Chemed Corp (CHE) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to Chemed Corporation's fourth-quarter 2010 conference call. My name is Fav and I will be your conference call facilitator today. Please note that today's call is being recorded. All lines have been placed on mute to prevent any background noise.After the speakers there will be a question-and-answer period.I would now like to turn the call over to Sherri Warner with Chemed Investor Relations.

Good morning. Our conference call this morning will review the financial results for the fourth quarter of 2010 ended December 31, 2010. 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 February 15th 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 February 15, 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, everyone. Welcome to Chemed Corporation's fourth-quarter 2010 conference call.

Chemed consolidated revenue in the quarter totaled $336 million and net income was $22.6 million. If you adjust for certain non-cash items and items that are not indicative of ongoing operations, adjusted net income totaled $27.9 million, and equated to adjusted earnings per share -- earnings per diluted share of $1.21, an increase of 14.2% when compared to adjusted earnings per diluted share in the fourth quarter of 2009.

In the fourth quarter of 2010, our hospice business segment generated revenue of $242 million, an increase of 11.4% over the comparable prior-year period, and adjusted EBITDA of $42.2 million, an increase of 23.1%. This equated to an adjusted EBITDA margin prior to Medicare Cap of 17.8%.

In the fourth quarter of 2010 our admissions totaled 14,776, an increase of 8% over the prior-year quarter. This brings our full-year 2010 admissions growth to 5.6%. This improvement in admissions trends in 2010 is attributed to several factors. The most significant has been the expansion of our inpatient units, or IPUs, over the past year. As of December 31, 2010, VITAS now has 32 dedicated IPUs with a total daily capacity of 427 beds. Over 75% of our inpatient days of care are within these dedicated units. The remaining 25% of our high-acuity inpatient care is provided with short-term contract beds.

New and refreshed patient units provide -- inpatient units provide VITAS with increased visibility to our referral sources, as well as increased capacity to provide hospice care to our high-acuity patients. I anticipate this approach of using inpatient units to maximize our visibility within the healthcare community to be a permanent part of our admissions strategy.

We have also made significant investments in our field personnel in terms of staffing, training, and support. These investments have provided a noticeable improvement in our overall admissions trends.

In the fourth quarter of 2010, VITAS recorded a Medicare Cap billing limitation of $1,056,000. This Medicare Cap liability in the fourth quarter of 2010 relates to one program, which is our largest provider number. Admissions for this program are typically impacted by admissions seasonality. The government's Medicare Cap fiscal year begins on September 29. The first quarter of a Medicare Cap year has the potential to be volatile if a program experiences any unusual admission or discharge patterns. As the year progresses, individual program Medicare Cap calculations become significantly less volatile and more predictable on a year-to-date basis.

Actual January 2011 admissions in this one program were adequate to eliminate all billing limitations for this program for the four-month period, October 2010 through January 2011. However, consistent application of our Medicare Cap accounting methodology requires VITAS to recognize this $1.1 million as a reduction in revenue in the fourth quarter of 2010. VITAS anticipates reversing the Medicare Cap liability related to this one program in the first quarter of 2011.

I should also note this exact situation occurred with this provider number in the fourth quarter of 2009, and we were able to reverse the Medicare Cap liability in the first quarter of 2010 based on actual admissions following the typical seasonality patterns. Of VITAS' 33 unique Medicare provider numbers, 30 provider numbers, or 91%, have a Medicare Cap cushion greater than 10% for the most-recent 12-month period. Three provider numbers have Medicare Cap cushion below 5%. VITAS generated an aggregate Medicare Cap cushion of $210 million, or 24.8%, during the trailing 12-month period.

Now, let's turn to our Roto-Rooter business segment. Roto-Rooter continues to see signs of strengthening demand in 2010 as we exit the economic recession. In addition, we continue to offset some of this recessionary weakness on our revenue through a combination of strategic price increases in individual markets, increased high-revenue excavation jobs, and operating expense management. During the quarter, Roto-Rooter generated $15.9 million of adjusted EBITDA, a decline of 0.4% over the prior-year quarter.

With that, I would like to turn this teleconference over to David Williams, our Chief Financial Officer.

Thanks, Kevin. Net revenue for VITAS was $242 million in the fourth quarter of 2010, which is an increase of 11.4% over the prior-year period. Excluding the impact of Medicare Cap, revenue increased 10.9%. This revenue growth was a result of increased ADC, average daily census of 7.7%, driven by an increase in admissions of 8%, combined with Medicare price increases of approximately 2.1%. The remaining growth was driven by geographic mix shift of the patient base. Our average revenue per patient per day in the quarter, excluding the impact of Medicare Cap, was $202.21, which is 3.0% above the prior-year period. Routine home care reimbursement and high-acuity care averaged $159.31, and $701.21 respectively, per patient per day in the fourth quarter of 2010. During the quarter, high-acuity days of care were 7.9% of total days of care, essentially equal with the prior-year quarter.

The fourth quarter of 2010 gross margin, excluding the impact of Medicare Cap, was 25.3%, which is an increase of 62-basis points when compared to the fourth quarter of 2009. This increase in our overall margin was accomplished while continuing to absorb increased expenses relating to field-based admissions, expansion of our inpatient units, and increased documentation requirements in Medicare recertifications. Our home care direct gross margin was 54.4% in the quarter, an increase of 190-basis points, when compared to the fourth quarter of 2009. Our direct inpatient margins in the quarter were 14.4%, which compares to 11.6% in the prior year. Occupancy of our inpatient units averaged 76.9% in the quarter, and compares to 71.1% occupancy in the fourth quarter of 2009.

Continuous care, the least predictable of all levels of care, had a direct gross margin of 22.6%, an increase of 250-basis points when compared to the prior-year quarter. Average hours billed for a day of continuous care averaged 18.7 in the quarter, or a 0.4% increase over the prior-year's average. VITAS' selling, general and administrative expense was $18.8 million in the fourth quarter of 2010, which is an increase of 4.7% when compared to the prior year. Adjusted EBITDA totaled $42.2 million in the quarter. Adjusted EBITDA margin, excluding the impact from Medicare Cap, was 17.8% in the quarter, in comparison to an adjusted EBITDA margin of 16.5% in the prior-year quarter.

Now, let's turn to our Roto-Rooter segment. Roto-Rooter's plumbing and drain cleaning business generated sales of $94 million for the fourth quarter of 2010, an increase of 9.7% over the prior-year quarter. Roto-Rooter's gross margin was 43.1% in the quarter, a 311-basis point decline when compared to the fourth quarter of 2009. Adjusted EBITDA in the fourth quarter of 2010 totaled $15.9 million, a decline of 0.4%, and the adjusted EBITDA margin was 17.0% in the quarter, a decline of 172-basis points, when compared to the prior year.

The decline in the gross margin and adjusted EBITDA margin in the fourth quarter is a result of several factors. Casualty insurance claims, primarily relating to prior periods, increased $1.8 million in the quarter. Health insurance, primarily large claims, increased $1.0 million. And bad debt expense was $81,000 in the prior-year quarter and it increased to $244,000 in the current quarter. Excavation revenue and direct gross margins of those increased in the quarter. However, these excavation jobs continue to have a margin below plumbing and drain cleaning services. This revenue mix shift to excavation reduced overall margins by 73-basis points. The impact these items had on margins were partially offset by Roto-Rooter's selling, general and administrative expense, excluding litigation costs, expanding 6.4%, well below total revenue growth of 9.7%.

Job count in the fourth quarter of 2010 increased 1.2% when compared to the prior-year period. In the fourth quarter of 2010, total residential jobs increased 0.4%, as residential plumbing jobs increased 2.3%, and residential drain cleaning jobs declined 0.3% when compared to the fourth quarter of 2009. Residential jobs represented 71% of total job count in the quarter. Total commercial jobs increased 3.3%, with commercial plumbing and excavation job count increasing 8.8%, and commercial drain cleaning increasing 1.5%, when compared to the prior-year quarter. Our other job category, although very small, declined 7.5%.

Now, let's review our consolidated balance sheet. Chemed had total debt of $159 million at December 31, 2010. This debt is net of the discount taken as a result of the convertible debt accounting requirement. Excluding this discount, aggregate debt is $187 million and is due May of 2014. Chemed's total debt equates to less than one times trailing 12 month adjusted EBITDA. Chemed has $175 million revolving credit facility that expires in May, 2012. At December 31, 2010, this credit facility had approximately $147 million of undrawn borrowing capacity after deducting $28 million used to secure letters of credit issued under the facility to secure our worker's compensation insurance. Capital expenditures for the fourth quarter of 2010 aggregated $6.5 million, and compares favorably to our depreciation and amortization during the same period of $7.3 million.

The Company increased its quarterly dividend per share in the third quarter of 2010 from $0.12 per share to $0.14 per share. We purchased $96.3 million of treasury stock in the fourth quarter of 2010, and an additional $19.1 million in January 2011, under a 10b5-1 share repurchase plan. Total shares repurchased in this four-month period totaled 1.802 million shares and has effectively exhausted our remaining authorization under previously-announced share repurchase programs. I should also note that the fourth-quarter 2010 share repurchases happened within the last week-and-a-half of the year and had very little impact on our aggregate share count in the quarter. We continually evaluate cash utilization alternatives, including share repurchase, debt repurchase, acquisitions and increased dividends, to determine the most beneficial use of capital resources.

Our 2011 guidance is as follows. VITAS expects to achieve full-year 2011 revenue growth prior to Medicare Cap of 7% to 9%, admissions in 2011 are estimated to increase 5% to 7%, and full-year adjusted EBITDA margin prior to Medicare Cap is estimated to be 15.3% to 16.3%. Effective October 1, 2010, Medicare increased the average hospice reimbursement rates by approximately 2.1%. And consistent with prior years, our guidance assumes $5 million of estimated Medicare Cap contractual billing limitations for calendar-year 2011. Roto-Rooter expects to achieve full-year 2011 revenue growth of 5% to 8%. The revenue estimate is a result of increased pricing of approximately 3%, a favorable mix shift to a higher-revenue jobs, with job count growth estimated at zero to 3%. Adjusted EBITDA margin for 2011 for Roto-Rooter is estimated in the range of 16.5% to 17.5%.

Based upon the above metrics, an effective tax rate of 39% and a full-year average diluted share count of 21.5 million shares, Management estimates our 2011 earnings per diluted share, excluding non-cash expense for stock options, the non-cash interest expense related to the accounting for convertible debt and the other items not indicative of ongoing operations will be in the range of $4.65 to $4.85. This compares to Chemed's 2010 adjusted earnings per diluted share of $4.17.

I will now turn this call over to Tim O'Toole, Chief Executive Officer of our VITAS subsidiary.

Thank you, David. As most of you are aware, we have put considerable efforts into our marketing and community education programs to increase admissions. Through the hard work of all of our employees, those who are directly responsible for developing referral sources and admitting patients and those providing excellent care, we have generated a total of 58,526 admissions in 2010. This is an increase of 5.6% over the prior year. These admissions, coupled with our patient census at the start of the year, resulted in VITAS caring for over 70,000 patients in 2010. I could not be more appreciative of all of the hard work from our employees during 2010, particularly our 200-plus hospice teams that deliver excellent care to the patients and families we serve.

In the fourth quarter of 2010, we admitted 14,776 patients, which is 8% higher than the prior-year quarter. During the quarter, our largest state, Florida, increased admissions 10.7%, and our second largest state presence, California, expanded admissions 7.6%. We were able to expand admissions in 11 of the 15 states, plus the District of Columbia, in which VITAS operates. Our most difficult states in 2009 had been Illinois and Texas. Both of these states have stabilized and in 2010, Illinois admissions declined 0.4%, and Texas increased 2.2%. These results represent a significant improvement over the prior-year period.

Admissions have increased in all four of our largest referral categories. During the fourth quarter, home-based admissions increased 7.4%, assisted care living facilities increased 18.9%, hospital-referred admissions increased 7.8%, and nursing home admissions increased 4%. This growth in admissions is in part due to our strategy of expanding inpatient capacity. This strategy raises VITAS' visibility with our referral sources in key markets. In addition, increased care to high-acuity patients has a very positive impact on our billing potential under the Medicare Cap formula.

The costs associated with the inpatient capacity did put some stress on our inpatient margins during the fourth quarter. If you exclude the roughly $538,000 incurred in inpatient unit start-up losses incurred in the quarter, our inpatient margin would have been 17.9%. We also continued to increase our staffing in the admissions area. As of December 31, 2010, we have 296 sales representatives, 122 admission coordinators, 343 admission nurses, 90 community liaisons, and 20 long-term care liaisons. These investments in the sales and admissions areas resulted in an increase in our total admissions cost of $3.6 million when compared to the prior-year period.

VITAS' average length of stay in the quarter was 80.8 days, which compares to 76.4 days in the prior-year quarter, and 78.2 in the third quarter of 2010. Average length of stay is calculated using total discharges during the quarter. Median length of stay increased one day to 15 days. Median length of stay is a key indicator of our penetration into the high-acuity sector of the market. Our days of care totaled 1,203,317 days in the quarter, an increase of 7.7% over the comparable prior-year period. Non-nursing home routine home care days increased 11.6% in the quarter. This increase was partially offset by a 1.8% decline in nursing home days of care. Continuous care days increased 7.8%, and inpatient days of care increased 7.3% when compared to the fourth quarter of 2009. As of December 31, 2010, we had one program classified as a start-up, there were four satellite offices opened in the quarter and two new start applications are in progress to enter two additional states. Additionally, we have been awarded a certificate of need by the state of Florida in the Jacksonville community, which we anticipate will open in the near term.

With that, I'd like to turn the call back over to Kevin.

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

(Operator Instructions)

Your first question will come from the line of Darren Lehrich from Deutsche Bank.

Thanks, and good morning. This is Brian Zimmerman in for Darren. So, I was looking at your 2011 revenue guidance for VITAS, and it looks pretty strong. I guess I was just wondering what assumptions were baked into that number that gives you confidence that you can grow between 7% and 9%?

Well, to put it in perspective, revenue was up -- let me get the exact numbers here. We grew revenue 8.3% in 2010, and we grew admissions 5.6%. That's just kind of what we're going off. And we saw increasing strength in our admissions in the second half of 2010, particularly the fourth quarter. So, really, if you think about it, our growth in revenue is based on three components -- growth in admissions, increase in length of stay -- for example, a two- to three-day increase going from, say, the average was going to be in the upper 70s -- if we can grow three, three-and-a-half days, that is a 5% top-line growth.

We don't think we'll grow that much, but length of stay will add a couple of points. And then we have our pricing from the federal government, which this quarter averaged 3%, but we think the overall is going to be about 2.1%.

So, if admissions are up just, say, 5.5% for the year, pricing goes up 2.5%, now you're at 8%, and then length of stay expands a couple of days, you're actually high single -- potentially slightly over 10%, just on those components. It's hard for us to predict exactly how much our revenue growth will come from those three components, but given the current trend line, we think our overall revenue growth is reasonable based on length of stay, pricing, and admissions growth.

And just a technical standpoint, if you look at revenue, it 's not purely additive of those three components, but those are indicative.

Okay, that's helpful. Thank you. And then on the Roto-Rooter side, you've given EBITDA margin guidance of like 16.5%, 17.5%, but the shift you have seen towards excavation projects hurting margins, how do you think you get to that number in 2011? Or what types of job growth are you expecting to see?

This is Dave again. For example, we averaged, for Roto-Rooter, 16.5%, and that was, again, with the continued excavation shift. Again, we've increased action margins over 300-basis points in the quarter, but it's still below our overall business in other plumbing and drain cleaning. However, when we're forecasting 16.5% to 17.5%, we're assuming we're not going to get a recurrence of the very unfavorable $1.8 million in casualty claims relating to prior-year periods, as well as getting really hit for some very large medical claims that hurt us by over $1 million. And that really surprised us, because our manpower is down in 2010 over 2009.

All things being equal, you would actually have expected to see a drop in those healthcare costs. So, we anticipate those don't recur, but we do have a continued shift, or a growth pattern in excavation. But with that said, and not getting those large insurance costs occurring again, we were anticipating 16.5% to 17.5%, which is still well below, we think, the peak we hit in 2007, which was 20%.

And also, just to amplify one of Dave's points, obviously the major part of the difference between the fourth quarter and our guidance is, as Dave said, the casualty and healthcare -- large healthcare claims that were above what was, say, budgeted or projected. But with regard to excavation, we're going to continue to grow that business, and we're going to continue to subcontract out less of that business. And as the subcontracting goes down and our internal expertise goes up on a geographic basis, our margins will improve and look a lot like our other businesses in that context.

All right. Thanks a lot, guys.

Your next question will come from the line of Brendan Strong from Barclays Capital.

Hey, good morning. It's really great to see the revenue growth picking up both at VITAS and Roto-Rooter, and I'm just wondering if there are other things you're working on or thinking about for -- to introduce maybe later this year that'll keep that growth rate at VITAS strong as we move into 2012?

Well, we're always looking to improve. And again, I think that the situation right now is we have very good momentum from the last half of last year, as we've reported, and we feel very good about our strategy, which we've explained, certainly expanding the inpatient units. We have a lot of opportunities that we're working on right now that will come to fruition in the next six months, probably add several new ones. The same good work we've been doing with making the admissions process better for the patient and their families and increasing that, and giving the great care. And, really, our sales force is stronger.

We've learned a lot in the last couple of years about additional places where we should be talking to people about the hospice opportunity and educating the public directly. We're having very strong marketing initiatives globally on a national basis with some Internet opportunities, developing our own and partnering with some of the leading portals out there, which is working for us.

But, overall, we're just building good momentum. And I do think that the environment is difficult for some of the competition, and we expect to take market share. Because we're building through our strong resources and systems, and everything we're doing, we're gaining momentum where we see some in the industry appearing to not do quite as well. So, again, we feel good. We'll keep adding new programs to recognize the special needs of our patients, and I think we'll do just fine.

And, in addition, maybe largely because some of the difficulties some of our competitors are having, acquisition discussions are very prevalent, and there's no question in my mind that we'll have the opportunity to make some acquisitions during the course of the year. The real question is, again, to the extent that they're fixer-uppers or ones that are laboring under some of the relatively new conditions of participation -- that creates some other elements to the calculus of those acquisitions -- but I have abundant confidence that we will pull the trigger on several.

And then, Kevin, how do your thoughts around acquisitions tie into announcing a new share buyback authorization?

How do they -- well, I'll put it this way. We've got plenty of access to capital, plenty of free cash flow. We are planning on doing both. And I would say, though, to the extent that we have a history of, a recent history of actually making several significant acquisitions, that will not -- we'll continue to buy in stock. There's -- we can do both for some length of time. And I think if we became very active on the acquisition front, you look at the payback on those, I guess we'd prefer to do acquisitions, but until we've done several, we're all (inaudible), I think, with regard to our strategy of both healthy dividend and healthy stock buybacks.

Okay. And then maybe just last question, going back to Tim. Can you just -- I'm not sure I really get the dynamic between the IPUs helping reduce cap exposure, but at the same time, length of stay has been increasing. Can you just help me understand that better?

Well, they are two different areas. Yes, the inpatient units generally build your admissions, because they're associated closely with the hospitals where there are large opportunities for referrals. And that's very healthy, as you know, for the cap calculation because every admission is the same regardless of length of stay as relates to the cap calculation. The other great thing, which we've talked about, as part of the strategy with the inpatient expansion, is it builds your home care program around it because many of the referrals are not referrals into the inpatient unit but they're referrals into the home care side of the business.

So, again, it just helps build your presence in the community, builds your presence with key referral sources, and allows you to take all patients that need the help without any limitations on type of care or the type of setting. So, it's just an overall piece of the strategy, and it helps build the home care referrals as well, which builds your overall program.

And let me say, you raise an interesting question. Let me start by saying one way to understand what we're talking about is to say that over a certain basic level with IPUs in the market, it's sales and marketing. It doesn't -- you're adding them not to attract more inpatient people, but it's sales and marketing over the certain basic level, and I think that that's what we've seen in some marquis locations that we've had, particularly in Florida.

Now, an implication from your question is if these are in hospitals -- some of our IPU's are not exclusively in hospital -- the suggestion is you get more hospital-based referrals, which we're getting a lot of hospital, increase in hospital [stay], that would tend to reduce your average length of stay. We're not seeing that. I think we're seeing, generally speaking, in hospice, treating upwards of average length of stay, and I still would associate that more to different disease states. That is virtually all cancer diagnoses have longer average length of stays for cancer, so we're seeing a continuation of that.

But your question implies, one, that if a majority of these marquis IPU units are associated with hospitals and high-visibility locations, yes, we expect over time to get more short-stay patients from those.

Okay, great.

It would have that affect on that average length of stay.

Maybe just one other thing just on assisted living. That was unbelievably strong this quarter. Was there a particular set of assets that you guys won over in the quarter?

Not really. Look, the assisted living presence, as the need is developing for that, that's just an area that's still growing. So there's more assisted living beds out there this year than last year, and we get our share. Nursing home beds are not growing. And, so, it's really just a function of the marketplace. And again, as Kevin and we've all talked about it, we serve all patients and all settings with all disease states, and that's an area of growth. So, it's just where we're growing with that industry.

All right, very good. Thank you.

Your next question will come from the line of Frank Morgan from RBC Capital Markets.

Good morning, a couple here. First, for Dave, on the guidance for 2011, do you have any assumed de novo starts in 2011 in the guidance, and how much start-up losses would that be if you do?

There is an assumption of two de novos, and the losses, I think, are about equivalent to the prior year.

Okay. Secondly, on bad debts decline and your bad debt expense on the hospice side, but an increase on the Roto-Rooter side, I know it's not a big number, but is there any color you can give us there?

Yes, sure, there's a couple of things. On the Roto-Rooter side, bad debts were phenomenally good last year, and they continue to be phenomenal. If you think about it, $244,000 for the quarter, given the size of Roto-Rooter is almost nonexistent and a big chunk about that is actually -- about $80,000, $90,000 of that is actually reserve against loans to independent contractors for working capital, so we're very conservative. So Roto-Rooter's bad debt is almost nonexistent.

On VITAS, they've had just phenomenal experience in terms of making sure we have adequate documentation to ensure that we basically can get every dollar of care provided --substantially every dollar -- to our Medicare, Medicaid, and private-pay patients. It did dip down to 0.7%, although we're going to anticipate in our guidance, it's assuming we are going to go forward with a 0.9% bad debt reserve, but we'll be watching that closely to see if we can justify pulling that down.

Basically, we did a little bit of cleanup at year end because of our phenomenal experience on the VITAS side of collections, but bad debts have actually, for both operating units, have never looked better.

Okay. Any ongoing [Nicholas] or ADR's or rack audits? There must not be with the kind of DSOs you've got, I'm assuming.

Well, Frank, this is Tim. We always have those reviews, and we probably always will because the government's expanding those type of reviews. The good news for us is that they're less now than they were a year ago, and probably the receivables that are held up in that process are down by half. And so we would expect those to continue.

They're always continuing, whether they be at the federal level, or various state level reviews, and we're doing very well in that regard and have improved, as Dave just mentioned, our internal processes. So we make sure we have all of the key documents in the file for those reviews and upgrading every aspect of our compliance program.

Okay. One last one, on the -- just the mix of the growth in the non-cancer, is it fair to say that the success and the growth that you've had on the inpatient side -- obviously that's a positive -- I'm assuming that is a positive for your cancer mix and, therefore, your length of stay and your cap, but because of the marketing programs, that more of the growth is coming from the non-inpatient marketing admissions is the reason for the growth in the non-cancer diagnoses?

No, no, we have not seen any change in our mix. Our days of care and our admissions, vis-a-vis cancer patients versus non-cancer patients, very similar, and so we're not really seeing any differential. Again --

We're not marketing differently to those disease states.

Absolutely not. We're looking to take all patients that have a terminal illness regardless of disease state, and we have not seen any shift of any substance between the categories on our admissions or the overall census in our programs.

Yes, Frank, so on our admissions our cancer were -- 34.5% of all of our admissions were cancer. Now, there's about a one-year lag because the NHPCL was always a year behind in terms of releasing their annual data, but we're very similar to the overall industry.

The overall industry, just a [trips] down we follow that pattern.

Okay, very good. Thank you much.

And your next question will come from the line of John Bossler from Dominic Brokerage.

Yes, gentlemen, on the Roto-Rooter side, could you help a little bit with the breakout of revenues and margins on the excavation versus the traditional business?

The increase in our excavation business contributed in the quarter about an 83 basis-point decline in our overall margin.

What is the dollar volume of the excavation business?

We don't release that.

Okay. And in the -- what do you -- how do you view the growth in your VITAS area with the non-profit companies having a larger struggle being smaller organizations? Are you looking at acquisitions there or just taking over businesses, and is that built in? When do you think that really starts to have a bigger impact going forward?

Look, we have no idea, other than it's something that we've been pushing very hard on for the last couple of years, and the not-for-profit side of it has been -- they've been tough eggs to break. There is a lot -- aside from -- you have issues other than financial or economic involved when you're trying to talk to an organization from either jettisoning their not-for-profit hospice program, or if it's a stand-alone organization just taking the purchase price and getting involved in another eleemosynary pursuit. It's one thing that we're constantly working on.

There's a lot of factors which would suggest that -- would think that would have those organizations, especially the ones struggling, thinking about it, but as far as projecting when the dam will break, I don't know. Three years ago I would have said certainly within three years. Hasn't happened yet.

And what are the two new states that you're going into for 2011?

We're not going to announce that just yet.

Okay. And the two largest states of Florida and California, what's the percentage of revenues there versus of the total?

We don't release that.

Okay. Thanks so much.

Florida's by far our largest (inaudible) --

We've spoken about it. It's over a third of our business.

Okay. Thank you very much.

And that does conclude today's question-and-answer session. I would now like to turn the call back over to Mr. Kevin McNamara for closing comments.

I have no further comments, and I'll just conclude our fourth-quarter 2010 conference call and look forward to discussing what I hope are good results three months in the future. Thank you.

Thank you all for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.