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 first quarter ended March 31, 2020, versus the comparable prior-year period, as follows:
Consolidated operating results:
- Revenue increased 11.6% to $516 million
- GAAP Diluted Earnings-per-Share (EPS) of $3.38, an increase of 25.2%
- Adjusted Diluted EPS of $3.68, an increase of 26.0%
VITAS segment operating results:
- Net Patient Revenue of $338 million, an increase of 10.1%
- Average Daily Census (ADC) of 19,215, an increase of 4.7%
- Admissions of 18,603, an increase of 4.8%
- Net Income, excluding certain discrete items, of $42.5 million, an increase of 22.7%
- Adjusted EBITDA, excluding Medicare Cap, of $60.2 million, an increase of 21.2%
- Adjusted EBITDA margin, excluding Medicare Cap, of 17.7%, an increase of 167-basis points
Roto-Rooter segment operating results:
- Revenue of $178 million, an increase of 14.6%
- Net Income, excluding certain discrete items, of $26.7 million, an increase of 14.3%
- Adjusted EBITDA of $40.0 million, an increase of 19.5%
- Adjusted EBITDA margin of 22.5%, an increase of 92-basis points
VITAS
VITAS net revenue was $338 million in the first quarter of 2020, which is an increase of 10.1%, when compared to the prior-year period. This revenue increase is comprised primarily of a 5.9% increase in days-of-care, a geographically weighted average Medicare reimbursement rate increase of approximately 5.0%, and acuity mix shift which then reduced the Medicare rate increase approximately 90-basis points. The combination of a decline in Medicare Cap, increase in Medicaid net room and board pass through and other contra revenue activity had minimal impact on overall revenue growth in the quarter.
In the first quarter of 2020, VITAS accrued $2.5 million in Medicare Cap billing limitations. This compares to the prior-year Medicare Cap billing limitation of $3.4 million.
VITAS currently has 30 Medicare provider numbers. During the first six months of the fiscal 2020 Medicare Cap year, 23 of these provider numbers have a Medicare Cap cushion of 10% or greater, two provider numbers have a cap cushion between 5% and 10%, two provider numbers have a cap cushion between 0% and 5%, and three provider numbers have an estimated 2020 Medicare Cap billing limitation.
Average revenue per patient per day in the first quarter of 2020 was $198.99, which, including acuity mix shift, is 4.1% above the prior-year period. Reimbursement for routine home care and high acuity care averaged $164.14 and $990.72, respectively. During the quarter, high acuity days-of-care were 4.2% of total days of care, 21-basis points less than the prior-year quarter. This 21-basis point mix shift in high acuity days-of-care reduced the increase in average revenue per patient per day from 5.0% to 4.1% in the quarter.
The first quarter 2020 gross margin, excluding Medicare Cap, was 23.8%, which is a 108-basis point margin improvement when compared to the first quarter of 2019.
Selling, general and administrative expense was $22.3 million in the first quarter of 2020, which is an increase of 3.4% compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $60.2 million in the quarter, an increase of 21.2%. Adjusted EBITDA margin, excluding Medicare Cap, was 17.7% in the quarter, which is a 167-basis point improvement when compared to the prior-year period.
Roto-Rooter
Roto-Rooter generated quarterly revenue of $178 million for the first quarter of 2020, an increase of $22.6 million, or 14.6%, over the prior-year quarter. On a unit for unit basis, which excludes the Oakland and HSW acquisitions completed in July and September 2019, respectively, Roto-Rooter generated quarterly revenue of $158 million for the first quarter of 2020, an increase of 1.6%, over the prior-year quarter.
Including acquisitions, total commercial revenue increased 20.1%. This aggregate commercial revenue growth consisted of drain cleaning revenue expanding 25.0%, commercial plumbing and excavation increasing 20.1%, and commercial water restoration declining 4.4%.
Excluding acquisitions, commercial drain cleaning revenue were equal to the prior year, commercial plumbing and excavation declined 4.3%, and commercial water restoration declined 15.5%. Commercial water restoration represents approximately 10% of total water restoration service revenue. Overall, commercial revenue excluding acquisitions decreased 3.5%.
Including acquisitions, total residential revenue increased 11.7%. This aggregate residential revenue growth consisted of residential drain cleaning increasing 18.5%, plumbing and excavation expanding 14.4%, and residential water restoration increasing 1.0%.
Excluding acquisitions, residential drain cleaning increased 4.1%, plumbing and excavation increased 4.4%, and residential water restoration decreased 1.9%. Overall, residential sales excluding acquisitions increased 2.4%.
Roto-Rooter’s gross margin in the quarter was 48.1%, a 105-basis point increase when compared to the first quarter of 2019. Adjusted EBITDA in the first quarter of 2020 totaled $40.0 million, an increase of 19.5%. The Adjusted EBITDA margin in the quarter was 22.5% which is a 92-basis point increase when compared to the prior year.
Chemed Consolidated
As of March 31, 2020, Chemed had total cash and cash equivalents of $29.0 million and long-term debt of $160 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 March 31, 2020, the Company had approximately $252 million of undrawn borrowing capacity under this credit agreement.
During the quarter, the Company repurchased 225,000 shares of Chemed stock for $100.2 million which equates to a cost per share of $445.49. On March 13, 2020, Chemed’s Board of Directors authorized an additional $250 million for stock repurchase under Chemed’s existing share repurchase program. As of March 31, 2020, there was approximately $254 million of remaining share repurchase authorization under this plan.
Chemed restarted its share repurchase program in 2007. Since that time Chemed has repurchased approximately 14.4 million shares, aggregating approximately $1.3 billion at an average share cost of $91.56. Including dividends over this period, Chemed has returned approximately $1.5 billion to shareholders.
Guidance for 2020
Management anticipates providing updated 2020 earnings guidance in July 2020 as part of the June 30, 2020, earnings press release.
Conference Call
Chemed will host a conference call and webcast at 10 a.m., ET, on Wednesday, April 29, 2020, 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 2398574. 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 2398574. 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 March 31, | ||||||||
2020 | 2019 | |||||||
| Service revenues and sales | $ | 515,798 | $ | 462,034 | ||||
| Cost of services provided and goods sold | 351,745 | 321,951 | ||||||
| Selling, general and administrative expenses (aa) | 70,583 | 74,029 | ||||||
| Depreciation | 11,388 | 9,710 | ||||||
| Amortization | 2,477 | 519 | ||||||
| Other operating expenses | 242 | 6,353 | ||||||
| Total costs and expenses | 436,435 | 412,562 | ||||||
| Income from operations | 79,363 | 49,472 | ||||||
| Interest expense | (975 | ) | (1,124 | ) | ||||
| Other (expense)/income--net (bb) | (9,466 | ) | 2,439 | |||||
| Income before income taxes | 68,922 | 50,787 | ||||||
| Income taxes | (13,031 | ) | (6,120 | ) | ||||
| Net income | $ | 55,891 | $ | 44,667 | ||||
| Earnings Per Share | ||||||||
| Net income | $ | 3.50 | $ | 2.80 | ||||
| Average number of shares outstanding | 15,991 | 15,954 | ||||||
| Diluted Earnings Per Share | ||||||||
| Net income | $ | 3.38 | $ | 2.70 | ||||
| Average number of shares outstanding | 16,516 | 16,525 | ||||||
| (aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands): | ||||||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
| SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation plans | $ | 78,334 | $ | 70,203 | ||||
| Market value adjustments related to deferred compensation trusts | (9,572 | ) | 2,338 | |||||
| Long-term incentive compensation | 1,821 | 1,488 | ||||||
| Total SG&A expenses | $ | 70,583 | $ | 74,029 | ||||
| (bb) Other (expense)/income--net comprises (in thousands): | ||||||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
| Market value adjustments related to deferred compensation trusts | $ | (9,572 | ) | $ | 2,338 | |||
| Interest income | 106 | 101 | ||||||
| Total other (expense)/income--net | $ | (9,466 | ) | $ | 2,439 | |||
| CHEMED CORPORATION AND SUBSIDIARY COMPANIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands, except per share data)(unaudited) | ||||||||
March 31, | ||||||||
2020 | 2019 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 28,951 | $ | 8,768 | ||||
| Accounts receivable less allowances | 134,695 | 119,575 | ||||||
| Inventories | 7,313 | 6,315 | ||||||
| Prepaid income taxes | 5,917 | 5,349 | ||||||
| Prepaid expenses | 21,939 | 19,148 | ||||||
| Total current assets | 198,815 | 159,155 | ||||||
| Investments of deferred compensation plans held in trust | 72,296 | 70,632 | ||||||
| Properties and equipment, at cost less accumulated depreciation | 183,729 | 164,629 | ||||||
| Lease right of use asset | 112,302 | 87,811 | ||||||
| Identifiable intangible assets less accumulated amortization | 124,219 | 67,868 | ||||||
| Goodwill | 577,236 | 510,598 | ||||||
| Other assets | 8,962 | 9,138 | ||||||
| Total Assets | $ | 1,277,559 | $ | 1,069,831 | ||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 37,838 | $ | 39,737 | ||||
| Income taxes | 6,133 | 3,922 | ||||||
| Accrued insurance | 56,480 | 48,477 | ||||||
| Accrued compensation | 63,622 | 52,526 | ||||||
| Accrued legal | 7,114 | 8,163 | ||||||
| Short-term lease liability | 36,252 | 30,699 | ||||||
| Other current liabilities | 39,298 | 33,576 | ||||||
| Total current liabilities | 246,737 | 217,100 | ||||||
| Deferred income taxes | 20,681 | 18,108 | ||||||
| Long-term debt | 160,000 | 100,000 | ||||||
| Deferred compensation liabilities | 70,363 | 70,934 | ||||||
| Long-term lease liability | 88,278 | 67,960 | ||||||
| Other liabilities | 7,899 | 7,719 | ||||||
| Total Liabilities | 593,958 | 481,821 | ||||||
| Stockholders' Equity | ||||||||
| Capital stock | 35,912 | 35,521 | ||||||
| Paid-in capital | 878,550 | 803,701 | ||||||
| Retained earnings | 1,476,151 | 1,265,485 | ||||||
| Treasury stock, at cost | (1,709,390 | ) | (1,519,077 | ) | ||||
| Deferred compensation payable in Company stock | 2,378 | 2,380 | ||||||
| Total Stockholders' Equity | 683,601 | 588,010 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 1,277,559 | $ | 1,069,831 | ||||
| CHEMED CORPORATION AND SUBSIDIARY COMPANIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands)(unaudited) | ||||||||
For the Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net income | $ | 55,891 | $ | 44,667 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 13,865 | 10,229 | ||||||
| Stock option expense | 5,045 | 4,089 | ||||||
| Provision/(benefit) for deferred income taxes | 2,290 | (3,489 | ) | |||||
| Noncash long-term incentive compensation | 1,598 | 1,119 | ||||||
| Provision for bad debts | 594 | - | ||||||
| Amortization of debt issuance costs | 76 | 76 | ||||||
| Litigation settlement | - | 6,000 | ||||||
| Changes in operating assets and liabilities, excluding amounts acquired in business combinations: | ||||||||
| Decrease/(increase) in accounts receivable | 6,269 | (81 | ) | |||||
| Decrease/(increase) in inventories | 149 | (610 | ) | |||||
| Decrease in prepaid expenses | 1,211 | 6 | ||||||
| (Decrease)/increase in accounts payable and other current liabilities | (7,037 | ) | 348 | |||||
| Change in current income taxes | 10,159 | 9,219 | ||||||
| Net change in lease assets and liabilities | (153 | ) | (328 | ) | ||||
| Decrease/(increase) in other assets | 5,048 | (5,006 | ) | |||||
| (Decrease)/increase in other liabilities | (6,067 | ) | 6,459 | |||||
| Other sources | 388 | 887 | ||||||
| Net cash provided by operating activities | 89,326 | 73,585 | ||||||
| Cash Flows from Investing Activities | ||||||||
| Capital expenditures | (19,897 | ) | (13,866 | ) | ||||
| Business combinations | (1,452 | ) | - | |||||
| Other uses | (144 | ) | (68 | ) | ||||
| Net cash used by investing activities | (21,493 | ) | (13,934 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from revolving line of credit | 174,100 | 125,100 | ||||||
| Payments on revolving line of credit | (104,100 | ) | (114,300 | ) | ||||
| Purchases of treasury stock | (100,235 | ) | (49,250 | ) | ||||
| Change in cash overdrafts payable | (9,849 | ) | (13,303 | ) | ||||
| Proceeds from exercise of stock options | 9,241 | 11,827 | ||||||
| Capital stock surrendered to pay taxes on stock-based compensation | (7,951 | ) | (11,170 | ) | ||||
| Dividends paid | (5,130 | ) | (4,799 | ) | ||||
| Other (uses)/sources | (1,116 | ) | 181 | |||||
| Net cash used by financing activities | (45,040 | ) | (55,714 | ) | ||||
| Increase in Cash and Cash Equivalents | 22,793 | 3,937 | ||||||
| Cash and cash equivalents at beginning of year | 6,158 | 4,831 | ||||||
| Cash and cash equivalents at end of year | $ | 28,951 | $ | 8,768 | ||||
| CHEMED CORPORATION AND SUBSIDIARY COMPANIES | ||||||||||||||||
| CONSOLIDATING STATEMENTS OF INCOME | ||||||||||||||||
| FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 | ||||||||||||||||
| (in thousands)(unaudited) | ||||||||||||||||
| Chemed | ||||||||||||||||
| VITAS | Roto-Rooter | Corporate | Consolidated | |||||||||||||
| 2020 (a) | ||||||||||||||||
| Service revenues and sales | $ | 337,916 | $ | 177,882 | $ | - | $ | 515,798 | ||||||||
| Cost of services provided and goods sold | 259,429 | 92,316 | - | 351,745 | ||||||||||||
| Selling, general and administrative expenses | 22,269 | 46,282 | 2,032 | 70,583 | ||||||||||||
| Depreciation | 5,474 | 5,878 | 36 | 11,388 | ||||||||||||
| Amortization | 18 | 2,459 | - | 2,477 | ||||||||||||
| Other operating expense | 114 | 128 | - | 242 | ||||||||||||
| Total costs and expenses | 287,304 | 147,063 | 2,068 | 436,435 | ||||||||||||
| Income/(loss) from operations | 50,612 | 30,819 | (2,068 | ) | 79,363 | |||||||||||
| Interest expense | (45 | ) | (102 | ) | (828 | ) | (975 | ) | ||||||||
| Intercompany interest income/(expense) | 4,386 | 1,349 | (5,735 | ) | - | |||||||||||
| Other (expense)/income—net | 65 | 40 | (9,571 | ) | (9,466 | ) | ||||||||||
| Income/(loss) before income taxes | 55,018 | 32,106 | (18,202 | ) | 68,922 | |||||||||||
| Income taxes | (13,739 | ) | (7,784 | ) | 8,492 | (13,031 | ) | |||||||||
| Net income/(loss) | $ | 41,279 | $ | 24,322 | $ | (9,710 | ) | $ | 55,891 | |||||||
| 2019 (b) | ||||||||||||||||
| Service revenues and sales | $ | 306,781 | $ | 155,253 | $ | - | $ | 462,034 | ||||||||
| Cost of services provided and goods sold | 239,743 | 82,208 | - | 321,951 | ||||||||||||
| Selling, general and administrative expenses | 21,536 | 39,601 | 12,892 | 74,029 | ||||||||||||
| Depreciation | 4,708 | 4,963 | 39 | 9,710 | ||||||||||||
| Amortization | 18 | 501 | - | 519 | ||||||||||||
| Other operating expense | 6,354 | (1 | ) | - | 6,353 | |||||||||||
| Total costs and expenses | 272,359 | 127,272 | 12,931 | 412,562 | ||||||||||||
| Income/(loss) from operations | 34,422 | 27,981 | (12,931 | ) | 49,472 | |||||||||||
| Interest expense | (47 | ) | (95 | ) | (982 | ) | (1,124 | ) | ||||||||
| Intercompany interest income/(expense) | 4,394 | 2,195 | (6,589 | ) | - | |||||||||||
| Other income—net | 88 | 14 | 2,337 | 2,439 | ||||||||||||
| Income/(loss) before income taxes | 38,857 | 30,095 | (18,165 | ) | 50,787 | |||||||||||
| Income taxes | (9,569 | ) | (7,109 | ) | 10,558 | (6,120 | ) | |||||||||
| Net income/(loss) | $ | 29,288 | $ | 22,986 | $ | (7,607 | ) | $ | 44,667 | |||||||
| 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 MARCH 31, 2020 AND 2019 | ||||||||||||||||
| (in thousands)(unaudited) | ||||||||||||||||
| Chemed | ||||||||||||||||
| VITAS | Roto-Rooter | Corporate | Consolidated | |||||||||||||
2020 | ||||||||||||||||
| Net income/(loss) | $ | 41,279 | $ | 24,322 | $ | (9,710 | ) | $ | 55,891 | |||||||
| Add/(deduct): | ||||||||||||||||
| Interest expense | 45 | 102 | 828 | 975 | ||||||||||||
| Income taxes | 13,739 | 7,784 | (8,492 | ) | 13,031 | |||||||||||
| Depreciation | 5,474 | 5,878 | 36 | 11,388 | ||||||||||||
| Amortization | 18 | 2,459 | - | 2,477 | ||||||||||||
| EBITDA | 60,555 | 40,545 | (17,338 | ) | 83,762 | |||||||||||
| Add/(deduct): | ||||||||||||||||
| Intercompany interest expense/(income) | (4,386 | ) | (1,349 | ) | 5,735 | - | ||||||||||
| Interest income | (68 | ) | (40 | ) | - | (108 | ) | |||||||||
| Stock option expense | - | - | 5,045 | 5,045 | ||||||||||||
| Direct costs related to COVID-19 | 973 | 861 | - | 1,834 | ||||||||||||
| Long-term incentive compensation | - | - | 1,821 | 1,821 | ||||||||||||
| Medicare cap sequestration adjustment | 675 | - | - | 675 | ||||||||||||
| Adjusted EBITDA | $ | 57,749 | $ | 40,017 | $ | (4,737 | ) | $ | 93,029 | |||||||
2019 | ||||||||||||||||
| Net income/(loss) | $ | 29,288 | $ | 22,986 | $ | (7,607 | ) | $ | 44,667 | |||||||
| Add/(deduct): | ||||||||||||||||
| Interest expense | 47 | 95 | 982 | 1,124 | ||||||||||||
| Income taxes | 9,569 | 7,109 | (10,558 | ) | 6,120 | |||||||||||
| Depreciation | 4,708 | 4,963 | 39 | 9,710 | ||||||||||||
| Amortization | 18 | 501 | - | 519 | ||||||||||||
| EBITDA | 43,630 | 35,654 | (17,144 | ) | 62,140 | |||||||||||
| Add/(deduct): | ||||||||||||||||
| Intercompany interest expense/(income) | (4,394 | ) | (2,195 | ) | 6,589 | - | ||||||||||
| Interest income | (88 | ) | (14 | ) | - | (102 | ) | |||||||||
| Litigation settlement | 6,000 | - | - | 6,000 | ||||||||||||
| Non cash ASC 842 expenses/(benefit) | 656 | 55 | (163 | ) | 548 | |||||||||||
| Medicare cap sequestration adjustment | 515 | - | - | 515 | ||||||||||||
| Acquisition expense | - | - | 120 | 120 | ||||||||||||
| Stock option expense | - | - | 4,089 | 4,089 | ||||||||||||
| Long-term incentive compensation | - | - | 1,488 | 1,488 | ||||||||||||
| Adjusted EBITDA | $ | 46,319 | $ | 33,500 | $ | (5,021 | ) | $ | 74,798 | |||||||
| 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 March 31, | ||||||||
2020 | 2019 | |||||||
| Net income as reported | $ | 55,891 | $ | 44,667 | ||||
| Add/(deduct) pre-tax cost of: | ||||||||
| Stock option expense | 5,045 | 4,089 | ||||||
| Amortization of reacquired franchise agreements | 2,352 | 441 | ||||||
| Direct costs related to COVID-19 | 1,834 | - | ||||||
| Long-term incentive compensation | 1,821 | 1,488 | ||||||
| Medicare cap sequestration adjustments | 675 | 515 | ||||||
| Litigation settlement | - | 6,000 | ||||||
| Acquisition expense | - | 120 | ||||||
| Non cash ASC 842 expenses | - | 548 | ||||||
| Add/(deduct) tax impacts: | ||||||||
| Tax impact of the above pre-tax adjustments (1) | (2,350 | ) | (2,961 | ) | ||||
| Excess tax benefits on stock compensation | (4,553 | ) | (6,732 | ) | ||||
| Adjusted net income | $ | 60,715 | $ | 48,175 | ||||
| Diluted Earnings Per Share As Reported | ||||||||
| Net income | $ | 3.38 | $ | 2.70 | ||||
| Average number of shares outstanding | 16,516 | 16,525 | ||||||
| Adjusted Diluted Earnings Per Share | ||||||||
| Adjusted net income | $ | 3.68 | $ | 2.92 | ||||
| Average number of shares outstanding | 16,516 | 16,525 | ||||||
| (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 March 31, | ||||||||
| OPERATING STATISTICS | 2020 | 2019 | ||||||
| Net revenue ($000) (c) | ||||||||
| Homecare | $ | 271,762 | $ | 258,847 | ||||
| Inpatient | 32,482 | 22,570 | ||||||
| Continuous care | 40,555 | 32,244 | ||||||
| Other | 3,147 | 2,010 | ||||||
| Subtotal | $ | 347,946 | $ | 315,671 | ||||
| Room and board, net | (3,381 | ) | (2,542 | ) | ||||
| Contractual allowances | (4,149 | ) | (2,948 | ) | ||||
| Medicare cap allowance | (2,500 | ) | (3,400 | ) | ||||
| Net Revenue | $ | 337,916 | $ | 306,781 | ||||
| Net revenue as a percent of total before Medicare cap allowance | ||||||||
| Homecare | 78.1 | % | 82.0 | % | ||||
| Inpatient | 9.3 | 7.1 | ||||||
| Continuous care | 11.7 | 10.2 | ||||||
| Other | 0.9 | 0.7 | ||||||
| Subtotal | 100.0 | 100.0 | ||||||
| Room and board, net | (1.0 | ) | (0.9 | ) | ||||
| Contractual allowances | (1.2 | ) | (1.0 | ) | ||||
| Medicare cap allowance | (0.7 | ) | (0.9 | ) | ||||
| Net Revenue | 97.1 | % | 97.2 | % | ||||
| Days of care | ||||||||
| Homecare | 1,364,746 | 1,281,899 | ||||||
| Nursing home | 303,374 | 289,769 | ||||||
| Respite | 6,692 | 6,301 | ||||||
| Subtotal routine homecare and respite | 1,674,812 | 1,577,969 | ||||||
| Inpatient | 32,348 | 29,150 | ||||||
| Continuous care | 41,373 | 43,923 | ||||||
| Total | 1,748,533 | 1,651,042 | ||||||
| Number of days in relevant time period | 91 | 90 | ||||||
| Average daily census ("ADC") (days) | ||||||||
| Homecare | 14,997 | 14,243 | ||||||
| Nursing home | 3,334 | 3,220 | ||||||
| Respite | 74 | 70 | ||||||
| Subtotal routine homecare and respite | 18,405 | 17,533 | ||||||
| Inpatient | 355 | 324 | ||||||
| Continuous care | 455 | 488 | ||||||
| Total | 19,215 | 18,345 | ||||||
| Total Admissions | 18,603 | 17,758 | ||||||
| Total Discharges | 18,196 | 17,339 | ||||||
| Average length of stay (days) | 90.7 | 91.3 | ||||||
| Median length of stay (days) | 14.0 | 15.0 | ||||||
| ADC by major diagnosis | ||||||||
| Cerebro | 35.9 | % | 35.6 | % | ||||
| Neurological | 21.4 | 19.9 | ||||||
| Cancer | 12.7 | 13.1 | ||||||
| Cardio | 15.9 | 16.9 | ||||||
| Respiratory | 8.3 | 8.2 | ||||||
| Other | 5.8 | 6.3 | ||||||
| Total | 100.0 | % | 100.0 | % | ||||
| Admissions by major diagnosis | ||||||||
| Cerebro | 21.1 | % | 20.7 | % | ||||
| Neurological | 12.5 | 12.8 | ||||||
| Cancer | 28.3 | 28.0 | ||||||
| Cardio | 15.1 | 16.3 | ||||||
| Respiratory | 12.2 | 12.0 | ||||||
| Other | 10.8 | 10.2 | ||||||
| Total | 100.0 | % | 100.0 | % | ||||
| Estimated uncollectible accounts as a percent of revenues | 1.2 | % | 1.0 | % | ||||
| Accounts receivable -- | ||||||||
| Days of revenue outstanding- excluding unapplied Medicare payments | 33.9 | 34.9 | ||||||
| Days of revenue outstanding- including unapplied Medicare payments | 26.1 | 23.3 | ||||||
| The "Footnotes to Financial Statements" are integral parts of this financial information. | ||||||||
| CHEMED CORPORATION AND SUBSIDIARY COMPANIES | ||||||||||||||||||
| FOOTNOTES TO FINANCIAL STATEMENTS | ||||||||||||||||||
| FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| (a) | Included in the results of operations for 2020 are the following significant credits/(charges) which may not be indicative of ongoing operations | |||||||||||||||||
| (in thousands): | ||||||||||||||||||
| Three Months Ended March 31, 2020 | ||||||||||||||||||
| VITAS | Roto-Rooter | Corporate | Consolidated | |||||||||||||||
| Stock option expense | $ | - | $ | - | $ | (5,045 | ) | $ | (5,045 | ) | ||||||||
| Amortization of reacquired franchise agreements | - | (2,352 | ) | - | (2,352 | ) | ||||||||||||
| Direct costs related to COVID-19 | (973 | ) | (861 | ) | - | (1,834 | ) | |||||||||||
| Long-term incentive compensation | - | - | (1,821 | ) | (1,821 | ) | ||||||||||||
| Medicare cap sequestration adjustment | (675 | ) | - | - | (675 | ) | ||||||||||||
| Pretax impact on earnings | (1,648 | ) | (3,213 | ) | (6,866 | ) | (11,727 | ) | ||||||||||
| Excess tax benefits on stock compensation | - | - | 4,553 | 4,553 | ||||||||||||||
| Income tax benefit on the above | 419 | 851 | 1,080 | 2,350 | ||||||||||||||
| After-tax impact on earnings | $ | (1,229 | ) | $ | (2,362 | ) | $ | (1,233 | ) | $ | (4,824 | ) | ||||||
| (b) | 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 March 31, 2019 | ||||||||||||||||||
| VITAS | Roto-Rooter | Corporate | Consolidated | |||||||||||||||
| Litigation settlement | $ | (6,000 | ) | $ | - | $ | - | $ | (6,000 | ) | ||||||||
| Stock option expense | - | - | (4,089 | ) | (4,089 | ) | ||||||||||||
| Long-term incentive compensation | - | - | (1,488 | ) | (1,488 | ) | ||||||||||||
| Non cash ASC 842 (expenses)/benefit | (656 | ) | (55 | ) | 163 | (548 | ) | |||||||||||
| Medicare cap sequestration adjustment | (515 | ) | - | - | (515 | ) | ||||||||||||
| Amortization of reacquired franchise agreements | - | (441 | ) | - | (441 | ) | ||||||||||||
| Acquisition expense | - | - | (120 | ) | (120 | ) | ||||||||||||
| Pretax impact on earnings | (7,171 | ) | (496 | ) | (5,534 | ) | (13,201 | ) | ||||||||||
| Excess tax benefits on stock compensation | - | - | 6,732 | 6,732 | ||||||||||||||
| Income tax benefit on the above | 1,819 | 132 | 1,010 | 2,961 | ||||||||||||||
| After-tax impact on earnings | $ | (5,352 | ) | $ | (364 | ) | $ | 2,208 | $ | (3,508 | ) | |||||||
| (c) | VITAS has 11 large (greater than 450 ADC), 22 medium (greater than 200 but less than 450 ADC) and 15 small (less than 200 ADC) hospice programs. Of Vitas' 30 Medicare provider numbers, for the first six months of the current cap year, 23 provider numbers have a Medicare cap cushion of 10% or greater, two provider numbers have a cap cushion between 5% and 10%, two provider numbers have a cap cushion between 0% and 5%, and three provider numbers have a Medicare cap liability. | |||||||||||||||||
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