Chemed Reports First-Quarter 2006 Results; Diluted EPS from Continuing Operations of $.46; Adjusted Diluted EPS from Continuing Operations of $.47.CINCINNATI Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. -- Chemed Corporation (Chemed) (NYSE NYSE See: New York Stock Exchange :CHE), which operates VITAS VITAS Vietnam Textile and Apparel Association Healthcare Corporation (VITAS), the nation's largest provider of end-of-life end-of-life Cardiac pacing noun The point at which a pacemaker signals need for replacement, as its battery is nearing depletion Medtalk adjective care, and Roto-Rooter Roto-Rooter is a United States company which originally specialized in clearing tree roots and other obstructions from sewer lines. It is the largest plumbing and drain-cleaning company in North America. , the nation's largest commercial and residential plumbing plumbing, piping systems inside buildings for water supply and sewage. The Romans had a highly developed plumbing system; water was brought to Rome by aqueducts and distributed to homes in lead pipes—hence the name plumbing from the Latin word plumbum and drain One side of a field effect transistor. When the gate is pulsed, current flows from the source to the drain, or vice versa depending on the design. See collector. (jargon) drain cleaning services provider, today reported financial results for its first quarter ended March 31, 2006, versus the comparable prior-year period, as follows: Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Operating Results from Continuing Operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the --Consolidated Revenue increased 13% to $246 million --Diluted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. from Continuing Operations of $.46 --Adjusted Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS from Continuing Operations of $.47 after excluding Loss on Extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of Debt and other items VITAS segment operating results --Quarterly Net Patient Revenue of $168 million, up 15% --Average Daily Census daily census See Census. (ADC (1) See A/D converter. (2) (Apple Display Connector) A peripheral connector from Apple that combines digital video display, USB and power in one cable. ) of 10,480, up 10% --Admissions of 13,896, an increase of 7.3% --Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become of $19.8 million, an increase of 12% Roto-Rooter segment reported record Revenue and Adjusted EBITDA --Revenue of $78 million, an increase of 7% --Job count of 207,018, up 2.0% --Adjusted EBITDA of $12.7 million, an increase of 8% "VITAS generated record admissions in the first quarter of 2006, increasing 7.3% over the prior-year quarter and 11.3% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen , significantly exceeding our first-quarter 2006 internal business plan," stated Kevin McNamara Kevin McNamara may refer to:
"The first quarter of the year is typically less predictable in terms of ADC and revenue. This is due to fluctuations in revenue mix, the timing of admissions and a seasonal spike A burst of extra voltage in a power line that lasts only a few nanoseconds. See power surge, power swell, sag and surge suppression. (jargon) spike - To defeat a selection mechanism by introducing a (sometimes temporary) device that forces a specific result. in discharges. For example, January January: see month. 2006 experienced record admissions of 4,593 patients, our single highest admissions month ever recorded. This exceeded the fourth-quarter 2005 average monthly admissions, as well as January 2005 admissions, by 10% and 7%, respectively. However, the timing of these admissions coupled with an unusually strong seasonal increase in the discharge To liberate or free; to terminate or extinguish. A discharge is the act or instrument by which a contract or agreement is ended. A mortgage is discharged if it has been carried out to the full extent originally contemplated or terminated prior to total execution. rate resulted in a modest decline in our January 2006 ADC when compared to December December: see month. 2005. In prior years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time February February: see month. and March results overcame this typical spike in discharge rates. However, the timing of our 2006 admissions combined with an unusually long tail on our seasonal discharge rate resulted in a flat ADC until the later part of March 2006. The census census, periodic official count of the number of persons and their condition and of the resources of a country. In ancient times, among the Jews and Romans, such enumeration was mainly for taxation and conscription purposes. on March 31, 2006, was 10,819. "The relatively flat ADC did not provide the opportunity to absorb absorb To offset sell orders or a new security offering with buy orders. the excess patient care capacity generated in the fourth quarter. In our year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. earnings teleconference, we noted our staffing levels relative to ADC were out of balance pulling down our operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . We maintained these staffing levels throughout the first quarter of 2006 given the strength of our admissions and anticipated growth in ADC. "The timing of admissions, coupled with the volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in our discharge rate, resulted in elevated staffing ratios existing for the majority of the first quarter. The higher labor costs associated with these staffing ratios negatively impacted the first quarter of 2006, generating routine home care direct margins of 47.5% as compared to 49.9% in the prior-year quarter. This negatively impacted our gross profit by $2.8 million. "Given the difficulty and cost related to hiring quality caregivers, I believe we made the correct decision to maintain staffing levels and allow the ADC to catch up to our current manpower. This ensures our patients receive quality care and provides VITAS with immediate capacity to care for the increase in ADC as the discharge rate returns to a normalized, more predictable level. "Roto-Rooter continues to generate strong operating results. For the first quarter of 2006, Roto-Rooter had revenue of $78 million, an increase of 7%. Adjusted EBITDA was $12.7 million, an increase of 8% and represents an adjusted EBITDA margin of 16.3%." VITAS "VITAS generated revenue growth of 15.3 % over the prior-year period and a decline of 0.4% sequentially," stated David Williams David Williams is the name of: Musicians
"This decline in margin is the result of increased staffing levels in routine home care. Direct home care margins were 47.5% in the first quarter of 2006, which compares to 49.9% in the prior-year quarter. The January 2006 routine home care margin was unfavorable to the prior year month by 330 basis points. In March 2006, this gap had been reduced to 190 basis points. The first-quarter 2006 gross margin includes $1.6 million in start-up Start-up The earliest stage of a new business venture. losses, which is $0.4 million higher than the losses from programs classified as new starts in the prior-year period. "Central support costs for VITAS, which are classified as selling, general and administrative expenses in the Consolidating Statement of Income, totaled $13.2 million, including $0.1 million in OIG Noun 1. OIG - the investigative arm of the Federal Trade Commission Office of Inspector General independent agency - an agency of the United States government that is created by an act of Congress and is independent of the executive departments investigation legal expenses. Excluding the OIG expense, central support costs increased less than 1% when compared to the prior-year quarter and declined 5.4% sequentially. Adjusted EBITDA was $19.8 million in the quarter, an increase of 11.6% over the prior year. The adjusted EBITDA margin in the first quarter of 2006 was 11.7%, which declined 39 basis points when compared to the first quarter of 2005." VITAS' Average Length of Stay (ALOS) for patients discharged DISCHARGED. Released, or liberated from custody. It is not equivalent to acquitted in a declaration for a malicious prosecution. 2 Yeates, 475 2 Term Rep. 231; 1 Strange, 114; Doug. 205 3 Leon. 100. in the quarter was 72.4 and our median length-of-stay was 12 days. This compares to 70.0 days in the fourth quarter of 2005 and 66.0 days in the first quarter of 2005. Total discharges in the period were 13,408, with 343, or 2.6%, of these patients being discharged for extended prognosis prognosis /prog·no·sis/ (prog-no´sis) a forecast of the probable course and outcome of a disorder.prognos´tic prog·no·sis n. pl. prog·no·ses 1. . "Our mix of revenue at VITAS shifted slightly to the higher per diem per diem adj. or n. Latin for "per day," it is short for payment of daily expenses and/or fees of an employee or an agent. levels of care during the quarter," Williams added. "Routine home care represented 68.6% of revenue, a 50 basis point decline over the prior-year quarter and a 70 basis point decline sequentially. Our inpatient inpatient /in·pa·tient/ (in´pa-shent) a patient who comes to a hospital or other health care facility for diagnosis or treatment that requires an overnight stay. in·pa·tient n. revenue aggregated 13.7% and continuous care was 17.7% of total revenue in the first quarter of 2006. "All of our base and new start programs, including Phoenix, are estimated to have Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. cap cushion Cushion In the context of project financing, the extra amount of net cash flow remaining after expected debt service. cushion See call protection. in excess of 10% for the 2006 measurement period which will end on October October: see month. 31, 2006," stated Williams. "Accordingly, based upon current admission and discharge trends, we have not accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. for any Medicare billing limitations in any of our programs for the 2006 cap period." Roto-Rooter Segment Roto-Rooter's plumbing and drain cleaning business generated sales of $78 million for the first quarter of 2006, 7.2% higher than the $73 million reported in the comparable prior-year quarter. Net income for the quarter was $7.2 million and compares to net income of $7.3 million in the prior year. The first-quarter 2005 net income includes $1.0 million of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. adjustments of casualty insurance accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. related to prior years' experience. Excluding this favorable item, net income in the first quarter of 2006 increased 14% over the prior-year period. Adjusted EBITDA in the first quarter of 2006 totaled $12.7 million, an increase of 7.7% over the first quarter of 2005 and an adjusted EBITDA margin of 16.3%, which slightly exceeded the prior-year period. "Job count in the first quarter of 2006 increased 2.0% over the prior-year period," stated Williams. "Commercial plumbing job count increased 5.7% and commercial drain cleaning increased 4.7% over the prior-year quarter. Residential plumbing jobs decreased a modest 0.7% and residential drain cleaning jobs expanded 1.5% when compared to the first quarter of 2005. Overall, commercial jobs increased 4.4% and residential jobs increased 0.9%. This is a favorable shift in job mix since a commercial job will typically average approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 30% more revenue than a residential job. Accordingly, this continued shift of job mix has a positive impact on aggregate revenue." Guidance for 2006 VITAS is estimated to generate a revenue increase of 15% to 18%, increased admissions of 7% to 9% and continued expansion of EBITDA margins through the leveraging of central support costs. This should result in VITAS increasing its adjusted EBITDA margin approximately 60 to 80 basis points. Roto-Rooter is estimated to generate a 5% to 6% increase in revenue in 2006, with adjusted EBITDA margins averaging between 16% and 17%. Based upon these factors, an effective tax rate of 39% and an average diluted share count of 27.0 million, our expectation is that full-year 2006 earnings per diluted share from continuing operations, excluding any charges or credits not indicative indicative: see mood. of ongoing operations as well as excluding any expense for stock options required under SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R, will be in the range of $2.20 to $2.35. The company adopted FAS 123/R "Shared Base Payment." Adoption of this standard did not have any impact on current or prior reported consolidated earnings. However, as a result of this adoption, all stock based compensation, including amortization of restricted stock grants and Long Term Incentive Plans, are now expensed at the Corporate segment. Prior-year segment reporting segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four has been restated to reclassify Verb 1. reclassify - classify anew, change the previous classification; "The zoologists had to reclassify the mollusks after they found new species" class, classify, sort out, assort, sort, separate - arrange or order by classes or categories; "How would you stock-based compensation expense from the VITAS and Roto-Rooter segments to the Corporate segment. Conference Call Chemed will host a conference call and webcast at 11 a.m., EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT , on Wednesday Wednesday: see week. , April 26, 2006, to discuss the company's quarterly results and provide an update on its business. The dial-in number for the conference call is (800) 291-9234 for U.S. and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. participants and (617) 614-3923 for international participants. The participant Participant A party of a funding. It usually refers to the lowest rank or smallest level of funding. pass code is 39847851. A live webcast of the call can be accessed on Chemed's website at www.chemed.com by clicking on Investor Relations Investor relations The process by which the corporation communicates with its investors. 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 pass code is 98427460. 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 hospice, program of humane and supportive care for the terminally ill and their families; the term also applies to a professional facility that provides care to dying patients who can no longer be cared for at home. services to over 10,000 patients with severe, life-limiting illnesses. This type of care is focused on making the terminally ill Terminally Ill When a person is not expected to live more than 12 months. Notes: Any gifts given out by the afflicted person at this time may be considered as a dispersion of the estate rather than a gift. 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 A person who contracts to do work for another person according to his or her own processes and methods; the contractor is not subject to another's control except for what is specified in a mutually binding agreement for a specific job. and franchisees in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Roto-Rooter also has licensed master franchisees in China/Hong Kong Kong is the Danish word for king, but can also refer to the following:
Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , the Philippines Philippines officially Republic of the Philippines Island country, western Pacific Ocean, on an archipelago off the southeast coast of Asia. Area: 122,121 sq mi (316,294 sq km). Population (2005 est.): 84,191,000. and the United Kingdom. This press release contains information about Chemed's EBITDA and Adjusted EBITDA, which are not measures derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) 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 Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. . 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements contained in this press release and the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. tables are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the hospice care or plumbing and drain cleaning industries; periodic changes in reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. levels and procedures under Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. 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 Form 10-Q See 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,
-----------------------------
2006 2005 (bb)
-------------- --------------
Continuing Operations
Service revenues and sales $ 246,238 $ 218,637
-------------- --------------
Cost of services provided and
goods sold (aa) 177,897 152,952
Selling, general and
administrative expenses (aa) 38,475 37,919
Depreciation 4,148 3,920
Amortization 1,396 1,192
-------------- --------------
Total costs and expenses 221,916 195,983
-------------- --------------
Income from operations 24,322 22,654
Interest expense (5,345) (5,835)
Loss on extinguishment of
debt (aa) (430) (3,971)
Other income--net 1,495 727
-------------- --------------
Income before income taxes 20,042 13,575
Income taxes (7,827) (5,670)
-------------- --------------
Income from continuing
operations 12,215 7,905
Discontinued Operations - 211
-------------- --------------
Net Income $ 12,215 $ 8,116
============== ==============
Earnings Per Share (aa)
Income from continuing
operations $ 0.47 $ 0.31
============== ==============
Net income $ 0.47 $ 0.32
============== ==============
Average number of shares
outstanding 26,044 25,152
============== ==============
Diluted Earnings Per Share (aa)
Income from continuing
operations $ 0.46 $ 0.31
============== ==============
Net income $ 0.46 $ 0.31
============== ==============
Average number of shares
outstanding 26,723 25,910
============== ==============
---------------------------------------
(aa) Included in the results of operations are the following
significant credits/(charges) which may not be indicative
of ongoing operations (in thousands, except per share data):
Three Months Ended March 31,
-----------------------------
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
Long-term incentive
compensation - (1,109)
Cost of accelerating vesting
of stock options - (215)
Expenses associated with OIG
investigation (132) -
Loss on extinguishment of debt (430) (3,971)
-------------- --------------
Pretax impact on earnings (562) (3,632)
Income tax benefit on the above 207 1,291
-------------- --------------
Aftertax impact on earnings $ (355) $ (2,341)
============== ==============
(bb) Reclassified to conform to 2006 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
March 31,
-------------------
2006 2005 (bb)
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 45,668 $ 8,557
Accounts receivable less allowances 71,864 81,880
Inventories 6,724 7,012
Current deferred income taxes 27,753 33,559
Prepaid income taxes 4,867 -
Current assets of discontinued operations - 15,162
Prepaid expenses and other current assets 8,867 8,461
--------- ---------
Total current assets 165,743 154,631
Investments of deferred compensation plans
held in trust 23,287 19,415
Other investments 1,445 1,445
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 65,179 58,172
Identifiable intangible assets less
accumulated amortization 74,254 75,904
Goodwill 433,783 436,820
Noncurrent assets of discontinued
operations - 5,717
Other assets 20,406 22,519
--------- ---------
Total Assets $796,597 $787,123
========= =========
Liabilities
Current liabilities
Accounts payable $ 42,342 $ 40,470
Current portion of long-term debt 207 1,277
Income taxes 4,948 16,529
Accrued insurance 39,254 26,087
Accrued compensation 25,443 28,151
Current liabilities of discontinued
operations - 21,929
Other current liabilities 42,454 26,758
--------- ---------
Total current liabilities 154,648 161,201
Deferred income taxes 22,408 17,395
Long-term debt 194,399 234,738
Deferred compensation liabilities 22,647 19,357
Noncurrent liabilities of discontinued
operations - 802
Other liabilities 3,989 8,062
--------- ---------
Total Liabilities 398,091 441,555
--------- ---------
Stockholders' Equity
Capital stock 28,667 13,662
Paid-in capital 244,101 219,000
Retained earnings 181,831 148,141
Treasury stock, at cost (58,440) (36,241)
Unearned compensation - ESOPs - (774)
Deferred compensation payable in Company
stock 2,401 2,318
Notes receivable for shares sold (54) (538)
--------- ---------
Total Stockholders' Equity 398,506 345,568
--------- ---------
Total Liabilities and
Stockholders' Equity $796,597 $787,123
========= =========
Book Value Per Share $ 15.23 $ 13.66 (cc)
========= =========
----------------------------------------------
(bb) Reclassified to conform to 2006 presentation.
(cc) Adjusted for 2-for-1 stock split in May 2005.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
Three Months Ended
March 31,
---------------------
2006 2005 (bb)
---------- ----------
Cash Flows from Operating Activities
Net income/(loss) $ 12,215 $ 8,116
Adjustments to reconcile net income to net
cash provided/(used) by operating
activities:
Depreciation and amortization 5,544 5,112
Provision for uncollectible accounts
receivable 2,033 1,530
Provision for deferred income taxes (1,242) (1,892)
Amortization of debt issuance costs 444 522
Write-off of unamortized debt issuance
costs 430 2,871
Noncash long-term incentive
compensation - 948
Discontinued operations - (211)
Changes in operating assets and
liabilities, excluding amounts
acquired in business combinations:
Decrease/(increase) in accounts
receivable 21,140 (18,747)
Decrease/(increase) in inventories (225) 7
Decrease in prepaid expenses and
other current assets 901 1,381
Decrease in accounts payable and
other current liabilities (13,207) (9,808)
Increase in income taxes 8,812 7,484
Decrease in other assets (1,917) (882)
Increase in other liabilities 1,050 635
Excess tax benefit on share-based
compensation (3,289) (1,752)
Noncash expense of internally financed
ESOPs - 286
Other sources/(uses) 51 (419)
---------- ----------
Net cash provided/(used) by
continuing operations 32,740 (4,819)
Net cash used by
discontinued operations - (1,081)
---------- ----------
Net cash provided/(used) by operating
activities 32,740 (5,900)
---------- ----------
Cash Flows from Investing Activities
Capital expenditures (3,972) (6,201)
Net uses from discontinued operations (1,684) (817)
Business combinations, net of cash acquired (384) (4,401)
Proceeds from sales of property and
equipment 65 36
Other uses (185) (136)
---------- ----------
Net cash used by investing activities (6,160) (11,519)
---------- ----------
Cash Flows from Financing Activities
Repayment of long-term debt (84,497) (140,680)
Net increase in revolving line of credit 44,000 -
Excess tax benefit on share-based
compensation 3,289 1,752
Issuance of capital stock, net of costs 2,360 4,208
Purchases of treasury stock (2,318) (833)
Dividends paid (1,572) (1,517)
Increase in cash overdrafts payable 786 8,023
Debt issuance costs (150) (1,555)
Proceeds from long-term debt - 85,000
Other sources 57 130
---------- ----------
Net cash provided/(used) by financing
activities (38,045) (45,472)
---------- ----------
Decrease in Cash and Cash Equivalents (11,465) (62,891)
Cash and cash equivalents at beginning of year 57,133 71,448
---------- ----------
Cash and cash equivalents at end of period 45,668 $ 8,557
========== ==========
(bb) Reclassified to conform to 2006 presentation.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(in thousands)(unaudited)
Roto- Chemed
VITAS Rooter Corporate Consolidated
--------- --------- --------- ------------
2006
--------------------------
Service revenues and
sales $168,374 $ 77,864 $ - $ 246,238
--------- --------- --------- ------------
Cost of services provided
and goods sold 135,458 42,439 - 177,897
Selling, general and
administrative
expenses (a) 13,236 22,542 2,697 38,475
Depreciation 2,073 1,969 106 4,148
Amortization 1,084 20 292 1,396
--------- --------- --------- ------------
Total costs and
expenses 151,851 66,970 3,095 221,916
--------- --------- --------- ------------
Income/(loss) from
operations 16,523 10,894 (3,095) 24,322
Interest expense (31) (173) (5,141) (5,345)
Intercompany interest
income/(expense) 954 852 (1,806) -
Loss on extinguishment
of debt (a) - - (430) (430)
Other income--net 12 362 1,121 1,495
--------- --------- --------- ------------
Income/(loss) before
income taxes 17,458 11,935 (9,351) 20,042
Income taxes (a) (6,601) (4,734) 3,508 (7,827)
--------- --------- --------- ------------
Net income/(loss) $ 10,857 7,201 (5,843) 12,215
========= ========= ========= ============
2005
--------------------------
Service revenues and
sales $145,990 $ 72,647 $ - $ 218,637
--------- --------- --------- ------------
Cost of services provided
and goods sold (b) 115,220 37,732 - 152,952
Selling, general and
administrative
expenses (b) 13,029 21,130 3,760 37,919
Depreciation 1,785 2,062 73 3,920
Amortization 995 26 171 1,192
--------- --------- --------- ------------
Total costs and
expenses 131,029 60,950 4,004 195,983
--------- --------- --------- ------------
Income/(loss) from
operations 14,961 11,697 (4,004) 22,654
Interest expense (38) (182) (5,615) (5,835)
Intercompany interest
income/(expense) 509 424 (933) -
Loss on extinguishment
of debt (b) - - (3,971) (3,971)
Other income--net 108 296 323 727
--------- --------- --------- ------------
Income/(loss) before
income taxes 15,540 12,235 (14,200) 13,575
Income taxes (b) (5,930) (4,925) 5,185 (5,670)
--------- --------- --------- ------------
Income/(loss) from
continuing operations 9,610 7,310 (9,015) 7,905
Discontinued operations - - 211 211
--------- --------- --------- ------------
Net income/(loss) $ 9,610 $ 7,310 $ (8,804) $ 8,116
========= ========= ========= ============
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, 2006 AND 2005
(in thousands)(unaudited)
Roto- Chemed
VITAS Rooter Corporate Consolidated
--------- --------- --------- ------------
2006
----------------------------
Net income/(loss) $ 10,857 $ 7,201 $ (5,843) $ 12,215
Add/(deduct):
Interest expense 31 173 5,141 5,345
Income taxes 6,601 4,734 (3,508) 7,827
Depreciation 2,073 1,969 106 4,148
Amortization 1,084 20 292 1,396
-------- --------- --------- ------------
EBITDA 20,646 14,097 (3,812) 30,931
Add/(deduct):
Legal expenses of OIG
investigation 132 - - 132
Advertising cost
adjustment (c) - (494) - (494)
Interest income (41) (23) (908) (972)
Intercompany interest
income/(expense) (954) (852) 1,806 -
Loss on extinguishment
of debt - - 430 430
-------- --------- --------- ------------
Adjusted EBITDA $ 19,783 $ 12,728 $ (2,484) $ 30,027
========= ========= ========= ============
2005
-----------------------------
Net income/(loss) $ 9,610 $ 7,310 $ (8,804) $ 8,116
Add/(deduct):
Discontinued
operations - - (211) (211)
Interest expense 38 182 5,615 5,835
Income taxes 5,930 4,925 (5,185) 5,670
Depreciation 1,785 2,062 73 3,920
Amortization 995 26 171 1,192
-------- --------- --------- ------------
EBITDA 18,358 14,505 (8,341) 24,522
Add/(deduct):
Long-term incentive
compensation - - 1,324 1,324
Prior-period insurance
adjustment - (1,663) - (1,663)
Advertising cost
adjustment (c) - (553) - (553)
Interest income (126) (41) (483) (650)
Intercompany interest
income/(expense) (509) (424) 933 -
Loss on extinguishment
of debt - - 3,971 3,971
-------- --------- --------- ------------
Adjusted EBITDA $ 17,723 $ 11,824 $ (2,596) $ 26,951
========= ========= ========= ============
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, 2006 AND 2005
(in thousands, except per share data)(unaudited)
2006 2005
-------- --------
Net income/(loss) as reported $12,215 $ 8,116
Add/(deduct):
Discontinued operations - (211)
Aftertax prior period insurance adjustment - (1,014)
Aftertax cost of long-term incentive
compensation (d) - 832
Aftertax cost of legal expenses of OIG
investigation 82 -
Aftertax cost of loss on extinguishment of
debt 273 2,523
-------- --------
Adjusted income from continuing operations $12,570 $10,246
======== ========
Earnings/(Loss) Per Share As Reported
Net income/(loss) $ 0.47 $ 0.32
======== ========
Average number of shares outstanding 26,044 25,152
======== ========
Diluted Earnings/(Loss) Per Share As Reported
Net income/(loss) $ 0.46 $ 0.31
======== ========
Average number of shares outstanding 26,723 25,910
======== ========
Adjusted Earnings Per Share
Income from continuing operations $ 0.48 $ 0.41
======== ========
Average number of shares outstanding 26,044 25,152
======== ========
Adjusted Diluted Earnings Per Share
Income from continuing operations $ 0.47 $ 0.40
======== ========
Average number of shares outstanding 26,723 25,910
======== ========
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, 2006 AND 2005
(unaudited)
2006 2005
--------- ---------
OPERATING STATISTICS
Net revenue ($000)
Homecare $115,458 $100,872
Inpatient 23,107 20,847
Continuous care 29,809 24,271
--------- ---------
Total $168,374 $145,990
========= =========
Net revenue as a percent of total
Homecare 68.6 % 69.1 %
Inpatient 13.7 14.3
Continuous care 17.7 16.6
--------- ---------
Total 100.0 % 100.0 %
========= =========
Average daily census ("ADC") (days)
Homecare 6,112 5,428
Nursing home 3,366 3,201
--------- ---------
Routine homecare 9,478 8,629
Inpatient 432 402
Continuous care 570 492
--------- ---------
Total 10,480 9,523
========= =========
Total Admissions 13,896 12,948
Average length of stay (days) 72.4 (e) 66.2
Median length of stay (days) 12.0 11.0
ADC by major diagnosis
Neurological 33.1 % 31.7 %
Cancer 20.5 21.5
Cardio 14.8 15.3
Respiratory 7.1 7.1
Other 24.5 24.4
--------- ---------
Total 100.0 % 100.0 %
========= =========
Admissions by major diagnosis
Neurological 20.5 % 19.7 %
Cancer 33.7 34.3
Cardio 13.8 14.0
Respiratory 7.9 8.4
Other 24.1 23.6
--------- ---------
Total 100.0 % 100.0 %
========= =========
Direct patient care margins (f)
Routine homecare 47.5 % 49.9 %
Inpatient 23.1 22.9
Continuous care 18.3 17.5
Homecare margin drivers
(dollars per patient day)
Labor costs $ 51.25 $ 45.71
Drug costs 7.43 7.48
Home medical equipment 5.56 5.47
Medical supplies 2.14 2.15
Inpatient margin drivers
(dollars per patient day)
Labor costs $ 246.67 $ 238.31
Continuous care margin drivers
(dollars per patient day)
Labor costs $ 454.53 $ 433.18
Bad debt expense as a percent of revenues 0.9 % 0.9 %
Accounts receivable --
days of revenue outstanding 39.4 39.5
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, 2006 AND 2005
(unaudited)
(a)Included in the results of operations for the three months ended
March 31, 2006 are the following significant credits/(charges)
which may not be indicative of on going operations (in thousands):
Roto-
VITAS Rooter Corporate Consolidated
--------- --------- --------- ------------
Selling, general and
administrative expenses
Costs associated with
OIG investigation $ (132) $ - $ - $ (132)
Loss on extinguishment
of debt - - (430) (430)
--------- --------- --------- ------------
Pretax impact on
earnings (132) - (430) (562)
Income tax benefit on
the above 50 - 157 207
--------- --------- --------- ------------
Aftertax impact on
earnings $ (82) $ - $ (273) $ (355)
========= ========= ========= ============
(b) Included in the results of operations for the three months ended
March 31, 2005 are the following significant credits/(charges)
which may not be indicative of on going operations (in thousands):
Roto-
VITAS 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 - - (1,109) (1,109)
Costs related to
accelerating the
vesting of
stock options - - (215) (215)
Loss on extinguishment
of debt - - (3,971) (3,971)
--------- --------- --------- ------------
Pretax impact on
earnings - 1,663 (5,295) (3,632)
Income tax benefit on
the above - (649) 1,940 1,291
--------- --------- --------- ------------
Aftertax impact on
earnings $ - $ 1,014 $ (3,355) $ (2,341)
========= ========= ========= ============
(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 2006 and 2005, GAAP advertising
expense for Roto-Rooter totaled $4,424,000 and $3,832,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the first quarters of 2006 and 2005 would total
$4,918,000 and $4,385,000, respectively.
(d) For the three months ended March 31, 2005, amounts include costs
related to accelerating the vesting of stock options in addition
to payouts under the Company's LTIP.
(e) VITAS has five large (greater than 450 ADC), 15 medium (greater
than 200 but less than 450 ADC) and 20 small (less than 200 ADC)
hospice programs. All base and new start programs, including the
Phoenix program, are estimated to have Medicare Cap cushion in
excess of 10% for the 2006 measurement period, which will end on
October 31, 2006.
(f) Amounts exclude indirect patient care and administrative costs.
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