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 fourth quarter ended December 31, 2013, versus
the comparable prior-year period, as follows:
Consolidated operating results:
VITAS segment operating results:
Roto-Rooter segment operating results:
Net revenue for VITAS was $256 million in the fourth quarter of 2013,
which is a decline of 6.1% when compared to the prior-year period. This
revenue decline is a combination of several factors. Medicare
reimbursement rates, including sequestration, decreased approximately
0.6%, ADC declined 1.9%, a mix shift away from high acuity care reduced
revenue 2.3% and a $3.0 million increase in Medicare Cap billing
adjustment which equated to 1.1% of additional revenue decline.
In the fourth quarter of 2013, VITAS recorded a Medicare Cap billing
adjustment of $3.8 million related to two provider numbers.
Of VITAS' 37 unique Medicare provider numbers, 33 provider numbers have
a Medicare Cap cushion of 10% or greater during the most recent twelve
month period; one provider number has a Medicare Cap cushion between 5%
to 10%; and two provider numbers have a cap cushion between 0% and 5%.
VITAS generated an aggregate cap cushion of $267 million during the
trailing twelve-month period.
Average revenue per patient per day in the quarter, excluding the impact
of Medicare Cap, was $199.28, which is 3.2% below the prior-year period.
The average revenue includes the 2.0% reduction in Medicare hospice
reimbursement effective April 1, 2013. Routine home care reimbursement
and high acuity care averaged $163.13 and $691.91, respectively, per
patient per day in the fourth quarter of 2013. During the quarter, high
acuity days of care were 6.8% of total days of care, 81 basis points
below the prior-year quarter.
The fourth quarter of 2013 gross margin, excluding the impact of
Medicare Cap, was 24.1%, which is a 60 basis point improvement when
compared to the fourth quarter of 2012.
Selling, general and administrative expense was $20.9 million in the
fourth quarter of 2013, which is an increase of 4.1% when compared to
the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled
$42.4 million in the quarter, a decrease of 5.4% over the prior-year
period. Adjusted EBITDA margin, excluding the impact from Medicare Cap,
was 16.3% in the quarter which is essentially equal to the prior-year
Roto-Rooter's plumbing and drain cleaning business generated sales of
$92.4 million for the fourth quarter of 2013, a decrease of 3.4% over
the prior-year quarter.
Total unit-for-unit job count decreased 4.8% in the fourth quarter of
2013 when compared to the prior-year period. This consisted of
residential drain cleaning job count decreasing 10.4% and residential
plumbing job count declining 0.7%, when compared to the fourth quarter
of 2012. Residential jobs represented 68% of total job count in the
quarter. Commercial drain cleaning decreased 1.4% and commercial
plumbing/excavation job count increased 7.8% when compared to the
Roto-Rooter's gross margin in the quarter was 47.3%, a 223 basis point
increase when compared to the fourth quarter of 2012. Adjusted EBITDA in
the fourth quarter of 2013 totaled $18.4 million, an increase of 7.8%,
and the Adjusted EBITDA margin was 20.0% in the quarter, an increase of
206 basis points. The increase in margin is primarily the result of
reductions in healthcare claims, supervisory wages and overtime premium.
As of December 31, 2013, Chemed had total cash and cash equivalents of
$84 million and debt of $184 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 December 31, 2013, 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 December 31, 2013, aggregated $29.3 million
and compares to depreciation and amortization during the same period of
During the quarter, the Company repurchased $3.3 million of Chemed
stock. This equates to 42,889 of Chemed shares repurchased at an average
cost of $76.95. Chemed currently has $21.8 million of authorization
remaining under this share repurchase plan.
Guidance for 2014
Effective October 1, 2012, Medicare increased the average hospice
reimbursement rates by approximately 0.9%. Effective April 1, 2013,
Medicare reduced hospice reimbursement rates 2.0%. As a result,
effective April 1, 2013, this 0.9% increase was reduced to a 1.1%
decline in Medicare rates when compared to the prior year. Effective
October 1, 2013, Medicare increased the average hospice rate
VITAS estimates its full-year 2014 revenue growth will continue to be
constrained in the first half of 2014. This is a result of the first
quarter of 2013 having Medicare rates 2% higher than the subsequent
quarters. In addition, VITAS anticipates continued mix shift from high
acuity care to routine home care will impact revenue comparisons for 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 $5.6 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% and job count essentially equal to the prior year.
Adjusted EBITDA margin for 2014 is estimated in the range of 19.0% to
Management estimates that full-year 2014 earnings per diluted share,
excluding non-cash expense for stock options, the non-cash interest
expense related to the accounting for convertible debt, litigation and
other discrete items, will be in the range of $5.90 to $6.10. This
compares to Chemed's 2013 reported adjusted earnings per diluted share
Chemed will host a conference call and webcast at 10 a.m., ET, on
Tuesday, February 18, 2014, to discuss the Company's quarterly results
and to provide an update on its business. The dial-in number for the
conference call is (866) 318-8617 for U.S. and Canadian participants and
(617) 399-5136 for international participants. The participant passcode
is 78679009. A live webcast of the call can be accessed on Chemed's
website at www.chemed.com
by clicking on Investor Relations Home.
A taped replay of the conference call will be available beginning
approximately 24 hours after the call's conclusion. It can be accessed
by dialing (888) 286-8010 for U.S. and Canadian callers and (617)
801-6888 for international callers and will be available for one week
following the live call. The replay passcode is 19056885. An archived
webcast will also be available at www.chemed.com.
Chemed Corporation operates in the healthcare field through its VITAS
Healthcare Corporation subsidiary. VITAS provides daily hospice services
to over 14,000 patients with severe, life-limiting illnesses. This type
of care is focused on making the terminally ill patient's final days as
comfortable and pain-free as possible.
Chemed operates in the residential and commercial plumbing and drain
cleaning industry under the brand name Roto-Rooter. Roto-Rooter provides
plumbing and drain service through company-owned branches, independent
contractors and franchisees in the United States and Canada. Roto-Rooter
also has licensed master franchisees in Indonesia, Singapore, Japan, and
This press release contains information about Chemed's EBITDA, Adjusted
EBITDA and Adjusted Diluted EPS, which are not measures derived in
accordance with GAAP and which exclude components that are important to
understanding Chemed's financial performance. In reporting its operating
results, Chemed provides EBITDA, Adjusted EBITDA and Adjusted Diluted
EPS measures to help investors and others evaluate the Company's
operating results, compare its operating performance with that of
similar companies that have different capital structures and evaluate
its ability to meet its future debt service, capital expenditures and
working capital requirements. Chemed's management similarly uses EBITDA,
Adjusted EBITDA and Adjusted Diluted EPS to assist it in evaluating the
performance of the Company across fiscal periods and in assessing how
its performance compares to its peer companies. These measures also help
Chemed's management to estimate the resources required to meet Chemed's
future financial obligations and expenditures. Chemed's EBITDA, Adjusted
EBITDA and Adjusted Diluted EPS should not be considered in isolation or
as a substitute for comparable measures calculated and presented in
accordance with GAAP. We calculated Adjusted EBITDA Margin by dividing
Adjusted EBITDA by service revenue and sales. A reconciliation of
Chemed's net income to its EBITDA, Adjusted EBITDA and Adjusted Diluted
EPS is presented in the tables following the text of this press release.
Certain statements contained in this press release and the accompanying
tables are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The words "believe,"
"expect," "hope," "anticipate," "plan" and similar expressions identify
forward-looking statements, which speak only as of the date the
statement was made. Chemed does not undertake and specifically disclaims
any obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. These statements are based on current expectations and
assumptions and involve various risks and uncertainties, which could
cause Chemed's actual results to differ from those expressed in such
forward-looking statements. These risks and uncertainties arise from,
among other things, possible changes in regulations governing the
hospice care or plumbing and drain cleaning industries; periodic changes
in reimbursement levels and procedures under Medicare and Medicaid
programs; difficulties predicting patient length of stay and estimating
potential Medicare reimbursement obligations; challenges inherent in
Chemed's growth strategy; the current shortage of qualified nurses,
other healthcare professionals and licensed plumbing and drain cleaning
technicians; Chemed's dependence on patient referral sources; and other
factors detailed under the caption "Description of Business by Segment"
or "Risk Factors" in Chemed's most recent report on form 10-Q or 10-K
and its other filings with the Securities and Exchange Commission. You
are cautioned not to place undue reliance on such forward-looking
statements and there are no assurances that the matters contained in
such statements will be achieved.
SG&A expenses before long-term incentivecompensation and
the impact of market valuegains related to deferred
Market value gains related to deferred compensation trusts
Adjustments to reconcile net income to net cash provided by
Changes in operating assets and liabilities, excluding amounts
acquired in business combinations:
The "Footnotes to Financial Statements" are integral parts of this
Included in the results of operations 2013 are the following
significant credits/(charges) which may not be indicative of
ongoing operations (in thousands):
Included in the results of operations 2012 are the following
significant credits/(charges) which may not be indicative of
ongoing operations (in thousands):
Under Generally Accepted Accounting Principles ("GAAP"), the
Roto-Rooter segment expenses all advertising, including the cost
of telephone directories, immediately upon the initial release of
the advertising. Telephone directories are generally in
circulation 12 months. If a directory is in circulation for a time
period greater or less than 12 months, the publisher adjusts the
directory billing for the change in billing period. The timing of
when a telephone directory is published can and does fluctuate
significantly on a quarterly basis. This "direct expensing"
results in significant fluctuations in quarterly advertising
expense. In the fourth quarters of 2013 and 2012, GAAP advertising
expense for Roto-Rooter totaled $6,518,000 and $6,857,000,
respectively. If the expense of the telephone directories were
spread over the periods they are in circulation, advertising
expense for the fourth quarters of 2013 and 2012 would total
$6,341,000 and $6,560,000, respectively.
Similarly, for the years ended December 31, 2013 and 2012, GAAP
advertising expense for Roto-Rooter totaled $24,092,000 and
$23,535,000, respectively. If the expense of the telephone
directories were spread over the periods they are in circulation,
advertising expense for the years ended December 31, 2013 and 2012
would total $25,258,000 and $25,108,000, respectively.
VITAS has 9 large (greater than 450 ADC), 15 medium (greater than
200 but less than 450 ADC) and 27 small (less than 200 ADC)
hospice programs. For the current Medicare cap year there are two
programs with a cap liability and two programs with Medicare cap
cushion of less than 10%.
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