Chemed Reports Second-Quarter 2020 Results

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, 2020, versus the comparable prior-year period, as follows:

Consolidated operating results:

  • Revenue increased 6.0% to $502 million
  • GAAP Diluted Earnings-per-Share (EPS) of $5.01, an increase of 62.7%
  • Adjusted Diluted EPS of $4.41, an increase of 31.3%

VITAS segment operating results:

  • Net Patient Revenue of $327 million, an increase of 4.7%
  • Average Daily Census (ADC) of 19,195, an increase of 2.8%
  • Admissions of 16,822 a decline of 3.8%
  • Net Income, excluding certain discrete items, of $50.1 million, an increase of 29.8%
  • Adjusted EBITDA, excluding Medicare Cap, of $72.5 million, an increase of 32.2%
  • Adjusted EBITDA margin, excluding Medicare Cap, of 21.7%, an increase of 440-basis points

Roto-Rooter segment operating results:

  • Revenue of $175 million, an increase of 8.6%
  • Net Income, excluding certain discrete items, of $32.0 million, an increase of 16.5%
  • Adjusted EBITDA of $46.8 million, an increase of 20.7%
  • Adjusted EBITDA margin of 26.8%, an increase of 269-basis points

VITAS

VITAS net revenue was $327 million in the second quarter of 2020, which is an increase of 4.7%, when compared to the prior-year period. This revenue increase is comprised primarily of a 2.8% increase in days-of-care, a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately 5.4%, and acuity mix shift which then reduced the blended average Medicare rate increase approximately 310-basis points. The combination of increased Medicare Cap and a decrease in Medicaid net room and board pass-through, as well as reductions in other contra revenue activity, reduced revenue growth an additional 42-basis points in the quarter.

VITAS accrued $5.8 million in Medicare Cap billing limitations in the second quarter of 2020. This $5.8 million of Medicare Cap includes approximately $2.3 million of Cap liability attributed to the pandemic. The suspension of sequestration resulted in an additional 2% increase in reimbursement effective May 1, 2020. In Medicare provider numbers that were in a Medicare Cap liability situation, this 2% reimbursement increase was effectively eliminated by a corresponding increase in Medicare Cap liability in those markets. In addition, disruption in Medicare admissions in these markets resulted in a further increase in the projected 2020 Medicare Cap billing limitation.

VITAS currently has 30 Medicare provider numbers. During the first nine months of the fiscal 2020 Medicare Cap year, 22 of these provider numbers have a Medicare Cap cushion of 10% or greater, three provider numbers have a cap cushion between 5% and 10%, two provider numbers have a cap cushion between 0% and 5%, and three provider numbers have an estimated 2020 Medicare Cap billing limitation.

Average revenue per patient per day in the second quarter of 2020 was $194.02, which, including acuity mix shift, is 2.3% above the prior-year period. Reimbursement for routine home care and high acuity care averaged $165.22 and $985.23, respectively. During the quarter, high acuity days-of-care were 3.5% of total days of care, 69-basis points less than the prior-year quarter. This 69-basis point mix shift in high acuity days-of-care reduced the increase in average revenue per patient per day from 5.4% to 2.3% in the quarter.

The second quarter 2020 gross margin, excluding Medicare Cap, increased costs for personal protection equipment (PPE), disinfecting facilities and increased costs for additional paid time off (PTO) for our front-line employees, was 27.2%, which is a 352-basis point margin improvement when compared to the second quarter of 2019. This increase in gross margin is attributed to a level-of-care mix shift to higher margin, lower reimbursement routine home care; efficiencies from utilizing telehealth when appropriate; and lower wage costs from reduced admission intake, including reduced hospital referred admissions that typically result in short length-of-stays and negative gross margins.

Selling, general and administrative expense was $21.1 million in the second quarter of 2020, which is a favorable decrease of 2.8% compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $72.5 million in the quarter, an increase of 32.2%. Adjusted EBITDA margin, excluding Medicare Cap, was 21.7% in the quarter, which is a 440-basis point improvement when compared to the prior-year period.

Roto-Rooter

Roto-Rooter generated quarterly revenue of $175 million in the second quarter of 2020, an increase of $13.9 million, or 8.6%, over the prior-year quarter. On a unit-for-unit basis, which excludes the Oakland and HSW acquisitions completed in July 2019 and September 2019, respectively, Roto-Rooter generated quarterly revenue of $158 million for the second quarter of 2020, a decline of 1.9% over the prior-year quarter.

Total commercial revenue, excluding acquisitions, decreased 29.1%. This aggregate commercial revenue decline consisted of drain cleaning revenue declining 31.2%, commercial plumbing and excavation declining 28.0%, and commercial water restoration declining 20.3%.

Total residential revenue, excluding acquisitions, increased 10.4%. This aggregate residential revenue growth consisted of residential drain cleaning increasing 10.2%, plumbing and excavation expanding 14.4%, and residential water restoration increasing 4.3%.

Roto-Rooter started the second quarter of 2020 with plummeting demand in our commercial business and very soft demand in our residential services when compared to the prior year. Fortunately, service demand began to improve in the later part of April and continued to strengthen throughout the remainder of the second quarter. This is reflected in our monthly performance with unit-for-unit commercial revenue declining 38.6%, 31.8% and 19.7% in April, May and June 2020, respectively. Unit-for-unit residential revenue sales declined 1.6% in April, increased 11.7% in May and increased 18.7% in June.

Roto-Rooter’s gross margin in the quarter was 51.2%, a 247-basis point increase when compared to the second quarter of 2019. Adjusted EBITDA in the second quarter of 2020 totaled $46.8 million, an increase of 20.7%. The Adjusted EBITDA margin in the quarter was 26.8% which is a 269-basis point increase when compared to the prior year. The increase in Adjusted EBITDA margin is attributed to residential services having a higher margin than commercial services, as well as increased residential excavation and water restoration services which have a significantly higher direct contribution margin compared to commercial plumbing and drain cleaning services.

Chemed Consolidated

As of June 30, 2020, Chemed had total cash and cash equivalents of $20.4 million and no long-term debt.

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, 2020, the Company had approximately $412 million of undrawn borrowing capacity under this credit agreement.

During the quarter, the Company repurchased 50,000 shares of Chemed stock for $21.9 million which equates to a cost per share of $438.27. As of June 30, 2020, there was approximately $232 million of remaining share repurchase authorization under this plan.

Chemed restarted its share repurchase program in 2007. Since that time Chemed has repurchased approximately 14.4 million shares, aggregating approximately $1.3 billion at an average share cost of $92.76. Including dividends over this period, Chemed has returned approximately $1.5 billion to shareholders.

Guidance for 2020

Historically, Chemed earnings guidance has been developed using previous years’ key operating metrics which are then modeled and projected out for the calendar year. Critical within these projections is the understanding of traditional patterned correlations among key operating metrics. Once we complete this phase of our projected operating results, we would then modify the projections for the timing of price increases, changes in commission structure, wages, marketing programs and a variety of continuous improvement initiatives that our business segments plan on executing over the coming year. This modeling exercise also takes into consideration anticipated industry and macro-economic issues outside of management’s control but are somewhat predictable in terms of timing and impact on our business segments’ operating results.

The 2020 pandemic has made accurate modeling and providing meaningful earnings guidance for Chemed exceptionally challenging. Federal, state and local government authorities are forced to make swift decisions within our healthcare system, labor pools and general economy. These governmental decisions have the potential for an immediate and material impact on VITAS and Roto-Rooter operating results.

Over the past four months, Chemed has been able to successfully navigate within this rapidly changing environment and produce operating results that we believe provide us with the ability to provide guidance for the remainder of the calendar year. However, this guidance should be taken with the recognition the pandemic will continue to materially disrupt all aspects of our healthcare system and general economy to such an extent that future rules, regulations and government mandates could materially impact our ability to achieve this guidance.

Revenue growth for VITAS in 2020, prior to Medicare Cap, is estimated to be in the range of 5% to 7%. Average Daily Census in 2020 is estimated to expand approximately 2% to 4%. Full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 19% to 20%. We are currently estimating $17 million for Medicare Cap billing limitations for calendar year 2020. We also anticipate the $80.2 million of CARES Act funds formulaically calculated by the federal government based upon our 2019 Medicare fee-for-service revenue will be adequate to cover increased costs specifically related to operating our healthcare unit during the pandemic as well as any incremental Medicare Cap billing limitations triggered from declines in Medicare admissions. Chemed’s full year adjusted earnings per share guidance eliminates any financial benefit from the CARES Act funds that relate to lost revenue. We anticipate returning any unused CARES Act funds to the federal government at the end of the pandemic measurement period.

Roto-Rooter is forecasted to achieve full-year 2020 revenue growth of 9% to 10%. Roto-Rooter’s Adjusted EBITDA margin for 2020 is estimated to be in the range of 23% to 25%.

Based upon the above, full-year 2020 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock options, costs related to litigation, and other discrete items, is estimated to be in the range of $16.20 to $16.40. This 2020 guidance assumes an effective corporate tax rate of 25.2%. Chemed’s 2019 reported adjusted earnings per diluted share was $13.96.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Thursday, July 30, 2020, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (844) 743-2500 for U.S. and Canadian participants and +1 (661) 378-9533 for international participants. The Conference ID is 2266476. 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 2266476. An archived webcast will also be available at www.chemed.com.

Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to approximately 19,000 patients with severe, life-limiting illnesses. This type of care is focused on making the terminally ill patient's final days as comfortable and pain-free as possible.

Chemed operates in the residential and commercial plumbing and drain cleaning industry under the brand name Roto-Rooter. Roto-Rooter provides plumbing, drain cleaning, and water cleanup services through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in the republics of Indonesia and Singapore, and the Philippines.

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

Forward-Looking Statements

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

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

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

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Service revenues and sales$

502,199

$

473,584

$

1,017,997

$

935,618

Cost of services provided and goods sold

352,163

323,637

703,908

645,588

Selling, general and administrative expenses (aa)

84,513

71,556

155,096

145,585

Depreciation

11,659

9,887

23,047

19,597

Amortization

2,488

406

4,965

925

Other operating (income)/expenses

(41,384

)

2,570

(41,142

)

8,923

Total costs and expenses

409,439

408,056

845,874

820,618

Income from operations

92,760

65,528

172,123

115,000

Interest expense

(651

)

(1,237

)

(1,626

)

(2,361

)

Other (expense)/income--net (bb)

7,514

13

(1,952

)

2,452

Income before income taxes

99,623

64,304

168,545

115,091

Income taxes

(17,522

)

(13,575

)

(30,553

)

(19,695

)

Net income$

82,101

$

50,729

$

137,992

$

95,396

Earnings Per Share
Net income$

5.16

$

3.18

$

8.65

$

5.98

Average number of shares outstanding

15,914

15,928

15,953

15,941

Diluted Earnings Per Share
Net income$

5.01

$

3.08

$

8.39

$

5.79

Average number of shares outstanding

16,373

16,449

16,445

16,489

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

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

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

75,176

$

70,300

$

153,511

$

140,504

Market value adjustments related to deferred compensation trusts

7,408

(130

)

(2,164

)

2,207

Long-term incentive compensation

1,929

1,386

3,749

2,874

Total SG&A expenses$

84,513

$

71,556

$

155,096

$

145,585

 
(bb) Other (expense)/income--net comprises (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Market value adjustments related to deferred compensation trusts$

7,408

$

(130

)

$

(2,164

)

$

2,207

Interest income

116

112

225

214

Other

(10

)

31

(13

)

31

Total other (expense)/income--net$

7,514

$

13

$

(1,952

)

$

2,452

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

June 30,

2020

2019

Assets
Current assets
Cash and cash equivalents$

20,376

$

3,323

Accounts receivable less allowances

132,487

136,113

Inventories

7,467

6,336

Prepaid income taxes

5,794

12,951

Prepaid expenses

23,183

21,455

Total current assets

189,307

180,178

Investments of deferred compensation plans held in trust

80,113

70,460

Properties and equipment, at cost less accumulated depreciation

183,017

149,917

Assets held for sale

-

15,750

Lease right of use asset

128,418

90,755

Identifiable intangible assets less accumulated amortization

122,791

67,511

Goodwill

578,491

510,627

Other assets

9,055

8,874

Total Assets$

1,291,192

$

1,094,072

Liabilities
Current liabilities
Accounts payable$

36,704

$

51,143

Income taxes

19,576

56

Accrued insurance

50,847

46,912

Accrued compensation

80,552

50,123

Accrued legal

6,959

8,431

Short-term lease liability

36,093

31,614

Unutilized CARES Act grant

39,236

-

Other current liabilities

48,549

35,390

Total current liabilities

318,516

223,669

Deferred income taxes

21,108

18,828

Long-term debt

-

85,000

Deferred compensation liabilities

77,639

70,273

Long-term lease liability

104,444

69,979

Other liabilities

18,789

7,754

Total Liabilities

540,496

475,503

Stockholders' Equity
Capital stock

36,040

35,591

Paid-in capital

904,421

817,255

Retained earnings

1,553,144

1,311,446

Treasury stock, at cost

(1,745,299

)

(1,548,138

)

Deferred compensation payable in Company stock

2,390

2,415

Total Stockholders' Equity

750,696

618,569

Total Liabilities and Stockholders' Equity$

1,291,192

$

1,094,072

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

For the Six Months Ended June 30,

2020

2019

Cash Flows from Operating Activities
Net income$

137,992

$

95,396

Adjustments to reconcile net income to net cash provided by operating activities:
Unutilized CARES Act grant

39,236

-

Depreciation and amortization

28,012

20,522

Deferred payroll taxes

10,716

-

Stock option expense

10,113

8,018

Noncash long-term incentive compensation

3,527

2,506

Provision/(benefit) for deferred income taxes

2,717

(2,769

)

Noncash directors' compensation

1,171

767

Provision for bad debts871

-

Amortization of debt issuance costs

153

153

Litigation settlement

-

6,000

Asset impairment loss

-

2,266

Changes in operating assets and liabilities, excluding amounts acquired in business combinations:
Decrease/(increase) in accounts receivable

6,696

(16,613

)

Increase in inventories

(5

)

(631

)

Increase in prepaid expenses

(33

)

(2,301

)

Increase/(decrease) in accounts payable and other current liabilities

13,303

(4,175

)

Change in current income taxes

23,725

(2,249

)

Net change in lease assets and liabilities

1,287

(338

)

Increase in other assets

(2,988

)

(4,653

)

Increase in other liabilities

1,383

5,833

Other (uses)/sources

(54

)

1,175

Net cash provided by operating activities

277,822

108,907

Cash Flows from Investing Activities
Capital expenditures

(32,251

)

(28,312

)

Business combinations

(3,600

)

-

Other sources/(uses)

473

(137

)

Net cash used by investing activities

(35,378

)

(28,449

)

Cash Flows from Financing Activities
Payments on revolving line of credit

(264,900

)

(227,000

)

Proceeds from revolving line of credit

174,900

222,800

Purchases of treasury stock

(122,148

)

(71,926

)

Proceeds from exercise of stock options

19,440

16,517

Capital stock surrendered to pay taxes on stock-based compensation

(14,845

)

(14,884

)

Dividends paid

(10,238

)

(9,567

)

Change in cash overdrafts payable

(9,849

)

1,710

Other (uses)/sources

(586

)

384

Net cash used by financing activities

(228,226

)

(81,966

)

Increase/(decrease) in Cash and Cash Equivalents

14,218

(1,508

)

Cash and cash equivalents at beginning of year

6,158

4,831

Cash and cash equivalents at end of year$

20,376

$

3,323

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND 2019
(in thousands)(unaudited)

Chemed

VITAS

Roto-Rooter

Corporate

Consolidated

2020 (a)
Service revenues and sales$

327,465

$

174,734

$

-

$

502,199

Cost of services provided and goods sold

266,815

85,348

-

352,163

Selling, general and administrative expenses

21,072

44,231

19,210

84,513

Depreciation

5,556

6,069

34

11,659

Amortization

18

2,470

-

2,488

Other operating income

(40,826

)

(558

)

-

(41,384

)

Total costs and expenses

252,635

137,560

19,244

409,439

Income/(loss) from operations

74,830

37,174

(19,244

)

92,760

Interest expense

(45

)

(90

)

(516

)

(651

)

Intercompany interest income/(expense)

4,739

1,422

(6,161

)

-

Other (expense)/income—net

104

(10

)

7,420

7,514

Income/(loss) before income taxes

79,628

38,496

(18,501

)

99,623

Income taxes

(19,383

)

(9,028

)

10,889

(17,522

)

Net income/(loss)$

60,245

$

29,468

$

(7,612

)

$

82,101

 
2019 (b)
Service revenues and sales$

312,750

$

160,834

$

-

$

473,584

Cost of services provided and goods sold

241,104

82,533

-

323,637

Selling, general and administrative expenses

21,682

39,377

10,497

71,556

Depreciation

4,831

5,017

39

9,887

Amortization

18

388

-

406

Other operating expense

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 (expense)/income—net

101

42

(130

)

13

Income/(loss) before income taxes

49,476

35,406

(20,578

)

64,304

Income taxes

(12,137

)

(8,231

)

6,793

(13,575

)

Net income/(loss)$

37,339

$

27,175

$

(13,785

)

$

50,729

 
 
The "Footnotes to Financial Statements" are integral parts of this financial information.
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(in thousands)(unaudited)
 

Chemed

VITAS

Roto-Rooter

Corporate

Consolidated

2020 (a)
Service revenues and sales$

665,380

$

352,617

$

-

$

1,017,997

Cost of services provided and goods sold

526,244

177,664

-

703,908

Selling, general and administrative expenses

43,341

90,513

21,242

155,096

Depreciation

11,030

11,947

70

23,047

Amortization

36

4,929

-

4,965

Other operating income

(40,712

)

(430

)

-

(41,142

)

Total costs and expenses

539,939

284,623

21,312

845,874

Income/(loss) from operations

125,441

67,994

(21,312

)

172,123

Interest expense

(90

)

(192

)

(1,344

)

(1,626

)

Intercompany interest income/(expense)

9,125

2,771

(11,896

)

-

Other (expense)/income—net

169

30

(2,151

)

(1,952

)

Income/(loss) before income taxes

134,645

70,603

(36,703

)

168,545

Income taxes

(33,121

)

(16,813

)

19,381

(30,553

)

Net income/(loss)$

101,524

$

53,790

$

(17,322

)

$

137,992

 
2019 (b)
Service revenues and sales$

619,531

$

316,087

$

-

$

935,618

Cost of services provided and goods sold

480,847

164,741

-

645,588

Selling, general and administrative expenses

43,218

78,978

23,389

145,585

Depreciation

9,539

9,980

78

19,597

Amortization

35

890

-

925

Other operating expense

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

(21,707

)

(15,339

)

17,351

(19,695

)

Net income/(loss)$

66,626

$

50,162

$

(21,392

)

$

95,396

 
 
The "Footnotes to Financial Statements" are integral parts of this financial information.
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARIES OF EBITDA
FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND 2019
(in thousands)(unaudited)

Chemed

VITAS

Roto-Rooter

Corporate

Consolidated

2020

Net income/(loss)$

60,245

$

29,468

$

(7,612

)

$

82,101

Add/(deduct):
Interest expense

45

90

516

651

Income taxes

19,383

9,028

(10,889

)

17,522

Depreciation

5,556

6,069

34

11,659

Amortization

18

2,470

-

2,488

EBITDA

85,247

47,125

(17,951

)

114,421

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

(4,739

)

(1,422

)

6,161

-

Interest income

(113

)

10

(13

)

(116

)

CARES Act grant

(40,989

)

-

-

(40,989

)

Direct costs related to COVID-19

24,265

1,117

-

25,382

Stock option expense

-

-

5,068

5,068

COVID-19 related Medicare cap

2,250

-

-

2,250

Long-term incentive compensation

-

-

1,929

1,929

Medicare cap sequestration adjustment

796

-

-

796

Adjusted EBITDA$

66,717

$

46,830

$

(4,806

)

$

108,741

 

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

 
The "Footnotes to Financial Statements" are integral parts of this financial information.
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARIES OF EBITDA
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(in thousands)(unaudited)

Chemed

VITAS

Roto-Rooter

Corporate

Consolidated

2020

Net income/(loss)$

101,524

$

53,790

$

(17,322

)

$

137,992

Add/(deduct):
Interest expense

90

192

1,344

1,626

Income taxes

33,121

16,813

(19,381

)

30,553

Depreciation

11,030

11,947

70

23,047

Amortization

36

4,929

-

4,965

EBITDA

145,801

87,671

(35,289

)

198,183

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

(9,125

)

(2,771

)

11,896

-

Interest income

(181

)

(31

)

(13

)

(225

)

Direct costs related to COVID-19

25,238

1,978

-

27,216

CARES Act grant

(40,989

)

-

-

(40,989

)

Stock option expense

-

-

10,114

10,114

Long-term incentive compensation

-

-

3,749

3,749

COVID-19 Medicare cap

2,250

-

-

2,250

Medicare cap sequestration adjustment

1,472

-

-

1,472

Adjusted EBITDA$

124,466

$

86,847

$

(9,543

)

$

201,770

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)/expense

(157

)

(56

)

-

(213

)

Stock option expense

-

-

8,018

8,018

Litigation settlement costs

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

Acquisition expense

-

97

120

217

Non cash ASC 842 expenses/(benefit)

656

55

(163

)

548

Adjusted EBITDA$

97,934

$

72,286

$

(10,332

)

$

159,888

 
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,

2020

2019

2020

2019

Net income as reported$

82,101

$

50,729

$

137,992

$

95,396

Add/(deduct) pre-tax cost of:
CARES Act grant

(40,989

)

-

(40,989

)

-

Direct costs related to COVID-19

25,382

-

27,216

-

Stock option expense

5,068

3,929

10,114

8,018

Amortization of reacquired franchise agreements

2,352

331

4,704

772

COVID-19 Medicare cap

2,250

-

2,250

-

Long-term incentive compensation

1,929

1,386

3,749

2,874

Medicare cap sequestration adjustments

796

1,689

1,472

2,204

Impairment loss on transportation equipment

-

2,266

-

2,266

Litigation settlement

-

-

-

6,000

Acquisition expense

-

97

-

217

Non cash ASC 842 expenses

-

-

-

548

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

1,537

(2,000

)

(814

)

(4,961

)

Excess tax benefits on stock compensation

(8,203

)

(3,212

)

(12,756

)

(9,944

)

Adjusted net income$

72,223

$

55,215

$

132,938

$

103,390

 
Diluted Earnings Per Share As Reported
Net income$

5.01

$

3.08

$

8.39

$

5.79

Average number of shares outstanding

16,373

16,449

16,445

16,489

 
Adjusted Diluted Earnings Per Share
Adjusted net income$

4.41

$

3.36

$

8.08

$

6.27

Average number of shares outstanding

16,373

16,449

16,445

16,489

 
(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

2020

2019

2020

2019

Net revenue ($000) (c)
Homecare$

276,345

$

266,461

$

548,098

$

525,312

Inpatient

25,868

22,894

58,350

45,464

Continuous care

34,582

30,786

75,137

63,030

Other

2,109

2,237

5,265

4,242

Subtotal$

338,904

$

322,378

$

686,850

$

638,048

Room and board, net

(2,647

)

(2,710

)

(6,028

)

(5,252

)

Contractual allowances

(3,042

)

(3,720

)

(7,192

)

(6,667

)

Medicare cap allowance

(5,750

)

(3,198

)

(8,250

)

(6,598

)

Net Revenue$

327,465

$

312,750

$

665,380

$

619,531

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

81.5

%

82.7

%

79.8

%

82.3

%

Inpatient

7.6

7.1

8.5

7.1

Continuous care

10.2

9.5

10.9

9.9

Other

0.7

0.7

0.8

0.7

Subtotal

100.0

100.0

100.0

100.0

Room and board, net

(0.8

)

(0.8

)

(0.9

)

(0.8

)

Contractual allowances

(0.9

)

(1.2

)

(1.0

)

(1.0

)

Medicare cap allowance

(1.7

)

(1.0

)

(1.2

)

(1.0

)

Net Revenue

96.6

%

97.0

%

96.9

%

97.2

%

Days of care
Homecare

1,401,744

1,317,854

2,766,490

2,599,753

Nursing home

279,462

303,983

582,836

593,752

Respite

4,158

6,669

10,850

12,970

Subtotal routine homecare and respite

1,685,364

1,628,506

3,360,176

3,206,475

Inpatient

25,542

29,663

57,890

58,813

Continuous care

35,814

41,804

77,187

85,727

Total

1,746,720

1,699,973

3,495,253

3,351,015

 
Number of days in relevant time period

91

91

182

181

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

15,404

14,482

15,201

14,364

Nursing home

3,071

3,340

3,202

3,280

Respite

45

73

60

72

Subtotal routine homecare and respite

18,520

17,895

18,463

17,716

Inpatient

281

327

318

325

Continuous care

394

459

424

474

Total

19,195

18,681

19,205

18,515

Total Admissions

16,822

17,491

35,425

35,249

Total Discharges

17,000

17,008

35,208

34,350

Average length of stay (days)

90.9

91.1

90.8

91.2

Median length of stay (days)

14.0

16.0

14.0

15.0

ADC by major diagnosis
Cerebro

35.2

%

35.7

%

35.7

%

35.8

%

Neurological

21.7

20.4

21.6

20.2

Cancer

12.8

12.7

12.7

12.7

Cardio

16.1

17.0

15.9

16.9

Respiratory

8.2

8.2

8.3

8.2

Other

6.0

6.0

5.8

6.2

Total

100.0

%

100.0

%

100.0

%

100.0

%

Admissions by major diagnosis
Cerebro

20.9

%

20.6

%

21.0

%

20.7

%

Neurological

13.4

12.2

12.9

12.5

Cancer

27.6

29.2

28.0

28.6

Cardio

14.6

16.0

14.9

16.1

Respiratory

9.8

11.7

10.9

11.8

Other

13.7

10.3

12.3

10.3

Total

100.0

%

100.0

%

100.0

%

100.0

%

 
Estimated uncollectible accounts as a percent of revenues

0.9

%

1.2

%

1.1

%

1.1

%

 
Accounts receivable --
Days of revenue outstanding-excluding unapplied Medicare payments

31.9

32.7

n.a.

n.a.

Days of revenue outstanding-including unapplied Medicare payments

26.7

27.7

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, 2020 AND 2019
(unaudited)
 

(a)

Included in the results of operations for 2020 are the following significant credits/(charges) which may not be indicative of ongoing operations

(in thousands):

Three Months Ended June 30, 2020

VITAS

Roto-Rooter

Corporate

Consolidated

 
CARES Act grant$

40,989

$

-

$

-

$

40,989

Direct costs related to COVID-19

(24,265

)

(1,117

)

-

(25,382

)

Stock option expense

-

-

(5,068

)

(5,068

)

Amortization of reacquired franchise agreements

-

(2,352

)

-

(2,352

)

COVID-19 Medicare cap

(2,250

)

-

-

(2,250

)

Long-term incentive compensation

-

-

(1,929

)

(1,929

)

Medicare cap sequestration adjustment

(796

)

-

-

(796

)

Pretax impact on earnings

13,678

(3,469

)

(6,997

)

3,212

Excess tax benefits on stock compensation

-

-

8,203

8,203

Income tax benefit on the above

(3,515

)

918

1,060

(1,537

)

After-tax impact on earnings$

10,163

$

(2,551

)

$

2,266

$

9,878

 

Six Months Ended June 30, 2020

VITAS

Roto-Rooter

Corporate

Consolidated

 
CARES Act grant$

40,989

$

-

$

-

$

40,989

Direct costs related to COVID-19

(25,238

)

(1,978

)

-

(27,216

)

Stock option expense

-

-

(10,114

)

(10,114

)

Amortization of acquired and cancelled franchise agreements

-

(4,704

)

-

(4,704

)

Long-term incentive compensation

-

-

(3,749

)

(3,749

)

COVID-19 Medicare cap

(2,250

)

-

-

(2,250

)

Medicare cap sequestration adjustment

(1,472

)

-

-

(1,472

)

Pretax impact on earnings

12,029

(6,682

)

(13,863

)

(8,516

)

Excess tax benefits on stock compensation

-

-

12,756

12,756

Income tax benefit on the above

(3,096

)

1,770

2,140

814

After-tax impact on earnings$

8,933

$

(4,912

)

$

1,033

$

5,054

 

(b)

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

(in thousands):

Three Months Ended June 30, 2019

VITAS

Roto-Rooter

Corporate

Consolidated

 
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

)

Amortization of reacquired franchise agreements

-

(331

)

(331

)

Acquisition expense

-

(97

)

-

(97

)

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

 
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

)

Amortization of reacquired franchise agreements

-

(772

)

(772

)

Non cash ASC 842 (expenses)/benefit

(656

)

(55

)

163

(548

)

Acquisition expense

-

(97

)

(120

)

(217

)

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

)

 

(c)

VITAS has 11 large (greater than 450 ADC), 20 medium (greater than 200 but less than 450 ADC) and 18 small (less than 200 ADC) hospice programs. Of Vitas' 30 Medicare provider numbers, for the first nine months of the current cap year, 22 provider numbers have a Medicare cap cushion of 10% or greater, three provider numbers have a cap cushion between 5% and 10%, two provider numbers have a cap cushion between 0% and 5%, and three provider numbers have a Medicare cap liability.

Contacts:

David P. Williams
(513) 762-6901

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