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 ~~June 30, 2021~~March 31, 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
(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)

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	x	No	o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).


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

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 o

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


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:


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

Capital Stock $1 Par Value	CHE	New York Stock Exchange	~~15,731,457~~14,967,917 Shares	~~June 30, 2021~~March 31, 2022

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CHEMED CORPORATION AND

SUBSIDIARY COMPANIES

Index



	Page No.
PART I. FINANCIAL INFORMATION:

Item 1. Financial Statements
Unaudited Consolidated Balance Sheets -
~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	3

Unaudited Consolidated Statements of Income -
Three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	4

Unaudited Consolidated Statements of Cash Flows -
~~Six~~Three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	5

Unaudited Consolidated Statements of Changes in Stockholders’ Equity-
Three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	6

Notes to Unaudited Consolidated Financial Statements	87

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	2219

Item 3. Quantitative and Qualitative Disclosures about Market Risk	3930

Item 4. Controls and Procedures	3930

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	3930

Item 1A. Risk Factors	3930

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4031

Item 3. Defaults Upon Senior Securities	4031

Item 4. Mine Safety Disclosures	4031

Item 5. Other Information	4031

Item 6. Exhibits	4032

EX – 31.1
EX – 31.2
EX – 31.3
EX – 32.1
EX – 32.2
EX – 32.3
EX – 101
EX – 104

‎

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



	June 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	92,120	$	162,675	$	18,160	$	32,895
Accounts receivable		123,329		126,853		117,319		137,217
Inventories		7,411		7,095		10,540		10,109
Prepaid income taxes		23,386		6,603		9,143		17,377
Prepaid expenses		22,840		26,177		29,589		32,688
Total current assets		269,086		329,403		184,751		230,286
Investments of deferred compensation plans		98,256		88,811		100,139		98,884
Properties and equipment, at cost, less accumulated depreciation of $307,347 (2020 - $293,380)		192,653		187,820
Properties and equipment, at cost, less accumulated depreciation of $326,154 (2021- $317,911)						192,405		193,680
Lease right of use asset		123,207		123,448		134,169		125,048
Identifiable intangible assets less accumulated amortization of $52,628 (2020 - $47,607)		113,137		118,085
Identifiable intangible assets less accumulated amortization of $60,166 (2021 - $57,648)						106,367		108,096
Goodwill		578,650		578,585		579,704		578,591
Other assets		8,807		8,759		8,222		8,138
Total Assets	$	1,383,796	$	1,434,911	$	1,305,757	$	1,342,723

LIABILITIES
Current liabilities
Accounts payable	$	55,975	$	54,234	$	64,710	$	73,024
Income taxes		5		9,464		15,390		41
Accrued insurance		51,963		54,703		58,952		55,918
Accrued compensation		83,608		91,282		62,205		95,598
Accrued legal		1,391		10,632		871		872
Short-term lease liability		36,440		36,200		38,856		37,913
Other current liabilities		38,020		42,593		38,667		39,033
Total current liabilities		267,402		299,108		279,651		302,399
Deferred income taxes		21,713		20,664		19,136		23,183
Long-term debt						120,000		185,000
Deferred compensation liabilities		97,374		88,456		100,812		98,597
Long-term lease liability		99,093		99,210		109,121		100,629
Other liabilities		27,440		26,273		10,332		9,642
Total Liabilities		513,022		533,711		639,052		719,450
Commitments and contingencies (Note 10)
STOCKHOLDERS' EQUITY
Capital stock - authorized 80,000,000 shares $1 par; issued 36,385,091 shares (2020 - 36,258,638 shares)		36,385		36,259
Capital stock - authorized 80,000,000 shares $1 par; issued 36,578,650 shares (2021 - 36,513,857 shares)						36,579		36,514
Paid-in capital		999,697		961,404		1,064,448		1,044,341
Retained earnings		1,834,835		1,723,777		2,029,158		1,970,311
Treasury stock - 20,720,835 shares (2020 - 20,351,562 shares)		(2,002,326)		(1,822,579)
Treasury stock - 21,676,467 shares (2021 - 21,601,325 shares)						(2,465,716)		(2,430,094)
Deferred compensation payable in Company stock		2,183		2,339		2,236		2,201
Total Stockholders' Equity		870,774		901,200		666,705		623,273
Total Liabilities and Stockholders' Equity	$	1,383,796	$	1,434,911	$	1,305,757	$	1,342,723

See accompanying Notes to Unaudited Consolidated Financial Statements.	See accompanying Notes to Unaudited Consolidated Financial Statements.				See accompanying Notes to Unaudited Consolidated Financial Statements.

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



	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2021		2020		2021		2020		2022		2021
Service revenues and sales	$	532,256	$	502,199	$	1,059,616	$	1,017,997	$	530,549	$	527,360
Cost of services provided and goods sold (excluding depreciation)		350,493		352,163		690,966		703,908		336,552		340,473
Selling, general and administrative expenses		93,838		84,513		185,437		155,096		89,954		91,599
Depreciation		13,612		11,659		25,327		23,047		12,138		11,715
Amortization		2,510		2,488		5,020		4,965		2,518		2,510
Other operating expenses/(income)		104		(41,384)		726		(41,142)
Other operating expenses										13		622
Total costs and expenses		460,557		409,439		907,476		845,874		441,175		446,919
Income from operations		71,699		92,760		152,140		172,123		89,374		80,441
Interest expense		(379)		(651)		(760)		(1,626)		(810)		(381)
Other income/(expense) - net		3,785		7,514		7,387		(1,952)
Other (expense)/income - net										(3,862)		3,602
Income before income taxes		75,105		99,623		158,767		168,545		84,702		83,662
Income taxes		(18,583)		(17,522)		(36,845)		(30,553)		(20,533)		(18,262)
Net income	$	56,522	$	82,101	$	121,922	$	137,992	$	64,169	$	65,400

Earnings Per Share:
Net income	$	3.57	$	5.16	$	7.66	$	8.65	$	4.28	$	4.08
Average number of shares outstanding		15,829		15,914		15,919		15,953		14,986		16,010

Diluted Earnings Per Share:
Net income	$	3.51	$	5.01	$	7.52	$	8.39	$	4.22	$	4.01
Average number of shares outstanding		16,101		16,373		16,205		16,445		15,192		16,310

Cash Dividends Per Share	$	0.34	$	0.32	$	0.68	$	0.64	$	0.36	$	0.34

See accompanying Notes to Unaudited Consolidated Financial Statements.	See accompanying Notes to Unaudited Consolidated Financial Statements.								See accompanying Notes to Unaudited Consolidated Financial Statements.

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

	Six Months Ended June 30,				Three Months Ended March 31,
	2021		2020		2022		2021
Cash Flows from Operating Activities
Net income	$	121,922	$	137,992	$	64,169	$	65,400
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		30,347		28,012		14,656		14,225
Stock option expense		12,345		10,113		7,451		6,106
Litigation settlements paid		(9,440)		-
Benefit for deferred income taxes						(4,047)		(930)
Noncash long-term incentive compensation		3,402		3,527		1,185		1,642
Noncash directors' compensation		1,173		1,171
Provision for deferred income taxes		1,051		2,717
Amortization of debt issuance costs		153		153		76		76
Provision for bad debts		40		871
Unutilized CARES Act grant		-		39,236
Deferred payroll taxes		-		10,716
Payments on previously accrued litigation settlements						-		(8,490)
Changes in operating assets and liabilities:
Decrease in accounts receivable		4,722		6,696		19,610		22,773
Increase in inventories		(316)		(5)
Decrease/(increase) in prepaid expenses		3,337		(33)
(Decrease)/increase in accounts payable and other current liabilities		(10,815)		13,303
(Increase)/decrease in inventories						(431)		318
Decrease in prepaid expenses						3,099		4,402
Decrease in accounts payable and other current liabilities						(30,332)		(18,369)
Change in current income taxes		(26,242)		23,725		23,530		18,395
Net change in lease assets and liabilities		(436)		1,287		743		(24)
Increase in other assets		(10,088)		(2,988)		(1,562)		(5,274)
Increase in other liabilities		10,088		1,383		2,958		5,759
Other sources/(uses)		796		(54)
Other (uses)/sources						(15)		710
Net cash provided by operating activities		132,039		277,822		101,090		106,719
Cash Flows from Investing Activities
Capital expenditures		(33,604)		(32,251)		(12,649)		(17,697)
Business combinations		-		(3,600)
Business combinations, net of cash acquired						(1,650)		-
Other sources		302		473		351		274
Net cash used by investing activities		(33,302)		(35,378)		(13,948)		(17,423)
Cash Flows from Financing Activities
Payments on revolving line of credit						(86,500)		-
Proceeds from revolving line of credit						21,500		-
Purchases of treasury stock		(166,649)		(122,148)		(27,794)		(41,107)
Proceeds from exercise of stock options		16,186		19,440		7,692		11,026
Change in cash overdrafts payable						(7,051)		-
Dividends paid		(10,864)		(10,238)		(5,322)		(5,437)
Capital stock surrendered to pay taxes on stock-based compensation		(8,598)		(14,845)		(4,893)		(6,613)
Payments on revolving line of credit		-		(264,900)
Proceeds from revolving line of credit		-		174,900
Change in cash overdrafts payable		-		(9,849)
Other sources/(uses)		633		(586)
Other sources						491		316
Net cash used by financing activities		(169,292)		(228,226)		(101,877)		(41,815)
(Decrease)/Increase in Cash and Cash Equivalents		(70,555)		14,218		(14,735)		47,481
Cash and cash equivalents at beginning of year		162,675		6,158		32,895		162,675
Cash and cash equivalents at end of period	$	92,120	$	20,376	$	18,160	$	210,156

See accompanying Notes to Unaudited Consolidated Financial Statements.	See accompanying Notes to Unaudited Consolidated Financial Statements.				See accompanying Notes to Unaudited Consolidated Financial Statements.

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

For the three months ended June 30, 2021 and 2020:										Deferred
For the three months ended March 31, 2022 and 2021:													For the three months ended March 31, 2022 and 2021:									Deferred
										Compensation												Compensation
								Treasury		Payable in										Treasury		Payable in
		Capital		Paid-in		Retained		Stock-		Company				Capital		Paid-in		Retained		Stock-		Company
		Stock		Capital		Earnings		at Cost		Stock		Total		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
Balance at December 31, 2021														36,514		1,044,341		1,970,311		(2,430,094)		2,201		623,273
Net income														-		-		64,169		-		-		64,169
Dividends paid ($0.36 per share)														-		-		(5,322)		-		-		(5,322)
Stock awards and exercise of stock options														65		19,603		-		(8,233)		-		11,435
Purchases of treasury stock														-		-		-		(27,353)		-		(27,353)
Other														-		504		-		(36)		35		503
Balance at March 31, 2022													$	36,579	$	1,064,448	$	2,029,158	$	(2,465,716)	$	2,236	$	666,705
																						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		-		-		56,522		-		-		56,522		-		-		65,400		-		-		65,400
Dividends paid ($0.34 per share)		-		-		(5,427)		-		-		(5,427)		-		-		(5,437)		-		-		(5,437)
Stock awards and exercise of stock options		40		16,630		-		(4,323)		-		12,347		86		21,007		-		(8,932)		-		12,161
Purchases of treasury stock		-		-		-		(121,882)		-		(121,882)		-		-		-		(44,768)		-		(44,768)
Other		-		328		-		194		(192)		330		-		328		-		(36)		36		328
Balance at June 30, 2021	$	36,385	$	999,697	$	1,834,835	$	(2,002,326)	$	2,183	$	870,774
										Deferred
										Compensation
						`		Treasury		Payable in
		Capital		Paid-in		Retained		Stock-		Company
		Stock		Capital		Earnings		at Cost		Stock		Total
Balance at March 31, 2020		35,912		878,550		1,476,151		(1,709,390)		2,378		683,601
Net income		-		-		82,101		-		-		82,101
Dividends paid ($0.32 per share)		-		-		(5,108)		-		-		(5,108)
Stock awards and exercise of stock options		128		25,340		-		(13,995)		-		11,473
Purchases of treasury stock		-		-		-		(21,914)		-		(21,914)
Other		-		531		-		-		12		543
Balance at June 30, 2020	$	36,040	$	904,421	$	1,553,144	$	(1,745,299)	$	2,390	$	750,696
Balance at March 31, 2021													$	36,345	$	982,739	$	1,783,740	$	(1,876,315)	$	2,375	$	928,884

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

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CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(in thousands, except per share data)
For the six months ended June 30, 2021 and 2020:
Deferred
Compensation
Treasury
Payable in
Capital
Paid-in
Retained
Stock-
Company
Stock
Capital
Earnings
at Cost
Stock
Total
Balance at December 31, 2020
36,259
961,404
1,723,777
(1,822,579)
2,339
901,200
Net income
-
-
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
Deferred
Compensation
Treasury
Payable in
Capital
Paid-in
Retained
Stock-
Company
Stock
Capital
Earnings
at Cost
Stock
Total
Balance at December 31, 2019
35,811
860,671
1,425,752
(1,597,940)
2,314
726,608
Net income
-
-
137,992
-
-
137,992
Dividends paid ($0.64 per share)
-
-
(10,238)
-
-
(10,238)
Stock awards and exercise of stock options
229
44,312
-
(25,135)
-
19,406
Purchases of treasury stock
-
-
-
(122,148)
-
(122,148)
Other
-
(562)
(362)
(76)
76
(924)
Balance at June 30, 2020
$
36,040
$
904,421
$
1,553,144
$
(1,745,299)
$
2,390
$
750,696
The Notes to Consolidated Financial Statements are integral parts of these statements.

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-7-

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

Notes to Unaudited Consolidated Financial Statements

1. Basis of Presentation

As used herein, the terms “We,” “Company” and “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, ~~2020~~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, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021~~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 included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

CORONAVIRUS AID, RELIEF AND ECONOMIC STIMULUS (CARES) ACT

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

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

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

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

On April 10, 2020 VITAS automatically received $80.2 million from the Relief Fund based upon VITAS’s 2019 Medicare fee-for-service Medicare revenue. The main condition that is attached to the grant is that the money will be used “only for health care related expenses or lost revenues that are attributable to coronavirus”. HHS guidance does not specifically designate what healthcare expenses are related to COVID-19. The guidance to date is general and broad but does provide some examples such as equipment and supplies, workforce training, reporting COVID-19 test results, securing separate facilities for COVID-19 patients and acquiring additional resources to expand or preserve care delivery. VITAS has cared for approximately 3,200 COVID positive patients through June 30, 2021.

The additional conditions to the Relief Fund payment are specific in nature, such as the money cannot be used for gun control advocacy purposes, abortions, embryo research, etc. The Company is in compliance, and intends to maintain compliance, with these specific conditions. Based on this analysis, management believes that there is reasonable assurance that VITAS will comply with the conditions.

Chemed and its subsidiaries have deferred $36.4 million of certain employer payroll taxes as permitted by the CARES Act. $18.2 million is classified as short-term and $18.2 million is classified as a long-term liability.

During the period from May 1, 2020 through June 30, 2021, the 2% Medicare sequestration reimbursement cut was suspended. For the three and six month periods ended June 30, 2021, approximately $5.9 million and $11.9 million, respectively, was recognized as revenue due to the suspension of sequestration. In April 2021, legislation was signed into law that suspended sequestration through December 31, 2021.

~~There is no U.S. GAAP that covers accounting for such government “grants” to for-profit entities. As a result, the Company analogized to International Accounting Standard 20 –~~ ~~Accounting for Government Grants and Disclosures~~ ~~(“IAS 20”). Under IAS 20,~~

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once it is reasonably assured that the entity will comply with the conditions of the grant, the grant money should be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or lost revenue.

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

CLOUD COMPUTING

As of ~~June 30, 2021, we have~~March 31, 2022, Roto-Rooter has 2 cloud computing arrangements that are service contracts. ~~Roto-Rooter is implementing~~The two projects consist of the development of a single source data warehouse and human resource system ~~to assist in technician dispatch and~~ integration with our enterprise software. No amortization has been recorded for these two projects as they have not been placed into service.

VITAS ~~implemented~~utilizes a ~~new~~ human resources ~~system.~~system that is considered a cloud computing arrangement. We have capitalized approximately ~~$9.1~~$5.6 million related to implementation of ~~these projects~~this project which ~~are~~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 55.7 years. For the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ $249,000 and ~~$263,000, respectively,~~$199,000 has been amortized. For the six months ended June 30, 2021 and 2020, $448,000 and $525,000, respectively, has been amortized. The Roto-Rooter project was placed into service during the second quarter of 2021. For the quarter and year to date ended June 30, 2021, $349,000 has been amortized.amortized, respectively.

INCOME TAXES

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

Our effective income tax rate was ~~24.7%~~24.2% in the ~~second~~first quarter of ~~2021~~2022 compared to ~~17.6%~~21.8% during the ~~second~~first quarter of ~~2020.~~2021. Excess tax benefit on stock options exercised reduced our income tax expenses by ~~$868,000~~$1.4 million and ~~$8.2~~$3.2 million, respectively for the quarters ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~

Our effective income tax rate was 23.2% in the first six months of 2021 compared to 18.1% during the first six months of 2020. Excess tax benefit on stock options reduced our income tax expenses by $4.1 million and $12.8 million, respectively for the first six months ended June 30, 2021 and 2020.2021.

NON-CASH TRANSACTIONS

Included in the accompanying Consolidated Balance Sheets are ~~$1.6 million~~$754,000 and ~~$3.9~~$1.9 million of capitalized property and equipment which were not paid for as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~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 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 16 for discussion of recent acquisitions.

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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.

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2. Revenue Recognition

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

VITAS

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

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

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

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

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

Respite Care permits a hospice patient to receive services on an inpatient basis for a short period of time in order to provide relief for the patient’s family or other caregivers from the demands of caring for the patient. A hospice can

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receive payment for respite care for a given patient for up to five consecutive days at a time, after which respite care is reimbursed at the routine home care rate.

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

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Care is provided to patients regardless of their ability to pay. Patients who meet our criteria for charity care are provided care without charge. There is no revenue or associated accounts receivable in the accompanying Consolidated Financial Statements related to charity care. The cost of providing charity care ~~during~~was $2.0 million for the quarters ended ~~June 30, 2021~~March 31, 2022 and ~~2020 was $2.3 million and $1.7 million, respectively. The cost of providing charity care during the first six months ended June 30, 2021 and 2020 was $4.4 million and $3.9 million, respectively.~~2021. The cost of charity care is included in cost of services provided and goods sold and is calculated by taking the ratio of charity care days to total days of care and multiplying by the total cost of care.

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

We are subject to certain limitations on Medicare payments for services which are considered variable consideration, as 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, 2021~~March 31, 2022 and ~~2020.~~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, 2021,~~March 31, 2022, all our programs except one are using the “streamlined” method.

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

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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 revenues are likely to exceed the annual per-beneficiary Medicare 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 actions, which include changes to the patient mix and increased patient admissions. However, should we project our corrective action will not prevent that program from exceeding its Medicare cap, we estimate revenue recognized during the 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 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 intermediary that an additional $8.7

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million is owed for Medicare cap in three programs arising during the 2013 through 2020 measurement periods. The amounts 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 the amounts they have withheld and intend to withhold under their current “as if” methodology. We have appealed CMS’s methodology change. ~~Pursuant to the recent legislation and the April extension, the sequestration has been lifted for the period from May 1, 2020 through December 31, 2021.~~

During the quarter ended ~~June 30, 2021,~~March 31, 2022, we recorded $~~2.0~~$2.5 million in net Medicare cap revenue reduction related to two programs for the ~~2021 government fiscal year. During the quarter ended June 30, 2020, we recorded $5.8~~ ~~million in net Medicare cap revenue reduction related to five programs for the 2020~~2022 government fiscal year.

During the ~~first six months~~quarter ended ~~June 30,~~March 31, 2021, we recorded $~~3.5~~$1.5 million in net Medicare cap revenue reduction related to two programs for the 2021 ~~government fiscal year. During the first six months ended June 30, 2020, we recorded $8.3~~ ~~million in net Medicare cap revenue reduction related to five programs for the 2020~~ government fiscal year.

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

The composition of patient care service revenue by payor and level of care for the quarter ended ~~June 30, 2021~~March 31, 2022 is as follows (in thousands):



	Medicare		Medicaid		Commercial		Total		Medicare		Medicaid		Commercial		Total
Routine home care	$	247,061	$	11,509		6,356	$	264,926	$	241,337	$	10,907		5,392	$	257,636
Continuous care		22,010		1,237		1,035		24,282		17,977		814		787		19,578
Inpatient care		23,905		2,069		1,397		27,371		23,427		1,963		1,180		26,570
	$	292,976	$	14,815	$	8,788	$	316,579	$	282,741	$	13,684	$	7,359	$	303,784

All other revenue - self-pay, respite care, etc.								3,078								3,007
Subtotal							$	319,657							$	306,791
Medicare cap adjustment								(2,000)								(2,500)
Implicit price concessions								(3,065)								(2,985)
Room and board, net								(2,657)								(2,117)
Net revenue							$	311,935							$	299,189

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

Medicare
Medicaid
Commercial
Total
Routine home care
$
257,550
$
12,673
$
6,122
$
276,345
Continuous care
31,483
1,622
1,477
34,582
Inpatient care
22,448
2,311
1,109
25,868
$
311,481
$
16,606
$
8,708
$
336,795
All other revenue - self-pay, respite care, etc.
2,109
Subtotal
$
338,904
Medicare cap adjustment
(5,750)
Implicit price concessions
(3,042)
Room and board, net
(2,647)
Net revenue
$
327,465

‎

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The composition of patient care service revenue by payor and level of care for the ~~six months~~quarter ended ~~June 30,2021~~March 31, 2021 is as follows (in thousands):


	Medicare		Medicaid		Commercial		Total		Medicare		Medicaid		Commercial		Total
Routine home care	$	493,125	$	23,088	$	12,467	$	528,680	$	246,064	$	11,579	$	6,111	$	263,754
Continuous care		46,917		2,496		2,218		51,631		24,907		1,259		1,183		27,349
Inpatient care		49,346		4,539		2,642		56,527		25,438		2,473		1,245		29,156
	$	589,388	$	30,123	$	17,327	$	636,838	$	296,409	$	15,311	$	8,539	$	320,259

All other revenue - self-pay, respite care, etc.								6,016								2,938
Subtotal							$	642,854							$	323,197
Medicare cap adjustment								(3,500)								(1,500)
Implicit price concessions								(6,309)								(3,244)
Room and board, net								(5,322)								(2,665)
Net revenue							$	627,723							$	315,788

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

Medicare
Medicaid
Commercial
Total
Routine home care
$
511,505
$
24,806
$
11,787
$
548,098
Continuous care
68,615
3,493
3,029
75,137
Inpatient care
50,596
4,870
2,884
58,350
$
630,716
$
33,169
$
17,700
$
681,585
All other revenue - self-pay, respite care, etc.
5,265
Subtotal
$
686,850
Medicare cap adjustment
(8,250)
Implicit price concessions
(7,192)
Room and board, net
(6,028)
Net revenue
$
665,380

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 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

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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.~~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~~Independent Contractor is responsible for

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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~~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~~Independent Contractors under these arrangements is the right to use Roto-Rooter’s registered trademarks. Roto-Rooter recognizes revenue from ~~independent contractors~~Independent Contractors over-time (weekly) as the ~~independent contractor’s~~Independent Contractor’s labor sales are completed and payment from customers are received. Payment from ~~independent contractors~~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~~Independent Contractor as a result of Roto-Rooter’s nationally recognized brand. Therefore, over-time recognition provides the most faithful depiction of the transfer of services as the customer simultaneously receives and consumes the benefits provided. There is no significant variable consideration related to these arrangements.

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

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

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

June 30,
2021
2020
Short-term core service jobs
$
162,683
$
126,541
Water restoration
38,583
31,426
Contractor revenue
19,026
15,193
Franchise fees
1,255
1,210
All other
3,882
2,971
Subtotal
$
225,429
$
177,341
Implicit price concessions and credit memos
(5,108)
(2,607)
Net revenue
$
220,321
$
174,734

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


	June 30,				March 31,
	2021		2020		2022		2021
Short-term core service jobs	$	318,032	$	260,965
Short-term core services					$	169,712	$	155,350
Water restoration		76,018		60,672		40,360		37,435
Contractor revenue		37,785		31,421
Independent Contractors						21,418		18,760
Franchise fees		2,582		2,400		1,317		1,327
All other		7,828		6,505		4,191		3,945
Subtotal	$	442,245	$	361,963	$	236,998	$	216,817
Implicit price concessions and credit memos		(10,352)		(9,346)		(5,638)		(5,245)
Net revenue	$	431,893	$	352,617	$	231,360	$	211,572

3. Segments

Service revenues and sales 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,
	2021		2020		2021		2020		Three months ended March 31,
									2022		2021
VITAS	$	29,712	$	60,245	$	70,481	$	101,524	$	36,481	$	40,770
Roto-Rooter		42,773		29,468		79,950		53,790		43,937		37,177
Total		72,485		89,713		150,431		155,314		80,418		77,947
Corporate		(15,963)		(7,612)		(28,509)		(17,322)		(16,249)		(12,547)
Net income	$	56,522	$	82,101	$	121,922	$	137,992	$	64,169	$	65,400

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

-12-

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
2021
Earnings
$
56,522
15,829
$
3.57
Dilutive stock options
-
235
Nonvested stock awards
-
37
Diluted earnings
$
56,522
16,101
$
3.51
2020
Earnings
$
82,101
15,914
$
5.16
Dilutive stock options
-
383
Nonvested stock awards
-
76
Diluted earnings
$
82,101
16,373
$
5.01


			Net Income
For the Three Months Ended March 31,		Income		Shares	Earnings per Share
2022
	Earnings	$	64,169	14,986	$	4.28
	Dilutive stock options		-	165
	Nonvested stock awards		-	41
	Diluted earnings	$	64,169	15,192	$	4.22

2021
	Earnings	$	65,400	16,010	$	4.08
	Dilutive stock options		-	250
	Nonvested stock awards		-	50
	Diluted earnings	$	65,400	16,310	$	4.01

‎

-15-

Net Income
For the Six Months Ended June 30,
Income
Shares
Earnings per Share
2021
Earnings
$
121,922
15,919
$
7.66
Dilutive stock options
-
242
Nonvested stock awards
-
44
Diluted earnings
$
121,922
16,205
$
7.52
2020
Earnings
$
137,992
15,953
$
8.65
Dilutive stock options
-
415
Nonvested stock awards
-
77
Diluted earnings
$
137,992
16,445
$
8.39

For the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, there were ~~235,000 and 242,000, respectively,~~609,000 stock options ~~were~~ excluded from the computation of dilutive earnings per share because they would have been anti-dilutive.

For the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, there were ~~285,000~~298,000 stock options excluded from the computation of dilutive earnings per share because they would have been anti-dilutive.

5. Long-Term Debt and Lines of Credit

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

~~There is 0~~As of March 31, 2022 there was $120.0 million of debt ~~outstanding as of June 30, 2021.~~outstanding.

The 2018 Credit Agreement contains the following quarterly financial covenants effective as of ~~June 30, 2021:~~March 31, 2022:



Description		Requirement

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

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

We are in compliance with all debt covenants as of ~~June 30, 2021.~~March 31, 2022. We have issued ~~$46.3~~$46.2 million in standby letters of credit as of ~~June 30, 2021,~~March 31, 2022, mainly for insurance purposes. Issued letters of credit reduce our available credit under the 2018 Credit Agreement. As of ~~June 30, 2021,~~March 31, 2022, we have approximately ~~$403.7~~$283.8 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility.

‎

-13-

6. Other ~~Income/~~(Expense)/Income – Net

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



	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2021		2020		2021		2020		2022		2021
Market value adjustment on assets held in	Market value adjustment on assets held in								Market value adjustment on assets held in
deferred compensation trust	$	3,655	$	7,408	$	6,693	$	(2,164)	$	(3,934)	$	3,038
Interest income		138		116		230		225		73		92
Other-net		(8)		(10)		464		(13)		(1)		472
Total other income/(expense) - net	$	3,785	$	7,514	$	7,387	$	(1,952)
Total other income - net									$	(3,862)	$	3,602

-16-

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.~~Independent Contractors. We analyzed these leases in accordance with ASC 842 and determined they are operating leases. As a result, Roto-Rooter will continue to capitalize the equipment underlying these leases, depreciate the equipment and recognize rental income.

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

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

‎June 30,

‎December 31,
2021
2020
Assets
Operating lease assets
$
123,207
$
123,448
Liabilities
Current operating leases
36,440
36,200
Noncurrent operating leases
99,093
99,210
Total operating lease liabilities
$
135,533
$
135,410

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

Three months ended June 30,
2021
2020
Lease Expense (a)
Operating lease expense
$
15,550
$
15,103
Sublease income
(46)
(7)
Net lease expense
$
15,504
$
15,096


	March 31,		‎December 31,
	2022		2021
Assets
Operating lease assets	$	134,169	$	125,048

Liabilities
Current operating leases		38,856		37,913
Noncurrent operating leases		109,121		100,629
Total operating lease liabilities	$	147,977	$	138,542

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


	Three months ended March 31,
	2022		2021
Lease Expense (a)
Operating lease expense	$	14,903	$	15,388
Sublease income		(45)		(45)
Net lease expense	$	14,858	$	15,343

Six months ended June 30,
2021
2020
Lease Expense (a)
Operating lease expense
$
30,911
$
29,731
Sublease income
(90)
(7)
Net lease expense
$
30,821
$
29,724

(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.

‎

-1714-

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


	Six months ended ‎June 30,				Three months ended ‎March 31,
	2021		2020		2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from leases	$	25,901	$	24,967	$	12,489	$	12,850

Leased assets obtained in exchange for new operating lease liabilities	$	25,685	$	40,133	$	20,453	$	13,776


Weighted Average Remaining Lease Term at ~~June 30, 2021~~March 31, 2022
Operating leases	~~4.9~~4.66	years


Weighted Average Discount Rate at ~~June 30, 2021~~March 31, 2022
Operating leases	~~2.56~~2.39	%


Maturity of Operating Lease Liabilities (in thousands)

2021	$	23,050
2022		35,336	$	34,158
2023		27,905		37,989
2024		21,414		29,353
2025		15,163		22,656
2026				16,434
Thereafter		21,414		16,038
Total lease payments	$	144,282	$	156,628
Less: interest		(8,749)		(8,651)
Total liability recognized on the balance sheet	$	135,533	$	147,977

For leases commencing prior to April 2019, minimum rental payments exclude payments to landlords for real estate taxes and common area maintenance. Operating lease payments include ~~$2.3~~$2.8 million related to extended lease terms that are reasonably certain of being exercised and exclude ~~$2.1 million~~$200,000 of lease payments for leases signed but not yet commenced.

8. Stock-Based Compensation Plans

On February ~~19, 2021,~~18, 2022, the Compensation/Incentive Committee of the Board of Directors (“CIC”) granted ~~6,277~~7,983 Performance Stock Units (“PSUs”) contingent upon the achievement of certain total shareholder return (“TSR”) targets as compared to the TSR of a group of peer companies for the three year period ending December 31, ~~2023,~~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 ~~$3.8~~$4.8 million.

On February ~~19, 2021,~~18, 2022, the CIC also granted ~~6,277~~7,983 PSUs contingent upon the achievement of certain earnings per share (“EPS”) targets for the three year period ending December 31, ~~2023.~~2024. At the end of each reporting period, the Company estimates the number of shares that it believes will ultimately be earned and records 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 ~~$3.1~~$3.7 million.

9. 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. Net ~~(losses)/~~gains for the Company’s retirement and profit-sharing plans, excess benefit plans and other similar plans are as follows (in thousands):

Three months ended June 30,
Six months ended June 30,
2021
2020
2021
2020
$
7,904
$
11,354
$
16,603
$
6,940



Three months ended March 31,
2022		2021
$	2,917	$	8,699

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

-18-

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, it is not possible at this

-15-

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 October 30, 2017, the Company entered into a settlement agreement to resolve civil litigation under the False Claims Act brought by the United States Department of Justice (“DOJ”) on behalf of the OIG and various relators concerning VITAS, filed in the U.S. District Court of the Western District of Missouri. The Company denied any violation of law and agreed to settlement without admission of wrongdoing.

In connection with the settlement, VITAS and certain of its subsidiaries entered into a corporate integrity agreement (“CIA”) on October 30, 2017. The CIA formalizes various aspects of VITAS’ already existing Compliance Program and contains requirements designed to document compliance with federal healthcare program requirements. It has a term of five years during which it imposes monitoring, reporting, certification, oversight, screening and training obligations, certain of which had previously been implemented by VITAS. It also requires VITAS to engage an Independent Review Organization to perform audit and review functions and to prepare reports regarding compliance with federal healthcare programs. In the 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.

~~The Company entered into a settlement agreement in March 2019 that resolved the California state-wide wage and hour class action claims raised in four separate cases: (1)~~ Jordan A. Seper on behalf of herself and others similarly situated v. VITAS Healthcare Corporation of California, a Delaware corporation; VITAS Healthcare Corp of CA, a business entity unknown; and DOES 1 to 100, inclusive~~; Los Angeles Superior Court Case Number BC 642857 (“Seper”); (2)~~ Jiwan 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 (“Chhina”) (which was subsequently merged with~~ ~~Seper); (3)~~ ~~Chere Phillips and Lady Moore v. VITAS Healthcare Corporation of California, Sacramento County Superior Court, Case No. 34-2017-0021-2755~~ ~~(“Phillips and Moore”);~~ ~~and (4)~~ ~~Williams v. VITAS Healthcare Corporation of California, Alameda County Superior Court Case No. RG 17853886 (“Williams~~”). These actions were brought by both current and former employees including a registered nurse, a licensed vocational nurse (LVN), home health aides and a social worker. Each action stated multiple claims generally including (1) failure to pay minimum wage for all hours worked; (2) failure to provide overtime for all hours worked; (3) failure to pay wages for all hours at the regular rate; (4) failure to provide meal periods; (5) failure to provide rest breaks; (6) failure to provide complete and accurate wage statements; (7) failure to pay for all reimbursement expenses; (8) unfair business practices; and (9) violation of the California Private Attorneys General Act. The cases generally asserted claims on behalf of classes defined to include all current and former non-exempt employees employed with VITAS in California within the four years preceding the filing of each lawsuit.

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

Alfred Lax (“Lax”), a former employee of Roto-Rooter Services Company (“RRSC”) filed a class action lawsuit in Santa Clara County Superior Court in November of 2018 alleging (1) failure to provide or compensate for required rest breaks; (2) failure to properly pay for all hours worked; (3) failure to provide accurate wage statements; (4) failure to reimburse for work-related expenses; and (5) unfair business practices. Lax stated these claims as a representative of a class defined as all service technicians employed by RRSC in California during the four years preceding the filing of the complaint. The lawsuit is, ~~Alfred Lax on behalf of himself and all others similarly situated v. Roto-Rooter Services Company, and Does 1 through 50 inclusive;~~ Santa Clara County Superior Court Case Number 18CV338652. The Company entered into a settlement agreement in August 2020 to resolve the allegations, for a settlement amount of $2.6 million plus employment taxes. The settlement includes technicians in its Menlo Park and Bristol locations. The settlement was recorded in the third quarter of 2020. Final approval of the settlement was granted in the first quarter of 2021 and the settlement was paid.

On October 16, 2020, VITAS received a Civil Investigative Demand (“CID”) issued by the U.S. Department of Justice pursuant to the False Claims Act concerning allegations of the submission of false claims for hospice services for which reimbursement was sought from federal healthcare programs, including Medicare. The CID has requested information regarding 32 patients from our Florida operations. We are cooperating with the U.S. Department of Justice with respect to this investigation. The Company cannot predict when the investigation will be 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 a sample of patients. At the audit’s conclusion, we expect that the OAS will make certain recommendations to CMS, which will be published on the OIG website, and may include repayment of Medicare funds received for elevated care of certain patients in the sample as well as extrapolated amounts based upon the incidence of claims within the sample. These extrapolated amounts may 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. The Company cannot predict the eventual outcome, or reasonably estimate any potential loss, from any such claims at this time.

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,

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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.

11. Concentration of Risk

As of ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, approximately ~~68%~~67% and ~~74%~~73%, respectively, of VITAS’ total accounts receivable balance were from Medicare and ~~24%~~26% and ~~20%~~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%~~73% of the consolidated net accounts receivable in the accompanying consolidated balance sheets as of ~~June 30, 2021.~~March 31, 2022.

VITAS has a pharmacy services contract with 1 service provider for specified pharmacy services related to its hospice operations. Similarly, effective January 1, 2022, VITAS obtains the majority of its medical supplies from a single vendor. A large majority of VITAS’ pharmaceutical and medical supplies purchases are from ~~this vendor.~~these vendors. The ~~pharmaceuticals~~pharmaceutical and medical supplies purchased by VITAS are available through many providers in the United States. However, a disruption from VITAS’ main service ~~provider~~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 0$4.8 million in cash overdrafts payable included in accounts payable at ~~June 30, 2021 or~~March 31, 2022. There were $11.9 million in cash overdrafts payable included in accounts payable at December 31, ~~2020.~~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 not material for each balance sheet date presented.

-16-

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.

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of ~~June 30, 2021~~March 31, 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)
Mutual fund investments of deferred
compensation plans held in trust
$
98,256
$
98,256
$
-
$
-


				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	$	100,139	$	100,139	$	-	$	-
Long-term debt		120,000		-		120,000		-

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of December 31, ~~2020~~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-tern debt		185,000		-		185,000		-

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 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.

‎

-20-

14. Capital Stock Repurchase Plan Transactions

We repurchased the following capital stock:



	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2021		2020		2021		2020		2022		2021

Total cost of repurchased shares (in thousands)	$	121,882	$	21,914	$	166,649	$	122,148	$	27,353	$	44,768
Shares repurchased		250,000		50,000		350,000		275,000		57,500		100,000
Weighted average price per share	$	487.52	$	438.27	$	476.14	$	444.18	$	475.71	$	447.67

In May and November 2021, the Board of Directors authorized ~~an additional $300.0~~a total of $600.0 million for additional stock repurchase under Chemed’s existing share repurchase program. We currently have ~~$311.8~~$174.6 million of authorization remaining under this share repurchase plan.

15. Recent Accounting Standards

In March 2020, the FASB issued Accounting Standards Update “ASU No. 2020-04 - Reference Rate Reform”. The update provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate expected to be discontinued. The update is effective for all entities as of March 12, 2020 and will apply through December 31, 2022. The interest rate charged on borrowings from our existing revolver is based on LIBOR. The credit agreement includes provisions for modifying the interest rate in the instance that LIBOR is discontinued. As a result, no contract modifications will be required when LIBOR is discontinued.

-17-

16. Acquisitions

On ~~June~~January 28, 2022 VITAS purchased the hospice assets of Broward Health Hospital System for $1.3 million in cash. On February 1, ~~2020, we~~2022, Roto-Rooter completed the acquisition of a ~~Roto-Rooter~~ franchise and the related assets in ~~Bloomington, IN~~Linden, NJ for ~~$2.2 million~~$400,000 in ~~cash.~~cash

Goodwill is assessed for impairment on a yearly basis as of October 1. All goodwill recognized is deductible for tax purposes.

Shown below is movement in Goodwill (in thousands):

VITAS
Roto-Rooter
Total
Balance at December 31, 2020
$
333,331
$
245,254
$
578,585
Foreign currency adjustments
-
65
65
Balance at June 30, 2021
$
333,331
$
245,319
$
578,650


	VITAS		Roto-Rooter		Total
Balance at December 31, 2021	$	333,331	$	245,260	$	578,591
Business combinations		732		336		1,068
Foreign currency adjustments		-		45		45
Balance at March 31, 2022	$	334,063	$	245,641	$	579,704

‎

-2118-

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,						Three months ended March 31,
	2021			2020			2021			2020			2022			2021
Service revenues and sales	$	532,256		$	502,199		$	1,059,616		$	1,017,997		$	530,549		$	527,360
Net income	$	56,522		$	82,101		$	121,922		$	137,992		$	64,169		$	65,400
Diluted EPS	$	3.51		$	5.01		$	7.52		$	8.39		$	4.22		$	4.01
Adjusted net income	$	74,100		$	72,223		$	146,470		$	132,938		$	72,780		$	72,370
Adjusted diluted EPS	$	4.60		$	4.41		$	9.04		$	8.08		$	4.79		$	4.44
Adjusted EBITDA	$	110,948		$	108,741		$	219,467		$	201,770		$	110,208		$	108,519
Adjusted EBITDA as a % of revenue		20.8	%		21.7	%		20.7	%		19.8	%		20.8	%		20.6	%

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 ~~35-37.~~27-28.

For the three months ended ~~June 30, 2021,~~March 31, 2022, the increase in consolidated service revenues and sales was driven by ~~an 26.1%~~a 9.4% increase at Roto-Rooter offset by a ~~4.7%~~5.3% decrease at VITAS. The increase in service revenues at Roto-Rooter was driven by an increase in all major service lines. ~~Roto-Rooter’s second quarter 2020 revenue was significantly impacted by shut-downs resulting from the COVID pandemic.~~ The decrease in service revenues at VITAS is comprised primarily of a ~~6.3%~~4.1% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately ~~1.8%~~1.3%. Acuity mix shift had a net impact of reducing revenue approximately ~~$3.8~~$7.1 million, or ~~1.2%~~2.2% in the quarter when compared to the prior year revenue and level-of-care mix. The combination of ~~a lower~~an increase in Medicare cap ~~revenue reduction~~ and other contra revenue changes ~~offset a portion of the~~negatively impacted revenue ~~decline~~growth by approximately 9030 basis points. See page 3829 for additional VITAS operating metrics.

For the six months ended June 30, 2021, the increase in consolidated service revenues and sales was driven by a 22.5% increase at Roto-Rooter offset by a 5.7% decrease at VITAS. The increase in service revenues at Roto-Rooter was driven by an increase in all major service lines. Roto-Rooter’s first six months 2020 revenue was significantly impacted by the COVID pandemic. The decrease in service revenues at VITAS is comprised primarily of a 6.7% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately 1.7%. Acuity mix shift had a net impact of reducing revenue approximately $9.1 million, or 1.4% in the quarter when compared to the prior year revenue and level-of-care mix. The combination of a lower Medicare cap revenue reduction and other contra revenue changes offset a portion of the revenue decline by approximately 70 basis points. See page 38 for additional VITAS operating metrics.

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

-22-

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

The COVID-19 pandemic has made accurate modeling and providing meaningful earnings guidance exceptionally challenging. Since the start of the pandemic, Chemed has been able to successfully navigate within this rapidly changing environment and produce operating results that we believe provide us with the ability to issue earnings guidance for the ~~2021~~2022 calendar year. However, this guidance should be taken with the recognition the pandemic will continue to disrupt our healthcare system and general economy to such an extent that future rules, regulations and government mandates could materially impact the company’s ability to achieve this guidance.

Statistically, patients residing in senior housing are identified as hospice appropriate earlier into their terminal prognosis and have a much greater probability of having a length of stay in excess of 90 days. Hospice patients referred from hospitals, oncology practices and similar referral sources are generally more acute and have a significantly lower probability of lengths-of-stay exceeding 90 days. According to data released by the National Investment Center for Seniors Housing & Care, COVID-19 continues to adversely

-19-

affect senior housing occupancy. This reduced occupancy in senior housing has had a corresponding reduction in VITAS nursing home admissions. Nursing home patients represented ~~14.9%~~15.6% of VITAS’ ~~second quarter~~fourth-quarter 2021 patient census. This compares to nursing home patients averaging 18.2% of total census just prior to the pandemic.

A November 2021 article in US News and World Report estimated that approximately 20% of all health care workers in the US have left the industry since the start of the pandemic. This shortage of licensed healthcare workers will generate short-term to medium-term pressure on VITAS’ labor costs and related margins.

Medicare hospice reimbursement rate increases are based on a government formula that utilizes the Bureau of Labor and Statistics’ measurement of healthcare wage inflation reflected in the hospital wage index basket. However, this formulaic methodology is based upon healthcare wage inflation and increased CPI, historically measured from April 1 through March 31 to determine the following October 1 reimbursement rates. This ~~guidance~~methodology effectively delays actual wage inflation from impacting hospice reimbursement by 12 to 18 months.

VITAS anticipates that senior housing will continue to have weak occupancy rates at least through the first half of 2022. Accordingly, VITAS anticipates senior housing ~~occupancy~~hospice referrals will ~~begin to normalize to pre-pandemic occupancy starting in~~not have meaningful growth until the second half of ~~calendar year 2021.~~

2022. Labor cost increases and related margin pressure are anticipated to continue through all of 2022 with some moderation starting with the next reimbursement increase on October 1, 2022.

Based upon the above discussion, VITAS ~~2021~~2022 revenue, prior to Medicare Cap, is estimated to decline ~~approximately 4.5~~%1.5% to 2.5% when compared to 2021. A portion of the ~~prior year.~~ ~~Average Daily Census~~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~~2021. ADC is estimated to decline ~~approximately 5.0%~~1.0% to 1.5%. ~~Full-year Adjusted~~Full year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be ~~18.3%~~15.5% to 16.0%. We are currently estimating ~~$7.5~~$12 million for Medicare Cap billing limitations in calendar year ~~2021.~~ 2022.

Roto-Rooter is forecasted to achieve full-year ~~2021~~2022 revenue growth of ~~15.0%~~8.0% to ~~15.5%~~9.5%. Roto-Rooter’s ~~Adjusted~~adjusted EBITDA margin for ~~2021~~2022 is ~~estimated~~expected to be ~~between 28%~~28.5% to ~~29%~~29.5%.

Based upon the above, full-year ~~2021~~ ~~adjusted~~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 ~~$18.20~~$19.10 to ~~$18.50.~~$19.50. This ~~compares to initial 2021 adjusted earnings per diluted share guidance of $17.00 to $17.50. This revised 2021~~2022 guidance assumes an effective corporate tax rate on adjusted earnings of ~~24.7%.~~25.1% and a diluted share count of 15.25 million shares. Chemed’s ~~2020~~2021 reported adjusted earnings per diluted share was ~~$18.08.~~$19.33.

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

Financial Condition

Liquidity and Capital Resources

Material changes in the balance sheet accounts from December 31, ~~2020~~2021 to ~~June 30, 2021~~March 31, 2022 include the following:

A ~~$3.5~~$19.9 million decrease in accounts receivable due to timing of receipts. See below.

~~A $16.8~~An $8.2 million ~~increase~~decrease in prepaid income taxes due to timing of payments.

A ~~$7.7~~$9.1 million increase in lease right of use asset due to new building leases at VITAS.

An $8.3 million decrease in accounts payable due to timing of payments.

A $33.4 million decrease in accrued compensation due to the ~~payments~~payment of ~~cash~~2021 bonuses in the first quarter of ~~2021.~~2022.

A ~~$9.2~~$65.0 million decrease in ~~accrued legal mainly as a result of the payments of two legal settlements.~~long-term debt due to repayments.

A ~~$179.7~~$9.4 million increase in total short-term and long-term lease liabilities due to new building leases at VITAS.

A $35.6 million increase in treasury stock due mainly to stock repurchases.

Net cash provided by operating activities decreased ~~$145.8~~$5.6 million from ~~June 30, 2020~~March 31, 2021 to ~~June 30, 2021.~~March 31, 2022. The main drivers of the decrease are a decrease in net income of ~~$16.1~~$1.2 million, ~~the Unutilized CARES Act grant received~~coupled with changes in ~~2020 of $39.2 million, the deferral of payroll taxes during the second quarter of 2020 of $10.7 million~~current assets and ~~increases in cash outflows associated with accounts payable and current income taxes of $74.0 million.~~liabilities. Significant changes in our accounts receivable balances are typically driven by the timing of payments received from the Federal government at our VITAS subsidiary. We typically receive a payment in excess of $40.0 million from the Federal government 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.

-20-

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.

-23-

On June 20, 2018, we ~~signed~~replaced our existing credit agreement with the Fourth Amended and Restated Credit Agreement (“2018 Credit Agreement”). Terms of the 2018 Credit Agreement consist of a ~~five year,~~five-year, $450 million revolving credit facility and a $150 million expansion feature, which may consist of term loans or additional revolving commitments. The ~~revolving credit facility has a five year maturity with principal payments due at maturity. The~~ interest rate at ~~the~~ inception of the agreement ~~was~~is LIBOR plus 100 basis points. The 2018 Credit Agreement has a floating interest rate that is generally LIBOR plus a tiered additional rate which varies based on our current leverage ratio. ~~We have no debt outstanding under~~For March 31, 2022 and 2021, respectively, the interest rate is LIBOR plus 100 basis points. The 2018 Credit Agreement includes transition provisions in the instance LIBOR is no longer published or used as ~~of June 30, 2021.~~an industry-accepted rate.

We have issued ~~$46.3~~$46.2 million in standby letters of credit as of ~~June 30, 2021,~~March 31, 2022, mainly for insurance purposes. Issued letters of credit reduce our available credit under the revolving credit agreement. As of ~~June 30, 2021,~~March 31, 2022, we have approximately ~~$403.7~~$283.8 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility. Management believes its liquidity and sources of capital are satisfactory for the Company’s needs in the foreseeable future.

Commitments and Contingencies

Collectively, the terms of our credit agreements require us to meet various financial covenants, to be tested quarterly. We are in compliance with all financial and other debt covenants as of ~~June 30, 2021~~March 31, 2022 and anticipate remaining in compliance throughout the foreseeable future.

We are subject to various lawsuits and claims in the 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 existence of regulatory and legal actions when we believe it is reasonably possible that a loss could occur in connection with the specific action. In most instances, we are unable to make a reasonable estimate of any reasonably possible liability due to the uncertainty of the outcome and stage of 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 current material legal matters.

‎

-21-

Results of Operations

Three months ended ~~June 30,~~March 31, 2022 versus 2021 ~~versus 2020~~ - Consolidated Results

Our service revenues and sales for the ~~second~~first quarter of ~~2021~~2022 increased ~~6.0%~~0.6% versus services and sales revenues for the ~~second~~first quarter of ~~2020.~~2021. Of this increase, a ~~$45.6~~$19.8 million increase was attributable to Roto-Rooter offset by a ~~$15.5~~$16.6 million decrease attributable to VITAS. The following chart shows the components of revenue by operating segment (in thousands):



	Three months ended June 30,				Three months ended March 31,				Increase/(Decrease)
	2021		2020		2022		2021		Percent
VITAS
Routine homecare	$	264,926	$	276,345	$	257,636	$	263,754	(2.3)
Continuous care		24,282		34,582		19,578		27,349	(28.4)
General inpatient		27,371		25,868		26,570		29,156	(8.9)
Other		3,078		2,109		3,007		2,938	2.3
Medicare cap adjustment		(2,000)		(5,750)		(2,500)		(1,500)	66.7
Room and board - net		(2,657)		(2,647)		(2,117)		(2,665)	(20.6)
Implicit price concessions		(3,065)		(3,042)		(2,985)		(3,244)	(8.0)
Roto-Rooter
Drain cleaning - short term core		62,649		49,455		66,687		61,756	8.0
Plumbing - short term core		44,609		32,022		47,672		41,313	15.4
Subtotal		107,258		81,477		114,359		103,069	11.0
Excavation - short term core		55,114		44,678		55,188		51,993	6.1
Water restoration		38,583		31,426		40,360		37,435	7.8
Contractor operations		19,026		15,193
Independent Contractors						21,418		18,760	14.2
Outside franchisee fees		1,255		1,210		1,317		1,327	(0.8)
Other - short term core		311		386		165		288	(42.7)
Other		3,882		2,971		4,191		3,945	6.2
Implicit price concessions		(5,108)		(2,607)		(5,638)		(5,245)	7.5
Total	$	532,256	$	502,199	$	530,549	$	527,360	0.6

-24-

Days of care at VITAS during the quarter ended ~~June 30~~March 31 were as follows:


	Days of Care		Increase/(Decrease)	Days of Care		Increase/(Decrease)
	2021	2020	Percent	2022	2021	Percent

Routine homecare	1,335,482	1,401,744	(4.7)	1,258,672	1,329,892	(5.4)
Nursing home	244,423	279,462	(12.5)	248,468	232,783	6.7
Respite	5,338	4,158	28.4	5,368	4,840	10.9
Subtotal routine homecare and respite	1,585,243	1,685,364	(5.9)	1,512,508	1,567,515	(3.5)
Continuous care	25,786	35,814	(28.0)	24,587	27,674	(11.2)
General inpatient	26,493	25,542	3.7	21,082	29,300	(28.0)
Total days of care	1,637,522	1,746,720	(6.3)	1,558,177	1,624,489	(4.1)

The decrease in service revenues at VITAS is comprised primarily of a ~~6.3% decline~~4.1% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately ~~1.8%~~1.3%. Acuity mix shift had a net impact of reducing revenue approximately ~~$3.8~~$7.1 million, or ~~1.2%~~2.2% in the quarter when compared to the prior year revenue and level-of-care mix. The combination of ~~a lower~~an increase in Medicare cap ~~revenue reduction~~ and other contra revenue changes ~~offset the~~negatively impacted revenue ~~decline~~growth by approximately ~~0.9%.~~30 basis points.

The increase in plumbing revenues for the ~~second~~first quarter of ~~2021~~2022 versus ~~2020~~2021 is attributable to a ~~21.1%~~1.8% increase in job count and to a ~~18.2% increase in price and service mix shift. The increase in excavation revenues for the second quarter of 2021 versus 2020 is attributable to a 10.1% increase in job count and to a 13.3%~~13.6% increase in price and service mix shift. Drain cleaning revenues for the ~~second~~first quarter of 2022 versus 2021 ~~versus 2020~~ reflect ~~a 11.7%~~an 11.9% increase in price and service mix shift ~~and~~offset by a ~~15.0% increase~~3.9% decrease in job count. ~~Water~~Excavation and water restoration jobs are generally sold as a result of initial calls from customers regarding drain cleaning issues. As a result, the 6.1% increase in excavation revenue and the 7.8% 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 revenue increased ~~for the second quarter of 2021 versus 2020~~14.2% due mainly to ~~a 9.4% increase in job count and a 13.4% increase in price and service mix shift. The increase in job count for all service lines was driven by both residential and commercial customers.~~increased expansion into water restoration.

The consolidated gross margin was ~~34.1%~~36.6% in the ~~second~~first quarter of ~~2021~~2022 as compared with ~~29.9%~~35.4% in the ~~second~~first quarter of ~~2020.~~2021. On a segment basis, VITAS’ gross margin was ~~20.7%~~24.0% in the ~~second~~first quarter of ~~2021~~2022 as compared with ~~18.5%~~24.4%, in the ~~second~~first quarter of ~~2020. The increase is primarily due to improved labor costs.~~2021. The Roto-Rooter segment’s gross margin was ~~53.3%~~52.8% for the ~~second~~first quarter of ~~2021~~2022 as compared with ~~51.2%~~51.9% in the ~~second~~first quarter of ~~2020~~2021 primarily due to increased revenue and improved labor costs.

-22-

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

Three months ended June 30,
2021
2020
SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts
$
88,510
$
75,176
Impact of market value adjustments related to assets held in deferred compensation trusts
3,655
7,408
Long-term incentive compensation
1,673
1,929
Total SG&A expenses
$
93,838
$
84,513

SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts for the second quarter of 2021 were up 17.7% when compared to the second quarter of 2020. This increase was mainly a result of the increase in variable selling and general administrative expenses and increased bonus expense at Roto-Rooter caused by increased income as well as a $1.0 million increase in paid time off granted at VITAS.

Depreciation for the second quarter of 2021 increased 16.8% when compared to the second quarter of 2020. This increase is primarily the result of VITAS’ acceleration of depreciation on leasehold improvements associated with a facility relocation.

Amortization for the second quarter of 2021 increased 0.9% when compared to the second quarter of 2020. Quarterly amortization of intangible assets is mainly driven by two Roto-Rooter franchise acquisitions completed in 2019. The total purchase price of these acquisitions was $138.0 million. As part of the purchase price allocation, approximately $59.2 million was determined to be the value of reacquired franchise rights which are being amortized over the remaining life of each franchise agreement. The average remaining life on the reacquired franchise agreements was approximately seven years. Quarterly amortization of reacquired franchise rights for these two acquisitions is approximately $2.0 million ($8.1 million annualized through 2026). This contrasts to quarterly franchise fees historically collected from these two franchisees of approximately $470,000 ($1.9 million annualized).

‎

-25-

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

Three months ended June 30,
2021
2020
CARES Act grant
$
-
$
(40,989)
Loss/(gain) on disposal of fixed assets
104
(395)
Total other operating expenses
$
104
$
(41,384)

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

Three months ended June 30,
2021
2020
Market value adjustment on assets held in deferred compensation trusts
$
3,655
$
7,408
Interest income
138
116
Other
(8)
(10)
Total other income/(expense) - net
$
3,785
$
7,514

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

Three months ended June 30,
2021
2020
Income tax provision calculated at the statutory federal rate
$
15,772
$
20,921
Stock compensation tax benefits
(868)
(8,203)
State and local income taxes
2,671
3,604
Other--net
1,008
1,200
Income tax provision
$
18,583
$
17,522
Effective tax rate
24.7
%
17.6
%

~~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,
2021
2020
VITAS
Direct costs related to COVID-19
$
(8,268)
$
(18,101)
Facility relocation costs
(1,384)
-
CARES Act grant
-
30,537
COVID-19 Medicare cap
-
(1,679)
Medicare cap sequestration adjustment
-
(594)
Roto-Rooter
Amortization of reacquired franchise agreements
(1,729)
(1,729)
Direct costs related to COVID-19
(428)
(822)
Litigation settlements
72
-
Corporate
Stock option expense
(5,166)
(4,209)
Long-term incentive compensation
(1,543)
(1,728)
Excess tax benefits on stock compensation
868
8,203
Total
$
(17,578)
$
9,878

‎

-26-

~~Three months ended June 30, 2021 versus 2020 - Segment Results~~

~~Net income/(loss) for the second quarter of 2021 versus the second quarter of 2020 by segment (in thousands):~~

Three months ended June 30,
2021
2020
VITAS
$
29,712
$
60,245
Roto-Rooter
42,773
29,468
Corporate
(15,963)
(7,612)
$
56,522
$
82,101

VITAS’ after-tax earnings decreased primarily due to CARES Grant funds received in 2020. After-tax earnings as a percent of revenue at VITAS in the second quarter of 2021 was 9.5% as compared to 18.4% in the second quarter of 2020.

Roto-Rooter’s net income was impacted in 2021 compared to 2020 primarily by higher revenue and improved labor costs. After-tax earnings as a percent of revenue at Roto-Rooter in the second quarter of 2021 was 19.4%, as compared to 16.9% in the second quarter of 2020.

~~After-tax Corporate expenses for 2021 increased 109.7% when compared to 2020 due mainly to a $7.3 million decrease in the excess tax benefits on stock compensation.~~

‎

-27-

~~Results of Operations~~

~~Six months ended June 30, 2021 versus 2020 - Consolidated Results~~

Our service revenues and sales for the first six months of 2021 increased 4.1% versus services and sales revenues for the first six months of 2020. Of this increase, $79.3 million was attributable to Roto-Rooter offset by a $37.7 million decrease attributable to VITAS. The following chart shows the components of revenue by operating segment (in thousands):

Six months ended June 30,
2021
2020
VITAS
Routine homecare
$
528,680
$
548,098
Continuous care
51,631
75,137
General inpatient
56,527
58,350
Other
6,016
5,265
Medicare cap adjustment
(3,500)
(8,250)
Room and board - net
(5,322)
(6,028)
Implicit price concessions
(6,309)
(7,192)
Roto-Rooter
Drain cleaning - short term core
124,406
103,475
Plumbing - short term core
85,922
68,816
Subtotal
210,328
172,291
Excavation - short term core
107,106
87,738
Water restoration
76,018
60,672
Contractor operations
37,785
31,421
Outside franchisee fees
2,582
2,400
Other - short term core
598
936
Other
7,828
6,505
Implicit price concessions
(10,352)
(9,346)
Total
$
1,059,616
$
1,017,997

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

Days of Care
Increase/(Decrease)
2021
2020
Percent
Routine homecare
2,665,374
2,766,490
(3.7)
Nursing home
477,206
582,836
(18.1)
Respite
10,178
10,850
(6.2)
Subtotal routine homecare and respite
3,152,758
3,360,176
(6.2)
Continuous care
55,086
77,187
(28.6)
General inpatient
54,167
57,890
(6.4)
Total days of care
3,262,011
3,495,253
(6.7)

The decrease in service revenues at VITAS is comprised primarily of a 6.7% decline in days-of-care offset by a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately 1.7%. Acuity mix shift had a net impact of reducing revenue approximately $9.1 million, or 1.4% in the first six months when compared to the prior year revenue and level-of-care mix. The combination of a lower Medicare cap revenue reduction and other contra revenue changes offset a portion of the revenue decline by approximately 70 basis points.

The increase in plumbing revenues for the first six months of 2021 versus 2020 is attributable to a 19.1% increase in job count and to a 5.8% increase in price and service mix shift. The increase in excavation revenues for the first six months of 2021 versus 2020 is attributable to a 16.0% increase in job count and to a 6.1% increase in price and service mix shift. Drain cleaning revenues for the first six months of 2021 versus 2020 reflect an 8.0% increase in price and service mix shift and a 12.2% increase in job count. Water restoration revenue increased for the first six months of 2021 versus 2020 due to a 9.8% increase in job count and a 15.5% increase in price and service mix shift. The increase in job count for all service lines was driven by both residential and commercial customers.

-28-

The consolidated gross margin was 34.8% in the first six months of 2021 as compared with 30.9% in the first six months of 2020. On a segment basis, VITAS’ gross margin was 22.5% in the first six months of 2021 as compared with 20.9%, in the first six months of 2020. The increase is primarily due to improved labor costs. The Roto-Rooter segment’s gross margin was 52.6% for the first six months of 2021 as compared with 49.6% in the first six months of 2020 primarily due to increased revenue and improved labor costs.

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


	Six months ended June 30,				Three months ended March 31,
	2021		2020		2022		2021
SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts	$	175,178	$	153,511	$	92,578	$	86,668
Impact of market value adjustments related to assets held in deferred compensation trusts		6,693		(2,164)		(3,934)		3,038
Long-term incentive compensation		3,566		3,749		1,310		1,893
Total SG&A expenses	$	185,437	$	155,096	$	89,954	$	91,599

SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts for the first ~~six months~~quarter of ~~2021~~2022 were up ~~14.1%~~6.8% when compared to the first ~~six months~~quarter of ~~2020.~~2021. This increase was mainly a result of the increase in variable selling and general administrative expenses and ~~increased bonus expense at Roto-Rooter caused by increased income as well as a $1.0 million increase in paid time off granted at VITAS.~~

~~Depreciation for the first six months of 2021 increased 9.9% when compared~~due to ~~the first six months of 2020. This increase is primarily the result of VITAS’ acceleration of depreciation on leasehold improvements associated with a facility relocation.~~normal salary increases.

Amortization for the first ~~six months~~quarter of ~~2021 increased 1.1%~~2022 was flat when compared to the first ~~six months~~quarter of ~~2020.~~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 purchase price allocation, approximately $59.2 million was determined to be the value of reacquired franchise rights which are being amortized over the remaining life of each franchise agreement. The average remaining life on the reacquired franchise agreements was approximately seven years. Quarterly amortization of reacquired franchise rights for these two acquisitions is approximately $2.0 million ($8.1 million annualized through 2026). This contrasts to quarterly franchise fees historically collected from these two franchisees of approximately $470,000 ($1.9 million annualized).

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

Six months ended June 30,
2021
2020
CARES Act grant
$
-
$
(40,989)
Loss/(gain) on disposal of fixed assets
726
(153)
Total other operating (income)/expenses
$
726
$
(41,142)

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


	Six months ended June 30,				Three months ended March 31,
	2021		2020		2022		2021
Market value adjustment on assets held in deferred compensation trusts	$	6,693	$	(2,164)	$	(3,934)	$	3,038
Interest income		230		225		73		92
Other		464		(13)		(1)		472
Total other income - net	$	7,387	$	(1,952)
Total (expense)/other income - net					$	(3,862)	$	3,602

‎

-29-

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


	Three months ended March 31,
	2022			2021

Income tax provision calculated at the statutory federal rate	$	17,787		$	17,569
Stock compensation tax benefits		(1,441)			(3,238)
State and local income taxes		3,299			2,956
Other--net		888			975
Income tax provision	$	20,533		$	18,262
Effective tax rate		24.2	%		21.8	%

Six months ended June 30,
2021
2020
Income tax provision calculated at the statutory federal rate
$
33,341
$
35,394
Stock compensation tax benefits
(4,106)
(12,756)
State and local income taxes
5,627
6,182
Other--net
1,983
1,733
Income tax provision
$
36,845
$
30,553
Effective tax rate
23.2
%
18.1
%

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


	Three months ended March 31,
	2022		2021
VITAS
Direct costs related to COVID-19	$	(292)	$	(1,308)
Roto-Rooter
Amortization of reacquired franchise agreements		(1,729)		(1,729)
Direct costs related to COVID-19		(706)		(407)
Corporate
Stock option expense		(6,166)		(5,066)
Excess tax benefits on stock compensation		1,441		3,238
Long-term incentive compensation		(1,159)		(1,670)
Direct costs related to COVID-19		-		(28)
Total	$	(8,611)	$	(6,970)

Six months ended June 30,
2021
2020
VITAS
Direct costs related to COVID-19
$
(9,576)
$
(18,828)
Facility relocation costs
(1,384)
-
CARES Act grant
-
30,537
COVID-19 Medicare cap
-
(1,679)
Medicare cap sequestration adjustment
-
(1,097)
Roto-Rooter
Amortization of reacquired franchise agreements
(3,457)
(3,457)
Direct costs related to COVID-19
(835)
(1,455)
Litigation settlements
72
-
Corporate
Stock option expense
(10,232)
(8,399)
Excess tax benefits on stock compensation
4,106
12,756
Long-term incentive compensation
(3,212)
(3,324)
Direct costs related to COVID-19
(30)
-
Total
$
(24,548)
$
5,054

-23-

~~Six~~Three months ended ~~June 30,~~March 31, 2022 versus 2021 ~~versus 2020~~ - Segment Results

Net income/(loss) for the first ~~six months~~quarter of ~~2021~~2022 versus the first ~~six months~~quarter of ~~2020~~2021 by segment (in thousands):



	Six months ended June 30,				Three months ended March 31,
	2021		2020		2022		2021
VITAS	$	70,481	$	101,524		36,481	$	40,770
Roto-Rooter		79,950		53,790		43,937		37,177
Corporate		(28,509)		(17,322)		(16,249)		(12,547)
	$	121,922	$	137,992	$	64,169	$	65,400

VITAS’ after-tax earnings decreased primarily due to lower revenue in the ~~CARES Act Grant received in 2020.~~first quarter of 2022 when compared to the first quarter of 2021. After-tax earnings as a percent of revenue at VITAS in the first ~~six months~~quarter of ~~2021~~2022 was ~~11.2%~~12.2% as compared to ~~15.3%~~12.9% in the first ~~six months~~quarter of ~~2020.~~2021.

Roto-Rooter’s net income was impacted in ~~2021~~the first quarter of 2022 compared to ~~2020~~the first quarter of 2021 primarily by higher revenue and improved labor costs. After-tax earnings as a percent of revenue at Roto-Rooter in the first ~~six months~~quarter of ~~2021~~2022 was ~~18.5%~~19.0%, as compared to ~~15.3%~~17.6% in the first ~~six months~~quarter of ~~2020.~~2021.

After-tax Corporate expenses for ~~2021~~the first quarter of 2022 increased ~~64.6%~~29.5% when compared to ~~2020~~the first quarter of 2021 due mainly to ~~a $8.7~~an $1.8 million decrease in the excess tax benefits on stock ~~compensation.~~compensation and an $1.1 million increase in stock option expense.

‎

-3024-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES	CHEMED CORPORATION AND SUBSIDIARY COMPANIES								CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME	CONSOLIDATING STATEMENTS OF INCOME								CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2021
FOR THE THREE MONTHS ENDED MARCH 31, 2022									FOR THE THREE MONTHS ENDED MARCH 31, 2022
(in thousands)(unaudited)	(in thousands)(unaudited)								(in thousands)(unaudited)

							Chemed								Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated		VITAS		Roto-Rooter		Corporate		Consolidated
2021 (a)
2022 (a)
Service revenues and sales	$	311,935	$	220,321	$	-	$	532,256	$	299,189	$	231,360	$	-	$	530,549
Cost of services provided and goods sold		247,519		102,974		-		350,493		227,240		109,312		-		336,552
Selling, general and administrative expenses		22,631		53,556		17,651		93,838		22,453		56,954		10,547		89,954
Depreciation		7,125		6,468		19		13,612		5,551		6,569		18		12,138
Amortization		18		2,492		-		2,510		24		2,494		-		2,518
Other operating expense		87		17		-		104
Other operating expense/(income)										(148)		161		-		13
Total costs and expenses		277,380		165,507		17,670		460,557		255,120		175,490		10,565		441,175
Income/(loss) from operations		34,555		54,814		(17,670)		71,699		44,069		55,870		(10,565)		89,374
Interest expense		(43)		(89)		(247)		(379)		(52)		(115)		(643)		(810)
Intercompany interest income/(expense)		4,486		1,649		(6,135)		-		4,656		2,176		(6,832)		-
Other income—net		99		32		3,654		3,785		37		35		(3,934)		(3,862)
Income/(expense) before income taxes		39,097		56,406		(20,398)		75,105		48,710		57,966		(21,974)		84,702
Income taxes		(9,385)		(13,633)		4,435		(18,583)		(12,229)		(14,029)		5,725		(20,533)
Net income/(loss)	$	29,712	$	42,773	$	(15,963)	$	56,522	$	36,481	$	43,937	$	(16,249)	$	64,169

(a) The following amounts are included in net income (in thousands):	(a) The following amounts are included in net income (in thousands):								(a) The following amounts are included in net income (in thousands):
							Chemed								Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated		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)	$	-	$	-	$	(7,451)	$	(7,451)
Amortization of reacquired franchise agreements		-		(2,352)		-		(2,352)		-		(2,352)		-		(2,352)
Facility relocation costs		(1,855)		-		-		(1,855)
Direct costs related to COVID-19										(391)		(961)		-		(1,352)
Long-term incentive compensation		-		-		(1,673)		(1,673)		-		-		(1,310)		(1,310)
Litigation settlements		-		98		-		98
Total	$	(12,939)	$	(2,836)	$	(7,912)	$	(23,687)	$	(391)	$	(3,313)	$	(8,761)	$	(12,465)

							Chemed								Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated		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)	$	-	$	-	$	(6,166)	$	(6,166)
Amortization of reacquired franchise agreements		-		(1,729)		-		(1,729)		-		(1,729)		-		(1,729)
Long-term incentive compensation		-		-		(1,543)		(1,543)		-		-		(1,159)		(1,159)
Facility relocation costs		(1,384)		-		-		(1,384)
Litigation settlements		-		72		-		72
Direct costs related to COVID-19										(292)		(706)		-		(998)
Excess tax benefits on stock compensation		-		-		868		868		-		-		1,441		1,441
Total	$	(9,652)	$	(2,085)	$	(5,841)	$	(17,578)	$	(292)	$	(2,435)	$	(5,884)	$	(8,611)

‎

-3125-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES	CHEMED CORPORATION AND SUBSIDIARY COMPANIES								CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME	CONSOLIDATING STATEMENTS OF INCOME								CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2020
FOR THE THREE MONTHS ENDED MARCH 31, 2021									FOR THE THREE MONTHS ENDED MARCH 31, 2021
(in thousands)(unaudited)	(in thousands)(unaudited)								(in thousands)(unaudited)

							Chemed								Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated		VITAS		Roto-Rooter		Corporate		Consolidated
2020 (a)
2021 (a)
Service revenues and sales	$	327,465	$	174,734	$	-	$	502,199	$	315,788	$	211,572	$	-	$	527,360
Cost of services provided and goods sold		266,815		85,348		-		352,163		238,667		101,806		-		340,473
Selling, general and administrative expenses		21,072		44,231		19,210		84,513		22,090		53,322		16,187		91,599
Depreciation		5,556		6,069		34		11,659		5,338		6,353		24		11,715
Amortization		18		2,470		-		2,488		18		2,492		-		2,510
Other operating income		(40,826)		(558)		-		(41,384)
Other operating expense										502		120		-		622
Total costs and expenses		252,635		137,560		19,244		409,439		266,615		164,093		16,211		446,919
Income/(loss) from operations		74,830		37,174		(19,244)		92,760		49,173		47,479		(16,211)		80,441
Interest expense		(45)		(90)		(516)		(651)		(42)		(89)		(250)		(381)
Intercompany interest income/(expense)		4,739		1,422		(6,161)		-		4,525		1,620		(6,145)		-
Other income/(expense)—net		104		(10)		7,420		7,514
Other income—net										533		31		3,038		3,602
Income/(expense) before income taxes		79,628		38,496		(18,501)		99,623		54,189		49,041		(19,568)		83,662
Income taxes		(19,383)		(9,028)		10,889		(17,522)		(13,419)		(11,864)		7,021		(18,262)
Net income/(loss)	$	60,245	$	29,468	$	(7,612)	$	82,101	$	40,770	$	37,177	$	(12,547)	$	65,400

(a) The following amounts are included in net income (in thousands):	(a) The following amounts are included in net income (in thousands):								(a) The following amounts are included in net income (in thousands):
							Chemed								Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated		VITAS		Roto-Rooter		Corporate		Consolidated
Pretax benefit/(cost):
CARES Act grant	$	40,989	$	-	$	-	$	40,989
Direct costs related to COVID-19		(24,265)		(1,117)		-		(25,382)
Stock option expense		-		-		(5,068)		(5,068)	$	-	$	-	$	(6,106)	$	(6,106)
Amortization of reacquired franchise agreements		-		(2,352)		-		(2,352)		-		(2,352)		-		(2,352)
COVID-19 Medicare cap		(2,250)		-		-		(2,250)
Direct costs related to COVID-19										(1,753)		(553)		(38)		(2,344)
Long-term incentive compensation		-		-		(1,929)		(1,929)		-		-		(1,893)		(1,893)
Medicare cap sequestration adjustment		(796)		-		-		(796)
Total	$	13,678	$	(3,469)	$	(6,997)	$	3,212	$	(1,753)	$	(2,905)	$	(8,037)	$	(12,695)

							Chemed								Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated		VITAS		Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
CARES Act grant	$	30,537	$	-	$	-	$	30,537
Stock option expense									$	-	$	-	$	(5,066)	$	(5,066)
Direct costs related to COVID-19		(18,101)		(822)		-		(18,923)		(1,308)		(407)		(28)		(1,743)
Stock option expense		-		-		(4,209)		(4,209)
Amortization of reacquired franchise agreements		-		(1,729)		-		(1,729)		-		(1,729)		-		(1,729)
Long-term incentive compensation		-		-		(1,728)		(1,728)		-		-		(1,670)		(1,670)
COVID-19 Medicare cap		(1,679)		-		-		(1,679)
Medicare cap sequestration adjustment		(594)		-		-		(594)
Excess tax benefits on stock compensation		-		-		8,203		8,203		-		-		3,238		3,238
	$	10,163	$	(2,551)	$	2,266	$	9,878
Total									$	(1,308)	$	(2,136)	$	(3,526)	$	(6,970)

‎

-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 settlement
-
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 settlement
-
72
-
72
Excess tax benefits on stock compensation
-
-
4,106
4,106
Total
$
(10,960)
$
(4,220)
$
(9,368)
$
(24,548)

‎

-33-

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2020
(in thousands)(unaudited)
Chemed
VITAS
Roto-Rooter
Corporate
Consolidated
2020 (a)




Service revenues and sales
$
665,380
$
352,617
$
-
$
1,017,997
Cost of services provided and goods sold
526,244
177,664
-
703,908
Selling, general and administrative expenses
43,341
90,513
21,242
155,096
Depreciation
11,030
11,947
70
23,047
Amortization
36
4,929
-
4,965
Other operating expenses
(40,712)
(430)
-
(41,142)
Total costs and expenses
539,939
284,623
21,312
845,874
Income/(loss) from operations
125,441
67,994
(21,312)
172,123
Interest expense
(90)
(192)
(1,344)
(1,626)
Intercompany interest income/(expense)
9,125
2,771
(11,896)
-
Other income—net
169
30
(2,151)
(1,952)
Income/(expense) before income taxes
134,645
70,603
(36,703)
168,545
Income taxes
(33,121)
(16,813)
19,381
(30,553)
Net income/(loss)
$
101,524
$
53,790
$
(17,322)
$
137,992
(a) The following amounts are included in net income (in thousands):
Chemed
VITAS
Roto-Rooter
Corporate
Consolidated
Pretax benefit/(cost):
CARES Act grant
$
40,989
$
-
$
-
$
40,989
Direct costs related to COVID-19
(25,238)
(1,978)
-
(27,216)
Stock option expense
-
-
(10,114)
(10,114)
Amortization of reacquired franchise agreements
-
(4,704)
-
(4,704)
Long-term incentive compensation
-
-
(3,749)
(3,749)
COVID-19 Medicare cap
(2,250)
-
-
(2,250)
Medicare cap sequestration adjustment
(1,472)
-
-
(1,472)
Total
$
12,029
$
(6,682)
$
(13,863)
$
(8,516)
Chemed
VITAS
Roto-Rooter
Corporate
Consolidated
After-tax benefit/(cost):
CARES Act grant
$
30,537
$
-
$
-
$
30,537
Direct costs related to COVID-19
(18,828)
(1,455)
-
(20,283)
Stock option expense
-
-
(8,399)
(8,399)
Amortization of reacquired franchise agreements
-
(3,457)
-
(3,457)
Long-term incentive compensation
-
-
(3,324)
(3,324)
COVID-19 Medicare cap
(1,679)
-
-
(1,679)
Medicare cap sequestration adjustment
(1,097)
-
-
(1,097)
Excess tax benefits on stock compensation
-
-
12,756
12,756
$
8,933
$
(4,912)
$
1,033
$
5,054

‎

-3426-


Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA	Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA									Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

Chemed Corporation and Subsidiary Companies	Chemed Corporation and Subsidiary Companies									Chemed Corporation and Subsidiary Companies
(in thousands)	(in thousands)							Chemed		(in thousands)							Chemed
For the three months ended June 30, 2021		VITAS		Roto-Rooter		Corporate		Consolidated
For the three months ended March 31, 2022										For the three months ended March 31, 2022	VITAS		Roto-Rooter		Corporate		Consolidated

	Net income/(loss)	$	29,712	$	42,773	$	(15,963)	$	56,522	Net income/(loss)	$	36,481	$	43,937	$	(16,249)	$	64,169
	Add/(deduct):									Add/(deduct):
	Interest expense		43		89		247		379	Interest expense		52		115		643		810
	Income taxes		9,385		13,633		(4,435)		18,583	Income taxes		12,229		14,029		(5,725)		20,533
	Depreciation		7,125		6,468		19		13,612	Depreciation		5,551		6,569		18		12,138
	Amortization		18		2,492		-		2,510	Amortization		24		2,494		-		2,518
	EBITDA		46,283		65,455		(20,132)		91,606	EBITDA		54,337		67,144		(21,313)		100,168
	Add/(deduct):									Add/(deduct):
	Intercompany interest expense/(income)		(4,486)		(1,649)		6,135		-	Intercompany interest expense/(income)		(4,656)		(2,176)		6,832		-
	Interest income		(106)		(32)		-		(138)	Interest income		(37)		(36)		-		(73)
	Direct costs related to COVID-19		11,084		582		-		11,666	Stock option expense		-		-		7,451		7,451
	Stock option expense		-		-		6,239		6,239	Direct costs related to COVID-19		391		961		-		1,352
	Long-term incentive compensation		-		-		1,673		1,673	Long-term incentive compensation		-		-		1,310		1,310
	Litigation settlement		-		(98)		-		(98)	Adjusted EBITDA	$	50,035	$	65,893	$	(5,720)	$	110,208
	Adjusted EBITDA	$	52,775	$	64,258	$	(6,085)	$	110,948
																	Chemed
								Chemed
For the three months ended June 30, 2020		VITAS		Roto-Rooter		Corporate		Consolidated
For the three months ended March 31, 2021										For the three months ended March 31, 2021	VITAS		Roto-Rooter		Corporate		Consolidated

	Net income/(loss)	$	60,245	$	29,468	$	(7,612)	$	82,101	Net income/(loss)	$	40,770	$	37,177	$	(12,547)	$	65,400
	Add/(deduct):									Add/(deduct):
	Interest expense		45		90		516		651	Interest expense		42		89		250		381
	Income taxes		19,383		9,028		(10,889)		17,522	Income taxes		13,419		11,864		(7,021)		18,262
	Depreciation		5,556		6,069		34		11,659	Depreciation		5,338		6,353		24		11,715
	Amortization		18		2,470		-		2,488	Amortization		18		2,492		-		2,510
	EBITDA		85,247		47,125		(17,951)		114,421	EBITDA		59,587		57,975		(19,294)		98,268
	Add/(deduct):									Add/(deduct):
	Intercompany interest expense/(income)		(4,739)		(1,422)		6,161		-	Intercompany interest expense/(income)		(4,525)		(1,620)		6,145		-
	Interest (income)/expense		(113)		10		(13)		(116)	Interest (income)		(61)		(31)		-		(92)
	CARES Act grant		(40,989)		-		-		(40,989)	Stock option expense		-		-		6,106		6,106
	Direct costs related to COVID-19		24,265		1,117		-		25,382	Direct costs related to COVID-19		1,753		553		38		2,344
	Stock option expense		-		-		5,068		5,068	Long-term incentive compensation		-		-		1,893		1,893
	COVID-19 related Medicare cap		2,250		-		-		2,250	Adjusted EBITDA	$	56,754	$	56,877	$	(5,112)	$	108,519
	Long-term incentive compensation		-		-		1,929		1,929
	Medicare cap sequestration adjustment		796		-		-		796
	Adjusted EBITDA	$	66,717	$	46,830	$	(4,806)	$	108,741

‎

-3527-

Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA
Chemed Corporation and Subsidiary Companies
(in thousands)
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
Chemed
For the six months ended June 30, 2020
VITAS
Roto-Rooter
Corporate
Consolidated
Net income/(loss)
$
101,524
$
53,790
$
(17,322)
$
137,992
Add/(deduct):
Interest expense
90
192
1,344
1,626
Income taxes
33,121
16,813
(19,381)
30,553
Depreciation
11,030
11,947
70
23,047
Amortization
36
4,929
-
4,965
EBITDA
145,801
87,671
(35,289)
198,183
Add/(deduct):
Intercompany interest expense/(income)
(9,125)
(2,771)
11,896
-
Interest income
(181)
(31)
(13)
(225)
CARES Act grant
(40,989)
-
-
(40,989)
Direct costs related to COVID-19
25,238
1,978
-
27,216
Stock option expense
-
-
10,114
10,114
Long-term incentive compensation
-
-
3,749
3,749
COVID-19 related Medicare cap
2,250
-
-
2,250
Medicare cap sequestration adjustment
1,472
-
-
1,472
Adjusted EBITDA
$
124,466
$
86,847
$
(9,543)
$
201,770

‎

-36-



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

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2021		2020		2021		2020		2022		2021
Net income as reported	$	56,522	$	82,101	$	121,922	$	137,992	$	64,169	$	65,400

Add/(deduct) pre-tax cost of:
Direct costs related to COVID-19		11,666		25,382		14,010		27,216
Stock option expense		6,239		5,068		12,345		10,114		7,451		6,106
Amortization of reacquired franchise agreements		2,352		2,352		4,704		4,704		2,352		2,352
Direct costs related to COVID-19										1,352		2,344
Long-term incentive compensation		1,673		1,929		3,566		3,749		1,310		1,893
Facility relocation costs		1,855		-		1,855		-
Litigation settlements		(98)		-		(98)		-
COVID-19 related Medicare cap		-		2,250		-		2,250
CARES Act grant		-		(40,989)		-		(40,989)
Medicare cap sequestration adjustment		-		796		-		1,472
Add/(deduct) tax impacts:
Tax impact of the above pre-tax adjustments (1)		(5,241)		1,537		(7,728)		(814)		(2,413)		(2,487)
Excess tax benefits on stock compensation		(868)		(8,203)		(4,106)		(12,756)		(1,441)		(3,238)
Adjusted net income	$	74,100	$	72,223	$	146,470	$	132,938	$	72,780	$	72,370

Diluted Earnings Per Share As Reported
Net income	$	3.51	$	5.01	$	7.52	$	8.39	$	4.22	$	4.01
Average number of shares outstanding		16,101		16,373		16,205		16,445		15,192		16,310

Adjusted Diluted Earnings Per Share
Adjusted net income	$	4.60	$	4.41	$	9.04	$	8.08	$	4.79	$	4.44
Adjusted average number of shares outstanding		16,101		16,373		16,205		16,445		15,192		16,310

(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.	(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.								(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.

‎

-3728-


CHEMED CORPORATION AND SUBSIDIARY COMPANIES	CHEMED CORPORATION AND SUBSIDIARY COMPANIES												CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT	OPERATING STATISTICS FOR VITAS SEGMENT												OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)	(unaudited)												(unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
OPERATING STATISTICS	2021			2020			2021			2020			2022			2021
Net revenue ($000)
Homecare	$	264,926		$	276,345		$	528,680		$	548,098		$	257,636		$	263,754
Inpatient		27,371			25,868			56,527			58,350			26,570			29,156
Continuous care		24,282			34,582			51,631			75,137			19,578			27,349
Other		3,078			2,109			6,016			5,265			3,007			2,938
Subtotal	$	319,657		$	338,904		$	642,854		$	686,850		$	306,791		$	323,197
Room and board, net		(2,657)			(2,647)			(5,322)			(6,028)			(2,117)			(2,665)
Contractual allowances		(3,065)			(3,042)			(6,309)			(7,192)			(2,985)			(3,244)
Medicare cap allowance		(2,000)			(5,750)			(3,500)			(8,250)			(2,500)			(1,500)
Total	$	311,935		$	327,465		$	627,723		$	665,380		$	299,189		$	315,788
Net revenue as a percent of total before Medicare cap allowances
Homecare		82.9	%		81.5	%		82.2	%		79.8	%		84.0	%		81.6	%
Inpatient		8.6			7.6			8.8			8.5			8.7			9.0
Continuous care		7.6			10.2			8.0			10.9			6.4			8.5
Other		0.9			0.7			1.0			0.8			0.9			0.9
Subtotal		100.0			100.0			100.0			100.0			100.0			100.0
Room and board, net		(0.8)			(0.8)			(0.8)			(0.9)			(0.7)			(0.8)
Contractual allowances		(1.0)			(0.9)			(1.0)			(1.0)			(1.0)			(1.0)
Medicare cap allowance		(0.6)			(1.7)			(0.6)			(1.2)			(0.8)			(0.5)
Total		97.6	%		96.6	%		97.6	%		96.9	%		97.5	%		97.7	%
Days of care
Homecare		1,335,482			1,401,744			2,665,374			2,766,490			1,258,672			1,329,892
Nursing home		244,423			279,462			477,206			582,836			248,468			232,783
Respite		5,338			4,158			10,178			10,850			5,368			4,840
Subtotal routine homecare and respite		1,585,243			1,685,364			3,152,758			3,360,176			1,512,508			1,567,515
Inpatient		26,493			25,542			54,167			57,890			24,587			27,674
Continuous care		25,786			35,814			55,086			77,187			21,082			29,300
Total		1,637,522			1,746,720			3,262,011			3,495,253			1,558,177			1,624,489
Number of days in relevant time period		91			91			181			182			90			90
Average daily census (days)
Homecare		14,676			15,404			14,726			15,201			13,985			14,777
Nursing home		2,686			3,071			2,636			3,202			2,761			2,586
Respite		59			45			57			60			60			54
Subtotal routine homecare and respite		17,421			18,520			17,419			18,463			16,806			17,417
Inpatient		291			281			299			318			273			307
Continuous care		283			394			304			424			234			326
Total		17,995			19,195			18,022			19,205			17,313			18,050
Total Admissions		16,840			16,822			34,975			35,425			16,530			18,135
Total Discharges		16,525			17,000			35,054			35,208			16,862			18,516
Average length of stay (days)		94.5			90.9			94.4			90.8			104.8			94.4
Median length of stay (days)		14.0			14.0			13.0			14.0			14.0			12.0
ADC by major diagnosis
Cerebro		36.8	%		35.2	%		36.5	%		35.7	%		36.7	%		35.9	%
Neurological		22.4			21.7			22.3			21.6			22.9			22.1
Cancer		12.1			12.8			12.2			12.7			11.1			12.2
Cardio		15.6			16.1			15.6			15.9			15.9			15.8
Respiratory		7.3			8.2			7.5			8.3			7.4			7.8
Other		5.8			6.0			5.9			5.8			6.0			6.2
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Admissions by major diagnosis
Cerebro		21.4			20.9	%		21.5	%		21.0	%		22.9			21.4	%
Neurological		12.3			13.4			12.3			12.9			12.9			12.3
Cancer		28.9			27.6			26.9			28.0			24.9			25.0
Cardio		14.8			14.6			14.5			14.9			14.1			14.2
Respiratory		10.5			9.8			10.7			10.9			11.1			11.0
Other		12.1			13.7			14.1			12.3			14.1			16.1
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Estimated uncollectible accounts as a percent of revenues		1.0	%		0.9	%		1.0	%		1.1	%		1.0	%		1.0	%
Accounts receivable --
Days of revenue outstanding- excluding unapplied Medicare payments		36.3			31.9			n.a.			n.a.			33.6			37.8
Days of revenue outstanding- including unapplied Medicare payments		21.0			26.7			n.a.			n.a.			23.9			26.9

‎

-3829-

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 ~~June 30, 2021,~~March 31, 2022, the Company had no variable rate debt outstanding. For each $10 million borrowed under the credit facility, an increase or decrease of 100 basis points (1%), increases or decreases the Company’s annual interest expense by $100,000.

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

Item 4. Controls and Procedures

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding the Company’s legal proceedings, see Note 10, 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.

‎

-3930-

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 ~~six~~three months of ~~2021:~~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, 2021
-
$
-
9,030,125
$
178,424,171
February 1 through February 28, 2021
20,000
446.44
9,050,125
169,495,380
March 1 through March 31, 2021
80,000
447.98
9,130,125
$
133,656,728
First Quarter Total
100,000
$
447.67
April 1 through April 30, 2021
14,685
$
478.70
9,144,810
$
126,627,084
May 1 through May 31, 2021
200,315
486.65
9,345,125
329,142,814
June 1 through June 30, 2021
35,000
496.21
9,380,125
$
311,775,318
Second Quarter Total
250,000
$
487.52



	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

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

‎

-31-

Item 6. Exhibits



Exhibit No.		Description

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

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

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

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

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

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

101		The following materials from Chemed Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2021~~March 31, 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		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2021,~~March 31, 2022, formatted in iXBRL and contained in Exhibit 101.

‎

-4032-

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)


Dated:	~~July 30, 2021~~April 29, 2022	By:	/s/ Kevin J. McNamara
			Kevin J. McNamara
			(President and Chief Executive Officer)


Dated:	~~July 30, 2021~~April 29, 2022	By:	/s/ David P. Williams
			David P. Williams
			(Executive Vice President and Chief Financial Officer)


Dated:	~~July 30, 2021~~April 29, 2022	By:	/s/ Michael D. Witzeman
			Michael D. Witzeman
			(Vice President and Controller)

-4133-


			Net Income
For the Three Months Ended June 30,		Income		Shares	Earnings per Share
2021
	Earnings	$	56,522	15,829	$	3.57
	Dilutive stock options		-	235
	Nonvested stock awards		-	37
	Diluted earnings	$	56,522	16,101	$	3.51

2020
	Earnings	$	82,101	15,914	$	5.16
	Dilutive stock options		-	383
	Nonvested stock awards		-	76
	Diluted earnings	$	82,101	16,373	$	5.01


			Net Income
For the Six Months Ended June 30,		Income		Shares	Earnings per Share
2021
	Earnings	$	121,922	15,919	$	7.66
	Dilutive stock options		-	242
	Nonvested stock awards		-	44
	Diluted earnings	$	121,922	16,205	$	7.52

2020
	Earnings	$	137,992	15,953	$	8.65
	Dilutive stock options		-	415
	Nonvested stock awards		-	77
	Diluted earnings	$	137,992	16,445	$	8.39


	‎June 30,		‎December 31,
	2021		2020
Assets
Operating lease assets	$	123,207	$	123,448

Liabilities
Current operating leases		36,440		36,200
Noncurrent operating leases		99,093		99,210
Total operating lease liabilities	$	135,533	$	135,410



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 settlement		-		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 settlement		-		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 STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2020
(in thousands)(unaudited)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
2020 (a)
Service revenues and sales	$	665,380	$	352,617	$	-	$	1,017,997
Cost of services provided and goods sold		526,244		177,664		-		703,908
Selling, general and administrative expenses		43,341		90,513		21,242		155,096
Depreciation		11,030		11,947		70		23,047
Amortization		36		4,929		-		4,965
Other operating expenses		(40,712)		(430)		-		(41,142)
Total costs and expenses		539,939		284,623		21,312		845,874
Income/(loss) from operations		125,441		67,994		(21,312)		172,123
Interest expense		(90)		(192)		(1,344)		(1,626)
Intercompany interest income/(expense)		9,125		2,771		(11,896)		-
Other income—net		169		30		(2,151)		(1,952)
Income/(expense) before income taxes		134,645		70,603		(36,703)		168,545
Income taxes		(33,121)		(16,813)		19,381		(30,553)
Net income/(loss)	$	101,524	$	53,790	$	(17,322)	$	137,992


(a) The following amounts are included in net income (in thousands):
							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
Pretax benefit/(cost):
CARES Act grant	$	40,989	$	-	$	-	$	40,989
Direct costs related to COVID-19		(25,238)		(1,978)		-		(27,216)
Stock option expense		-		-		(10,114)		(10,114)
Amortization of reacquired franchise agreements		-		(4,704)		-		(4,704)
Long-term incentive compensation		-		-		(3,749)		(3,749)
COVID-19 Medicare cap		(2,250)		-		-		(2,250)
Medicare cap sequestration adjustment		(1,472)		-		-		(1,472)
Total	$	12,029	$	(6,682)	$	(13,863)	$	(8,516)

							Chemed
	VITAS		Roto-Rooter		Corporate		Consolidated
After-tax benefit/(cost):
CARES Act grant	$	30,537	$	-	$	-	$	30,537
Direct costs related to COVID-19		(18,828)		(1,455)		-		(20,283)
Stock option expense		-		-		(8,399)		(8,399)
Amortization of reacquired franchise agreements		-		(3,457)		-		(3,457)
Long-term incentive compensation		-		-		(3,324)		(3,324)
COVID-19 Medicare cap		(1,679)		-		-		(1,679)
Medicare cap sequestration adjustment		(1,097)		-		-		(1,097)
Excess tax benefits on stock compensation		-		-		12,756		12,756
	$	8,933	$	(4,912)	$	1,033	$	5,054