Good day ladies and gentleman, and welcome to the Second Quarter 2015 Chemed Corporation Earnings Conference Call. My name is Jasmine and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. And I would now like to turn the conference over to your host for today Ms. Sherri Warner, with Chemed Investor Relations. Please proceed.

Good morning. Our conference call this morning will review the financial results for the second quarter of 2015 ended June 30, 2015. Before we begin, let me remind you that the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call. During the course of this call, the company will make various remarks concerning Management's expectations, predictions, plans and prospects that constitute forward-looking statements. Actual results may differ materially from those projected by these forward-looking statements as a result of a variety of factors, including those identified in the company's news release of July 23 and in various other filings with the SEC. You are cautioned that any forward-looking statements reflect Management's current view only and that the company undertakes no obligation to revise or update such statements in the future. In addition, Management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation and amortization, or EBITDA and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company's press release dated July 23 which is available on the company's website at chemed.com. I would now like to introduce our speakers for today; Kevin McNamara, President and Chief Executive Officer of Chemed Corporation; Dave Williams, Executive Vice President and Chief Financial Officer of Chemed; and Tim O'Toole, Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara.

Thank you, Sherri. Good morning. Welcome to Chemed Corporation's second quarter 2015 conference call. I will begin with some of the highlights for the quarter and David and Tim will follow with some additional operating detail. I will then open the call up for questions. Chemed generated $382 million of revenue in the quarter, an increase of 6%. This revenue growth translated into a 10.7% increase in net income. Excluding special items, Chemed's net income increased 11.8%. Our adjusted diluted earnings per share aggregated $1.71 in the quarter which is an increase of 14% when compared to the second quarter of 2014. VITAS and Roto-Rooter continue to generate solid operating metrics which translates into excellent profitability growth in both of these operating segments. VITAS provided almost 1.4 million days of care in the quarter resulting in $276 million of revenue in the quarter and equating to a 4.7% increase in revenue when compared to the prior year. Our admissions increased 5.8% to 16,683 new patients, increasing our average daily census to 15,283 patients in the quarter. On June 30, 2015 we had 15,676 patients under our care which have a positive impact on our third quarter in terms of days of care and revenue growth. Roto-Rooter generated sales of $105 million. This is a revenue increase of $9.3 million or 9.7% compared to the prior year. This revenue growth is being generated primarily from water restoration services. Water restoration is a remediation service removing water and excess humidity from a home or business caused by an untoward water incident. These services generated $9.2 million of revenue in the quarter, an increase of $5.8 million when compared to the second quarter of 2014. It is difficult to predict how significant water restoration will become Roto-Rooter's total service revenue. However, I anticipate water restoration will be a significant contributor to Roto-Rooter's revenue growth in 2015. With that, I would like to turn this teleconference over to David Williams, our Chief Financial Officer.

Thanks, Kevin. As Kevin just noted, the net revenue for VITAS was $276 million in the second quarter of 2015 which is an increase of $12.4 million, or 4.7%, when compared to the prior-year period. This revenue increase was comprised of an average Medicare reimbursement rate increase of approximately 1.4%, a 5.1% increase in average daily census, offset by the level of care as well as the geographic mix shift when compared to the prior year. In the second quarter of 2015, VITAS did not record any adjustments in estimated Medicare Cap billing limitations. This compares to $0.1 million of Medicare Cap billing limitations recorded in the second quarter of 2014. At June 30, 2015, VITAS had 34 Medicare provider numbers, none of which has an estimated 2015 Medicare Cap billing limitation. Our average revenue per patient per day in the quarter, excluding the impact of Medicare Cap, was $198.79 which is 0.5% below the prior-year period. Routine home care reimbursement and high acuity care averaged $164.07 and $698.96, respectively. During the quarter, high acuity days of care was 6.5% of total days of care, 40 basis points less than the prior-year quarter. The second quarter of 2015 gross margin, excluding any impact of Medicare Cap, was 21.9% which is 14 basis points below the second quarter of 2014. Our routine home care direct gross margin was 52.4% in the quarter, a decrease of 100 basis points when compared to the second quarter of 2014. Direct inpatient margins in the quarter were 6.0% which compares to 6.9% in the prior year quarter. Occupancy of our 34 dedicated inpatient units averaged 73.9% in the quarter and compares to 74.7% occupancy in the second quarter of 2014. Approximately 77% of our inpatient days of care are in these dedicated units, with the…

Thank you, David. I continue to be pleased with our admissions growth over the past several quarters. In this quarter we generated admissions totaling 16,683 new patients which is an increase of 5.8% over the prior year. This brings our year-to-date growth and admissions to 5.7%. During the quarter admissions generated from hospitals referrals, which typically represent over 50% of total admissions, increased 8.5%. Home-based referrals expanded 2%, nursing home admissions increased 2%, and assisted living facility admission increased 3.3%. Our per patient per day pharmaceutical cost averaged $6.94 in the quarter which is 4.4% favorable to the prior year. Medical equipment per patient per day cost in the quarter totaled $6.57 which is a 2.8% reduction in cost when compared to the second quarter of 2014. VITAS' average length of stay in the quarter was 78.5 days which compares to 82.4 days in the prior year quarter and 79.0 days in the first quarter of 2015. Average length of stay is calculated using total discharges during the period. Median length of stay was 15 days in the quarter and compares to a median of 16 days in the prior-year quarter and 13 days in the first quarter of 2015. Median length of stay is a key indicator of our penetration into the high acuity sector of the market. Our days of care totaled 1,390,735 days in the quarter, an increase of 5.1%. Non-nursing home routine home care days increased to 7% in the quarter and nursing home routine home care increased 0.6%. At June 30, 2015, we had one program classified as a start-up and it is admitting patients. The new start is a Medicare-certified operation and is billing under an existing provider number. With that, I'll turn the call back over to Kevin.

I will now open this teleconference to questions.

[Operator Instructions] And our first question comes from the line of Jim Barrett from C.L. King. Please proceed.

Hi, good morning everyone. Kevin, I heard your comment that you - it was difficult to quantify the water restoration business. But can you discuss it a little bit further in terms of SERVPRO seems to be the largest player. To what degree is this a good fit with your current service offerings, are there any competitive advantages that Roto-Rooter has in the space? And could you talk about the margin profile if you could relative to Roto-Rooter overall?

I'll start and then I’ll let Dave jump in to flush out anything that I left out. But let me start by saying, one of the reasons it's hard to fully predict is, it's a new business for us. There is some trial and error going on, we haven't made all services uniform in all our branches. Some branches are doing better than others. If you extrapolate across only our best branches in this regard, it would be a very significant increase in Roto-Rooter’s business. I mean to the extent that we moderate that view, again there's a pretty big range there. In that regard, that aspect to your question, I’ll say the thing that remains to be seen is can we expand the service offering outside of kind of referrals from performing jobs, drain cleaning jobs that we’re doing. Currently, in this way it's good fit with our business, we have people who - plumbers and drain cleaners who are called to a home or business because there is an immediate problem. First thing they do maybe is stop the flow of water, obviously job two is to make sure that water is remediated so that it doesn’t cause further damage and/or lingering problems like mold. And to the extent that the homeowner says, what do you do now, the comment is well, there’s a number of companies that provide this service including our company. We could have somebody here in 10 minutes, I mean and obviously the good branches where they already know there is water incident in advance may already have dispatched somebody, knowledgeable as far as estimating and able to handle that aspect of it. But I guess my point is, right now Roto-Rooter is pursuing that business with regard to the home grown leads as they were. One question is how big it's going to get is to the extent that how we approach the general market, where we don't have the lead, whether that makes sense for us and, but again, I won’t even go into, obviously right now we’re just operating in a small percentage of the overall market. As you say there are some big players in the industry and it remains to be seen how we would attack that aspect of the business. With regard to margin, let me say the margin profile is good. I mean it's similar to – if I was to say at this point a little bit lower, not higher, but little bit lower than our main - our core business sewer drain cleaning. But very healthy and let’s say - given the fact that the cost of acquisition of a job and that referral of that lead is relatively low, it yields a real nice business for us. But Dave anything that I have left out there you want to flush out.

Just a couple of points although Kevin’s absolutely correct it has slightly lower margin than our other service offering because there is drafting behind the infrastructure that already exist for Roto-Rooter branch, that’s really why you’re seeing us popping above 20% in the EBITDA margin. Typically, if we are having a good year, the fourth quarter might pop above 20%. Now, we’ve actually done the first two quarters because of the contribution of water restoration. Last quarter was 20% and this quarter is 20.9% from an EBITDA margin. But even to back up a little bit, although there are a couple of large players in the industry, the fact is they are still basically the major competition is locally owned and operated, and it's first responders and your ability to immediately remediate the damage that gives Roto-Rooter advantage because we are already in the customer’s home. So, that’s really what we are taking advantage of. But if you looked at Roto-Rooter 20 years ago or even 10 years ago, this probably wouldn't have been something we could have done, but there's been a evolution within Roto-Rooter and it really starting with excavation about 10 years ago where we've developed a core competency to do larger jobs, jobs that are equipment and labor intensive and jobs where we are not charging a commission or not paying a commission to our technicians but it’s more of a fixed contract. As we developed over the last 10 years core competency in excavation, that actually then had a natural transition to extend that core competency now into the water restoration business and capturing the business we were either not taking advantage of or just quite frankly referring away to other companies. So, we think we are well positioned to be at a minimum a niche player taking advantage of business that's available to our existing customers and there may very well be opportunities to branch beyond our existing customers as we develop a platform. What Kevin and I would caution though is, we expect to - have to develop a more detailed infrastructure within the Roto-Rooter branch because of the uniqueness to water restoration developed in a specialized accounts receivable and follow up for insurance companies, as well as capturing deductibles from customers, getting it actually more refined in terms of the equipment we need, so, that could increase cost a little bit but still very profitable, as well as it could expand our margins as we become greater experts, an individual insurance companies and maximize billing and maximizing the services we can provide within what is allowable by the insurance companies, which is a long way of saying is, we think this is very, very positive and we’re going to be refining our approach to water restoration really over the next couple of years.

I do recognize it's a fairly new business for you but Kevin would you view envision a day once the infrastructure is established and relationships with insurance companies are also well established that you would either consider purchasing one of the large national players or even rolling up some of the larger regional companies?

No, I don’t think so. I mean, it's a possibility but I view it as more another leg to the Roto-Rooter service offering and rather than a standalone business. I guess what I am saying is, what makes us successful at this point is the connection to Roto-Rooter and we are capturing a huge percentage of those jobs because in this business speed in getting people there to start remediation before the damage has been done in many respects, has been so important. It's a different business when you’re talking about just appealing to the general public that has these issues and yet doesn't have - than already have a referral through their plumber or insurance company. So, it’s a possibility Jim but it’s not a high priority to us at this point because it would be a different undertaking completely. And again, to the extent we become more expert at it and [indiscernible] long way from thinking of it we are better than everybody else in providing this service in more efficient way, we are long way from that, and we probably wouldn’t consider expanding in it until we thought we were ahead of that power curve, not behind it.

Thank you both.

Okay. Well, I think I don't see any more questions. So again, not that surprising in that our quarter was in our minds pretty much within the expectation. Yes, we tweaked our guidance a little bit but best part of that is to the extent that we're further along in the year and we are proceeding as expected. So with that, well thank you for your attention and see you after one more quarter.

Ladies and gentlemen that concludes today's conference. Thank you for your participation. You may now disconnect. You all have a great day.