Chemed Corp (CHE) 2014 Q2 法說會逐字稿

Welcome to the second quarter 2014 Chemed Corporation earnings conference call. My name is Derek, and I'll be your operator for today.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Miss Sherri Warner, Chemed Investor Relations.

Good morning. Our conference call this morning will review the financial results for the second quarter of 2014, ended June 30, 2014. 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 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 www.chemed.com.

I would now like to introduce our speakers for today. Kevin McNamara, President and Chief Executive Officer of Chemed Corp. 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.

Good morning. Welcome to Chemed Corp's second quarter 2014 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.

As most of you are aware, in March 2013, CMS issued proposed rules in regards to coding of the principal reason for a terminal prognosis. Then in August, 2013, CMS issued the final rules effective October 1, 2014. The essence of these rule refinements is the elimination of the principal diagnosis codes, the debility and failure to thrive.

CMS's intent was primarily a documentation refinement, and based upon explicit explanation in the federal register they clearly did not anticipate that these coding clarifications would create limitations or barriers for eligible Medicare beneficiaries to access hospice. Unfortunately, this change did cause significant admissions disruption to VITAS and the entire hospice industry.

From a process standpoint, CMS requires hospice providers to select a principal code as the single primary medical reason for a terminal prognosis. For VITAS, 85% of admissions have had enough medical indicators for a doctor to reach a terminal prognosis for a specific condition. We historically utilized the debility or failure to thrive as a principal code for about 15% of our admissions when it was difficult, if not impossible to determine a single principal condition as the medical reason for a terminal prognosis.

These are typically patients with severe multiple chronic or co-existing conditions that taken collectively contribute to the physician concluding that the patient has a terminal prognosis. CMS is directing hospices for patients with severe multiple chronic conditions to assign a principal code for one condition most contributory to the terminal prognosis. Basically, use of the most severe condition of the patient as the principal prognosis, even though the patient would not be considered terminal for that single condition.

CMS then requires the utilization of additional sub codes to report all co-existing or additional diagnoses related to the physician reaching a terminal prognosis. Unfortunately, the industry misinterpreted the change in the coding process as a change in hospice eligibility for some patients that would have been considered debility or failure to thrive.

Over the past year VITAS has spent considerable efforts in dialog with referral sources, doctors, and internal admissions personnel in every single hospice program regarding these types of patients. These efforts have been successful in returning our admissions to more traditional patterns. As a result, our admissions decline has been reversed.

During the second quarter, VITAS had a 4.4% admissions decline in April 2014, a 3.1% admissions increase in May, and a 2.7% admissions growth in June. Admissions in debility and failure to thrive which averaged 15% of the total admissions prior to CMS proposed rule change was down to 3.3% in the most recent quarter.

Now let's turn to our Roto-Rooter business segment. During the second quarter of 2014, Roto-Rooter's plumbing and drain cleaning business generated sales of $96 million. This is a revenue increase of 2.7%. Overall, Roto-Rooter had a solid quarter, and generated $19.1 million of adjusted EBITDA, an increase of 0.9%, and equated to an adjusted EBITDA margin of 20%. 2014 is on track to be another record year for Roto-Rooter in terms of revenue and operational profitability. With that, I'd like to turn this teleconference over to David Williams, our Chief Financial Officer.

Net revenue for VITAS was $264 million in the second quarter of 2014, which is an increase of $500,000, or 0.2% when compared to the prior year period. This revenue increase consists of a Medicare reimbursement rate increase of 1.4% offset by a 1% decline in average daily census.

In the second quarter of 2014, VITAS recorded $100,000 in estimated Medicare cap billing limitations. VITAS has 38 unique provider numbers. At June 30, 2014, we had two programs with an estimated 2014 Medicare cap billing limitation. Of the remaining 36 Medicare provider numbers, 33 provider numbers have a Medicare cap cushion of 10% or greater for the 2014 Medicare cap period, two providers have a Medicare cap cushion of between 5 and 10%. And one provider number has a cap cushion between 0% and 5%.

VITAS generated an aggregate cap cushion of $248 million during the trailing 12 month period. The second quarter of 2014 gross margin, excluding the impact of Medicare cap, was 22.1%, which is a 9 basis point decline when compared to the second quarter of 2013. Our routine home care direct gross margin was 53.4% in the quarter, an increase of 101 basis points, when compared to the second quarter of 2013.

Direct inpatient margins in the quarter were 6.9%, which compares to 3.6% in the prior year quarter, and 4.2% in the first quarter of 2014. Occupancy of our 35 inpatient units average 74.7% in the quarter, and compares to 69.7% occupancy in the second quarter of 2013. Continuous care had a direct gross margin of 17.5%, an increase of 290 basis points, when compared to the prior year quarter. Average hours billed for a day of continuous care was 18.8 in the quarter, a slight increase when compared to the average hours billed in the second quarter of 2013.

Now let's turn to the Roto-Rooter segment. As Kevin mentioned, Roto-Rooter plumbing and draining cleaning business generated sales of $96 million for the second quarter of 2014, an increase of 2.7% over the prior year quarter. On a unit per unit basis, commercial drain cleaning revenue increased 0.6%, and commercial plumbing and excavation decreased 1.6%. Overall, our commercial revenue increased 0.5%.

Residential plumbing and excavation increased 2.4%, but was partially offset by a 3.2% decline in residential drain cleaning revenue. Overall, unit for unit residential sales increased 4.3% primarily driven by increased revenue in the other services category. Now let's look at our consolidated balance sheet.

As of June 30, 2014, Chemed had total cash and cash equivalence of $28 million and debt of $160 million. In June 2014, Chemed entered into a five-year amended and re-stated credit agreement that consists of a $100 million amortizable full term loan, net $350 million revolving credit facility. The interest rate on this facility has a floating rate that is currently LIBOR plus 125 basis points. At June 30, 2014 the Company had approximately $253 million of undrawn-borrowing capacity under this agreement.

Capital expenditures through June 30, 2014 aggregated $19.5 million, and compares to the depreciation and amortization during the same period of $16.2 million. The Company repurchased $25.5 million of Chemed stock during the quarter. This equated to 300,000 shares of Chemed stock repurchased at an average cost of $85.04. Chemed currently has $63.3 million of authorization remaining under the share repurchase plan.

Our 2014 full year guidance is as follows. VITAS's revenue growth was constrained in the first half of 2014. This is primarily the result of 2% Medicare cap cut implemented in the second quarter of 2013 as well as mixed shift from high acuity care to routine home care. These factors negatively impacted revenue comparisons in the first half of 2014.

Our full year 2014 revenue growth for VITAS, prior to Medicare cap, is estimated to be in the range of 1% to 2%. Admissions in 2014 are estimated to increase 2%, and full year adjusted EBITDA margin prior to Medicare cap, is estimated to be 14.5% to 15%. Medicare cap is estimated to be $3.7 million in 2014.

Roto-Rooter is forecasted to achieve full year 2014 revenue growth of 3% to 4%. This revenue estimate is based upon increased job pricing of approximately 2%. Adjusted EBITDA margin for 2014 is estimated in the range of 19.5% to 20%. Management estimates that full-year 2014 earnings per diluted share, excluding non-cash expense for stock options, and non-cash interest expense related to accounting for convertible debt, litigation and other discrete items, will be in the range of $5.90 to $6.10.

This compares to Chemed's 2013 reported adjusted earnings per diluted share of $5.62. I will turn this call over to Tim O'Toole, our Chief Executive Officer of VITAS.

Thank you, David. As Kevin mentioned earlier, our admissions patterns had been disrupted over the past few quarters for patients who traditionally would have been admitted with a principal hospice diagnosis of debility or failure to thrive. Through a very detailed process of training and reeducation of referral sources, as well of our admissions personnel, doctors and nurses, we have significantly reduced the number of admissions that are admitted under what the principal diagnosis of debility or failure to thrive.

Admissions with these two diagnoses were 3.3% in the quarter, and compares to 6.7% in the first quarter of 2014, and 15.3% in the first quarter of 2013. As you would expect, admissions under other principal diagnoses have experienced significant increases. During the second quarter of 2014, admissions from hospital referrals decreased 1.2%, nursing home admissions increased 0.7%, and assisted living facilities decreased 2.1%. Home-based referrals were essentially equal to the prior year quarter.

Our per patient per day pharmaceutical costs averaged $7.26 in the quarter, which is 3.8% favorable to the prior year. Our medical equipment per patient per day costs in the quarter totaled $6.76, which is 3% above the prior year period. VITAS's average length of stay in the quarter was 82.4 days, which compares to 84.8 days in the prior year quarter and 81.1 days in the first quarter of 2014.

Average length of stay is calculated using total discharges during the period. Median length of stay was 16 days in the quarter, median length of stay is a key indicator of our penetration into the high acuity sector of the market. Our days of care totaled 1,322,818 days in the quarter, a decline of 1%.

Non-nursing home routine home care days decreased 1.6% in the quarter, and nursing home routine home care increased 1.6%. At June 30, 2014, we had one program classified as a start-up, and have already admitted patients in the third quarter of this year at this program. This new start is Medicare certified with the ability to begin billing under an existing provider number. With that, I would like to turn the call back over to Kevin.

Thanks, Tim. Now appropriate to, to take some questions from anybody interested in asking a question.

(Operator Instructions)

Your first question is from the line of Darren Lehrich, Deutsche Banc.

Thanks, good morning, everybody. I wanted to start out with just a question around Roto-Rooter. Dave, I think I missed just some of the numbers you mentioned here, but can you just run through your job count growth on -- in the various segments of the business, and then just maybe a comment or two about how you're thinking about job growth in volume in the plumbing side?

Yes, as we've mentioned several quarters ago, Darren, we've actually gotten away from talking about job count by segment primarily because there was too much of a variability related to the prices of jobs,.

And mix shift.

And mix shift, so the numbers weren't consistent. So, job count just isn't a good metric to track in terms of what's going on within Roto-Rooter, which is why we're not just talking about revenue [buy-up] products service segment.

We compile it and we study it, but we think that very often, it's mis-informative more than it is informative.

Okay. That's fair. So just so I'm clear, the numbers -- and maybe I can just go back to the transcript then, but your revenue by segment, you're breaking it down now into two buckets per, in both residential, commercial, and you're not [spiking] out the others. Is that right?

That's right. We're primarily talking about a two-by-two matrix, commercial, residential, and then down, would be plumbing and drain cleaning. There is a third category that we talk about as "other." And other gives a combination of commercial and residential.

So to restate it again -- so for commercial drain cleaning that revenue was up 0.6%; commercial plumbing and excavation decreased 1.6%. Overall, commercial revenue increased 0.5%. Residential plumbing and excavation increased 2.4%, and residential drain cleaning declined 3.2%. But overall, unit-for-unit sales increased 4.3%, and that was driven by the "other" category.

Got it. Okay. That's helpful.

All right, and then on just, you know, I guess going back to your comments, the real shift that you saw intra-quarter here on -- stands out as it relates to your ability to get these adult failure to thrive and debility under different primary diagnoses. I wanted to hear a little bit more about what exactly you're doing? And when you think about the remaining, at this point, 3.3% of your admissions, going into the October 1 time frame, would you expect then all of them to ultimately fall under different categories?

Let me start at the end. (Inaudible) the answer, they will be zero at October 1 as a matter (inaudible).

And then, of course, we expect, they've been really making the point, this law was -- change of the regulation never meant to reduce the opportunity for hospice for anyone with a terminal diagnosis. We're certain that will be (inaudible) organization, I think the re-energizing around it, the education. Again, talking to the referral sources, we're taking a lead in that area, and everybody appreciates it. And yes, to answer your question, we do not expect any fallout from that.

(Multiple speakers) Darren, you're asking a question. Partly, (inaudible) is a question I've asked several times. Obviously, when it was 15%, and they put this cloud over it, there was dislocation, you might say. If it was 0% in the third quarter, end of the second quarter, there would be no dislocation associated with going to -- from 0% to 0%. Here we're going from 3.3% to 0%. Do we expect some dislocation?

I would say maybe a little bit, but you've got to remember that from my perspective, and I'm one step removed, if -- to the extent that you have so many of our patients that are with us just a few days. A large group of the remainder is -- my sense, is the group that is so ill that, and they're going to be alive such a short period of time, the coding physician just doesn't want to go to that much effort, to accept there's still an other category available, no sense doing the paperwork for somebody that's going to survive two or three or four days.

To the extent that, number one, from an economic standpoint, those patients, you know, are not of great moment to the extent that there was a dislocation. But again, I'm not saying it's not impossible to come up with a primary diagnosis for those. But I guess what I just want to say is, I feel from an operational standpoint that there will not be much dislocation with that last 3.3% disappearing. I know that was the last part of your question, I'm just trying to focus on -- do you have another question related to that?

No, it's helpful. I think the numbers you gave make it pretty clear that there's been some fundamental shift in with the referral sources and how you're able to get at this issue. Tim, it sounded like, it went from negative at the beginning of the quarter, overall admissions to positive in May and June?

Yes, that's correct.

Absolutely.

If you just wanted to say, these numbers we're talking about, if I remember correctly, last year we had 62,000 admits. Is the number going to be higher this year? Yes. Is it going to be in the range of 64,000 something or other? That's our best guess at this point. We're halfway through the year, you look at the trends. We're very comfortable with that.

That doesn't -- to the extent that somebody says -- and we've looked at some of the analyst reports that say that's the one element of our guidance that looks mathematically speculative, but from our perspective, we're comparing the low basis in the second half of the year, and if we just keep doing what we're doing, we're going to hit those numbers.

Okay. That's great. And just the last thing from me here is just relative to Medicare and the proposal for 2015, it was sort of silent about any kind of refinement. Curious just to get your thoughts about time lines and what you're hearing from CMS, and any comment you might have on just the part D issue and how that's resolved, and how that might change your outlook, if at all?

On the CMS has not projected any date for a change in reimbursement methodology or strategy, although we do know Medpac in late June of this year sent a letter trying to incentivize or encourage CMS to come up with that change in reimbursement, but right now, no dates are set.

We do have a dialogue, and we would encourage CMS, once they come up with a new reimbursement methodology, we would really like to see them test that reimbursement before they do a big bang, just to make sure we can identify any unintended consequences. That's just a long way of saying there's no changes anticipated in the near term, and they appear to be very thoughtful on how they're approaching it.

That's right, as Dave said, and I'll just comment on the part D. That's been working out very well for VITAS, and we have not seen much increase at all in our cost of drugs for our patients because of a shift from unrelated to related to their diagnosis. And we have put in a very healthy process internally where we're proactively reaching out to help all of our patients and our referral sources if they need a prior authorization for the unrelated drugs, which they do now under the rules, where they didn't before, we have actually implemented a very favorable system that's accomplishing that and getting great service and quality of their care for our patients.

And I know some other hospice companies are not doing well with that. So the part D has not gone badly for us, we're handling it very well, and there's even some discussion among the regulators that they need to make sure that gets implemented in a timely way with transitions so the beneficiaries aren't hurt. So we're handling it very well, don't see it's a problem.

And under the surface, Darren, the classic, this is the way of the world, from a strategic standpoint because VITAS is the largest, and I think the best organized hospice program, they are more nimble. They were able to deal with something that obviously is a headache, very well. That gives them a strategic comparative advantage which they have been able to make some headway with.

But to the extent that it goes away, that's good for everybody, but we'll have to look for, number one, we'll look for other strategic advantages, number one. But number two, it gives me some confidence of their nimbleness to deal with what are inevitable changes that happen or come on down the pike one by one.

Darren, think about it from a process standpoint. CMS is responsible for trying to manage the overall cost of the Medicare and Medicaid system. They came up with this proposed part D, and they probably went too far, but they listened to what the industry said, they listened to individual providers like VITAS, they listened to the NHPCO, and they refined that approach to the four categories of [parts] that are predominantly palliative related.

And I think, they came up with a very pragmatic answer that was appropriate for the providers, the Medicare beneficiaries and for CMS as the payor. We are very encouraged in terms of how CMS responded appropriately to our concerns. And it was really a good end result.

Thanks for taking the questions.

Your next question will be from the line of Frank Morgan, RBC Capital market.

Couple of my questions were answered in that last series. But I would -- I'm curious, I think I understand the dynamic with admission trends turning, but obviously the length of stay continued to decline, and that had a pressure on your census. I'm curious, you attribute that decline in lengths of stay, is that purely as a result of this change in these categories where you're seeing fewer of these patients in that group? Or is there some other driver there?

(Multiple speakers) I would say no, it's not material, and keep in mind, our median is going higher, so there's a lot of revenue in that under-16-day category that overall helps. So it balances out. But there's no -- there's nothing material going on with that. I guess as Dave said, it's kind of noise moving around.

Next quarter, if you asked us if we were -- we'd flip a coin whether it's going to be higher or lower, by the time we get to the end of the current quarter. (Multiple speakers).

Like half a day, every day.

Nothing that is ascertainable by trend.

And back to the part D discussion, just to be clear here, the revised guideline that was issued here in the last few weeks, that is where they limited it to just a couple of drugs. Maybe you could describe to us what was it going to be before and what is it as a result of these revised guidelines that just came out?

They just made it a little more clear about the categories of drugs and the detailed analysis of related to the terminal illness, unrelated realizing that palliative is not necessarily unrelated, so just giving clarification, and, again, nothing that unusual.

But their starting point was all meds, would be hospice related, and then they carved it out to the four drug categories for pain, anxiety, nausea, and constipation and those are the drugs, if you looked at our top ten drugs, that's what they tend to be related to. So they focused it appropriately on things that relate to palliative care.

So, while it was never a real issue for you, certainly some other players in the industry were suggesting it was going to be a significant cost. You're saying now it's a non event for you?

This was an issue for us to deal with in the organization to get it -- the process right. And I think we've done that better than most. So when you admit a patient and if the drug is related to hospice, we cover it. If it's unrelated, it goes through part D Medicare, but we have to put a prior authorization into the system that day that you admit the patient, or when they try to get the unrelated drug, it gets blocked at the pharmacy.

That was causing problems so we connected our systems to the pharmacy so we could accomplish that prior authorization on the same day we admitted our patients, geared up pharmacy techs, did it ourself, communicated with the nursing homes, and it worked very well for us.

All we know is many hospices were not able to do that as well as us, and it's been helpful to us. Most importantly, very helpful to our patients because if it's not done right, they all of a sudden get their drug from the retail pharmacy not paid for and they think it's something to do with hospice when it's not. It adds confusion and we certainly don't want that to be a limiting factor to hospice access which we all know is very important. So we've handled it well; the industry's done okay; CMS responded to the issues; I do not see it as a concern going forward for VITAS.

Okay. One more and I'll hop. Any kind of general thoughts that you have regarding just overall industry backdrops, specifically for acquisition activity? We've seen some growth in palliative care. Some companies there have been some transitions on the hospice side. What are you seeing out there in terms of, do you sense the frequency of opportunities that is being presented as more or less, and where do you see valuations, and how do you think it will play out given all these changing dynamics? Thanks.

Tim, I'll jump in. I'll start by saying, I haven't seen any significant change in valuation. Really what I'm saying is it's -- because of that, I haven't seen anything that makes hospice acquisitions for VITAS/Chemed more attractive at this point. I don't think -- probably what we've said the last few conference calls is it would be surprising to me if there was a big transaction that occurred, given what's going on in the market. I haven't seen any significant change in that regard.

Again, we've obviously seen there's been some -- a lot of headlines on the home healthcare side that spills over into hospice, but I don't think the hospice end of it has been at the driving force behind those combinations or proposed combinations. Tim?

Absolutely, and I would only comment on your thought about palliative care and acquisitions. And all I would say is we've developed our own palliative care programs for the last three years within VITAS, and most of our large programs have a palliative care program running and it's very helpful to provide bridges and relationships with referrals and help our patients so we have that under control. And I -- what Kevin said about acquisition's exactly right. No big change there.

Thank you.

Your next question is from the line of Jim Barrett, CL King & Associates.

Good morning, everyone.

Good morning.

I just had two questions. One was for you, Kevin. Are those entities seeking to acquire hospice assets any shift between strategic acquirers and financial buyers over the last, say, year or two? Or has that remained unchanged?

There's only been a couple, so it's not like we're having a big trend here. But from my perspective, I think hospice is an add-on tool. I think that the leverage and the operational advantages are coming -- that are perceived on the -- strongly perceived on the home healthcare side, and to the extent that there's a -- in the case of Gentiva, there's obviously a very significant hospice portion as well. That's icing on the cake, maybe, to their strategic planners. I don't think that's the driving factor.

So, again, part of that is the nature of hospice. It's a very -- it's a per diem, it's (inaudible) referral sources that come from a wide variety of places, there's channel conflict, it's hard to build -- again, there's so much -- in most service businesses, the labor is such a big component of it. Hard to see operationals on the hospice side.

I don't see those driving combinations within the sector. The issue probably though that remains is from a public -- used to be three public companies that were purely hospice, now there's one. Your other question went to to more of the financial versus strategic. There's just not -- from my perspective, there's not much activity on the financial purchase side.

There's some rearranging of the deck chairs. Some people are taking positions that were fairly stable with the financial buyer side, but on the strategic side, I haven't seen that much activity over the last couple of years. Other than I don't want to ignore Amedysis [following] the failure to buy Odyssey. That was a fairly significant purchase.

But from a strategic standpoint, is that surprising? It's not because we're brilliant, but when we saw -- we said several years ago, look, we're not going to sit around and wait for acquisitions and all the vagaries dealing with what was -- are pricey acquisitions. We started opening up our own programs, and as Tim said in his presentation, referred to some of our start-ups.

That has become probably the smarter strategic option over the last couple years for operational companies. If you have no hospice and you want a hospice, and you think you can pull together a catenation of small programs and sell it to somebody at a profit, okay, that's a financial buyer. There isn't much of that going on in -- for any significant programs that are 500 [field census] programs out there. It's just not out there.

Jim, you bring up an interesting point in terms of there has been an observation going on in the industry that the small and medium -- hospice is still very fragmented. In the small provider numbers to medium size average daily census provider numbers, some of the concerns that seem to be, say, for example the Medpac letter that came out in June, concerns on some of these small providers and medium providers that aren't providing high acuity care because they lack the infrastructure to be able to do it without losing a lot of money.

There seems to be a concern that size matters relative to scale, so you can efficiently deliver quality end of life care, so we -- I'd say we're beginning to see the momentum building for consolidation, just from that end. If pressure is put on small hospice providers, they really should be living up to the conditions of participation, and providing all three key levels of care. I think they are going to have to get bigger, so that might trigger consolidation.

I don't want to make too much of it, Jim. One element of our lawsuit with the justice department. Again, focus on that one aspect, focus on their press release, where they focus. They say look how much continuous care VITAS does. That's -- something has got to be wrong there, because they do so much, and other people do so little. The letter from CMS is supportive of what we've been saying all along.

If the question is look, it's got to be one or the other. Either VITAS is doing too much or everyone else is doing too little, it's pretty clear that everybody else is doing -- the smaller ones are doing too little, if 55% of hospices do none. It's some confirmation of something that we think is a central tenant in our -- I don't necessarily focus on defense of that action, but more an explanation of VITAS and its -- our various levels of care and where they fall out.

We'll see. We saw that with -- we thought that CMS was -- and Medpac, in that case, was -- had their heart in the right place. They said, if we're going to hold people to give hospice eligible people the rights that they have, and that's a right to really four levels of care. What hospices are out there should all be required to give them. And as Dave said, to the extent you have to have a certain size in order to have the wherewithal to do that effectively, good for us. We'll see.

Okay. Understood. I think you should be commended on your capital allocation over the years, really by avoiding dilutive acquisitions. Speaking of capital allocation, Dave, you're clearly -- certainly this year, increasingly have put your surplus cash to work share repurchase.

If the share price continues to appreciate, what's the thinking in terms of shifting funds to dividends or should we conclude that they'll continue to be a heavy emphasize on share repurchase, even though the company's -- I think financially is quite capable of providing a much higher dividend to its shareholders.

Well, we look at share repurchase, dividends and acquisitions all in the same light. It's all about what creates the most shareholder value and you do it when it's appropriate. Although we think a dividend is important for one, certain funds require dividends to hold our stock. And a methodically increasing dividend is a projection of strength, but all of us recognize a dividend is very, very tax inefficient.

So I think when we're talking about returning capital to shareholders, share repurchase will still be much, much, much more predominant than a dividend. We will evaluate all of those on a regular basis on what makes the most sense at the right time. And we certainly like to be opportunistic on our share repurchase, but we certainly look at over the past several years, in dollar averaging of a share repurchase also makes sense. (Multiple speakers).

Jim, our dollar right now is -- I believe, last time I looked at it was $59 a share. We have been able to do that opportunistically. That's number one. Number two, unless the board changes it, the board is basically committed to an increasing dividend. We're talking about a healthcare company, and they tend to have a little bit lower dividends than other companies, but the board is saying yes. We should -- they expect to increase the dividend every year.

Your point is, at the end, like, boy, it's one thing to buy stock at $59, and another if it's $103. We look at that, we look at it very carefully, and we always -- if there's one argument that can be made against a stock repurchase program where you have a lot of free cash flow, the one argument is that, well, a lot of these managements they buy at the wrong time. They buy high and sell low, and they end up with a high average. That's something that we are very -- we recognize.

That is a situation to be avoided if we want to say that we've been good safeguards of the -- safeguarders of the Company's assets. We do keep that in mind. But again, it makes you gulp a little bit if you say Chemed is at an all-time high, and it was $72 at the end of the year and it's $102 now. Are you still aggressively buying stock? That's the kind of thing that makes it a tougher decision. We wouldn't just go and do that willy-nilly without a pretty full analysis.

Okay. Thank you both. That discussion was very helpful.

Okay. I think there's no more questions. But I want to thank everybody for their attention and we'll reconvene in about three months.

Ladies and gentlemen, that concludes today's conference, we thank you for your participation. You may now disconnect. Have a great day.