Chemed Reports Second-Quarter 2008 Results

Business Wire, July 28, 2008

- Guides 2008 Earnings to Higher End of Range

CINCINNATI -- Chemed Corporation (Chemed) (NYSE:CHE), which operates VITAS Healthcare Corporation (VITAS), the nation's largest provider of end-of-life care, and Roto-Rooter, the nation's largest commercial and residential plumbing and drain cleaning services provider, today reported financial results for its second quarter ended June 30, 2008, versus the comparable prior-year period, as follows:

Consolidated operating results:

* Revenue increased 4.3% to $283 million

* Diluted EPS of $.73

* Diluted EPS, excluding stock options and certain other items, of $.77

VITAS segment operating results:

* Net Patient Revenue of $199 million, up 7.2%

* Average Daily Census (ADC) of 11,846, up 3.9%

* Admissions of 13,956, an increase of 2.2%

* Average Length of Stay in the quarter of 73.2 days

* Adjusted EBITDA of $26.3 million, an increase of 5.7%

Roto-Rooter segment operating results:

* Revenue of $84.1 million, a decline of 1.8%

* Job count of 182,083, a decline of 9.8%

* Adjusted EBITDA of $14.8 million, a decline of 18.2%

VITAS

Net revenue for VITAS was $199 million in the second quarter of 2008, which is an increase of 7.2% over the prior-year period. This revenue growth was the result of increased ADC of 3.9% and a Medicare price increase of approximately 3.2%.

Average revenue per patient per day in the quarter was $184.64, which is 3.2 % above the prior-year period. Routine home care reimbursement and high acuity care averaged $145.68 and $642.30, respectively, per patient per day in the second quarter of 2008. During the quarter, high acuity days-of-care was 7.8% of total days-of-care. Quarterly high acuity days-of-care had averaged between 8.0% and 8.4% in 2007. Any shift in revenue mix will typically have a noticeable impact on overall revenue given the significant disparity in reimbursement. However, this marginal decline in high acuity days-of-care was more than offset by the geographic mix of high acuity patients residing in areas with above average per diem reimbursement.

VITAS did not have any billing restrictions related to Medicare Cap for its second-quarter 2008 operating activity. As of June 30, 2008, VITAS has not accrued any Medicare billing restrictions for the 2008 or 2007 Cap years. Of VITAS' 36 unique Medicare provider numbers, 31 provider numbers, or 86%, have a Cap cushion greater than 20% for the 2008 Cap year, three provider numbers are between 10% and 20%, and two provider numbers have Cap cushion of approximately 6%.

Gross margin in the second quarter of 2008 was 21.9%. This is 25 basis points below the second quarter of 2007. This margin decline is a result of increased expenses related to admissions substantially offset by increased direct care patient margins.

As part of its growth strategy, VITAS has expanded its investment in the admissions process. At the end of the second quarter of 2008, VITAS increased staffing of sales representatives, admissions coordinators and admissions nurses by 8.5%. This resulted in an additional $1.4 million of admission expense in the quarter when compared to the prior-year period.

VITAS continues to focus on more efficient scheduling of direct labor. This involves utilization of field-based labor management tools designed to meet and respond to hospice team staffing requirements. VITAS anticipates increased efficiency in its labor management during the second half of 2008.

Selling, general and administrative expense was $17.3 million in the second quarter of 2008, which is an increase of 6.2% over the prior-year quarter and 3.9% on a year-to-date basis. Adjusted EBITDA totaled $26.3 million, an increase of 5.7% over the prior year and equates to an adjusted EBITDA margin of 13.2%.

Roto-Rooter

Roto-Rooter's plumbing and drain cleaning business generated sales of $84 million for the second quarter of 2008, 1.8% lower than the $86 million reported in the comparable prior-year quarter. Adjusted EBITDA in the second quarter of 2008 totaled $14.8 million, a decrease of 18.2% over the second quarter of 2007, and equated to an adjusted EBITDA margin of 17.6%.

Job count in the second quarter of 2008 declined 9.8% when compared to the prior-year period. Total residential jobs declined 10.4% and consisted of residential plumbing jobs decreasing 8.0% and residential drain cleaning jobs declining 11.5%, when compared to the second quarter of 2007. Residential jobs represent approximately 70% of total job count. Total commercial jobs declined 8.5% with commercial plumbing job count declining 6.0% and commercial drain cleaning decreasing 9.2%, over the prior-year quarter.

The second quarter of 2008 continues to indicate recessionary pressure impacting demand for certain discretionary plumbing and drain cleaning services. This is evidenced by a 14% decline in call volume in Roto-Rooter's centralized call centers. This decline has been substantially offset by increased pricing, favorable job mix shift to higher revenue per job excavation work and increased conversion rates of calls to paid jobs.