CINCINNATI–(BUSINESS WIRE)–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, 2022, versus the comparable prior-year period, as follows:
Consolidated operating results:
Revenue declined 0.2% to $531 million
GAAP Diluted Earnings-per-Share (EPS) of $4.40, an increase of 25.4%
Adjusted Diluted EPS of $4.84, an increase of 5.2%
VITAS segment operating results:
Net Patient Revenue of $298 million, a decline of 4.5%
Average Daily Census (ADC) of 17,315, a decline of 3.8%
Admissions of 14,735, a decline of 12.5%
Net Income, excluding certain discrete items, of $35.3 million, a decline of 10.4%
Adjusted EBITDA, excluding Medicare Cap, of $50.0 million, a decline of 8.8%
Adjusted EBITDA margin, excluding Medicare Cap, of 16.7%, a decrease of 78-basis points
Roto-Rooter segment operating results:
Revenue of $233 million, an increase of 6.0%
Net Income, excluding certain discrete items, of $48.8 million, an increase of 8.8%
Adjusted EBITDA of $69.0 million, an increase of 7.4%
Adjusted EBITDA margin of 29.6%, an increase of 39-basis points
VITAS
VITAS net revenue was $298 million in the second quarter of 2022, which is a decline of 4.5%, when compared to the prior-year period. This revenue decline is comprised primarily of a 3.8% decline in days-of-care partially offset by a geographically weighted average Medicare reimbursement rate increase of approximately 0.8%. Acuity mix shift had a net impact of reducing revenue approximately $5.2 million, or 1.6%, in the quarter when compared to the prior-year revenue and level-of-care mix. The combination of Medicare Cap and other contra revenue changes reduced the revenue decline by approximately 10-basis points.
In the second quarter of 2022, VITAS accrued $2.0 million in Medicare Cap billing limitations. This is equal to the Medicare Cap billing limitation in the second quarter of 2021.
Of VITAS’ 30 Medicare provider numbers, 27 provider numbers have a Medicare Cap cushion of 10% or greater, one provider number has a cushion between 5% and 10%, and two provider numbers have an estimated fiscal 2022 Medicare Cap billing limitation liability.
Average revenue per patient per day in the second quarter of 2022 was $193.57 which, including acuity mix shift, is 84-basis points below the prior-year period. Reimbursement for routine home care and high acuity care averaged $170.29 and $1,004.55, respectively. During the quarter, high acuity days-of-care were 2.8% of total days of care, 40-basis points less than the prior-year quarter.
The second quarter 2022 gross margin, excluding Medicare Cap and increased costs directly related to operating during the pandemic, was 24.1%. This is a 61-basis point margin decline when compared to the second quarter of 2021.
Selling, general and administrative expense was $23.1 million in the second quarter of 2022 and compares to $22.6 million incurred in the prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $50.0 million in the quarter, a decrease of 8.8%. Adjusted EBITDA margin in the quarter, excluding Medicare Cap, was 16.7%, which is 78-basis points below the prior-year period.
Roto-Rooter
Roto-Rooter generated quarterly revenue of $233 million in the second quarter of 2022, an increase of $13.2 million, or 6.0%, when compared to the prior-year quarter.
Roto-Rooter branch commercial revenue in the quarter totaled $54.8 million, an increase of $3.8 million, or 7.5%, over the prior year. This aggregate commercial revenue growth consisted of drain cleaning revenue increasing 8.4%, plumbing increasing 10.4%, water restoration increasing 4.1%, and excavation increasing 4.2%.
Roto-Rooter branch residential revenue in the quarter totaled $159 million, an increase of $7.6 million, or 5.0%, over the prior-year period. This aggregate residential revenue growth consisted of drain cleaning remaining essentially equal to the prior year quarter, plumbing expanding 9.3%, excavation declining 0.1%, and water restoration increasing 14.0%.
Roto-Rooter’s gross margin in the quarter was 53.2%, a 6-basis point decline when compared to the second quarter of 2021. Adjusted EBITDA in the second quarter of 2022 totaled $69.0 million, an increase of 7.4%. The Adjusted EBITDA margin in the quarter was 29.6%, which is a 39-basis point improvement when compared to the prior year.
Chemed Consolidated
As of June 30, 2022, Chemed had total cash and cash equivalents of $9.6 million and $117 million of current and long-term debt.
In June 2022, Chemed entered into a five-year $550 million Amended and Restated Credit Agreement (Credit Agreement). This Credit Agreement consists of a $100 million amortizable term loan and a $450 million revolving credit facility. The interest rate on this Credit Agreement has a floating rate that is currently SOFR plus 100-basis points. On June 30, 2022, the Company had approximately $387 million of undrawn borrowing capacity under this credit agreement.
During the quarter, the Company repurchased 100,000 shares of Chemed stock for $49.9 million which equates to a cost per share of $498.61. As of June 30, 2022, there was approximately $125 million of remaining share repurchase authorization under this plan.
Chemed restarted its share repurchase program in 2007. Since that time, Chemed has repurchased approximately 15.9 million shares, aggregating approximately $2.0 billion at an average share cost of $128.76. Including dividends over this period, Chemed has returned approximately $2.3 billion to shareholders.
Guidance for 2022
Historically, Chemed earnings guidance has been developed using previous periods’ key operating metrics which are then modeled and projected out for future periods. Critical within these projections is the understanding of traditional patterned correlations among key operating metrics. This modeling exercise also takes into consideration anticipated industry and macro-economic issues outside of management’s control but are somewhat predictable in terms of timing and impact on our business segments’ operating results.
The COVID-19 pandemic, uncertainty regarding forward looking inflation, and a potential economic recession, has made accurate modeling and providing meaningful earnings guidance exceptionally challenging. Since the start of the pandemic, Chemed has been able to successfully navigate within this rapidly changing environment and produce operating results that we believe provide us with the ability to issue earnings guidance for the remainder of the 2022 calendar year. However, this guidance should be taken with the recognition the above macro issues could materially impact the company’s ability to achieve this guidance.
Based upon the above discussion, VITAS 2022 revenue, prior to Medicare Cap, is estimated to decline 4.5% to 5.0% when compared to 2021. A portion of the estimated revenue reduction, approximately $15 million, is the result of the phase out of sequestration relief over the first half of 2022 compared to a full year of sequestration relief in 2021. ADC is estimated to decline 3.5%. Full year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 17.0% to 17.2%. We are currently estimating $10 million for Medicare Cap billing limitations in calendar year 2022.
Roto-Rooter is forecasted to achieve full-year 2022 revenue growth of 5.5% to 5.7%. Roto-Rooter’s adjusted EBITDA margin for 2022 is expected to be 29.2% to 29.5%.
Based upon the above, full-year 2022 earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, costs related to litigation and other discrete items, is estimated to be in the range of $19.30 to $19.50. This compares to our previous 2022 adjusted earnings per share guidance of $19.10 to $19.50. Current 2022 guidance assumes an effective corporate tax rate on adjusted earnings of 25.1% and a diluted share count of 15.12 million shares. Chemed’s 2021 reported adjusted earnings per diluted share was $19.33.
Conference Call
Chemed will host a conference call and webcast at 10 a.m., ET, on Thursday, July 28, 2022, to discuss the company’s quarterly results and to provide an update on its business. Participants may access a live webcast of the conference call through the investor relations section of Chemed’s website, Investor Relations Home | Chemed Corporation or the hosting website https://edge.media-server.com/mmc/p/z8752xj3.
Participants may also register via teleconference at: https://register.vevent.com/register/BIb15c9a69666f4f3f8c4010ce89314068. Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. All participants are instructed to dial-in 15 minutes prior to the start time.
A taped replay of the conference call will be available beginning approximately two hours after the call’s conclusion. You may access the replay via webcast through the investors relations section of Chemed’s website.
Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to approximately 17,300 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 cleanup 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 STATEMENTS OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Service revenues and sales
$
531,288
$
532,256
1,061,837
$
1,059,616
Cost of services provided and goods sold
336,821
350,493
673,373
690,966
Selling, general and administrative expenses (aa)
87,853
93,838
177,807
185,437
Depreciation
12,714
13,612
24,852
25,327
Amortization
2,520
2,510
5,038
5,020
Other operating (income)/expense
(558
)
104
(545
)
726
Total costs and expenses
439,350
460,557
880,525
907,476
Income from operations
91,938
71,699
181,312
152,140
Interest expense
(902
)
(379
)
(1,712
)
(760
)
Other (expense)/income–net (bb)
(4,930
)
3,785
(8,792
)
7,387
Income before income taxes
86,106
75,105
170,808
158,767
Income taxes
(19,650
)
(18,583
)
(40,183
)
(36,845
)
Net income
$
66,456
$
56,522
$
130,625
$
121,922
Earnings Per Share
Net income
$
4.45
$
3.57
$
8.73
$
7.66
Average number of shares outstanding
14,932
15,829
14,959
15,919
Diluted Earnings Per Share
Net income
$
4.40
$
3.51
$
8.62
$
7.52
Average number of shares outstanding
15,111
16,101
15,152
16,205
(aa) Selling, general and administrative (“SG&A”) expenses comprise (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
SG&A expenses before long-term incentive compensation
and the impact of market value adjustments related to
deferred compensation plans
$
91,422
$
88,510
$
184,000
$
175,178
Market value adjustments related to deferred
compensation trusts
(5,086
)
3,655
(9,020
)
6,693
Long-term incentive compensation
1,517
1,673
2,827
3,566
Total SG&A expenses
$
87,853
$
93,838
$
177,807
$
185,437
(bb) Other (expense)/income–net comprises (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Market value adjustments related to deferred
compensation trusts
$
(5,086
)
$
3,655
$
(9,020
)
$
6,693
Interest income
154
138
226
230
Other
2
(8
)
2
464
Total other (expense)/income–net
$
(4,930
)
$
3,785
$
(8,792
)
$
7,387
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)(unaudited)
June 30,
2022
2021
Assets
Current assets
Cash and cash equivalents
$
9,640
$
92,120
Accounts receivable less allowances
136,555
123,329
Inventories
10,696
7,411
Prepaid income taxes
17,256
23,386
Prepaid expenses
28,999
22,840
Total current assets
203,146
269,086
Investments of deferred compensation plans held in trust
96,061
98,256
Properties and equipment, at cost less accumulated depreciation
192,005
192,653
Lease right of use asset
128,290
123,207
Identifiable intangible assets less accumulated amortization
103,837
113,137
Goodwill
579,653
578,650
Other assets
9,972
8,807
Total Assets
$
1,312,964
$
1,383,796
Liabilities
Current liabilities
Accounts payable
$
73,975
$
55,975
Current portion of long-term debt
5,000
–
Income taxes
–
5
Accrued insurance
54,828
51,963
Accrued compensation
68,290
83,608
Accrued legal
808
1,391
Short-term lease liability
39,062
36,440
Other current liabilities
43,105
38,020
Total current liabilities
285,068
267,402
Deferred income taxes
21,054
21,713
Long-term debt
111,800
–
Deferred compensation liabilities
95,624
97,374
Long-term lease liability
103,389
99,093
Other liabilities
11,069
27,440
Total Liabilities
628,004
513,022
Stockholders’ Equity
Capital stock
36,651
36,385
Paid-in capital
1,089,129
999,697
Retained earnings
2,090,214
1,834,835
Treasury stock, at cost
(2,533,306
)
(2,002,326
)
Deferred compensation payable in Company stock
2,272
2,183
Total Stockholders’ Equity
684,960
870,774
Total Liabilities and Stockholders’ Equity
$
1,312,964
$
1,383,796
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)(unaudited)
For the Six Months Ended June 30,
2022
2021
Cash Flows from Operating Activities
Net income
$
130,625
$
121,922
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
29,890
30,347
Stock option expense
14,667
12,345
(Benefit)/provision for deferred income taxes
(2,129
)
1,051
Noncash long-term incentive compensation
2,497
3,402
Noncash directors’ compensation
1,170
1,173
Amortization of debt issuance costs
153
153
Provision for bad debts
–
40
Payments on previously accrued litigation settlements
–
(9,440
)
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations:
Decrease in accounts receivable
887
4,722
Increase in inventories
(587
)
(316
)
Decrease in prepaid expenses
3,689
3,337
Decrease in accounts payable and
other current liabilities
(24,001
)
(10,815
)
Change in current income taxes
27
(26,242
)
Net change in lease assets and liabilities
705
(436
)
Decrease/(increase) in other assets
2,071
(10,088
)
(Decrease)/increase in other liabilities
(1,491
)
10,088
Other (uses)/sources
(503
)
796
Net cash provided by operating activities
157,670
132,039
Cash Flows from Investing Activities
Capital expenditures
(25,610
)
(33,604
)
Proceeds from sale of fixed assets
1,757
522
Business combinations, net of cash acquired
(1,650
)
–
Other uses
(132
)
(220
)
Net cash used by investing activities
(25,635
)
(33,302
)
Cash Flows from Financing Activities
Payments on revolving line of credit
(263,300
)
–
Proceeds from revolving line of credit
95,100
–
Proceeds from other long-term debt
100,000
–
Purchases of treasury stock
(77,214
)
(166,649
)
Proceeds from exercise of stock options
12,869
16,186
Capital stock surrendered to pay taxes on stock-based compensation
(12,115
)
(8,598
)
Dividends paid
(10,722
)
(10,864
)
Change in cash overdrafts payable
1,716
–
Debt issuance costs
(1,510
)
–
Other (uses)/sources
(114
)
633
Net cash used by financing activities
(155,290
)
(169,292
)
Decrease in Cash and Cash Equivalents
(23,255
)
(70,555
)
Cash and cash equivalents at beginning of year
32,895
162,675
Cash and cash equivalents at end of year
$
9,640
$
92,120
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021
(in thousands)(unaudited)
Chemed
VITAS
Roto-Rooter
Corporate
Consolidated
2022 (a)
Service revenues and sales
$
297,781
$
233,507
$
–
$
531,288
Cost of services provided and goods sold
227,533
109,288
–
336,821
Selling, general and administrative expenses
23,148
54,982
9,723
87,853
Depreciation
6,062
6,634
18
12,714
Amortization
26
2,494
–
2,520
Other operating (income)/expense
(807
)
249
–
(558
)
Total costs and expenses
255,962
173,647
9,741
439,350
Income/(loss) from operations
41,819
59,860
(9,741
)
91,938
Interest expense
(44
)
(115
)
(743
)
(902
)
Intercompany interest income/(expense)
4,683
2,205
(6,888
)
–
Other income/(expense)—net
119
37
(5,086
)
(4,930
)
Income/(loss) before income taxes
46,577
61,987
(22,458
)
86,106
Income taxes
(11,365
)
(14,915
)
6,630
(19,650
)
Net income/(loss)
$
35,212
$
47,072
$
(15,828
)
$
66,456
2021 (b)
Service revenues and sales
$
311,935
$
220,321
$
–
$
532,256
Cost of services provided and goods sold
247,519
102,974
–
350,493
Selling, general and administrative expenses
22,631
53,556
17,651
93,838
Depreciation
7,125
6,468
19
13,612
Amortization
18
2,492
–
2,510
Other operating expense
87
17
–
104
Total costs and expenses
277,380
165,507
17,670
460,557
Income/(loss) from operations
34,555
54,814
(17,670
)
71,699
Interest expense
(43
)
(89
)
(247
)
(379
)
Intercompany interest income/(expense)
4,486
1,649
(6,135
)
–
Other income—net
99
32
3,654
3,785
Income/(loss) before income taxes
39,097
56,406
(20,398
)
75,105
Income taxes
(9,385
)
(13,633
)
4,435
(18,583
)
Net income/(loss)
$
29,712
$
42,773
$
(15,963
)
$
56,522
The “Footnotes to Financial Statements” are integral parts of this financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(in thousands)(unaudited)
Chemed
VITAS
Roto-Rooter
Corporate
Consolidated
2022 (a)
Service revenues and sales
$
596,970
$
464,867
$
–
$
1,061,837
Cost of services provided and goods sold
454,773
218,600
–
673,373
Selling, general and administrative expenses
45,600
111,937
20,270
177,807
Depreciation
11,613
13,203
36
24,852
Amortization
49
4,989
–
5,038
Other operating (income)/expense
(955
)
410
–
(545
)
Total costs and expenses
511,080
349,139
20,306
880,525
Income/(loss) from operations
85,890
115,728
(20,306
)
181,312
Interest expense
(96
)
(229
)
(1,387
)
(1,712
)
Intercompany interest income/(expense)
9,339
4,381
(13,720
)
–
Other income/(expense)—net
156
72
(9,020
)
(8,792
)
Income/(loss) before income taxes
95,289
119,952
(44,433
)
170,808
Income taxes
(23,595
)
(28,943
)
12,355
(40,183
)
Net income/(loss)
$
71,694
$
91,009
$
(32,078
)
$
130,625
2021 (b)
Service revenues and sales
$
627,723
$
431,893
$
–
$
1,059,616
Cost of services provided and goods sold
486,186
204,780
–
690,966
Selling, general and administrative expenses
44,721
106,878
33,838
185,437
Depreciation
12,462
12,821
44
25,327
Amortization
36
4,984
–
5,020
Other operating expense
590
136
–
726
Total costs and expenses
543,995
329,599
33,882
907,476
Income/(loss) from operations
83,728
102,294
(33,882
)
152,140
Interest expense
(85
)
(179
)
(496
)
(760
)
Intercompany interest income/(expense)
9,011
3,269
(12,280
)
–
Other income—net
632
63
6,692
7,387
Income/(loss) before income taxes
93,286
105,447
(39,966
)
158,767
Income taxes
(22,805
)
(25,497
)
11,457
(36,845
)
Net income/(loss)
$
70,481
$
79,950
$
(28,509
)
$
121,922
The “Footnotes to Financial Statements” are integral parts of this financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARIES OF EBITDA
FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021
(in thousands)(unaudited)
Chemed
VITAS
Roto-Rooter
Corporate
Consolidated
2022
Net income/(loss)
$
35,212
$
47,072
$
(15,828
)
$
66,456
Add/(deduct):
Interest expense
44
115
743
902
Income taxes
11,365
14,915
(6,630
)
19,650
Depreciation
6,062
6,634
18
12,714
Amortization
26
2,494
–
2,520
EBITDA
52,709
71,230
(21,697
)
102,242
Add/(deduct):
Intercompany interest expense/(income)
(4,683
)
(2,205
)
6,888
–
Interest income
(118
)
(37
)
1
(154
)
Stock option expense
–
–
7,216
7,216
Long-term incentive compensation
–
–
1,517
1,517
Medicare cap sequestration adjustment
138
–
–
138
Direct costs related to COVID-19
(80
)
–
–
(80
)
Other
–
28
–
28
Adjusted EBITDA
$
47,966
$
69,016
$
(6,075
)
$
110,907
2021
Net income/(loss)
$
29,712
$
42,773
$
(15,963
)
$
56,522
Add/(deduct):
Interest expense
43
89
247
379
Income taxes
9,385
13,633
(4,435
)
18,583
Depreciation
7,125
6,468
19
13,612
Amortization
18
2,492
–
2,510
EBITDA
46,283
65,455
(20,132
)
91,606
Add/(deduct):
Intercompany interest expense/(income)
(4,486
)
(1,649
)
6,135
–
Interest income
(106
)
(32
)
–
(138
)
Direct costs related to COVID-19
11,084
582
–
11,666
Stock option expense
–
–
6,239
6,239
Long-term incentive compensation
–
–
1,673
1,673
Litigation settlements
–
(98
)
–
(98
)
Adjusted EBITDA
$
52,775
$
64,258
$
(6,085
)
$
110,948
The “Footnotes to Financial Statements” are integral parts of this financial information.
Contacts
Chemed Corporation
David P. Williams
(513) 762-6901