Full Press Release Details
Reports Third-Quarter 2018 Results - Earnings Guidance Increased
CINCINNATI--(BUSINESS WIRE)--October 29, 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
third quarter ended September 30, 2018, versus the comparable prior-year
Consolidated operating results:
Revenue increased 6.4% to $444 million
GAAP Diluted Earnings-per-Share (EPS) of $3.06, an increase of 43.7%
Adjusted Diluted EPS of $3.07, an increase of 42.8%
VITAS segment operating results:
Net Patient Revenue of $302 million, an increase of 4.4%
Average Daily Census (ADC) of 17,957, an increase of 7.8%
Admissions of 16,403, an increase of 2.5%
Net Income, excluding special items, of $36.4 million, an increase of
Adjusted EBITDA, excluding cap, of $50.9 million, an increase of 15.9%
Roto-Rooter segment operating results:
Revenue of $142 million, an increase of 10.8%
Net Income of $24.6 million, an increase of 53.2%
Adjusted EBITDA of $34.0 million, an increase of 18.2%
Adjusted EBITDA margin of 23.9%, an increase of 123-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' third-quarter 2018 revenue and cost of sales by $2.6 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 third-quarter
2018 earnings release narrative does reclassify the third-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 $302 million in the third quarter of 2018, which
is an increase of 6.5%, when compared to the prior-year period. This
revenue increase is comprised primarily of a geographically weighted
average Medicare reimbursement rate increase of approximately 0.8%; a
7.8% increase in average daily census; and a Medicare Cap liability that
reduced revenue growth by 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 third quarter of 2018, VITAS accrued $1.9 million in Medicare Cap
billing limitations. At September 30, 2018, VITAS had 30 Medicare
provider numbers, two of which have a current estimated 2018 Medicare
Cap billing limitation liability of approximately $2.9 million.
Of VITAS' 30 Medicare provider numbers, 25 provider numbers have a
Medicare Cap cushion of 10% or greater, two provider numbers have a cap
cushion between 5% and 10%, one provider number has a cap cushion
between 0% and 5%, 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 $187.19, which is
0.8% below the prior-year period. Reimbursement for routine home care
and high acuity care averaged $163.58 and $744.15, respectively. During
the quarter, high acuity days-of-care were 4.1% of total days of care,
54-basis points less than the prior-year quarter.
The third quarter of 2018 gross margin, excluding Medicare Cap, was
23.3%, which is an 85-basis point increase when compared to the third
Selling, general and administrative expense was $20.4 million in the
third quarter of 2018, which is a decrease of 0.6% compared to the
prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled
$50.9 million in the quarter, an increase of 15.9%. Adjusted EBITDA
margin, excluding Medicare Cap, was 16.8% in the quarter which is a
125-basis point increase when compared to the prior-year period.
Roto-Rooter generated quarterly revenue of $142 million for the third
quarter of 2018, an increase of $15.4 million, or 12.1%, over the
prior-year quarter. Revenue from the water restoration service segment
totaled $25.0 million, an increase of $3.9 million, or 18.3%, 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 9.7%, commercial plumbing
and excavation increased 1.7% and commercial water restoration declined
13.1%. Overall, commercial revenue increased 3.5%.
Residential drain cleaning increased 13.1%, plumbing and excavation
increased 15.1% and residential water restoration increased 23.5%.
Aggregate residential sales increased 16.1%.
Roto-Rooter's gross margin in the quarter was 49.2%, a 112-basis point
increase when compared to the third quarter of 2017. Adjusted EBITDA in
the third quarter of 2018 totaled $34.0 million, an increase of 18.2%.
The Adjusted EBITDA margin in the quarter was 23.9% which is a 123-basis
point improvement over the prior year.
As of September 30, 2018, Chemed had total cash and cash equivalents of
$67 million and debt of $130 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 September 30, 2018, the
Company had approximately $284 million of undrawn borrowing capacity
under this credit agreement.