CINCINNATI--(BUSINESS WIRE)--Feb. 16, 2009-- 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, reported financial results for its fourth quarter ended December 31, 2008, versus the comparable prior-year period, as follows:

Consolidated operating results from continuing operations:

• Revenue increased 2.3% to $292 million
• Diluted EPS of $.89
• Diluted EPS, excluding stock options and certain other items, of $.99
• Full-Year Diluted EPS, excluding stock options and certain other items, of $3.38

VITAS segment operating results:

• Net Patient Revenue of $206 million, up 4.4%
• Average Daily Census (ADC) of 11,829, up 1.4%
• Admissions of 13,314, a decline of 2.1%
• Average Length of Stay in the quarter of 83.1 days
• Adjusted EBITDA of $34.3 million, an increase of 20.7%
• Adjusted EBITDA margin of 16.7%, an increase of 226 basis points

Roto-Rooter segment operating results:

• Revenue of $86.3 million, a decline of 2.5%
• Job count of 179,180, a decline of 12.5%
• Adjusted EBITDA of $15.5 million
• Adjusted EBITDA margin of 17.9%

VITAS

Congress has recently approved The American Recovery and Reinvestment Act of 2009. The President has stated that he intends to sign this stimulus package on Tuesday, February 17, 2009. This Act provides for an increase in the Medicare hospice wage index for the period October 1, 2008, through September 30, 2009. Given the timing of the passage of this Act, VITAS has not included any adjustment to fourth-quarter 2008 revenue for this increase in Medicare hospice reimbursement.

Net revenue for VITAS was $206 million in the fourth quarter of 2008, which is an increase of 4.4% over the prior-year period. This revenue growth was the result of increased ADC of 1.4% and a Medicare price increase of approximately 2.6%. The remaining difference is attributed to revenue mix.

Average revenue per patient per day in the quarter was $189.37, which is 3.0% above the prior-year period. Routine home care reimbursement and high acuity care averaged $149.26 and $665.38, respectively, per patient per day in the fourth quarter of 2008. During the quarter, high acuity days-of-care were 7.8% of total days-of-care. Quarterly high acuity days-of-care averaged between 8.0% and 8.4% in 2007.

VITAS did not have any Medicare Cap liability for the 2008 measurement period ended September 28, 2008. VITAS has recorded $235,000 of Medicare Cap liability related to the first three months of the 2009 cap measurement period. This Medicare Cap liability relates to one provider number that has a gross margin in excess of 20%. Admissions in this provider number have declined in the first three months of the 2009 Medicare Cap year. This program generated a 15% cap cushion over the prior 12-month period.

Of VITAS’ 34 unique Medicare provider numbers, 29 provider numbers, or 85%, have a Medicare Cap cushion greater than 20% for the most recent 12-month period, four provider numbers have 15% to 20% cushion and one provider number has cap cushion of less than 10%. VITAS generated an aggregate cap cushion of $220 million during calendar year 2008.

Gross margin in the fourth quarter of 2008 was 25.1%. This is 192 basis points above the fourth quarter of 2007. This margin increase is a result of improved management of scheduled labor. 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.

Selling, general and administrative expense was $17.2 million in the fourth quarter of 2008, which is a decline of 0.3% when compared to the prior year. Adjusted EBITDA totaled $34.3 million, an increase of 20.7% over the prior year and equates to an adjusted EBITDA margin of 16.7%.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $86 million for the fourth quarter of 2008, 2.5% lower than the $89 million reported in the comparable prior-year quarter. Adjusted EBITDA in the fourth quarter of 2008 totaled $15.5 million, a decrease of 19.0% from the fourth quarter of 2007, and equated to an adjusted EBITDA margin of 17.9%.

Job count in the fourth quarter of 2008 declined 12.5% when compared to the prior-year period. Total residential jobs declined 12.2% and consisted of residential plumbing jobs decreasing 11.0% and residential drain cleaning jobs declining 12.8%, when compared to the fourth quarter of 2007. Residential jobs represent approximately 70% of total job count. Total commercial jobs declined 13.3% with commercial plumbing job count declining 13.2% and commercial drain cleaning decreasing 13.7%, when compared to the prior-year quarter.

This job count decline was significantly mitigated relative to total revenue through a combination of increased pricing, favorable job mix shift to more expensive jobs such as excavation and increased conversion rates of calls to paid jobs.

There continues to be substantial disparity in demand for Roto-Rooter services within the United States. The South region has experienced a 17.3% year-to-date decline in commercial jobs while the Northeast Region had a modest 2.7% decline in commercial volume. Residential demand is not as disparate, with the South region residential job count declining 13.5% while the remaining regions have experienced a job count decline ranging from 6% to 11%.

Management continues to have discussions with existing franchisees to acquire Roto-Rooter franchise territories. This increase in activity is attributed to the current state of the capital markets, the potential increase in tax rates and the recessionary difficulties our franchisees are experiencing. The timing or actual completion of these acquisitions cannot be predicted; however, management intends to be highly disciplined in terms of valuation and risk assessment to ensure these acquisitions will be accretive to shareholders.

Chemed Consolidated Debt and Cash Flows

Chemed’s debt aggregated $210 million at December 31, 2008, $187 million of which carries a fixed interest rate of 1.875% and is due in May 2014. The remaining debt consists of a $14.5 million bank term loan and $8.2 million of debt drawn against Chemed’s $175 million revolving credit facility. The current interest rate on this debt is approximately 1.4%.

Chemed’s $175 million revolving credit facility expires in May 2012. At December 31, 2008, this credit facility had approximately $140 million of undrawn borrowing capacity after deducting for $8.2 million of borrowing and $27 million of letters of credit issued under this facility to secure the Company’s workers’ compensation insurance.

Chemed’s total debt divided by the trailing four quarters of Adjusted EBITDA reflects a debt leverage ratio of 1.3.

Effective January 1, 2009, the Company will be required to retrospectively adopt the provisions of FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments that May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” This new rule requires the Company to separately account for the debt and equity portions of its 1.875% Senior Convertible Notes (Notes). This accounting creates a discount on the Notes that will be recorded in equity at the inception of the debt. The Notes, net of this discount, will be accreted to their face value over the life of the Notes using the effective interest method. The impact of this accounting change for the year ended December 31, 2009, is projected to be a non-cash increase in pretax interest expense of approximately $ 6.0 million ($3.8 million after-tax).

Year-to-date net cash provided from operations aggregated $112 million. Capital expenditures for 2008 aggregated $26 million and compares favorably to total 2007 capital expenditures of $27 million. Chemed’s full-year 2008 depreciation and amortization aggregated $28 million.

Guidance for 2009

Congress has recently approved The American Recovery and Reinvestment Act of 2009. This Act provides for an increase in the Medicare hospice wage index for the period October 1, 2008, through September 30, 2009. This 2009 guidance includes approximately $8 million in additional revenue related to this adjustment in the Medicare hospice reimbursement rate.

VITAS is estimated to generate full-year 2009 revenue growth, prior to Medicare Cap, of 6.0% to 7.5%. Admissions are estimated to increase 2% to 4% and full-year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 15.3% to 16.3%. This guidance assumes VITAS will receive a Medicare basket price increase of 1.5% effective October 1, 2009. Full calendar year 2009 Medicare contractual billing limitations are estimated at $5.0 million.

Roto-Rooter is estimated to generate full-year 2008 revenue growth of 4.0% to 5.0%. The revenue growth is a result of increased pricing of 4.0% to 5.0% and a favorable mix shift to higher revenue jobs, partially offset by a job count decline estimated at 7.0% to 9.0% Adjusted EBITDA margin for 2009 is estimated in the range of 17.0% to 18.0%. This guidance does not include any Roto-Rooter franchise acquisitions that may be completed in 2009.

Chemed’s effective tax rate has been impacted by the severe volatility in the stock market as it relates to certain deferred compensation investments and required GAAP tax accounting. This stock market volatility does not have any material impact on Chemed’s reported pretax earnings. Excluding the impact of taxes associated with this deferred compensation issue, Chemed’s effective tax rate for full-year 2009, is estimated at 39.0%.

Based upon these factors and a full-year average diluted share count of 22.8 million shares, management estimates 2009 earnings per diluted share from continuing operations, excluding noncash expenses for stock options, the non-cash increase in interest expense related to the accounting change for convertible debt interest expense and the tax rate impact from deferred compensation investments will be in the range of $3.70 to $3.95.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Tuesday, February 17, 2009, to discuss the company's quarterly results and provide an update on its business. The dial-in number for the conference call is (800) 884-5695 for U.S. and Canadian participants and (617) 786-2960 for international participants. The participant passcode is 91895366. A live webcast of the call can be accessed on Chemed's website at www.chemed.com by clicking on Investor Relations Home.

A taped replay of the conference call will be available beginning approximately two hours after the call's conclusion. It can be accessed by dialing (888) 286-8010 for U.S. and Canadian callers and (617) 801-6888 for international callers and will be available for one week following the live call. The replay passcode is 53390517. An archived webcast will also be available at www.chemed.com.

Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to approximately 12,000 patients with severe, life-limiting illnesses. This type of care is focused on making the terminally ill patient's final days as comfortable and pain-free as possible.

Chemed operates in the residential and commercial plumbing and drain cleaning industry under the brand name Roto-Rooter. Roto-Rooter provides plumbing and drain service through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in Indonesia, Singapore, Japan, and the Philippines.

This press release contains information about Chemed’s EBITDA and adjusted EBITDA, which are not measures derived in accordance with generally accepted accounting principles and which exclude components that are important to understanding Chemed’s financial performance. Chemed provides EBITDA and adjusted EBITDA to help investors and others evaluate its operating results, compare its operating performance with that of similar companies that have different capital structures and evaluate its ability to meet its future debt service, capital expenditures and working capital requirements. Chemed’s EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. A reconciliation of Chemed’s net income to its adjusted EBITDA is presented in the tables following the text of this press release.

Forward-Looking Statements

Certain statements contained in this press release and the accompanying tables are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope," "anticipate," "plan" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Chemed does not undertake and specifically disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause Chemed's actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties arise from, among other things, possible changes in regulations governing the hospice care or plumbing and drain cleaning industries; periodic changes in reimbursement levels and procedures under Medicare and Medicaid programs; difficulties predicting patient length of stay and estimating potential Medicare reimbursement obligations; challenges inherent in Chemed's growth strategy; the current shortage of qualified nurses, other healthcare professionals and licensed plumbing and drain cleaning technicians; Chemed’s dependence on patient referral sources; and other factors detailed under the caption "Description of Business by Segment" or "Risk Factors" in Chemed’s most recent report on form 10-Q or 10-K and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved.