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

CINCINNATI--(BUSINESS WIRE)--Jul. 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 second quarter ended June 30, 2013, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 0.9% to $357 million
  • GAAP Diluted EPS, including litigation settlement, decreased 30.0% to $0.77
  • Adjusted Diluted EPS increased 14.3% to $1.44

VITAS segment operating results:

  • Net Patient Revenue of $264 million, a decrease of 0.6%
  • Average Daily Census (ADC) of 14,679, an increase of 4.0%
  • Admissions of 15,721, a decrease of 1.2%
  • Net Income of $20.5 million, an increase of 0.3%
  • Adjusted EBITDA of $37.7 million, an increase of 1.7%
  • Adjusted EBITDA margin of 14.3%, an increase of 32 basis points

Roto-Rooter segment operating results:

  • Revenue of $93.6 million, an increase of 5.3%
  • Unit-for-unit job count of 162,432, an increase of 1.0%
  • Net Income, including litigation settlement, of $1.4 million
  • Adjusted EBITDA of $18.9 million, an increase of 31.1%
  • Adjusted EBITDA margin of 20.2%, an increase of 398 basis points

VITAS

Net revenue for VITAS was $264 million in the second quarter of 2013, which is a decline of 0.6% when compared to the prior-year period. This revenue decline is a combination of Medicare reimbursement rates decreasing approximately 1.1%, increased ADC of 4.0% and level of care mix shifting as the proportion of high acuity days-of-care declined 89 basis points.

In the second quarter of 2013, VITAS recorded a Medicare Cap billing adjustment of $0.9 million related to one provider number.

Of VITAS’ 36 unique Medicare provider numbers, 32 provider numbers have a Medicare Cap cushion of 10% or greater during the first nine months of the 2013 Medicare Cap year; two provider numbers have a Medicare Cap cushion between 5% to 10%; and one provider number has 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 $197.95, which is 4.2% below the prior-year period. The average revenue includes the 2.0% reduction in Medicare hospice reimbursement effective April 1, 2013. Routine home care reimbursement and high acuity care averaged $161.08 and $693.20, respectively, per patient per day in the second quarter of 2013. During the quarter, high acuity days of care were 6.9% of total days of care, 89 basis points below the prior-year quarter.

The second quarter of 2013 gross margin, excluding the impact of Medicare Cap, was 22.2%, which is a 54 basis point improvement when compared to the second quarter of 2012.

Selling, general and administrative expense was $21.1 million in the second quarter of 2013, which is an increase of 2.9% when compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $38.5 million in the quarter, an increase of 4.0% over the prior-year period. Adjusted EBITDA margin, excluding the impact from Medicare Cap, was 14.6% in the quarter which is 60 basis points above the prior-year quarter.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $93.6 million for the second quarter of 2013, an increase of 5.3%, over the prior-year quarter.

Total unit-for-unit job count increased 1.0% in the second quarter of 2013 when compared to the prior-year period. This consisted of a residential drain cleaning job count increase of 5.8% and residential plumbing job count decline of 4.5%, when compared to the second quarter of 2012. Residential jobs represented 69% of total job count in the quarter. Commercial drain cleaning increased 0.8% and commercial plumbing/excavation job count declined 2.2% when compared to the prior-year quarter.

Roto-Rooter’s gross margin in the quarter was 47.1%, a 273 basis point increase when compared to the second quarter of 2012. Adjusted EBITDA in the second quarter of 2013 totaled $18.9 million, an increase of 31.1%, and the Adjusted EBITDA margin was 20.2% in the quarter, an increase of 398 basis points.

In June 2013 Roto-Rooter reached a tentative agreement, subject to Court approval, to settle litigation claims for alleged violation of the Fair Labor Standards Act (“FLSA”) and alleged claims for violations of the labor laws of multiple states. As a result of this tentative settlement, Roto-Rooter recorded an after-tax expense in the quarter of $9.0 million.

Chemed Consolidated

As of June 30, 2013, Chemed had total cash and cash equivalents of $113 million, and debt of $179 million. 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.

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 June 30, 2013, the Company had approximately $317 million of undrawn borrowing capacity under this credit agreement after deducting $33 million for letters of credit issued to secure the Company’s workers’ compensation insurance.

Capital expenditures through June 30, 2013, aggregated $12.2 million and compares to depreciation and amortization during the same period of $16.0 million.

During the quarter, the Company repurchased $18.4 million of Chemed stock. This equates to 280,701 of Chemed shares repurchased at an average cost of $65.72. Chemed currently has $96.3 million of authorization remaining under this share repurchase plan.

Guidance for 2013

Effective October 1, 2012, Medicare increased the average hospice reimbursement rates by approximately 0.9%. Effective April 1, 2013, Medicare reduced hospice reimbursement rates 2.0%. As a result, effective April 1, 2013, this 0.9% increase was reduced to a 1.1% decline in Medicare rates when compared to the prior year. The impact from sequestration 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 will be constrained in the second half of 2013 as a result of mix shift from high acuity care to routine home care. This mix shift is anticipated to have a modest impact on overall profitability given the relatively low direct contribution margins of high acuity care.

Full year 2013 revenue growth, prior to Medicare Cap, is estimated to be in the range of 0.5% to 2.0%. Admissions in 2013 are estimated to increase approximately 2.0% to 4.0% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 14.0% to 14.5%.

Roto-Rooter is forecasted to achieve full-year 2013 revenue growth of 4.0% to 5.0%. This revenue estimate is based upon increased job pricing of approximately 3.5% and job count increasing 0.5% to 1.0%. Adjusted EBITDA margin for 2013 is estimated in the range of 19.0% to 19.5%.

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, litigation 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, July 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) 578-5771 for U.S. and Canadian participants and (617) 213-8055 for international participants. The participant passcode is 98464909. 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 78884155. 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 June 30, Six Months Ended June 30,
2013 2012 2013 2012
Service revenues and sales $ 357,198   $ 354,170   $ 723,839   $ 707,113  
Cost of services provided and goods sold 255,359 257,368 519,666 514,813
Selling, general and administrative expenses (aa) 53,107 49,770 108,667 102,937
Depreciation 6,899 6,380 13,694 12,621
Amortization 1,181 1,127 2,308 2,240
Other operating expenses (bb)   14,760     -     14,760     -  
Total costs and expenses   331,306     314,645     659,095     632,611  
Income from operations 25,892 39,525 64,744 74,502
Interest expense (3,697 ) (3,672 ) (7,791 ) (7,289 )
Other income/(expense)--net (cc)   1,696     (970 )   3,402     1,125  
Income before income taxes 23,891 34,883 60,355 68,338
Income taxes   (9,283 )   (13,609 )   (23,469 )   (26,619 )
Net income $ 14,608   $ 21,274   $ 36,886   $ 41,719  
 
 
Earnings Per Share
Net income $ 0.79   $ 1.12   $ 1.99   $ 2.20  
Average number of shares outstanding   18,606     18,998     18,564     18,976  
 
Diluted Earnings Per Share
Net income $ 0.77   $ 1.10   $ 1.94   $ 2.16  
Average number of shares outstanding   18,966     19,369     18,980     19,357  
 
 
                             
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2013 2012 2013 2012

SG&A expenses before long-term incentive compensation and the impact of market gains and losses related to deferred compensation plans

$ 51,550 $ 50,718 $ 105,026 $ 101,752

Market value gains/(losses) related to deferred compensation plans (cc)

1,063 (948 ) 2,535 1,185
Long-term incentive compensation   494     -     1,106     -  
Total SG&A expenses $ 53,107   $ 49,770   $ 108,667   $ 102,937  
 
(bb) Other operating expenses comprise a litigation settlement in June 2013.
 
(cc) Other income/(expense)--net comprises (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2013 2012 2013 2012

Market value gains/(losses) related to deferred compensation plans

$ 1,063 $ (948 ) $ 2,535 $ 1,185
Interest income 670 59 973 110
Loss on disposal of property and equipment (1 ) (67 ) (79 ) (148 )
Other   (36 )   (14 )   (27 )   (22 )
Total other income--net $ 1,696   $ (970 ) $ 3,402   $ 1,125  
 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
                   
 
June 30,
2013 2012
Assets
Current assets
Cash and cash equivalents $ 113,047 $ 59,966
Accounts receivable less allowances 76,356 81,811
Inventories 6,156 8,146
Current deferred income taxes 19,322 13,226
Prepaid income taxes 4,911 4,187
Prepaid expenses   13,518     10,737  
Total current assets 233,310 178,073
Investments of deferred compensation plans held in trust 40,583 33,215
Properties and equipment, at cost less accumulated depreciation 90,229 88,571
Identifiable intangible assets less accumulated amortization 57,348 57,635
Goodwill 466,271 461,965
Other assets   11,137     11,669  
Total Assets $ 898,878   $ 831,128  
 
Liabilities
Current liabilities
Accounts payable $ 35,921 $ 51,002
Current portion of long-term debt 179,154 -
Income taxes 4,561 167
Accrued insurance 42,616 36,786
Accrued compensation 42,156 39,729
Other current liabilities   33,840     14,906  
Total current liabilities 338,248 142,590
Deferred income taxes 27,981 25,257
Long-term debt - 170,769
Deferred compensation liabilities 39,660 33,149
Other liabilities   11,702     11,918  
Total Liabilities   417,591     383,683  
 
Stockholders' Equity
Capital stock 32,075 31,142
Paid-in capital 466,980 410,957
Retained earnings 653,146 582,316
Treasury stock, at cost (673,008 ) (579,013 )
Deferred compensation payable in Company stock   2,094     2,043  
Total Stockholders' Equity   481,287     447,445  
Total Liabilities and Stockholders' Equity $ 898,878   $ 831,128  
 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
                     
 
Six Months Ended June 30,
2013 2012
Cash Flows from Operating Activities
Net income $ 36,886 $ 41,719

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

Depreciation and amortization 16,002 14,861
Provision for uncollectible accounts receivable 5,432 4,730
Provision for deferred income taxes (5,375 ) (4,895 )
Amortization of discount on convertible notes 4,264 3,985
Stock option expense 3,103 4,312
Noncash long-term incentive compensation 1,106 -
Amortization of debt issuance costs 1,097 621

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

Decrease/(increase) in accounts receivable 11,745 (8,543 )
Decrease in inventories 902 522
Decrease/(increase) in prepaid expenses (2,017 ) 672

Increase/(decrease) in accounts payable and other current liabilities

14,721 (3,593 )
Decrease in income taxes (409 ) (1,029 )
Increase in other assets (4,914 ) (2,283 )
Increase in other liabilities 4,401 4,493
Excess tax benefit on share-based compensation (2,478 ) (1,069 )
Other sources   200     152  
Net cash provided by operating activities   84,666     54,655  
Cash Flows from Investing Activities
Capital expenditures (12,200 ) (18,474 )
Business combinations, net of cash acquired (1,501 ) (1,500 )
Other sources   101     357  
Net cash used by investing activities   (13,600 )   (19,617 )
Cash Flows from Financing Activities
Purchases of treasury stock (18,448 ) (11,138 )
Proceeds from issuance of capital stock 12,558 3,670
Increase/(decrease) in cash overdrafts payable (11,608 ) 985
Dividends paid (6,775 ) (6,160 )
Capital stock surrendered to pay taxes on stock-based compensation (4,269 ) (1,645 )
Excess tax benefit on share-based compensation 2,478 1,069
Debt issuances costs (1,104 ) -

Other sources/(uses)

  (382 )   66  
Net cash used by financing activities   (27,550 )   (13,153 )
Increase in Cash and Cash Equivalents 43,516 21,885
Cash and cash equivalents at beginning of year   69,531     38,081  
Cash and cash equivalents at end of period $ 113,047   $ 59,966  
 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2013 AND 2012
(in thousands)(unaudited)
                 
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2013

Service revenues and sales $ 263,568   $ 93,630   $ -   $ 357,198  
Cost of services provided and goods sold 205,788 49,571 - 255,359
Selling, general and administrative expenses (a) 21,063 25,230 6,814 53,107
Depreciation 4,520 2,246 133 6,899
Amortization 536 149 496 1,181
Other operating expenses   -     14,760     -     14,760  
Total costs and expenses   231,907     91,956     7,443     331,306  
Income/(loss) from operations 31,661 1,674 (7,443 ) 25,892
Interest expense (a) (51 ) (97 ) (3,549 ) (3,697 )
Intercompany interest income/(expense) 866 436 (1,302 ) -
Other income/(expense)—net   585     34     1,077     1,696  
Income/(loss) before income taxes 33,061 2,047 (11,217 ) 23,891
Income taxes (a)   (12,576 )   (633 )   3,926     (9,283 )
Net income/(loss) $ 20,485   $ 1,414   $ (7,291 ) $ 14,608  
 

 2012

Service revenues and sales $ 265,213   $ 88,957   $ -   $ 354,170  
Cost of services provided and goods sold 207,839 49,529 - 257,368
Selling, general and administrative expenses (b) 20,471 24,372 4,927 49,770
Depreciation 4,164 2,085 131 6,380
Amortization   488     157     482     1,127  
Total costs and expenses   232,962     76,143     5,540     314,645  
Income/(loss) from operations 32,251 12,814 (5,540 ) 39,525
Interest expense (b) (63 ) (107 ) (3,502 ) (3,672 )
Intercompany interest income/(expense) 812 430 (1,242 ) -
Other income/(expense)—net   (1 )   (33 )   (936 )   (970 )
Income/(loss) before income taxes 32,999 13,104 (11,220 ) 34,883
Income taxes (b)   (12,566 )   (5,030 )   3,987     (13,609 )
Net income/(loss) $ 20,433   $ 8,074   $ (7,233 ) $ 21,274  

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, 2013 AND 2012
(in thousands)(unaudited)
                 
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2013

Service revenues and sales $ 534,895   $ 188,944   $ -   $ 723,839  
Cost of services provided and goods sold 418,949 100,717 - 519,666
Selling, general and administrative expenses (a) 42,667 51,892 14,108 108,667
Depreciation 9,033 4,394 267 13,694
Amortization 1,026 303 979 2,308
Other operating expenses   -     14,760     -     14,760  
Total costs and expenses   471,675     172,066     15,354     659,095  
Income/(loss) from operations 63,220 16,878 (15,354 ) 64,744
Interest expense (a) (97 ) (156 ) (7,538 ) (7,791 )
Intercompany interest income/(expense) 1,709 864 (2,573 ) -
Other income/(expense)—net   805     34     2,563     3,402  
Income/(loss) before income taxes 65,637 17,620 (22,902 ) 60,355
Income taxes (a)   (25,009 )   (6,582 )   8,122     (23,469 )
Net income/(loss) $ 40,628   $ 11,038   $ (14,780 ) $ 36,886  
 

 2012

Service revenues and sales $ 526,060   $ 181,053   $ -   $ 707,113  
Cost of services provided and goods sold 413,459 101,354 - 514,813
Selling, general and administrative expenses (b) 40,219 50,525 12,193 102,937
Depreciation 8,188 4,171 262 12,621
Amortization   978     311     951     2,240  
Total costs and expenses   462,844     156,361     13,406     632,611  
Income/(loss) from operations 63,216 24,692 (13,406 ) 74,502
Interest expense (b) (126 ) (214 ) (6,949 ) (7,289 )
Intercompany interest income/(expense) 1,566 825 (2,391 ) -
Other income/(expense)—net   (32 )   (54 )   1,211     1,125  
Income/(loss) before income taxes 64,624 25,249 (21,535 ) 68,338
Income taxes (b)   (24,564 )   (9,680 )   7,625     (26,619 )
Net income/(loss) $ 40,060   $ 15,569   $ (13,910 ) $ 41,719  
 

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, 2013 AND 2012
(in thousands)(unaudited)
                   
 
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2013

Net income/(loss) $ 20,485 $ 1,414 $ (7,291 ) $ 14,608
Add/(deduct):
Interest expense 51 97 3,549 3,697
Income taxes 12,576 633 (3,926 ) 9,283
Depreciation 4,520 2,246 133 6,899
Amortization 536     149     496     1,181  
EBITDA 38,168 4,539 (7,039 ) 35,668
Add/(deduct):
Intercompany interest expense/(income) (866 ) (436 ) 1,302 -
Interest income (642 ) (14 ) (14 ) (670 )
Expenses related to OIG investigation 996 - - 996
Acquisition expenses 19 1 - 20
Litigation settlement - 14,760 - 14,760
Expenses related to litigation settlements - 567 - 567
Advertising cost adjustment (c) - (505 ) - (505 )

Stock option expense

- - 1,612 1,612
Long-term incentive compensation - - 494 494
Expenses related to securities litigation   -     -     1     1  
Adjusted EBITDA $ 37,675   $ 18,912   $ (3,644 ) $ 52,943  
 

 2012

Net income/(loss) $ 20,433 $ 8,074 $ (7,233 ) $ 21,274
Add/(deduct):
Interest expense 63 107 3,502 3,672
Income taxes 12,566 5,030 (3,987 ) 13,609
Depreciation 4,164 2,085 131 6,380
Amortization   488     157     482     1,127  
EBITDA 37,714 15,453 (7,105 ) 46,062
Add/(deduct):
Intercompany interest expense/(income) (812 ) (430 ) 1,242 -
Interest income (42 ) (2 ) (15 ) (59 )
Expenses related to OIG investigation 195 - - 195
Acquisition expenses - 20 - 20
Expenses related to litigation settlements - 80 - 80
Advertising cost adjustment (c) - (696 ) - (696 )
Stock option expense - - 2,374 2,374
Expenses related to securities litigation   -     -     197     197  
Adjusted EBITDA $ 37,055   $ 14,425   $ (3,307 ) $ 48,173  
 

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, 2013 AND 2012
(in thousands)(unaudited)
                   
 
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2013

Net income/(loss) $ 40,628 $ 11,038 $ (14,780 ) $ 36,886
Add/(deduct):
Interest expense 97 156 7,538 7,791
Income taxes 25,009 6,582 (8,122 ) 23,469
Depreciation 9,033 4,394 267 13,694
Amortization   1,026     303     979     2,308  
EBITDA 75,793 22,473 (14,118 ) 84,148
Add/(deduct):
Intercompany interest expense/(income) (1,709 ) (864 ) 2,573 -
Interest income (888 ) (56 ) (29 ) (973 )
Expenses related to OIG investigation 2,035 - - 2,035
Acquisition expenses 20 1 - 21
Litigation settlement - 14,760 - 14,760
Expenses related to litigation settlements - 708 - 708
Advertising cost adjustment (c) - (974 ) - (974 )
Cost of severance arrangements - 302 - 302
Stock option expense - - 3,103 3,103
Long-term incentive compensation - - 1,106 1,106
Expenses related to securities litigation   -     -     3     3  
Adjusted EBITDA $ 75,251   $ 36,350   $ (7,362 ) $ 104,239  
 

 2012

 
Net income/(loss) $ 40,060 $ 15,569 $ (13,910 ) $ 41,719
Add/(deduct):
Interest expense 126 214 6,949 7,289
Income taxes 24,564 9,680 (7,625 ) 26,619
Depreciation 8,188 4,171 262 12,621
Amortization   978     311     951     2,240  
EBITDA 73,916 29,945 (13,373 ) 90,488
Add/(deduct):
Intercompany interest expense/(income) (1,566 ) (825 ) 2,391 -
Interest income (72 ) (10 ) (28 ) (110 )
Expenses related to OIG investigation 266 - - 266
Acquisition expenses - 35 - 35
Expenses related to litigation settlements - 727 - 727
Advertising cost adjustment (c) - (1,402 ) - (1,402 )
Stock option expense - - 4,312 4,312
Expenses related to securities litigation   -     -     197     197  
Adjusted EBITDA $ 72,544   $ 28,470   $ (6,501 ) $ 94,513  
 

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,
2013 2012 2013 2012
Net income as reported $ 14,608 $ 21,274 $ 36,886 $ 41,719
 
Add/(deduct) after-tax cost of:
Litigation settlement 8,967 - 8,967 -

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

1,348 1,248 2,671 2,472
Stock option expense 1,020 1,502 1,963 2,727
Expenses of OIG investigation 618 121 1,262 165
Expenses related to litigation settlements 344 49 430 442
Long-term incentive compensation 313 - 700 -
Acquisition expenses 13 12 13 21
Expenses related to securities litigation 1 124 2 124
Loss on extinguishment of debt - - 294 -
Severance arrangements   -   -   184    
 
Adjusted net income $ 27,232 $ 24,330 $ 53,372 $ 47,670
 
 
Earnings Per Share As Reported
Net income $ 0.79 $ 1.12 $ 1.99 $ 2.20
Average number of shares outstanding   18,606   18,998   18,564   18,976
Diluted Earnings Per Share As Reported
Net income $ 0.77 $ 1.10 $ 1.94 $ 2.16
Average number of shares outstanding   18,966   19,369   18,980   19,357
 
 
Adjusted Earnings Per Share
Net income $ 1.46 $ 1.28 $ 2.88 $ 2.51
Average number of shares outstanding   18,606   18,998   18,564   18,976
Adjusted Diluted Earnings Per Share
Net income $ 1.44 $ 1.26 $ 2.81 $ 2.46
Average number of shares outstanding   18,966   19,369   18,980   19,357
 

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, 2013 AND 2012
(unaudited)
                     
Three Months Ended June 30, Six Months Ended June 30,
OPERATING STATISTICS 2013 2012 2013 2012
Net revenue ($000) (d)
Homecare $ 200,273 $ 193,150 $ 396,934 $ 379,747
Inpatient 25,889 29,247 54,357 58,399
Continuous care   38,261     42,816   83,586   85,337
Total before Medicare cap allowance $ 264,423 $ 265,213 $ 534,877 $ 523,483
Medicare cap allowance   (855 )   -   18   2,577
Total $ 263,568   $ 265,213 $ 534,895 $ 526,060
Net revenue as a percent of total before Medicare cap allowance
Homecare 75.7 % 72.9 % 74.2 % 72.5 %
Inpatient 9.8 11.0 10.2 11.2
Continuous care   14.5     16.1   15.6   16.3
Total before Medicare cap allowance 100.0 100.0 100.0 100.0
Medicare cap allowance   (0.3 )   -   -   0.5
Total   99.7   %   100.0 %   100.0 % 100.5 %
Average daily census ("ADC") (days)
Homecare 10,719 9,971 10,538 9,792
Nursing home   2,943     3,036   2,936   3,011
Routine homecare 13,662 13,007 13,474 12,803
Inpatient 434 466 451 469
Continuous care   583     638   631   635
Total   14,679     14,111   14,556   13,907
 
Total Admissions 15,721 15,912 32,858 32,234
Total Discharges 15,763 15,508 32,622 31,707
Average length of stay (days) 84.8 74.0 80.9 78.3
Median length of stay (days) 16.0 14.0 14.0 14.0
ADC by major diagnosis
Neurological 35.5 % 33.6 % 35.1 % 34.0 %
Cancer 16.9 17.7 16.9 17.8
Cardio 12.5 11.6 12.0 11.5
Respiratory 7.5 6.7 7.3 6.7
Other   27.6     30.4   28.7   30.0
Total   100.0   %   100.0 %   100.0 % 100.0 %
Admissions by major diagnosis
Neurological 20.1 % 18.9 % 19.8 % 19.2 %
Cancer 33.6 33.5 32.3 32.9
Cardio 13.2 10.8 12.5 11.3
Respiratory 9.1 8.1 9.4 8.5
Other   24.0     28.7   26.0   28.1
Total   100.0   %   100.0 %   100.0 % 100.0 %
Direct patient care margins (e)
Routine homecare 52.3 % 52.4 % 52.1 % 51.4 %
Inpatient 3.6 12.7 7.4 13.4
Continuous care 14.6 19.7 16.3 19.8
Homecare margin drivers (dollars per patient day)
Labor costs $ 55.04 $ 54.56 $ 56.09 $ 56.13
Drug costs 7.55 8.31 7.56 8.32
Home medical equipment 6.56 6.79 6.70 6.80
Medical supplies 3.13 2.79 3.03 2.77
Inpatient margin drivers (dollars per patient day)
Labor costs $ 346.46 $ 321.16 $ 333.15 $ 317.73
Continuous care margin drivers (dollars per patient day)
Labor costs $ 595.29 $ 569.98 $ 591.24 $ 569.76
Bad debt expense as a percent of revenues 0.8 % 0.8 % 0.8 % 0.8 %
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments 36.8 35.0 n.a. n.a.
Days of revenue outstanding- including unapplied Medicare payments 20.5 30.6 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, 2013 AND 2012
(unaudited)
 
(a)

Included in the results of operations 2013 are the following significant credits/(charges) which may not be indicative of ongoing operations

(in thousands):

 
                    Three Months Ended June 30, 2013
VITAS   Roto-Rooter   Corporate   Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (996 ) $ - $ - $ (996 )
Acquisition expenses (19 ) (1 ) - (20 )
Expenses related to litigation settlements - (567 ) - (567 )
Stock option expense - - (1,612 ) (1,612 )
Long-term incentive compensation - - (494 ) (494 )
Expenses related to securities litigation - - (1 ) (1 )
Other operating expenses:
Litigation settlement - (14,760 ) - (14,760 )
Interest expense:

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

  -     -     (2,132 )   (2,132 )
Pretax impact on earnings (1,015 ) (15,328 ) (4,239 ) (20,582 )
Income tax benefit on the above   385     6,016     1,557     7,958  
After-tax impact on earnings $ (630 ) $ (9,312 ) $ (2,682 ) $ (12,624 )
 
Six Months Ended June 30, 2013
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (2,035 ) $ - $ - $ (2,035 )
Acquisition expenses (20 ) (1 ) - (21 )
Expenses related to litigation settlements - (708 ) - (708 )
Costs of severance arrangements - (302 ) - (302 )
Stock option expense - - (3,103 ) (3,103 )
Long-term incentive compensation - - (1,106 ) (1,106 )
Expenses related to securities litigation - - (3 ) (3 )
Other operating expenses:
Litigation settlement - (14,760 ) - (14,760 )
Interest expense:

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

- - (4,223 ) (4,223 )
Loss on extinguishment of debt   -     -     (465 )   (465 )
Pretax impact on earnings (2,055 ) (15,771 ) (8,900 ) (26,726 )
Income tax benefit on the above   781     6,189     3,270     10,240  
After-tax impact on earnings $ (1,274 ) $ (9,582 ) $ (5,630 ) $ (16,486 )
 
(b) Included in the results of operations 2012 are the following significant credits/(charges) which may not be indicative of ongoing operations
(in thousands):
 
                    Three Months Ended June 30, 2012
VITAS   Roto-Rooter   Corporate   Consolidated

 

Selling, general and administrative expenses:
Expenses related to OIG investigation $ (195 ) $ - $ - $ (195 )
Acquisition expenses - (20 ) - (20 )
Expenses related to litigation settlements - (80 ) - (80 )
Stock option expense - - (2,374 ) (2,374 )
Expenses related to securities litigation - - (197 ) (197 )
Interest expense:

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

  -     -     (1,973 )   (1,973 )
Pretax impact on earnings (195 ) (100 ) (4,544 ) (4,839 )
Income tax benefit on the above   74     39     1,670     1,783  
After-tax impact on earnings $ (121 ) $ (61 ) $ (2,874 ) $ (3,056 )
 
Six Months Ended June 30, 2012
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (266 ) $ - $ - $ (266 )
Acquisition expenses - (35 ) - (35 )
Expenses related to litigation settlements - (727 ) - (727 )
Stock option expense - - (4,312 ) (4,312 )
Expenses related to securities litigation - - (197 ) (197 )
Interest expense:

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

  -     -     (3,908 )   (3,908 )
Pretax impact on earnings (266 ) (762 ) (8,417 ) (9,445 )
Income tax benefit on the above   101     299     3,094     3,494  
After-tax impact on earnings $ (165 ) $ (463 ) $ (5,323 ) $ (5,951 )
 

(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 2013 and 2012, GAAP advertising expense for Roto-Rooter totaled $6,094,000 and $5,270,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the second quarters of 2013 and 2012 would total $6,599,000 and $5,966,000, respectively.

 

Similarly, for the first six months of 2013 and 2012, GAAP advertising expense for Roto-Rooter totaled $11,798,000 and $10,894,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the first six months of 2013 and 2012 would total $12,772,000 and $12,296,000, 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, 32 provider numbers have a Medicare cap cushion of 10% or greater during the first nine months of the current cap year; two provider numbers have a Medicare cap cushion between 5% and 10%; and one provider number has a cap cushion between 0% and 5%. There is one program with a cap liability in the current cap year.

 
(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

All information current at time of original publication. Read complete disclaimer for details.
Copyright © 2005, Chemed Corporation. All rights reserved.
Page last modified: 04/18/05