CINCINNATI--(BUSINESS WIRE)--Apr. 22, 2009-- 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, 2009, versus the comparable prior-year period, as follows:

Consolidated operating results from continuing operations:

• Revenue increased 3.4% to $294.9 million
• Diluted EPS increased 30.8% to $0.85
• Adjusted Diluted EPS increased 28.8% to $0.94

VITAS segment operating results:

• Net Patient Revenue of $208.4 million, up 5.0%
• Average Daily Census (ADC) of 11,728, up 0.3%
• Average Length of Stay in the quarter of 76.6 days
• Net Income of $17.3 million, an increase of 30.0%
• Adjusted EBITDA of $31.2 million, an increase of 32.2%
• Adjusted EBITDA margin of 15.0%, an increase of 308 basis points

Roto-Rooter segment operating results:

• Revenue of $86.5 million, essentially equal to the comparable prior-year period
• Job count of 182,716, a decline of 6.9%
• Net Income of $8.3 million, a decline of 9.0%
• Adjusted EBITDA of $14.5 million, a decline of 9.2%
• Adjusted EBITDA margin of 16.7%, a decline of 167 basis points

VITAS

Congress approved The American Recovery and Reinvestment Act in late February 2009. This Act provides for an increase in the Medicare hospice wage index for the period October 1, 2008, through September 30, 2009. Given the timing of the passage of this Act, VITAS did not include any adjustment to fourth-quarter 2008 revenue for this increase in Medicare hospice reimbursement. Accordingly, the revenue recorded in first quarter of 2009 includes approximately $2.0 million of additional revenue that relates to the fourth quarter of 2008.

Net revenue for VITAS was $208.4 million in the first quarter of 2009, which is an increase of 5.0% over the prior-year period. Excluding the fourth-quarter pricing adjustment recorded in the first quarter of 2009, revenue increased 4.0%. This revenue growth was the result of increased ADC of 0.3% and a Medicare price increase of approximately 3.5%. The remaining difference is attributed to revenue and patient geographic mix.

Average revenue per patient per day in the quarter was $195.87, which is 4.9% above the prior-year period. Routine home care reimbursement and high acuity care averaged $152.16 and $671.03, respectively, per patient per day in the first quarter of 2009. During the quarter, high acuity days-of-care were 8.4% of total days-of-care.

VITAS has recorded $270,000 of Medicare Cap liability in the first quarter of 2009. This Medicare Cap liability relates to one provider number that has a gross margin in excess of 20%, including this cap liability. Admissions in this provider number increased 10% on a sequential basis.

Of VITAS’ 34 unique Medicare provider numbers, 32 provider numbers, or 94%, have a Medicare Cap cushion greater than 15% for the current Medicare Cap year, one provider number has a 5% to 10% cushion and one provider number has a cap liability. VITAS generated an aggregate cap cushion of $220 million during calendar year 2008.

The first quarter of 2009 gross margin, excluding the impact of cap and the retro-active pricing adjustment that related to the fourth quarter of 2008, was 22.8%. This is 276 basis points above VITAS' gross margin in the first quarter of 2008. This is the fourth consecutive quarter of margin increase and is a direct result of refinements to scheduled field labor.

Selling, general and administrative expense was $17.5 million in the first quarter of 2009, which is an increase of 8.7% when compared to the prior year. Adjusted EBITDA totaled $31.2 million. Excluding Medicare Cap and the impact of the fourth-quarter 2008 pricing adjustment, Adjusted EBITDA increased 25.1% over the prior year and Adjusted EBITDA Margin increased 239 basis points to 14.3%.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $86.5 million for the first quarter of 2009, essentially equal to the comparable prior-year quarter. Adjusted EBITDA in the first quarter of 2009 totaled $14.5 million, a decrease of 9.2% from the first quarter of 2008, and equated to an Adjusted EBITDA Margin of 16.7%.

Job count in the first quarter of 2009 declined 6.9% when compared to the prior-year period. Total residential jobs declined 5.2%, as residential plumbing jobs decreased 4.4% and residential drain cleaning jobs declined 5.6%, when compared to the first quarter of 2008. Residential jobs represent approximately 70% of total job count. Total commercial jobs declined 10.8% with commercial plumbing job count declining 12.7% and commercial drain cleaning decreasing 11.3%, when compared to the prior-year quarter. These declines were partially offset by an 18.8% increase in jobs in the “Other” category.

This job count decline was significantly mitigated relative to total revenue through a combination of increased pricing, favorable job mix shift to more expensive jobs such as excavation, and increased conversion rates of calls to paid jobs.

There continues to be substantial disparity in demand for Roto-Rooter services within the United States, although this disparity has lessened somewhat over the past several quarters. The South Region has experienced a 19.4% year-to-date decline in commercial jobs while commercial volume declined 11.2% in the Northeast Region. Residential demand is not as disparate, with the South Region residential job count declining 11.5% while the remaining regions have experienced a job count decline ranging from 4.5% to 9.6%.

Management continues to have discussions with existing franchisees to acquire Roto-Rooter franchise territories. This increase in activity is attributed to the current state of the capital markets, the potential increase in tax rates and the recessionary difficulties our franchisees are experiencing. Management will continue to be highly disciplined in terms of valuation, risk assessment and overall return on investment of any potential acquisition. However, the timing or actual completion of any acquisition cannot be predicted.

Chemed Consolidated Debt and Cash Flows

Effective January 1, 2009, the Company retrospectively adopted the provisions of FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments that May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” This new rule required the Company to separately account for the debt and equity portions of its 1.875% Senior Convertible Notes (Notes). This accounting assumed the Company could have borrowed under a conventional seven year fixed rate interest only note at 6.875%. The difference between the 1.875% coupon rate of the Notes and this estimated borrowing rate created a discount on the Notes that is recorded in equity at the inception of the debt. The Notes, net of this discount, will be accreted to their face value over the life of the Notes using the effective interest method. The impact of this accounting change for the year ended December 31, 2009, is projected to be a non-cash increase in pretax interest expense of approximately $6.3 million ($4.0 million after-tax).

Chemed had total debt of $159 million at March 31, 2009. This debt is net of the discount taken as a result of FASB Staff Position No. APB 14-1. Excluding this discount, aggregate debt is $199 million of which $187 million carries a fixed interest rate of 1.875% and is due in May 2014. The remaining debt consists of a $12.0 million bank term loan with a current interest rate of approximately 1.4%. Chemed’s total debt is less than one times trailing four quarters of Adjusted EBITDA.

Chemed’s $175 million revolving credit facility expires in May 2012. At March 31, 2009, this credit facility had approximately $149 million of undrawn borrowing capacity after deducting $26 million of letters of credit issued under this facility to secure the Company’s workers’ compensation insurance.

Net cash provided from operations in the first three months aggregated $25.1 million. Capital expenditures for the first quarter of 2009 aggregated $3.4 million and compares favorably to first-quarter 2009 depreciation and amortization of $6.9 million.

Guidance for 2009

Congress has recently approved The American Recovery and Reinvestment Act of 2009. This Act provides for an increase in the Medicare hospice wage index for the period October 1, 2008, through September 30, 2009. This 2009 guidance includes approximately $8.0 million in additional revenue related to this adjustment in the Medicare hospice reimbursement rate.

VITAS expects to achieve full-year 2009 revenue growth, prior to Medicare Cap, of 5.5% to 7.0%. Admissions are estimated to increase 1.5% to 3.5% and full-year Adjusted EBITDA Margin, prior to Medicare Cap, is estimated to be 15.5% to 16.5%. This guidance assumes VITAS will receive a Medicare basket price increase, net of the BNAF phase-out, of 1.5% effective October 1, 2009. Full calendar year 2009 Medicare contractual billing limitations are estimated at $4.0 million.

Roto-Rooter expects to achieve full-year 2009 revenue growth of 3.0% to 4.0%. The revenue growth is a result of increased pricing of 5.0%, a favorable mix shift to higher revenue jobs, partially offset by a job count decline estimated at 7.0% to 9.0% Adjusted EBITDA Margin for 2009 is estimated in the range of 17.5% to 18.5%. This guidance does not include any Roto-Rooter franchise acquisitions that may be completed in 2009.

Chemed’s effective tax rate has been impacted by the severe volatility in the stock market as it relates to certain deferred compensation investments and required generally accepted accounting principles (GAAP) tax accounting. This stock market volatility does not have any material impact on Chemed’s reported pretax earnings. Excluding the impact of taxes associated with this deferred compensation issue, Chemed’s effective tax rate for full-year 2009, is estimated at 39.0%.

Based upon these factors and a full-year average diluted share count of 22.6 million shares, management estimates 2009 earnings per diluted share from continuing operations, excluding noncash expenses for stock options, the non-cash increase in interest expense related to the accounting change for convertible debt interest expense and the tax rate impact from deferred compensation investments will be in the range of $3.70 to $3.95.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., EDT, on Wednesday, April 22, 2009, to discuss the company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (800) 320-2978 for U.S. and Canadian participants and (617) 614-4923 for international participants. The participant passcode is 63314619. 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 91024524. 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 approximately 12,000 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.

Source: Chemed Corporation

Chemed Corporation
David P. Williams, 513-762-6901