Chemed Reports First-Quarter 2014 Results CINCINNATI--(BUSINESS WIRE)

Reports First-Quarter 2014 Results

CINCINNATI--(BUSINESS WIRE)--April 29, 2014--Chemed Corporation (Chemed)

(NYSE:CHE), which operates VITAS Healthcare Corporation (VITAS),

the nation's largest provider 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 first quarter

ended March 31, 2014, versus the comparable prior-year period, as

Consolidated operating results:

Revenue decreased 2.3% to $358 million

GAAP Diluted EPS decreased 4.3% to $1.12

Adjusted Diluted EPS decreased 4.3% to $1.32

VITAS segment operating results:

Net Patient Revenue of $260 million, a decrease of 4.0%

Average Daily Census (ADC) of 14,317, a decrease of 0.8%

Admissions of 16,353, a decrease of 4.6%

Net Income, including litigation costs, of $18.2 million, a decrease

Adjusted EBITDA of $33.9 million, a decrease of 9.7%

Adjusted EBITDA margin of 13.0%, a decrease of 82 basis points

Roto-Rooter segment operating results:

Revenue of $97.9 million, an increase of 2.7%

Net Income of $10.0 million, an increase of 4.2%

Adjusted EBITDA of $17.7 million, an increase of 1.3%

Adjusted EBITDA margin of 18.0%, a decrease of 25 basis points

Net revenue for VITAS was $260 million in the first quarter of 2014,

which is a decline of $10.9 million, or 4.0%, when compared to the

prior-year period. This revenue decline is a combination of several

factors. Sequestration negatively impacted revenue by approximately $5.0

million. In addition, high acuity care as a percentage of total days of

care declined 89 basis points which equated to a $6.4 million reduction

in revenue. Other significant factors impacting revenue include a 1.4%

increase in Medicare reimbursement rates and a 0.8% decline in average

In the first quarter of 2014, VITAS reversed $0.8 million in estimated

Medicare Cap billing limitations. At March 31, 2014, VITAS had one

program with an estimated 2014 Medicare Cap billing limitation.

Of VITAS' 38 unique Medicare provider numbers, 32 provider numbers have

a Medicare Cap cushion of 10% or greater for the 2014 Medicare Cap

period; three provider numbers have a Medicare Cap cushion of 5% to 10%;

and two provider numbers have a cap cushion between 0% and 5%. VITAS

generated an aggregate cap cushion of $261 million during the trailing

twelve-month period.

Average revenue per patient per day in the quarter, excluding the impact

of Medicare Cap, was $201.45, which is 3.3% below the prior-year period.

Routine home care reimbursement and high acuity care averaged $163.19

and $703.92, respectively. The average revenue includes the 2.0%

reduction in Medicare hospice reimbursement that became effective April

1, 2013. During the quarter, high acuity days of care were 7.1% of total

days of care, 89 basis points below the prior-year quarter.

The first quarter of 2014 gross margin, excluding the impact of Medicare

Cap, was 20.9%, which is a 31 basis point decline when compared to the

first quarter of 2013. Excluding the impact of sequestration, gross

margins would have improved approximately 118 basis points.

Selling, general and administrative expense was $21.7 million in the

first quarter of 2014, which is an increase of 0.5% when compared to the

prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled

$33.1 million in the quarter, a decrease of 9.8% over the prior-year

period. Adjusted EBITDA margin, excluding the impact from Medicare Cap,

was 12.7% in the quarter which is 82 basis points below the prior-year

Roto-Rooter's plumbing and drain cleaning business generated sales of

$97.9 million for the first quarter of 2014, an increase of 2.7% over

the prior-year quarter.

Roto-Rooter's gross margin in the quarter was 46.4%, a 10 basis point

increase when compared to the first quarter of 2013. Adjusted EBITDA in

the first quarter of 2014 totaled $17.7 million, an increase of 1.3%,

and the Adjusted EBITDA margin was 18.0% in the quarter, a decrease of

As of March 31, 2014, Chemed had total cash and cash equivalents of $39

million and debt of $186 million. This debt is net of the discount taken

as a result of convertible debt accounting requirements. Excluding this

discount, aggregate debt is $187 million and is due in May 2014.

In January 2013 Chemed entered into a five-year Amended and Restated

Credit Agreement that consists of a $350 million revolving credit

facility. The interest rate on this facility has a floating rate that is

currently LIBOR plus 125 basis points. At March 31, 2014, the Company

had approximately $315 million of undrawn borrowing capacity under this

credit agreement after deducting $35 million for letters of credit

issued to secure the Company's workers' compensation insurance.

Capital expenditures through March 31, 2014, aggregated $8.1 million and

compares to depreciation and amortization during the same period of $8.2

The Company repurchased $33 million of Chemed stock during the quarter.

This equates to 382,934 of Chemed shares repurchased at an average cost

of $86.13. Chemed currently has $89 million of authorization remaining

under this share repurchase plan.

On April 1, 2013, Medicare reduced hospice reimbursement rates 2.0%.

Effective October 1, 2013, Medicare increased the average hospice rate

approximately 1.4%. This effectively reduced Medicare hospice

reimbursement 0.6% in the first quarter of 2014 when compared to the

VITAS estimates its revenue growth will be constrained in the first half

of 2014. This is primarily the result of the 2.0% Medicare rate cut

implemented in the second quarter of 2013 as well as continued mix shift

from high acuity care to routine home care. These factors will

negatively impact revenue comparisons in the first half of 2014.

Full-year 2014 revenue growth for VITAS, prior to Medicare Cap, is

estimated to be in the range of 1% to 3%. Admissions in 2014 are

estimated to increase 3% to 4% and full-year Adjusted EBITDA margin,

prior to Medicare Cap, is estimated to be 14.5% to 15.0%. Medicare Cap

is estimated to be $5 million in 2014. Revenue, Adjusted EBITDA and

admissions growth is anticipated to begin in the second quarter of 2014,

with the majority of this growth weighted to the second half of 2014.

Roto-Rooter is forecasted to achieve full-year 2014 revenue growth of 3%

to 4%. This revenue estimate is based upon increased job pricing of

approximately 2.0%. Adjusted EBITDA margin for 2014 is estimated in the