Chemed Reports Third-Quarter 2017 Results

October 26, 2017 at 4:15 PM EDT

-Increases Full-Year Guidance-

CINCINNATI--(BUSINESS WIRE)--Oct. 26, 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 third quarter ended September 30, 2017, versus the comparable prior-year period, as follows:

Consolidated operating results:

Revenue increased 6.3% to $417 million
GAAP Earnings-per-Share of $2.13, an increase of 31.5%
Adjusted Diluted EPS of $2.15 an increase of 24.3%

VITAS segment operating results:

Net Patient Revenue of $289 million, an increase of 2.2%
Average Daily Census (ADC) of 16,652 an increase of 2.8%
Admissions of 16,000, a decrease of 1.0%
Net Income of $26.5 million, an increase of 26.6%
Adjusted EBITDA of $43.9 million, an increase of 13.7%

Roto-Rooter segment operating results:

Revenue of $128 million, an increase of 17.1%
Net Income of $16.0 million, an increase of 24.7%
Adjusted EBITDA of $28.8 million, an increase of 21.3%
Adjusted EBITDA margin of 22.4%, an increase of 77 basis points

VITAS

Net revenue for VITAS was $289 million in the third quarter of 2017, which is an increase of 2.2%, when compared to the prior-year period. This revenue increase is comprised of a geographically weighted average Medicare reimbursement rate increase of approximately 1.3%, a 2.8% increase in average daily census, offset by acuity mix shift which negatively impacted revenue 2.2%, when compared to the prior-year period.

In the third quarter of 2017, VITAS had a 24.4/75.6 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 24.6/75.4 and SIA revenue of $1.3 million.

VITAS did not incur any Medicare Cap billing limitations in the quarter. At September 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, 28 provider numbers have a Medicare Cap cushion of 10% or greater and two provider numbers had a cap cushion between 5% and 10% for the 2017 Medicare Cap period.

Average revenue per patient per day in the quarter was $188.62, which is 0.7% below the prior-year period. Routine home care reimbursement and high acuity care averaged $162.24 and $709.80, respectively. During the quarter, high acuity days of care were 4.8% of total days of care, 74 basis points less than the prior-year quarter.

The third quarter of 2017 gross margin was 23.1%, which, excluding 2016 Medicare Cap, is a 240-basis point improvement when compared to the third quarter of 2016.

Selling, general and administrative expense was $23.8 million in the third quarter of 2017, which is an increase of 9.2% compared to the prior-year quarter. Adjusted EBITDA totaled $43.9 million in the quarter, an increase of 13.7%. Adjusted EBITDA margin was 15.2% in the quarter which is 154 basis point improvement when compared to the prior-year period.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $128 million for the third quarter of 2017, an increase of $18.8 million, or 17.1%, over the prior-year quarter. Revenue from water restoration totaled $21.1 million, an increase of $9.2 million or, 77.2%, when compared to the prior-year quarter.

Roto-Rooter’s gross margin in the quarter was 48.7%, an 86 basis point improvement when compared to the third quarter of 2016. Adjusted EBITDA in the third quarter of 2017 totaled $28.8 million, an increase of 21.3%, and the Adjusted EBITDA margin was 22.4% in the quarter, 77 basis points higher than the prior year.

Chemed Consolidated

As of September 30, 2017, Chemed had total cash and cash equivalents of $19 million and debt of $83 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 September 30, 2017, the Company had approximately $309 million of undrawn borrowing capacity under this credit agreement.

During the quarter, the Company repurchased 50,000 shares of Chemed stock for $9.6 million which equates to a cost per share of $191.52. 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 September 30, 2017, there was $55.5 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 2% to 3% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 15.0%. We are currently estimating $1.5 million for Medicare Cap billing limitations in the 2017 calendar year.

Roto-Rooter is forecasted to achieve full-year 2017 revenue growth of 13% to 14%. 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 at 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 $8.35 to $8.40. 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 Friday, October 27, 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 92685764. 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 92685764. 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 16,500 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.


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)


				Three Months Ended September 30,						Nine Months Ended September 30,
				2017			2016			2017			2016
Service revenues and sales				$	417,444		$	392,607		$	1,238,367		$	1,173,405
Cost of services provided and goods sold					288,047			281,658			859,039			836,348
Selling, general and administrative expenses (aa)					66,919			59,373			205,031			181,046
Depreciation					8,819			8,614			26,545			25,619
Amortization					33			91			111			274
Other operating expenses					(371	)		-			91,138			4,491
	Total costs and expenses				363,447			349,736			1,181,864			1,047,778
	Income from operations				53,997			42,871			56,503			125,627
Interest expense					(1,048	)		(1,018	)		(3,164	)		(2,831	)
Other income--net (bb)					1,323			1,640			5,439			1,933
	Income before income taxes				54,272			43,493			58,778			124,729
Income taxes					(18,835	)		(16,664	)		(15,153	)		(48,175	)
Net income				$	35,437		$	26,829		$	43,625		$	76,554


Earnings Per Share
	Net income			$	2.22		$	1.66		$	2.72		$	4.66
	Average number of shares outstanding				15,976			16,166			16,068			16,443

Diluted Earnings Per Share
	Net income			$	2.13		$	1.62		$	2.60		$	4.54
	Average number of shares outstanding				16,676			16,559			16,763			16,851




(aa)	Selling, general and administrative ("SG&A") expenses comprise (in thousands):

				Three Months Ended September 30,						Nine Months Ended September 30,
				2017			2016			2017			2016
		SG&A expenses before long-term incentive
		compensation, expenses related to the O.I.G.
		investigation and the impact of market value
		adjustments related to deferred compensation
		plans		$	63,463		$	56,475		$	191,213		$	174,183
		Market value adjustments related to
			deferred compensation plans		1,417			1,656			5,619			1,857
		Long-term incentive compensation			1,104			643			3,021			901
		Expenses related to the O.I.G. investigation			935			599			5,178			4,105
			Total SG&A expenses	$	66,919		$	59,373		$	205,031		$	181,046

(bb)	Other income--net comprises (in thousands):
				Three Months Ended September 30,						Nine Months Ended September 30,
				2017			2016			2017			2016
		Market value adjustments related to
			deferred compensation plans	$	1,417		$	1,656		$	5,619		$	1,857
		Loss on disposal of property and equipment			(146	)		(134	)		(481	)		(224	)
		Interest income			51			119			297			301
		Other			1			(1	)		4			(1	)
			Total other income--net	$	1,323		$	1,640		$	5,439		$	1,933

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET

(in thousands, except per share data)(unaudited)

September 30,

2017

2016

Assets

Current assets

Cash and cash equivalents

18,871

21,285

Accounts receivable less allowances

91,483

86,006

Inventories

5,658

6,101

Prepaid income taxes

3,621

5,069

Prepaid expenses

15,678

14,498

Total current assets

135,311

132,959

Investments of deferred compensation plans held in trust

60,445

55,158

Properties and equipment, at cost less accumulated depreciation

143,148

119,994

Identifiable intangible assets less accumulated amortization

54,793

55,067

Goodwill

473,024

472,418

Deferred income taxes

21,893

Other assets

6,845

6,870

Total Assets

895,459

842,476

Liabilities

Current liabilities

Accounts payable

34,752

42,844

Current portion of long-term debt

10,000

8,125

Income taxes

12,349

Accrued insurance

44,584

46,233

Accrued compensation

53,857

48,391

Accrued legal

91,450

1,495

Other current liabilities

22,382

20,369

Total current liabilities

269,374

167,457

Deferred income taxes

15,586

Long-term debt

72,500

102,500

Deferred compensation liabilities

59,389

54,455

Other liabilities

16,494

15,276

Total Liabilities

417,757

355,274

Stockholders' Equity

Capital stock

34,514

34,174

Paid-in capital

668,573

625,961

Retained earnings

988,895

930,184

Treasury stock, at cost

(1,216,509

)

(1,105,620

)

Deferred compensation payable in Company stock

2,229

2,503

Total Stockholders' Equity

477,702

487,202

Total Liabilities and Stockholders' Equity

895,459

842,476


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)


							Nine Months Ended September 30,
							2017			2016
Cash Flows from Operating Activities
	Net income						$	43,625		$	76,554
	Adjustments to reconcile net income to net cash provided
		by operating activities:
			Depreciation and amortization					26,656			25,893
			Provision for uncollectible accounts receivable					12,953			12,132
			Stock option expense					7,738			6,259
			Benefit for deferred income taxes					(36,175	)		(5,530	)
			Potential litigation settlement					90,000			-
			Noncash early retirement expense					-			1,747
			Amortization of restricted stock awards					933			1,415
			Noncash directors' compensation					766			541
			Noncash long-term incentive compensation					2,888			837
			Amortization of debt issuance costs					387			390
			Changes in operating assets and liabilities, excluding
				amounts acquired in business combinations:
					Decrease in accounts receivable			27,534			8,061
					Decrease in inventories			97			213
					Increase in prepaid expenses			(2,573	)		(1,646	)
					Increase/(decrease) in accounts payable and
						other current liabilities		2,448			(5,471	)
					Increase in income taxes			12,432			8,587
					Increase in other assets			(6,238	)		(5,694	)
					Increase in other liabilities			6,046			6,835
			Excess tax benefit on share-based compensation					-			(2,974	)
			Other sources					1,472			204
				Net cash provided by operating activities				190,989			128,353
Cash Flows from Investing Activities
	Capital expenditures							(50,247	)		(29,708	)
	Business combinations, net of cash acquired							(525	)		-
	Other sources/(uses)							116			(114	)
				Net cash used by investing activities				(50,656	)		(29,822	)
Cash Flows from Financing Activities
	Payments on revolving line of credit							(203,700	)		(85,200	)
	Proceeds from revolving line of credit							183,700			110,200
	Purchases of treasury stock							(94,640	)		(102,313	)
	Dividends paid							(12,879	)		(12,215	)
	Proceeds from exercise of stock options							11,625			4,625
	Decrease in cash overdrafts payable							(8,139	)		2,092
	Capital stock surrendered to pay taxes on stock-based compensation							(7,637	)		(7,051	)
	Payments on other long-term debt							(6,250	)		(5,625	)
	Excess tax benefit on share-based compensation							-			2,974
	Other sources							1,148			540
				Net cash used by financing activities				(136,772	)		(91,973	)
Increase in Cash and Cash Equivalents								3,561			6,558
Cash and cash equivalents at beginning of year								15,310			14,727
Cash and cash equivalents at end of period							$	18,871		$	21,285


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(in thousands)(unaudited)

											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated
2017
Service revenues and sales		$	288,951		$	128,493		$	-		$	417,444
Cost of services provided and goods sold			222,119			65,928			-			288,047
Selling, general and administrative expenses (a)			23,783			33,694			9,442			66,919
Depreciation			4,529			4,268			22			8,819
Amortization			-			33			-			33
Other operating expenses (a)			(371	)		-			-			(371	)
	Total costs and expenses		250,060			103,923			9,464			363,447
	Income/(loss) from operations		38,891			24,570			(9,464	)		53,997
Interest expense			(53	)		(73	)		(922	)		(1,048	)
Intercompany interest income/(expense)			2,950			1,378			(4,328	)		-
Other income/(expense)—net			(86	)		(8	)		1,417			1,323
	Income/(loss) before income taxes		41,702			25,867			(13,297	)		54,272
Income taxes (a)			(15,248	)		(9,833	)		6,246			(18,835	)
	Net income/(loss)	$	26,454		$	16,034		$	(7,051	)	$	35,437

2016
Service revenues and sales (b)		$	282,865		$	109,742		$	-		$	392,607
Cost of services provided and goods sold			224,410			57,248			-			281,658
Selling, general and administrative expenses (b)			21,775			28,635			8,963			59,373
Depreciation			4,751			3,731			132			8,614
Amortization			14			77			-			91
	Total costs and expenses		250,950			89,691			9,095			349,736
	Income/(loss) from operations		31,915			20,051			(9,095	)		42,871
Interest expense			(59	)		(78	)		(881	)		(1,018	)
Intercompany interest income/(expense)			1,810			800			(2,610	)		-
Other income/(expense)—net			(1	)		(14	)		1,655			1,640
	Income/(loss) before income taxes		33,665			20,759			(10,931	)		43,493
Income taxes (b)			(12,762	)		(7,904	)		4,002			(16,664	)
	Net income/(loss)	$	20,903		$	12,855		$	(6,929	)	$	26,829

The "Footnotes to Financial Statements" are integral parts of this financial information.


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(in thousands)(unaudited)

											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated
2017
Service revenues and sales (a)		$	855,977		$	382,390		$	-		$	1,238,367
Cost of services provided and goods sold			663,565			195,474			-			859,039
Selling, general and administrative expenses (a)			72,608			100,917			31,506			205,031
Depreciation			14,048			12,322			175			26,545
Amortization			14			97			-			111
Other operating expenses (a)			91,138			-			-			91,138
	Total costs and expenses		841,373			308,810			31,681			1,181,864
	Income/(loss) from operations		14,604			73,580			(31,681	)		56,503
Interest expense			(161	)		(259	)		(2,744	)		(3,164	)
Intercompany interest income/(expense)			8,478			4,035			(12,513	)		-
Other income/(expense)—net			(95	)		(85	)		5,619			5,439
	Income/(loss) before income taxes		22,826			77,271			(41,319	)		58,778
Income taxes (a)			(8,029	)		(29,555	)		22,431			(15,153	)
	Net income/(loss)	$	14,797		$	47,716		$	(18,888	)	$	43,625

2016
Service revenues and sales (b)		$	839,131		$	334,274		$	-		$	1,173,405
Cost of services provided and goods sold			662,371			173,977			-			836,348
Selling, general and administrative expenses (b)			69,197			87,890			23,959			181,046
Depreciation			14,346			10,860			413			25,619
Amortization			41			233			-			274
Other operating expenses (b)			4,491			-			-			4,491
	Total costs and expenses		750,446			272,960			24,372			1,047,778
	Income/(loss) from operations		88,685			61,314			(24,372	)		125,627
Interest expense			(176	)		(264	)		(2,391	)		(2,831	)
Intercompany interest income/(expense)			5,840			2,614			(8,454	)		-
Other income/(expense)—net			76			(2	)		1,859			1,933
	Income/(loss) before income taxes		94,425			63,662			(33,358	)		124,729
Income taxes (b)			(35,887	)		(24,446	)		12,158			(48,175	)
	Net income/(loss)	$	58,538		$	39,216		$	(21,200	)	$	76,554

The "Footnotes to Financial Statements" are integral parts of this financial information.


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(in thousands)(unaudited)


												Chemed
			VITAS			Roto-Rooter			Corporate			Consolidated
2017
Net income/(loss)			$	26,454		$	16,034		$	(7,051	)	$	35,437
Add/(deduct):
	Interest expense			53			73			922			1,048
	Income taxes			15,248			9,833			(6,246	)		18,835
	Depreciation			4,529			4,268			22			8,819
	Amortization			-			33			-			33
		EBITDA		46,284			30,241			(12,353	)		64,172
Add/(deduct):
	Intercompany interest expense/(income)			(2,950	)		(1,378	)		4,328			-
	Interest income			(48	)		(4	)		-			(52	)
	Expenses related to OIG investigation			935			-			-			935
	Program closure expenses			(371	)		-			-			(371	)
	Amortization of stock awards			72			67			156			295
	Advertising cost adjustment (c)			-			(162	)		-			(162	)
	Stock option expense			-			-			1,683			1,683
	Long-term incentive compensation			-			-			1,104			1,104
		Adjusted EBITDA	$	43,922		$	28,764		$	(5,082	)	$	67,604

2016
Net income/(loss)			$	20,903		$	12,855		$	(6,929	)	$	26,829
Add/(deduct):
	Interest expense			59			78			881			1,018
	Income taxes			12,762			7,904			(4,002	)		16,664
	Depreciation			4,751			3,731			132			8,614
	Amortization			14			77			-			91
		EBITDA		38,489			24,645			(9,918	)		53,216
Add/(deduct):
	Intercompany interest expense/(income)			(1,810	)		(800	)		2,610			-
	Interest income			(108	)		(11	)		-			(119	)
	Expenses related to OIG investigation			599			-			-			599
	Net expenses related to litigation settlements			1,149			-			-			1,149
	Medicare cap sequestration adjustment			228			-			-			228
	Amortization of stock awards			85			76			279			440
	Advertising cost adjustment (c)			-			(188	)		-			(188	)
	Stock option expense			-			-			1,419			1,419
	Long-term incentive compensation			-			-			643			643
		Adjusted EBITDA	$	38,632		$	23,722		$	(4,967	)	$	57,387

The "Footnotes to Financial Statements" are integral parts of this financial information.


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(in thousands)(unaudited)


												Chemed
			VITAS			Roto-Rooter			Corporate			Consolidated
2017
Net income/(loss)			$	14,797		$	47,716		$	(18,888	)	$	43,625
Add/(deduct):
	Interest expense			161			259			2,744			3,164
	Income taxes			8,029			29,555			(22,431	)		15,153
	Depreciation			14,048			12,322			175			26,545
	Amortization			14			97			-			111
		EBITDA		37,049			89,949			(38,400	)		88,598
Add/(deduct):
	Intercompany interest expense/(income)			(8,478	)		(4,035	)		12,513			-
	Interest income			(267	)		(29	)		-			(296	)
	Potential litigation settlement			90,000			-			-			90,000
	Medicare cap sequestration adjustment			105			-			-			105
	Program closure expenses			1,138			-			-			1,138
	Expenses related to OIG investigation			5,178			-			-			5,178
	Amortization of stock awards			220			203			510			933
	Advertising cost adjustment (c)			-			(707	)		-			(707	)
	Expenses related to litigation settlements			-			213			-			213
	Stock option expense			-			-			7,738			7,738
	Long-term incentive compensation			-			-			3,021			3,021
		Adjusted EBITDA	$	124,945		$	85,594		$	(14,618	)	$	195,921

2016
Net income/(loss)			$	58,538		$	39,216		$	(21,200	)	$	76,554
Add/(deduct):
	Interest expense			176			264			2,391			2,831
	Income taxes			35,887			24,446			(12,158	)		48,175
	Depreciation			14,346			10,860			413			25,619
	Amortization			41			233			-			274
		EBITDA		108,988			75,019			(30,554	)		153,453
Add/(deduct):
	Intercompany interest expense/(income)			(5,840	)		(2,614	)		8,454			-
	Interest income			(256	)		(45	)		-			(301	)
	Early retirement expenses			4,491			-			-			4,491
	Expenses related to OIG investigation			4,105			-			-			4,105
	Amortization of stock awards			302			230			883			1,415
	Medicare cap sequestration adjustment			228			-			-			228
	Advertising cost adjustment (c)			-			(1,353	)		-			(1,353	)
	Net expenses related to litigation settlements			1,149			44			-			1,193
	Long-term incentive compensation			-			-			901			901
	Stock option expense			-			-			6,259			6,259
		Adjusted EBITDA	$	113,167		$	71,281		$	(14,057	)	$	170,391

The "Footnotes to Financial Statements" are integral parts of this financial information.


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME
(in thousands, except per share data)(unaudited)


		Three Months Ended September 30,					Nine Months Ended September 30,
		2017			2016		2017			2016
Net income as reported		$	35,437		$	26,829	$	43,625		$	76,554

Add/(deduct) after-tax cost of:
	Potential litigation settlement		-			-		55,800			-
	Excess tax benefits on stock compensation		(1,783	)		-		(8,121	)		-
	Stock option expense		1,064			897		4,892			3,958
	Long-term incentive compensation		699			406		1,911			570
	Expenses of OIG investigation		578			370		3,198			2,535
	Program closure expenses		(223	)		-		675			-
	Expenses related to litigation settlements		-			-		129			27
	Medicare cap sequestration adjustments		-			141		65			141
	Early retirement expenses		-			-		-			2,840
Adjusted net income		$	35,772		$	28,643	$	102,174		$	86,625


Diluted Earnings Per Share As Reported
	Net income	$	2.13		$	1.62	$	2.60		$	4.54
	Average number of shares outstanding		16,676			16,559		16,763			16,851


Adjusted Diluted Earnings Per Share
	Adjusted net income	$	2.15		$	1.73	$	6.10		$	5.14
	Average number of shares outstanding		16,676			16,559		16,763			16,851

The "Footnotes to Financial Statements" are integral parts of this financial information.


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(unaudited)

				Three Months Ended September 30,							Nine Months Ended September 30,
OPERATING STATISTICS				2017			2016				2017				2016
	Net revenue ($000) (d)
		Homecare		$	236,565		$	225,348			$	693,359			$	659,477
		Inpatient			22,516			23,850				68,439				73,856
		Continuous care			29,870			33,895				94,426				106,026
			Total before Medicare cap allowance	$	288,951		$	283,093			$	856,224			$	839,359
		Medicare cap allowance			-			(228	)			(247	)			(228	)
			Total	$	288,951		$	282,865			$	855,977			$	839,131
	Net revenue as a percent of total before Medicare cap allowance
		Homecare			81.9	%		79.6		%		81.0		%		78.6		%
		Inpatient			7.8			8.4				8.0				8.8
		Continuous care			10.3			12.0				11.0				12.6
			Total before Medicare cap allowance		100.0			100.0				100.0				100.0
		Medicare cap allowance			-			(0.1	)			-				-
			Total		100.0	%		99.9		%		100.0		%		100.0		%
	Average daily census ("ADC") (days)
		Homecare			12,596			12,223				12,444				11,972
		Nursing home			3,254			3,077				3,148				3,028
			Routine homecare		15,850			15,300				15,592				15,000
		Inpatient			354			394				358				406
		Continuous care			448			507				475				530
			Total		16,652			16,201				16,425				15,936

	Total Admissions				16,000			16,157				49,874				49,205
	Total Discharges				15,726			15,690				49,074				48,403
	Average length of stay (days)				89.5			87.7				87.9				85.2
	Median length of stay (days)				16.0			16.0				16.0				16.0
	ADC by major diagnosis
		Cerebro			35.6	%		32.9		%		35.0		%		32.2		%
		Neurological			18.9			20.7				19.4				21.3
		Cardio			16.6			17.1				16.6				17.3
		Cancer			14.4			15.5				14.8				15.3
		Respiratory			7.9			7.8				7.9				7.8
		Other			6.6			6.0				6.3				6.1
			Total		100.0	%		100.0		%		100.0		%		100.0		%
	Admissions by major diagnosis
		Cerebro			22.0	%		21.2		%		21.9		%		20.9		%
		Neurological			10.0			11.0				10.5				11.0
		Cancer			31.5			33.3				30.8				31.9
		Cardio			14.9			14.4				15.1				15.3
		Respiratory			10.6			9.0				10.9				10.1
		Other			11.0			11.1				10.8				10.8
			Total		100.0	%		100.0		%		100.0		%		100.0		%
	Direct patient care margins (e)
		Routine homecare			52.4	%		51.4		%		52.2		%		51.8		%
		Inpatient			3.4			(2.4	)			4.4				2.7
		Continuous care			17.3			12.2				16.9				13.7
	Homecare margin drivers (dollars per patient day)
		Labor costs		$	56.48		$	56.53			$	57.20			$	56.51
		Combined drug, home medical equipment and
			medical supplies cost		14.67			16.30				14.77				15.90
	Inpatient margin drivers (dollars per patient day)
		Labor costs		$	362.48		$	360.35			$	369.77			$	346.61
	Continuous care margin drivers (dollars per patient day)
		Labor costs		$	579.31		$	618.15			$	584.82			$	609.08
	Bad debt expense as a percent of revenues				1.1	%		1.2		%		1.1		%		1.2		%
	Accounts receivable --
	Days of revenue outstanding- excluding unapplied Medicare payments				34.6			38.4				n.a.				n.a.
	Days of revenue outstanding- including unapplied Medicare payments				19.9			20.7				n.a.				n.a.

The "Footnotes to Financial Statements" are integral parts of this financial information.


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
FOOTNOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(unaudited)


(a)	Included in the results of operations for 2017 are the following significant credits/(charges) which may not be indicative of ongoing operations
	(in thousands):
				Three Months Ended September 30, 2017
				VITAS			Corporate			Consolidated
	Selling, general and administrative expenses:
		Expenses related to OIG investigation		$	(935	)	$	-		$	(935	)
		Stock option expense			-			(1,683	)		(1,683	)
		Long-term incentive compensation			-			(1,104	)		(1,104	)
	Other operating expenses:
		Program closure expenses			371			-			371
			Pretax impact on earnings		(564	)		(2,787	)		(3,351	)
	Excess tax benefits on stock compensation				-			1,783			1,783
	Income tax benefit on the above				209			1,024			1,233
			After-tax impact on earnings	$	(355	)	$	20		$	(335	)

				Nine Months Ended September 30, 2017
				VITAS			Roto-Rooter			Corporate			Consolidated
	Service revenues and sales:
		Medicare cap sequestration adjustment		$	(105	)	$	-		$	-		$	(105	)
	Selling, general and administrative expenses:
		Expenses related to OIG investigation			(5,178	)		-			-			(5,178	)
		Expenses related to litigation settlements			-			(213	)		-			(213	)
		Stock option expense			-			-			(7,738	)		(7,738	)
		Long-term incentive compensation			-			-			(3,021	)		(3,021	)
	Other operating expenses:
		Potential litigation settlement			(90,000	)		-			-			(90,000	)
		Program closure expenses			(1,138	)		-			-			(1,138	)
			Pretax impact on earnings		(96,421	)		(213	)		(10,759	)		(107,393	)
	Excess tax benefits on stock compensation				-			-			8,121			8,121
	Income tax benefit on the above				36,683			84			3,956			40,723
			After-tax impact on earnings	$	(59,738	)	$	(129	)	$	1,318		$	(58,549	)

(b)	Included in the results of operations for 2016 are the following significant credits/(charges) which may not be indicative of ongoing operations
	(in thousands):
				Three Months Ended September 30, 2016
				VITAS			Corporate			Consolidated
	Service revenues and sales:
		Medicare cap sequestration adjustment		$	(228	)	$	-		$	(228	)
	Selling, general and administrative expenses:
		Expenses related to OIG investigation			(599	)		-			(599	)
		Stock option expense			-			(1,419	)		(1,419	)
		Long-term incentive compensation			-			(643	)		(643	)
			Pretax impact on earnings		(827	)		(2,062	)		(2,889	)
	Income tax benefit on the above				316			759			1,075
			After-tax impact on earnings	$	(511	)	$	(1,303	)	$	(1,814	)

				Nine Months Ended September 30, 2016
				VITAS			Roto-Rooter			Corporate			Consolidated
	Service revenues and sales:
		Medicare cap sequestration adjustment		$	(228	)	$	-		$	-		$	(228	)
	Selling, general and administrative expenses:
		Expenses related to OIG investigation			(4,105	)		-			-			(4,105	)
		Expenses related to litigation settlements			-			(44	)		-			(44	)
		Stock option expense			-			-			(6,259	)		(6,259	)
		Long-term incentive compensation			-			-			(901	)		(901	)
	Other operating expenses:
		Early retirement expenses			(4,491	)		-			-			(4,491	)
			Pretax impact on earnings		(8,824	)		(44	)		(7,160	)		(16,028	)
	Income tax benefit on the above				3,308			17			2,632			5,957
			After-tax impact on earnings	$	(5,516	)	$	(27	)	$	(4,528	)	$	(10,071	)

(c)		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 third quarters of 2017 and 2016, GAAP advertising expense for Roto-Rooter totaled $8,113,000 and $6,496,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the third quarters of 2017 and 2016 would total $8,275,000 and $6,684,000, respectively.

		Similarly, for the first nine months of 2017 and 2016, GAAP advertising expense for Roto-Rooter totaled $22,897,000 and $19,394,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the first nine months of 2017 and 2016 would total $23,604,000 and $20,747,000, respectively.

(d)		VITAS has 10 large (greater than 450 ADC), 16 medium (greater than 200 but less than 450 ADC) and 18 small (less than 200 ADC) hospice programs. Of VITAS' 30 unique Medicare provider numbers, 28 provider numbers have a Medicare cap cushion of 10% or greater during the first nine months of the current cap year and two provider number has a Medicare cap cushion between 5% and 10%.

(e)		Amounts exclude indirect patient care and administrative costs, as well as Medicare Cap billing limitation.

View source version on businesswire.com: http://www.businesswire.com/news/home/20171026006432/en/

Source: Chemed Corporation

Chemed Corporation
David P. Williams, 513-762-6901

Symbol:
Price:
Change: