Full Press Release Details
Reports First-Quarter 2018 Results
CINCINNATI--(BUSINESS WIRE)--April 19, 2018--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, 2018, versus the comparable prior-year period, as
Consolidated operating results:
Revenue increased 8.2% to $439 million
GAAP Diluted Earnings-per-Share of $2.66, an increase of 49.4%
Adjusted Diluted EPS of $2.72, an increase of 49.5%
VITAS segment operating results:
Net Patient Revenue of $292 million, an increase of 3.4%
Average Daily Census (ADC) of 17,209, an increase of 6.1%
Admissions of 18,279, an increase of 4.1%
Net Income of $32.0 million, an increase of 55.4%
Adjusted EBITDA of $44.7 million, an increase of 16.3%
Roto-Rooter segment operating results:
Revenue of $147 million, an increase of 19.1%
Net Income of $22.9 million, an increase of 56.9%
Adjusted EBITDA of $33.9 million, an increase of 28.7%
Adjusted EBITDA margin of 23.0%, an increase of 171 basis points
Effective January 1, 2018, the Financial Accounting Standards Board
(FASB) mandated changes in revenue recognition under Generally Accepted
Accounting Principles (GAAP). For Chemed the accounting standard
mandated reclassification of certain costs within the 2018 income
statement when compared to prior-year formats. These reclassifications
do not impact EBITDA, pretax income or net income. This accounting
standard has been adopted on a modified retrospective basis, meaning
prior-year results are not reclassified and are reported using
historical revenue recognition accounting standards.
This resulted in the reclassification of net room and board expenses
associated with certain patients residing in nursing homes to be
reclassified from cost of services to revenue, effectively reducing
VITAS revenue and cost of sales by $2.6 million. In addition,
uncollectable accounts receivable, commonly referred to as normal bad
debt expense, historically included in selling, general and
administrative expenses for VITAS and Roto-Rooter, are now netted
against service revenue and sales.
The discussion of operating results below does recast net room and board
and estimated uncollectable receivables in the first quarter of 2017 to
facilitate analysis of operating results in a format consistent with the
2018 revenue recognition accounting standard.
VITAS net revenue was $292 million in the first quarter of 2018, which
is an increase of 5.5%, when compared to the prior-year period. This
revenue increase is comprised primarily of a geographically weighted
average Medicare reimbursement rate increase of approximately 0.7%, a
6.1% increase in average daily census, and a reduction in Medicare Cap
that increased revenue 0.6%. This growth is partially offset by acuity
mix shift that negatively impacted revenue growth 1.8% when compared to
the prior-year period.
In the first quarter of 2018, VITAS reversed $1.8 million in Medicare
Cap billing limitations recorded in the fourth quarter of 2017 related
to the 2018 Medicare Cap billing period.
At March 31, 2018, VITAS had 30 Medicare provider numbers, two of which
have a current estimated 2018 Medicare Cap billing limitation of
approximately $616,000.
Of VITAS' 30 unique Medicare provider numbers, 27 provider numbers have
a Medicare Cap cushion of 10% or greater, one provider number has a cap
cushion between 5% and 10% and two provider numbers have a Medicare Cap
billing limitation for the 2018 Medicare Cap period.
Average revenue per patient per day in the quarter was $189.76, which is
1.2% below the prior-year period. Routine home care reimbursement and
high acuity care averaged $163.53 and $706.24, respectively. During the
quarter, high acuity days of care were 4.8% of total days of care,
60-basis points less than the prior-year quarter.
The first quarter of 2018 gross margin, excluding Medicare Cap, was
21.7%, which is a 97-basis point improvement when compared to the first
Selling, general and administrative expense was $20.5 million in the
first quarter of 2018, which is a favorable decrease of 2.4% compared to
the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled
$42.9 million in the quarter, an increase of 11.6%. Adjusted EBITDA
margin, excluding Medicare Cap, was 14.8% in the quarter which is an
89-basis point improvement when compared to the prior-year period.
Roto-Rooter's plumbing and drain cleaning business generated sales of
$147 million for the first quarter of 2018, an increase of $24.7
million, or 20.2%, over the prior-year quarter. Revenue from water
restoration totaled $27.7 million, an increase of $9.6 million, or
53.3%, when compared to the prior-year quarter.
Roto-Rooter's gross margin in the quarter was 47.5%, a 69-basis point
decline when compared to the first quarter of 2017. Adjusted EBITDA in
the first quarter of 2018 totaled $33.9 million, an increase of 28.7%.
The Adjusted EBITDA margin in the quarter was 23.0% which is a 152-basis
point improvement over the prior year.
As of March 31, 2018, Chemed had total cash and cash equivalents of $14
million and debt of $143 million.
In June 2014, Chemed entered into a five-year Amended and Restated
Credit Agreement that consisted of a $100 million amortizable term loan
and a $350 million revolving credit facility. The interest rate on this
facility has a floating rate that is currently LIBOR plus 112.5 basis
points. At March 31, 2018, the Company had approximately $244 million of
undrawn borrowing capacity under this credit agreement.
During the quarter, the Company repurchased 300,000 shares of Chemed
stock for $81.1 million which equates to a cost per share of $270.42. On
March 6, 2018, Chemed's Board of Directors authorized an additional $150
million for stock repurchase under Chemed's existing share repurchase
program. As of March 31, 2018, there was $124.4 million of remaining
share repurchase authorization under this plan.
Chemed restarted its share repurchase program in 2007. Since that time
Chemed has repurchased 13.6 million shares, aggregating over $1.0