Le Lézard
Classified in: Environment, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Chemed Reports Third-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 third quarter ended September 30, 2020, versus the comparable prior-year period, as follows:

Consolidated operating results:

VITAS segment operating results:

Roto-Rooter segment operating results:

VITAS

VITAS net revenue was $337 million in the third quarter of 2020, which is an increase of 4.8%, when compared to the prior-year period. This revenue increase is comprised primarily of a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately 5.7%, a 0.2% decline in days-of-care, and acuity mix shift which then reduced the blended average Medicare rate increase 242-basis points. In addition, a reduction in Medicare Cap liability increased revenue growth 162-basis points. The combination of Medicaid net room and board pass-through and other contra revenue activity increased revenue growth approximately 9-basis points in the quarter.

In the third quarter of 2020, VITAS reversed $4.1 million in Medicare Cap billing limitations recorded in earlier quarters. This compares favorably to the prior-year third quarter Medicare Cap billing limitation of $1.3 million.

The federal government's Medicare Cap billing limitation fiscal year end is September 30. At September 30, 2020, VITAS had 30 Medicare provider numbers, four of which have an estimated fiscal 2020 Medicare Cap billing limitation liability of $8.7 million. This compares favorably to the full year fiscal 2019 Medicare Cap billing limitation liability of approximately $11.4 million.

Of VITAS' 30 Medicare provider numbers, 22 provider numbers have a Medicare Cap cushion of 10% or greater, one provider number has a cap cushion between 5% and 10%, three provider numbers have a cap cushion between 0% and 5%, and four provider numbers have a fiscal 2020 Medicare Cap billing limitation.

Average revenue per patient per day in the third quarter of 2020 was $194.10, which, including acuity mix shift, is 3.2% above the prior-year period. Reimbursement for routine home care and high acuity care averaged $166.51 and $971.71, respectively. During the quarter, high acuity days-of-care were 3.4% of total days of care, 57-basis points less than the prior-year quarter. This 57-basis point mix shift in high acuity days-of-care reduced the increase in average revenue per patient per day from 5.7% to 3.2% in the quarter.

The third quarter 2020 gross margin, excluding Medicare Cap and excluding $7 million of costs for personal protection equipment (PPE), disinfecting facilities and other incremental expenses directly related to the pandemic, was 28.0%, which is a 465-basis point margin improvement when compared to the third quarter of 2019. This increase in gross margin is attributed to a 2% increase in reimbursement from the temporary suspension of sequestration, a level-of-care mix shift to higher margin, lower reimbursement routine home care and efficiencies from utilizing telehealth when appropriate.

Selling, general and administrative expense was $21.8 million in the third quarter of 2020, which is a favorable decrease of 0.8% compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $68.2 million in the quarter, an increase of 25.6%. Adjusted EBITDA margin, excluding Medicare Cap, was 20.5% in the quarter, which is a 367-basis point improvement when compared to the prior-year period.

Roto-Rooter

Roto-Rooter generated quarterly revenue of $191 million in the third quarter of 2020, an increase of $32.3 million, or 20.4%, 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 $173 million for the third quarter of 2020, an increase of 11.4% over the prior-year quarter.

Total commercial revenue, excluding acquisitions, decreased 11.6%. This aggregate unit-for-unit commercial revenue decline consisted of drain cleaning revenue declining 13.0%, commercial plumbing and excavation declining 11.2%, and commercial water restoration declining 1.6%.

Total residential revenue, excluding acquisitions, increased 24.6%. This aggregate residential revenue growth consisted of residential drain cleaning increasing 22.0%, plumbing and excavation expanding 31.2%, and residential water restoration increasing 16.1%.

Roto-Rooter started the second quarter of 2020 with weak commercial and residential demand when compared to the prior year. Fortunately, service demand began to improve in the later part of April and continued to strengthen throughout the second quarter. This positive trend continued throughout the third quarter with unit-for-unit commercial revenue declining 15.7%, 8.5% and 10.7% in July, August and September 2020, respectively. Unit-for-unit residential revenue sales increased 22.8% in July, increased 24.1% in August, and increased 26.6% in September 2020.

Roto-Rooter's gross margin in the quarter was 51.6%, a 232-basis point increase when compared to the third quarter of 2019. Adjusted EBITDA in the third quarter of 2020 totaled $51.8 million, an increase of 30.2%. The Adjusted EBITDA margin in the quarter was 27.1% which is a 205-basis point increase when compared to the prior year. The increase in Adjusted EBITDA margin is attributed to strong residential revenue growth which contribute slightly higher margin than commercial revenue, as well as excellent expense management on costs related to managing Roto-Rooter branch infrastructure.

Chemed Consolidated

As of September 30, 2020, Chemed had total cash and cash equivalents of $113 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 September 30, 2020, the Company had $38 million in outstanding letters of credit resulting in approximately $412 million of undrawn borrowing capacity under this credit agreement.

During the quarter, the Company repurchased 50,000 shares of Chemed stock for $25.0 million which equates to a cost per share of $499.48. As of September 30, 2020, there was approximately $207 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 $94.17. Including dividends over this period, Chemed has returned approximately $1.6 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 seven 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 issue 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 4%. Average Daily Census in 2020 is estimated to expand approximately 1.3%. Full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 21%. We are currently estimating $8.7 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 12.5% to 13.0%. Roto-Rooter's Adjusted EBITDA margin for 2020 is estimated to be 26.1%.

Based upon the above, full-year 2020 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 $18.00 to $18.15 and compares to Chemed's previous 2020 guidance of $16.20 to $16.40. This 2020 guidance assumes an effective corporate tax rate of 25.8%. Chemed's 2019 reported adjusted earnings per diluted share was $13.95.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Friday, October 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 8376498. 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 8376498. 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 September 30, Nine Months Ended September 30,

2020

 

2019

 

2020

 

2019

 

Service revenues and sales $

528,297

 

$

480,613

 

$

1,546,294

 

$

1,416,231

 

Cost of services provided and goods sold

339,240

 

328,183

 

1,043,148

 

973,771

 

Selling, general and administrative expenses (aa)

88,317

 

76,836

 

243,413

 

222,421

 

Depreciation

11,714

 

10,147

 

34,761

 

29,744

 

Amortization

2,511

 

441

 

7,476

 

1,366

 

Other operating (income)/expenses

12,207

 

78

 

(28,935

)

9,001

 

Total costs and expenses

453,989

 

415,685

 

1,299,863

 

1,236,303

 

Income from operations

74,308

 

64,928

 

246,431

 

179,928

 

Interest expense

(379

)

(1,041

)

(2,005

)

(3,402

)

Other income--net (bb)

7,675

 

3,036

 

5,723

 

5,488

 

Income before income taxes

81,604

 

66,923

 

250,149

 

182,014

 

Income taxes

(13,882

)

(7,976

)

(44,435

)

(27,671

)

Net income $

67,722

 

$

58,947

 

$

205,714

 

$

154,343

 

Earnings Per Share
Net income $

4.25

 

$

3.69

 

$

12.90

 

$

9.68

 

Average number of shares outstanding

15,940

 

15,970

 

15,948

 

15,952

 

Diluted Earnings Per Share
Net income $

4.14

 

$

3.56

 

$

12.53

 

$

9.35

 

Average number of shares outstanding

16,373

 

16,555

 

16,419

 

16,514

 

 
(aa) Selling, general and administrative ("SG&A") expenses comprise (in thousands):
 
Three Months Ended September 30, Nine Months Ended September 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 $

79,287

 

$

72,273

 

$

232,797

 

$

212,775

 

Market value adjustments related to deferred
compensation trusts

7,256

 

2,886

 

5,093

 

5,094

 

Long-term incentive compensation

1,774

 

1,677

 

5,523

 

4,552

 

Total SG&A expenses $

88,317

 

$

76,836

 

$

243,413

 

$

222,421

 

 
(bb) Other income--net comprises (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,

2020

 

2019

 

2020

 

2019

 

Market value adjustments related to deferred
compensation trusts $

7,256

 

$

2,886

 

$

5,093

 

$

5,094

 

Interest income

423

 

173

 

647

 

387

 

Other

(4

)

(23

)

(17

)

7

 

Total other income--net $

7,675

 

$

3,036

 

$

5,723

 

$

5,488

 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)(unaudited)
 
September 30,

2020

 

2019

 

Assets
Current assets
Cash and cash equivalents $

112,765

 

$

9,066

 

Accounts receivable less allowances

110,839

 

114,480

 

Inventories

7,546

 

7,354

 

Prepaid income taxes

14,224

 

10,745

 

Prepaid expenses

25,222

 

26,150

 

Total current assets

270,596

 

167,795

 

Investments of deferred compensation plans held in trust

86,865

 

73,714

 

Properties and equipment, at cost less accumulated depreciation

181,386

 

172,932

 

Lease right of use asset

120,382

 

103,286

 

Identifiable intangible assets less accumulated amortization

120,401

 

129,276

 

Goodwill

578,519

 

576,600

 

Other assets

8,805

 

8,982

 

Total Assets $

1,366,954

 

$

1,232,585

 

Liabilities
Current liabilities
Accounts payable $

39,268

 

$

44,027

 

Accrued insurance

50,727

 

47,726

 

Accrued compensation

101,868

 

75,208

 

Accrued legal

9,561

 

7,283

 

Short-term lease liability

33,311

 

33,761

 

Unutilized CARES Act grant

48,041

 

-

 

Other current liabilities

46,387

 

43,496

 

Total current liabilities

329,163

 

251,501

 

Deferred income taxes

19,222

 

15,512

 

Long-term debt

-

 

130,000

 

Deferred compensation liabilities

86,875

 

73,335

 

Long-term lease liability

99,241

 

82,012

 

Other liabilities

31,045

 

7,845

 

Total Liabilities

565,546

 

560,205

 

Stockholders' Equity
Capital stock

36,137

 

35,738

 

Paid-in capital

925,271

 

841,837

 

Retained earnings

1,615,465

 

1,365,303

 

Treasury stock, at cost

(1,777,809

)

(1,572,844

)

Deferred compensation payable in Company stock

2,344

 

2,346

 

Total Stockholders' Equity

801,408

 

672,380

 

Total Liabilities and Stockholders' Equity $

1,366,954

 

$

1,232,585

 

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)(unaudited)
 
For the Nine Months Ended September 30,

2020

 

2019

 

Cash Flows from Operating Activities
Net income $

205,714

 

$

154,343

 

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

48,041

 

-

 

Depreciation and amortization

42,237

 

31,110

 

Deferred payroll taxes

22,941

 

-

 

Stock option expense

13,296

 

10,729

 

Noncash long-term incentive compensation

5,301

 

4,184

 

Litigation settlement

2,684

 

6,000

 

Noncash directors' compensation

1,171

 

767

 

Deferred tax provision/(benefit)

831

 

(6,085

)

Amortization of debt issuance costs

229

 

229

 

Asset impairment loss

-

 

2,266

 

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

27,993

 

10,558

 

Increase in inventories

(84

)

(1,649

)

Increase in prepaid expenses

(2,072

)

(6,836

)

Increase in accounts payable and
other current liabilities

34,526

 

28,622

 

Change in current income taxes

(4,366

)

(81

)

Net change in lease assets and liabilities

1,583

 

1,311

 

Increase in other assets

(9,646

)

(8,145

)

Increase in other liabilities

10,735

 

9,045

 

Other sources

1,298

 

1,277

 

Net cash provided by operating activities

402,412

 

237,645

 

Cash Flows from Investing Activities
Capital expenditures

(42,670

)

(39,753

)

Business combinations

(3,600

)

(138,010

)

Other sources

672

 

101

 

Net cash used by investing activities

(45,598

)

(177,662

)

Cash Flows from Financing Activities
Payments on revolving line of credit

(264,900

)

(359,900

)

Proceeds from revolving line of credit

174,900

 

400,700

 

Purchases of treasury stock

(147,123

)

(71,926

)

Proceeds from exercise of stock options

31,498

 

23,383

 

Capital stock surrendered to pay taxes on stock-based compensation

(18,707

)

(26,108

)

Dividends paid

(15,639

)

(14,657

)

Change in cash overdrafts payable

(9,849

)

(7,535

)

Other (uses)/sources

(387

)

295

 

Net cash used by financing activities

(250,207

)

(55,748

)

Increase in Cash and Cash Equivalents

106,607

 

4,235

 

Cash and cash equivalents at beginning of year

6,158

 

4,831

 

Cash and cash equivalents at end of year $

112,765

 

$

9,066

 

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated
2020 (a)
Service revenues and sales $

337,097

 

$

191,200

 

$

-

 

$

528,297

 

Cost of services provided and goods sold

246,636

 

92,604

 

-

 

339,240

 

Selling, general and administrative expenses

21,799

 

48,074

 

18,444

 

88,317

 

Depreciation

5,592

 

6,089

 

33

 

11,714

 

Amortization

18

 

2,493

 

-

 

2,511

 

Other operating expense

9,052

 

3,155

 

-

 

12,207

 

Total costs and expenses

283,097

 

152,415

 

18,477

 

453,989

 

Income/(loss) from operations

54,000

 

38,785

 

(18,477

)

74,308

 

Interest expense

(47

)

(80

)

(252

)

(379

)

Intercompany interest income/(expense)

5,337

 

1,651

 

(6,988

)

-

 

Other income?net

381

 

38

 

7,256

 

7,675

 

Income/(loss) before income taxes

59,671

 

40,394

 

(18,461

)

81,604

 

Income taxes

(13,934

)

(9,218

)

9,270

 

(13,882

)

Net income/(loss) $

45,737

 

$

31,176

 

$

(9,191

)

$

67,722

 

 
2019 (b)
Service revenues and sales $

321,748

 

$

158,865

 

$

-

 

$

480,613

 

Cost of services provided and goods sold

247,551

 

80,632

 

-

 

328,183

 

Selling, general and administrative expenses

21,965

 

41,758

 

13,113

 

76,836

 

Depreciation

5,105

 

5,003

 

39

 

10,147

 

Amortization

18

 

423

 

-

 

441

 

Other operating expense/(income)

97

 

(19

)

-

 

78

 

Total costs and expenses

274,736

 

127,797

 

13,152

 

415,685

 

Income/(loss) from operations

47,012

 

31,068

 

(13,152

)

64,928

 

Interest expense

(48

)

(80

)

(913

)

(1,041

)

Intercompany interest income/(expense)

4,618

 

2,234

 

(6,852

)

-

 

Other income?net

121

 

31

 

2,884

 

3,036

 

Income/(loss) before income taxes

51,703

 

33,253

 

(18,033

)

66,923

 

Income taxes

(11,930

)

(7,113

)

11,067

 

(7,976

)

Net income/(loss) $

39,773

 

$

26,140

 

$

(6,966

)

$

58,947

 

 
 
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, 2020 AND 2019
(in thousands)(unaudited)
 
Chemed
VITAS Roto-Rooter Corporate Consolidated
2020 (a)
Service revenues and sales $

1,002,477

 

$

543,817

 

$

-

 

$

1,546,294

 

Cost of services provided and goods sold

772,880

 

270,268

 

-

 

1,043,148

 

Selling, general and administrative expenses

65,141

 

138,587

 

39,685

 

243,413

 

Depreciation

16,622

 

18,035

 

104

 

34,761

 

Amortization

53

 

7,423

 

-

 

7,476

 

Other operating (income)/expense

(31,661

)

2,725

 

1

 

(28,935

)

Total costs and expenses

823,035

 

437,038

 

39,790

 

1,299,863

 

Income/(loss) from operations

179,442

 

106,779

 

(39,790

)

246,431

 

Interest expense

(137

)

(272

)

(1,596

)

(2,005

)

Intercompany interest income/(expense)

14,463

 

4,422

 

(18,885

)

-

 

Other income?net

549

 

68

 

5,106

 

5,723

 

Income/(loss) before income taxes

194,317

 

110,997

 

(55,165

)

250,149

 

Income taxes

(47,055

)

(26,031

)

28,651

 

(44,435

)

Net income/(loss) $

147,262

 

$

84,966

 

$

(26,514

)

$

205,714

 

 
2019 (b)
Service revenues and sales $

941,279

 

$

474,952

 

$

-

 

$

1,416,231

 

Cost of services provided and goods sold

728,397

 

245,374

 

-

 

973,771

 

Selling, general and administrative expenses

65,182

 

120,736

 

36,503

 

222,421

 

Depreciation

14,644

 

14,983

 

117

 

29,744

 

Amortization

53

 

1,313

 

-

 

1,366

 

Other operating expense

6,521

 

214

 

2,266

 

9,001

 

Total costs and expenses

814,797

 

382,620

 

38,886

 

1,236,303

 

Income/(loss) from operations

126,482

 

92,332

 

(38,886

)

179,928

 

Interest expense

(150

)

(273

)

(2,979

)

(3,402

)

Intercompany interest income/(expense)

13,395

 

6,609

 

(20,004

)

-

 

Other income?net

309

 

86

 

5,093

 

5,488

 

Income/(loss) before income taxes

140,036

 

98,754

 

(56,776

)

182,014

 

Income taxes

(33,636

)

(22,452

)

28,417

 

(27,671

)

Net income/(loss) $

106,400

 

$

76,302

 

$

(28,359

)

$

154,343

 

 
 
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, 2020 AND 2019
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated

2020

Net income/(loss) $

45,737

 

$

31,176

 

$

(9,191

)

$

67,722

 

Add/(deduct):
Interest expense

47

 

80

 

252

 

379

 

Income taxes

13,934

 

9,218

 

(9,270

)

13,882

 

Depreciation

5,592

 

6,089

 

33

 

11,714

 

Amortization

18

 

2,493

 

-

 

2,511

 

EBITDA

65,328

 

49,056

 

(18,176

)

96,208

 

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

(5,337

)

(1,651

)

6,988

 

-

 

Interest income

(385

)

(38

)

-

 

(423

)

CARES Act grant

8,805

 

-

 

-

 

8,805

 

Direct costs related to COVID-19

6,945

 

1,321

 

-

 

8,266

 

Stock option expense

-

 

-

 

3,182

 

3,182

 

Litigation settlement

-

 

3,095

 

-

 

3,095

 

COVID-19 related Medicare cap

(2,250

)

-

 

-

 

(2,250

)

Long-term incentive compensation

-

 

-

 

1,774

 

1,774

 

Medicare cap sequestration adjustment

(852

)

-

 

-

 

(852

)

Adjusted EBITDA $

72,254

 

$

51,783

 

$

(6,232

)

$

117,805

 

 

2019

Net income/(loss) $

39,773

 

$

26,140

 

$

(6,966

)

$

58,947

 

Add/(deduct):
Interest expense

48

 

80

 

913

 

1,041

 

Income taxes

11,930

 

7,113

 

(11,067

)

7,976

 

Depreciation

5,105

 

5,003

 

39

 

10,147

 

Amortization

18

 

423

 

-

 

441

 

EBITDA

56,874

 

38,759

 

(17,081

)

78,552

 

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

(4,618

)

(2,234

)

6,852

 

-

 

Interest income

(139

)

(34

)

-

 

(173

)

Acquisition expense

-

 

3,281

 

-

 

3,281

 

Stock option expense

-

 

-

 

2,711

 

2,711

 

Long-term incentive compensation

-

 

-

 

1,677

 

1,677

 

Medicare cap sequestration adjustment

859

 

-

 

-

 

859

 

Adjusted EBITDA $

52,976

 

$

39,772

 

$

(5,841

)

$

86,907

 

 
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, 2020 AND 2019
(in thousands)(unaudited)
Chemed
VITAS Roto-Rooter Corporate Consolidated

2020

Net income/(loss) $

147,262

 

$

84,966

 

$

(26,514

)

$

205,714

 

Add/(deduct):
Interest expense

137

 

272

 

1,596

 

2,005

 

Income taxes

47,055

 

26,031

 

(28,651

)

44,435

 

Depreciation

16,622

 

18,035

 

104

 

34,761

 

Amortization

53

 

7,423

 

-

 

7,476

 

EBITDA

211,129

 

136,727

 

(53,465

)

294,391

 

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

(14,463

)

(4,422

)

18,885

 

-

 

Interest income

(566

)

(68

)

(13

)

(647

)

Direct costs related to COVID-19

32,184

 

3,299

 

-

 

35,483

 

CARES Act grant

(32,184

)

-

 

-

 

(32,184

)

Stock option expense

-

 

-

 

13,296

 

13,296

 

Long-term incentive compensation

-

 

-

 

5,523

 

5,523

 

Litigation settlement costs

-

 

3,095

 

-

 

3,095

 

Medicare cap sequestration adjustment

619

 

-

 

-

 

619

 

Adjusted EBITDA $

196,719

 

$

138,631

 

$

(15,774

)

$

319,576

 

2019

Net income/(loss) $

106,400

 

$

76,302

 

$

(28,359

)

$

154,343

 

Add/(deduct):
Interest expense

150

 

273

 

2,979

 

3,402

 

Income taxes

33,636

 

22,452

 

(28,417

)

27,671

 

Depreciation

14,644

 

14,983

 

117

 

29,744

 

Amortization

53

 

1,313

 

-

 

1,366

 

EBITDA

154,883

 

115,323

 

(53,680

)

216,526

 

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

(13,395

)

(6,609

)

20,004

 

-

 

Interest (income)/expense

(296

)

(91

)

-

 

(387

)

Stock option expense

-

 

-

 

10,729

 

10,729

 

Litigation settlement costs

6,000

 

-

 

-

 

6,000

 

Long-term incentive compensation

-

 

-

 

4,552

 

4,552

 

Acquisition expense

-

 

3,377

 

120

 

3,497

 

Medicare cap sequestration adjustment

3,063

 

-

 

-

 

3,063

 

Impairment loss on transportation equipment

-

 

-

 

2,266

 

2,266

 

Non cash ASC 842 expenses/(benefit)

656

 

55

 

(163

)

548

 

Adjusted EBITDA $

150,911

 

$

112,055

 

$

(16,172

)

$

246,794

 

 
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 Nine Months Ended
September 30, September 30,

2020

 

2019

 

2020

 

2019

 

Net income as reported $

67,722

 

$

58,947

 

$

205,714

 

$

154,343

 

Add/(deduct) pre-tax cost of:
Direct costs related to COVID-19

8,266

 

-

 

35,483

 

-

 

CARES Act grant

8,805

 

-

 

(32,184

)

-

 

Stock option expense

3,182

 

2,711

 

13,296

 

10,729

 

Amortization of reacquired franchise agreements

2,352

 

331

 

7,056

 

1,103

 

Long-term incentive compensation

1,774

 

1,677

 

5,523

 

4,552

 

Litigation settlement

3,095

 

-

 

3,095

 

6,000

 

Medicare cap sequestration adjustments

(852

)

859

 

619

 

3,063

 

COVID-19 Medicare cap

(2,250

)

-

 

-

 

-

 

Impairment loss on transportation equipment

-

 

-

 

-

 

2,266

 

Acquisition expense

-

 

3,281

 

-

 

3,497

 

Non cash ASC 842 expenses

-

 

-

 

-

 

548

 

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

(5,351

)

(1,801

)

(6,165

)

(6,761

)

Excess tax benefits on stock compensation

(7,187

)

(8,792

)

(19,943

)

(18,737

)

Adjusted net income $

79,556

 

$

57,213

 

$

212,494

 

$

160,603

 

 
Diluted Earnings Per Share As Reported
Net income $

4.14

 

$

3.56

 

$

12.53

 

$

9.35

 

Average number of shares outstanding

16,373

 

16,555

 

16,419

 

16,514

 

 
Adjusted Diluted Earnings Per Share
Adjusted net income $

4.86

 

$

3.46

 

$

12.94

 

$

9.73

 

Average number of shares outstanding

16,373

 

16,555

 

16,419

 

16,514

 

 
(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

2020

 

2019

 

2020

2019

Net revenue ($000) (c)
Homecare $

278,856

 

$

274,746

 

$

826,954

 

$

800,059

 

Inpatient

27,633

 

23,599

 

85,983

 

69,063

 

Continuous care

30,699

 

29,446

 

105,836

 

92,476

 

Other

2,910

 

2,356

 

8,175

 

6,598

 

Subtotal $

340,098

 

$

330,147

 

$

1,026,948

 

$

968,196

 

Room and board, net

(3,289

)

(2,846

)

(9,317

)

(8,098

)

Contractual allowances

(3,784

)

(4,236

)

(10,976

)

(10,904

)

Medicare cap allowance

4,072

 

(1,317

)

(4,178

)

(7,915

)

Net Revenue $

337,097

 

$

321,748

 

$

1,002,477

 

$

941,279

 

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

82.0

 

%

83.2

 

%

80.5

 

%

82.6

 

%

Inpatient

8.1

 

7.1

 

8.4

 

7.1

 

Continuous care

9.0

 

8.9

 

10.3

 

9.6

 

Other

0.9

 

0.8

 

0.8

 

0.7

 

Subtotal

100.0

 

100.0

 

100.0

 

100.0

 

Room and board, net

(1.0

)

(0.9

)

(0.9

)

(0.8

)

Contractual allowances

(1.1

)

(1.3

)

(1.1

)

(1.2

)

Medicare cap allowance

1.2

 

(0.4

)

(0.4

)

(0.8

)

Net Revenue

99.1

 

%

97.4

 

%

97.6

 

%

97.2

 

%

Days of care
Homecare

1,426,191

 

1,361,508

 

4,192,681

 

3,961,261

 

Nursing home

261,396

 

315,566

 

844,232

 

909,318

 

Respite

4,566

 

8,582

 

15,416

 

21,552

 

Subtotal routine homecare and respite

1,692,153

 

1,685,656

 

5,052,329

 

4,892,131

 

Inpatient

27,017

 

30,553

 

84,907

 

89,366

 

Continuous care

33,013

 

39,670

 

110,200

 

125,397

 

Total

1,752,183

 

1,755,879

 

5,247,436

 

5,106,894

 

 
Number of days in relevant time period

92

 

92

 

274

 

273

 

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

15,502

 

14,799

 

15,302

 

14,510

 

Nursing home

2,841

 

3,430

 

3,081

 

3,331

 

Respite

50

 

93

 

56

 

79

 

Subtotal routine homecare and respite

18,393

 

18,322

 

18,439

 

17,920

 

Inpatient

294

 

332

 

310

 

327

 

Continuous care

358

 

432

 

402

 

460

 

Total

19,045

 

19,086

 

19,151

 

18,707

 

Total Admissions

17,943

 

17,131

 

53,368

 

52,380

 

Total Discharges

18,205

 

16,915

 

51,281

 

51,274

 

Average length of stay (days)

97.1

 

92.6

 

92.9

 

91.6

 

Median length of stay (days)

14.0

 

17.0

 

14.0

 

16.0

 

ADC by major diagnosis
Cerebro

35.1

 

%

35.7

 

%

35.7

 

%

35.9

 

%

Neurological

22.1

 

20.7

 

21.7

 

20.4

 

Cancer

12.5

 

12.9

 

12.6

 

12.9

 

Cardio

16.1

 

16.6

 

15.9

 

16.7

 

Respiratory

8.0

 

8.1

 

8.2

 

8.1

 

Other

6.2

 

6.0

 

5.9

 

6.0

 

Total

100.0

 

%

100.0

 

%

100.0

 

%

100.0

 

%

Admissions by major diagnosis
Cerebro

21.4

 

%

21.1

 

%

21.2

 

%

20.8

 

%

Neurological

13.2

 

12.7

 

13.0

 

12.6

 

Cancer

27.4

 

30.5

 

27.8

 

29.2

 

Cardio

13.6

 

14.8

 

14.5

 

15.7

 

Respiratory

9.9

 

10.2

 

10.6

 

11.3

 

Other

14.5

 

10.7

 

12.9

 

10.4

 

Total

100.0

 

%

100.0

 

%

100.0

 

%

100.0

 

%

 
Estimated uncollectible accounts as a percent of revenues

1.1

 

%

1.3

 

%

1.1

 

%

1.1

 

%

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

33.4

 

32.7

 

n.a.

 

n.a.

 

Days of revenue outstanding-including unapplied Medicare payments

22.1

 

21.0

 

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, 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 September 30, 2020
VITAS Roto-Rooter Corporate Consolidated
 
CARES Act grant $

(8,805

)

$

-

 

$

-

 

$

(8,805

)

Direct costs related to COVID-19

(6,945

)

(1,321

)

-

 

(8,266

)

Stock option expense

-

 

-

 

(3,182

)

(3,182

)

Litigation settlement

-

 

(3,095

)

-

 

(3,095

)

Amortization of reacquired franchise agreements

-

 

(2,352

)

-

 

(2,352

)

COVID-19 Medicare cap

2,250

 

-

 

-

 

2,250

 

Long-term incentive compensation

-

 

-

 

(1,774

)

(1,774

)

Medicare cap sequestration adjustment

852

 

-

 

-

 

852

 

Pretax impact on earnings

(12,648

)

(6,768

)

(4,956

)

(24,372

)

Excess tax benefits on stock compensation

-

 

-

 

7,187

 

7,187

 

Income tax benefit on the above

3,253

 

1,794

 

304

 

5,351

 

After-tax impact on earnings $

(9,395

)

$

(4,974

)

$

2,535

 

$

(11,834

)

 
Nine Months Ended September 30, 2020
VITAS Roto-Rooter Corporate Consolidated
 
Direct costs related to COVID-19 $

(32,184

)

$

(3,299

)

$

-

 

$

(35,483

)

CARES Act grant

32,184

 

-

 

-

 

32,184

 

Stock option expense

-

 

-

 

(13,296

)

(13,296

)

Amortization of acquired and cancelled franchise agreements

-

 

(7,056

)

-

 

(7,056

)

Long-term incentive compensation

-

 

-

 

(5,523

)

(5,523

)

Litigation settlement

-

 

(3,095

)

-

 

(3,095

)

Medicare cap sequestration adjustment

(619

)

-

 

-

 

(619

)

Pretax impact on earnings

(619

)

(13,450

)

(18,819

)

(32,888

)

Excess tax benefits on stock compensation

-

 

-

 

19,943

 

19,943

 

Income tax benefit on the above

157

 

3,564

 

2,444

 

6,165

 

After-tax impact on earnings $

(462

)

$

(9,886

)

$

3,568

 

$

(6,780

)

 
(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 September 30, 2019
VITAS Roto-Rooter Corporate Consolidated
 
Acquisition expense $

-

 

$

(3,281

)

$

-

 

$

(3,281

)

Stock option expense

-

 

-

 

(2,711

)

(2,711

)

Long-term incentive compensation

-

 

-

 

(1,677

)

(1,677

)

Medicare cap sequestration adjustment

(859

)

-

 

-

 

(859

)

Amortization of reacquired franchise agreements

-

 

(331

)

-

 

(331

)

Pretax impact on earnings

(859

)

(3,612

)

(4,388

)

(8,859

)

Excess tax benefits on stock compensation

-

 

-

 

8,792

 

8,792

 

Income tax benefit on the above

220

 

957

 

624

 

1,801

 

After-tax impact on earnings $

(639

)

$

(2,655

)

$

5,028

 

$

1,734

 

 
Nine Months Ended September 30, 2019
VITAS Roto-Rooter Corporate Consolidated
 
Stock option expense $

-

 

$

-

 

$

(10,729

)

$

(10,729

)

Litigation settlement

(6,000

)

-

 

-

 

(6,000

)

Long-term incentive compensation

-

 

-

 

(4,552

)

(4,552

)

Acquisition expense

-

 

(3,377

)

(120

)

(3,497

)

Medicare cap sequestration adjustment

(3,063

)

-

 

-

 

(3,063

)

Impairment loss on transportation equipment

-

 

-

 

(2,266

)

(2,266

)

Amortization of reacquired franchise agreements

-

 

(1,103

)

-

 

(1,103

)

Non cash ASC 842 (expenses)/benefit

(656

)

(55

)

163

 

(548

)

Pretax impact on earnings

(9,719

)

(4,535

)

(17,504

)

(31,758

)

Excess tax benefits on stock compensation

-

 

-

 

18,737

 

18,737

 

Income tax benefit on the above

2,474

 

1,202

 

3,085

 

6,761

 

After-tax impact on earnings $

(7,245

)

$

(3,333

)

$

4,318

 

$

(6,260

)

 
(c) VITAS has 11 large (greater than 450 ADC), 21 medium (greater than 200 but less than 450 ADC) and 17 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, one provider numbers have a cap cushion between 5% and 10%, three provider numbers have a cap cushion between 0% and 5%, and four provider numbers have a Medicare cap liability.

 


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