Chemed Reports Second-Quarter 2018 Results - Earnings Guidance Increased CINCINNATI--(BUSINESS WIRE)

Reports Second-Quarter 2018 Results - Earnings Guidance Increased

CINCINNATI--(BUSINESS WIRE)--July 25, 2018--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

second quarter ended June 30, 2018, versus the comparable prior-year

Consolidated operating results:

Revenue increased 6.4% to $442 million

GAAP Diluted Earnings-per-Share (EPS) of $3.27

Adjusted Diluted EPS of $2.81, an increase of 30.7%

VITAS segment operating results:

Net Patient Revenue of $297 million, an increase of 4.2%

Average Daily Census (ADC) of 17,643, an increase of 7.6%

Admissions of 16,858, an increase of 3.4%

Net Income, excluding special items, of $31.8 million, an increase of

Adjusted EBITDA of $43.1 million, an increase of 1.2%

Roto-Rooter segment operating results:

Revenue of $145 million, an increase of 11.3%

Net Income of $25.3 million, an increase of 48.3%

Adjusted EBITDA of $36.5 million, an increase of 19.8%

Adjusted EBITDA margin of 25.2%, an increase of 179-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 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' second quarter 2018 revenue and cost of sales by $2.7 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 of operating results below does recast net room and board

and estimated uncollectable receivables in the second quarter of 2017 to

facilitate analysis of operating results in a format consistent with the

2018 revenue recognition accounting standard.

VITAS net revenue was $297 million in the second quarter of 2018, which

is an increase of 6.3%, when compared to the prior-year period. This

revenue increase is comprised primarily of a geographically weighted

average Medicare reimbursement rate increase of approximately 0.6%; a

7.6% increase in average daily census; and a Medicare Cap liability that

reduced revenue growth by 0.1%. This growth is partially offset by

acuity mix shift that negatively impacted revenue growth 1.6% when

compared to the prior-year period.

In the second quarter of 2018, VITAS accrued $536,000 in Medicare Cap

billing limitations. At June 30, 2018, VITAS had 30 Medicare provider

numbers, two of which have a current estimated 2018 Medicare Cap billing

limitation liability of approximately $971,000.

Of VITAS' 30 Medicare provider numbers, 26 provider numbers have a

Medicare Cap cushion of 10% or greater, two provider numbers have 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 $188.69, which is

1.2% below the prior-year period. Reimbursement for routine home care

and high acuity care averaged $164.51 and $707.96, respectively. During

the quarter, high acuity days-of-care were 4.5% of total days of care,

53-basis points less than the prior-year quarter.

The second quarter of 2018 gross margin, excluding Medicare Cap, was

21.6%, which is a 54-basis point decline when compared to the second

Selling, general and administrative expense was $20.7 million in the

second quarter of 2018, which is a favorable decline of 2.9% compared to

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

$43.6 million in the quarter, an increase of 1.9%. Adjusted EBITDA

margin, excluding Medicare Cap, was 14.7% in the quarter which is a

64-basis point decline when compared to the prior-year period.

Roto-Rooter generated quarterly revenue of $145 million for the second

quarter of 2018, an increase of $15.4 million, or 11.9%, over the

prior-year quarter. Revenue from the water restoration service segment

totaled $24.8 million, an increase of $3.9 million, or 18.4%, when

compared to the prior-year quarter.

Commercial drain cleaning revenue increased 9.7%, commercial plumbing

and excavation increased 8.8% and commercial water restoration grew

9.9%. Overall, commercial revenue increased 8.8%.

Residential drain cleaning increased 12.5%, plumbing and excavation

increased 15.4% and residential water restoration expanded 19.6%.

Aggregate residential sales increased 15.1%.

Roto-Rooter's gross margin in the quarter was 49.9%, an 89-basis point

increase when compared to the second quarter of 2017. Adjusted EBITDA in

the second quarter of 2018 totaled $36.5 million, an increase of 19.8%.

The Adjusted EBITDA margin in the quarter was 25.2% which is a 179-basis

point improvement over the prior year.

As of June 30, 2018, Chemed had total cash and cash equivalents of $13

million and debt of $103 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 June 30, 2018, the Company had

approximately $310 million of undrawn borrowing capacity under this

During the quarter, the Company repurchased 10,000 shares of Chemed

stock for $3.2 million which equates to a cost per share of $317.86. 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 June 30, 2018, there was approximately $121 million of