 1,251 3,599
Long-term incentive
costs - - - -
-------- -------- -------- --------
Total costs and
expenses 114,725 116,611 120,905 352,241
-------- -------- -------- --------
Income from operations 9,257 13,629 14,196 37,082
Interest expense (28) (30) (32) (90)
Intercompany interest
income/(expense) - 131 289 420
Loss on extinguishment
of debt - - - -
Other income--net 72 45 93 210
-------- -------- -------- --------
Income before income
taxes 9,301 13,775 14,546 37,622
Income taxes (3,701) (5,647) (5,886) (15,234)
-------- -------- -------- --------
Net income $ 5,600 $ 8,128 $ 8,660 $ 22,388
======== ======== ======== ========
Year-to-
First Second Third date
Quarter Quarter Quarter September
-------- -------- -------- --------
2003 (b)
- -------------------------
Service revenues and
sales $100,182 $106,245 $113,528 $319,955
-------- -------- -------- --------
Cost of services
provided and goods sold 80,919 82,684 88,372 251,975
Selling, general and
administrative expenses 11,714 13,686 14,023 39,423
Depreciation 818 873 634 2,325
Amortization 1,041 1,042 1,041 3,124
Long-term incentive
costs - - - -
-------- -------- -------- --------
Total costs and
expenses 94,492 98,285 104,070 296,847
-------- -------- -------- --------
Income from operations 5,690 7,960 9,458 23,108
Interest expense - - - -
Intercompany interest
income/(expense) - - - -
Loss on extinguishment
of debt - - - -
Other income--net 150 203 168 521
-------- -------- -------- --------
Income before income
taxes 5,840 8,163 9,626 23,629
Income taxes (2,337) (3,274) (3,819) (9,430)
-------- -------- -------- --------
Net income $ 3,503 $ 4,889 $ 5,807 $ 14,199
======== ======== ======== ========
- -------------------------
(a) The pro forma statement of income for 2004 assumes the Company's
acquisition of VITAS was completed as of January 1, 2004, on the
same terms and conditions as completed on February 24, 2004.
(b) The pro forma statement of income for 2003 assumes the Company's
acquisition of VITAS was completed as of January 1, 2003, on the
same terms and conditions as completed on February 24, 2004.
CHEMED CORPORATION
CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Corp- Consoli-
VITAS Rooter America orate dated
------- ------- ----- ------- -------
2004
- --------------------
Net income/(loss) $ 8,975 $ 6,067 $(125) $(4,305) $10,612
Add/(deduct):
Interest expense 32 43 2 6,008 6,085
Income taxes 6,097 2,375 (70) (4,755) 3,647
Depreciation and
amortization 2,031 2,112 392 164 4,699
------- ------- ----- ------- -------
EBITDA 17,135 10,597 199 (2,888) 25,043
Add/(deduct):
Long-term
incentive
compensation - - - - -
Advertising cost
adjustment (a) - (577) - - (577)
Interest income (94) (44) (9) (402) (549)
Intercompany
interest
(income)/expense (289) (327) (39) 655 -
Loss on
extinguishment
of debt - - - - -
Equity in income
of VITAS - - - (131) (131)
------- ------- ----- ------- -------
Adjusted
EBITDA $16,752 $ 9,649 $ 151 $(2,766) $23,786
======= ======= ===== ======= =======
2003
- --------------------
Net income/(loss) $ - $ 2,788 $ 64 $ 61 $ 2,913
Add/(deduct):
Interest expense - 33 8 714 755
Income taxes - 1,707 114 (73) 1,748
Depreciation and
amortization - 2,335 737 92 3,164
------- ------- ----- ------- -------
EBITDA - 6,863 923 794 8,580
Add/(deduct):
Severance charges - - - - -
Advertising cost
adjustment (a) - 466 - - 466
Interest income - (44) (87) (517) (648)
Intercompany
interest
(income)/expense - (157) (1) 158 -
Dividend income
from VITAS - - - (108) (108)
Gains on sales of
investments - - - (1,846) (1,846)
------- ------- ----- ------- -------
Adjusted
EBITDA $ - $ 7,128 $ 835 $(1,519) $ 6,444
======= ======= ===== ======= =======
- --------------------
(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 third quarters of 2004 and 2003, GAAP advertising
expense for Roto-Rooter totaled $4,040,000 and $4,451,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the third quarters of 2004 and 2003 would total
$4,617,000 and $3,985,000, respectively.
CHEMED CORPORATION
CONSOLIDATING SUMMARY OF EBITDA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Corp- Consoli-
VITAS Rooter America orate dated
------- ------- ------ -------- -------
2004
- ------------------
Net income/(loss) $19,479 $15,454 $ (6) $(23,107) $11,820
Add/(deduct):
Interest expense 90 102 9 14,995 15,196
Income taxes 13,489 8,486 48 (13,040) 8,983
Depreciation and
amortization 6,073 6,657 1,393 299 14,422
------- ------- ------ -------- -------
EBITDA 39,131 30,699 1,444 (20,853) 50,421
Add/(deduct):
Long-term
incentive
compensation - 1,558 275 7,225 9,058
Advertising cost
adjustment (a) - (1,043) - - (1,043)
Interest income (190) (108) (127) (1,236) (1,661)
Intercompany
interest
(income)/expense (420) (700) (66) 1,186 -
Loss on
extinguishment
of debt - - - 3,330 3,330
Equity in loss of
VITAS - - - 3,153 3,153
------- ------- ------ -------- -------
Adjusted EBITDA $38,521 $30,406 $1,526 $ (7,195) $63,258
======= ======= ====== ======== =======
2003
- ------------------
Net income/(loss) $ - $11,101 $ 167 $ (1,498) $ 9,770
Add/(deduct):
Interest expense - 148 28 2,253 2,429
Income taxes - 6,730 303 (1,135) 5,898
Depreciation and
amortization - 7,079 2,202 282 9,563
------- ------- ------ -------- -------
EBITDA - 25,058 2,700 (98) 27,660
Add/(deduct):
Severance charges - - - 3,627 3,627
Advertising cost
adjustment (a) - (1,860) - - (1,860)
Interest income - (176) (272) (1,718) (2,166)
Intercompany
interest
(income)/expense - (414) 17 397 -
Dividend income
from VITAS - - - (1,532) (1,532)
Gains on sales of
investments - - - (5,390) (5,390)
------- ------- ------ -------- -------
Adjusted EBITDA $ - $22,608 $2,445 $ (4,714) $20,339
======= ======= ====== ======== =======
- ------------------
(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 nine months of 2004 and 2003, GAAP
advertising expense for Roto-Rooter totaled $12,170,000 and
$9,502,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the first nine months of 2004 and 2003
would total $13,213,000 and $11,362,000, respectively.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Corp- Consoli-
VITAS(a) Rooter America orate(a) dated
------- ------- ------ -------- -------
2004
- ------------------
Pro forma net
income/(loss) $ 8,660 $ 6,067 $(125) $(4,436) $10,166
Add/(deduct):
Interest expense 32 43 2 6,008 6,085
Income taxes 5,886 2,375 (70) (4,755) 3,436
Depreciation and
amortization 2,557 2,112 392 164 5,225
------- ------- ----- ------- -------
Pro forma
EBITDA 17,135 10,597 199 (3,019) 24,912
Add/(deduct):
Long-term
incentive
compensation - - - - -
Advertising cost
adjustment (b) - (577) - - (577)
Interest income (94) (44) (9) (402) (549)
Intercompany
interest
(income)/expense (289) (327) (39) 655 -
Loss on
extinguishment
of debt - - - - -
------- ------- ----- ------- -------
Pro forma
adjusted
EBITDA $16,752 $ 9,649 $ 151 $(2,766) $23,786
======= ======= ===== ======= =======
2003
- ------------------
Pro forma net
income/(loss) $ 5,807 $ 2,788 $ 64 $(3,961) $ 4,698
Add/(deduct):
Interest expense - 33 8 6,519 6,560
Income taxes 3,819 1,707 114 (2,092) 3,548
Depreciation and
amortization 1,675 2,335 737 92 4,839
------- ------- ----- ------- -------
Pro forma
EBITDA 11,301 6,863 923 558 19,645
Add/(deduct):
Severance charges - - - - -
Advertising cost
adjustment (b) - 466 - - 466
Interest income (168) (44) (87) (517) (816)
Intercompany
interest
(income)/expense - (157) (1) 158 -
Gains on sales of
investments - - - (1,846) (1,846)
Loss on
extinguishment of
debt - - - - -
------- ------- ----- ------- -------
Pro forma
adjusted
EBITDA $11,133 $ 7,128 $ 835 $(1,647) $17,449
======= ======= ===== ======= =======
- ------------------
(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 third quarters of 2004 and 2003, GAAP advertising
expense for Roto-Rooter totaled $4,040,000 and $4,451,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the third quarters of 2004 and 2003 would total
$4,617,000 and $3,985,000, respectively.
CHEMED CORPORATION
PRO FORMA CONSOLIDATING SUMMARY OF EBITDA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Corp- Consoli-
VITAS(a) Rooter America orate(a) dated
------- ------- ------ -------- -------
2004
- ------------------
Pro forma net
income/(loss) $22,388 $15,454 $ (6) $(22,083) $15,753
Add/(deduct):
Interest expense 90 102 9 18,397 18,598
Income taxes 15,234 8,486 48 (14,174) 9,594
Depreciation and
amortization 7,157 6,657 1,393 299 15,506
------- ------- ------ -------- -------
Pro forma
EBITDA 44,869 30,699 1,444 (17,561) 59,451
Add/(deduct):
Long-term
incentive
compensation - 1,558 275 7,225 9,058
Advertising cost
adjustment (b) - (1,043) - - (1,043)
Interest income (231) (108) (127) (1,236) (1,702)
Intercompany
interest (income)/
expense (420) (700) (66) 1,186 -
Loss on
extinguishment
of debt - - - 3,330 3,330
------ ------- ------ -------- -------
Pro forma
adjusted
EBITDA $44,218 $30,406 $1,526 $ (7,056) $69,094
======= ======= ====== ======== =======
2003
- ------------------
Pro forma net
income/(loss) $14,199 $11,101 $ 167 $(15,965) $ 9,502
Add/(deduct):
Interest expense - 148 28 19,111 19,287
Income taxes 9,430 6,730 303 (8,244) 8,219
Depreciation and
amortization 5,449 7,079 2,202 282 15,012
------- ------- ------ -------- -------
Pro forma
EBITDA 29,078 25,058 2,700 (4,816) 52,020
Add/(deduct):
Severance charges - - - 3,627 3,627
Advertising cost
adjustment (b) - (1,860) - - (1,860)
Interest income (521) (176) (272) (1,718) (2,687)
Intercompany
interest (income)/
expense - (414) 17 397 -
Gains on sales of
investments - - - (5,390) (5,390)
Loss on
extinguishment
of debt - - - 3,330 3,330
------- ------- ------ -------- -------
Pro forma
adjusted
EBITDA $28,557 $22,608 $2,445 $ (4,570) $49,040
======= ======= ====== ======== =======
- ------------------
(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 nine months of 2004 and 2003, GAAP
advertising expense for Roto-Rooter totaled $12,170,000 and
$9,502,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the first nine months of 2004 and 2003
would total $13,213,000 and $11,362,000, respectively.
CHEMED CORPORATION
VITAS PRO FORMA QUARTERLY SUMMARY OF EBITDA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands) (unaudited)
Year-to-
First Second Third date
2004 (a) Quarter Quarter Quarter September
- ---------------------------- ------- ------- ------- -------
Pro forma net income $ 5,600 $ 8,128 $ 8,660 $22,388
Add/(deduct):
Interest expense 28 30 32 90
Income taxes 3,701 5,647 5,886 15,234
Depreciation 982 1,270 1,306 3,558
Amortization 1,024 1,324 1,251 3,599
------- ------- ------- -------
Pro forma EBITDA 11,335 16,399 17,135 44,869
Add/(deduct):
Interest income (72) (65) (94) (231)
Intercompany interest
(income)/expense - (131) (289) (420)
------- ------- ------- -------
Pro forma adjusted EBITDA $11,263 $16,203 $16,752 $44,218
======= ======= ======= =======
Year-to-
First Second Third date
2003 (b) Quarter Quarter Quarter September
- ---------------------------- ------- ------- ------- -------
Pro forma net income $ 3,503 $ 4,889 $ 5,807 $14,199
Add/(deduct):
Interest expense - - - -
Income taxes 2,337 3,274 3,819 9,430
Depreciation 818 873 634 2,325
Amortization 1,041 1,042 1,041 3,124
------- ------- ------- -------
Pro forma EBITDA 7,699 10,078 11,301 29,078
Add/(deduct):
Interest income (150) (203) (168) (521)
Intercompany interest
(income)/expense - - - -
------- ------- ------- -------
Pro forma adjusted EBITDA $ 7,549 $ 9,875 $11,133 $28,557
======= ======= ======= =======
- ----------------------------
(a) The pro forma statement of income for 2004 assumes the Company's
acquisition of VITAS was completed as of January 1, 2004, on the
same terms and conditions as completed on February 24, 2004.
(b) The pro forma statement of income for 2003 assumes the Company's
acquisition of VITAS was completed as of January 1, 2003, on the
same terms and conditions as completed on February 24, 2004.
CHEMED CORPORATION
RECONCILIATION OF PRO FORMA ADJUSTED NET INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands, except per share data)(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ------------------
2004 2003 2004 2003
------- ------- ------- --------
Net income as reported $10,612 $ 2,913 $11,820 $ 9,770
Add/(deduct):
Pro forma VITAS net income
contribution for the period
(a) - 5,887 2,991 14,439
Pro forma prior-period VITAS
intangibles amortization (315) - - -
Pro forma financing costs
related to acquisition of
VITAS (b) - (3,774) (2,211) (10,958)
Pro forma loss on
extinguishment of debt (b) - - - (2,164)
Pro forma elimination of
equity in income of VITAS
(c) (131) - 3,153 -
Pro forma elimination of
preferred dividend income
from VITAS (c) - (328) - (1,585)
------- ------- ------- --------
Pro forma net income 10,166 4,698 15,753 9,502
Add/(deduct):
Prior-period tax adjustments (2,118) - (1,020) -
Severance charges - - - 2,358
Capital gains, etc - (1,200) - (3,351)
Aftertax cost of long-term
incentive payout - - 5,607 -
Aftertax cost of loss on
extinguishment of debt - - 2,030 2,164
------- ------- ------- --------
Adjusted pro forma net income $ 8,048 $ 3,498 $22,370 $ 10,673
======= ======= ======= ========
Earnings Per Share As
Reported
Net income $ 0.85 $ 0.29 $ 0.99 $ 0.99
======= ======= ======= ========
Average number of shares
outstanding 12,470 9,941 11,904 9,913
======= ======= ======= ========
Diluted Earnings Per Share As
Reported
Net income $ 0.84 $ 0.29 $ 0.97 $ 0.98
======= ======= ======= ========
Average number of shares
outstanding 12,701 9,988 12,136 9,940
======= ======= ======= ========
Adjusted Pro Forma Earnings
Per Share
Net income $ 0.65 $ 0.29 $ 1.80 $ 0.90
======= ======= ======= ========
Average number of shares
outstanding 12,470 11,941 12,453 11,913
======= ======= ======= ========
Adjusted Pro Forma Diluted
Earnings Per Share
Net income $ 0.63 $ 0.29 $ 1.76 $ 0.89
======= ======= ======= ========
Average number of shares
outstanding 12,701 11,988 12,685 11,940
======= ======= ======= ========
- -----------------------------
(a) Amount represents 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 Third-Quarter Results;
Consolidated Diluted EPS of $.84
CINCINNATI--Oct. 25, 2004--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, 2004, versus the comparable prior-year
period, as follows:
- -- Consolidated Operating Results (GAAP)
-- Revenue increased 181% to $211.1 million
-- Diluted EPS of $.84
- -- VITAS generated record Revenue and ADC levels
-- Quarterly Net Patient Revenue of $135.1 million, up 19%
-- Average Daily Census (ADC) of 8,949, up 17%
-- Net Income of $9.0 million
- -- Roto-Rooter segment reported increased Revenue and Net Income
-- Revenue increased 5%
-- Net Income, including prior quarters' tax benefits, of $6.1
million, an increase of 118%
"Chemed Corporation continues to generate strong fundamental
performance," stated Kevin McNamara, Chemed president and chief
executive officer. "Our methodical expansion of the VITAS business
model now includes 32 programs in 11 states. ADC for the third quarter
of 2004 was 8,949, an increase of 17.1% over the prior-year quarter
and 4.3% above the second quarter of 2004. This translated into
revenue growth of 19.0% over the prior year and 3.7% over the second
quarter of 2004. We currently have 10 new starts in various stages of
development, including our small acquisition in Atlanta. New starts
generated $1.4 million of operating losses in the quarter, which had a
modest impact on our overall margins.
"In addition, Roto-Rooter continues to show strong earnings
improvements over the prior year. For the third quarter of 2004,
revenue growth aggregated 5.4% and net income, including $847,000 of
favorable tax adjustments, increased 118% over the prior year."
"The third quarter of 2004 does contain a number of items that
positively impacted our GAAP operating results," said David Williams,
Chemed's chief financial officer. "These items included reversing out
certain severance accruals related to the VITAS merger, as well as
adjusting year-to-date amortization and depreciation expense as we
finalize valuations for the VITAS transaction. In addition, we have
recently completed a multi-state and local tax planning analysis that
had a favorable impact on our year-to-date effective tax rate. These
items are explained in the notes to the accompanying statements of
income. These should assist in projecting a more reasonable estimate
of our earnings on a go-forward basis. We continue to caution everyone
to carefully review the accounting issues relating to the refinancing
and merger of VITAS into Chemed when analyzing quarter and
year-to-date operating results."
For a detailed presentation of operating results, adjustments and
special 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, only a portion of VITAS' operating results is
fully consolidated into Chemed's first quarter of 2004 results.
VITAS had net patient revenue of $135.1 million, income from
operations of $14.7 million and net income of $9.0 million in the
third quarter of 2004.
VITAS generated revenue growth of 19.0% over the prior-year period
and 3.7% sequentially. Gross margins remained relatively flat at 21.8%
in the third quarter of 2004 as compared to the prior-year quarter.
The third-quarter 2004 gross margin includes $1.4 million in startup
losses, which is an incremental $0.9 million over the prior-year
period. This negatively impacted margins by 104 basis points. Central
support costs for VITAS, which are included as selling, general and
administrative expenses, declined 9.8% from the prior-year quarter and
increased 3.5% sequentially.
VITAS' average daily census (ADC) in the third quarter of 2004 was
8,949. This compares to an ADC of 7,643 in the comparable prior-year
period, an increase of 17% and a 4% increase over the second quarter
of 2004. Average length of stay (LOS) per patient was 60.8 days for
the quarter and compares to 54.7 days in the third quarter of 2003.
Average LOS for all non-startup programs ranged from a low of 35.2
days to a high of 84.5 days in the third quarter of 2004. The median
LOS was 13.0 days in the quarter, an increase of 1.0 day over the
prior year.
"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 397 patients per program. In our large programs, those with
an average daily census in excess of 450, ADC growth was 14% over the
prior-year quarter and increased 2.2% sequentially. Our small and
medium programs generated ADC growth of 20.6% over the prior year and
6.5% sequentially."
"We did see significant mix fluctuations in our revenue components
this quarter," Williams stated. "Routine home care aggregated 69.8% of
revenue, an increase of 130 basis points over the prior-year quarter
and a 150-basis-point increase on a sequential basis. Our inpatient
revenue aggregated 13.6% of total revenue and continuous care was
16.6% of revenue in the third quarter of 2004."
Roto-Rooter Segment
Roto-Rooter's plumbing and drain cleaning business generated sales
of $66.8 million for the third quarter of 2004, 5.4% higher than the
$63.3 million reported in the comparable prior-year quarter. Net
income for the quarter, including $847,000 of favorable tax benefits
relating to prior quarters, totaled $6.1 million, an increase of 118%
over the prior-year quarter.
"There are several factors contributing to the improvement in the
plumbing and drain cleaning segment," stated McNamara. "Job count
increased 1.9% in the third quarter of 2004 over the prior-year
period. We continue to see strengthening demand in commercial and
residential plumbing. Our expense control at the field level resulted
in a third-quarter-2004 gross profit margin of 45.4%, which is 160
basis points above the third quarter of 2003."
Consolidated Financial Position
"Our cash position is solid," Williams stated. "As of September
30, 2004, we have over $51 million in cash and approximately $72
million of unused lines of credit under our Credit Facility. In
addition, we have tax refunds in excess of $15 million relating to the
deductibility of stock option buyouts at the VITAS level that should
be received by the end of the year."
Guidance for the Remainder of the Year
"Looking ahead into the fourth quarter of 2004," Williams stated,
"we anticipate sequential consolidated revenue to be materially above
the third quarter due to seasonality factors within Roto-Rooter.
Roto-Rooter is estimated to generate a 5% to 7% sequential revenue
growth in the fourth quarter, which is consistent with historical
seasonality.
"VITAS continues to show consistent ADC growth. The past six
quarters have averaged a sequential quarterly increase in ADC of 345.
If this trend line continues, ADC would approximate 9,300 in the
fourth quarter. We are optimistic as to the long-term sustainable
trend-line improvements in ADC, revenue and earnings per share.
However, we should keep in perspective VITAS will experience
fluctuations in growth patterns and revenue mix quarter to quarter. 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 actual ADC.
"Based upon these factors and a current diluted share count of
12.7 million, our expectation is that earnings per diluted share for
the fourth quarter will be in the range of $.73 to $.77. We anticipate
providing full-year 2005 guidance when we release our final 2004
operating results."
Conference Call
Chemed will hold a conference call to discuss third quarter
results Tuesday, October 26, 2004, at 11 a.m., ET. 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 live
webcast of the call can be accessed on Chemed's website at
www.chemed.com by clicking on "Investor Relations Home" and then on
"Featured Event: Web Cast - Live! Q3 2004 Chemed Corporation Earnings
Conference Call." An archived webcast will also be available at
www.chemed.com and will remain available for 14 days following the
live call.
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 1034741. The telephone replay will be available for one week
following the live call.
Chemed Corporation operates in the healthcare field through its
VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice
services to approximately 9,000 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
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 earnings report 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 Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2004 (a) 2003 (b) 2004 (a) 2003 (b)
-------- ------- -------- --------
Service revenues
and sales $211,134 $75,172 $551,176 $230,088
-------- ------- -------- --------
Cost of services provided
and goods sold 149,409 44,215 382,839 135,978
Selling, general and
administrative expenses 38,908 25,607 107,844 76,754
Depreciation 3,002 2,983 11,161 9,025
Long-term incentive
compensation - - 9,058 -
-------- ------- -------- --------
Total costs and
expenses 191,319 72,805 510,902 221,757
-------- ------- -------- --------
Income from operations 19,815 2,367 40,274 8,331
Interest expense (6,085) (755) (15,196) (2,429)
Loss on extinguishment of
debt - - (3,330) -
Other income--net 398 3,049 2,208 9,766
-------- ------- -------- --------
Income before income
taxes 14,128 4,661 23,956 15,668
Income taxes (3,647) (1,748) (8,983) (5,898)
Equity in income/(loss) of
affiliate (VITAS) 131 - (3,153) -
-------- ------- -------- --------
Net Income $ 10,612 $ 2,913 $ 11,820 $ 9,770
======== ======= ======== ========
Earnings Per Share
Net income $ 0.85 $ 0.29 $ 0.99 $ 0.99
======== ======= ======== ========
Average number of shares
outstanding 12,470 9,941 11,904 9,913
======== ======= ======== ========
Diluted Earnings Per
Share
Net income $ 0.84 $ 0.29 $ 0.97 $ 0.98
======== ======= ======== ========
Average number of shares
outstanding 12,701 9,988 12,136 9,940
======== ======= ======== ========
- ----------------------------------
(a) Results for 2004 include the following adjustments/special items
which increased/(reduced) earnings (in thousands):
Third Nine
Quarter Months
------ --------
Adjustments to revise VITAS purchase price
allocation and related amortization of
assets:
Increase in amortization expense (included
in selling, gen. and administrative exp.) $ (311) $ -
Reduction in depreciation expense 837 -
Payouts under the Company's long-term
incentive program - (9,058)
Loss on extinguishment of debt - (3,330)
------ --------
Total impact on income before income taxes 526 (12,388)
Adjustment of income taxes related to the
above (211) 4,751
Tax adjustments resulting from the
finalization of prior-year tax returns in the
third quarter of 2004 1,020 1,020
Tax adjustments from the cumulative reduction
of estimated state and local tax rates 1,098 -
Equity in the earnings/(loss) of VITAS,
impacted significantly by transaction-
related expenses incurred by VITAS prior to
its merger with Chemed in February 2004 131 (3,153)
------ --------
Total impact on net income $2,564 $ (9,770)
====== ========
These 2004 adjustments/special items increased earnings per share
by $.20 ($.21 on a diluted basis) in the third quarter and reduced
earnings per share by $.82 ($.81 on a diluted basis) in the nine
months.
(b) Results for 2003 include the following adjustments/special items
which increased/(reduced) earnings (in thousands):
Third Nine
Quarter Months
------ --------
Severance charges in March 2003 (included in
selling, gen. and administrative exp.) $ - $ (3,627)
Pretax capital gains from the redemption of
VITAS preferred stock and the sales of
investments (included in other income) 1,846 5,390
Dividend income from VITAS preferred stock
redeemed in 2003 (included in other income) 371 1,794
------ --------
Total impact on income before income taxes 2,217 3,557
Adjustment of income taxes related to the
above (689) (979)
------ --------
Total impact on net income $1,528 $ 2,578
====== ========
These 2003 adjustments/special items increased earnings per share
by $.15 in the third quarter and increased earnings per share by
$.26 in the nine months.
CHEMED CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
September 30,
-------------------
2004 2003(a)
-------- ---------
Assets
Current assets
Cash and cash equivalents $ 51,261 $ 72,607
Accounts receivable less allowances 71,476 13,310
Inventories 8,391 8,548
Statutory deposits 7,924 9,852
Prepaid income taxes 10,493 4,612
Current deferred income taxes 24,247 9,167
Prepaid expenses and other current assets 8,354 6,941
-------- ---------
Total current assets 182,146 125,037
Investments of deferred compensation plans held
in trust 19,302 16,832
Other investments 1,445 5,546
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 58,422 47,456
Identifiable intangible assets less accumulated
amortization 75,828 2,450
Goodwill less accumulated amortization 407,407 113,437
Other assets 24,754 16,908
-------- ---------
Total Assets $781,804 $ 340,166
======== =========
Liabilities
Current liabilities
Accounts payable $ 39,406 $ 5,033
Current portion of long-term debt 5,401 463
Income taxes 401 21
Deferred contract revenue 15,987 16,053
Accrued insurance 23,729 16,844
Other current liabilities 56,368 20,348
-------- ---------
Total current liabilities 141,292 58,762
Long-term debt 288,311 25,635
Mandatorily redeemable convertible preferred
securities of the Chemed Capital Trust - 14,146
Deferred compensation liabilities 19,306 16,824
Other liabilities 18,000 20,315
-------- ---------
Total Liabilities 466,909 135,682
-------- ---------
Stockholders' Equity
Capital stock 13,437 13,452
Paid-in capital 209,564 169,406
Retained earnings 127,357 134,143
Treasury stock, at cost (32,984) (110,492)
Unearned compensation (4,289) (3,389)
Deferred compensation payable in Company
stock 2,351 2,294
Notes receivable for shares sold (541) (930)
-------- ---------
Total Stockholders' Equity 314,895 204,484
-------- ---------
Total Liabilities and Stockholders'
Equity $781,804 $ 340,166
======== =========
Book Value Per Share $ 25.25 $ 20.70
======== =========
(a) Reclassified to conform to 2004 presentation
CHEMED CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Corp- Consoli-
VITAS Rooter America orate dated
-------- ------- ------- ------- --------
2004
- -----------------
Service revenues
and sales $135,101 $66,785 $ 9,248 $ - $211,134
-------- ------- ------- ------- --------
Cost of services
provided and
goods sold 105,695 36,433 7,281 - 149,409
Selling, general
and
administrative
expenses 14,215 20,021 1,831 2,841 38,908
Depreciation 469 2,081 392 60 3,002
Long-term
incentive costs - - - - -
-------- ------- ------- ------- --------
Total costs and
expenses 120,379 58,535 9,504 2,901 191,319
-------- ------- ------- ------- --------
Income/(loss)
from
operations 14,722 8,250 (256) (2,901) 19,815
Interest expense (32) (43) (2) (6,008) (6,085)
Intercompany
interest income/
(expense) 289 327 39 (655) -
Loss on
extinguishment
of debt - - - - -
Other income--net 93 (92) 24 373 398
-------- ------- ------- ------- --------
Income/(loss)
before income
taxes 15,072 8,442 (195) (9,191) 14,128
Income taxes (6,097) (2,375)(a) 70 4,755(a) (3,647)
Equity in loss of
VITAS - - - 131(b) 131
-------- ------- ------- ------- --------
Net
income/(loss) $ 8,975 $ 6,067 $ (125) $(4,305) $ 10,612
======== ======= ======= ======= ========
2003
- -----------------
Service revenues
and sales $ - $63,342 $11,830 $ - $ 75,172
-------- ------- ------- ------- --------
Cost of services
provided and
goods sold - 35,583 8,632 - 44,215
Selling, general
and
administrative
expenses - 21,424 2,458 1,725 25,607
Depreciation - 2,276 619 88 2,983
-------- ------- ------- ------- --------
Total costs and
expenses - 59,283 11,709 1,813 72,805
-------- ------- ------- ------- --------
Income/(loss)
from
operations - 4,059 121 (1,813) 2,367
Interest expense - (33) (8) (714) (755)
Intercompany
interest income/
(expense) - 157 1 (158) -
Other income--net - 312 64 2,673(c) 3,049
-------- ------- ------- ------- --------
Income/(loss)
before income
taxes - 4,495 178 (12) 4,661
Income taxes - (1,707) (114) 73 (1,748)
-------- ------- ------- ------- --------
Net
income/(loss) $ - $ 2,788 $ 64 $ 61 $ 2,913
======== ======= ======= ======= ========
- -----------------
(a) Amounts include favorable adjustments related to finalization of
prior-year tax returns during the third quarter of 2004. The
aftertax benefit received from these adjustments was $390,000 for
Corporate and $630,000 for Roto-Rooter. In addition, amounts
included tax benefits related to prior quarters due to the
Company's adjusting its effective tax rate for state and local
taxes during the third quarter. The aftertax benefit recorded for
these prior-quarter adjustments was $881,000 for Corporate and
$217,000 for Roto-Rooter.
(b) Amount includes the Company's aftertax share of VITAS' charges
related to the Company's acquisition of VITAS prior to the
acquisition date. The accruals for transaction costs were adjusted
in the third 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
transaction-related expenses that increased the Company's equity
in the earnings/(loss) of VITAS by $131,000 during the third
quarter of 2004.
(c) Amount includes a pretax gain of $1,846,000 ($1,200,000 aftertax)
from the redemption of VITAS preferred stock in the third quarter
of 2003.
CHEMED CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(in thousands)(unaudited)
Chemed
Roto- Service Corp- Consoli-
VITAS Rooter America orate dated
-------- -------- ------- -------- --------
2004
- -----------------
Service revenues
and sales $316,453 $204,907 $29,816 $ - $551,176
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold 247,971 113,077 21,791 - 382,839
Selling, general
and admin-
istrative
expenses 32,935 61,023 6,550 7,336 107,844
Depreciation 3,078 6,501 1,393 189 11,161
Long-term
incentive costs - 1,558 (a) 275(a) 7,225 (a) 9,058
-------- -------- ------- -------- --------
Total costs
and expenses 283,984 182,159 30,009 14,750 510,902
-------- -------- ------- -------- --------
Income/
(loss) from
operations 32,469 22,748 (193) (14,750) 40,274
Interest expense (90) (102) (9) (14,995) (15,196)
Intercompany
interest income/
(expense) 420 700 66 (1,186) -
Loss on extin-
guishment of
debt - - - (3,330)(b) (3,330)
Other income --
net 169 594 178 1,267 2,208
-------- --------- ------- -------- --------
Income/
(loss) before
income taxes 32,968 23,940 42 (32,994) 23,956
Income taxes (13,489) (8,486)(f) (48) 13,040 (f) (8,983)
Equity in
earnings of
VITAS - - - (3,153)(c) (3,153)
-------- -------- ------- -------- --------
Net income/
(loss) $ 19,479 $ 15,454 $ (6) $(23,107) $ 11,820
======== ======== ======= ======== ========
2003
- -----------------
Service revenues
and sales $ - $192,659 $37,429 $ - $230,088
-------- -------- ------- -------- --------
Cost of services
provided and
goods sold - 108,180 27,798 - 135,978
Selling, general
and
administrative
expenses - 60,721 7,545 8,488 (d) 76,754
Depreciation - 6,900 1,859 266 9,025
-------- -------- ------- -------- --------
Total costs
and expenses - 175,801 37,202 8,754 221,757
-------- -------- ------- -------- --------
Income/
(loss) from
operations - 16,858 227 (8,754) 8,331
Interest expense - (148) (28) (2,253) (2,429)
Intercompany
interest income/
(expense) - 414 (17) (397) -
Other income--net - 707 288 8,771 (e) 9,766
-------- -------- ------- -------- --------
Income/
(loss) before
income taxes - 17,831 470 (2,633) 15,668
Income taxes - (6,730) (303) 1,135 (5,898)
-------- -------- ------- -------- --------
Net income/
(loss) $ - $ 11,101 $ 167 $ (1,498) $ 9,770
======== ======== ======= ======== ========
- -----------------
(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 $4,455,000 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 ($2,030,000 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 and third quarters
of 2004 based on changed facts and circumstances. These charges
comprise transaction-related expenses that increased the Company's
equity in the earnings/(loss) of VITAS by $3,669,000 during the
first nine months of 2004.
(d) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax)
for severance charges 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 and a
pretax gain of $1,846,000 ($1,200,000 aftertax) from the
redemption of VITAS preferred stock in the third quarter of 2003.
(f) Amounts include favorable adjustments related to finalization of
prior-year tax returns during the third quarter of 2004. The
aftertax benefit received from these adjustments was $390,000 for
Corporate and $630,000 for Roto-Rooter.