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, 2006, versus the comparable prior-year period, as
follows: Consolidated operating results from Continuing Operations:
Revenue increased 8.5% to $253 million Diluted EPS from Continuing
Operations of $.38 Adjusted diluted EPS from Continuing Operations,
excluding certain items, of $.48 VITAS segment operating results:
Net Patient Revenue of $175 million, up 9.0%, including $5.5
million of Medicare Cap accrual Average Daily Census (ADC) of
11,213, up 9.3% Admissions of 12,753, an increase of 3.1% Average
Length of Stay in the quarter was 71.0 days Net income of $7.8
million, a decline of 33.1% Adjusted EBITDA of $19.4 million, a
decline of 6.1% Roto-Rooter segment operating results: Revenue of
$78 million, an increase of 7.5% Job count of 198,394, up 0.4% Net
Income of $8.5 million, up 20.2% Adjusted EBITDA of $12.9 million,
an increase of 11.4% In the third quarter of 2006, VITAS recorded a
Medicare contractual billing adjustment (Medicare Cap). This
accrual reduced revenues by $5.5 million and negatively impacted
diluted EPS in the quarter by $0.13 per share. Medicare Cap is
currently impacting three hospice programs in the third quarter of
2006. The Phoenix program, acquired in December 2004, recorded an
estimated Medicare Cap billing limitation of $2.9 million. The
remaining two programs recorded $1.6 million of Medicare Cap in the
third quarter of 2006. The third-quarter 2006 Medicare Cap accrual
includes an additional $1.0 million for estimated prior-year
billing limitations resulting from the Fiscal Intermediary
reallocating admissions for deceased Medicare patients who received
hospice care from multiple providers. Of this prior-year billing,
$0.5 million is for one of the programs noted above and $0.5
million is estimated for a program not anticipated to have a
billing restriction in calendar year 2006. VITAS is in the process
of exiting the hospice market in Phoenix, Arizona. VITAS has been
successful in growing admissions of terminally ill patients who
reside primarily in assisted living settings within the Phoenix
community. Patients residing in these types of facilities tend to
exit curative care and enter into hospice early on into their
terminal illness diagnosis. The current Medicare hospice
reimbursement program limits payment for hospice care when a
significant portion of the patient census enters into hospice in
the early stage of their terminal diagnosis. Although VITAS, on
average, has relatively short average and median lengths of stay in
the majority of its programs, each program is measured separately
and cannot be considered in the aggregate of its hospice programs
under common control and ownership. The Phoenix program had an
average daily census of approximately 200 patients in the third
quarter of 2006. Revenue and operating losses for Phoenix in the
third quarter of 2006 were a negative $0.5 million and $4.8
million, respectively. Included in this operating loss is a $2.4
million charge for asset impairment. On a year-to-date basis,
revenue and operating losses aggregated $2.5 million and $5.8
million, respectively, including $4.6 million of revenue reduction
for Medicare billing limitations and $2.4 million for asset
impairment. Historically, VITAS� operating model has been able to
avoid any Medicare billing limitations. This had been achieved by
admitting a significant number of high acuity patients, those
patients in the later stage of their terminal illness. High acuity
intakes are reflected in VITAS� overall median length of stay
(MLOS), which is typically 14 days or less. MLOS means that half of
all patients admitted to VITAS are discharged in 14 days or less of
entering the program. This compares to the National Hospice and
Palliative Care Organization�s (NHPCO) industry MLOS estimate of 22
days. Typically, VITAS hospice programs with the lowest MLOS also
have the highest percentage of cap cushion. VITAS defines cap
cushion as the difference between the maximum Medicare billing
potential based upon total first-time Medicare hospice admissions
and the actual Medicare billings in a program. In most of VITAS�
base programs, the MLOS, average daily census, admissions and
discharges are relatively stable and predictable quarter to
quarter. However, programs experiencing exceptionally strong growth
rates are inherently more volatile and will have significant
fluctuations in these metrics. This volatility increases the
potential for a sudden shift in metrics in any given quarter. A
severe decline in admissions and/or discharges could result in the
program having a less optimal patient mix and potentially having
Medicare billing limitations. To the extent the program has a
predictable level of high acuity patient admissions, the program�s
patient mix has a high probability of being rebalanced and
continuing to contractually bill Medicare for 100% of services
provided. From a business model perspective, hospice programs that
are slightly above or below the Medicare Cap are essentially
maximizing revenue, profitability and operating margin for that
program. Given the industry trend to longer lengths of stay, it is
highly probable that VITAS� hospice programs will continue to
expand Medicare billings on a per patient basis. As this trend of
revenue growth continues, certain hospice programs have increased
potential of being in a Medicare contractual billing limitation
situation. The Company believes its relatively low MLOS in the
majority of its hospice programs provides a competitive advantage
to minimize the financial impact of Medicare Cap as well as limit
the duration of time the program remains in a Medicare Cap
situation. VITAS VITAS generated net revenue growth of 9.0% over
the prior-year period. Net income for the quarter was $7.8 million.
Medicare cap accruals negatively impacted revenue by $5.5 million
and reduced net income by $3.5 million. ADC increased 9.3% to
11,213 and admissions increased 3.1% to 12,753. Admissions for
VITAS have been abnormally low in the second and third quarters of
2006. This has resulted in a slowing of overall ADC growth over the
past six months. The lower than anticipated ADC growth negatively
impacted gross margins in the quarter. Routine home care direct
gross margins, before the reduction in revenue from contractual
billing limitations, were 49.1%, a decline of 130 basis points over
the prior year. Continuous care direct gross margins were 17.5%, a
decline of 60 basis points when compared to the prior year and
inpatient direct care margins were 16.5% in the quarter, which are
480 basis points below the prior-year period. These margin declines
are primarily the result of increased manpower and labor capacity
relative to ADC. Given the inherent difficulty in hiring and
retaining qualified healthcare professionals, management continued
to build manpower in anticipation of an increase in admissions and
overall census in the majority of its programs in the fourth
quarter of 2006. Central support costs for VITAS, which are
classified as selling, general and administrative expenses in the
Consolidating Statement of Income, totaled $13.6 million, including
$0.3 million in OIG investigation legal expenses. Excluding the OIG
expense, central support costs decreased 172 basis points when
compared to the prior-year quarter and decreased 66 basis points
sequentially. VITAS� average length of stay (ALOS) for patients
discharged in the quarter was 71.0 days and median length of stay
was 14 days. This compares to an ALOS of 68.0 days in the second
quarter of 2006 and 66.5 days in the third quarter of 2005.
Roto-Rooter Roto-Rooter�s plumbing and drain cleaning business
generated sales of $78 million for the third quarter of 2006, 7.5%
higher than the $73 million reported in the comparable prior-year
quarter. Net income for the quarter was $8.5 million, an increase
of 20.2% over the prior year. Adjusted EBITDA in the third quarter
of 2006 totaled $12.9 million, an increase of 11.4% over the third
quarter of 2005 and an adjusted EBITDA margin of 16.5%, an increase
of 57 basis points over the prior-year period. Job count in the
third quarter of 2006 decreased 0.4% over the prior-year period.
Commercial plumbing job count decreased 2.7% and commercial drain
cleaning decreased 2.6% over the prior-year quarter. Residential
plumbing jobs increased 0.7% and residential drain cleaning jobs
expanded 0.7% when compared to the third quarter of 2005. Overall,
commercial jobs decreased 2.6% and residential jobs increased 0.7%.
Year to date, commercial jobs increased 1.3% and residential jobs
increased 0.5%. Guidance for 2006 VITAS is estimated to generate
full-year revenue growth from continuing operations, prior to
Medicare Cap, of 14.0% to 14.5%, increased admissions of 5.0% to
5.5%, increased ADC of 10.0% to 11.0% and adjusted EBITDA margins,
prior to Medicare Cap, of 12.9% to 13.2%. This guidance assumes a
Medicare price increase that will average 3.8% in the fourth
quarter of 2006. Full-year Medicare contractual billing
limitations, excluding Phoenix, which is anticipated to be
classified as a discontinued operation in the fourth quarter of
2006, are estimated to range from $5.7 million to $8.6 million,
which equates to revenue reduction of 80 to 120 basis points.
Roto-Rooter is estimated to generate a 6.0% to 7.0% increase in
revenue in 2006, job count growth between 0.5% and 1.0% and
adjusted EBITDA margins averaging between 16.5% and 17.0%. Based
upon these factors, an effective tax rate of 39% and average
diluted share count of 26.7 million in the second half of 2006, our
expectation is that full-year 2006 earnings per diluted share from
continuing operations, excluding any charges or credits not
indicative of ongoing operations, and excluding expense for stock
options, will be in the range of $2.00 to $2.10. This earnings per
share guidance includes $.13 to $.20 for the after-tax impact of
Medicare Cap related to continuing operations. Conference Call
Chemed will host a conference call and webcast at 11 a.m., ET, on
Friday, October 27, 2006, to discuss the company's quarterly
results and provide an update on its business. The dial-in number
for the conference call is (866) 314-4865 for U.S. and Canadian
participants and (617) 213-8050 for international participants. The
participant passcode is 37819056. A live webcast of the call can be
accessed on Chemed's website at www.chemed.com by clicking on
Investor Relations Home. A taped replay of the conference call will
be available beginning approximately two hours after the call's
conclusion. It can be accessed by dialing (888) 286-8010 for U.S.
and Canadian callers and (617) 801-6888 for international callers
and will be available for one week following the live call. The
replay passcode is 21945810. An archived webcast will also be
available at www.chemed.com and will remain available for 14 days
following the live call. Chemed Corporation operates in the
healthcare field through its VITAS Healthcare Corporation
subsidiary. VITAS provides daily hospice services to over 11,000
patients with severe, life-limiting illnesses. This type of care is
focused on making the terminally ill patient's final days as
comfortable and pain-free as possible. Chemed operates in the
residential and commercial plumbing and drain cleaning industry
under the brand name Roto-Rooter. Roto-Rooter provides plumbing and
drain service through company-owned branches, independent
contractors and franchisees in the United States and Canada.
Roto-Rooter also has licensed master franchisees in Indonesia,
Singapore, Japan, Mexico and the Philippines. This press release
contains information about Chemed�s EBITDA and Adjusted EBITDA,
which are not measures derived in accordance with generally
accepted accounting principles and which exclude components that
are important to understanding Chemed�s financial performance.
Chemed provides EBITDA and Adjusted EBITDA to help investors and
others evaluate its operating results, compare its operating
performance with that of similar companies that have different
capital structures and evaluate its ability to meet its future debt
service, capital expenditures and working capital requirements.
Chemed�s EBITDA and Adjusted EBITDA should not be considered in
isolation or as a substitute for comparable measures calculated and
presented in accordance with GAAP. A reconciliation of Chemed�s net
income to its Adjusted EBITDA is presented in the tables following
the text of this press release. Forward-Looking Statements Certain
statements contained in this press release and the accompanying
tables are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The words
"believe," "expect," "hope," "anticipate," "plan" and similar
expressions identify forward-looking statements, which speak only
as of the date the statement was made. Chemed does not undertake
and specifically disclaims any obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. These statements are based
on current expectations and assumptions and involve various risks
and uncertainties, which could cause Chemed's actual results to
differ from those expressed in such forward-looking statements.
These risks and uncertainties arise from, among other things,
possible changes in regulations governing the hospice care or
plumbing and drain cleaning industries; periodic changes in
reimbursement levels and procedures under Medicare and Medicaid
programs; difficulties predicting patient length of stay and
estimating potential Medicare reimbursement obligations; challenges
inherent in Chemed's growth strategy; the current shortage of
qualified nurses, other healthcare professionals and licensed
plumbing and drain cleaning technicians; Chemed�s dependence on
patient referral sources; and other factors detailed under the
caption "Description of Business by Segment" or "Risk Factors" in
Chemed�s most recent report on form 10-Q or 10-K and its other
filings with the Securities and Exchange Commission. You are
cautioned not to place undue reliance on such forward-looking
statements and there are no assurances that the matters contained
in such statements will be achieved. CHEMED CORPORATION AND
SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (in
thousands, except per share data)(unaudited) � Three Months Ended
Nine Months Ended September 30, September 30, 2006� 2005� 2006�
2005� Continuing Operations (aa) Service revenues and sales $
253,202� $ 233,328� $ 749,223� $ 678,274� Cost of services provided
and goods sold (bb) 187,190� 165,229� 546,012� 479,301� Selling,
general and administrative expenses (bb) 39,160� 38,423� 116,279�
114,981� Depreciation 4,200� 4,086� 12,465� 11,934� Amortization
1,421� 1,248� 4,234� 3,671� Other expenses -- net (bb) � 2,692� �
(130) � 2,692� � (801) Total costs and expenses � 234,663� �
208,856� � 681,682� � 609,086� Income from operations 18,539�
24,472� 67,541� 69,188� Interest expense (4,081) (5,147) (13,726)
(16,021) Loss from impairment of investment (1,445) -� (1,445) -�
Loss on extinguishment of debt -� -� (430) (3,971) Other
income--net � 715� � 1,317� � 2,734� � 2,644� Income before income
taxes 13,728� 20,642� 54,674� 51,840� Income taxes � (3,541) �
(6,010) � (19,430) � (18,192) Income from continuing operations
10,187� 14,632� 35,244� 33,648� Discontinued Operations (cc) �
(2,226) � -� � (2,226) � (2,015) Net Income $ 7,961� $ 14,632� $
33,018� $ 31,633� � Earnings Per Share Income from continuing
operations $ 0.39� $ 0.57� $ 1.35� $ 1.32� Net income $ 0.30� $
0.57� $ 1.26� $ 1.24� Average number of shares outstanding �
26,190� � 25,719� � 26,147� � 25,453� Diluted Earnings Per Share
Income from continuing operations $ 0.38� $ 0.55� $ 1.32� $ 1.28�
Net income $ 0.30� $ 0.55� $ 1.23� $ 1.21� Average number of shares
outstanding � 26,633� � 26,401� � 26,750� � 26,202� � � � � (aa)
�Amounts include the operating results of the VITAS Phoenix
business, which will be sold or closed in the next several months
(in thousands): � Three Months Ended Nine Months Ended September
30, September 30, 2006� 2005� 2006� 2005� Service revenues $ (493)
$ 2,436� $ 2,539� $ 8,043� Income/(loss) before income taxes
(2,401) 592� (3,348) 2,530� Income/(loss) from continuing
operations (1,333) 336� (1,864) 1,420� Service revenues include
Medicare cap reductions of $2,891,000 and $4,632,000, respectively,
for the three- and nine-month periods ended September 30, 2006. The
above income/(loss) amounts exclude the asset impairment charges
related to VITAS Phoenix, shown in note (bb), below. � (bb) Amounts
include the following significant credits/(charges) which may not
be indicative of ongoing operations (in thousands): � Three Months
Ended Nine Months Ended September 30, September 30, 2006� 2005�
2006� 2005� Cost of services provided and goods sold Favorable
adjustment to casualty insurance accruals related to prior years'
experience $ -� $ -� $ -� $ 1,663� Selling, general and
administrative expenses Stock option expense (597) -� (615) (215)
Costs associated with OIG investigation (344) (310) (818) (564)
Long-term incentive compensation -� -� -� (2,946) Other expenses --
net Asset impairment charges related to selling or closing VITAS'
Phoenix operation (2,419) -� (2,419) -� Costs related to class
action litigation (273) -� (273) -� Adjustments to
transaction-related costs of the VITAS acquisition -� 130� -� 801�
Loss from impairment of investment (1,445) -� (1,445) -� Loss on
extinguishment of debt � -� � -� � (430) � (3,971) Pretax impact on
earnings (5,078) (180) (6,000) (5,232) Income tax benefit/(charge)
on the above 2,044� 118� 2,387� 2,188� Income tax benefit from
finalizing prior years' returns � 1,791� � 1,787� � 1,791� � 1,787�
Aftertax impact on earnings $ (1,243) $ 1,725� $ (1,822) $ (1,257)
� (cc) Discontinued operations for 2006 included accrual
adjustments for expenses related to the sale of Patient Care in
2002 ($1,466,000) and DuBois Chemicals in 1991 ($760,000). For
2005, discontinued operations represent the results of operations
and loss on disposal of Service America. CHEMED CORPORATION AND
SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (in thousands,
except per share data)(unaudited) � � September 30, 2006� 2005 (cc)
Assets Current assets Cash and cash equivalents $ 5,414� $ 37,575�
Accounts receivable less allowances 104,240� 84,472� Inventories
6,381� 7,252� Current deferred income taxes 25,461� 21,486� Prepaid
income taxes 5,642� 8,112� Current assets of discontinued
operations -� 3,112� Prepaid expenses and other current assets �
5,844� � 7,186� Total current assets 152,982� 169,195� Investments
of deferred compensation plans held in trust 24,278� 21,072� Other
investments -� 1,445� Note receivable 12,500� 12,500� Properties
and equipment, at cost less accumulated depreciation 68,616�
62,687� Identifiable intangible assets less accumulated
amortization 69,880� 73,892� Goodwill 434,066� 434,559� Noncurrent
assets of discontinued operations -� 287� Other assets � 19,459� �
22,111� Total Assets $ 781,781� $ 797,748� � � Liabilities Current
liabilities Accounts payable $ 45,745� $ 45,401� Current portion of
long-term debt 207� 1,123� Income taxes 4,903� 5,830� Accrued
insurance 41,368� 28,634� Accrued compensation 32,429� 28,988�
Current liabilities of discontinued operations -� 6,301� Other
current liabilities � 27,460� � 24,270� Total current liabilities
152,112� 140,547� Deferred income taxes 20,570� 18,880� Long-term
debt 165,796� 234,327� Deferred compensation liabilities 23,932�
20,991� Noncurrent liabilities of discontinued operations -� 411�
Other liabilities � 3,929� � 7,044� Total Liabilities � 366,339� �
422,200� � Stockholders' Equity Capital stock 28,810� 28,021�
Paid-in capital 250,373� 223,114� Retained earnings 199,467�
168,564� Treasury stock, at cost (65,555) (45,757) Unearned
compensation -� (202) Deferred compensation payable in Company
stock 2,402� 2,354� Notes receivable for shares sold � (55) � (546)
Total Stockholders' Equity � 415,442� � 375,548� Total Liabilities
and Stockholders' Equity $ 781,781� $ 797,748� � Book Value Per
Share $ 15.89� $ 14.58� � � � � � � � � � � � � (cc) �Reclassified
to conform to 2006 presentation. CHEMED CORPORATION AND SUBSIDIARY
COMPANIES UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (in
thousands) � Nine Months Ended September 30, 2006� 2005� Cash Flows
from Operating Activities Net income $ 33,018� $ 31,633�
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 16,699� 15,605�
Provision for uncollectible accounts receivable 6,003� 5,352�
Losses on asset impairments 3,864� -� Discontinued operations
2,226� 2,015� Amortization of debt issuance costs 1,325� 1,395�
Provision for deferred income taxes (1,233) (1,176) Write off
unamortized debt issuance costs 430� 2,871� Noncash long-term
incentive compensation -� 2,574� Changes in operating assets and
liabilities, excluding amounts acquired in business combinations:
Increase in accounts receivable (17,545) (25,264)
Decrease/(increase) in inventories 118� (233) Decrease in prepaid
expenses and other current assets 2,673� 2,656� Decrease in
accounts payable and other current liabilities (16,147) (3,584)
Increase in income taxes 10,636� 11,827� Increase in other assets
(248) (2,876) Increase in other liabilities 2,403� 1,464� Excess
tax benefit on share-based compensation (4,943) -� Noncash expense
of internally financed ESOP -� 858� Other sources � 1,374� � 479�
Net cash provided by continuing operations 40,653� 45,596� Net cash
used by discontinued operations � -� � (1,559) Net cash provided by
operating activities � 40,653� � 44,037� Cash Flows from Investing
Activities Capital expenditures (16,207) (18,874) Net uses from
disposals of discontinued operations (3,360) (7,145) Business
combinations, net of cash acquired (1,489) (5,680) Proceeds from
sales of property and equipment 287� 125� Other uses � (553) �
(232) Net cash used by investing activities � (21,322) � (31,806)
Cash Flows from Financing Activities Repayment of long-term debt
(84,500) (141,245) Net increase in revolving line of credit 15,400�
-� Purchases of treasury stock (8,253) (4,390) Excess tax benefit
on share-based compensation 4,943� -� Dividends paid (4,739)
(4,611) Issuance of capital stock, net of issuance costs 3,854�
10,009� Increase in cash overdraft payable 2,145� 10,684� Debt
issuance costs (154) (1,755) Proceeds from issuance of long-term
debt -� 85,000� Other sources � 254� � 204� Net cash used by
financing activities � (71,050) � (46,104) Decrease in Cash and
Cash Equivalents (51,719) (33,873) Cash and cash equivalents at
beginning of year � 57,133� � 71,448� Cash and cash equivalents at
end of period $ 5,414� $ 37,575� CHEMED CORPORATION AND SUBSIDIARY
COMPANIES CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2006 AND 2005 (in thousands)(unaudited) VITAS
Roto-Rooter Corporate ChemedConsolidated �2006� Service revenues
and sales $ 174,795� $ 78,407� $ -� $ 253,202� Cost of services
provided and goods sold 144,410� 42,780� -� 187,190� Selling,
general and administrative expenses(a) 13,639� 22,376� 3,145�
39,160� Depreciation 2,217� 1,900� 83� 4,200� Amortization 1,050�
16� 355� 1,421� Other expenses - net(a) � 2,692� � -� � -� � 2,692�
Total costs and expenses � 164,008� � 67,072� � 3,583� � 234,663�
Income/(loss) from operations 10,787� 11,335� (3,583) 18,539�
Interest expense (87) 1� (3,995) (4,081) Intercompany interest
income/(expense) 1,397� 1,088� (2,485) -� Loss from impairment of
investment(a) -� -� (1,445) (1,445) Other income�net � 5� � 179� �
531� � 715� Income/(loss) before income taxes 12,102� 12,603�
(10,977) 13,728� Income taxes(a) � (4,304) � (4,094) � 4,857� �
(3,541) Income/(loss) from continuing operations 7,798� 8,509�
(6,120) 10,187� Discontinued operations � -� � -� � (2,226) �
(2,226) Net income/(loss) $ 7,798� $ 8,509� $ (8,346) $ 7,961� �
2005� Service revenues and sales $ 160,408� $ 72,920� $ -� $
233,328� Cost of services provided and goods sold 125,629� 39,600�
-� 165,229� Selling, general and administrative expenses(b) 13,837�
21,738� 2,848� 38,423� Depreciation 1,922� 2,091� 73� 4,086�
Amortization 984� 21� 243� 1,248� Other expenses - net(b) � -� � -�
� (130) � (130) Total costs and expenses � 142,372� � 63,450� �
3,034� � 208,856� Income/(loss) from operations 18,036� 9,470�
(3,034) 24,472� Interest expense (33) (129) (4,985) (5,147)
Intercompany interest income/(expense) 579� 565� (1,144) -� Other
income�net � 12� � 380� � 925� � 1,317� Income/(loss) before income
taxes 18,594� 10,286� (8,238) 20,642� Income taxes(b) � (6,931) �
(3,206) � 4,127� � (6,010) Net income/(loss) $ 11,663� $ 7,080� $
(4,111) $ 14,632� � The "Footnotes to Financial Statements" are
integral parts of this financial information. CHEMED CORPORATION
AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF INCOME FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (in
thousands)(unaudited) VITAS Roto-Rooter Corporate
ChemedConsolidated 2006� Service revenues and sales $ 515,411� $
233,812� $ -� $ 749,223� Cost of services provided and goods sold
418,387� 127,625� -� 546,012� Selling, general and administrative
expenses(a) 40,600� 67,150� 8,529� 116,279� Depreciation 6,412�
5,783� 270� 12,465� Amortization 3,218� 56� 960� 4,234� Other
expenses - net(a) � 2,692� � -� � -� � 2,692� Total costs and
expenses � 471,309� � 200,614� � 9,759� � 681,682� Income/(loss)
from operations 44,102� 33,198� (9,759) 67,541� Interest expense
(156) (281) (13,289) (13,726) Intercompany interest
income/(expense) 3,746� 2,889� (6,635) -� Loss from impairment of
investment(a) -� -� (1,445) (1,445) Loss on extinguishment of debt
-� -� (430) (430) Other income�net � 62� � 452� � 2,220� � 2,734�
Income/(loss) before income taxes 47,754� 36,258� (29,338) 54,674�
Income taxes(a) � (17,700) � (13,545) � 11,815� � (19,430)
Income/(loss) from continuing operations 30,054� 22,713� (17,523)
35,244� Discontinued operations � -� � -� � (2,226) � (2,226) Net
income/(loss) $ 30,054� $ 22,713� $ (19,749) $ 33,018� � 2005�
Service revenues and sales $ 460,146� $ 218,128� $ -� $ 678,274�
Cost of services provided and goods sold(b) 361,703� 117,598� -�
479,301� Selling, general and administrative expenses(b) 40,312�
63,892� 10,777� 114,981� Depreciation 5,477� 6,239� 218� 11,934�
Amortization 2,963� 70� 638� 3,671� Other expenses - net(b) � -� �
-� � (801) � (801) Total costs and expenses � 410,455� � 187,799� �
10,832� � 609,086� Income/(loss) from operations 49,691� 30,329�
(10,832) 69,188� Interest expense (104) (408) (15,509) (16,021)
Intercompany interest income/(expense) 1,769� 1,505� (3,274) -�
Loss on extinguishment of debt(b) -� -� (3,971) (3,971) Other
income�net � 134� � 822� � 1,688� � 2,644� Income/(loss) before
income taxes 51,490� 32,248� (31,898) 51,840� Income taxes(b) �
(19,614) � (11,983) � 13,405� � (18,192) Income/(loss) from
continuing operations 31,876� 20,265� (18,493) 33,648� Discontinued
operations � -� � -� � (2,015) � (2,015) Net income/(loss) $
31,876� $ 20,265� $ (20,508) $ 31,633� � The "Footnotes to
Financial Statements" are integral parts of this financial
information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2006 AND 2005 (in thousands)(unaudited) VITAS
Roto-Rooter Corporate ChemedConsolidated 2006� Net income/(loss) $
7,798� $ 8,509� $ (8,346) $ 7,961� Add/(deduct): Discontinued
operations -� -� 2,226� 2,226� Interest expense 87� (1) 3,995�
4,081� Income taxes 4,304� 4,094� (4,857) 3,541� Depreciation
2,217� 1,900� 83� 4,200� Amortization � 1,050� � 16� � 355� �
1,421� EBITDA 15,456� 14,518� (6,544) 23,430� Add/(deduct): EBITDA
of VITAS' Phoenix operation 2,306� -� -� 2,306� Asset impairment -
VITAS' Phoenix operation 2,419� -� -� 2,419� Loss from impairment
of investment -� -� 1,445� 1,445� Lawsuit settlement 273� -� -�
273� Legal expenses of OIG investigation 344� -� -� 344� Stock
option expense -� -� 597� 597� Advertising cost adjustment (c) -�
(491) -� (491) Interest income (24) (29) (373) (426) Intercompany
interest income/(expense) � (1,397) � (1,088) � 2,485� � -�
Adjusted EBITDA $ 19,377� $ 12,910� $ (2,390) $ 29,897� � 2005� Net
income/(loss) $ 11,663� $ 7,080� $ (4,111) $ 14,632� Add/(deduct):
Interest expense 33� 129� 4,985� 5,147� Income taxes 6,931� 3,206�
(4,127) 6,010� Depreciation 1,922� 2,091� 73� 4,086� Amortization �
984� � 21� � 243� � 1,248� EBITDA 21,533� 12,527� (2,937) 31,123�
Add/(deduct): EBITDA of VITAS' Phoenix operation (601) -� -� (601)
Legal expenses of OIG Investigation 310� -� -� 310� VITAS
transaction expense adjustment -� -� (130) (130) Advertising cost
adjustment (c) -� (340) -� (340) Interest income (33) (30) (469)
(532) Intercompany interest income/(expense) � (579) � (565) �
1,144� � -� Adjusted EBITDA $ 20,630� $ 11,592� $ (2,392) $ 29,830�
� The "Footnotes to Financial Statements" are integral parts of
this financial information. CHEMED CORPORATION AND SUBSIDIARY
COMPANIES CONSOLIDATING SUMMARY OF EBITDA FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2006 AND 2005 (in thousands)(unaudited) VITAS
Roto-Rooter Corporate ChemedConsolidated 2006� Net income/(loss) $
30,054� $ 22,713� $ (19,749) $ 33,018� Add/(deduct): Discontinued
operations -� -� 2,226� 2,226� Interest expense 156� 281� 13,289�
13,726� Income taxes 17,700� 13,545� (11,815) 19,430� Depreciation
6,412� 5,783� 270� 12,465� Amortization � 3,218� � 56� � 960� �
4,234� EBITDA 57,540� 42,378� (14,819) 85,099� Add/(deduct): EBITDA
of VITAS' Phoenix operation 3,001� -� -� 3,001� Asset impairment -
VITAS' Phoenix operation 2,419� -� -� 2,419� Loss from impairment
of investment -� -� 1,445� 1,445� Lawsuit settlement 273� -� -�
273� Legal expenses of OIG investigation 818� -� -� 818� Stock
option expense -� -� 615� 615� Advertising cost adjustment (c) -�
(1,072) -� (1,072) Interest income (100) (69) (1,808) (1,977)
Intercompany interest income/(expense) (3,746) (2,889) 6,635� -�
Loss on extinguishment of debt � -� � -� � 430� � 430� Adjusted
EBITDA $ 60,205� $ 38,348� $ (7,502) $ 91,051� � 2005� Net
income/(loss) $ 31,876� $ 20,265� $ (20,508) $ 31,633�
Add/(deduct): Discontinued operations -� -� 2,015� 2,015� Interest
expense 104� 408� 15,509� 16,021� Income taxes 19,614� 11,983�
(13,405) 18,192� Depreciation 5,477� 6,239� 218� 11,934�
Amortization � 2,963� � 70� � 638� � 3,671� EBITDA 60,034� 38,965�
(15,533) 83,466� Add/(deduct): EBITDA of VITAS' Phoenix operation
(2,545) -� -� (2,545) Long-term incentive compensation -� -� 2,946�
2,946� Stock option expense -� -� 215� 215� Prior-period insurance
adjustment -� (1,663) -� (1,663) Legal expenses of OIG
Investigation 564� -� -� 564� VITAS transaction expense adjustment
-� -� (801) (801) Advertising cost adjustment (c) -� (969) -� (969)
Interest income (192) (118) (1,134) (1,444) Intercompany interest
income/(expense) (1,769) (1,505) 3,274� -� Loss on extinguishment
of debt � -� � -� � 3,971� � 3,971� Adjusted EBITDA $ 56,092� $
34,710� $ (7,062) $ 83,740� � The "Footnotes to Financial
Statements" are integral parts of this financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES RECONCILIATION OF
ADJUSTED NET INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2006 AND 2005 (in thousands, except per share data)(unaudited)
� Three Months Ended Nine Months Ended September 30, September 30,
2006� 2005� 2006� 2005� Net income/(loss) as reported $ 7,961� $
14,632� $ 33,018� $ 31,633� � Add/(deduct): Discontinued operations
2,226� -� 2,226� 2,015� Net (income)/loss of VITAS' Phoenix
operation 1,333� (336) 1,864� (1,420) Asset impairment VITAS'
Phoenix Operation 1,355� -� 1,355� -� Loss on impairment of
investment 918� -� 918� -� Lawsuit settlement 169� -� 169� -�
Prior-period tax adjustments (1,791) (1,787) (1,791) (1,787)
Aftertax prior period insurance adjustment -� -� -� (1,014)
Aftertax cost of long-term incentive compensation -� -� -� 1,847�
Aftertax cost of legal expenses of OIG investigation 213� 192� 507�
352� Aftertax stock option expense 379� -� 391� 137� Aftertax VITAS
transaction expense adjustment -� (130) -� (801) Aftertax cost of
loss on extinguishment of debt � -� � -� � 273� � 2,523� � Adjusted
income from continuing operations $ 12,763� $ 12,571� $ 38,930� $
33,485� � � Earnings/(Loss) Per Share As Reported Net income/(loss)
$ 0.30� $ 0.57� $ 1.26� $ 1.24� Average number of shares
outstanding � 26,190� � 25,719� � 26,147� � 25,453� Diluted
Earnings/(Loss) Per Share As Reported Net income/(loss) $ 0.30� $
0.55� $ 1.23� $ 1.21� Average number of shares outstanding �
26,633� � 26,401� � 26,750� � 26,202� � � Adjusted Earnings Per
Share Income from continuing operations $ 0.49� $ 0.49� $ 1.49� $
1.32� Average number of shares outstanding � 26,190� � 25,719� �
26,147� � 25,453� Adjusted Diluted Earnings Per Share Income from
continuing operations $ 0.48� $ 0.48� $ 1.46� $ 1.28� Average
number of shares outstanding � 26,633� � 26,401� � 26,750� �
26,202� � The "Footnotes to Financial Statements" are integral
parts of this financial information. CHEMED CORPORATION AND
SUBSIDIARY COMPANIES OPERATING STATISTICS FOR VITAS SEGMENT FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited)
� Three Months Ended September 30, Nine Months Ended September 30,
2006� 2005� 2006� 2005� OPERATING STATISTICS Net revenue ($000) (d)
Homecare $ 128,268� $ 111,959� $ 366,888� $ 319,441� Inpatient
21,890� 21,321� 66,779� 63,300� Continuous care � 30,140� � 27,128�
� 89,587� � 77,405� Total before Medicare cap allowance 180,298�
160,408� 523,254� 460,146� Medicare cap allowance � (5,503) � -� �
(7,843) � -� Total $ 174,795� $ 160,408� $ 515,411� $ 460,146� Net
revenue as a percent of total before Medicare cap allowance
Homecare 71.2� % 69.8� % 70.1� % 69.4� % Inpatient 12.1� 13.3�
12.8� 13.8� Continuous care � 16.7� � 16.9� 17.1� � 16.8� Total
before Medicare cap allowance 100.0� 100.0� 100.0� 100.0� Medicare
cap allowance � (3.1) � -� � (1.5) � -� Total � 96.9� % � 100.0� %
� 98.5� % � 100.0� % Average daily census ("ADC") (days) Homecare
6,670� 5,972� 6,419� 5,719� Nursing home � 3,590� � 3,366� � 3,484�
� 3,276� Routine homecare 10,260� 9,338� 9,903� 8,995� Inpatient
401� 404� 413� 404� Continuous care � 552� � 517� � 553� � 502�
Total � 11,213� � 10,259� � 10,869� � 9,901� � Total Admissions
12,753� 12,375� 39,718� 37,969� Total Discharges 12,621� 12,025�
38,640� 36,766� Average length of stay (days) 71.0� 66.5� 70.5�
66.8� Median length of stay (days) 14.0� 13.0� 13.0� 12.0� ADC by
major diagnosis Neurological 33.6� % 32.1� % 33.4� % 32.0� % Cancer
20.1� 21.3� 20.1� 21.4� Cardio 14.7� 14.9� 14.9� 15.1� Respiratory
6.9� 7.1� 7.1� 7.1� Other � 24.7� � 24.6� � 24.5� � 24.4� Total �
100.0� % � 100.0� % � 100.0� % � 100.0� % Admissions by major
diagnosis Neurological 19.3� % 18.0� % 19.9� % 18.8� % Cancer 37.0�
38.3� 35.4� 36.6� Cardio 12.4� 12.4� 13.2� 13.5� Respiratory 6.7�
6.3� 7.2� 7.2� Other � 24.6� � 25.0� � 24.3� � 23.9� Total � 100.0�
% � 100.0� % � 100.0� % � 100.0� % Direct patient care margins(e)
Routine homecare 49.1� % 50.4� % 48.8� % 49.9� % Inpatient 16.5�
21.3� 20.2� 22.4� Continuous care 17.5� 18.1� 18.7� 18.4� Homecare
margin drivers (dollars per patient day) Labor costs $ 48.21� $
45.04� $ 49.15� $ 45.58� Drug costs 8.46� 7.66� 8.12� 7.71� Home
medical equipment 5.66� 5.45� 5.58� 5.48� Medical supplies 2.21�
2.23� 2.15� 2.18� Inpatient margin drivers (dollars per patient
day) Labor costs $ 269.72� $ 242.70� $ 257.82� $ 240.61� Continuous
care margin drivers (dollars per patient day) Labor costs $ 467.65�
$ 447.99� $ 461.89� $ 441.83� Bad debt expense as a percent of
revenues 0.9� % 0.9� % 0.9� % 0.9� % Accounts receivable -- days of
revenue outstanding 42.1� 42.1� N/A� N/A� � The "Footnotes to
Financial Statements" are integral parts of this financial
information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES FOOTNOTES
TO FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2006 AND 2005 (unaudited) � (a) �Included in the
results of operations for the three and nine months ended September
30, 2006 are the following significant credits/(charges) which may
not be indicative of ongoing operations (in thousands): � Three
Months Ended September 30, 2006 VITAS Roto-Rooter Corporate
Consolidated Selling, general and administrative expenses Costs
associated with OIG investigation $ (344) $ -� $ -� $ (344) Stock
option expense -� -� (597) (597) Other expenses - net Asset
impairment - VITAS' Phoenix operation (2,419) -� -� (2,419) Lawsuit
settlement (273) -� -� (273) Loss from impairment of investment �
-� � -� � (1,445) � (1,445) Pretax impact on earnings (3,036) -�
(2,042) (5,078) Income tax benefit on the above � 1,299� � 927� �
1,609� � 3,835� Aftertax impact on earnings $ (1,737) $ 927� $
(433) $ (1,243) � Nine Months Ended September 30, 2006 VITAS
Roto-Rooter Corporate Consolidated Selling, general and
administrative expenses Costs associated with OIG investigation $
(818) $ -� $ -� $ (818) Stock option expense -� -� (615) (615)
Other expenses - net Asset impairment - VITAS' Phoenix operation
(2,419) -� -� (2,419) Lawsuit settlement (273) -� -� (273) Loss
from impairment of investment -� -� (1,445) (1,445) Loss on
extinguishment of debt � -� � -� � (430) � (430) Pretax impact on
earnings (3,510) -� (2,490) (6,000) Income tax benefit on the above
� 1,479� � 927� � 1,772� � 4,178� Aftertax impact on earnings $
(2,031) $ 927� $ (718) $ (1,822) � (b) �Included in the results of
operations for the three and nine months ended September 30, 2005
are the following significant credits/(charges) which may not be
indicative of ongoing operations (in thousands): � Three Months
Ended September 30, 2005 VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses Costs associated with
OIG investigation $ (310) $ -� $ -� $ (310) Adjustments to
transaction-related costs of the VITAS acquisition � -� � -� � 130�
� 130� Pretax impact on earnings (310) -� 130� (180) Income tax
benefit on the above � 118� � 952� � 835� � 1,905� Aftertax impact
on earnings $ (192) $ 952� $ 965� $ 1,725� � Nine Months Ended
September 30, 2005 VITAS Roto-Rooter Corporate Consolidated Cost of
services provided and goods sold Favorable adjustment to casualty
insurance accruals related to prior years' experience $ -� $ 1,663�
$ -� $ 1,663� Selling, general and administrative expenses
Long-term incentive compensation -� -� (2,946) (2,946) Costs
associated with OIG investigation (564) -� -� (564) Stock option
expense -� -� (215) (215) Adjustments to transaction-related costs
of the VITAS acquisition -� -� 801� 801� Loss on extinguishment of
debt � -� � -� � (3,971) � (3,971) Pretax impact on earnings (564)
1,663� (6,331) (5,232) Income tax benefit on the above � 212� �
303� � 3,460� � 3,975� Aftertax impact on earnings $ (352) $ 1,966�
$ (2,871) $ (1,257) � (c) �Under Generally Accepted Accounting
Principles ("GAAP"), the Roto-Rooter segment expenses all
advertising, including the cost of telephone directories,
immediately upon the initial release of the advertising. Telephone
directories are generally in circulation 12 months. If a directory
is in circulation for a time period greater or less than 12 months,
the publisher adjusts the directory billing for the change in
billing period. The timing of when a telephone directory is
published can and does fluctuate significantly on a quarterly
basis. This "direct expensing" results in significant fluctuations
in quarterly advertising expense. In the third quarters of 2006 and
2005, GAAP advertising expense for Roto-Rooter totaled $4,646,000
and $4,362,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the third quarters of 2006 and 2005 would
total $5,137,000 and $4,702,000, respectively. For the nine months
ended September 30, 2006 and 2005, GAAP advertising expense for
Roto-Rooter totaled $13,984,000 and $12,685,000, 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 2006 and 2005 would total $15,056,000 and
$13,654,000, respectively. � (d) �VITAS has 6 large (greater than
450 ADC), 15 medium (greater than 200 but less than 450 ADC) and 21
small (less than 200 ADC) hospice programs. There are three
programs with estimated Medicare Cap billing limitations for the
2006 measurement period. There is one other program with Medicare
Cap cushion of less than 10% for the 2006 measurement period. No
other programs have an estimated Medicare Cap cushion of less than
10% for the 2006 measurement period � (e) �Amounts exclude indirect
patient care and administrative costs, as well as Medicare Cap
billing limitation. 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, 2006, versus the comparable prior-year period,
as follows: Consolidated operating results from Continuing
Operations: -- Revenue increased 8.5% to $253 million -- Diluted
EPS from Continuing Operations of $.38 -- Adjusted diluted EPS from
Continuing Operations, excluding certain items, of $.48 VITAS
segment operating results: -- Net Patient Revenue of $175 million,
up 9.0%, including $5.5 million of Medicare Cap accrual -- Average
Daily Census (ADC) of 11,213, up 9.3% -- Admissions of 12,753, an
increase of 3.1% -- Average Length of Stay in the quarter was 71.0
days -- Net income of $7.8 million, a decline of 33.1% -- Adjusted
EBITDA of $19.4 million, a decline of 6.1% Roto-Rooter segment
operating results: -- Revenue of $78 million, an increase of 7.5%
-- Job count of 198,394, up 0.4% -- Net Income of $8.5 million, up
20.2% -- Adjusted EBITDA of $12.9 million, an increase of 11.4% In
the third quarter of 2006, VITAS recorded a Medicare contractual
billing adjustment (Medicare Cap). This accrual reduced revenues by
$5.5 million and negatively impacted diluted EPS in the quarter by
$0.13 per share. Medicare Cap is currently impacting three hospice
programs in the third quarter of 2006. The Phoenix program,
acquired in December 2004, recorded an estimated Medicare Cap
billing limitation of $2.9 million. The remaining two programs
recorded $1.6 million of Medicare Cap in the third quarter of 2006.
The third-quarter 2006 Medicare Cap accrual includes an additional
$1.0 million for estimated prior-year billing limitations resulting
from the Fiscal Intermediary reallocating admissions for deceased
Medicare patients who received hospice care from multiple
providers. Of this prior-year billing, $0.5 million is for one of
the programs noted above and $0.5 million is estimated for a
program not anticipated to have a billing restriction in calendar
year 2006. VITAS is in the process of exiting the hospice market in
Phoenix, Arizona. VITAS has been successful in growing admissions
of terminally ill patients who reside primarily in assisted living
settings within the Phoenix community. Patients residing in these
types of facilities tend to exit curative care and enter into
hospice early on into their terminal illness diagnosis. The current
Medicare hospice reimbursement program limits payment for hospice
care when a significant portion of the patient census enters into
hospice in the early stage of their terminal diagnosis. Although
VITAS, on average, has relatively short average and median lengths
of stay in the majority of its programs, each program is measured
separately and cannot be considered in the aggregate of its hospice
programs under common control and ownership. The Phoenix program
had an average daily census of approximately 200 patients in the
third quarter of 2006. Revenue and operating losses for Phoenix in
the third quarter of 2006 were a negative $0.5 million and $4.8
million, respectively. Included in this operating loss is a $2.4
million charge for asset impairment. On a year-to-date basis,
revenue and operating losses aggregated $2.5 million and $5.8
million, respectively, including $4.6 million of revenue reduction
for Medicare billing limitations and $2.4 million for asset
impairment. Historically, VITAS' operating model has been able to
avoid any Medicare billing limitations. This had been achieved by
admitting a significant number of high acuity patients, those
patients in the later stage of their terminal illness. High acuity
intakes are reflected in VITAS' overall median length of stay
(MLOS), which is typically 14 days or less. MLOS means that half of
all patients admitted to VITAS are discharged in 14 days or less of
entering the program. This compares to the National Hospice and
Palliative Care Organization's (NHPCO) industry MLOS estimate of 22
days. Typically, VITAS hospice programs with the lowest MLOS also
have the highest percentage of cap cushion. VITAS defines cap
cushion as the difference between the maximum Medicare billing
potential based upon total first-time Medicare hospice admissions
and the actual Medicare billings in a program. In most of VITAS'
base programs, the MLOS, average daily census, admissions and
discharges are relatively stable and predictable quarter to
quarter. However, programs experiencing exceptionally strong growth
rates are inherently more volatile and will have significant
fluctuations in these metrics. This volatility increases the
potential for a sudden shift in metrics in any given quarter. A
severe decline in admissions and/or discharges could result in the
program having a less optimal patient mix and potentially having
Medicare billing limitations. To the extent the program has a
predictable level of high acuity patient admissions, the program's
patient mix has a high probability of being rebalanced and
continuing to contractually bill Medicare for 100% of services
provided. From a business model perspective, hospice programs that
are slightly above or below the Medicare Cap are essentially
maximizing revenue, profitability and operating margin for that
program. Given the industry trend to longer lengths of stay, it is
highly probable that VITAS' hospice programs will continue to
expand Medicare billings on a per patient basis. As this trend of
revenue growth continues, certain hospice programs have increased
potential of being in a Medicare contractual billing limitation
situation. The Company believes its relatively low MLOS in the
majority of its hospice programs provides a competitive advantage
to minimize the financial impact of Medicare Cap as well as limit
the duration of time the program remains in a Medicare Cap
situation. VITAS VITAS generated net revenue growth of 9.0% over
the prior-year period. Net income for the quarter was $7.8 million.
Medicare cap accruals negatively impacted revenue by $5.5 million
and reduced net income by $3.5 million. ADC increased 9.3% to
11,213 and admissions increased 3.1% to 12,753. Admissions for
VITAS have been abnormally low in the second and third quarters of
2006. This has resulted in a slowing of overall ADC growth over the
past six months. The lower than anticipated ADC growth negatively
impacted gross margins in the quarter. Routine home care direct
gross margins, before the reduction in revenue from contractual
billing limitations, were 49.1%, a decline of 130 basis points over
the prior year. Continuous care direct gross margins were 17.5%, a
decline of 60 basis points when compared to the prior year and
inpatient direct care margins were 16.5% in the quarter, which are
480 basis points below the prior-year period. These margin declines
are primarily the result of increased manpower and labor capacity
relative to ADC. Given the inherent difficulty in hiring and
retaining qualified healthcare professionals, management continued
to build manpower in anticipation of an increase in admissions and
overall census in the majority of its programs in the fourth
quarter of 2006. Central support costs for VITAS, which are
classified as selling, general and administrative expenses in the
Consolidating Statement of Income, totaled $13.6 million, including
$0.3 million in OIG investigation legal expenses. Excluding the OIG
expense, central support costs decreased 172 basis points when
compared to the prior-year quarter and decreased 66 basis points
sequentially. VITAS' average length of stay (ALOS) for patients
discharged in the quarter was 71.0 days and median length of stay
was 14 days. This compares to an ALOS of 68.0 days in the second
quarter of 2006 and 66.5 days in the third quarter of 2005.
Roto-Rooter Roto-Rooter's plumbing and drain cleaning business
generated sales of $78 million for the third quarter of 2006, 7.5%
higher than the $73 million reported in the comparable prior-year
quarter. Net income for the quarter was $8.5 million, an increase
of 20.2% over the prior year. Adjusted EBITDA in the third quarter
of 2006 totaled $12.9 million, an increase of 11.4% over the third
quarter of 2005 and an adjusted EBITDA margin of 16.5%, an increase
of 57 basis points over the prior-year period. Job count in the
third quarter of 2006 decreased 0.4% over the prior-year period.
Commercial plumbing job count decreased 2.7% and commercial drain
cleaning decreased 2.6% over the prior-year quarter. Residential
plumbing jobs increased 0.7% and residential drain cleaning jobs
expanded 0.7% when compared to the third quarter of 2005. Overall,
commercial jobs decreased 2.6% and residential jobs increased 0.7%.
Year to date, commercial jobs increased 1.3% and residential jobs
increased 0.5%. Guidance for 2006 VITAS is estimated to generate
full-year revenue growth from continuing operations, prior to
Medicare Cap, of 14.0% to 14.5%, increased admissions of 5.0% to
5.5%, increased ADC of 10.0% to 11.0% and adjusted EBITDA margins,
prior to Medicare Cap, of 12.9% to 13.2%. This guidance assumes a
Medicare price increase that will average 3.8% in the fourth
quarter of 2006. Full-year Medicare contractual billing
limitations, excluding Phoenix, which is anticipated to be
classified as a discontinued operation in the fourth quarter of
2006, are estimated to range from $5.7 million to $8.6 million,
which equates to revenue reduction of 80 to 120 basis points.
Roto-Rooter is estimated to generate a 6.0% to 7.0% increase in
revenue in 2006, job count growth between 0.5% and 1.0% and
adjusted EBITDA margins averaging between 16.5% and 17.0%. Based
upon these factors, an effective tax rate of 39% and average
diluted share count of 26.7 million in the second half of 2006, our
expectation is that full-year 2006 earnings per diluted share from
continuing operations, excluding any charges or credits not
indicative of ongoing operations, and excluding expense for stock
options, will be in the range of $2.00 to $2.10. This earnings per
share guidance includes $.13 to $.20 for the after-tax impact of
Medicare Cap related to continuing operations. Conference Call
Chemed will host a conference call and webcast at 11 a.m., ET, on
Friday, October 27, 2006, to discuss the company's quarterly
results and provide an update on its business. The dial-in number
for the conference call is (866) 314-4865 for U.S. and Canadian
participants and (617) 213-8050 for international participants. The
participant passcode is 37819056. A live webcast of the call can be
accessed on Chemed's website at www.chemed.com by clicking on
Investor Relations Home. A taped replay of the conference call will
be available beginning approximately two hours after the call's
conclusion. It can be accessed by dialing (888) 286-8010 for U.S.
and Canadian callers and (617) 801-6888 for international callers
and will be available for one week following the live call. The
replay passcode is 21945810. An archived webcast will also be
available at www.chemed.com and will remain available for 14 days
following the live call. Chemed Corporation operates in the
healthcare field through its VITAS Healthcare Corporation
subsidiary. VITAS provides daily hospice services to over 11,000
patients with severe, life-limiting illnesses. This type of care is
focused on making the terminally ill patient's final days as
comfortable and pain-free as possible. Chemed operates in the
residential and commercial plumbing and drain cleaning industry
under the brand name Roto-Rooter. Roto-Rooter provides plumbing and
drain service through company-owned branches, independent
contractors and franchisees in the United States and Canada.
Roto-Rooter also has licensed master franchisees in Indonesia,
Singapore, Japan, Mexico and the Philippines. This press release
contains information about Chemed's EBITDA and Adjusted EBITDA,
which are not measures derived in accordance with generally
accepted accounting principles and which exclude components that
are important to understanding Chemed's financial performance.
Chemed provides EBITDA and Adjusted EBITDA to help investors and
others evaluate its operating results, compare its operating
performance with that of similar companies that have different
capital structures and evaluate its ability to meet its future debt
service, capital expenditures and working capital requirements.
Chemed's EBITDA and Adjusted EBITDA should not be considered in
isolation or as a substitute for comparable measures calculated and
presented in accordance with GAAP. A reconciliation of Chemed's net
income to its Adjusted EBITDA is presented in the tables following
the text of this press release. Forward-Looking Statements Certain
statements contained in this press release and the accompanying
tables are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The words
"believe," "expect," "hope," "anticipate," "plan" and similar
expressions identify forward-looking statements, which speak only
as of the date the statement was made. Chemed does not undertake
and specifically disclaims any obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. These statements are based
on current expectations and assumptions and involve various risks
and uncertainties, which could cause Chemed's actual results to
differ from those expressed in such forward-looking statements.
These risks and uncertainties arise from, among other things,
possible changes in regulations governing the hospice care or
plumbing and drain cleaning industries; periodic changes in
reimbursement levels and procedures under Medicare and Medicaid
programs; difficulties predicting patient length of stay and
estimating potential Medicare reimbursement obligations; challenges
inherent in Chemed's growth strategy; the current shortage of
qualified nurses, other healthcare professionals and licensed
plumbing and drain cleaning technicians; Chemed's dependence on
patient referral sources; and other factors detailed under the
caption "Description of Business by Segment" or "Risk Factors" in
Chemed's most recent report on form 10-Q or 10-K and its other
filings with the Securities and Exchange Commission. You are
cautioned not to place undue reliance on such forward-looking
statements and there are no assurances that the matters contained
in such statements will be achieved. -0- *T CHEMED CORPORATION AND
SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (in
thousands, except per share data)(unaudited) Three Months Ended
Nine Months Ended September 30, September 30, --------------------
------------------- 2006 2005 2006 2005 ---------- ---------
--------- --------- Continuing Operations (aa) Service revenues and
sales $253,202 $233,328 $749,223 $678,274 ---------- ---------
--------- --------- Cost of services provided and goods sold (bb)
187,190 165,229 546,012 479,301 Selling, general and administrative
expenses (bb) 39,160 38,423 116,279 114,981 Depreciation 4,200
4,086 12,465 11,934 Amortization 1,421 1,248 4,234 3,671 Other
expenses -- net (bb) 2,692 (130) 2,692 (801) ---------- ---------
--------- --------- Total costs and expenses 234,663 208,856
681,682 609,086 ---------- --------- --------- --------- Income
from operations 18,539 24,472 67,541 69,188 Interest expense
(4,081) (5,147) (13,726) (16,021) Loss from impairment of
investment (1,445) - (1,445) - Loss on extinguishment of debt - -
(430) (3,971) Other income--net 715 1,317 2,734 2,644 ----------
--------- --------- --------- Income before income taxes 13,728
20,642 54,674 51,840 Income taxes (3,541) (6,010) (19,430) (18,192)
---------- --------- --------- --------- Income from continuing
operations 10,187 14,632 35,244 33,648 Discontinued Operations (cc)
(2,226) - (2,226) (2,015) ---------- --------- --------- ---------
Net Income $ 7,961 $ 14,632 $ 33,018 $ 31,633 ========== =========
========= ========= Earnings Per Share Income from continuing
operations $ 0.39 $ 0.57 $ 1.35 $ 1.32 ========== =========
========= ========= Net income $ 0.30 $ 0.57 $ 1.26 $ 1.24
========== ========= ========= ========= Average number of shares
outstanding 26,190 25,719 26,147 25,453 ========== =========
========= ========= Diluted Earnings Per Share Income from
continuing operations $ 0.38 $ 0.55 $ 1.32 $ 1.28 ==========
========= ========= ========= Net income $ 0.30 $ 0.55 $ 1.23 $
1.21 ========== ========= ========= ========= Average number of
shares outstanding 26,633 26,401 26,750 26,202 ========== =========
========= ========= -------------------------------- (aa) Amounts
include the operating results of the VITAS Phoenix business, which
will be sold or closed in the next several months (in thousands):
Three Months Ended Nine Months Ended September 30, September 30,
-------------------- ------------------- 2006 2005 2006 2005
---------- --------- --------- --------- Service revenues $ (493) $
2,436 $ 2,539 $ 8,043 Income/(loss) before income taxes (2,401) 592
(3,348) 2,530 Income/(loss) from continuing operations (1,333) 336
(1,864) 1,420 Service revenues include Medicare cap reductions of
$2,891,000 and $4,632,000, respectively, for the three- and
nine-month periods ended September 30, 2006. The above
income/(loss) amounts exclude the asset impairment charges related
to VITAS Phoenix, shown in note (bb), below. (bb) Amounts include
the following significant credits/(charges) which may not be
indicative of ongoing operations (in thousands): Three Months Ended
Nine Months Ended September 30, September 30, --------------------
------------------- 2006 2005 2006 2005 ---------- ---------
--------- --------- Cost of services provided and goods sold
Favorable adjustment to casualty insurance accruals related to
prior years' experience $ - $ - $ - $ 1,663 Selling, general and
administrative expenses Stock option expense (597) - (615) (215)
Costs associated with OIG investigation (344) (310) (818) (564)
Long-term incentive compensation - - - (2,946) Other expenses --
net Asset impairment charges related to selling or closing VITAS'
Phoenix operation (2,419) - (2,419) - Costs related to class action
litigation (273) - (273) - Adjustments to transaction-related costs
of the VITAS acquisition - 130 - 801 Loss from impairment of
investment (1,445) - (1,445) - Loss on extinguishment of debt - -
(430) (3,971) ---------- --------- --------- --------- Pretax
impact on earnings (5,078) (180) (6,000) (5,232) Income tax
benefit/(charge) on the above 2,044 118 2,387 2,188 Income tax
benefit from finalizing prior years' returns 1,791 1,787 1,791
1,787 ---------- --------- --------- --------- Aftertax impact on
earnings $ (1,243) $ 1,725 $ (1,822) $ (1,257) ========== =========
========= ========= (cc) Discontinued operations for 2006 included
accrual adjustments for expenses related to the sale of Patient
Care in 2002 ($1,466,000) and DuBois Chemicals in 1991 ($760,000).
For 2005, discontinued operations represent the results of
operations and loss on disposal of Service America. *T -0- *T
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE
SHEET (in thousands, except per share data)(unaudited) September
30, ------------------- 2006 2005 (cc) --------- --------- Assets
Current assets Cash and cash equivalents $ 5,414 $ 37,575 Accounts
receivable less allowances 104,240 84,472 Inventories 6,381 7,252
Current deferred income taxes 25,461 21,486 Prepaid income taxes
5,642 8,112 Current assets of discontinued operations - 3,112
Prepaid expenses and other current assets 5,844 7,186 ---------
--------- Total current assets 152,982 169,195 Investments of
deferred compensation plans held in trust 24,278 21,072 Other
investments - 1,445 Note receivable 12,500 12,500 Properties and
equipment, at cost less accumulated depreciation 68,616 62,687
Identifiable intangible assets less accumulated amortization 69,880
73,892 Goodwill 434,066 434,559 Noncurrent assets of discontinued
operations - 287 Other assets 19,459 22,111 --------- ---------
Total Assets $781,781 $797,748 ========= ========= Liabilities
Current liabilities Accounts payable $ 45,745 $ 45,401 Current
portion of long-term debt 207 1,123 Income taxes 4,903 5,830
Accrued insurance 41,368 28,634 Accrued compensation 32,429 28,988
Current liabilities of discontinued operations - 6,301 Other
current liabilities 27,460 24,270 --------- --------- Total current
liabilities 152,112 140,547 Deferred income taxes 20,570 18,880
Long-term debt 165,796 234,327 Deferred compensation liabilities
23,932 20,991 Noncurrent liabilities of discontinued operations -
411 Other liabilities 3,929 7,044 --------- --------- Total
Liabilities 366,339 422,200 --------- --------- Stockholders'
Equity Capital stock 28,810 28,021 Paid-in capital 250,373 223,114
Retained earnings 199,467 168,564 Treasury stock, at cost (65,555)
(45,757) Unearned compensation - (202) Deferred compensation
payable in Company stock 2,402 2,354 Notes receivable for shares
sold (55) (546) --------- --------- Total Stockholders' Equity
415,442 375,548 --------- --------- Total Liabilities and
Stockholders' Equity $781,781 $797,748 ========= ========= Book
Value Per Share $ 15.89 $ 14.58 ========= =========
--------------------------------------------------- (cc)
Reclassified to conform to 2006 presentation. *T -0- *T CHEMED
CORPORATION AND SUBSIDIARY COMPANIES UNAUDITED CONSOLIDATED
STATEMENT OF CASH FLOWS (in thousands) Nine Months Ended September
30, -------------------- 2006 2005 --------- ---------- Cash Flows
from Operating Activities Net income $ 33,018 $ 31,633 Adjustments
to reconcile net income to net cash provided by operating
activities: Depreciation and amortization 16,699 15,605 Provision
for uncollectible accounts receivable 6,003 5,352 Losses on asset
impairments 3,864 - Discontinued operations 2,226 2,015
Amortization of debt issuance costs 1,325 1,395 Provision for
deferred income taxes (1,233) (1,176) Write off unamortized debt
issuance costs 430 2,871 Noncash long-term incentive compensation -
2,574 Changes in operating assets and liabilities, excluding
amounts acquired in business combinations: Increase in accounts
receivable (17,545) (25,264) Decrease/(increase) in inventories 118
(233) Decrease in prepaid expenses and other current assets 2,673
2,656 Decrease in accounts payable and other current liabilities
(16,147) (3,584) Increase in income taxes 10,636 11,827 Increase in
other assets (248) (2,876) Increase in other liabilities 2,403
1,464 Excess tax benefit on share-based compensation (4,943) -
Noncash expense of internally financed ESOP - 858 Other sources
1,374 479 --------- ---------- Net cash provided by continuing
operations 40,653 45,596 Net cash used by discontinued operations -
(1,559) --------- ---------- Net cash provided by operating
activities 40,653 44,037 --------- ---------- Cash Flows from
Investing Activities Capital expenditures (16,207) (18,874) Net
uses from disposals of discontinued operations (3,360) (7,145)
Business combinations, net of cash acquired (1,489) (5,680)
Proceeds from sales of property and equipment 287 125 Other uses
(553) (232) --------- ---------- Net cash used by investing
activities (21,322) (31,806) --------- ---------- Cash Flows from
Financing Activities Repayment of long-term debt (84,500) (141,245)
Net increase in revolving line of credit 15,400 - Purchases of
treasury stock (8,253) (4,390) Excess tax benefit on share-based
compensation 4,943 - Dividends paid (4,739) (4,611) Issuance of
capital stock, net of issuance costs 3,854 10,009 Increase in cash
overdraft payable 2,145 10,684 Debt issuance costs (154) (1,755)
Proceeds from issuance of long-term debt - 85,000 Other sources 254
204 --------- ---------- Net cash used by financing activities
(71,050) (46,104) --------- ---------- Decrease in Cash and Cash
Equivalents (51,719) (33,873) Cash and cash equivalents at
beginning of year 57,133 71,448 --------- ---------- Cash and cash
equivalents at end of period $ 5,414 $ 37,575 ========= ==========
*T -0- *T CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
AND 2005 (in thousands)(unaudited) Chemed VITAS Roto-Rooter
Corporate Consolidated --------- ------------ ----------
-------------- 2006 --------------------- Service revenues and
sales $174,795 $ 78,407 $ - $ 253,202 --------- ------------
---------- -------------- Cost of services provided and goods sold
144,410 42,780 - 187,190 Selling, general and administrative
expenses(a) 13,639 22,376 3,145 39,160 Depreciation 2,217 1,900 83
4,200 Amortization 1,050 16 355 1,421 Other expenses - net(a) 2,692
- - 2,692 --------- ------------ ---------- -------------- Total
costs and expenses 164,008 67,072 3,583 234,663 ---------
------------ ---------- -------------- Income/(loss) from
operations 10,787 11,335 (3,583) 18,539 Interest expense (87) 1
(3,995) (4,081) Intercompany interest income/(expense) 1,397 1,088
(2,485) - Loss from impairment of investment(a) - - (1,445) (1,445)
Other income--net 5 179 531 715 --------- ------------ ----------
-------------- Income/(loss) before income taxes 12,102 12,603
(10,977) 13,728 Income taxes(a) (4,304) (4,094) 4,857 (3,541)
--------- ------------ ---------- -------------- Income/(loss) from
continuing operations 7,798 8,509 (6,120) 10,187 Discontinued
operations - - (2,226) (2,226) --------- ------------ ----------
-------------- Net income/(loss) $ 7,798 $ 8,509 $ (8,346) $ 7,961
========= ============ ========== ============== 2005
--------------------- Service revenues and sales $160,408 $ 72,920
$ - $ 233,328 --------- ------------ ---------- -------------- Cost
of services provided and goods sold 125,629 39,600 - 165,229
Selling, general and administrative expenses(b) 13,837 21,738 2,848
38,423 Depreciation 1,922 2,091 73 4,086 Amortization 984 21 243
1,248 Other expenses - net(b) - - (130) (130) ---------
------------ ---------- -------------- Total costs and expenses
142,372 63,450 3,034 208,856 --------- ------------ ----------
-------------- Income/(loss) from operations 18,036 9,470 (3,034)
24,472 Interest expense (33) (129) (4,985) (5,147) Intercompany
interest income/(expense) 579 565 (1,144) - Other income--net 12
380 925 1,317 --------- ------------ ---------- --------------
Income/(loss) before income taxes 18,594 10,286 (8,238) 20,642
Income taxes(b) (6,931) (3,206) 4,127 (6,010) ---------
------------ ---------- -------------- Net income/(loss) $ 11,663 $
7,080 $ (4,111) $ 14,632 ========= ============ ==========
============== The "Footnotes to Financial Statements" are integral
parts of this financial information. *T -0- *T CHEMED CORPORATION
AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF INCOME FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (in
thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate
Consolidated --------- ------------ ---------- -------------- 2006
--------------------- Service revenues and sales $515,411 $ 233,812
$ - $ 749,223 --------- ------------ ---------- -------------- Cost
of services provided and goods sold 418,387 127,625 - 546,012
Selling, general and administrative expenses(a) 40,600 67,150 8,529
116,279 Depreciation 6,412 5,783 270 12,465 Amortization 3,218 56
960 4,234 Other expenses - net(a) 2,692 - - 2,692 ---------
------------ ---------- -------------- Total costs and expenses
471,309 200,614 9,759 681,682 --------- ------------ ----------
-------------- Income/(loss) from operations 44,102 33,198 (9,759)
67,541 Interest expense (156) (281) (13,289) (13,726) Intercompany
interest income/(expense) 3,746 2,889 (6,635) - Loss from
impairment of investment(a) - - (1,445) (1,445) Loss on
extinguishment of debt - - (430) (430) Other income--net 62 452
2,220 2,734 --------- ------------ ---------- --------------
Income/(loss) before income taxes 47,754 36,258 (29,338) 54,674
Income taxes(a) (17,700) (13,545) 11,815 (19,430) ---------
------------ ---------- -------------- Income/(loss) from
continuing operations 30,054 22,713 (17,523) 35,244 Discontinued
operations - - (2,226) (2,226) --------- ------------ ----------
-------------- Net income/(loss) $ 30,054 $ 22,713 $ (19,749) $
33,018 ========= ============ ========== ============== 2005
--------------------- Service revenues and sales $460,146 $ 218,128
$ - $ 678,274 --------- ------------ ---------- -------------- Cost
of services provided and goods sold(b) 361,703 117,598 - 479,301
Selling, general and administrative expenses(b) 40,312 63,892
10,777 114,981 Depreciation 5,477 6,239 218 11,934 Amortization
2,963 70 638 3,671 Other expenses - net(b) - - (801) (801)
--------- ------------ ---------- -------------- Total costs and
expenses 410,455 187,799 10,832 609,086 --------- ------------
---------- -------------- Income/(loss) from operations 49,691
30,329 (10,832) 69,188 Interest expense (104) (408) (15,509)
(16,021) Intercompany interest income/(expense) 1,769 1,505 (3,274)
- Loss on extinguishment of debt(b) - - (3,971) (3,971) Other
income--net 134 822 1,688 2,644 --------- ------------ ----------
-------------- Income/(loss) before income taxes 51,490 32,248
(31,898) 51,840 Income taxes(b) (19,614) (11,983) 13,405 (18,192)
--------- ------------ ---------- -------------- Income/(loss) from
continuing operations 31,876 20,265 (18,493) 33,648 Discontinued
operations - - (2,015) (2,015) --------- ------------ ----------
-------------- Net income/(loss) $ 31,876 $ 20,265 $ (20,508) $
31,633 ========= ============ ========== ============== The
"Footnotes to Financial Statements" are integral parts of this
financial information. *T -0- *T CHEMED CORPORATION AND SUBSIDIARY
COMPANIES CONSOLIDATING SUMMARY OF EBITDA FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2006 AND 2005 (in thousands)(unaudited) Chemed
VITAS Roto-Rooter Corporate Consolidated -------- ------------
---------- -------------- 2006 ----------------------- Net
income/(loss) $ 7,798 $ 8,509 $ (8,346) $ 7,961 Add/(deduct):
Discontinued operations - - 2,226 2,226 Interest expense 87 (1)
3,995 4,081 Income taxes 4,304 4,094 (4,857) 3,541 Depreciation
2,217 1,900 83 4,200 Amortization 1,050 16 355 1,421 --------
------------ ---------- -------------- EBITDA 15,456 14,518 (6,544)
23,430 Add/(deduct): EBITDA of VITAS' Phoenix operation 2,306 - -
2,306 Asset impairment - VITAS' Phoenix operation 2,419 - - 2,419
Loss from impairment of investment - - 1,445 1,445 Lawsuit
settlement 273 - - 273 Legal expenses of OIG investigation 344 - -
344 Stock option expense - - 597 597 Advertising cost adjustment
(c) - (491) - (491) Interest income (24) (29) (373) (426)
Intercompany interest income/(expense) (1,397) (1,088) 2,485 -
-------- ------------ ---------- -------------- Adjusted EBITDA
$19,377 $ 12,910 $ (2,390) $ 29,897 ======== ============
========== ============== 2005 ----------------------- Net
income/(loss) $11,663 $ 7,080 $ (4,111) $ 14,632 Add/(deduct):
Interest expense 33 129 4,985 5,147 Income taxes 6,931 3,206
(4,127) 6,010 Depreciation 1,922 2,091 73 4,086 Amortization 984 21
243 1,248 -------- ------------ ---------- -------------- EBITDA
21,533 12,527 (2,937) 31,123 Add/(deduct): EBITDA of VITAS' Phoenix
operation (601) - - (601) Legal expenses of OIG Investigation 310 -
- 310 VITAS transaction expense adjustment - - (130) (130)
Advertising cost adjustment (c) - (340) - (340) Interest income
(33) (30) (469) (532) Intercompany interest income/(expense) (579)
(565) 1,144 - -------- ------------ ---------- --------------
Adjusted EBITDA $20,630 $ 11,592 $ (2,392) $ 29,830 ========
============ ========== ============== The "Footnotes to Financial
Statements" are integral parts of this financial information. *T
-0- *T CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING
SUMMARY OF EBITDA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND
2005 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate
Consolidated -------- ------------ ---------- ------------- 2006
------------------------ Net income/(loss) $30,054 $ 22,713 $
(19,749) $ 33,018 Add/(deduct): Discontinued operations - - 2,226
2,226 Interest expense 156 281 13,289 13,726 Income taxes 17,700
13,545 (11,815) 19,430 Depreciation 6,412 5,783 270 12,465
Amortization 3,218 56 960 4,234 -------- ------------ ----------
------------- EBITDA 57,540 42,378 (14,819) 85,099 Add/(deduct):
EBITDA of VITAS' Phoenix operation 3,001 - - 3,001 Asset impairment
- VITAS' Phoenix operation 2,419 - - 2,419 Loss from impairment of
investment - - 1,445 1,445 Lawsuit settlement 273 - - 273 Legal
expenses of OIG investigation 818 - - 818 Stock option expense - -
615 615 Advertising cost adjustment (c) - (1,072) - (1,072)
Interest income (100) (69) (1,808) (1,977) Intercompany interest
income/(expense) (3,746) (2,889) 6,635 - Loss on extinguishment of
debt - - 430 430 -------- ------------ ---------- -------------
Adjusted EBITDA $60,205 $ 38,348 $ (7,502) $ 91,051 ========
============ ========== ============= 2005 ------------------------
Net income/(loss) $31,876 $ 20,265 $ (20,508) $ 31,633
Add/(deduct): Discontinued operations - - 2,015 2,015 Interest
expense 104 408 15,509 16,021 Income taxes 19,614 11,983 (13,405)
18,192 Depreciation 5,477 6,239 218 11,934 Amortization 2,963 70
638 3,671 -------- ------------ ---------- ------------- EBITDA
60,034 38,965 (15,533) 83,466 Add/(deduct): EBITDA of VITAS'
Phoenix operation (2,545) - - (2,545) Long-term incentive
compensation - - 2,946 2,946 Stock option expense - - 215 215
Prior-period insurance adjustment - (1,663) - (1,663) Legal
expenses of OIG Investigation 564 - - 564 VITAS transaction expense
adjustment - - (801) (801) Advertising cost adjustment (c) - (969)
- (969) Interest income (192) (118) (1,134) (1,444) Intercompany
interest income/(expense) (1,769) (1,505) 3,274 - Loss on
extinguishment of debt - - 3,971 3,971 -------- ------------
---------- ------------- Adjusted EBITDA $56,092 $ 34,710 $ (7,062)
$ 83,740 ======== ============ ========== ============= The
"Footnotes to Financial Statements" are integral parts of this
financial information. *T -0- *T CHEMED CORPORATION AND SUBSIDIARY
COMPANIES RECONCILIATION OF ADJUSTED NET INCOME FOR THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (in thousands, except
per share data)(unaudited) Three Months Ended Nine Months Ended
September 30, September 30, ------------------ -----------------
2006 2005 2006 2005 --------- -------- -------- -------- Net
income/(loss) as reported $ 7,961 $14,632 $33,018 $31,633
Add/(deduct): Discontinued operations 2,226 - 2,226 2,015 Net
(income)/loss of VITAS' Phoenix operation 1,333 (336) 1,864 (1,420)
Asset impairment VITAS' Phoenix Operation 1,355 - 1,355 - Loss on
impairment of investment 918 - 918 - Lawsuit settlement 169 - 169 -
Prior-period tax adjustments (1,791) (1,787) (1,791) (1,787)
Aftertax prior period insurance adjustment - - - (1,014) Aftertax
cost of long-term incentive compensation - - - 1,847 Aftertax cost
of legal expenses of OIG investigation 213 192 507 352 Aftertax
stock option expense 379 - 391 137 Aftertax VITAS transaction
expense adjustment - (130) - (801) Aftertax cost of loss on
extinguishment of debt - - 273 2,523 --------- -------- --------
-------- Adjusted income from continuing operations $12,763 $12,571
$38,930 $33,485 ========= ======== ======== ========
Earnings/(Loss) Per Share As Reported Net income/(loss) $ 0.30 $
0.57 $ 1.26 $ 1.24 ========= ======== ======== ======== Average
number of shares outstanding 26,190 25,719 26,147 25,453 =========
======== ======== ======== Diluted Earnings/(Loss) Per Share As
Reported Net income/(loss) $ 0.30 $ 0.55 $ 1.23 $ 1.21 =========
======== ======== ======== Average number of shares outstanding
26,633 26,401 26,750 26,202 ========= ======== ======== ========
Adjusted Earnings Per Share Income from continuing operations $
0.49 $ 0.49 $ 1.49 $ 1.32 ========= ======== ======== ========
Average number of shares outstanding 26,190 25,719 26,147 25,453
========= ======== ======== ======== Adjusted Diluted Earnings Per
Share Income from continuing operations $ 0.48 $ 0.48 $ 1.46 $ 1.28
========= ======== ======== ======== Average number of shares
outstanding 26,633 26,401 26,750 26,202 ========= ======== ========
======== The "Footnotes to Financial Statements" are integral parts
of this financial information. *T -0- *T CHEMED CORPORATION AND
SUBSIDIARY COMPANIES OPERATING STATISTICS FOR VITAS SEGMENT FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited)
Three Months Ended Nine Months Ended September 30, September 30,
------------------- ------------------- 2006 2005 2006 2005
--------- --------- --------- --------- OPERATING STATISTICS Net
revenue ($000) (d) Homecare $128,268 $111,959 $366,888 $319,441
Inpatient 21,890 21,321 66,779 63,300 Continuous care 30,140 27,128
89,587 77,405 --------- --------- --------- --------- Total before
Medicare cap allowance 180,298 160,408 523,254 460,146 Medicare cap
allowance (5,503) - (7,843) - --------- --------- ---------
--------- Total $174,795 $160,408 $515,411 $460,146 =========
========= ========= ========= Net revenue as a percent of total
before Medicare cap allowance Homecare 71.2 % 69.8 % 70.1 % 69.4 %
Inpatient 12.1 13.3 12.8 13.8 Continuous care 16.7 16.9 17.1 16.8
--------- --------- -------- --------- Total before Medicare cap
allowance 100.0 100.0 100.0 100.0 Medicare cap allowance (3.1) -
(1.5) - --------- --------- --------- --------- Total 96.9 % 100.0
% 98.5 % 100.0 % ========= ========= ========= ========= Average
daily census ("ADC") (days) Homecare 6,670 5,972 6,419 5,719
Nursing home 3,590 3,366 3,484 3,276 --------- --------- ---------
--------- Routine homecare 10,260 9,338 9,903 8,995 Inpatient 401
404 413 404 Continuous care 552 517 553 502 --------- ---------
--------- --------- Total 11,213 10,259 10,869 9,901 =========
========= ========= ========= Total Admissions 12,753 12,375 39,718
37,969 Total Discharges 12,621 12,025 38,640 36,766 Average length
of stay (days) 71.0 66.5 70.5 66.8 Median length of stay (days)
14.0 13.0 13.0 12.0 ADC by major diagnosis Neurological 33.6 % 32.1
% 33.4 % 32.0 % Cancer 20.1 21.3 20.1 21.4 Cardio 14.7 14.9 14.9
15.1 Respiratory 6.9 7.1 7.1 7.1 Other 24.7 24.6 24.5 24.4
--------- --------- --------- --------- Total 100.0 % 100.0 % 100.0
% 100.0 % ========= ========= ========= ========= Admissions by
major diagnosis Neurological 19.3 % 18.0 % 19.9 % 18.8 % Cancer
37.0 38.3 35.4 36.6 Cardio 12.4 12.4 13.2 13.5 Respiratory 6.7 6.3
7.2 7.2 Other 24.6 25.0 24.3 23.9 --------- --------- ---------
--------- Total 100.0 % 100.0 % 100.0 % 100.0 % ========= =========
========= ========= Direct patient care margins(e) Routine homecare
49.1 % 50.4 % 48.8 % 49.9 % Inpatient 16.5 21.3 20.2 22.4
Continuous care 17.5 18.1 18.7 18.4 Homecare margin drivers
(dollars per patient day) Labor costs $ 48.21 $ 45.04 $ 49.15 $
45.58 Drug costs 8.46 7.66 8.12 7.71 Home medical equipment 5.66
5.45 5.58 5.48 Medical supplies 2.21 2.23 2.15 2.18 Inpatient
margin drivers (dollars per patient day) Labor costs $ 269.72 $
242.70 $ 257.82 $ 240.61 Continuous care margin drivers (dollars
per patient day) Labor costs $ 467.65 $ 447.99 $ 461.89 $ 441.83
Bad debt expense as a percent of revenues 0.9 % 0.9 % 0.9 % 0.9 %
Accounts receivable -- days of revenue outstanding 42.1 42.1 N/A
N/A The "Footnotes to Financial Statements" are integral parts of
this financial information. *T -0- *T CHEMED CORPORATION AND
SUBSIDIARY COMPANIES FOOTNOTES TO FINANCIAL STATEMENTS FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited)
(a) Included in the results of operations for the three and nine
months ended September 30, 2006 are the following significant
credits/(charges) which may not be indicative of ongoing operations
(in thousands): Three Months Ended September 30, 2006
---------------------------------------------- VITAS Roto-Rooter
Corporate Consolidated -------- ------------ ----------
------------- Selling, general and administrative expenses Costs
associated with OIG investigation $ (344) $ - $ - $ (344) Stock
option expense - - (597) (597) Other expenses - net Asset
impairment - VITAS' Phoenix operation (2,419) - - (2,419) Lawsuit
settlement (273) - - (273) Loss from impairment of investment - -
(1,445) (1,445) -------- ------------ ---------- -------------
Pretax impact on earnings (3,036) - (2,042) (5,078) Income tax
benefit on the above 1,299 927 1,609 3,835 -------- ------------
---------- ------------- Aftertax impact on earnings $(1,737) $ 927
$ (433) $ (1,243) ======== ============ ========== =============
Nine Months Ended September 30, 2006
---------------------------------------------- VITAS Roto-Rooter
Corporate Consolidated -------- ------------ ----------
------------- Selling, general and administrative expenses Costs
associated with OIG investigation $ (818) $ - $ - $ (818) Stock
option expense - - (615) (615) Other expenses - net Asset
impairment - VITAS' Phoenix operation (2,419) - - (2,419) Lawsuit
settlement (273) - - (273) Loss from impairment of investment - -
(1,445) (1,445) Loss on extinguishment of debt - - (430) (430)
-------- ------------ ---------- ------------- Pretax impact on
earnings (3,510) - (2,490) (6,000) Income tax benefit on the above
1,479 927 1,772 4,178 -------- ------------ ----------
------------- Aftertax impact on earnings $(2,031) $ 927 $ (718) $
(1,822) ======== ============ ========== ============= (b) Included
in the results of operations for the three and nine months ended
September 30, 2005 are the following significant credits/(charges)
which may not be indicative of ongoing operations (in thousands):
Three Months Ended September 30, 2005
---------------------------------------------- VITAS Roto-Rooter
Corporate Consolidated -------- ------------ ----------
------------- Selling, general and administrative expenses Costs
associated with OIG investigation $ (310) $ - $ - $ (310)
Adjustments to transaction- related costs of the VITAS acquisition
- - 130 130 -------- ------------ ---------- ------------- Pretax
impact on earnings (310) - 130 (180) Income tax benefit on the
above 118 952 835 1,905 -------- ------------ ----------
------------- Aftertax impact on earnings $ (192) $ 952 $ 965 $
1,725 ======== ============ ========== ============= Nine Months
Ended September 30, 2005
---------------------------------------------- VITAS Roto-Rooter
Corporate Consolidated -------- ------------ ----------
------------- Cost of services provided and goods sold Favorable
adjustment to casualty insurance accruals related to prior years'
experience $ - $ 1,663 $ - $ 1,663 Selling, general and
administrative expenses Long-term incentive compensation - -
(2,946) (2,946) Costs associated with OIG investigation (564) - -
(564) Stock option expense - - (215) (215) Adjustments to
transaction- related costs of the VITAS acquisition - - 801 801
Loss on extinguishment of debt - - (3,971) (3,971) --------
------------ ---------- ------------- Pretax impact on earnings
(564) 1,663 (6,331) (5,232) Income tax benefit on the above 212 303
3,460 3,975 -------- ------------ ---------- ------------- Aftertax
impact on earnings $ (352) $ 1,966 $ (2,871) $ (1,257) ========
============ ========== ============= (c) Under Generally Accepted
Accounting Principles ("GAAP"), the Roto-Rooter segment expenses
all advertising, including the cost of telephone directories,
immediately upon the initial release of the advertising. Telephone
directories are generally in circulation 12 months. If a directory
is in circulation for a time period greater or less than 12 months,
the publisher adjusts the directory billing for the change in
billing period. The timing of when a telephone directory is
published can and does fluctuate significantly on a quarterly
basis. This "direct expensing" results in significant fluctuations
in quarterly advertising expense. In the third quarters of 2006 and
2005, GAAP advertising expense for Roto-Rooter totaled $4,646,000
and $4,362,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the third quarters of 2006 and 2005 would
total $5,137,000 and $4,702,000, respectively. For the nine months
ended September 30, 2006 and 2005, GAAP advertising expense for
Roto-Rooter totaled $13,984,000 and $12,685,000, 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 2006 and 2005 would total $15,056,000 and
$13,654,000, respectively. (d) VITAS has 6 large (greater than 450
ADC), 15 medium (greater than 200 but less than 450 ADC) and 21
small (less than 200 ADC) hospice programs. There are three
programs with estimated Medicare Cap billing limitations for the
2006 measurement period. There is one other program with Medicare
Cap cushion of less than 10% for the 2006 measurement period. No
other programs have an estimated Medicare Cap cushion of less than
10% for the 2006 measurement period (e) Amounts exclude indirect
patient care and administrative costs, as well as Medicare Cap
billing limitation. *T
Chemed (NYSE:CHE)
Historical Stock Chart
From May 2024 to Jun 2024
Chemed (NYSE:CHE)
Historical Stock Chart
From Jun 2023 to Jun 2024