Chemed Reports Fourth-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 fourth quarter ended December 31, 2020, versus the comparable prior-year period, as follows:
Consolidated operating results:
Revenue increased 2.1% to $533 million GAAP Diluted Earnings-per-Share (EPS) of $6.96, an increase of 75.8% Adjusted Diluted EPS of $5.13, an increase of 21.6%VITAS segment operating results:
Net Patient Revenue of $332 million, a decline of 2.3% Average Daily Census (ADC) of 18,718, a decline of 2.8% Admissions of 17,960 an increase of 2.8% Net Income, excluding certain discrete items, of $58.1 million, an increase of 16.0% Adjusted EBITDA, excluding Medicare Cap, of $78.7 million, an increase of 11.7% Adjusted EBITDA margin, excluding Medicare Cap, of 23.5%, an increase of 306-basis pointsRoto-Rooter segment operating results:
Revenue of $201 million, an increase of 10.2% Net Income, excluding certain discrete items, of $37.9 million, an increase of 24.6% Adjusted EBITDA of $54.5 million, an increase of 24.7% Adjusted EBITDA margin of 27.1%, an increase of 313-basis pointsVITAS
VITAS net revenue was $332 million in the fourth quarter of 2020, which is a decline of 2.3%, when compared to the prior-year period. This revenue decline is comprised primarily of a 2.8% decline in days-of-care, a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately 2.4%, and acuity mix shift which then reduced the blended average Medicare rate increase approximately 255-basis points. The combination of lower Medicare Cap and a decrease in Medicaid net room and board pass-through, increased revenue growth an additional 64-basis points in the quarter.
In the fourth quarter of 2020, VITAS accrued $2.5 million in Medicare Cap billing limitations. This compares to a $4.5 million Medicare Cap billing limitation in the fourth quarter of 2019.
Of VITAS’ 30 Medicare provider numbers, 23 provider numbers currently have a Medicare Cap cushion of 10% or greater, four provider numbers have a cap cushion between 5% and 10%, one provider number has a cap cushion between 0% and 5% and two provider numbers currently have a fiscal 2021 Medicare Cap billing limitation liability.
Average revenue per patient per day in the fourth quarter of 2020 was $198.33, which, including acuity mix shift, is 7-basis points below the prior-year period. Reimbursement for routine home care and high acuity care averaged $169.83 and $997.37, respectively. During the quarter, high acuity days-of-care were 3.4% of total days of care, 62-basis points less than the prior-year quarter.
The fourth quarter 2020 gross margin, excluding Medicare Cap, increased costs for personal protection equipment (PPE), disinfecting facilities and other costs related to operating during the pandemic, was 29.9%. This is a 357-basis point margin improvement when compared to the fourth quarter of 2019. This increase in gross margin is attributed to a level-of-care mix shift to higher margin routine home care and the temporary suspension of sequestration which increased reimbursement 200-basis points.
Selling, general and administrative expense was $20.3 million in the fourth quarter of 2020, which is a favorable decrease of 4.0% compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $78.7 million in the quarter, an increase of 11.7%. Adjusted EBITDA margin, excluding Medicare Cap, was 23.5% in the quarter, which is a 306-basis point improvement when compared to the prior-year period.
Roto-Rooter
Roto-Rooter generated quarterly revenue of $201 million in the fourth quarter of 2020, an increase of $18.7 million, or 10.2%, 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 $183 million for the fourth quarter of 2020, an increase of 12.8% over the prior-year quarter.
Total commercial revenue in the quarter, excluding acquisitions, decreased 9.8%. This aggregate commercial revenue decline consisted of drain cleaning revenue declining 11.6%, commercial plumbing and excavation declining 8.9%, and commercial water restoration increasing 1.0%.
Total residential revenue, excluding acquisitions, increased 20.8%. This aggregate residential revenue growth consisted of residential drain cleaning increasing 17.1%, plumbing and excavation expanding 25.5%, and residential water restoration increasing 16.8%.
Roto-Rooter’s gross margin in the quarter was 51.6%, a 301-basis point increase when compared to the fourth quarter of 2019. Adjusted EBITDA in the fourth quarter of 2020 totaled $54.5 million, an increase of 24.7%. The Adjusted EBITDA margin in the quarter was 27.1% which is a 313-basis point increase when compared to the prior year.
Chemed Consolidated
As of December 31, 2020, Chemed had total cash and cash equivalents of $163 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 December 31, 2020, the Company had approximately $412 million of undrawn borrowing capacity under this credit agreement.
During the quarter, the Company repurchased 59,252 shares of Chemed stock for $28.5 million which equates to a cost per share of $480.52. As of December 31, 2020, there was approximately $178 million of remaining share repurchase authorization under this plan.
Chemed restarted its share repurchase program in 2007. Since that time, Chemed has repurchased approximately 14.5 million shares, aggregating approximately $1.4 billion at an average share cost of $95.75. Including dividends over this period, Chemed has returned approximately $1.6 billion to shareholders.
Guidance for 2021
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 COVID-19 pandemic has made accurate modeling and providing meaningful earnings guidance 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.
Since the start of the pandemic, 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 issue earnings guidance for the 2021 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.
Statistically, patients residing in senior housing are identified as hospice appropriate earlier into their terminal prognosis and have a much greater probability of having a length of stay in excess of 90 days. Hospice patients referred from hospitals, oncology practices and similar referral sources are generally more acute and have a significantly lower probability of lengths-of-stay exceeding 90 days. According to data released by the National Investment Center for Seniors Housing & Care, COVID-19 continues to adversely affect senior housing occupancy, which reached another record low in the third quarter of 2020. This reduced occupancy in senior housing has had a corresponding reduction in VITAS nursing home admissions. Nursing home patients represented 14.7% of the VITAS fourth quarter 2020 patient census, a 310-basis point reduction when compared the fourth quarter of 2019.
VITAS anticipates continued weak occupancy and corresponding weak referrals from senior housing for the first half of 2021. This guidance anticipates senior housing occupancy will begin to normalize to pre-pandemic occupancy starting in the second half of calendar year 2021.
Based upon the above discussion, VITAS 2021 revenue, prior to Medicare Cap, is estimated to decline approximately 4.0% when compared to the prior year. Average Daily Census in 2021 is estimated to decline approximately 5.0%. Full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 19.4%. We are currently estimating $10 million for Medicare Cap billing limitations in calendar year 2021.
Roto-Rooter is forecasted to achieve full-year 2021 revenue growth of 5% to 6%. Roto-Rooter’s Adjusted EBITDA margin for 2021 is estimated to be 26.0%.
Based upon the above, full-year 2021 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, costs related to litigation, and other discrete items, is estimated to be in the range of $17.00 to $17.50. This 2021 guidance assumes an effective corporate tax rate on adjusted earnings of 24.7%. Chemed’s 2020 reported adjusted earnings per diluted share was $18.08.
Conference Call
Chemed will host a conference call and webcast at 10 a.m., ET, on Wednesday, February 24, 2021, 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 7865216. 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 7865216. 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 December 31,
For the Years Ended December 31,
2020
2019
2020
2019
Service revenues and sales $533,289
$
522,324
2,079,583
$
1,938,555
Cost of services provided and goods sold
335,049
347,355
1,378,197
1,321,126
Selling, general and administrative expenses (aa)
86,805
83,291
330,218
305,712
Depreciation
11,835
11,126
46,596
40,870
Amortization
2,511
2,969
9,987
4,335
Other operating (income)/expenses
(46,160
)
131
(75,095
)
9,132
Total costs and expenses
390,040
444,872
1,689,903
1,681,175
Income from operations
143,249
77,452
389,680
257,380
Interest expense
(350
)
(1,133
)
(2,355
)
(4,535
)
Other income--net (bb)2,942
3,276
8,665
8,764
Income before income taxes
145,841
79,595
395,990
261,609
Income taxes
(32,089
)
(14,015
)
(76,524
)
(41,686
)
Net income $113,752
$
65,580
$
319,466
$
219,923
Earnings Per Share Net income $
7.12
$
4.09
$
20.02
$
13.77
Average number of shares outstanding
15,973
16,022
15,955
15,969
Diluted Earnings Per Share Net income $
6.96
$
3.96
$
19.48
$
13.31
Average number of shares outstanding
16,348
16,565
16,398
16,527
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
Three Months Ended December 31,
For the Years Ended December 31,
2020
2019
2020
2019
SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation plans $80,551
$
77,053
$
313,348
$
289,828
Long-term incentive compensation
3,414
3,078
8,937
7,630
Market value adjustments related to deferred compensation trusts
2,840
3,160
7,933
8,254
Total SG&A expenses $
86,805
$
83,291
$
330,218
$
305,712
(bb) Other income--net comprises (in thousands):
Three Months Ended December 31,
For the Years Ended December 31,
2020
2019
2020
2019
Market value adjustments related to deferred compensation trusts $2,840
$
3,160
$
7,933
$
8,254
Interest income
109
126
757
513
Other
(7
)
(10
)
(25
)
(3
)
Total other income--net $2,942
$
3,276
$
8,665
$
8,764
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)(unaudited)
December 31,
2020
2019
Assets Current assets Cash and cash equivalents $162,675
$
6,158
Accounts receivable less allowances
126,853
143,827
Inventories
7,095
7,462
Prepaid income taxes
6,603
10,074
Prepaid expenses
26,177
23,150
Total current assets
329,403
190,671
Investments of deferred compensation plans held in trust
88,811
77,446
Properties and equipment, at cost less accumulated depreciation
187,820
175,763
Lease right of use asset
123,448
111,652
Identifiable intangible assets less accumulated amortization
118,085
126,370
Goodwill
578,585
577,367
Other assets
8,759
9,048
Total Assets $
1,434,911
$
1,268,317
Liabilities Current liabilities Accounts payable $
54,234
$
51,101
Income taxes
9,464
131
Accrued insurance
54,703
50,328
Accrued compensation
91,282
70,814
Accrued legal
10,632
6,941
Short-term lease liability
36,200
39,280
Other current liabilities
42,593
43,625
Total current liabilities
299,108
262,220
Deferred income taxes
20,664
18,504
Long-term debt
-
90,000
Deferred compensation liabilities
88,456
76,446
Long-term lease liability
99,210
86,656
Other liabilities
26,273
7,883
Total Liabilities
533,711
541,709
Stockholders' Equity Capital stock
36,259
35,811
Paid-in capital
961,404
860,671
Retained earnings
1,723,777
1,425,752
Treasury stock, at cost
(1,822,579
)
(1,597,940
)
Deferred compensation payable in Company stock2,339
2,314
Total Stockholders' Equity
901,200
726,608
Total Liabilities and Stockholders' Equity $
1,434,911
$
1,268,317
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)(unaudited)
For the Years Ended December 31,
2020
2019
Cash Flows from Operating Activities Net income $319,466
$
219,923
Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization
56,583
45,205
Stock option expense
18,422
14,831
Deferred payroll taxes
36,350
-
Noncash long-term incentive compensation
7,208
5,740
Litigation settlement
2,684
6,000
Deferred tax provision/(benefit)
1,433
(2,770
)
Noncash directors' compensation1,171
767
Amortization of debt issuance costs
306
306
Asset impairment loss
-
2,266
Changes in operating assets and liabilities, excluding amounts acquired in business combinations:
Decrease/(increase) in accounts receivable12,773
(19,247
)
Decrease/(increase) in inventories367
(1,757
)
Increase in prepaid expenses(3,027
)
(3,491
)
Increase in accounts payable and other current liabilities
19,096
28,417
Change in current income taxes
13,525
161
Net change in lease assets and liabilities
1,206
3,108
Increase in other assets
(11,834
)
(11,963
)
Increase in other liabilities12,323
12,354
Other sources
1,237
1,399
Net cash provided by operating activities
489,289
301,249
Cash Flows from Investing Activities Capital expenditures
(58,831
)
(53,022
)
Business combinations(3,600
)
(138,010
)
Other sources871
272
Net cash used by investing activities
(61,560
)
(190,760
)
Cash Flows from Financing Activities Payments on revolving line of credit(264,900
)
(482,100
)
Proceeds from revolving line of credit174,900
482,900
Purchases of treasury stock
(175,594
)
(92,631
)
Proceeds from exercise of stock options50,382
34,380
Capital stock surrendered to pay taxes on stock-based compensation
(25,328
)
(28,474
)
Dividends paid(21,079
)
(19,788
)
Change in cash overdrafts payable(9,849
)
(3,927
)
Other sources256
478
Net cash used by financing activities
(271,212
)
(109,162
)
Increase in Cash and Cash Equivalents156,517
1,327
Cash and cash equivalents at beginning of year
6,158
4,831
Cash and cash equivalents at end of year $
162,675
$
6,158
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (in thousands)(unaudited)
Chemed
VITAS
Roto-Rooter
Corporate
Consolidated
2020 (a) Service revenues and sales $332,190
$
201,099
$
-
$
533,289
Cost of services provided and goods sold
237,812
97,237
-
335,049
Selling, general and administrative expenses
20,305
49,679
16,821
86,805
Depreciation
5,546
6,257
32
11,835
Amortization
18
2,493
-
2,511
Other operating expense/(income)
(46,929
)
769
-
(46,160
)
Total costs and expenses216,752
156,435
16,853
390,040
Income/(loss) from operations
115,438
44,664
(16,853
)
143,249
Interest expense
(29
)
(68
)
(253
)
(350
)
Intercompany interest income/(expense)5,434
1,834
(7,268
)
-
Other income—net
95
7
2,840
2,942
Income/(loss) before income taxes
120,938
46,437
(21,534
)
145,841
Income taxes
(29,419
)
(11,007
)
8,337
(32,089
)
Net income/(loss) $91,519
$
35,430
$
(13,197
)
$113,752
2019 (b) Service revenues and sales $
339,905
$
182,419
$
-
$
522,324
Cost of services provided and goods sold
253,659
93,696
-
347,355
Selling, general and administrative expenses
21,162
46,198
15,931
83,291
Depreciation
5,341
5,747
38
11,126
Amortization
18
2,951
-
2,969
Other operating expense
25
106
-
131
Total costs and expenses
280,205
148,698
15,969
444,872
Income/(loss) from operations
59,700
33,721
(15,969
)
77,452
Interest expense
(19
)
(72
)
(1,042
)
(1,133
)
Intercompany interest income/(expense)4,740
1,543
(6,283
)
-
Other income—net
76
40
3,160
3,276
Income/(loss) before income taxes
64,497
35,232
(20,134
)
79,595
Income taxes
(15,075
)
(7,823
)
8,883
(14,015
)
Net income/(loss) $49,422
$
27,409
$
(11,251
)
$65,580
The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated 2020 (a) Service revenues and sales $
1,334,667
$
744,916
$
-
$
2,079,583
Cost of services provided and goods sold
1,010,693
367,504
-
1,378,197
Selling, general and administrative expenses
85,445
188,268
56,505
330,218
Depreciation
22,168
24,292
136
46,596
Amortization
71
9,916
-
9,987
Other operating (income)/expense
(78,590
)
3,495
-
(75,095
)
Total costs and expenses1,039,787
593,475
56,641
1,689,903
Income/(loss) from operations
294,880
151,441
(56,641
)
389,680
Interest expense
(166
)
(340
)
(1,849
)
(2,355
)
Intercompany interest income/(expense)19,897
6,256
(26,153
)
-
Other income—net
644
75
7,946
8,665
Income/(loss) before income taxes
315,255
157,432
(76,697
)
395,990
Income taxes
(76,473
)
(37,038
)
36,987
(76,524
)
Net income/(loss) $238,782
$
120,394
$
(39,710
)
$319,466
2019 (b) Service revenues and sales $
1,281,184
$
657,371
$
-
$
1,938,555
Cost of services provided and goods sold
982,056
339,070
-
1,321,126
Selling, general and administrative expenses
86,345
166,934
52,433
305,712
Depreciation
19,984
20,730
156
40,870
Amortization
71
4,264
-
4,335
Other operating expense
6,546
320
2,266
9,132
Total costs and expenses
1,095,002
531,318
54,855
1,681,175
Income/(loss) from operations
186,182
126,053
(54,855
)
257,380
Interest expense
(169
)
(345
)
(4,021
)
(4,535
)
Intercompany interest income/(expense)18,135
8,152
(26,287
)
-
Other income—net
385
126
8,253
8,764
Income/(loss) before income taxes
204,533
133,986
(76,910
)
261,609
Income taxes
(48,711
)
(30,276
)
37,301
(41,686
)
Net income/(loss) $155,822
$
103,710
$
(39,609
)
$219,923
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 DECEMBER 31, 2020 AND 2019 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated
2020
Net income/(loss) $91,519
$
35,430
$
(13,197
)
$113,752
Add/(deduct): Interest expense
29
68
253
350
Income taxes
29,419
11,007
(8,337
)
32,089
Depreciation
5,546
6,257
32
11,835
Amortization
18
2,493
-
2,511
EBITDA
126,531
55,255
(21,249
)
160,537
Add/(deduct): Intercompany interest expense/(income)
(5,434
)
(1,834
)
7,268
-
Interest income
(102
)
(7
)
-
(109
)
CARES Act grant(48,041
)
-
-
(48,041
)
Direct costs related to COVID-193,257
520
-
3,777
Stock option expense
-
-
5,127
5,127
Long-term incentive compensation
-
-
3,413
3,413
Litigation settlement
-
544
-
544
Adjusted EBITDA $
76,211
$
54,478
$
(5,441
)
$125,248
2019
Net income/(loss) $49,422
$
27,409
$
(11,251
)
$65,580
Add/(deduct): Interest expense
19
72
1,042
1,133
Income taxes
15,075
7,823
(8,883
)
14,015
Depreciation
5,341
5,747
38
11,126
Amortization
18
2,951
-
2,969
EBITDA
69,875
44,002
(19,054
)
94,823
Add/(deduct): Intercompany interest expense/(income)
(4,740
)
(1,543
)
6,283
-
Interest income
(84
)
(42
)
-
(126
)
Stock option expense-
-
4,102
4,102
Long-term incentive compensation
-
-
3,079
3,079
Acquisition expense
-
1,286
50
1,336
Medicare cap sequestration adjustment
919
-
-
919
Adjusted EBITDA $
65,970
$
43,703
$
(5,540
)
$104,133
The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING SUMMARIES OF EBITDA FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (in thousands)(unaudited)
Chemed
VITAS
Roto-Rooter
Corporate
Consolidated
2020
Net income/(loss) $238,782
$
120,394
$
(39,710
)
$319,466
Add/(deduct): Interest expense
166
340
1,849
2,355
Income taxes
76,473
37,038
(36,987
)
76,524
Depreciation
22,168
24,292
136
46,596
Amortization
71
9,916
-
9,987
EBITDA
337,660
191,980
(74,712
)
454,928
Add/(deduct): Intercompany interest expense/(income)
(19,897
)
(6,256
)
26,153
-
Interest income
(668
)
(76
)
(13
)
(757
)
CARES Act grant(80,225
)
-
-
(80,225
)
Direct costs related to COVID-1935,441
3,819
-
39,260
Stock option expense
-
-
18,422
18,422
Long-term incentive compensation
-
-
8,937
8,937
Litigation settlement costs
-
3,639
-
3,639
Medicare cap sequestration adjustment
619
-
-
619
Adjusted EBITDA $
272,930
$
193,106
$
(21,213
)
$444,823
2019
Net income/(loss) $155,822
$
103,710
$
(39,609
)
$219,923
Add/(deduct): Interest expense
169
345
4,021
4,535
Income taxes
48,711
30,276
(37,301
)
41,686
Depreciation
19,984
20,730
156
40,870
Amortization
71
4,264
-
4,335
EBITDA
224,757
159,325
(72,733
)
311,349
Add/(deduct): Intercompany interest expense/(income)
(18,135
)
(8,152
)
26,287
-
Interest (income)/expense
(380
)
(133
)
-
(513
)
Stock option expense-
-
14,831
14,831
Long-term incentive compensation
-
-
7,630
7,630
Litigation settlement costs
6,000
-
-
6,000
Acquisition expense
-
4,664
170
4,834
Medicare cap sequestration adjustment
3,982
-
-
3,982
Impairment loss on transportation equipment
-
-
2,266
2,266
Non cash ASC 842 expenses/(benefit)
656
55
(163
)
548
Adjusted EBITDA $
216,880
$
155,759
$
(21,712
)
$350,927
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
For the Years Ended
December 31,
December 31,
2020
2019
2020
2019
Net income as reported $113,752
$
65,580
$
319,466
$
219,923
Add/(deduct) pre-tax cost of: CARES Act grant
(48,041
)
-
(80,225
)
-
Direct costs related to COVID-19
3,777
-
39,260
-
Stock option expense
5,127
4,102
18,422
14,831
Amortization of reacquired franchise agreements
2,352
2,861
9,408
3,964
Long-term incentive compensation
3,413
3,079
8,937
7,630
Litigation settlement
544
-
3,639
6,000
Medicare cap sequestration adjustments
-
919
619
3,982
Impairment loss on transportation equipment
-
-
-
2,266
Acquisition expense
-
1,336
-
4,834
Non cash ASC 842 expenses
-
-
-
548
Add/(deduct) tax impacts: Tax impact of the above pre-tax adjustments (1)
9,141
(2,567
)
2,976
(9,328
)
Excess tax benefits on stock compensation(6,146
)
(5,440
)
(26,089
)
(24,177
)
Adjusted net income $83,919
$
69,870
$
296,413
$
230,473
Diluted Earnings Per Share As Reported Net income $
6.96
$
3.96
$
19.48
$
13.31
Average number of shares outstanding
16,348
16,565
16,398
16,527
Adjusted Diluted Earnings Per Share Adjusted net income $
5.13
$
4.22
$
18.08
$
13.95
Average number of shares outstanding
16,348
16,565
16,398
16,527
(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 December 31,
For the Years Ended December 31,
OPERATING STATISTICS2020
2019
2020
2019
Net revenue ($000) (c) Homecare279,410
$
275,976
$
1,106,358
$
1,076,025
Inpatient
28,973
30,857
114,956
99,920
Continuous care
30,175
40,997
136,011
133,473
Other
2,984
3,825
11,164
10,433
Subtotal
341,542
$
351,655
$
1,368,489
$
1,319,851
Room and board, net
(2,858
)
(3,260
)
(12,174
)
(11,359
)
Contractual allowances(3,994
)
(3,990
)
(14,970
)
(14,893
)
Medicare cap allowance(2,500
)
(4,500
)
(6,678
)
(12,415
)
Net Revenue332,190
$
339,905
$
1,334,667
$
1,281,184
Net revenue as a percent of total before Medicare cap allowance Homecare
81.8
%
78.5
%
80.8
%
81.5
%
Inpatient8.5
8.8
8.4
7.6
Continuous care
8.8
11.7
9.9
10.1
Other
0.9
1.0
0.9
0.8
Subtotal
100.0
100.0
100.0
100.0
Room and board, net
(0.8
)
(0.9
)
(0.9
)
(0.9
)
Contractual allowances(1.2
)
(1.1
)
(1.1
)
(1.1
)
Medicare cap allowance(0.7
)
(1.3
)
(0.5
)
(0.9
)
Net Revenue97.3
%
96.7
%
97.5
%
97.1
%
Days of care Homecare1,404,532
1,377,403
5,597,213
5,338,664
Nursing home
253,261
314,946
1,097,493
1,224,264
Respite
4,971
7,305
20,387
28,857
Subtotal routine homecare and respite
1,662,764
1,699,654
6,715,093
6,591,785
Inpatient
27,811
30,697
112,718
120,063
Continuous care
31,493
41,386
141,693
166,783
Total
1,722,068
1,771,737
6,969,504
6,878,631
Number of days in relevant time period
92
92
366
365
Average daily census ("ADC") (days) Homecare
15,267
14,972
15,293
14,626
Nursing home
2,753
3,423
2,999
3,354
Respite
54
79
55
79
Subtotal routine homecare and respite
18,074
18,474
18,347
18,059
Inpatient
302
334
308
329
Continuous care
342
450
387
458
Total
18,718
19,258
19,042
18,846
Total Admissions
17,960
17,479
71,328
69,859
Total Discharges
18,570
17,575
72,009
68,857
Average length of stay (days)
97.2
95.2
94.0
92.6
Median length of stay (days)
14.0
16.0
14.0
16.0
ADC by major diagnosis Cerebro
35.5
%
35.8
%
35.8
%
36.0
%
Neurological22.4
21.1
21.9
20.6
Cancer
12.3
12.8
12.5
12.9
Cardio
15.9
16.2
15.8
16.5
Respiratory
7.9
8.1
8.1
8.1
Other
6.0
6.0
5.9
5.9
Total
100.0
%
100.0
%
100.0
%
100.0
%
Admissions by major diagnosis Cerebro20.9
%
21.9
%
21.1
%
21.1
%
Neurological12.6
12.9
12.9
12.6
Cancer
26.7
29.2
27.6
29.2
Cardio
13.8
14.7
14.3
15.5
Respiratory
10.4
10.5
10.6
11.0
Other
15.6
10.8
13.5
10.6
Total
100.0
%
100.0
%
100.0
%
100.0
%
Estimated uncollectible accounts as a percent of revenues1.2
%
1.2
%
1.1
%
1.2
%
Accounts receivable -- Days of revenue outstanding-excluding unapplied Medicare payments36.0
35.4
n.a. n.a. Days of revenue outstanding-including unapplied Medicare payments
25.6
27.2
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, 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 December 31, 2020
VITAS
Roto-Rooter
Corporate
Consolidated
CARES Act grant $48,041
$
-
$
-
$
48,041
Direct costs related to COVID-19
(3,257
)
(520
)
-
(3,777
)
Stock option expense-
-
(5,127
)
(5,127
)
Long-term incentive compensation-
-
(3,413
)
(3,413
)
Amortization of reacquired franchise agreements-
(2,352
)
-
(2,352
)
Litigation settlement-
(544
)
-
(544
)
Pretax impact on earnings44,784
(3,416
)
(8,540
)
32,828
Excess tax benefits on stock compensation
-
-
6,146
6,146
Income tax benefit on the above
(11,367
)
906
1,320
(9,141
)
After-tax impact on earnings $33,417
$
(2,510
)
$(1,074
)
$29,833
For the Year Ended December 31, 2020 VITAS Roto-Rooter Corporate Consolidated CARES Act grant $
80,225
$
-
$
-
$
80,225
Direct costs related to COVID-19
(35,441
)
(3,819
)
-
(39,260
)
Stock option expense-
-
(18,422
)
(18,422
)
Amortization of acquired and cancelled franchise agreements-
(9,408
)
-
(9,408
)
Long-term incentive compensation-
-
(8,937
)
(8,937
)
Litigation settlement-
(3,639
)
-
(3,639
)
Medicare cap sequestration adjustment(619
)
-
-
(619
)
Pretax impact on earnings44,165
(16,866
)
(27,359
)
(60
)
Excess tax benefits on stock compensation-
-
26,089
26,089
Income tax benefit on the above
(11,209
)
4,469
3,764
(2,976
)
After-tax impact on earnings $32,956
$
(12,397
)
$2,494
$
23,053
(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 December 31, 2019 VITAS Roto-Rooter Corporate Consolidated Stock option expense $
-
$
-
$
(4,102
)
$(4,102
)
Long-term incentive compensation-
-
(3,079
)
(3,079
)
Amortization of reacquired franchise agreements-
(2,861
)
-
(2,861
)
Acquisition expense-
(1,286
)
(50
)
(1,336
)
Medicare cap sequestration adjustment(919
)
-
-
(919
)
Pretax impact on earnings(919
)
(4,147
)
(7,231
)
(12,297
)
Excess tax benefits on stock compensation-
-
5,441
5,441
Income tax benefit on the above
233
1,100
1,233
2,566
After-tax impact on earnings $
(686
)
$(3,047
)
$(557
)
$(4,290
)
For the Year Ended December 31, 2019 VITAS Roto-Rooter Corporate Consolidated Stock option expense $-
$
-
$
(14,831
)
$(14,831
)
Long-term incentive compensation-
-
(7,630
)
(7,630
)
Litigation settlement(6,000
)
-
-
(6,000
)
Acquisition expense-
(4,664
)
(170
)
(4,834
)
Medicare cap sequestration adjustment(3,982
)
-
-
(3,982
)
Amortization of reacquired franchise agreements-
(3,964
)
-
(3,964
)
Impairment loss on transportation equipment-
-
(2,266
)
(2,266
)
Non cash ASC 842 (expenses)/benefit(656
)
(55
)
163
(548
)
Pretax impact on earnings(10,638
)
(8,683
)
(24,734
)
(44,055
)
Excess tax benefits on stock compensation-
-
24,177
24,177
Income tax benefit on the above
2,707
2,301
4,320
9,328
After-tax impact on earnings $
(7,931
)
$(6,382
)
$3,763
$
(10,550
)
(c) VITAS has 10 large (greater than 450 ADC), 21 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 current cap year, 22 provider numbers have a Medicare cap cushion of 10% or greater, four provider numbers have a cap cushion between 5% and 10%, two provider numbers have a cap cushion between 0% and 5%, and two provider numbers have a Medicare cap liability.
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