Chemed Corp. (CHE) filed Quarterly Report for the period ended 2009-09-30.
Chemed Corporation is the nation's largest provider of end-of-life hospice care services through its VITAS Healthcare Corporation subsidiary. Chemed also maintains a presence in the residential and commercial repair-and-maintenance industry through two subsidiaries. Roto-Rooter is North America's largest provider of plumbing and drain cleaning services. Service America Network Inc. provides major-appliance and heating/air-conditioning repair maintenance and replacement services. Chemed Corp. has a market cap of $1.01 billion; its shares were traded at around $44.82 with a P/E ratio of 12.6 and P/S ratio of 0.9. The dividend yield of Chemed Corp. stocks is 1%. Chemed Corp. had an annual average earning growth of 14.4% over the past 10 years.
Highlight of Business Operations:
For the three months ended September 30, 2009 and 2008, the increase in consolidated service revenues and sales was driven by a 6% increase at VITAS while Roto-Rooter revenues decreased by 4%. The increase in service revenues at VITAS was a result of increased admissions of 3.1%, the October 1, 2008 Medicare reimbursement rate increase of approximately 3.5%, partially offset by a 1.2% increase in the number of discharged patients. The remaining difference is related to the timing within the quarter of admissions and discharges as well as a mix shift to higher acuity days of care. Roto-Rooter was driven by an 8% decrease in job count offset by an approximate 5% price and mix shift increase. The Roto-Rooter changes include the impact of acquisitions in 2008 and 2009, offset by the conversion of one company-owned branch to an independent contractor in 2009. The impact of these transactions is not material. Consolidated net income increased mainly as a result of the increase in revenues. Diluted EPS increased as the result of increased earnings.
For the nine months ended September 30, 2009 and 2008, the increase in consolidated service revenues and sales was driven by a 6% increase in service revenues at VITAS while Roto-Rooter revenues decreased approximately 2%. The increase in service revenues at VITAS was driven by a 0.5% increase in ADC, the October 1, 2008 Medicare reimbursement rate increase of approximately 3.5%, a reversal of Medicare cap billing limitations recorded in previous periods, an $1.95 million increase related to the retroactive price increase for services in the fourth quarter of 2008 and a mix shift to higher acuity days of care. ADC was flat between periods. Roto-Rooter was driven by an 8% decrease in job count offset by an approximate 7% price and mix shift increase. The Roto-Rooter changes include the impact of acquisitions in 2008 and 2009, offset by the conversion of one company-owned branch to an independent contractor in 2009. Consolidated net income increased mainly as a result of the increase in revenues. Diluted EPS increased as the result of increased earnings and a reduction in the average shares outstanding due to our stock repurchase program.
VITAS expects to achieve full-year 2009 revenue growth, prior to Medicare cap, of 5.7% to 6.2%. Admissions are estimated to be in the range of 98% to 100% of total 2008 admissions. Medicare contractual billing limitations are estimated at $1.25 million in the fourth quarter of 2009. Roto-Rooter expects full-year 2009 revenue to range from 98% to 101% of 2008 full year revenue. This expected revenue growth is a result of increased pricing of 5.0% and a favorable mix shift to higher revenue jobs, partially offset by a job count decline estimated at 7.0% to 8.0%. We anticipate that our operating income and cash flows will be sufficient to operate our businesses and meet any commitments for the foreseeable future.
The consolidated gross margin was 29.6% in the third quarter of 2009 as compared with 29.8% in the third quarter of 2008. On a segment basis, VITAS gross margin was 23.4% in the third quarter of 2009 and 23.6% in the third quarter of 2008. The Roto-Rooter segment s gross margin was 46.4% in the third quarter of 2009 and 45.1% in the third quarter of 2008. The increase in Roto-Rooter s gross margin was primarily the result of a $646,000 decrease in health insurance expense over the prior year quarter, lower fuel costs due to lower gas prices and fewer technicians in training which improves the overall efficiency of our workforce.
The increase in VITAS service revenues for the first nine months of 2009 versus the first nine months of 2008 is primarily the result of the 2008 Medicare reimbursement rate increase of approximately 3.5%, a $1.95 million increase for the BNAF related to the fourth quarter of 2008, a net reversal of Medicare cap reserves of $192,000, as well as favorable mix shift to higher acuity days of care and an ADC increase of 0.5% compared with the prior year period. The increase in ADC is a result of a 0.4% increase in routine homecare, an increase of 8.4% in continuous care and a 5.4% decrease in general inpatient. In excess of 90% of VITAS service revenues for the period were from Medicare and Medicaid.
The consolidated gross margin was 29.7% for the first nine months of 2009 as compared with 28.9% for the first nine months of 2008. On a segment basis, VITAS gross margin was 23.4% for the first nine months of 2009 and 21.8% for the first nine months of 2008. VITAS gross margin increased as the result of the $1.95 million BNAF adjustment related to fourth quarter of 2008, the net reversal of $192,000 in the Medicare cap accrual and refinements to scheduled field labor. The Roto-Rooter segment s gross margin was 45.9% for the first nine months of 2009 and 45.6% for the first nine months of 2008.
CHE is in the portfolios of Ron Baron of Baron Funds, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
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