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Chemed > Investor Relations > News Releases > News Release
News Releases
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Chemed Reports Fourth-Quarter 2014 Results

CINCINNATI--(BUSINESS WIRE)--Feb. 17, 2015-- Chemed Corporation (Chemed) (NYSE:CHE), which operates VITAS Healthcare Corporation (VITAS), the nation’s largest provider of end-of-life care, and Roto-Rooter, the nation’s largest commercial and residential plumbing and drain cleaning services provider, reported financial results for its fourth quarter ended December 31, 2014, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 8.8% to $379 million
  • GAAP Diluted EPS increased 33.6% to $1.71
  • Adjusted Diluted EPS increased 24.1% to $1.80

VITAS segment operating results:

  • Net Patient Revenue of $274 million, an increase of 7.1%
  • Average Daily Census (ADC) of 14,838, an increase of 4.6%
  • Admissions of 16,313, an increase of 5.6%
  • Net Income, including litigation costs, of $25.5 million, an increase of 22.2%
  • Adjusted EBITDA of $45.7 million, an increase of 18.4%
  • Adjusted EBITDA margin of 16.7%, an increase of 159 basis points

Roto-Rooter segment operating results:

  • Revenue of $105 million, an increase of 13.7%
  • Net Income of $11.5 million, an increase of 14.5%
  • Adjusted EBITDA of $21.1 million, an increase of 14.5%
  • Adjusted EBITDA margin of 20.1%, an increase of 15 basis points

VITAS

Net revenue for VITAS was $274 million in the fourth quarter of 2014, which is an increase of $18.2 million, or 7.1%, when compared to the prior-year period. This revenue increase is comprised of an average Medicare reimbursement rate increase of approximately 1.4%, a 4.6% increase in average daily census, and a favorable comparison relative to the Medicare Cap billing limitation.

In the fourth quarter of 2014, VITAS reversed $0.5 million in estimated Medicare Cap billing limitations. This compares to $3.8 million of Medicare Cap billing limitations recorded in the fourth quarter of 2013. At December 31, 2014, VITAS had 35 Medicare provider numbers with one provider number having an estimated 2015 Medicare Cap billing limitation.

Of VITAS’ 35 unique Medicare provider numbers, 29 provider numbers have a Medicare Cap cushion of 10% or greater for the 2015 Medicare Cap period; two provider numbers have a Medicare Cap cushion between 5% to 10%; three provider numbers have a cap cushion between 0% and 5% and one provider number is in a Medicare Cap billing limitation. VITAS generated an aggregate cap cushion of $276 million during the trailing twelve-month period.

Average revenue per patient per day in the quarter, excluding the impact of Medicare Cap, was $200.62, which is 0.7% above the prior-year period. Routine home care reimbursement and high acuity care averaged $164.58 and $702.86, respectively. During the quarter, high acuity days of care were 6.7% of total days of care, 14 basis points below the prior-year quarter.

The fourth quarter of 2014 gross margin, excluding the impact of Medicare Cap, was 24.3%, which is a 12 basis point increase when compared to the fourth quarter of 2013.

Selling, general and administrative expense was $21.7 million in the fourth quarter of 2014, which is an increase of 3.4% when compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $45.2 million in the quarter, an increase 6.5% over the prior-year period. Adjusted EBITDA margin, excluding the impact from Medicare Cap, was 16.5% in the quarter which is 18 basis points favorable to the prior-year period.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $105 million for the fourth quarter of 2014, an increase of $12.6 million, or 13.7%, over the prior-year quarter.

Roto-Rooter utilizes a universal calendar of four 13-week quarters equating to a 52 week full year reporting period and then accrues for an additional one or two days of operating results in the fourth quarter to equate to a full 365 or 366 day year. In the fourth quarter of 2014, Roto-Rooter had 14 weeks of operating activity during the quarter. This additional week of operating activity, net of the accrued operating results from earlier years, resulted in Roto-Rooter recognizing an incremental $2.8 million of revenue, $0.9 million of Adjusted EBITDA and $0.5 million of net income in the fourth quarter of 2014 when compared to the fourth quarter of 2013.

Roto-Rooter’s gross margin in the quarter was 46.7%, a 59 basis point decline when compared to the fourth quarter of 2013. Adjusted EBITDA in the fourth quarter of 2014 totaled $21.1 million, an increase of 14.5%, and the Adjusted EBITDA margin was 20.1% in the quarter, 15 basis points higher than the prior year.

Chemed Consolidated

As of December 31, 2014, Chemed had total cash and cash equivalents of $14 million and debt of $148 million.

In June 2014 Chemed entered into a five-year Amended and Restated Credit Agreement that consisted of a $100 million amortizable term loan and 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 December 31, 2014, the Company had approximately $263 million of undrawn borrowing capacity under this credit agreement.

Capital expenditures through December 31, 2014, aggregated $43.6 million and compares to depreciation and amortization during the same period of $33.1 million.

The Company repurchased $110 million of Chemed stock through December 31, 2014. This equates to 1.2 million shares of Chemed stock repurchased during the year at an average cost of $93.01 Chemed currently has $11.8 million of authorization remaining under this share repurchase plan.

Guidance for 2015

Full-year 2015 revenue growth for VITAS, prior to Medicare Cap, is estimated to be in the range of 3% to 4%. Admissions in 2015 are estimated to increase 4% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 14% to 15%. Medicare Cap billing limitations for calendar year 2015 are estimated to be $5.5 million.

Roto-Rooter is forecasted to achieve full-year 2015 revenue growth of 3% to 4%. This revenue estimate is based upon increased job pricing of approximately 1%. Adjusted EBITDA margin for 2015 is estimated in the range of 19% to 20%.

Management estimates that full-year 2015 adjusted earnings per diluted share, which excludes non-cash expense for stock options, costs related to litigation and other discrete items, will be in the range of $6.50 to $6.70. This compares to Chemed’s 2014 reported adjusted earnings per diluted share of $6.07.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Wednesday, February 18, 2015, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (877) 280-4958 for U.S. and Canadian participants and (857) 244-7315 for international participants. The participant passcode is 81941669. 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 35554615. 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)
               
 
For the Three Months Ended For the Years Ended
December 31, December 31,
2014 2013 2014 2013
Service revenues and sales $ 379,411   $ 348,604   $ 1,456,282   $ 1,413,329  
Cost of services provided and goods sold 263,402 245,958 1,034,673 1,008,808
Selling, general and administrative expenses (aa) 57,232 54,981 220,118 212,518
Depreciation 8,010 7,033 29,881 27,698
Amortization 730 1,192 3,191 4,690
Other operating expenses (bb)   -     -     -     26,221  
Total costs and expenses   329,374     309,164     1,287,863     1,279,935  
Income from operations 50,037 39,440 168,419 133,394
Interest expense (962 ) (3,744 ) (8,186 ) (15,035 )
Other income--net (cc)   244     2,158     2,521     5,470  
Income before income taxes 49,319 37,854 162,754 123,829
Income taxes   (19,524 )   (14,945 )   (63,437 )   (46,602 )
Net income $ 29,795   $ 22,909   $ 99,317   $ 77,227  
 
 
Earnings Per Share
Net income $ 1.77   $ 1.31   $ 5.79   $ 4.24  
Average number of shares outstanding   16,878     17,492     17,165     18,199  
 
Diluted Earnings Per Share
Net income $ 1.71   $ 1.28   $ 5.57   $ 4.16  
Average number of shares outstanding   17,469     17,899     17,840     18,585  
 
                             
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
For the Three Months Ended For the Years Ended
December 31, December 31,
2014 2013 2014 2013

 

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

$ 56,241 $ 52,205 $ 214,431 $ 206,235

Market value gains related to deferred
    compensation trusts

410 2,636 3,118 4,982
Long-term incentive compensation   581     140     2,569     1,301  

     Total SG&A expenses

$ 57,232   $ 54,981   $ 220,118   $ 212,518  
 
(bb) Other operating expenses comprise litigation settlements of the Roto-Rooter segment ($15,721,000) and of the VITAS segment ($10,500,00).
 
(cc) Other income--net comprises (in thousands):
For the Three Months Ended For the Years Ended
December 31, December 31,
2014 2013 2014 2013

 

Market value gains related to deferred
    compensation trusts

$ 410 $ 2,636 $ 3,118 $ 4,982
Loss on disposal of property and equipment (147 ) (140 ) (640 ) (320 )
Interest income (24 ) (318 ) (29 ) 847
Other   5     (20 )   72     (39 )

    Total other income--net

$ 244   $ 2,158   $ 2,521   $ 5,470  
 

     
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
             
 
December 31,
2014 2013
Assets
Current assets
Cash and cash equivalents $ 14,132 $ 84,418
Accounts receivable less allowances 124,607 91,770
Inventories 6,168 6,703
Current deferred income taxes 15,414 20,257
Prepaid income taxes 2,787 3,690
Prepaid expenses   11,456     17,818  
Total current assets 174,564 224,656
Investments of deferred compensation plans held in trust 49,147 42,465
Properties and equipment, at cost less accumulated depreciation 105,336 92,955
Identifiable intangible assets less accumulated amortization 56,027 56,556
Goodwill 466,722 466,871
Other assets   8,136     10,198  
Total Assets $ 859,932   $ 893,701  
 
Liabilities
Current liabilities
Accounts payable $ 46,849 $ 41,758
Current portion of long-term debt 6,250 183,564
Income taxes 5,818 111
Accrued insurance 40,814 41,859
Accrued compensation 50,718 48,323
Accrued legal 753 23,210
Other current liabilities   24,352     25,161  
Total current liabilities 175,554 363,986
Deferred income taxes 29,945 27,301
Long-term debt 141,250 -
Deferred compensation liabilities 48,684 42,348
Other liabilities   13,143     11,176  
Total Liabilities   408,576     444,811  
 
Stockholders' Equity
Capital stock 33,337 32,245
Paid-in capital 538,845 481,011
Retained earnings 771,176 686,114
Treasury stock, at cost (894,285 ) (752,634 )
Deferred compensation payable in Company stock   2,283     2,154  
Total Stockholders' Equity   451,356     448,890  
Total Liabilities and Stockholders' Equity $ 859,932   $ 893,701  
 

       
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
                 
 
For the Years Ended December 31,
2014 2013
Cash Flows from Operating Activities
Net income $ 99,317 $ 77,227
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 33,072 32,388
Provision for uncollectible accounts receivable 13,173 10,907
Provision for deferred income taxes 6,978 (6,988 )
Stock option expense 4,802 6,042
Amortization of discount on convertible notes 3,392 8,674
Noncash long-term incentive compensation 2,569 1,301
Amortization of debt issuance costs 826 1,751
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations:
Increase in accounts receivable (45,785 ) (9,009 )
Decrease in inventories 535 355
Decrease/(increase) in prepaid expenses 6,362 (6,317 )
Increase/(decrease) in accounts payable and other current liabilities (25,824 ) 40,340
Increase/(decrease) in income taxes 11,279 (2,461 )
Increase in other assets (4,769 ) (6,507 )
Increase in other liabilities 8,484 6,713
Excess tax benefit on stock-based compensation (5,172 ) (3,982 )
Other sources   1,040     413  
Net cash provided by operating activities   110,279     150,847  
Cash Flows from Investing Activities
Capital expenditures (43,571 ) (29,324 )
Business combinations, net of cash acquired (250 ) (2,257 )
Other sources   294     235  
Net cash used by investing activities   (43,527 )   (31,346 )
Cash Flows from Financing Activities
Proceeds from revolving line of credit 386,350 -
Payments on revolving line of credit (336,350 ) -
Payments on other long-term debt (189,456 ) -
Purchases of treasury stock (110,019 ) (92,911 )
Proceeds from other long-term debt 100,000 -
Proceeds from exercise of stock options 23,910 17,122
Dividends paid (14,255 ) (14,148 )
Increase/(decrease) in cash overdrafts payable 9,714 (11,415 )
Capital stock surrendered to pay taxes on stock-based compensation (7,524 ) (5,348 )
Retirement of warrants (2,648 ) -
Excess tax benefit on stock-based compensation 5,172 3,982
Debt issuances costs (914 ) (1,108 )
Other uses   (1,018 )   (788 )
Net cash used by financing activities   (137,038 )   (104,614 )
Increase/(Decrease) in Cash and Cash Equivalents (70,286 ) 14,887
Cash and cash equivalents at beginning of year   84,418     69,531  
Cash and cash equivalents at end of period $ 14,132   $ 84,418  
 

   
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2014 AND 2013
(in thousands)(unaudited)
             
Chemed
VITAS Roto-Rooter   Corporate Consolidated

 2014

Service revenues and sales $ 274,383   $ 105,028   $ -   $ 379,411  
Cost of services provided and goods sold 207,424 55,978 - 263,402
Selling, general and administrative expenses (a) 21,657 28,140 7,435 57,232
Depreciation 4,892 2,970 148 8,010
Amortization   205     128     397     730  
Total costs and expenses   234,178     87,216     7,980     329,374  
Income/(loss) from operations 40,205 17,812 (7,980 ) 50,037
Interest expense (a) (40 ) (68 ) (854 ) (962 )
Intercompany interest income/(expense) 1,669 802 (2,471 ) -
Other income/(expense)—net   (176 )   10     410     244  
Income/(loss) before income taxes 41,658 18,556 (10,895 ) 49,319
Income taxes (a)   (16,116 )   (7,081 )   3,673     (19,524 )
Net income/(loss) $ 25,542   $ 11,475   $ (7,222 ) $ 29,795  
 

 2013

Service revenues and sales $ 256,218   $ 92,386   $ -   $ 348,604  
Cost of services provided and goods sold 197,265 48,693 - 245,958
Selling, general and administrative expenses (b) 20,948 25,691 8,342 54,981
Depreciation 4,569 2,329 135 7,033
Amortization   538     153     501     1,192  
Total costs and expenses   223,320     76,866     8,978     309,164  
Income/(loss) from operations 32,898 15,520 (8,978 ) 39,440
Interest expense (b) (37 ) (83 ) (3,624 ) (3,744 )
Intercompany interest income/(expense) 1,347 613 (1,960 ) -
Other income/(expense)—net   (441 )   (45 )   2,644     2,158  
Income/(loss) before income taxes 33,767 16,005 (11,918 ) 37,854
Income taxes (b)   (12,859 )   (5,980 )   3,894     (14,945 )
Net income/(loss) $ 20,908   $ 10,025   $ (8,024 ) $ 22,909  
 

The "Footnotes to Financial Statements" are integral parts of this financial information.

   
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(in thousands)(unaudited)
             
Chemed
VITAS Roto-Rooter   Corporate Consolidated

 2014

Service revenues and sales $ 1,064,205   $ 392,077   $ -   $ 1,456,282  
Cost of services provided and goods sold 825,739 208,934 - 1,034,673
Selling, general and administrative expenses (a) 84,597 106,708 28,813 220,118
Depreciation 18,601 10,702 578 29,881
Amortization   1,034     525     1,632     3,191  
Total costs and expenses   929,971     326,869     31,023     1,287,863  
Income/(loss) from operations 134,234 65,208 (31,023 ) 168,419
Interest expense (a) (207 ) (363 ) (7,616 ) (8,186 )
Intercompany interest income/(expense) 6,189 2,892 (9,081 ) -
Other income/(expense)—net   (753 )   146     3,128     2,521  
Income/(loss) before income taxes 139,463 67,883 (44,592 ) 162,754
Income taxes (a)   (53,278 )   (25,808 )   15,649     (63,437 )
Net income/(loss) $ 86,185   $ 42,075   $ (28,943 ) $ 99,317  
 

 2013

Service revenues and sales $ 1,045,113   $ 368,216   $ -   $ 1,413,329  
Cost of services provided and goods sold 813,600 195,208 - 1,008,808
Selling, general and administrative expenses (b) 82,252 102,592 27,674 212,518
Depreciation 18,149 9,014 535 27,698
Amortization 2,102 607 1,981 4,690
Other operating expenses (b)   10,500     15,721     -     26,221  
Total costs and expenses   926,603     323,142     30,190     1,279,935  
Income/(loss) from operations 118,510 45,074 (30,190 ) 133,394
Interest expense (b) (182 ) (322 ) (14,531 ) (15,035 )
Intercompany interest income/(expense) 4,288 2,055 (6,343 ) -
Other income—net   438     (4 )   5,036     5,470  
Income/(loss) before income taxes 123,054 46,803 (46,028 ) 123,829
Income taxes (b)   (46,910 )   (17,560 )   17,868     (46,602 )
Net income/(loss) $ 76,144   $ 29,243   $ (28,160 ) $ 77,227  
 

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 DECEMBER 31, 2014 AND 2013
(in thousands)(unaudited)
           
 
Chemed
VITAS Roto-Rooter   Corporate Consolidated

 2014

Net income/(loss) $ 25,542 $ 11,475 $ (7,222 ) $ 29,795
Add/(deduct):
Interest expense 40 68 854 962
Income taxes 16,116 7,081 (3,673 ) 19,524
Depreciation 4,892 2,970 148 8,010
Amortization 205     128     397     730
EBITDA 46,795 21,722 (9,496 ) 59,021
Add/(deduct):
Intercompany interest expense/(income) (1,669 ) (802 ) 2,471 -
Interest income 35 (10 ) (1 ) 24
Expenses related to OIG investigation 533 - - 533
Acquisition expenses - 23 - 23
Expenses related to litigation settlements - 16 - 16
Advertising cost adjustment (c) - 161 - 161
Stock option expense - - 1,372 1,372
Long-term incentive compensation   -     -     581     581
Adjusted EBITDA $ 45,694   $ 21,110   $ (5,073 ) $ 61,731
 

 2013

Net income/(loss) $ 20,908 $ 10,025 $ (8,024 ) $ 22,909
Add/(deduct):
Interest expense 37 83 3,624 3,744
Income taxes 12,859 5,980 (3,894 ) 14,945
Depreciation 4,569 2,329 135 7,033
Amortization   538     153     501     1,192
EBITDA 38,911 18,570 (7,658 ) 49,823
Add/(deduct):
Intercompany interest expense/(income) (1,347 ) (613 ) 1,960 -
Interest income 300 26 (8 ) 318
Expenses related to OIG investigation 705 - - 705
Acquisition expenses 20 - - 20
Expenses related to litigation settlements - 274 - 274
Advertising cost adjustment (c) - 177 - 177
Stock option expense - - 1,310 1,310
Long-term incentive compensation - - 140 140
Expenses related to securities litigation   -     -     105     105
Adjusted EBITDA $ 38,589   $ 18,434   $ (4,151 ) $ 52,872
 

The "Footnotes to Financial Statements" are integral parts of this financial information.

       
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(in thousands)(unaudited)
           
 
Chemed
VITAS Roto-Rooter   Corporate Consolidated

 2014

Net income/(loss) $ 86,185 $ 42,075 $ (28,943 ) $ 99,317
Add/(deduct):
Interest expense 207 363 7,616 8,186
Income taxes 53,278 25,808 (15,649 ) 63,437
Depreciation 18,601 10,702 578 29,881
Amortization   1,034     525     1,632     3,191  
EBITDA 159,305 79,473 (34,766 ) 204,012
Add/(deduct):
Intercompany interest expense/(income) (6,189 ) (2,892 ) 9,081 -
Interest income 78 (39 ) (10 ) 29
Expenses related to OIG investigation 2,141 - - 2,141
Net expenses related to litigation settlements 113 7 - 120
Acquisition expenses 1 23 - 24
Advertising cost adjustment (c) - (1,462 ) - (1,462 )
Stock option expense - - 4,802 4,802
Long-term incentive compensation - - 2,569 2,569
Expenses related to securities litigation   -     -     327     327  
Adjusted EBITDA $ 155,449   $ 75,110   $ (17,997 ) $ 212,562  
 

 2013

Net income/(loss) $ 76,144 $ 29,243 $ (28,160 ) $ 77,227
Add/(deduct):
Interest expense 182 322 14,531 15,035
Income taxes 46,910 17,560 (17,868 ) 46,602
Depreciation 18,149 9,014 535 27,698
Amortization   2,102     607     1,981     4,690  
EBITDA 143,487 56,746 (28,981 ) 171,252
Add/(deduct):
Intercompany interest expense/(income) (4,288 ) (2,055 ) 6,343 -
Interest income (750 ) (41 ) (56 ) (847 )
Expenses related to OIG investigation 2,149 - - 2,149
Litigation settlements 10,500 15,721 - 26,221
Expenses related to litigation settlements - 1,425 - 1,425
Acquisition expenses 58 4 - 62
Advertising cost adjustment (c) - (1,166 ) - (1,166 )
Expenses of severance arrangement - 302 - 302
Stock option expense - - 6,042 6,042
Long-term incentive compensation - - 1,301 1,301
Expenses related to securities litigation   -     -     109     109  
Adjusted EBITDA $ 151,156   $ 70,936   $ (15,242 ) $ 206,850  
 

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)
           
 
 

For the Three Months Ended

For the Years Ended
December 31, December 31,
2014 2013 2014 2013
Net income as reported $ 29,795 $ 22,909 $ 99,317 $ 77,227

 

Add/(deduct) the after-tax:
Stock option expense 863 820 3,022 3,813
Long-term incentive compensation 367 88 1,625 822
Expenses related to OIG investigation 331 438 1,328 1,333
Acquisition expenses 14 13 15 38
Net expenses related to litigation settlements 10 166 74 865
Non-cash expense of change in accounting for convertible debt - 1,402 2,143 5,448
Expenses related to securities litigation - 66 207 69
Litigation settlements - - - 16,061
Uncertain tax position adjustments - - - (1,782 )
Loss on extinguishment of debt - - - 294
Expenses of severance arrangements -   -   -   184  
 
Adjusted net income $ 31,380 $ 25,902 $ 107,731 $ 104,372  
 
 
Diluted Earnings Per Share As Reported
Net income $ 1.71 $ 1.28 $ 5.57 $ 4.16  
Average number of shares outstanding   17,469   17,899   17,840   18,585  
 
 
Adjusted Diluted Earnings Per Share
Net income $

1.80

$

1.45

$

6.07

$

5.62

Adjusted average number of shares outstanding (d)  

17,469

 

17,899

 

17,738

 

18,585

 

The "Footnotes to Financial Statements" are integral parts of this financial information.

   
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)
                 
 
For the Three Months Ended For the Years Ended
December 31, December 31,
OPERATING STATISTICS 2014 2013 2014 2013
Net revenue ($000) (e)
Homecare $ 209,633 $ 198,325 $ 810,413 $ 791,735
Inpatient 25,839 25,788 102,876 104,968
Continuous care   38,405   35,943     152,206     155,409  
Total before Medicare cap allowance $ 273,877 $ 260,056 $ 1,065,495 $ 1,052,112
Medicare cap allowance   506   (3,838 )   (1,290 )   (6,999 )
Total $ 274,383 $ 256,218   $ 1,064,205   $ 1,045,113  
Net revenue as a percent of total before Medicare cap allowance
Homecare 76.6 % 76.3 % 76.0 % 75.2 %
Inpatient 9.4 9.9 9.7 10.0
Continuous care   14.0   13.8     14.3     14.8  
Total before Medicare cap allowance 100.0 100.0 100.0 100.0
Medicare cap allowance   0.2   (1.5 )   (0.1 )   (0.7 )
Total   100.2 %   98.5   %   99.9   % 99.3   %
Average daily census ("ADC") (days)
Homecare 10,850 10,353 10,634 10,449
Nursing home   2,995   2,862     2,954     2,911  
Routine homecare 13,845 13,215 13,588 13,360
Inpatient 427 433 428 438
Continuous care   566   537     568     585  
Total   14,838   14,185     14,584     14,383  
 
Total Admissions 16,313 15,445 64,090 62,858
Total Discharges 16,333 15,396 63,478 62,999
Average length of stay (days) 82.7 82.6 82.4 81.6
Median length of stay (days) 15.0 15.0 15.0 15.0
ADC by major diagnosis
Neurological 25.4 % 38.9 % 30.1 % 37.7 %
Cancer 17.2 17.2 17.3 17.1
Cardio 17.8 14.3 17.0 13.2
Respiratory 7.8 7.8 7.9 7.6
Other   31.8   21.8     27.7     24.4  
Total   100.0 %   100.0   %   100.0   % 100.0   %
Admissions by major diagnosis
Neurological 13.2 % 21.3 % 18.6 % 20.7 %
Cancer 33.1 33.8 33.3 33.2
Cardio 15.2 13.4 14.9 13.1
Respiratory 9.3 8.7 9.4 9.2
Other   29.2   22.8     23.8     23.8  
Total   100.0 %   100.0   %   100.0   % 100.0   %
Direct patient care margins (f)
Routine homecare 54.9 % 53.8 % 53.8 % 52.6 %
Inpatient 7.2 5.0 5.8 5.5
Continuous care 18.2 16.1 17.4 15.9
Homecare margin drivers (dollars per patient day)
Labor costs $ 53.06 $ 53.85 $ 53.99 $ 55.17

Drug costs

6.90 7.54 7.01 7.54

Home medical equipment

6.41 6.38 6.61 6.61
Medical supplies 3.10 2.99 3.18 2.97
Inpatient margin drivers (dollars per patient day)
Labor costs $ 327.53 $ 334.50 $ 339.90 $ 338.51
Continuous care margin drivers (dollars per patient day)
Labor costs $ 582.69 $ 589.51 $ 585.61 $ 591.54
Bad debt expense as a percent of revenues 1.0 % 0.9 % 1.0 % 0.9 %
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments 38.9 36.5 n.a. n.a.
Days of revenue outstanding- including unapplied Medicare payments 33.6 25.9 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 MONTHS AND YEARS ENDED DECEMBER 31, 2014 AND 2013
(unaudited)
               
 
(a) Included in the results of operations 2014 are the following significant credits/(charges) which may not be indicative of ongoing operations
(in thousands):
For the Three Months Ended December 31, 2014
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (533 ) $ - $ - $ (533 )
Acquisition expenses - (23 ) - (23 )
Expenses related to litigation settlements - (16 ) - (16 )
Stock option expense - - (1,372 ) (1,372 )
Long-term incentive compensation   -     -     (581 )   (581 )
Pretax impact on earnings (533 ) (39 ) (1,953 ) (2,525 )
Income tax benefit on the above   202     15     723     940  
After-tax impact on earnings $ (331 ) $ (24 ) $ (1,230 ) $ (1,585 )
 
For the Year Ended December 31, 2014
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (2,141 ) $ - $ - $ (2,141 )
Net expenses related to litigation settlements (113 ) (7 ) - (120 )
Acquisition expenses (1 ) (23 ) - (24 )
Stock option expense - - (4,802 ) (4,802 )
Long-term incentive compensation - - (2,569 ) (2,569 )
Expenses related to securities litigation - - (327 ) (327 )
Interest expense:
Non-cash expense of change in accounting for convertible debt   -     -     (3,389 )   (3,389 )
Pretax impact on earnings (2,255 ) (30 ) (11,087 ) (13,372 )
Income tax benefit on the above   856     12     4,090     4,958  
After-tax impact on earnings $ (1,399 ) $ (18 ) $ (6,997 ) $ (8,414 )
 
(b) Included in the results of operations 2013 are the following significant credits/(charges) which may not be indicative of ongoing operations
(in thousands):
For the Three Months Ended December 31, 2013
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (705 ) $ - $ - $ (705 )
Acquisition expenses (20 ) - - (20 )
Expenses related to litigation settlements - (274 ) - (274 )
Stock option expense - - (1,310 ) (1,310 )
Long-term incentive compensation - - (140 ) (140 )
Expenses related to securities litigation - - (105 ) (105 )
Interest expense:
Non-cash expense of change in accounting for convertible debt   -     -     (2,216 )   (2,216 )
Pretax impact on earnings (725 ) (274 ) (3,771 ) (4,770 )
Income tax benefit on the above   274     108     1,395     1,777  
After-tax impact on earnings $ (451 ) $ (166 ) $ (2,376 ) $ (2,993 )
 
For the Year Ended December 31, 2013
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (2,149 ) $ - $ - $ (2,149 )
Acquisition expenses (58 ) (4 ) - (62 )
Expenses related to litigation settlements - (1,425 ) - (1,425 )
Expense of severance arrangement - (302 ) - (302 )
Stock option expense - - (6,042 ) (6,042 )
Long-term incentive compensation - - (1,301 ) (1,301 )
Expenses related to securities litigation - - (109 ) (109 )
Other operating expenses:
Litigation settlements (10,500 ) (15,721 ) - (26,221 )
Interest expense:
Non-cash expense of change in accounting for convertible debt - - (8,613 ) (8,613 )
Loss on extinguishment of debt   -     -     (465 )   (465 )
Pretax impact on earnings (12,707 ) (17,452 ) (16,530 ) (46,689 )
Income tax benefit on the above   4,828     6,850     7,866     19,544  
After-tax impact on earnings $ (7,879 ) $ (10,602 ) $ (8,664 ) $ (27,145 )
 

(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 fourth quarters of 2014 and 2013, GAAP advertising expense for Roto-Rooter totaled $6,596,000 and $6,518,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the fourth quarters of 2014 and 2013 would total $6,435,000 and $6,341,000, respectively.

 

Similarly, for the years ended December 31, 2014 and 2013, GAAP advertising expense for Roto-Rooter totaled $24,804,000 and $24,092,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the years ended December 31, 2014 and 2013 would total $26,266,000 and $25,258,000, respectively.

 
(d)

Adjusted diluted average shares outstanding excludes the estimated dilutive impact of the convertible notes prior to conversion of these notes on May 15, 2014 (impact of 102,000 shares for the year ended December 31, 2014) as this impact was entirely offset upon the exercise of the note hedges on May 15, 2014.

 
(e)

VITAS has 9 large (greater than 450 ADC), 17 medium (greater than 200 but less than 450 ADC) and 23 small (less than 200 ADC) hospice programs. For the current Medicare cap year there is one program with a cap liability and five programs with Medicare cap cushion of less than 10%.

 
(f) 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