Chemed Reports Second-Quarter 2019 Results

Date : 07/25/2019 @ 8:15PM
Source : Business Wire
Stock : Chemed Corporation (CHE)
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Chemed Reports Second-Quarter 2019 Results

Chemed (NYSE:CHE)
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6 Months : From Jun 2019 to Dec 2019

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Chemed Corporation (Chemed) (NYSE: CHE), which operates VITAS Healthcare Corporation (VITAS), one of the nation’s largest providers of end-of-life care, and Roto-Rooter, the nation’s largest commercial and residential plumbing and drain cleaning services provider, reported financial results for its second quarter ended June 30, 2019, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 7.2% to $474 million
  • GAAP Diluted Earnings-per-Share (EPS) of $3.08
  • Adjusted Diluted EPS of $3.36, an increase of 19.6%

VITAS segment operating results:

  • Net Patient Revenue of $313 million, an increase of 5.4%
  • Average Daily Census (ADC) of 18,681, an increase of 5.9%
  • Admissions of 17,491, an increase of 3.8%
  • Net Income, excluding certain discrete items, of $38.6 million, an increase of 21.5%
  • Adjusted EBITDA, excluding cap, of $54.8 million, an increase of 25.6%

Roto-Rooter segment operating results:

  • Revenue of $161 million, an increase of 10.9%
  • Net Income, excluding certain discrete items, of $27.5 million, an increase of 8.7%
  • Adjusted EBITDA of $38.8 million, an increase of 6.2%
  • Adjusted EBITDA margin of 24.1%, a decrease of 107-basis points

VITAS

VITAS net revenue was $313 million in the second quarter of 2019, which is an increase of 5.4%, when compared to the prior-year period. This revenue increase is comprised primarily of a geographically weighted average Medicare reimbursement rate increase of approximately 0.5% and a 5.9% increase in days-of-care. This growth was partially offset by a Medicare Cap billing limitation that reduced revenue growth by 0.9% as well as the combination of acuity mix shift, fluctuations in net room and board and contractual adjustments, the combination of which negatively impacted revenue growth approximately 0.3%, when compared to the prior-year period.

In the second quarter of 2019, VITAS accrued $3.2 million in Medicare Cap billing limitations, of which $847,000 relates to prior years Medicare Cap redeterminations. At June 30, 2019, VITAS had 30 Medicare provider numbers, three of which have an estimated 2019 calendar year Medicare Cap billing limitation of approximately $9 million.

Of VITAS’ 30 Medicare provider numbers, on a trailing 12-month basis, 23 provider numbers have a Medicare Cap cushion of 10% or greater, two provider numbers have a cap cushion between 5% and 10%, two provider numbers have a cap cushion between 0% and 5%, and three provider numbers have a Medicare Cap billing limitation.

Average revenue per patient per day in the quarter was $189.64, which is 0.5% above the prior-year period. Reimbursement for routine home care and high acuity care averaged $165.00 and $751.12, respectively. During the quarter, high acuity days-of-care were 4.2% of total days of care, 7-basis points less than the prior-year quarter.

The second quarter of 2019 gross margin, excluding Medicare Cap, was 23.7%, which is a 208-basis point increase when compared to the second quarter of 2018.

Selling, general and administrative expense was $21.7 million in the second quarter of 2019, which is an increase of 4.7% compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $54.8 million in the quarter, an increase of 25.6%. Adjusted EBITDA margin, excluding Medicare Cap, was 17.3% in the quarter, which is a 267-basis point increase when compared to the prior-year period.

Roto-Rooter

Roto-Rooter generated quarterly revenue of $161 million for the second quarter of 2019, an increase of $15.8 million, or 10.9%, over the prior-year quarter. Revenue from the water restoration service segment totaled $28.2 million, an increase of 14.0%, when compared to the prior-year quarter. Approximately 90% of the water restoration revenue is generated from residential customers and the remaining 10% is generated from commercial accounts.

Commercial drain cleaning revenue increased 9.9%, commercial plumbing and excavation increased 11.9% and commercial water restoration increased 16.2%. Overall, commercial revenue increased 11.0%.

Residential drain cleaning increased 7.7%, plumbing and excavation increased 9.6% and residential water restoration increased 13.8%. Aggregate residential sales increased 9.9%.

Roto-Rooter’s gross margin in the quarter was 48.7%, a 121-basis point decline when compared to the second quarter of 2018. Adjusted EBITDA in the second quarter of 2019 totaled $38.8 million, an increase of 6.2%. The Adjusted EBITDA margin in the quarter was 24.1% which is a 107-basis point decline over the prior year.

Chemed Consolidated

As of June 30, 2019, Chemed had total cash and cash equivalents of $3 million and debt of $85 million.

In June 2018, Chemed entered into a five-year Amended and Restated Credit Agreement that consists of a $450 million revolving credit facility. The interest rate on this facility has a floating rate that is currently LIBOR plus 100-basis points. At June 30, 2019, the Company had approximately $327 million of undrawn borrowing capacity under this credit agreement.

During the quarter, the Company repurchased 69,009 shares of Chemed stock for $22.7 million, which equates to a cost per share of $328.59. On February 22, 2019, Chemed’s Board of Directors authorized an additional $150 million for stock repurchase under Chemed’s existing share repurchase program. As of June 30, 2019, there was approximately $125 million of remaining share repurchase authorization under this plan.

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

Updated Guidance for 2019

Chemed will issue updated guidance in August 2019 following the Centers for Medicare and Medicaid Services (CMS) publishing the final rule on the Fiscal Year 2020 Hospice Wage Index and Payment Rate update.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Friday, July 26, 2019, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (844) 743-2500 for U.S. and Canadian participants and +1 (661) 378-9533 for international participants. The Conference ID is 1109197. A live webcast of the call can be accessed on Chemed's website at www.chemed.com by clicking on Investor Relations Home.

A taped replay of the conference call will be available beginning approximately 24 hours after the call's conclusion. It can be accessed by dialing (855) 859-2056 for U.S. and Canadian callers and +1 (404) 537-3406 for international callers and will be available for one week following the live call. The replay Conference ID is 1109197. 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 18,500 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, drain cleaning, and water cleanup services through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in the republics of Indonesia and Singapore, and the Philippines.

This press release contains information about Chemed’s EBITDA, Adjusted EBITDA and Adjusted Diluted EPS, which are not measures derived in accordance with GAAP and which exclude components that are important to understanding Chemed’s financial performance. In reporting its operating results, Chemed provides EBITDA, Adjusted EBITDA and Adjusted Diluted EPS measures to help investors and others evaluate the Company’s operating results, compare its operating performance with that of similar companies that have different capital structures and evaluate its ability to meet its future debt service, capital expenditures and working capital requirements. Chemed’s management similarly uses EBITDA, Adjusted EBITDA and Adjusted Diluted EPS to assist it in evaluating the performance of the Company across fiscal periods and in assessing how its performance compares to its peer companies. These measures also help Chemed’s management to estimate the resources required to meet Chemed’s future financial obligations and expenditures. Chemed’s EBITDA, Adjusted EBITDA and Adjusted Diluted EPS should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. We calculated Adjusted EBITDA Margin by dividing Adjusted EBITDA by service revenue and sales. A reconciliation of Chemed’s net income to its EBITDA, Adjusted EBITDA and Adjusted Diluted EPS is presented in the tables following the text of this press release.

Forward-Looking Statements

Certain statements contained in this press release and the accompanying tables are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope," "anticipate," "plan" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Chemed does not undertake and specifically disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause Chemed's actual results to differ from those expressed in such forward-looking statements.

These risks and uncertainties arise from, among other things, possible changes in regulations governing the hospice care or plumbing and drain cleaning industries; periodic changes in reimbursement levels and procedures under Medicare and Medicaid programs; difficulties predicting patient length of stay and estimating potential Medicare reimbursement obligations; challenges inherent in Chemed's growth strategy; the current shortage of qualified nurses, other healthcare professionals and licensed plumbing and drain cleaning technicians; Chemed’s dependence on patient referral sources; and other factors detailed under the caption "Description of Business by Segment" or "Risk Factors" in Chemed’s most recent report on form 10-Q or 10-K and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share data)(unaudited)  

Three Months Ended June 30,

 

Six Months Ended June 30,

2019

 

2018

 

2019

 

2018

Service revenues and sales

$

 

473,584

 

$

 

441,813

 

$

 

935,618

 

$

 

880,989

 

Cost of services provided and goods sold

323,637

 

305,741

 

645,588

 

610,277

 

Selling, general and administrative expenses (aa)

71,556

 

68,297

 

145,585

 

137,297

 

Depreciation

9,887

 

9,718

 

19,597

 

18,985

 

Amortization

406

 

34

 

925

 

61

 

Other operating (income)/expenses

2,570

 

(118

)

8,923

 

(169

)

Total costs and expenses

408,056

 

383,672

 

820,618

 

766,451

 

Income from operations

65,528

 

58,141

 

115,000

 

114,538

 

Interest expense

(1,237

)

(1,524

)

(2,361

)

(2,731

)

Other income--net (bb)

13

 

1,038

 

2,452

 

2,056

 

Income before income taxes

64,304

 

57,655

 

115,091

 

113,863

 

Income taxes

(13,575

)

(2,684

)

(19,695

)

(13,896

)

Net income

$

 

50,729

 

$

 

54,971

 

$

 

95,396

 

$

 

99,967

 

    Earnings Per Share Net income

$

 

3.18

 

$

 

3.43

 

$

 

5.98

 

$

 

6.22

 

Average number of shares outstanding

15,928

 

16,035

 

15,941

 

16,067

 

  Diluted Earnings Per Share Net income

$

 

3.08

 

$

 

3.27

 

$

 

5.79

 

$

 

5.93

 

Average number of shares outstanding

16,449

 

16,811

 

16,489

 

16,854

 

       

(aa)

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

Three Months Ended June 30,

 

Six Months Ended June 30,

2019

 

2018

 

2019

 

2018

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

$

 

70,300

 

$

 

66,296

 

$

 

140,504

 

$

 

132,517

 

Long-term incentive compensation

1,386

 

1,222

 

2,874

 

3,142

 

Market value gains/(losses) related to deferred compensation trusts

(130

)

779

 

2,207

 

1,638

 

Total SG&A expenses

$

 

71,556

 

$

 

68,297

 

$

 

145,585

 

$

 

137,297

 

 

(bb)

Other income--net comprises (in thousands):

Three Months Ended June 30,

 

Six Months Ended June 30,

2019

 

2018

 

2019

 

2018

  Market value gains/(losses) related to deferred compensation trusts

$

 

(130

)

$

 

779

 

$

 

2,207

 

$

 

1,638

 

Interest income

112

 

259

 

214

 

417

 

Other

31

 

-

 

31

 

1

 

Total other income--net

$

 

13

 

$

 

1,038

 

$

 

2,452

 

$

 

2,056

 

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

June 30,

2019

 

2018

Assets Current assets Cash and cash equivalents

$

 

3,323

 

$

 

12,668

 

Accounts receivable less allowances

136,113

 

119,206

 

Inventories

6,336

 

5,696

 

Prepaid income taxes

12,951

 

19,666

 

Prepaid expenses

21,455

 

16,205

 

Total current assets

180,178

 

173,441

 

Investments of deferred compensation plans held in trust

70,460

 

67,573

 

Properties and equipment, at cost less accumulated depreciation

149,917

 

145,903

 

Assets held for sale

15,750

-

Lease right of use asset

90,755

-

Identifiable intangible assets less accumulated amortization

67,511

 

55,250

 

Goodwill

510,627

 

478,202

 

Other assets

8,874

 

7,845

 

Total Assets

$

 

1,094,072

 

$

 

928,214

 

  Liabilities Current liabilities Accounts payable

$

 

51,143

 

$

 

48,236

 

Accrued insurance

46,912

 

42,826

 

Accrued compensation

50,123

 

49,372

 

Accrued legal

8,431

 

823

 

Short-term lease liability

31,614

 

-

 

Other current liabilities

35,446

 

25,159

 

Total current liabilities

223,669

 

166,416

 

Deferred income taxes

18,828

 

18,811

 

Long-term debt

85,000

 

103,400

 

Deferred compensation liabilities

70,273

 

66,154

 

Long-term lease liability

69,979

 

-

 

Other liabilities

7,754

 

17,042

 

Total Liabilities

475,503

 

371,823

 

  Stockholders' Equity Capital stock

35,591

 

35,141

 

Paid-in capital

817,255

 

744,228

 

Retained earnings

1,311,446

 

1,129,289

 

Treasury stock, at cost

(1,548,138

)

(1,354,538

)

Deferred compensation payable in Company stock

2,415

 

2,271

 

Total Stockholders' Equity

618,569

 

556,391

 

Total Liabilities and Stockholders' Equity

$

 

1,094,072

 

$

 

928,214

 

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

Six Months Ended June 30,

2019

2018

Cash Flows from Operating Activities Net income

$

 

95,396

 

$

 

99,967

 

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization

20,522

 

19,046

 

Stock option expense

8,018

 

7,305

 

Litigation settlement

6,000

 

-

 

(Benefit)/provision for deferred income taxes

(2,769

)

2,173

 

Noncash long-term incentive compensation

2,506

 

2,942

 

Asset impairment loss

2,266

 

-

 

Noncash directors' compensation

767

 

766

 

Amortization of debt issuance costs

153

 

288

 

Amortization of restricted stock awards

-

 

446

 

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

(16,613

)

(6,057

)

Increase in inventories

(631

)

(362

)

Increase in prepaid expenses

(2,301

)

(113

)

Decrease in accounts payable and other current liabilities

(4,175

)

(14,909

)

Change in current income taxes

(2,249

)

10,136

 

Increase in other assets

(4,653

)

(5,667

)

Increase in other liabilities

5,833

 

4,889

 

Other sources

837

 

186

 

Net cash provided by operating activities

108,907

 

121,036

 

Cash Flows from Investing Activities Capital expenditures

(28,312

)

(23,872

)

Business combinations, net of cash acquired

-

 

(1,875

)

Other (uses)/sources

(137

)

533

 

Net cash used by investing activities

(28,449

)

(25,214

)

Cash Flows from Financing Activities Payments on revolving line of credit

(227,000

)

(281,150

)

Proceeds from revolving line of credit

222,800

 

358,350

 

Purchases of treasury stock

(71,926

)

(84,304

)

Proceeds from exercise of stock options

16,517

 

20,209

 

Capital stock surrendered to pay taxes on stock-based compensation

(14,884

)

(21,022

)

Dividends paid

(9,567

)

(9,016

)

Change in cash overdrafts payable

1,710

 

(711

)

Payments on other long-term debt

-

 

(75,000

)

Debt issuance costs

-

 

(968

)

Other sources/(uses)

384

 

(663

)

Net cash used by financing activities

(81,966

)

(94,275

)

(Decrease)/increase in Cash and Cash Equivalents

(1,508

)

1,547

 

Cash and cash equivalents at beginning of year

4,831

 

11,121

 

Cash and cash equivalents at end of year

$

 

3,323

 

$

 

12,668

 

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

 

 

 

 

 

 

Chemed

VITAS

 

Roto-Rooter

 

Corporate

 

Consolidated

2019

Service revenues and sales (a)

$

 

312,750

 

$

 

160,834

 

$

 

-

 

$

 

473,584

 

Cost of services provided and goods sold

241,104

 

82,533

 

-

 

323,637

 

Selling, general and administrative expenses (a)

21,682

 

39,377

 

10,497

 

71,556

 

Depreciation

4,831

 

5,017

 

39

 

9,887

 

Amortization

18

 

388

 

-

 

406

 

Other operating expense (a)

69

 

235

 

2,266

 

2,570

 

Total costs and expenses

267,704

 

127,550

 

12,802

 

408,056

 

Income/(loss) from operations

45,046

 

33,284

 

(12,802

)

65,528

 

Interest expense

(53

)

(100

)

(1,084

)

(1,237

)

Intercompany interest income/(expense)

4,382

 

2,180

 

(6,562

)

-

 

Other income/(expense)—net

101

 

42

 

(130

)

13

 

Income/(loss) before income taxes

49,476

 

35,406

 

(20,578

)

64,304

 

Income taxes (a)

(12,137

)

(8,231

)

6,793

 

(13,575

)

Net income/(loss)

$

 

37,339

 

$

 

27,175

 

$

 

(13,785

)

$

 

50,729

 

 

2018

Service revenues and sales (b)

$

 

296,799

 

$

 

145,014

 

$

 

-

 

$

 

441,813

 

Cost of services provided and goods sold

233,073

 

72,668

 

-

 

305,741

 

Selling, general and administrative expenses (b)

20,702

 

35,909

 

11,686

 

68,297

 

Depreciation

5,050

 

4,628

 

40

 

9,718

 

Amortization

-

 

34

 

-

 

34

 

Other operating income (b)

(67

)

(51

)

-

 

(118

)

Total costs and expenses

258,758

 

113,188

 

11,726

 

383,672

 

Income/(loss) from operations

38,041

 

31,826

 

(11,726

)

58,141

 

Interest expense

(53

)

(92

)

(1,379

)

(1,524

)

Intercompany interest income/(expense)

3,124

 

1,739

 

(4,863

)

-

 

Other income—net

238

 

21

 

779

 

1,038

 

Income/(loss) before income taxes

41,350

 

33,494

 

(17,189

)

57,655

 

Income taxes (b)

(9,565

)

(8,196

)

15,077

 

(2,684

)

Net income/(loss)

$

 

31,785

 

$

 

25,298

 

$

 

(2,112

)

$

 

54,971

 

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

 

 

 

 

 

 

Chemed

VITAS

 

Roto-Rooter

 

Corporate

 

Consolidated

2019

Service revenues and sales (a)

$

 

619,531

 

$

 

316,087

 

$

 

-

 

$

 

935,618

 

Cost of services provided and goods sold

480,847

 

164,741

 

-

 

645,588

 

Selling, general and administrative expenses (a)

43,218

 

78,978

 

23,389

 

145,585

 

Depreciation

9,539

 

9,980

 

78

 

19,597

 

Amortization

35

 

890

 

-

 

925

 

Other operating expense (a)

6,423

 

234

 

2,266

 

8,923

 

Total costs and expenses

540,062

 

254,823

 

25,733

 

820,618

 

Income/(loss) from operations

79,469

 

61,264

 

(25,733

)

115,000

 

Interest expense

(101

)

(194

)

(2,066

)

(2,361

)

Intercompany interest income/(expense)

8,777

 

4,375

 

(13,152

)

-

 

Other income—net

188

 

56

 

2,208

 

2,452

 

Income/(loss) before income taxes

88,333

 

65,501

 

(38,743

)

115,091

 

Income taxes (a)

(21,707

)

(15,339

)

17,351

 

(19,695

)

Net income/(loss)

$

 

66,626

 

$

 

50,162

 

$

 

(21,392

)

$

 

95,396

 

 

2018

Service revenues and sales (b)

$

 

588,813

 

$

 

292,176

 

$

 

-

 

$

 

880,989

 

Cost of services provided and goods sold

460,329

 

149,948

 

-

 

610,277

 

Selling, general and administrative expenses (b)

41,213

 

72,006

 

24,078

 

137,297

 

Depreciation

9,846

 

9,072

 

67

 

18,985

 

Amortization

-

 

61

 

-

 

61

 

Other operating expense (b)

(84

)

(85

)

-

 

(169

)

Total costs and expenses

511,304

 

231,002

 

24,145

 

766,451

 

Income/(loss) from operations

77,509

 

61,174

 

(24,145

)

114,538

 

Interest expense

(104

)

(184

)

(2,443

)

(2,731

)

Intercompany interest income/(expense)

6,218

 

3,417

 

(9,635

)

-

 

Other income—net

380

 

37

 

1,639

 

2,056

 

Income/(loss) before income taxes

84,003

 

64,444

 

(34,584

)

113,863

 

Income taxes (b)

(20,203

)

(16,208

)

22,515

 

(13,896

)

Net income/(loss)

$

 

63,800

 

$

 

48,236

 

$

 

(12,069

)

$

 

99,967

 

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 JUNE 30, 2019 AND 2018 (in thousands)(unaudited)  

 

 

 

 

 

 

Chemed

VITAS

 

Roto-Rooter

 

Corporate

 

Consolidated

2019

Net income/(loss)

$

 

37,339

 

$

 

27,175

 

$

 

(13,785

)

$

 

50,729

 

Add/(deduct): Interest expense

53

 

100

 

1,084

 

1,237

 

Income taxes

12,137

 

8,231

 

(6,793

)

13,575

 

Depreciation

4,831

 

5,017

 

39

 

9,887

 

Amortization

18

 

388

 

-

 

406

 

EBITDA

54,378

 

40,911

 

(19,455

)

75,834

 

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

(4,382

)

(2,180

)

6,562

 

-

 

Interest income

(69

)

(43

)

-

 

(112

)

Stock option expense

-

 

-

 

3,929

 

3,929

 

Impairment loss on transportation equipment

-

 

-

 

2,266

 

2,266

 

Medicare cap sequestration adjustment

1,689

 

-

 

-

 

1,689

 

Long-term incentive compensation

-

 

-

 

1,386

 

1,386

 

Acquisition expense

-

 

97

 

-

 

97

 

Adjusted EBITDA

$

 

51,616

 

$

 

38,785

 

$

 

(5,312

)

$

 

85,089

 

 

2018

Net income/(loss)

$

 

31,785

 

$

 

25,298

 

$

 

(2,112

)

$

 

54,971

 

Add/(deduct): Interest expense

53

 

92

 

1,379

 

1,524

 

Income taxes

9,565

 

8,196

 

(15,077

)

2,684

 

Depreciation

5,050

 

4,628

 

40

 

9,718

 

Amortization

-

 

34

 

-

 

34

 

EBITDA

46,453

 

38,248

 

(15,770

)

68,931

 

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

(3,124

)

(1,739

)

4,863

 

-

 

Interest income

(237

)

(22

)

-

 

(259

)

Stock option expense

-

 

-

 

3,652

 

3,652

 

Long-term incentive compensation

-

 

-

 

1,222

 

1,222

 

Litigation settlement

(204

)

-

 

-

 

(204

)

Medicare cap sequestration adjustment

185

 

-

 

-

 

185

 

Amortization of stock awards

37

 

35

 

83

 

155

 

Adjusted EBITDA

$

 

43,110

 

$

 

36,522

 

$

 

(5,950

)

$

 

73,682

 

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

 

 

 

 

 

 

Chemed

VITAS

 

Roto-Rooter

 

Corporate

 

Consolidated

2019

Net income/(loss)

$

 

66,626

 

$

 

50,162

 

$

 

(21,392

)

$

 

95,396

 

Add/(deduct): Interest expense

101

 

194

 

2,066

 

2,361

 

Income taxes

21,707

 

15,339

 

(17,351

)

19,695

 

Depreciation

9,539

 

9,980

 

78

 

19,597

 

Amortization

35

 

890

 

-

 

925

 

EBITDA

98,008

 

76,565

 

(36,599

)

137,974

 

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

(8,777

)

(4,375

)

13,152

 

-

 

Interest income

(157

)

(56

)

-

 

(213

)

Stock option expense

-

 

-

 

8,018

 

8,018

 

Litigation settlement

6,000

 

-

 

-

 

6,000

 

Long-term incentive compensation

-

 

-

 

2,874

 

2,874

 

Impairment loss on transportation equipment

-

 

-

 

2,266

 

2,266

 

Medicare cap sequestration adjustment

2,204

 

-

 

-

 

2,204

 

Non cash ASC 842 expenses/(benefit)

656

 

55

 

(163

)

548

 

Acquisition Expense

-

 

97

 

120

 

217

 

Adjusted EBITDA

$

 

97,934

 

$

 

72,286

 

$

 

(10,332

)

$

 

159,888

 

 

2018

Net income/(loss)

$

 

63,800

 

$

 

48,236

 

$

 

(12,069

)

$

 

99,967

 

Add/(deduct): Interest expense

104

 

184

 

2,443

 

2,731

 

Income taxes

20,203

 

16,208

 

(22,515

)

13,896

 

Depreciation

9,846

 

9,072

 

67

 

18,985

 

Amortization

-

 

61

 

-

 

61

 

EBITDA

93,953

 

73,761

 

(32,074

)

135,640

 

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

(6,218

)

(3,417

)

9,635

 

-

 

Interest income

(380

)

(37

)

-

 

(417

)

Stock option expense

-

 

-

 

7,305

 

7,305

 

Long-term incentive compensation

-

 

-

 

3,142

 

3,142

 

Medicare cap sequestration adjustment

537

 

-

 

-

 

537

 

Amortization of stock awards

107

 

100

 

239

 

446

 

Litigation settlement

(204

)

-

 

-

 

(204

)

Adjusted EBITDA

$

 

87,795

 

$

 

70,407

 

$

 

(11,753

)

$

 

146,449

 

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 June 30,

 

Six Months Ended June 30,

2019

 

2018

 

2019

 

2018

Net income as reported

$

 

50,729

 

$

 

54,971

 

$

 

95,396

 

$

 

99,967

 

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

3,929

 

3,652

 

8,018

 

7,305

 

Litigation settlement

-

 

(204

)

6,000

 

(204

)

Long-term incentive compensation

1,386

 

1,222

 

2,874

 

3,142

 

Impairment loss on transportation equipment

2,266

 

-

 

2,266

 

-

 

Medicare cap sequestration adjustments

1,689

 

185

 

2,204

 

537

 

Amortization of acquired and cancelled franchise agreements

331

 

-

 

772

 

-

 

Non cash ASC 842 expenses

-

 

-

 

548

 

-

 

Acquisition expenses

97

 

-

 

217

 

-

 

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

(2,000

)

(966

)

(4,961

)

(2,238

)

Excess tax benefits on stock compensation

(3,212

)

(11,702

)

(9,944

)

(15,500

)

Adjusted net income

$

 

55,215

 

$

 

47,158

 

$

 

103,390

 

$

 

93,009

 

    Diluted Earnings Per Share As Reported Net income

$

 

3.08

 

$

 

3.27

 

$

 

5.79

 

$

 

5.93

 

Average number of shares outstanding

16,449

 

16,811

 

16,489

 

16,854

 

    Adjusted Diluted Earnings Per Share Adjusted net income

$

 

3.36

 

$

 

2.81

 

$

 

6.27

 

$

 

5.52

 

Average number of shares outstanding

16,449

 

16,811

 

16,489

 

16,854

 

(1) The tax impact of pre-tax adjustments was calculated using the effective tax rate of the operating unit for which each adjustment is associated.   The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES OPERATING STATISTICS FOR VITAS SEGMENT (unaudited)  

Three Months Ended June 30,

 

Six Months Ended June 30,

OPERATING STATISTICS

2019

 

2018

 

2019

 

2018

Net revenue ($000) (c) Homecare

$

266,461

$

250,381

$

525,312

$

491,412

Inpatient

22,894

20,077

45,464

42,186

Continuous care

30,786

30,513

63,030

61,279

Other

2,237

1,998

4,242

3,740

Subtotal

$

322,378

$

302,969

$

638,048

$

598,617

Room and board, net

(2,710

)

(2,675

)

(5,252

)

(5,294

)

Contractual allowances

(3,720

)

(2,959

)

(6,667

)

(5,792

)

Medicare cap allowance

(3,198

)

(536

)

(6,598

)

1,282

Net Revenue

$

312,750

$

296,799

$

619,531

$

588,813

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

82.7

%

82.6

%

82.3

%

82.1

%

Inpatient

7.1

6.6

7.1

7.0

Continuous care

9.5

10.1

9.9

10.2

Other

0.7

0.7

0.7

0.7

Subtotal

100.0

100.0

100.0

100.0

Room and board, net

(0.8

)

(0.9

)

(0.8

)

(0.9

)

Contractual allowances

(1.2

)

(1.0

)

(1.0

)

(1.0

)

Medicare cap allowance

(1.0

)

(0.1

)

(1.0

)

0.3

Net Revenue

97.0

%

98.0

%

97.2

%

98.4

%

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

14,482

13,583

14,364

13,375

Nursing home

3,382

3,275

3,318

3,245

Routine homecare

17,864

16,858

17,682

16,620

Inpatient

358

318

359

335

Continuous care

459

467

474

473

Total

18,681

17,643

18,515

17,428

  Total Admissions

17,491

16,858

35,249

35,137

Total Discharges

17,008

16,474

34,350

34,054

Average length of stay (days)

91.1

89.0

91.2

88.4

Median length of stay (days)

16.0

17.0

15.0

16.0

ADC by major diagnosis Cerebro

35.7

%

36.2

%

35.8

%

36.4

%

Neurological

20.4

18.6

20.2

18.6

Cancer

12.7

13.9

12.7

13.9

Cardio

17.0

16.6

16.9

16.4

Respiratory

8.2

8.3

8.2

8.2

Other

6.0

6.4

6.2

6.5

Total

100.0

%

100.0

%

100.0

%

100.0

%

Admissions by major diagnosis Cerebro

20.6

%

21.7

%

20.7

%

22.2

%

Neurological

12.2

11.1

12.5

11.2

Cancer

29.2

30.5

28.6

29.2

Cardio

16.0

15.6

16.1

15.6

Respiratory

11.7

10.8

11.8

11.3

Other

10.3

10.3

10.3

10.5

Total

100.0

%

100.0

%

100.0

%

100.0

%

  Estimated uncollectible accounts as a percent of revenues

1.2

%

 

 

1.0

%

 

 

1.1

%

 

 

1.0

%

Accounts receivable --

 

 

 

 

 

 

 

 

 

 

Days of revenue outstanding- excluding unapplied Medicare payments

32.7

 

 

 

31.9

 

 

 

n.a.

 

 

n.a.

Days of revenue outstanding- including unapplied Medicare payments

27.7

 

 

 

25.6

 

 

 

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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (unaudited)  

(a)

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

Three Months Ended June 30, 2019

VITAS

 

Roto-Rooter

 

Corporate

 

Consolidated

Service revenues and sales: Medicare cap sequestration adjustment

$

 

(1,689

)

$

 

-

 

$

 

-

 

$

 

(1,689

)

Selling, general and administrative expenses: Stock option expense

-

 

-

 

(3,929

)

(3,929

)

Long-term incentive compensation

-

 

-

 

(1,386

)

(1,386

)

Amortization of acquired and cancelled franchise agreements

-

 

(331

)

-

 

(331

)

Acquisition expense

-

 

(97

)

-

 

(97

)

Other operating expenses: Impairment loss on transportation equipment

-

 

-

 

(2,266

)

(2,266

)

Pretax impact on earnings

(1,689

)

(428

)

(7,581

)

(9,698

)

Excess tax benefits on stock compensation

-

 

-

 

3,212

 

3,212

 

Income tax benefit on the above

435

 

113

 

1,452

 

2,000

 

After-tax impact on earnings

$

 

(1,254

)

$

 

(315

)

$

 

(2,917

)

$

 

(4,486

)

 

Six Months Ended June 30, 2019

VITAS

 

Roto-Rooter

 

Corporate

 

Consolidated

Service revenues and sales: Medicare cap sequestration adjustment

$

 

(2,204

)

$

 

-

 

$

 

-

 

$

 

(2,204

)

Selling, general and administrative expenses: Stock option expense

-

 

-

 

(8,018

)

(8,018

)

Long-term incentive compensation

-

 

-

 

(2,874

)

(2,874

)

Amortization of acquired and cancelled franchise agreements

-

 

(772

)

-

 

(772

)

Non cash ASC 842 (expenses)/benefit

(656

)

(55

)

163

 

(548

)

Acquisition expense

-

 

(97

)

(120

)

(217

)

Other operating expenses: Litigation settlement

(6,000

)

-

 

-

 

(6,000

)

Impairment loss on transportation equipment

-

 

-

 

(2,266

)

(2,266

)

Pretax impact on earnings

(8,860

)

(924

)

(13,115

)

(22,899

)

Excess tax benefits on stock compensation

-

 

-

 

9,944

 

9,944

 

Income tax benefit on the above

2,254

 

245

 

2,462

 

4,961

 

After-tax impact on earnings

$

 

(6,606

)

$

 

(679

)

$

 

(709

)

$

 

(7,994

)

 

(b)

Included in the results of operations for 2018 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):

Three Months Ended June 30, 2018

VITAS

 

Roto-Rooter

 

Corporate

 

Consolidated

Service revenues and sales: Medicare cap sequestration adjustment

$

 

(185

)

$

 

-

 

$

 

-

 

$

 

(185

)

Selling, general and administrative expenses: Stock option expense

-

 

-

 

(3,652

)

(3,652

)

Long-term incentive compensation

-

 

-

 

(1,222

)

(1,222

)

Other operating expenses: Litigation settlements

204

 

-

 

-

 

204

 

Pretax impact on earnings

19

 

-

 

(4,874

)

(4,855

)

Excess tax benefits on stock compensation

-

 

-

 

11,702

 

11,702

 

Income tax benefit on the above

(5

)

-

 

971

 

966

 

After-tax impact on earnings

$

 

14

 

$

 

-

 

$

 

7,799

 

$

 

7,813

 

 

Six Months Ended June 30, 2018

VITAS

 

Roto-Rooter

 

Corporate

 

Consolidated

Service revenues and sales: Medicare cap sequestration adjustment

$

 

(537

)

$

 

-

 

$

 

-

 

$

 

(537

)

Selling, general and administrative expenses: Stock option expense

-

 

-

 

(7,305

)

(7,305

)

Long-term incentive compensation

-

 

-

 

(3,142

)

(3,142

)

Other operating expenses: Litigation settlement

204

 

-

 

-

 

204

 

Pretax impact on earnings

(333

)

-

 

(10,447

)

(10,780

)

Excess tax benefits on stock compensation

-

 

-

 

15,500

 

15,500

 

Income tax benefit on the above

84

 

-

 

2,154

 

2,238

 

After-tax impact on earnings

$

 

(249

)

$

 

-

 

$

 

7,207

 

$

 

6,958

 

(c)

VITAS has 11 large (greater than 450 ADC), 19 medium (greater than 200 but less than 450 ADC) and 18 small (less than 200 ADC) hospice programs. Of VITAS' 30 Medicare provider numbers, 25 provider numbers have a Medicare cap cushion of 5% or greater during the current cap year, one provider number has a cap cushion between 0% and 5%, and four provider numbers have a Medicare cap liability.

 

David P. Williams (513) 762-6901

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