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, 2011, versus the comparable prior-year period, as follows:
Consolidated operating results:
- Revenue increased 4.2% to $350
million
- GAAP Diluted EPS increased 33.7% to
$1.31
- Adjusted Diluted EPS increased 19.8% to
$1.45
VITAS segment operating results:
- Net Patient Revenue of $255 million, an
increase of 5.1%
- Average Daily Census (ADC) of 13,724,
an increase of 4.9%
- Admissions of 15,191, an increase of
2.8%
- Net Income of $22.7 million, a decrease
of 2.6%
- Adjusted EBITDA of $40.0 million, a
decrease of 5.2%
- Adjusted EBITDA margin of 15.7%, a
decrease of 171 basis points
Roto-Rooter segment operating results:
- Revenue of $95.7 million, an increase
of 1.8%
- Unit-for-unit job count of 165,841, a
decrease of 0.2%
- Net Income of $9.3 million, an increase
of 27.6%
- Adjusted EBITDA of $17.8 million, an
increase of 12.0%
- Adjusted EBITDA margin of 18.7%, an
increase of 169 basis points
VITAS
Net revenue for VITAS was $255 million in the fourth quarter of
2011, which is an increase of 5.1% over the prior-year period.
Excluding the impact of Medicare Cap, revenue increased 5.7%. This
revenue growth was the result of increased ADC of 4.9%, driven by
an increase in admissions of 2.8% and Medicare price increases of
approximately 2.5%. 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 $203.68, which is 0.7% above the
prior-year period. Routine home care reimbursement and high acuity
care averaged $161.90 and $707.89, respectively, per patient per
day in the fourth quarter of 2011. During the quarter, high acuity
days of care were 7.6% of total days of care, 27 basis points lower
than the prior-year quarter.
In the fourth quarter of 2011, VITAS recorded a Medicare Cap
liability of $2.6 million. This compares to $1.1 million of
Medicare Cap liability recorded in the fourth quarter of 2010. 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 or seasonal admission and
discharge patterns. Based upon actual January 2012 admissions,
VITAS anticipates reversing a significant portion of this Medicare
Cap liability in the first quarter of 2012.
Of VITAS’ 37 unique Medicare provider numbers, 32 provider
numbers have a Medicare Cap cushion of 10% or greater during the
trailing twelve-month period; two provider numbers have a Medicare
Cap cushion between 5% to 10%; and three provider numbers have a
cap cushion between 0% and 5%. VITAS generated an aggregate cap
cushion of $218 million during the trailing twelve-month
period.
The fourth quarter of 2011 gross margin, excluding the impact of
Medicare Cap, was 23.8%, which is a decline of 155 basis points
from the fourth 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 $18.3 million in
the fourth quarter of 2011, which is a decrease of 2.8% when
compared to the prior-year quarter. Adjusted EBITDA totaled
$40.0 million in the quarter, a decrease of 5.2% over the
prior-year period. Adjusted EBITDA margin, excluding the impact
from Medicare Cap, was 16.6% in the quarter which was 122 basis
points below the prior-year quarter.
Roto-Rooter
Roto-Rooter’s plumbing and drain cleaning business generated
sales of $95.7 million for the fourth quarter of 2011, an increase
of 1.8% over the prior-year quarter. This revenue growth was the
result of a combination of selective price increases and favorable
mix shift, partially offset by a slight decline in aggregate job
count.
Unit-for-unit job count in the fourth quarter of 2011 declined
0.2% when compared to the prior-year period. During the fourth
quarter of 2011, total residential jobs decreased 2.6%, as
residential plumbing jobs increased 5.6% and residential drain
cleaning jobs decreased 6.6%, when compared to the fourth quarter
of 2010. Residential jobs represented 70% of total job count in the
quarter. Total commercial jobs increased 5.7%, with commercial
plumbing/excavation job count increasing 10.8% and commercial drain
cleaning increasing 4.3% 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 6.1%.
Roto-Rooter’s gross margin was 45.4% in the quarter, a 228 basis
point increase when compared to the fourth quarter of 2010.
Adjusted EBITDA in the fourth quarter of 2011 totaled
$17.8 million, an increase of 12.0%, and the Adjusted EBITDA
margin was 18.7% in the quarter, an increase of 169 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 $167 million at December 31, 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 December
31, 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 in 2011 aggregated $29.6 million and
compares to depreciation and amortization during the same period of
$29.5 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 $144 million, or 2,602,513 shares, of Chemed stock in
2011. As of December 31, 2011, $75.3 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
2012
VITAS expects to achieve full-year 2012 revenue growth, prior to
Medicare Cap, of 5.0% to 8.0%. Admissions in 2012 are estimated to
increase approximately 2.5% 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, 2011, Medicare increased the average
hospice reimbursement rates by approximately 2.5%. Our guidance
assumes VITAS will incur $5.0 million of estimated Medicare
contractual billing limitations for calendar year 2012.
Roto-Rooter expects to achieve full-year 2012 revenue growth of
4.0% to 5.0%. The revenue estimate is a result of increased pricing
of approximately 2%, a favorable mix shift to higher revenue jobs,
with job count growth estimated at 0% to 1.5%. Adjusted EBITDA
margin for 2012 is estimated in the range of 17.0% to 18.0%.
Based upon the above, management estimates 2012 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 $5.35 to $5.55. This compares to Chemed’s 2011
adjusted earnings per diluted share of $4.78.
Conference
Call
Chemed will host a conference call and webcast at 10 a.m., ET,
on Wednesday, February 15, 2012, 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) 203-3436 for U.S. and
Canadian participants and (617) 213-8849 for international
participants. The participant passcode is 77396059. 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 43136718. 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 13,500 patients with severe,
life-limiting illnesses. This type of care is focused on making the
terminally ill patient's final days as comfortable and pain-free as
possible.
Chemed operates in the residential and commercial plumbing and
drain cleaning industry under the brand name Roto-Rooter.
Roto-Rooter provides plumbing 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,
2011 2010
2011
2010 Service revenues and sales
$ 350,253 $
336,286
$ 1,355,970 $ 1,280,545
Cost of services provided and goods sold
248,366 235,262
970,484 906,016 Selling, general and administrative expenses
(aa)
48,564 55,270
202,260 201,964 Depreciation
6,288 6,338
25,247 24,386 Amortization
1,009 950
4,252
4,657 Total costs and expenses
304,227
297,820
1,202,243
1,137,023 Income from operations
46,026 38,466
153,727 143,522 Interest expense
(3,628 )
(3,013 )
(13,888 ) (11,959 ) Other
income/(expense)--net (bb)
(164 ) 1,850
717 2,268 Income before
income taxes
42,234 37,303
140,556 133,831 Income
taxes
(16,529 ) (14,673 )
(54,577 ) (52,000 ) Net income
$
25,705 $ 22,630
$ 85,979
$ 81,831
Earnings Per Share Net income
$ 1.34 $ 1.00
$ 4.19
$ 3.62
Average number of shares outstanding
19,237 22,534
20,523 22,587
Diluted
Earnings Per Share Net income
$ 1.31 $
0.98
$ 4.10 $ 3.55 Average
number of shares outstanding
19,556
23,070
20,945 23,031
(aa)
Selling, general and administrative
("SG&A") expenses comprise (in thousands):
For the Three Months Ended For the Years Ended December 31,
December 31,
2011 2010
2011 2010
SG&A expenses before long-term
incentivecompensation and the impact of market valuegains of
deferred compensation plans
$ 48,561 $ 50,473
$ 198,449 $ 195,020
Market value gains on assets held in
deferredcompensation trusts
3 1,862
799 2,210 Long-term incentive compensation
- 2,935
3,012
4,734
Total SG&A expenses
$
48,564
$
55,270
$
202,260
$
201,964
(bb) Other income/(expense)--net comprises (in thousands):
For the Three Months Ended For the Years Ended December 31,
December 31,
2011 2010
2011 2010 Loss on disposal of
property and equipment
$ (373 ) $ (132 )
$ (441 ) $ (425 ) Interest income
229
110
426 444
Market value gains on assets held in
deferredcompensation trusts
3 1,862
799 2,210 Other
(23 )
10
(67 ) 39
Total other income/(expense)--net
$ (164 ) $ 1,850
$ 717
$ 2,268
CHEMED CORPORATION AND SUBSIDIARY
COMPANIES
CONSOLIDATED BALANCE SHEET (in thousands, except per share
data)(unaudited)
December 31,
2011 2010
Assets Current assets
Cash and cash equivalents
$ 38,081 $ 49,917 Accounts
receivable less allowances
77,924 112,999 Inventories
8,668 7,728 Current deferred income taxes
12,540
15,098 Prepaid income taxes
2,131 770 Prepaid expenses
11,409 10,285 Total current
assets
150,753 196,797 Investments of deferred compensation
plans held in trust
31,629 28,304 Properties and equipment,
at cost less accumulated depreciation
82,951 79,292
Identifiable intangible assets less accumulated amortization
58,262 57,858 Goodwill
460,633 458,343 Other assets
11,677 9,567 Total Assets
$ 795,905 $ 830,161
Liabilities Current liabilities Accounts payable
$
48,225 $ 55,829 Income taxes
90 1,161 Accrued
insurance
37,147 36,492 Accrued compensation
41,087
39,719 Other current liabilities
18,851
16,141 Total current liabilities
145,400 149,342
Deferred income taxes
29,463 25,085 Long-term debt
166,784 159,208 Deferred compensation liabilities
30,693 27,851 Other liabilities
9,881
6,626 Total Liabilities
382,221
368,112
Stockholders' Equity Capital
stock
30,937 30,382 Paid-in capital
398,094 365,007
Retained earnings
546,757 473,316 Treasury stock, at cost
(564,091 ) (408,615 ) Deferred compensation payable
in Company stock
1,987 1,959
Total Stockholders' Equity
413,684
462,049 Total Liabilities and Stockholders' Equity
$
795,905 $ 830,161
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS (in
thousands)(unaudited)
For the Years Ended December 31,
2011 2010
Cash Flows from Operating Activities Net income $
85,979 $ 81,831 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization
29,499 29,043 Provision for uncollectible
accounts receivable
8,563 9,078 Stock option expense
8,376 7,762 Amortization of discount on convertible notes
7,576 7,081 Provision for deferred income taxes
7,242
(2,409 ) Noncash long-term incentive compensation
2,595
4,161 Amortization of debt issuance costs
1,137 654 Changes
in operating assets and liabilities, excluding amounts acquired in
business combinations: Decrease/(increase) in accounts receivable
26,896 (68,656 ) Increase in inventories
(940
) (151 ) Decrease/(increase) in prepaid expenses
(1,124 ) 332 Increase/(decrease) in accounts payable
and other current liabilities
(1,397 ) 13,810
Increase in income taxes
2,708 4,825 Increase in other
assets
(4,009 ) (4,398 ) Increase in other
liabilities
4,548 5,999 Excess tax benefit on share-based
compensation
(3,854 ) (3,357 ) Other sources
548 407 Net cash provided by operating
activities
174,343 86,012
Cash Flows from Investing Activities Capital expenditures
(29,592 ) (25,639 ) Business combinations, net of
cash acquired
(3,664 ) (9,469 ) Other uses
(858 ) (592 ) Net cash used by investing
activities
(34,114 ) (35,700 )
Cash
Flows from Financing Activities Purchases of treasury stock
(147,886 ) (109,330 ) Dividends paid
(12,538
) (11,881 ) Proceeds from exercise of stock options
8,036 5,327 Excess tax benefit on share-based compensation
3,854 3,357 Debt issuance costs
(2,657 ) -
Increase/(decrease) in cash overdraft payable
(826 )
(581 ) Other sources
(48 ) 297
Net cash used by financing activities
(152,065
) (112,811 )
Increase/(Decrease) in Cash and Cash
Equivalents (11,836 ) (62,499 ) Cash and cash
equivalents at beginning of year
49,917
112,416 Cash and cash equivalents at end of year $
38,081 $ 49,917
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31,
2011 AND 2010 (in thousands)(unaudited)
Chemed VITAS Roto-Rooter
Corporate Consolidated
2011
Service revenues and sales
$ 254,560 $ 95,693 $ - $ 350,253 Cost
of services provided and goods sold 196,084 52,282 - 248,366
Selling, general and administrative
expenses (a)
18,306 26,347 3,911 48,564 Depreciation 4,094 2,063 131 6,288
Amortization 384 156 469
1,009 Total costs and expenses 218,868
80,848 4,511 304,227
Income/(loss) from operations 35,692 14,845 (4,511 ) 46,026
Interest expense (a) (57 ) (84 ) (3,487 ) (3,628 ) Intercompany
interest income/(expense) 735 394 (1,129 ) - Other
income/(expense)—net 59 (233 ) 10
(164 ) Income/(loss) before income taxes 36,429
14,922 (9,117 ) 42,234 Income taxes (a) (13,755 )
(5,661 ) 2,887 (16,529 ) Net income/(loss) $
22,674 $ 9,261 $ (6,230 ) $ 25,705
2010
Service revenues and sales
$ 242,268 $ 94,018 $ - $ 336,286 Cost
of services provided and goods sold 181,747 53,515 - 235,262
Selling, general and administrative expenses (b) 18,836 27,208
9,226 55,270 Depreciation 4,252 1,949 137 6,338 Amortization
486 126 338 950
Total costs and expenses 205,321 82,798
9,701 297,820 Income/(loss) from
operations 36,947 11,220 (9,701 ) 38,466 Interest expense (b) (4 )
(46 ) (2,963 ) (3,013 ) Intercompany interest income/(expense) 854
486 (1,340 ) - Other income/(expense)—net (80 ) 18
1,912 1,850 Income/(loss) before
income taxes 37,717 11,678 (12,092 ) 37,303 Income taxes (b)
(14,445 ) (4,421 ) 4,193 (14,673 ) Net
income/(loss) $ 23,272 $ 7,257 $ (7,899 ) $ 22,630
The "Footnotes to Financial Statements" are integral
parts of this financial information.
CHEMED CORPORATION AND SUBSIDIARY
COMPANIES CONSOLIDATING STATEMENT OF INCOME FOR THE
YEARS ENDED DECEMBER 31, 2011 AND 2010 (in
thousands)(unaudited) Chemed VITAS
Roto-Rooter Corporate Consolidated
2011
Service revenues and sales $ 986,272 $ 369,698 $ -
$ 1,355,970 Cost of services provided and goods sold
766,732 203,752 - 970,484 Selling, general and administrative
expenses (a) 75,698 102,528 24,034 202,260 Depreciation 16,583
8,130 534 25,247 Amortization 1,897 599
1,756 4,252 Total costs and expenses
860,910 315,009 26,324
1,202,243 Income/(loss) from operations 125,362
54,689 (26,324 ) 153,727 Interest expense (a) (229 ) (358 ) (13,301
) (13,888 ) Intercompany interest income/(expense) 3,998 2,136
(6,134 ) - Other income/(expense)—net 62 (235
) 890 717 Income/(loss) before income
taxes 129,193 56,232 (44,869 ) 140,556 Income taxes (a)
(48,835 ) (21,353 ) 15,611 (54,577 )
Net income/(loss) $ 80,358 $ 34,879 $ (29,258 ) $
85,979
2010
Service revenues and sales $ 925,810 $ 354,735 $ -
$ 1,280,545 Cost of services provided and goods sold
709,094 196,922 - 906,016 Selling, general and administrative
expenses (b) 73,755 100,731 27,478 201,964 Depreciation 16,161
7,775 450 24,386 Amortization 2,739 514
1,404 4,657 Total costs and expenses
801,749 305,942 29,332
1,137,023 Income/(loss) from operations 124,061
48,793 (29,332 ) 143,522 Interest expense (b) (131 ) (233 ) (11,595
) (11,959 ) Intercompany interest income/(expense) 4,632 2,612
(7,244 ) - Other income/(expense)—net (165 ) 53
2,380 2,268 Income/(loss) before
income taxes 128,397 51,225 (45,791 ) 133,831 Income taxes (b)
(48,601 ) (19,547 ) 16,148
(52,000 ) Net income/(loss) $ 79,796 $ 31,678 $
(29,643 ) $ 81,831 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, 2011 AND 2010 (in
thousands)(unaudited)
Chemed VITAS Roto-Rooter
Corporate Consolidated
2011
Net income/(loss)
$ 22,674 $ 9,261 $ (6,230 ) $ 25,705 Add/(deduct): Interest expense
57 84 3,487 3,628 Income taxes 13,755 5,661 (2,887 ) 16,529
Depreciation 4,094 2,063 131 6,288 Amortization 384
156 469 1,009 EBITDA 40,964
17,225 (5,030 ) 53,159 Add/(deduct): Intercompany interest
expense/(income) (735 ) (394 ) 1,129 - Interest income (208 ) (12 )
(9 ) (229 ) Legal expenses of OIG investigation (21 ) - - (21 )
Acquisition expenses 30 (20 ) - 10 Costs related to litigation
settlements - 848 - 848 Advertising cost adjustment (c) - 202 - 202
Stock option expense - - 1,473
1,473 Adjusted EBITDA $ 40,030 $ 17,849
$ (2,437 ) $ 55,442
2010
Net income/(loss) $ 23,272 $ 7,257 $ (7,899 ) $ 22,630
Add/(deduct): Interest expense 4 46 2,963 3,013 Income taxes 14,445
4,421 (4,193 ) 14,673 Depreciation 4,252 1,949 137 6,338
Amortization 486 126 338
950 EBITDA 42,459 13,799 (8,654 ) 47,604
Add/(deduct): Intercompany interest expense/(income) (854 ) (486 )
1,340 - Interest income (48 ) (12 ) (50 ) (110 ) Legal expenses of
OIG investigation 622 - - 622 Acquisition expenses 68 256 - 324
Costs related to litigation settlements - 1,426 - 1,426 Advertising
cost adjustment (c) - 960 - 960 Long-term incentive compensation -
- 2,935 2,935 Stock option expense - -
1,397 1,397 Adjusted EBITDA $ 42,247
$ 15,943 $ (3,032 ) $ 55,158 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, 2011 AND 2010
(in thousands)(unaudited)
Chemed VITAS Roto-Rooter
Corporate Consolidated
2011
Net income/(loss) $ 80,358 $ 34,879 $ (29,258 ) $ 85,979
Add/(deduct): Interest expense 229 358 13,301 13,888 Income taxes
48,835 21,353 (15,611 ) 54,577 Depreciation 16,583 8,130 534 25,247
Amortization 1,897 599 1,756
4,252 EBITDA 147,902 65,319 (29,278 ) 183,943
Add/(deduct): Intercompany interest expense/(income) (3,998 )
(2,136 ) 6,134 - Interest income (295 ) (40 ) (91 ) (426 ) Legal
expenses of OIG investigation 1,188 - - 1,188 Acquisition expenses
147 (26 ) - 121 Costs related to litigation settlements - 2,299 -
2,299 Advertising cost adjustment (c) - (1,240 ) - (1,240 ) Stock
option expense - - 8,376 8,376 Long-term incentive compensation
- - 3,012 3,012
Adjusted EBITDA $ 144,944 $ 64,176 $ (11,847 )
$ 197,273
2010
Net income/(loss) $ 79,796 $ 31,678 $ (29,643 ) $ 81,831
Add/(deduct): Interest expense 131 233 11,595 11,959 Income taxes
48,601 19,547 (16,148 ) 52,000 Depreciation 16,161 7,775 450 24,386
Amortization 2,739 514 1,404
4,657 EBITDA 147,428 59,747 (32,342 ) 174,833
Add/(deduct): Intercompany interest expense/(income) (4,632 )
(2,612 ) 7,244 - Interest income (220 ) (49 ) (175 ) (444 ) Legal
expenses of OIG investigation 1,012 - - 1,012 Acquisition expenses
68 256 - 324 Costs related to litigation settlements - 1,853 -
1,853 Advertising cost adjustment (c) - (679 ) - (679 ) Stock
option expense - - 7,762 7,762 Long-term incentive compensation
- - 4,734 4,734
Adjusted EBITDA $ 143,656 $ 58,516 $ (12,777 )
$ 189,395 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) For the Three
Months Ended For the Years Ended December 31, December 31,
2011 2010
2011 2010 Net income as reported
$
25,705 $ 22,630
$ 85,979 $ 81,831
Add/(deduct) impact of: After-tax additional interest expense
resulting from the change in accounting for the conversion feature
of the convertible notes
1,200 1,110
4,664 4,313
After-tax stock option expense
932 883
5,298 4,909
After-tax cost of costs related to litigation settlements
516 869
1,397 1,126 After-tax cost of legal expenses
of OIG investigation
(12 ) 385
737 627
After-tax cost of acquisition expenses
6 198
75 198
After-tax long-term incentive compensation
-
1,833
1,880 2,957 Adjusted net income
$ 28,347 $ 27,908
$ 100,030 $
95,961 Earnings Per Share As Reported Net income
$ 1.34 $ 1.00
$ 4.19 $ 3.62
Average number of shares outstanding
19,237
22,534
20,523 22,587 Diluted Earnings
Per Share As Reported Net income
$ 1.31 $ 0.98
$ 4.10 $ 3.55 Average number of shares outstanding
19,556 23,070
20,945
23,031 Adjusted Earnings Per Share Net income
$ 1.47 $ 1.24
$ 4.87 $ 4.25
Average number of shares outstanding
19,237
22,534
20,523 22,587 Adjusted Diluted
Earnings Per Share Net income
$ 1.45 $ 1.21
$ 4.78 $ 4.17 Average number of shares outstanding
19,556 23,070
20,945
23,031 The "Footnotes to Financial Statements" are
integral parts of this financial information.
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES OPERATING STATISTICS FOR VITAS
SEGMENT (unaudited) For the Three
Months Ended For the Years Ended December 31, December 31,
OPERATING STATISTICS
2011 2010
2011 2010 Net revenue
($000) (d) Homecare
$ 188,782 $ 176,517
$
718,658 $ 666,562 Inpatient
27,882 27,344
110,742 105,588 Continuous care
40,516
39,463
158,466 153,050
Total before Medicare cap allowance
$ 257,180
$ 243,324
$ 987,866 $ 925,200 Medicare cap allowance
(2,620 ) (1,056 )
(1,594
) 610 Total
$ 254,560 $
242,268
$ 986,272 $ 925,810 Net
revenue as a percent of total before Medicare cap allowance
Homecare
73.4 % 72.6 %
72.7 % 72.0 %
Inpatient
10.8 11.2
11.2 11.4 Continuous care
15.8 16.2
16.1
16.6 Total before Medicare cap allowance
100.0
100.0
100.0 100.0 Medicare cap allowance
(1.0
) (0.4 )
(0.2 ) (0.1 )
Total
99.0 % 99.6 %
99.8 % 99.9 % Average daily census
("ADC") (days) Homecare
9,582 8,851
9,285 8,476
Nursing home
3,092 3,193
3,069 3,207 Routine homecare
12,674 12,044
12,354 11,683 Inpatient
443 436
449 434 Continuous care
607 600
603 596 Total
13,724 13,080
13,406
12,713 Total Admissions
15,191
14,776
60,162 58,526 Total Discharges
15,289 15,038
60,393 57,817 Average length of stay (days)
79.0 80.8
78.8 78.1 Median length of stay (days)
14.0 15.0
14.0 14.0 ADC by major diagnosis Neurological
34.0
% 33.9 %
34.4 % 33.6 % Cancer
17.8 18.3
17.7 18.4 Cardio
11.3 11.7
11.5 11.9
Respiratory
6.4 6.6
6.7 6.6 Other
30.5
29.5
29.7 29.5
Total
100.0 % 100.0 %
100.0 % 100.0 % Admissions by
major diagnosis Neurological
19.4 % 19.5 %
19.4 % 18.8 % Cancer
34.4 34.4
33.5
34.5 Cardio
10.8 11.0
10.8 11.3 Respiratory
7.6 7.4
8.3 8.0 Other
27.8
27.7
28.0 27.4
Total
100.0 % 100.0 %
100.0 % 100.0 % Direct patient care
margins (e) Routine homecare
53.2 %
54.0
%
52.3 % 52.8 % Inpatient
13.1 14.4
12.9 13.6 Continuous care
19.9 22.6
20.3 21.4
Homecare margin drivers (dollars per patient day) Labor costs
$ 52.92 $ 51.97
$ 53.63 $ 52.57 Drug
costs
8.31 7.89
8.19 7.81 Home medical equipment
6.78 5.84
6.69 6.48 Medical supplies
2.79 2.67
2.80 2.56 Inpatient margin drivers (dollars per patient day)
Labor costs
$ 320.43 $ 305.19
$ 312.78
$ 299.54 Continuous care margin drivers (dollars per patient day)
Labor costs
$ 559.11 $ 533.32
$ 552.38
$ 531.69 Bad debt expense as a percent of revenues
0.6
% 0.7 %
0.7 % 0.9 % Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments
36.7 38.2
n.a. n.a. Days of revenue outstanding-
including unapplied Medicare payments
22.3 36.5
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 MONTHS
AND YEARS ENDED DECEMBER 31, 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):
For the Three Months Ended December 31, 2011 VITAS
Roto-Rooter Corporate Consolidated Selling,
general and administrative expenses: Legal expenses of OIG
investigation $ 21 $ - $ - $ 21 Acquisition expenses (30 ) 20 - (10
) Costs related to litigation settlements - (848 ) - (848 ) Stock
option expense - - (1,473 ) (1,473 ) Interest expense: Additional
interest expense resulting from the change in accounting for the
conversion feature of the convertible notes -
- (1,898 ) (1,898 ) Pretax impact on earnings
(9 ) (828 ) (3,371 ) (4,208 ) Income tax benefit on the above
3 324 1,239 1,566
After-tax impact on earnings $ (6 ) $ (504 ) $ (2,132 ) $
(2,642 )
For the Years Ended December 31, 2011
VITAS Roto-Rooter Corporate
Consolidated Selling, general and administrative expenses:
Legal expenses of OIG investigation $ (1,188 ) $ - $ - $ (1,188 )
Acquisition expenses (147 ) 26 - (121 ) Costs related to litigation
settlements - (2,299 ) - (2,299 ) Stock option expense - - (8,376 )
(8,376 ) 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 - - (7,374 ) (7,374
) Pretax impact on earnings (1,335 ) (2,273 ) (18,762 ) (22,370 )
Income tax benefit on the above 507 892
6,920 8,319 After-tax impact on
earnings $ (828 ) $ (1,381 ) $ (11,842 ) $ (14,051 )
(b)
Included in the results of operations 2010
are the following significant credits/(charges) which may not be
indicative of ongoing operations (in thousands):
For the Three Months Ended December 31, 2010 VITAS
Roto-Rooter Corporate Consolidated Selling,
general and administrative expenses: Legal expenses of OIG
investigation $ (622 ) $ - $ - $ (622 ) Acquisition expenses (68 )
(256 ) - (324 ) Costs related to litigation settlements - (1,426 )
- (1,426 ) Long-term incentive compensation - - (2,935 ) (2,935 )
Stock option expense - - (1,397 ) (1,397 ) Interest expense:
Additional interest expense resulting from the change in accounting
for the conversion feature of the convertible notes -
- (1,756 ) (1,756 ) Pretax impact on
earnings (690 ) (1,682 ) (6,088 ) (8,460 ) Income tax benefit on
the above 263 657 2,262
3,182 After-tax impact on earnings $ (427 ) $ (1,025
) $ (3,826 ) $ (5,278 )
For the Years Ended December 31,
2010 VITAS Roto-Rooter Corporate
Consolidated Selling, general and administrative expenses:
Legal expenses of OIG investigation $ (1,012 ) $ - $ - $ (1,012 )
Acquisition expenses (68 ) (256 ) - (324 ) Costs related to
litigation settlements - (1,853 ) - (1,853 ) Stock option expense -
- (7,762 ) (7,762 ) Long-term incentive compensation - - (4,734 )
(4,734 ) Interest expense: Additional interest expense resulting
from the change in accounting for the conversion feature of the
convertible notes - - (6,820 )
(6,820 ) Pretax impact on earnings (1,080 ) (2,109 ) (19,316
) (22,505 ) Income tax benefit on the above 411
827 7,137 8,375 After-tax
impact on earnings $ (669 ) $ (1,282 ) $ (12,179 ) $ (14,130 )
(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 2011
and 2010, GAAP advertising expense for Roto-Rooter totaled
$6,073,000 and $7,034,000, respectively. If the expense of the
telephone directories were spread over the periods they are in
circulation, advertising expense for the fourth quarters of 2011
and 2010 would total $5,871,000 and $6,074,000, respectively.
Similarly, for the years ended December
31, 2011 and 2010, GAAP advertising expense for Roto-Rooter totaled
$22,534,000 and $23,849,00, respectively. If the expense of the
telephone directories were spread over the periods they are in
circulation, advertising expense for years ended December 31, 2011
and 2010, would total $23,774,000 and $24,528,000,
respectively.
(d)
VITAS has 8 large (greater than 450 ADC),
16 medium (greater than 200 but less than 450 ADC) and 28 small
(less than 200 ADC) hospice programs. For the current cap year
there are three programs with a cap liabilities and six programs
with Medicare cap cushions of less than 10%.
(e) Amounts exclude indirect patient care and administrative
costs, as well as Medicare Cap billing limitation.
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