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 first quarter ended March
31, 2008, versus the comparable prior-year period, as follows:
Consolidated operating results: Revenue increased 5.5% to $285
million Diluted EPS of $.69 Diluted EPS, excluding special items,
of $.73 VITAS segment operating results: Net Patient Revenue of
$199 million, up 7.9% Average Daily Census (ADC) of 11,691, up 3.4%
Admissions of 15,212, an increase of 7.8% Average Length of Stay in
the quarter of 71.5 days Adjusted EBITDA of $23.6 million, a
decline of 9.3% Roto-Rooter segment operating results: Revenue of
$87 million, an increase of 0.3% Job count of 196,249, a decline of
7.0% Adjusted EBITDA of $15.9 million, a decline of 2.7% VITAS Net
revenue for VITAS was $199 million in the first quarter of 2008,
which is an increase of 7.9% over the prior-year period. This
revenue growth was the result of increased ADC of 3.4%, a Medicare
price increase of approximately 3%, and a favorable shift in
revenue mix from routine home care to high acuity care. Average
revenue per patient per day in the quarter was $186.67, which is
3.5% above the prior-year period. Routine home care reimbursement
and high acuity care averaged $145.42 and $633.10, respectively,
per patient per day in the first quarter of 2008. During the
quarter, high acuity days-of-care was 8.5% of total days-of-care.
Quarterly high acuity days-of-care had averaged between 8.0% and
8.4% in 2007. Any shift in revenue mix will have a noticeable
impact on overall revenue given the significant disparity in
reimbursement. However, given the relatively low profitability
margin on high acuity care, this favorable mix shift had minimal
impact on gross profit and net income in the quarter. VITAS did not
have any billing restrictions related to Medicare Cap for its
first-quarter 2008 operating activity. As of March 31, 2008, VITAS
has not accrued any Medicare billing restrictions for the 2008 or
2007 Cap years. Of VITAS� 35 unique Medicare provider numbers, 30
provider numbers, or 86%, have a Cap cushion greater than 20% for
the 2008 Cap year, four provider numbers are between 10% and 20%,
and one provider number has Cap cushion of approximately 4%. Gross
margin in the first quarter of 2008 was 20.0%. This is 257 basis
points below the first quarter of 2007, excluding the 2007 benefit
from Medicare cap. This margin decline is a combination of
increased expenses related to admissions and increased costs for
direct patient care labor. As part of its growth strategy, VITAS
has expanded its investment in the admissions process. At the end
of the first quarter of 2008, VITAS increased staffing of sales
representatives, admissions coordinators and admissions nurses by
18%. This resulted in an additional $2.1 million of admission
expense in the quarter and equates to 106 basis points of the
decline in gross margin in the quarter. The remaining margin
decline is due to an increase in direct patient care labor. This
additional labor is a combination of salary rate increases for
existing employees as well as excess staffing relative to current
patient census and individual plans of care. In the first quarter
of 2008, total field salary increases averaged 4.2% over the
prior-year period which is largely commensurate with local market
salary requirements. This is above the 3.0% inflation per diem
increase VITAS received from CMS in October 2007. Over the past
several years the CMS calculated inflation factor has been below
the actual inflation on direct patient care costs, primarily wages.
Historically, VITAS has been able to offset this inflation
adjustment shortfall through scale in management systems and
infrastructure. VITAS continues to refine the process of scheduling
direct labor to allow for more daily flexibility with the goal of
ensuring proper levels of staffing notwithstanding length of stay
and census fluctuations. This involves more efficient utilization
of field-based labor management tools designed to meet and respond
to hospice team staffing requirements. VITAS anticipates more
efficient labor management during the second quarter of 2008 with
margins returning to more historical levels in the second half of
2008. Selling, general and administrative expense was $16.1 million
in the first quarter of 2008, which is an increase of 1.5% over the
prior year. Adjusted EBITDA totaled $23.6 million, a decline of
9.3% over the prior year and equates to an adjusted EBITDA margin
of 11.9%. Roto-Rooter Roto-Rooter�s plumbing and drain cleaning
business generated sales of $87 million for the first quarter of
2008, 0.3% higher than the $86 million reported in the comparable
prior-year quarter. Net income for the quarter was $9.1 million.
The first-quarter net income includes a $0.4 million aftertax
charge for a settlement of litigation relating to a 2003 fire that,
for unique technical reasons, was not covered by Roto-Rooter�s
secondary insurance carrier. Excluding this settlement, net income
in the first quarter of 2008 declined approximately 0.6% over the
first quarter of 2007. Adjusted EBITDA in the first quarter of 2008
totaled $15.9 million, a decrease of 2.7% over the first quarter of
2007, and equated to an adjusted EBITDA margin of 18.4%. Job count
in the first quarter of 2008 declined 7.0% when compared to the
prior-year period. Total residential jobs declined 6.4% and
consisted of residential plumbing jobs decreasing 4.9% and
residential drain cleaning jobs declining 7.1%, when compared to
the first quarter of 2007. Residential jobs represent approximately
70% of total job count. Total commercial jobs declined 8.4% with
commercial plumbing job count declining 4.9% and commercial drain
cleaning decreasing 9.9%, over the prior-year quarter. The first
quarter of 2008 clearly indicates recessionary pressures impacting
demand for certain plumbing and drain cleaning services. This is
evidenced by an 11% decline in aggregate call volume tracked in
Roto-Rooter�s two centralized call centers. This decline in call
volume has been partially offset by an increase in call conversion
rate to paid jobs. There is also greater disparity in demand within
the United States. The Southeast region has experienced a 14.1%
decline in commercial jobs while the Northeast had a modest 1.8%
decline in commercial volume. Residential demand is also following
a similar pattern in the Southeast, with job count declining 10.1%
while the remaining regions have experienced a job count decline
ranging between 4.3% and 6.7%. Guidance for 2008 VITAS is estimated
to generate full-year revenue growth from continuing operations,
prior to Medicare Cap, of 8% to 10%. Admissions are estimated to
increase 5% to 8% and full-year adjusted EBITDA margin, prior to
Medicare Cap, is estimated to be 13% to 14%. EBITDA margins are
forecasted to improve sequentially throughout 2008, with an
adjusted EBITDA margin averaging 13.5% to 14.0% in the second half
of 2008. This guidance assumes the hospice industry receives a full
Medicare basket price increase of 3.0% in the fourth quarter of
2008. Full calendar year 2008 Medicare contractual billing
limitations are estimated at $3.75 million. Roto-Rooter is
estimated to generate revenue totaling $343 million to $349
million. This guidance assumes revenue of approximately $83 million
to $85 million in the second and third quarters of 2008 and $90
million to $92 million in the fourth quarter of the year. Adjusted
EBITDA margin for 2008 is estimated in the range of 18.5% to 19.5%.
Based upon these factors, an effective tax rate of 39% and an
average diluted share count of 24.2 million shares, our estimate is
that full-year 2008 earnings per diluted share from continuing
operations, excluding noncash expenses for stock options and
charges or credits not indicative of ongoing operations, will be in
the range of $3.05 to $3.20. Conference Call Chemed will host a
conference call and webcast at 10 a.m., ET, on Friday, April 25,
2008, to discuss the company's quarterly results and provide an
update on its business. The dial-in number for the conference call
is (866) 510-0710 for U.S. and Canadian participants and (617)
597-5378 for international participants. The participant passcode
is 12125956. 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 61838951.
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 11,600 patients with severe, life-limiting
illnesses. This type of care is focused on making the terminally
ill patient's final days as comfortable and pain-free as possible.
Chemed operates in the residential and commercial plumbing and
drain cleaning industry under the brand name Roto-Rooter.
Roto-Rooter provides plumbing and drain service through
company-owned branches, independent contractors and franchisees in
the United States and Canada. Roto-Rooter also has licensed master
franchisees in Indonesia, Singapore, Japan, and the Philippines.
This press release contains information about Chemed�s EBITDA and
adjusted EBITDA, which are not measures derived in accordance with
generally accepted accounting principles and which exclude
components that are important to understanding Chemed�s financial
performance. Chemed provides EBITDA and adjusted EBITDA to help
investors and others evaluate its operating results, compare its
operating performance with that of similar companies that have
different capital structures and evaluate its ability to meet its
future debt service, capital expenditures and working capital
requirements. Chemed�s EBITDA and adjusted EBITDA should not be
considered in isolation or as a substitute for comparable measures
calculated and presented in accordance with GAAP. A reconciliation
of Chemed�s net income to its adjusted EBITDA is presented in the
tables following the text of this press release. Forward-Looking
Statements Certain statements contained in this press release and
the accompanying tables are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
The words "believe," "expect," "hope," "anticipate," "plan" and
similar expressions identify forward-looking statements, which
speak only as of the date the statement was made. Chemed does not
undertake and specifically disclaims any obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. These
statements are based on current expectations and assumptions and
involve various risks and uncertainties, which could cause Chemed's
actual results to differ from those expressed in such
forward-looking statements. These risks and uncertainties arise
from, among other things, possible changes in regulations governing
the hospice care or plumbing and drain cleaning industries;
periodic changes in reimbursement levels and procedures under
Medicare and Medicaid programs; difficulties predicting patient
length of stay and estimating potential Medicare reimbursement
obligations; challenges inherent in Chemed's growth strategy; the
current shortage of qualified nurses, other healthcare
professionals and licensed plumbing and drain cleaning technicians;
Chemed�s dependence on patient referral sources; and other factors
detailed under the caption "Description of Business by Segment" or
"Risk Factors" in Chemed�s most recent report on form 10-Q or 10-K
and its other filings with the Securities and Exchange Commission.
You are cautioned not to place undue reliance on such
forward-looking statements and there are no assurances that the
matters contained in such statements will be achieved. CHEMED
CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF
INCOME (in thousands, except per share data)(unaudited) � � � � � �
� Three Months Ended March 31, 2008 2007 Service revenues and sales
$ 285,268 � $ 270,439 � Cost of services provided and goods sold
(aa) 205,812 188,247 Selling, general and administrative expenses
(aa) 42,727 48,070 Depreciation 5,438 4,715 Amortization 1,450
1,315 Other operating expense/(income) (aa) � - � � (1,138 ) Total
costs and expenses � 255,427 � � 241,209 � Income from operations
29,841 29,230 Interest expense (1,597 ) (3,742 ) Other income--net
� (1,189 ) � 869 � Income before income taxes 27,055 26,357 Income
taxes � (10,235 ) � (10,136 ) Net Income $ 16,820 � $ 16,221 � �
Earnings Per Share (aa) Net income $ 0.70 � $ 0.63 � Average number
of shares outstanding � 23,873 � � 25,716 � � Diluted Earnings Per
Share (aa) Net income $ 0.69 � $ 0.62 � Average number of shares
outstanding � 24,285 � � 26,162 � � � � � � � � � � (aa) Included
in the results of operations are the following credits/(charges)
which may not be indicative of ongoing operations (in thousands,
except per share data): � Three Months Ended March 31, 2008 2007 �
� Cost of services provided and goods sold Unreserved prior year's
insurance claim $ (597 ) $ - Selling, general and administrative
expenses Stock option expense � (1,391 ) � (585 )
Adjustments/(expenses) associated with OIG investigation 15 (66 )
Long-term incentive compensation - (5,447 ) Other - 467 Other
operating expenses/(income) Gain on sale of property � - � � 1,138
� Pretax impact on earnings (1,973 ) (4,493 ) Income tax benefit on
the above 740 1,687 Income tax credit related to prior years � 322
� � - � Aftertax impact on earnings $ (911 ) $ (2,806 ) CHEMED
CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (in
thousands, except per share data)(unaudited) � � � � � � � March
31, 2008 2007 (bb) Assets Current assets Cash and cash equivalents
$ 29,704 $ 30,137 Accounts receivable less allowances 87,004 83,280
Inventories 7,439 6,752 Current deferred income taxes 14,996 21,595
Prepaid expenses and other current assets � 9,035 � � 9,110 � Total
current assets 148,178 150,874 Investments of deferred compensation
plans held in trust 29,524 27,736 Notes receivable - 14,701
Properties and equipment, at cost less accumulated depreciation
72,910 69,295 Identifiable intangible assets less accumulated
amortization 64,168 68,205 Goodwill 438,656 435,040 Other assets �
15,467 � � 16,194 � Total Assets $ 768,903 � $ 782,045 � �
Liabilities Current liabilities Accounts payable $ 46,450 $ 53,341
Current portion of long-term debt 10,166 164 Income taxes 10,100
9,410 Accrued insurance 37,600 39,889 Accrued compensation 31,195
29,110 Other current liabilities � 14,474 � � 26,653 � Total
current liabilities 149,985 158,567 Deferred income taxes 5,465
24,970 Long-term debt 212,070 150,235 Deferred compensation
liabilities 29,653 27,157 Other liabilities � 5,540 � � 5,382 �
Total Liabilities � 402,713 � � 366,311 � Stockholders' Equity
Capital stock 29,379 29,036 Paid-in capital 271,296 260,641
Retained earnings 293,707 234,914 Treasury stock, at cost (230,594
) (111,293 ) Deferred compensation payable in Company stock � 2,402
� � 2,436 � Total Stockholders' Equity � 366,190 � � 415,734 �
Total Liabilities and Stockholders' Equity $ 768,903 � $ 782,045 �
� Book Value Per Share $ 15.43 � $ 16.43 � � � � � � � � � � � � �
� (bb) Reclassified to conform to 2008 presentation. CHEMED
CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH
FLOWS (in thousands)(unaudited) � � � � � � � � � � Three Months
Ended March 31, 2008 2007 (bb) Cash Flows from Operating Activities
Net income $ 16,820 $ 16,221 Adjustments to reconcile net income to
net cash provided/(used) by operating activities: Depreciation and
amortization 6,888 6,030 Provision for uncollectible accounts
receivable 2,002 2,084 Provision for deferred income taxes (1,126 )
(345 ) Amortization of debt issuance costs 254 455 Noncash
long-term incentive compensation - 4,719 Changes in operating
assets and liabilities, excluding amounts acquired in business
combinations: Decrease in accounts receivable 12,112 5,275 Increase
in inventories (843 ) (174 ) Decrease in prepaid expenses and other
current assets 1,488 858 Decrease in accounts payable and other
current liabilities (5,679 ) (9,091 ) Increase in income taxes
6,677 9,538 Increase in other assets (293 ) (2,102 ) Increase in
other liabilities 532 2,218 Excess tax benefit on share-based
compensation (825 ) (611 ) Other sources/(uses) � 1,524 � � (375 )
Net cash provided by operating activities � 39,531 � � 34,700 �
Cash Flows from Investing Activities Net proceeds/(uses) from the
disposition of discontinued operations 9,556 (3,876 ) Capital
expenditures (3,891 ) (5,764 ) Proceeds from sales of property and
equipment 19 2,975 Other uses � (122 ) � (361 ) Net cash
provided/(used) by investing activities � 5,562 � � (7,026 ) Cash
Flows from Financing Activities Purchases of treasury stock (16,263
) (24,199 ) Repayment of long-term debt (2,595 ) (141 ) Dividends
paid (1,449 ) (1,555 ) Decrease in cash overdrafts payable (963 )
(1,608 ) Excess tax benefit on share-based compensation 825 611
Other sources � 68 � � 81 � Net cash used by financing activities �
(20,377 ) � (26,811 ) Increase in Cash and Cash Equivalents 24,716
863 Cash and cash equivalents at beginning of year � 4,988 � �
29,274 � Cash and cash equivalents at end of period � 29,704 � $
30,137 � � � � � � � � � � � � � (bb) Reclassified to conform to
2008 presentation. CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH
31, 2008 AND 2007 (in thousands)(unaudited) � � � � � � � � �
Chemed VITAS Roto-Rooter Corporate Consolidated 2008 � Service
revenues and sales $ 198,585 � $ 86,683 � $ - � $ 285,268 � Cost of
services provided and goods sold 158,803 47,009 - 205,812 Selling,
general and administrative expenses (a) 16,147 23,771 2,809 42,727
Depreciation 3,280 2,082 76 5,438 Amortization � 996 � � 13 � � 441
� � 1,450 � Total costs and expenses � 179,226 � � 72,875 � � 3,326
� � 255,427 � Income/(loss) from operations 19,359 13,808 (3,326 )
29,841 Interest expense (51 ) (83 ) (1,463 ) (1,597 ) Intercompany
interest income/(expense) 1,365 1,042 (2,407 ) - Other income�net �
23 � � 28 � � (1,240 ) � (1,189 ) Income/(loss) before income taxes
20,696 14,795 (8,436 ) 27,055 Income taxes (a) � (7,398 ) � (5,700
) � 2,863 � � (10,235 ) Net income/(loss) $ 13,298 � � 9,095 � �
(5,573 ) � 16,820 � � � 2007 (f) Service revenues and sales $
184,049 � $ 86,390 � $ - � $ 270,439 � Cost of services provided
and goods sold 142,095 46,152 - 188,247 Selling, general and
administrative expenses (b) 15,904 23,542 8,624 48,070 Depreciation
2,538 2,101 76 4,715 Amortization 996 15 304 1,315 Other operating
expense/(income) (b) � - � � - � � (1,138 ) � (1,138 ) Total costs
and expenses � 161,533 � � 71,810 � � 7,866 � � 241,209 �
Income/(loss) from operations 22,516 14,580 (7,866 ) 29,230
Interest expense (36 ) (83 ) (3,623 ) (3,742 ) Intercompany
interest income/(expense) 1,712 1,156 (2,868 ) - Other income�net �
(88 ) � 50 � � 907 � � 869 � Income/(loss) before income taxes
24,104 15,703 (13,450 ) 26,357 Income taxes (b) � (9,117 ) � (6,197
) � 5,178 � � (10,136 ) Net income/(loss) $ 14,987 � $ 9,506 � $
(8,272 ) $ 16,221 � � 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 MARCH 31, 2008 AND 2007 (in
thousands)(unaudited) � � � � � � � � � � � � Chemed VITAS
Roto-Rooter Corporate Consolidated 2008 Net income/(loss) $ 13,298
$ 9,095 $ (5,573 ) $ 16,820 Add/(deduct): Interest expense 51 83
1,463 1,597 Income taxes 7,398 5,700 (2,863 ) 10,235 Depreciation
3,280 2,082 76 5,438 Amortization � 996 � � 13 � � 441 � � 1,450 �
EBITDA 25,023 16,973 (6,456 ) 35,540 Add/(deduct): Unreserved
insurance claim - 597 - 597 Legal expenses of OIG investigation (15
) - - (15 ) Stock option expense - - 1,391 1,391 Advertising cost
adjustment (c) - (570 ) - (570 ) Interest income (38 ) (18 ) (281 )
(337 ) Intercompany interest income/(expense) � (1,365 ) � (1,042 )
� 2,407 � � - � Adjusted EBITDA $ 23,605 � $ 15,940 � $ (2,939 ) $
36,606 � � 2007 (f) Net income/(loss) $ 14,987 $ 9,506 $ (8,272 ) $
16,221 Add/(deduct): Interest expense 36 83 3,623 3,742 Income
taxes 9,117 6,197 (5,178 ) 10,136 Depreciation 2,538 2,101 76 4,715
Amortization � 996 � � 15 � � 304 � � 1,315 � EBITDA 27,674 17,902
(9,447 ) 36,129 Add/(deduct): Long-term incentive compensation - -
5,447 5,447 Gain on sale of property - - (1,138 ) (1,138 ) Legal
expenses of OIG investigation 66 - - 66 Stock option expense - -
585 585 Advertising cost adjustment (c) - (297 ) - (297 ) Interest
income (13 ) (59 ) (695 ) (767 ) Intercompany interest
income/(expense) (1,712 ) (1,156 ) 2,868 - Other � - � � - � � (467
) � (467 ) Adjusted EBITDA $ 26,015 � $ 16,390 � $ (2,847 ) $
39,558 � � 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 MONTHS ENDED MARCH 31, 2008 AND 2007 (in thousands, except
per share data)(unaudited) � � � � � � � � � 2008 2007 Net income
as reported $ 16,820 $ 16,221 � Add/(deduct): Aftertax cost of
long-term incentive compensation - 3,414 Aftertax cost of legal
expenses/(adjustments) of OIG investigation (9 ) 41 Aftertax stock
option expense 884 371 Aftertax gain on sale of property - (724 )
Aftertax other - (296 ) Income tax credit related to prior years
(322 ) - Aftertax unreserved insurance cost � 358 � � - � �
Adjusted Net Income $ 17,731 � $ 19,027 � � � Earnings Per Share As
Reported Net Income $ 0.70 � $ 0.63 � Average number of shares
outstanding � 23,873 � � 25,716 � Diluted Earnings Per Share As
Reported Net Income $ 0.69 � $ 0.62 � Average number of shares
outstanding � 24,285 � � 26,162 � � � Adjusted Earnings Per Share
Net Income $ 0.74 � $ 0.74 � Average number of shares outstanding �
23,873 � � 25,716 � Adjusted Diluted Earnings Per Share Net Income
$ 0.73 � $ 0.73 � Average number of shares outstanding � 24,285 � �
26,162 � � 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 MONTHS ENDED MARCH 31, 2008 AND 2007 (unaudited) � � � � � �
2008 2007 OPERATING STATISTICS Net revenue ($000) (d) Homecare $
141,617 $ 131,548 Inpatient 25,971 23,462 Continuous care � 30,997
� 28,567 Total before Medicare cap allowance 198,585 $ 183,577
Medicare cap allowance � - � 472 Total $ 198,585 $ 184,049 Net
revenue as a percent of total before Medicare cap allowance
Homecare 71.3 % 71.6 % Inpatient 13.1 12.8 Continuous care � 15.6 �
15.6 Total before Medicare cap allowance 100.0 100.0 Medicare cap
allowance � - � 0.3 Total � 100.0 % � 100.3 % Average daily census
("ADC") (days) Homecare 7,154 6,786 Nursing home � 3,548 � 3,574
Routine homecare 10,702 10,360 Inpatient 453 426 Continuous care �
536 � 523 Total � 11,691 � 11,309 � Total Admissions 15,212 14,110
Total Discharges 14,992 14,051 Average length of stay (days) 71.5
76.9 Median length of stay (days) 13.0 13.0 ADC by major diagnosis
Neurological 32.5 % 33.3 % Cancer 20.0 19.7 Cardio 13.0 14.6
Respiratory 6.9 7.0 Other � 27.6 � 25.4 Total � 100.0 % � 100.0 %
Admissions by major diagnosis Neurological 19.0 % 18.9 % Cancer
33.4 33.6 Cardio 11.9 13.3 Respiratory 8.5 7.8 Other � 27.2 � 26.4
Total � 100.0 % � 100.0 % Direct patient care margins (e) Routine
homecare 49.5 % 50.8 % Inpatient 19.3 20.1 Continuous care 16.5
20.0 Homecare margin drivers (dollars per patient day) Labor costs
$ 52.26 $ 49.12 Drug costs 7.49 8.18 Home medical equipment 6.17
5.75 Medical supplies 2.57 2.17 Inpatient margin drivers (dollars
per patient day) Labor costs $ 266.18 $ 252.42 Continuous care
margin drivers (dollars per patient day) Labor costs $ 509.62 $
464.54 Bad debt expense as a percent of revenues 0.9 % 0.9 %
Accounts receivable -- days of revenue outstanding 45.5 38.1 � The
"Footnotes to Financial Statements" are integral parts of this
financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES
FOOTNOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH
31, 2008 AND 2007 (unaudited) � � � � � � � � � � � (a) Included in
the results of operations for the three months ended March 31, 2008
are the following significant credits/(charges) which may not be
indicative of ongoing operations (in thousands): � VITAS
Roto-Rooter Corporate Consolidated � Cost of services provided and
goods sold Unreserved prior year's insurance claim $ - $ (597) $ -
$ (597) Selling, general and administrative expenses Stock option
expense � - � - � (1,391) � (1,391) Adjustments/ (expenses)
associated with OIG investigation � 15 � - � - � 15 Pretax impact
on earnings 15 (597) (1,391) (1,973) Income tax benefit/(charge) on
the above (6) 239 507 740 Income tax credit related to prior years
� 322 � - � - � 322 Aftertax impact on earnings $ 331 $ (358) $
(884) $ (911) � (b) Included in the results of operations for the
three months ended March 31, 2007 are the following significant
credits/(charges) which may not be indicative of ongoing operations
(in thousands): � VITAS Corporate Consolidated Selling, general and
administrative expenses Long-term incentive compensation $ - $
(5,447) $ (5,447) Costs associated with OIG investigation (66) -
(66) Stock option expense - (585) (585) Other - 467 467 Other
operating expenses/(income) Gain on sale of property � - � 1,138 �
1,138 Pretax impact on earnings (66) (4,427) (4,493) Income tax
benefit/(charge) on the above � 25 � 1,662 � 1,687 Aftertax impact
on earnings $ (41) $ (2,765) $ (2,806) � (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 first
quarters of 2008 and 2007, GAAP advertising expense for Roto-Rooter
totaled $5,456,000 and $5,193,000, respectively. If the expense of
the telephone directories were spread over the periods they are in
circulation, advertising expense for the first quarters of 2008 and
2007 would total $6,026,000 and $5,490,000, respectively. � (d)
VITAS has 5 large (greater than 450 ADC), 17 medium (greater than
200 but less than 450 ADC) and 21 small (less than 200 ADC) hospice
programs. There is one program continuing at March 31, 2008 with
Medicare cap cushion of less than 10% for the 2008 measurement
period. � (e) Amounts exclude indirect patient care and
administrative costs, as well as Medicare Cap billing limitation. �
(f) Reclassified to conform to 2008 presentation.
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