Full Press Release Details
Reports Fourth-Quarter 2018 Results
CINCINNATI--(BUSINESS WIRE)--February 20, 2019--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
fourth quarter ended December 31, 2018, versus the comparable prior-year
Consolidated operating results:
Revenue increased 6.8% to $458 million
GAAP Diluted Earnings-per-Share (EPS) of $3.26
Adjusted Diluted EPS of $3.35, an increase of 44.4%
VITAS segment operating results:
Net Patient Revenue of $307 million, an increase of 5.0%
Average Daily Census (ADC) of 18,149, an increase of 7.3%
Admissions of 16,579, essentially equal to prior year
Net Income, excluding special items, of $40.2 million, an increase of
Adjusted EBITDA, excluding cap, of $55.5 million, an increase of 11.2%
Roto-Rooter segment operating results:
Revenue of $151 million, an increase of 10.6%
Net Income, including special items, of $26.2 million, an increase of
Adjusted EBITDA of $36.1 million, an increase of 16.3%
Adjusted EBITDA margin of 24.0%, an increase of 118-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, Adjusted EBITDA, pretax income or net income. This
accounting standard has been adopted on a modified retrospective basis,
meaning prior-year GAAP 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' fourth-quarter 2018 revenue and cost of sales by $2.2 million. In
addition, uncollectable accounts receivable, commonly referred to as bad
debt expense, historically has been included in selling, general and
administrative expenses for VITAS and Roto-Rooter, are now netted
against service revenue and sales.
The discussion and analysis of operating results in this fourth-quarter
2018 earnings release narrative does reclassify the fourth-quarter 2017
net room and board and estimated uncollectable receivables to facilitate
analysis of operating results in a format consistent with the 2018
revenue recognition accounting standard.
VITAS net revenue was $307 million in the fourth quarter of 2018, which
is an increase of 7.3%, when compared to the prior-year period. This
revenue increase is comprised primarily of a geographically weighted
average Medicare reimbursement rate increase of approximately 1.1%; a
7.3% increase in average daily census; and a Medicare Cap liability that
reduced revenue growth by 0.4%. This growth is partially offset by
acuity mix shift that negatively impacted revenue growth 1.0% when
compared to the prior-year period.
In the fourth quarter of 2018, VITAS accrued $3.5 million in Medicare
Cap billing limitations. At December 31, 2018, VITAS had 30 Medicare
provider numbers, two of which have an estimated 2019 Medicare Cap
billing limitation liability of approximately $13.6 million.
Of VITAS' 30 Medicare provider numbers, on a trailing 12-month basis, 25
provider numbers have a Medicare Cap cushion of 10% or greater, one
provider number has a cap cushion between 5% and 10%, two provider
numbers have a cap cushion between 0% and 5%, and two provider numbers
would have a Medicare Cap billing limitation.
Average revenue per patient per day in the quarter was $189.06, which is
0.1% below the prior-year period. Reimbursement for routine home care
and high acuity care averaged $164.98 and $741.21, respectively. During
the quarter, high acuity days-of-care were 4.2% of total days of care,
31-basis points less than the prior-year quarter.
The fourth quarter of 2018 gross margin, excluding Medicare Cap, was
24.0%, which is a 13-basis point increase when compared to the fourth
Selling, general and administrative expense was $19.4 million in the
fourth quarter of 2018, which is an increase of 0.6% compared to the
prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled
$55.5 million in the quarter, an increase of 11.2%. Adjusted EBITDA
margin, excluding Medicare Cap, was 17.9% in the quarter which is a
59-basis point increase when compared to the prior-year period.
Roto-Rooter generated quarterly revenue of $151 million for the fourth
quarter of 2018, an increase of $15.6 million, or 11.6%, over the
prior-year quarter. Revenue from the water restoration service segment
totaled $24.3 million, an increase of $2.1 million, or 9.7%, when
compared to the prior-year quarter. Approximately 90% of the water
restoration revenue is generated from residential customers and the
remaining 10% is generated from commercial accounts.
Commercial drain cleaning revenue increased 11.6%, commercial plumbing
and excavation increased 12.5% and commercial water restoration
increased 12.4%. Overall, commercial revenue increased 12.0%.
Residential drain cleaning increased 9.4%, plumbing and excavation
increased 14.2% and residential water restoration increased 9.3%.
Aggregate residential sales increased 11.4%.
Roto-Rooter's gross margin in the quarter was 48.8%, a 6-basis point
decline when compared to the fourth quarter of 2017. Adjusted EBITDA in
the fourth quarter of 2018 totaled $36.1 million, an increase of 16.3%.
The Adjusted EBITDA margin in the quarter was 24.0% which is a 98-basis
point improvement over the prior year.
As of December 31, 2018, Chemed had total cash and cash equivalents of
$5 million and debt of $89 million.
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 December 31, 2018, the Company
had approximately $324 million of undrawn borrowing capacity under this
During the quarter, the Company repurchased 130,524 shares of Chemed