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Chemed > Investor Relations > News Releases > News Release
News Releases
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Chemed Reports Second-Quarter 2009 Results

CINCINNATI--(BUSINESS WIRE)--Jul. 30, 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 second quarter ended June 30, 2009, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 4.3% to $295.3 million
  • Diluted EPS increased 11.8% to $0.76
  • Adjusted Diluted EPS increased 26.0% to $0.97

VITAS segment operating results:

  • Net Patient Revenue of $211.3 million, up 6.2%
  • Average Daily Census (ADC) of 11,920, up 0.6%
  • Average Length of Stay in the quarter of 73.4 days
  • Net Income of $17.2 million, an increase of 20.4%
  • Adjusted EBITDA of $31.3 million, an increase of 19.2%
  • Adjusted EBITDA margin of 14.8%, an increase of 162 basis points

Roto-Rooter segment operating results:

  • Revenue of $84.0 million, essentially equal to comparable prior-year period
  • Job count of 168,017, a decline of 7.7%
  • Net Income of $8.9 million, an increase of 5.5%
  • Adjusted EBITDA of $15.6 million, an increase of 4.9%
  • Adjusted EBITDA margin of 18.6%, an increase of 90 basis points

VITAS

Net revenue for VITAS was $211.3 million in the second quarter of 2009, which is an increase of 6.2% over the prior-year period. This revenue growth was the result of increased ADC of 0.6%, a Medicare price increase of approximately 3.5% and the reversal of previously recorded Medicare Cap billing limitations. The remaining difference is attributed to revenue and patient geographic mix.

Average revenue per patient per day in the quarter was $194.33, which is 5.3% above the prior-year period. Routine home care reimbursement and high acuity care averaged $152.42 and $672.67, respectively, per patient per day in the second quarter of 2009. During the quarter, high acuity days-of-care were 8.1% of total days-of-care.

The Medicare Cap billing limitation of $505,000 recorded in the fourth quarter of 2008 and first quarter of 2009 was reversed in the second quarter of 2009. This reversal is the result of improved Medicare admissions in the one provider number which we calculated had billing limitations earlier in the 2009 measurement period. Of VITAS’ 34 unique Medicare provider numbers, 32 provider numbers, or 94%, have a Medicare Cap cushion greater than 10% for the most recent twelve-month period and two provider numbers have cushion of less than 5%. VITAS generated an aggregate cap cushion of $189 million or 25% during the most recent twelve-month period.

The second quarter of 2009 gross margin was 23.3% which is 139 basis points above VITAS’ gross margin in the second quarter of 2008. This is the fifth consecutive quarter of margin improvement and is a result of continued refinements to scheduled field labor.

Selling, general and administrative expense was $17.9 million in the second quarter of 2009, which is an increase of 3.5% when compared to the prior year. Adjusted EBITDA totaled $31.3 million, an increase of 19.2% over the comparable prior-year period. Adjusted EBITDA margin was 14.8% in the quarter, increasing 162 basis points when compared to the prior year.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $84.0 million for the second quarter of 2009, essentially equal to the comparable prior-year quarter. Despite essentially flat revenues, Roto-Rooter’s gross margin expanded 44 basis points as compared to the second quarter of 2008 to 46.2% This is attributable primarily to favorable technician turnover rates and a 5.7% decline in our average field-based workforce for the first six months of 2009 as compared to the same period of 2008. Favorable technician turnover rates improve margins by reducing training costs, inefficient labor hours and medical expenses. Adjusted EBITDA in the second quarter of 2009 totaled $15.6 million, an increase of 4.9% from the second quarter of 2008, and equated to an Adjusted EBITDA margin of 18.6%.

Job count in the second quarter of 2009 declined 7.7% when compared to the prior-year period. Total residential jobs declined 6.3%, as residential plumbing jobs decreased 8.5% and residential drain cleaning jobs declined 5.4%, when compared to the second quarter of 2008. Residential jobs represent approximately 70% of total job count. Total commercial jobs declined 11.1% with commercial plumbing job count declining 13.6% and commercial drain cleaning decreasing 11.4%, when compared to the prior-year quarter. These declines were partially offset by a 20.6% increase in jobs in the “Other” category.

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, although this disparity has lessened somewhat over the past several quarters. The South Region has experienced a 19.7% year-to-date decline in commercial jobs while commercial volume declined 10.7% in the Central Region. Residential demand is not as disparate, with the South Region residential job count declining 11.4% while the remaining regions have experienced a job count decline ranging from 5.4% to 10.3%.

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. Management will continue to be highly disciplined in terms of valuation, risk assessment and overall return on investment of any potential acquisition. However, the timing or actual completion of any acquisition cannot be predicted.

Chemed Consolidated Debt and Cash Flows

Effective January 1, 2009, the Company retrospectively adopted 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 required the Company to separately account for the debt and equity portions of its 1.875% Senior Convertible Notes (Notes). This accounting assumed the Company could have borrowed under a conventional seven-year fixed rate interest only note at 6.875%. The difference between the 1.875% coupon rate of the Notes and this estimated borrowing rate created a discount on the Notes that is 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 $6.3 million ($4.0 million after-tax).

Chemed had total debt of $153.8 million at June 30, 2009. This debt is net of the discount taken as a result of FASB Staff Position No. APB 14-1. Excluding this discount, aggregate debt is $192.0 million of which $187.0 million carries a fixed interest rate of 1.875% and is due in May 2014. The remaining debt consists of a $5.0 million bank term loan with a current interest rate of approximately 1.2%. During the second quarter of 2009, we prepaid $4.5 million of the bank term loan utilizing cash on hand. Chemed’s total debt is less than one times trailing four quarters of Adjusted EBITDA.

Chemed’s $175.0 million revolving credit facility expires in May 2012. At June 30, 2009, this credit facility had approximately $147.2 million of undrawn borrowing capacity after deducting $27.8 million of letters of credit issued under this facility to secure the Company’s workers’ compensation insurance.

Total cash and cash equivalents as of June 30, 2009, was $16.6 million which represents 10.5% of total current assets. Net cash provided from operations in the first six months of 2009 aggregated $43.1 million. Capital expenditures for the first six months of 2009 aggregated $8.1 million and compares favorably to depreciation and amortization in the first six months of 2009 of $13.8 million. Management continually evaluates alternatives, including share or debt repurchase, acquisitions and increased dividends, to determine the most beneficial use of our available capital resources.

Guidance for 2009

VITAS expects to achieve full-year 2009 revenue growth, prior to Medicare Cap, of 5.0% to 6.0%. Admissions in 2009 are estimated to be in the range of 98% to 102% of total 2008 admissions and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 15.5% to 16.5%. Visibility on Medicare reimbursement for the Federal government’s 2010 fiscal year continues to be difficult. As a result of the lack of visibility, management has maintained the prior quarter’s estimate on reimbursement which assumes a net reimbursement increase of 1.5% effective October 1, 2009. Full calendar year 2009 Medicare contractual billing limitations are estimated at $2.3 million.

Roto-Rooter expects to achieve full-year 2009 revenue to range from flat to an increase of 1%. The revenue growth is a result of increased pricing of 5.0%, 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 17.5% to 18.5%.

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 22.7 million shares, management estimates 2009 earnings per diluted share from continuing operations, excluding non-cash expenses for stock options, the non-cash increase in interest expense related to the accounting change for convertible debt interest expense and other items not indicative of ongoing operations will be in the range of $3.75 to $3.95.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., EDT, on Thursday, July 30, 2009, to discuss the company’s quarterly results and to provide an update on its business. The dial-in number for the conference call is (866) 783-2137 for U.S. and Canadian participants and (857) 350-1596 for international participants. The participant passcode is 46513577. 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 (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 91427994. 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, 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,

2009 2008 2009 2008
Service revenues and sales $ 295,255   $ 283,156   $ 590,193   $ 568,424  
Cost of services provided and goods sold (aa) 207,337 201,139 414,350 406,951
Selling, general and administrative expenses (aa) 49,580 46,321 95,373 89,048
Depreciation 5,338 5,370 10,663 10,808
Amortization 1,618 1,489 3,154 2,939
Other operating expense (aa)   3,444     -     3,989     -  
Total costs and expenses   267,317     254,319     527,529     509,746  
Income from operations 27,938 28,837 62,664 58,678
Interest expense (aa) (3,142 ) (2,964 ) (5,986 ) (6,073 )
Other income--net (aa)   3,358     886     3,082     (303 )
Income before income taxes 28,154 26,759 59,760 52,302
Income taxes   (10,904 )   (10,488 )   (23,171 )   (20,171 )
Net Income $ 17,250   $ 16,271   $ 36,589   $ 32,131  
 
 
Earnings Per Share (aa)
Net income $ 0.77   $ 0.69   $ 1.63   $ 1.36  
Average number of shares outstanding   22,417     23,486     22,406     23,681  
 
Diluted Earnings Per Share (aa)
Net income $ 0.76   $ 0.68   $ 1.61   $ 1.34  
Average number of shares outstanding   22,672     23,759     22,660     24,026  
                 
(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 June 30,

 

Six Months Ended June 30,

2009 2008 2009 2008
Cost of services provided and goods sold
Unreserved prior-year's insurance claim $ - $ - $ - $ (597 )
Selling, general and administrative expenses
Stock option expense (2,443 ) (1,591 ) (4,485 ) (2,982 )

Legal costs associated with OIG investigation

(86 ) (57 ) (99 ) (42 )
Other operating expense

Expenses associated with contested proxy solicitation

(3,444 ) - (3,989 ) -
Interest expense

Additional interest expense resulting from the change in accounting for the conversion of the convertible notes (bb)

(1,561 ) (1,542 ) (3,091 ) (3,054 )
Other income--net

Non-taxable income from certain investments held in deferred compensation trusts

  -     -     1,211     -  
Pretax impact on earnings (7,534 ) (3,190 ) (10,453 ) (6,675 )
Income tax benefit on the above 2,770 1,166 4,287 2,458

Income tax impact of non-deductible net market losses on investments held in deferred compensation trusts

20 - (455 ) -
Income tax credit related to prior years   -     -     -     322  
After-tax impact on earnings $ (4,744 ) $ (2,024 ) $ (6,621 ) $ (3,895 )
 
(bb)

Effective January 1, 2009, we adopted 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)." Financial statements for 2008 and prior periods have been restated for this change in accounting.

 

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET

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

                 
 

June 30,

2009 2008 (bb)
Assets
Current assets
Cash and cash equivalents $ 16,632 $ 1,525
Accounts receivable less allowances 104,123 101,403
Inventories 8,240 7,588
Current deferred income taxes 15,911 14,855
Prepaid income taxes 5,049 2,370
Prepaid expenses and other current assets   9,031     9,323  
Total current assets 158,986 137,064
Investments of deferred compensation plans held in trust 20,348 30,630
Properties and equipment, at cost less accumulated depreciation 73,081 72,276
Identifiable intangible assets less accumulated amortization 59,875 63,160
Goodwill 450,005 439,216
Other assets   13,908     14,643  
Total Assets $ 776,203   $ 756,989  
 
Liabilities
Current liabilities
Accounts payable $ 49,471 $ 50,760
Current portion of long-term debt 5,070 10,166
Income taxes 1,301 863
Accrued insurance 35,029 34,501
Accrued compensation 37,936 34,492
Other current liabilities   13,876     13,230  
Total current liabilities 142,683 144,012
Deferred income taxes 23,305 21,725
Long-term debt 148,763 170,168
Deferred compensation liabilities 20,157 30,752
Other liabilities   4,391     5,819  
Total Liabilities   339,299     372,476  
 
Stockholders' Equity
Capital stock 29,614 29,390
Paid-in capital 320,629 307,598
Retained earnings 371,617 305,232
Treasury stock, at cost (286,888 ) (260,122 )
Deferred compensation payable in Company stock   1,932     2,415  
Total Stockholders' Equity   436,904     384,513  
Total Liabilities and Stockholders' Equity $ 776,203   $ 756,989  
                       
(bb)

Effective January 1, 2009, we adopted 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)." Financial statements for 2008 and prior periods have been restated for this change in accounting.

 

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)(unaudited)

                   

Six Months Ended June 30,

2009 2008 (bb)
Cash Flows from Operating Activities
Net income $ 36,589 $ 32,131

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

Depreciation and amortization 13,817 13,747
Provision for uncollectible accounts receivable 5,459 4,351
Stock option expense 4,485 2,982
Amortization of discount on convertible notes 3,253 3,252
Provision for deferred income taxes 317 (2,809 )
Amortization of debt issuance costs 309 309

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

Increase in accounts receivable (11,575 ) (4,652 )
Increase in inventories (668 ) (953 )

Decrease in prepaid expenses and other current assets

902 1,179

Decrease in accounts payable and other current liabilities

(4,005 ) (2,248 )
Decrease in income taxes (4,267 ) (4,903 )
Decrease/(increase) in other assets 2,264 (1,906 )
Increase/(decrease) in other liabilities (3,481 ) 1,910
Excess tax benefit on share-based compensation (313 ) (825 )
Other sources   34     206  
Net cash provided by operating activities   43,120     41,771  
Cash Flows from Investing Activities
Capital expenditures (8,136 ) (8,715 )
Business combinations, net of cash acquired (1,859 ) (577 )
Proceeds from sales of property and equipment 1,496 71
Net proceeds/(uses) from the sale of discontinued operations (219 ) 9,439
Other uses   (256 )   (306 )
Net cash used by investing activities   (8,974 )   (88 )
Cash Flows from Financing Activities
Repayment of long-term debt (9,599 ) (5,095 )
Net increase/(decrease) in revolving line of credit (8,200 ) 8,300
Dividends paid (2,711 ) (2,900 )
Decrease in cash overdrafts payable (781 ) (655 )
Purchases of treasury stock (526 ) (45,791 )
Excess tax benefit on share-based compensation 313 825
Other sources   362     170  
Net cash used by financing activities   (21,142 )   (45,146 )
Increase/(Decrease) in Cash and Cash Equivalents 13,004 (3,463 )
Cash and cash equivalents at beginning of year   3,628     4,988  
Cash and cash equivalents at end of period $ 16,632   $ 1,525  
                       
(bb)

Effective January 1, 2009, we adopted 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)." Financial statements for 2008 and prior periods have been restated for this change in accounting.

 

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
(in thousands)(unaudited)
             
Chemed
VITAS Roto-Rooter Corporate Consolidated
2009
Service revenues and sales $ 211,303   $ 83,952   $ -   $ 295,255  
Cost of services provided and goods sold 162,176 45,161 - 207,337
Selling, general and administrative expenses (a) 17,877 22,844 8,859 49,580
Depreciation 3,256 2,035 47 5,338
Amortization 989 33 596 1,618
Other operating expense (a)   -     -     3,444     3,444  
Total costs and expenses   184,298     70,073     12,946     267,317  
Income/(loss) from operations 27,005 13,879 (12,946 ) 27,938
Interest expense (a) (326 ) (59 ) (2,757 ) (3,142 )
Intercompany interest income/(expense) 1,022 581 (1,603 ) -
Other income—net   123     6     3,229     3,358  
Income/(loss) before income taxes 27,824 14,407 (14,077 ) 28,154
Income taxes (a)   (10,580 )   (5,556 )   5,232     (10,904 )
Net income/(loss) $ 17,244   $ 8,851   $ (8,845 ) $ 17,250  
 
2008 (f)
Service revenues and sales $ 199,048   $ 84,108   $ -   $ 283,156  
Cost of services provided and goods sold 155,530 45,609 - 201,139
Selling, general and administrative expenses (b) 17,273 23,363 5,685 46,321
Depreciation 3,233 2,065 72 5,370
Amortization   996     12     481     1,489  
Total costs and expenses   177,032     71,049     6,238     254,319  
Income/(loss) from operations 22,016 13,059 (6,238 ) 28,837
Interest expense (b) (32 ) (77 ) (2,855 ) (2,964 )
Intercompany interest income/(expense) 1,062 764 (1,826 ) -
Other income—net   (12 )   (15 )   913     886  
Income/(loss) before income taxes 23,034 13,731 (10,006 ) 26,759
Income taxes (b)   (8,713 )   (5,338 )   3,563     (10,488 )
Net income/(loss) $ 14,321     8,393     (6,443 )   16,271  
 
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, 2009 AND 2008
(in thousands)(unaudited)
             
Chemed
VITAS Roto-Rooter Corporate Consolidated
2009  
Service revenues and sales $ 419,720   $ 170,473   $ -   $ 590,193  
Cost of services provided and goods sold 321,807 92,543 - 414,350
Selling, general and administrative expenses (a) 35,423 47,219 12,731 95,373
Depreciation 6,475 4,089 99 10,663
Amortization 1,979 48 1,127 3,154
Other operating expense (a)   -     -     3,989     3,989  
Total costs and expenses   365,684     143,899     17,946     527,529  
Income/(loss) from operations 54,036 26,574 (17,946 ) 62,664
Interest expense (a) (365 ) (94 ) (5,527 ) (5,986 )
Intercompany interest income/(expense) 1,913 1,117 (3,030 ) -
Other income—net (a)   120     122     2,840     3,082  
Income/(loss) before income taxes 55,704 27,719 (23,663 ) 59,760
Income taxes (a)   (21,177 )   (10,592 )   8,598     (23,171 )
Net income/(loss) $ 34,527   $ 17,127   $ (15,065 ) $ 36,589  
 
2008 (f)
Service revenues and sales $ 397,633   $ 170,791   $ -   $ 568,424  
Cost of services provided and goods sold 314,333 92,618 - 406,951
Selling, general and administrative expenses (b) 33,420 47,134 8,494 89,048
Depreciation 6,513 4,147 148 10,808
Amortization   1,992     25     922     2,939  
Total costs and expenses   356,258     143,924     9,564     509,746  
Income/(loss) from operations 41,375 26,867 (9,564 ) 58,678
Interest expense (b) (83 ) (160 ) (5,830 ) (6,073 )
Intercompany interest income/(expense) 2,427 1,806 (4,233 ) -
Other income—net   11     13     (327 )   (303 )
Income/(loss) before income taxes 43,730 28,526 (19,954 ) 52,302
Income taxes (b)   (16,111 )   (11,038 )   6,978     (20,171 )
Net income/(loss) $ 27,619   $ 17,488   $ (12,976 ) $ 32,131  
 
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, 2009 AND 2008
(in thousands)(unaudited)
                 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2009
Net income/(loss) $ 17,244 $ 8,851 $ (8,845 ) $ 17,250
Add/(deduct):
Interest expense 326 59 2,757 3,142
Income taxes 10,580 5,556 (5,232 ) 10,904
Depreciation 3,256 2,035 47 5,338
Amortization   989     33     596     1,618  
EBITDA 32,395 16,534 (10,677 ) 38,252
Add/(deduct):
Expenses associated with contested proxy solicitation. - - 3,444 3,444
Legal expenses of OIG investigation 86 - - 86
Stock option expense - - 2,443 2,443
Advertising cost adjustment (c) - (368 ) - (368 )
Interest income (148 ) (16 ) (43 ) (207 )
Intercompany interest income/(expense)   (1,022 )   (581 )   1,603     -  
Adjusted EBITDA $ 31,311   $ 15,569   $ (3,230 ) $ 43,650  
 
2008 (f)
Net income/(loss) $ 14,321 $ 8,393 $ (6,443 ) $ 16,271
Add/(deduct):
Interest expense 32 77 2,855 2,964
Income taxes 8,713 5,338 (3,563 ) 10,488
Depreciation 3,233 2,065 72 5,370
Amortization   996     12     481     1,489  
EBITDA 27,295 15,885 (6,598 ) 36,582
Add/(deduct):
Legal expenses of OIG investigation 57 - - 57
Stock option expense - - 1,591 1,591
Advertising cost adjustment (c) - (255 ) - (255 )
Interest income (13 ) (22 ) (71 ) (106 )
Intercompany interest income/(expense)   (1,062 )   (764 )   1,826     -  
Adjusted EBITDA $ 26,277   $ 14,844   $ (3,252 ) $ 37,869  
 
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, 2009 AND 2008
(in thousands)(unaudited)
                 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2009
Net income/(loss) $ 34,527 $ 17,127 $ (15,065 ) $ 36,589
Add/(deduct):
Interest expense 365 94 5,527 5,986
Income taxes 21,177 10,592 (8,598 ) 23,171
Depreciation 6,475 4,089 99 10,663
Amortization   1,979     48     1,127     3,154  
EBITDA 64,523 31,950 (16,910 ) 79,563
Add/(deduct):

Non-taxable income from certain investments held in deferred compensation trusts

- - (1,211 ) (1,211 )
Expenses associated with contested proxy solicitation. - - 3,989 3,989
Legal expenses of OIG investigation 99 - - 99
Stock option expense - - 4,485 4,485
Advertising cost adjustment (c) - (762 ) - (762 )
Interest income (196 ) (35 ) (58 ) (289 )
Intercompany interest income/(expense)   (1,913 )   (1,117 )   3,030     -  
Adjusted EBITDA $ 62,513   $ 30,036   $ (6,675 ) $ 85,874  
 
2008 (f)
Net income/(loss) $ 27,619 $ 17,488 $ (12,976 ) $ 32,131
Add/(deduct):
Interest expense 83 160 5,830 6,073
Income taxes 16,111 11,038 (6,978 ) 20,171
Depreciation 6,513 4,147 148 10,808
Amortization   1,992     25     922     2,939  
EBITDA 52,318 32,858 (13,054 ) 72,122
Add/(deduct):
Unreserved insurance claim - 597 - 597
Legal expenses of OIG investigation 42 - - 42
Stock option expense - - 2,982 2,982
Advertising cost adjustment (c) - (825 ) - (825 )
Interest income (51 ) (40 ) (352 ) (443 )
Intercompany interest income/(expense)   (2,427 )   (1,806 )   4,233     -  
Adjusted EBITDA $ 49,882   $ 30,784   $ (6,191 ) $ 74,475  
 
The "Footnotes to Financial Statements" are integral parts of this financial information.
 

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(in thousands, except per share data)(unaudited)
                 
Three Months Ended Six Months Ended
June 30, June 30,
2009

2008 (f)

2009

2008 (f)

Net income as reported

$

17,250

$ 16,271

$

36,589

$ 32,131
 
Add/(deduct):
After-tax expenses associated with contested proxy solicitation

2,180

-

2,525

-
After-tax cost of legal expenses of OIG investigation

53

35

61

26
After-tax stock option expense

1,544

1,010

2,836

1,894

After-tax additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes

987

979

1,955

1,939

After-tax impact of non-deductible losses and non-taxable gains on investments held in deferred compensation trusts

(20

)

-

(756

)

-
Income tax credit related to prior years

-

-

-

(322 )
After-tax unreserved insurance cost  

-

    -    

-

    358  
 
Adjusted net income

$

21,994

  $ 18,295  

$

43,210

  $ 36,026  
 
 
Earnings Per Share As Reported
Net income

$

0.77

  $ 0.69  

$

1.63

  $ 1.36  
Average number of shares outstanding  

22,417

    23,486    

22,406

    23,681  
Diluted Earnings Per Share As Reported
Net income

$

0.76

  $ 0.68  

$

1.61

  $ 1.34  
Average number of shares outstanding  

22,672

    23,759    

22,660

    24,026  
 
 
Adjusted Earnings Per Share
Net income

$

0.98

  $ 0.78  

$

1.93

  $ 1.52  
Average number of shares outstanding  

22,417

    23,486    

22,406

    23,681  
Adjusted Diluted Earnings Per Share
Net income

$

0.97

  $ 0.77  

$

1.91

  $ 1.50  
Average number of shares outstanding  

22,672

    23,759    

22,660

    24,026  
 
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, 2009 AND 2008

(unaudited)

                 

Three Months Ended June 30,

Six Months Ended June 30,

OPERATING STATISTICS 2009 2008 2009 2008
Net revenue ($000) (d)
Homecare $ 152,006 $ 144,726 $ 299,060 $ 286,343
Inpatient 23,667 24,371 48,759 50,342
Continuous care   35,125   29,951   69,716   60,948
Total before Medicare cap allowance and 2008 BNAF* $ 210,798 $ 199,048 $ 417,535 $ 397,633
Estimated BNAF* Accrual Q4 2008 - - 1,950 -
Medicare cap allowance   505   -   235   -
Total $ 211,303 $ 199,048 $ 419,720 $ 397,633

Net revenue as a percent of total before Medicare cap allowance

Homecare 72.1 % 72.8 % 71.6 % 72.0 %
Inpatient 11.2 12.2 11.7 12.7
Continuous care   16.7   15.0   16.7   15.3
Total before Medicare cap allowance and 2008 BNAF* 100.0 100.0 100.0 100.0
Estimated BNAF* Accrual Q4 2008 - - 0.5 -
Medicare cap allowance   0.2   -   -   -
Total   100.2 % 100.0 % 100.5 % 100.0 %
Average daily census ("ADC") (days)
Homecare 7,668 7,347 7,573 7,251
Nursing home   3,292   3,570   3,277   3,559
Routine homecare 10,960 10,917 10,850 10,810
Inpatient 394 422 407 438
Continuous care   566   507   567   521
Total   11,920   11,846   11,824   11,769
 
Total Admissions 13,840 13,956 28,008 29,168
Total Discharges 13,740 13,707 27,605 28,704
Average length of stay (days) 73.4 73.2 75.0 72.3
Median length of stay (days) 14.0 13.0 14.0 13.0
ADC by major diagnosis
Neurological 32.8 % 32.1 % 32.7 % 32.3 %
Cancer 19.2 20.0 19.3 20.0
Cardio 12.1 12.9 12.2 13.0
Respiratory 6.6 6.7 6.6 6.8
Other   29.3   28.3   29.2   27.9
Total   100.0 % 100.0 % 100.0 % 100.0 %
Admissions by major diagnosis
Neurological 17.3 % 17.7 % 17.9 % 18.5 %
Cancer 35.4 35.7 34.9 34.6
Cardio 11.9 12.0 12.1 12.0
Respiratory 7.7 7.9 7.8 8.2
Other   27.7   26.7   27.3   26.7
Total   100.0 % 100.0 % 100.0 % 100.0 %
Direct patient care margins (e)
Routine homecare 52.1 % 51.5 % 51.9 % 50.5 %
Inpatient 16.6 17.8 17.1 18.6
Continuous care 20.2 17.6 20.2 17.1
Homecare margin drivers (dollars per patient day)
Labor costs $ 51.83 $ 49.72 $ 52.32 $ 50.98
Drug costs 7.71 7.74 7.68 7.62
Home medical equipment 6.82 6.20 6.75 6.19
Medical supplies 2.36 2.32 2.32 2.44
Inpatient margin drivers (dollars per patient day)
Labor costs $ 282.46 $ 261.79 $ 276.96 $ 264.06
Continuous care margin drivers (dollars per patient day)
Labor costs $ 522.27 $ 513.89 $ 521.79 $ 511.70
Bad debt expense as a percent of revenues 1.1 % 1.0 % 1.1 % 1.0 %
Accounts receivable --
days of revenue outstanding 55.9 45.3 N.A. N.A.
 
* Budget Neutrality Adjustment Factor.
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, 2009 AND 2008

(unaudited)

           
(a)

Included in the results of operations for the three and six months ended June 30, 2009 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

 
Three Months Ended June 30, 2009
VITAS Corporate Consolidated
Selling, general and administrative expenses
Stock option expense

$

-

$

(2,443 )

$

(2,443 )
Legal expenses of OIG investigation (86 ) - (86 )
Other operating expense
Expenses associated with contested proxy solicitation - (3,444 ) (3,444 )
Interest expense

Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes

  -     (1,561 )   (1,561 )
Pretax impact on earnings (86 ) (7,448 ) (7,534 )
Income tax benefit on the above 33 2,737 2,770

Income tax impact of non-deductible net market losses on investments held in deferred compensation trusts

  -     20     20  
After-tax impact on earnings $ (53 ) $ (4,691 ) $ (4,744 )
 
Six Months Ended June 30, 2009
VITAS Roto-Rooter Consolidated
Selling, general and administrative expenses
Stock option expense

$

-

$

(4,485 )

$

(4,485 )
Legal expenses of OIG investigation (99 ) - (99 )
Other operating expense
Expenses associated with contested proxy solicitation - (3,989 ) (3,989 )
Interest expense

Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes

- (3,091 ) (3,091 )
Other income-net

Non-taxable income from certain investments held in deferred compensation trusts

  -     1,211     1,211  
Pretax impact on earnings (99 ) (10,354 ) (10,453 )
Income tax benefit on the above 38 4,249 4,287

Income tax impact of non-deductible net market losses on investments held in deferred compensation trusts

  -     (455 )   (455 )
After-tax impact on earnings $ (61 ) $ (6,560 ) $ (6,621 )
 
(b)

Included in the results of operations for the three and six months ended June 30, 2008 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

 
Three Months Ended June 30, 2008
VITAS Corporate (f) Consolidated
Selling, general and administrative expenses
Stock option expense

$

-

$

(1,591 )

$

(1,591 )
Legal expenses of OIG investigation (57 ) - (57 )
Interest expense

Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes

  -     (1,542 )   (1,542 )
Pretax impact on earnings (57 ) (3,133 ) (3,190 )
Income tax benefit on the above   22     1,144     1,166  
After-tax impact on earnings

$

(35 )

$

(1,989 )

$

(2,024 )
 
Six Months Ended June 30, 2008
VITAS Roto-Rooter Corporate (f) Consolidated
Cost of services provided and goods sold
Unreserved prior year's insurance claim

$

- $ (597 ) $ - $ (597 )
Selling, general and administrative expenses
Stock option expense - - (2,982 ) (2,982 )
Legal expenses of OIG investigation (42 ) - - (42 )
Interest expense

Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes

  -     -     (3,054 )   (3,054 )
Pretax impact on earnings (42 ) (597 ) (6,036 ) (6,675 )
Income tax benefit on the above 16 239 2,203 2,458
Income tax credit related to prior years   322     -     -     322  
After-tax impact on earnings $ 296   $ (358 ) $ (3,833 ) $ (3,895 )
 
(c)

Under Generally Accepted Accounting Principles ("GAAP"), the Roto-Rooter segment expenses all advertising, including the cost of telephone directories, immediately upon the initial release of the advertising. Telephone directories are generally in circulation 12 months. If a directory is in circulation for a time period greater or less than 12 months, the publisher adjusts the directory billing for the change in billing period. The timing of when a telephone directory is published can and does fluctuate significantly on a quarterly basis. This "direct expensing" results in significant fluctuations in quarterly advertising expense. In the second quarters of 2009 and 2008, GAAP advertising expense for Roto-Rooter totaled $5,771,000 and $5,702,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the second quarters of 2009 and 2008 would total $6,139,000 and $5,957,000, respectively. For the six months ended June 30, 2009 and 2008, GAAP advertising expense for Roto-Rooter totaled $11,528,000 and $11,158,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the six months ended June 30, 2009 and 2008, would total $12,290,000 and $11,983,000, respectively.

 

(d)

VITAS has 4 large (greater than 450 ADC), 18 medium (greater than 200 but less than 450 ADC) and 23 small (less than 200 ADC) hospice programs. There are two programs continuing at June 30, 2009, with Medicare Cap cushion of less than 5% for the most recent twelve month period.

 

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

Effective January 1, 2009, we adopted 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)." Financial statements for 2008 and prior periods have been restated for this change in accounting.

 

Source: Chemed Corporation

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

All information current at time of original publication. Read complete disclaimer for details.
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Page last modified: 04/18/05