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

CINCINNATI--(BUSINESS WIRE)--Oct. 26, 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 third quarter ended September 30, 2016, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 1.7% to $393 million
  • GAAP Diluted EPS decreased 1.8% to $1.62
  • Adjusted Diluted EPS decreased 2.8% to $1.73

VITAS segment operating results:

  • Net Patient Revenue of $283 million, a decrease of 0.8%
  • Average Daily Census (ADC) of 16,201, an increase of 3.0%
  • Unit for Unit admissions of 16,157, an increase of 1.7%
  • Net Income, including discrete items, of $20.9 million, a decrease of 18.7%
  • Adjusted EBITDA of $38.6 million, a decrease of 14.7%

Roto-Rooter segment operating results:

  • Revenue of $110 million, an increase of 8.4%
  • Net Income of $12.9 million, an increase of 17.3%
  • Adjusted EBITDA of $23.7 million, an increase of 20.0%
  • Adjusted EBITDA margin of 21.6%, an increase of 208 basis points

VITAS

Net revenue for VITAS was $283 million in the third quarter of 2016, which is a decrease of 0.8%, when compared to the prior-year period. This revenue decrease is comprised primarily of an average Medicare reimbursement rate increase of approximately 0.6%, a 3.0% increase in average daily census, offset by acuity mix shift which negatively impacted revenue 1.7% and changes in Medicare hospice reimbursement methodology 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 days 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 third quarter of 2016, VITAS had a 24.6/75.4 RHC Days-of-Care ratio and generated approximately $1.3 million in SIA payments. This resulted in $6.0 million 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 current or prior-year quarter for the 2016 Medicare cap year.

Approximately $0.2 million of cap was recorded in the quarter relating to the 2015 measurement period. The methodology used to calculate the Medicare Cap is in dispute. CMS is calculating the Medicare Cap liability using theoretical revenue that assumes no revenue reduction from sequestration.

At September 30, 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, 27 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 two provider numbers have a cap cushion between 0% and 5%. VITAS generated an aggregate cap cushion of $281 million during the trailing twelve-month period.

Average revenue per patient per day in the quarter was $189.94, which is 3.6% below the prior-year period. Routine home care reimbursement and high acuity care averaged $160.09 and $697.21, respectively. During the quarter, high acuity days of care were 5.6% of total days of care, 58 basis points less than the prior-year quarter.

The third quarter of 2016 gross margin, excluding Medicare Cap, was 20.7%, which is a 260 basis point decline when compared to the third quarter of 2015.

Selling, general and administrative expense was $21.8 million in the third quarter of 2016, which is 2.6% favorable when compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $38.6 million in the quarter, a decrease of 14.7% over the prior-year period. Adjusted EBITDA margin was 13.6% in the quarter which is 225 basis points below the prior-year period.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $110 million for the third quarter of 2016, an increase of $8.5 million, or 8.4%, over the prior-year quarter. Revenue from water restoration totaled $11.9 million, an increase of 46.3% over the prior year.

Roto-Rooter’s gross margin in the quarter was 47.8%, a 75 basis point improvement when compared to the third quarter of 2015. Adjusted EBITDA in the third quarter of 2016 totaled $23.7 million, an increase of 20.0%, and the Adjusted EBITDA margin was 21.6% in the quarter, 208 basis points higher than the prior year.

Chemed Consolidated

As of September 30, 2016, Chemed had total cash and cash equivalents of $21 million and debt of $111 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 September 30, 2016, the Company had approximately $288 million of undrawn borrowing capacity under this credit agreement.

Capital expenditures through September 30, 2016, aggregated $29.7 million and compares to depreciation and amortization during the same period of $25.9 million.

On March 11, 2016, Chemed’s Board of Directors authorized an additional $100 million for stock repurchase under Chemed’s existing share repurchase program. On a year-to-date basis, the company has purchased 780,134 shares of Chemed stock at an aggregate cost of $102.3 million. The company did not purchase any shares of Chemed stock in the third quarter of 2016. As of September 30, 2016, there is $50.2 million of 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 1.0% to 2.0%. Average Daily Census (ADC) in 2016 is estimated to expand approximately 4.5% to 5.0% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 14.0% to 14.5%. We are currently estimating $1.25 million for Medicare Cap billing limitations in the fourth quarter.

Roto-Rooter is forecasted to achieve full-year 2016 revenue growth of 5.0% to 5.5%. 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 21.0% to 21.3%.

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 $7.20 to $7.30. This compares to Chemed’s 2015 reported adjusted earnings per diluted share of $6.98.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Thursday, October 27, 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 +1 (503) 343-6664 for international participants. The participant passcode/Conference ID is 96139697. 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 +1 (404) 537-3406 for international callers and will be available for one week following the live call. The replay Conference ID is 96139697. 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 16,000 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 Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Service revenues and sales $ 392,607   $ 386,226   $ 1,173,405   $ 1,144,799  
Cost of services provided and goods sold 281,658 272,089

 

836,348 811,637
Selling, general and administrative expenses (aa) 59,373 55,788 181,046 173,267
Depreciation 8,614 8,075 25,619 24,189
Amortization 91 146 274 407
Other operating expenses   -     -     4,491     -  
Total costs and expenses   349,736     336,098     1,047,778     1,009,500  
Income from operations 42,871 50,128 125,627 135,299
Interest expense (1,018 ) (908 ) (2,831 ) (2,846 )
Other income/(expense)--net (bb)   1,640     (2,355 )   1,933     (1,256 )
Income before income taxes 43,493 46,865 124,729 131,197
Income taxes   (16,664 )   (18,032 )   (48,175 )   (50,852 )
Net income $ 26,829   $ 28,833   $ 76,554   $ 80,345  
 
 
 
Earnings Per Share
Net income $ 1.66   $ 1.71   $ 4.66   $ 4.76  
Average number of shares outstanding   16,166     16,865     16,443     16,887  
 
Diluted Earnings Per Share
Net income $ 1.62   $ 1.65   $ 4.54   $ 4.61  
Average number of shares outstanding   16,559     17,422     16,851     17,430  
 
 
 
                     
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015

SG&A expenses before the impact of market gain/(losses) related to deferred compensation plans, long-term incentive compensation and O.I.G. expenses

$ 56,475 $ 55,601 $ 174,183 $ 166,555

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

1,656 (2,328 ) 1,857 (880 )
Long-term incentive compensation 643 1,364 901 3,755
O.I.G. expenses   599     1,151     4,105     3,837  
Total SG&A expenses $ 59,373   $ 55,788   $ 181,046   $ 173,267  
 
(bb) Other income/(expense)--net comprises (in thousands):
Three Months Ended September 30,   Nine Months Ended September 30,
2016   2015   2016   2015  

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

$ 1,656 $ (2,328 ) $ 1,857 $ (880 )
Loss on disposal of property and equipment (134 ) (116 ) (224 ) (131 )
Interest income--net 119 77 301 207
Other   (1 )   12     (1 )   (452 )
Total other income/(expense)--net $ 1,640   $ (2,355 ) $ 1,933   $ (1,256 )
 

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
                 
 
September 30,
2016 2015
Assets
Current assets
Cash and cash equivalents $ 21,285 $ 38,450
Accounts receivable less allowances 86,006 123,665
Inventories 6,101 6,545
Current deferred income taxes - 17,313
Prepaid income taxes 5,069 3,308
Prepaid expenses   14,498     11,494  
Total current assets 132,959 200,775
Investments of deferred compensation plans held in trust 55,158 49,951
Properties and equipment, at cost less accumulated depreciation 119,994 111,221
Identifiable intangible assets less accumulated amortization 55,067 55,834
Goodwill 472,418 472,407
Other assets   6,880     7,450  
Total Assets $ 842,476   $ 897,638  
 
Liabilities
Current liabilities
Accounts payable $ 42,844 $ 52,468
Current portion of long-term debt 8,125 7,500
Income taxes - 736
Accrued insurance 46,233 42,356
Accrued compensation 48,391 59,533
Accrued legal 1,495 1,698
Other current liabilities   20,369     22,472  
Total current liabilities 167,457 186,763
Deferred income taxes 15,586 29,370
Long-term debt 102,500 130,625
Deferred compensation liabilities 54,455 49,282
Other liabilities   15,276     13,022  
Total Liabilities   355,274     409,062  
 
Stockholders' Equity
Capital stock 34,174 33,816
Paid-in capital 625,961 581,342
Retained earnings 930,184 839,979
Treasury stock, at cost (1,105,620 ) (968,946 )
Deferred compensation payable in Company stock   2,503     2,385  
Total Stockholders' Equity   487,202     488,576  
Total Liabilities and Stockholders' Equity $ 842,476   $ 897,638  
 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
                     
 
Nine Months Ended September 30,
2016 2015
Cash Flows from Operating Activities
Net income $ 76,554 $ 80,345

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

Depreciation and amortization 25,893 24,596
Provision for uncollectible accounts receivable 12,132 11,100
Stock option expense 6,259 3,600
Benefit for deferred income taxes (5,530 ) (2,694 )
Noncash early retirement expense 1,747 -
Amortization of restricted stock awards 1,415 1,488
Noncash long-term incentive compensation 837 3,755

Noncash directors' compensation

541 540
Amortization of debt issuance costs 390 392

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

Decrease/(increase) in accounts receivable 8,061 (10,110 )
Decrease/(increase) in inventories 213 (373 )
Decrease/(increase) in prepaid expenses (1,646 ) 68

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

(5,471 ) 5,416
Increase in income taxes 8,587 3,049
Increase in other assets (5,694 ) (605 )
Increase in other liabilities 6,835 524
Excess tax benefit on share-based compensation (2,974 ) (8,474 )
Other sources   204     467  
Net cash provided by operating activities   128,353     113,084  
Cash Flows from Investing Activities
Capital expenditures (29,708 ) (30,194 )
Business combinations, net of cash acquired - (6,614 )
Other sources/(uses)   (114 )   396  
Net cash used by investing activities   (29,822 )   (36,412 )
Cash Flows from Financing Activities
Proceeds from revolving line of credit 110,200 103,200
Purchases of treasury stock (102,313 ) (36,682 )
Payments on revolving line of credit (85,200 ) (108,200 )
Dividends paid (12,215 ) (11,542 )
Capital stock surrendered to pay taxes on stock-based compensation (7,051 ) (11,226 )
Payments on other long-term debt (5,625 ) (4,375 )
Proceeds from exercise of stock options 4,625 11,193
Excess tax benefit on share-based compensation 2,974 8,474
Increase/(decrease) in cash overdrafts payable 2,092 (1,745 )
Other sources/(uses)   540     (1,451 )
Net cash used by financing activities   (91,973 )   (52,354 )
Increase in Cash and Cash Equivalents 6,558 24,318
Cash and cash equivalents at beginning of year   14,727     14,132  
Cash and cash equivalents at end of period $ 21,285   $ 38,450  
 

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(in thousands)(unaudited)
         
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2016

Service revenues and sales $ 282,865   $ 109,742   $ -   $ 392,607  
Cost of services provided and goods sold 224,410 57,248 - 281,658
Selling, general and administrative expenses (a) 21,775 28,635 8,963 59,373
Depreciation 4,751 3,731 132 8,614
Amortization   14     77     -     91  
Total costs and expenses   250,950     89,691     9,095     349,736  
Income/(loss) from operations 31,915 20,051 (9,095 ) 42,871
Interest expense (a) (59 ) (78 ) (881 ) (1,018 )
Intercompany interest income/(expense) 1,810 800 (2,610 ) -
Other income/(expense)—net   (1 )   (14 )   1,655     1,640  
Income/(loss) before income taxes 33,665 20,759 (10,931 ) 43,493
Income taxes (a)   (12,762 )   (7,904 )   4,002     (16,664 )
Net income/(loss) $ 20,903   $ 12,855   $ (6,929 ) $ 26,829  
 

 2015

Service revenues and sales $ 285,008   $ 101,218   $ -   $ 386,226  
Cost of services provided and goods sold 218,528 53,561 - 272,089
Selling, general and administrative expenses (a) 22,367 27,523 5,898 55,788
Depreciation 4,631 3,300 144 8,075
Amortization   60     86     -     146  
Total costs and expenses   245,586     84,470     6,042     336,098  
Income/(loss) from operations 39,422 16,748 (6,042 ) 50,128
Interest expense (a) (54 ) (80 ) (774 ) (908 )
Intercompany interest income/(expense) 1,979 858 (2,837 ) -
Other income/(expense)—net   (11 )   (15 )   (2,329 )   (2,355 )
Income/(loss) before income taxes 41,336 17,511 (11,982 ) 46,865
Income taxes (a)   (15,613 )   (6,550 )   4,131     (18,032 )
Net income/(loss) $ 25,723   $ 10,961   $ (7,851 ) $ 28,833  
 

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

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(in thousands)(unaudited)
                 
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2016

Service revenues and sales $ 839,131   $ 334,274   $ -   $ 1,173,405  
Cost of services provided and goods sold 662,371 173,977 - 836,348
Selling, general and administrative expenses (a) 69,197 87,890 23,959 181,046
Depreciation 14,346 10,860 413 25,619
Amortization 41 233 - 274
Other operating expenses   4,491     -     -     4,491  
Total costs and expenses   750,446     272,960    

24,372

    1,047,778  

Income/(loss) from operations

88,685 61,314 (24,372 ) 125,627
Interest expense (a) (176 ) (264 ) (2,391 ) (2,831 )
Intercompany interest income/(expense) 5,840 2,614 (8,454 ) -
Other income/(expense)—net   76     (2 )   1,859     1,933  
Income/(loss) before income taxes 94,425 63,662 (33,358 ) 124,729
Income taxes (a)   (35,887 )   (24,446 )   12,158     (48,175 )
Net income/(loss) $ 58,538   $ 39,216   $ (21,200 ) $ 76,554  
 

 2015

Service revenues and sales $ 831,081   $ 313,718   $ -   $ 1,144,799  
Cost of services provided and goods sold 646,801 164,836 - 811,637
Selling, general and administrative expenses (a) 66,792 84,620 21,855 173,267
Depreciation 14,141 9,598 450 24,189
Amortization   180     227     -     407  
Total costs and expenses   727,914     259,281     22,305     1,009,500  
Income/(loss) from operations 103,167 54,437 (22,305 ) 135,299
Interest expense (a) (164 ) (274 ) (2,408 ) (2,846 )
Intercompany interest income/(expense) 5,461 2,501 (7,962 ) -
Other income/(expense)—net   (395 )   19     (880 )   (1,256 )
Income/(loss) before income taxes 108,069 56,683 (33,555 ) 131,197
Income taxes (a)   (41,230 )   (21,561 )   11,939     (50,852 )
Net income/(loss) $ 66,839   $ 35,122   $ (21,616 ) $ 80,345  
 

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 SEPTEMBER 30, 2016 AND 2015
(in thousands)(unaudited)
           
 
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2016

Net income/(loss) $ 20,903 $ 12,855 $ (6,929 ) $ 26,829
Add/(deduct):
Interest expense 59 78 881 1,018
Income taxes 12,762 7,904 (4,002 ) 16,664
Depreciation 4,751 3,731 132 8,614
Amortization   14     77     -     91  
EBITDA 38,489 24,645 (9,918 ) 53,216
Add/(deduct):
Intercompany interest expense/(income) (1,810 ) (800 ) 2,610 -
Interest income--net (108 ) (11 ) - (119 )

Net expenses related to litigation settlements

1,149

-

-

1,149

Expenses related to OIG investigation 599 - - 599
Medicare cap sequestration adjustment 228 - - 228
Amortization of stock awards 85 76 279 440
Advertising cost adjustment (c) - (188 ) - (188 )
Long-term incentive compensation - - 643 643
Stock option expense   -     -     1,419     1,419  
Adjusted EBITDA $

38,632

  $ 23,722   $ (4,967 ) $

57,387

 
 

 2015

Net income/(loss) $ 25,723 $ 10,961 $ (7,851 ) $ 28,833
Add/(deduct):
Interest expense 54 80 774 908
Income taxes 15,613 6,550 (4,131 ) 18,032
Depreciation 4,631 3,300 144 8,075
Amortization   60     86     -     146  
EBITDA 46,081 20,977 (11,064 ) 55,994
Add/(deduct):
Intercompany interest expense/(income) (1,979 ) (858 ) 2,837 -
Interest income--net (68 ) (9 ) - (77 )
Expenses related to OIG investigation 1,151 - - 1,151
Amortization of stock awards 126 86 379 591
Advertising cost adjustment (c) - (456 ) - (456 )
Acquisition expenses - 30 - 30
Long-term incentive compensation - - 1,364 1,364
Stock option expense   -     -     813     813  
Adjusted EBITDA $ 45,311   $ 19,770   $ (5,671 ) $ 59,410  
 

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

     
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(in thousands)(unaudited)
     
 
Chemed
VITAS Roto-Rooter Corporate Consolidated

 2016

 
Net income/(loss) $ 58,538 $ 39,216 $ (21,200 ) $ 76,554
Add/(deduct):
Interest expense 176 264 2,391 2,831
Income taxes 35,887 24,446 (12,158 ) 48,175
Depreciation 14,346 10,860 413 25,619
Amortization   41     233     -     274  
EBITDA 108,988 75,019 (30,554 ) 153,453
Add/(deduct):
Intercompany interest expense/(income) (5,840 ) (2,614 ) 8,454 -
Interest income--net (256 ) (45 ) - (301 )
Early retirement expenses 4,491 - - 4,491
Expenses related to OIG investigation 4,105 - - 4,105
Amortization of stock awards 302 230 883 1,415
Medicare cap sequestration adjustment 228 - - 228
Advertising cost adjustment (c) - (1,353 ) - (1,353 )
Net expenses related to litigation settlements

1,149

44 -

1,193

Long-term incentive compensation - - 901 901
Stock option expense   -     -     6,259     6,259  
Adjusted EBITDA $

113,167

  $ 71,281   $ (14,057 ) $

170,391

 
 

 2015

 
Net income/(loss) $ 66,839 $ 35,122 $ (21,616 ) $ 80,345
Add/(deduct):
Interest expense 164 274 2,408 2,846
Income taxes 41,230 21,561 (11,939 ) 50,852
Depreciation 14,141 9,598 450 24,189
Amortization   180     227     -     407  
EBITDA 122,554 66,782 (30,697 ) 158,639
Add/(deduct):
Intercompany interest expense/(income) (5,461 ) (2,501 ) 7,962 -
Interest income--net (179 ) (27 ) (1 ) (207 )
Expenses related to OIG investigation 3,837 - - 3,837
Amortization of stock awards 343 181 964 1,488
Advertising cost adjustment (c) - (1,367 ) - (1,367 )
Acquisition expenses - 161 - 161
Net expenses related to litigation settlements - 5 - 5
Long-term incentive compensation - - 3,755 3,755
Stock option expense - - 3,600 3,600
Expenses of securities litigation   -     -     37     37  
Adjusted EBITDA $ 121,094   $ 63,234   $ (14,380 ) $ 169,948  
 

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

     
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
(in thousands, except per share data)(unaudited)
   
 
 
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Net income as reported $ 26,829 $ 28,833 $ 76,554 $ 80,345
 
Add after-tax costs of:
Stock option expense 897 509 3,958 2,268
Long-term incentive compensation 406 863 570 2,375
Net expenses related to OIG investigation 370 711 2,535 2,369
Medicare cap sequestration adjustment 141 - 141 -
Acquisition expenses - 18 - 98
Early retirement expenses - - 2,840 -
Litigation settlements - - 27 23
Net expenses related to litigation settlements   -   -   -   3
 
Adjusted net income $ 28,643 $ 30,934 $ 86,625 $ 87,481
 
 
Diluted Earnings Per Share As Reported
Net income $ 1.62 $ 1.65 $ 4.54 $ 4.61
Average number of shares outstanding   16,559   17,422   16,851   17,430
 
 
Adjusted Diluted Earnings Per Share
Net income $ 1.73 $ 1.78 $ 5.14 $ 5.02
Adjusted average number of shares outstanding (e)   16,559   17,422   16,851   17,430
 

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 Nine Months Ended
September 30, September 30,
OPERATING STATISTICS 2016 2015 2016 2015
Net revenue ($000) (d)
Homecare $ 225,348 $ 222,952 $ 659,477 $ 640,867
Inpatient 23,850 24,271 73,856 76,485
Continuous care   33,895     37,785   106,026     113,564
Total before Medicare cap allowance 283,093 285,008 839,359 830,916
Medicare cap allowance   (228 )   -   (228 )   165
Total $ 282,865   $ 285,008 $ 839,131   $ 831,081
Net revenue as a percent of total before Medicare cap allowance
Homecare 79.6 % 78.2 % 78.6 % 77.1 %
Inpatient 8.4 8.5 8.8 9.2
Continuous care   12.0     13.3   12.6     13.7
Total before Medicare cap allowance 100.0 100.0 100.0 100.0
Medicare cap allowance   (0.1 )   -   -     -
Total   99.9   %   100.0 %   100.0   % 100.0 %
Average daily census ("ADC") (days)
Homecare 12,223 11,607 11,972 11,259
Nursing home   3,077     3,150   3,028     3,026
Routine homecare 15,300 14,757 15,000 14,285
Inpatient 394 404 406 424
Continuous care   507     561   530     571
Total   16,201     15,722   15,936     15,280
 
Total Admissions 16,157 16,131 49,205 50,082
Total Discharges 15,690 15,949 48,403 48,979
Average length of stay (days) 87.7 78.6 85.2 78.9
Median length of stay (days) 16.0 16.0 16.0 15.0
ADC by major diagnosis
Cerebro 32.9 % 28.8 % 32.2 % 28.6 %
Neurological 20.7 22.9 21.3 23.3
Cancer 15.5 16.6 15.3 16.7
Cardio 17.1 17.4 17.3 17.5
Respiratory 7.8 7.9 7.8 7.9
Other   6.0     6.4   6.1     6.0
Total   100.0   %   100.0 %   100.0   % 100.0 %
Admissions by major diagnosis
Cerebro 21.2 % 18.7 % 20.9 % 18.8 %
Neurological 11.0 12.5 11.0 12.3
Cancer 33.3 33.3 31.9 32.1
Cardio 14.4 14.5 15.3 15.3
Respiratory 9.0 9.2 10.1 10.0
Other   11.1     11.8   10.8     11.5
Total   100.0   %   100.0 %   100.0   % 100.0 %
Direct patient care margins (f)
Routine homecare 51.4 % 53.7 % 51.8 % 52.9 %
Inpatient (2.4 ) 3.8 2.7 6.1
Continuous care 12.2 15.7 13.7 16.1
Homecare margin drivers (dollars per patient day)
Labor costs $ 56.53 $ 54.92 $ 56.51 $ 56.14
Combined drug, home medical equipment and
medical supplies cost $ 16.30 16.12 15.90 16.18
Inpatient margin drivers (dollars per patient day)
Labor costs $ 360.35 $ 355.30 $ 346.61 $ 347.52
Continuous care margin drivers (dollars per patient day)
Labor costs $ 618.15 $ 569.39 $ 609.08 $ 591.26
Bad debt expense as a percent of revenues 1.2 % 1.0 % 1.2 % 1.0 %
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments 38.4 38.1 n.a. n.a.
Days of revenue outstanding- including unapplied Medicare payments 20.7 32.3 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 NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(unaudited)
         
 
 
 
 
(a)

Included in the results of operations 2016 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

Three Months Ended September 30, 2016
VITAS Corporate Consolidated
Service revenues and sales
Medicare cap sequestration adjustment $ (228 ) $ - $ (228 )
Selling, general and administrative expenses:
Expenses related to OIG investigation (599 ) - (599 )
Long-term incentive compensation - (643 ) (643 )
Stock option expense   -     (1,419 )   (1,419 )
Pretax impact on earnings (827 ) (2,062 ) (2,889 )
Income tax benefit on the above   316     759     1,075  
After-tax impact on earnings $ (511 ) $ (1,303 ) $ (1,814 )
 
Nine Months Ended September 30, 2016
VITAS Roto-Rooter Corporate Consolidated
Service revenues and sales
Medicare cap sequestration adjustment $ (228 ) $ - $ - $ (228 )
Selling, general and administrative expenses:
Expenses related to OIG investigation (4,105 ) - - (4,105 )
Expenses related to litigation settlements - (44 ) - (44 )
Long-term incentive compensation - - (901 ) (901 )
Stock option expense - - (6,259 ) (6,259 )
Other operating expenses:
Early retirement expenses (4,491 )   -     -     (4,491 )
Pretax impact on earnings (8,824 ) (44 ) (7,160 ) (16,028 )
Income tax benefit on the above   3,308     17     2,632     5,957  
After-tax impact on earnings $ (5,516 ) $ (27 ) $ (4,528 ) $ (10,071 )
 
(b)

Included in the results of operations 2015 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

Three Months Ended September 30, 2015
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (1,151 ) $ - $ - $ (1,151 )
Acquisition expenses - (30 ) - (30 )
Long-term incentive compensation - - (1,364 ) (1,364 )
Stock option expense   -     -     (813 )   (813 )
Pretax impact on earnings (1,151 ) (30 ) (2,177 ) (3,358 )
Income tax benefit on the above   440     12     805     1,257  
After-tax impact on earnings $ (711 ) $ (18 ) $ (1,372 ) $ (2,101 )
 
Nine Months Ended September 30, 2015
VITAS Roto-Rooter Corporate Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (3,837 ) $ - $ - $ (3,837 )
Acquisition expenses - (161 ) - (161 )
Expenses related to litigation settlements - (5 ) - (5 )
Long-term incentive compensation - - (3,755 ) (3,755 )
Stock option expense - - (3,600 ) (3,600 )
Expenses of securities litigation   -     -     (37 )   (37 )
Pretax impact on earnings (3,837 ) (166 ) (7,392 ) (11,395 )
Income tax benefit on the above   1,468     65     2,726     4,259  
After-tax impact on earnings $ (2,369 ) $ (101 ) $ (4,666 ) $ (7,136 )
 
(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 third quarters of 2016 and 2015, GAAP advertising expense for Roto-Rooter totaled $6,496,000 and $6,028,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the third quarters of 2016 and 2015 would total $6,684,000 and $6,484,000, respectively.

 

Similarly, for the first nine months of 2016 and 2015, GAAP advertising expense for Roto-Rooter totaled $19,394,000 and $18,486,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the first nine months of 2016 and 2015 would total $20,747,000 and $19,853,000, respectively.

 
(d)

VITAS has nine large (greater than 450 ADC), 20 medium (greater than 200 but less than 450 ADC) and 15 small (less than 200 ADC) hospice programs. For the current Medicare cap year there are no programs with a cap liability and four programs with a Medicare cap cushion of less than 10%.

 
(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.
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Page last modified: 04/18/05