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 fourth quarter ended
December 31, 2009, versus the comparable prior-year
period, as follows:
Consolidated operating results:
- Revenue increased 3.8% to $303.2
million
- Diluted EPS of $0.78
- Adjusted Diluted EPS increased
7.1% to $1.06
VITAS segment operating results:
- Net Patient Revenue of $217.6
million, an increase of 5.7%
- Average Daily Census (ADC) of
12,149, an increase of 2.7%
- Admissions of 13,677, an
increase of 2.7%
- Net Income of $19.4 million, a
decrease of 0.9%
- Adjusted EBITDA of $34.3
million, essentially equal to the prior year
- Adjusted EBITDA margin of 15.8%,
a decrease of 91 basis points
Roto-Rooter segment operating results:
- Revenue of $85.7 million, a
decline of 0.8%
- Job count of 167,877, a decline
of 6.3%
- Net Income of $8.1 million, a
decrease of 0.2%
- Adjusted EBITDA of $16.0
million, an increase of 3.4%
- Adjusted EBITDA margin of 18.7%,
an increase of 76 basis points
VITAS
Net revenue for VITAS was $217.6 million in the fourth quarter
of 2009, which is an increase of 5.7% over the prior-year period.
This revenue growth was the result of increased ADC and admissions
of 2.7% and Medicare price increases of approximately 3.5%. The
Medicare price increase of 3.5% is a combination of adjustments to
the BNAF phase-out in February and August of 2009 and a 1.3% market
basket update effective October 1, 2009. The remaining difference
is attributed to patient geographic mix.
Average revenue per patient per day in the quarter, before the
effect of the Medicare Cap, was $196.28, which is 3.6% above the
prior-year period. Routine home care reimbursement and high acuity
care averaged $154.74 and $678.94, respectively, per patient per
day in the fourth quarter of 2009. During the quarter, high acuity
days-of-care were 7.9% of total days-of-care. This compares to high
acuity days of care of 7.8% in the prior-year quarter.
In the fourth quarter of 2009, VITAS recorded a reduction in
revenue due to estimated Medicare Cap limitations of $1.8 million.
The amount recorded relates predominantly to one program which is
our largest provider number. Admissions for this provider were
strong during the quarter. However, revenue increased at a more
rapid pace during the quarter due to a decrease in overall
discharges and a mix shift to higher acuity days of care. The
full-year gross margin for this program, including the Medicare
Cap, is approximately 28%.
The government’s Medicare Cap fiscal year begins on September
29. The first quarter of a Medicare Cap year has the potential to
be volatile if a program experiences unusual admission or discharge
patterns. As the year progresses, the Medicare Cap estimate tends
to become more predictable on a quarterly and year-to-date basis.
Actual January 2010 admissions in this one program were more than
adequate to eliminate all billing limitations for this program for
the four-month period. Consequently, VITAS anticipates reversing a
significant portion of the Medicare Cap liability related to this
program during the first quarter of 2010.
Of VITAS’ 34 unique Medicare provider numbers, 32 provider
numbers, or 94%, have a Medicare Cap cushion greater than 10% for
the trailing twelve-month period with two provider numbers having
cushion of less than 5%. VITAS generated an aggregate cap cushion
of $189 million or 24%, during the trailing twelve-month
period.
The fourth quarter of 2009 gross margin was 24.1%, which is 106
basis points lower than the fourth quarter of 2008. The revenue
reduction for Medicare Cap limitations reduced 2009 gross margin by
64 basis points. The remaining decline is caused by slightly higher
labor costs and a mix shift towards higher acuity care which
carries a lower gross margin than routine homecare.
Selling, general and administrative expense was $18.0 million in
the fourth quarter of 2009, which is an increase of 4.4% when
compared to the prior year. Adjusted EBITDA totaled
$34.3 million in the quarter. Adjusted EBITDA margin,
excluding the impact from Medicare Cap, was 16.5% in the quarter.
This compares to an Adjusted EBITDA margin of 16.8% in the
prior-year quarter.
Roto-Rooter
Roto-Rooter’s plumbing and drain cleaning business generated
sales of $85.7 million for the fourth quarter of 2009, a decline of
0.8%. Despite the decline in revenues, Roto-Rooter’s gross margin
expanded 61 basis points to 46.2%, as compared to the fourth
quarter of 2008. This is attributable primarily to favorable
technician turnover rate and lower health insurance expense.
Favorable technician turnover rates improve margins by reducing
hiring expenses and training costs. Adjusted EBITDA in the fourth
quarter of 2009 totaled $16.0 million and the Adjusted EBITDA
margin was 18.7% in the quarter, an increase of 76 basis points
when compared to the prior-year quarter.
Job count in the fourth quarter of 2009 declined 6.3% when
compared to the prior-year period. Total residential jobs declined
4.9%, as residential plumbing jobs decreased 3.5% and residential
drain cleaning jobs declined 5.6%, when compared to the fourth
quarter of 2008. Residential jobs represented 72% of total job
count in the quarter. Total commercial jobs declined 9.8% with
commercial plumbing job count declining 13.7% and commercial drain
cleaning decreasing 9.7%, when compared to the prior-year quarter.
These declines were partially offset by a 21.5% increase in jobs in
the “Other” category.
This job count decline was significantly mitigated relative to
total revenue through a combination of increased pricing and
favorable job mix shift to more expensive jobs such as
excavation.
Management continues to have discussions with existing
franchisees to acquire Roto-Rooter franchise territories. This
activity is attributed to the current state of the capital markets,
the potential increase in tax rates and the recessionary
difficulties our franchisees are experiencing. Management will
continue to be highly disciplined in terms of valuation, risk
assessment and overall return on investment of any potential
acquisition. However, the timing or actual completion of any
acquisition cannot be predicted.
Chemed
Consolidated Debt and Cash Flows
Effective January 1, 2009, the Company retrospectively adopted a
new accounting standard to account for its convertible debt
instrument. This accounting standard required the Company to
separately account for the debt and equity portions of its 1.875%
Senior Convertible Notes (Notes). This accounting method assumed
the Company could have borrowed under a conventional seven-year
fixed rate interest-only note at 6.875%. The difference between the
actual 1.875% coupon rate of the Notes and this estimated borrowing
rate created a discount on the Notes that is recorded in equity at
the inception of the debt. The Notes, net of this discount, will be
accreted to their face value over the life of the Notes using the
effective interest method. The impact of this accounting change for
the year ended December 31, 2009, was a non-cash increase in pretax
interest expense of approximately $6.3 million ($4.0 million
after-tax).
Chemed had total debt of $152.1 million at December 31, 2009.
This debt is net of the discount taken as a result of the new
accounting standard. Excluding this discount, aggregate debt is
$187.0 million and is due in May 2014. Chemed’s total debt
equates to less than one times trailing twelve-month adjusted
EBITDA.
Chemed’s $175.0 million revolving credit facility expires in May
2012. At December 31, 2009, this credit facility had approximately
$146.2 million of undrawn borrowing capacity after deducting $28.8
million for letters of credit issued under this facility to secure
the Company’s workers’ compensation insurance.
Capital expenditures for 2009 aggregated $21.5 million and
compares favorably to depreciation and amortization in 2009 of
$27.9 million.
Total cash and cash equivalents as of December 31, 2009, was
$112.4 million, which represents 56.7% of total current assets. Net
cash provided from operations in the fourth quarter of 2009
aggregated $80.3 million. The fourth quarter cash flow was
unusually high due primarily to the liquidation of $50.7 million in
accounts receivable primarily at VITAS. During the fourth quarter
of 2009, VITAS cleared certain regulatory hurdles allowing for
collection of accounts receivable which had been delayed, mainly by
Medicare, due to administrative or compliance audit delays.
Additionally, VITAS received its final periodic payment from
Medicare for the year of $30.4 million on December 31, 2009, which
enhanced total cash collections during the quarter.
The Company increased its quarterly dividend per share in the
third quarter of 2009, from $0.06 per share to $0.12 per share.
During the fourth quarter, the company purchased $742,000 of
treasury stock and has approximately $53 million of remaining
authorization under its previously announced share repurchase
program. Management continually evaluates cash utilization
alternatives, including share repurchase, debt repurchase,
acquisitions and increased dividends to determine the most
beneficial use of available capital resources.
Guidance for 2010
VITAS expects to achieve full-year 2010 revenue growth, prior to
Medicare Cap, of 5.0% to 6.0%. Admissions in 2010 are estimated to
increase 2.0% to 4.0% and full-year Adjusted EBITDA margin, prior
to Medicare Cap, is estimated to be 15.0% to 15.5%. Effective
October 1, 2009, Medicare increased average hospice
reimbursement rates by approximately 1.3%. Our full-year guidance
includes $5.0 million of estimated Medicare contractual billing
limitations during 2010.
Roto-Rooter expects to achieve full-year 2010 revenue growth of
1.0% to 3.0%. The revenue estimate is a result of increased pricing
of 3.0%, a favorable mix shift to higher revenue jobs, offset by a
job count decline estimated at 2.0% to 4.0%. Adjusted EBITDA margin
for 2010 is estimated in the range of 17.5% to 18.0%.
Based upon these factors, an effective tax rate of 39.0% and a
full-year average diluted share count of 22.8 million shares,
management estimates 2010 earnings per diluted share from
continuing operations, excluding non-cash expenses for stock
options, the non-cash increase in interest expense related to the
accounting change for convertible debt interest expense and other
items not indicative of ongoing operations will be in the range of
$4.05 to $4.20.
Conference Call
Chemed will host a conference call and webcast at 10 a.m., EDT,
on Tuesday, February 16, 2010, to discuss the Company's
quarterly results and to provide an update on its business. The
dial-in number for the conference call is (866) 713-8395 for U.S.
and Canadian participants and (617) 597-5309 for international
participants. The participant passcode is 86627956. A live webcast
of the call can be accessed on Chemed's website at www.chemed.com by clicking on Investor
Relations Home.
A taped replay of the conference call will be available
beginning approximately 24 hours after the call's conclusion. It
can be accessed by dialing (888) 286-8010 for U.S. and Canadian
callers and (617) 801-6888 for international callers and will be
available for one week following the live call. The replay passcode
is 62119750. An archived webcast will also be available at
www.chemed.com.
Chemed Corporation operates in the healthcare field through its
VITAS Healthcare Corporation subsidiary. VITAS provides daily
hospice services to approximately 12,000 patients with severe,
life-limiting illnesses. This type of care is focused on making the
terminally ill patient's final days as comfortable and pain-free as
possible.
Chemed operates in the residential and commercial plumbing and
drain cleaning industry under the brand name Roto-Rooter.
Roto-Rooter provides plumbing and drain service through
company-owned branches, independent contractors and franchisees in
the United States and Canada. Roto-Rooter also has licensed master
franchisees in Indonesia, Singapore, Japan, and the
Philippines.
This press release contains information about Chemed’s EBITDA,
Adjusted EBITDA and Adjusted Diluted EPS, which are not measures
derived in accordance with GAAP and which exclude components that
are important to understanding Chemed’s financial performance. In
reporting its operating results, Chemed provides EBITDA, Adjusted
EBITDA and Adjusted Diluted EPS measures to help investors and
others evaluate the Company’s operating results, compare its
operating performance with that of similar companies that have
different capital structures and evaluate its ability to meet its
future debt service, capital expenditures and working capital
requirements. Chemed’s management similarly uses EBITDA, Adjusted
EBITDA and Adjusted Diluted EPS to assist it in evaluating the
performance of the Company across fiscal periods and in assessing
how its performance compares to its peer companies. These measures
also help Chemed’s management to estimate the resources required to
meet Chemed’s future financial obligations and expenditures.
Chemed’s EBITDA, Adjusted EBITDA and Adjusted Diluted EPS should
not be considered in isolation or as a substitute for comparable
measures calculated and presented in accordance with GAAP. We
calculated Adjusted EBITDA Margin by dividing Adjusted EBITDA by
service revenue and sales. A reconciliation of Chemed’s net income
to its EBITDA, Adjusted EBITDA and Adjusted Diluted EPS is
presented in the tables following the text of this press
release.
Forward-Looking Statements
Certain statements contained in this press release and the
accompanying tables are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
The words "believe," "expect," "hope," "anticipate," "plan" and
similar expressions identify forward-looking statements, which
speak only as of the date the statement was made. Chemed does not
undertake and specifically disclaims any obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. These
statements are based on current expectations and assumptions and
involve various risks and uncertainties, which could cause Chemed's
actual results to differ from those expressed in such
forward-looking statements. These risks and uncertainties arise
from, among other things, possible changes in regulations governing
the hospice care or plumbing and drain cleaning industries;
periodic changes in reimbursement levels and procedures under
Medicare and Medicaid programs; difficulties predicting patient
length of stay and estimating potential Medicare reimbursement
obligations; challenges inherent in Chemed's growth strategy; the
current shortage of qualified nurses, other healthcare
professionals and licensed plumbing and drain cleaning technicians;
Chemed’s dependence on patient referral sources; and other factors
detailed under the caption "Description of Business by Segment" or
"Risk Factors" in Chemed’s most recent report on form 10-Q or 10-K
and its other filings with the Securities and Exchange Commission.
You are cautioned not to place undue reliance on such
forward-looking statements and there are no assurances that the
matters contained in such statements will be achieved.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED
STATEMENT OF INCOME (in thousands, except per share
data)(unaudited)
For the Three Months Ended For the Years Ended
December 31, December 31,
2009 2008 (aa)
2009 2008
(aa)
Continuing Operations Service revenues and sales
$ 303,249 $ 292,205
$
1,190,236
$ 1,148,941 Cost of services provided and goods sold
211,336 201,150
834,574 810,547 Selling, general and
administrative expenses (bb)
53,905 42,263
197,426
175,333 Depreciation
5,511 5,332
21,535 21,581
Amortization
1,602 1,491
6,367 5,924 Other operating
expenses (cc)
- 2,699
3,989 2,699 Total costs and expenses
272,354 252,935
1,063,891 1,016,084 Income from
operations
30,895 39,270
126,345 132,857 Interest
expense
(2,760 ) (2,910 )
(11,599 )
(12,123 ) Gain on extinguishment of debt
- 3,406
-
3,406 Other income/(expense)--net (dd)
1,059
(6,525 )
5,874 (8,736 ) Income
before income taxes
29,194 33,241
120,620 115,404
Income taxes
(10,956 ) (13,954 )
(46,583 ) (47,035 ) Income from continuing
operations
18,238 19,287
74,037 68,369
Discontinued Operations (ee) (253 )
(1,088 )
(253 ) (1,088 )
Net
Income $ 17,985 $ 18,199
$
73,784 $ 67,281
Earnings Per
Share Income from continuing operations
$ 0.81
$ 0.86
$ 3.30 $ 2.97 Net
Income
$ 0.80 $ 0.81
$
3.29 $ 2.92 Average number of shares
outstanding
22,551 22,382
22,451 23,058
Diluted Earnings Per
Share Income from continuing operations
$ 0.80
$ 0.85
$ 3.26 $ 2.93 Net
Income
$ 0.78 $ 0.80
$
3.24 $ 2.88 Average number of shares
outstanding
22,937 22,644
22,742 23,374
(aa)
Effective January 1, 2009, we
retrospectively adopted the provisions of the FASB's guidance,
issued in May 2008, for accounting for certain convertible debt
instruments.
(bb) Selling, general and administrative ("SG&A") expenses
comprise (in thousands):
Three Months EndedDecember 31,
For the Years EndedDecember
31,
2009 2008
2009 2008
SG&A expenses before long-term
incentive compensation and the impact of market gains and losses of
deferred compensation plans
$ 47,681 $ 48,777
$ 187,828 $ 184,473
Long-term incentive compensation
5,007 -
5,007 -
Impact of market gains and losses
1,217
(6,514 )
4,591 (9,140 ) Total SG&A
expenses
$ 53,905 $ 42,263
$
197,426 $ 175,333 (cc) Amount for 2009
represents expenses of contested proxy solicitation; amount for
2008 represents impairment charge for transportation equipment.
(dd) Other income/(expense)--net comprises (in thousands):
Three Months EndedDecember 31,
For the Years EndedDecember
31,
2009 2008
2009 2008
Market value gains/(losses) on
assets held in deferred compensation trust
$ 1,217 $ (6,514 )
$ 4,591 $ (9,140 )
Loss on disposal of property and equipment
(156 )
(154 )
(369 ) (415 ) Interest income
48
140
423
742
Non-taxable income on certain
investments held in deferred compensation trusts
- -
1,211 - Other
(50
)
3
18
77
Total other income--net
$ 1,059 $
(6,525 )
$ 5,874 $ (8,736 ) (ee)
Discontinued operations includes
accrual adjustment to liabilities associated with the sale of
operations discontinued in prior years (1997, 2002 and 2004).
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED
BALANCE SHEET (in thousands, except per share data)(unaudited)
December 31,
2009 2008 (aa)
Assets
Current assets Cash and cash equivalents
$ 112,416 $
3,628 Accounts receivable less allowances
53,461 98,076
Inventories
7,543 7,569 Current deferred income taxes
13,701 15,392 Prepaid expenses
11,137
11,268 Total current assets
198,258 135,933
Investments of deferred compensation plans held in trust
24,158 22,628 Properties and equipment, at cost less
accumulated depreciation
75,358 76,962 Identifiable
intangible assets less accumulated amortization
57,920
61,303 Goodwill
450,042 448,721 Other assets
13,734 14,075 Total Assets
$
819,470 $ 759,622
Liabilities Current liabilities Accounts payable
$
52,071 $ 52,810 Current portion of long-term debt
-
10,169 Income taxes
63 2,181 Accrued insurance
35,161
35,994 Accrued compensation
34,662 40,741 Other current
liabilities
14,127 12,180 Total
current liabilities
136,084 154,075 Deferred income taxes
25,924 22,477 Long-term debt
152,127 158,210 Deferred
compensation liabilities
23,637 22,417 Other liabilities
4,536 5,612 Total Liabilities
342,308 362,791
Stockholders'
Equity Capital stock
29,891 29,515 Paid-in capital
335,890 313,516 Retained earnings
403,366 337,739
Treasury stock, at cost
(293,941 ) (285,977 )
Deferred compensation payable in Company stock
1,956
2,038 Total Stockholders' Equity
477,162 396,831 Total Liabilities and
Stockholders' Equity
$ 819,470 $ 759,622
(aa)
Effective January 1, 2009, we
retrospectively adopted the provisions of the FASB's guidance,
issued in May 2008, for accounting for certain convertible debt
instruments.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED
STATEMENT OF CASH FLOWS (in thousands)(unaudited)
For the Years Ended December 31, 2009
2008 (aa)
Cash Flows from Operating Activities Net income $
73,784 $ 67,281
Adjustments to reconcile net
income to net cash provided by operating activities:
Depreciation and amortization
27,902 27,505 Provision for
uncollectible accounts receivable
10,833 9,820 Stock option
expense
8,639 7,303 Amortization of discount on convertible
notes
6,617 6,560 Provision for deferred income taxes
4,979 (2,772 ) Noncash portion of long-term incentive
compensation
4,385 - Amortization of debt issuance costs
632 618 Discontinued operations
253 1,088 Noncash
loss on early extinguishment of debt
- (3,406 ) Loss on
impairment of equipment
- 2,699
Changes in operating assets and
liabilities, excluding amounts acquired in business
combinations:
Decrease/(increase) in accounts receivable
33,754 (6,659 )
Decrease/(increase) in inventories
29 (898 )
Decrease/(increase) in prepaid
expenses and other current assets
(455 ) 305
Increase/(decrease) in accounts
payable and other current liabilities
(8,109
) 5,585 Increase/(decrease) in income taxes
623
(776 ) Decrease/(increase) in other assets
(1,678
) 5,480 Increase/(decrease) in other liabilities
272
(6,423 ) Excess tax benefit on share-based compensation
(1,955 ) (2,422 ) Other sources
327
1,195 Net cash provided by operating
activities
160,832
112,083
Cash Flows from Investing
Activities Capital expenditures
(21,496 ) (26,094
) Business combinations, net of cash acquired
(1,919
) (11,200 ) Proceeds from sales of property and equipment
1,577 387 Net proceeds/(uses) from disposals of discontinued
operations
(630 ) 8,824 Other uses
(374
) (544 ) Net cash used by investing activities
(22,842 ) (28,627 )
Cash Flows from
Financing Activities Repayment of long-term debt
(14,669
) (18,713 )
Net increase/(decrease) in
revolving line of credit
(8,200 ) 8,200 Dividends paid
(8,157 )
(5,543 ) Purchases of treasury stock
(4,225 ) (69,788
) Increase/(decrease) in cash overdraft payable
2,891 (856 )
Excess tax benefit on share-based compensation
1,955 2,422
Other sources/(uses)
1,203
(538 ) Net cash used by financing activities
(29,202
) (84,816 )
Increase/(Decrease) in Cash and Cash
Equivalents 108,788 (1,360 ) Cash and cash equivalents
at beginning of year
3,628 4,988
Cash and cash equivalents at end of year $
112,416 $
3,628
(aa)
Effective January 1, 2009, we
retrospectively adopted the provisions of the FASB's guidance,
issued in May 2008, for accounting for certain convertible debt
instruments.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31,
2009 AND 2008 (in thousands)(unaudited)
Chemed VITAS
Roto-Rooter Corporate Consolidated 2009
Service revenues and sales $ 217,556 $ 85,693
$ - $ 303,249 Cost of services provided and
goods sold 165,223 46,113 - 211,336 Selling, general and
administrative expenses (a) 17,993 25,115 10,797 53,905
Depreciation 3,502 1,974 35 5,511 Amortization 990
33 579 1,602 Total costs
and expenses 187,708 73,235
11,411 272,354 Income/(loss) from operations
29,848 12,458 (11,411 ) 30,895 Interest expense (a) 42 (49 ) (2,753
) (2,760 ) Intercompany interest income/(expense) 1,223 713 (1,936
) - Other income/(expense)—net (156 ) (2 )
1,217
1,059
Income/(loss) before income taxes 30,957 13,120 (14,883 )
29,194 Income taxes (a) (11,594 ) (4,989 )
5,627 (10,956 ) Income/(loss) from continuing
operations 19,363 8,131 (9,256 ) 18,238 Discontinued operations
- - (253 ) (253 ) Net
income/(loss) $ 19,363 $ 8,131 $ (9,509 ) $ 17,985
2008 (f) Service revenues and
sales $ 205,856 $ 86,349 $ - $ 292,205
Cost of services provided and goods sold 154,159 46,991 - 201,150
Selling, general and administrative expenses (b) 17,230 25,261 (228
) 42,263 Depreciation 3,231 2,045 56 5,332 Amortization 996 14 481
1,491 Other operating expenses (b) - -
2,699 2,699 Total costs and expenses
175,616 74,311 3,008
252,935 Income/(loss) from operations 30,240 12,038
(3,008 ) 39,270
Interest expense (b)
(37 ) (30 ) (2,843 ) (2,910 ) Intercompany interest
income/(expense) 1,337 876 (2,213 ) -
Gain on extinguishment of debt
(b)
- - 3,406 3,406
Other income/(expense)—net
(101 ) 3 (6,427 ) (6,525 )
Income/(loss) before income taxes 31,439 12,887 (11,085 ) 33,241
Income taxes (b)
(11,900 ) (4,740 ) 2,686 (13,954
) Income/(loss) from continuing operations 19,539 8,147 (8,399 )
19,287 Discontinued operations - -
(1,088 ) (1,088 ) Net income/(loss) $ 19,539 $
8,147 $ (9,487 ) $ 18,199
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT OF INCOME
FOR THE YEARS ENDED December 31, 2009 AND 2008 (in
thousands)(unaudited)
Chemed VITAS Roto-Rooter
Corporate Consolidated 2009
Service revenues and sales $ 854,343 $ 335,893
$ - $ 1,190,236 Cost of services provided and goods
sold 653,212 181,362 - 834,574 Selling, general and administrative
expenses (a) 71,643 95,073 30,710 197,426 Depreciation 13,269 8,068
198 21,535 Amortization 3,959 114 2,294 6,367 Other operating
expenses (a) - - 3,989
3,989 Total costs and expenses 742,083
284,617 37,191 1,063,891
Income/(loss) from operations 112,260 51,276 (37,191 ) 126,345
Interest expense (a) (374 ) (186 ) (11,039 ) (11,599 ) Intercompany
interest income/(expense) 4,314 2,514 (6,828 ) -
Other income/(expense)—net (a)
(122 ) 135 5,861 5,874
Income/(loss) before income taxes 116,078 53,739 (49,197 )
120,620 Income taxes (a) (43,921 ) (20,493 )
17,831 (46,583 ) Income/(loss) from continuing
operations 72,157 33,246 (31,366 ) 74,037 Discontinued operations
- - (253 ) (253 ) Net
income/(loss) $ 72,157 $ 33,246 $ (31,619 ) $ 73,784
2008 (f) Service revenues and sales $
808,445 $ 340,496 $ - $ 1,148,941 Cost
of services provided and goods sold (b) 625,177 185,370 - 810,547
Selling, general and administrative expenses (b) 67,750 95,971
11,612 175,333 Depreciation 13,000 8,294 287 21,581 Amortization
3,984 50 1,890 5,924 Other operating expenses (b) -
- 2,699 2,699 Total costs
and expenses 709,911 289,685
16,488 1,016,084 Income/(loss) from operations
98,534 50,811 (16,488 ) 132,857 Interest expense (b) (155 ) (246 )
(11,722 ) (12,123 ) Intercompany interest income/(expense) 5,199
3,708 (8,907 ) - Gain on extinguishment of debt (b) - - 3,406 3,406
Other income/(expense)—net
(149 ) 61 (8,648 ) (8,736 )
Income/(loss) before income taxes 103,429 54,334 (42,359 ) 115,404
Income taxes (b) (38,710 ) (20,742 ) 12,417
(47,035 ) Income/(loss) from continuing operations
64,719 33,592 (29,942 ) 68,369 Discontinued operations -
- (1,088 ) (1,088 ) Net
income/(loss) $ 64,719 $ 33,592 $ (31,030 ) $ 67,281
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 December 31, 2009 AND 2008 (in
thousands)(unaudited)
Chemed VITAS Roto-Rooter
Corporate Consolidated 2009
Net income/(loss) $ 19,363 $ 8,131 $ (9,509 ) $
17,985 Add/(deduct): Discontinued operations - - 253 253 Interest
expense (42 ) 49 2,753 2,760 Income taxes 11,594 4,989 (5,627 )
10,956 Depreciation 3,502 1,974 35 5,511 Amortization 990
33 579 1,602
EBITDA 35,407 15,176 (11,516 ) 39,067 Add/(deduct): Long-term
incentive compensation - - 5,007 5,007 Litigation settlement costs
- 882 - 882 Legal expenses of OIG investigation 144 - - 144 Stock
option expense - - 1,940 1,940 Advertising cost adjustment (c) -
688 - 688 Interest income (17 ) (29 ) (2 ) (48 ) Intercompany
interest income/(expense) (1,223 ) (713 )
1,936 - Adjusted EBITDA $ 34,311 $
16,004 $ (2,635 ) $ 47,680 2008 (f)
Net income/(loss) $ 19,539 $ 8,147 $ (9,487 ) $
18,199 Add/(deduct): Discontinued operations - - 1,088 1,088
Interest expense 37 30 2,843 2,910 Income taxes 11,900 4,740 (2,686
) 13,954 Depreciation 3,231 2,045 56 5,332 Amortization 996
14 481 1,491
EBITDA 35,703 14,976 (7,705 ) 42,974 Add/(deduct): Impairment loss
on transportation equipment - - 2,699 2,699 Legal expenses of OIG
investigation 2 - - 2 Stock option expense - - 2,219 2,219 Gain on
extinguishment of debt - - (3,406 ) (3,406 ) Advertising cost
adjustment (c) - 1,401 - 1,401 Interest income (28 ) (25 ) (87 )
(140 ) Intercompany interest income/(expense) (1,337 )
(876 ) 2,213 - Adjusted EBITDA $
34,340 $ 15,476 $ (4,067 ) $ 45,749 The
"Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY
COMPANIES CONSOLIDATING SUMMARY OF EBITDA FOR THE
YEARS ENDED December 31, 2009 AND 2008 (in
thousands)(unaudited)
Chemed VITAS Roto-Rooter
Corporate Consolidated 2009
Net income/(loss) $ 72,157 $ 33,246 $ (31,619 ) $
73,784 Add/(deduct): Discontinued operations - - 253 253 Interest
expense 374 186 11,039 11,599 Income taxes 43,921 20,493 (17,831 )
46,583 Depreciation 13,269 8,068 198 21,535 Amortization
3,959 114 2,294 6,367
EBITDA 133,680 62,107 (35,666 ) 160,121 Add/(deduct):
Long-term incentive compensation - - 5,007 5,007
Non-taxable income from certain
investments held in deferred compensation trusts
- - (1,211 ) (1,211 ) Litigation settlement costs - 882 - 882
Expenses associated with contested proxy solicitation. - - 3,989
3,989 Legal expenses of OIG investigation 586 - - 586 Stock option
expense - - 8,639 8,639 Advertising cost adjustment (c) - (540 ) -
(540 ) Interest income (267 ) (73 ) (83 ) (423 ) Intercompany
interest income/(expense) (4,314 ) (2,514 )
6,828 - Adjusted EBITDA $ 129,685 $
59,862 $ (12,497 ) $ 177,050 2008 (f)
Net income/(loss) $ 64,719 $ 33,592 $ (31,030 ) $
67,281 Add/(deduct): Discontinued operations - - 1,088 1,088
Interest expense 155 246 11,722 12,123 Income taxes 38,710 20,742
(12,417 ) 47,035 Depreciation 13,000 8,294 287 21,581 Amortization
3,984 50 1,890
5,924 EBITDA 120,568 62,924 (28,460 ) 155,032 Add/(deduct):
Unreserved insurance claim - 597 - 597 Impairment loss on
transportation equipment - - 2,699 2,699 Legal expenses of OIG
investigation 46 - - 46 Stock option expense - - 7,303 7,303 Gain
on extinguishment of debt - - (3,406 ) (3,406 ) Advertising cost
adjustment (c) - 225 - 225 Interest income (137 ) (116 ) (489 )
(742 ) Intercompany interest income/(expense) (5,199 )
(3,708 ) 8,907 - Adjusted EBITDA
$ 115,278 $ 59,922 $ (13,446 ) $ 161,754
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
Year Ended December 31, December 31,
2009 2008 (f) 2009 2008 (f) Net income
as reported
$ 17,985 $ 18,199
$ 73,784
$ 67,281 Add/(deduct): Discontinued operations
253
1,088
253 1,088 After-tax long-term incentive compensation
3,134 -
3,134 - After-tax litigation settlement costs
534 -
534 - After-tax expenses associated with
contested proxy solicitation
- -
2,525 - After-tax
impairment loss on transportation equipment
- 1,714
-
1,714 After-tax cost of legal expenses of OIG investigation
89 1
363 28 After-tax stock option expense
1,227 1,391
5,464 4,619
After-tax additional interest
expense resulting from the change in accounting for the conversion
feature of the convertible notes
1,027
1,070
3,988
4,006
After-tax gain on extinguishment
of debt
-
(2,934
)
-
(2,934
)
After-tax impact of non-deductible
losses and non-taxable gains on investments held in deferred
compensation trusts
- 1,825
(756 ) 3,062 Income tax credit related
to prior years
- -
- (322 ) After-tax unreserved
insurance cost
- -
-
358 Adjusted net income
$
24,249 $ 22,354
$ 89,289 $
78,900 Earnings Per Share As Reported Net
income
$ 0.80 $ 0.81
$ 3.29
$ 2.92 Average number of shares outstanding
22,551 22,382
22,451
23,058 Diluted Earnings Per Share As Reported Net
income
$ 0.78 $ 0.80
$ 3.24
$ 2.88 Average number of shares outstanding
22,937 22,644
22,742
23,374 Adjusted Earnings Per Share Net
income
$ 1.08 $ 1.00
$ 3.98
$ 3.42 Average number of shares outstanding
22,551 22,382
22,451
23,058 Adjusted Diluted Earnings Per Share Net
income
$ 1.06 $ 0.99
$ 3.93
$ 3.38 Average number of shares outstanding
22,937 22,644
22,742
23,374 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 December 31, Year Ended December
31, OPERATING STATISTICS
2009 2008
2009 2008 Net
revenue ($000) (d) Homecare
$ 159,248 $ 149,816
$ 615,408 $ 585,891 Inpatient
24,550
23,398
97,356 97,895 Continuous care
35,593
32,877
141,272
124,894 Total before Medicare cap allowance and 2008 BNAF*
$
219,391
$ 206,091
$ 854,036 $ 808,680 Estimated BNAF* Accrual
Q4 2008
- -
1,950 - Medicare cap allowance
(1,835
) (235 )
(1,643 ) (235 )
Total
$ 217,556 $ 205,856
$
854,343 $ 808,445
Net revenue as a percent of total
before Medicare cap allowance
Homecare
72.6 % 72.6 %
72.1 % 72.5 %
Inpatient
11.2 11.4
11.4 12.1 Continuous care
16.2 16.0
16.5
15.4 Total before Medicare cap allowance and 2008
BNAF*
100.0 100.0
100.0 100.0 Estimated BNAF* Accrual
Q4 2008
- -
0.2 - Medicare cap allowance
(0.8 ) (0.1 )
(0.2 )
- Total
99.2 %
99.9 %
100.0 % 100.0
% Average daily census ("ADC") (days) Homecare
7,933
7,458
7,730 7,374 Nursing home
3,253
3,452
3,281 3,535
Routine homecare
11,186 10,910
11,011 10,909
Inpatient
407 386
406 417 Continuous care
556 533
563
524 Total
12,149 11,829
11,980 11,850 Total
Admissions
13,677 13,314
55,420 55,799 Total
Discharges
13,667 13,693
54,814 55,691 Average length
of stay (days)
76.4 83.1
76.0 75.4 Median length of
stay (days)
14.0 14.0
14.0 14.0 ADC by major
diagnosis Neurological
33.0 % 33.1 %
33.0
% 32.7 % Cancer
18.8 19.3
19.1 19.8 Cardio
11.9 12.5
12.1 12.8 Respiratory
6.3 6.5
6.4 6.6 Other
30.0 28.6
29.4 28.1 Total
100.0
%
100.0 %
100.0 %
100.0 % Admissions by major diagnosis Neurological
18.8 % 18.6 %
18.1 % 18.4 % Cancer
35.8 35.9
35.7 35.7 Cardio
10.4 11.1
11.5 11.6 Respiratory
7.5 7.6
7.5 7.8 Other
27.5 26.8
27.2
26.5 Total
100.0 %
100.0 %
100.0 %
100.0 % Direct patient care margins (e) Routine homecare
52.5 % 53.3 %
52.0 % 51.7 % Inpatient
11.6 14.9
14.6 17.2 Continuous care
20.1 20.1
20.2 18.1 Homecare margin drivers (dollars per patient day)
Labor costs
$ 51.89 $ 48.99
$ 52.27 $
49.87 Drug costs
7.58 7.87
7.63 7.74 Home medical
equipment
6.91 6.32
6.86 6.24 Medical supplies
2.55 2.22
2.42 2.32 Inpatient margin drivers (dollars
per patient day) Labor costs
$ 300.26 $ 266.86
$ 287.16 $ 264.45 Continuous care margin drivers
(dollars per patient day) Labor costs
$ 534.60 $
514.93
$ 527.27 $ 512.61 Bad debt expense as a
percent of revenues
1.1 % 1.1 %
1.1 %
1.0 % Accounts receivable -- Days of revenue outstanding- excluding
unapplied Medicare payments
48.3 49.1
N.A. N.A. Days
of revenue outstanding- including unapplied Medicare payments
18.0 34.7
N.A. N.A. * Budget Neutrality
Adjustment Factor. 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 AND YEARS ENDED DECEMBER 31,
2009 AND 2008 (unaudited)
(a)
Included in the results of
operations for the three months and year ended December 31, 2009,
are the following significant credits/(charges) which may not be
indicative of ongoing operations (in thousands):
Three Months Ended December 31, 2009 VITAS
Roto-Rooter Corporate Consolidated Selling,
general and administrative expenses Stock option expense $ - $ - $
(1,940 ) $ (1,940 ) Long-term incentive compensation - - (5,007 )
(5,007 ) Legal expenses of OIG investigation (144 ) - - (144 )
Litigation settlement expenses - (882 ) - (882 ) Interest expense
Additional interest expense
resulting from the change in accounting for the conversion feature
of the convertible notes
- - (1,623 ) (1,623 )
Pretax impact on earnings (144 ) (882 ) (8,570 ) (9,596 ) Income
tax benefit/(charge) on the above 55 348
3,182 3,585 After-tax impact on
earnings $ (89 ) $ (534 ) $ (5,388 ) $ (6,011 )
Year
Ended December 31, 2009 VITAS Roto-Rooter
Corporate Consolidated Selling, general and
administrative expenses Stock option expense $ - $ - $ (8,639 ) $
(8,639 ) Long-term incentive compensation (5,007 ) (5,007 ) Legal
expenses of OIG investigation (586 ) - - (586 ) Litigation
settlement expenses - (882 ) - (882 ) Other operating expenses
Expenses associated with contested proxy solicitation - - (3,989 )
(3,989 ) Interest expense
Additional interest expense
resulting from the change in accounting for the conversion feature
of the convertible notes
- - (6,305 ) (6,305 )
Other income/(expense)-net
Non-taxable income from certain
investments held in deferred compensation trusts
- - 1,211 1,211
Pretax impact on earnings (586 ) (882 ) (22,729 ) (24,197 )
Income tax benefit/(charge) on the above 223 348 8,829 9,400
Income tax impact of
non-deductible net market losses on investments held in deferred
compensation trusts
- - (455 ) (455 )
After-tax impact on earnings $ (363 ) $ (534 ) $ (14,355 ) $
(15,252 ) (b)
Included in the results of
operations for the three months and year ended December 31, 2008,
are the following significant credits/(charges) which may not be
indicative of ongoing operations (in thousands):
Three Months Ended December 31, 2008 VITAS
Corporate Consolidated Selling, general and
administrative expenses Stock option expense $ - $ (2,219 ) $
(2,219 ) Legal expenses of OIG investigation (2 ) - (2 ) Other
operating expenses Impairment loss on transportation equipment -
(2,699 ) (2,699 ) Interest expense
Additional interest expense
resulting from the change in accounting for the conversion feature
of the convertible notes
- (1,515 ) (1,515 ) Gain on extinguishment of debt -
3,406 3,406 Pretax impact on earnings
(2 ) (3,027 ) (3,029 ) Income tax benefit/(charge) on the above 1
1,786 1,787
Income tax impact of
non-deductible net market losses on investments held in deferred
compensation trusts
- (1,825 ) (1,825 ) After-tax impact on
earnings $ (1 ) $ (3,066 ) $ (3,067 )
Year Ended
December 31, 2008 VITAS Roto-Rooter
Corporate Consolidated Cost of services provided and
goods sold Unreserved prior-year's insurance claim $ - $ (597 ) $ -
$ (597 ) Selling, general and administrative expenses Stock option
expense
- - (7,303 ) (7,303 ) Legal expenses of OIG
investigation (46 ) - - (46 ) Other operating expenses Impairment
loss on transportation equipment
-
-
(2,699 ) (2,699 ) Interest expense
Additional interest expense
resulting from the change in accounting for the conversion feature
of the convertible notes
-
-
(6,139 ) (6,139 ) Gain on extinguishment of debt -
- 3,406 3,406 Pretax
impact on earnings (46 ) (597 ) (12,735 ) (13,378 ) Income tax
benefit/(charge) on the above 18 239 5,330 5,587
Income tax impact of
non-deductible net market losses on investments held in deferred
compensation trusts
- - (3,062 ) (3,062 ) Income tax credit related to prior years
322 - - 322
After-tax impact on earnings $ 294 $ (358 ) $ (10,467 ) $
(10,531 ) (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 fourth quarters of 2009
and 2008, GAAP advertising expense for Roto-Rooter totaled
$6,766,000 and $7,421,000, respectively. If the expense of the
telephone directories were spread over the periods they are in
circulation, advertising expense for the fourth quarters of 2009
and 2008 would total $6,078,000 and $6,020,000, respectively. For
the years ended December 31, 2009 and 2008, GAAP advertising
expense for Roto-Rooter totaled $23,968,000 and $24,077,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the years ended December 31, 2009 and 2008, would total
$24,508,000 and $23,852,000, respectively.
(d)
VITAS has 4 large (greater than
450 ADC), 19 medium (greater than 200 but less than 450 ADC) and 22
small (less than 200 ADC) hospice programs. There are two programs
as of December 31, 2009, with Medicare cap cushion of less than 10%
for the trailing twelve month period.
(e) Amounts exclude indirect patient care and administrative
costs, as well as Medicare cap billing limitation. (f)
Effective January 1, 2009, we
retrospectively adopted the provisions of the FASB's guidance,
issued in May 2008, for accounting for certain convertible debt
instruments.
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