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Chemed > Investor Relations > News Releases > News Release
News Releases
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Chemed Reports First-Quarter 2013 Results

Reaffirms Full-Year 2013 Earnings Guidance

CINCINNATI--(BUSINESS WIRE)--Apr. 18, 2013-- 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 first quarter ended March 31, 2013, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 3.9% to $367 million
  • GAAP Diluted EPS increased 10.4% to $1.17
  • Adjusted Diluted EPS increased 14.0% to $1.38

VITAS segment operating results:

  • Net Patient Revenue of $271 million, an increase of 4.0%
  • Average Daily Census (ADC) of 14,432, an increase of 5.3%
  • Admissions of 17,137, an increase of 5.0%
  • Net Income of $20.1 million, an increase of 2.6%
  • Adjusted EBITDA of $37.6 million, an increase of 5.9%
  • Adjusted EBITDA margin of 13.8%, a increase of 24 basis points

Roto-Rooter segment operating results:

  • Revenue of $95.3 million, an increase of 3.5%
  • Unit-for-unit job count of 168,967, an increase of 0.1%
  • Net Income of $9.6 million, a increase of 28.4%
  • Adjusted EBITDA of $17.4 million, an increase of 24.1%
  • Adjusted EBITDA margin of 18.3%, an increase of 304 basis points

VITAS

Net revenue for VITAS was $271 million in the first quarter of 2013, which is an increase of 4.0% over the prior-year period. This revenue growth was the result of increased ADC of 5.3%, driven by an increase in admissions of 5.0%, increased discharges of 4.0% and Medicare price increases of approximately 0.9%. Revenue growth aggregated 5.9% excluding the impact of 2012 leap year and the impact of revenue recognition related from the reversal of prior years Medicare Cap accruals.

In the first quarter of 2013, VITAS recorded a positive revenue adjustment of $0.9 million related to eliminating the Medicare Cap billing limitation recorded in the fourth quarter of 2012. This compares with $2.6 million of additional revenue recorded in the first quarter of 2012.

Of VITAS' 36 unique Medicare provider numbers, 31 provider numbers have a Medicare Cap cushion of 10% or greater during the first six months of the 2013 Medicare Cap year; two provider numbers have a Medicare Cap cushion between 5% to 10%; and three provider numbers have a cap cushion between 0% and 5%. VITAS generated an aggregate cap cushion of $233 million during the trailing twelve-month period.

Average revenue per patient per day in the quarter, excluding the impact of Medicare Cap, was $208.23, which is 0.5% above the prior-year period. Routine home care reimbursement and high acuity care averaged $164.51 and $713.65, respectively, per patient per day in the first quarter of 2013. During the quarter, high acuity days of care were 8.0% of total days of care, 10 basis points below the prior-year quarter.

The first quarter of 2013 gross margin, excluding the impact of Medicare Cap, was 21.2%, which is an 80 basis point improvement when compared to the first quarter of 2012.

Selling, general and administrative expense was $21.6 million in the first quarter of 2013, which is an increase of 9.4% when compared to the prior-year quarter. Adjusted EBITDA totaled $37.6 million in the quarter, an increase of 5.9% over the prior-year period. Adjusted EBITDA margin, excluding the impact from Medicare Cap, was 13.6% in the quarter which is 83 basis points above the prior-year quarter.

Roto-Rooter

Roto-Rooter's plumbing and drain cleaning business generated sales of $95.3 million for the first quarter of 2013, an increase of 3.5%, over the prior-year quarter.

Total residential and commercial unit-for-unit job count increased 0.1% in the first quarter of 2013 when compared to the prior-year period. This consisted of a residential plumbing job count decline of 4.9% and residential drain cleaning job increase of 5.4%, when compared to the first quarter of 2012. Residential jobs represent over 70% of total job count in the quarter. Commercial plumbing/excavation job count declined 2.6% and commercial drain cleaning decreased 2.4% when compared to the prior-year quarter.

Roto-Rooter's gross margin in the quarter was 46.3%, a 261 basis point increase when compared to the first quarter of 2012. Adjusted EBITDA in the first quarter of 2013 totaled $17.4 million, an increase of 24.1%, and the Adjusted EBITDA margin was 18.3% in the quarter, an increase of 304 basis points.

Chemed Consolidated

Chemed had total cash and cash equivalents of $73 million, and debt of $177 million, at March 31, 2013. This debt is net of the discount taken as a result of convertible debt accounting requirements. Excluding this discount, aggregate debt is $187 million and is due in May 2014. Chemed's total debt equates to less than one times trailing twelve-month adjusted EBITDA.

In January 2013 Chemed entered into a five-year Amended and Restated Credit Agreement that consists of a $350 million revolving credit facility. The interest rate on this facility has a floating rate that is currently LIBOR plus 125 basis points. At March 31, 2013, the Company had approximately $321 million of undrawn borrowing capacity under this credit agreement after deducting $29 million for letters of credit issued to secure the Company's workers' compensation insurance.

Capital expenditures for the first quarter of 2013 aggregated $5.4 million and compares to depreciation and amortization during the same period of $7.9 million.

During the quarter, the Board of Directors authorized an additional $100 million for share repurchase. Chemed currently has $114.7 million of authorization remaining under this share repurchase plan. The Company did not repurchase any shares during the first quarter of 2013.

Guidance for 2013

Effective April 1, 2013, Medicare reduced hospice reimbursement rates 2.0% for Medicare beneficiaries. This reduction impacts approximately 91.2% of Vitas' revenue base and is factored into the 2013 guidance detailed below.

VITAS estimates its full-year 2013 revenue growth, prior to Medicare Cap, will be in the range of 4.5% to 5.5%. Admissions in 2013 are estimated to increase approximately 5.0% to 6.0% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 13.8% to 14.2%. Effective October 1, 2012, Medicare increased the average hospice reimbursement rates by approximately 0.9%. As a result of sequestration, effective April 1, 2013, this 0.9% increase was reduced to a 1.1% decline in Medicare rates when compared to the prior year.

Roto-Rooter estimates it will achieve full-year 2013 revenue growth of 2.5% to 4.0%. This revenue estimate is based upon increased job pricing of approximately 1.5%, a favorable mix shift to higher revenue jobs, and job count increasing 0.1% to 0.5%. Adjusted EBITDA margin for 2013 is estimated in the range of 18.0% to 19.5%.

The negative effect of this reduction in Medicare reimbursement is offset by increased profitability in the first quarter of 2013, combined with the anticipated benefits of continued operational efficiencies in the hospice segment, reduced risk of Medicare cap billing limitations, and continued margin improvement in the Roto Rooter segment. Accordingly, management reaffirms previous guidance that full-year 2013 earnings per diluted share, excluding non-cash expense for stock options, the non-cash interest expense related to the accounting for convertible debt and other items not indicative of ongoing operations, will be in the range of $5.65 to $5.80. This compares to Chemed's 2012 reported adjusted earnings per diluted share of $5.29.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Friday, April 19, 2013, 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) 953-6856 for U.S. and Canadian participants and (617) 399-3480 for international participants. The participant passcode is 15147522. 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 68047307. 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 14,000 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 March 31,
2013 2012
Service revenues and sales $ 366,641   $ 352,943  
Cost of services provided and goods sold 264,307 257,445
Selling, general and administrative expenses (aa) 55,560 53,167
Depreciation 6,795 6,241
Amortization   1,127     1,113  
Total costs and expenses   327,789     317,966  
Income from operations 38,852 34,977
Interest expense (4,094 ) (3,617 )
Other income--net (bb)   1,706     2,095  
Income before income taxes 36,464 33,455
Income taxes   (14,186 )   (13,010 )
Net income $ 22,278   $ 20,445  
 
Earnings Per Share
Net income $ 1.20   $ 1.08  
Average number of shares outstanding  

18,522

    18,958  
 
Diluted Earnings Per Share
Net income $ 1.17   $ 1.06  
Average number of shares outstanding   19,000     19,353  
 
 
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
Three Months Ended March 31,
2013 2012
SG&A expenses before long-term incentive compensation and the
impact of market value gains related to deferred compensation plans $ 53,476 $ 51,034
Market value gains related to deferred compensation plans 1,472 2,133
Long-term incentive compensation   612     -  
Total SG&A expenses $ 55,560   $ 53,167  
 
(bb) Other income--net comprises (in thousands):
Three Months Ended March 31,
2013 2012
Market value gains related to deferred compensation plans $ 1,472 $ 2,133
Interest income 303 51
Loss on disposal of property and equipment (78 ) (81 )
Other   9     (8 )

Total other income--net

$ 1,706   $ 2,095  
 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
                         
 
March 31,
2013 2012
Assets
Current assets
Cash and cash equivalents $ 72,956 $ 34,214
Accounts receivable less allowances 127,220 110,656
Inventories 6,559 8,468
Current deferred income taxes 14,816 13,725
Prepaid income taxes 2,159 637
Prepaid expenses   12,539     9,576  
Total current assets 236,249 177,276
Investments of deferred compensation plans held in trust 39,144 35,055
Properties and equipment, at cost less accumulated depreciation 90,374 88,579
Identifiable intangible assets less accumulated amortization 56,798 57,941
Goodwill 465,734 461,064
Other assets   11,110     11,568  
Total Assets $ 899,409   $ 831,483  
 
Liabilities
Current liabilities
Accounts payable $ 48,496 $ 52,999
Income taxes 12,912 13,334
Accrued insurance 43,041 37,305
Accrued compensation 38,552 35,834
Other current liabilities   17,917     15,724  
Total current liabilities 160,918 155,196
Deferred income taxes 28,155 27,256
Long-term debt 177,004 168,759
Deferred compensation liabilities 38,481 34,186
Other liabilities   11,762     11,629  
Total Liabilities   416,320     397,026  
Stockholders' Equity
Capital stock 31,957 31,063
Paid-in capital 457,790 404,546
Retained earnings 641,946 564,130
Treasury stock, at cost (650,668 ) (567,279 )
Deferred compensation payable in Company stock   2,064     1,997  
Total Stockholders' Equity   483,089     434,457  
Total Liabilities and Stockholders' Equity $ 899,409   $ 831,483  
 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
                   
Three Months Ended
March 31,
2013 2012
Cash Flows from Operating Activities
Net income $ 22,278 $ 20,445
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 7,922 7,354
Provision for uncollectible accounts receivable 2,967 2,245
Amortization of discount on convertible notes 2,114 1,975
Stock option expense 1,491 1,938
Provision for deferred income taxes (681 ) (3,397 )
Noncash long-term incentive compensation 612 -
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations:
Increase in accounts receivable (36,706 ) (34,949 )
Decrease in inventories 499 200
Decrease/(increase) in prepaid expenses (1,092 ) 1,833
Decrease in accounts payable and other current liabilities (698 ) (3,894 )
Increase in income taxes 10,139 15,532
Increase in other assets (3,071 ) (3,654 )
Increase in other liabilities 3,282 5,241
Excess tax benefit on share-based compensation (1,891 ) (797 )
Other sources  

976

   

309

 
Net cash provided by operating activities   8,141     10,381  
Cash Flows from Investing Activities
Capital expenditures (5,406 ) (12,018 )
Business combinations - (415 )
Other sources   78     311  
Net cash used by investing activities   (5,328 )   (12,122 )
Cash Flows from Financing Activities
Proceeeds from issuance of capital stock 10,168 1,042

Capital stock surrendered to pay taxes on stock-based

compensation

(3,389 ) (1,431 )
Dividends paid (3,367 ) (3,072 )
Increase/(decrease) in cash overdrafts payable (3,165 ) 226
Excess tax benefit on share-based compensation 1,891 797
Debt issuance costs (1,107 ) -
Other sources/(uses)   (419 )   312  
Net cash used by financing activities   612     (2,126 )
Increase/(Decrease) in Cash and Cash Equivalents 3,425 (3,867 )
Cash and cash equivalents at beginning of year   69,531     38,081  
Cash and cash equivalents at end of period $ 72,956   $ 34,214  
 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(in thousands)(unaudited)
                         
Chemed
VITAS Roto-Rooter Corporate Consolidated
2013
Service revenues and sales $ 271,326   $ 95,315   $ -   $ 366,641  
Cost of services provided and goods sold 213,160 51,147 - 264,307
Selling, general and administrative expenses (a) 21,604 26,662 7,294 55,560
Depreciation 4,514 2,147 134 6,795
Amortization   491     154     482     1,127  
Total costs and expenses   239,769     80,110     7,910     327,789  
Income/(loss) from operations 31,557 15,205 (7,910 ) 38,852
Interest expense (a) (46 ) (59 ) (3,989 ) (4,094 )
Intercompany interest income/(expense) 843 428 (1,271 ) -
Other income/(expense)-net   221     (1 )   1,486   1,706  
Income/(loss) before income taxes 32,575 15,573 (11,684 ) 36,464
Income taxes (a)   (12,433 )   (5,949 )   4,196     (14,186 )
Net income/(loss) $ 20,142   $ 9,624   $ (7,488 ) $ 22,278  
 

2012

Service revenues and sales $ 260,847   $ 92,096   $ -   $ 352,943  
Cost of services provided and goods sold 205,620 51,825 - 257,445
Selling, general and administrative expenses (b) 19,748 26,153 7,266 53,167
Depreciation 4,025 2,085 131 6,241
Amortization   490     154     469     1,113  
Total costs and expenses   229,883     80,217     7,866     317,966  
Income/(loss) from operations 30,964 11,879 (7,866 ) 34,977
Interest expense (b) (62 ) (108 ) (3,447 ) (3,617 )
Intercompany interest income/(expense) 755 395 (1,150 ) -
Other income/(expense)-net   (31 )   (20 )   2,146     2,095  
Income/(loss) before income taxes 31,626 12,146 (10,317 ) 33,455
Income taxes (b)   (11,999 )   (4,650 )   3,639     (13,010 )
Net income/(loss) $ 19,627   $ 7,496   $ (6,678 ) $ 20,445  
 
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 MARCH 31, 2013 AND 2012
(in thousands)(unaudited)
                     
 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2013
Net income/(loss) $ 20,142 $ 9,624 $ (7,488 ) $ 22,278
Add/(deduct):
Interest expense 46 59 3,989 4,094
Income taxes 12,433 5,949 (4,196 ) 14,186
Depreciation 4,514 2,147 134 6,795
Amortization   491     154     482     1,127  
EBITDA 37,626 17,933 (7,079 ) 48,480
Add/(deduct):
Expenses related to OIG investigation 1,039 - - 1,039
Acquisition expenses 1 - - 1
Expenses of severance arrangements - 302 - 302
Expenses related to litigation settlements - 141 - 141
Advertising cost adjustment (c) - (469 ) - (469 )
Stock option expense - - 1,491 1,491

Long-term incentive compensations

- - 612 612
Expenses related to securities litigation - - 2 2
Interest income (246 ) (42 ) (15 ) (303 )

Intercompany interest income/(expense)

  (843 )   (428 )   1,271     -  
Adjusted EBITDA $ 37,577   $ 17,437   $ (3,718 ) $ 51,296  
 
2012
Net income/(loss) $ 19,627 $ 7,496 $ (6,678 ) $ 20,445
Add/(deduct):
Interest expense 62 108 3,447 3,617
Income taxes 11,999 4,650 (3,639 ) 13,010
Depreciation 4,025 2,085 131 6,241
Amortization   490     154     469     1,113  
EBITDA 36,203 14,493 (6,270 ) 44,426
Add/(deduct):
Expenses related to OIG investigation 71 - - 71
Acquisition expenses - 15 - 15
Expenses related to litigation settlements - 647 - 647
Advertising cost adjustment (c) - (706 ) - (706 )
Stock option expense - - 1,938 1,938
Interest income (30 ) (8 ) (13 ) (51 )
Intercompany interest income/(expense)   (755 )   (395 )   1,150     -  
Adjusted EBITDA $ 35,489   $ 14,046   $ (3,195 ) $ 46,340  
 
 
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 March 31,
2013 2012
Net income as reported $ 22,278 $ 20,445
 
Add/(deduct) after-tax cost of:

Additional interest expense resulting from the change

in accounting for the conversion feature of the convertible notes

1,323 1,224
Stock option expense 943 1,225
Expenses related to OIG investigation 644 44
Long-term incentive compensation 387 -
Loss on extinguishment of debt 294 -
Expenses of severance arrangements 184 -
Expenses related to litigation settlements 86 393
Expenses related to securities litigation 1 -
Acquisition expenses   -   9
Adjusted net income $ 26,140 $ 23,340
 
 
Earnings Per Share As Reported
Net income $ 1.20 $ 1.08
Average number of shares outstanding  

18,522

  18,958
Diluted Earnings Per Share As Reported
Net income $ 1.17 $ 1.06
Average number of shares outstanding   19,000   19,353
 
 
Adjusted Earnings Per Share
Net income $ 1.41 $ 1.23
Average number of shares outstanding  

18,522

  18,958
Adjusted Diluted Earnings Per Share
Net income $ 1.38 $ 1.21
Average number of shares outstanding   19,000   19,353
 
The "Footnotes to Financial Statements" are integral parts of this financial information.
 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)
             
Three Months Ended March 31,
OPERATING STATISTICS 2013 2012
Net revenue ($000) (d)
Homecare $ 196,660 $ 186,597
Inpatient 28,468 29,152
Continuous care   45,325   42,521
Total before Medicare cap allowance $ 270,453 $ 258,270
Medicare cap allowance   873   2,577
Total $ 271,326 $ 260,847
Net revenue as a percent of total
before Medicare cap allowance
Homecare 72.7 % 72.2 %
Inpatient 10.5 11.3
Continuous care   16.8   16.5
Total before Medicare cap allowance 100.0 100.0
Medicare cap allowance   0.3   1.0
Total   100.3 %   101.0 %
Average daily census ("ADC") (days)
Homecare 10,354 9,613
Nursing home   2,929   2,986
Routine homecare 13,283 12,599
Inpatient 468 472
Continuous care   681   632
Total   14,432   13,703
 
Total Admissions 17,137 16,322
Total Discharges 16,843 16,196
Average length of stay (days) 77.4 82.4
Median length of stay (days) 13.0 14.0
ADC by major diagnosis
Neurological 33.2 % 34.2 %
Cancer 16.9 17.9
Cardio 11.2 11.6
Respiratory 6.9 6.6

 

Other

  31.8   29.7
Total   100.0 %   100.0 %
Admissions by major diagnosis
Neurological 19.2 % 19.6 %
Cancer 30.8 32.1
Cardio 11.6 11.8
Respiratory 9.6 8.7
Other   28.8   27.8
Total   100.0 %   100.0 %
Direct patient care margins (e)
Routine homecare 51.9 % 50.4 %
Inpatient 10.9 14.1
Continuous care 17.7 19.9
Homecare margin drivers (dollars per patient day)
Labor costs $ 57.18 $ 57.76
Drug costs 7.57 8.33
Home medical equipment 6.85 6.82
Medical supplies 2.92 2.75
Inpatient margin drivers (dollars per patient day)
Labor costs $ 320.67 $ 314.34
Continuous care margin drivers (dollars per patient day)
Labor costs $ 587.73 $ 569.54
Bad debt expense as a percent of revenues 0.8 % 0.8 %
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments 39.0 36.6
Days of revenue outstanding- including unapplied Medicare payments 29.6 30.8
 
 
The "Footnotes to Financial Statements" are integral parts of this financial information.
 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
FOOTNOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(unaudited)
                   
 
 
(a)

Included in the results of operations for the three months ended March 31, 2013, are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

 

 

VITAS

Roto-Rooter

Corporate Total
Selling, general and administrative expenses
Expenses related to OIG investigation $ (1,039 ) $ - $ - $ (1,039 )
Acquisition expenses (1 ) - - (1 )
Expenses of severance arrangements - (302 ) - (302 )
Expenses related to litigation settlements - (141 ) - (141 )
Stock option expense - - (1,491 ) (1,491 )
Long-term incentive compensation - - (612 ) (612 )
Expenses related to securities litigation - - (2 ) (2 )
Interest expense
Additional interest expense resulting from the change in accounting
for the conversion feature of the convertible notes - - (2,091 ) (2,091 )
Loss on extinguishment of debt   -     -     (465 )   (465 )
Pretax impact on earnings (1,040 ) (443 ) (4,661 ) (6,144 )
Income tax benefit/(charge) on the above   396     173     1,713     2,282  
After-tax impact on earnings $ (644 ) $ (270 ) $ (2,948 ) $ (3,862 )
 
(b)

Included in the results of operations for the three months ended March 31, 2012, are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

 

 

VITAS

Roto-Rooter

Corporate Total
Selling, general and administrative expenses
Expenses related to OIG investigation $ (71 ) $ - $ - $ (71 )
Acquisition expenses - (15 ) - (15 )
Expenses related to litigation settlements - (647 ) - (647 )
Stock option expense - - (1,938 ) (1,938 )
Interest expense
Additional interest expense resulting from the change in accounting

 

for the conversion feature of the convertible notes   -     -     (1,935 )   (1,935 )
Pretax impact on earnings (71 ) (662 ) (3,873 ) (4,606 )
Income tax benefit/(charge) on the above   27     260     1,424     1,711  
After-tax impact on earnings $ (44 ) $ (402 ) $ (2,449 ) $ (2,895 )
 
(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 first quarters of 2013 and 2012, GAAP advertising expense for Roto-Rooter totaled $5,704,000 and $5,624,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the first quarters of 2013 and 2012 would total $6,173,000 and $6,330,000, respectively.

 
(d)

VITAS has 10 large (greater than 450 ADC), 14 medium (greater than 200 but less than 450 ADC) and 27 small (less than 200 ADC) hospice programs. Of VITAS' 36 unique Medicare provider numbers, 31 provider numbers have a Medicare cap cushion of 10% or greater during the first six months of the Medicare cap year; two provider numbers have a Medicare cap cushion between 5% and 10%; and three provider numbers have a cap cushion between 0% and 5%.

 
(e) 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

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