Chemed Reports Second-Quarter 2018 Results - Earnings Guidance Increased
<< Back
Chemed Reports Second-Quarter 2018 Results - Earnings Guidance Increased

CINCINNATI--(BUSINESS WIRE)--Jul. 25, 2018-- Chemed Corporation (Chemed) (NYSE: CHE),which operates VITAS Healthcare Corporation (VITAS), one of the nation’s largest providers 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 second quarter ended June 30, 2018, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 6.4% to $442 million
  • GAAP Diluted Earnings-per-Share (EPS) of $3.27
  • Adjusted Diluted EPS of $2.81, an increase of 30.7%

VITAS segment operating results:

  • Net Patient Revenue of $297 million, an increase of 4.2%
  • Average Daily Census (ADC) of 17,643, an increase of 7.6%
  • Admissions of 16,858, an increase of 3.4%
  • Net Income, excluding special items, of $31.8 million, an increase of 25.6%
  • Adjusted EBITDA of $43.1 million, an increase of 1.2%

Roto-Rooter segment operating results:

  • Revenue of $145 million, an increase of 11.3%
  • Net Income of $25.3 million, an increase of 48.3%
  • Adjusted EBITDA of $36.5 million, an increase of 19.8%
  • Adjusted EBITDA margin of 25.2%, an increase of 179-basis points

Effective January 1, 2018, the Financial Accounting Standards Board (FASB) mandated changes in revenue recognition under Generally Accepted Accounting Principles (GAAP). For Chemed, the accounting standard mandated reclassification of certain costs within the 2018 income statement when compared to prior-year formats. These reclassifications do not impact EBITDA, Adjusted EBITDA, pretax income or net income. This accounting standard has been adopted on a modified retrospective basis, meaning prior-year results are not reclassified and are reported using historical revenue recognition accounting standards.

This resulted in the reclassification of net room and board expenses associated with certain patients residing in nursing homes to be reclassified from cost of services to revenue, effectively reducing VITAS’ second quarter 2018 revenue and cost of sales by $2.7 million. In addition, uncollectable accounts receivable, commonly referred to as bad debt expense, historically has been included in selling, general and administrative expenses for VITAS and Roto-Rooter, are now netted against service revenue and sales.

The discussion of operating results below does recast net room and board and estimated uncollectable receivables in the second quarter of 2017 to facilitate analysis of operating results in a format consistent with the 2018 revenue recognition accounting standard.

VITAS

VITAS net revenue was $297 million in the second quarter of 2018, which is an increase of 6.3%, when compared to the prior-year period. This revenue increase is comprised primarily of a geographically weighted average Medicare reimbursement rate increase of approximately 0.6%; a 7.6% increase in average daily census; and a Medicare Cap liability that reduced revenue growth by 0.1%. This growth is partially offset by acuity mix shift that negatively impacted revenue growth 1.6% when compared to the prior-year period.

In the second quarter of 2018, VITAS accrued $536,000 in Medicare Cap billing limitations. At June 30, 2018, VITAS had 30 Medicare provider numbers, two of which have a current estimated 2018 Medicare Cap billing limitation liability of approximately $971,000.

Of VITAS’ 30 Medicare provider numbers, 26 provider numbers have a Medicare Cap cushion of 10% or greater, two provider numbers have a cap cushion between 5% and 10% and two provider numbers have a Medicare Cap billing limitation for the 2018 Medicare Cap period.

Average revenue per patient per day in the quarter was $188.69, which is 1.2% below the prior-year period. Reimbursement for routine home care and high acuity care averaged $164.51 and $707.96, respectively. During the quarter, high acuity days-of-care were 4.5% of total days of care, 53-basis points less than the prior-year quarter.

The second quarter of 2018 gross margin, excluding Medicare Cap, was 21.6%, which is a 54-basis point decline when compared to the second quarter of 2017.

Selling, general and administrative expense was $20.7 million in the second quarter of 2018, which is a favorable decline of 2.9% compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $43.6 million in the quarter, an increase of 1.9%. Adjusted EBITDA margin, excluding Medicare Cap, was 14.7% in the quarter which is a 64-basis point decline when compared to the prior-year period.

Roto-Rooter

Roto-Rooter generated quarterly revenue of $145 million for the second quarter of 2018, an increase of $15.4 million, or 11.9%, over the prior-year quarter. Revenue from the water restoration service segment totaled $24.8 million, an increase of $3.9 million, or 18.4%, when compared to the prior-year quarter.

Commercial drain cleaning revenue increased 9.7%, commercial plumbing and excavation increased 8.8% and commercial water restoration grew 9.9%. Overall, commercial revenue increased 8.8%.

Residential drain cleaning increased 12.5%, plumbing and excavation increased 15.4% and residential water restoration expanded 19.6%. Aggregate residential sales increased 15.1%.

Roto-Rooter’s gross margin in the quarter was 49.9%, an 89-basis point increase when compared to the second quarter of 2017. Adjusted EBITDA in the second quarter of 2018 totaled $36.5 million, an increase of 19.8%. The Adjusted EBITDA margin in the quarter was 25.2% which is a 179-basis point improvement over the prior year.

Chemed Consolidated

As of June 30, 2018, Chemed had total cash and cash equivalents of $13 million and debt of $103 million.

In June 2018, Chemed entered into a five-year Amended and Restated Credit Agreement that consists of a $450 million revolving credit facility. The interest rate on this facility has a floating rate that is currently LIBOR plus 100-basis points. At June 30, 2018, the Company had approximately $310 million of undrawn borrowing capacity under this credit agreement.

During the quarter, the Company repurchased 10,000 shares of Chemed stock for $3.2 million which equates to a cost per share of $317.86. On March 6, 2018, Chemed’s Board of Directors authorized an additional $150 million for stock repurchase under Chemed’s existing share repurchase program. As of June 30, 2018, there was approximately $121 million of remaining share repurchase authorization under this plan.

Chemed restarted its share repurchase program in 2007. Since that time Chemed has repurchased 13.6 million shares, aggregating over $1.0 billion at an average share cost of $76.75. Including dividends over this period, Chemed has returned over $1.2 billion to shareholders.

Guidance for 2018

Revenue growth for VITAS in 2018, prior to Medicare Cap, is estimated to be in the range of 4.0% to 5.0%. Admissions are estimated to expand approximately 4.5% to 5.0% and Average Daily Census in 2018 is estimated to expand approximately 6.5% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 15.9%. We are currently estimating $2.5 million for Medicare Cap billing limitations in the second half of the 2018 calendar year.

Roto-Rooter is forecasted to achieve full-year 2018 revenue growth of 12.0% to 13.0%. This revenue estimate is based upon increased job pricing of approximately 2%, continued growth in core plumbing and drain cleaning services as well as revenue growth from water restoration services. Roto-Rooter’s adjusted EBITDA margin for 2018 is estimated at 24.0%.

Based upon the above, full-year 2018 adjusted earnings per diluted share, excluding non-cash expense for stock options, costs related to litigation, and other discrete items, is estimated to be in the range of $11.35 to $11.55. This compares to Chemed’s 2017 reported adjusted earnings per diluted share of $8.43. This 2018 guidance assumes an effective corporate tax rate of 25.5%.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Thursday, July 26, 2018, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (844) 743-2500 for U.S. and Canadian participants and +1 (661) 378-9533 for international participants. The participant passcode/Conference ID is 7691818. 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 24 hours after the call's conclusion. It can be accessed by dialing (855) 859-2056 for U.S. and Canadian callers and +1 (404) 537-3406 for international callers and will be available for one week following the live call. The replay Conference ID is 7691818. 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 over 17,500 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, drain cleaning, and water cleanup services through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in the republics of Indonesia and Singapore, and the Philippines.

This press release contains information about Chemed’s EBITDA, Adjusted EBITDA and Adjusted Diluted EPS, which are not measures derived in accordance with GAAP and which exclude components that are important to understanding Chemed’s financial performance. In reporting its operating results, Chemed provides EBITDA, Adjusted EBITDA and Adjusted Diluted EPS measures to help investors and others evaluate the Company’s 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 management similarly uses EBITDA, Adjusted EBITDA and Adjusted Diluted EPS to assist it in evaluating the performance of the Company across fiscal periods and in assessing how its performance compares to its peer companies. These measures also help Chemed’s management to estimate the resources required to meet Chemed’s future financial obligations and expenditures. Chemed’s EBITDA, Adjusted EBITDA and Adjusted Diluted EPS should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. We calculated Adjusted EBITDA Margin by dividing Adjusted EBITDA by service revenue and sales. A reconciliation of Chemed’s net income to its EBITDA, Adjusted EBITDA and Adjusted Diluted EPS is presented in the tables following the text of this press release.

Forward-Looking Statements

Certain statements contained in this press release and the accompanying tables are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope," "anticipate," "plan" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Chemed does not undertake and specifically disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause Chemed's actual results to differ from those expressed in such forward-looking statements.

These risks and uncertainties arise from, among other things, possible changes in regulations governing the hospice care or plumbing and drain cleaning industries; periodic changes in reimbursement levels and procedures under Medicare and Medicaid programs; difficulties predicting patient length of stay and estimating potential Medicare reimbursement obligations; challenges inherent in Chemed's growth strategy; the current shortage of qualified nurses, other healthcare professionals and licensed plumbing and drain cleaning technicians; Chemed’s dependence on patient referral sources; and other factors detailed under the caption "Description of Business by Segment" or "Risk Factors" in Chemed’s most recent report on form 10-Q or 10-K and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved.

                 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF INCOME

(in thousands, except per share data)(unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
Service revenues and sales $ 441,813   $ 415,059   $ 880,989   $ 820,923  
Cost of services provided and goods sold 305,741 285,852 610,277 570,992
Selling, general and administrative expenses (aa) 68,297 68,654 137,297 138,112
Depreciation 9,718 8,833 18,985 17,726
Amortization 34 32 61 78
Other operating (income)/expenses   (118 )   90,636     (169 )   91,509  
Total costs and expenses   383,672     454,007     766,451     818,417  
Income/(loss) from operations 58,141 (38,948 ) 114,538 2,506
Interest expense (1,524 ) (1,121 ) (2,731 ) (2,116 )
Other income--net (bb)   1,038     1,653     2,056     4,116  
Income/(loss) before income taxes 57,655 (38,416 ) 113,863 4,506
Income taxes   (2,684 )   16,760     (13,896 )   3,682  
Net income/(loss) $ 54,971   $ (21,656 ) $ 99,967   $ 8,188  
 
Earnings Per Share
Net income/(loss) $ 3.43   $ (1.35 ) $ 6.22   $ 0.51  
Average number of shares outstanding   16,035     16,010     16,067     16,114  
 
Diluted Earnings Per Share
Net income/(loss) $ 3.27   $ (1.35 ) $ 5.93   $ 0.49  
Average number of shares outstanding   16,811     16,010     16,854     16,758  
                               
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
 
Three Months Ended June 30, Six Months Ended June 30,

2018

2017 2018 2017

SG&A expenses before long-term incentive compensation, expenses related to the OIG investigation and the impact of market value adjustments related to deferred compensation plans

$

66,296

$ 64,018 $

132,517

$ 127,750
Long-term incentive compensation

1,222

956

3,142

1,917

Market value adjustments related to deferred compensation plans

779 1,587 1,638 4,202

Expenses related to the OIG investigation

  -     2,093     -     4,243  
Total SG&A expenses $ 68,297   $ 68,654   $ 137,297   $ 138,112  
 
(bb) Other income--net comprises (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017

Market value adjustments related to deferred compensation plans

$ 779 $ 1,587 $ 1,638 $ 4,202
Interest income 259 161 417 245
Loss on disposal of property and equipment - (98 ) - (334 )
Other   -     3     1     3  
Total other income--net $ 1,038   $ 1,653   $ 2,056   $ 4,116  
 

   

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET

(in thousands, except per share data)(unaudited)

             
June 30,
2018 2017
Assets
Current assets
Cash and cash equivalents $ 12,668 $ 13,753
Accounts receivable less allowances 119,206 117,906
Inventories 5,696 5,618
Prepaid income taxes 19,666 4,537
Prepaid expenses   16,205     14,678  
Total current assets 173,441 156,492
Investments of deferred compensation plans held in trust 67,573 58,579
Properties and equipment, at cost less accumulated depreciation 145,903 140,209
Identifiable intangible assets less accumulated amortization 55,250 54,737
Goodwill 478,202 472,897
Deferred income taxes

-

20,593
Other assets  

7,845

    6,767  
Total Assets $ 928,214   $ 910,274  
 
Liabilities
Current liabilities
Accounts payable $ 48,236 $ 49,154
Current portion of long-term debt - 10,000
Income taxes - 3,815
Accrued insurance

42,826

44,905
Accrued compensation 49,372 48,082
Accrued legal 823 92,502
Other current liabilities   25,159     20,142  
Total current liabilities

166,416

268,600
Deferred income taxes 18,811 -
Long-term debt 103,400 115,000
Deferred compensation liabilities 66,154 57,811
Other liabilities  

17,042

    15,780  
Total Liabilities   371,823     457,191  
 
Stockholders' Equity
Capital stock 35,141 34,470
Paid-in capital 744,228 661,553
Retained earnings 1,129,289 957,941
Treasury stock, at cost (1,354,538 ) (1,203,077 )
Deferred compensation payable in Company stock   2,271     2,196  
Total Stockholders' Equity   556,391     453,083  
Total Liabilities and Stockholders' Equity $ 928,214   $ 910,274  
 

   

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
                   
 
Six Months Ended June 30,
2018 2017
Cash Flows from Operating Activities
Net income $ 99,967 $ 8,188

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 19,046 17,804
Stock option expense 7,305 6,055
Noncash long-term incentive compensation 2,942 1,783
Provision/(benefit) for deferred income taxes 2,173 (34,876 )
Noncash directors' compensation 766 766
Amortization of restricted stock awards 446 638
Amortization of debt issuance costs 288 258
Provision for uncollectible accounts receivable - 8,250
Potential litigation settlement - 90,000

Changes in operating assets and liabilities, excluding amounts acquired in business combinations:

(Increase)/decrease in accounts receivable (6,057 ) 5,804
(Increase)/decrease in inventories (362 ) 137
Increase in prepaid expenses (113 ) (1,573 )

Decrease in accounts payable and other current liabilities

(14,909 ) (6,931 )

Change in current income taxes

10,136 2,982
Increase in other assets (5,667 ) (4,152 )
Increase in other liabilities 4,889 3,754
Other sources   186     1,437  
Net cash provided by operating activities   121,036     100,324  
Cash Flows from Investing Activities
Capital expenditures (23,872 ) (28,133 )
Business combinations, net of cash acquired (1,875 ) (525 )
Other sources   533     87  
Net cash used by investing activities   (25,214 )   (28,571 )
Cash Flows from Financing Activities
Proceeds from revolving line of credit 358,350 135,800
Payments on revolving line of credit (281,150 ) (115,800 )
Purchases of treasury stock (84,304 ) (85,063 )
Payments on other long-term debt (75,000 ) (3,750 )
Capital stock surrendered to pay taxes on stock-based compensation (21,022 ) (5,716 )
Proceeds from exercise of stock options 20,209 10,398
Dividends paid (9,016 ) (8,396 )
Debt issuance costs (968 ) -
Decrease in cash overdrafts payable (711 ) (1,090 )
Other (uses)/sources   (663 )   307  
Net cash used by financing activities   (94,275 )   (73,310 )
Increase/(Decrease) in Cash and Cash Equivalents 1,547 (1,557 )
Cash and cash equivalents at beginning of year   11,121     15,310  
Cash and cash equivalents at end of period $ 12,668   $ 13,753  
 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(in thousands)(unaudited)
                  Chemed
VITAS Roto-Rooter Corporate Consolidated
2018
Service revenues and sales $ 296,799   $ 145,014   $ -   $ 441,813  
Cost of services provided and goods sold 233,073 72,668 - 305,741
Selling, general and administrative expenses (a) 20,702 35,909 11,686 68,297
Depreciation 5,050 4,628 40 9,718
Amortization - 34 - 34
Other operating (income)/expense   (67 )   (51 )   -     (118 )
Total costs and expenses   258,758     113,188     11,726     383,672  
Income/(loss) from operations 38,041 31,826 (11,726 ) 58,141
Interest expense (53 ) (92 ) (1,379 ) (1,524 )
Intercompany interest income/(expense) 3,124 1,739 (4,863 ) -
Other income/(expense)—net   238     21     779     1,038  
Income/(loss) before income taxes 41,350 33,494 (17,189 ) 57,655
Income taxes (a)   (9,565 )   (8,196 )   15,077     (2,684 )
Net income/(loss) $ 31,785   $ 25,298   $ (2,112 ) $ 54,971  
 
2017
Service revenues and sales $ 284,710   $

130,349

  $ -   $ 415,059  
Cost of services provided and goods sold 219,769 66,083 - 285,852
Selling, general and administrative expenses (b) 24,531 33,763 10,360 68,654
Depreciation 4,741 4,070 22 8,833
Amortization - 32 - 32
Other operating expenses   90,636     -     -     90,636  
Total costs and expenses   339,677     103,948     10,382     454,007  
Income/(loss) from operations (54,967 ) 26,401 (10,382 ) (38,948 )
Interest expense (53 ) (87 ) (981 ) (1,121 )
Intercompany interest income/(expense) 2,826 1,346 (4,172 ) -
Other income/(expense)—net   71     (4 )   1,586     1,653  
Income/(loss) before income taxes (52,123 ) 27,656 (13,949 ) (38,416 )
Income taxes (b)   19,869     (10,598 )   7,489     16,760  
Net income/(loss) $ (32,254 ) $ 17,058   $ (6,460 ) $ (21,656 )
 
The "Footnotes to Financial Statements" are integral parts of this financial information.

   
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(in thousands)(unaudited)
              Chemed
VITAS Roto-Rooter Corporate Consolidated
2018
Service revenues and sales $ 588,813   $ 292,176   $ -   $ 880,989  
Cost of services provided and goods sold 460,329 149,948 - 610,277
Selling, general and administrative expenses (a) 41,213 72,006 24,078 137,297
Depreciation 9,846 9,072 67 18,985
Amortization - 61 - 61
Other operating income   (84 )   (85 )   -     (169 )
Total costs and expenses   511,304     231,002     24,145     766,451  
Income/(loss) from operations 77,509 61,174 (24,145 ) 114,538
Interest expense (104 ) (184 ) (2,443 ) (2,731 )
Intercompany interest income/(expense) 6,218 3,417 (9,635 ) -
Other income/(expense)—net   380     37     1,639     2,056  
Income/(loss) before income taxes 84,003 64,444 (34,584 ) 113,863
Income taxes (a)   (20,203 )   (16,208 )   22,515     (13,896 )
Net income/(loss) $ 63,800   $ 48,236   $ (12,069 ) $ 99,967  
 
2017
Service revenues and sales $ 567,026   $ 253,897   $ -   $ 820,923  
Cost of services provided and goods sold 441,446 129,546 - 570,992
Selling, general and administrative expenses (b) 48,825 67,223 22,064 138,112
Depreciation 9,519 8,054 153 17,726
Amortization 14 64 - 78
Other operating expenses   91,509     -     -     91,509  
Total costs and expenses   591,313     204,887     22,217     818,417  
Income/(loss) from operations (24,287 ) 49,010 (22,217 ) 2,506
Interest expense (108 ) (185 ) (1,823 ) (2,116 )
Intercompany interest income/(expense) 5,528 2,656 (8,184 ) -
Other income/(expense)—net   (9 )   (77 )   4,202     4,116  
Income/(loss) before income taxes (18,876 ) 51,404 (28,022 ) 4,506
Income taxes (b)   7,219     (19,722 )   16,185     3,682  
Net income/(loss) $ (11,657 ) $ 31,682   $ (11,837 ) $ 8,188  
 
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 JUNE 30, 2018 AND 2017
(in thousands)(unaudited)
           
Chemed
VITAS Roto-Rooter Corporate Consolidated
2018
Net income/(loss) $ 31,785 $ 25,298 $ (2,112 ) $ 54,971
Add/(deduct):
Interest expense 53 92 1,379 1,524
Income taxes 9,565 8,196 (15,077 ) 2,684
Depreciation 5,050 4,628 40 9,718
Amortization -     34     -     34  
EBITDA 46,453 38,248 (15,770 ) 68,931
Add/(deduct):
Intercompany interest expense/(income) (3,124 ) (1,739 ) 4,863 -
Interest income (237 ) (22 ) - (259 )
Amortization of stock awards 37 35 83 155
Medicare cap sequestration adjustment 185 - - 185
Accrued litigation settlement (204 ) - - (204 )

Stock option expense

- - 3,652 3,652
Long-term incentive compensation   -     -     1,222     1,222  
Adjusted EBITDA $ 43,110   $ 36,522   $ (5,950 ) $ 73,682  
 
2017
Net income/(loss) $ (32,254 ) $ 17,058 $ (6,460 ) $ (21,656 )
Add/(deduct):
Interest expense 53 87 981 1,121
Income taxes (19,869 ) 10,598 (7,489 ) (16,760 )
Depreciation 4,741 4,070 22 8,833
Amortization -     32     -     32  
EBITDA (47,329 ) 31,845 (12,946 ) (28,430 )
Add/(deduct):
Intercompany interest expense/(income) (2,826 ) (1,346 ) 4,172 -
Interest income (149 ) (12 ) - (161 )
Accrued litigation settlement 90,000 - - 90,000
Expenses related to OIG investigation 2,093 - - 2,093
Program closure expenses 636 - - 636
Medicare cap sequestration adjustment 105 - - 105
Amortization of stock awards 71 66 166 303
Advertising cost adjustment - (272 ) - (272 )
Expenses related to litigation settlements - 213 - 213

Stock option expense

- - 3,054 3,054
Long-term incentive compensation   -     -     956     956  
Adjusted EBITDA $ 42,601   $ 30,494   $ (4,598 ) $ 68,497  
 
The "Footnotes to Financial Statements" are integral parts of this financial information.

       
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(in thousands)(unaudited)
         
Chemed
VITAS Roto-Rooter Corporate Consolidated
2018
Net income/(loss) $ 63,800 $ 48,236 $ (12,069 ) $ 99,967
Add/(deduct):
Interest expense 104 184 2,443 2,731
Income taxes 20,203 16,208 (22,515 ) 13,896
Depreciation 9,846 9,072 67 18,985
Amortization   -     61     -     61  
EBITDA 93,953 73,761 (32,074 ) 135,640
Add/(deduct):
Intercompany interest expense/(income) (6,218 ) (3,417 ) 9,635 -
Interest income (380 ) (37 ) - (417 )
Amortization of stock awards 107 100 239 446
Medicare cap sequestration adjustment 537 - - 537
Stock option expense - - 7,305 7,305

Accrued litigation settlement

(204 ) - - (204 )
Long-term incentive compensation   -     -     3,142     3,142  
Adjusted EBITDA $ 87,795   $ 70,407   $ (11,753 ) $ 146,449  
 
2017
Net income/(loss) $ (11,657 ) $ 31,682 $ (11,837 ) $ 8,188
Add/(deduct):
Interest expense 108 185 1,823 2,116
Income taxes (7,219 ) 19,722 (16,185 ) (3,682 )
Depreciation 9,519 8,054 153 17,726
Amortization   14     64     -     78  
EBITDA (9,235 ) 59,707 (26,046 ) 24,426
Add/(deduct):
Intercompany interest expense/(income) (5,528 ) (2,656 ) 8,184 -
Interest income (219 ) (26 ) - (245 )

Accrued litigation settlement

90,000 - - 90,000
Medicare cap sequestration adjustment 105 - - 105
Program closure expenses 1,509 - - 1,509
Expenses related to OIG investigation 4,243 - - 4,243
Amortization of stock awards 148 136 354 638
Advertising cost adjustment - (545 ) - (545 )
Expenses related to litigation settlements - 213 - 213
Stock option expense - - 6,055 6,055
Long-term incentive compensation   -     -     1,917     1,917  
Adjusted EBITDA $ 81,023   $ 56,829   $ (9,536 ) $ 128,316  
 
The "Footnotes to Financial Statements" are integral parts of this financial information.

               

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

RECONCILIATION OF ADJUSTED NET INCOME

(in thousands, except per share data)(unaudited)

 
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
Net income/(loss) as reported $ 54,971 $ (21,656 ) $ 99,967 $ 8,188
 
Add/(deduct) after-tax cost of:
Excess tax benefits on stock compensation (11,702 ) (2,643 ) (15,500 ) (6,338 )
Stock option expense 2,900 1,931 5,791 3,828
Long-term incentive compensation 1,003 604 2,502 1,212
Accrued litigation settlement (152 ) 55,800 (152 ) 55,800
Medicare cap sequestration adjustments 138 65 401 65
Expenses of OIG investigation - 1,292 - 2,620
Program closure expenses - 385 - 898
Expenses related to litigation settlements   -     129     -     129  
Adjusted net income $ 47,158   $ 35,907   $ 93,009   $ 66,402  
 
 
Diluted Earnings Per Share As Reported
Net income/(loss) $ 3.27   $ (1.35 ) $ 5.93   $ 0.49  
Average number of shares outstanding   16,811     16,010     16,854     16,758  
 
 
Adjusted Diluted Earnings Per Share
Adjusted net income $ 2.81   $ 2.15   $ 5.52   $ 3.96  
Average number of shares outstanding   16,811     16,702     16,854     16,758  
 
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 AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
OPERATING STATISTICS 2018   2017 2018 2017
Net revenue ($000) (c)
Homecare $ 250,381 $ 229,948 $ 491,412 $ 454,147
Inpatient 20,077 21,316 42,186 44,562
Continuous care 30,513 31,699 61,279 64,556
Other   1,998     1,994     3,740     4,008  
Subtotal $ 302,969 $ 284,957 $ 598,617 $ 567,273
Room and board, net (2,675 ) - (5,294 ) -
Contractual allowances (2,959 ) - (5,792 ) -
Medicare cap allowance   (536 )   (247 )   1,282     (247 )
Net Revenue $ 296,799   $ 284,710   $ 588,813   $ 567,026  
Net revenue as a percent of total before Medicare cap allowance
Homecare 82.6 % 80.7 % 82.1 % 80.1 %
Inpatient 6.6 7.5 7.0 7.9
Continuous care 10.1 11.1 10.2 11.4
Other   0.7     0.7     0.7     0.6  
Subtotal 100.0 100.0 100.0 100.0
Room and board, net (0.9 ) - (0.9 ) -
Contractual allowances (1.0 ) - (1.0 ) -
Medicare cap allowance   (0.1 )   (0.1 )   0.3     -  
Net Revenue   98.0   %   99.9   %   98.4   % 100.0   %
Average daily census ("ADC") (days)
Homecare 13,583 12,446 13,375 12,368
Nursing home   3,275     3,135     3,245     3,093  
Routine homecare 16,858 15,581 16,620 15,461
Inpatient 318 343 335 360
Continuous care   467     474     473     489  
Total   17,643     16,398     17,428     16,310  
 
Total Admissions 16,858 16,311 35,137 33,874
Total Discharges 16,474 16,124 34,054 33,344
Average length of stay (days) 89.0 85.2 88.4 87.1
Median length of stay (days) 17.0 16.0 16.0 16.0
ADC by major diagnosis
Cerebro 36.2 % 34.8 % 36.4 % 34.7 %
Neurological 18.6 19.5 18.6 19.6
Cardio 16.6 16.5 16.4 16.5
Cancer 13.9 14.9 13.9 15.0
Respiratory 8.3 7.9 8.2 7.9
Other   6.4     6.4     6.5     6.3  
Total   100.0   %   100.0   %   100.0   % 100.0   %
Admissions by major diagnosis
Cerebro 21.7 % 21.4 % 22.2 % 21.7 %
Neurological 11.1 10.7 11.2 10.8
Cardio 15.6 15.1 15.6 15.1
Cancer 30.5 31.5 29.2 30.4
Respiratory 10.8 10.2 11.3 11.0
Other   10.3     11.1     10.5     11.0  
Total   100.0   %   100.0   %   100.0   % 100.0   %
Direct patient care margins (d)
Routine homecare 52.6 % 52.8 % 52.4 % 52.1 %
Inpatient 4.2 3.7 5.9 4.8
Continuous care 17.3 18.0 17.5 16.8
Homecare margin drivers (dollars per patient day)
Labor costs $ 57.67 $ 56.55 $ 58.14 $ 57.58

Combined drug, home medical equipment and medical supplies cost

14.39 14.51 14.43 14.82
Inpatient margin drivers (dollars per patient day)
Labor costs $ 380.94 $ 377.13 $ 371.44 $ 373.41
Continuous care margin drivers (dollars per patient day)
Labor costs $ 575.36 $ 583.87 $ 571.41 $ 587.39
Bad debt expense as a percent of revenues 1.0 % 1.1 % 1.0 % 1.1 %
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments 31.9 34.5

n.a. 

n.a. 

Days of revenue outstanding- including unapplied Medicare payments 25.6 28.0

n.a. 

n.a. 

 
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 SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(unaudited)
 
(a)

Included in the results of operations for 2018 are the following significant credits/(charges) which may not be indicative of ongoing operations

(in thousands):
              Three Months Ended June 30, 2018
VITAS   Corporate

 

Consolidated
Service revenues and sales:
Medicare cap sequestration adjustment $ (185 ) $ - $ (185 )
Selling, general and administrative expenses:
Stock option expense - (3,652 ) (3,652 )
Long-term incentive compensation - (1,222 ) (1,222 )
Other operating expenses:
Accrued litigation settlement   204     -     204  
Pretax impact on earnings 19 (4,874 ) (4,855 )
Excess tax benefits on stock compensation - 11,702 11,702
Income tax benefit on the above   (5 )   971     966  
After-tax impact on earnings $ 14   $ 7,799   $ 7,813  
 
Six Months Ended June 30, 2018
VITAS Corporate Consolidated
Service revenues and sales:
Medicare cap sequestration adjustment $ (537 ) $ - $ (537 )
Selling, general and administrative expenses:
Stock option expense - (7,305 ) (7,305 )
Long-term incentive compensation - (3,142 ) (3,142 )
Other operating expenses:

Accrued litigation settlement

  204     -     204  
Pretax impact on earnings (333 ) (10,447 ) (10,780 )
Excess tax benefits on stock compensation - 15,500 15,500
Income tax benefit on the above   84     2,154     2,238  
After-tax impact on earnings $ (249 ) $ 7,207   $ 6,958  
 
(b) Included in the results of operations for 2076 are the following significant credits/(charges) which may not be indicative of ongoing operations
(in thousands):
Three Months Ended June 30, 2017
VITAS Roto-Rooter Corporate Consolidated
Service revenues and sales:
Medicare cap sequestration adjustment $ (105 ) $ - $ - $ (105 )
Selling, general and administrative expenses:
Expenses related to OIG investigation (2,093 ) - - (2,093 )
Expenses related to litigation settlements - (213 ) - (213 )
Stock option expense - - (3,054 ) (3,054 )
Long-term incentive compensation - - (956 ) (956 )
Other operating expenses:
Accrued litigation settlement (90,000 ) - - (90,000 )
Program closure expenses   (636 )   -     -     (636 )
Pretax impact on earnings (92,834 ) (213 ) (4,010 ) (97,057 )
Excess tax benefits on stock compensation - - 2,643 2,643
Income tax benefit on the above   35,292     84     1,475     36,851  
After-tax impact on earnings $ (57,542 ) $ (129 ) $ 108   $ (57,563 )
 
Six Months Ended June 30, 2017
VITAS Roto-Rooter Corporate Consolidated
Service revenues and sales:
Medicare cap sequestration adjustment $ (105 ) $ - $ - $ (105 )
Selling, general and administrative expenses:
Expenses related to OIG investigation (4,243 ) - - (4,243 )
Expenses related to litigation settlements - (213 ) - (213 )
Stock option expense - - (6,055 ) (6,055 )
Long-term incentive compensation - - (1,917 ) (1,917 )
Other operating expenses:
Accrued litigation settlement (90,000 ) - - (90,000 )
Program closure expenses   (1,509 )   -     -     (1,509 )
Pretax impact on earnings (95,857 ) (213 ) (7,972 ) (104,042 )
Excess tax benefits on stock compensation - - 6,338 6,338
Income tax benefit on the above   36,474     84     2,932     39,490  
After-tax impact on earnings $ (59,383 ) $ (129 ) $ 1,298   $ (58,214 )
 
(c)

VITAS has 12 large (greater than 450 ADC), 18 medium (greater than 200 but less than 450 ADC) and 15 small (less than 200 ADC) hospice programs. Of VITAS' 30 unique Medicare provider numbers, 28 provider numbers have a Medicare cap cushion of 5% or greater during the first six months of the current cap year and two provider number have a Medicare cap liability.

 

(d) Amounts exclude indirect patient care and administrative costs, as well as Medicare Cap billing limitation.

Source: Chemed Corporation

Chemed Corporation
David P. Williams, 513-762-6901

All information current at time of original publication. Read complete disclaimer for details.
Copyright © 2017, Chemed Corporation. All rights reserved.
Page last modified: 04/18/05