Chemed Reports Third-Quarter 2005 Results; EPS Guidance for 2005 Increased; VITAS and Roto-Rooter Report Record Earnings.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 third quarter ended September September: see month. 30, 2005, 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 16% to $233 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 $.55, including $.06 favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax adjustments and other items VITAS generated record operating results --Quarterly Net Patient Revenue of $160 million, up 19% --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 10,259, up 15% --Net income of $11.6 million, up 34% over 2004 Pro Forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma Net Income --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 $21.1 million, an increase of 26% Roto-Rooter segment reported increased Revenue, Net Income and Adjusted EBITDA --Revenue of $73 million, an increase of 9% --Net income of $7.1 million, an increase of 16% --Adjusted EBITDA of $11.6 million, an increase of 20% "VITAS continues to generate excellent 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. and admissions growth, with third-quarter ADC totaling 10,259, up 15%, and admissions in the quarter of 12,375, an increase of 10% over the prior-year quarter. Net income for VITAS in the quarter was $11.6 million, an increase of 34% when compared to the prior-year pro forma net income. Adjusted EBITDA margin increased to 13.1%," stated Kevin McNamara Kevin McNamara may refer to:
"Roto-Rooter also reported solid financial operating results. For the third quarter of 2005, Roto-Rooter had revenue of $73 million, an increase of 9%. Adjusted EBITDA was $11.6 million at a margin of 15.9%, resulting in net income for the quarter of $7.1 million." VITAS The merger of VITAS was completed on February February: see month. 24, 2004. Prior to that date, the Company accounted for its 37% ownership of VITAS under the equity method of accounting. As a result, under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , only a portion of VITAS' operating results is fully consolidated into Chemed's first-quarter 2004 results. To facilitate review of Chemed's operating results, pro forma supplemental schedules are included in this earnings release that adjust 2004 assuming Chemed owned 100% of VITAS as of January January: see month. 1, 2004. "VITAS generated revenue growth of 18.7% over the prior-year period and 4.3% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen ," stated David Williams David Williams is the name of: Musicians
The earliest stage of a new business venture. losses, which is $0.3 million higher than the $1.4 million in 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 Statement of Operations See Income statement. , totaled $14.0 million, including $0.3 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 legal expenses. Excluding these OIG expenses, central support costs increased 8.3% when compared to the prior-year quarter and increased 2.6% sequentially." VITAS' ADC in the third quarter of 2005 was 10,259. This compares to an ADC of 8,949 in the comparable prior-year period, an increase of 14.6% and 3.5% sequential One after the other in some consecutive order such as by name or number. growth. Admissions totaled 12,375, an increase of 9.8% over the third quarter of 2004. The 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 66.5 days and compares to 66.9 days in the second quarter of 2005 and 60.8 days in the third quarter of 2004. "VITAS continues to generate strong internal growth," said Williams. "Internal growth, which excludes 2004 and 2005 acquisitions, generated revenue, ADC and admissions increases of 15.4%, 10.7% and 7.3%, respectively, over the prior-year quarter. "Our mix of revenue at VITAS was relatively stable," Williams added. "Routine home care represented 69.8% of revenue, flat over the prior-year quarter and a 50 basis point increase 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 13.3% and continuous care was 16.9% of total revenue in the third quarter of 2005. "All of our base and new start programs are forecasted 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. for the 2005 measurement period which ends on October October: see month. 31, 2005," stated Williams. "As previously discussed, we have been closely monitoring Medicare cap limitations at our Phoenix acquisition. Phoenix continues to forecast a Medicare cap liability ranging from $1.0 million to $1.5 million as of October 31, 2005, which is consistent with what we reported in the second quarter of 2005. The potential of reaching cap in the initial year of acquisition was identified during our due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. of Phoenix. Since this cap limitation relates to patients admitted into the program prior to acquisition, the estimated cap accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. has been accounted for as a contingent liability Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. assumed at acquisition and is not reflected in the Consolidated Statement of Income. VITAS anticipates creating cap cushion in the Phoenix program by increasing access to shorter stay patients and broadening broad·en tr. & intr.v. broad·ened, broad·en·ing, broad·ens To make or become broad or broader. broad access to in patient and continuous care patients. This broad mix of patients is consistent with the clinical model provided by VITAS in its other programs." Roto-Rooter Segment Roto-Rooter's plumbing and drain cleaning business generated sales of $73 million for the third quarter of 2005, 9.2% higher than the $67 million reported in the comparable prior-year quarter. Net income for the quarter was $7.1 million, including $1.0 million of favorable prior-year tax adjustments. The third quarter of 2004 also included favorable tax and other adjustments of $0.8 million. Excluding these favorable adjustments, adjusted net income in the third quarter of 2005 increased 16.5%. Adjusted EBITDA in the third quarter of 2005 totaled $11.6 million, an increase of 20.0% over the third quarter of 2004. Adjusted EBITDA margin in the third quarter of 2005 was 15.9%, a 150 basis point increase over the prior-year period. "Job count in the third quarter of 2005 increased 2.4% over the prior year period," stated Williams. "Commercial plumbing and drain cleaning job count increased 12.0% and 5.5%, respectively, over the prior-year quarter. Residential plumbing jobs increased 6.5% but were offset by a 2.6% decline in residential drain cleaning jobs during the quarter. A commercial job will typically average approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 34% more revenue than a residential job. Accordingly, this continued shift of job mix has a positive impact on aggregate revenue." Guidance for 2005 "Going into the fourth quarter of 2005," Williams stated, "we anticipate VITAS to continue its expansion of operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: through the leveraging of central support costs. Roto-Rooter is estimated to generate a 5% to 6% increase in revenue with margins that approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. 50 basis points above those generated in 2004. Our go-forward effective consolidated tax rate should approximate 39.2%. "Based upon these factors and a current 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. share count of 26.4 million, our expectation is that full-year 2005 earnings per diluted share from continuing operations, excluding the early 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 charges or credits not indicative indicative: see mood. of ongoing operations, will be in the range of $1.87 to $1.90." 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 Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , October 28, 2005, to discuss the company's quarterly results and provide an update on its business. The dial-in number for the conference call is 800-561-2813 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 617-614-3529 for international participants. The participant Participant A party of a funding. It usually refers to the lowest rank or smallest level of funding. passcode is 37179326. 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 passcode is 61415963. An archived webcast will also be available at www.chemed.com and will remain available for 30 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 approximately 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 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
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2005 2004 (bb) 2005 2004 (bb)
--------- --------- --------- ---------
Continuing Operations
Service revenues and sales $233,328 $201,885 $678,274 $521,360
-------- -------- -------- --------
Cost of services provided
and goods sold(aa) 165,229 142,130 479,301 361,049
Selling, general and
administrative
expenses(aa) 38,423 35,371 111,820 98,059
Depreciation(aa) 4,086 2,610 11,934 9,768
Amortization(aa) 1,248 1,704 3,671 3,262
Other expenses -- net(aa) (130) (219) 2,360 7,196
-------- -------- -------- --------
Total costs and expenses 208,856 181,596 609,086 479,334
-------- -------- -------- --------
Income from operations 24,472 20,289 69,188 42,026
Interest expense (5,147) (6,083) (16,021) (15,187)
Loss on extinguishment of
debt - - (3,971) (3,330)
Other income--net 1,317 336 2,644 1,964
-------- -------- -------- --------
Income before income taxes 20,642 14,542 51,840 25,473
Income taxes (6,010) (3,805) (18,192) (9,560)
Equity in loss of affiliate
(VITAS)(aa) - - - (4,105)
-------- -------- -------- --------
Income from continuing
operations 14,632 10,737 33,648 11,808
Discontinued Operations(bb) - (125) (2,015) 12
-------- -------- -------- --------
Net Income $ 14,632 $ 10,612 $ 31,633 $ 11,820
======== ======== ======== ========
Earnings Per Share
Income from continuing
operations $ 0.57 $ 0.43 $ 1.32 $ 0.50
======== ======== ======== ========
Net income $ 0.57 $ 0.43 $ 1.24 $ 0.50
======== ======== ======== ========
Average number of shares
outstanding 25,719 24,940 25,453 23,808
======== ======== ======== ========
Diluted Earnings Per Share
Income from continuing
operations $ 0.55 $ 0.42 $ 1.28 $ 0.49
======== ======== ======== ========
Net income $ 0.55 $ 0.42 $ 1.21 $ 0.49
======== ======== ======== ========
Average number of shares
outstanding 26,401 25,402 26,202 24,272
======== ======== ======== ========
--------------------------------
(aa) Included in the results of operations are 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,
---------------------------------------
2005 2004 2005 2004
--------- --------- --------- ---------
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
Costs associated with OIG
investigation (310) - (564) -
Depreciation
Reduction in expense
related to revision of
purchase price allocation
for VITAS - 837 - -
Amortization
Increase in expense related
to revision of purchase
price allocation for VITAS - (311) - -
Other expenses -- net
Long-term incentive
compensation - - (2,946) (8,783)
Cost of accelerating
vesting of stock options - - (215) -
Adjustments to transaction-
related costs of the VITAS
acquisition 130 219 801 1,587
Loss on extinguishment of debt - - (3,971) (3,330)
------- ------- -------- --------
Pretax impact on
earnings (180) 745 (5,232) (10,526)
Income tax benefit/(charge)
on the above 118 (299) 2,188 4,011
Income tax benefit from
finalizing prior years'
returns 1,787 1,020 1,787 1,020
Prior quarters' impact of
adjustment to effective
tax rate - 1,098 - -
Equity in loss of affiliate
(VITAS) is attributable to
transaction-related
expenses incurred by VITAS
prior to its acquisition
by Chemed - - - (4,105)
------- ------- -------- --------
Aftertax impact on
earnings $ 1,725 $ 2,564 $(1,257) $(9,600)
======= ======= ======== ========
(bb) Results of operations for 2004 have been reclassified for the
results of Service America, discontinued in December 2004.
Included in discontinued operations for 2005 is an aftertax loss
of $2,350,000 resulting from finalizing the disposal of Service
America in May 2005.
CHEMED CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
September 30,
--------------------
2005 2004 (cc)
---------- ---------
Assets
Current assets
Cash and cash equivalents $ 37,575 $ 51,261
Accounts receivable less allowances 84,472 71,920
Inventories 7,252 6,713
Current deferred income taxes 21,486 22,678
Prepaid income taxes 8,112 5,564
Current assets of discontinued operations 3,112 14,253
Prepaid expenses and other current assets 7,186 7,956
-------- --------
Total current assets 169,195 180,345
Investments of deferred compensation plans
held in trust 21,072 18,922
Other investments 1,445 1,445
Note receivable 12,500 12,500
Properties and equipment, at cost less
accumulated depreciation 62,687 50,118
Identifiable intangible assets less
accumulated amortization 73,892 75,828
Goodwill 434,559 407,407
Noncurrent assets of discontinued operations 287 9,791
Other assets 22,111 24,465
-------- --------
Total Assets $797,748 $780,821
======== ========
Liabilities
Current liabilities
Accounts payable $ 45,401 $ 38,759
Current portion of long-term debt 1,123 5,401
Income taxes 5,830 4,330
Accrued insurance 28,634 22,406
Accrued salaries and wages 19,563 22,572
Current liabilities of discontinued
operations 6,301 22,390
Other current liabilities 33,695 33,044
-------- --------
Total current liabilities 140,547 148,902
Deferred income taxes 18,880 1,075
Long-term debt 234,327 288,311
Deferred compensation liabilities 20,991 18,925
Noncurrent liabilities of discontinued
operations 411 482
Other liabilities 7,044 8,231
-------- --------
Total Liabilities 422,200 465,926
-------- --------
Stockholders' Equity
Capital stock 28,021 13,437
Paid-in capital 226,275 209,564
Retained earnings 168,564 127,357
Treasury stock, at cost (45,757) (32,984)
Unearned compensation (3,363) (4,289)
Deferred compensation payable in Company stock 2,354 2,351
Notes receivable for shares sold (546) (541)
-------- --------
Total Stockholders' Equity 375,548 314,895
-------- --------
Total Liabilities and
Stockholders' Equity $797,748 $780,821
======== ========
Book Value Per Share $ 14.58 $ 12.63(dd)
======== ========
---------------------------------------------
(cc) Reclassified for operations discontinued in December 2004.
(dd) Adjusted for 2-for-1 stock split in May 2005.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
Nine Months Ended
September 30,
---------------------
2005 2004 (cc)
---------- ----------
Cash Flows from Operating Activities
Net income/(loss) $ 31,633 $ 11,820
Adjustments to reconcile net income/(loss) to
net cash provided/(used) by operating
activities:
Depreciation and amortization 15,605 13,030
Provision for uncollectible accounts
receivable 5,352 4,543
Write-off of unamortized debt issuance costs 2,871 -
Noncash long-term incentive compensation 2,574 4,988
Discontinued operations 2,015 (12)
Provision for deferred income taxes (1,176) (874)
Amortization of debt issuance costs 1,395 1,457
Equity in loss of affiliate - 4,105
Changes in operating assets and
liabilities, excluding amounts acquired
in business combinations:
Increase in accounts receivable (25,264) (14,328)
Increase in inventories (233) (702)
Decrease in prepaid expenses and
other current assets 2,656 15,302
Decrease in accounts payable and other
current liabilities (3,584) (14,080)
Increase in income taxes 11,827 9,288
Decrease/(increase) in other assets (2,876) 5,786
Increase in other liabilities 1,464 418
Noncash expense of internally financed ESOPs 858 1,420
Other sources/(uses) 479 (200)
--------- ---------
Net cash provided by continuing operations 45,596 41,961
Net cash provided/(used) by discontinued
operations (1,559) 4,604
--------- ---------
Net cash provided by operating activities 44,037 46,565
--------- ---------
Cash Flows from Investing Activities
Capital expenditures (18,874) (13,108)
Net uses from disposals of discontinued
operations (7,145) (1,156)
Business combinations, net of cash acquired (5,680) (330,881)
Proceeds from sales of property and equipment 125 375
Return of merger deposit - 10,000
Other uses (232) (192)
--------- ---------
Net cash used by investing activities (31,806) (334,962)
--------- ---------
Cash Flows from Financing Activities
Repayment of long-term debt (141,245) (94,686)
Proceeds from issuance of long-term debt 85,000 295,000
Increase in cash overdraft payable 10,684 6,920
Issuance of capital stock, net of costs 10,009 97,429
Dividends paid (4,611) (4,210)
Purchases of treasury stock (4,390) (2,391)
Debt issuance costs (1,755) (14,436)
Repayment of stock subscription note receivable - 8,053
Redemption of convertible trust preferred
securities - (2,736)
Other sources 204 27
--------- ---------
Net cash provided/(used) by financing
activities (46,104) 288,970
--------- ---------
Increase/(decrease) in Cash and Cash Equivalents (33,873) 573
Cash and cash equivalents at beginning of year 71,448 50,688
--------- ---------
Cash and cash equivalents at end of period $ 37,575 $ 51,261
========= =========
(cc) Reclassified for operations discontinued in December 2004.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
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(a) 13,995 21,756 2,672 38,423
Depreciation 1,922 2,091 73 4,086
Amortization 984 21 243 1,248
Other expenses(b) - - (130) (130)
-------- -------- -------- --------
Total costs and
expenses 142,530 63,468 2,858 208,856
-------- -------- -------- --------
Income/(loss) from
operations 17,878 9,452 (2,858) 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 18,436 10,268 (8,062) 20,642
Income taxes (6,872) (3,199) 4,061 (6,010)
-------- -------- -------- --------
Income/(loss) from
continuing operations 11,564 7,069 (4,001) 14,632
Discontinued operations - - - -
-------- -------- -------- --------
Net income/(loss) $ 11,564 $ 7,069 $ (4,001) $ 14,632
======== ======== ======== ========
2004
--------------------------
Service revenues and
sales $135,101 $ 66,784 $ - $201,885
-------- -------- -------- --------
Cost of services provided
and goods sold 105,695 36,435 - 142,130
Selling, general and
administrative expenses 12,632 19,987 2,752 35,371
Depreciation 469 2,081 60 2,610
Amortization 1,583 31 90 1,704
Other expenses(b) - - (219) (219)
-------- -------- -------- --------
Total costs and
expenses 120,379 58,534 2,683 181,596
-------- -------- -------- --------
Income/(loss) from
operations 14,722 8,250 (2,683) 20,289
Interest expense (32) (43) (6,008) (6,083)
Intercompany interest
income/(expense) 289 327 (616) -
Other income--net 93 (92) 335 336
-------- -------- -------- --------
Income/(loss) before
income taxes 15,072 8,442 (8,972) 14,542
Income taxes (6,097) (2,375) 4,667 (3,805)
-------- -------- -------- --------
Income/(loss) from
continuing operations 8,975 6,067 (4,305) 10,737
Discontinued operations - - (125) (125)
-------- -------- -------- --------
Net income/(loss) $ 8,975 $ 6,067 $ (4,430) $ 10,612
======== ======== ======== ========
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2005
--------------------------
Service revenues and
sales $460,146 $218,128 $ - $678,274
-------- -------- -------- --------
Cost of services provided
and goods sold(c) 361,703 117,598 - 479,301
Selling, general and
administrative
expenses(a) 40,709 63,949 7,162 111,820
Depreciation 5,477 6,239 218 11,934
Amortization 2,963 70 638 3,671
Other expenses(b) 881 552 927 2,360
-------- -------- -------- --------
Total costs and
expenses 411,733 188,408 8,945 609,086
-------- -------- -------- --------
Income/(loss) from
operations 48,413 29,720 (8,945) 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(d) - - (3,971) (3,971)
Other income--net 134 822 1,688 2,644
-------- -------- -------- --------
Income/(loss) before
income taxes 50,212 31,639 (30,011) 51,840
Income taxes (19,130) (11,749) 12,687 (18,192)
-------- -------- -------- --------
Income/(loss) from
continuing operations 31,082 19,890 (17,324) 33,648
Discontinued operations - - (2,015) (2,015)
-------- -------- -------- --------
Net income/(loss) $ 31,082 $ 19,890 $(19,339) $ 31,633
======== ======== ======== ========
2004
--------------------------
Service revenues and
sales $316,453 $204,907 $ - $521,360
-------- -------- -------- --------
Cost of services provided
and goods sold 247,971 113,078 - 361,049
Selling, general and
administrative expenses 29,940 60,866 7,253 98,059
Depreciation 3,078 6,501 189 9,768
Amortization 2,995 156 111 3,262
Other expenses(b) - 1,558 5,638 7,196
-------- -------- -------- --------
Total costs and
expenses 283,984 182,159 13,191 479,334
-------- -------- -------- --------
Income/(loss) from
operations 32,469 22,748 (13,191) 42,026
Interest expense (90) (102) (14,995) (15,187)
Intercompany interest
income/(expense) 420 700 (1,120) -
Loss on extinguishment
of debt(d) - - (3,330) (3,330)
Other income--net 169 594 1,201 1,964
-------- -------- -------- --------
Income/(loss) before
income taxes 32,968 23,940 (31,435) 25,473
Income taxes (13,489) (8,486) 12,415 (9,560)
Equity in loss of
VITAS(e) - - (4,105) (4,105)
-------- -------- -------- --------
Income/(loss) from
continuing operations 19,479 15,454 (23,125) 11,808
Discontinued operations - - 12 12
-------- -------- -------- --------
Net income/(loss) $ 19,479 $ 15,454 $(23,113) $ 11,820
======== ======== ======== ========
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, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2005
--------------------------
Net income/(loss) $11,564 $ 7,069 $(4,001) $14,632
Add/(deduct):
Discontinued operations - - - -
Interest expense 33 129 4,985 5,147
Income taxes 6,872 3,199 (4,061) 6,010
Depreciation 1,922 2,091 73 4,086
Amortization 984 21 243 1,248
------- ------- ------- -------
EBITDA 21,375 12,509 (2,761) 31,123
Add/(deduct):
Legal expenses of
OIG investigation 310 - - 310
VITAS transaction
expense adjustment(f) - - (130) (130)
Advertising cost
adjustment(g) - (340) - (340)
Interest income (33) (30) (469) (532)
Intercompany interest
income/(expense) (579) (565) 1,144 -
------- ------- ------- -------
Adjusted EBITDA $21,073 $11,574 $(2,216) $30,431
======= ======= ======= =======
2004
---------------------------
Net income/(loss) $ 8,975 $ 6,067 $(4,430) $10,612
Add/(deduct):
Discontinued operations - - 125 125
Interest expense 32 43 6,008 6,083
Income taxes 6,097 2,375 (4,667) 3,805
Depreciation 469 2,081 60 2,610
Amortization 1,583 31 90 1,704
------- ------- ------- -------
EBITDA 17,156 10,597 (2,814) 24,939
Add/(deduct):
VITAS transaction
expense adjustment(f) - - (219) (219)
Advertising cost
adjustment(g) - (577) - (577)
Interest income (94) (44) (336) (474)
Intercompany interest
income/(expense) (289) (327) 616 -
------- ------- ------- -------
Adjusted EBITDA $16,773 $ 9,649 $(2,753) $23,669
======= ======= ======= =======
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, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2005
--------------------------
Net income/(loss) $31,082 $19,890 $(19,339) $31,633
Add/(deduct):
Discontinued operations - - 2,015 2,015
Interest expense 104 408 15,509 16,021
Income taxes 19,130 11,749 (12,687) 18,192
Depreciation 5,477 6,239 218 11,934
Amortization 2,963 70 638 3,671
------- ------- -------- -------
EBITDA 58,756 38,356 (13,646) 83,466
Add/(deduct):
Long-term incentive
compensation(h) 881 552 1,728 3,161
Prior-period insurance
adjustment - (1,663) - (1,663)
Legal expenses of
OIG investigation 564 - - 564
VITAS transaction
expense adjustment(f) - - (801) (801)
Advertising cost
adjustment(g) - (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 $58,240 $34,653 $ (6,608) $86,285
======= ======= ======== =======
2004
--------------------------
Net income/(loss) $19,479 $15,454 $(23,113) $11,820
Add/(deduct):
Discontinued operations - - (12) (12)
Interest expense 90 102 14,995 15,187
Income taxes 13,489 8,486 (12,415) 9,560
Depreciation 3,078 6,501 189 9,768
Amortization 2,995 156 111 3,262
------- ------- -------- -------
EBITDA 39,131 30,699 (20,245) 49,585
Add/(deduct):
Long-term incentive
compensation - 1,558 7,225 8,783
VITAS transaction
expense adjustment(f) - - (1,587) (1,587)
Advertising cost
adjustment(g) - (1,043) - (1,043)
Interest income (190) (108) (1,170) (1,468)
Intercompany interest
income/(expense) (420) (700) 1,120 -
Equity in loss of VITAS - - 4,105 4,105
Loss on extinguishment
of debt - - 3,330 3,330
------- ------- -------- -------
Adjusted EBITDA $38,521 $30,406 $ (7,222) $61,705
======= ======= ======== =======
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF NET INCOME TO ADJUSTED PRO FORMA INCOME FROM
CONTINUING OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(in thousands, except per share data)(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Net income as reported $14,632 $10,612 $31,633 $11,820
Add/(deduct):
Pro forma VITAS net income
contribution for the period(i) - (315) - 2,991
Pro forma financing costs
related to acquisition of
VITAS(j) - - - (2,211)
Pro forma elimination of VITAS
transaction expense
adjustment(f) - (131) - (952)
Pro forma elimination of
equity in loss of VITAS(k) - - - 4,105
------- ------- ------- -------
Pro forma net income 14,632 10,166 31,633 15,753
Add/(deduct):
Discontinued operations - 125 2,015 (12)
Prior period tax adjustments (1,787) (2,118) (1,787) (1,020)
Aftertax prior-period
insurance adjustment - - (1,014) -
Aftertax cost of long-term
incentive compensation(h) - - 1,984 5,437
Aftertax cost of legal
expenses of OIG investigation 192 - 352 -
Aftertax VITAS transaction
expense adjustment(f) (130) - (801) -
Aftertax cost of loss on
extinguishment of debt - - 2,523 2,030
------- ------- ------- -------
Adjusted pro forma income from
continuing operations $12,907 $ 8,173 $34,905 $22,188
======= ======= ======= =======
Earnings Per Share As Reported
Net income $ 0.57 $ 0.43 $ 1.24 $ 0.50
======= ======= ======= =======
Average number of shares
outstanding 25,719 24,940 25,453 23,808
======= ======= ======= =======
Diluted Earnings Per Share As
Reported
Net income $ 0.55 $ 0.42 $ 1.21 $ 0.49
======= ======= ======= =======
Average number of shares
outstanding 26,401 25,402 26,202 24,272
======= ======= ======= =======
Adjusted Pro Forma Earnings Per Share
Income from continuing
operations $ 0.50 $ 0.33 $ 1.37 $ 0.90
======= ======= ======= =======
Average number of shares
outstanding 25,719 24,940 25,453 24,596
======= ======= ======= =======
Adjusted Pro Forma Diluted
Earnings Per Share
Income from continuing
operations $ 0.49 $ 0.32 $ 1.33 $ 0.89
======= ======= ======= =======
Average number of shares
outstanding 26,401 25,402 26,202 25,060
======= ======= ======= =======
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(in thousands, except per share data) (unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
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(a) 13,995 21,756 2,672 38,423
Depreciation 1,922 2,091 73 4,086
Amortization 984 21 243 1,248
Other expenses(b) - - (130) (130)
-------- ------- -------- --------
Total costs and
expenses 142,530 63,468 2,858 208,856
-------- ------- -------- --------
Income/(loss) from
operations 17,878 9,452 (2,858) 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 18,436 10,268 (8,062) 20,642
Income taxes (6,872) (3,199) 4,061 (6,010)
-------- ------- -------- --------
Income/(loss) from
continuing operations 11,564 7,069 (4,001) 14,632
Discontinued operations - - - -
-------- ------- -------- --------
Net income/(loss) $ 11,564 $ 7,069 $ (4,001) $ 14,632
======== ======= ======== ========
Earnings Per Share
Continuing operations $ 0.57
========
Net income $ 0.57
========
Average number of
shares outstanding 25,719
========
Diluted Earnings Per Share
Continuing operations $ 0.55
========
Net income $ 0.55
========
Average number of
shares outstanding 26,401
========
2004 (l)
--------------------------
Service revenues and
sales $135,101 $66,784 $ - $201,885
-------- ------- -------- --------
Cost of services provided
and goods sold 105,695 36,435 - 142,130
Selling, general and
administrative expenses 12,632 19,987 2,752 35,371
Depreciation 1,306 2,081 60 3,447
Amortization 1,272 31 90 1,393
-------- ------- -------- --------
Total costs and
expenses 120,905 58,534 2,902 182,341
-------- ------- -------- --------
Income/(loss) from
operations 14,196 8,250 (2,902) 19,544
Interest expense (32) (43) (6,008) (6,083)
Intercompany interest
income/(expense) 289 327 (616) -
Other income--net 93 (92) 335 336
-------- ------- -------- --------
Income/(loss) before
income taxes 14,546 8,442 (9,191) 13,797
Income taxes (5,886) (2,375) 4,755 (3,506)
-------- ------- -------- --------
Income/(loss) from
continuing operations 8,660 6,067 (4,436) 10,291
Discontinued operations - - (125) (125)
-------- ------- -------- --------
Net income/(loss) $ 8,660 $ 6,067 $ (4,561) $ 10,166
======== ======= ======== ========
Earnings Per Share
Continuing operations $ 0.41
========
Net income $ 0.41
========
Average number of
shares outstanding 24,940
========
Diluted Earnings Per Share
Continuing operations $ 0.41
========
Net income $ 0.40
========
Average number of
shares outstanding 25,402
========
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(in thousands, except per share data) (unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2005
--------------------------
Service revenues and
sales $460,146 $218,128 $ - $678,274
-------- -------- -------- --------
Cost of services provided
and goods sold(c) 361,703 117,598 - 479,301
Selling, general and
administrative
expenses(a) 40,709 63,949 7,162 111,820
Depreciation 5,477 6,239 218 11,934
Amortization 2,963 70 638 3,671
Other expenses(b) 881 552 927 2,360
-------- -------- -------- --------
Total costs and
expenses 411,733 188,408 8,945 609,086
-------- -------- -------- --------
Income/(loss) from
operations 48,413 29,720 (8,945) 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(d) - - (3,971) (3,971)
Other income--net 134 822 1,688 2,644
-------- -------- -------- --------
Income/(loss) before
income taxes 50,212 31,639 (30,011) 51,840
Income taxes (19,130) (11,749) 12,687 (18,192)
-------- -------- -------- --------
Income/(loss) from
continuing operations 31,082 19,890 (17,324) 33,648
Discontinued operations - - (2,015) (2,015)
-------- -------- -------- --------
Net income/(loss) $ 31,082 $ 19,890 $(19,339) $ 31,633
======== ======== ======== ========
Earnings Per Share
Continuing operations $ 1.32
========
Net income $ 1.24
========
Average number of
shares outstanding 25,453
========
Diluted Earnings Per Share
Continuing operations $ 1.28
========
Net income $ 1.21
========
Average number of
shares outstanding 26,202
========
2004 (l)
--------------------------
Service revenues and
sales $389,323 $204,907 $ - $594,230
-------- -------- -------- --------
Cost of services provided
and goods sold 306,819 113,078 - 419,897
Selling, general and
administrative expenses 38,265 60,866 7,114 106,245
Depreciation 3,558 6,501 189 10,248
Amortization 3,599 156 111 3,866
Other expenses(b) - 1,558 7,225 8,783
-------- -------- -------- --------
Total costs and
expenses 352,241 182,159 14,639 549,039
-------- -------- -------- --------
Income/(loss) from
operations 37,082 22,748 (14,639) 45,191
Interest expense (90) (102) (18,397) (18,589)
Intercompany interest
income/(expense) 420 700 (1,120) -
Loss on extinguishment
of debt(d) - - (3,330) (3,330)
Other income--net 210 594 1,201 2,005
-------- -------- -------- --------
Income/(loss) before
income taxes 37,622 23,940 (36,285) 25,277
Income taxes (15,234) (8,486) 14,184 (9,536)
-------- -------- -------- --------
Income/(loss) from
continuing operations 22,388 15,454 (22,101) 15,741
Discontinued operations - - 12 12
-------- -------- -------- --------
Net income/(loss) $ 22,388 $ 15,454 $(22,089) $ 15,753
======== ======== ======== ========
Earnings Per Share
Continuing operations $ 0.64
========
Net income $ 0.64
========
Average number of
shares outstanding 24,596
========
Diluted Earnings Per Share
Continuing operations $ 0.63
========
Net income $ 0.63
========
Average number of
shares outstanding 25,060
========
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2005
--------------------------
Net income/(loss) $11,564 $ 7,069 $(4,001) $14,632
Add/(deduct):
Discontinued operations - - - -
Interest expense 33 129 4,985 5,147
Income taxes 6,872 3,199 (4,061) 6,010
Depreciation 1,922 2,091 73 4,086
Amortization 984 21 243 1,248
------- ------- ------- -------
EBITDA 21,375 12,509 (2,761) 31,123
Add/(deduct):
Long-term incentive
compensation - - - -
Legal expenses of
OIG investigation 310 - - 310
VITAS transaction
expense adjustment(f) - - (130) (130)
Advertising cost
adjustment(g) - (340) - (340)
Interest income (33) (30) (469) (532)
Intercompany interest
income/(expense) (579) (565) 1,144 -
------- ------- ------- -------
Adjusted EBITDA $21,073 $11,574 $(2,216) $30,431
======= ======= ======= =======
2004 (l)
--------------------------
Pro forma net
income/(loss) $ 8,660 $ 6,067 $(4,561) $10,166
Add/(deduct):
Discontinued operations - - 125 125
Interest expense 32 43 6,008 6,083
Income taxes 5,886 2,375 (4,755) 3,506
Depreciation 1,306 2,081 60 3,447
Amortization 1,272 31 90 1,393
------- ------- ------- -------
Pro forma EBITDA 17,156 10,597 (3,033) 24,720
Add/(deduct):
Advertising cost
adjustment(g) - (577) - (577)
Interest income (94) (44) (336) (474)
Intercompany interest
income/(expense) (289) (327) 616 -
------- ------- ------- -------
Pro forma adjusted
EBITDA $16,773 $ 9,649 $(2,753) $23,669
======= ======= ======= =======
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONSOLIDATING SUMMARY OF EBITDA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
--------- ----------- --------- ------------
2005
--------------------------
Net income/(loss) $31,082 $19,890 $(19,339) $31,633
Add/(deduct):
Discontinued operations - - 2,015 2,015
Interest expense 104 408 15,509 16,021
Income taxes 19,130 11,749 (12,687) 18,192
Depreciation 5,477 6,239 218 11,934
Amortization 2,963 70 638 3,671
------- ------- -------- -------
EBITDA 58,756 38,356 (13,646) 83,466
Add/(deduct):
Long-term incentive
compensation(h) 881 552 1,728 3,161
Prior-period insurance
adjustment - (1,663) - (1,663)
Legal expenses of
OIG investigation 564 - - 564
VITAS transaction
expense adjustment(f) - - (801) (801)
Advertising cost
adjustment(g) - (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 $58,240 $34,653 $ (6,608) $86,285
======= ======= ======== =======
2004 (l)
--------------------------
Pro forma net
income/(loss) $22,388 $15,454 $(22,089) $15,753
Add/(deduct):
Discontinued operations - - (12) (12)
Interest expense 90 102 18,397 18,589
Income taxes 15,234 8,486 (14,184) 9,536
Depreciation 3,558 6,501 189 10,248
Amortization 3,599 156 111 3,866
------- ------- -------- -------
Pro forma EBITDA 44,869 30,699 (17,588) 57,980
Add/(deduct):
Long-term incentive
compensation - 1,558 7,225 8,783
Advertising cost
adjustment(g) - (1,043) - (1,043)
Interest income (231) (108) (1,170) (1,509)
Intercompany interest
income/(expense) (420) (700) 1,120 -
Loss on extinguishment
of debt - - 3,330 3,330
------- ------- -------- -------
Pro forma adjusted
EBITDA $44,218 $30,406 $ (7,083) $67,541
======= ======= ======== ========
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, 2005 AND 2004
(unaudited)
(a) For the third quarter and nine months ended September 30, 2005,
amounts for VITAS include $310,000 ($192,000 aftertax) and
$564,000 ($352,000 aftertax), respectively, for legal expenses
incurred in connection with the Office of Inspector General
("OIG") investigation.
(b) Other expenses include the following (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2005 2004 2005 2004
Pretax cost/(benefit): -------- -------- -------- --------
Long-term incentive plan
payout $ - $ - $2,946 $ 8,783
Adjustment of transaction-
related expenses of the
VITAS acquisition (130) (219) (801) (1,587)
Cost of accelerating vesting
of stock options - - 215 -
----- ----- ------ -------
Total other expenses $(130) $(219) $2,360 $ 7,196
===== ===== ====== =======
Aftertax cost/(benefit):
Long-term incentive plan
payout $ - $ - $1,847 $ 5,437
Adjustment of transaction-
related expenses of the
VITAS acquisition (130) (131) (801) (952)
Cost of accelerating vesting
of stock options - - 137 -
----- ----- ------ -------
Total other expenses,
net of income taxes $(130) $(131) $1,183 $ 4,485
===== ===== ====== =======
(c) For the nine months ended September 30, 2005, amount for Roto-
Rooter includes a favorable adjustment to casualty insurance
related to prior periods' experience of $1,663,000 ($1,014,000
aftertax).
(d) For the nine months ended September 30, 2005, amounts include the
prepayment penalty and write-off of debt issuance costs related to
the early extinguishment and refinancing of certain portions of
the Company's debt ($2,523,000 aftertax). For the nine months
ended September 30, 2004, amount represents the prepayment penalty
incurred on the early extinguishment of the Company's debt
($2,030,000 aftertax).
(e) Amount includes the Company's aftertax share of VITAS' charges
related to the Company's acquisition of VITAS in the first quarter
of 2004 prior to the acquisition date. These charges comprise
transaction-related expenses that reduced the Company's equity in
the earnings/(loss) of VITAS by $4,621,000 during the first
quarter of 2004.
(f) Amounts represent favorable adjustments to transaction expenses
related to the acquisition of VITAS.
(g) 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 2005 and 2004, GAAP advertising
expense for Roto-Rooter totaled $4,362,000 and $4,040,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the third quarters of 2005 and 2004 would total
$4,692,000 and $4,617,000, respectively. For the nine months ended
September 30, 2005 and 2004, GAAP advertising expense for
Roto-Rooter totaled $12,685,000 and $12,170,000, respectively. If
the expense of the telephone directories were spread over the
periods they are in circulation, advertising expense for the nine
months ended September 30, 2005 and 2004, would total $13,654,000
and $13,213,000, respectively.
(h) For the nine months ended September 30, 2005, amounts include
costs related to accelerating the vesting of stock options in
addition to payouts under the Company's LTIP.
(i) Amounts represent the additional net income VITAS would contribute
assuming the acquisition were completed on January 1 of the
respective years (excluding Chemed management fees).
(j) Amount represents the additional financing costs, including a loss
on early extinguishment of debt in 2004, that would have been
incurred assuming the financing were completed on January 1, 2004.
(k) Amount represents the impact of eliminating the Company's prior
investments in VITAS, assuming the acquisition of VITAS were
completed on January 1, 2004.
(l) Pro forma amounts for 2004 for VITAS and Corporate assume the
Company's acquisition of VITAS and its financing (including the
retirement of existing debt) were completed as of January 1, 2004,
on the same terms and conditions as completed on February 24,
2004.
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