CHEMED CORP - FORM 8-K - EX-99 - EXHIBIT 99 - October 26, 2017

Attached files

file filename
8-K - CHEMED CORPORATION 8-K - CHEMED CORPa51702714.htm

Exhibit 99

Chemed Reports Third-Quarter 2017 Results

-Increases Full-Year Guidance-

CINCINNATI--(BUSINESS WIRE)--October 26, 2017--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, 2017, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 6.3% to $417 million
  • GAAP Earnings-per-Share of $2.13, an increase of 31.5%
  • Adjusted Diluted EPS of $2.15 an increase of 24.3%

VITAS segment operating results:

  • Net Patient Revenue of $289 million, an increase of 2.2%
  • Average Daily Census (ADC) of 16,652 an increase of 2.8%
  • Admissions of 16,000, a decrease of 1.0%
  • Net Income of $26.5 million, an increase of 26.6%
  • Adjusted EBITDA of $43.9 million, an increase of 13.7%

Roto-Rooter segment operating results:

  • Revenue of $128 million, an increase of 17.1%
  • Net Income of $16.0 million, an increase of 24.7%
  • Adjusted EBITDA of $28.8 million, an increase of 21.3%
  • Adjusted EBITDA margin of 22.4%, an increase of 77 basis points

VITAS

Net revenue for VITAS was $289 million in the third quarter of 2017, which is an increase of 2.2%, when compared to the prior-year period. This revenue increase is comprised of a geographically weighted average Medicare reimbursement rate increase of approximately 1.3%, a 2.8% increase in average daily census, offset by acuity mix shift which negatively impacted revenue 2.2%, when compared to the prior-year period.

In the third quarter of 2017, VITAS had a 24.4/75.6 RHC Days-of-Care ratio and generated approximately $1.2 million in SIA revenue. This compares to a 2016 RHC Days-of-Care ratio of 24.6/75.4 and SIA revenue of $1.3 million.

VITAS did not incur any Medicare Cap billing limitations in the quarter. At September 30, 2017, VITAS had 30 Medicare provider numbers, none of which has an estimated 2017 Medicare Cap billing limitation.

Of VITAS’ 30 unique Medicare provider numbers, 28 provider numbers have a Medicare Cap cushion of 10% or greater and two provider numbers had a cap cushion between 5% and 10% for the 2017 Medicare Cap period.

Average revenue per patient per day in the quarter was $188.62, which is 0.7% below the prior-year period. Routine home care reimbursement and high acuity care averaged $162.24 and $709.80, respectively. During the quarter, high acuity days of care were 4.8% of total days of care, 74 basis points less than the prior-year quarter.

The third quarter of 2017 gross margin was 23.1%, which, excluding 2016 Medicare Cap, is a 240-basis point improvement when compared to the third quarter of 2016.

Selling, general and administrative expense was $23.8 million in the third quarter of 2017, which is an increase of 9.2% compared to the prior-year quarter. Adjusted EBITDA totaled $43.9 million in the quarter, an increase of 13.7%. Adjusted EBITDA margin was 15.2% in the quarter which is 154 basis point improvement when compared to the prior-year period.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $128 million for the third quarter of 2017, an increase of $18.8 million, or 17.1%, over the prior-year quarter. Revenue from water restoration totaled $21.1 million, an increase of $9.2 million or, 77.2%, when compared to the prior-year quarter.

Roto-Rooter’s gross margin in the quarter was 48.7%, an 86 basis point improvement when compared to the third quarter of 2016. Adjusted EBITDA in the third quarter of 2017 totaled $28.8 million, an increase of 21.3%, and the Adjusted EBITDA margin was 22.4% in the quarter, 77 basis points higher than the prior year.

Chemed Consolidated

As of September 30, 2017, Chemed had total cash and cash equivalents of $19 million and debt of $83 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, 2017, the Company had approximately $309 million of undrawn borrowing capacity under this credit agreement.

During the quarter, the Company repurchased 50,000 shares of Chemed stock for $9.6 million which equates to a cost per share of $191.52. On March 10, 2017, Chemed’s Board of Directors authorized an additional $100 million for stock repurchase under Chemed’s existing share repurchase program. As of September 30, 2017, there was $55.5 million of remaining share repurchase authorization under this plan.

Updated Guidance for 2017

Revenue growth for VITAS in 2017, prior to Medicare Cap, is estimated to be in the range of 2% to 3%. Admissions and Average Daily Census in 2017 are estimated to expand approximately 2% to 3% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 15.0%. We are currently estimating $1.5 million for Medicare Cap billing limitations in the 2017 calendar year.

Roto-Rooter is forecasted to achieve full-year 2017 revenue growth of 13% to 14%. This revenue estimate is based upon increased job pricing of approximately 2% and continued growth in water restoration services. Adjusted EBITDA margin for 2017 is estimated at 22.5%.

Based upon the above, full-year 2017 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 $8.35 to $8.40. This compares to Chemed’s 2016 reported adjusted earnings per diluted share of $7.24.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Friday, October 27, 2017, 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 92685764. 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 92685764. 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 16,500 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 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 September 30,   Nine Months Ended September 30,
2017 2016 2017 2016
Service revenues and sales $ 417,444   $ 392,607   $ 1,238,367   $ 1,173,405  
Cost of services provided and goods sold 288,047 281,658 859,039 836,348
Selling, general and administrative expenses (aa) 66,919 59,373 205,031 181,046
Depreciation 8,819 8,614 26,545 25,619
Amortization 33 91 111 274
Other operating expenses   (371 )   -     91,138     4,491  
Total costs and expenses   363,447     349,736     1,181,864     1,047,778  
Income from operations 53,997 42,871 56,503 125,627
Interest expense (1,048 ) (1,018 ) (3,164 ) (2,831 )
Other income--net (bb)   1,323     1,640     5,439     1,933  
Income before income taxes 54,272 43,493 58,778 124,729
Income taxes   (18,835 )   (16,664 )   (15,153 )   (48,175 )
Net income $ 35,437   $ 26,829   $ 43,625   $ 76,554  
 
 
Earnings Per Share
Net income $ 2.22   $ 1.66   $ 2.72   $ 4.66  
Average number of shares outstanding   15,976     16,166     16,068     16,443  
 
Diluted Earnings Per Share
Net income $ 2.13   $ 1.62   $ 2.60   $ 4.54  
Average number of shares outstanding   16,676     16,559     16,763     16,851  
 
 
 
                             
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
 
Three Months Ended September 30,   Nine Months Ended September 30,
2017 2016 2017 2016
SG&A expenses before long-term incentive
compensation, expenses related to the O.I.G.
investigation and the impact of market value
adjustments related to deferred compensation
plans $ 63,463 $ 56,475 $ 191,213 $ 174,183
Market value adjustments related to
deferred compensation plans 1,417 1,656 5,619 1,857
Long-term incentive compensation 1,104 643 3,021 901
Expenses related to the O.I.G. investigation   935     599     5,178     4,105  
Total SG&A expenses $ 66,919   $ 59,373   $ 205,031   $ 181,046  
 
(bb) Other income--net comprises (in thousands):
Three Months Ended September 30,   Nine Months Ended September 30,
2017 2016 2017 2016
Market value adjustments related to
deferred compensation plans $ 1,417 $ 1,656 $ 5,619 $ 1,857
Loss on disposal of property and equipment (146 ) (134 ) (481 ) (224 )
Interest income 51 119 297 301
Other   1     (1 )   4     (1 )
Total other income--net $ 1,323   $ 1,640   $ 5,439   $ 1,933  
 
       
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
             
 
September 30,
2017 2016
Assets
Current assets
Cash and cash equivalents $ 18,871 $ 21,285
Accounts receivable less allowances 91,483 86,006
Inventories 5,658 6,101
Prepaid income taxes 3,621 5,069
Prepaid expenses   15,678     14,498  
Total current assets 135,311 132,959
Investments of deferred compensation plans held in trust 60,445 55,158
Properties and equipment, at cost less accumulated depreciation 143,148 119,994
Identifiable intangible assets less accumulated amortization 54,793 55,067
Goodwill 473,024 472,418
Deferred income taxes 21,893 10
Other assets   6,845     6,870  
Total Assets $ 895,459   $ 842,476  
 
Liabilities
Current liabilities
Accounts payable $ 34,752 $ 42,844
Current portion of long-term debt 10,000 8,125
Income taxes 12,349 -
Accrued insurance 44,584 46,233
Accrued compensation 53,857 48,391
Accrued legal 91,450 1,495
Other current liabilities   22,382     20,369  
Total current liabilities 269,374 167,457
Deferred income taxes - 15,586
Long-term debt 72,500 102,500
Deferred compensation liabilities 59,389 54,455
Other liabilities   16,494     15,276  
Total Liabilities   417,757     355,274  
 
Stockholders' Equity
Capital stock 34,514 34,174
Paid-in capital 668,573 625,961
Retained earnings 988,895 930,184
Treasury stock, at cost (1,216,509 ) (1,105,620 )
Deferred compensation payable in Company stock   2,229     2,503  
Total Stockholders' Equity   477,702     487,202  
Total Liabilities and Stockholders' Equity $ 895,459   $ 842,476  
 
     
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
                 
 
Nine Months Ended September 30,
2017

2016

Cash Flows from Operating Activities
Net income $ 43,625 $ 76,554
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 26,656 25,893
Provision for uncollectible accounts receivable 12,953 12,132
Stock option expense 7,738 6,259
Benefit for deferred income taxes (36,175 ) (5,530 )
Potential litigation settlement 90,000 -
Noncash early retirement expense - 1,747
Amortization of restricted stock awards

933

1,415
Noncash directors' compensation 766 541
Noncash long-term incentive compensation 2,888 837
Amortization of debt issuance costs 387 390
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations:
Decrease in accounts receivable 27,534 8,061
Decrease in inventories 97 213
Increase in prepaid expenses (2,573 ) (1,646 )
Increase/(decrease) in accounts payable and
other current liabilities 2,448 (5,471 )
Increase in income taxes 12,432 8,587
Increase in other assets (6,238 ) (5,694 )
Increase in other liabilities 6,046 6,835
Excess tax benefit on share-based compensation - (2,974 )
Other sources   1,472     204  
Net cash provided by operating activities  

190,989

    128,353  
Cash Flows from Investing Activities
Capital expenditures (50,247 ) (29,708 )
Business combinations, net of cash acquired (525 ) -
Other sources/(uses)   116     (114 )
Net cash used by investing activities   (50,656 )   (29,822 )
Cash Flows from Financing Activities
Payments on revolving line of credit (203,700 ) (85,200 )
Proceeds from revolving line of credit 183,700 110,200
Purchases of treasury stock (94,640 ) (102,313 )
Dividends paid (12,879 ) (12,215 )
Proceeds from exercise of stock options 11,625 4,625
Decrease in cash overdrafts payable (8,139 ) 2,092
Capital stock surrendered to pay taxes on stock-based compensation (7,637 ) (7,051 )
Payments on other long-term debt (6,250 ) (5,625 )
Excess tax benefit on share-based compensation - 2,974
Other sources  

1,148

    540  
Net cash used by financing activities  

(136,772

)   (91,973 )
Increase in Cash and Cash Equivalents 3,561 6,558
Cash and cash equivalents at beginning of year   15,310     14,727  
Cash and cash equivalents at end of period $ 18,871   $ 21,285  
 
   
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(in thousands)(unaudited)
           
Chemed
VITAS Roto-Rooter Corporate Consolidated
2017        
Service revenues and sales $ 288,951   $ 128,493   $ -   $ 417,444  
Cost of services provided and goods sold 222,119 65,928 - 288,047
Selling, general and administrative expenses (a) 23,783 33,694 9,442 66,919
Depreciation 4,529 4,268 22 8,819
Amortization - 33 - 33

Other operating expenses (a)

  (371 )   -     -     (371 )
Total costs and expenses   250,060     103,923     9,464     363,447  
Income/(loss) from operations 38,891 24,570 (9,464 ) 53,997

Interest expense

(53 ) (73 ) (922 ) (1,048 )
Intercompany interest income/(expense) 2,950 1,378 (4,328 ) -
Other income/(expense)—net   (86 )   (8 )   1,417     1,323  
Income/(loss) before income taxes 41,702 25,867 (13,297 ) 54,272
Income taxes (a)   (15,248 )   (9,833 )   6,246     (18,835 )
Net income/(loss) $ 26,454   $ 16,034   $ (7,051 ) $ 35,437  
 
2016        

Service revenues and sales (b)

$ 282,865   $ 109,742   $ -   $ 392,607  
Cost of services provided and goods sold 224,410 57,248 - 281,658

Selling, general and administrative expenses (b)

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

(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 (b)

  (12,762 )   (7,904 )   4,002     (16,664 )
Net income/(loss) $ 20,903   $ 12,855   $ (6,929 ) $ 26,829  

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, 2017 AND 2016
(in thousands)(unaudited)
           
Chemed
VITAS Roto-Rooter Corporate Consolidated
2017        

Service revenues and sales (a)

$ 855,977   $ 382,390   $ -   $ 1,238,367  
Cost of services provided and goods sold 663,565 195,474 - 859,039
Selling, general and administrative expenses (a) 72,608 100,917 31,506 205,031
Depreciation 14,048 12,322 175 26,545
Amortization 14 97 - 111

Other operating expenses (a)

  91,138     -     -     91,138  
Total costs and expenses   841,373     308,810     31,681     1,181,864  
Income/(loss) from operations 14,604 73,580 (31,681 ) 56,503

Interest expense

(161 ) (259 ) (2,744 ) (3,164 )
Intercompany interest income/(expense) 8,478 4,035 (12,513 ) -
Other income/(expense)—net   (95 )   (85 )   5,619     5,439  
Income/(loss) before income taxes 22,826 77,271 (41,319 ) 58,778
Income taxes (a)   (8,029 )   (29,555 )   22,431     (15,153 )
Net income/(loss) $ 14,797   $ 47,716   $ (18,888 ) $ 43,625  
 
2016        

Service revenues and sales (b)

$ 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 (b)

69,197 87,890 23,959 181,046
Depreciation 14,346 10,860 413 25,619
Amortization 41 233 - 274

Other operating expenses (b)

  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

(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 (b)

  (35,887 )   (24,446 )   12,158     (48,175 )
Net income/(loss) $ 58,538   $ 39,216   $ (21,200 ) $ 76,554  

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, 2017 AND 2016
(in thousands)(unaudited)
         
 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2017            
Net income/(loss) $ 26,454 $ 16,034 $ (7,051 ) $ 35,437
Add/(deduct):
Interest expense 53 73 922 1,048
Income taxes 15,248 9,833 (6,246 ) 18,835
Depreciation 4,529 4,268 22 8,819
Amortization -     33     -     33  
EBITDA 46,284 30,241 (12,353 ) 64,172
Add/(deduct):
Intercompany interest expense/(income) (2,950 ) (1,378 ) 4,328 -
Interest income (48 ) (4 ) - (52 )
Expenses related to OIG investigation 935 - - 935
Program closure expenses (371 ) - - (371 )
Amortization of stock awards 72 67 156 295
Advertising cost adjustment (c) - (162 ) - (162 )

Stock option expense

- - 1,683 1,683
Long-term incentive compensation   -     -     1,104     1,104  
Adjusted EBITDA $ 43,922   $ 28,764   $ (5,082 ) $ 67,604  
 
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 (108 ) (11 ) - (119 )
Expenses related to OIG investigation 599 - - 599
Net expenses related to litigation settlements 1,149 - - 1,149
Medicare cap sequestration adjustment 228 - - 228
Amortization of stock awards 85 76 279 440
Advertising cost adjustment (c) - (188 ) - (188 )

Stock option expense

- - 1,419 1,419
Long-term incentive compensation   -     -     643     643  
Adjusted EBITDA $ 38,632   $ 23,722   $ (4,967 ) $ 57,387  

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, 2017 AND 2016
(in thousands)(unaudited)
         
 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2017            
Net income/(loss) $ 14,797 $ 47,716 $ (18,888 ) $ 43,625
Add/(deduct):
Interest expense 161 259 2,744 3,164
Income taxes 8,029 29,555 (22,431 ) 15,153
Depreciation 14,048 12,322 175 26,545
Amortization   14     97     -     111  
EBITDA 37,049 89,949 (38,400 ) 88,598
Add/(deduct):
Intercompany interest expense/(income) (8,478 ) (4,035 ) 12,513 -
Interest income (267 ) (29 ) - (296 )
Potential litigation settlement 90,000 - - 90,000
Medicare cap sequestration adjustment 105 - - 105
Program closure expenses 1,138 - - 1,138
Expenses related to OIG investigation 5,178 - - 5,178
Amortization of stock awards 220 203 510 933
Advertising cost adjustment (c) - (707 ) - (707 )
Expenses related to litigation settlements - 213 - 213
Stock option expense - - 7,738 7,738
Long-term incentive compensation   -     -     3,021     3,021  
Adjusted EBITDA $ 124,945   $ 85,594   $ (14,618 ) $ 195,921  
 
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 (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  

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 September 30,   Nine Months Ended September 30,
2017   2016 2017   2016
Net income as reported $ 35,437 $ 26,829 $ 43,625 $ 76,554
 
Add/(deduct) after-tax cost of:
Potential litigation settlement - - 55,800 -
Excess tax benefits on stock compensation (1,783 ) - (8,121 ) -
Stock option expense 1,064 897 4,892 3,958
Long-term incentive compensation 699 406 1,911 570
Expenses of OIG investigation 578 370 3,198 2,535
Program closure expenses (223 ) - 675 -
Expenses related to litigation settlements - - 129 27
Medicare cap sequestration adjustments - 141 65 141
Early retirement expenses   -     -   -     2,840
Adjusted net income $ 35,772   $ 28,643 $ 102,174   $ 86,625
 
 
Diluted Earnings Per Share As Reported
Net income $ 2.13   $ 1.62 $ 2.60   $ 4.54
Average number of shares outstanding   16,676     16,559   16,763     16,851
 
 
Adjusted Diluted Earnings Per Share
Adjusted net income $ 2.15   $ 1.73 $ 6.10   $ 5.14
Average number of shares outstanding   16,676     16,559   16,763     16,851

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 NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(unaudited)
                   
Three Months Ended September 30,   Nine Months Ended September 30,  
OPERATING STATISTICS 2017 2016   2017 2016
Net revenue ($000) (d)
Homecare $ 236,565 $ 225,348 $ 693,359 $ 659,477
Inpatient 22,516 23,850 68,439 73,856
Continuous care   29,870   33,895     94,426     106,026  
Total before Medicare cap allowance $ 288,951 $ 283,093 $ 856,224 $ 839,359
Medicare cap allowance   -   (228 )   (247 )   (228 )
Total $ 288,951 $ 282,865   $ 855,977   $ 839,131  
Net revenue as a percent of total before Medicare cap allowance
Homecare 81.9 % 79.6 % 81.0 % 78.6 %
Inpatient 7.8 8.4 8.0 8.8
Continuous care   10.3   12.0     11.0     12.6  
Total before Medicare cap allowance 100.0 100.0 100.0 100.0
Medicare cap allowance   -   (0.1 )   -     -  
Total   100.0

%

  99.9   %   100.0   % 100.0   %
Average daily census ("ADC") (days)
Homecare 12,596 12,223 12,444 11,972
Nursing home   3,254   3,077     3,148     3,028  
Routine homecare 15,850 15,300 15,592 15,000
Inpatient 354 394 358 406
Continuous care   448   507     475     530  
Total   16,652   16,201     16,425     15,936  
 
Total Admissions 16,000 16,157 49,874 49,205
Total Discharges 15,726 15,690 49,074 48,403
Average length of stay (days) 89.5 87.7 87.9 85.2
Median length of stay (days) 16.0 16.0 16.0 16.0
ADC by major diagnosis
Cerebro 35.6 % 32.9 % 35.0 % 32.2 %
Neurological 18.9 20.7 19.4 21.3
Cardio 16.6 17.1 16.6 17.3
Cancer 14.4 15.5 14.8 15.3
Respiratory 7.9 7.8 7.9 7.8
Other   6.6   6.0     6.3     6.1  
Total   100.0 %   100.0   %   100.0   % 100.0   %
Admissions by major diagnosis
Cerebro 22.0 % 21.2 % 21.9 % 20.9 %
Neurological 10.0 11.0 10.5 11.0
Cancer 31.5 33.3 30.8 31.9
Cardio 14.9 14.4 15.1 15.3
Respiratory 10.6 9.0 10.9 10.1
Other   11.0   11.1     10.8     10.8  
Total   100.0 %   100.0   %   100.0   % 100.0   %
Direct patient care margins (e)
Routine homecare 52.4 % 51.4 % 52.2 % 51.8 %
Inpatient 3.4 (2.4 ) 4.4 2.7
Continuous care 17.3 12.2 16.9 13.7
Homecare margin drivers (dollars per patient day)
Labor costs $ 56.48 $ 56.53 $ 57.20 $ 56.51
Combined drug, home medical equipment and
medical supplies cost 14.67 16.30 14.77 15.90
Inpatient margin drivers (dollars per patient day)
Labor costs $ 362.48 $ 360.35 $ 369.77 $ 346.61
Continuous care margin drivers (dollars per patient day)
Labor costs $ 579.31 $ 618.15 $ 584.82 $ 609.08
Bad debt expense as a percent of revenues 1.1 % 1.2 % 1.1 % 1.2 %
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments 34.6 38.4 n.a. n.a.
Days of revenue outstanding- including unapplied Medicare payments 19.9 20.7 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, 2017 AND 2016
(unaudited)
               
 
(a) Included in the results of operations for 2017 are the following significant credits/(charges) which may not be indicative of ongoing operations
(in thousands):
Three Months Ended September 30, 2017
VITAS Corporate Consolidated
Selling, general and administrative expenses:
Expenses related to OIG investigation $ (935 ) $ - $ (935 )
Stock option expense - (1,683 ) (1,683 )
Long-term incentive compensation - (1,104 ) (1,104 )
Other operating expenses:
Program closure expenses   371     -     371  
Pretax impact on earnings (564 ) (2,787 ) (3,351 )
Excess tax benefits on stock compensation - 1,783 1,783
Income tax benefit on the above   209     1,024     1,233  
After-tax impact on earnings $ (355 ) $ 20   $ (335 )
 
Nine Months Ended September 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 (5,178 ) - - (5,178 )
Expenses related to litigation settlements - (213 ) - (213 )
Stock option expense - - (7,738 ) (7,738 )
Long-term incentive compensation - - (3,021 ) (3,021 )
Other operating expenses:
Potential litigation settlement (90,000 ) - - (90,000 )
Program closure expenses   (1,138 )   -     -     (1,138 )
Pretax impact on earnings (96,421 ) (213 ) (10,759 ) (107,393 )
Excess tax benefits on stock compensation - - 8,121 8,121
Income tax benefit on the above   36,683     84     3,956     40,723  
After-tax impact on earnings $ (59,738 ) $ (129 ) $ 1,318   $ (58,549 )
 
(b) Included in the results of operations for 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 )
Stock option expense - (1,419 ) (1,419 )
Long-term incentive compensation   -     (643 )   (643 )
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 )
Stock option expense - - (6,259 ) (6,259 )
Long-term incentive compensation - - (901 ) (901 )
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 )
(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 2017 and 2016, GAAP advertising expense for Roto-Rooter totaled $8,113,000 and $6,496,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the third quarters of 2017 and 2016 would total $8,275,000 and $6,684,000, respectively.

 

Similarly, for the first nine months of 2017 and 2016, GAAP advertising expense for Roto-Rooter totaled $22,897,000 and $19,394,000, 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 2017 and 2016 would total $23,604,000 and $20,747,000, respectively.

 
(d)

VITAS has 10 large (greater than 450 ADC), 16 medium (greater than 200 but less than 450 ADC) and 18 small (less than 200 ADC) hospice programs. Of VITAS' 30 unique Medicare provider numbers, 28 provider numbers have a Medicare cap cushion of 10% or greater during the first nine months of the current cap year and two provider number has a Medicare cap cushion between 5% and 10%.

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

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

Stock widget

Investing forum

CHEMED CORP Reports