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Chemed Reports Third-Quarter 2019 Results

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 third quarter ended September 30, 2019, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 8.2% to $481 million
  • GAAP Diluted Earnings-per-Share (EPS) of $3.56, an increase of 16.3%
  • Adjusted Diluted EPS of $3.46, an increase of 12.7%

VITAS segment operating results:

  • Net Patient Revenue of $322 million, an increase of 6.6%
  • Average Daily Census (ADC) of 19,086, an increase of 6.3%
  • Admissions of 17,131, an increase of 4.4%
  • Net Income, excluding certain discrete items, of $40.4 million, an increase of 10.9%
  • Adjusted EBITDA, excluding Medicare Cap, of $54.3 million, an increase of 6.7%

Roto-Rooter segment operating results:

  • Revenue of $159 million, an increase of 11.6%
  • Net Income, excluding certain discrete items, of $28.8 million, an increase of 16.6%
  • Adjusted EBITDA of $39.8 million, an increase of 17.0%
  • Adjusted EBITDA margin of 25.0%, an increase of 116-basis points

VITAS

VITAS net revenue was $322 million in the third quarter of 2019, which is an increase of 6.6%, when compared to the prior-year period. This revenue increase is comprised primarily of a geographically weighted average Medicare reimbursement rate increase of approximately 0.5%, a 6.3% increase in days-of-care and a reduction in the Medicare Cap billing limitation that increased revenue 0.2%. This growth was partially offset by acuity mix shift, fluctuations in net room and board and contractual adjustments, the combination of which negatively impacted revenue growth approximately 0.4%, when compared to the prior-year period.

In the third quarter of 2019, VITAS accrued $1.3 million in Medicare Cap billing limitations. This compares favorably to the prior-year Medicare Cap billing limitation of $2.0 million. At September 30, 2019, VITAS had 30 Medicare provider numbers, three of which have an estimated fiscal 2019 Medicare Cap billing limitation liability of approximately $9.6 million.

Of VITAS’ 30 Medicare provider numbers, 23 provider numbers have a Medicare Cap cushion of 10% or greater, one provider number has a cap cushion between 5% and 10%, three provider numbers have a cap cushion between 0% and 5%, and three provider numbers have a fiscal 2019 Medicare Cap billing limitation.

Average revenue per patient per day in the quarter was $188.02, which is 0.4% above the prior-year period. Reimbursement for routine home care and high acuity care averaged $164.39 and $755.38, respectively. During the quarter, high acuity days-of-care were 4.0% of total days of care, 7-basis points less than the prior-year quarter.

The third quarter of 2019 gross margin, excluding Medicare Cap, was 23.4%, which is a 9-basis point margin improvement when compared to the third quarter of 2018.

Selling, general and administrative expense was $22.0 million in the third quarter of 2019, which is an increase of 7.7% compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $54.3 million in the quarter, an increase of 6.7%. Adjusted EBITDA margin, excluding Medicare Cap, was 16.8% in the quarter, which is a 5-basis point margin improvement when compared to the prior-year period.

Roto-Rooter

Roto-Rooter generated quarterly revenue of $159 million for the third quarter of 2019, an increase of $16.5 million, or 11.6%, over the prior-year quarter. Revenue from the water restoration service segment totaled $25.7 million, an increase of 3.0%, when compared to the prior-year quarter. Approximately 90% of the water restoration revenue is generated from residential customers and the remaining 10% is generated from commercial accounts.

Commercial drain cleaning revenue increased 16.5%, commercial plumbing and excavation increased 24.9%, and commercial water restoration increased 3.1%. Overall, commercial revenue increased 19.3%.

Residential drain cleaning increased 9.8%, plumbing and excavation increased 7.0%, and residential water restoration increased 2.9%. Aggregate residential sales increased 6.5%.

Roto-Rooter’s gross margin in the quarter was 49.2%, a slight increase when compared to the third quarter of 2018. Adjusted EBITDA in the third quarter of 2019 totaled $39.8 million, an increase of 17.0%. The Adjusted EBITDA margin in the quarter was 25.0% which is a 116-basis point margin expansion over the prior year.

Chemed Consolidated

As of September 30, 2019, Chemed had total cash and cash equivalents of $9 million and debt of $130 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 September 30, 2019, the Company had approximately $282 million of undrawn borrowing capacity under this credit agreement.

The Company did not purchase any shares during the third quarter of 2019. As of September 30, 2019, there was approximately $125 million of remaining share repurchase authorization under this share repurchase program.

Chemed restarted its share repurchase program in 2007. Since that time Chemed has repurchased over 14 million shares, aggregating approximately $1.2 billion at an average share cost of $84.76. Including dividends over this period, Chemed has returned approximately $1.4 billion to shareholders.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Wednesday, October 30, 2019, 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 Conference ID is 5229315. 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 5229315. 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 19,000 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 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 STATEMENTS OF INCOME
(in thousands, except per share data)(unaudited)
 

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Service revenues and sales

$

480,613

$

444,151

$

1,416,231

$

1,325,140

Cost of services provided and goods sold

328,183

305,312

973,771

915,589

Selling, general and administrative expenses (aa)

76,836

67,177

222,421

204,474

Depreciation

10,147

9,657

29,744

28,642

Amortization

441

35

1,366

96

Other operating expenses

78

257

9,001

88

Total costs and expenses

415,685

382,438

1,236,303

1,148,889

Income from operations

64,928

61,713

179,928

176,251

Interest expense

(1,041

)

(1,082

)

(3,402

)

(3,813

)

Other income--net (bb)

3,036

2,300

5,488

4,356

Income before income taxes

66,923

62,931

182,014

176,794

Income taxes

(7,976

)

(11,682

)

(27,671

)

(25,578

)

Net income

$

58,947

$

51,249

$

154,343

$

151,216

 
 
Earnings Per Share
Net income

$

3.69

$

3.19

$

9.68

$

9.41

Average number of shares outstanding

15,970

16,074

15,952

16,070

 
Diluted Earnings Per Share
Net income

$

3.56

$

3.06

$

9.35

$

8.98

Average number of shares outstanding

16,555

16,772

16,514

16,830

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

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

 
SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation plans

$

72,273

$

63,754

$

212,775

$

196,271

Market value adjustments related to deferred compensation trusts

2,886

2,189

5,094

3,827

Long-term incentive compensation

1,677

1,234

4,552

4,376

Total SG&A expenses

$

76,836

$

67,177

$

222,421

$

204,474

 
(bb)Other income--net comprises (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

 
Market value adjustments related to deferred compensation trusts

$

2,886

$

2,189

$

5,094

$

3,827

Interest income

173

111

387

529

Other

(23

)

-

7

-

Total other income--net

$

3,036

$

2,300

$

5,488

$

4,356

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)(unaudited)
 

September 30,

2019

2018

Assets
Current assets
Cash and cash equivalents

$

9,066

$

67,459

Accounts receivable less allowances

114,480

108,999

Inventories

7,354

5,763

Prepaid income taxes

10,745

6,039

Prepaid expenses

26,150

17,610

Total current assets

167,795

205,870

Investments of deferred compensation plans held in trust

73,714

70,237

Properties and equipment, at cost less accumulated depreciation

172,932

154,434

Lease right of use asset

103,286

-

Identifiable intangible assets less accumulated amortization

129,276

56,649

Goodwill

576,600

483,281

Other assets

8,982

8,653

Total Assets

$

1,232,585

$

979,124

 
Liabilities
Current liabilities
Accounts payable

$

44,027

$

36,977

Accrued insurance

47,726

43,503

Accrued compensation

75,208

70,687

Accrued legal

7,283

1,423

Short-term lease liability

33,761

-

Other current liabilities

43,496

27,608

Total current liabilities

251,501

180,198

Deferred income taxes

15,512

15,293

Long-term debt

130,000

130,000

Deferred compensation liabilities

73,335

68,492

Long-term lease liability

82,012

-

Other liabilities

7,845

16,988

Total Liabilities.

560,205

410,971

 
Stockholders' Equity
Capital stock

35,738

35,211

Paid-in capital

841,837

755,263

Retained earnings

1,365,303

1,175,949

Treasury stock, at cost

(1,572,844

)

(1,400,577

)

Deferred compensation payable in Company stock

2,346

2,307

Total Stockholders' Equity

672,380

568,153

Total Liabilities and Stockholders' Equity

$

1,232,585

$

979,124

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

Nine Months Ended September 30,

2019

2018

Cash Flows from Operating Activities
Net income

$

154,343

$

151,216

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

Depreciation and amortization

31,110

28,738

Stock option expense

10,729

9,360

Benefit for deferred income taxes

(6,085

)

(1,344

)

Litigation settlement

6,000

-

Noncash long-term incentive compensation

4,184

4,176

Asset impairment loss

2,266

-

Noncash directors' compensation

767

766

Amortization of debt issuance costs

229

361

Amortization of restricted stock awards

-

446

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

10,558

4,637

Increase in inventories

(1,649

)

(429

)

Increase in prepaid expenses

(6,836

)

(1,518

)

Increase in accounts payable and other current liabilities

28,622

12,182

Change in current income taxes

(81

)

23,858

Net change in lease assets and liabilities

1,311

-

Increase in other assets

(8,145

)

(9,441

)

Increase in other liabilities

9,045

7,190

Other sources

1,277

410

Net cash provided by operating activities

237,645

230,608

Cash Flows from Investing Activities
Business combinations, net of cash acquired

(138,010

)

(12,875

)

Capital expenditures

(39,753

)

(36,554

)

Other sources

101

480

Net cash used by investing activities

(177,662

)

(48,949

)

Cash Flows from Financing Activities
Proceeds from revolving line of credit

400,700

428,150

Payments on revolving line of credit

(359,900

)

(324,350

)

Purchases of treasury stock

(71,926

)

(121,976

)

Capital stock surrendered to pay taxes on stock-based compensation

(26,108

)

(24,763

)

Proceeds from exercise of stock options

23,383

23,079

Dividends paid

(14,657

)

(13,850

)

Change in cash overdrafts payable

(7,535

)

(15,307

)

Payments on other long-term debt

-

(75,000

)

Debt issuance costs

-

(985

)

Other sources/(uses)

295

(319

)

Net cash used by financing activities

(55,748

)

(125,321

)

Increase in Cash and Cash Equivalents

4,235

56,338

Cash and cash equivalents at beginning of year

4,831

11,121

Cash and cash equivalents at end of year

$

9,066

$

67,459

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(in thousands)(unaudited)
 

Chemed

VITAS

Roto-Rooter

Corporate

Consolidated

2019

Service revenues and sales (a)

$

321,748

$

158,865

$

-

$

480,613

Cost of services provided and goods sold

247,551

80,632

-

328,183

Selling, general and administrative expenses (a)

21,965

41,758

13,113

76,836

Depreciation

5,105

5,003

39

10,147

Amortization

18

423

-

441

Other operating expense/(income)

97

(19

)

-

78

Total costs and expenses

274,736

127,797

13,152

415,685

Income/(loss) from operations

47,012

31,068

(13,152

)

64,928

Interest expense.

(48

)

(80

)

(913

)

(1,041

)

Intercompany interest income/(expense)

4,618

2,234

(6,852

)

-

Other income—net

121

31

2,884

3,036

Income/(loss) before income taxes

51,703

33,253

(18,033

)

66,923

Income taxes (a)

(11,930

)

(7,113

)

11,067

(7,976

)

Net income/(loss)

$

39,773

$

26,140

$

(6,966

)

$

58,947

 

2018

Service revenues and sales (b)

$

301,764

$

142,387

$

-

$

444,151

Cost of services provided and goods sold

233,006

72,306

-

305,312

Selling, general and administrative expenses (b)

20,394

36,112

10,671

67,177

Depreciation

4,905

4,712

40

9,657

Amortization

-

35

-

35

Other operating expense

100

157

-

257

Total costs and expenses

258,405

113,322

10,711

382,438

Income/(loss) from operations

43,359

29,065

(10,711

)

61,713

Interest expense

(49

)

(71

)

(962

)

(1,082

)

Intercompany interest income/(expense)

3,306

1,814

(5,120

)

-

Other income—net

89

22

2,189

2,300

Income/(loss) before income taxes

46,705

30,830

(14,604

)

62,931

Income taxes (b)

(10,784

)

(6,267

)

5,369

(11,682

)

Net income/(loss)

$

35,921

$

24,563

$

(9,235

)

$

51,249

The "Footnotes to Financial Statements" are integral parts of this financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(in thousands)(unaudited)
 

Chemed

VITAS

Roto-Rooter

Corporate

Consolidated

2019

Service revenues and sales (a)

$

941,279

$

474,952

$

-

$

1,416,231

Cost of services provided and goods sold

728,397

245,374

-

973,771

Selling, general and administrative expenses (a)

65,182

120,736

36,503

222,421

Depreciation

14,644

14,983

117

29,744

Amortization

53

1,313

-

1,366

Other operating expense (a)

6,521

214

2,266

9,001

Total costs and expenses

814,797

382,620

38,886

1,236,303

Income/(loss) from operations

126,482

92,332

(38,886

)

179,928

Interest expense

(150

)

(273

)

(2,979

)

(3,402

)

Intercompany interest income/(expense)

13,395

6,609

(20,004

)

-

Other income—net

309

86

5,093

5,488

Income/(loss) before income taxes

140,036

98,754

(56,776

)

182,014

Income taxes (a)

(33,636

)

(22,452

)

28,417

(27,671

)

Net income/(loss)

$

106,400

$

76,302

$

(28,359

)

$

154,343

 

2018

Service revenues and sales (b)

$

890,577

$

434,563

$

-

$

1,325,140

Cost of services provided and goods sold

693,335

222,254

-

915,589

Selling, general and administrative expenses (b)

61,606

108,120

34,748

204,474

Depreciation

14,753

13,782

107

28,642

Amortization

-

96

-

96

Other operating expense (b)

16

72

-

88

Total costs and expenses

769,710

344,324

34,855

1,148,889

Income/(loss) from operations

120,867

90,239

(34,855

)

176,251

Interest expense

(153

)

(255

)

(3,405

)

(3,813

)

Intercompany interest income/(expense)

9,524

5,231

(14,755

)

-

Other income—net

469

60

3,827

4,356

Income/(loss) before income taxes

130,707

95,275

(49,188

)

176,794

Income taxes (b)

(30,987

)

(22,476

)

27,885

(25,578

)

Net income/(loss)

$

99,720

$

72,799

$

(21,303

)

$

151,216

The "Footnotes to Financial Statements" are integral parts of this financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARIES OF EBITDA
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(in thousands)(unaudited)
 

Chemed

VITAS

Roto-Rooter

Corporate

Consolidated

2019

Net income/(loss)

$

39,773

$

26,140

$

(6,966

)

$

58,947

Add/(deduct):
Interest expense

48

80

913

1,041

Income taxes

11,930

7,113

(11,067

)

7,976

Depreciation

5,105

5,003

39

10,147

Amortization

18

423

-

441

EBITDA

56,874

38,759

(17,081

)

78,552

Add/(deduct):
Intercompany interest expense/(income)

(4,618

)

(2,234

)

6,852

-

Interest income

(139

)

(34

)

-

(173

)

Acquisition expense

-

3,281

-

3,281

Stock option expense

-

-

2,711

2,711

Long-term incentive compensation

-

-

1,677

1,677

Medicare cap sequestration adjustment

859

-

-

859

Adjusted EBITDA

$

52,976

$

39,772

$

(5,841

)

$

86,907

 

2018

Net income/(loss)

$

35,921

$

24,563

$

(9,235

)

$

51,249

Add/(deduct):
Interest expense

49

71

962

1,082

Income taxes

10,784

6,267

(5,369

)

11,682

Depreciation

4,905

4,712

40

9,657

Amortization

-

35

-

35

EBITDA

51,659

35,648

(13,602

)

73,705

Add/(deduct):
Intercompany interest expense/(income)

(3,306

)

(1,814

)

5,120

-

Interest income..

(88

)

(23

)

-

(111

)

Medicare cap sequestration adjustment..

503

-

-

503

Acquisition expense

177

177

-

354

Stock option expense

-

-

2,055

2,055

Long-term incentive compensation

-

-

1,234

1,234

Adjusted EBITDA

$

48,945

$

33,988

$

(5,193

)

$

77,740

The "Footnotes to Financial Statements" are integral parts of this financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARIES OF EBITDA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(in thousands)(unaudited)
 

Chemed

VITAS

Roto-Rooter

Corporate

Consolidated

2019

Net income/(loss)

$

106,400

$

76,302

$

(28,359

)

$

154,343

Add/(deduct):
Interest expense

150

273

2,979

3,402

Income taxes

33,636

22,452

(28,417

)

27,671

Depreciation

14,644

14,983

117

29,744

Amortization

53

1,313

-

1,366

EBITDA

154,883

115,323

(53,680

)

216,526

Add/(deduct):
Intercompany interest expense/(income)

(13,395

)

(6,609

)

20,004

-

Interest income

(296

)

(91

)

-

(387

)

Stock option expense

-

-

10,729

10,729

Litigation settlement

6,000

-

-

6,000

Long-term incentive compensation

-

-

4,552

4,552

Acquisition Expense

-

3,377

120

3,497

Medicare cap sequestration adjustment

3,063

-

-

3,063

Impairment loss on transportation equipment

-

-

2,266

2,266

Non cash ASC 842 expenses/(benefit)

656

55

(163

)

548

Adjusted EBITDA

$

150,911

$

112,055

$

(16,172

)

$

246,794

 

2018

Net income/(loss)

$

99,720

$

72,799

$

(21,303

)

$

151,216

Add/(deduct):
Interest expense

153

255

3,405

3,813

Income taxes..

30,987

22,476

(27,885

)

25,578

Depreciation

14,753

13,782

107

28,642

Amortization

-

96

-

96

EBITDA

145,613

109,408

(45,676

)

209,345

Add/(deduct):
Intercompany interest expense/(income)

(9,524

)

(5,231

)

14,755

-

Interest income

(468

)

(60

)

-

(528

)

Stock option expense

-

-

9,360

9,360

Long-term incentive compensation

-

-

4,376

4,376

Medicare cap sequestration adjustment

1,040

-

-

1,040

Amortization of stock awards

107

100

239

446

Acquisition expense

177

177

-

354

Litigation settlement

(204

)

-

-

(204

)

Adjusted EBITDA

$

136,741

$

104,394

$

(16,946

)

$

224,189

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,

2019

2018

2019

2018

Net income as reported

$

58,947

$

51,249

$

154,343

$

151,216

 
Add/(deduct) pre-tax cost of:
 
Stock option expense

2,711

2,055

10,729

9,360

Litigation settlement

-

-

6,000

(204

)

Long-term incentive compensation

1,677

1,234

4,552

4,376

Acquisition expense

3,281

354

3,497

354

Medicare cap sequestration adjustments

859

503

3,063

1,040

Impairment loss on transportation equipment

-

-

2,266

-

Amortization of acquired and cancelled franchise agreements

331

-

1,103

-

Non cash ASC 842 expenses

-

-

548

-

Add/(deduct) tax impacts:
Tax impact of the above pre-tax adjustments (1)

(1,801

)

(821

)

(6,761

)

(3,059

)

Excess tax benefits on stock compensation

(8,792

)

(3,118

)

(18,737

)

(18,618

)

Adjusted net income

$

57,213

$

51,456

$

160,603

$

144,465

 
 
Diluted Earnings Per Share As Reported
Net income

$

3.56

$

3.06

$

9.35

$

8.98

Average number of shares outstanding

16,555

16,772

16,514

16,830

 
 
Adjusted Diluted Earnings Per Share
Adjusted net income

$

3.46

$

3.07

$

9.73

$

8.58

Average number of shares outstanding

16,555

16,772

16,514

16,830

(1)

The tax impact of pre-tax adjustments was calculated using the effective tax rate of the operating unit for which each adjustment is associated.

 
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 September 30,

Nine Months Ended September 30,

OPERATING STATISTICS

2019

2018

2019

2018

Net revenue ($000) (c)
Homecare

$

274,746

$

257,134

$

800,059

$

748,546

Inpatient

23,599

19,617

69,063

61,803

Continuous care

29,446

30,385

92,476

91,664

Other

2,356

2,104

6,598

5,844

Subtotal

$

330,147

$

309,240

$

968,196

$

907,857

Room and board, net

(2,846

)

(2,569

)

(8,098

)

(7,863

)

Contractual allowances

(4,236

)

(2,957

)

(10,904

)

(8,749

)

Medicare cap allowance

(1,317

)

(1,950

)

(7,915

)

(668

)

Net Revenue

$

321,748

$

301,764

$

941,279

$

890,577

Net revenue as a percent of total before Medicare cap allowance
Homecare

83.2

%

83.2

%

82.6

%

82.5

%

Inpatient

7.1

6.3

7.1

6.8

Continuous care

8.9

9.8

9.6

10.1

Other

0.8

0.7

0.7

0.6

Subtotal

100.0

100.0

100.0

100.0

Room and board, net

(0.9

)

(0.8

)

(0.8

)

(0.9

)

Contractual allowances

(1.3

)

(1.0

)

(1.2

)

(1.0

)

Medicare cap allowance

(0.4

)

(0.6

)

(0.8

)

(0.1

)

Net Revenue

97.4

%

97.6

%

97.2

%

98.0

%

Average daily census ("ADC") (days)
Homecare

14,799

13,791

14,510

13,515

Nursing home

3,483

3,402

3,374

3,298

Routine homecare

18,282

17,193

17,884

16,813

Inpatient

373

313

363

328

Continuous care

431

451

460

466

Total

19,086

17,957

18,707

17,607

 
Total Admissions

17,131

16,403

52,380

51,540

Total Discharges

16,915

16,171

51,274

50,234

Average length of stay (days)

92.6

90.0

91.6

89.0

Median length of stay (days)

17.0

18.0

16.0

16.0

ADC by major diagnosis
Cerebro

35.7

%

36.2

%

35.9

%

36.5

%

Neurological

20.7

18.8

20.4

18.7

Cancer

12.9

13.8

12.9

13.8

Cardio

16.6

16.4

16.7

16.4

Respiratory

8.1

8.1

8.1

8.1

Other

6.0

6.7

6.0

6.5

Total

100.0

%

100.0

%

100.0

%

100.0

%

Admissions by major diagnosis
Cerebro

21.1

%

21.1

%

20.8

%

21.9

%

Neurological

12.7

11.6

12.6

11.3

Cancer

30.5

31.5

29.2

30.0

Cardio

14.8

14.7

15.7

15.3

Respiratory

10.2

10.3

11.3

11.0

Other

10.7

10.8

10.4

10.5

Total

100.0

%

100.0

%

100.0

%

100.0

%

 
Estimated uncollectible accounts as a percent of revenues

1.3

%

1.0

%

1.1

%

1.0

%

Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments

32.7

36.0

n.a.

n.a.

Days of revenue outstanding- including unapplied Medicare payments

21.0

22.8

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, 2019 AND 2018
(unaudited)
 

(a)

Included in the results of operations for 2019 are the following significant credits/(charges) which may not be indicative of ongoing operations
(in thousands):

Three Months Ended September 30, 2019

VITAS

Roto-Rooter

Corporate

Consolidated

Service revenues and sales:
Medicare cap sequestration adjustment

$

(859

)

$

-

$

-

$

(859

)

Selling, general and administrative expenses:
Acquisition expense

-

(3,281

)

-

(3,281

)

Stock option expense

-

-

(2,711

)

(2,711

)

Long-term incentive compensation

-

-

(1,677

)

(1,677

)

Amortization of acquired and cancelled franchise agreements

-

(331

)

-

(331

)

Pretax impact on earnings

(859

)

(3,612

)

(4,388

)

(8,859

)

Excess tax benefits on stock compensation

-

-

8,792

8,792

Income tax benefit on the above

220

957

624

1,801

After-tax impact on earnings

$

(639

)

$

(2,655

)

$

5,028

$

1,734

 

Nine Months Ended September 30, 2019

VITAS

Roto-Rooter

Corporate

Consolidated

Service revenues and sales:
Medicare cap sequestration adjustment

$

(3,063

)

$

-

$

-

$

(3,063

)

Selling, general and administrative expenses:
Stock option expense

-

-

(10,729

)

(10,729

)

Long-term incentive compensation

-

-

(4,552

)

(4,552

)

Acquisition expense

-

(3,377

)

(120

)

(3,497

)

Amortization of acquired and cancelled franchise agreements

-

(1,103

)

-

(1,103

)

Non cash ASC 842 (expenses)/benefit

(656

)

(55

)

163

(548

)

Other operating expenses:
Litigation settlement

(6,000

)

-

-

(6,000

)

Impairment loss on transportation equipment

-

-

(2,266

)

(2,266

)

Pretax impact on earnings

(9,719

)

(4,535

)

(17,504

)

(31,758

)

Excess tax benefits on stock compensation

-

-

18,737

18,737

Income tax benefit on the above

2,474

1,202

3,085

6,761

After-tax impact on earnings

$

(7,245

)

$

(3,333

)

$

4,318

$

(6,260

)

 

(b)

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 September 30, 2018

VITAS

Roto-Rooter

Corporate

Consolidated

Service revenues and sales:
Medicare cap sequestration adjustment

$

(503

)

$

-

$

-

$

(503

)

Selling, general and administrative expenses:
Stock option expense

-

-

(2,055

)

(2,055

)

Long-term incentive compensation

-

-

(1,234

)

(1,234

)

Acquisition expense

(177

)

(177

)

-

(354

)

Pretax impact on earnings

(680

)

(177

)

(3,289

)

(4,146

)

Excess tax benefits on stock compensation

-

-

3,118

3,118

Income tax benefit on the above

172

47

602

821

After-tax impact on earnings

$

(508

)

$

(130

)

$

431

$

(207

)

 

Nine Months Ended September 30, 2018

VITAS

Roto-Rooter

Corporate

Consolidated

Service revenues and sales:
Medicare cap sequestration adjustment

$

(1,040

)

$

-

$

-

$

(1,040

)

Selling, general and administrative expenses:
Stock option expense

-

-

(9,360

)

(9,360

)

Long-term incentive compensation

-

-

(4,376

)

(4,376

)

Acquisition expense

(177

)

(177

)

-

(354

)

Other operating expenses:
Litigation settlement

204

-

-

204

Pretax impact on earnings

(1,013

)

(177

)

(13,736

)

(14,926

)

Excess tax benefits on stock compensation

-

-

18,618

18,618

Income tax benefit on the above

256

47

2,756

3,059

After-tax impact on earnings

$

(757

)

$

(130

)

$

7,638

$

6,751

(c)VITAS has 12 large (greater than 450 ADC), 19 medium (greater than 200 but less than 450 ADC) and 17 small (less than 200 ADC) hospice programs. Of VITAS' 30 Medicare provider numbers, 24 provider numbers have a Medicare cap cushion of 5% or greater during the current cap year, three provider numbers have a cap cushion between 0% and 5%, and three provider numbers have a Medicare cap liability.

Contacts:

David P. Williams
(513) 762-6901

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