Chemed Corporation (Chemed) (NYSE:CHE), which operates VITAS
Healthcare Corporation (VITAS), the nation’s largest provider of
end-of-life care, and Roto-Rooter, the nation’s largest commercial
and residential plumbing and drain cleaning services provider,
reported financial results for its third quarter ended September
30, 2011, versus the comparable prior-year period, as follows:
Consolidated operating results:
- Revenue increased 6.5% to $341
million
- GAAP Diluted EPS increased 14.3% to
$1.04
- Adjusted Diluted EPS increased 16.5% to
$1.20
VITAS segment operating results:
- Net Patient Revenue of $253 million, an
increase of 8.1%
- Average Daily Census (ADC) of 13,658,
an increase of 6.2%
- Admissions of 14,879, an increase of
2.7%
- Net Income of $21.0 million, an
increase of 5.9%
- Adjusted EBITDA of $37.8 million, an
increase of 6.3%
- Adjusted EBITDA margin of 15.0%, a
decrease of 25 basis points
Roto-Rooter segment operating results:
- Revenue of $88.5 million, an increase
of 2.3%
- Unit-for-unit job count of 157,466, an
increase of 0.5%
- Net Income of $8.0 million, an increase
of 3.5%
- Adjusted EBITDA of $14.9 million, an
increase of 8.7%
- Adjusted EBITDA margin of 16.9%, an
increase of 100 basis points
VITAS
Net revenue for VITAS was $253 million in the third quarter of
2011, which is an increase of 8.1% over the prior-year period.
Excluding the impact of Medicare Cap, revenue increased 7.9%. This
revenue growth was the result of increased ADC of 6.2%, driven by
an increase in admissions of 2.7%, combined with Medicare price
increases of approximately 2.1%. This growth was partially offset
by geographic and level of acuity mix shift of the patient
base.
Average revenue per patient per day in the quarter, excluding
the impact of Medicare Cap, was $201.00, which is 1.6% above the
prior-year period. Routine home care reimbursement and high acuity
care averaged $158.83 and $704.73, respectively, per patient per
day in the third quarter of 2011. During the quarter, high acuity
days of care were 7.7% of total days of care, 22 basis points lower
than the prior-year quarter.
In the third quarter of 2011, VITAS reversed a Medicare Cap
liability of $384,000. This compares to $117,000 of Medicare Cap
liability recorded in the third quarter of 2010.
Of VITAS’ 33 unique Medicare provider numbers, 29 provider
numbers have a Medicare Cap cushion of 10% or greater during the
trailing twelve-month period. Three provider numbers have a
Medicare Cap cushion of less than 10% and one small program has a
$282,000 Medicare Cap liability. VITAS generated an aggregate
Medicare Cap cushion of $211 million, or 24%, during the
trailing twelve-month period.
The third quarter of 2011 gross margin, excluding the impact of
Medicare Cap, was 22.2%, which is a decline of 87 basis points from
the third quarter of 2010. This decline in margin is primarily the
result of increased costs related to the 2011 mandated physician
visit for recertification, expansion of our community liaison
program, expansion of losses in start-up locations as well as
increased costs associated with expansion of inpatient units.
Selling, general and administrative expense was $18.9 million in
the third quarter of 2011, which is an increase of 3.1% when
compared to the prior-year quarter. Adjusted EBITDA totaled
$37.8 million in the quarter, an increase of 6.3% over the
prior-year period. Adjusted EBITDA margin, excluding the impact
from Medicare Cap, was 14.8% in the quarter which was 43 basis
points below the prior-year quarter.
Roto-Rooter
Roto-Rooter’s plumbing and drain cleaning business generated
sales of $88.5 million for the third quarter of 2011, an increase
of 2.3% over the prior-year quarter. This revenue growth was the
result of a combination of selective price increases and favorable
mix shift to higher value jobs, partially offset by a slight
decline in aggregate job count.
Unit for unit job count in the third quarter of 2011 increased
0.5% when compared to the prior-year period. During the third
quarter of 2011, total residential jobs decreased 0.6%, as
residential plumbing jobs increased 3.8% and residential drain
cleaning jobs decreased 3.0% when compared to the third quarter of
2010. Residential jobs represented 70% of total job count in the
quarter. Total commercial jobs increased 3.0%, with commercial
plumbing/excavation job count increasing 6.9% and commercial drain
cleaning increasing 1.9% when compared to the prior-year quarter.
The “All Other” residential and commercial job category, which
represents less than 2% of aggregate job count, decreased 5.3%.
Roto-Rooter’s gross margin was 45.0% in the quarter, a 42 basis
point increase when compared to the third quarter of 2010. Adjusted
EBITDA in the third quarter of 2011 totaled $14.9 million, an
increase of 8.7%, and the Adjusted EBITDA margin was 16.9% in the
quarter, an increase of 100 basis points, when compared to the
prior-year quarter.
Roto-Rooter continues to have periodic discussions with existing
franchisees to acquire franchise territories. Management will be
highly disciplined in terms of valuation, risk assessment and
overall return on investment of any potential acquisition. The
timing or actual completion of any acquisition cannot be
predicted.
Chemed Consolidated Debt
and Cash Flows
Chemed had total debt of $165 million at September 30, 2011.
This debt is net of the discount taken as a result of convertible
debt accounting requirements. Excluding this discount, aggregate
debt is $187 million and is due in May 2014. Chemed’s total
debt equates to less than one times trailing twelve-month adjusted
EBITDA.
In March 2011 Chemed replaced its existing credit facility with
a new Credit Agreement. Terms of this Credit Agreement consist of a
five-year $350 million revolving credit facility. The interest rate
on this Credit Agreement has a floating rate that is currently
LIBOR plus 175 basis points. This Credit Agreement provides Chemed
with increased flexibility in terms of acquisitions, share
repurchases, dividends and other corporate needs. In addition, an
expansion feature is included in this Credit Agreement that
provides Chemed the opportunity to increase its revolver and/or
enter into term loans for an additional $150 million. At September
30, 2011, this facility had approximately $321 million of undrawn
borrowing capacity after deducting $29 million for letters of
credit issued to secure the Company’s workers’ compensation
insurance.
Capital expenditures for the first nine months of 2011
aggregated $23.5 million and compares to depreciation and
amortization during the same period of $22.2 million.
The Company increased its quarterly dividend from $0.14 to $0.16
per share in the third quarter of 2011. In addition, the company
has purchased $106.5 million, or 1,871,543 shares, of Chemed stock
in the first nine months of 2011. As of September 30, 2011, $12.6
million is remaining under Chemed’s previously announced share
repurchase program. Management will continually evaluate cash
utilization alternatives, including share repurchase, debt
repurchase, acquisitions and increased dividends to determine the
most beneficial use of available capital resources.
Guidance for
2011
VITAS expects to achieve full-year 2011 revenue growth, prior to
Medicare Cap, of 7.5% to 8.0%. Admissions in 2011 are estimated to
increase approximately 5.0% to 5.5% and full-year Adjusted EBITDA
margin, prior to Medicare Cap, is estimated to be 15.2% to 15.7%.
Effective October 1, 2011, Medicare increased the average
hospice reimbursement rates by approximately 2.5%. Consistent with
prior years, our guidance assumes VITAS will incur an additional
$1.25 million of estimated Medicare contractual billing limitations
for the fourth quarter of 2011.
Roto-Rooter expects to achieve full-year 2011 revenue growth of
4.5% to 5.5%. The revenue estimate is a result of increased pricing
of approximately 2% to 3%, a favorable mix shift to higher revenue
jobs, with job count growth estimated at 0% to 1%. Adjusted EBITDA
margin for 2011 is estimated in the range of 17.0% to 18.0%.
Based upon the above, management estimates 2011 earnings per
diluted share, excluding non-cash expense for stock options, the
non-cash interest expense related to the accounting for convertible
debt and other items not indicative of ongoing operations, will be
in the range of $4.75 to $4.85. This compares to Chemed’s 2010
adjusted earnings per diluted share of $4.17.
Conference
Call
Chemed will host a conference call and webcast at 10 a.m., ET,
on Wednesday, October 26, 2011, 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) 510-0708 for U.S. and
Canadian participants and (617) 597-5377 for international
participants. The participant passcode is 59588119. 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 46875269. 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 13,000 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)
Three Months Ended
Nine Months Ended September 30, September 30,
2011 2010
2011 2010 Service revenues and sales
$ 341,439
$ 320,451
$ 1,005,717 $ 944,259
Cost of services provided and goods sold
245,063
227,915
722,118 670,754 Selling, general and administrative
expenses (aa)
47,618 48,200
153,696 146,694
Depreciation
6,313 6,385
18,959 18,048 Amortization
1,134 1,196
3,243
3,707 Total costs and expenses
300,128 283,696
898,016
839,203 Income from operations
41,311
36,755
107,701 105,056 Interest expense
(3,555
) (2,995 )
(10,260 ) (8,946 ) Other
income--net (bb)
(1,935 ) 222
881 418 Income before income
taxes
35,821 33,982
98,322 96,528 Income taxes
(13,934 ) (12,994 )
(38,048
) (37,327 ) Net income
$ 21,887
$ 20,988
$ 60,274 $ 59,201
Earnings Per Share Net income
$
1.06 $ 0.93
$ 2.88 $ 2.62
Average number of shares outstanding
20,674
22,597
20,934
22,604
Diluted Earnings Per Share Net income
$ 1.04 $ 0.91
$ 2.82
$ 2.57 Average number of shares outstanding
21,055 22,996
21,400
23,006
(aa)
Selling, general and administrative ("SG&A") expenses comprise
(in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2011 2010
2011 2010 SG&A expenses before
long-term incentive compensation and the impact of market gains and
losses of deferred compensation plans
$ 49,629 $
47,957
$ 149,888 $ 144,547 Market value
gains/(losses) on assets held in deferred compensation trusts
(2,011 ) 243
796 348 Long-term incentive
compensation
- -
3,012 1,799 Total SG&A expenses
$ 47,618 $ 48,200
$
153,696 $ 146,694 (bb) Other
income--net comprises (in thousands): Three Months Ended September
30,
Nine Months Ended September 30,
2011 2010
2011 2010 Market value gains/(losses) on
assets held in deferred compensation trusts
$ (2,011
) $ 243
$ 796 $ 348 Loss on disposal of
property and equipment
(79 ) (141 )
(68
) (293 ) Interest income
74 109
197 334 Other
81 11
(44 )
29 Total other income--net
$ (1,935
) $ 222
$ 881 $ 418
CHEMED
CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE
SHEET
(in thousands, except per share
data)(unaudited)
September 30,
2011 2010
Assets Current
assets Cash and cash equivalents
$ 21,342 $ 137,457
Accounts receivable less allowances
112,721 105,686
Inventories
8,888 7,951 Current deferred income taxes
14,850 14,650 Prepaid income taxes
764 337 Prepaid
expenses
10,031 9,925 Total
current assets
168,596 276,006 Investments of deferred
compensation plans held in trust
31,339 26,022 Properties
and equipment, at cost less accumulated depreciation
83,484
78,982 Identifiable intangible assets less accumulated amortization
55,983 56,097 Goodwill
460,747 450,095 Other assets
14,907 11,190 Total Assets
$ 815,056 $ 898,392
Liabilities Current liabilities Accounts payable
$
59,186 $ 52,552 Income taxes
8,267 4,575 Accrued
insurance
35,655 34,320 Accrued compensation
40,376
45,183 Other current liabilities
17,308
15,637 Total current liabilities
160,792 152,267
Deferred income taxes
23,262 23,045 Long-term debt
164,841 157,392 Deferred compensation liabilities
30,267 25,508 Other liabilities
9,559
6,624 Total Liabilities
388,721
364,836
Stockholders' Equity Capital
stock
30,913 30,207 Paid-in capital
394,822 354,473
Retained earnings
524,197 453,886 Treasury stock, at cost
(525,555 ) (306,977 ) Deferred compensation payable
in Company stock
1,958 1,967
Total Stockholders' Equity
426,335
533,556 Total Liabilities and Stockholders' Equity
$
815,056 $ 898,392
CHEMED CORPORATION AND SUBSIDIARY
COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
Nine Months Ended September 30,
2011 2010
Cash Flows from Operating Activities Net income
$
60,274 $ 59,201 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization
22,202 21,755 Stock option expense
6,903
6,365 Provision for uncollectible accounts receivable
6,640
7,248 Amortization of discount on convertible notes
5,633
5,265 Noncash long-term incentive compensation
2,595 1,580
Provision for deferred income taxes
(1,608 ) (3,886 )
Changes in operating assets and liabilities, excluding amounts
acquired in business combinations: Increase in accounts receivable
(5,991 ) (59,528 ) Increase in inventories
(1,160 ) (408 ) Decrease in prepaid expenses
254 463 Increase in accounts payable and other current
liabilities
2,654 12,479 Increase in income taxes
12,253 6,729 Increase in other assets
(3,811 )
(2,180 ) Increase in other liabilities
3,567 3,960 Excess
tax benefit on share-based compensation
(3,368 )
(1,823 ) Other sources
899 770
Net cash provided by operating activities
107,936
57,990
Cash Flows from Investing
Activities Capital expenditures
(23,459 ) (19,107
) Business combinations, net of cash acquired
(3,689
) (30 ) Other uses
(829 ) (448 )
Net cash used by investing activities
(27,977
) (19,585 )
Cash Flows from Financing
Activities Purchases of treasury stock
(110,288 )
(10,175 ) Dividends paid
(9,393 ) (8,682 ) Proceeds
from issuance of capital stock
7,979 3,632 Excess tax
benefit on share-based compensation
3,368 1,823 Debt
issuances costs
(2,723 ) -
Increase/(decrease) in cash overdrafts
payable
2,297 (184 ) Other sources
226
222 Net cash used by financing activities
(108,534 ) (13,364 )
Increase/(Decrease) in
Cash and Cash Equivalents (28,575 ) 25,041 Cash
and cash equivalents at beginning of year
49,917
112,416 Cash and cash equivalents at end of
period
$ 21,342 $ 137,457
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2011 AND 2010
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate
Consolidated
2011
Service revenues and sales $ 252,944 $ 88,495
$ - $ 341,439 Cost of services provided and goods
sold 196,407 48,656 - 245,063 Selling, general and administrative
expenses (a) 18,945 25,057 3,616 47,618 Depreciation 4,123 2,058
132 6,313 Amortization 510 156
468 1,134 Total costs and expenses
219,985 75,927 4,216
300,128 Income/(loss) from operations 32,959 12,568 (4,216 )
41,311 Interest expense (a) (62 ) (132 ) (3,361 ) (3,555 )
Intercompany interest income/(expense) 834 451 (1,285 ) - Other
income/(expense)—net 62 (7 ) (1,990 )
(1,935 ) Income/(loss) before income taxes 33,793 12,880
(10,852 ) 35,821 Income taxes (a) (12,823 ) (4,864 )
3,753 (13,934 ) Net income/(loss) $ 20,970
$ 8,016 $ (7,099 ) $ 21,887
2010
Service revenues and sales $ 233,964 $ 86,487
$ - $ 320,451 Cost of services provided and goods
sold 179,997 47,918 - 227,915 Selling, general and administrative
expenses (b) 18,370 24,573 5,257 48,200 Depreciation 4,321 1,925
139 6,385 Amortization 694 133
369 1,196 Total costs and expenses
203,382 74,549 5,765
283,696 Income/(loss) from operations 30,582 11,938 (5,765 )
36,755 Interest expense (b) (48 ) (55 ) (2,892 ) (2,995 )
Intercompany interest income/(expense) 1,139 651 (1,790 ) - Other
income/(expense)—net (92 ) 11 303
222 Income/(loss) before income taxes 31,581
12,545 (10,144 ) 33,982 Income taxes (b) (11,778 )
(4,798 ) 3,582 (12,994 ) Net income/(loss) $
19,803 $ 7,747 $ (6,562 ) $ 20,988 The
"Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED
CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENT
OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND
2010
(in thousands)(unaudited)
Chemed VITAS
Roto-Rooter Corporate Consolidated 2011
Service revenues and sales $ 731,712 $ 274,005
$ - $ 1,005,717 Cost of services provided and goods
sold 570,648 151,470 - 722,118 Selling, general and administrative
expenses (a) 57,392 76,181 20,123 153,696 Depreciation 12,489 6,067
403 18,959 Amortization 1,513 443
1,287 3,243 Total costs and expenses
642,042 234,161 21,813
898,016 Income/(loss) from operations 89,670 39,844
(21,813 ) 107,701 Interest expense (a) (172 ) (274 ) (9,814 )
(10,260 ) Intercompany interest income/(expense) 3,263 1,742 (5,005
) - Other income/(expense)—net 3 (2 )
880 881 Income/(loss) before income taxes
92,764 41,310 (35,752 ) 98,322 Income taxes (a) (35,080 )
(15,692 ) 12,724 (38,048 ) Net
income/(loss) $ 57,684 $ 25,618 $ (23,028 ) $ 60,274
2010 Service revenues and sales $ 683,542
$ 260,717 $ - $ 944,259 Cost of
services provided and goods sold 527,347 143,407 - 670,754 Selling,
general and administrative expenses (b) 54,920 73,523 18,251
146,694 Depreciation 11,909 5,826 313 18,048 Amortization
2,253 388 1,066 3,707
Total costs and expenses 596,429
223,144 19,630 839,203
Income/(loss) from operations 87,113 37,573 (19,630 ) 105,056
Interest expense (b) (127 ) (187 ) (8,632 ) (8,946 ) Intercompany
interest income/(expense) 3,778 2,126 (5,904 ) - Other
income/(expense)—net (85 ) 35 468
418 Income/(loss) before income taxes 90,679
39,547 (33,698 ) 96,528 Income taxes (b) (34,156 )
(15,127 ) 11,956 (37,327 ) Net income/(loss) $
56,523 $ 24,420 $ (21,742 ) $ 59,201
The "Footnotes to Financial Statements" are integral parts of this
financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING
SUMMARY OF EBITDA FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2011 AND 2010
(in thousands)(unaudited)
Chemed VITAS Roto-Rooter
Corporate Consolidated 2011 Net
income/(loss) $ 20,970 $ 8,016 $ (7,099 ) $ 21,887 Add/(deduct):
Interest expense 62 132 3,361 3,555 Income taxes 12,823 4,864
(3,753 ) 13,934 Depreciation 4,123 2,058 132 6,313 Amortization
510 156 468 1,134
EBITDA 38,488 15,226 (6,891 ) 46,823 Add/(deduct):
Intercompany interest expense/(income) (834 ) (451 ) 1,285 -
Interest income (43 ) (12 ) (19 ) (74 ) Legal expenses of OIG
investigation 212 - - 212 Acquisition expenses 2 - - 2 Expenses of
class action litigation - 770 - 770 Advertising cost adjustment (c)
- (585 ) - (585 ) Stock option expense - -
2,408 2,408 Adjusted EBITDA $
37,825 $ 14,948 $ (3,217 ) $ 49,556
2010 Net income/(loss) $ 19,803 $ 7,747 $ (6,562 ) $ 20,988
Add/(deduct): Interest expense 48 55 2,892 2,995 Income taxes
11,778 4,798 (3,582 ) 12,994 Depreciation 4,321 1,925 139 6,385
Amortization 694 133 369
1,196 EBITDA 36,644 14,658 (6,744 ) 44,558
Add/(deduct): Intercompany interest expense/(income) (1,139 ) (651
) 1,790 - Interest income (37 ) (10 ) (62 ) (109 ) Legal expenses
of OIG investigation 112 - - 112 Expenses of class action
litigation - 322 - 322 Advertising cost adjustment (c) - (571 ) -
(571 ) Stock option expense - -
1,968 1,968 Adjusted EBITDA $ 35,580 $
13,748 $ (3,048 ) $ 46,280 The "Footnotes to
Financial Statements" are integral parts of this financial
information.
CHEMED
CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING SUMMARY
OF EBITDA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND
2010
(in thousands)(unaudited)
Chemed VITAS Roto-Rooter
Corporate Consolidated 2011 Net
income/(loss) $ 57,684 $ 25,618 $ (23,028 ) $ 60,274 Add/(deduct):
Interest expense 172 274 9,814 10,260 Income taxes 35,080 15,692
(12,724 ) 38,048 Depreciation 12,489 6,067 403 18,959 Amortization
1,513 443 1,287
3,243 EBITDA 106,938 48,094 (24,248 ) 130,784 Add/(deduct):
Intercompany interest expense/(income) (3,263 ) (1,742 ) 5,005 -
Interest income (86 ) (28 ) (83 ) (197 ) Legal expenses of OIG
investigation 1,209 - - 1,209 Acquisition expenses 117 (6 ) - 111
Expenses of class action litigation - 1,451 - 1,451 Advertising
cost adjustment (c) - (1,442 ) - (1,442 ) Stock option expense - -
6,903 6,903 Long-term incentive compensation -
- 3,012 3,012 Adjusted EBITDA $
104,915 $ 46,327 $ (9,411 ) $ 141,831
2010 Net income/(loss) $ 56,523 $ 24,420 $ (21,742 ) $
59,201 Add/(deduct): Interest expense 127 187 8,632 8,946 Income
taxes 34,156 15,127 (11,956 ) 37,327 Depreciation 11,909 5,826 313
18,048 Amortization 2,253 388
1,066 3,707 EBITDA 104,968 45,948 (23,687 )
127,229 Add/(deduct): Intercompany interest expense/(income) (3,778
) (2,126 ) 5,904 - Interest income (172 ) (37 ) (125 ) (334 ) Legal
expenses of OIG investigation 390 - - 390 Expenses of class action
litigation - 427 - 427 Advertising cost adjustment (c) - (1,639 ) -
(1,639 ) Stock option expense - - 6,365 6,365 Long-term incentive
compensation - - 1,799
1,799 Adjusted EBITDA $ 101,408 $ 42,573
$ (9,744 ) $ 134,237 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 Nine Months
Ended September 30, September 30,
2011 2010
2011 2010
Net income as reported
$ 21,887 $ 20,988
$
60,274 $ 59,201 Add/(deduct) impact of: After-tax
stock option expense
1,523 1,244
4,366 4,026
After-tax additional interest expense resulting from the change in
accounting for the conversion feature of the convertible notes
1,177 1,088
3,464 3,203 After-tax cost of legal
expenses of OIG investigation
131 69
749 242
After-tax cost of expenses of class action litigation
467
194
881 257 After-tax cost of acquisition expenses
2
-
69 - After-tax long-term incentive compensation
-
-
1,880 1,124 Adjusted net
income
$ 25,187 $ 23,583
$ 71,683 $
68,053 Earnings Per Share As Reported Net income
$ 1.06 $ 0.93
$ 2.88 $ 2.62 Average
number of shares outstanding
20,674 22,597
20,934 22,604 Diluted Earnings Per Share As
Reported Net income
$ 1.04 $ 0.91
$
2.82 $ 2.57 Average number of shares outstanding
21,055 22,996
21,400 23,006
Adjusted Earnings Per Share Net income
$
1.22 $ 1.04
$ 3.42 $ 3.01 Average number of
shares outstanding
20,674 22,597
20,934 22,604 Adjusted Diluted Earnings Per Share Net
income
$ 1.20 $ 1.03
$ 3.35 $ 2.96
Average number of shares outstanding
21,055
22,996
21,400 23,006 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 Nine Months Ended September
30, September 30, OPERATING STATISTICS
2011 2010
2011
2010 Net revenue ($000) (d) Homecare
$ 184,155 $
169,306
$ 529,874 $ 490,044 Inpatient
28,292
25,963
82,861 78,244 Continuous care
40,113
38,812
117,950 113,588 Total
before Medicare cap allowance
$ 252,560 $ 234,081
$ 730,685 $ 681,876 Medicare cap allowance
384 (117 )
1,027 1,666 Total
$ 252,944 $ 233,964
$ 731,712 $
683,542 Net revenue as a percent of total before Medicare cap
allowance Homecare
72.9 % 72.3 %
72.5 %
71.8 % Inpatient
11.2 11.1
11.3 11.5 Continuous care
15.9 16.6
16.2
16.7 Total before Medicare cap allowance
100.0 100.0
100.0 100.0 Medicare cap allowance
0.2
(0.1 )
0.1 0.2 Total
100.2
% 99.9 %
100.1 %
100.2 % Average daily census ("ADC") (days) Homecare
9,485
8,586
9,185 8,350 Nursing home
3,118
3,250
3,062 3,212 Routine homecare
12,603 11,836
12,247 11,562 Inpatient
456 425
451 433 Continuous care
599 596
601 595 Total
13,658
12,857
13,299 12,590 Total
Admissions
14,879 14,483
45,971 43,750 Total
Discharges
14,682 14,076
45,104 42,767 Average length
of stay (days)
80.1 78.2
78.7 77.1 Median length of
stay (days)
15.0 15.0
14.0 14.0 ADC by major
diagnosis Neurological
34.3 % 33.4 %
34.4
% 33.2 % Cancer
17.5 18.5
17.7 18.4 Cardio
11.3 11.9
11.6 11.9 Respiratory
6.6 6.5
6.8 6.6 Other
30.3 29.7
29.5 29.9 Total
100.0 %
100.0 %
100.0 % 100.0 %
Admissions by major diagnosis Neurological
19.0 %
18.4 %
19.3 % 18.6 % Cancer
34.7 35.8
33.1 34.6 Cardio
10.4 11.1
10.9 11.3
Respiratory
7.8 7.5
8.5 8.1 Other
28.1
27.2
28.2 27.4 Total
100.0 % 100.0 %
100.0
% 100.0 % Direct patient care margins (e) Routine
homecare
52.4 % 52.7 %
52.0 % 52.2 %
Inpatient
12.4 12.3
12.9 13.3 Continuous care
20.7 21.1
20.5 21.0 Homecare margin drivers (dollars
per patient day) Labor costs
$ 53.13 $ 51.97
$
53.88 $ 52.79 Drug costs
8.26 7.89
8.14 7.78
Home medical equipment
6.64
6.54
6.65
6.71
Medical supplies
2.81 2.66
2.80 2.53 Inpatient margin
drivers (dollars per patient day) Labor costs
$
312.72 $ 304.42
$ 310.25 $ 297.63 Continuous
care margin drivers (dollars per patient day) Labor costs
$
555.63 $ 536.83
$ 550.09 $ 531.14 Bad debt
expense as a percent of revenues
0.8 % 0.9 %
0.7 % 0.9 % Accounts receivable --
Days of revenue outstanding - excluding
unapplied Medicare payments
38.9 39.7
n.a. n.a.
Days of revenue outstanding - including
unapplied Medicare payments
34.6 34.9
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,
2011 AND 2010 (unaudited) (a)
Included in the results of operations 2011 are the following
significant credits/(charges) which may not be indicative of
ongoing operations (in thousands):
Three Months Ended September
30, 2011 VITAS Roto-Rooter Corporate
Consolidated Selling, general and administrative expenses:
Legal expenses of OIG investigation $ (212 ) $ - $ - $ (212 )
Acquisition expenses (2 ) - - (2 ) Expenses of class action
litigation - (770 ) - (770 ) Stock option expense - - (2,408 )
(2,408 ) Interest expense: Additional interest expense resulting
from the change in accounting for the conversion feature of the
convertible notes - - (1,861 )
(1,861 ) Pretax impact on earnings (214 ) (770 ) (4,269 )
(5,253 ) Income tax benefit on the above 81
303 1,569 1,953 After-tax impact
on earnings $ (133 ) $ (467 ) $ (2,700 ) $ (3,300 )
Nine
Months Ended September 30, 2011 VITAS Roto-Rooter
Corporate Consolidated Selling, general and
administrative expenses: Legal expenses of OIG investigation $
(1,209 ) $ - $ - $ (1,209 ) Acquisition expenses (117 ) 6 - (111 )
Expenses of class action litigation - (1,451 ) - (1,451 ) Stock
option expense - - (6,903 ) (6,903 ) Long-term incentive
compensation - - (3,012 ) (3,012 ) Interest expense: Additional
interest expense resulting from the change in accounting for the
conversion feature of the convertible notes -
- (5,476 ) (5,476 ) Pretax impact on earnings
(1,326 ) (1,445 ) (15,391 ) (18,162 ) Income tax benefit on the
above 504 568 5,681
6,753 After-tax impact on earnings $ (822 ) $ (877 )
$ (9,710 ) $ (11,409 ) (b) Included in the results of
operations 2010 are the following significant credits/(charges)
which may not be indicative of ongoing operations (in thousands):
Three Months Ended September 30, 2010 VITAS
Roto-Rooter Corporate Consolidated Selling,
general and administrative expenses: Legal expenses of OIG
investigation $ (112 ) $ - $ - $ (112 ) Expenses of class action
litigation - (322 ) - (322 ) Stock option expense - - (1,968 )
(1,968 ) Interest expense: Additional interest expense resulting
from the change in accounting for the conversion feature of the
convertible notes - - (1,721 )
(1,721 ) Pretax impact on earnings (112 ) (322 ) (3,689 )
(4,123 ) Income tax benefit on the above 43
128 1,357 1,528 After-tax impact
on earnings $ (69 ) $ (194 ) $ (2,332 ) $ (2,595 )
Nine
Months Ended September 30, 2010 VITAS Roto-Rooter
Corporate Consolidated Selling, general and
administrative expenses: Legal expenses of OIG investigation $ (390
) $ - $ - $ (390 ) Expenses of class action litigation - (427 ) -
(427 ) Stock option expense - - (6,365 ) (6,365 ) Long-term
incentive compensation - - (1,799 ) (1,799 ) Interest expense:
Additional interest expense resulting from the change in accounting
for the conversion feature of the convertible notes -
- (5,064 ) (5,064 ) Pretax impact on
earnings (390 ) (427 ) (13,228 ) (14,045 ) Income tax benefit on
the above 148 170 4,875
5,193 After-tax impact on earnings $ (242 ) $ (257 )
$ (8,353 ) $ (8,852 ) (c)
Under Generally Accepted Accounting
Principles ("GAAP"), the Roto-Rooter segment expenses all
advertising, including the cost of telephone directories,
immediately upon the initial release of the advertising. Telephone
directories are generally in circulation 12 months. If a directory
is in circulation for a time period greater or less than 12 months,
the publisher adjusts the directory billing for the change in
billing period. The timing of when a telephone directory is
published can and does fluctuate significantly on a quarterly
basis. This "direct expensing" results in significant fluctuations
in quarterly advertising expense. In the third quarters of 2011 and
2010, GAAP advertising expense for Roto-Rooter totaled $5,239,000
and $5,579,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the third quarters of 2011 and 2010 would
total $5,824,000 and $6,150,000, respectively.
Similarly, for the first nine months of
2011 and 2010, GAAP advertising expense for Roto-Rooter totaled
$16,461,000 and $16,815,00, respectively. If the expense of the
telephone directories were spread over the periods they are in
circulation, advertising expense for the first nine months of 2011
and 2010 would total $17,903,000 and $18,454,000, respectively.
(d)
VITAS has 7 large (greater than 450 ADC),
17 medium (greater than 200 but less than 450 ADC) and 28 small
(less than 200 ADC) hospice programs. For the current cap year
there is one program with a small cap liability and three programs
with Medicare cap cushion of less than 10%.
(e)
Amounts exclude indirect patient care and
administrative costs, as well as Medicare Cap billing
limitation.
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