Chemed Reports Third-Quarter 2022 Results - Increases 2022 Earnings Guidance
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 third quarter ended September 30, 2022, versus the comparable prior-year period, as follows:
Consolidated operating results:
Revenue declined 2.3% to $526 million GAAP Diluted Earnings-per-Share (EPS) of $3.78 Adjusted Diluted EPS of $4.74, a decline of 6.3%VITAS segment operating results:
Net Patient Revenue of $297 million, a decline of 6.6% Average Daily Census (ADC) of 17,242, a decline of 4.4% Admissions of 14,680, a decline of 16.6% Net Income, excluding certain discrete items, of $33.2 million, a decline of 25.9% Adjusted EBITDA, excluding Medicare Cap, of $45.4 million, a decline of 24.9% Adjusted EBITDA margin, excluding Medicare Cap, of 15.3%, a decrease of 375-basis pointsRoto-Rooter segment operating results:
Revenue of $230 million, an increase of 3.9% Net Income, excluding certain discrete items, of $49.3 million, an increase of 5.9% Adjusted EBITDA of $69.5 million, an increase of 5.7% Adjusted EBITDA margin of 30.2%, an increase of 50-basis pointsVITAS
VITAS net revenue was $297 million in the third quarter of 2022, which is a decline of 6.6%, when compared to the prior-year period. This revenue decline is comprised primarily of a 4.4% reduction in days-of-care and a geographically weighted average Medicare reimbursement rate decrease of approximately 0.2%. Reimbursement rates in the quarter were negatively impacted by 200-basis points as a result of CMS reimplementing the 2% sequestration cut that was suspended at the start of the pandemic. Acuity mix shift had a net impact of reducing revenue approximately $5.3 million, or 1.7%, in the quarter when compared to the prior-year revenue and level-of-care mix. The combination of Medicare Cap and other contra revenue changes negatively impacted revenue growth by 30-basis points.
In the third quarter of 2022, VITAS accrued $0.6 million in Medicare Cap billing limitations. This compares to a $0.1 million Medicare Cap billing limitation in the third quarter of 2021.
Of VITAS’ 30 Medicare provider numbers, 25 provider numbers have a Medicare Cap cushion of 10% or greater, two provider numbers have a cushion between 5% and 10%, one provider number has a cushion between 0% and 5%, and two provider numbers have an estimated fiscal 2022 Medicare Cap billing limitation liability.
Average revenue per patient per day in the third quarter of 2022 was $190.78 which, including acuity mix shift, is 193-basis points below the prior-year period. Reimbursement for routine home care and high acuity care averaged $168.20 and $990.67, respectively. During the quarter, high acuity days-of-care were 2.7% of total days of care, 41-basis points below the prior-year quarter.
The third quarter 2022 gross margin, excluding Medicare Cap, expenses related to VITAS’ 12-month hiring and retention program, and increased costs directly related to operating during the pandemic, was 22.5%. This is a 323-basis point margin decline when compared to the third quarter of 2021. Approximately 200-basis points of this decline is from Medicare reimplementing sequestration effective July 1, 2022. An additional 70-basis points of this margin decline is attributed to increased staffing and patient capacity from VITAS’ hiring and retention program.
Selling, general and administrative expense was $21.6 million in the third quarter of 2022 and compares to $21.4 million incurred in the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $45.4 million in the quarter, a decrease of 24.9%. Adjusted EBITDA margin in the quarter, excluding Medicare Cap, was 15.3%, which is 375-basis points below the prior-year period. This Adjusted EBITDA margin was also negatively impacted by 200-basis points for the reimplementation of sequestration and approximately 70-basis points due to increased staffing and patient capacity from VITAS’ hiring and retention program.
Roto-Rooter
Roto-Rooter generated quarterly revenue of $230 million in the third quarter of 2022, an increase of 3.9%, when compared to the prior-year quarter.
Roto-Rooter branch commercial revenue in the quarter totaled $55.9 million, an increase of 6.9%, over the prior year. This aggregate commercial revenue growth consisted of drain cleaning revenue increasing 2.9%, plumbing increasing 11.6%, excavation increasing 9.8%, and water restoration increasing 6.7%.
Roto-Rooter branch residential revenue in the quarter totaled $155 million, an increase of 2.5%, over the prior-year period. This aggregate residential revenue growth consisted of drain cleaning decreasing 2.9%, plumbing expanding 5.9%, excavation expanding 0.9%, and water restoration increasing 7.6%.
Roto-Rooter’s gross margin in the quarter was 53.4%, a 37-basis point increase when compared to the third quarter of 2021. Adjusted EBITDA in the third quarter of 2022 totaled $69.5 million, an increase of 5.7%. The Adjusted EBITDA margin in the quarter was 30.2%, which is a 50-basis point improvement when compared to the prior year.
Chemed Consolidated
As of September 30, 2022, Chemed had total cash and cash equivalents of $7.8 million and $101 million of current and long-term debt.
In June 2022, Chemed entered into a five-year $550 million Amended and Restated Credit Agreement (Credit Agreement). This Credit Agreement consists of a $100 million amortizable term loan and a $450 million revolving credit facility. The interest rate on this Credit Agreement has a floating rate that is currently SOFR plus 100-basis points. On September 30, 2022, the Company had approximately $401 million of undrawn borrowing capacity under this credit agreement.
During the quarter, the Company repurchased 50,000 shares of Chemed stock for $23.9 million which equates to a cost per share of $477.68. As of September 30, 2022, there was approximately $101 million of remaining share repurchase authorization under its plan.
Guidance for 2022
Historically, Chemed earnings guidance has been developed using previous periods’ key operating metrics which are then modeled and projected out for future periods. Critical within these projections is the understanding of traditional patterned correlations among key operating metrics. 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, uncertainty regarding forward looking inflation, and a potential economic recession, has made accurate modeling and providing meaningful earnings guidance exceptionally challenging. 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 remainder of the 2022 calendar year. This guidance should be taken with the recognition that the above macro issues could materially impact the company’s ability to achieve this guidance.
Based upon the above discussion, VITAS 2022 revenue, prior to Medicare Cap, is estimated to decline 4.5% to 5.0% when compared to 2021. A portion of the estimated revenue decline, approximately $15 million or 118-basis points, is the result of the phase out of sequestration relief over the first half of 2022 compared to a full year of sequestration relief in 2021. ADC is estimated to decline 3.4%. Full year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 17.1% to 17.2%. We are currently estimating $8.1 million for Medicare Cap billing limitations in calendar year 2022.
Roto-Rooter is forecasted to achieve full-year 2022 revenue growth of 6.2% to 6.5%. Roto-Rooter’s adjusted EBITDA margin for 2022 is expected to be 29.5% to 29.7%.
Based upon the above, full-year 2022 earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, costs related to litigation, retention program for licensed healthcare employees, and other discrete items, is estimated to be in the range of $19.60 to $19.70. This compares to our previous 2022 adjusted earnings per share guidance of $19.30 to $19.50. Current 2022 guidance assumes an effective corporate tax rate on adjusted earnings of 25.1% and a diluted share count of 15.12 million shares. Chemed’s 2021 reported adjusted earnings per diluted share was $19.33.
Conference Call
Chemed will host a conference call and webcast at 10 a.m., ET, on Tuesday November 1, 2022, to discuss the company's quarterly results and to provide an update on its business. Participants may access a live webcast of the conference call through the investor relations section of Chemed’s website, Investor Relations Home | Chemed Corporation or the hosting website https://edge.media-server.com/mmc/p/8ovxyhbq.
Participants may also register via teleconference at:
https://register.vevent.com/register/BId400f56fad7a4877af359aca78465824. Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. All participants are instructed to dial-in 15 minutes prior to the start time.
A taped replay of the conference call will be available beginning approximately two hours after the call's conclusion. You may access the replay via webcast through the investor relations section of Chemed’s website.
Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to approximately 17,300 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 September 30, Nine Months Ended September 30,2022
2021
2022
2021
Service revenues and sales $526,472
$
538,667
1,588,309
$
1,598,283
Cost of services provided and goods sold
346,934
342,164
1,020,307
1,033,130
Selling, general and administrative expenses (aa)
83,992
89,217
261,799
274,654
Depreciation
12,154
11,844
37,006
37,171
Amortization
2,520
2,510
7,558
7,530
Other operating expense/(income)
15
63
(530
)
789
Total costs and expenses
445,615
445,798
1,326,140
1,353,274
Income from operations
80,857
92,869
262,169
245,009
Interest expense
(1,271
)
(583
)
(2,983
)
(1,343
)
Other (expense)/income--net (bb)(3,115
)
3,134
(11,907
)
10,521
Income before income taxes
76,471
95,420
247,279
254,187
Income taxes
(19,598
)
(23,417
)
(59,781
)
(60,262
)
Net income $56,873
$
72,003
$
187,498
$
193,925
Earnings Per Share Net income $
3.82
$
4.62
$
12.55
$
12.27
Average number of shares outstanding
14,888
15,587
14,935
15,808
Diluted Earnings Per Share Net income $
3.78
$
4.55
$
12.41
$
12.06
Average number of shares outstanding
15,042
15,842
15,114
16,083
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands): Three Months Ended September 30, Nine Months Ended September 30,
2022
2021
2022
2021
SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation plans $85,118
$
84,197
$
269,118
$
259,376
Market value adjustments related to deferred compensation trusts
(3,176
)
3,078
(12,196
)
9,770
Long-term incentive compensation
2,050
1,942
4,877
5,508
Total SG&A expenses $
83,992
$
89,217
$
261,799
$
274,654
(bb) Other (expense)/income--net comprises (in thousands): Three Months Ended September 30, Nine Months Ended September 30,
2022
2021
2022
2021
Market value adjustments related to deferred compensation trusts $(3,176
)
$3,078
$
(12,196
)
$9,770
Interest income
62
57
288
288
Other
(1
)
(1
)
1
463
Total other (expense)/income--net $
(3,115
)
$3,134
$
(11,907
)
$10,521
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)(unaudited) September 30,
2022
2021
Assets Current assets Cash and cash equivalents $7,781
$
28,743
Accounts receivable less allowances
121,662
118,193
Inventories
10,469
8,394
Prepaid income taxes
27,526
12,940
Prepaid expenses
31,431
32,294
Total current assets
198,869
200,564
Investments of deferred compensation plans held in trust
90,097
102,045
Properties and equipment, at cost less accumulated depreciation
193,705
190,781
Lease right of use asset
131,430
127,077
Identifiable intangible assets less accumulated amortization
102,103
110,606
Goodwill
579,887
578,610
Other assets
60,104
8,450
Total Assets $
1,356,195
$
1,318,133
Liabilities Current liabilities Accounts payable $
77,170
$
60,042
Current portion of long-term debt
5,000
-
Income taxes
-
180
Accrued insurance
56,732
52,645
Accrued compensation
67,230
97,256
Accrued legal
653
1,497
Short-term lease liability
39,813
35,148
Other current liabilities
51,552
39,318
Total current liabilities
298,150
286,086
Deferred income taxes
33,590
20,100
Long-term debt
95,850
-
Deferred compensation liabilities
89,873
100,409
Long-term lease liability
105,594
104,198
Other liabilities
11,722
27,621
Total Liabilities
634,779
538,414
Stockholders' Equity Capital stock
36,670
36,402
Paid-in capital
1,100,161
1,007,506
Retained earnings
2,141,418
1,901,245
Treasury stock, at cost
(2,559,141
)
(2,167,640
)
Deferred compensation payable in Company stock2,308
2,206
Total Stockholders' Equity
721,416
779,719
Total Liabilities and Stockholders' Equity $
1,356,195
$
1,318,133
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)(unaudited) For the Nine Months Ended September 30,
2022
2021
Cash Flows from Operating Activities Net income $187,498
$
193,925
Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization
44,564
44,701
Stock option expense
19,343
16,342
Provision/(benefit) for deferred income taxes
10,408
(561
)
Noncash long-term incentive compensation4,343
5,344
Noncash directors' compensation
1,170
1,173
Amortization of debt issuance costs
247
229
Payments on previously accrued litigation settlements
-
(9,440
)
Changes in operating assets and liabilities, excluding amounts acquired in business combinations: Decrease in accounts receivable16,166
9,247
Increase in inventories
(360
)
(1,299
)
Decrease/(increase) in prepaid expenses1,257
(6,117
)
(Increase)/decrease in accounts payable and other current liabilities(15,765
)
6,330
Change in current income taxes
(10,277
)
(15,749
)
Net change in lease assets and liabilities313
15
Increase in other assets
(42,424
)
(13,561
)
(Decrease)/increase in other liabilities(6,555
)
13,474
Other (uses)/sources
(241
)
974
Net cash provided by operating activities
209,687
245,027
Cash Flows from Investing Activities Capital expenditures
(39,066
)
(44,472
)
Proceeds from sale of fixed assets2,037
710
Business combinations, net of cash acquired
(2,044
)
-
Other (uses)/sources
(841
)
50
Net cash used by investing activities
(39,914
)
(43,712
)
Cash Flows from Financing Activities Payments on revolving line of credit(299,400
)
(1,500
)
Proceeds from revolving line of credit116,500
1,500
Proceeds from other long-term debt
100,000
-
Payments on other long-term debt
(1,250
)
-
Purchases of treasury stock
(101,539
)
(330,380
)
Proceeds from exercise of stock options17,128
17,918
Dividends paid
(16,391
)
(16,457
)
Capital stock surrendered to pay taxes on stock-based compensation(12,497
)
(9,445
)
Change in cash overdrafts payable5,535
3,054
Debt issuance costs
(1,584
)
-
Other (uses)/sources
(1,389
)
63
Net cash used by financing activities
(194,887
)
(335,247
)
Decrease in Cash and Cash Equivalents(25,114
)
(133,932
)
Cash and cash equivalents at beginning of year32,895
162,675
Cash and cash equivalents at end of year $
7,781
$
28,743
CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated 2022 (a) Service revenues and sales $
296,536
$
229,936
$
-
$
526,472
Cost of services provided and goods sold
239,755
107,179
-
346,934
Selling, general and administrative expenses
21,581
53,225
9,186
83,992
Depreciation
5,281
6,855
18
12,154
Amortization
26
2,494
-
2,520
Other operating expense/(income)
26
(11
)
-
15
Total costs and expenses
266,669
169,742
9,204
445,615
Income/(loss) from operations
29,867
60,194
(9,204
)
80,857
Interest expense
(44
)
(91
)
(1,136
)
(1,271
)
Intercompany interest income/(expense)4,842
2,371
(7,213
)
-
Other income/(expense)—net
26
36
(3,177
)
(3,115
)
Income/(loss) before income taxes34,691
62,510
(20,730
)
76,471
Income taxes
(8,605
)
(14,924
)
3,931
(19,598
)
Net income/(loss) $26,086
$
47,586
$
(16,799
)
$56,873
2021 (b) Service revenues and sales $
317,411
$
221,256
$
-
$
538,667
Cost of services provided and goods sold
238,212
103,952
-
342,164
Selling, general and administrative expenses
21,372
51,914
15,931
89,217
Depreciation
5,286
6,539
19
11,844
Amortization
18
2,492
2,510
Other operating expense/(income)
65
(3
)
1
63
Total costs and expenses
264,953
164,894
15,951
445,798
Income/(loss) from operations
52,458
56,362
(15,951
)
92,869
Interest expense
(43
)
(285
)
(255
)
(583
)
Intercompany interest income/(expense)4,513
1,847
(6,360
)
-
Other income—net
22
34
3,078
3,134
Income/(loss) before income taxes
56,950
57,958
(19,488
)
95,420
Income taxes
(14,000
)
(13,404
)
3,987
(23,417
)
Net income/(loss) $42,950
$
44,554
$
(15,501
)
$72,003
The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated 2022 (a) Service revenues and sales $
893,506
$
694,803
$
-
$
1,588,309
Cost of services provided and goods sold
694,528
325,779
-
1,020,307
Selling, general and administrative expenses
67,181
165,162
29,456
261,799
Depreciation
16,894
20,058
54
37,006
Amortization
76
7,482
-
7,558
Other operating (income)/expense
(929
)
399
-
(530
)
Total costs and expenses777,750
518,880
29,510
1,326,140
Income/(loss) from operations
115,756
175,923
(29,510
)
262,169
Interest expense
(142
)
(319
)
(2,522
)
(2,983
)
Intercompany interest income/(expense)14,181
6,751
(20,932
)
-
Other income/(expense)—net
183
107
(12,197
)
(11,907
)
Income/(loss) before income taxes129,978
182,462
(65,161
)
247,279
Income taxes
(32,199
)
(43,867
)
16,285
(59,781
)
Net income/(loss) $97,779
$
138,595
$
(48,876
)
$187,498
2021 (b) Service revenues and sales $
945,135
$
653,148
$
-
$
1,598,283
Cost of services provided and goods sold
724,398
308,732
-
1,033,130
Selling, general and administrative expenses
66,094
158,791
49,769
274,654
Depreciation
17,749
19,359
63
37,171
Amortization
53
7,477
-
7,530
Other operating expense
655
133
1
789
Total costs and expenses
808,949
494,492
49,833
1,353,274
Income/(loss) from operations
136,186
158,656
(49,833
)
245,009
Interest expense
(129
)
(464
)
(750
)
(1,343
)
Intercompany interest income/(expense)13,524
5,116
(18,640
)
-
Other income—net
654
97
9,770
10,521
Income/(loss) before income taxes
150,235
163,405
(59,453
)
254,187
Income taxes
(36,805
)
(38,901
)
15,444
(60,262
)
Net income/(loss) $113,430
$
124,504
$
(44,009
)
$193,925
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 SEPTEMBER 30, 2022 AND 2021 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated
2022
Net income/(loss) $26,086
$
47,586
$
(16,799
)
$56,873
Add/(deduct): Interest expense
44
91
1,136
1,271
Income taxes
8,605
14,924
(3,931
)
19,598
Depreciation
5,281
6,855
18
12,154
Amortization
26
2,494
-
2,520
EBITDA
40,042
71,950
(19,576
)
92,416
Add/(deduct): Intercompany interest expense/(income)
(4,842
)
(2,371
)
7,213
-
Interest income
(27
)
(35
)
-
(62
)
Licensed healthcare retention bonus9,559
-
-
9,559
Stock option expense
-
-
4,676
4,676
Long-term incentive compensation
-
-
2,050
2,050
Direct costs related to COVID-19
-
-
89
89
Adjusted EBITDA $
44,732
$
69,544
$
(5,548
)
$108,728
2021
Net income/(loss) $42,950
$
44,554
$
(15,501
)
$72,003
Add/(deduct): Interest expense
43
285
255
583
Income taxes
14,000
13,404
(3,987
)
23,417
Depreciation
5,286
6,539
19
11,844
Amortization
18
2,492
-
2,510
EBITDA
62,297
67,274
(19,214
)
110,357
Add/(deduct): Intercompany interest expense/(income)
(4,513
)
(1,847
)
6,360
-
Interest income
(24
)
(34
)
-
(58
)
Stock option expense-
-
3,998
3,998
Direct costs related to COVID-19
2,501
415
-
2,916
Long-term incentive compensation
-
-
1,942
1,942
Other
-
-
218
218
Adjusted EBITDA $
60,261
$
65,808
$
(6,696
)
$119,373
The "Footnotes to Financial Statements" are integral parts of this financial information. CHEMED CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING SUMMARIES OF EBITDA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (in thousands)(unaudited) Chemed VITAS Roto-Rooter Corporate Consolidated
2022
Net income/(loss) $97,779
$
138,595
$
(48,876
)
$187,498
Add/(deduct): Interest expense
142
319
2,522
2,983
Income taxes
32,199
43,867
(16,285
)
59,781
Depreciation
16,894
20,058
54
37,006
Amortization
76
7,482
-
7,558
EBITDA
147,090
210,321
(62,585
)
294,826
Add/(deduct): Intercompany interest expense/(income)
(14,181
)
(6,751
)
20,932
-
Interest income
(181
)
(107
)
-
(288
)
Stock option expense-
-
19,343
19,343
Licensed healthcare retention bonus
9,559
-
-
9,559
Long-term incentive compensation
-
-
4,877
4,877
Direct costs related to COVID-19
310
988
89
1,387
Medicare cap sequestration adjustment
138
-
-
138
Adjusted EBITDA $
142,735
$
204,451
$
(17,344
)
$329,842
2021
Net income/(loss) $113,430
$
124,504
$
(44,009
)
$193,925
Add/(deduct): Interest expense
129
464
750
1,343
Income taxes
36,805
38,901
(15,444
)
60,262
Depreciation
17,749
19,359
63
37,171
Amortization
53
7,477
-
7,530
EBITDA
168,166
190,705
(58,640
)
300,231
Add/(deduct): Intercompany interest expense/(income)
(13,524
)
(5,116
)
18,640
-
Interest income
(191
)
(97
)
-
(288
)
Direct costs related to COVID-1915,338
1,551
38
16,927
Stock option expense
-
-
16,342
16,342
Long-term incentive compensation
-
-
5,508
5,508
Litigation settlements
-
(98
)
-
(98
)
Other-
-
218
218
Adjusted EBITDA $
169,789
$
186,945
$
(17,894
)
$338,840
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 September 30, Nine Months Ended September 30,
2022
2021
2022
2021
Net income as reported $56,873
$
72,003
$
187,498
$
193,925
Add/(deduct) pre-tax cost of: Stock option expense
4,676
3,998
19,343
16,342
Licensed healthcare worker retention bonus
9,559
-
9,559
-
Amortization of reacquired franchise agreements
2,352
2,352
7,056
7,056
Long-term incentive compensation
2,050
1,942
4,877
5,508
Direct costs related to COVID-19
89
2,916
1,387
16,927
Medicare cap sequestration adjustment
-
-
138
-
Facility relocation expenses
-
-
-
1,855
Litigation settlements
-
-
-
(98
)
Other-
218
-
218
Add/(deduct) tax impacts: Tax impact of the above pre-tax adjustments (1)
(3,902
)
(2,146
)
(8,351
)
(9,874
)
Excess tax benefits on stock compensation(450
)
(1,199
)
(4,390
)
(5,305
)
Adjusted net income $71,247
$
80,084
$
217,117
$
226,554
Diluted Earnings Per Share As Reported Net income $
3.78
$
4.55
$
12.41
$
12.06
Average number of shares outstanding
15,042
15,842
15,114
16,083
Adjusted Diluted Earnings Per Share Adjusted net income $
4.74
$
5.06
$
14.37
$
14.09
Average number of shares outstanding
15,042
15,842
15,114
16,083
(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 September 30, Nine Months Ended September 30, OPERATING STATISTICS
2022
2021
2022
2021
Net revenue ($000) (c) Homecare $256,253
$
268,137
$
771,520
$
796,817
Inpatient
24,526
29,368
75,714
85,895
Continuous care
18,600
22,027
57,717
73,658
Other
3,240
3,225
9,461
9,241
Subtotal $
302,619
$
322,757
$
914,412
$
965,611
Room and board, net
(2,513
)
(2,130
)
(6,796
)
(7,451
)
Contractual allowances(2,952
)
(3,119
)
(8,992
)
(9,428
)
Medicare cap allowance(618
)
(97
)
(5,118
)
(3,597
)
Net Revenue $296,536
$
317,411
$
893,506
$
945,135
Net revenue as a percent of total before Medicare cap allowance Homecare
84.7
%
83.1
%
84.4
%
82.5
%
Inpatient8.1
9.1
8.3
8.9
Continuous care
6.1
6.8
6.3
7.6
Other
1.1
1.0
1.0
1.0
Subtotal
100.0
100.0
100.0
100.0
Room and board, net
(0.8
)
(0.7
)
(0.7
)
(0.8
)
Contractual allowances(1.0
)
(1.0
)
(1.0
)
(1.0
)
Medicare cap allowance(0.2
)
-
(0.6
)
(0.3
)
Net Revenue98.0
%
98.3
%
97.7
%
97.9
%
Days of care Homecare1,271,678
1,342,841
3,796,954
4,008,215
Nursing home
264,407
258,700
771,921
735,906
Respite
6,635
5,331
18,098
15,509
Subtotal routine homecare and respite
1,542,720
1,606,872
4,586,973
4,759,630
Inpatient
23,435
27,962
71,177
82,129
Continuous care
20,097
24,299
61,981
79,385
Total
1,586,252
1,659,133
4,720,131
4,921,144
Number of days in relevant time period
92
92
273
273
Average daily census ("ADC") (days) Homecare
13,823
14,596
13,908
14,682
Nursing home
2,874
2,812
2,828
2,696
Respite
72
58
66
57
Subtotal routine homecare and respite
16,769
17,466
16,802
17,435
Inpatient
255
304
261
301
Continuous care
218
264
227
291
Total
17,242
18,034
17,290
18,027
Total Admissions
14,680
17,598
45,945
52,573
Total Discharges
14,603
17,686
46,139
52,747
Average length of stay (days)
106.2
96.0
104.9
95.0
Median length of stay (days)
17.0
13.0
16.0
13.0
ADC by major diagnosis Cerebro
39.3
%
36.4
%
38.5
%
36.7
%
Neurological22.0
22.7
22.3
22.5
Cancer
10.7
12.0
11.0
12.1
Cardio
15.4
15.5
15.6
15.5
Respiratory
7.2
7.5
7.3
7.5
Other
5.4
5.9
5.3
5.7
Total
100.0
%
100.0
%
100.0
%
100.0
%
Admissions by major diagnosis Cerebro25.9
%
20.3
%
24.2
%
21.1
%
Neurological12.4
12.1
12.7
12.2
Cancer
26.6
27.0
26.2
26.9
Cardio
14.9
14.1
14.8
14.4
Respiratory
9.5
11.3
10.3
10.9
Other
10.7
15.2
11.8
14.5
Total
100.0
%
100.0
%
100.0
%
100.0
%
Estimated uncollectible accounts as a percent of revenues1.0
%
1.0
%
1.0
%
1.0
%
Accounts receivable -- Days of revenue outstanding-excluding unapplied Medicare payments33.8
33.7
n.a. n.a. Days of revenue outstanding-including unapplied Medicare payments
24.9
23.4
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 NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (unaudited) (a) Included in the results of operations for 2022 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands): Three Months Ended September 30, 2022 VITAS Roto-Rooter Corporate Consolidated Licensed healthcare worker retention bonus $
(9,559
)
$-
$
-
$
(9,559
)
Stock option expense-
-
(4,676
)
(4,676
)
Amortization of reacquired franchise agreements-
(2,352
)
-
(2,352
)
Long-term incentive compensation-
-
(2,050
)
(2,050
)
Direct costs related to COVID-19-
-
(89
)
(89
)
Pretax impact on earnings(9,559
)
(2,352
)
(6,815
)
(18,726
)
Excess tax benefits on stock compensation-
-
450
450
Income tax benefit on the above
2,428
623
851
3,902
After-tax impact on earnings $
(7,131
)
$(1,729
)
$(5,514
)
$(14,374
)
Nine Months Ended September 30, 2022 VITAS Roto-Rooter Corporate Consolidated Stock option expense $-
$
-
$
(19,343
)
$(19,343
)
Licensed healthcare worker retention bonus(9,559
)
-
-
(9,559
)
Amortization of reacquired franchise agreements-
(7,056
)
-
(7,056
)
Long-term incentive compensation-
-
(4,877
)
(4,877
)
Direct costs related to COVID-19(310
)
(988
)
(89
)
(1,387
)
Medicare cap sequestration adjustment(138
)
-
-
(138
)
Pretax impact on earnings(10,007
)
(8,044
)
(24,309
)
(42,360
)
Excess tax benefits on stock compensation-
-
4,390
4,390
Income tax benefit on the above
2,542
2,131
3,678
8,351
After-tax impact on earnings $
(7,465
)
$(5,913
)
$(16,241
)
$(29,619
)
(b) Included in the results of operations for 2021 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands): Three Months Ended September 30, 2021 VITAS Roto-Rooter Corporate Consolidated Stock option expense $-
$
-
$
(3,998
)
$(3,998
)
Direct costs related to COVID-19(2,501
)
(415
)
-
(2,916
)
Amortization of reacquired franchise agreements-
(2,352
)
-
(2,352
)
Long-term incentive compensation-
-
(1,942
)
(1,942
)
Other-
-
(218
)
(218
)
Pretax impact on earnings(2,501
)
(2,767
)
(6,158
)
(11,426
)
Excess tax benefits on stock compensation-
-
1,199
1,199
Income tax benefit on the above
635
733
778
2,146
After-tax impact on earnings $
(1,866
)
$(2,034
)
$(4,181
)
$(8,081
)
Nine Months Ended September 30, 2021 VITAS Roto-Rooter Corporate Consolidated Direct costs related to COVID-19 $(15,338
)
$(1,551
)
$(38
)
$(16,927
)
Stock option expense-
-
(16,342
)
(16,342
)
Amortization of reacquired franchise agreements-
(7,056
)
-
(7,056
)
Long-term incentive compensation-
-
(5,508
)
(5,508
)
Facility relocation expenses(1,855
)
-
-
(1,855
)
Litigation settlements-
98
-
98
Other
-
-
(218
)
(218
)
Pretax impact on earnings(17,193
)
(8,509
)
(22,106
)
(47,808
)
Excess tax benefits on stock compensation-
-
5,305
5,305
Income tax benefit on the above
4,367
2,255
3,252
9,874
After-tax impact on earnings $
(12,826
)
$(6,254
)
$(13,549
)
$(32,629
)
(c) VITAS has 9 large (greater than 450 ADC), 16 medium (greater than 200 but less than 450 ADC) and 25 small (less than 200 ADC) hospice programs. Of Vitas' 30 Medicare provider numbers, for the current cap year, 25 provider numbers have a Medicare cap cushion of greater than 10%, two provider numbers have Medicare cap cushion between 5% and 10%, one provider number has a Medicare cap cushion between 1% and 5% and two provider numbers have a Medicare cap liability.
View source version on businesswire.com: https://www.businesswire.com/news/home/20221031005015/en/