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 pointsRoto-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 pointsVITAS
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 stock2,390
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' compensation1,171
767
Provision for bad debts 871
-
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 liabilities13,303
(4,175
)
Change in current income taxes23,725
(2,249
)
Net change in lease assets and liabilities1,287
(338
)
Increase in other assets(2,988
)
(4,653
)
Increase in other liabilities1,383
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 credit174,900
222,800
Purchases of treasury stock
(122,148
)
(71,926
)
Proceeds from exercise of stock options19,440
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 Equivalents14,218
(1,508
)
Cash and cash equivalents at beginning of year6,158
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 expenses252,635
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 expenses539,939
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 taxes134,645
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-1924,265
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-1925,238
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 STATISTICS2020
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
%
Inpatient7.6
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 Revenue96.6
%
97.0
%
96.9
%
97.2
%
Days of care Homecare1,401,744
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
%
Neurological21.7
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 Cerebro20.9
%
20.6
%
21.0
%
20.7
%
Neurological13.4
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 revenues0.9
%
1.2
%
1.1
%
1.1
%
Accounts receivable -- Days of revenue outstanding-excluding unapplied Medicare payments31.9
32.7
n.a.
n.a.
Days of revenue outstanding-including unapplied Medicare payments26.7
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 earnings13,678
(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 earnings12,029
(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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20200729005842/en/