Sherri Warner - Investor Relations Kevin McNamara - President and Chief Executive Officer David Williams - Chief Financial Officer Nick Westfall - Chief Executive Officer of VITAS Healthcare Corporation

Good day ladies and gentlemen, and welcome to the Chemed Corporation Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Later, we will conduct a question-and-answer session and our instructions will follow at that time. As a reminder, today’s conference is being recorded. I’d now like to introduce your host for today’s conference is Sherri Warner, Chemed Investor Relations. Ma'am, please proceed.

Good morning. Our conference call this morning will review the financial results for the third quarter of 2017 ended September 30, 2017. 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 October 26 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 October 26, 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 Nick Westfall, 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 third quarter 2017 conference call. I will begin with highlights for the quarter, and David and Nick will follow with additional operating detail. I will then open up the call up for questions. The third quarter of 2017 had solid operational performance, margin improvement and overall financial results. In the third quarter of 2017, Chemed generated $417 million of revenue and increase of 6.3%. Consolidated net income in the quarter excluding cost and other discrete items generated adjusted earnings per diluted share of $2.15, with the increase of 24.3%. Both the have performed well, exceeding the high-end of our internal projections. VITAS admissions did decline 1% in the quarter, the three hurricanes in the quarter was disrupted to our third quarter admissions particularly in Florida. However, given the structure of our Medicare [Inaudible] coupled with our loan medium length of stay where we have a negative margin on short stay admissions. The hurricanes did not materially impact a quarterly operating results. Nick will provide more information on this later in the call. Roto-Rooter continues to show excellent results in our core plumbing and drain cleaning service segments as well as strong growth in water restoration. This resulted in Roto-Rooter having a record third quarter 2017 revenue, adjusted EBITDA and adjusted EBITDA margin. During the quarter, the company we purchased 50,000 shares of Chemed’s stock for $9.6 million which equates to a cost per share of $191.52. With that, I would like to turn the teleconference over to David Williams, our Chief Financial Officer.

Thank you, Kevin. Net revenue for VITAS was $280 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%. 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’s 30 unique Medicare provide numbers, 28 of these provider numbers have a Medicare Cap position of 10% or greater and two provider numbers had a cap position between 5% and 10% for the 2017 Medicare Cap period. Our average revenue per patient per day in the quarter was $188.62, which is 70 basis points 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, and this is 74 basis points less than the prior-year quarter. Our third quarter 2017 gross margin for VITAS was 23.1%, which excluding the 2016 Medicare Cap is a 240 basis point improvement when compared to the third quarter of 2016. Our Routine homecare direct gross margin was 52.4% in the quarter, an increase of 100 basis points when compared to the prior quarter. Direct inpatient margin in the quarter was 3.4% and compares to a negative margin of 2.4% in the prior year quarter. Occupancy of our 29 dedicated inpatient units averaged 68.9% in the quarter and compared to occupancy of 70% in the third quarter of 2016. Continuous care had a direct gross margin…

Thanks, David. Before I discuss the specifics of VITAS this third quarter performance, I wanted to start by acknowledging and thanking our team members whose dedication and compassion allowed us to persevere to Hurricanes Harvey and Irma. Our emergency preparedness, communication and coordination plans were tested within this quarter and I couldn’t be more proud of how they performed. Before, during and after both Harvey and Irma our VITAS team continue to provide appropriate high quality care for our patients on service, along with taking care of one another. These are the two – two of the Company’s key values, and each member of our Company truly live those values throughout these storms. Additionally, the selfless determination and focus across our entire organization towards assessing our patients, fellow employees and company infrastructure during and immediately after the storms allowed us to quickly remobilize across both Houston and Florida in the aftermath. In fact, during the immediate aftermath of hurricane Irma, our local care teams and centralized infrastructure were fully up and running caring for our patients, available to respond newer for our requests and supporting each other’s personal needs within 36 to 48 hours in the majority of our locations. We would backup so quickly that we actually had to wait on some of the national shipping providers and local ancillary providers to reopen before we could get fully backup to speed with bring on new patients. I’ve never been more proud of the organization and managing through these events, and I’m happy to state that as a result of everyone rallying around one another, we’ve come out of these events stronger as an organization. With that, let me quickly discuss our operating results for the third quarter. VITAS had a solid quarter, both financially and operationally. Our average daily…

Thank you, Nick. I will now open this teleconference to questions.

Thank you. The one thing I’ll say is a question we’ve had given the recent development of the passing of tax reform in some form and the house representatives. People that associate with the tax, with the corporate tax [Inaudible] was down 20% all that mean to Chemed and they jump in the air in terms of $1.80 a share of current share account.

Yeah, [Inaudible] every 100 basis point reduction in the federal tax rate from say, 35% to 34% that’s worth to $0.12 to $0.13 per share in additional earnings.

Okay, so that’s…

Well, a 15 point reduction where we had a $1.80 to a $1.90.

Very well. But I’d like to thank everyone for their kind attention. And we’ll get back in mid-February to discuss our results for the fourth quarter. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may now disconnect. Everyone have a great day.