UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

x Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended September 30, ~~2017~~

☐2021

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 1-8351

CHEMED CORPORATION

(Exact name of registrant as specified in its charter)

~~Delaware~~		~~31-0791746~~
Delaware		31-0791746
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

255 E. Fifth Street, Suite 2600, Cincinnati, Ohio		45202
(Address of principal executive offices)		(Zip code)
(513) 762-6690 (Registrant’s telephone number, including area code)

~~(513) 762-6690~~

~~(Registrant’s telephone number, including area code)~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

	~~Yes~~	☒	No
Yes	☐ x	No	o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

	~~Yes~~	☒	No
Yes	☐ x	No	o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

~~Large accelerated filer~~

☒

~~Accelerated filer~~

☐

~~Non-accelerated filer~~

☐

~~Smaller reporting company~~

☐

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

~~Emerging growth company~~

Smaller Reporting Company

☐

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

	~~Yes~~	☐	No
Yes	☒ o	No	x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Securities registered pursuant to Section 12(b) of the Act:

~~Class~~		~~Amount~~	~~Date~~
Title of Each Class	Trading Symbol	Name of Each Exchange on which Registered	Amount	Date

Capital Stock $1 Par Value	CHE	~~15,966,003~~ New York Stock Exchange	15,395,049 Shares		September 30, ~~2017~~2021

‎

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CHEMED CORPORATION AND

SUBSIDIARY COMPANIES

Index

~~Index~~

				~~Page No.~~

	Page No.
PART I. FINANCIAL INFORMATION:

Item 1. Financial Statements
		Unaudited Consolidated Balance Sheets -
		September 30, ~~2017~~2021 and December 31, ~~2016~~ 2020		3

		Unaudited Consolidated Statements of Income -
		Three and nine months ended September 30, ~~2017~~2021 and ~~2016~~ 2020		4

		Unaudited Consolidated Statements of Cash Flows -
		Nine months ended September 30, ~~2017~~2021 and ~~2016~~ 2020		5

Unaudited Consolidated Statements of Changes in Stockholders’ Equity-
Three and nine months ended September 30, 2021 and 2020	6

Notes to Unaudited Consolidated Financial Statements	6 8

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			16 23

	Item 3. Quantitative and Qualitative Disclosures about Market Risk			34 40

	Item 4. Controls and Procedures			34 40

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	34 40

	Item 1A. Risk Factors			34 40

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35 41

	Item 3. Defaults Upon Senior Securities			35 41

	Item 4. Mine Safety Disclosures			35 41

	Item 5. Other Information			35 41

	Item 6. Exhibits			36 42

	EX – 31.1
			EX – 31.2
			EX – 31.3
			EX – 32.1
			EX – 32.2
			EX – 32.3
			EX – ~~101.INS~~101
			EX – ~~101.SCH~~104
			~~EX – 101.CAL~~
			~~EX – 101.DEF~~
			~~EX – 101.LAB~~
			~~EX – 101.PRE~~

‎

~~-2-~~

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)



	September 30, 2021		December 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	28,743	$	162,675
Accounts receivable		118,193		126,853
Inventories		8,394		7,095
Prepaid income taxes		12,940		6,603
Prepaid expenses		32,294		26,177
Total current assets		200,564		329,403
Investments of deferred compensation plans		102,045		88,811
Properties and equipment, at cost, less accumulated depreciation of $310,972 (2020 - $293,380)		190,781		187,820
Lease right of use asset		127,077		123,448
Identifiable intangible assets less accumulated amortization of $55,138 (2020 - $47,607)		110,606		118,085
Goodwill		578,610		578,585
Other assets		8,450		8,759
Total Assets	$	1,318,133	$	1,434,911

LIABILITIES
Current liabilities
Accounts payable	$	60,042	$	54,234
Income taxes		180		9,464
Accrued insurance		52,645		54,703
Accrued compensation		97,256		91,282
Accrued legal		1,497		10,632
Short-term lease liability		35,148		36,200
Other current liabilities		39,318		42,593
Total current liabilities		286,086		299,108
Deferred income taxes		20,100		20,664
Deferred compensation liabilities		100,409		88,456
Long-term lease liability		104,198		99,210
Other liabilities		27,621		26,273
Total Liabilities		538,414		533,711
Commitments and contingencies (Note 10)
STOCKHOLDERS' EQUITY
Capital stock - authorized 80,000,000 shares $1 par; issued 36,402,025 shares (2020 - 36,258,638 shares)		36,402		36,259
Paid-in capital		1,007,506		961,404
Retained earnings		1,901,245		1,723,777
Treasury stock - 21,073,917 shares (2020 - 20,351,562 shares)		(2,167,640)		(1,822,579)
Deferred compensation payable in Company stock		2,206		2,339
Total Stockholders' Equity		779,719		901,200
Total Liabilities and Stockholders' Equity	$	1,318,133	$	1,434,911

See accompanying Notes to Unaudited Consolidated Financial Statements.

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

September 30, 2017 December 31, 2016
ASSETS
Current assets
Cash and cash equivalents $ 18,871 $ 15,310
Accounts receivable less allowances of $14,997 (2016 - $14,236) 91,483 132,021
Inventories 5,658 5,755
Prepaid income taxes 3,621 3,709
Prepaid expenses 15,678 13,105
Total current assets 135,311 169,900
Investments of deferred compensation plans 60,445 54,389
Properties and equipment, at cost, less accumulated depreciation of $227,036 (2016 - $211,290) 143,148 121,302
Identifiable intangible assets less accumulated amortization of $32,862 (2016 - $33,225) 54,793 55,065
Goodwill 473,024 472,366
Deferred income taxes 21,893 8
Other assets 6,845 7,029
Total Assets $ 895,459 $ 880,059

LIABILITIES
Current liabilities
Accounts payable $ 34,752 $ 39,586
Current portion of long-term debt 10,000 8,750
Income taxes 12,349 -
Accrued insurance 44,584 47,960
Accrued compensation 53,857 53,979
Accrued legal 91,450 1,805
Other current liabilities 22,382 19,752
Total current liabilities 269,374 171,832
Deferred income taxes - 14,291
Long-term debt 72,500 100,000
Deferred compensation liabilities 59,389 54,288
Other liabilities 16,494 15,549
Total Liabilities 417,757 355,960
Commitments and contingencies (Note 11)
STOCKHOLDERS' EQUITY
Capital stock - authorized 80,000,000 shares $1 par; issued 34,513,535 shares (2016 - 34,270,104 shares) 34,514 34,270
Paid-in capital 668,573 639,703
Retained earnings 988,895 958,149
Treasury stock - 18,632,867 shares (2016 - 18,083,527) (1,216,509 ) (1,110,536 )
Deferred compensation payable in Company stock 2,229 2,513
Total Stockholders' Equity 477,702 524,099
Total Liabilities and Stockholders' Equity $ 895,459 $ 880,059

See accompanying notes to unaudited consolidated financial statements.

‎

~~-3-~~

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CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Service revenues and sales	$	538,667	$	528,297	$	1,598,283	$	1,546,294
Cost of services provided and goods sold (excluding depreciation)		342,164		339,240		1,033,130		1,043,148
Selling, general and administrative expenses		89,217		88,317		274,654		243,413
Depreciation		11,844		11,714		37,171		34,761
Amortization		2,510		2,511		7,530		7,476
Other operating expenses/(income)		63		12,207		789		(28,935)
Total costs and expenses		445,798		453,989		1,353,274		1,299,863
Income from operations		92,869		74,308		245,009		246,431
Interest expense		(583)		(379)		(1,343)		(2,005)
Other income - net		3,134		7,675		10,521		5,723
Income before income taxes		95,420		81,604		254,187		250,149
Income taxes		(23,417)		(13,882)		(60,262)		(44,435)
Net income	$	72,003	$	67,722	$	193,925	$	205,714

Earnings Per Share:
Net income	$	4.62	$	4.25	$	12.27	$	12.90
Average number of shares outstanding		15,587		15,940		15,808		15,948

Diluted Earnings Per Share:
Net income	$	4.55	$	4.14	$	12.06	$	12.53
Average number of shares outstanding		15,842		16,373		16,083		16,419

Cash Dividends Per Share	$	0.36	$	0.34	$	1.04	$	0.98

See accompanying Notes to Unaudited Consolidated Financial Statements.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Service revenues and sales $ 417,444 $ 392,607 $ 1,238,367 $ 1,173,405
Cost of services provided and goods sold (excluding depreciation) 288,047 281,658 859,039 836,348
Selling, general and administrative expenses 66,919 59,373 205,031 181,046
Depreciation 8,819 8,614 26,545 25,619
Amortization 33 91 111 274
Other operating expenses/(income) (371 ) - 91,138 4,491
Total costs and expenses 363,447 349,736 1,181,864 1,047,778
Income from operations 53,997 42,871 56,503 125,627
Interest expense (1,048 ) (1,018 ) (3,164 ) (2,831 )
Other income - net 1,323 1,640 5,439 1,933
Income before income taxes 54,272 43,493 58,778 124,729
Income taxes (18,835 ) (16,664 ) (15,153 ) (48,175 )
Net income $ 35,437 $ 26,829 $ 43,625 $ 76,554

Earnings Per Share
Net income $ 2.22 $ 1.66 $ 2.72 $ 4.66
Average number of shares outstanding 15,976 16,166 16,068 16,443

Diluted Earnings Per Share
Net income $ 2.13 $ 1.62 $ 2.60 $ 4.54
Average number of shares outstanding 16,676 16,559 16,763 16,851

Cash Dividends Per Share $ 0.28 $ 0.26 $ 0.80 $ 0.74

See accompanying notes to unaudited consolidated financial statements.

‎

~~-4-~~

-4-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Nine Months Ended September 30,
	2021		2020
Cash Flows from Operating Activities
Net income	$	193,925	$	205,714
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		44,701		42,237
Stock option expense		16,342		13,296
Litigation settlements		(9,440)		2,684
Noncash long-term incentive compensation		5,344		5,301
Noncash directors' compensation		1,173		1,171
(Benefit)/provision for deferred income taxes		(561)		831
Amortization of debt issuance costs		229		229
Unutilized CARES Act grant		-		48,041
Deferred payroll taxes		-		22,941
Changes in operating assets and liabilities:
Decrease in accounts receivable		9,247		27,993
Increase in inventories		(1,299)		(84)
Increase in prepaid expenses		(6,117)		(2,072)
Increase in accounts payable and other current liabilities		6,330		34,526
Change in current income taxes		(15,749)		(4,366)
Net change in lease assets and liabilities		15		1,583
Increase in other assets		(13,561)		(9,646)
Increase in other liabilities		13,474		10,735
Other sources		974		1,298
Net cash provided by operating activities		245,027		402,412
Cash Flows from Investing Activities
Capital expenditures		(44,472)		(42,670)
Business combinations		-		(3,600)
Other sources		760		672
Net cash used by investing activities		(43,712)		(45,598)
Cash Flows from Financing Activities
Purchases of treasury stock		(330,380)		(147,123)
Proceeds from exercise of stock options		17,918		31,498
Dividends paid		(16,457)		(15,639)
Capital stock surrendered to pay taxes on stock-based compensation		(9,445)		(18,707)
Change in cash overdrafts payable		3,054		(9,849)
Payments on revolving line of credit		(1,500)		(264,900)
Proceeds from revolving line of credit		1,500		174,900
Other sources/(uses)		63		(387)
Net cash used by financing activities		(335,247)		(250,207)
(Decrease)/Increase in Cash and Cash Equivalents		(133,932)		106,607
Cash and cash equivalents at beginning of year		162,675		6,158
Cash and cash equivalents at end of period	$	28,743	$	112,765

See accompanying Notes to Unaudited Consolidated Financial Statements.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended September 30,
2017 2016
Cash Flows from Operating Activities
Net income $ 43,625 $ 76,554
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 26,656 25,893
Provision for uncollectible accounts receivable 12,953 12,132
Stock option expense 7,738 6,259
Benefit for deferred income taxes (36,175 ) (5,530 )
Potential litigation settlement 90,000 -
Noncash early retirement expense - 1,747
Amortization of restricted stock awards 933 1,415
Noncash directors' compensation 766 541
Noncash long-term incentive compensation 2,888 837
Amortization of debt issuance costs 387 390
Changes in operating assets and liabilities:
Decrease in accounts receivable 27,534 8,061
Decrease in inventories 97 213
Increase in prepaid expenses (2,573 ) (1,646 )
Increase/(decrease) in accounts payable and other current liabilities 2,448 (5,471 )
Increase in income taxes 12,432 8,587
Increase in other assets (6,238 ) (5,694 )
Increase in other liabilities 6,046 6,835
Excess tax benefit on share-based compensation - (2,974 )
Other sources 1,472 204
Net cash provided by operating activities 190,989 128,353
Cash Flows from Investing Activities
Capital expenditures (50,247 ) (29,708 )
Business combinations (525 ) -
Other sources/(uses) 116 (114 )
Net cash used by investing activities (50,656 ) (29,822 )
Cash Flows from Financing Activities
Payments on revolving line of credit (203,700 ) (85,200 )
Proceeds from revolving line of credit 183,700 110,200
Purchases of treasury stock (94,640 ) (102,313 )
Dividends paid (12,879 ) (12,215 )
Proceeds from exercise of stock options 11,625 4,625
Change in cash overdrafts payable (8,139 ) 2,092
Capital stock surrendered to pay taxes on stock-based compensation (7,637 ) (7,051 )
Payments on other long-term debt (6,250 ) (5,625 )
Excess tax benefit on share-based compensation - 2,974
Other sources 1,148 540
Net cash used by financing activities (136,772 ) (91,973 )
Increase in Cash and Cash Equivalents 3,561 6,558
Cash and cash equivalents at beginning of year 15,310 14,727
Cash and cash equivalents at end of period $ 18,871 $ 21,285

See accompanying notes to unaudited consolidated financial statements.

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~~-5-~~

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CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except per share data)

For the three months ended September 30, 2021 and 2020:										Deferred
										Compensation
								Treasury		Payable in
		Capital		Paid-in		Retained		Stock-		Company
		Stock		Capital		Earnings		at Cost		Stock		Total
Balance at June 30, 2021		36,385		999,697		1,834,835		(2,002,326)		2,183		870,774
Net income		-		-		72,003		-		-		72,003
Dividends paid ($0.36 per share)		-		-		(5,593)		-		-		(5,593)
Stock awards and exercise of stock options		17		8,233		-		(1,426)		-		6,824
Purchases of treasury stock		-		-		-		(163,731)		-		(163,731)
Other		-		(424)		-		(157)		23		(558)
Balance at September 30, 2021	$	36,402	$	1,007,506	$	1,901,245	$	(2,167,640)	$	2,206	$	779,719
										Deferred
										Compensation
						`		Treasury		Payable in
		Capital		Paid-in		Retained		Stock-		Company
		Stock		Capital		Earnings		at Cost		Stock		Total
Balance at June 30, 2020		36,040		904,421		1,553,144		(1,745,299)		2,390		750,696
Net income		-		-		67,722		-		-		67,722
Dividends paid ($0.34 per share)		-		-		(5,401)		-		-		(5,401)
Stock awards and exercise of stock options		97		20,636		-		(7,581)		-		13,152
Purchases of treasury stock		-		-		-		(24,975)		-		(24,975)
Other		-		214		-		46		(46)		214
Balance at September 30, 2020	$	36,137	$	925,271	$	1,615,465	$	(1,777,809)	$	2,344	$	801,408

The Notes to Consolidated Financial Statements are integral parts of these statements.

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CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except per share data)
For the nine months ended September 30, 2021 and 2020:										Deferred
										Compensation
								Treasury		Payable in
		Capital		Paid-in		Retained		Stock-		Company
		Stock		Capital		Earnings		at Cost		Stock		Total
Balance at December 31, 2020		36,259		961,404		1,723,777		(1,822,579)		2,339		901,200
Net income		-		-		193,925		-		-		193,925
Dividends paid ($1.04 per share)		-		-		(16,457)		-		-		(16,457)
Stock awards and exercise of stock options		143		45,870		-		(14,681)		-		31,332
Purchases of treasury stock		-		-		-		(330,380)		-		(330,380)
Other		-		232		-		-		(133)		99
Balance at September 30, 2021	$	36,402	$	1,007,506	$	1,901,245	$	(2,167,640)	$	2,206	$	779,719
										Deferred
										Compensation
								Treasury		Payable in
		Capital		Paid-in		Retained		Stock-		Company
		Stock		Capital		Earnings		at Cost		Stock		Total
Balance at December 31, 2019		35,811		860,671		1,425,752		(1,597,940)		2,314		726,608
Net income		-		-		205,714		-		-		205,714
Dividends paid ($0.98 per share)		-		-		(15,639)		-		-		(15,639)
Stock awards and exercise of stock options		326		64,948		-		(32,716)		-		32,558
Purchases of treasury stock		-		-		-		(147,123)		-		(147,123)
Other		-		(348)		(362)		(30)		30		(710)
Balance at September 30, 2020	$	36,137	$	925,271	$	1,615,465	$	(1,777,809)	$	2,344	$	801,408

The Notes to Consolidated Financial Statements are integral parts of these statements.

‎

-7-

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

Notes to Unaudited Consolidated Financial Statements

1. Basis of Presentation

As used herein, the terms ~~"We," "Company"~~“We,” “Company” and ~~"Chemed"~~“Chemed” refer to Chemed Corporation or Chemed Corporation and its consolidated subsidiaries.

We have prepared the accompanying unaudited consolidated financial statements of Chemed in accordance with Rule 10-01 of SEC Regulation S-X. Consequently, we have omitted certain disclosures required under generally accepted accounting principles in the United States (“GAAP”) for complete financial statements. The December 31, ~~2016~~2020 balance sheet data were derived from audited financial statements but do not include all disclosures required by GAAP. However, in our opinion, the financial statements presented herein contain all adjustments, consisting only of normal recurring adjustments, necessary to state fairly our financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other future period, and we make no representations related thereto. These financial statements are prepared on the same basis as and should be read in conjunction with the audited Consolidated Financial Statements and related ~~notes~~Notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~EARNINGS PER SHARE~~

~~In March 2016, the FASB issued Accounting Standards Update “ASU No. 2016-09 - Compensation – Stock Compensation” which is part of the FASB’s Simplification Initiative.~~ 2020.

CORONAVIRUS AID, RELIEF AND ECONOMIC STIMULUS (CARES) ACT

The object of this initiative is to identify, evaluate, and improve areas of GAAP. The areas of simplification in this initiative involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance was effective for fiscal years beginning after December 15, 2016. We adopted the applicable provisions of ASU 2016-09 oncurrent COVID-19 pandemic did have a ~~prospective basis. The~~material impact ~~of this ASU~~ on our results of operations, cash flow and financial ~~statements~~position as of and for the quarter ended September 30, 2017 was to decrease our income tax expense by $1.8 million as the result of excess tax benefits on stock based compensation being recorded on the statements of income. This, combined with the required change in diluted share count, resulted in an increase to basicthree and ~~diluted earnings per share of $0.11 and $0.09, respectively. The impact of this ASU on our financial statements for the~~ nine months ended September 30, ~~2017~~2021. We are closely monitoring the impact of the pandemic on all aspects of our business including impacts to employees, customers, patients, suppliers and vendors. The Company’s two operating subsidiaries have been categorized as critical infrastructure businesses and are not currently materially limited by federal, state or local regulations that restrict movement or operating ability.

The length and severity of the pandemic, coupled with related governmental actions including relief acts and actions relating to our workforce at federal, state and local levels, and underlying economic disruption will determine the ultimate short-term and long-term impact to our business operations and financial results. We are unable to predict the myriad of possible issues that could arise or the ultimate effect to our businesses as a result of the unknown short, medium and long-term impacts that the pandemic will have on the United States economy and society as a whole.

On March 27, 2020, the CARES Act was passed. It is intended to ~~decrease our income tax expense~~provide economic relief to individuals and businesses affected by ~~$8.1~~the coronavirus pandemic. It also contains provisions related to healthcare providers’ operations and the issues caused by the coronavirus pandemic. The following are significant economic impacts for Chemed and its subsidiaries as a result of specific provisions of the CARES Act:

A portion of the CARES Act provides $100 billion from the Public Health and Social Services Emergency Fund (“Relief Fund”) to healthcare providers on the front lines of the coronavirus response. Of this distribution, $30 billion was designated to be automatically distributed to facilities and healthcare providers based upon their 2019 Medicare fee-for-service revenue.

On April 10, 2020 VITAS automatically received $80.2 million from the Relief Fund based upon VITAS’s 2019 Medicare fee-for-service Medicare revenue. The main condition that is attached to the grant is that the money will be used “only for health care related expenses or lost revenues that are attributable to coronavirus”. HHS guidance does not specifically designate what healthcare expenses are related to COVID-19. The guidance to date is general and broad but does provide some examples such as equipment and supplies, workforce training, reporting COVID-19 test results, securing separate facilities for COVID-19 patients and acquiring additional resources to expand or preserve care delivery.

The additional conditions to the Relief Fund payment are specific in nature, such as the ~~result of excess tax benefits~~money cannot be used for gun control advocacy purposes, abortions, embryo research, etc. The Company is in compliance, and intends to maintain compliance, with these specific conditions. Based on ~~stock based compensation being recorded on the statements of income. This, combined~~this analysis, management believes that there is reasonable assurance that VITAS will comply with the ~~required change in diluted share count, resulted in an increase to basic earnings per share~~conditions.

Chemed and its subsidiaries have deferred $36.4 million of certain employer payroll taxes as permitted by ~~$0.51~~the CARES Act. $18.2 million is classified as short-term and ~~an increase to diluted earnings per share by $0.46.~~

~~INCOME TAXES~~

~~The effective tax rate for~~$18.2 million is classified as a long-term liability.

During the period from May 1, 2020 through September 30, 2021, the 2% Medicare sequestration reimbursement cut was suspended. For the three and nine month periods ended September 30, ~~2017~~2021, approximately $6.0 million and $17.9 million, respectively, was ~~34.7%~~recognized as revenue due to the suspension of sequestration. In April 2021, legislation was signed into law that suspended sequestration through December 31, 2021.

There is no U.S. GAAP that covers accounting for such government “grants” to for-profit entities. As a result, the Company analogized to International Accounting Standard 20 – Accounting for Government Grants and ~~25.8%,~~Disclosures (“IAS 20”). Under IAS 20, once it is reasonably assured that the entity will comply with the conditions of the grant, the grant money should be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or lost revenue.

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All CARES Act funds received were fully recognized as of December 31, 2020. However, the rules concerning the utilization of the funds continue to evolve and we will continue to comply with those applicable to us. The portal to report utilization of CARES Act funds opened on July 1, 2021. We completed our reporting by the September 30, 2021 deadline.

CLOUD COMPUTING

As of September 30, 2021, we have 2 cloud computing arrangements that are service contracts. Roto-Rooter is implementing a system to assist in technician dispatch and VITAS implemented a new human resources system. We have capitalized approximately $8.9 million related to implementation of these projects which are included in prepaid assets in the accompanying balance sheets. The VITAS human resource system was placed into service in January 2020 and is being amortized over 5 years. For the three months ended September 30, 2021 and 2020, $249,000 and $282,000, respectively, has been amortized. For the nine months ended September 30, 2021 and 2020, $697,000 and $807,000, respectively, has been amortized. The Roto-Rooter project was placed into service during the second quarter of 2021. For the three and nine months ended September 30, 2021, $15,000 and $84,000 respectively has been amortized.

INCOME TAXES

In December 2019, the FASB issued Accounting Standards Update “ASU No. 2019-12 – Simplifying the Accounting for Income Taxes”. The ASU adds new guidance to simplify accounting for income taxes, changes the accounting for certain income tax transactions and makes minor improvements to the codifications. The ASU is effective for the Company on January 1, 2021. The impact of adoption was not material.

Our effective income tax rate was 24.5% in the third quarter of 2021 compared to 17.0% during the third quarter of 2020. Excess tax benefit on stock options reduced our income tax expenses by $1.2 million and $7.2 million, respectively for the quarters ended September 30, 2021 and 2020.

Our effective income tax rate was 23.7% in the first nine months of 2021 compared to 17.8% during the first nine months of 2020. Excess tax benefit on stock options reduced our income tax expenses by $5.3 million and $19.9 million, respectively for the first nine months ended September 30, 2021 and 2020.

NON-CASH TRANSACTIONS

Included in the accompanying Consolidated Balance Sheets are $1.0 million and $3.9 million of capitalized property and equipment which were not paid for as of September 30, 2021 and December 31, 2020, respectively. ~~These~~Accrued property and equipment purchases have been excluded from capital expenditures in the accompanying Consolidated Statements of Cash Flow. There are no material non-cash amounts included in interest expense for any period presented.

BUSINESS COMBINATIONS

We account for acquired businesses using the acquisition method of accounting. All assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of fair value involves estimates and the use of valuation techniques when market value is not readily available. We use various techniques to determine fair value in accordance with accepted valuation models, primarily the income approach. The significant assumptions used in developing fair values include, but are not limited to, revenue growth rates, the amount and timing of future cash flows, discount rates, useful lives, royalty rates and future tax rates. The excess of purchase price over the fair value of assets and liabilities acquired is recorded as goodwill. See Note 17 for discussion of recent acquisitions.

Quarterly amortization of intangible assets is mainly driven by two Roto-Rooter franchise acquisitions completed in 2019. The total purchase price of these acquisitions was $138.0 million. As part of the purchase price allocation, approximately $59.2 million was determined to be the value of reacquired franchise rights which are being amortized over the remaining life of each franchise agreement. The average remaining life on the reacquired franchise agreements was approximately seven years. Quarterly amortization of reacquired franchise rights for these two acquisitions is approximately $2.0 million ($8.1 million annualized through 2026). This contrasts to quarterly franchise fees historically collected from these two franchisees of approximately $470,000 ($1.9 million annualized).

ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying Notes. Actual results could differ from those estimates. Disclosures of after-tax expenses and adjustments are based on estimates of the ~~US statutory~~effective income tax rates for the applicable segments.

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2. Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update “ASU No. 2014-09 – Revenue from Contracts with Customers.” The standard and subsequent amendments are theoretically intended to develop a common revenue standard for removing inconsistencies and weaknesses, improve comparability, provide for more useful information to users through improved disclosure requirements and simplify the preparation of financial statements. The standard is also referred to as Accounting Standards Codification No. 606 (“ASC 606”).

VITAS

Service revenue for VITAS is reported at the amount that reflects the ultimate consideration we expect to receive in exchange for providing patient care. These amounts are due from third-party payors, primarily commercial health insurers and government programs (Medicare and Medicaid), and include variable consideration for revenue adjustments due to settlements of audits and reviews, as well as certain hospice-specific revenue capitations. Amounts are generally billed monthly or subsequent to patient discharge. Subsequent changes in the transaction price initially recognized are not significant.

Hospice services are provided on a daily basis and the type of service provided is determined based on a physician’s determination of each patient’s specific needs on that given day. Reimbursement rates for hospice services are on a per diem basis regardless of the type of service provided or the payor. Reimbursement rates from government programs are established by the appropriate governmental agency and are standard across all hospice providers. Reimbursement rates from health insurers are negotiated with each payor and generally structured to closely mirror the Medicare reimbursement model. The types of hospice services provided and associated reimbursement model for each are as follows:

Routine Home Care occurs when a patient receives hospice care in their home, including a nursing home setting. The routine home care rate is paid for each day that a patient is in a hospice program and is not receiving one of the other categories of hospice care. For Medicare patients, the routine home care rate reflects a two-tiered rate, with a higher rate for the first 60 days of a hospice patient’s care and a lower rate for days 61 and after. In addition, there is a Service Intensity Add-on payment which covers direct home care visits conducted by a registered nurse or social worker in the last seven days of a hospice patient’s life, reimbursed up to 4 hours per day in 15 minute increments at the continuous home care rate.

General Inpatient Care occurs when a patient requires services in a controlled setting for a short period of time for pain control or symptom management which cannot be managed in other settings. General inpatient care services must be provided in a Medicare or Medicaid certified hospital or long-term care facility or at a freestanding inpatient hospice facility with the required registered nurse staffing.

Continuous Home Care is provided to patients while at home, including a nursing home setting, during periods of crisis when intensive monitoring and care, primarily nursing care, is required in order to achieve palliation or management of acute medical symptoms. Continuous home care requires a minimum of 8 hours of care within a 24-hour day, which begins at midnight. The care must be predominantly nursing care provided by either a registered nurse or licensed nurse practitioner. While the published Medicare continuous home care rates are daily rates, Medicare pays for continuous home care in 15 minute increments. This 15 minute rate is calculated by dividing the daily rate by 96.

Respite Care permits a hospice patient to receive services on an inpatient basis for a short period of time in order to provide relief for the patient’s family or other caregivers from the demands of caring for the patient. A hospice can receive payment for respite care for a given patient for up to five consecutive days at a time, after which respite care is reimbursed at the routine home care rate.

Each level of care represents a separate promise under the contract of care and is provided independently for each patient contingent upon the patient’s specific medical needs as determined by a physician. However, the clinical criteria used to determine a patient’s level of care is consistent across all patients, given that, each patient is subject to the same payor rules and regulations. As a result, we have concluded that each level of care is capable of being distinct and is distinct in the context of the contract. Furthermore, we have determined that each level of care represents a stand ready service provided as a series of either days or hours of patient care. We believe that the performance obligations for each level of care meet criteria to be satisfied over time. VITAS recognizes revenue based on the service output. VITAS believes this to be the most faithful depiction of the transfer of control of services as the patient simultaneously receives and consumes the benefits provided by our performance. Revenue is recognized on a daily or hourly basis for each patient in accordance with the reimbursement model for each type of service. VITAS’ performance obligations relate to contracts with an expected duration of less than one year. Therefore, VITAS has elected to apply the optional exception provided in ASC 606 and is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The unsatisfied or partially satisfied performance obligations referred to above relate to bereavement services provided to patients’ families for at least 12 months after discharge.

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Care is provided to patients regardless of their ability to pay. Patients who meet our criteria for charity care are provided care without charge. There is no revenue or associated accounts receivable in the accompanying Consolidated Financial Statements related to charity care. The cost of providing charity care was $2.1 million for the quarters ended September 30, 2021 and 2020, respectively. The cost of providing charity care during the first nine months ended September 30, 2021 and 2020 was $6.4 million and $6.1 million, respectively. The cost of charity care is included in cost of services provided and goods sold and is calculated by taking the ratio of charity care days to total days of care and multiplying by the total cost of care.

Generally, patients who are covered by third-party payors are responsible for related deductibles and coinsurance which vary in amount. VITAS also provides service to patients without a reimbursement source and may offer those patients discounts from standard charges. VITAS estimates the transaction price for patients with deductibles and coinsurance, along with those uninsured patients, based on historical experience and current conditions. The estimate of any contractual adjustments, discounts or implicit price concessions reduces the amount of revenue initially recognized. Subsequent changes to the estimate of the transaction price are recorded as adjustments to patient service revenue in the period of change. Subsequent changes that are determined to be the result of an adverse change in the patients’ ability to pay (i.e. change in credit risk) are recorded as bad debt expense. VITAS has no material adjustments related to subsequent changes in the estimate of the transaction price or subsequent changes as the result of an adverse change in the ~~adoption~~patient’s ability to pay for any period reported.

Laws and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation. Medicare and Medicaid programs have broad authority to audit and review compliance with such laws and regulations, and impose payment suspensions when merited. Additionally, the contracts we have with commercial health insurance payors provide for retroactive audit and review of ~~ASU 2016-09 described above.~~

~~2. Revenue Recognition~~

~~Both~~claims. Settlement with third party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the VITAS segment and the Roto-Rooter segment recognize service revenues and sales when the earnings process has been completed. Generally, this occurs when services are provided or products are shipped. VITAS recognizes revenue atdetermination of the estimated ~~realizable amount due~~transaction price for providing patient care. The variable consideration is estimated based on the terms of the payment agreement, existing correspondence from ~~third-party payers. Medicare payments~~the payor and our historical settlement activity. These estimates are adjusted in future periods, as new information becomes available.

We are subject to certain limitations on Medicare payments for services which are considered variable consideration, as ~~described below.~~

follows:

Inpatient Cap. If the number of inpatient care days any hospice program provides to Medicare beneficiaries exceeds 20% of the total days of hospice care such program provided to all Medicare patients for an annual period beginning September 28, the days in excess of the 20% figure may be reimbursed only at the routine homecare rate. None of VITAS’ hospice programs exceeded the payment limits on inpatient services during the three months ended September 30, 2021 and 2020.

Medicare Cap. We are also subject to a Medicare annual per-beneficiary cap (“Medicare cap”). Compliance with the Medicare cap is measured in one of two ways based on a provider election. The “streamlined” method compares total Medicare payments received under a Medicare provider number with respect to services provided to all Medicare hospice care beneficiaries in the program or programs covered by that Medicare provider number with the product of the per-beneficiary cap amount and the number of Medicare beneficiaries electing hospice care for the first time from that hospice program or programs from September 28 through September 27 of the following year. At September 30, 2021, all our programs except one are using the “streamlined” method.

The “proportional” method compares the total Medicare payments received under a Medicare provider number with respect to services provided to all Medicare hospice care beneficiaries in the program or programs covered by the Medicare provider number between September 28 and September 27 of the following year with the product of the per beneficiary cap amount and a pro-rated number of Medicare beneficiaries receiving hospice services from that program during the same period. The pro-rated number of Medicare beneficiaries is calculated based on the ratio of days the beneficiary received hospice services during the measurement period to the total number of days the beneficiary received hospice services.

We actively monitor each of our hospice programs, by provider number, as to their specific admission, discharge rate and median length of stay data in an attempt to determine whether ~~they~~revenues are likely to exceed the annual per-beneficiary Medicare ~~cap (“Medicare cap”).~~cap. Should we determine that revenues for a program are likely to exceed the Medicare cap based on projected trends, we attempt to institute corrective ~~action~~actions, which include changes to ~~influence~~ the patient mix ~~or to increase~~and increased patient admissions. However, should we project our corrective action will not prevent that program from exceeding its Medicare cap, we estimate ~~the amount of~~ revenue recognized during the ~~period~~government fiscal year that will require repayment to the Federal government under the Medicare cap and record an adjustment to revenue of an amount equal to a ratable portion of our best estimate for the ~~amount as a reduction to patient revenue.~~

year.

In 2013, the U.S. government implemented automatic budget reductions of 2.0% for all government payees, including hospice benefits paid under the Medicare program. In 2015, CMS determined that the Medicare cap should be calculated “as if” sequestration did not occur. As a result of this decision, VITAS has received notification from our ~~third party~~ third-party intermediary that an additional ~~$2.3~~$8.7 million is owed for Medicare cap in three programs arising during the 2013 ~~2014 and 2015~~through 2020 measurement periods. The amounts ~~were~~ are

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automatically deducted from our semi-monthly PIP payments. We do not believe that CMS is authorized under the sequestration authority or the statutory methodology for establishing the Medicare cap to ~~demand~~ the ~~$2.3 million~~amounts they have withheld and intend to withhold under their current “as if” methodology. We have ~~not recorded a reserve as of September 30, 2017 for $480,000 of the potential exposure. We have~~ appealed CMS’s methodology ~~change with~~change. Pursuant to the ~~appropriate regulatory appeal board.~~

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recent legislation and the April extension, the sequestration has been lifted for the period from May 1, 2020 through December 31, 2021.

During the ~~three and~~quarter ended September 30, 2021, we recorded $97,000 in net Medicare cap revenue reduction related to two programs for the 2021 government fiscal year. During the quarter ended September 30, 2020, we recorded a reversal of $4.1 million in net Medicare cap revenue reduction for the 2020 government fiscal year.

During the first nine months ended September 30, ~~2016, respectively, $228,000~~2021, we recorded $3.6 million in net Medicare cap ~~was~~revenue reduction related to two programs for the 2021 government fiscal year. During the first nine months ended September 30, 2020, we recorded ~~for one program’s projected 2015 measurement period liability~~

~~There was no~~$4.2 million in net Medicare cap ~~recorded~~revenue reduction related to five programs for the 2020 government fiscal year.

For VITAS’ patients in the nursing home setting in which Medicaid pays the nursing home room and board, VITAS serves as a pass-through between Medicaid and the nursing home. We are responsible for paying the nursing home for that patient’s room and board. Medicaid reimburses us for 95% of the amount we have paid. This results in a 5% net expense for VITAS related to nursing home room and board. This transaction creates a performance obligation in that VITAS is facilitating room and board being delivered to our patient. As a result, the 5% net expense is recognized as a contra-revenue account under ASC 606 in the accompanying financial statements.

The composition of patient care service revenue by payor and level of care for the quarter ended September 30, ~~2017. During~~2021 is as follows (in thousands):



	Medicare		Medicaid		Commercial		Total
Routine home care	$	249,633	$	12,102		6,402	$	268,137
Continuous care		20,000		1,105		922		22,027
Inpatient care		25,249		2,628		1,491		29,368
	$	294,882	$	15,835	$	8,815	$	319,532

All other revenue - self-pay, respite care, etc.								3,225
Subtotal							$	322,757
Medicare cap adjustment								(97)
Implicit price concessions								(3,119)
Room and board, net								(2,130)
Net revenue							$	317,411

The composition of patient care service revenue by payor and level of care for the quarter ended September 30, 2020 is as follows (in thousands):


	Medicare		Medicaid		Commercial		Total
Routine home care	$	260,658	$	12,107	$	6,091	$	278,856
Continuous care		27,739		1,364		1,596		30,699
Inpatient care		24,199		2,415		1,019		27,633
	$	312,596	$	15,886	$	8,706	$	337,188

All other revenue - self-pay, respite care, etc.								2,910
Subtotal							$	340,098
Medicare cap adjustment								4,072
Implicit price concessions								(3,784)
Room and board, net								(3,289)
Net revenue							$	337,097

‎

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The composition of patient care service revenue by payor and level of care for the nine months ended September 30,2021 is as follows (in thousands):


	Medicare		Medicaid		Commercial		Total
Routine home care	$	742,759	$	35,190	$	18,868	$	796,817
Continuous care		66,916		3,601		3,141		73,658
Inpatient care		74,594		7,168		4,133		85,895
	$	884,269	$	45,959	$	26,142	$	956,370

All other revenue - self-pay, respite care, etc.								9,241
Subtotal							$	965,611
Medicare cap adjustment								(3,597)
Implicit price concessions								(9,428)
Room and board, net								(7,451)
Net revenue							$	945,135

The composition of patient care service revenue by payor and level of care for the nine months ended September 30, ~~2017, we recorded $247,000 for two programs cap liability for the 2013, 2014 and 2015 measurement periods of the amount recorded, $105,000 relates to the sequestration issue described above.~~

~~Shown below is the Medicare cap liability activity for the fiscal periods ended (in thousands):~~

September 30,
2017 2016
Beginning balance January 1, $ 235 $ 1,165
Prior measurement periods 247 228
Payments (482 ) (1,158 )
Ending balance September 30, $ - $ 235

Vitas provides charity care, in certain circumstances, to patients without charge when management of the hospice program determines, at the time services are performed, that the patient cannot afford payment. There is no revenue or associated accounts receivable in the accompanying consolidated financial statements related to charity care. The cost of charity care is calculated by taking the ratio of charity care days to total days of care and multiplying by total cost of care. The cost of charity care2020 is as follows (in thousands):


	Medicare		Medicaid		Commercial		Total
Routine home care	$	772,162	$	36,914	$	17,878	$	826,954
Continuous care		96,354		4,856		4,626		105,836
Inpatient care		74,796		7,285		3,902		85,983
	$	943,312	$	49,055	$	26,406	$	1,018,773

All other revenue - self-pay, respite care, etc.								8,175
Subtotal							$	1,026,948
Medicare cap adjustment								(4,178)
Implicit price concessions								(10,976)
Room and board, net								(9,317)
Net revenue							$	1,002,477

Roto-Rooter

Roto-Rooter provides plumbing, drain cleaning, water restoration and other related services to both residential and commercial customers primarily in the United States. Services are provided through a network of company-owned branches, independent contractors and franchisees. Service revenue for Roto-Rooter is reported at the amount that reflects the ultimate consideration we expect to receive in exchange for providing services.

Roto-Rooter owns and operates branches focusing mainly on large population centers in the United States. Roto-Rooter’s primary lines of business in company-owned branches consist of plumbing, sewer and drain cleaning, excavation and water restoration. For purposes of ASC 606 analysis, plumbing, sewer and drain cleaning, and excavation have been combined into one portfolio and are referred to as “short-term core services”. Water restoration is analyzed as a separate portfolio. The following describes the key characteristics of these portfolios:

Short-term Core Services are plumbing, drain and sewer cleaning and excavation services. These services are provided to both commercial and residential customers. The duration of services provided in this category range from a few hours to a few days. There are no significant warranty costs or on-going obligations to the customer once a service has been completed. For residential customers, payment is received at the time of job completion before the Roto-Rooter technician leaves the residence. Commercial customers may be granted credit subject to internally designated authority limits and credit check guidelines. If credit is granted, payment terms are generally 30 days or less.

Each job in this category is a distinct service with a distinct performance obligation to the customer. Revenue is recognized at the completion of each job. Variable consideration consists of pre-invoice discounts and post-invoice discounts. Pre-invoice discounts are given in the form of coupons or price concessions. Post-invoice discounts consist of credit memos generally granted to resolve customer service issues. Variable consideration is estimated based on historical activity and recorded at the time service is completed.

Water Restoration Services involve the remediation of water and humidity after a flood. These services are provided to both commercial and residential customers. The duration of services provided in this category generally ranges from 3 to 5 days. There are no significant warranties or on-going obligations to the customer once service has been completed. The majority of these services are paid by the customer’s insurance company. Variable consideration relates primarily to allowances taken by insurance companies upon payment. Variable consideration is estimated based on historical activity and recorded at the time service is completed.

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Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
$ 1,906 $ 1,711 $ 5,603 $ 5,231

For both short-term core services and water restoration services, Roto-Rooter satisfies its performance obligation at a point in time. The services provided generally involve fixing plumbing, drainage or flood-related issues at the customer’s property. At the time service is complete, the customer acknowledges its obligation to pay for service and its satisfaction with the service performed. This provides evidence that the customer has accepted the service and Roto-Rooter is now entitled to payment. As such, Roto-Rooter recognizes revenue for these services upon completion of the job and receipt of customer acknowledgement. Roto-Rooter’s performance obligations for short-term core services and water restoration services relate to contracts with an expected duration of less than a year. Therefore, Roto-Rooter has elected to apply the optional exception provided in ASC 606 and is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. Roto-Rooter does not have significant unsatisfied or partially unsatisfied performance obligations at the time of initial revenue recognition for short-term core or water restoration services.

Roto-Rooter owns the rights to certain territories and contracts with independent third-parties to operate the territory under Roto-Rooter’s registered trademarks. Such contracts are for a specified term but cancellable by either party without penalty with 90 days’ advance notice. Under the terms of these arrangements, Roto-Rooter provides certain back office support and advertising along with a limited license to use Roto-Rooter’s registered trademarks. The independent contractor is responsible for all day-to-day management of the business including staffing decisions and pricing of services provided. All performance obligations of Roto-Rooter cease at the termination of the arrangement.

Independent contractors pay Roto-Rooter a standard fee calculated as a percentage of their cash collection from weekly sales. The primary value for the independent contractors under these arrangements is the right to use Roto-Rooter’s registered trademarks. Roto-Rooter recognizes revenue from independent contractors over-time (weekly) as the independent contractor’s labor sales are completed and payment from customers are received. Payment from independent contractors is also received on a weekly basis. The use of Roto-Rooter’s registered trademarks and advertising provides immediate value to the independent contractor as a result of Roto-Rooter’s nationally recognized brand. Therefore, over-time recognition provides the most faithful depiction of the transfer of services as the customer simultaneously receives and consumes the benefits provided. There is no significant variable consideration related to these arrangements.

Roto-Rooter has licensed the rights to operate under Roto-Rooter’s registered trademarks in other territories to franchisees. Each such contract is for a 10 year term but cancellable by Roto-Rooter for cause with 60 day advance notice without penalty. The franchisee may cancel the contract for any reason with 60 days advance notice without penalty. Under the terms of the contract, Roto-Rooter provides national advertising and consultation on various aspects of operating a Roto-Rooter business along with the right to use Roto-Rooter’s registered trademarks. The franchisee is responsible for all day- to-day management of the business including staffing decisions, pricing of services provided and local advertising spend and placement. All performance obligations of Roto-Rooter cease at the termination of the arrangement.

Franchisees pay Roto-Rooter a standard monthly fee based on the population within the franchise territory. The standard fee is revised on a yearly basis based on changes in the Consumer Price Index for All Urban Consumers. The primary value for the franchisees under this arrangement is the right to use Roto-Rooter’s registered trademarks. Roto-Rooter recognizes revenue from franchisees over-time (monthly). Payment from franchisees is also received on a monthly basis. The use of Roto-Rooter’s registered trademarks and advertising provides immediate value to the franchisees as a result of Roto-Rooter’s nationally recognized brand. Therefore, over-time recognition provides the most faithful depiction of the transfer of services as the customer simultaneously receives and consumes the benefits provided. There is no significant variable consideration related to these arrangements.

The composition of disaggregated revenue for the third quarter is as follows (in thousands):


	September 30,
	2021		2020
Short-term core service jobs	$	161,057	$	143,089
Water restoration		39,786		32,137
Contractor revenue		18,969		16,274
Franchise fees		1,260		1,235
All other		3,773		3,332
Subtotal	$	224,845	$	196,067
Implicit price concessions and credit memos		(3,589)		(4,867)
Net revenue	$	221,256	$	191,200

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The composition of disaggregated revenue for the first nine months is as follows (in thousands):


	September 30,
	2021		2020
Short-term core service jobs	$	479,089	$	404,054
Water restoration		115,804		92,810
Contractor revenue		56,754		47,695
Franchise fees		3,842		3,635
All other		11,601		9,836
Subtotal	$	667,090	$	558,030
Implicit price concessions and credit memos		(13,942)		(14,213)
Net revenue	$	653,148	$	543,817

3. Segments

Service revenues and sales ~~and after-tax earnings~~by business segment are shown in Note 2. After-tax income/(loss) by business segment are as follows (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

VITAS	$	42,950	$	45,737	$	113,430	$	147,262
Roto-Rooter		44,554		31,176		124,504		84,966
Total		87,504		76,913		237,934		232,228
Corporate		(15,501)		(9,191)		(44,009)		(26,514)
Net income	$	72,003	$	67,722	$	193,925	$	205,714

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Service Revenues and Sales

VITAS $ 288,951 $ 282,865 $ 855,977 $ 839,131
Roto-Rooter 128,493 109,742 382,390 334,274
Total $ 417,444 $ 392,607 $ 1,238,367 $ 1,173,405

After-tax Income/(Loss)

VITAS $ 26,454 $ 20,903 $ 14,797 $ 58,538
Roto-Rooter 16,034 12,855 47,716 39,216
Total 42,488 33,758 62,513 97,754
Corporate (7,051 ) (6,929 ) (18,888 ) (21,200 )
Net income $ 35,437 $ 26,829 $ 43,625 $ 76,554

We report corporate administrative expenses and unallocated investing and financing income and expense not directly related to either segment as “Corporate”.

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4. Earnings per Share

Earnings per share (“EPS”) are computed using the weighted average number of shares of capital stock outstanding. Earnings and diluted earnings per share are computed as follows (in thousands, except per share data):


			Net Income
For the Three Months Ended September 30,		Income		Shares	Earnings per Share
2021
	Earnings	$	72,003	15,587	$	4.62
	Dilutive stock options		-	215
	Nonvested stock awards		-	40
	Diluted earnings	$	72,003	15,842	$	4.55

2020
	Earnings	$	67,722	15,940	$	4.25
	Dilutive stock options		-	358
	Nonvested stock awards		-	75
	Diluted earnings	$	67,722	16,373	$	4.14

‎

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Net Income
For the Three Months Ended September 30, Income Shares Earnings per Share
2017
Earnings $ 35,437 15,976 $ 2.22
Dilutive stock options - 616
Nonvested stock awards - 84
Diluted earnings $ 35,437 16,676 $ 2.13

2016
Earnings $ 26,829 16,166 $ 1.66
Dilutive stock options - 294
Nonvested stock awards - 99
Diluted earnings $ 26,829 16,559 $ 1.62


			Net Income
For the Nine Months Ended September 30,		Income		Shares	Earnings per Share
2021
	Earnings	$	193,925	15,808	$	12.27
	Dilutive stock options		-	233
	Nonvested stock awards		-	42
	Diluted earnings	$	193,925	16,083	$	12.06

2020
	Earnings	$	205,714	15,948	$	12.90
	Dilutive stock options		-	394
	Nonvested stock awards		-	77
	Diluted earnings	$	205,714	16,419	$	12.53

Net Income
For the Nine Months Ended September 30, Income Shares Earnings per Share
2017
Earnings $ 43,625 16,068 $ 2.72
Dilutive stock options - 609
Nonvested stock awards - 86
Diluted earnings $ 43,625 16,763 $ 2.60

2016
Earnings $ 76,554 16,443 $ 4.66
Dilutive stock options - 296
Nonvested stock awards - 112
Diluted earnings $ 76,554 16,851 $ 4.54

For the three and nine months ended September 30, ~~2017, no~~2021, 297,000 and 299,000, respectively, stock options ~~and nonvested stock awards have been~~were excluded infrom the ~~calculation~~computation of dilutive earnings per share because they would have been anti-dilutive.

For the ~~nine month period~~three months ended September 30, ~~2017,~~2020, there were ~~7,304~~0 stock options excluded from the computation of ~~diluted~~dilutive earnings per share because they would have been anti-dilutive.

For the ~~three and~~ nine ~~month periods~~months ended September 30, ~~2016, 418,000~~2020, there were 277,000 stock options ~~were~~ excluded from the computation of ~~diluted~~dilutive earnings per share because they would have been anti-dilutive.

5. Long-Term Debt

and Lines of Credit

On June ~~30, 2014,~~20, 2018, we replaced our existing credit agreement with the ~~Third~~Fourth Amended and Restated Credit Agreement (“~~2014~~2018 Credit Agreement”). Terms of the ~~2014~~2018 Credit Agreement consist of a ~~five-year, $350~~five year, $450 million revolving credit facility and a ~~$100~~$150 million expansion feature, which may consist of term ~~loan.~~loans or additional revolving commitments. The ~~2014~~interest rate at the inception of the agreement is LIBOR plus 100 basis points. The 2018 Credit Agreement has a floating interest rate that is generally LIBOR plus a tiered additional rate which varies based on our current leverage ratio. The ~~interest rate~~2018 Credit Agreement includes transition provisions in the instance LIBOR is no longer published or used as ~~of September 30, 2017~~an industry-accepted rate.

There is ~~LIBOR plus 113 basis points.~~

~~-8-~~

~~The~~0 debt outstanding as of September 30, ~~2017 consists of the following:~~

Revolver $ 5,000
Term loan 77,500
Total 82,500
Current portion of long-term debt (10,000 )
Long-term debt $ 72,500

~~Scheduled principal payments of the term loan are as follows:~~

2017 $ 2,500
2018 10,000
2019 65,000
$ 77,500

2021.

The ~~2014~~2018 Credit Agreement contains the following quarterly financial ~~covenants:~~

covenants effective as of September 30, 2021:

~~Description~~		~~Requirement~~

Description		Requirement

Leverage Ratio (Consolidated Indebtedness/Consolidated Adj. EBITDA)		< 3.50 to 1.00

Fixed Charge Coverage Ratio (Consolidated Free Cash Flow/Consolidated Fixed Charges)		> 1.50 to 1.00

~~Annual Operating Lease Commitment~~		~~< $50.0 million~~

We are in compliance with all debt covenants as of September 30, ~~2017.~~2021. We have issued ~~$35.6~~$46.2 million in standby letters of credit as of September 30, ~~2017~~2021, mainly for insurance purposes. Issued letters of credit reduce our available credit under the ~~2014~~2018 Credit Agreement. As of September 30, ~~2017,~~2021, we have approximately ~~$309.4~~$403.8 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility.

‎

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6. Other Operating ~~Income/(Expenses)~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016

Potential litigation settlement $ - $ - $ 90,000 $ -
Program closure (income)/expenses (371 ) - 1,138 -
Retirement expenses - - - 4,491
Total other operating (income)/expenses $ (371 ) $ - $ 91,138 $ 4,491

~~During~~Expense/(Income)

Other operating expense/(income) comprises the three and nine months ended September 30, 2017, the Company recorded a credit for recovery of previously expensed costs of $371,000 and a net expense of $1.1 million, respectively, related to the closure of three Alabama programs at VITAS.following (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

Loss on disposal of fixed assets	$	63	$	307		789		154
CARES Act grant		-		8,805		-		(32,184)
Litigation settlement		-		3,095		-		3,095

Total other operating expenses/(income)	$	63	$	12,207	$	789	$	(28,935)

~~During the nine months ended September 30, 2017, the Company recorded $90 million for a potential litigation settlement.~~

See ~~footnote 11~~Footnote 1 for further ~~discussion.~~

~~During~~discussion of the ~~nine months ended September 30, 2016,~~accounting for the Company recorded early retirement related costs and accelerated stock-based compensation expense of approximately $4.5 million pretax and $2.8 million after-tax, related to the early retirement of VITAS’ former Chief Executive Officer.

~~-9-~~

CARES Act grant.

7. Other Income – Net

Other income --– net comprises the following (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Market value adjustment on assets held in
deferred compensation trust	$	3,078	$	7,256	$	9,770	$	5,093
Interest income		57		423		288		647
Other-net		(1)		(4)		463		(17)
Total other income - net	$	3,134	$	7,675	$	10,521	$	5,723

8. Leases

Chemed and each of its operating subsidiaries are service companies. As such, real estate leases comprise the largest lease obligation (and conversely, right of use asset) in our lease portfolio. VITAS has leased office space, as well as space for inpatient units (“IPUs”) and/or contract beds within hospitals. Roto-Rooter mainly has leased office space. Our leases have remaining terms of under 1 year to 10 years, some of which include options to extend the lease for up to 5 years, and some of which include options to terminate the lease within 1 year.

Roto-Rooter purchases equipment and leases it to certain of its independent contractors. We analyzed these leases in accordance with ASC 842 and determined they are operating leases. As a result, Roto-Rooter will continue to capitalize the equipment underlying these leases, depreciate the equipment and recognize rental income.

We do not currently have any finance leases, therefore all lease information disclosed is related to operating leases.

The components of balance sheet information related to leases were as follows:


	‎September 30,		‎December 31,
	2021		2020
Assets
Operating lease assets	$	127,077	$	123,448

Liabilities
Current operating leases		35,148		36,200
Noncurrent operating leases		104,198		99,210
Total operating lease liabilities	$	139,346	$	135,410

‎

-17-

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Market value adjustment on assets held in
deferred compensation trust $ 1,417 $ 1,656 $ 5,619 $ 1,857
Loss on disposal of property and equipment (146 ) (134 ) (481 ) (224 )
Interest income 51 119 297 301
Other - net 1 (1 ) 4 (1 )
Total other income - net $ 1,323 $ 1,640 $ 5,439 $ 1,933

The components of lease expense for the third quarter is as follows (in thousands):


	Three months ended September 30,
	2021		2020
Lease Expense (a)
Operating lease expense	$	15,342	$	15,277
Sublease income		(45)		(31)
Net lease expense	$	15,297	$	15,246

The components of lease expense for the first nine months is as follows (in thousands):


	Nine months ended September 30,
	2021		2020
Lease Expense (a)
Operating lease expense	$	46,255	$	45,007
Sublease income		(135)		(38)
Net lease expense	$	46,120	$	44,969

(a)Includes short-term leases and variable lease costs, which are immaterial. Included in both cost of services provided and goods sold and selling, general and administrative expenses.

The components of cash flow information related to leases were as follows:


	Nine months ended ‎September 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from leases	$	38,796	$	37,393

Leased assets obtained in exchange for new operating lease liabilities	$	43,143	$	44,366


Weighted Average Remaining Lease Term at September 30, 2021
Operating leases	4.8	years


Weighted Average Discount Rate at September 30, 2021
Operating leases	2.47	%


Maturity of Operating Lease Liabilities (in thousands)

2021	$	11,220
2022		38,801
2023		31,254
2024		24,483
2025		18,336
Thereafter		23,921
Total lease payments	$	148,015
Less: interest		(8,669)
Total liability recognized on the balance sheet	$	139,346

For leases commencing prior to April 2019, minimum rental payments exclude payments to landlords for real estate taxes and common area maintenance. Operating lease payments include $2.3 million related to extended lease terms that are reasonably certain of being exercised and exclude $263,000 of lease payments for leases signed but not yet commenced.

9. Stock-Based Compensation Plans

On February ~~17, 2017,~~19, 2021, the Compensation/Incentive Committee of the Board of Directors (“CIC”) granted ~~7,304~~6,277 Performance Stock Units (“PSUs”) contingent upon the achievement of certain total ~~shareholders~~shareholder return (“TSR”) targets as compared to the TSR of a group of peer companies for the ~~three-year~~three year period ending December 31, ~~2019,~~2023, the date at which such awards vest. The cumulative compensation cost of the TSR-based PSU award to be recorded over the three year service period is ~~$1.7~~$3.8 million.

On February ~~17, 2017,~~19, 2021, the CIC also granted ~~7,304~~6,277 PSUs contingent upon the achievement of certain earnings per share (“EPS”) targets for the ~~three-year~~three year period ending December 31, ~~2019.~~2023. At the end of each reporting period, the Company estimates the number of

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shares that it believes will ultimately be earned and records ~~that~~the corresponding expense over the service period of the award. We currently estimate the cumulative compensation cost of the EPS-based PSUs to be recorded over the three year service period is ~~$1.3~~$3.1 million.

~~9. Independent Contractor Operations~~

The Roto-Rooter segment sublicenses with 69 independent contractors to operate certain plumbing repair, excavation, water restoration and drain cleaning businesses in lesser-populated areas of the United States and Canada. We had notes receivable from our independent contractors as of September 30, 2017 totaling $1.5 million (December 31, 2016 - $1.7 million). In most cases these loans are fully or partially secured by equipment owned by the contractor. The interest rates on the loans range from 0% to 7% per annum and the remaining terms of the loans range from less than 3 months to approximately 5 years at September 30, 2017. We recorded the following from our independent contractors (in thousands):

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Revenues $ 10,455 $ 9,823 $ 32,632 $ 29,451
Pretax income 6,311 5,835 19,742 18,015

10. Retirement Plans

All of the Company’s plans that provide retirement and similar benefits are defined contribution plans. These expenses include the impact of market gains and losses on assets held in deferred compensation plans and are recorded in selling, general and administrative expenses. ~~Expenses~~Net (losses)/gains for the Company’s retirement and profit-sharing plans, excess benefit plans and other similar plans are as follows (in thousands):



Three months ended September 30,				Nine months ended September 30,
2021		2020		2021		2020
$	7,006	$	11,506	$	23,609	$	18,445

Three months ended September 30, Nine months ended Nine 30,
2017 2016 2017 2016
$ 4,427 $ 4,423 $ 15,136 $ 10,809

~~-10-~~

11. Legal and Regulatory Matters

The VITAS segment of the Company’s business operates in a heavily-regulated industry. As a result, the Company is subjected to inquiries and investigations by various government agencies, which can result in penalties including repayment obligations, funding withholding, or debarment, as well as to lawsuits, including qui tam actions. The following sections describe the various ongoing material lawsuits and investigations of which the Company is currently aware. Other than as described below, ~~with respect to~~ ~~U.S. v. Vitas~~, it is not possible at this time for us to estimate either the timing or outcome of any of those matters, or whether any potential loss, or range of potential losses, is probable or reasonably estimable.

Regulatory Matters and Litigation

On ~~May 2, 2013,~~October 30, 2017, the ~~government filed~~Company entered into a settlement agreement to resolve civil litigation under the False Claims Act ~~complaint against~~brought by the ~~Company~~United States Department of Justice (“DOJ”) on behalf of the OIG and ~~certain of its hospice-related subsidiaries~~various relators concerning VITAS, filed in the U.S. District Court ~~for~~of the Western District of ~~Missouri,~~ ~~United States v. VITAS Hospice Services, LLC, et al., No. 4:13-cv-00449-BCW (the “2013 Action”). Prior~~Missouri. The Company denied any violation of law and agreed to ~~that date,~~settlement without admission of wrongdoing.

In connection with the ~~Company received various qui tam lawsuits and subpoenas from the U.S. Department of Justice and OIG that have been previously disclosed. The 2013 Action alleges that, since at least 2002,~~settlement, VITAS and ~~since 2004,~~certain of its subsidiaries entered into a corporate integrity agreement (“CIA”) on October 30, 2017. The CIA formalizes various aspects of VITAS’ already existing Compliance Program and contains requirements designed to document compliance with federal healthcare program requirements. It has a term of five years during which it imposes monitoring, reporting, certification, oversight, screening and training obligations, certain of which had previously been implemented by VITAS. It also requires VITAS to engage an Independent Review Organization to perform audit and review functions and to prepare reports regarding compliance with federal healthcare programs. In the ~~Company, submitted or caused the submission~~event of false claims to the Medicare program by (a) billing Medicare for continuous home care services when the patients were not eligible, the services were not provided, or the medical care was inappropriate, and (b) billing Medicare for patients who were not eligible for the Medicare hospice benefit because they did not have a life expectancy of six months or less if their illnesses ran their normal course. This complaint seeks treble damages, statutory penalties, and the costsbreach of the action, plus interest. The defendants filed a motion to dismiss on September 24, 2013. On September 30, 2014, the Court denied the motion, except to the extent that claims were filed before July 24, 2002. On November 13, 2014, the government filed a Second Amended Complaint. The Second Amended Complaint changed and supplemented someCIA, VITAS could become liable for payment of ~~the allegations, but did not otherwise expand the causes of action~~stipulated penalties or the nature of the relief sought against VITAS. VITAS filed its Answer to the Second Amended Complaint on August 11, 2015. Based on recent case developments, including recent mediation discussions with the U.S. Department of Justice, we believe it probable that this matter willcould be settled, to include payments of $55.8 million after-tax ($90.0 million pretax) including attorneys’ fees. A final settlement will require the parties to resolve several outstanding issues, and to draft and negotiate definitive documentation. There can be no assurance that such a final definitive settlement will be reached on these, or other, terms. For additional procedural history of this litigation, please refer to our prior quarterly and annual filings. The costs incurred related to U.S. v. Vitas and related regulatory matters were $935,000 and $599,000 for the quarters ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, the net costs were $5.2 million and $4.1 million respectively.

Net income for the nine months ended September 30, 2017 includes the $55.8 million of after-tax expense ($90 million pre-tax) for the accrual of such potential litigation settlement. As required by GAAP, the Company accrues for contingent loss claimsexcluded from participation in ~~its financial statements when it is probable that a liability has been incurred and the amount can be reasonably estimated.~~

federal healthcare programs.

The Company entered into a settlement agreement in March 2019 that resolved the California state-wide wage and ~~certain current and former directors and officers~~ ~~are defendants in a case captioned~~ ~~In re Chemed Corp. Shareholder Derivative Litigation, No. 13 Civ. 1854 (LPS) (CJB) (D. Del.), which was consolidated on February 2, 2015.~~

On February 2, 2015, the Court appointed KBC Asset Management NV the sole lead plaintiff and its counsel, the sole lead and liaison counsel. On March 3, 2015, Lead Plaintiff KBC designated its Complaint as the operative complaint in the consolidated proceedings and defendants renewed a previously filed motion to dismiss those claims and allegations. ~~The consolidated Complaint named fourteen individual defendants, together with the Company as nominal defendant.~~ ~~The Complaint~~ alleges a claim for breach of fiduciary duty against the individual defendants for allegedly permitting the Company to submit false claims to the U.S. government. The Complaint seeks (a) a declaration that the individual defendants breached their fiduciary duties to the Company; (b) an order requiring those defendants to pay compensatory damages, restitution and exemplary damages, in unspecified amounts, to the Company; (c) an order directing the Company to implement new policies and procedures; and (d) costs and disbursements incurred in bringing the action, including attorneys’ fees. On May 12, 2016, the Court issued a Memorandum Order granting Chemed’s motion to dismiss, and dismissing Lead Plaintiff KBC’s Complaint without prejudice to KBC’s opportunity to file within 30 days of the date of the Court’s Order (i.e., by June 13, 2016) an amended Complaint addressing the deficiencies in its duty of loyalty claim. Lead Plaintiff KBC did not file an amended Complaint within the time specified by the Court.

~~-11-~~

However, on June 13, 2016, counsel for Chemed shareholder Michael Kvint filed a letter with the Court requesting a two-week extension to file a motion to substitute Mr. Kvint as lead plaintiff, in place of Lead Plaintiff KBC and to file an amended Complaint. Alternatively, counsel for Mr. Kvint requested that any dismissal of the action be with prejudice to KBC only. On June 14, 2016, Chemed filed a reply letter with the Court, reserving its rights to oppose any motion filed by Mr. Kvint and, if warranted, to oppose any other actions taken by Mr. Kvint to proceed with the action (including by filing an untimely amended Complaint). On June 21, 2016, the Court entered an Oral Order providing Mr. Kvint until June 30, 2016 to file a Motion to Substitute and Motion for Leave to File an Amended Complaint. On that date, Mr. Kvint filed, under seal, a Motion to Substitute Plaintiff and File Amended Complaint, and attached a Proposed Amended Complaint. Mr. Kvint’s motion was fully briefed by the parties. On April 25, 2017, Magistrate Judge Burke issued a Report and Recommendation recommending that the Court permit Mr. Kvint to intervene as Lead Plaintiff and grant leave to amend the complaint to replead the duty of loyalty claim only. On May 16, 2017, Chief Judge Stark signed an Order adopting that Report and Recommendation. Plaintiff Kvint filed a Corrected Amended Complaint on May 30, 2017. On September 13, 2017, the Court entered an order dismissing with prejudice the claims against defendants Timothy S. O’Toole and Joel F. Gemunder and permitting Defendants to file a Motion to Dismiss the Corrected Amended Complaint on or before September 29, 2017, with Plaintiff’s Answering Brief to be filed on or before December 1, 2017, and Defendants’ Reply Brief to be filed on or before December 29, 2017. Defendants filed their Motion to Dismiss timely. As the Company has previously disclosed, the legal fees and costs associated with defending against this lawsuit are presently being paid by insurance. For additional procedural history of this litigation, please refer to our prior quarterly and annual filings.

Jordan Seper, (“Seper”) a Registered Nurse at VITAS' Inland Empire program from May 12, 2014 to March 21, 2015, filed a lawsuit in San Francisco Superior Court on September 26, 2016. She alleged VITAS Healthcare Corp of CA (“VITAS CA”) (1) failed to provide minimum wage for all hours worked; (2) failed to provide overtime for all hours worked; (3) failed to provide a second meal period; (4) failed to provide rest breaks; (5) failed to indemnify for necessary expenditures; (6) failed to timely pay wages due at time of separation; and (7) engaged in unfair business practices. Seper seeks a state-widehour class action ~~of current and former non-exempt employees employed with VITAS~~claims raised in ~~California within the~~ four years preceding the filing of the lawsuit. She seeks court determination that this action may be maintained as a class action for the entire California class and subclasses, designation as class representative, declaratory relief, injunctive relief, damages (including wages for regular or overtime hours allegedly worked but not paid, premium payments for missed meal or rest periods, and unreimbursed expenses), all applicable penalties associated with each claim, pre and post-judgment interest, and attorneys' fees and costs. Seper served VITAS CA with the lawsuit, separate cases: (1) Jordan A. Seper on behalf of herself and others similarly situated v. VITAS Healthcare Corporation of California, a Delaware corporation; VITAS Healthcare Corp of CA, a business entity unknown; and DOES 1 to 100,~~, inclusive;~~ inclusive; Los Angeles Superior Court Case Number BC 642857 ~~on October 13, 2016.~~

On November 14, 2016, the Parties filed a Stipulation to transfer the venue of the lawsuit from San Francisco to Los Angeles. The Los Angeles Superior Court Complex Division accepted transfer of the case on December 6, 2016 and stayed the case. On December 16, 2016, VITAS CA filed its Answer and served written discovery on Seper.

(“Seper”); (2) Jiwan Chhina ~~("Chhina")~~v. VITAS Health Services of California, Inc., ~~hired by~~a California corporation; VITAS asHealthcare Corporation of California, a ~~Home Health Aide on February 5, 2002, is currently~~Delaware corporation; VITAS Healthcare Corporation of California, a ~~Licensed Vocational Nurse for VITAS' San Diego program. On September 27, 2016, Chhina filed a lawsuit in~~Delaware corporation dba VITAS Healthcare Inc.; and DOES 1 to 100, inclusive; San Diego Superior Court ~~alleging~~Case Number 37-2015-00033978-CU-OE-CTL (“Chhina”) (which was subsequently merged with Seper); (3) Chere Phillips and Lady Moore v. VITAS Healthcare Corporation of California, Sacramento County Superior Court, Case No. 34-2017-0021-2755 (“Phillips and Moore”); and (4) Williams v. VITAS Healthcare Corporation of California, Alameda County Superior Court Case No. RG 17853886 (“Williams”). These actions were brought by both current and former employees including a registered nurse, a licensed vocational nurse (LVN), home health aides and a social worker. Each action stated multiple claims generally including (1) failure to pay minimum wage for all hours worked; (2) failure to provide overtime for all hours worked; (3) failure to pay wages for all hours at the regular rate; (4) failure to provide meal periods; (5) failure to provide rest breaks; (6) failure to provide complete and accurate wage statements; (7) failure to pay for all reimbursement expenses; (8) unfair business practices; and (9) violation of the California Private Attorneys General Act. ~~Chhina seeks~~The cases generally asserted claims on behalf of classes defined to ~~pursue these claims in the form of a state-wide class action of~~include all current and former non-exempt employees employed with VITAS in California within the four years preceding the filing of each lawsuit.

The settlement amount of $5.75 million plus employment taxes was recorded in the ~~lawsuit. He seeks~~first quarter of 2019. The definition of the class to participate in the settlement is intended to cover claims raised in the consolidated Seper/Chhina matter, claims raised in Phillips and Moore, as well as any class claims in Williams. The court ~~determination that this action may be maintained as~~granted final approval of the settlement hearing in December of 2020 and the settlement was paid in the first quarter of 2021.

Alfred Lax (“Lax”), a former employee of Roto-Rooter Services Company (“RRSC”) filed a class action for the entire California class and subclasses, designation as class representative, declaratory relief, injunctive relief, damages (including wages for regular or overtime hours allegedly worked but not paid, premium payments for missed meal or rest periods, and unreimbursed expenses), all applicable penalties associated with each claim, pre-judgment interest, and attorneys' fees and costs. Chhina served VITAS CA with the lawsuit, Jiwann Chhina v. VITAS Health Services of California, Inc., a California corporation; VITAS Healthcare Corporation of California, a Delaware corporation; VITAS Healthcare Corporation of California, a Delaware corporation dba VITAS Healthcare, Inc.; and DOES 1 to 100, inclusive~~; San Diego Superior Court Case Number 37-2015-00033978-CU-OE-CTL on November 3, 2016. On December 1, 2016, VITAS CA filed its Answer and served written discovery on Chhina.~~

~~On May 19, 2017, Chere Phillips (a Home Health Aide~~ in ~~Sacramento) and Lady Moore (a former Social Worker in Sacramento) filed a lawsuit against VITAS Healthcare Corporation of California in Sacramento~~Santa Clara County Superior Court in November of 2018 alleging ~~claims for~~ (1) failure to ~~pay all wages due;~~provide or compensate for required rest breaks; (2) failure to ~~authorize and permit rest periods;~~properly

-19-

pay for all hours worked; (3) failure to provide ~~off-duty meal periods;~~accurate wage statements; (4) failure to ~~furnish accurate wage statements;~~reimburse for work-related expenses; and (5) ~~unreimbursed~~unfair business ~~expenses; (6) waiting time penalties; (7) violations of unfair competition law; and (8) violation of the Private Attorney General Act. The case is captioned:~~ ~~Chere Phillips and Lady Moore v. VITAS Healthcare Corporation of California, Sacramento County Superior Court, Case No. 34-2017-0021-2755. Plaintiffs sought to pursue~~practices. Lax stated these claims ~~in the form~~as a representative of a ~~state-wide~~ class ~~action of current and former non-exempt employees~~defined as all service technicians employed ~~with VITAS CA~~by RRSC in California ~~within~~during the four years preceding the filing of the ~~lawsuit. Plaintiffs served VITAS with the~~complaint. The lawsuit is, Alfred Lax on ~~June 5, 2017. VITAS CA timely answered the Complaint generally denying the Plaintiffs’ allegations. The Court has stayed~~behalf of himself and all ~~class discovery in this case pending resolution of the November 10, 2017 mediation in the~~ ~~Seper~~others similarly situated v. Roto-Rooter Services Company, and ~~Chhina~~ ~~cases.~~

~~-12-~~

There are currently three other lawsuits against VITAS pending in the superior courts of other California counties that contain claims and class periods that substantially overlap with Phillips’ and Moore’s claims. These are ~~Seper, v. VITAS Healthcare Corp of California et al., filed on September 26, 2016 in Los Angeles~~Does 1 through 50 inclusive; Santa Clara County Superior Court ~~BC 642857; Chhina v.~~Case Number 18CV338652. The Company entered into a settlement agreement in August 2020 to resolve the allegations, for a settlement amount of $2.6 million plus employment taxes. The settlement includes technicians in its Menlo Park and Bristol locations. The settlement was recorded in the third quarter of 2020. Final approval of the settlement was granted in the first quarter of 2021 and the settlement was paid.

On October 16, 2020, VITAS ~~Health Service, Inc. et al., filed on September 27, 2016 in San Diego County Superior Court, 34-2015-00033998 CU_OE_CTL; both described above~~ ~~and~~ ~~Williams v. VITAS Healthcare Corporation~~received a Civil Investigative Demand (“CID”) issued by the U.S. Department of ~~California, filed on May 22, 2017 in Alameda County Superior Court, RG 17853886.~~

~~Jazzina Williams’ (a Home Health Aide in Sacramento) lawsuit alleges~~Justice pursuant to the False Claims Act concerning allegations of the submission of false claims for ~~(1) failure~~hospice services for which reimbursement was sought from federal healthcare programs, including Medicare. The CID has requested information regarding 32 patients from our Florida operations. We are cooperating with the U.S. Department of Justice with respect to pay all wages due; (2) failure to authorize and permit rest periods; (3) failure to provide off-duty meal periods; (4) failure to furnish accurate wage statements; (5) unreimbursed business expenses; (6) waiting time penalties; and (7) violationsthis investigation. The Company cannot predict when the investigation will be resolved or the outcome of the ~~Private Attorney General Act. Williams seeks~~investigation.

VITAS is one of a group of hospice providers selected by the OIG’s Office of Audit Services (“OAS”) for inclusion in an audit of the provision of elevated level-of-care hospice services to ~~pursue these claims~~a sample of patients. At the audit’s conclusion, we expect that the OAS will make certain recommendations to CMS, which will be published on the OIG website, and may include repayment of Medicare funds received for elevated care of certain patients in the ~~form~~sample as well as extrapolated amounts based upon the incidence of ~~a state-wide class action of current and former non-exempt employees. Plaintiff served VITAS~~claims within the sample. These extrapolated amounts may appear material. Any claims pursued by CMS will proceed in accordance with the ~~lawsuit on May 31, 2017. VITAS timely answered the Complaint generally denying Plaintiff’s allegations. Williams is pursuing discovery~~standard reconsideration and appeals process for claims that arise out of ~~her individual claims and has agreed to a stay of class discovery pending outcome of a November 10, 2017 mediation of the~~ ~~Seper~~ ~~and~~ ~~Chhina~~ ~~cases. Defendant filed and served each of Plaintiffs Williams, Phillips, and Moore with a Notice of Related Cases on July 19, 2017.~~

~~Defendant understands that the~~ ~~Seper~~ ~~and~~ ~~Chhina~~ ~~cases will be effectively consolidated in Los Angeles County Superior court:~~ ~~Chhina~~ ~~will be dismissed as a separate action and joined with~~ ~~Seper~~ ~~through the filing of an amended complaint in~~ ~~Seper~~ ~~in which~~ ~~Chhina~~ ~~is also identified as a named plaintiff.~~

CMS audits. The Company ~~is not able to~~cannot predict the eventual outcome, or reasonably estimate ~~the probability of~~any potential loss, ~~or range of loss for~~from any ~~of these lawsuits~~such claims at this time.

~~The Company intends to defend vigorously against the allegations in each of the above lawsuits.~~

Regardless of the outcome of any of the preceding matters, dealing with the various regulatory agencies and opposing parties can adversely affect us through defense costs, potential payments, withholding of governmental funding, diversion of management time, and related publicity. Although the Company intends to defend them vigorously, there can be no assurance that those suits will not have a material adverse effect on the Company.

12. Concentration of Risk

~~During~~

As of September 30, 2021, and December 31, 2020, approximately 67% and 74%, respectively, of VITAS’ total accounts receivable balance were from Medicare and 25% and 20%, respectively, of VITAS’ total accounts receivable balance were due from various state Medicaid or managed Medicaid programs. Combined accounts receivable from Medicare, Medicaid, and managed Medicaid represent approximately 73% of the ~~quarter~~ consolidated net accounts receivable in the accompanying consolidated balance sheets as of September 30, 2021.

VITAS ~~had~~has a pharmacy services ~~agreements~~contract with ~~one~~1 service provider ~~to provide~~for specified pharmacy services ~~for VITAS and~~related to its hospice ~~patients. VITAS made~~operations. A large majority of VITAS’ pharmaceutical purchases are from this provider of $7.7 and $24.8 million for the three and nine months ended September 30, 2017, respectively. Vitas made purchases from two providers of $9.5 and $26.9 million for the three and nine months ended September 30, 2016, respectively. Purchases from these providers were more than 90% of all pharmacy services usedvendor. The pharmaceuticals purchased by VITAS ~~during each period presented.~~

are available through many providers in the United States. However, a disruption from VITAS’ main service provider could adversely impact VITAS’ operations, including temporary logistical challenges and increased cost associated with getting medication to our patients.

13. Cash Overdrafts and Cash Equivalents

There are ~~$468,000~~$3.1 million in cash overdrafts payable included in accounts payable at September 30, ~~2017 (December~~2021. There were 0 cash overdrafts payable included in accounts payable at December 31, ~~2016 - $8.6 million).~~

2020.

From time to time throughout the year, we invest excess cash in money market funds with major commercial banks. We closely monitor the creditworthiness of the institutions with which we invest our overnight funds. The amount invested was ~~less than $100,000~~not material for each balance sheet date presented.

14. Financial Instruments

FASB’s authoritative guidance on fair value measurements defines a hierarchy which prioritizes the inputs in fair value measurements. Level 1 measurements are measurements using quoted prices in active markets for identical assets or liabilities. Level 2 measurements use significant other observable inputs. Level 3 measurements are measurements using significant unobservable inputs which require a company to develop its own assumptions. In recording the fair value of assets and liabilities, companies must use the most reliable measurement available.

~~-13-~~

-20-

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of September 30, ~~2017~~2021 (in thousands):


				Fair Value Measure
		Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Mutual fund investments of deferred
compensation plans held in trust	$	102,045	$	102,045	$	-	$	-

Fair Value Measure
Carrying Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant
Unobservable
Inputs (Level 3)

Mutual fund investments of deferred
compensation plans held in trust $ 60,445 $ 60,445 $ - $ -
Total debt 82,500 - 82,500 -

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of December 31, ~~2016~~2020 (in thousands):


				Fair Value Measure
		Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Mutual fund investments of deferred
compensation plans held in trust	$	86,865	$	86,865	$	-	$	-

Fair Value Measure
Carrying Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant
Unobservable
Inputs (Level 3)

Mutual fund investments of deferred
compensation plans held in trust $ 54,389 $ 54,389 $ - $ -
Total debt 108,750 - 108,750 -

For cash and cash equivalents, accounts receivable and accounts payable, the carrying amount is a reasonable estimate of fair value because of the liquidity and short-term nature of these instruments. As further described in ~~Footnote~~Note 5, our outstanding long-term debt and current portion of long-term debt have floating interest rates that are reset at short-term intervals, generally 30 or 60 days. The interest rate we pay also includes an additional amount based on our current leverage ratio. As such, we believe our borrowings reflect significant nonperformance risks, mainly credit risk. Based on these factors, we believe the fair value of our long-term debt and current portion of long-term debt approximate the carrying value.

15. Capital Stock Repurchase Plan Transactions

We repurchased the following capital ~~stock for the three and nine months ended September 30, 2017 and 2016:~~stock:



	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

Total cost of repurchased shares (in thousands)	$	163,731	$	24,975	$	330,380	$	147,123
Shares repurchased		350,000		50,000		700,000		325,000
Weighted average price per share	$	467.80	$	499.48	$	471.97	$	452.69

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016

Total cost of repurchased shares (in thousands) $ 9,576 $ - $ 94,640 $ 102,313
Shares repurchased 50,000 - 500,000 780,134
Weighted average price per share $ 191.52 $ - $ 189.28 $ 131.15

In ~~March 2017,~~May 2021, the Board of Directors authorized an additional ~~$100.0~~$300.0 million for stock repurchase under Chemed’s existing share repurchase program. We currently have $~~55.5 million~~$148.0 million of au~~thorization~~authorization remaining under this share repurchase plan.

~~-14-~~

16. Recent Accounting Standards

In ~~May 2014,~~March 2020, the FASB issued Accounting Standards Update “ASU No. ~~2014-09 – Revenue from Contracts with Customers” which~~2020-04 - Reference Rate Reform”. The update provides ~~additional guidance~~optional expedients and exceptions for applying GAAP to ~~clarify the principles for recognizing revenue.~~contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate expected to be discontinued. The standard and subsequent amendments are intended to develop a common revenue standard for removing inconsistencies and weaknesses, improve comparability, provide more useful information to users through improved disclosure requirements, and simplify the preparation of financial statements. This guidance and subsequent amendments are effective for fiscal years beginning after December 15, 2017. At both VITAS and Roto-Rooter, we have performed an initial analysis to determine the appropriate aggregation of customers into portfolios with similar collection and service requirement characteristics. This analysis is currently being refined to ensure the portfolios identified will result in a materially consistent revenue recognition pattern that would result as if each customer were evaluated separately. Additionally, based on our initial evaluation, we believe the majority of our provision for bad debts, currently classified in selling, general and administrative expense in our Statements of Income, will be reclassified as a contra-revenue as it will be considered an implicit price concession at the time service is performed. For the nine month period ended September 30, 2017, our total provision for bad debt is $13.0 million. We anticipate a modified retrospective adoption of the ASU.

In February 2016, the FASB issued Accounting Standards Update “ASU No. 2016-02 – Leases” which introduces a lessee model that brings most leases on to the balance sheets and updates lessor accounting to align with changes in the lessee model and the revenue recognition standard. The guidanceupdate is effective for ~~fiscal years beginning after~~all entities as of March 12, 2020 and will apply through December ~~15, 2018. Based~~31, 2022. The interest rate charged on borrowings from our existing revolver is based on LIBOR. The credit agreement includes provisions for modifying the provisions of the ASU, we anticipate a material increase in both assets and liabilities when our current operating lease contracts are recorded on the balance sheet. We do not currently have a specific estimate of the impact.

~~In August 2016, the FASB issued Accounting Standards Update “ASU No. 2016-15 – Cash Flow Classification” which amends guidance on the classification of certain cash receipts and payments~~interest rate in the ~~statement~~instance that LIBOR is discontinued. As a result, no contract modifications will be required when LIBOR is discontinued.

17. Acquisitions

On June 1, 2020, we completed the acquisition of ~~cash flows. The primary purpose~~a Roto-Rooter franchise and the related assets in Bloomington, IN for $2.2 million in cash.

Goodwill is assessed for impairment on a yearly basis as of ~~ASU 2016-15~~October 1. All goodwill recognized is ~~to reduce diversity in practice related to eight specific cash flow issues. The guidance in this ASU is effective~~deductible for ~~fiscal years beginning after December 15, 2017. We have analyzed the impact of ASU 2016-15 on our statement of cash flows and do not expect it to have a material effect.~~tax purposes.

-21-

In January 2017, the FASB issued Accounting Standards Update “ASU No. 2017-4 – Intangibles – Goodwill and Other”. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. The guidance in the ASU is effective for the Company in fiscal years beginning after December 15, 2019. Early adoption is permitted. We anticipate adoption of this standard will have no impact on our consolidated financial statements.

~~17. Goodwill~~

Shown below is movement in Goodwill (in thousands):


	VITAS		Roto-Rooter		Total
Balance at December 31, 2020	$	333,331	$	245,254	$	578,585
Foreign currency adjustments		-		25		25
Balance at September 30, 2021	$	333,331	$	245,279	$	578,610

Vitas Roto-Rooter Total
Balance at December 31, 2016 $ 328,301 $ 144,065 $ 472,366
Business combinations - 481 481
Foreign currency adjustments - 177 177
Balance at September 30, 2017 $ 328,301 $ 144,723 $ 473,024

~~During 2017, we completed one business combination within the Roto-Rooter segment for $525,000 in cash to increase our market penetration.~~

‎

~~-15-~~

-22-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

We operate through our two wholly-owned subsidiaries, VITAS Healthcare Corporation and Roto-Rooter Group, Inc. VITAS focuses on hospice care that helps make terminally ill patients’ final days as comfortable as possible. Through its teams of doctors, nurses, home health aides, social workers, clergy and volunteers, VITAS provides direct medical services to patients, as well as spiritual and emotional counseling to both patients and their families. Roto-Rooter’s services are focused on providing plumbing, drain cleaning, water restoration and other related services to both residential and commercial customers. Through its network of company-owned branches, independent contractors and franchisees, Roto-Rooter offers plumbing and drain cleaning service to over 90% of the U.S. population.

The following is a summary of the key operating results (in thousands except per share amounts):



	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Service revenues and sales	$	538,667		$	528,297		$	1,598,283		$	1,546,294
Net income	$	72,003		$	67,722		$	193,925		$	205,714
Diluted EPS	$	4.55		$	4.14		$	12.06		$	12.53
Adjusted net income	$	80,084		$	79,556		$	226,554		$	212,494
Adjusted diluted EPS	$	5.06		$	4.86		$	14.09		$	12.94
Adjusted EBITDA	$	119,373		$	117,805		$	338,840		$	319,576
Adjusted EBITDA as a % of revenue		22.2	%		22.3	%		21.2	%		20.7	%

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Service revenues and sales $ 417,444 $ 392,607 $ 1,238,367 $ 1,173,405
Net income $ 35,437 $ 26,829 $ 43,625 $ 76,554
Diluted EPS $ 2.13 $ 1.62 $ 2.60 $ 4.54
Adjusted net income $ 35,772 $ 28,643 $ 102,174 $ 86,625
Adjusted diluted EPS $ 2.15 $ 1.73 $ 6.10 $ 5.14
Adjusted EBITDA $ 67,604 $ 57,387 $ 195,921 $ 170,391
Adjusted EBITDA as a % of revenue 16.2 % 14.6 % 15.8 % 14.5 %

Adjusted net income, adjusted diluted EPS, earnings before interest, taxes and depreciation and amortization (“EBITDA”), Adjusted EBITDA and Adjusted EBITDA as a percent of revenue are not measures derived in accordance with US GAAP. We provide non-GAAP measures to help readers evaluate our operating results and to compare our operating performance with that of similar companies that have different capital structures. Our non-GAAP measures should not be considered in isolation or as a substitute for comparable measures presented in accordance with GAAP. A reconciliation of our non-GAAP measures is presented on pages ~~30-32.~~

Both VITAS and Roto-Rooter have significant operations in Houston and south Florida. For the three and nine months ended September 30, 2017 we did not experience any material business interruptions or loss of assets related to the hurricanes in Houston or Florida.

Net income for the nine months ended September 30, 2017 includes $55.8 million ($3.33 per share) of after-tax expense ($90 million pre-tax) for the accrual of a potential litigation settlement related to the May 2, 2013 complaint filed against the Company by the U.S. Department of Justice. As required by U.S. Generally Accepted Accounting Principles, the Company accrues for contingent loss claims in its financial statements when it is probable that a liability has been incurred and the amount can be reasonably estimated. Based on recent case developments, including recent mediation discussions with the U.S. Department of Justice, the Company believes that it is probable that this matter will be settled, and that such settlement will include settlement payments and relator attorney fees, by the Company of approximately the accrued amount. However, the achievement of a final, definitive settlement will require the parties to resolve several outstanding issues (and draft and negotiate related definitive documentation), and there can be no assurance that such a final, definitive settlement will be reached and agreed on these or other terms.

36-38.

For the three months ended September 30, ~~2017,~~2021, the increase in consolidated service revenues and sales was driven by a ~~17.1%~~15.7% increase at Roto-Rooter ~~and~~offset by a ~~2.2% increase~~5.8% decrease at VITAS. The increase in service revenues at Roto-Rooter was driven by an increase in all major service lines. Of Roto-Rooter’s ~~total~~third quarter 2020 revenue ~~increase, 49.1% is related to water restoration.~~was significantly impacted by shut-downs resulting from the COVID pandemic. The ~~increase~~decrease in service revenues at VITAS ~~was~~is comprised primarily of a ~~result of~~5.3% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement ~~rates increasing 1.3%, a 2.8%~~rate increase ~~in days~~(including the suspension of ~~care, offset by acuity~~sequestration on May 1, 2020) of approximately 1.2%. Acuity mix shift ~~which negatively impacted~~had a net impact of reducing revenue ~~2.2%~~approximately $3.0 million, or 0.9% in the quarter when compared to the prior year ~~period. Adjusted EBITDA as~~revenue and level-of-care mix. The combination of a ~~percent of~~Medicare cap revenue ~~increased 160~~reduction and other contra revenue changes negatively impacted revenue growth by approximately 80 basis ~~points when compared to the prior year quarter mainly as a result of mix shift in levels of care and improved cost management for high acuity care.~~points. See page 3339 for additional VITAS operating metrics.

For the nine months ended September 30, ~~2017,~~2021, the increase in consolidated service revenues and sales was driven by a ~~14.4%~~20.1% increase at Roto-Rooter ~~and~~offset by a ~~2.0% increase~~5.7% decrease at VITAS. The increase in service revenues at Roto-Rooter was driven by an increase in all major service lines. Of Roto-Rooter’s ~~total~~first nine months 2020 revenue ~~increase, 49.0%~~ was ~~related to water restoration.~~significantly impacted by the COVID pandemic. The ~~increase~~decrease in service revenues at VITAS ~~was~~is comprised primarily of a ~~result of~~6.2% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement ~~rates increasing 1.7%, a 2.7%~~rate increase ~~in days~~(including the suspension of ~~care, offset by acuity~~sequestration on May 1, 2020) of approximately 1.9%. Acuity mix shift ~~which negatively impacted~~had a net impact of reducing revenue ~~2.4%~~approximately $16.0 million, or 1.6% in the quarter when compared to the prior year ~~period. Adjusted EBITDA~~revenue and level-of-care mix. The combination of a lower Medicare cap revenue reduction and other contra revenue changes offset a portion of the revenue decline by approximately 20 basis points. See page 39 for additional VITAS operating metrics.

The current COVID-19 pandemic did have a material impact on our business operations, results of operations, cash flow and financial position as of and for the three months and nine months ended September 30, 2021 and 2020, respectively. We are closely monitoring the impact of the pandemic on all aspects of our business including impacts to employees, customers, patients, suppliers and vendors. The Company’s two operating subsidiaries have been categorized as critical infrastructure businesses and are not currently materially limited by federal, state or local regulations that restrict movement or operating ability.

The length and severity of the pandemic, coupled with related governmental actions including relief acts and actions relating to our workforce at federal, state and local levels, and underlying economic disruption will determine the ultimate short-term and long-term impact to our business operations and financial results. We are unable to predict the myriad of possible issues that could arise or the ultimate effect to our businesses as a ~~percent~~result of the unknown short, medium and long-term impacts that the pandemic will have on the United States economy and society as a whole.

-23-

Historically, Chemed earnings guidance has been developed using previous years’ key operating metrics which are then modeled and projected out for the calendar year. Critical within these projections is the understanding of traditional patterned correlations among key operating metrics. This modeling exercise also takes into consideration anticipated industry and macro-economic issues outside of management’s control but are somewhat predictable in terms of timing and impact on our business segments’ operating results.

The COVID-19 pandemic has made accurate modeling and providing meaningful earnings guidance exceptionally challenging. Since the start of the pandemic, Chemed has been able to successfully navigate within this rapidly changing environment and produce operating results that we believe provide us with the ability to issue earnings guidance for the 2021 calendar year. However, this guidance should be taken with the recognition the pandemic will continue to disrupt our healthcare system and general economy to such an extent that future rules, regulations and government mandates could materially impact the company’s ability to achieve this guidance.

Statistically, patients residing in senior housing are identified as hospice appropriate earlier into their terminal prognosis and have a much greater probability of having a length of stay in excess of 90 days. Hospice patients referred from hospitals, oncology practices and similar referral sources are generally more acute and have a significantly lower probability of lengths-of-stay exceeding 90 days. According to data released by the National Investment Center for Seniors Housing & Care, COVID-19 continues to adversely affect senior housing occupancy. This reduced occupancy in senior housing has had a corresponding reduction in VITAS nursing home admissions. Nursing home patients represented 15.6% of VITAS’ third-quarter 2021 patient census. This compares to nursing home patients averaging 18.2% of total census just prior to the pandemic.

Based upon the above discussion, VITAS 2021 revenue, ~~increased 130 basis points~~prior to Medicare Cap, is estimated to decline approximately 5% when compared to the prior ~~year quarter mainly as a result of mix shift~~year. Average Daily Census in ~~levels of care and improved cost management for high acuity care. See page 33 for additional VITAS operating metrics.~~

~~VITAS expects its full-year 2017 revenue growth,~~2021 is estimated to decline approximately 5.5%. Full-year Adjusted EBITDA margin, prior to Medicare ~~cap,~~Cap, is estimated to be 18.8%. We are currently estimating $6.6 million for Medicare Cap billing limitations in calendar year 2021.

Roto-Rooter is forecasted to achieve full-year 2021 revenue growth of 17.3%. Roto-Rooter’s Adjusted EBITDA margin for 2021 is estimated to be between 28.5% to 29.0%.

Based upon the above, full-year 2021 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, costs related to litigation, and other discrete items, is estimated to be in the range of ~~2.0%~~$19.00 to ~~3.0%~~$19.20. This compares to initial 2021 adjusted earnings per diluted share guidance of $17.00 to $17.50. This revised 2021 guidance assumes an effective corporate tax rate on adjusted earnings of 25.1%. Admissions and Average Daily Census in 2017 are estimated to expand approximately 2.0% to 3.0%. Adjusted EBITDA margin, prior to Medicare cap, is estimated to be 15.0%. This guidance includes $1.5 million for Medicare cap billing limitations. Roto-Rooter expects full-year 2017 revenue growth of 13.0% to 14.0%. The revenue estimate is a based upon increased job pricing of approximately 2.0% and continued growth in water restoration services. Adjusted EBITDA margin for 2017 is estimated in the range of 22.5%. Chemed’s 2020 reported adjusted earnings per diluted share was $18.08.

We anticipate that our operating income and cash flows will be sufficient to operate our businesses and meet any commitments for the foreseeable future.

~~-16-~~

Financial Condition

Liquidity and Capital Resources

Material changes in the balance sheet accounts from December 31, ~~2016~~2020 to September 30, ~~2017~~2021 include the following:

~~A $40.5~~

An $8.7 million decrease in accounts receivable due ~~mainly~~ to timing of ~~Medicare and Medicaid payments.~~

receipts.

A ~~$21.8~~$6.3 million increase in ~~properties plant and equipment mainly due to the purchase of transportation equipment during the quarter.~~

~~A $36.2 million increase in net deferred taxes associated with amounts recorded for a potential litigation settlement.~~

~~A $4.8 million decrease in accounts payable mainly due to timing of payments.~~

~~A $12.3 increase in~~prepaid income taxes due to timing of payments.

~~An $89.6~~

A $6.1 million increase in prepaid expense due primarily to a $6.0 million increase in prepaid software at VITAS.

A $13.2 million increase in investment of deferred compensation plans due primarily to contributions and market valuation gains. These gains are offset by expense recognized in the deferred compensation liability.

A $7.5 million decrease in identifiable intangible assets due to amortization.

A $5.8 million increase in accounts payable due to timing of payments.

A $6.0 million increase in accrued ~~legal~~compensation due to ~~a potential litigation settlement.~~

accrual of additional paid time off for VITAS front line workers and an increase in accrued bonus.

A ~~$26.3~~$9.1 million decrease in ~~long-term debt~~accrued legal mainly as a result of the payments of two legal settlements.

A $345.1 million increase in treasury stock due mainly to ~~payments on our term loan and revolving line of credit.~~

stock repurchases.

Net cash provided by operating activities ~~increased $62.6~~decreased $157.4 million ~~mainly as~~from September 30, 2020 to September 30, 2021. The main drivers of the decrease are a ~~result of a $22.9 million increase~~decrease in net income ~~excluding potential litigation settlement~~of $11.8 million, the Unutilized CARES Act grant received in 2020 of $48.0 million, the deferral of payroll taxes during the second quarter of 2020 of $22.9 million and ~~a $19.5 million decrease caused by changes~~increases in cash outflows associated with accounts ~~receivable. The potential litigation settlement recorded is non-cash at September 30, 2017~~

-24-

payable and ~~does not impact net cash provided by operating activities.~~

current income taxes of $39.6 million. Significant changes in our accounts receivable balances are typically driven ~~mainly~~ by the timing of payments received from the Federal government at our VITAS subsidiary. We typically receive a payment in excess of $40.0 million from the Federal government ~~from~~for hospice services every other Friday. The timing of a period end will have a significant impact on the accounts receivable at VITAS. These changes generally normalize over a two year period, as cash flow variations in one year are offset in the following year.

Management continually evaluates cash utilization alternatives, including share repurchase, debt repurchase, acquisitions and increased dividends to determine the most beneficial use of available capital resources.

On June 20, 2018, we signed the Fourth Amended and Restated Credit Agreement (“2018 Credit Agreement”). Terms of the 2018 Credit Agreement consist of a five year, $450 million revolving credit facility and a $150 million expansion feature, which may consist of term loans or additional revolving commitments. The revolving credit facility has a five year maturity with principal payments due at maturity. The interest rate at the inception of the agreement was LIBOR plus 100 basis points. The 2018 Credit Agreement has a floating interest rate that is generally LIBOR plus a tiered additional rate which varies based on our current leverage ratio. We have no debt outstanding under the 2018 Credit Agreement as of September 30, 2021.

We have issued ~~$35.6~~$46.2 million in standby letters of credit as of September 30, ~~2017,~~2021, mainly for insurance purposes. Issued letters of credit reduce our available credit under the revolving credit agreement. As of September 30, ~~2017,~~2021, we have approximately ~~$309.4~~$403.8 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility. Management believes its liquidity and sources of capital are satisfactory for the Company’s needs in the foreseeable future.

Commitments and Contingencies

Collectively, the terms of our credit agreements require us to meet various financial covenants, to be tested quarterly. We are in compliance with all financial and other debt covenants as of September 30, ~~2017~~2021 and anticipate remaining in compliance throughout the foreseeable future.

~~The VITAS segment of the Company’s business operates in a heavily-regulated industry. As a result, the Company is subjected~~

We are subject to ~~inquiries and investigations by~~ various ~~government agencies, as well as to lawsuits, including~~ ~~qui tam~~ ~~actions. The following sections describe the various ongoing material~~ lawsuits and ~~investigations of which the Company is currently aware. Other than as described below with respect to~~ ~~U.S. v. Vitas~~, it is not possible at this time for us to estimate either the timing or outcome of any of those matters, or whether any potential loss, or range of potential losses, is probable or reasonably estimable.

~~-17-~~

~~On May 2, 2013, the government filed a False Claims Act complaint against the Company and certain of its hospice-related subsidiaries~~claims in the ~~U.S. District Court~~normal course of our business. In addition, we periodically receive communications from governmental and regulatory agencies concerning compliance with Medicare and Medicaid billing requirements at our VITAS subsidiary. We establish reserves for specific, uninsured liabilities in connection with regulatory and legal action that we deem to be probable and estimable. We disclose the ~~Western District~~existence of ~~Missouri,~~ ~~United States v. VITAS Hospice Services, LLC, et al., No. 4:13-cv-00449-BCW (the “2013 Action”). Prior to that date, the Company received various qui tam lawsuits~~regulatory and subpoenas from the U.S. Department of Justice and OIG that have been previously disclosed. The 2013 Action alleges that, since at least 2002, VITAS, and since 2004, the Company, submitted or caused the submission of false claims to the Medicare program by (a) billing Medicare for continuous home care serviceslegal actions when the patients were not eligible, the services were not provided, or the medical care was inappropriate, and (b) billing Medicare for patients who were not eligible for the Medicare hospice benefit because they did not have a life expectancy of six months or less if their illnesses ran their normal course. This complaint seeks treble damages, statutory penalties, and the costs of the action, plus interest. The defendants filed a motion to dismiss on September 24, 2013. On September 30, 2014, the Court denied the motion, except to the extent that claims were filed before July 24, 2002. On November 13, 2014, the government filed a Second Amended Complaint. The Second Amended Complaint changed and supplemented some of the allegations, but did not otherwise expand the causes of action or the nature of the relief sought against VITAS. VITAS filed its Answer to the Second Amended Complaint on August 11, 2015. Based on recent case developments, including recent mediation discussions with the U.S. Department of Justice, we believe it probable that this matter will be settled, to include payments of $55.8 million after-tax ($90.0 million pretax) including attorneys’ fees. A final settlement will require the parties to resolve several outstanding issues, and to draft and negotiate definitive documentation. There can be no assurance that such a final definitive settlement will be reached on these, or other, terms. For additional procedural history of this litigation, please refer to our prior quarterly and annual filings. The costs incurred related to U.S. v. Vitas and related regulatory matters were $935,000 and $599,000 for the quarters ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, the net costs were $5.2 million and $4.1 million respectively.

Net income for the nine months ended September 30, 2017 includes the $55.8 million of after-tax expense ($90 million pre-tax) for the accrual of such potential litigation settlement. As required by GAAP, the Company accrues for contingent loss claims in its financial statements when it is ~~probable~~reasonably possible that a ~~liability has been incurred and the amount can be reasonably estimated.~~

~~The Company and certain current and former directors and officers~~ ~~are defendants~~loss could occur in ~~a case captioned~~ ~~In re Chemed Corp. Shareholder Derivative Litigation, No. 13 Civ. 1854 (LPS) (CJB) (D. Del.), which was consolidated on February 2, 2015.~~

On February 2, 2015, the Court appointed KBC Asset Management NV the sole lead plaintiff and its counsel, the sole lead and liaison counsel. On March 3, 2015, Lead Plaintiff KBC designated its Complaint as the operative complaint in the consolidated proceedings and defendants renewed a previously filed motion to dismiss those claims and allegations. ~~The consolidated Complaint named fourteen individual defendants, together~~connection with the ~~Company as nominal defendant.~~ ~~The Complaint~~ ~~alleges~~specific action. In most instances, we are unable to make a ~~claim for breach~~reasonable estimate of ~~fiduciary duty against the individual defendants for allegedly permitting the Company to submit false claims~~any reasonably possible liability due to the U.S. government. The Complaint seeks (a) a declaration that the individual defendants breached their fiduciary duties to the Company; (b) an order requiring those defendants to pay compensatory damages, restitution and exemplary damages, in unspecified amounts, to the Company; (c) an order directing the Company to implement new policies and procedures; and (d) costs and disbursements incurred in bringing the action, including attorneys’ fees. On May 12, 2016, the Court issued a Memorandum Order granting Chemed’s motion to dismiss, and dismissing Lead Plaintiff KBC’s Complaint without prejudice to KBC’s opportunity to file within 30 days of the date of the Court’s Order (i.e., by June 13, 2016) an amended Complaint addressing the deficiencies in its duty of loyalty claim. Lead Plaintiff KBC did not file an amended Complaint within the time specified by the Court.

However, on June 13, 2016, counsel for Chemed shareholder Michael Kvint filed a letter with the Court requesting a two-week extension to file a motion to substitute Mr. Kvint as lead plaintiff, in place of Lead Plaintiff KBC and to file an amended Complaint. Alternatively, counsel for Mr. Kvint requested that any dismissal of the action be with prejudice to KBC only. On June 14, 2016, Chemed filed a reply letter with the Court, reserving its rights to oppose any motion filed by Mr. Kvint and, if warranted, to oppose any other actions taken by Mr. Kvint to proceed with the action (including by filing an untimely amended Complaint). On June 21, 2016, the Court entered an Oral Order providing Mr. Kvint until June 30, 2016 to file a Motion to Substitute and Motion for Leave to File an Amended Complaint. On that date, Mr. Kvint filed, under seal, a Motion to Substitute Plaintiff and File Amended Complaint, and attached a Proposed Amended Complaint. Mr. Kvint’s motion was fully briefed by the parties. On April 25, 2017, Magistrate Judge Burke issued a Report and Recommendation recommending that the Court permit Mr. Kvint to intervene as Lead Plaintiff and grant leave to amend the complaint to replead the duty of loyalty claim only. On May 16, 2017, Chief Judge Stark signed an Order adopting that Report and Recommendation. Plaintiff Kvint filed a Corrected Amended Complaint on May 30, 2017. On September 13, 2017, the Court entered an order dismissing with prejudice the claims against defendants Timothy S, O’Toole and Joel F. Gemunder and permitting Defendants to file a Motion to Dismiss the Corrected Amended Complaint on or before September 29, 2017, with Plaintiff’s Answering to be filed on or before December 1, 2017, and Defendants’ Reply Brief to be filed on or before December 29, 2017. Defendants filed their Motion to Dismiss timely. As the Company has previously disclosed, the legal fees and costs associated with defending against this lawsuit are presently being paid by insurance. For additional procedural history of this litigation, please refer to our prior quarterly and annual filings.

~~-18-~~

Jordan Seper, (“Seper”) a Registered Nurse at VITAS' Inland Empire program from May 12, 2014 to March 21, 2015, filed a lawsuit in San Francisco Superior Court on September 26, 2016. She alleged VITAS Healthcare Corp of CA (“VITAS CA”) (1) failed to provide minimum wage for all hours worked; (2) failed to provide overtime for all hours worked; (3) failed to provide a second meal period; (4) failed to provide rest breaks; (5) failed to indemnify for necessary expenditures; (6) failed to timely pay wages due at time of separation; and (7) engaged in unfair business practices. Seper seeks a state-wide class action of current and former non-exempt employees employed with VITAS in California within the four years preceding the filing of the lawsuit. She seeks court determination that this action may be maintained as a class action for the entire California class and subclasses, designation as class representative, declaratory relief, injunctive relief, damages (including wages for regular or overtime hours allegedly worked but not paid, premium payments for missed meal or rest periods, and unreimbursed expenses), all applicable penalties associated with each claim, pre and post-judgment interest, and attorneys' fees and costs. Seper served VITAS CA with the lawsuit, Jordan A. Seper on behalf of herself and others similarly situated v. VITAS Healthcare Corporation of California, a Delaware corporation; VITAS Healthcare Corp of CA, a business entity unknown; and DOES 1 to 100, inclusive~~; Los Angeles Superior Court Case Number BC 642857 on October 13, 2016.~~

Jiwan Chhina ("Chhina"), hired by VITAS as a Home Health Aide on February 5, 2002, is currently a Licensed Vocational Nurse for VITAS' San Diego program. On September 27, 2016, Chhina filed a lawsuit in San Diego Superior Court, alleging (1) failure to pay minimum wage for all hours worked; (2) failure to provide overtime for all hours worked; (3) failure to pay wages for all hours at the regular rate; (4) failure to provide meal periods; (5) failure to provide rest breaks; (6) failure to provide complete and accurate wage statements; (7) failure to pay for all reimbursement expenses; (8) unfair business practices; and (9) violation of the California Private Attorneys General Act. Chhina seeks to pursue these claims in the form of a state-wide class action of current and former non-exempt employees employed with VITAS in California within the four years preceding the filing of the lawsuit. He seeks court determination that this action may be maintained as a class action for the entire California class and subclasses, designation as class representative, declaratory relief, injunctive relief, damages (including wages for regular or overtime hours allegedly worked but not paid, premium payments for missed meal or rest periods, and unreimbursed expenses), all applicable penalties associated with each claim, pre-judgment interest, and attorneys' fees and costs. Chhina served VITAS CA with the lawsuit, Jiwann Chhina v. VITAS Health Services of California, Inc., a California corporation; VITAS Healthcare Corporation of California, a Delaware corporation; VITAS Healthcare Corporation of California, a Delaware corporation dba VITAS Healthcare, Inc.; and DOES 1 to 100, inclusive~~; San Diego Superior Court Case Number 37-2015-00033978-CU-OE-CTL on November 3, 2016. On December 1, 2016, VITAS CA filed its Answer and served written discovery on Chhina.~~

On May 19, 2017, Chere Phillips (a Home Health Aide in Sacramento) and Lady Moore (a former Social Worker in Sacramento) filed a lawsuit against VITAS Healthcare Corporation of California in Sacramento County Superior Court, alleging claims for (1) failure to pay all wages due; (2) failure to authorize and permit rest periods; (3) failure to provide off-duty meal periods; (4) failure to furnish accurate wage statements; (5) unreimbursed business expenses; (6) waiting time penalties; (7) violations of unfair competition law; and (8) violation of the Private Attorney General Act. The case is captioned: ~~Chere Phillips and Lady Moore v. VITAS Healthcare Corporation of California~~, Sacramento County Superior Court, Case No. 34-2017-0021-2755. Plaintiffs sought to pursue these claims in the form of a state-wide class action of current and former non-exempt employees employed with VITAS CA in California within the four years preceding the filing of the lawsuit. Plaintiffs served VITAS with the lawsuit on June 5, 2017. VITAS CA timely answered the Complaint generally denying the Plaintiffs’ allegations. The Court has stayed all class discovery in this case pending the resolution of the November 10, 2017 in the ~~Seper~~ ~~and~~ ~~Chhina~~ ~~cases.~~

There are currently three other lawsuits against VITAS pending in the superior courts of other California counties that contain claims and class periods that substantially overlap with Phillips’ and Moore’s claims. These are Seper, v. VITAS Healthcare Corp of California et al., filed on September 26, 2016 in Los Angeles County Superior Court BC 642857; Chhina v. VITAS Health Service, Inc. et al., filed on September 27, 2016 in San Diego County Superior Court, 34-2015-00033998 CU_OE_CTL; both described above ~~and~~ ~~Williams v. VITAS Healthcare Corporation of California, filed on May 22, 2017 in Alameda County Superior Court, RG 17853886.~~

Jazzina Williams’ (a Home Health Aide in Sacramento) lawsuit alleges claims for (1) failure to pay all wages due; (2) failure to authorize and permit rest periods; (3) failure to provide off-duty meal periods; (4) failure to furnish accurate wage statements; (5) unreimbursed business expenses; (6) waiting time penalties; and (7) violations of the Private Attorney General Act. Williams seeks to pursue these claims in the form of a state-wide class action of current and former non-exempt employees. Plaintiff served VITAS with the lawsuit on May 31, 2017. VITAS timely answered the Complaint generally denying Plaintiff’s allegations. Williams is pursuing discovery of her individual claims and has agreed to a stay of class discovery pending outcome of a November 10, 2017 mediation of the ~~Seper~~ ~~and~~ ~~Chhina~~ ~~cases. Defendant filed and served each of Plaintiffs Williams, Phillips, and Moore with a Notice of Related Cases on July 19, 2017. Defendant understands that the~~ ~~Seper~~ ~~and~~ ~~Chhina~~ ~~cases will be effectively consolidated in Los Angeles County Superior court:~~ ~~Chhina~~ ~~will be dismissed as a separate action and joined with~~ ~~Seper~~ ~~through the filing of an amended complaint in~~ ~~Seper~~ ~~in which~~ ~~Chhina~~ ~~is also identified as a named plaintiff.~~

~~-19-~~

~~The Company is not able to reasonably estimate the probability of loss or range of loss for any of these lawsuits at this time.~~

~~The Company intends to defend vigorously against the allegations in each of the above lawsuits. Regardless~~uncertainty of the outcome and stage of ~~any~~litigation. We record legal fees associated with legal and regulatory actions as the costs are incurred.

See Note 11 in the Notes to the Unaudited Consolidated Financial Statements in Item 1 above for a description of the preceding matters, dealing with the various regulatory agencies and opposing parties can adversely affect us through defense costs, potential payments, diversion of management time, and related publicity. Although the Company intends to defend them vigorously, there can be no assurance that those suits will not have acurrent material ~~adverse effect on the Company.~~legal matters.

‎

-25-

Results of Operations

Three months ended September 30, ~~2017~~2021 versus ~~2016~~2020 - Consolidated Results

Our service revenues and sales for the third quarter of ~~2017~~2021 increased ~~6.3%~~2.0% versus services and sales revenues for the third quarter of ~~2016.~~2020. Of this increase, a ~~$6.1~~$30.1 million increase was attributable to ~~VITAS and $18.8~~Roto-Rooter offset by a $19.7 million ~~increase was~~decrease attributable to ~~Roto-Rooter.~~VITAS. The following chart shows the components of ~~those changes~~revenue by operating segment (in thousands):



	Three months ended September 30,
	2021		2020
VITAS
Routine homecare	$	268,137	$	278,856
Continuous care		22,027		30,699
General inpatient		29,368		27,633
Other		3,225		2,910
Medicare cap adjustment		(97)		4,072
Room and board - net		(2,130)		(3,289)
Implicit price concessions		(3,119)		(3,784)
Roto-Rooter
Drain cleaning - short term core		63,072		55,527
Plumbing - short term core		45,124		39,439
Subtotal		108,196		94,966
Excavation - short term core		52,607		47,688
Water restoration		39,786		32,137
Contractor operations		18,969		16,274
Outside franchisee fees		1,260		1,235
Other - short term core		254		435
Other		3,773		3,332
Implicit price concessions		(3,589)		(4,867)
Total	$	538,667	$	528,297

Increase/(Decrease)
Amount Percent
VITAS
Routine homecare $ 11,217 5.0
Continuous care (4,025 ) (11.9 )
General inpatient (1,334 ) (5.6 )
Medicare cap 228 100.0
Roto-Rooter
Plumbing 7,262 15.2
Drain cleaning 1,442 4.1
Water restoration 9,208 77.2
Contractor operations 632 6.4
Other 207 4.2
Total $ 24,837 6.3

The increase in VITAS’ revenues for the third quarter of 2017 versus the third quarter of 2016 was comprised of an average net Medicare reimbursement rate increasing approximately 1.3%, a 2.8% increase in days

Days of care ~~offset by acuity mix shift which negatively impacted revenue 2.2% when compared to the prior year period.~~

~~Days of care~~at VITAS during the quarter ended September 30 were as follows:


	Days of Care		Increase/(Decrease)
	2021	2020	Percent

Routine homecare	1,342,841	1,426,191	(5.8)
Nursing home	258,700	261,396	(1.0)
Respite	5,331	4,566	16.8
Subtotal routine homecare and respite	1,606,872	1,692,153	(5.0)
Continuous care	24,299	33,013	(26.4)
General inpatient	27,962	27,017	3.5
Total days of care	1,659,133	1,752,183	(5.3)

Days of Care Increase/(Decrease)
2017 2016 Percent

Routine homecare 1,458,153 1,407,623 3.6
Continuous care 41,237 46,582 (11.5)
General inpatient 32,567 36,241 (10.1)
Total days of care 1,531,957 1,490,446 2.8

~~Over 90% of VITAS’~~

The decrease in service revenues ~~for~~at VITAS is comprised primarily of a 5.3% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement rate increase (including the ~~period were from~~suspension of sequestration on May 1, 2020) of approximately 1.2%. Acuity mix shift had a net impact of reducing revenue approximately $3.0 million, or 0.9% in the quarter when compared to the prior year revenue and level-of-care mix. The combination of Medicare cap revenue reduction and ~~Medicaid.~~

other contra revenue changes negatively impacted revenue growth by approximately 80 basis points.

The increase in plumbing revenues for the third quarter of ~~2017~~2021 versus ~~2016~~2020 is attributable to a 1.0% increase in job count and to a 13.4% increase in price and service mix shift. The increase in excavation revenues for the third quarter of 2021 versus 2020 is attributable to a 14.2% increase in price and service mix shift ~~as well as~~and a ~~1.0% increase~~3.9% decrease in job count. Drain cleaning revenues for the third quarter of ~~2017~~2021 versus ~~2016~~2020 reflect a ~~6.2%~~11.2% increase in price and service mix shift ~~offset by~~and a ~~2.1% decrease~~2.4% increase in job count. Water restoration revenue increased for the third quarter of ~~2017~~2021 versus ~~2016 increased 77.2% as~~2020 due to a ~~result of continued expansion of this service offering including a 38.0%~~11.0% increase in ~~number of jobs performed. Contractor operations increased 6.4% mainly due to their expansion into water restoration.~~

~~-20-~~

job count and a 12.8% increase in price and service mix shift.

The consolidated gross margin was ~~31.0%~~36.5% in the third quarter of ~~2017~~2021 as compared with ~~28.3%~~35.8% in the third quarter of ~~2016.~~2020. On a segment basis, VITAS’ gross margin was ~~23.1%~~25.0% in the third quarter of ~~2017~~2021 as compared with ~~20.7%~~26.8%, in the third quarter of ~~2016.~~2020. The ~~increase in VITAS gross margin~~decrease is primarily due to the ~~result~~payout of ~~labor and ancillary cost management.~~discretionary bonuses. The Roto-Rooter segment’s gross margin was ~~48.7%~~53.0% for the third quarter of ~~2017~~2021 as compared with ~~47.8%~~51.6% in the third quarter of ~~2016. The increase in Roto-Rooter gross margin is the result mainly of higher revenues, particularly in water restoration, with relatively low increase in branch level fixed~~2020 primarily due to increased revenue and improved labor costs.

-26-

Selling, general and administrative expenses (“SG&A”) comprise (in thousands):


	Three months ended September 30,
	2021		2020
SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts	$	84,197	$	79,287
Impact of market value adjustments related to assets held in deferred compensation trusts		3,078		7,256
Long-term incentive compensation		1,942		1,774
Total SG&A expenses	$	89,217	$	88,317

Three months ended September 30,
2017 2016
SG&A expenses before market value adjustments of deferred compensation
plans, long-term incentive compensation, and OIG investigation expenses $ 63,463 $ 56,475
Impact of market value adjustments related to assets held in deferred
compensation trusts 1,417 1,656
Long-term incentive compensation 1,104 643
Expenses related to OIG investigation 935 599
Total SG&A expenses $ 66,919 $ 59,373

SG&A expenses before long-term incentive compensation ~~expenses related to OIG investigation~~ and the impact of market value adjustments related to ~~assets held in~~ deferred compensation trusts for the third quarter of ~~2017~~2021 were up ~~12.4%~~6.2% when compared to the third quarter of ~~2016.~~2020. This increase was mainly a result of the increase in variable selling and general administrative expenses and increased bonus expense at Roto-Rooter caused by increased ~~revenue, particularly in the Roto-Rooter segment, increased advertising expense at Roto-Rooter and normal salary increases in 2017.~~

~~During~~income.

Depreciation for the third quarter of ~~2017, a credit of $371,000 was recorded due~~2021 increased 1.1% when compared to ~~the recovery of previously recognized expenses related to the closure of the programs in one state at Vitas. There were no other operating expenses recorded in~~ the third quarter of ~~2016.~~

2020.

Amortization for the third quarter of 2021 was flat when compared to the third quarter of 2020. Quarterly amortization of intangible assets is mainly driven by two Roto-Rooter franchise acquisitions completed in 2019. The total purchase price of these acquisitions was $138.0 million. As part of the purchase price allocation, approximately $59.2 million was determined to be the value of reacquired franchise rights which are being amortized over the remaining life of each franchise agreement. The average remaining life on the reacquired franchise agreements was approximately seven years. Quarterly amortization of reacquired franchise rights for these two acquisitions is approximately $2.0 million ($8.1 million annualized through 2026). This contrasts to quarterly franchise fees historically collected from these two franchisees of approximately $470,000 ($1.9 million annualized).

Other ~~income/(expense) -~~operating expenses comprise the following:


	Three months ended September 30,
	2021		2020
Loss on disposal of fixed assets	$	63	$	307
CARES Act grant		-		8,805
Litigation settlement		-		3,095
Total other operating expenses	$	63	$	12,207

Other income – net comprise (in thousands):


	Three months ended September 30,
	2021		2020
Market value adjustment on assets held in deferred compensation trusts	$	3,078	$	7,256
Interest income		57		423
Other		(1)		(4)
Total other income - net	$	3,134	$	7,675

‎

-27-

Three months ended September 30,
2017 2016
Market value adjustment on assets held in
deferred compensation trusts $ 1,417 $ 1,656
Loss on disposal of property and equipment (146 ) (134 )
Interest income 51 119
Other 1 (1 )
Total other income/(expense) - net $ 1,323 $ 1,640

Our effective ~~income~~ tax rate ~~was 34.7% in the third quarter of 2017 compared to 38.3% during the third quarter of 2016. The change in the effective income tax rate~~reconciliation is a result of the adoption of ASU No. 2016-09 – Compensation – Stock Compensation in 2017 which requires that the excess tax benefits from stock based compensation now be recorded in the income tax provision on the statements of income. Excluding the adoption of the ASU, our effective income tax rate is 38.0%.as follows (in thousands):


	Three months ended September 30,
	2021			2020

Income tax provision calculated at the statutory federal rate	$	20,038		$	17,137
Stock compensation tax benefits		(1,199)			(7,187)
State and local income taxes		3,153			3,028
Other--net		1,425			904
Income tax provision	$	23,417		$	13,882
Effective tax rate		24.5	%		17.0	%

~~-21-~~

Net income for both periods included the following after-tax items/adjustments that (reduced) or increased after-tax earnings (in thousands):


	Three months ended September 30,
	2021		2020
VITAS
Direct costs related to COVID-19	$	(1,866)	$	(5,181)
CARES Act grant		-		(6,528)
COVID-19 Medicare cap		-		1,679
Medicare cap sequestration adjustment		-		635
Roto-Rooter
Amortization of reacquired franchise agreements		(1,729)		(1,728)
Direct costs related to COVID-19		(305)		(971)
Litigation settlements		-		(2,275)
Corporate
Stock option expense		(3,462)		(2,970)
Long-term incentive compensation		(1,752)		(1,682)
Excess tax benefits on stock compensation		1,199		7,187
Other		(166)		-
Total	$	(8,081)	$	(11,834)

Three months ended September 30,
2017 2016
VITAS
Expenses related to OIG investigation $ (578 ) $ (370 )
Program closure income 223 -
Medicare cap sequestration adjustment - (141 )
Corporate
Excess tax benefits on stock compensation 1,783 -
Stock option expense (1,064 ) (897 )
Long-term incentive compensation (699 ) (406 )
Total $ (335 ) $ (1,814 )

Three months ended September 30, ~~2017~~2021 versus ~~2016~~2020 - Segment Results

~~The change in net~~

Net income/(loss) for the third quarter of ~~2017~~2021 versus the third quarter of ~~2016 is due to~~2020 by segment (in thousands):



	Three months ended September 30,
	2021		2020
VITAS		42,950	$	45,737
Roto-Rooter		44,554		31,176
Corporate		(15,501)		(9,191)
	$	72,003	$	67,722

Increase/(Decrease)
Amount Percent
VITAS $ 5,551 26.6
Roto-Rooter 3,179 24.7
Corporate (122 ) (1.8 )
$ 8,608 32.1

VITAS’ after-tax earnings ~~were positively impacted~~decreased primarily due to lower revenue in ~~2017~~the third quarter of 2021 when compared to ~~2016 by a $6.1 million increase in revenue and a $2.3 million decrease in cost~~the third quarter of ~~services provided and goods sold.~~2020. After-tax earnings as a percent of revenue at VITAS in the third quarter of ~~2017 were 9.2%, an increase of 1.8% over~~2021 was 13.5% as compared to 13.6% in the third quarter of ~~2016.~~

2020.

Roto-Rooter’s net income was ~~positively~~ impacted in ~~2017~~2021 compared to ~~2016~~2020 primarily by ~~a $9.2 million~~higher revenue ~~increase in Roto-Rooter’s water restoration line of business~~ and ~~a $7.3 million increase in plumbing revenue.~~improved labor costs. After-tax earnings as a percent of revenue at Roto-Rooter in the third quarter of ~~2017~~2021 was ~~12.5%~~20.1%, as compared to ~~11.7%~~16.3% in the third quarter of ~~2016.~~2020.

After-tax Corporate expenses for 2021 increased 68.7% when compared to 2020 due mainly to a $6.0 million decrease in the excess tax benefits on stock compensation.

‎

-28-

Results of Operations

Nine months ended September 30, ~~2017~~2021 versus ~~2016~~2020 - Consolidated Results

Our service revenues and sales for the first nine months of ~~2017~~2021 increased ~~5.5%~~3.4% versus services and sales revenues for the first nine months of ~~2016.~~2020. Of this increase, ~~a $16.9~~$109.3 million ~~increase~~ was attributable to ~~VITAS and $48.1~~Roto-Rooter offset by a $57.3 million ~~increase was~~decrease attributable to ~~Roto-Rooter.~~VITAS. The following chart shows the components of ~~those changes~~revenue by operating segment (in thousands):


	Nine months ended September 30,
	2021		2020
VITAS
Routine homecare	$	796,817	$	826,954
Continuous care		73,658		105,836
General inpatient		85,895		85,983
Other		9,241		8,175
Medicare cap adjustment		(3,597)		(4,178)
Room and board - net		(7,451)		(9,317)
Implicit price concessions		(9,428)		(10,976)
Roto-Rooter
Drain cleaning - short term core		187,477		159,003
Plumbing - short term core		131,045		108,255
Subtotal		318,522		267,258
Excavation - short term core		159,714		135,425
Water restoration		115,804		92,810
Contractor operations		56,754		47,695
Outside franchisee fees		3,842		3,635
Other - short term core		853		1,371
Other		11,601		9,836
Implicit price concessions		(13,942)		(14,213)
Total	$	1,598,283	$	1,546,294

Increase/(Decrease)
Amount Percent
VITAS
Routine homecare $ 33,882 5.1
Continuous care (11,600 ) (10.9 )
General inpatient (5,417 ) (7.3 )
Medicare cap (19 ) (8.3 )
Roto-Rooter
Plumbing 16,852 11.6
Drain cleaning 3,454 3.2
Water restoration 23,597 64.6
Contractor operations 3,180 10.8
Other 1,033 6.9
Total $ 64,962 5.5

~~-22-~~

The increase in VITAS’ revenues for the first nine months of 2017 versus the first nine months of 2016 was comprised of an average net Medicare reimbursement rate increasing approximately 1.3%, a 2.7% increase in days

Days of care ~~offset by acuity mix shift which negatively impacted revenue when compared to the prior year period.~~

~~Days of care~~at VITAS during the nine months ended September 30 were as follows:


	Days of Care		Increase/(Decrease)
	2021	2020	Percent

Routine homecare	4,008,215	4,192,681	(4.4)
Nursing home	735,906	844,232	(12.8)
Respite	15,509	15,416	0.6
Subtotal routine homecare and respite	4,759,630	5,052,329	(5.8)
Continuous care	79,385	110,200	(28.0)
General inpatient	82,129	84,907	(3.3)
Total days of care	4,921,144	5,247,436	(6.2)

Days of Care Increase/(Decrease)
2017 2016 Percent

Routine homecare 4,256,541 4,109,775 3.6
Continuous care 129,762 145,327 (10.7)
General inpatient 97,803 111,323 (12.1)
Total days of care 4,484,106 4,366,425 2.7

~~Over 90% of VITAS’~~

The decrease in service revenues ~~for~~at VITAS is comprised primarily of a 6.2% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement rate increase (including the ~~period were from~~suspension of sequestration on May 1, 2020) of approximately 1.9%. Acuity mix shift had a net impact of reducing revenue approximately $16.0 million, or 1.6% in the quarter when compared to the prior year revenue and level-of-care mix. The combination of a lower Medicare cap revenue reduction and ~~Medicaid.~~

other contra revenue changes offset a portion of the revenue decline by approximately 20 basis points.

The increase in plumbing revenues for the first nine months of ~~2017~~2021 versus ~~2016~~2020 is attributable ~~primarily~~ to ~~service mix shift as well as~~ a ~~0.6%~~12.3% increase in job ~~count.~~count and to an 8.8% increase in price and service mix shift. The increase in excavation revenues for the first nine months of 2021 versus 2020 is attributable to a 9.2% increase in job count and to an 8.7% increase in price and service mix shift. Drain cleaning revenues for the first nine months of ~~2017~~2021 versus ~~2016~~2020 reflect a ~~5.3%~~9.1% increase in price and service mix shift ~~offset by a 2.1% decrease~~and an 8.8% increase in job count. Water restoration revenue increased for the first nine months of ~~2017~~2021 versus ~~2016 increased 64.6% as~~2020 due to a ~~result of continued expansion of this service offering including a 32.6%~~10.2% increase in ~~jobs performed. Contractor operations increased 10.8% mainly due to their expansion into water restoration.~~

job count and a 14.6% increase in price and service mix shift. The increase in job count for all service lines was driven by both residential and commercial customers.

The consolidated gross margin was ~~30.6%~~35.4% in the first nine months of ~~2017~~2021 as compared with ~~28.7%~~32.5% in the first nine months of ~~2016.~~2020. On a segment basis, VITAS’ gross margin was ~~22.5%~~23.4% in the first nine months of ~~2017~~2021 as compared with ~~21.1%~~22.9%, in the first nine months of ~~2016.~~2020. The increase ~~in VITAS’ gross margin~~ is ~~the result of mix shift~~primarily due to ~~higher margin care,~~improved labor ~~and ancillary cost management.~~costs. The Roto-Rooter segment’s gross margin was ~~48.9%~~52.7% for the first nine months of ~~2017~~2021 as compared with ~~48.0%~~50.3% in the first nine months of ~~2016. The increase in the Roto-Rooter gross margin is the result mainly of higher revenues, particularly in water restoration, with relatively low increase in branch level fixed~~2020 primarily due to increased revenue and improved labor costs.

-29-

Selling, general and administrative expenses (“SG&A”) comprise (in thousands):


	Nine months ended September 30,
	2021		2020
SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts	$	259,376	$	232,797
Impact of market value adjustments related to assets held in deferred compensation trusts		9,770		5,093
Long-term incentive compensation		5,508		5,523
Total SG&A expenses	$	274,654	$	243,413

Nine months ended September 30,
2017 2016
SG&A expenses before market value adjustments of deferred compensation
plans, long-term incentive compensation, and OIG investigation expenses $ 191,213 $ 174,183
Impact of market value adjustments related to assets held in deferred
compensation trusts 5,619 1,857
Expenses related to OIG investigation 5,178 4,105
Long-term incentive compensation 3,021 901
Total SG&A expenses $ 205,031 $ 181,046

SG&A expenses before long-term incentive compensation ~~expenses related to OIG investigation~~ and the impact of market value adjustments related to ~~assets held in~~ deferred compensation trusts for the first nine months of ~~2017~~2021 were up ~~9.8%~~11.4% when compared to the first nine months of ~~2016.~~2020. This increase was mainly a result of the increase in variable selling and general administrative expenses and increased bonus expense at Roto-Rooter caused by increased ~~revenue, particularly in the in the Roto-Rooter segment, increased advertising expense at Roto-Rooter and normal salary increases in 2017.~~

Other operating expenses were $91.1 million during the first nine months of 2017 related to a $90.0 million potential litigation settlement and $1.1 million related to the closure of the programs in one state at Vitas. During the first nine months of 2016, the Company recorded $4.5 million related to early retirement expenses.

~~-23-~~

~~Other income - net comprise (in thousands):~~

Nine months ended September 30,
2017 2016
Market value adjustment on assets held in
deferred compensation trusts $ 5,619 $ 1,857
Loss on disposal of property and equipment (481 ) (224 )
Interest income 297 301
Other 4 (1 )
Total other income - net $ 5,439 $ 1,933

Our effective income tax rate was 25.8% in the first nine months of 2017 compared to 38.6% during the first nine months of 2016. The change in the effective income tax rate is due to the adoption of ASU No. 2016-09 – Compensation – Stock Compensation which requires that the excess tax benefits from stock based compensation now be recorded in the income tax provision on the statements of income. ~~Excluding the impact of the ASU, our effective income tax rate~~

Depreciation for the first nine months of ~~2017~~2021 increased 6.9% when compared to the first nine months of 2020.

Amortization for the first nine months of 2021 increased 0.7% when compared to the first nine months of 2020. Quarterly amortization of intangible assets is mainly driven by two Roto-Rooter franchise acquisitions completed in 2019. The total purchase price of these acquisitions was ~~39.6%~~$138.0 million. As part of the purchase price allocation, approximately $59.2 million was determined to be the value of reacquired franchise rights which are being amortized over the remaining life of each franchise agreement. The average remaining life on the reacquired franchise agreements was approximately seven years. Quarterly amortization of reacquired franchise rights for these two acquisitions is approximately $2.0 million ($8.1 million annualized through 2026). This contrasts to quarterly franchise fees historically collected from these two franchisees of approximately $470,000 ($1.9 million annualized).

Other operating (income)/expenses comprise the following:


	Nine months ended September 30,
	2021		2020
Loss on disposal of fixed assets	$	789	$	154
CARES Act grant		-		(32,184)
Litigation settlement		-		3,095
Total other operating (income)/expenses	$	789	$	(28,935)

Other income – net comprise (in thousands):


	Nine months ended September 30,
	2021		2020
Market value adjustment on assets held in deferred compensation trusts	$	9,770	$	5,093
Interest income		288		647
Other		463		(17)
Total other income - net	$	10,521	$	5,723

‎

-30-

Our effective tax rate reconciliation is as follows (in thousands):


	Nine months ended September 30,
	2021			2020

Income tax provision calculated at the statutory federal rate	$	53,379		$	52,531
Stock compensation tax benefits		(5,305)			(19,943)
State and local income taxes		9,332			9,118
Other--net		2,856			2,729
Income tax provision	$	60,262		$	44,435
Effective tax rate		23.7	%		17.8	%

Net income for both periods included the following after-tax items/adjustments that (reduced) or increased after-tax earnings (in thousands):



	Nine months ended September 30,
	2021		2020
VITAS
Direct costs related to COVID-19	$	(11,442)	$	(24,009)
Facility relocation costs		(1,384)		-
CARES Act grant		-		24,009
Medicare cap sequestration adjustment		-		(462)
Roto-Rooter
Amortization of reacquired franchise agreements		(5,186)		(5,185)
Direct costs related to COVID-19		(1,140)		(2,426)
Litigation settlements		72		(2,275)
Corporate
Stock option expense		(13,695)		(11,369)
Excess tax benefits on stock compensation		5,305		19,943
Long-term incentive compensation		(4,964)		(5,006)
Direct costs related to COVID-19		(29)		-
Other		(166)		-
Total	$	(32,629)	$	(6,780)

Nine Months Ended September 30,
2017 2016
VITAS
Potential litigation settlement $ (55,800 ) $ -
Expenses related to OIG investigation (3,198 ) (2,535 )
Program closure expenses (675 ) -
Medicare cap sequestration adjustment (65 ) (141 )
Early retirement expenses - (2,840 )
Roto-Rooter
Expenses related to litigation settlements (129 ) (27 )
Corporate
Excess tax benefits on stock compensation 8,121 -
Stock option expense (4,892 ) (3,958 )
Long-term incentive compensation (1,911 ) (570 )
Total $ (58,549 ) $ (10,071 )

Nine months ended September 30, ~~2017~~2021 versus ~~2016~~2020 - Segment Results

~~The change in net~~

Net income/(loss) for the first nine months of ~~2017~~2021 versus the first nine months of ~~2016 is~~2020 by segment (in thousands):



	Nine months ended September 30,
	2021		2020
VITAS	$	113,430	$	147,262
Roto-Rooter		124,504		84,966
Corporate		(44,009)		(26,514)
	$	193,925	$	205,714

VITAS’ after-tax earnings decreased primarily due to ~~(in thousands):~~

Increase/(Decrease)
Amount Percent
VITAS $ (43,741 ) (74.7 )
Roto-Rooter 8,500 21.7
Corporate 2,312 10.9
$ (32,929 ) (43.0 )

~~VITAS’ 2017 after-tax~~lower revenue. After-tax earnings ~~were impacted~~as a percent of revenue at VITAS in ~~2017 when~~the first nine months of 2021 was 12.0% as compared to ~~2016 by a $55.8 million (after-tax) potential ligation settlement offset by a $16.8 million increase~~14.7% in ~~revenue and a $1.2 million decrease in cost~~the first nine months of ~~services provided and goods sold.~~

~~-24-~~

2020.

Roto-Rooter’s net income was ~~positively~~ impacted in ~~2017~~2021 compared to ~~2016~~2020 primarily by ~~a $23.6 million revenue increase in Roto-Rooter’s water restoration line of business, a $16.9 million increase in plumbing~~higher revenue and ~~a $7.7 million increase in all other revenue types.~~improved labor costs. After-tax earnings as a percent of revenue at Roto-Rooter in ~~2017 were 12.5%~~the first nine months of 2021 was 19.1%, as compared to ~~11.7%~~15.6% in ~~2016.~~

~~The improvement at~~the first nine months of 2020.

After-tax Corporate isexpenses for 2021 increased 66.0% when compared to 2020 due mainly to a $14.6 million decrease in the ~~impact of the adoption of ASU 2016-09 which positively impacted the Company’s~~excess tax ~~provision by approximately $8.1 million which is partially offset by higher~~benefits on stock ~~based compensation expenses.~~

compensation.

‎

~~-25-~~

-31-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021
(in thousands)(unaudited)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
2021 (a)
Service revenues and sales	$	317,411	$	221,256	$	-	$	538,667
Cost of services provided and goods sold		238,212		103,952		-		342,164
Selling, general and administrative expenses		21,372		51,914		15,931		89,217
Depreciation		5,286		6,539		19		11,844
Amortization		18		2,492		-		2,510
Other operating expense/(income)		65		(3)		1		63
Total costs and expenses		264,953		164,894		15,951		445,798
Income/(loss) from operations		52,458		56,362		(15,951)		92,869
Interest expense		(43)		(285)		(255)		(583)
Intercompany interest income/(expense)		4,513		1,847		(6,360)		-
Other income—net		22		34		3,078		3,134
Income/(expense) before income taxes		56,950		57,958		(19,488)		95,420
Income taxes		(14,000)		(13,404)		3,987		(23,417)
Net income/(loss)	$	42,950	$	44,554	$	(15,501)	$	72,003

(a) The following amounts are included in net income (in thousands):
							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
Pretax benefit/(cost):
Stock option expense	$	-		-		(3,998)	$	(3,998)
Direct costs related to COVID-19		(2,501)	$	(415)	$	-		(2,916)
Amortization of reacquired franchise agreements		-		(2,352)		-		(2,352)
Long-term incentive compensation		-		-		(1,942)		(1,942)
Other		-		-		(218)		(218)
Total	$	(2,501)	$	(2,767)	$	(6,158)	$	(11,426)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
Stock option expense	$	-		-		(3,462)	$	(3,462)
Direct costs related to COVID-19		(1,866)	$	(305)	$	-		(2,171)
Amortization of reacquired franchise agreements		-		(1,729)		-		(1,729)
Long-term incentive compensation		-		-		(1,752)		(1,752)
Other		-		-		(166)		(166)
Excess tax benefits on stock compensation		-		-		1,199		1,199
Total	$	(1,866)	$	(2,034)	$	(4,181)	$	(8,081)

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands)(unaudited)

Chemed
VITAS Roto-Rooter Corporate Consolidated
2017 (a)
Service revenues and sales $ 288,951 $ 128,493 $ - $ 417,444
Cost of services provided and goods sold 222,119 65,928 - 288,047
Selling, general and administrative expenses 23,783 33,694 9,442 66,919
Depreciation 4,529 4,268 22 8,819
Amortization - 33 - 33
Other operating expenses (371 ) - - (371 )
Total costs and expenses 250,060 103,923 9,464 363,447
Income/(loss) from operations 38,891 24,570 (9,464 ) 53,997
Interest expense (53 ) (73 ) (922 ) (1,048 )
Intercompany interest income/(expense) 2,950 1,378 (4,328 ) -
Other income/(expense)—net (86 ) (8 ) 1,417 1,323
Income/(expense) before income taxes 41,702 25,867 (13,297 ) 54,272
Income taxes (15,248 ) (9,833 ) 6,246 (18,835 )
Net income/(loss) $ 26,454 $ 16,034 $ (7,051 ) $ 35,437

(a) The following amounts are included in net income (in thousands):
Chemed
VITAS Roto-Rooter Corporate Consolidated
Pretax benefit/(cost):
Stock option expense $ - $ - $ (1,683 ) $ (1,683 )
Long-term incentive compensation - - (1,104 ) (1,104 )
Program closure expenses 371 - - 371
Expenses related to OIG investigation (935 ) - - (935 )
Total $ (564 ) $ - $ (2,787 ) $ (3,351 )

Chemed
VITAS Roto-Rooter Corporate Consolidated
After-tax benefit/(cost):
Stock option expense $ - $ - $ (1,064 ) $ (1,064 )
Long-term incentive compensation - - (699 ) (699 )
Program closure expenses 223 - - 223
Expenses related to OIG investigation (578 ) - - (578 )
Excess tax benefits on stock compensation - - 1,783 1,783
Total $ (355 ) $ - $ 20 $ (335 )

‎

~~-26-~~

-32-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020
(in thousands)(unaudited)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
2020 (a)
Service revenues and sales	$	337,097	$	191,200	$	-	$	528,297
Cost of services provided and goods sold		246,636		92,604		-		339,240
Selling, general and administrative expenses		21,799		48,074		18,444		88,317
Depreciation		5,592		6,089		33		11,714
Amortization		18		2,493		-		2,511
Other operating expense		9,052		3,155		-		12,207
Total costs and expenses		283,097		152,415		18,477		453,989
Income/(loss) from operations		54,000		38,785		(18,477)		74,308
Interest expense		(47)		(80)		(252)		(379)
Intercompany interest income/(expense)		5,337		1,651		(6,988)		-
Other income—net		381		38		7,256		7,675
Income/(expense) before income taxes		59,671		40,394		(18,461)		81,604
Income taxes		(13,934)		(9,218)		9,270		(13,882)
Net income/(loss)	$	45,737	$	31,176	$	(9,191)	$	67,722

(a) The following amounts are included in net income (in thousands):
							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
Pretax benefit/(cost):
CARES Act grant	$	(8,805)	$	-	$	-	$	(8,805)
Direct costs related to COVID-19		(6,945)		(1,321)		-		(8,266)
Stock option expense		-		-		(3,182)		(3,182)
Litigation settlement				(3,095)				(3,095)
Amortization of reacquired franchise agreements		-		(2,352)		-		(2,352)
COVID-19 Medicare cap		2,250		-		-		2,250
Long-term incentive compensation		-		-		(1,774)		(1,774)
Medicare cap sequestration adjustment		852		-		-		852
Total	$	(12,648)	$	(6,768)	$	(4,956)	$	(24,372)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
CARES Act grant	$	(6,528)	$	-	$	-	$	(6,528)
Direct costs related to COVID-19		(5,181)		(971)		-		(6,152)
Stock option expense		-		-		(2,970)		(2,970)
Litigation settlement				(2,275)				(2,275)
Amortization of reacquired franchise agreements		-		(1,728)		-		(1,728)
Long-term incentive compensation		-		-		(1,682)		(1,682)
COVID-19 Medicare cap		1,679		-		-		1,679
Medicare cap sequestration adjustment		635		-		-		635
Excess tax benefits on stock compensation		-		-		7,187		7,187
Total	$	(9,395)	$	(4,974)	$	2,535	$	(11,834)

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016
(in thousands)(unaudited)

Chemed
VITAS Roto-Rooter Corporate Consolidated
2016 (a)
Service revenues and sales $ 282,865 $ 109,742 $ - $ 392,607
Cost of services provided and goods sold 224,410 57,248 - 281,658
Selling, general and administrative expenses 21,775 28,635 8,963 59,373
Depreciation 4,751 3,731 132 8,614
Amortization 14 77 - 91
Total costs and expenses 250,950 89,691 9,095 349,736
Income/(loss) from operations 31,915 20,051 (9,095 ) 42,871
Interest expense (59 ) (78 ) (881 ) (1,018 )
Intercompany interest income/(expense) 1,810 800 (2,610 ) -
Other income/(expense)—net (1 ) (14 ) 1,655 1,640
Income/(expense) before income taxes 33,665 20,759 (10,931 ) 43,493
Income taxes (12,762 ) (7,904 ) 4,002 (16,664 )
Net income/(loss) $ 20,903 $ 12,855 $ (6,929 ) $ 26,829

(a) The following amounts are included in net income (in thousands):
Chemed
VITAS Roto-Rooter Corporate Consolidated
Pretax benefit/(cost):
Stock option expense $ - $ - $ (1,419 ) $ (1,419 )
Long-term incentive compensation - - (643 ) (643 )
Medicare cap sequestration adjustment (228 ) - - (228 )
Expenses related to OIG investigation (599 ) - - (599 )
Total $ (827 ) $ - $ (2,062 ) $ (2,889 )

Chemed
VITAS Roto-Rooter Corporate Consolidated
After-tax benefit/(cost):
Stock option expense $ - $ - $ (897 ) $ (897 )
Long-term incentive compensation - - (406 ) (406 )
Medicare cap sequestration adjustment (141 ) - - (141 )
Expenses related to OIG investigation (370 ) - - (370 )
Total $ (511 ) $ - $ (1,303 ) $ (1,814 )

‎

~~-27-~~

-33-



CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(in thousands)(unaudited)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
2021 (a)
Service revenues and sales	$	945,135	$	653,148	$	-	$	1,598,283
Cost of services provided and goods sold		724,398		308,732		-		1,033,130
Selling, general and administrative expenses		66,094		158,791		49,769		274,654
Depreciation		17,749		19,359		63		37,171
Amortization		53		7,477		-		7,530
Other operating expense		655		133		1		789
Total costs and expenses		808,949		494,492		49,833		1,353,274
Income/(loss) from operations		136,186		158,656		(49,833)		245,009
Interest expense		(129)		(464)		(750)		(1,343)
Intercompany interest income/(expense)		13,524		5,116		(18,640)		-
Other income—net		654		97		9,770		10,521
Income/(expense) before income taxes		150,235		163,405		(59,453)		254,187
Income taxes		(36,805)		(38,901)		15,444		(60,262)
Net income/(loss)	$	113,430	$	124,504	$	(44,009)	$	193,925


(a) The following amounts are included in net income (in thousands):
							Chemed
		VITAS	Roto-Rooter		Corporate		Consolidated
Pretax benefit/(cost):
Direct costs related to COVID-19	$	(15,338)	$	(1,551)	$	(38)	$	(16,927)
Stock option expense		-		-		(16,342)		(16,342)
Amortization of reacquired franchise agreements		-		(7,056)		-		(7,056)
Long-term incentive compensation		-		-		(5,508)		(5,508)
Facility relocation costs		(1,855)		-		-		(1,855)
Litigation settlement		-		98		-		98
Other		-		-		(218)		(218)
Total	$	(17,193)	$	(8,509)	$	(22,106)	$	(47,808)

							Chemed
		VITAS	Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
Stock option expense	$	-	$	-	$	(13,695)	$	(13,695)
Direct costs related to COVID-19		(11,442)		(1,140)		(29)		(12,611)
Amortization of reacquired franchise agreements		-		(5,186)		-		(5,186)
Long-term incentive compensation		-		-		(4,964)		(4,964)
Facility relocation costs		(1,384)		-		-		(1,384)
Litigation settlement		-		72		-		72
Other		-		-		(166)		(166)
Excess tax benefits on stock compensation		-		-		5,305		5,305
Total	$	(12,826)	$	(6,254)	$	(13,549)	$	(32,629)

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands)(unaudited)

Chemed
VITAS Roto-Rooter Corporate Consolidated
2017 (a)
Service revenues and sales $ 855,977 $ 382,390 $ - $ 1,238,367
Cost of services provided and goods sold 663,565 195,474 - 859,039
Selling, general and administrative expenses 72,608 100,917 31,506 205,031
Depreciation 14,048 12,322 175 26,545
Amortization 14 97 - 111
Other operating expenses 91,138 - - 91,138
Total costs and expenses 841,373 308,810 31,681 1,181,864
Income/(loss) from operations 14,604 73,580 (31,681 ) 56,503
Interest expense (161 ) (259 ) (2,744 ) (3,164 )
Intercompany interest income/(expense) 8,478 4,035 (12,513 ) -
Other income/(expense)—net (95 ) (85 ) 5,619 5,439
Income/(expense) before income taxes 22,826 77,271 (41,319 ) 58,778
Income taxes (8,029 ) (29,555 ) 22,431 (15,153 )
Net income/(loss) $ 14,797 $ 47,716 $ (18,888 ) $ 43,625

(a) The following amounts are included in net income (in thousands):
Chemed
VITAS Roto-Rooter Corporate Consolidated
Pretax benefit/(cost):
Potential litigation settlement $ (90,000 ) $ - $ - $ (90,000 )
Medicare cap sequestration adjustments (105 ) - - (105 )
Stock option expense - - (7,738 ) (7,738 )
Long-term incentive compensation - - (3,021 ) (3,021 )
Expenses related to litigation settlements - (213 ) - (213 )
Program closure expenses (1,138 ) - - (1,138 )
Expenses related to OIG investigation (5,178 ) - - (5,178 )
Total $ (96,421 ) $ (213 ) $ (10,759 ) $ (107,393 )

Chemed
VITAS Roto-Rooter Corporate Consolidated
After-tax benefit/(cost):
Potential litigation settlement $ (55,800 ) $ - $ - $ (55,800 )
Medicare cap sequestration adjustments (65 ) - - (65 )
Stock option expense - - (4,892 ) (4,892 )
Long-term incentive compensation - - (1,911 ) (1,911 )
Expenses related to litigation settlements - (129 ) - (129 )
Program closure expenses (675 ) - - (675 )
Expenses related to OIG investigation (3,198 ) - - (3,198 )
Excess tax benefits on stock compensation - - 8,121 8,121
Total $ (59,738 ) $ (129 ) $ 1,318 $ (58,549 )

‎

~~-28-~~

-34-



CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(in thousands)(unaudited)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
2020 (a)
Service revenues and sales	$	1,002,477	$	543,817	$	-	$	1,546,294
Cost of services provided and goods sold		772,880		270,268		-		1,043,148
Selling, general and administrative expenses		65,141		138,587		39,685		243,413
Depreciation		16,622		18,035		104		34,761
Amortization		53		7,423		-		7,476
Other operating (income)/expense		(31,661)		2,725		1		(28,935)
Total costs and expenses		823,035		437,038		39,790		1,299,863
Income/(loss) from operations		179,442		106,779		(39,790)		246,431
Interest expense		(137)		(272)		(1,596)		(2,005)
Intercompany interest income/(expense)		14,463		4,422		(18,885)		-
Other income—net		549		68		5,106		5,723
Income/(expense) before income taxes		194,317		110,997		(55,165)		250,149
Income taxes		(47,055)		(26,031)		28,651		(44,435)
Net income/(loss)	$	147,262	$	84,966	$	(26,514)	$	205,714


(a) The following amounts are included in net income (in thousands):
							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
Pretax benefit/(cost):
Direct costs related to COVID-19	$	(32,184)	$	(3,299)	$	-	$	(35,483)
CARES Act grant		32,184		-		-		32,184
Stock option expense		-		-		(13,296)		(13,296)
Amortization of reacquired franchise agreements		-		(7,056)		-		(7,056)
Long-term incentive compensation		-		-		(5,523)		(5,523)
Litigation Settlement		-		(3,095)		-		(3,095)
Medicare cap sequestration adjustment		(619)		-		-		(619)
Total	$	(619)	$	(13,450)	$	(18,819)	$	(32,888)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
Direct costs related to COVID-19	$	(24,009)	$	(2,426)	$	-	$	(26,435)
CARES Act grant		24,009		-		-		24,009
Stock option expense		-		-		(11,369)		(11,369)
Amortization of reacquired franchise agreements		-		(5,185)		-		(5,185)
Long-term incentive compensation		-		-		(5,006)		(5,006)
Litigation settlement		-		(2,275)		-		(2,275)
Medicare cap sequestration adjustment		(462)		-		-		(462)
Excess tax benefits on stock compensation		-		-		19,943		19,943
Total	$	(462)	$	(9,886)	$	3,568	$	(6,780)

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(in thousands)(unaudited)

Chemed
VITAS Roto-Rooter Corporate Consolidated
2016 (a)
Service revenues and sales $ 839,131 $ 334,274 $ - $ 1,173,405
Cost of services provided and goods sold 662,371 173,977 - 836,348
Selling, general and administrative expenses 69,197 87,890 23,959 181,046
Depreciation 14,346 10,860 413 25,619
Amortization 41 233 - 274
Other operating expenses 4,491 - - 4,491
Total costs and expenses 750,446 272,960 24,372 1,047,778
Income/(loss) from operations 88,685 61,314 (24,372 ) 125,627
Interest expense (176 ) (264 ) (2,391 ) (2,831 )
Intercompany interest income/(expense) 5,840 2,614 (8,454 ) -
Other income/(expense)—net 76 (2 ) 1,859 1,933
Income/(expense) before income taxes 94,425 63,662 (33,358 ) 124,729
Income taxes (35,887 ) (24,446 ) 12,158 (48,175 )
Net income/(loss) $ 58,538 $ 39,216 $ (21,200 ) $ 76,554

(a) The following amounts are included in net income (in thousands):
Chemed
VITAS Roto-Rooter Corporate Consolidated
Pretax benefit/(cost):
Stock option expense $ - $ - $ (6,259 ) $ (6,259 )
Medicare cap sequestration adjustment (228 ) - - (228 )
Long-term incentive compensation - - (901 ) (901 )
Early retirement expenses (4,491 ) - - (4,491 )
Expenses related to litigation settlements - (44 ) - (44 )
Expenses related to OIG investigation (4,105 ) - - (4,105 )
Total $ (8,824 ) $ (44 ) $ (7,160 ) $ (16,028 )

Chemed
VITAS Roto-Rooter Corporate Consolidated
After-tax benefit/(cost):
Stock option expense $ - $ - $ (3,958 ) $ (3,958 )
Medicare cap sequestration adjustment (141 ) - - (141 )
Long-term incentive compensation - - (570 ) (570 )
Early retirement expenses (2,840 ) - - (2,840 )
Expenses related to litigation settlements - (27 ) - (27 )
Expenses related to OIG investigation (2,535 ) - - (2,535 )
Total $ (5,516 ) $ (27 ) $ (4,528 ) $ (10,071 )

‎

~~-29-~~

-35-


Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

Chemed Corporation and Subsidiary Companies
(in thousands)								Chemed
For the three months ended Setptember 30, 2021		VITAS		Roto-Rooter		Corporate		Consolidated

	Net income/(loss)	$	42,950	$	44,554	$	(15,501)	$	72,003
	Add/(deduct):
	Interest expense		43		285		255		583
	Income taxes		14,000		13,404		(3,987)		23,417
	Depreciation		5,286		6,539		19		11,844
	Amortization		18		2,492		-		2,510
	EBITDA		62,297		67,274		(19,214)		110,357
	Add/(deduct):
	Intercompany interest expense/(income)		(4,513)		(1,847)		6,360		-
	Interest income		(24)		(34)		-		(58)
	Stock option expense		-		-		3,998		3,998
	Direct costs related to COVID-19		2,501		415		-		2,916
	Long-term incentive compensation		-		-		1,942		1,942
	Other		-		-		218		218
	Adjusted EBITDA	$	60,261	$	65,808	$	(6,696)	$	119,373

								Chemed
For the three months ended September 30, 2020		VITAS		Roto-Rooter		Corporate		Consolidated

	Net income/(loss)	$	45,737	$	31,176	$	(9,191)	$	67,722
	Add/(deduct):
	Interest expense		47		80		252		379
	Income taxes		13,934		9,218		(9,270)		13,882
	Depreciation		5,592		6,089		33		11,714
	Amortization		18		2,493		-		2,511
	EBITDA		65,328		49,056		(18,176)		96,208
	Add/(deduct):
	Intercompany interest expense/(income)		(5,337)		(1,651)		6,988		-
	Interest (income)/expense		(385)		(38)		-		(423)
	CARES Act grant		8,805		-		-		8,805
	Direct costs related to COVID-19		6,945		1,321		-		8,266
	Stock option expense		-		-		3,182		3,182
	Litigation Settlement		-		3,095		-		3,095
	COVID-19 related Medicare cap		(2,250)		-		-		(2,250)
	Long-term incentive compensation		-		-		1,774		1,774
	Medicare cap sequestration adjustment		(852)		-		-		(852)
	Adjusted EBITDA	$	72,254	$	51,783	$	(6,232)	$	117,805

Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

Chemed Corporation and Subsidiary Companies
(in thousands) Chemed
For the three months ended September 30, 2017 VITAS Roto-Rooter Corporate Consolidated

Net income/(loss) $ 26,454 $ 16,034 $ (7,051 ) $ 35,437
Add/(deduct):
Interest expense 53 73 922 1,048
Income taxes 15,248 9,833 (6,246 ) 18,835
Depreciation 4,529 4,268 22 8,819
Amortization - 33 - 33
EBITDA 46,284 30,241 (12,353 ) 64,172
Add/(deduct):
Intercompany interest expense/(income) (2,950 ) (1,378 ) 4,328 -
Interest income (48 ) (4 ) - (52 )
Expenses related to OIG investigation 935 - - 935
Program closure expenses (371 ) - - (371 )
Amortization of stock awards 72 67 156 295
Advertising cost adjustment - (162 ) - (162 )
Stock option expense - - 1,683 1,683
Long-term incentive compensation - - 1,104 1,104
Adjusted EBITDA $ 43,922 $ 28,764 $ (5,082 ) $ 67,604

Chemed
For the three months ended September 30, 2016 VITAS Roto-Rooter Corporate Consolidated

Net income/(loss) $ 20,903 $ 12,855 $ (6,929 ) $ 26,829
Add/(deduct):
Interest expense 59 78 881 1,018
Income taxes 12,762 7,904 (4,002 ) 16,664
Depreciation 4,751 3,731 132 8,614
Amortization 14 77 - 91
EBITDA 38,489 24,645 (9,918 ) 53,216
Add/(deduct):
Intercompany interest expense/(income) (1,810 ) (800 ) 2,610 -
Interest income (108 ) (11 ) - (119 )
Expenses related to litigation settlements 1,149 - - 1,149
Expenses related to OIG investigation 599 - - 599
Medicare cap sequestration adjustment 228 - - 228
Amortization of stock awards 85 76 279 440
Advertising cost adjustment - (188 ) - (188 )
Stock option expense - - 1,419 1,419
Long-term incentive compensation - - 643 643
Adjusted EBITDA $ 38,632 $ 23,722 $ (4,967 ) $ 57,387

‎

~~-30-~~

-36-


Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

Chemed Corporation and Subsidiary Companies
(in thousands)							Chemed
For the nine months ended September 30, 2021	VITAS		Roto-Rooter		Corporate		Consolidated

Net income/(loss)	$	113,430	$	124,504	$	(44,009)	$	193,925
Add/(deduct):
Interest expense		129		464		750		1,343
Income taxes		36,805		38,901		(15,444)		60,262
Depreciation		17,749		19,359		63		37,171
Amortization		53		7,477		-		7,530
EBITDA		168,166		190,705		(58,640)		300,231
Add/(deduct):
Intercompany interest expense/(income)		(13,524)		(5,116)		18,640		-
Interest income		(191)		(97)		-		(288)
Direct costs related to COVID-19		15,338		1,551		38		16,927
Stock option expense		-		-		16,342		16,342
Long-term incentive compensation		-		-		5,508		5,508
Litigation settlement		-		(98)		-		(98)
Other		-		-		218		218
Adjusted EBITDA	$	169,789	$	186,945	$	(17,894)	$	338,840

							Chemed
For the nine months ended September 30, 2020	VITAS		Roto-Rooter		Corporate		Consolidated

Net income/(loss)	$	147,262	$	84,966	$	(26,514)	$	205,714
Add/(deduct):
Interest expense		137		272		1,596		2,005
Income taxes		47,055		26,031		(28,651)		44,435
Depreciation		16,622		18,035		104		34,761
Amortization		53		7,423		-		7,476
EBITDA		211,129		136,727		(53,465)		294,391
Add/(deduct):
Intercompany interest expense/(income)		(14,463)		(4,422)		18,885		-
Interest income		(566)		(68)		(13)		(647)
Direct costs related to COVID-19		32,184		3,299		-		35,483
CARES Act grant		(32,184)		-		-		(32,184)
Stock option expense		-		-		13,296		13,296
Long-term incentive compensation		-		-		5,523		5,523
Litigation settlement		-		3,095		-		3,095
Medicare cap sequestration adjustment		619		-		-		619
Adjusted EBITDA	$	196,719	$	138,631	$	(15,774)	$	319,576

Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

Chemed Corporation and Subsidiary Companies
(in thousands) Chemed
For the nine months ended September 30, 2017 VITAS Roto-Rooter Corporate Consolidated

Net income/(loss) $ 14,797 $ 47,716 $ (18,888 ) $ 43,625
Add/(deduct):
Interest expense 161 259 2,744 3,164
Income taxes 8,029 29,555 (22,431 ) 15,153
Depreciation 14,048 12,322 175 26,545
Amortization 14 97 - 111
EBITDA 37,049 89,949 (38,400 ) 88,598
Add/(deduct):
Intercompany interest expense/(income) (8,478 ) (4,035 ) 12,513 -
Interest income (267 ) (29 ) - (296 )
Potential litigation settlement 90,000 - - 90,000
Medicare cap sequestration adjustment 105 - - 105
Program closure expenses 1,138 - - 1,138
Expenses related to OIG investigation 5,178 - - 5,178
Stock award amortization 220 203 510 933
Advertising cost adjustment - (707 ) - (707 )
Expenses related to litigation settlements - 213 - 213
Stock option expense - - 7,738 7,738
Long-term incentive compensation - - 3,021 3,021
Adjusted EBITDA $ 124,945 $ 85,594 $ (14,618 ) $ 195,921

Chemed
For the nine months ended September 30, 2016 VITAS Roto-Rooter Corporate Consolidated

Net income/(loss) $ 58,538 $ 39,216 $ (21,200 ) $ 76,554
Add/(deduct):
Interest expense 176 264 2,391 2,831
Income taxes 35,887 24,446 (12,158 ) 48,175
Depreciation 14,346 10,860 413 25,619
Amortization 41 233 - 274
EBITDA 108,988 75,019 (30,554 ) 153,453
Add/(deduct):
Intercompany interest expense/(income) (5,840 ) (2,614 ) 8,454 -
Interest income (256 ) (45 ) - (301 )
Early retirement expenses 4,491 - - 4,491
Expenses related to OIG investigation 4,105 - - 4,105
Stock award amortization 302 230 883 1,415
Medicare cap sequestration adjustment 228 - - 228
Expenses related to litigation settlements 1,149 44 - 1,193
Advertising cost adjustment - (1,353 ) - (1,353 )
Stock option expense - - 6,259 6,259
Long-term incentive compensation - - 901 901
Adjusted EBITDA $ 113,167 $ 71,281 $ (14,057 ) $ 170,391

‎

~~-31-~~

-37-



RECONCILIATION OF ADJUSTED NET INCOME
(in thousands, except per share data)(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income as reported	$	72,003	$	67,722	$	193,925	$	205,714

Add/(deduct) pre-tax cost of:
Direct costs related to COVID-19		2,916		8,266		16,927		35,483
Stock option expense		3,998		3,182		16,342		13,296
Amortization of reacquired franchise agreements		2,352		2,352		7,056		7,056
Long-term incentive compensation		1,942		1,774		5,508		5,523
Facility relocation costs		-		-		1,855		-
Litigation settlements		-		3,095		(98)		3,095
Other		218		-		218
COVID-19 related Medicare cap		-		(2,250)		-		-
CARES Act grant		-		8,805		-		(32,184)
Medicare cap sequestration adjustment		-		(852)		-		619
Add/(deduct) tax impacts:
Tax impact of the above pre-tax adjustments (1)		(2,146)		(5,351)		(9,874)		(6,165)
Excess tax benefits on stock compensation		(1,199)		(7,187)		(5,305)		(19,943)
Adjusted net income	$	80,084	$	79,556	$	226,554	$	212,494

Diluted Earnings Per Share As Reported
Net income	$	4.55	$	4.14	$	12.06	$	12.53
Average number of shares outstanding		15,842		16,373		16,083		16,419

Adjusted Diluted Earnings Per Share
Adjusted net income	$	5.06	$	4.86	$	14.09	$	12.94
Adjusted average number of shares outstanding		15,842		16,373		16,083		16,419

(1) The tax impact of pre-tax adjustments was calculated using the effective tax rate of the operating unit for which each adjustment is associated.

RECONCILIATION OF ADJUSTED NET INCOME
(in thousands, except per share data)(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income/(loss) as reported $ 35,437 $ 26,829 $ 43,625 $ 76,554

Add/(deduct) after-tax cost of:
Excess tax benefits on stock compensation (1,783 ) - (8,121 ) -
Stock option expense 1,064 897 4,892 3,958
Long-term incentive compensation 699 406 1,911 570
Expenses of OIG investigation 578 370 3,198 2,535
Program closure expenses (223 ) - 675 -
Medicare cap sequestration adjustment - 141 65 141
Potential litigation settlement - - 55,800 -
Expenses related to litigation settlements - - 129 27
Early retirement expenses - - - 2,840
Adjusted net income $ 35,772 $ 28,643 $ 102,174 $ 86,625

Diluted Earnings Per Share As Reported
Net income/(loss) $ 2.13 $ 1.62 $ 2.60 $ 4.54
Average number of shares outstanding 16,676 16,559 16,763 16,851

Adjusted Diluted Earnings Per Share
Adjusted net income $ 2.15 $ 1.73 $ 6.10 $ 5.14
Adjusted average number of shares outstanding 16,676 16,559 16,763 16,851

‎

~~-32-~~

-38-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
OPERATING STATISTICS	2021			2020			2021			2020
Net revenue ($000)
Homecare	$	268,137		$	278,856		$	796,817		$	826,954
Inpatient		29,368			27,633			85,895			85,983
Continuous care		22,027			30,699			73,658			105,836
Other		3,225			2,910			9,241			8,175
Subtotal	$	322,757		$	340,098		$	965,611		$	1,026,948
Room and board, net		(2,130)			(3,289)			(7,451)			(9,317)
Contractual allowances		(3,119)			(3,784)			(9,428)			(10,976)
Medicare cap allowance		(97)			4,072			(3,597)			(4,178)
Total	$	317,411		$	337,097		$	945,135		$	1,002,477
Net revenue as a percent of total before Medicare cap allowances
Homecare		83.1	%		82.0	%		82.5	%		80.5	%
Inpatient		9.1			8.1			8.9			8.4
Continuous care		6.8			9.0			7.6			10.3
Other		1.0			0.9			1.0			0.8
Subtotal		100.0			100.0			100.0			100.0
Room and board, net		(0.7)			(1.0)			(0.8)			(0.9)
Contractual allowances		(1.0)			(1.1)			(1.0)			(1.1)
Medicare cap allowance		-			1.2			(0.3)			(0.4)
Total		98.3	%		99.1	%		97.9	%		97.6	%
Days of care
Homecare		1,342,841			1,426,191			4,008,215			4,192,681
Nursing home		258,700			261,396			735,906			844,232
Respite		5,331			4,566			15,509			15,416
Subtotal routine homecare and respite		1,606,872			1,692,153			4,759,630			5,052,329
Inpatient		27,962			27,017			82,129			84,907
Continuous care		24,299			33,013			79,385			110,200
Total		1,659,133			1,752,183			4,921,144			5,247,436
Number of days in relevant time period		92			92			273			274
Average daily census (days)
Homecare		14,596			15,502			14,682			15,302
Nursing home		2,812			2,841			2,696			3,081
Respite		58			50			57			56
Subtotal routine homecare and respite		17,466			18,393			17,435			18,439
Inpatient		304			294			301			310
Continuous care		264			358			291			402
Total		18,034			19,045			18,027			19,151
Total Admissions		17,598			17,943			52,573			53,368
Total Discharges		17,686			18,205			52,747			51,281
Average length of stay (days)		96.0			97.1			95.0			92.9
Median length of stay (days)		13.0			14.0			13.0			14.0
ADC by major diagnosis
Cerebro		36.4	%		35.1	%		36.7	%		35.7	%
Neurological		22.7			22.1			22.5			21.7
Cancer		12.0			12.5			12.1			12.6
Cardio		15.5			16.1			15.5			15.9
Respiratory		7.5			8.0			7.5			8.2
Other		5.9			6.2			5.7			5.9
Total		100.0	%		100.0	%		100.0	%		100.0	%
Admissions by major diagnosis
Cerebro		20.3			21.4	%		21.1	%		21.2	%
Neurological		12.1			13.2			12.2			13.0
Cancer		27.0			27.4			26.9			27.8
Cardio		14.1			13.6			14.4			14.5
Respiratory		11.3			9.9			10.9			10.6
Other		15.2			14.5			14.5			12.9
Total		100.0	%		100.0	%		100.0	%		100.0	%

Estimated uncollectible accounts as a percent of revenues		1.0	%		1.1	%		1.0	%		1.1	%
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments		33.7			33.4			n.a.			n.a.
Days of revenue outstanding- including unapplied Medicare payments		23.4			22.1			n.a.			n.a.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)
Three Months Ended September 30, Nine Months Ended Setpember 30,
OPERATING STATISTICS 2017 2016 2017 2016
Net revenue ($000)
Homecare $ 236,565 $ 225,348 $ 693,359 $ 659,477
Inpatient 22,516 23,850 68,439 73,856
Continuous care 29,870 33,895 94,426 106,026
Total before Medicare cap allowance $ 288,951 $ 283,093 $ 856,224 $ 839,359
Medicare cap allowance - (228 ) (247 ) (228 )
Total $ 288,951 $ 282,865 $ 855,977 $ 839,131
Net revenue as a percent of total before Medicare cap allowances
Homecare 81.9 % 79.6 % 81.0 % 78.6 %
Inpatient 7.8 8.4 8.0 8.8
Continuous care 10.3 12.0 11.0 12.6
Total before Medicare cap allowance 100.0 100.0 100.0 100.0
Medicare cap allowance - (0.1 ) - -
Total 100.0 % 99.9 % 100.0 % 100.0 %
Average daily census (days)
Homecare 12,596 12,223 12,444 11,972
Nursing home 3,254 3,077 3,148 3,028
Routine homecare 15,850 15,300 15,592 15,000
Inpatient 354 394 358 406
Continuous care 448 507 475 530
Total 16,652 16,201 16,425 15,936
Total Admissions 16,000 16,157 49,874 49,205
Total Discharges 15,726 15,690 49,074 48,403
Average length of stay (days) 89.5 87.7 87.9 85.2
Median length of stay (days) 16.0 16.0 16.0 16.0
ADC by major diagnosis
Cerebro 35.6 % 32.9 % 35.0 % 32.2 %
Neurological 18.9 20.7 19.4 21.3
Cardio 16.6 17.1 16.6 17.3
Cancer 14.4 15.5 14.8 15.3
Respiratory 7.9 7.8 7.9 7.8
Other 6.6 6.0 6.3 6.1
Total 100.0 % 100.0 % 100.0 % 100.0 %
Admissions by major diagnosis
Cerebro 22.0 21.2 % 21.9 % 20.9 %
Neurological 10.0 11.0 10.5 11.0
Cancer 31.5 33.3 30.8 31.9
Cardio 14.9 14.4 15.1 15.3
Respiratory 10.6 9.0 10.9 10.1
Other 11.0 11.1 10.8 10.8
Total 100.0 % 100.0 % 100.0 % 100.0 %
Direct patient care margins
Routine homecare 52.4 % 51.4 % 52.2 % 51.8 %
Inpatient 3.4 (2.4 ) 4.4 2.7
Continuous care 17.3 12.2 16.9 13.7
Homecare margin drivers (dollars per patient day)
Labor costs $ 56.48 $ 56.53 $ 57.20 $ 56.51
Combined drug, HME and medical supplies 14.67 16.30 14.77 15.90
Inpatient margin drivers (dollars per patient day)
Labor costs $ 362.48 $ 360.35 $ 369.77 $ 346.61
Continuous care margin drivers (dollars per patient day)
Labor costs $ 579.31 $ 618.15 $ 584.82 $ 609.08
Bad debt expense as a percent of revenues 1.1 % 1.2 % 1.1 % 1.2 %
Accounts receivable -- Days of revenue outstanding- excluding unapplied Medicare payments 34.6 38.4 n.a n.a.
Accounts receivable -- Days of revenue outstanding- including unapplied Medicare payments 19.9 20.7 n.a n.a.

‎

~~-33-~~

-39-

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Regarding Forward-Looking Information

Certain statements contained in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe”, “expect”, “hope”, “anticipate”, “plan” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. These forward-looking statements are based on current expectations and assumptions and involve various known and unknown risks, uncertainties, contingencies and other factors, which could cause Chemed’s actual results to differ from those expressed in such forward-looking statements. Variances in any or all of the risks, uncertainties, contingencies, and other factors from our assumptions could cause actual results to differ materially from these forward-looking statements and trends. In addition, our ability to deal with the unknown outcomes of these events, many of which are beyond our control, may affect the reliability of projections and other financial matters. Investors are cautioned that such forward-looking statements are subject to inherent risk and there are no assurances that the matters contained in such statements will be achieved. Chemed does not undertake and specifically disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of a new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s primary market risk exposure relates to interest rate risk exposure through its variable interest line of credit. At September 30, ~~2017,~~2021, the Company had ~~$82.5 million of~~no variable rate debt outstanding. For each $10 million ~~dollars~~ borrowed under the credit facility, an increase or decrease of 100 basis points (1% ~~point)~~), increases or decreases the Company’s annual interest expense by $100,000.

The Company continually evaluates this interest rate exposure and periodically weighs the cost versus the benefit of fixing the variable interest rates through a variety of hedging techniques.

Item 4. Controls and Procedures

We carried out an evaluation, under the supervision of our President and Chief Executive Officer and with the participation of the Executive Vice President and Chief Financial Officer and the Vice President and Controller, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the President and Chief Executive Officer, Executive Vice President and Chief Financial Officer and Vice President and Controller have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. There has been no change in our internal control over financial reporting that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding the Company’s legal proceedings, see ~~note 10,~~Note 11, Legal and Regulatory Matters, under Part I, Item I of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

There have been no other material changes from the risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K.

‎

~~-34-~~

-40-

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 2(c). Purchases of Equity Securities by Issuer and Affiliated Purchasers

The following table shows the activity related to our share repurchase program for the first nine months of ~~2017:~~2021:



	Total Number	Weighted Average		Cumulative Shares	Dollar Amount
	of Shares	Price Paid Per		Repurchased Under	Remaining Under
	Repurchased	Share		the Program	The Program

February 2011 Program
January 1 through January 31, 2021	-	$	-	9,030,125	$	178,424,171
February 1 through February 28, 2021	20,000		446.44	9,050,125		169,495,380
March 1 through March 31, 2021	80,000		447.98	9,130,125	$	133,656,728

First Quarter Total	100,000	$	447.67

April 1 through April 30, 2021	14,685	$	478.70	9,144,810	$	126,627,084
May 1 through May 31, 2021	200,315		486.65	9,345,125		329,142,814
June 1 through June 30, 2021	35,000		496.21	9,380,125	$	311,775,318

Second Quarter Total	250,000	$	487.52

July 1 through July 31, 2021	-	$	-	9,380,125	$	311,775,318
August 1 through August 31, 2021	279,171		465.57	9,659,296		181,801,156
September 1 through September 30, 2021	70,829		476.60	9,730,125	$	148,044,270

Third Quarter Total	350,000	$	467.80

Total Number Weighted Average Cumulative Shares Dollar Amount
of Shares Price Paid Per Repurchased Under Remaining Under
Repurchased Share the Program The Program

February 2011 Program

January 1 through January 31, 2017 - $ - 7,315,718 $ 50,173,009
February 1 through February 28, 2017 104,358 178.39 7,420,076 31,556,555
March 1 through March 31, 2017 195,642 182.20 7,615,718 $ 95,910,768

First Quarter Total 300,000 $ 180.87

April 1 through April 30, 2017 - $ - 7,615,718 $ 95,910,768
May 1 through May 31, 2017 150,000 205.34 7,765,718 65,109,586
June 1 through June 30, 2017 - - 7,765,718 $ 65,109,586

Second Quarter Total 150,000 $ 205.34

July 1 through July 31, 2017 - $ - 7,765,718 $ 65,109,586
August 1 through August 31, 2017 47,726 191.53 7,813,444 55,968,634
September 1 through September 30, 2017 2,274 191.42 7,815,718 $ 55,533,344

Third Quarter Total 50,000 $ 191.52

~~On March 13, 2017 our Board of Directors authorized an additional $100 million under the February 2011 Repurchase Program.~~

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

‎

~~-35-~~

-41-

Item 6. Exhibits

~~Exhibit No.~~		~~Description~~

~~31.1~~ Exhibit No.		Description

31.1		Certification by Kevin J. McNamara pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act of 1934.

31.2		Certification by David P. Williams pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act of ~~1934.~~1934.

31.3		Certification by Michael D. Witzeman pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act of 1934.

32.1		Certification by Kevin J. McNamara pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by David P. Williams pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.

32.3		Certification by Michael D. Witzeman pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

~~101.INS~~ 101		~~XBRL Instance Document~~ The following materials from Chemed Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) The Condensed Consolidated Balance Sheet, (ii) The Condensed Consolidated Statement of Income, (iii) The Condensed Consolidated Statement of Cash Flows, (iv) The Condensed Statement of Equity, and (v) Notes to the Condensed Consolidated Financial Statements.
104
~~101.SCH~~		~~XBRL Taxonomy Extension Schema~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase~~ The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in iXBRL and contained in Exhibit 101.

‎

~~SIGNATURES~~

-42-

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

							~~Chemed Corporation~~
							~~(Registrant)~~ Chemed Corporation
							(Registrant)

	~~Dated:~~		~~October 27, 2017~~		~~By:~~
Dated:		November 1, 2021		By:		/s/ Kevin J. McNamara
							Kevin J. McNamara
							(President and Chief Executive Officer)


Dated:	~~Dated:~~	November 1, 2021	~~October 27, 2017~~	By:	~~By:~~		/s/ David P. Williams
							David P. Williams
							(Executive Vice President and Chief Financial Officer)


Dated:	~~Dated:~~	November 1, 2021	~~October 27, 2017~~	By:	~~By:~~		/s/ Michael D. Witzeman
							Michael D. Witzeman
							(Vice President and Controller)

-43-

~~-36-~~

	September 30,
	2017			2016
Beginning balance January 1,	$	235		$	1,165
Prior measurement periods		247			228
Payments		(482	)		(1,158	)
Ending balance September 30,	$	-		$	235

Revolver	$	5,000
Term loan		77,500
Total		82,500
Current portion of long-term debt		(10,000	)
Long-term debt	$	72,500

Three months ended September 30,						Nine months ended Nine 30,
2017			2016			2017			2016
	$	4,427		$	4,423		$	15,136		$	10,809

			Fair Value Measure
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Mutual fund investments of deferred
compensation plans held in trust	$	60,445	$	60,445	$	-	$	-
Total debt		82,500		-		82,500		-

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands)(unaudited)

										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
2017 (a)
Service revenues and sales	$	288,951		$	128,493		$	-		$	417,444
Cost of services provided and goods sold		222,119			65,928			-			288,047
Selling, general and administrative expenses		23,783			33,694			9,442			66,919
Depreciation		4,529			4,268			22			8,819
Amortization		-			33			-			33
Other operating expenses		(371	)		-			-			(371	)
Total costs and expenses		250,060			103,923			9,464			363,447
Income/(loss) from operations		38,891			24,570			(9,464	)		53,997
Interest expense		(53	)		(73	)		(922	)		(1,048	)
Intercompany interest income/(expense)		2,950			1,378			(4,328	)		-
Other income/(expense)—net		(86	)		(8	)		1,417			1,323
Income/(expense) before income taxes		41,702			25,867			(13,297	)		54,272
Income taxes		(15,248	)		(9,833	)		6,246			(18,835	)
Net income/(loss)	$	26,454		$	16,034		$	(7,051	)	$	35,437

(a) The following amounts are included in net income (in thousands):
										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
Pretax benefit/(cost):
Stock option expense	$	-		$	-		$	(1,683	)	$	(1,683	)
Long-term incentive compensation		-			-			(1,104	)		(1,104	)
Program closure expenses		371			-			-			371
Expenses related to OIG investigation		(935	)		-			-			(935	)
Total	$	(564	)	$	-		$	(2,787	)	$	(3,351	)

										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
After-tax benefit/(cost):
Stock option expense	$	-		$	-		$	(1,064	)	$	(1,064	)
Long-term incentive compensation		-			-			(699	)		(699	)
Program closure expenses		223			-			-			223
Expenses related to OIG investigation		(578	)		-			-			(578	)
Excess tax benefits on stock compensation		-			-			1,783			1,783
Total	$	(355	)	$	-		$	20		$	(335	)