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~~June 30, ~~2017~~

☐2022

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	14,904,946 Shares	June 30, 2022
	~~September 30, 2017~~

‎

~~-1-~~

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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~~ June 30, ~~2017~~2022 and December 31, ~~2016~~ 2021		3

		Unaudited Consolidated Statements of Income -
		Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~ 2021		4

		Unaudited Consolidated Statements of Cash Flows -
		~~Nine~~ Six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~ 2021		5

Unaudited Consolidated Statements of Changes in Stockholders’ Equity-
Three and six months ended June 30, 2022 and 2021	6

Notes to Unaudited Consolidated Financial Statements	6 8

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			16 21

	Item 3. Quantitative and Qualitative Disclosures about Market Risk			34 38

	Item 4. Controls and Procedures			34 38

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	34 38

	Item 1A. Risk Factors			34 38

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35 39

	Item 3. Defaults Upon Senior Securities			35 39

	Item 4. Mine Safety Disclosures			35 39

	Item 5. Other Information			35 39

	Item 6. Exhibits			36 40

	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)



	June 30, 2022		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	9,640	$	32,895
Accounts receivable		136,555		137,217
Inventories		10,696		10,109
Prepaid income taxes		17,256		17,377
Prepaid expenses		28,999		32,688
Total current assets		203,146		230,286
Investments of deferred compensation plans		96,061		98,884
Properties and equipment, at cost, less accumulated depreciation of $329,967 (2021- $317,911)		192,005		193,680
Lease right of use asset		128,290		125,048
Identifiable intangible assets less accumulated amortization of $62,685 (2021 - $57,648)		103,837		108,096
Goodwill		579,653		578,591
Other assets		9,972		8,138
Total Assets	$	1,312,964	$	1,342,723

LIABILITIES
Current liabilities
Accounts payable	$	73,975	$	73,024
Current portion of long-term debt		5,000		-
Income taxes		-		41
Accrued insurance		54,828		55,918
Accrued compensation		68,290		95,598
Accrued legal		808		872
Short-term lease liability		39,062		37,913
Other current liabilities		43,105		39,033
Total current liabilities		285,068		302,399
Deferred income taxes		21,054		23,183
Long-term debt		111,800		185,000
Deferred compensation liabilities		95,624		98,597
Long-term lease liability		103,389		100,629
Other liabilities		11,069		9,642
Total Liabilities		628,004		719,450
Commitments and contingencies (Note 10)
STOCKHOLDERS' EQUITY
Capital stock - authorized 80,000,000 shares $1 par; issued 36,651,151 shares (2021 - 36,513,857 shares)		36,651		36,514
Paid-in capital		1,089,129		1,044,341
Retained earnings		2,090,214		1,970,311
Treasury stock - 21,812,013 shares (2021 - 21,601,325 shares)		(2,533,306)		(2,430,094)
Deferred compensation payable in Company stock		2,272		2,201
Total Stockholders' Equity		684,960		623,273
Total Liabilities and Stockholders' Equity	$	1,312,964	$	1,342,723

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 June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Service revenues and sales	$	531,288	$	532,256	$	1,061,837	$	1,059,616
Cost of services provided and goods sold (excluding depreciation)		336,821		350,493		673,373		690,966
Selling, general and administrative expenses		87,853		93,838		177,807		185,437
Depreciation		12,714		13,612		24,852		25,327
Amortization		2,520		2,510		5,038		5,020
Other operating (income)/expense		(558)		104		(545)		726
Total costs and expenses		439,350		460,557		880,525		907,476
Income from operations		91,938		71,699		181,312		152,140
Interest expense		(902)		(379)		(1,712)		(760)
Other (expense)/income - net		(4,930)		3,785		(8,792)		7,387
Income before income taxes		86,106		75,105		170,808		158,767
Income taxes		(19,650)		(18,583)		(40,183)		(36,845)
Net income	$	66,456	$	56,522	$	130,625	$	121,922

Earnings Per Share:
Net income	$	4.45	$	3.57	$	8.73	$	7.66
Average number of shares outstanding		14,932		15,829		14,959		15,919

Diluted Earnings Per Share:
Net income	$	4.40	$	3.51	$	8.62	$	7.52
Average number of shares outstanding		15,111		16,101		15,152		16,205

Cash Dividends Per Share	$	0.36	$	0.34	$	0.72	$	0.68

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)

	Six Months Ended June 30,
	2022		2021
Cash Flows from Operating Activities
Net income	$	130,625	$	121,922
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		29,890		30,347
Stock option expense		14,667		12,345
(Benefit)/provision for deferred income taxes		(2,129)		1,051
Noncash long-term incentive compensation		2,497		3,402
Noncash directors' compensation		1,170		1,173
Amortization of debt issuance costs		153		153
Provision for bad debts		-		40
Litigation settlements paid previously accrued		-		(9,440)
Changes in operating assets and liabilities:
Decrease in accounts receivable		887		4,722
Increase in inventories		(587)		(316)
Decrease in prepaid expenses		3,689		3,337
Decrease in accounts payable and other current liabilities		(24,001)		(10,815)
Change in current income taxes		27		(26,242)
Net change in lease assets and liabilities		705		(436)
Decrease/(increase) in other assets		2,071		(10,088)
(Decrease)/increase in other liabilities		(1,491)		10,088
Other (uses)/sources		(503)		796
Net cash provided by operating activities		157,670		132,039
Cash Flows from Investing Activities
Capital expenditures		(25,610)		(33,604)
Proceeds from sale of fixed assets		1,757		522
Business combinations, net of cash acquired		(1,650)		-
Other sources		(132)		(220)
Net cash used by investing activities		(25,635)		(33,302)
Cash Flows from Financing Activities
Payments on revolving line of credit		(263,300)		-
Proceeds from revolving line of credit		95,100		-
Proceeds from other long-term debt		100,000		-
Purchases of treasury stock		(77,214)		(166,649)
Proceeds from exercise of stock options		12,869		16,186
Capital stock surrendered to pay taxes on stock-based compensation		(12,115)		(8,598)
Dividends paid		(10,722)		(10,864)
Change in cash overdrafts payable		1,716		-
Debt issuance costs		(1,510)		-
Other (uses)/sources		(114)		633
Net cash used by financing activities		(155,290)		(169,292)
Decrease in Cash and Cash Equivalents		(23,255)		(70,555)
Cash and cash equivalents at beginning of year		32,895		162,675
Cash and cash equivalents at end of period	$	9,640	$	92,120

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

For the three months ended June 30, 2022 and 2021:										Deferred
										Compensation
								Treasury		Payable in
		Capital		Paid-in		Retained		Stock-		Company
		Stock		Capital		Earnings		at Cost		Stock		Total
Balance at March 31, 2022		36,579	$	1,064,448	$	2,029,158	$	(2,465,716)	$	2,236	$	666,705
Net income		-		-		66,456		-		-		66,456
Dividends paid ($0.36 per share)		-		-		(5,400)		-		-		(5,400)
Stock awards and exercise of stock options		72		25,274		-		(17,693)		-		7,653
Purchases of treasury stock		-		-		-		(49,861)		-		(49,861)
Other		-		(593)		-		(36)		36		(593)
Balance at June 30, 2022	$	36,651	$	1,089,129	$	2,090,214	$	(2,533,306)	$	2,272	$	684,960
										Deferred
										Compensation
						`		Treasury		Payable in
		Capital		Paid-in		Retained		Stock-		Company
		Stock		Capital		Earnings		at Cost		Stock		Total
Balance at March 31, 2021		36,345	$	982,739	$	1,783,740	$	(1,876,315)	$	2,375	$	928,884
Net income		-		-		56,522		-		-		56,522
Dividends paid ($0.34 per share)		-		-		(5,427)		-		-		(5,427)
Stock awards and exercise of stock options		40		16,630		-		(4,323)		-		12,347
Purchases of treasury stock		-		-		-		(121,882)		-		(121,882)
Other		-		328		-		194		(192)		330
Balance at June 30, 2021	$	36,385	$	999,697	$	1,834,835	$	(2,002,326)	$	2,183	$	870,774

See Accompanying Notes to Unaudited Consolidated Financial 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 six months ended June 30, 2022 and 2021:										Deferred
										Compensation
								Treasury		Payable in
		Capital		Paid-in		Retained		Stock-		Company
		Stock		Capital		Earnings		at Cost		Stock		Total
Balance at December 31, 2021		36,514		1,044,341		1,970,311		(2,430,094)		2,201		623,273
Net income		-		-		130,625		-		-		130,625
Dividends paid ($0.72 per share)		-		-		(10,722)		-		-		(10,722)
Stock awards and exercise of stock options		137		44,877		-		(25,926)		-		19,088
Purchases of treasury stock		-		-		-		(77,214)		-		(77,214)
Other		-		(89)		-		(72)		71		(90)
Balance at June 30, 2022	$	36,651	$	1,089,129	$	2,090,214	$	(2,533,306)	$	2,272	$	684,960
										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		-		-		121,922		-		-		121,922
Dividends paid ($0.68 per share)		-		-		(10,864)		-		-		(10,864)
Stock awards and exercise of stock options		126		37,637		-		(13,255)		-		24,508
Purchases of treasury stock		-		-		-		(166,649)		-		(166,649)
Other		-		656		-		157		(156)		657
Balance at June 30, 2021	$	36,385	$	999,697	$	1,834,835	$	(2,002,326)	$	2,183	$	870,774

See Accompanying Notes to Unaudited Consolidated Financial 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~~2021 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 six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 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.~~2021.

CORONAVIRUS AID, RELIEF AND ECONOMIC STIMULUS (CARES) ACT

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 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.

CLOUD COMPUTING

As of June 30, 2022, Roto-Rooter has 2 cloud computing arrangements that are service contracts. The two projects consist of the development of a single source data warehouse and human resource system integration with our enterprise software. We have capitalized $471,000 for the two projects. NaN amortization has been recorded for these as they have not been placed into service.

VITAS utilizes a human resources system that is considered a cloud computing arrangement. We have capitalized approximately $5.6 million related to implementation of this project which is 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 5.7 years. For the three months ended June 30, 2022 and 2021, $249,000 has been amortized. For the six months ended June 30, 2022 and 2021, $497,000 and $448,000, respectively, has been amortized.

INCOME TAXES

Our effective income tax rate was 22.8% in the second quarter of 2022 compared to 24.7% during the second quarter of 2021. Excess tax benefit on stock options exercised reduced our income tax expenses by $2.5 million and $868,000, respectively for the quarters ended June 30, 2022 and 2021.

Our effective income tax rate was 23.5% in the first six months of 2022 compared to 23.2% during the first six months of 2021. Excess tax benefit on stock options exercised reduced our income tax expenses by $3.9 million and $4.1 million, respectively for the first six months ended June 30, 2022 and 2021

NON-CASH TRANSACTIONS

Included in the accompanying Consolidated Balance Sheets are $836,000 and $1.9 million of capitalized property and equipment which were not paid for as of June 30, 2022 and December 31, 2021, respectively. 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

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~~EARNINGS PER SHARE~~

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 15 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 effective income tax rates for the applicable segments.

2. Revenue Recognition

In ~~March 2016,~~May 2014, the FASB issued Accounting Standards Update “ASU No. ~~2016-09 - Compensation~~2014-09 – ~~Stock Compensation” which~~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 ~~part~~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 ~~FASB’s Simplification Initiative.~~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 ~~object~~types of ~~this initiative~~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 ~~to identify, evaluate,~~paid for each day that a patient is in a hospice program and ~~improve areas of GAAP. The areas of simplification in this initiative involve several aspects~~is not receiving one of the ~~accounting~~other categories of hospice care. For Medicare patients, the routine home care rate reflects a two-tiered rate, with a higher rate for ~~share-based~~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 ~~transactions,~~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 ~~income tax consequences, classification~~published Medicare continuous home care rates are daily rates,

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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 ~~awards~~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 ~~equity~~days or ~~liabilities, and classification~~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 ~~statement~~service output. VITAS believes this to be the most faithful depiction of ~~cash flows. The guidance was effective for fiscal years beginning after December 15, 2016. We adopted~~ the ~~applicable provisions~~transfer of ~~ASU 2016-09~~control of services as the patient simultaneously receives and consumes the benefits provided by our performance. Revenue is recognized on a ~~prospective basis.~~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 ~~impact~~unsatisfied or partially satisfied performance obligations referred to above relate to bereavement services provided to patients’ families for at least 12 months after discharge.

Care is provided to patients regardless of ~~this ASU~~their ability to pay. Patients who meet our criteria for charity care are provided care without charge. There is 0 revenue or associated accounts receivable in the accompanying Consolidated Financial Statements related to charity care. The cost of providing charity care during the quarters ended June 30, 2022 and 2021 was $1.9 million and $2.3 million, respectively. The cost of providing charity case during the first six months ended June 30, 2022 and 2021 was $4.0 million and $4.4 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 ~~our financial statements for~~historical experience and current conditions. The estimate of any contractual adjustments, discounts or implicit price concessions reduces the ~~quarter ended September 30, 2017 was~~amount of revenue initially recognized. Subsequent changes to ~~decrease our income tax expense by $1.8 million~~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 ~~excess tax benefits on stock~~an adverse change in the 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 claims. Settlement with third party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. The variable consideration is estimated based ~~compensation being recorded~~ on the ~~statements~~terms of ~~income. This, combined with~~ the required change in diluted share count, resulted in an increase to basic 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 was to decrease our income tax expense by $8.1 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 basic earnings per share by $0.51 and an increase to diluted earnings per share by $0.46.

~~INCOME TAXES~~

~~The effective tax rate for the three and nine month periods ended September 30, 2017 was 34.7% and 25.8%, respectively. These rates differ~~payment agreement, existing correspondence from the ~~US statutory tax rates primarily~~payor and our historical settlement activity. These estimates are adjusted in future periods, as ~~the result of the adoption of ASU 2016-09 described above.~~

~~2. Revenue Recognition~~

Both 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 at the estimated realizable amount due from third-party payers. Medicare paymentsnew 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 June 30, 2022 and 2021.

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 June 30, 2022, all our programs except one are using the “streamlined” method.

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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~~$8.8 million is owed for Medicare cap in three programs arising during the 2013 ~~2014 and 2015~~through 2022 measurement periods. The amounts ~~were~~are 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 the appropriate regulatory appeal board.~~

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change.

During the ~~three and nine~~quarter ended June 30, 2022, we recorded $2.0 million in net Medicare cap revenue reduction related to two programs for the 2022 government fiscal year. During the quarter ended June 30, 2021, we recorded $2.0 million in net Medicare cap revenue reduction related to two programs for the 2021 government fiscal year.

During the first six months ended ~~September~~June 30, ~~2016, respectively, $228,000~~2022, we recorded $4.5 million in net Medicare cap ~~was~~revenue reduction related to two programs for the 2022 government fiscal year. During the first six months ended June 30, 2021, we recorded ~~for one program’s projected 2015 measurement period liability~~

~~There was no~~$3.5 million in net Medicare cap ~~recorded~~revenue reduction related to two programs for the 2021 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~~June 30, 2017. During 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 care2022 is as follows (in thousands):



	Medicare		Medicaid		Commercial		Total
Routine home care	$	241,028	$	11,119		5,484	$	257,631
Continuous care		18,044		735		759		19,538
Inpatient care		21,595		1,807		1,217		24,619
	$	280,667	$	13,661	$	7,460	$	301,788

All other revenue - self-pay, respite care, etc.								3,213
Subtotal							$	305,001
Medicare cap adjustment								(2,000)
Implicit price concessions								(3,054)
Room and board, net								(2,166)
Net revenue							$	297,781

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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

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


	Medicare		Medicaid		Commercial		Total
Routine home care	$	247,061	$	11,509	$	6,356	$	264,926
Continuous care		22,010		1,237		1,035		24,282
Inpatient care		23,905		2,069		1,397		27,371
	$	292,976	$	14,815	$	8,788	$	316,579

All other revenue - self-pay, respite care, etc.								3,078
Subtotal							$	319,657
Medicare cap adjustment								(2,000)
Implicit price concessions								(3,065)
Room and board, net								(2,657)
Net revenue							$	311,935

The composition of patient care service revenue by payor and level of care for the six months ended June 30, 2022 is as follows (in thousands):


	Medicare		Medicaid		Commercial		Total
Routine home care	$	482,365	$	22,026	$	10,876	$	515,267
Continuous care		36,020		1,550		1,546		39,116
Inpatient care		45,022		3,770		2,397		51,189
	$	563,407	$	27,346	$	14,819	$	605,572

All other revenue - self-pay, respite care, etc.								6,220
Subtotal							$	611,792
Medicare cap adjustment								(4,500)
Implicit price concessions								(6,039)
Room and board, net								(4,283)
Net revenue							$	596,970

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


	Medicare		Medicaid		Commercial		Total
Routine home care	$	493,125	$	23,088	$	12,467	$	528,680
Continuous care		46,917		2,496		2,218		51,631
Inpatient care		49,346		4,539		2,642		56,527
	$	589,388	$	30,123	$	17,327	$	636,838

All other revenue - self-pay, respite care, etc.								6,016
Subtotal							$	642,854
Medicare cap adjustment								(3,500)
Implicit price concessions								(6,309)
Room and board, net								(5,322)
Net revenue							$	627,723

Roto-Rooter

Roto-Rooter provides plumbing, drain cleaning, excavation, 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

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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.

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 (“Independent Contractors”). 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.

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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 second quarter is as follows (in thousands):


	June 30,
	2022		2021
Drain cleaning	$	64,532	$	62,649
Plumbing		48,885		44,609
Excavation		55,546		55,114
Other		155		311
Subtotal - short term core		169,118		162,683
Water restoration		43,673		38,583
Independent Contractors		21,005		19,026
Franchisee fees		1,370		1,255
Other		4,240		3,882
Gross revenue		239,406		225,429
Implicit price concessions and credit memos		(5,899)		(5,108)
Net revenue	$	233,507	$	220,321

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


	June 30,
	2022		2021
Drain cleaning	$	131,219	$	124,406
Plumbing		96,557		85,922
Excavation		110,734		107,106
Other		321		598
Subtotal - short term core		338,831		318,032
Water restoration		84,033		76,018
Independent Contractors		42,423		37,785
Franchisee fees		2,688		2,582
Other		8,430		7,828
Gross revenue		476,405		442,245
Implicit price concessions and credit memos		(11,538)		(10,352)
Net revenue	$	464,867	$	431,893

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 June 30,				Six months ended June 30,
	2022		2021		2022		2021
VITAS	$	35,212	$	29,712	$	71,694	$	70,481
Roto-Rooter		47,072		42,773		91,009		79,950
Total		82,284		72,485		162,703		150,431
Corporate		(15,828)		(15,963)		(32,078)		(28,509)
Net income	$	66,456	$	56,522	$	130,625	$	121,922

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”.

~~-7-~~

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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 June 30,		Income		Shares	Earnings per Share
2022
	Earnings	$	66,456	14,932	$	4.45
	Dilutive stock options		-	139
	Nonvested stock awards		-	40
	Diluted earnings	$	66,456	15,111	$	4.40

2021
	Earnings	$	56,522	15,829	$	3.57
	Dilutive stock options		-	235
	Nonvested stock awards		-	37
	Diluted earnings	$	56,522	16,101	$	3.51


			Net Income
For the Six Months Ended June 30,		Income		Shares	Earnings per Share
2022
	Earnings	$	130,625	14,959	$	8.73
	Dilutive stock options		-	152
	Nonvested stock awards		-	41
	Diluted earnings	$	130,625	15,152	$	8.62

2021
	Earnings	$	121,922	15,919	$	7.66
	Dilutive stock options		-	242
	Nonvested stock awards		-	44
	Diluted earnings	$	121,922	16,205	$	7.52

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
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 six months ended ~~September~~June 30, ~~2017, no~~2022, there were 596,000 stock options ~~and nonvested stock awards have been~~ excluded infrom the ~~calculation~~computation of dilutive earnings per share because they would have been anti-dilutive.

For the ~~nine month period~~three and six months ended ~~September~~June 30, ~~2017,~~2021, there were ~~7,304~~298,000 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 ended September 30, 2016, 418,000 stock options were excluded from the computation of diluted earnings per share because they would have been anti-dilutive.~~

5. Long-Term Debt

and Lines of Credit

On June ~~30, 2014,~~28, 2022, we replaced our existing credit ~~agreement~~facility with ~~the Third Amended~~a fifth amended and ~~Restated~~restated Credit Agreement (“~~2014~~2022 Credit ~~Agreement”~~Facilities”). Terms of the ~~2014~~2022 Credit ~~Agreement~~Facilities consist of a ~~five-year, $350~~five-year $450 million ~~revolving credit facility and~~revolver as well as afive-year $100 million term loan. Principal payments of $1.25 million on the term loan are due on the last day of each fiscal quarter, with a final payment due at the end of the agreement. The ~~2014~~interest rate on the 2022 Credit ~~Agreement~~Facilities has a floating ~~interest~~ rate that is generally ~~LIBOR~~the secured overnight financing rate (“SOFR”) plus aan additional tiered ~~additional~~ rate which varies based on our current leverage ratio. ~~The~~As of June 30, 2022, the interest rate ~~as of September 30, 2017~~ is ~~LIBOR~~SOFR plus ~~113~~100 basis points.

~~-8-~~

The 2022 Credit Facilities include an expansion feature that provides the Company the opportunity to increase its revolver and or term loan by an additional $250 million.

The debt outstanding as of ~~September~~June 30, ~~2017~~2022 consists of the following:



Revolver	$	16,800
Term loan		100,000
Total		116,800
Current portion of long-term debt		(5,000)
Long-term debt	$	111,800

-15-

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

Debt issuance costs associated with the prior credit agreement were not written off as the lenders did not change and their relative percentage participation in the facility was substantially the same. Deferred financing cost of $1.5 million for the 2022 Credit Facilities were capitalized during the quarter ended June 30,2022.

Scheduled ~~principal~~ payments of the ~~term loan~~2022 Credit Facilities are as follows:



2022	$	2,500
2023		5,000
2024		5,000
2025		5,000
2026		5,000
Thereafter		94,300
	$	116,800

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

The ~~2014~~2022 Credit ~~Agreement contains~~Facilities contain the following quarterly financial ~~covenants:~~

covenants effective as of June 30, 2022:

~~Description~~		~~Requirement~~

Description		Requirement

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

~~Fixed Charge~~ Interest Coverage Ratio (Consolidated ~~Free Cash Flow/~~Adj. EBITDA/Consolidated ~~Fixed Charges)~~Interest Expense)		> ~~1.50~~3.00 to 1.00

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

We are in compliance with all debt covenants as of ~~September~~June 30, ~~2017.~~2022. We have issued ~~$35.6~~$46.2 million in standby letters of credit as of ~~September~~June 30, ~~2017~~2022, mainly for insurance purposes. Issued letters of credit reduce our available credit under the ~~2014~~2022 Credit ~~Agreement.~~Facilities. As of ~~September~~June 30, ~~2017,~~2022, we have approximately ~~$309.4~~$387.0 million of unused lines of credit available and eligible to be drawn down under ~~our~~ revolving credit facility.

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 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.

~~During the nine months ended September 30, 2017, the Company recorded $90 million for a potential litigation settlement. See footnote 11 for further discussion.~~

During the nine months ended September 30, 2016, 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-~~

~~7. Other~~ (Expense)/Income – Net

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



	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Market value adjustment on assets held in
deferred compensation trust	$	(5,086)	$	3,655	$	(9,020)	$	6,693
Interest income		154		138		226		230
Other-net		2		(8)		2		464
Total other (expense)/income - net	$	(4,930)	$	3,785	$	(8,792)	$	7,387

7. 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.

‎

-16-

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 balance sheet information related to leases were as follows:


	June 30,		‎December 31,
	2022		2021
Assets
Operating lease assets	$	128,290	$	125,048

Liabilities
Current operating leases		39,062		37,913
Noncurrent operating leases		103,389		100,629
Total operating lease liabilities	$	142,451	$	138,542

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


	Three months ended June 30,
	2022		2021
Lease Expense (a)
Operating lease expense	$	13,249	$	15,550
Sublease income		(45)		(46)
Net lease expense	$	13,204	$	15,504

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


	Six months ended June 30,
	2022		2021
Lease Expense (a)
Operating lease expense	$	26,300	$	30,911
Sublease income		(91)		(90)
Net lease expense	$	26,209	$	30,821

(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:


	Six months ended June 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from leases	$	25,173	$	25,901

Leased assets obtained in exchange for new operating lease liabilities	$	27,589	$	25,685


Weighted Average Remaining Lease Term at June 30, 2022
Operating leases	4.52	years


Weighted Average Discount Rate at June 30, 2022
Operating leases	2.39	%

-17-


Maturity of Operating Lease Liabilities (in thousands)

2022	$	23,263
2023		40,947
2024		31,752
2025		24,501
2026		18,212
Thereafter		12,183
Total lease payments	$	150,858
Less: interest		(8,407)
Total liability recognized on the balance sheet	$	142,451

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 $2.7 million related to extended lease terms that are reasonably certain of being exercised and exclude $5.8 million of lease payments for leases signed but not yet commenced.

8. Stock-Based Compensation Plans

On February ~~17, 2017,~~18, 2022, the Compensation/Incentive Committee of the Board of Directors (“CIC”) granted ~~7,304~~7,983 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,~~2024, 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~~$4.8 million.

On February ~~17, 2017,~~18, 2022, the CIC also granted ~~7,304~~7,983 PSUs contingent upon the achievement of certain earnings per share (“EPS”) targets for the ~~three-year~~three year period ending December 31, ~~2019.~~2024. At the end of each reporting period, the Company estimates the number of 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~~$3.7 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 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 June 30,				Six months ended June 30,
2022		2021		2022		2021
$	639	$	7,904	$	3,556	$	16,603

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

~~-10-~~

~~11.~~

10. 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.~~Missouri. The Company denied any violation of law and agreed to settlement without admission of wrongdoing.

In connection with the settlement, VITAS ~~Hospice Services, LLC, et al., No. 4:13-cv-00449-BCW (the “2013 Action”~~and certain of its subsidiaries entered into a corporate integrity agreement (“CIA”)~~. Prior~~ on October 30, 2017. The CIA formalizes various aspects of VITAS’ already existing Compliance Program and contains requirements designed to ~~that date,~~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~~event of breach of the CIA, VITAS could become liable for payment of stipulated penalties or could be excluded from participation in federal healthcare programs.

-18-

On October 16, 2020, VITAS received ~~various qui tam lawsuits and subpoenas from~~a Civil Investigative Demand (“CID”) issued by 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,~~pursuant to the ~~Company, submitted or caused~~False Claims Act concerning allegations of the submission of false claims ~~to the Medicare program by (a) billing Medicare~~ for ~~continuous home care~~hospice services ~~when the~~for which reimbursement was sought from federal healthcare programs, including Medicare. The CID has requested information regarding 32 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 discussionsfrom our Florida operations. We are cooperating with the U.S. Department of Justice ~~we believe it probable that~~with respect to this ~~matter~~investigation. The Company cannot predict when the investigation will be ~~settled,~~resolved or the outcome of the 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 ~~include payments~~a sample of ~~$55.8~~patients. On July 14, 2022, VITAS received the final audit report from OAS, which includes a series of recommendations to VITAS, including that it repay approximately $140 million ~~after-tax ($90.0 million pretax) including attorneys’ fees. A final settlement will require~~previously received from Medicare. As a result of the ~~parties to resolve several outstanding issues, and to draft and negotiate definitive documentation. There can be no assurance~~report, VITAS anticipates receiving a demand letter from CMS through its fiscal intermediary for a portion of the suggested repayment amount. To the extent a demand is received, VITAS believes that ~~such a final definitive settlement~~the demand will be ~~reached on these, or other, terms. For additional procedural history~~reduced significantly from the amount requested in the report due mainly to the expiration of ~~this litigation, please refer~~certain claims, but the amount demanded may likely appear material. Any claims pursued by CMS will proceed in accordance with the standard reconsideration and appeals process for claims that arise out of CMS audits. VITAS believes that the audit report contains significant flaws including its methodology, medical reviews, technical reviews, and proposed extrapolation, and contravenes the “reasonable physician standard” set forth in the appliable Aseracare precedent. VITAS intends 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,vigorously defend any claims brought; however, the Company ~~accrues for contingent loss claims in its financial statements when it is probable that a liability has been incurred and~~cannot predict the ~~amount can be reasonably estimated.~~

~~The Company 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 oneventual outcome, 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-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.~~

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.

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 resolution of the November 10, 2017 mediation in the ~~Seper~~ ~~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 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.~~

~~The Company is not able to~~ 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.~~

11. Concentration of Risk

~~During~~

As of June 30, 2022, and December 31, 2021, approximately 71% and 73%, respectively, of VITAS’ total accounts receivable balance were from Medicare and 24% and 21%, 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 75% of the ~~quarter~~ consolidated net accounts receivable in the accompanying consolidated balance sheets as of June 30, 2022.

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.~~operations. Similarly, effective January 1, 2022, VITAS ~~made~~obtains the majority of its medical supplies from a single vendor. A large majority of VITAS’ pharmaceutical and medical supplies purchases 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. Purchasesare from these ~~providers were more than 90% of all pharmacy services used~~vendors. The pharmaceutical and medical supplies purchased by VITAS ~~during each period presented.~~

~~13.~~are available through many providers in the United States. However, a disruption from VITAS’ main service providers could adversely impact VITAS’ operations, including temporary logistical challenges and increased cost associated with getting medication and medical supplies to our patients.

12. Cash Overdrafts and Cash Equivalents

There are ~~$468,000~~$13.6 million in cash overdrafts payable included in accounts payable at ~~September~~June 30, ~~2017 (December~~2022. There were $11.9 million in cash overdrafts payable included in accounts payable at December 31, ~~2016 - $8.6 million).~~

2021.

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.~~

13. 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-~~

-19-

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of ~~September~~June 30, ~~2017~~2022 (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)
Investments of deferred compensation
plans held in trust	$	96,061	$	96,061	$	-	$	-
Long-term debt and current portion of long-term debt		116,800		-		116,800		-

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~~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)
Investments of deferred compensation
plans held in trust	$	98,884	$	98,884	$	-	$	-
Long-term debt		185,000		-		185,000		-

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~~has a floating interest ~~rates~~rate that ~~are~~is 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~~approximates its carrying value.

~~15.~~

14. Capital Stock Repurchase Plan Transactions

We repurchased the following capital ~~stock for the three~~stock:



	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021

Total cost of repurchased shares (in thousands)	$	49,861	$	121,882	$	77,214	$	166,649
Shares repurchased		100,000		250,000		157,500		350,000
Weighted average price per share	$	498.61	$	487.52	$	491.81	$	476.14

In May and ~~nine months ended September 30, 2017 and 2016:~~

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,~~November 2021, the Board of Directors authorized ~~an additional $100.0~~a total of $600.0 million for additional stock repurchase under Chemed’s existing share repurchase program. We currently have $~~55.5 million~~$124.7 million of au~~thorization~~authorization remaining under this share repurchase plan.

~~-14-~~

~~16. Recent Accounting Standards~~

~~In May 2014,~~

15. Acquisitions

On January 28, 2022 VITAS purchased the ~~FASB issued Accounting Standards Update “ASU No. 2014-09 – Revenue from Contracts with Customers” which provides additional guidance to clarify~~hospice assets of Broward Health Hospital System for $1.25 million in cash. On February 1, 2022, Roto-Rooter completed the ~~principles for recognizing revenue. The standard and subsequent amendments are intended to develop~~acquisition of 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 modelfranchise and the ~~revenue recognition standard. The guidance~~related assets in Linden, NJ for $400,000 in cash.

Goodwill is ~~effective~~assessed for ~~fiscal years beginning after December 15, 2018. Based~~impairment on ~~the provisions~~a yearly basis as 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 in the statement of cash flows. The primary purpose of ASU 2016-15October 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.~~

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~~

tax purposes.

Shown below is movement in Goodwill (in thousands):


	VITAS		Roto-Rooter		Total
Balance at December 31, 2021	$	333,331	$	245,260	$	578,591
Business combinations		732		336		1,068
Foreign currency adjustments		-		(6)		(6)
Balance at June 30, 2022	$	334,063	$	245,590	$	579,653

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-~~

-20-

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~~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 June 30,						Six months ended June 30,
	2022			2021			2022			2021
Service revenues and sales	$	531,288		$	532,256		$	1,061,837		$	1,059,616
Net income	$	66,456		$	56,522		$	130,625		$	121,922
Diluted EPS	$	4.40		$	3.51		$	8.62		$	7.52
Adjusted net income	$	73,090		$	74,100		$	145,870		$	146,470
Adjusted diluted EPS	$	4.84		$	4.60		$	9.63		$	9.04
Adjusted EBITDA	$	110,907		$	110,948		$	221,114		$	219,467
Adjusted EBITDA as a % of revenue		20.9	%		20.8	%		20.8	%		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.

34-36.

For the three months ended ~~September~~June 30, ~~2017,~~2022, the ~~increase~~decrease in consolidated service revenues and sales was driven by a ~~17.1%~~6.0% increase at Roto-Rooter ~~and~~offset by a ~~2.2% increase~~4.5% 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 revenue increase, 49.1% is related to water restoration.~~ The ~~increase~~decrease in service revenues at VITAS ~~was~~is comprised primarily of a ~~result of~~3.8% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement ~~rates increasing 1.3%, a 2.8%~~rate increase ~~in days~~ of ~~care, offset by acuity~~approximately 0.8%. Acuity mix shift ~~which negatively impacted~~had a net impact of reducing revenue ~~2.2%~~approximately 1.6% in the quarter when compared to the prior year ~~period. Adjusted EBITDA as a percent~~revenue and level-of-care mix. The combination of an increase in Medicare cap and other contra revenue ~~increased 160~~changes positively impacted revenue growth by approximately 10 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 3337 for additional VITAS operating metrics.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, the increase in consolidated service revenues and sales was driven by a ~~14.4%~~7.6% increase at Roto-Rooter ~~and~~offset by a ~~2.0% increase~~4.9% 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 revenue increase, 49.0% was related to water restoration.~~ The ~~increase~~decrease in service revenues at VITAS ~~was~~is comprised primarily of a ~~result of~~3.9% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement ~~rates increasing 1.7%, a 2.7%~~rate increase ~~in days~~ of ~~care, offset by acuity~~approximately 1.0%. Acuity mix shift ~~which negatively impacted~~had a net impact of reducing revenue ~~2.4%~~approximately 1.9% over the six months when compared to the prior year ~~period. Adjusted EBITDA as a percent~~revenue and level-of-care mix. The combination of an increase in Medicare cap and other contra revenue ~~increased 130~~changes negatively impacted revenue growth by approximately 10 basis ~~points when compared~~points. See page 37 for additional VITAS operating metrics.

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 length and severity of the ~~prior year quarter mainly~~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 ~~mix shift~~the unknown short, medium and long-term impacts that the pandemic will have on the United States economy and society as a whole.

Historically, Chemed earnings guidance has been developed using previous periods’ key operating metrics which are then modeled and projected out for future periods. 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 ~~levels~~terms of ~~care~~timing and ~~improved cost management~~impact on our business segments’ operating results.

-21-

The COVID-19 pandemic, uncertainty regarding forward looking inflation, and a potential economic recession, 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 ~~high acuity care. See page 33 for additional~~the remainder of the 2022 calendar year. However, this guidance should be taken with the recognition the above macro issues 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.

Based upon the above discussion, VITAS ~~operating metrics.~~

~~VITAS expects its full-year 2017~~2022 revenue, ~~growth,~~ prior to Medicare ~~cap,~~Cap, is estimated to decline 4.5% to 5.0% when compared to 2021. A portion of the estimated revenue reduction, approximately $15 million, is the result of the phase out of sequestration relief over the first half of 2022 compared to a full year of sequestration relief in 2021. ADC is estimated to decline 3.5%. Full year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 17.0% to 17.2%. We are currently estimating $10 million for Medicare Cap billing limitations in calendar year 2022.

Roto-Rooter is forecasted to achieve full-year 2022 revenue growth of 5.5% to 5.7%. Roto-Rooter’s adjusted EBITDA margin for 2022 is expected to be 29.2% to 29.5%.

Based upon the above, full-year 2022 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%~~$19.30 to ~~3.0%~~$19.50. This 2022 guidance assumes an effective corporate tax rate on adjusted earnings of 25.1% and a diluted share count of 15.12 million shares. Chemed’s 2021 reported adjusted earnings per diluted share was $19.33.

On June 28, 2022, we replaced our existing credit facility with a fifth amended and restated Credit Agreement (“2022 Credit Facilities”). ~~Admissions~~Terms of the 2022 Credit Facilities consist of a five-year $450 million revolver as well as a five-year $100 million term loan. Principal payments of $1.25 million on the term loan are due on the last day of each fiscal quarter, with a final payment due at the end of the agreement. The interest rate on the 2022 Credit Facilities has a floating rate that is generally SOFR plus an additional tiered rate which varies based on our current leverage ratio. As of June 30, 2022, the interest rate is SOFR plus 100 basis points. The 2022 Credit Facilities includes an expansion feature that provides the Company the opportunity to increase its revolver and ~~Average Daily Census~~or term loan by an additional $250 million.

We have issued $46.2 million in ~~2017 are estimated to expand~~standby letters of credit as of June 30, 2022, mainly for insurance purposes. Issued letters of credit reduce our available credit under the 2022 Credit Facilities. As of June 30, 2022, we have approximately ~~2.0% to 3.0%. Adjusted EBITDA margin, prior to Medicare cap, is estimated~~$387.0 million of unused lines of credit available and eligible to be ~~15.0%. This guidance includes $1.5 million~~drawn down under our revolving credit facility. Management believes its liquidity and sources of capital are satisfactory 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 estimatedthe Company’s needs in the ~~range of 22.5%.~~ foreseeable future.

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~~2021 to ~~September~~June 30, ~~2017~~2022 include the following:

A ~~$40.5~~$5.0 million increase in the current portion of long-term debt due to the new term loan established with the 2022 Credit Facilities.

A $27.3 million decrease in ~~accounts receivable due mainly to timing of Medicare and Medicaid payments.~~

~~A $21.8 million increase in properties plant and equipment mainly~~accrued compensation due to the ~~purchase~~payment of ~~transportation equipment during~~2021 bonuses in the ~~quarter.~~

first quarter of 2022.

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 income taxes due to timing of payments.~~

~~An $89.6 million increase in accrued legal due to a potential litigation settlement.~~

~~A $26.3~~$73.2 million decrease in long-term debt due to ~~payments on our term loan and revolving line of credit.~~

repayments.

A $103.2 million increase in treasury stock due mainly to stock repurchases.

Net cash provided by operating activities increased ~~$62.6~~$25.6 million ~~mainly as a result~~from June 30, 2021 to June 30, 2022. The main drivers of ~~a $22.9 million~~the increase are an increase in net income ~~excluding potential litigation settlement and a $19.5~~of $8.7 million, ~~decrease caused by~~coupled with changes in ~~accounts receivable. The potential litigation settlement recorded is non-cash at September 30, 2017~~current assets and ~~does not impact net cash provided by operating activities.~~

liabilities. 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~~$42.0 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.

-22-

We have issued $35.6 million in standby letters of credit as of September 30, 2017, mainly for insurance purposes. Issued letters of credit reduce our available credit under the revolving credit agreement. As of September 30, 2017, we have approximately $309.4 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~~The 2022 Credit Facilities 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~~June 30, ~~2017~~2022 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.~~

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.~~

~~-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 10 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.

‎

-23-

Results of Operations

Three months ended ~~September~~June 30, ~~2017~~2022 versus ~~2016~~2021 - Consolidated Results

Our service revenues and sales for the ~~third~~second quarter of ~~2017 increased 6.3%~~2022 decreased 0.2% versus services and sales revenues for the ~~third~~second quarter of ~~2016.~~2021. Of this ~~increase,~~decrease, a ~~$6.1~~$13.2 million increase was attributable to ~~VITAS and $18.8~~Roto-Rooter, offset by a $14.2 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 June 30,				Increase/(Decrease)
	2022		2021		Percent
VITAS
Routine homecare	$	257,631	$	264,926	(2.8)
Continuous care		19,538		24,282	(19.5)
General inpatient		24,619		27,371	(10.1)
Other		3,213		3,078	4.4
Subtotal		305,001		319,657	(4.6)
Medicare cap adjustment		(2,000)		(2,000)	-
Room and board - net		(2,166)		(2,657)	18.5
Implicit price concessions		(3,054)		(3,065)	0.4
Net revenue	$	297,781	$	311,935	(4.5)

Roto-Rooter
Drain cleaning	$	64,532	$	62,649	3.0
Plumbing		48,885		44,609	9.6
Excavation		55,546		55,114	0.8
Other		155		311	(50.2)
Subtotal - short term core		169,118		162,683	4.0
Water restoration		43,673		38,583	13.2
Independent Contractors		21,005		19,026	10.4
Outside franchisee fees		1,370		1,255	9.2
Other		4,240		3,882	9.2
Gross revenue		239,406		225,429	6.2
Implicit price concessions		(5,899)		(5,108)	(15.5)
Net revenue		233,507		220,321	6.0
Total Revenues	$	531,288	$	532,256	(0.2)

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


	Days of Care		Increase/(Decrease)
	2022	2021	Percent

Routine homecare	1,266,604	1,335,482	(5.2)
Nursing home	259,046	244,423	6.0
Respite	6,095	5,338	14.2
Subtotal routine homecare and respite	1,531,745	1,585,243	(3.4)
General inpatient	23,155	26,493	(12.6)
Continuous care	20,802	25,786	(19.3)
Total days of care	1,575,702	1,637,522	(3.8)

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~~decrease in ~~VITAS’~~service revenues ~~for the third quarter~~at VITAS is comprised primarily of ~~2017 versus the third quarter of 2016 was comprised of an~~a 3.8% decrease in days-of-care offset by a geographically weighted average ~~net~~ Medicare reimbursement rate ~~increasing~~increase of approximately ~~1.3%, a 2.8% increase in days of care offset by acuity~~0.8%. Acuity mix shift ~~which negatively impacted~~had a net impact of reducing revenue ~~2.2%~~approximately 1.6% in the quarter when compared to the prior year ~~period.~~

~~Days~~revenue and level-of-care mix. The combination of ~~care during the quarter ended September 30 were as follows:~~

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’ service revenues for the period were from~~an increase in Medicare cap and ~~Medicaid.~~

other contra revenue changes positively impacted revenue growth by approximately 10 basis points.

The increase in plumbing revenues for the ~~third~~second quarter of ~~2017~~2022 versus ~~2016~~2021 is attributable to a ~~14.2% increase in price and service mix shift as well as a 1.0% increase in job count. Drain cleaning revenues for the third quarter of 2017 versus 2016 reflect a 6.2%~~12.5% increase in price and service mix shift offset by a ~~2.1%~~2.9% decrease in job count. ~~Water restoration~~Drain cleaning revenues for the ~~third~~second quarter of ~~2017~~2022 versus ~~2016 increased 77.2%~~2021 reflect an 10.7% increase in price and service mix shift offset by a 7.7% decrease in job count. Excavation and water restoration jobs are generally sold as a result of ~~continued expansion of this service offering including~~initial calls from customers regarding drain cleaning issues. As a ~~38.0%~~result, the 0.8% increase in ~~number~~excavation revenue and

-24-

the 13.2% increase in water restoration revenue are mainly a function of ~~jobs performed.~~the numbers and size of drain cleaning issues we encounter on a quarterly basis. Independent Contractor ~~operations~~revenue increased ~~6.4%~~10.4% due mainly ~~due~~ to ~~their~~increased expansion into water restoration.

~~-20-~~

The consolidated gross margin was ~~31.0%~~36.6% in the ~~third~~second quarter of ~~2017~~2022 as compared with ~~28.3%~~34.1% in the ~~third~~second quarter of ~~2016.~~2021. On a segment basis, VITAS’ gross margin was ~~23.1%~~23.6% in the ~~third~~second quarter of ~~2017~~2022 as compared with 20.7%, in the ~~third~~second quarter of ~~2016. The increase in VITAS gross margin is the result of~~2021 primarily due to improved labor and ancillary ~~cost management.~~costs. The Roto-Rooter segment’s gross margin was ~~48.7%~~53.2% for the ~~third~~second quarter of ~~2017 compared with 47.8% in~~2022 which is essentially equal to the ~~third~~second 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 costs.~~

2021.

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


	Three months ended June 30,
	2022		2021
SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts	$	91,422	$	88,510
Impact of market value adjustments related to assets held in deferred compensation trusts		(5,086)		3,655
Long-term incentive compensation		1,517		1,673
Total SG&A expenses	$	87,853	$	93,838

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~~second quarter of ~~2017~~2022 were up ~~12.4%~~3.3% when compared to the ~~third~~second quarter of ~~2016.~~2021. This increase was mainly a result of the increase in variable selling and general administrative expenses ~~caused by increased revenue, particularly in the Roto-Rooter segment, increased advertising expense at Roto-Rooter~~ and due to normal salary ~~increases in 2017.~~

~~During~~increases.

Amortization for the ~~third~~second quarter of ~~2017, a credit of $371,000~~2022 was ~~recorded due~~flat when compared to the ~~recovery~~second quarter of ~~previously recognized expenses related to the closure~~2021. 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 ~~programs in one state at Vitas. There were no other operating expenses recorded in~~purchase price allocation, approximately $59.2 million was determined to be the ~~third quarter~~value of ~~2016.~~

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) -/income – net comprise (in thousands):


	Three months ended June 30,
	2022		2021
Market value adjustment on assets held in deferred compensation trusts	$	(5,086)	$	3,655
Interest income		154		138
Other		2		(8)
Total (expense)/other income - net	$	(4,930)	$	3,785

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 June 30,
	2022			2021

Income tax provision calculated at the statutory federal rate	$	18,082		$	15,772
Stock compensation tax benefits		(2,499)			(868)
State and local income taxes		2,744			2,671
Other--net		1,323			1,008
Income tax provision	$	19,650		$	18,583
Effective tax rate		22.8	%		24.7	%

‎

~~-21-~~

-25-

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


	Three months ended June 30,
	2022		2021
VITAS
Medicare cap sequestration adjustment	$	(103)	$	-
Direct costs related to COVID-19		60		(8,268)
Facility relocation costs		-		(1,384)
Roto-Rooter
Amortization of reacquired franchise agreements		(1,729)		(1,729)
Direct costs related to COVID-19		-		(428)
Litigation settlements		-		72
Other		(20)		-
Corporate
Stock option expense		(5,993)		(5,166)
Excess tax benefits on stock compensation		2,499		868
Long-term incentive compensation		(1,348)		(1,543)
Total	$	(6,634)	$	(17,578)

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~~June 30, ~~2017~~2022 versus ~~2016~~2021 - Segment Results

~~The change in net~~

Net income/(loss) for the ~~third~~second quarter of ~~2017~~2022 versus the ~~third~~second quarter of ~~2016 is due to~~2021 by segment (in thousands):



	Three months ended June 30,
	2022		2021
VITAS		35,212	$	29,712
Roto-Rooter		47,072		42,773
Corporate		(15,828)		(15,963)
	$	66,456	$	56,522

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~~increased primarily due to margin improvement and lower depreciation in ~~2017~~the second quarter of 2022 when compared to ~~2016 by a $6.1 million increase in revenue and a $2.3 million decrease in cost~~the second quarter of ~~services provided and goods sold.~~2021. After-tax earnings as a percent of revenue at VITAS in the ~~third~~second quarter of ~~2017 were 9.2%, an increase of 1.8% over~~2022 was 11.8% as compared to 9.5% in the ~~third~~second quarter of ~~2016.~~

2021.

Roto-Rooter’s net income was ~~positively~~ impacted in ~~2017~~the second quarter of 2022 compared to ~~2016~~the second quarter of 2021 primarily by ~~a $9.2 million revenue increase in Roto-Rooter’s water restoration line of business and a $7.3 million increase in plumbing~~higher revenue. After-tax earnings as a percent of revenue at Roto-Rooter in the ~~third~~second quarter of ~~2017~~2022 was ~~12.5%~~20.2%, as compared to ~~11.7%~~19.4% in the ~~third~~second quarter of ~~2016.~~2021.

After-tax Corporate expenses for the second quarter of 2022 were essentially flat when compared to the second quarter of 2021.

‎

-26-

Results of Operations

~~Nine~~

Six months ended ~~September~~June 30, ~~2017~~2022 versus ~~2016~~2021 - Consolidated Results

Our service revenues and sales for the first ~~nine~~six months of ~~2017~~2022 increased ~~5.5%~~0.2% versus services and sales revenues for the first ~~nine~~six months of ~~2016.~~2021. Of this increase, a ~~$16.9~~$33.0 million increase was attributable to ~~VITAS and $48.1~~Roto-Rooter offset by a $30.7 million ~~increase was~~decrease attributable to ~~Roto-Rooter.~~VITAS. The following chart shows the components of ~~those changes~~revenue by operating segment (in thousands):


	Six months ended June 30,				Increase/(Decrease)
	2022		2021		Percent
VITAS
Routine homecare	$	515,267	$	528,680	(2.5)
Continuous care		39,116		51,631	(24.2)
General inpatient		51,189		56,527	(9.4)
Other		6,220		6,016	3.4
Subtotal		611,792		642,854	(4.8)
Medicare cap adjustment		(4,500)		(3,500)	(28.6)
Room and board - net		(4,283)		(5,322)	19.5
Implicit price concessions		(6,039)		(6,309)	4.3
Net revenue	$	596,970	$	627,723	(4.9)

Roto-Rooter
Drain cleaning	$	131,219	$	124,406	5.5
Plumbing		96,557		85,922	12.4
Excavation		110,734		107,106	3.4
Other		321		598	(46.3)
Subtotal - short term core		338,831		318,032	6.5
Water restoration		84,033		76,018	10.5
Independent Contractors		42,423		37,785	12.3
Outside franchisee fees		2,688		2,582	4.1
Other		8,430		7,828	7.7
Gross revenue		476,405		442,245	7.7
Implicit price concessions		(11,538)		(10,352)	(11.5)
Net revenue		464,867	$	431,893	7.6
Total Revenues	$	1,061,837	$	1,059,616	0.2

Days of care at VITAS during the six months ended June 30 were as follows:


	Days of Care		Increase/(Decrease)
	2022	2021	Percent

Routine homecare	2,525,276	2,665,374	(5.3)
Nursing home	507,514	477,206	6.4
Respite	11,463	10,178	12.6
Subtotal routine homecare and respite	3,044,253	3,152,758	(3.4)
General inpatient	47,742	54,167	(11.9)
Continuous care	41,884	55,086	(24.0)
Total days of care	3,133,879	3,262,011	(3.9)

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~~decrease in ~~VITAS’~~service revenues ~~for the first nine months~~at VITAS is comprised primarily of ~~2017 versus the first nine months of 2016 was comprised of an~~a 3.9% decrease in days-of-care offset by a geographically weighted average ~~net~~ Medicare reimbursement rate ~~increasing~~increase of approximately ~~1.3%, a 2.7% increase in days of care offset by acuity~~1.0%. Acuity mix shift ~~which negatively impacted~~had a net impact of reducing revenue approximately 1.9% in the six months period when compared to the prior year ~~period.~~

~~Days~~revenue and level-of-care mix. The combination of ~~care during the nine months ended September 30 were as follows:~~

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’ service revenues for the period were from~~an increase in Medicare cap and ~~Medicaid.~~

other contra revenue changes negatively impacted revenue growth by approximately 10 basis points.

The increase in plumbing revenues for the first ~~nine~~six months of ~~2017~~2022 versus ~~2016~~2021 is attributable ~~primarily~~ to a 13.1% increase in price and service mix shift ~~as well as a 0.6% increase~~and 0.7% decrease in job count. Drain cleaning revenues for the first ~~nine~~six months of ~~2017~~2022 versus ~~2016~~2021 reflect ~~a 5.3%~~an 11.3% increase in price and service mix shift offset by a ~~2.1%~~5.8% decrease in job count. ~~Water~~Excavation and water restoration ~~for the first nine months of 2017 versus 2016 increased 64.6%~~jobs are generally sold as a result of ~~continued expansion of this service offering including~~initial calls from customers regarding drain cleaning issues. As a ~~32.6%~~result, the 3.4% increase in ~~jobs performed.~~excavation revenue and the

-27-

10.5% increase in water restoration revenue are mainly a function of the numbers and size of drain cleaning issues we encounter on a quarterly basis. Independent Contractor ~~operations~~revenue increased ~~10.8%~~12.3% due mainly ~~due~~ to ~~their~~increased expansion into water restoration.

The consolidated gross margin was ~~30.6%~~36.6% in the first ~~nine~~six months of ~~2017~~2022 as compared with ~~28.7%~~34.8% in the first ~~nine~~six months of ~~2016.~~2021. On a segment basis, VITAS’ gross margin was ~~22.5%~~23.8% in the first ~~nine~~six months of ~~2017~~2022 as compared with ~~21.1%~~22.5%, in ~~the~~ first ~~nine~~six months of ~~2016. The increase in VITAS’ gross margin is the~~2021 primarily a result of ~~mix shift to higher margin care,~~improved labor and ancillary ~~cost management.~~costs. The Roto-Rooter segment’s gross margin was ~~48.9%~~53.0% for the first ~~nine~~six months of ~~2017~~2022 as compared with ~~48.0%~~52.6% in the first ~~nine~~six 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~~2021 primarily due to increased revenue and improved labor costs.

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


	Six months ended June 30,
	2022		2021
SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts	$	184,000	$	175,178
Impact of market value adjustments related to assets held in deferred compensation trusts		(9,020)		6,693
Long-term incentive compensation		2,827		3,566
Total SG&A expenses	$	177,807	$	185,437

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~~six months of ~~2017~~2022 were up ~~9.8%~~5.0% when compared to the first ~~nine~~six months of ~~2016.~~2021. This increase was mainly a result of the increase in variable selling and general administrative expenses ~~caused by increased revenue, particularly in the in the Roto-Rooter segment, increased advertising expense at Roto-Rooter~~ and due to normal salary ~~increases in 2017.~~

~~Other operating expenses were $91.1 million during~~increases.

Amortization for the first ~~nine~~six months of ~~2017 related to a $90.0 million potential litigation settlement and $1.1 million related~~2022 was flat when compared to the ~~closure~~first six months of 2021. 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 ~~programs in one state at Vitas. During~~purchase price allocation, approximately $59.2 million was determined to be the ~~first nine months~~value of ~~2016,~~reacquired franchise rights which are being amortized over the ~~Company recorded $4.5~~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 ~~related~~($8.1 million annualized through 2026). This contrasts to ~~early retirement expenses.~~

~~-23-~~

quarterly franchise fees historically collected from these two franchisees of approximately $470,000 ($1.9 million annualized).

Other (expense)/income -– net comprise (in thousands):


	Six months ended June 30,
	2022		2021
Market value adjustment on assets held in deferred compensation trusts	$	(9,020)	$	6,693
Interest income		226		230
Other		2		464
Total other (expense)/income - net	$	(8,792)	$	7,387

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~~reconciliation 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 for the first nine months of 2017 was 39.6%.as follows (in thousands):


	Six months ended June 30,
	2022			2021

Income tax provision calculated at the statutory federal rate	$	35,870		$	33,341
Stock compensation tax benefits		(3,940)			(4,106)
State and local income taxes		6,427			5,627
Other--net		1,826			1,983
Income tax provision	$	40,183		$	36,845
Effective tax rate		23.5	%		23.2	%

‎

-28-

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



	Six months ended June 30,
	2022		2021
VITAS
Direct costs related to COVID-19	$	(231)	$	(9,576)
Medicare cap sequestration adjustment		(103)		-
Facility relocation costs		-		(1,384)
Roto-Rooter
Amortization of reacquired franchise agreements		(3,457)		(3,457)
Direct costs related to COVID-19		(707)		(835)
Litigation settlements		-		72
Other		(20)		-
Corporate
Stock option expense		(12,160)		(10,232)
Excess tax benefits on stock compensation		3,940		4,106
Long-term incentive compensation		(2,507)		(3,212)
Direct costs related to COVID-19		-		(30)
Total	$	(15,245)	$	(24,548)

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~~

Six months ended ~~September~~June 30, ~~2017~~2022 versus ~~2016~~2021 - Segment Results

~~The change in net~~

Net income/(loss) for the first ~~nine~~six months of ~~2017~~2022 versus the first ~~nine~~six months of ~~2016 is~~2021 by segment (in thousands):



	Six months ended June 30,
	2022		2021
VITAS	$	71,694	$	70,481
Roto-Rooter		91,009		79,950
Corporate		(32,078)		(28,509)
	$	130,625	$	121,922

VITAS’ after-tax earnings increased 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 earnings were impacted in 2017~~lower revenue offset by improved margins and lower depreciation for the first six months of 2022 when compared to ~~2016 by~~the first six months of 2021. After-tax earnings as a ~~$55.8 million (after-tax) potential ligation settlement offset by a $16.8 million increase~~percent of revenue at VITAS in ~~revenue and a $1.2 million decrease~~the first six months of 2022 was 12.0% as compared to 11.2% in ~~cost~~the first six months of ~~services provided and goods sold.~~

~~-24-~~

2021.

Roto-Rooter’s net income was ~~positively~~ impacted in ~~2017~~the first six months of 2022 compared to ~~2016~~the first six months of 2021 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 six months of 2022 was 19.6%, as compared to ~~11.7%~~18.5% in ~~2016.~~

~~The improvement at~~the first six months of 2021.

After-tax Corporate ~~is due mainly~~expenses for the first six months of 2022 increased 12.5% when compared to the ~~impact~~first six months of ~~the adoption of ASU 2016-09 which positively impacted the Company’s~~2021 due to an $1.2 million increase in stock-based compensation expense, increase in interest expense, and a decrease in excess tax ~~provision by approximately $8.1 million which is partially offset by higher~~benefits on stock ~~based compensation expenses.~~

compensation.

‎

~~-25-~~

-29-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2022
(in thousands)(unaudited)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
2022 (a)
Service revenues and sales	$	297,781	$	233,507	$	-	$	531,288
Cost of services provided and goods sold		227,533		109,288		-		336,821
Selling, general and administrative expenses		23,148		54,982		9,723		87,853
Depreciation		6,062		6,634		18		12,714
Amortization		26		2,494		-		2,520
Other operating (income)/expense		(807)		249		-		(558)
Total costs and expenses		255,962		173,647		9,741		439,350
Income/(loss) from operations		41,819		59,860		(9,741)		91,938
Interest expense		(44)		(115)		(743)		(902)
Intercompany interest income/(expense)		4,683		2,205		(6,888)		-
Other income—net		119		37		(5,086)		(4,930)
Income/(expense) before income taxes		46,577		61,987		(22,458)		86,106
Income taxes		(11,365)		(14,915)		6,630		(19,650)
Net income/(loss)	$	35,212	$	47,072	$	(15,828)	$	66,456

(a) The following amounts are included in net income (in thousands):
							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
Pretax benefit/(cost):
Stock option expense	$	-	$	-	$	(7,216)	$	(7,216)
Amortization of reacquired franchise agreements		-		(2,352)		-		(2,352)
Long-term incentive compensation		-		-		(1,517)		(1,517)
Medicare cap sequestration adjustment		(138)		-		-		(138)
Direct costs related to COVID-19		80		-		-		80
Other		-		(28)		-		(28)
Total	$	(58)	$	(2,380)	$	(8,733)	$	(11,171)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
Stock option expense	$	-	$	-	$	(5,993)	$	(5,993)
Amortization of reacquired franchise agreements		-		(1,729)		-		(1,729)
Long-term incentive compensation		-		-		(1,348)		(1,348)
Medicare cap sequestration adjustment		(103)		-		-		(103)
Direct costs related to COVID-19		60		-		-		60
Other		-		(20)		-		(20)
Excess tax benefits on stock compensation		-		-		2,499		2,499
Total	$	(43)	$	(1,749)	$	(4,842)	$	(6,634)

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-~~

-30-


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

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
2021 (a)
Service revenues and sales	$	311,935	$	220,321	$	-	$	532,256
Cost of services provided and goods sold		247,519		102,974		-		350,493
Selling, general and administrative expenses		22,631		53,556		17,651		93,838
Depreciation		7,125		6,468		19		13,612
Amortization		18		2,492		-		2,510
Other operating expense		87		17		-		104
Total costs and expenses		277,380		165,507		17,670		460,557
Income/(loss) from operations		34,555		54,814		(17,670)		71,699
Interest expense		(43)		(89)		(247)		(379)
Intercompany interest income/(expense)		4,486		1,649		(6,135)		-
Other income—net		99		32		3,654		3,785
Income/(expense) before income taxes		39,097		56,406		(20,398)		75,105
Income taxes		(9,385)		(13,633)		4,435		(18,583)
Net income/(loss)	$	29,712	$	42,773	$	(15,963)	$	56,522

(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	$	(11,084)	$	(582)	$	-	$	(11,666)
Stock option expense		-		-		(6,239)		(6,239)
Amortization of reacquired franchise agreements		-		(2,352)		-		(2,352)
Facility relocation costs		(1,855)						(1,855)
Long-term incentive compensation		-		-		(1,673)		(1,673)
Litigation settlements				98				98
Total	$	(12,939)	$	(2,836)	$	(7,912)	$	(23,687)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
Direct costs related to COVID-19	$	(8,268)	$	(428)	$	-	$	(8,696)
Stock option expense		-		-		(5,166)		(5,166)
Amortization of reacquired franchise agreements		-		(1,729)		-		(1,729)
Long-term incentive compensation		-		-		(1,543)		(1,543)
Facility relocation costs		(1,384)						(1,384)
Litigation settlements				72				72
Excess tax benefits on stock compensation		-		-		868		868
Total	$	(9,652)	$	(2,085)	$	(5,841)	$	(17,578)

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-~~

-31-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2022
(in thousands)(unaudited)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
2022 (a)
Service revenues and sales	$	596,970	$	464,867	$	-	$	1,061,837
Cost of services provided and goods sold		454,773		218,600		-		673,373
Selling, general and administrative expenses		45,600		111,937		20,270		177,807
Depreciation		11,613		13,203		36		24,852
Amortization		49		4,989		-		5,038
Other operating (income)/expense		(955)		410		-		(545)
Total costs and expenses		511,080		349,139		20,306		880,525
Income/(loss) from operations		85,890		115,728		(20,306)		181,312
Interest expense		(96)		(229)		(1,387)		(1,712)
Intercompany interest income/(expense)		9,339		4,381		(13,720)		-
Other income—net		156		72		(9,020)		(8,792)
Income/(expense) before income taxes		95,289		119,952		(44,433)		170,808
Income taxes		(23,595)		(28,943)		12,355		(40,183)
Net income/(loss)	$	71,694	$	91,009	$	(32,078)	$	130,625

(a) The following amounts are included in net income (in thousands):
							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
Pretax benefit/(cost):
Stock option expense	$	-	$	-	$	(14,667)	$	(14,667)
Amortization of reacquired franchise agreements		-		(4,704)		-		(4,704)
Long-term incentive compensation		-		-		(2,827)		(2,827)
Direct costs related to COVID-19		(310)		(960)		-		(1,270)
Medicare cap sequestration adjustment		(138)		-		-		(138)
Other		-		(28)		-		(28)
Total	$	(448)	$	(5,692)	$	(17,494)	$	(23,634)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
Stock option expense	$	-	$	-	$	(12,160)	$	(12,160)
Amortization of reacquired franchise agreements		-		(3,457)		-		(3,457)
Long-term incentive compensation		-		-		(2,507)		(2,507)
Direct costs related to COVID-19		(231)		(707)		-		(938)
Medicare cap sequestration adjustment		(103)		-		-		(103)
Other		-		(20)				(20)
Excess tax benefits on stock compensation		-		-		3,940		3,940
Total	$	(334)	$	(4,184)	$	(10,727)	$	(15,245)

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-~~

-32-


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

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
2021 (a)
Service revenues and sales	$	627,723	$	431,893	$	-	$	1,059,616
Cost of services provided and goods sold		486,186		204,780		-		690,966
Selling, general and administrative expenses		44,721		106,878		33,838		185,437
Depreciation		12,462		12,821		44		25,327
Amortization		36		4,984		-		5,020
Other operating expense		590		136		-		726
Total costs and expenses		543,995		329,599		33,882		907,476
Income/(loss) from operations		83,728		102,294		(33,882)		152,140
Interest expense		(85)		(179)		(496)		(760)
Intercompany interest income/(expense)		9,011		3,269		(12,280)		-
Other income—net		632		63		6,692		7,387
Income/(expense) before income taxes		93,286		105,447		(39,966)		158,767
Income taxes		(22,805)		(25,497)		11,457		(36,845)
Net income/(loss)	$	70,481	$	79,950	$	(28,509)	$	121,922

(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	$	(12,836)	$	(1,136)	$	(38)	$	(14,010)
Stock option expense		-		-		(12,345)		(12,345)
Amortization of reacquired franchise agreements		-		(4,704)		-		(4,704)
Long-term incentive compensation		-		-		(3,566)		(3,566)
Facility relocation costs		(1,855)		-		-		(1,855)
Litigation settlements		-		98		-		98
Total	$	(14,691)	$	(5,742)	$	(15,949)	$	(36,382)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
Direct costs related to COVID-19	$	(9,576)	$	(835)	$	(30)	$	(10,441)
Stock option expense		-		-		(10,232)		(10,232)
Amortization of reacquired franchise agreements		-		(3,457)		-		(3,457)
Long-term incentive compensation		-		-		(3,212)		(3,212)
Facility relocation costs		(1,384)						(1,384)
Litigation settlements				72				72
Excess tax benefits on stock compensation		-		-		4,106		4,106
Total	$	(10,960)	$	(4,220)	$	(9,368)	$	(24,548)

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-~~

-33-


Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

Chemed Corporation and Subsidiary Companies
(in thousands)								Chemed
For the three months ended June 30, 2022		VITAS		Roto-Rooter		Corporate		Consolidated

	Net income/(loss)	$	35,212	$	47,072	$	(15,828)	$	66,456
	Add/(deduct):
	Interest expense		44		115		743		902
	Income taxes		11,365		14,915		(6,630)		19,650
	Depreciation		6,062		6,634		18		12,714
	Amortization		26		2,494		-		2,520
	EBITDA		52,709		71,230		(21,697)		102,242
	Add/(deduct):
	Intercompany interest expense/(income)		(4,683)		(2,205)		6,888		-
	Interest income		(118)		(37)		1		(154)
	Stock option expense		-		-		7,216		7,216
	Long-term incentive compensation		-		-		1,517		1,517
	Medicare cap sequestration adjustment		138		-		-		138
	Direct costs related to COVID-19		(80)		-		-		(80)
	Other		-		28		-		28
	Adjusted EBITDA	$	47,966	$	69,016	$	(6,075)	$	110,907

								Chemed
For the three months ended June 30, 2021		VITAS		Roto-Rooter		Corporate		Consolidated

	Net income/(loss)	$	29,712	$	42,773	$	(15,963)	$	56,522
	Add/(deduct):
	Interest expense		43		89		247		379
	Income taxes		9,385		13,633		(4,435)		18,583
	Depreciation		7,125		6,468		19		13,612
	Amortization		18		2,492		-		2,510
	EBITDA		46,283		65,455		(20,132)		91,606
	Add/(deduct):
	Intercompany interest expense/(income)		(4,486)		(1,649)		6,135		-
	Interest income		(106)		(32)		-		(138)
	Direct costs related to COVID-19		11,084		582		-		11,666
	Stock option expense		-		-		6,239		6,239
	Long-term incentive compensation		-		-		1,673		1,673
	Litigation settlement		-		(98)		-		(98)
	Adjusted EBITDA	$	52,775	$	64,258	$	(6,085)	$	110,948

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-~~

-34-


Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

Chemed Corporation and Subsidiary Companies
(in thousands)								Chemed
For the six months ended June 30, 2022		VITAS		Roto-Rooter		Corporate		Consolidated

	Net income/(loss)	$	71,694	$	91,009	$	(32,078)	$	130,625
	Add/(deduct):
	Interest expense		96		229		1,387		1,712
	Income taxes		23,595		28,943		(12,355)		40,183
	Depreciation		11,613		13,203		36		24,852
	Amortization		49		4,989		-		5,038
	EBITDA		107,047		138,373		(43,010)		202,410
	Add/(deduct):
	Intercompany interest expense/(income)		(9,339)		(4,381)		13,720		-
	Interest income		(155)		(71)		-		(226)
	Stock option expense		-		-		14,667		14,667
	Long-term incentive compensation		-		-		2,827		2,827
	Direct costs related to COVID-19		310		960		-		1,270
	Medicare cap sequestration adjustment		138		-		-		138
	Other		-		28		-		28
	Adjusted EBITDA	$	98,001	$	134,909	$	(11,796)	$	221,114

								Chemed
For the six months ended June 30, 2021		VITAS		Roto-Rooter		Corporate		Consolidated

	Net income/(loss)	$	70,481	$	79,950	$	(28,509)	$	121,922
	Add/(deduct):
	Interest expense		85		179		496		760
	Income taxes		22,805		25,497		(11,457)		36,845
	Depreciation		12,462		12,821		44		25,327
	Amortization		36		4,984		-		5,020
	EBITDA		105,869		123,431		(39,426)		189,874
	Add/(deduct):
	Intercompany interest expense/(income)		(9,011)		(3,269)		12,280		-
	Interest income		(167)		(63)		-		(230)
	Direct costs related to COVID-19		12,836		1,136		38		14,010
	Stock option expense		-		-		12,345		12,345
	Long-term incentive compensation		-		-		3,566		3,566
	Litigation settlement		-		(98)				(98)
	Adjusted EBITDA	$	109,527	$	121,137	$	(11,197)	$	219,467

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-~~

-35-



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

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income as reported	$	66,456	$	56,522	$	130,625	$	121,922

Add/(deduct) pre-tax cost of:
Stock option expense		7,216		6,239		14,667		12,345
Amortization of reacquired franchise agreements		2,352		2,352		4,704		4,704
Long-term incentive compensation		1,517		1,673		2,827		3,566
Direct costs related to COVID-19		(80)		11,666		1,270		14,010
Medicare cap sequestration adjustment		138		-		138		-
Other		28		-		28		-
Facility relocation cost		-		1,855		-		1,855
Litigation settlements		-		(98)		-		(98)
Add/(deduct) tax impacts:
Tax impact of the above pre-tax adjustments (1)		(2,038)		(5,241)		(4,449)		(7,728)
Excess tax benefits on stock compensation		(2,499)		(868)		(3,940)		(4,106)
Adjusted net income	$	73,090	$	74,100	$	145,870	$	146,470

Diluted Earnings Per Share As Reported
Net income	$	4.40	$	3.51	$	8.62	$	7.52
Average number of shares outstanding		15,111		16,101		15,152		16,205

Adjusted Diluted Earnings Per Share
Adjusted net income	$	4.84	$	4.60	$	9.63	$	9.04
Adjusted average number of shares outstanding		15,111		16,101		15,152		16,205

(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-~~

-36-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
OPERATING STATISTICS	2022			2021			2022			2021
Net revenue ($000)
Homecare	$	257,631		$	264,926		$	515,267		$	528,680
Inpatient		24,619			27,371			51,189			56,527
Continuous care		19,538			24,282			39,116			51,631
Other		3,213			3,078			6,220			6,016
Subtotal	$	305,001		$	319,657		$	611,792		$	642,854
Room and board, net		(2,166)			(2,657)			(4,283)			(5,322)
Contractual allowances		(3,054)			(3,065)			(6,039)			(6,309)
Medicare cap allowance		(2,000)			(2,000)			(4,500)			(3,500)
Total	$	297,781		$	311,935		$	596,970		$	627,723
Net revenue as a percent of total before Medicare cap allowances
Homecare		84.5	%		82.9	%		84.2	%		82.2	%
Inpatient		8.1			8.6			8.4			8.8
Continuous care		6.4			7.6			6.4			8.0
Other		1.0			0.9			1.0			1.0
Subtotal		100.0			100.0			100.0			100.0
Room and board, net		(0.7)			(0.8)			(0.7)			(0.8)
Contractual allowances		(1.0)			(1.0)			(1.0)			(1.0)
Medicare cap allowance		(0.7)			(0.6)			(0.7)			(0.6)
Total		97.6	%		97.6	%		97.6	%		97.6	%
Days of care
Homecare		1,266,604			1,335,482			2,525,276			2,665,374
Nursing home		259,046			244,423			507,514			477,206
Respite		6,095			5,338			11,463			10,178
Subtotal routine homecare and respite		1,531,745			1,585,243			3,044,253			3,152,758
Inpatient		23,155			26,493			47,742			54,167
Continuous care		20,802			25,786			41,884			55,086
Total		1,575,702			1,637,522			3,133,879			3,262,011
Number of days in relevant time period		91			91			181			181
Average daily census (days)
Homecare		13,918			14,676			13,952			14,726
Nursing home		2,847			2,686			2,804			2,636
Respite		67			59			63			57
Subtotal routine homecare and respite		16,832			17,421			16,819			17,419
Inpatient		254			291			264			299
Continuous care		229			283			231			304
Total		17,315			17,995			17,314			18,022
Total Admissions		14,735			16,840			31,265			34,975
Total Discharges		14,603			16,525			31,465			35,054
Average length of stay (days)		103.7			94.5			104.3			94.4
Median length of stay (days)		17.0			14.0			16.0			13.0
ADC by major diagnosis
Cerebro		37.6	%		36.8	%		37.5	%		36.5	%
Neurological		22.7			22.4			22.8			22.3
Cancer		11.2			12.1			11.2			12.2
Cardio		15.8			15.6			15.8			15.6
Respiratory		7.2			7.3			7.3			7.5
Other		5.5			5.8			5.4			5.9
Total		100.0	%		100.0	%		100.0	%		100.0	%
Admissions by major diagnosis
Cerebro		23.8			21.4	%		23.4	%		21.5	%
Neurological		13.0			12.3			12.9			12.3
Cancer		27.3			28.9			26.0			26.9
Cardio		15.4			14.8			14.7			14.5
Respiratory		9.9			10.5			10.6			10.7
Other		10.6			12.1			12.4			14.1
Total		100.0	%		100.0	%		100.0	%		100.0	%

Estimated uncollectible accounts as a percent of revenues		1.0	%		1.0	%		1.0	%		1.0	%
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments		33.7			36.3			n.a.			n.a.
Days of revenue outstanding- including unapplied Medicare payments		28.2			21.0			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-~~

-37-

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~~June 30, ~~2017,~~2022, the Company had ~~$82.5~~$116.8 million of 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~~Note 10, 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-~~

-38-

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~~six months of ~~2017:~~2022:



	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, 2022	-	$	-	10,225,654	$	201,941,318
February 1 through February 28, 2022	-		-	10,225,654		201,941,318
March 1 through March 31, 2022	57,500		475.71	10,283,154	$	174,587,938

First Quarter Total	57,500	$	475.71

April 1 through April 30, 2022	4,932	$	493.78	10,288,086	$	172,152,453
May 1 through May 31, 2022	95,068		498.86	10,383,154		124,726,992
June 1 through June 30, 2022	-		-	10,383,154	$	124,726,992

Second Quarter Total	100,000	$	498.61

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-~~

-39-

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.

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.

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 June 30, 2022 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 June 30, 2022, formatted in iXBRL and contained in Exhibit 101.

‎

~~SIGNATURES~~

-40-

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:		July 29, 2022		By:		/s/ Kevin J. McNamara
							Kevin J. McNamara
							(President and Chief Executive Officer)


Dated:	~~Dated:~~	July 29, 2022	~~October 27, 2017~~	By:	~~By:~~		/s/ David P. Williams
							David P. Williams
							(Executive Vice President and Chief Financial Officer)


Dated:	~~Dated:~~	July 29, 2022	~~October 27, 2017~~	By:	~~By:~~		/s/ Michael D. Witzeman
							Michael D. Witzeman
							(Vice President and Controller)

-41-

~~-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

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

	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
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

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	)

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	)