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Chemed > Investor Relations > News Releases > News Release
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Chemed Reports First-Quarter 2016 Results

CINCINNATI--(BUSINESS WIRE)--Apr. 28, 2016-- 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, 2016, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 3.6% to $390 million
  • GAAP Diluted EPS increased 3.6% to $1.45
  • Adjusted Diluted EPS increased 5.2% to $1.62

VITAS segment operating results:

  • Net Patient Revenue of $278 million, an increase of 2.9%
  • Average Daily Census (ADC) of 15,653, an increase of 5.6%
  • Admissions of 16,868, a decrease of 2.3%
  • Unit for Unit admissions decreased 0.7%
  • Net Income, including litigation costs, of $19.1 million, a decrease of 1.2%
  • Adjusted EBITDA, excluding cap, of $35.9 million, an increase of 0.3%
  • Adjusted EBITDA margin, excluding cap, of 12.9%, a decrease of 34 basis points

Roto-Rooter segment operating results:

  • Revenue of $113 million, an increase of 5.4%
  • Net Income of $13.0 million, an increase of 8.4%
  • Adjusted EBITDA of $23.4 million, an increase of 9.1%
  • Adjusted EBITDA margin of 20.7%, an increase of 69 basis points

VITAS

Net revenue for VITAS was $278 million in the first quarter of 2016, which is an increase of 2.9%, when compared to the prior-year period. This revenue increase is comprised primarily of an average Medicare reimbursement rate increase of approximately 0.6%, a 5.6% increase in average daily census, offset by acuity mix shift which negatively impacted revenue 1.8% and changes in Medicare hospice reimbursement which negatively impacted revenue 2.1%.

On January 1, 2016, CMS implemented a refinement to the Medicare hospice reimbursement per diem. This refinement eliminated the single-tier per diem for routine home care (RHC) and replaced it with a two-tiered rate, with a higher per diem rate for the first 60 days of a hospice patient’s care, and a lower rate for day 61 and after. In addition, CMS provided for a Service Intensity Add-on (SIA) payment which provides for reimbursement of care provided by a registered nurse or social worker for RHC patients within seven days prior to death. The reimbursement for continuous care, inpatient care and respite care are not impacted by this rebasing.

The current two-tiered national per diem rate for RHC is $186.84 for the first 60 days and $146.83 for RHC provided to patients in hospice beyond 60 days. An individual hospice’s actual per diem rate is adjusted for differences in geographic cost of living.

Rebasing in 2016 would be revenue neutral to a hospice if it has 37.6% of total RHC days-of-care being provided to patients in their first 60 days of admission and 62.4% of total RHC days-of-care provided to patients after the 60 days. (RHC Days-of-Care ratio).

In the first quarter of 2016, VITAS had a 25/75 RHC Days-of-Care ratio and generated approximately $1.0 million in SIA payments. This resulted in 2.1% less revenue than under the previous Medicare reimbursement methodology.

VITAS did not have any adjustments to revenue related to the Medicare Cap billing limitation in the quarter. This compares to $0.2 million of Medicare Cap billing limitations reversed in the first quarter of 2015.

At March 31, 2016, VITAS had 31 Medicare provider numbers, none of which has an estimated 2016 Medicare Cap billing limitation.

Of VITAS’ 31 unique Medicare provider numbers, 28 provider numbers have a Medicare Cap cushion of 10% or greater for the 2016 Medicare Cap period, two provider numbers have a cap cushion between 5% and 10%, and one provider number has a cap cushion between 0% and 5%. VITAS generated an aggregate cap cushion of $264 million during the trailing twelve-month period.

Average revenue per patient per day in the quarter, excluding the impact of Medicare Cap, was $194.84, which is 3.5% below the prior-year period. Routine home care reimbursement and high acuity care averaged $160.92 and $702.52, respectively. During the quarter, high acuity days of care were 6.3% of total days of care, 66 basis points less than the prior-year quarter.

The first quarter of 2016 gross margin, excluding the impact of Medicare Cap, was 21.0%, which is a 14 basis point decline when compared to the first quarter of 2015.

Selling, general and administrative expense, excluding litigation costs, was $22.4 million in the first quarter of 2016, which is an increase of 7.9% when compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $35.9 million in the quarter, an increase of 0.3% over the prior-year period. Adjusted EBITDA margin, excluding the impact from Medicare Cap, was 12.9% in the quarter which is 34 basis points below the prior-year period.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $113 million for the first quarter of 2016, an increase of $5.8 million, or 5.4%, over the prior-year quarter. Revenue from water restoration totaled $12.5 million, an increase of 19.2% over the prior year.

Roto-Rooter’s gross margin in the quarter was 47.6%, a 26 basis point improvement when compared to the first quarter of 2015. Adjusted EBITDA in the first quarter of 2016 totaled $23.4 million, an increase of 9.1%, and the Adjusted EBITDA margin was 20.7% in the quarter, 69 basis points higher than the prior year.

Chemed Consolidated

As of March 31, 2016, Chemed had total cash and cash equivalents of $15 million and debt of $145 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 112.5 basis points. At March 31, 2016, the Company had approximately $257 million of undrawn borrowing capacity under this credit agreement.

Capital expenditures through March 31, 2016, aggregated $11.5 million and compares to depreciation and amortization during the same period of $8.5 million.

During the quarter, the Company repurchased 400,000 shares of Chemed stock for $52.5 million which equates to a cost per share of $131.15. On March 11, 2016, Chemed’s Board of Directors authorized an additional $100 million for stock repurchase under Chemed’s existing share repurchase program. As of March 31, 2016, there is $100 million of remaining share repurchase authorization under this plan.

Guidance for 2016

Including the impact of the change in Medicare hospice reimbursement previously discussed, full-year 2016 revenue growth for VITAS, prior to Medicare Cap, is estimated to be in the range of 2.5% to 3.5%. Admissions in 2016 are estimated to increase 3% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 14% to 15%. This guidance includes $3.8 million for Medicare Cap billing limitations.

Roto-Rooter is forecasted to achieve full-year 2016 revenue growth of 3.5% to 4.5%. This revenue estimate is based upon increased job pricing of approximately 1% and continued growth in water restoration services. Adjusted EBITDA margin for 2016 is estimated in the range of 20% to 21%.

Based upon the above, full-year 2016 adjusted earnings per diluted share, excluding non-cash expense for stock options, costs related to litigation, and other discrete items, is estimated to be in the range of $7.05 to $7.25. This compares to Chemed’s 2015 reported adjusted earnings per diluted share of $6.98.

The impact on diluted earnings per share from rebasing is approximately $0.56. Excluding rebasing, 2016 guidance for adjusted earnings per diluted share would have been in the range of $7.61 to $7.81.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Friday, April 29, 2016, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (855) 715-1324 for U.S. and Canadian participants and (503) 343-6664 for international participants. The participant passcode is 91650980. A live webcast of the call can be accessed on Chemed's website at www.chemed.com by clicking on Investor Relations Home.

A taped replay of the conference call will be available beginning approximately 24 hours after the call's conclusion. It can be accessed by dialing (855) 859-2056 for U.S. and Canadian callers and (404) 537-3406 for international callers and will be available for one week following the live call. The replay pass code is 91650980. 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, drain cleaning, and water restoration services through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in the republics of Indonesia and Singapore, and the Philippines.

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

Forward-Looking Statements

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

These risks and uncertainties arise from, among other things, possible changes in regulations governing the hospice care or plumbing and drain cleaning industries; periodic changes in reimbursement levels and procedures under Medicare and Medicaid programs; difficulties predicting patient length of stay and estimating potential Medicare reimbursement obligations; challenges inherent in Chemed's growth strategy; the current shortage of qualified nurses, other healthcare professionals and licensed plumbing and drain cleaning technicians; Chemed’s dependence on patient referral sources; and other factors detailed under the caption "Description of Business by Segment" or "Risk Factors" in Chemed’s most recent report on form 10-Q or

10-K and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
               
 
Three Months Ended March 31,
2016 2015
Service revenues and sales $ 390,389   $ 376,652  
Cost of services provided and goods sold 278,435 268,885
Selling, general and administrative expenses (aa) 59,045 59,037
Depreciation 8,424 8,032
Amortization   92     127  
Total costs and expenses   345,996     336,081  
Income from operations 44,393 40,571
Interest expense (842 ) (969 )
Other income--net (bb)   (2,924 )   563  
Income before income taxes 40,627 40,165
Income taxes   (15,787 )   (15,628 )
Net income $ 24,840   $ 24,537  
 
Earnings Per Share
Net income $ 1.49   $ 1.45  
Average number of shares outstanding   16,720     16,914  
 
Diluted Earnings Per Share
Net income $ 1.45   $ 1.40  
Average number of shares outstanding   17,170     17,466  
 
               
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
Three Months Ended March 31,
2016 2015

SG&A expenses before long-term incentive compensation, expenses related to the O.I.G. investigation and the impact of market value adjustment related to deferred compensation plans

$ 59,937 $ 55,879

Market value adjustment related to deferred compensation plans

(2,987 ) 950
Expenses related to O.I.G. investigation 2,336 1,274
Long-term incentive compensation   (241 )   934  
Total SG&A expenses $ 59,045   $ 59,037  
 
(bb) Other income--net comprises (in thousands):
Three Months Ended March 31,
2016 2015

Market value adjustment related to deferred compensation plans

$ (2,987 ) $ 950
Interest income 97 44
Gain/(loss) on disposal of property and equipment (33 ) 48
Other   (1 )   (479 )
Total other income--net $ (2,924 ) $ 563  
 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET

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

                   

March 31,

2016

2015

Assets
  Current assets
  Cash and cash equivalents $ 15,235 $ 28,335
Accounts receivable less allowances 143,040 145,757
Inventories 6,102 6,166
Current deferred income taxes - 16,926
Prepaid income taxes 3,258 1,279
Prepaid expenses   12,306     10,023  
Total current assets 179,941 208,486
Investments of deferred compensation plans held in trust 49,195 52,075
Properties and equipment, at cost less accumulated depreciation 119,331 104,796
Identifiable intangible assets less accumulated amortization 55,018 55,901
Goodwill 472,438 466,576
Other assets   6,996     7,843  
Total Assets $ 882,919   $ 895,677  
 
Liabilities
Current liabilities
Accounts payable $ 50,721 $ 43,618
Current portion of long-term debt 18,000 6,875
Income taxes 11,129 13,033
Accrued insurance 45,628 42,498
Accrued compensation 43,844 43,578
Accrued legal 2,819 1,115
Other current liabilities   19,416     20,853  
Total current liabilities 191,557 171,570
Deferred income taxes 16,861 28,794
Long-term debt 126,875 154,375
Deferred compensation liabilities 49,188 51,407
Other liabilities   13,617     12,989  
Total Liabilities   398,098     419,135  
Stockholders' Equity
Capital stock 34,076 33,516
Paid-in capital 610,219 553,565
Retained earnings 886,604 791,970
Treasury stock, at cost (1,048,509 ) (904,825 )
Deferred compensation payable in Company stock   2,431     2,316  
Total Stockholders' Equity   484,821     476,542  
Total Liabilities and Stockholders' Equity $ 882,919   $ 895,677  
 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
                         
Three Months Ended
March 31,
2016 2015
Cash Flows from Operating Activities
Net income $ 24,840 $ 24,537

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

Depreciation and amortization 8,516 8,159
Provision for uncollectible accounts receivable 4,242 3,804
Benefit for deferred income taxes (4,202 ) (2,734 )
Stock option expense 2,563 1,444
Amortization of restricted stock awards 539 449
Noncash long-term incentive compensation (305 ) 934
Amortization of debt issuance costs 130 131

Changes in operating assets and liabilities:

Increase in accounts receivable (41,050 ) (24,926 )
Decrease in inventories 212 2
Decrease in prepaid expenses 546 1,433
Decrease in accounts payable and other current liabilities (7,567 ) (9,538 )
Increase in income taxes 19,448 11,696
Decrease/(increase) in other assets 410 (2,815 )
Increase/(decrease) in other liabilities (140 ) 2,569
Excess tax benefit on share-based compensation (900 ) (2,900 )
Other sources/(uses)   (59 )   129  
Net cash provided by operating activities   7,223     12,374  
Cash Flows from Investing Activities
Capital expenditures (11,473 ) (8,553 )
Other sources   153     351  
Net cash used by investing activities   (11,320 )   (8,202 )
Cash Flows from Financing Activities
Proceeds from revolving line of credit 59,000 37,200
Payments on revolving line of credit (3,500 ) (22,200 )
Payments on other long-term debt (1,875 ) (1,250 )
Purchase of treasury stock (52,460 ) -
Increase/(decrease) in cash overdrafts payable 7,061 (1,528 )
Dividends paid (4,081 ) (3,743 )
Capital stock surrendered to pay taxes on stock-based compensation (4,020 ) (5,464 )
Proceeds from exercise of stock options 2,887 4,899
Excess tax benefit on share-based compensation 900 2,900
Other uses   693     (783 )
Net cash provided by financing activities   4,605     10,031  
Increase in Cash and Cash Equivalents 508 14,203
Cash and cash equivalents at beginning of year   14,727     14,132  
Cash and cash equivalents at end of period $ 15,235   $ 28,335  
 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015
(in thousands)(unaudited)
               
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2016

Service revenues and sales $ 277,528   $ 112,861   $ -   $ 390,389  
Cost of services provided and goods sold 219,266 59,169 - 278,435
Selling, general and administrative expenses (a) 24,783 29,807 4,455 59,045
Depreciation 4,781 3,501 142 8,424
Amortization   14     78     -     92  
Total costs and expenses   248,844     92,555     4,597     345,996  
Income/(loss) from operations 28,684 20,306 (4,597 ) 44,393
Interest expense (59 ) (93 ) (690 ) (842 )
Intercompany interest income/(expense) 2,103 948 (3,051 ) -
Other income/(expense)—net   41     23     (2,988 ) (2,924 )
Income/(loss) before income taxes 30,769 21,184 (11,326 ) 40,627
Income taxes (a)   (11,682 )   (8,164 )   4,059     (15,787 )
Net income/(loss) $ 19,087   $ 13,020   $ (7,267 ) $ 24,840  
 

 2015

Service revenues and sales $ 269,613   $ 107,039   $ -   $ 376,652  
Cost of services provided and goods sold 212,495 56,390 - 268,885
Selling, general and administrative expenses (b) 22,078 28,802 8,157 59,037
Depreciation 4,785 3,094 153 8,032
Amortization   60     67     -     127  
Total costs and expenses   239,418     88,353     8,310     336,081  
Income/(loss) from operations 30,195 18,686 (8,310 ) 40,571
Interest expense (57 ) (96 ) (816 ) (969 )
Intercompany interest income/(expense) 1,726 838 (2,564 ) -
Other income/(expense)-net   (433 )   46     950   563  
Income/(loss) before income taxes 31,431 19,474 (10,740 ) 40,165
Income taxes (b)   (12,116 )   (7,466 )   3,954     (15,628 )
Net income/(loss) $ 19,315   $ 12,008   $ (6,786 ) $ 24,537  
 
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, 2016 AND 2015
(in thousands)(unaudited)
                   
 
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2016

Net income/(loss) $ 19,087 $ 13,020 $ (7,267 ) $ 24,840
Add/(deduct):
Interest expense 59 93 690 842
Income taxes 11,682 8,164 (4,059 ) 15,787
Depreciation 4,781 3,501 142 8,424
Amortization   14     78     -     92  
EBITDA 35,623 24,856 (10,494 ) 49,985
Add/(deduct):
Intercompany interest income/(expense) (2,103 ) (948 ) 3,051 -
Interest income (79 ) (17 ) (1 ) (97 )
Expenses related to O.I.G. investigation 2,336 - - 2,336
Amortization of stock awards 131 81 327 539
Advertising cost adjustment (c) - (608 ) - (608 )
Stock option expense - - 2,563 2,563

Long-term incentive compensation

- - (241 ) (241 )
Expenses related to securities litigation   -     -     3     3  
Adjusted EBITDA $ 35,908   $ 23,364   $ (4,792 ) $ 54,480  
 

 2015

Net income/(loss) $ 19,315 $ 12,008 $ (6,786 ) $ 24,537
Add/(deduct):
Interest expense 57 96 816 969
Income taxes 12,116 7,466 (3,954 ) 15,628
Depreciation 4,785 3,094 153 8,032
Amortization   60     67     -     127  
EBITDA 36,333 22,731 (9,771 ) 49,293
Add/(deduct):
Intercompany interest income/(expense) (1,726 ) (838 ) 2,564 -
Interest income (34 ) (10 ) - (44 )
Expenses related to O.I.G. investigation 1,274 - - 1,274
Amortization of stock awards 107 41 301 449
Advertising cost adjustment (c) - (506 ) - (506 )
Expenses related to litigation settlements - 5 - 5
Stock option expense - - 1,444 1,444

Long-term incentive compensation

  -     -     934     934  
Adjusted EBITDA $ 35,954   $ 21,423   $ (4,528 ) $ 52,849  
 
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,
2016 2015
Net income as reported $ 24,840 $ 24,537
 
Add after-tax cost of:
Stock option expense 1,621 910
Expenses related to O.I.G. investigation 1,443 790
Long-term incentive compensation (152 ) 591
Expenses related to securities litigation 2 -
Expenses related to litigation settlements   -     3
Adjusted net income $ 27,754   $ 26,831
 
 
 
Diluted Earnings Per Share As Reported
Net income $ 1.45   $ 1.40
Average number of shares outstanding   17,170     17,466
 
Adjusted Diluted Earnings Per Share
Adjusted net income $ 1.62   $ 1.54
Average number of shares outstanding   17,170     17,466
 
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 2016 2015
Net revenue ($000) (d)
Homecare $ 214,850 $ 204,541
Inpatient 25,517 26,716
Continuous care   37,161   38,191
Total before Medicare cap allowance $ 277,528 $ 269,448
Medicare cap allowance   -   165
Total $ 277,528 $ 269,613

Net revenue as a percent of total before Medicare cap allowance

Homecare 77.4 % 75.9 %
Inpatient 9.2 9.9
Continuous care   13.4   14.2
Total before Medicare cap allowance 100.0 100.0
Medicare cap allowance   -   0.1
Total   100.0 %   100.1 %
Average daily census ("ADC") (days)
Homecare 11,681 10,877
Nursing home   2,991   2,920
Routine homecare 14,672 13,797
Inpatient 421 440
Continuous care   560   587
Total   15,653   14,824
 
Total Admissions 16,868 17,268
Total Discharges 16,743 16,990
Average length of stay (days) 83.7 79.0
Median length of stay (days) 15.0 13.0
ADC by major diagnosis
Neurological 22.1 % 23.7 %
Cerebro 31.2 28.0
Cancer 15.3 16.9
Cardio 17.3 17.8
Respiratory 7.9 7.8

 

Other   6.2   5.8
Total   100.0 %   100.0 %
Admissions by major diagnosis
Neurological 11.3 % 12.9 %
Cerebro 20.9 18.6
Cancer 30.5 30.6
Cardio 15.5 15.8
Respiratory 10.9 10.8
Other   10.9   11.3
Total   100.0 %   100.0 %
Direct patient care margins (e)
Routine homecare 52.1 % 52.7 %
Inpatient 5.7 8.4
Continuous care 15.1 15.9
Homecare margin drivers (dollars per patient day)
Labor costs $ 56.72 $ 57.21
Drug costs 5.93 6.50
Home medical equipment 6.68 6.41
Medical supplies 2.85 2.92
Inpatient margin drivers (dollars per patient day)
Labor costs $ 338.73 $ 339.37
Continuous care margin drivers (dollars per patient day)
Labor costs $ 599.38 $ 587.63
Bad debt expense as a percent of revenues 1.3 % 1.0 %
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments 38.3 41.3
Days of revenue outstanding- including unapplied Medicare payments 36.8 38.1
 
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, 2016 AND 2015
(unaudited)
 
 
 
(a)

Included in the results of operations for the three months ended March 31, 2016, are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

            VITAS   Corporate   Total
Selling, general and administrative expenses
Expenses related to O.I.G. investigation $ (2,336 ) $ - $ (2,336 )
Stock option expense - (2,563 ) (2,563 )
Long-term incentive compensation - 241 241
Expenses related to securities litigation   -     (3 )   (3 )
Pretax impact on earnings (2,336 ) (2,325 ) (4,661 )
Income tax benefit/(charge) on the above   893     854     1,747  
After-tax impact on earnings $ (1,443 ) $ (1,471 ) $ (2,914 )
 
(b)  

Included in the results of operations for the three months ended March 31, 2015, 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 O.I.G. investigation $ (1,274 ) $ - $ - $ (1,274 )
Expenses related to litigation settlements - (5 ) - (5 )
Stock option expense - - (1,444 ) (1,444 )
Long-term incentive compensation   -     -     (934 )   (934 )
Pretax impact on earnings (1,274 ) (5 ) (2,378 ) (3,657 )
Income tax benefit/(charge) on the above   484     2     877     1,363  
After-tax impact on earnings $ (790 ) $ (3 ) $ (1,501 ) $ (2,294 )
 
(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 2016 and 2015, GAAP advertising expense for Roto-Rooter totaled $6,283,000 and $6,067,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the first quarters of 2016 and 2015 would total $6,891,000 and $6,573,000, respectively.

 

(d)

VITAS has eight large (greater than 450 ADC), 20 medium (greater than 200 but less than 450 ADC) and 16 small (less than 200 ADC) hospice programs. Of VITAS' 31 unique Medicare provider numbers, 28 provider numbers have a Medicare cap cushion of 10% or greater during the current Medicare cap year, two provider numbers have a Medicare cap cushion between 5% and 10% and one provider number has a Medicare 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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