Chemed Corp

Ladies and gentlemen, thank you for standing by, and welcome to the ChemEd Corporation First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Sherry Warner with Investor Relations. Please go ahead, ma'am.

Good morning. Our conference call this morning will review the financial results for the first quarter of 2020, ended March 31st, 2020. 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 April 28 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. 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 April 28th, which is available on the company's website at CAMED.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 Westphal, President and Chief Executive Officer of ChemEd's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara.

Thank you, Sherry. Good morning. Welcome to ChemEd Corporation's first quarter 2020 conference call. I will begin with highlights for the quarter, and David and Nick will follow up with additional operating detail. I will then open the call up for questions. First, let's start with the obvious. The coronavirus and related shutdown of significant portions of the U.S. economy in March 2020 has triggered significant operational issues and disruption in both of our business segments, and specifically within our labor scheduling and supply chains. Fortunately, both VITAS and Road Router are classified as essential services, allowing ChemEd the opportunity to continue to operate both operating units throughout the pandemic. However, make no mistake, this is not business as usual. Operating during a pandemic with an incredibly infectious and deadly virus creates unique challenges. First and foremost, our number one focus is the safety and well-being of our employees, patients, and customers. We will maintain this focus regardless of the cost to safety to operate during the pandemic and panic. Starting in March, we have seen a significant escalation in cost of some supplies, primarily in the area of personal protection equipment, or PPE. In addition, we are experiencing increased labor costs as we robustly staff schedules to increase our ability to meet the immediate needs of our patients, family, and industrial customers. We've also followed state and federal guidelines and are providing the infrastructure necessary to allow field support and corporate staff to work from home and limit, as much as practical, physical interaction among our 17,000 employees. On the VTAS segment, the federal government, and specifically HHS and CMS, have been exceptionally supportive in terms of relaxing regulations and creating pragmatic flexibility in caring for our patients. During the term of this pandemic, I anticipate some disruption around our patient referral patterns. Admissions expanded 4.8% in the first quarter of 2020. However, as we began to experience disruption to the healthcare system in the second half of March, admissions increased a modest 1.1% for the month when compared to the prior year. Hospital referral admissions typically represent roughly 50% of our total admissions and are a key portal for identifying terminal patients. In fact, our admissions from hospital referrals increased 7.9% in the quarter. However, as hospitals shift their focus to COVID-19 patients, it is likely for short-term disruptions to emerge, in our hospital referral patterns. We have continued working closely with our hospital partners to identify patients within the hospital care continuum who are hospice appropriate. As most of you are aware, on March 27, 2020, the CARES Act was passed and signed into law by President Trump. The CARES Act contains provisions related to healthcare providers' operations and issues caused by the coronavirus pandemic. On April 10, 2020, VITAS, without application, received $80.2 million from the CARES Act Relief Fund as a formulaic calculation applied to VITAS' 2019 Medicare fee-for-service revenue. While specific granular details of the program have not been announced, funds are specified to be used, prepared for, and respond to coronavirus and shall reimburse the recipient for healthcare-related expenses or lost revenues that are attributable to the coronavirus. The ability of VITAS to retain and utilize the full $80.2 million from the relief fund will depend on the magnitude, timing, and nature of the economic impact of COVID-19 within VITAS, as well as the guidelines and rules of the federal relief program. This financial support is material for VITAS in maintaining its operational capacity to safely and appropriately care for over 19,000 patients daily. The CARES Act funding provides for VITAS to operate in the near term with increased labor costs, higher PPE and equipment costs, as well as disruption to hospital referrals without a material negative impact to our operating results and their overall financial condition. Rotor Rear continues to operate at full capacity. However, in March of 2020, we noticed disruption in our commercial business. Commercial plumbing and drain cleaning services represented 28% of total road route revenue in 2019. With the shutdown of most restaurants and retail businesses, we have noticed a demand impact on this subset of our commercial business. Fortunately, our first quarter 2020 revenue service demand, which typically represents over 61% of road route revenue, continues to remain solid. David will provide additional color on road route revenue later in the call. With that, I would like to turn this teleconference over to David.