News Release Details

-Earnings Guidance Increased-

CINCINNATI--(BUSINESS WIRE)--Jul. 25, 2017-- 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 second quarter ended June 30, 2017, versus the comparable prior-year period, as follows:

Consolidated operating results:

• Revenue increased 6.3% to $415 million
• GAAP Loss-per-Share of ($1.35) which includes ($3.49) for potential litigation settlement
• Adjusted Diluted EPS increased 19.4% to $2.15

VITAS segment operating results:

• Net Patient Revenue of $285 million, an increase of 2.1%
• Unit-for-Unit Average Daily Census (ADC) of 16,398, an increase of 3.4%
• Unit-for-Unit Admissions of 16,311, an increase of 1.3%
• Net Loss, including potential litigation settlement, of ($32.3) million
• Adjusted EBITDA of $42.6 million, an increase of 10.3%

Roto-Rooter segment operating results:

• Revenue of $130 million, an increase of 16.7%
• Net Income of $17.1 million, an increase of 27.9%
• Adjusted EBITDA of $30.5 million, an increase of 26.0%
• Adjusted EBITDA margin of 23.4%, an increase of 173 basis points

The GAAP Loss-per-Share noted above includes $55.8 million ($3.49 per share) of after-tax expense ($90 million pre-tax) for the accrual of a potential litigation settlement related to the May 2, 2013 complaint filed against the Company by the U.S. Department of Justice. As required by U.S. Generally Accepted Accounting Principles, the Company accrues for contingent loss claims in its financial statements when it is probable that a liability has been incurred and the amount can be reasonably estimated. Based on recent case developments, including recent mediation discussions with the U.S. Department of Justice, the Company believes that it is probable that this matter will be settled, and that such settlement will include settlement payments and relator attorney fees, by the Company of approximately the accrued amount. However, the achievement of a final, definitive settlement will require the parties to resolve several outstanding issues (and draft and negotiate related definitive documentation), and there can be no assurance that such a final, definitive settlement will be reached and agreed on these or other terms.

VITAS

Net revenue for VITAS was $285 million in the second quarter of 2017, which is an increase of 2.1%, when compared to the prior-year period. This revenue increase is comprised of a geographically weighted average Medicare reimbursement rate increase of approximately 1.7%, a 2.8% increase in average daily census, offset by acuity mix shift which negatively impacted revenue 2.5%, when compared to the prior-year period.

In the second quarter of 2017, VITAS had a 25.7/74.3 RHC Days-of-Care ratio and generated approximately $1.2 million in SIA revenue. This compares to a 2016 RHC Days-of-Care ratio of 25.0/75.0 and SIA revenue of $1.0 million.

VITAS recorded $247,000 in Medicare Cap billing limitations in the quarter, all of which related to the 2013, 2014 or 2015 Medicare Cap billing periods.

At June 30, 2017, VITAS had 30 Medicare provider numbers, none of which has an estimated 2017 Medicare Cap billing limitation.

Of VITAS’ 30 unique Medicare provider numbers, 29 provider numbers have a Medicare Cap cushion of 10% or greater and one provider number has a cap cushion between 0% and 5% on a trailing twelve-month period.

Average revenue per patient per day in the quarter was $190.96, which is 0.6% below the prior-year period. Routine home care reimbursement and high acuity care averaged $163.11 and $722.16, respectively. During the quarter, high acuity days of care were 5.0% of total days of care, 85 basis points less than the prior-year quarter.

The second quarter of 2017 gross margin, excluding Medicare Cap, was 22.9%, which is a 133 basis point improvement when compared to the second quarter of 2016.

Selling, general and administrative expense was $24.5 million in the second quarter of 2017, which is an increase of 8.4% compared to the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $42.8 million in the quarter, an increase of 10.9%. Adjusted EBITDA margin, excluding Medicare Cap, was 15.0% in the quarter which is 118 basis points improvement when compared to the prior-year period.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $130 million for the second quarter of 2017, an increase of $18.7 million, or 16.7%, over the prior-year quarter. Revenue from water restoration totaled $20.9 million, an increase of $8.8 million or 72.1%, when compared to the prior-year quarter.

Roto-Rooter’s gross margin in the quarter was 49.3%, an 85 basis point improvement when compared to the second quarter of 2016. Adjusted EBITDA in the second quarter of 2017 totaled $30.5 million, an increase of 26.0%, and the Adjusted EBITDA margin was 23.4% in the quarter, 173 basis points higher than the prior year.

Chemed Consolidated

As of June 30, 2017, Chemed had total cash and cash equivalents of $14 million and debt of $125 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 June 30, 2017, the Company had approximately $269 million of undrawn borrowing capacity under this credit agreement.

Capital expenditures through June 30, 2017, aggregated $28.1 million and compares to depreciation and amortization during the same period of $17.8 million.

During the quarter, the Company repurchased 150,000 shares of Chemed stock for $30.8 million which equates to a cost per share of $205.34. On March 10, 2017, Chemed’s Board of Directors authorized an additional $100 million for stock repurchase under Chemed’s existing share repurchase program. As of June 30, 2017, there was $65.1 million of remaining share repurchase authorization under this plan.

Updated Guidance for 2017

Revenue growth for VITAS in 2017, prior to Medicare Cap, is estimated to be in the range of 2% to 3%. Admissions and Average Daily Census in 2017 are estimated to expand approximately 3% to 5% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 15.0% to 15.5%. We are currently estimating $2.5 million for Medicare Cap billing limitations in the 2017 calendar year.

Roto-Rooter is forecasted to achieve full-year 2017 revenue growth of 12% to 13%. This revenue estimate is based upon increased job pricing of approximately 2% and continued growth in water restoration services. Adjusted EBITDA margin for 2017 is estimated in the range of 22.0% to 22.5%.

Based upon the above, full-year 2017 adjusted earnings per diluted share, excluding non-cash expense for stock options, costs related to litigation, and other discrete items, is estimated to be in the range of $8.10 to $8.20. This compares to Chemed’s 2016 reported adjusted earnings per diluted share of $7.24.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Wednesday July 26, 2017, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (844) 743-2500 for U.S. and Canadian participants and +1 (661) 378-9533 for international participants. The participant passcode/Conference ID is 52397487. 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 (855) 859-2056 for U.S. and Canadian callers and +1 (404) 537-3406 for international callers and will be available for one week following the live call. The replay Conference ID is 52397487. 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 16,000 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, drain cleaning, and water restoration services through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in the republics of Indonesia and Singapore, and the Philippines.

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.

Forward-Looking Statements

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.