Chemed Reports Second-Quarter 2018 Results - Earnings Guidance Increased

CINCINNATI--(BUSINESS WIRE)--Jul. 25, 2018-- Chemed Corporation (Chemed) (NYSE: CHE),which operates VITAS Healthcare Corporation (VITAS), one of the nation’s largest providers of end-of-life care, and Roto-Rooter, the nation’s largest commercial and residential plumbing and drain cleaning services provider, reported financial results for its second quarter ended June 30, 2018, versus the comparable prior-year period, as follows:

Consolidated operating results:

Revenue increased 6.4% to $442 million
GAAP Diluted Earnings-per-Share (EPS) of $3.27
Adjusted Diluted EPS of $2.81, an increase of 30.7%

VITAS segment operating results:

Net Patient Revenue of $297 million, an increase of 4.2%
Average Daily Census (ADC) of 17,643, an increase of 7.6%
Admissions of 16,858, an increase of 3.4%
Net Income, excluding special items, of $31.8 million, an increase of 25.6%
Adjusted EBITDA of $43.1 million, an increase of 1.2%

Roto-Rooter segment operating results:

Revenue of $145 million, an increase of 11.3%
Net Income of $25.3 million, an increase of 48.3%
Adjusted EBITDA of $36.5 million, an increase of 19.8%
Adjusted EBITDA margin of 25.2%, an increase of 179-basis points

Effective January 1, 2018, the Financial Accounting Standards Board (FASB) mandated changes in revenue recognition under Generally Accepted Accounting Principles (GAAP). For Chemed, the accounting standard mandated reclassification of certain costs within the 2018 income statement when compared to prior-year formats. These reclassifications do not impact EBITDA, Adjusted EBITDA, pretax income or net income. This accounting standard has been adopted on a modified retrospective basis, meaning prior-year results are not reclassified and are reported using historical revenue recognition accounting standards.

This resulted in the reclassification of net room and board expenses associated with certain patients residing in nursing homes to be reclassified from cost of services to revenue, effectively reducing VITAS’ second quarter 2018 revenue and cost of sales by $2.7 million. In addition, uncollectable accounts receivable, commonly referred to as bad debt expense, historically has been included in selling, general and administrative expenses for VITAS and Roto-Rooter, are now netted against service revenue and sales.

The discussion of operating results below does recast net room and board and estimated uncollectable receivables in the second quarter of 2017 to facilitate analysis of operating results in a format consistent with the 2018 revenue recognition accounting standard.

VITAS

VITAS net revenue was $297 million in the second quarter of 2018, which is an increase of 6.3%, when compared to the prior-year period. This revenue increase is comprised primarily of a geographically weighted average Medicare reimbursement rate increase of approximately 0.6%; a 7.6% increase in average daily census; and a Medicare Cap liability that reduced revenue growth by 0.1%. This growth is partially offset by acuity mix shift that negatively impacted revenue growth 1.6% when compared to the prior-year period.

In the second quarter of 2018, VITAS accrued $536,000 in Medicare Cap billing limitations. At June 30, 2018, VITAS had 30 Medicare provider numbers, two of which have a current estimated 2018 Medicare Cap billing limitation liability of approximately $971,000.

Of VITAS’ 30 Medicare provider numbers, 26 provider numbers have a Medicare Cap cushion of 10% or greater, two provider numbers have a cap cushion between 5% and 10% and two provider numbers have a Medicare Cap billing limitation for the 2018 Medicare Cap period.

Average revenue per patient per day in the quarter was $188.69, which is 1.2% below the prior-year period. Reimbursement for routine home care and high acuity care averaged $164.51 and $707.96, respectively. During the quarter, high acuity days-of-care were 4.5% of total days of care, 53-basis points less than the prior-year quarter.

The second quarter of 2018 gross margin, excluding Medicare Cap, was 21.6%, which is a 54-basis point decline when compared to the second quarter of 2017.

Selling, general and administrative expense was $20.7 million in the second quarter of 2018, which is a favorable decline of 2.9% compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $43.6 million in the quarter, an increase of 1.9%. Adjusted EBITDA margin, excluding Medicare Cap, was 14.7% in the quarter which is a 64-basis point decline when compared to the prior-year period.

Roto-Rooter

Roto-Rooter generated quarterly revenue of $145 million for the second quarter of 2018, an increase of $15.4 million, or 11.9%, over the prior-year quarter. Revenue from the water restoration service segment totaled $24.8 million, an increase of $3.9 million, or 18.4%, when compared to the prior-year quarter.

Commercial drain cleaning revenue increased 9.7%, commercial plumbing and excavation increased 8.8% and commercial water restoration grew 9.9%. Overall, commercial revenue increased 8.8%.

Residential drain cleaning increased 12.5%, plumbing and excavation increased 15.4% and residential water restoration expanded 19.6%. Aggregate residential sales increased 15.1%.

Roto-Rooter’s gross margin in the quarter was 49.9%, an 89-basis point increase when compared to the second quarter of 2017. Adjusted EBITDA in the second quarter of 2018 totaled $36.5 million, an increase of 19.8%. The Adjusted EBITDA margin in the quarter was 25.2% which is a 179-basis point improvement over the prior year.

Chemed Consolidated

As of June 30, 2018, Chemed had total cash and cash equivalents of $13 million and debt of $103 million.

In June 2018, Chemed entered into a five-year Amended and Restated Credit Agreement that consists of a $450 million revolving credit facility. The interest rate on this facility has a floating rate that is currently LIBOR plus 100-basis points. At June 30, 2018, the Company had approximately $310 million of undrawn borrowing capacity under this credit agreement.

During the quarter, the Company repurchased 10,000 shares of Chemed stock for $3.2 million which equates to a cost per share of $317.86. On March 6, 2018, Chemed’s Board of Directors authorized an additional $150 million for stock repurchase under Chemed’s existing share repurchase program. As of June 30, 2018, there was approximately $121 million of remaining share repurchase authorization under this plan.

Chemed restarted its share repurchase program in 2007. Since that time Chemed has repurchased 13.6 million shares, aggregating over $1.0 billion at an average share cost of $76.75. Including dividends over this period, Chemed has returned over $1.2 billion to shareholders.

Guidance for 2018

Revenue growth for VITAS in 2018, prior to Medicare Cap, is estimated to be in the range of 4.0% to 5.0%. Admissions are estimated to expand approximately 4.5% to 5.0% and Average Daily Census in 2018 is estimated to expand approximately 6.5% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 15.9%. We are currently estimating $2.5 million for Medicare Cap billing limitations in the second half of the 2018 calendar year.

Roto-Rooter is forecasted to achieve full-year 2018 revenue growth of 12.0% to 13.0%. This revenue estimate is based upon increased job pricing of approximately 2%, continued growth in core plumbing and drain cleaning services as well as revenue growth from water restoration services. Roto-Rooter’s adjusted EBITDA margin for 2018 is estimated at 24.0%.

Based upon the above, full-year 2018 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 $11.35 to $11.55. This compares to Chemed’s 2017 reported adjusted earnings per diluted share of $8.43. This 2018 guidance assumes an effective corporate tax rate of 25.5%.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Thursday, July 26, 2018, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (844) 743-2500 for U.S. and Canadian participants and +1 (661) 378-9533 for international participants. The participant passcode/Conference ID is 7691818. 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 7691818. 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 17,500 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 cleanup 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 June 30,						Six Months Ended June 30,
				2018			2017			2018			2017
Service revenues and sales				$	441,813		$	415,059		$	880,989		$	820,923
Cost of services provided and goods sold					305,741			285,852			610,277			570,992
Selling, general and administrative expenses (aa)					68,297			68,654			137,297			138,112
Depreciation					9,718			8,833			18,985			17,726
Amortization					34			32			61			78
Other operating (income)/expenses					(118	)		90,636			(169	)		91,509
	Total costs and expenses				383,672			454,007			766,451			818,417
	Income/(loss) from operations				58,141			(38,948	)		114,538			2,506
Interest expense					(1,524	)		(1,121	)		(2,731	)		(2,116	)
Other income--net (bb)					1,038			1,653			2,056			4,116
	Income/(loss) before income taxes				57,655			(38,416	)		113,863			4,506
Income taxes					(2,684	)		16,760			(13,896	)		3,682
Net income/(loss)				$	54,971		$	(21,656	)	$	99,967		$	8,188

Earnings Per Share
	Net income/(loss)			$	3.43		$	(1.35	)	$	6.22		$	0.51
	Average number of shares outstanding				16,035			16,010			16,067			16,114

Diluted Earnings Per Share
	Net income/(loss)			$	3.27		$	(1.35	)	$	5.93		$	0.49
	Average number of shares outstanding				16,811			16,010			16,854			16,758

(aa)	Selling, general and administrative ("SG&A") expenses comprise (in thousands):

				Three Months Ended June 30,						Six Months Ended June 30,
				2018			2017			2018			2017
		SG&A expenses before long-term incentive compensation, expenses related to the OIG investigation and the impact of market value adjustments related to deferred compensation plans		$	66,296		$	64,018		$	132,517		$	127,750
		Long-term incentive compensation			1,222			956			3,142			1,917
		Market value adjustments related to deferred compensation plans			779			1,587			1,638			4,202
		Expenses related to the OIG investigation			-			2,093			-			4,243
			Total SG&A expenses	$	68,297		$	68,654		$	137,297		$	138,112

(bb)	Other income--net comprises (in thousands):
				Three Months Ended June 30,						Six Months Ended June 30,
				2018			2017			2018			2017
		Market value adjustments related to deferred compensation plans		$	779		$	1,587		$	1,638		$	4,202
		Interest income			259			161			417			245
		Loss on disposal of property and equipment			-			(98	)		-			(334	)
		Other			-			3			1			3
			Total other income--net	$	1,038		$	1,653		$	2,056		$	4,116

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET

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

June 30,

2018

2017

Assets

Current assets

Cash and cash equivalents

12,668

13,753

Accounts receivable less allowances

119,206

117,906

Inventories

5,696

5,618

Prepaid income taxes

19,666

4,537

Prepaid expenses

16,205

14,678

Total current assets

173,441

156,492

Investments of deferred compensation plans held in trust

67,573

58,579

Properties and equipment, at cost less accumulated depreciation

145,903

140,209

Identifiable intangible assets less accumulated amortization

55,250

54,737

Goodwill

478,202

472,897

Deferred income taxes

20,593

Other assets

7,845

6,767

Total Assets

928,214

910,274

Liabilities

Current liabilities

Accounts payable

48,236

49,154

Current portion of long-term debt

10,000

Income taxes

3,815

Accrued insurance

42,826

44,905

Accrued compensation

49,372

48,082

Accrued legal

823

92,502

Other current liabilities

25,159

20,142

Total current liabilities

166,416

268,600

Deferred income taxes

18,811

Long-term debt

103,400

115,000

Deferred compensation liabilities

66,154

57,811

Other liabilities

17,042

15,780

Total Liabilities

371,823

457,191

Stockholders' Equity

Capital stock

35,141

34,470

Paid-in capital

744,228

661,553

Retained earnings

1,129,289

957,941

Treasury stock, at cost

(1,354,538

)

(1,203,077

)

Deferred compensation payable in Company stock

2,271

2,196

Total Stockholders' Equity

556,391

453,083

Total Liabilities and Stockholders' Equity

928,214

910,274


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)


					Six Months Ended June 30,
					2018			2017
Cash Flows from Operating Activities
	Net income				$	99,967		$	8,188
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				19,046			17,804
		Stock option expense				7,305			6,055
		Noncash long-term incentive compensation				2,942			1,783
		Provision/(benefit) for deferred income taxes				2,173			(34,876	)
		Noncash directors' compensation				766			766
		Amortization of restricted stock awards				446			638
		Amortization of debt issuance costs				288			258
		Provision for uncollectible accounts receivable				-			8,250
		Potential litigation settlement				-			90,000
		Changes in operating assets and liabilities, excluding amounts acquired in business combinations:
				(Increase)/decrease in accounts receivable		(6,057	)		5,804
				(Increase)/decrease in inventories		(362	)		137
				Increase in prepaid expenses		(113	)		(1,573	)
				Decrease in accounts payable and other current liabilities		(14,909	)		(6,931	)
				Change in current income taxes		10,136			2,982
				Increase in other assets		(5,667	)		(4,152	)
				Increase in other liabilities		4,889			3,754
		Other sources				186			1,437
			Net cash provided by operating activities			121,036			100,324
Cash Flows from Investing Activities
	Capital expenditures					(23,872	)		(28,133	)
	Business combinations, net of cash acquired					(1,875	)		(525	)
	Other sources					533			87
			Net cash used by investing activities			(25,214	)		(28,571	)
Cash Flows from Financing Activities
	Proceeds from revolving line of credit					358,350			135,800
	Payments on revolving line of credit					(281,150	)		(115,800	)
	Purchases of treasury stock					(84,304	)		(85,063	)
	Payments on other long-term debt					(75,000	)		(3,750	)
	Capital stock surrendered to pay taxes on stock-based compensation					(21,022	)		(5,716	)
	Proceeds from exercise of stock options					20,209			10,398
	Dividends paid					(9,016	)		(8,396	)
	Debt issuance costs					(968	)		-
	Decrease in cash overdrafts payable					(711	)		(1,090	)
	Other (uses)/sources					(663	)		307
			Net cash used by financing activities			(94,275	)		(73,310	)
Increase/(Decrease) in Cash and Cash Equivalents						1,547			(1,557	)
Cash and cash equivalents at beginning of year						11,121			15,310
Cash and cash equivalents at end of period					$	12,668		$	13,753

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(in thousands)(unaudited)
											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated
2018
Service revenues and sales		$	296,799		$	145,014		$	-		$	441,813
Cost of services provided and goods sold			233,073			72,668			-			305,741
Selling, general and administrative expenses (a)			20,702			35,909			11,686			68,297
Depreciation			5,050			4,628			40			9,718
Amortization			-			34			-			34
Other operating (income)/expense			(67	)		(51	)		-			(118	)
	Total costs and expenses		258,758			113,188			11,726			383,672
	Income/(loss) from operations		38,041			31,826			(11,726	)		58,141
Interest expense			(53	)		(92	)		(1,379	)		(1,524	)
Intercompany interest income/(expense)			3,124			1,739			(4,863	)		-
Other income/(expense)—net			238			21			779			1,038
	Income/(loss) before income taxes		41,350			33,494			(17,189	)		57,655
Income taxes (a)			(9,565	)		(8,196	)		15,077			(2,684	)
	Net income/(loss)	$	31,785		$	25,298		$	(2,112	)	$	54,971

2017
Service revenues and sales		$	284,710		$	130,349		$	-		$	415,059
Cost of services provided and goods sold			219,769			66,083			-			285,852
Selling, general and administrative expenses (b)			24,531			33,763			10,360			68,654
Depreciation			4,741			4,070			22			8,833
Amortization			-			32			-			32
Other operating expenses			90,636			-			-			90,636
	Total costs and expenses		339,677			103,948			10,382			454,007
	Income/(loss) from operations		(54,967	)		26,401			(10,382	)		(38,948	)
Interest expense			(53	)		(87	)		(981	)		(1,121	)
Intercompany interest income/(expense)			2,826			1,346			(4,172	)		-
Other income/(expense)—net			71			(4	)		1,586			1,653
	Income/(loss) before income taxes		(52,123	)		27,656			(13,949	)		(38,416	)
Income taxes (b)			19,869			(10,598	)		7,489			16,760
	Net income/(loss)	$	(32,254	)	$	17,058		$	(6,460	)	$	(21,656	)

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


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(in thousands)(unaudited)
											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated
2018
Service revenues and sales		$	588,813		$	292,176		$	-		$	880,989
Cost of services provided and goods sold			460,329			149,948			-			610,277
Selling, general and administrative expenses (a)			41,213			72,006			24,078			137,297
Depreciation			9,846			9,072			67			18,985
Amortization			-			61			-			61
Other operating income			(84	)		(85	)		-			(169	)
	Total costs and expenses		511,304			231,002			24,145			766,451
	Income/(loss) from operations		77,509			61,174			(24,145	)		114,538
Interest expense			(104	)		(184	)		(2,443	)		(2,731	)
Intercompany interest income/(expense)			6,218			3,417			(9,635	)		-
Other income/(expense)—net			380			37			1,639			2,056
	Income/(loss) before income taxes		84,003			64,444			(34,584	)		113,863
Income taxes (a)			(20,203	)		(16,208	)		22,515			(13,896	)
	Net income/(loss)	$	63,800		$	48,236		$	(12,069	)	$	99,967

2017
Service revenues and sales		$	567,026		$	253,897		$	-		$	820,923
Cost of services provided and goods sold			441,446			129,546			-			570,992
Selling, general and administrative expenses (b)			48,825			67,223			22,064			138,112
Depreciation			9,519			8,054			153			17,726
Amortization			14			64			-			78
Other operating expenses			91,509			-			-			91,509
	Total costs and expenses		591,313			204,887			22,217			818,417
	Income/(loss) from operations		(24,287	)		49,010			(22,217	)		2,506
Interest expense			(108	)		(185	)		(1,823	)		(2,116	)
Intercompany interest income/(expense)			5,528			2,656			(8,184	)		-
Other income/(expense)—net			(9	)		(77	)		4,202			4,116
	Income/(loss) before income taxes		(18,876	)		51,404			(28,022	)		4,506
Income taxes (b)			7,219			(19,722	)		16,185			3,682
	Net income/(loss)	$	(11,657	)	$	31,682		$	(11,837	)	$	8,188

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


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(in thousands)(unaudited)

												Chemed
			VITAS			Roto-Rooter			Corporate			Consolidated
2018
Net income/(loss)			$	31,785		$	25,298		$	(2,112	)	$	54,971
Add/(deduct):
	Interest expense			53			92			1,379			1,524
	Income taxes			9,565			8,196			(15,077	)		2,684
	Depreciation			5,050			4,628			40			9,718
	Amortization			-			34			-			34
		EBITDA		46,453			38,248			(15,770	)		68,931
Add/(deduct):
	Intercompany interest expense/(income)			(3,124	)		(1,739	)		4,863			-
	Interest income			(237	)		(22	)		-			(259	)
	Amortization of stock awards			37			35			83			155
	Medicare cap sequestration adjustment			185			-			-			185
	Accrued litigation settlement			(204	)		-			-			(204	)
	Stock option expense			-			-			3,652			3,652
	Long-term incentive compensation			-			-			1,222			1,222
		Adjusted EBITDA	$	43,110		$	36,522		$	(5,950	)	$	73,682

2017
Net income/(loss)			$	(32,254	)	$	17,058		$	(6,460	)	$	(21,656	)
Add/(deduct):
	Interest expense			53			87			981			1,121
	Income taxes			(19,869	)		10,598			(7,489	)		(16,760	)
	Depreciation			4,741			4,070			22			8,833
	Amortization			-			32			-			32
		EBITDA		(47,329	)		31,845			(12,946	)		(28,430	)
Add/(deduct):
	Intercompany interest expense/(income)			(2,826	)		(1,346	)		4,172			-
	Interest income			(149	)		(12	)		-			(161	)
	Accrued litigation settlement			90,000			-			-			90,000
	Expenses related to OIG investigation			2,093			-			-			2,093
	Program closure expenses			636			-			-			636
	Medicare cap sequestration adjustment			105			-			-			105
	Amortization of stock awards			71			66			166			303
	Advertising cost adjustment			-			(272	)		-			(272	)
	Expenses related to litigation settlements			-			213			-			213
	Stock option expense			-			-			3,054			3,054
	Long-term incentive compensation			-			-			956			956
		Adjusted EBITDA	$	42,601		$	30,494		$	(4,598	)	$	68,497

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


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(in thousands)(unaudited)

												Chemed
			VITAS			Roto-Rooter			Corporate			Consolidated
2018
Net income/(loss)			$	63,800		$	48,236		$	(12,069	)	$	99,967
Add/(deduct):
	Interest expense			104			184			2,443			2,731
	Income taxes			20,203			16,208			(22,515	)		13,896
	Depreciation			9,846			9,072			67			18,985
	Amortization			-			61			-			61
		EBITDA		93,953			73,761			(32,074	)		135,640
Add/(deduct):
	Intercompany interest expense/(income)			(6,218	)		(3,417	)		9,635			-
	Interest income			(380	)		(37	)		-			(417	)
	Amortization of stock awards			107			100			239			446
	Medicare cap sequestration adjustment			537			-			-			537
	Stock option expense			-			-			7,305			7,305
	Accrued litigation settlement			(204	)		-			-			(204	)
	Long-term incentive compensation			-			-			3,142			3,142
		Adjusted EBITDA	$	87,795		$	70,407		$	(11,753	)	$	146,449

2017
Net income/(loss)			$	(11,657	)	$	31,682		$	(11,837	)	$	8,188
Add/(deduct):
	Interest expense			108			185			1,823			2,116
	Income taxes			(7,219	)		19,722			(16,185	)		(3,682	)
	Depreciation			9,519			8,054			153			17,726
	Amortization			14			64			-			78
		EBITDA		(9,235	)		59,707			(26,046	)		24,426
Add/(deduct):
	Intercompany interest expense/(income)			(5,528	)		(2,656	)		8,184			-
	Interest income			(219	)		(26	)		-			(245	)
	Accrued litigation settlement			90,000			-			-			90,000
	Medicare cap sequestration adjustment			105			-			-			105
	Program closure expenses			1,509			-			-			1,509
	Expenses related to OIG investigation			4,243			-			-			4,243
	Amortization of stock awards			148			136			354			638
	Advertising cost adjustment			-			(545	)		-			(545	)
	Expenses related to litigation settlements			-			213			-			213
	Stock option expense			-			-			6,055			6,055
	Long-term incentive compensation			-			-			1,917			1,917
		Adjusted EBITDA	$	81,023		$	56,829		$	(9,536	)	$	128,316

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


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME
(in thousands, except per share data)(unaudited)

		Three Months Ended June 30,						Six Months Ended June 30,
		2018			2017			2018			2017
Net income/(loss) as reported		$	54,971		$	(21,656	)	$	99,967		$	8,188

Add/(deduct) after-tax cost of:
	Excess tax benefits on stock compensation		(11,702	)		(2,643	)		(15,500	)		(6,338	)
	Stock option expense		2,900			1,931			5,791			3,828
	Long-term incentive compensation		1,003			604			2,502			1,212
	Accrued litigation settlement		(152	)		55,800			(152	)		55,800
	Medicare cap sequestration adjustments		138			65			401			65
	Expenses of OIG investigation		-			1,292			-			2,620
	Program closure expenses		-			385			-			898
	Expenses related to litigation settlements		-			129			-			129
Adjusted net income		$	47,158		$	35,907		$	93,009		$	66,402


Diluted Earnings Per Share As Reported
	Net income/(loss)	$	3.27		$	(1.35	)	$	5.93		$	0.49
	Average number of shares outstanding		16,811			16,010			16,854			16,758


Adjusted Diluted Earnings Per Share
	Adjusted net income	$	2.81		$	2.15		$	5.52		$	3.96
	Average number of shares outstanding		16,811			16,702			16,854			16,758

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


	CHEMED CORPORATION AND SUBSIDIARY COMPANIES
	OPERATING STATISTICS FOR VITAS SEGMENT
	FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017
	(unaudited)

				Three Months Ended June 30,								Six Months Ended June 30,
OPERATING STATISTICS				2018				2017				2018				2017
	Net revenue ($000) (c)
		Homecare		$	250,381			$	229,948			$	491,412			$	454,147
		Inpatient			20,077				21,316				42,186				44,562
		Continuous care			30,513				31,699				61,279				64,556
		Other			1,998				1,994				3,740				4,008
			Subtotal	$	302,969			$	284,957			$	598,617			$	567,273
		Room and board, net			(2,675	)			-				(5,294	)			-
		Contractual allowances			(2,959	)			-				(5,792	)			-
		Medicare cap allowance			(536	)			(247	)			1,282				(247	)
			Net Revenue	$	296,799			$	284,710			$	588,813			$	567,026
	Net revenue as a percent of total before Medicare cap allowance
		Homecare			82.6		%		80.7		%		82.1		%		80.1		%
		Inpatient			6.6				7.5				7.0				7.9
		Continuous care			10.1				11.1				10.2				11.4
		Other			0.7				0.7				0.7				0.6
			Subtotal		100.0				100.0				100.0				100.0
		Room and board, net			(0.9	)			-				(0.9	)			-
		Contractual allowances			(1.0	)			-				(1.0	)			-
		Medicare cap allowance			(0.1	)			(0.1	)			0.3				-
			Net Revenue		98.0		%		99.9		%		98.4		%		100.0		%
	Average daily census ("ADC") (days)
		Homecare			13,583				12,446				13,375				12,368
		Nursing home			3,275				3,135				3,245				3,093
			Routine homecare		16,858				15,581				16,620				15,461
		Inpatient			318				343				335				360
		Continuous care			467				474				473				489
			Total		17,643				16,398				17,428				16,310

	Total Admissions				16,858				16,311				35,137				33,874
	Total Discharges				16,474				16,124				34,054				33,344
	Average length of stay (days)				89.0				85.2				88.4				87.1
	Median length of stay (days)				17.0				16.0				16.0				16.0
	ADC by major diagnosis
		Cerebro			36.2		%		34.8		%		36.4		%		34.7		%
		Neurological			18.6				19.5				18.6				19.6
		Cardio			16.6				16.5				16.4				16.5
		Cancer			13.9				14.9				13.9				15.0
		Respiratory			8.3				7.9				8.2				7.9
		Other			6.4				6.4				6.5				6.3
			Total		100.0		%		100.0		%		100.0		%		100.0		%
	Admissions by major diagnosis
		Cerebro			21.7		%		21.4		%		22.2		%		21.7		%
		Neurological			11.1				10.7				11.2				10.8
		Cardio			15.6				15.1				15.6				15.1
		Cancer			30.5				31.5				29.2				30.4
		Respiratory			10.8				10.2				11.3				11.0
		Other			10.3				11.1				10.5				11.0
			Total		100.0		%		100.0		%		100.0		%		100.0		%
	Direct patient care margins (d)
		Routine homecare			52.6		%		52.8		%		52.4		%		52.1		%
		Inpatient			4.2				3.7				5.9				4.8
		Continuous care			17.3				18.0				17.5				16.8
	Homecare margin drivers (dollars per patient day)
		Labor costs		$	57.67			$	56.55			$	58.14			$	57.58
		Combined drug, home medical equipment and medical supplies cost			14.39				14.51				14.43				14.82
	Inpatient margin drivers (dollars per patient day)
		Labor costs		$	380.94			$	377.13			$	371.44			$	373.41
	Continuous care margin drivers (dollars per patient day)
		Labor costs		$	575.36			$	583.87			$	571.41			$	587.39
	Bad debt expense as a percent of revenues				1.0		%		1.1		%		1.0		%		1.1		%
	Accounts receivable --
	Days of revenue outstanding- excluding unapplied Medicare payments				31.9				34.5				n.a.				n.a.
	Days of revenue outstanding- including unapplied Medicare payments				25.6				28.0				n.a.				n.a.

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


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
FOOTNOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(unaudited)

(a)	Included in the results of operations for 2018 are the following significant credits/(charges) which may not be indicative of ongoing operations
	(in thousands):
				Three Months Ended June 30, 2018
				VITAS			Corporate			Consolidated
	Service revenues and sales:
		Medicare cap sequestration adjustment		$	(185	)	$	-		$	(185	)
	Selling, general and administrative expenses:
		Stock option expense			-			(3,652	)		(3,652	)
		Long-term incentive compensation			-			(1,222	)		(1,222	)
	Other operating expenses:
		Accrued litigation settlement			204			-			204
			Pretax impact on earnings		19			(4,874	)		(4,855	)
	Excess tax benefits on stock compensation				-			11,702			11,702
	Income tax benefit on the above				(5	)		971			966
			After-tax impact on earnings	$	14		$	7,799		$	7,813

				Six Months Ended June 30, 2018
				VITAS			Corporate			Consolidated
	Service revenues and sales:
		Medicare cap sequestration adjustment		$	(537	)	$	-		$	(537	)
	Selling, general and administrative expenses:
		Stock option expense			-			(7,305	)		(7,305	)
		Long-term incentive compensation			-			(3,142	)		(3,142	)
	Other operating expenses:
		Accrued litigation settlement			204			-			204
			Pretax impact on earnings		(333	)		(10,447	)		(10,780	)
	Excess tax benefits on stock compensation				-			15,500			15,500
	Income tax benefit on the above				84			2,154			2,238
			After-tax impact on earnings	$	(249	)	$	7,207		$	6,958

(b)	Included in the results of operations for 2076 are the following significant credits/(charges) which may not be indicative of ongoing operations
	(in thousands):
				Three Months Ended June 30, 2017
				VITAS			Roto-Rooter			Corporate			Consolidated
	Service revenues and sales:
		Medicare cap sequestration adjustment		$	(105	)	$	-		$	-		$	(105	)
	Selling, general and administrative expenses:
		Expenses related to OIG investigation			(2,093	)		-			-			(2,093	)
		Expenses related to litigation settlements			-			(213	)		-			(213	)
		Stock option expense			-			-			(3,054	)		(3,054	)
		Long-term incentive compensation			-			-			(956	)		(956	)
	Other operating expenses:
		Accrued litigation settlement			(90,000	)		-			-			(90,000	)
		Program closure expenses			(636	)		-			-			(636	)
			Pretax impact on earnings		(92,834	)		(213	)		(4,010	)		(97,057	)
	Excess tax benefits on stock compensation				-			-			2,643			2,643
	Income tax benefit on the above				35,292			84			1,475			36,851
			After-tax impact on earnings	$	(57,542	)	$	(129	)	$	108		$	(57,563	)

				Six Months Ended June 30, 2017
				VITAS			Roto-Rooter			Corporate			Consolidated
	Service revenues and sales:
		Medicare cap sequestration adjustment		$	(105	)	$	-		$	-		$	(105	)
	Selling, general and administrative expenses:
		Expenses related to OIG investigation			(4,243	)		-			-			(4,243	)
		Expenses related to litigation settlements			-			(213	)		-			(213	)
		Stock option expense			-			-			(6,055	)		(6,055	)
		Long-term incentive compensation			-			-			(1,917	)		(1,917	)
	Other operating expenses:
		Accrued litigation settlement			(90,000	)		-			-			(90,000	)
		Program closure expenses			(1,509	)		-			-			(1,509	)
			Pretax impact on earnings		(95,857	)		(213	)		(7,972	)		(104,042	)
	Excess tax benefits on stock compensation				-			-			6,338			6,338
	Income tax benefit on the above				36,474			84			2,932			39,490
			After-tax impact on earnings	$	(59,383	)	$	(129	)	$	1,298		$	(58,214	)

(c)	VITAS has 12 large (greater than 450 ADC), 18 medium (greater than 200 but less than 450 ADC) and 15 small (less than 200 ADC) hospice programs. Of VITAS' 30 unique Medicare provider numbers, 28 provider numbers have a Medicare cap cushion of 5% or greater during the first six months of the current cap year and two provider number have a Medicare cap liability.

(d)	Amounts exclude indirect patient care and administrative costs, as well as Medicare Cap billing limitation.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180725005776/en/

Source: Chemed Corporation

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