UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended ~~September~~June 30, ~~2016~~2017

☐ 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

☒

☐

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

Yes

☒

☐

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 ☐

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

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

Yes

☐

☒

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

Class	Amount	Date

Capital Stock $1 Par Value	~~16,223,927~~15,991,878 Shares	~~September~~June 30, ~~2016~~2017

~~-1-~~- 1 -

CHEMED CORPORATION AND

SUBSIDIARY COMPANIES

Index



	Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Consolidated Balance ~~Sheet~~Sheets -
~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016	3

Unaudited Consolidated ~~Statement~~Statements of Income -
Three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	4

Unaudited Consolidated ~~Statement~~Statements of Cash Flows -
~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	5

Notes to Unaudited Consolidated Financial Statements	6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	15 16

Item 3. Quantitative and Qualitative Disclosures about Market Risk	31 33

Item 4. Controls and Procedures	31 33

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	31 33

Item 1A. Risk Factors	31 33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32 34

Item 3. Defaults Upon Senior Securities	32 34

Item 4. Mine Safety Disclosures	32 34

Item 5. Other Information	32 34

Item 6. Exhibits	33 35
EX – 31.1
EX – 31.2
EX – 31.3
EX – 32.1
EX – 32.2
EX – 32.3
EX – 101.INS
EX – 101.SCH
EX – 101.CAL
EX – 101.DEF
EX – 101.LAB
EX – 101.PRE

- 2 -

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



	June 30, 2017			December 31, 2016
ASSETS
Current assets
Cash and cash equivalents	$	13,753		$	15,310
Accounts receivable less allowances of $16,193 (2016 - $14,236)		117,906			132,021
Inventories		5,618			5,755
Prepaid income taxes		4,537			3,709
Prepaid expenses		14,678			13,105
Total current assets		156,492			169,900
Investments of deferred compensation plans		58,579			54,389
Properties and equipment, at cost, less accumulated depreciation of $222,332 (2016 - $211,290)		140,209			121,302
Identifiable intangible assets less accumulated amortization of $32,827 (2016 - $33,225)		54,737			55,065
Goodwill		472,897			472,366
Deferred income taxes		20,593			8
Other assets		6,767			7,029
Total Assets	$	910,274		$	880,059

LIABILITIES
Current liabilities
Accounts payable	$	49,154		$	39,586
Current portion of long-term debt		10,000			8,750
Income taxes		3,815			-
Accrued insurance		44,905			47,960
Accrued compensation		48,082			53,979
Accrued legal		92,502			1,805
Other current liabilities		20,142			19,752
Total current liabilities		268,600			171,832
Deferred income taxes		-			14,291
Long-term debt		115,000			100,000
Deferred compensation liabilities		57,811			54,288
Other liabilities		15,780			15,549
Total Liabilities		457,191			355,960
Commitments and contingencies (Note 11)
STOCKHOLDERS' EQUITY
Capital stock - authorized 80,000,000 shares $1 par; issued 34,470,426 shares (2016 - 34,270,104 shares)		34,470			34,270
Paid-in capital		661,553			639,703
Retained earnings		957,941			958,149
Treasury stock - 18,563,720 shares (2016 - 18,083,527)		(1,203,077	)		(1,110,536	)
Deferred compensation payable in Company stock		2,196			2,513
Total Stockholders' Equity		453,083			524,099
Total Liabilities and Stockholders' Equity	$	910,274		$	880,059


See accompanying notes to unaudited consolidated financial statements.

~~-2-~~- 3 -

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Service revenues and sales	$	415,059		$	390,409		$	820,923		$	780,798
Cost of services provided and goods sold (excluding depreciation)		285,852			276,255			570,992			554,690
Selling, general and administrative expenses		68,654			62,628			138,112			121,673
Depreciation		8,833			8,581			17,726			17,005
Amortization		32			91			78			183
Other operating expenses		90,636			4,491			91,509			4,491
Total costs and expenses		454,007			352,046			818,417			698,042
Income/(loss) from operations		(38,948	)		38,363			2,506			82,756
Interest expense		(1,121	)		(971	)		(2,116	)		(1,813	)
Other income/(expense) - net		1,653			3,217			4,116			293
Income/(loss) before income taxes		(38,416	)		40,609			4,506			81,236
Income taxes		16,760			(15,724	)		3,682			(31,511	)
Net income/(loss)	$	(21,656	)	$	24,885		$	8,188		$	49,725

Earnings/(Loss) Per Share
Net income/(loss)	$	(1.35	)	$	1.51		$	0.51		$	3.00
Average number of shares outstanding		16,010			16,443			16,114			16,583

Diluted Earnings/(Loss) Per Share
Net income/(loss)	$	(1.35	)	$	1.48		$	0.49		$	2.93
Average number of shares outstanding		16,010			16,831			16,758			16,999

Cash Dividends Per Share	$	0.26		$	0.24		$	0.52		$	0.48

See accompanying notes to unaudited consolidated financial statements.

- 4 -

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share data)

September 30, 2016 December 31, 2015
ASSETS
Current assets
Cash and cash equivalents $ 21,285 $ 14,727
Accounts receivable less allowances of $14,340 (2015 - $13,244) 86,006 106,262
Inventories 6,101 6,314
Prepaid income taxes 5,069 10,653
Prepaid expenses 14,498 12,852
Total current assets 132,959 150,808
Investments of deferred compensation plans 55,158 49,481
Properties and equipment, at cost, less accumulated depreciation of $208,674 (2015 - $201,094) 119,994 117,370
Identifiable intangible assets less accumulated amortization of $33,141 (2015 - $32,866) 55,067 55,111
Goodwill 472,418 472,322
Other assets 6,880 7,233
Total Assets $ 842,476 $ 852,325

LIABILITIES
Current liabilities
Accounts payable $ 42,844 $ 43,695
Current portion of long-term debt 8,125 7,500
Accrued insurance 46,233 43,972
Accrued compensation 48,391 52,817
Accrued legal 1,495 1,233
Other current liabilities 20,369 22,119
Total current liabilities 167,457 171,336
Deferred income taxes 15,586 21,041
Long-term debt 102,500 83,750
Deferred compensation liabilities 54,455 49,467
Other liabilities 15,276 13,478
Total Liabilities 355,274 339,072
Commitments and contingencies (Note 11)
STOCKHOLDERS' EQUITY
Capital stock - authorized 80,000,000 shares $1 par; issued 34,173,782 shares (2015 - 33,985,316 shares) 34,174 33,985
Paid-in capital 625,961 603,006
Retained earnings 930,184 865,845
Treasury stock - 18,049,933 shares (2015 - 17,187,540) (1,105,620 ) (991,978 )
Deferred compensation payable in Company stock 2,503 2,395
Total Stockholders' Equity 487,202 513,253
Total Liabilities and Stockholders' Equity $ 842,476 $ 852,325

See accompanying notes to unaudited consolidated financial statements.

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

	Six Months Ended June 30,
	2017			2016
Cash Flows from Operating Activities
Net income	$	8,188		$	49,725
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		17,804			17,188
Provision for uncollectible accounts receivable		8,250			8,124
Stock option expense		6,055			4,840
Benefit for deferred income taxes		(34,876	)		(4,244	)
Potential litigation settlement		90,000			-
Noncash early retirement expense		-			1,747
Amortization of restricted stock awards		638			974
Noncash directors' compensation		766			541
Noncash long-term incentive compensation		1,783			196
Amortization of debt issuance costs		258			260
Changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable		5,804			(839	)
Decrease in inventories		137			194
Increase in prepaid expenses		(1,573	)		(2,605	)
Decrease in accounts payable and other current liabilities		(6,931	)		(4,879	)
Increase in income taxes		2,982			3,109
Increase in other assets		(4,152	)		(3,636	)
Increase in other liabilities		3,754			4,145
Excess tax benefit on share-based compensation		-			(1,383	)
Other sources/(uses)		1,437			(9	)
Net cash provided by operating activities		100,324			73,448
Cash Flows from Investing Activities
Capital expenditures		(28,133	)		(19,983	)
Business combinations		(525	)		-
Other sources		87			214
Net cash used by investing activities		(28,571	)		(19,769	)
Cash Flows from Financing Activities
Proceeds from long-term debt		135,800			92,400
Payments on revolving line of credit		(115,800	)		(32,400	)
Purchases of treasury stock		(85,063	)		(94,337	)
Change in cash overdrafts payable		(1,090	)		(5,440	)
Proceeds from exercise of stock options		10,398			3,533
Capital stock surrendered to pay taxes on stock-based compensation		(5,716	)		(5,163	)
Dividends paid		(8,396	)		(8,039	)
Payments on other long-term debt		(3,750	)		(3,750	)
Excess tax benefit on share-based compensation		-			1,383
Other sources		307			881
Net cash used by financing activities		(73,310	)		(50,932	)
Increase/(Decrease) in Cash and Cash Equivalents		(1,557	)		2,747
Cash and cash equivalents at beginning of year		15,310			14,727
Cash and cash equivalents at end of period	$	13,753		$	17,474

See accompanying notes to unaudited consolidated financial statements.

~~-3-~~- 5 -

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

UNAUDITED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Service revenues and sales $ 392,607 $ 386,226 $ 1,173,405 $ 1,144,799
Cost of services provided and goods sold (excluding depreciation) 281,658 272,089 836,348 811,637
Selling, general and administrative expenses 59,373 55,788 181,046 173,267
Depreciation 8,614 8,075 25,619 24,189
Amortization 91 146 274 407
Other operating expenses - - 4,491 -
Total costs and expenses 349,736 336,098 1,047,778 1,009,500
Income from operations 42,871 50,128 125,627 135,299
Interest expense (1,018 ) (908 ) (2,831 ) (2,846 )
Other income/(expense) - net 1,640 (2,355 ) 1,933 (1,256 )
Income before income taxes 43,493 46,865 124,729 131,197
Income taxes (16,664 ) (18,032 ) (48,175 ) (50,852 )
Net income $ 26,829 $ 28,833 $ 76,554 $ 80,345

Earnings Per Share
Net income $ 1.66 $ 1.71 $ 4.66 $ 4.76
Average number of shares outstanding 16,166 16,865 16,443 16,887

Diluted Earnings Per Share
Net income $ 1.62 $ 1.65 $ 4.54 $ 4.61
Average number of shares outstanding 16,559 17,422 16,851 17,430

Cash Dividends Per Share $ 0.26 $ 0.24 $ 0.74 $ 0.68

See accompanying notes to unaudited consolidated financial statements.

~~-4-~~

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

Nine Months Ended September 30,
2016 2015
Cash Flows from Operating Activities
Net income $ 76,554 $ 80,345
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 25,893 24,596
Provision for uncollectible accounts receivable 12,132 11,100
Stock option expense 6,259 3,600
Benefit for deferred income taxes (5,530 ) (2,694 )
Noncash early retirement expense 1,747 -
Amortization of restricted stock awards 1,415 1,488
Noncash long-term incentive compensation 837 3,755
Noncash directors' compensation 541 540
Amortization of debt issuance costs 390 392
Changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable 8,061 (10,110 )
Decrease/(increase) in inventories 213 (373 )
Decrease/(increase) in prepaid expenses (1,646 ) 68
Increase/(decrease) in accounts payable and other current liabilities (5,471 ) 5,416
Increase in income taxes 8,587 3,049
Increase in other assets (5,694 ) (605 )
Increase in other liabilities 6,835 524
Excess tax benefit on share-based compensation (2,974 ) (8,474 )
Other sources 204 467
Net cash provided by operating activities 128,353 113,084
Cash Flows from Investing Activities
Capital expenditures (29,708 ) (30,194 )
Business combinations, net of cash acquired - (6,614 )
Other sources/(uses) (114 ) 396
Net cash used by investing activities (29,822 ) (36,412 )
Cash Flows from Financing Activities
Proceeds from revolving line of credit 110,200 103,200
Purchases of treasury stock (102,313 ) (36,682 )
Payments on revolving line of credit (85,200 ) (108,200 )
Dividends paid (12,215 ) (11,542 )
Capital stock surrendered to pay taxes on stock-based compensation (7,051 ) (11,226 )
Payments on other long-term debt (5,625 ) (4,375 )
Proceeds from exercise of stock options 4,625 11,193
Excess tax benefit on share-based compensation 2,974 8,474
Increase/(decrease) in cash overdrafts payable 2,092 (1,745 )
Other sources/(uses) 540 (1,451 )
Net cash used by financing activities (91,973 ) (52,354 )
Increase in Cash and Cash Equivalents 6,558 24,318
Cash and cash equivalents at beginning of year 14,727 14,132
Cash and cash equivalents at end of period $ 21,285 $ 38,450

See accompanying notes to unaudited consolidated financial statements.

~~-5-~~

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, ~~2015~~2016 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. 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, ~~2015.~~2016.

~~TAXES ON INCOME~~EARNINGS PER SHARE

In ~~November 2015,~~March 2016, the ~~Financial~~FASB issued Accounting Standards ~~Board (“FASB”) issued ASU~~Update “ASU No. ~~2015-17~~2016-09 - Compensation – Stock Compensation” which ~~simplifies~~is part of the ~~balance sheet~~FASB’s Simplification Initiative. The object of this initiative is to identify, evaluate, and improve areas of GAAP. The areas of simplification in this initiative involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification ~~required~~of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance was effective for deferred tax balances. It allows for a company’s deferred tax assets and liabilities to be netted into a noncurrent account, either asset or liability, by jurisdiction. The ASU is required to be adopted for annual periodsfiscal years beginning after December 15, 2016 and the interim periods within that annual period. Early adoption is permitted. Companies have the choice to adopt prospectively or retrospectively. In order to simplify our balance sheet classification required for deferred tax balances, we2016. We adopted the applicable provisions of ASU ~~for our annual balance sheet as of December 31, 2015~~2016-09 on a prospective basis. ~~Prior periods have not been retrospectively adjusted. We do not believe that~~The impact of this ~~change results in a material comparability issue between years~~ASU on our ~~balance sheet~~

~~CLASSIFICATION ADJUSTMENTS~~

~~During~~financial statements for the ~~three~~quarter ended June 30, 2017 was to decrease our income tax expense by $2.6 million as the result of excess tax benefits on stock based compensation being recorded on the statements of income. This, combined with the required change in diluted share count, resulted in an increase to basic and ~~nine~~diluted earnings per share of $0.17. The impact of this ASU on our financial statements for the six months ended ~~September~~June 30, 2016, we classified $441,000 and $1.4 million respectively of non-cash restricted stock award amortization in selling, general and administrative expenses. We also recorded a classification adjustment of $592,000 and $1.5 million2017 was to decrease ~~amortization~~our income tax expense by $6.3 million as the result of excess tax benefits on stock based compensation being recorded on the statements of income. This, combined with the required change in diluted share count, resulted in an increase to basic earnings per share by $0.39 and an increase ~~selling, general and administrative expenses in our Consolidated Statement of Income~~to diluted earnings per share by $0.38.

INCOME TAXES

The effective tax rate for the three and ~~nine months~~six month periods ended ~~September~~June 30, ~~2015 respectively related to non-cash restricted stock award amortization. This classification adjustment does not impact income~~2017 was 43.6% (income tax benefit on pre-tax loss) and 81.7% (income tax benefit on pre-tax income), respectively. These rates differ from ~~operations, income before income taxes, net income, and earnings per share, net cash provided by operating activities or our Consolidated Balance Sheet. We believe~~ the ~~impact~~US statutory tax rates primarily as the result of the ~~classification adjustments are immaterial~~adoption of ASU 2016-09 described above. The remaining difference relates to our ~~consolidated financial statements~~normal, small permanent differences between book and tax income having a larger than normal impact on our effective rate due to a lower absolute dollar value of pretax income (loss). These permanent differences generally do not significantly impact our effective rate. However, as described fully in footnote 11, we recorded a charge during the quarter for ~~all periods presented.~~potential litigation settlement of $90.0 million causing a decrease in pretax income (increase in pretax loss).

2. Revenue Recognition

Both the VITAS segment and the Roto-Rooter segment recognize service revenues and sales when the earnings process has been completed. Generally, this occurs when services are provided or products are shipped. VITAS recognizes revenue at the estimated realizable amount due from third-party payers. Medicare payments are subject to certain limitations, as described below.

We actively monitor each of our hospice programs, by provider number, as to their specific admission, discharge rate and median length of stay data in an attempt to determine whether they are likely to exceed the annual per-beneficiary Medicare cap (“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 action to influence the patient mix or to increase patient admissions. However, should we project our corrective action will not prevent that program from exceeding its Medicare cap, we estimate the amount of revenue recognized during the period that will require repayment to the Federal government under the Medicare cap and record the amount as a reduction to patient revenue.

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 ~~$2.1~~$2.2 million is owed for Medicare cap in three programs arising during the 2013, 2014 and 2015 measurement periods. The amounts were automatically deducted from our semi-monthly PIP payments. We do not believe that CMS is authorized under the sequestration authority or the statutory methodology for establishing the Medicare cap to demand the ~~$2.1~~$2.2 million under their “as if” methodology. We have not recorded a reserve as of ~~September~~June 30, ~~2016~~2017 for $1.9 million of the potential exposure. We have appealed CMS’s methodology change with the appropriate regulatory appeal board.

~~-6-~~- 6 -

During the three and six months ended June 30, 2016, respectively, no Medicare cap was recorded.

During the three and ~~nine~~six months ~~September~~ended June 30, ~~2016,~~2017, respectively, we recorded ~~$228,000 in Medicare~~$247,000 for two programs cap liability ~~related to one program’s projected~~for the 2013, 2014 and 2015 measurement ~~period liability. This liability was related~~periods of the amount recorded, $105,000 relates to the ~~CMS’s methodology change~~sequestration issue described above.

During the first nine months ended September 30, 2015, we recorded $165,000 Medicare cap reversal of amounts recorded in the fourth quarter of 2014 for one program’s projected 2015 measurement period liability. The fourth quarter of 2014 was part of the 2015 Medicare cap year.

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

	September 30,						June 30,
	2016			2015			2017		2016
Beginning balance January 1,	$	1,165		$	6,112		$	235	$	1,165
2015 measurement period		228			(165	)
Prior measurement periods								247		-
Payments		(1,158	)		(4,782	)		-		(618	)
Ending balance September 30,	$	235		$	1,165
Ending balance June 30,							$	482	$	547

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

Three months ended September 30, Nine months ended September 30,
2016 2015 2016 2015
$ 1,711 $ 1,929 $ 5,231 $ 5,788

Three months ended June 30,						Six months ended June 30,
2017			2016			2017			2016
	$	1,761		$	1,715		$	3,698		$	3,521

3. Segments

Service revenues and sales and after-tax earnings by business segment are as follows (in thousands):

	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Service Revenues and Sales
VITAS	$	282,865		$	285,008		$	839,131		$	831,081		$	284,710		$	278,739		$	567,026		$	556,266
Roto-Rooter		109,742			101,218			334,274			313,718			130,349			111,670			253,897			224,532
Total	$	392,607		$	386,226		$	1,173,405		$	1,144,799		$	415,059		$	390,409		$	820,923		$	780,798

After-tax Earnings
After-tax Income/(Loss)
VITAS	$	20,903		$	25,723		$	58,538		$	66,839		$	(32,254	)	$	18,550		$	(11,657	)	$	37,637
Roto-Rooter		12,855			10,961			39,216			35,122			17,058			13,341			31,682			26,359
Total		33,758			36,684			97,754			101,961			(15,196	)		31,891			20,025			63,996
Corporate		(6,929	)		(7,851	)		(21,200	)		(21,616	)		(6,460	)		(7,006	)		(11,837	)		(14,271	)
Net income	$	26,829		$	28,833		$	76,554		$	80,345		$	(21,656	)	$	24,885		$	8,188		$	49,725

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

~~-7-~~- 7 -

4. ~~Earnings~~Earnings/(Loss) per Share

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

	Net Income
For the Three Months Ended September 30,	Income		Shares		Earnings per Share
							Net Income/(Loss)
For the Three Months Ended June 30,							Income/(Loss)			Shares		Earnings/(Loss) per Share
2017
Loss							$	(21,656	)		16,010	$	(1.35	)
Dilutive stock options								-			-
Nonvested stock awards								-			-
Diluted loss							$	(21,656	)		16,010	$	(1.35	)

2016
Earnings	$	26,829		16,166	$	1.66	$	24,885			16,443	$	1.51
Dilutive stock options		-		294				-			289
Nonvested stock awards		-		99				-			99
Diluted earnings	$	26,829		16,559	$	1.62	$	24,885			16,831	$	1.48

2015
Earnings	$	28,833		16,865	$	1.71
Dilutive stock options		-		399
Nonvested stock awards		-		158
Diluted earnings	$	28,833		17,422	$	1.65

	Net Income						Net Income
For the Nine Months Ended September 30,	Income		Shares		Earnings per Share
For the Six Months Ended June 30,							Income		Shares		Earnings per Share
2017
Earnings							$	8,188		16,114	$	0.51
Dilutive stock options								-		557
Nonvested stock awards								-		87
Diluted earnings							$	8,188		16,758	$	0.49

2016
Earnings	$	76,554		16,443	$	4.66	$	49,725		16,583	$	3.00
Dilutive stock options		-		296				-		297
Nonvested stock awards		-		112				-		119
Diluted earnings	$	76,554		16,851	$	4.54	$	49,725		16,999	$	2.93

2015
Earnings	$	80,345		16,887	$	4.76
Dilutive stock options		-		391
Nonvested stock awards		-		152
Diluted earnings	$	80,345		17,430	$	4.61

For the three ~~and nine-month periods~~months ended ~~September~~June 30, ~~2016, 418,000~~2017, all stock options and nonvested stock awards have been excluded in the calculation of dilutive earnings per share as they be would anti-dilutive due to the net loss for the period.

For the six month period ended June 30, 2017, there were no stock options excluded from the computation of diluted earnings per share because they would have been anti-dilutive.

For the three and ~~nine-months~~six month periods ended ~~September~~June 30, ~~2015, no~~2016, 418,000 stock options were excluded from the computation of diluted earnings per share because they would have been anti-dilutive.

5. Long-Term Debt

On June 30, 2014, we replaced our existing credit agreement with the Third Amended and Restated Credit Agreement (“2014 Credit Agreement”). Terms of the 2014 Credit Agreement consist of a five-year, $350 million revolving credit facility and a $100 million term loan. The 2014 Credit Agreement has a floating interest rate that is ~~currently~~generally LIBOR plus a tiered additional rate which varies based on our current leverage ratio. The interest rate as of June 30, 2017 is LIBOR plus 113 basis points.

- 8 -

The debt outstanding as of ~~September~~June 30, ~~2016~~2017 consists of the following:

Revolver $ 25,000
Term loan 85,625
Total 110,625
Current portion of long-term debt (8,125 )
Long-term debt $ 102,500

~~-8-~~


Revolver	$	45,000
Term loan		80,000
Total		125,000
Current portion of long-term debt		(10,000	)
Long-term debt	$	115,000

Scheduled principal payments of the term loan are as follows:

2016 $ 1,875
2017 8,750
2018 10,000
2019 65,000
$ 85,625

2017	$	5,000
2018		10,000
2019		65,000
	$	80,000

The 2014 Credit Agreement contains the following quarterly financial covenants:

Description		Requirement

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

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

Annual Operating Lease Commitment		< $50.0 million

We are in compliance with all debt covenants as of ~~September~~June 30, ~~2016.~~2017. We have issued ~~$37.4~~$36.1 million in standby letters of credit as of ~~September~~June 30, ~~2016~~2017 mainly for insurance purposes. Issued letters of credit reduce our available credit under the 2014 Credit Agreement. As of ~~September~~June 30, ~~2016,~~2017, we have approximately ~~$287.6~~$268.9 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility.

6. Other Operating Expenses

	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016

Potential litigation settlement	$	90,000	$	-	$	90,000	$	-
Program closure expense		636		-		1,509		-
Retirement expenses		-		4,491		-		4,491
Total other operating expenses	$	90,636	$	4,491	$	91,509	$	4,491

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

During the three and six months ended June 30, 2017, the Company recorded $636,000 and $1.5 million, respectively, related to the closure of three Alabama programs at VITAS.

During the three and six months ended June 30, 2016, the Company recorded early retirement related costs and accelerated stock-based compensation expense of approximately $4.5 million pretax and $2.8 million after-tax, related to the early retirement of VITAS’ former Chief Executive Officer. ~~The accrual was calculated in accordance with the terms of his employment agreement.~~

- 9 -

7. Other Income/(Expense) – Net

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

	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Market value adjustment on assets held in
deferred compensation trust	$	1,656		$	(2,328	)	$	1,857		$	(880	)	$	1,587		$	3,188		$	4,202		$	201
Loss on disposal of property and equipment		(134	)		(116	)		(224	)		(131	)		(98	)		(57	)		(334	)		(90	)
Interest income - net		119			77			301			207
Interest income														161			85			245			182
Other - net		(1	)		12			(1	)		(452	)		3			1			3			-
Total other income/(expense) - net	$	1,640		$	(2,355	)	$	1,933		$	(1,256	)	$	1,653		$	3,217		$	4,116		$	293

8. Stock-Based Compensation Plans

On February ~~19, 2016,~~17, 2017, the Compensation/Incentive Committee of the Board of Directors (“CIC”) granted ~~9,541~~7,304 Performance Stock Units (“PSUs”) contingent upon the achievement of certain total shareholders return (“TSR”) targets as compared to the TSR of a group of peer companies for the three-year period ending December 31, ~~2018,~~2019, the date at which such awards vest. The cumulative compensation cost of the TSR-based PSU award to be recorded over the three year service period is ~~$1.4~~$1.7 million.

~~-9-~~

On February ~~19, 2016,~~17, 2017, the CIC also granted ~~9,541~~7,304 PSUs contingent upon the achievement of certain earnings per share (“EPS”) targets for the three-year period ending December 31, ~~2018.~~2019. At the end of each reporting period, the Company estimates the number of shares that it believes will ultimately be earned and records that 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 ~~$557,000.~~$1.3 million.

9. Independent Contractor Operations

The Roto-Rooter segment sublicenses with 69 independent contractors to operate certain plumbing repair, excavation, water restoration and drain cleaning businesses in lesser-populated areas of the United States and Canada. We had notes receivable from our independent contractors as of ~~September~~June 30, ~~2016~~2017 totaling ~~$1.6~~$1.4 million (December 31, ~~2015~~2016 - ~~$1.8~~$1.7 million). In most cases these loans are fully or partially secured by equipment owned by the contractor. The interest rates on the loans range from 0% to 7% per annum and the remaining terms of the loans range from 2.5 months to 5.4 years at ~~September~~June 30, ~~2016.~~2017. We recorded the following from our independent contractors (in thousands):

	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,				Six months ended June 30,
	2016			2015			2016			2015			2017		2016		2017		2016
Revenues		$	9,823		$	9,119		$	29,451		$	28,110	$	11,151	$	9,770	$	22,176	$	19,629
Pretax profits			5,835			5,435			18,015			16,653
Pretax income														6,742		6,024		13,431		12,180

10. Retirement Plans

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

Three months ended September 30, Nine months ended September 30,
2016 2015 2016 2015
$ 4,423 $ 458 $ 10,809 $ 7,636

Three months ended June 30,						Six months ended June 30,
2017			2016			2017			2016
	$	4,551		$	5,861		$	10,709		$	6,387

- 10 -

11. Legal and Regulatory Matters

The VITAS segment of the Company’s business operates in a heavily-regulated industry. As a result, the Company is subjected to inquiries and investigations by various government agencies, 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. ItOther than as described below with respect to U.S. v. Vitas, it is not possible at this time for us to estimate either the timing or outcome of any of those matters, or whether any potential loss, or range of potential losses, is probable or reasonably estimable.

Regulatory Matters and Litigation

On May 2, 2013, the government filed a False Claims Act complaint against the Company and certain of its hospice-related subsidiaries in the U.S. District Court for the Western District of Missouri, United States v. VITAS Hospice Services, LLC, et al., No. 4:13-cv-00449-BCW (the “2013 Action”). Prior to that date, the Company received various qui tam lawsuits and subpoenas from the U.S. Department of Justice and OIG that have been previously disclosed. The 2013 Action alleges that, since at least 2002, VITAS, and since 2004, the Company, submitted or caused the submission of false claims to the Medicare program by (a) billing Medicare for continuous home care services when the patients were not eligible, the services were not provided, or the medical care was inappropriate, and (b) billing Medicare for patients who were not eligible for the Medicare hospice benefit because they did not have a life expectancy of six months or less if their illnesses ran their normal course. This complaint seeks treble damages, statutory penalties, and the costs of the action, plus interest. The defendants filed a motion to dismiss on September 24, 2013. On September 30, 2014, the Court denied the motion, except to the extent that claims were filed before July 24, 2002. On November 13, 2014, the government filed a Second Amended Complaint. The Second Amended Complaint changed and supplemented some of the allegations, but did not otherwise expand the causes of action or the nature of the relief sought against VITAS. VITAS filed its Answer to the Second Amended Complaint on August 11, 2015. ~~The Company~~This case is ~~not able~~in the discovery phase. Based on recent case developments, including recent mediation discussions with the U.S. Department of Justice, we believe it probable that this matter will be settled, to ~~reasonably estimate~~include payments of $55.8 million after-tax ($90.0 million pretax) including attorneys’ fees. A final settlement will require the ~~probability of loss~~parties to resolve several outstanding issues, and to draft and negotiate definitive documentation. There can be no assurance that such a final definitive settlement will be reached on these, or ~~range of loss at this time.~~

~~-10-~~

other, terms. For additional procedural history of this litigation, please refer to our prior quarterly and annual filings. The ~~net~~ costs incurred related to U.S. v. Vitas and related regulatory matters were ~~$599,000~~$2.1 million and $1.2 million for the quarters ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the net costs were ~~$4.1~~$4.2 million and ~~$3.8~~$3.5 million respectively.

~~In November 2013, two shareholder derivative lawsuits were filed against~~Net income/(loss) for the ~~Company’s~~three and six months ended June 30, 2017 includes the $55.8 million of after-tax expense ($90 million pre-tax) for the accrual of such potential litigation settlement. As required by U.S. Generally Accepted Accounting Principles, the Company accrues for contingent loss claims in its financial statements when it is probable that a liability has been incurred and the amount can be reasonably estimated.

The Company and certain current and former directors ~~as well as certain of its~~and officers ~~both of which~~ are ~~covered by the Company’s commercial insurance. On November 6, 2013, KBC Asset Management NV filed suit~~defendants in ~~the United States District Court for the District of Delaware,~~ ~~KBC Asset Management NV, derivatively on behalf of Chemed Corp. v. McNamara, et al., No. 13 Civ. 1854 (LPS) (D. Del.).~~ ~~On November 14, 2013, Mildred A. North filed suit in the United States District Court for the Southern District of Ohio,~~ ~~North, derivatively on behalf of Chemed Corp. v. Kevin McNamara, et al., No. 13 Civ. 833 (MRB) (S.D. Ohio). Those proceedings were subsequently consolidated in the District of Delaware under the caption~~a case captioned In re Chemed Corp. Shareholder ~~and~~ Derivative Litigation, No. 13 Civ. 1854 (LPS) (CJB) (D. Del.), ~~by Order of the United States District Court for the District of Delaware dated~~which was consolidated on February 2, 2015. ~~Also on~~

On February 2, 2015, the Court appointed ~~Plaintiff~~ KBC Asset Management NV the sole lead plaintiff and its counsel, the sole lead and liaison counsel.

On March 3, 2015, Lead Plaintiff KBC designated its Complaint as the operative complaint in the consolidated ~~proceedings.~~proceedings and defendants renewed a previously filed motion to dismiss those claims and allegations. The consolidated Complaint named Kevin McNamara, Joel Gemunder, Patrick Grace, Thomas Hutton, Walter Krebs, Andrea Lindell, Thomas Rice, Donald Saunders, Arthur Tucker, Jr., George Walsh III, Frank Wood, Timothy O’Toole, David Williams and Ernest Mrozek asfourteen individual defendants, together with the Company as nominal defendant. The Complaint alleges a claim for breach of fiduciary duty against the individual defendants ~~and~~for allegedly permitting the Company to submit false claims to the U.S. government. The Complaint seeks (a) a declaration that the individual defendants breached their fiduciary duties to the Company; (b) an order requiring those defendants to pay compensatory damages, restitution and exemplary damages, in unspecified amounts, to the Company; (c) an order directing the Company to implement new policies and procedures; and (d) costs and disbursements incurred in bringing the action, including attorneys’ fees. ~~Also on March 3, 2015, defendants renewed their previously-filed motion to dismiss those claims and allegations, which motion the court referred to Magistrate Judge Burke.~~

On December 23, 2015, Magistrate Judge Burke issued a Report and Recommendation recommending that (1) defendants’ motion to dismiss be granted; (2) plaintiff be given 14 days from the date of affirmance by the district court to file an amended complaint addressing deficiencies with regard to their duty of loyalty claim; and (3) failure to do so should give rise to dismissal with prejudice. On January 11, 2016, Lead Plaintiff KBC filed Objections to the Report and Recommendation. Defendants’ responses to those Objections were filed on January 28, 2016.On May 12, 2016, the ~~court~~Court issued a Memorandum Order ~~(1) overruling Lead Plaintiff KBC’s Objections to the Report and Recommendation; (2) adopting the Report and Recommendation; (3)~~ granting Chemed’s motion to ~~dismiss;~~dismiss, and ~~(4)~~ dismissing Lead Plaintiff KBC’s Complaint without prejudice to KBC’s opportunity to file within 30 days of the date of the ~~court’s~~Court’s Order (i.e., by June 13, 2016) an amended Complaint addressing the deficiencies in its duty of loyalty claim. Lead Plaintiff KBC did not file an amended Complaint within the time specified by the ~~court—i.e.,~~Court.

- 11 -

However, on ~~or before~~ June 13, ~~2016.~~

~~However, on that date (June 13, 2016),~~2016, counsel for Chemed shareholder Michael Kvint filed a letter with the ~~court~~Court requesting a two-week extension ~~(1)~~ to file a motion to substitute Mr. Kvint as ~~Lead Plaintiff,~~lead plaintiff, in place of Lead Plaintiff ~~KBC;~~KBC and ~~(2) in that capacity,~~ to file an amended Complaint. Alternatively, counsel for Mr. Kvint requested that any dismissal of the action be with prejudice to KBC only. On June 14, 2016, Chemed filed a reply letter with the ~~court,~~Court, reserving its rights to oppose any motion filed by Mr. Kvint and, if warranted, to oppose any other actions taken by Mr. Kvint to proceed with the action (including by filing an untimely amended Complaint). On June 21, 2016, the ~~court~~Court entered an Oral Order providing Mr. Kvint until June 30, 2016 to file a Motion to Substitute and Motion for Leave to File an Amended Complaint. On that date, Mr. Kvint filed, under seal, a Motion Toto Substitute Plaintiff and File Amended Complaint, and attached a Proposed Amended Complaint. ~~Chemed~~Mr. Kvint’s motion was fully briefed by the parties. On April 25, 2017, Magistrate Judge Burke issued a Report and Recommendation recommending that the Court permit Mr. Kvint to intervene as Lead Plaintiff and grant leave to amend the complaint to replead the duty of loyalty claim only. On May 16, 2017, Chief Judge Stark signed an Order adopting that Report and Recommendation. Plaintiff Kvint filed a Corrected Amended Complaint on May 30, 2017. On July 25, 2017, the Court entered an order permitting Defendants to file a Motion to Dismiss the Corrected Amended Complaint on or before August 14, 2017, with Plaintiff’s Answering Brief in ~~Opposition~~opposition to ~~Mr. Kvint’ motion~~the Motion to Dismiss to be filed on ~~July 18, 2016. Mr. Kvint filed a~~or before October 16, 2017, and Defendants’ Reply Brief in ~~Support~~support of ~~his motion~~the Motion to Dismiss to be filed on ~~July~~or before November 13, 2017. As the Company has previously disclosed, the legal fees and costs associated with defending against this lawsuit are presently being paid by insurance. For additional procedural history of this litigation, please refer to our prior quarterly and annual filings.

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

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

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

The Court in Seper lifted the stay at the Initial Status Conference on May 11, 2017. At the Conference, Seper’s counsel informed the Court that he was in contact with Jiwan Chhina’s counsel to consolidate the two cases. The Court set a Further Status Conference for July 13, 2017 expressly to receive a status update on the consolidation efforts. If the cases are consolidated and proceed under the jurisdiction of the Los Angeles Superior Court Complex Division, the Chhina case in the San Diego Superior Court would then be dismissed. The Parties have agreed to stay further discovery efforts pending the issue of consolidation of the two cases. Counsel for Seper and counsel for Chhina are currently preparing a joint Amended Complaint.

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

- 12 -

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

~~-11-~~

12. Concentration of Risk

During the quarter VITAS had pharmacy services agreements with ~~two~~one service ~~providers~~provider to provide specified pharmacy services for VITAS and its hospice patients. VITAS made purchases from ~~two~~this provider of ~~these providers of $9.5 million~~$8.2 and ~~$26.9~~$17.0 million for the three and ~~nine month periods~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively. Vitas made purchases from ~~one of these~~two providers of ~~$9.5~~$8.5 and ~~$28.3~~$17.4 million for the three and ~~nine month periods~~six months ended ~~September 15, 2015,~~June 30, 2016, respectively. Purchases from these providers were approximately 90% of all pharmacy services used by ~~VITAS.~~VITAS during each quarter presented.

13. Cash Overdrafts and Cash Equivalents

~~Included~~There are $7.5 million in cash overdrafts payable included in accounts payable at ~~September~~June 30, ~~2016 is cash overdrafts payable of $11.4 million~~2017 (December 31, ~~2015~~2016 - ~~$9.3~~$8.6 million).

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. We had ~~$52,000~~$79,000 in cash equivalents as of ~~September~~June 30, ~~2016.~~2017. There was ~~$76,000~~$72,000 in cash equivalents as of December 31, ~~2015. The weighted average rate~~2016.

Included in properties and equipment and accounts payable on the balance sheet at June 30, 2017 is $10.8 million of ~~return~~unpaid commitments related to the purchase of transportation equipment. This amount will be paid in July 2017 and is not reflected in capital expenditures in the statement of cash flows. Unpaid commitments to purchase properties and equipment for ~~our cash equivalents was 0.48% at September 30, 2016 and 0.20% at December 31, 2015.~~comparable periods is not material.

14. Financial Instruments

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

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of June 30, 2017 (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		$	58,579		$	58,579		$	-		$	-
Total debt			125,000			-			125,000			-

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of December 31, 2016 (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		$	54,389		$	54,389		$	-		$	-
Total debt			108,750			-			108,750			-

- 13 -

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.

~~The following shows the carrying value, fair value and the hierarchy for~~ As further described in Footnote 5, our ~~financial instruments as of~~

~~September 30, 2016 (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 $ 55,158 $ 55,158 $ - $ -
Long-term debt 110,625 - 110,625 -

~~The following shows the carrying value, fair value and the hierarchy for our financial instruments as of December 31, 2015 (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 $ 49,481 $ 49,481 $ - $ -
Long-term debt 91,250 - 91,250 -

~~For the mutual fund investments carrying value is fair value. All~~ outstanding long-term debt ~~is at a~~and current portion of long-term debt have floating interest rates that are reset at short-term intervals, generally 30 or 60 days. The interest rate ~~tied to LIBOR. Therefore,~~we pay also includes an additional amount based on our current leverage ratio. As such, we believe our borrowings reflect significant nonperformance risks, mainly credit risk. Based on these factors, we believe the fair value of our long-term debt and current portion of long-term debt approximate the carrying ~~amount is a reasonable estimation of fair~~ value.

~~-12-~~

15. Capital Stock Repurchase Plan Transactions

We repurchased the following capital stock for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015:~~2016:

	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015		2017		2016		2017		2016

Total cost of repurchased shares (in thousands):	$	-	$	18,230	$	102,313	$	47,992	$	30,801	$	49,853	$	85,063	$	102,313
Shares repurchased		-		135,765		780,134		385,765		150,000		380,134		450,000		780,134
Weighted average price per share	$	-	$	134.28	$	131.15	$	124.41	$	205.34	$	131.15	$	189.03	$	131.15

In March ~~2016,~~2017, the Board of Directors authorized an additional $100.0 million for stock repurchase under Chemed’s existing share repurchase program. We currently have $~~50.2~~65.1 million of authorization remaining under this share repurchase plan.

16. Recent Accounting Statements

In May 2014, the FASB issued Accounting Standards Update “ASU No. 2014-09 – Revenue from Contracts with Customers” which provides additional guidance to clarify the principles for recognizing revenue. The standard isand subsequent amendments are intended to develop a common revenue standard for removing inconsistencies and weaknesses, improve comparability, provide more useful information to users through improved disclosure requirements, and simplify the preparation of financial statements. ~~As a result, this~~This guidance and subsequent amendments are effective for fiscal years beginning after December 15, 2017. We are in the process of analyzing various contractual arrangements with customers at each subsidiary. We believe that it is likely, as a result of adopting the ASU that certain expenses currently ~~evaluating~~included in bad debt expense will be shown as contractual allowances (i.e. net revenue). We currently do not have an estimate of the ~~impact~~magnitude of this ~~ASU on our existing revenue recognition policies and disclosures.~~

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, “ASU No. 2014-15 - Presentation of Financial Statements-Going Concern”. ASU 2014-15 is intended to define management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue aspotential impact. We anticipate a ~~going concern and to provide related footnote disclosures. This guidance is effective for us for the annual period ending December 31, 2016 and interim periods thereafter. We do not expect the~~modified retrospective adoption of ~~this standard to have a material impact on our consolidated financial position, results of operations or cash flows.~~the ASU.

In February 2016, the FASB issued Accounting Standards Update “ASU No. 2016-02 – Leases” which introduces a lessee model that brings most leases on to the balance sheets and updates lessor accounting to align with changes in the lessee model and the revenue recognition standard. The guidance is effective for fiscal years beginning after December 15, 2018. We are currently evaluating the impact of this ASU on our financial statements, existing lease recognition policies and disclosures.

In March 2016, the FASB issued Accounting Standards Update “ASU No. 2016-09 - Compensation – Stock Compensation” which is part of the FASB’s Simplification Initiative. The object of this initiative is to identify, evaluate, and improve areas of GAAP. The areas of simplification in this initiative involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016. The impact of this ASU on our financial statements in 2017 and later years could be material, dependent upon the volatility of our stock price. This price volatility could materially increase or decrease the amount of the income tax benefit related to stock compensation recognized in the income statement and the classification of such benefit in the statement of cash flows. Adoption of this statement will not materially impact our statement of financial position.

In August 2016, the FASB issued Accounting Standards Update “ASU No. 2016-15 – Cash Flow Classification” which amends guidance on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU 2016-15 is to reduce diversity in practice related to eight specific cash flow issues. The guidance in this ASU is effective for fiscal years beginning after December 15, 2017. ~~Early adoption is permitted and must be applied retrospectively.~~ We have analyzed the impact of ASU 2016-15 on our statement of cash flows and do not expect it to have a material effect.

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

~~-13-~~- 14 -

17. Goodwill

Shown below is movement in Goodwill (in thousands):

	Vitas		Roto-Rooter			Total			Vitas		Roto-Rooter		Total
Balance at December 31, 2014	$	328,301	$	138,421		$	466,722
Balance at December 31, 2016									$	328,301	$	144,065	$	472,366
Business combinations		-		5,944			5,944			-		481		481
Foreign currency adjustments		-		(344	)		(344	)		-		50		50
Balance at December 31, 2015	$	328,301	$	144,021		$	472,322
Foreign currency adjustments		-		96			96
Balance at September 30, 2016	$	328,301	$	144,117		$	472,418
Balance at June 30, 2017									$	328,301	$	144,596	$	472,897

~~-14-~~- 15 -

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

Executive Summary

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

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


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015				2017			2016			2017			2016
Service revenues and sales	$	392,607		$	386,226		$	1,173,405		$	1,144,799		$	415,059		$	390,409		$	820,923		$	$780,798
Net income	$	26,829		$	28,833		$	76,554		$	80,345
Diluted EPS	$	1.62		$	1.65		$	4.54		$	4.61
Net income/(loss)													$	(21,656	)	$	24,885		$	8,188		$	$49,725
Diluted EPS/(LPS)													$	(1.35	)	$	1.48		$	0.49		$	$2.93
Adjusted net income	$	28,643		$	30,934		$	86,625		$	87,481		$	35,907		$	30,228		$	66,402		$	$57,982
Adjusted diluted EPS	$	1.73		$	1.78		$	5.14		$	5.02		$	2.15		$	1.80		$	3.96		$	$3.41
Adjusted EBITDA	$	57,387		$	59,410		$	170,391		$	169,948		$	68,497		$	58,523		$	128,316		$	$113,003
Adjusted EBITDA as a % of revenue		14.6	%		15.4	%		14.5	%		14.8	%		16.5	%		15.0	%		15.6	%		14.5	%

Adjusted net income, adjusted diluted EPS, earnings before interest, taxes and depreciation and amortization (“EBITDA”), Adjusted EBITDA and Adjusted EBITDA as a % of revenue are not measures derived in accordance with 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 ~~27-29.~~29-31.

Net income/(loss) for the three and six months ended June 30, 2017 includes $55.8 million ($3.49 per share) of after-tax expense ($90 million pre-tax) for the accrual of a potential litigation settlement related to the May 2, 2013 complaint filed against the Company by the U.S. Department of Justice. As required by U.S. Generally Accepted Accounting Principles, the Company accrues for contingent loss claims in its financial statements when it is probable that a liability has been incurred and the amount can be reasonably estimated. Based on recent case developments, including recent mediation discussions with the U.S. Department of Justice, the Company believes that it probable that this matter will be settled, and that such settlement will include settlement payments and relator attorney fees, by the Company of approximately the accrued amount. However, the achievement of a final, definitive settlement will require the parties to resolve several outstanding issues (and draft and negotiate related definitive documentation), and there can be no assurance that such a final, definitive settlement will be reached and agreed on these or other terms.

For the three months ended ~~September~~June 30, 2016, the increase in consolidated service revenues and sales was driven by an 8.4% increase at Roto-Rooter and a 0.8% decrease at VITAS. The increase in service revenues at Roto-Rooter was driven by an increase in all major service lines. The decrease in service revenues at VITAS was primarily a result of Medicare reimbursement rates increasing 0.6%, a 3.0% increase in days of care, offset by acuity mix shift which negatively impacted revenue 1.7% and changes in Medicare hospice reimbursement which negatively impacted revenue 2.1%. Consolidated net income decreased 7.0% mainly due to decreased revenue and gross profit margin at VITAS. Diluted EPS decreased 1.5% as a result of the decrease in net income offset by a lower number of shares outstanding. Adjusted EBITDA as a percent of revenue decreased 0.8% when compared to the prior year quarter mainly as a result of the decrease in net income. See page 30 for additional VITAS operating metrics.

~~For the nine months ended September 30, 2016,~~2017, the increase in consolidated service revenues and sales was driven by a ~~6.6%~~16.7% increase at Roto-Rooter and a ~~1.0%~~2.1% increase at VITAS. The increase in service revenues at Roto-Rooter was driven by an increase in all major service ~~lines.~~lines, of Roto-Rooter’s total revenue increase 46.9% is related to water restoration. The increase in service revenues at VITAS was primarily a result of Medicare reimbursement rates increasing ~~0.6%~~1.7%, a ~~4.7%~~2.8% increase in ~~days of care,~~average daily census, offset by acuity mix shift which negatively impacted revenue ~~1.8% and changes in Medicare hospice reimbursement which negatively impacted revenue 2.1%. Consolidated net income decreased 4.7% mainly due to other operating expenses related~~2.5% when compared to the ~~early retirement of VITAS’ Chief Executive Officer. Diluted EPS decreased 1.8% as a result of the decrease in net income offset by a lower number of shares outstanding.~~prior year period. Adjusted EBITDA as a percent of revenue ~~decreased 0.3%~~increased 150 basis points when compared to the prior ~~year.~~year quarter mainly as a result of the increase in adjusted net income. See page 3032 for additional VITAS operating metrics.

~~On January 1, 2016, CMS implemented~~For the six months ended June 30, 2017, the increase in consolidated service revenues and sales was driven by a ~~refinement~~13.1% increase at Roto-Rooter and a 1.9% increase at VITAS. The increase in service revenues at Roto-Rooter was driven by an increase in all major service lines, of Roto-Rooter’s total revenue increase 49.0% was related to water restoration. The increase in service revenues at VITAS was primarily a result of Medicare reimbursement rates increasing 1.7%, a 3.2% increase in average daily census, offset by acuity mix shift which negatively impacted revenue when compared to the ~~Medicare hospice reimbursement per diem. This rebasing eliminated~~prior year period. Adjusted EBITDA as a percent of revenue increased 110 basis points when compared to the ~~single tier per diem~~prior year quarter mainly as a result of the increase in adjusted net income. See page 32 for routine home care (RHC) and replaced it with 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, CMS added a Service Intensity Add-on (SIA) payment which provides for reimbursement of care provided by a registered nurse or social worker for RHC patients within seven days prior to death. The reimbursement for continuous care, inpatient care and respite care are not impacted by this rebasing.additional VITAS operating metrics.

~~-15-~~- 16 -

The two tiered national per diem rate for RHC is $186.84 for the first 60 days and $146.83 for RHC beyond 60 days. An individual hospice’s actual per diem rate is adjusted for differences in geographic cost of living. We estimate rebasing in 2016 would be revenue neutral to a hospice if it has 37.6% of total RHC days-of-care provided to patients in their first 60 days of admission and 62.4% of total RHC days-of-care provided to patients after the 60~~days.~~

Historically, VITAS had a 32/68 aggregate Days-of-Care ratio. High acuity care historically has represented 6% to 7% of VITAS’ total days-of-care. VITAS high acuity days-of-care provided to patients within the first 60 days of admission represented approximately 15% of days-of-care provided to patients in the first 60 days of admission. This results in a VITAS RHC Days-of-Care ratio of approximately 29/71.

For the three and nine months ended September 30, 2016, VITAS had a 25/75 RHC Days-of-Care ratio and generated approximately $1.3 million and $3.3 million in SIA payments, respectively. This resulted in 2.0% less revenue than under the previous Medicare reimbursement methodology.

VITAS expects its full-year ~~2016~~2017 revenue growth, prior to Medicare cap, to be in the range of ~~1.0%~~2.0% to ~~2.0%~~3.0%. Admissions and Average Daily Census in ~~2016 is~~2017 are estimated to expand approximately ~~4.5%~~3.0% to 5.0%. Adjusted EBITDA margin, prior to Medicare cap, is estimated to be ~~14.0%~~15.0% to ~~14.5%~~15.5%. This guidance includes ~~$1.25~~$2.5 million for Medicare cap billing limitations. Roto-Rooter expects full-year ~~2016~~2017 revenue growth of ~~5.0%~~12.0% to ~~5.5%~~13.0%. The revenue estimate is a based upon increased job pricing of approximately ~~1.0%~~2.0% and continued growth in water restoration services. Adjusted EBITDA margin for ~~2016~~2017 is estimated in the range of ~~21.0%~~22.0% to ~~21.3%~~22.5%. 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, ~~2015~~2016 to ~~September~~June 30, ~~2016~~2017 include the following:

●	~~A $20.3 million decrease in accounts receivable due mainly to timing of Medicare and Medicaid payments.~~

A $14.1 million decrease in accounts receivable due mainly to timing of Medicare and Medicaid payments.

●	~~A $5.6 million decrease in prepaid income taxes due to timing of payments.~~

An $18.9 million increase in properties plant and equipment mainly due to the purchase of transportation equipment during the quarter.

●	~~A $5.7 million increase in investments of deferred compensation plans related to participant contributions and market valuation gains.~~

A $20.6 million increase in deferred taxes associated with amounts recorded for a potential litigation settlement.

●	~~A $2.3 million increase in accrued insurance due to timing of insurance payments.~~

A $9.6 million increase in accounts payable mainly due to transportation equipment accrued but not paid at June 30, 2017.

●	~~A $4.4 million decrease in accrued compensation due to timing of payments of incentive compensation.~~

A $5.9 million decrease in accrued compensation due to the payments of cash bonuses accrued in 2016.

●	~~A $5.5 million decrease in deferred income taxes due to changes in various temporary differences including accrued expenses.~~

A $90.7 million increase in accrued legal due to a potential litigation settlement.

●	~~A $5.0 million increase in deferred compensation liabilities related to market valuation gains, participant contributions reduced by payouts to participants.~~

A $16.3 million increase in long-term debt due to borrowings on our revolving line of credit.

●	~~A $19.4 million increase in long-term debt due to borrowings on our revolving line of credit.~~

Net cash provided by operating activities increased ~~$15.3~~$26.9 million mainly as a result of a $14.3 million increase in net income excluding potential litigation settlement and a $6.6 million decrease in accounts ~~receivable due to the timing of payments. Management continually evaluates~~receivable. The potential litigation settlement recorded is non-cash at June 30, 2017 and does not impact net cash ~~utilization alternatives, including share repurchase, debt repurchase, acquisitions and increased dividends to determine the most beneficial use of available capital resources.~~

We have issued $37.4 million in standby letters of credit as of September 30, 2016, mainly for insurance purposes. Issued letters of credit reduce our available credit under the revolving credit agreement. As of September 30, 2016, we have approximately $287.6 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.provided by operating activities.

Significant changes in our accounts receivable balances are typically driven mainly by the timing of payments received from the Federal government at our VITAS subsidiary. We typically receive a payment in excess of ~~$35.0~~$40.0 million from the Federal government from hospice services every other Friday. The timing of period end will have a significant impact on the accounts receivable at VITAS. These changes generally normalize over a two year period, as cash flow variations in one year are offset in the following year.

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

We have issued $36.1 million in standby letters of credit as of June 30, 2017, mainly for insurance purposes. Issued letters of credit reduce our available credit under the revolving credit agreement. As of June 30, 2017, we have approximately $268.9 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility. Management believes its liquidity and sources of capital are satisfactory for the Company’s needs in the foreseeable future.

Commitments and Contingencies

Collectively, the terms of our credit agreements require us to meet various financial covenants, to be tested quarterly. We are in compliance with all financial and other debt covenants as of ~~September~~June 30, ~~2016~~2017 and anticipate remaining in compliance throughout the foreseeable future.

~~-16-~~

- 17 -

On February 2, 2015, the Court appointed ~~Plaintiff~~ KBC Asset Management NV the sole lead plaintiff and its counsel, the sole lead and liaison counsel.

~~-17-~~

Court.

However, on ~~that date (June~~June 13, ~~2016),~~2016, counsel for Chemed shareholder Michael Kvint filed a letter with the ~~court~~Court requesting a two-week extension ~~(1)~~ to file a motion to substitute Mr. Kvint as ~~Lead Plaintiff,~~lead plaintiff, in place of Lead Plaintiff ~~KBC;~~KBC and ~~(2) in that capacity,~~ to file an amended Complaint. Alternatively, counsel for Mr. Kvint requested that any dismissal of the action be with prejudice to KBC only. On June 14, 2016, Chemed filed a reply letter with the ~~court,~~Court, reserving its rights to oppose any motion filed by Mr. Kvint and, if warranted, to oppose any other actions taken by Mr. Kvint to proceed with the action (including by filing an untimely amended Complaint). On June 21, 2016, the ~~court~~Court entered an Oral Order providing Mr. Kvint until June 30, 2016 to file a Motion to Substitute and Motion for Leave to File an Amended Complaint. On that date, Mr. Kvint filed, under seal, a Motion to Substitute Plaintiff and File Amended Complaint, and attached a Proposed Amended Complaint. ~~Chemed~~Mr. Kvint’s motion was fully briefed by the parties. On April 25, 2017, Magistrate Judge Burke issued a Report and Recommendation recommending that the Court permit Mr. Kvint to intervene as Lead Plaintiff and grant leave to amend the complaint to replead the duty of loyalty claim only. On May 16, 2017, Chief Judge Stark signed an Order adopting that Report and Recommendation. Plaintiff Kvint filed a Corrected Amended Complaint on May 30, 2017. On July 25, 2017, the Court entered an order permitting Defendants to file a Motion to Dismiss the Corrected Amended Complaint on or before August 14, 2017, with Plaintiff’s Answering Brief in ~~Opposition~~opposition to ~~Mr. Kvint’s motion~~the Motion to Dismiss to be filed on ~~July 18, 2016. Mr. Kvint filed a~~or before October 16, 2017, and Defendants’ Reply Brief in ~~Support~~support of ~~his motion~~the Motion to Dismiss to be filed on ~~July~~or before November 13, 2017. As the Company has previously disclosed, the legal fees and costs associated with defending against this lawsuit are presently being paid by insurance. For additional procedural history of this litigation, please refer to our prior quarterly and annual filings.

- 18 -

The Court in Seper lifted the stay at the Initial Status Conference on May 11, 2017. At the Conference, Seper’s counsel informed the Court that he was in contact with Jiwan Chhina’s counsel to consolidate the two cases. The Court set a ~~Request~~Further Status Conference for ~~Oral Argument.~~July 13, 2017 expressly to receive a status update on the consolidation efforts. If the cases are consolidated and proceed under the jurisdiction of the Los Angeles Superior Court Complex Division, the Chhina case in the San Diego Superior Court would then be dismissed. The ~~parties await~~Parties have agreed to stay further discovery efforts pending the issue of consolidation of the two cases. Counsel for Seper and counsel for Chhina are currently preparing a ~~response from~~joint Amended Complaint.

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

- 19 -

Results of Operations

Three months ended ~~September~~June 30, ~~2016~~2017 versus ~~2015~~2016 - Consolidated Results

Our service revenues and sales for the ~~third~~second quarter of ~~2016~~2017 increased ~~1.7%~~6.3% versus services and sales revenues for the ~~third~~second quarter of ~~2015.~~2016. Of this increase, a ~~$2.1~~$6.0 million ~~decrease~~increase was attributable to VITAS and ~~$8.5~~$18.7 million increase was attributable to Roto-Rooter. The following chart shows the components of those changes (in thousands):



	Increase/(Decrease)						Increase/(Decrease)
	Amount			Percent			Amount			Percent
VITAS
Routine homecare	$	2,396			1.1		$	11,978			5.5
Continuous care		(3,890	)		(10.3	)		(3,271	)		(9.4	)
General inpatient		(421	)		(1.7	)		(2,489	)		(10.2	)
Medicare cap		(228	)		-			(247	)		-
Roto-Rooter
Plumbing		2,916			6.5			6,469			13.3
Drain cleaning		1,389			4.1			1,599			4.4
Water restoration		3,773			46.3			8,763			72.1
Contractor operations		704			7.7			1,381			14.1
Other		(258	)		(5.0	)		467			9.5
Total	$	6,381			1.7		$	24,650			6.3

The ~~decrease~~increase in VITAS’ revenues for the ~~third~~second quarter of 2017 versus the second quarter of 2016 ~~versus the third quarter~~was comprised of ~~2015 was a primarily a result of~~an average net Medicare reimbursement ~~rates~~rate increasing approximately ~~0.6%~~1.7%, a ~~3.0%~~2.8% increase in days of care offset by acuity mix shift which negatively impacted revenue ~~1.7% and changes in Medicare hospice reimbursement which negatively impacted revenue 2.1%.~~2.5% when compared to the prior year period.

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

	Days of Care				Increase/(Decrease)			Days of Care				Increase/(Decrease)
	2016		2015		Percent			2017		2016		Percent

Routine homecare		1,407,623		1,357,688		3.7			1,417,840		1,366,985		3.7
Continuous care		46,582		51,652		(9.8	)		43,108		47,775		(9.8	)
General inpatient		36,241		37,121		(2.4	)		31,251		36,833		(15.2	)
Total days of care		1,490,446		1,446,461		3.0			1,492,199		1,451,593		2.8

Over 90% of VITAS’ service revenues for the period were from Medicare and Medicaid.

~~-18-~~

The increase in plumbing revenues for the ~~third~~second quarter of ~~2016~~2017 versus ~~2015~~2016 is attributable to a 0.1% increase in job count and a 6.4% increase in a combination of price and service mix shift. Drain cleaning revenues for the third quarter of 2016 versus 2015 reflect a 1.0% decrease in the number of jobs performed combined with an10.6% increase in price and service mix shift as well as a 2.7% increase in job count. Drain cleaning revenues for the second quarter of ~~5.1%.~~2017 versus 2016 reflect a 6.4% increase in price and service mix shift offset by a 2.0% decrease in job count. Water restoration for the ~~third~~second quarter of 2017 versus 2016 ~~versus 2015~~ increased ~~46.3%~~72.1% as a result of continued expansion of this service offering ~~into~~in all Roto-Rooter locations. Contractor operations increased ~~7.7% and Other Roto-Rooter revenue decreased 5.0%.~~14.1% mainly due to their expansion into water restoration.

The consolidated gross margin was ~~28.3%~~31.1% in the ~~third~~second quarter of ~~2016~~2017 as compared with ~~29.6%~~29.2% in the ~~third~~second quarter of ~~2015.~~2016. On a segment basis, VITAS’ gross margin was ~~20.7%~~22.8% in the ~~third~~second quarter of ~~2016~~2017 as compared with ~~23.3%~~21.5%, in the ~~third~~second quarter of ~~2015.~~2016. The ~~decline~~increase in VITAS gross margin is ~~mainly~~ the result of ~~lower revenues in the high acuity service-lines. There are generally higher fixed costs associated with high-acuity care.~~labor and ancillary cost management. The Roto-Rooter segment’s gross margin was ~~47.8%~~49.3% for the ~~third~~second quarter of ~~2016~~2017 compared with ~~47.1%~~48.5% in the ~~third~~second quarter of ~~2015.~~2016. The increase in Roto-Rooter gross margin is the result mainly of higher revenues, particularly in water restoration, allowing more fixed costs to be covered.

- 20 -

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

	Three months ended September 30,					Three months ended June 30,
	2016		2015			2017		2016
SG&A expenses before market value adjustments of deferred compensation
plans, long-term incentive compensation, and OIG investigation expenses	$	56,475	$	55,601		$	64,018	$	57,771
Long-term incentive compensation		643		1,364
Expenses related to OIG investigation		599		1,151			2,093		1,170
Impact of market value adjustments related to assets held in deferred
compensation trusts		1,656		(2,328	)		1,587		3,188
Long-term incentive compensation							956		499
Total SG&A expenses	$	59,373	$	55,788		$	68,654	$	62,628

SG&A expenses before long-term incentive compensation, expenses related to OIG investigation and the impact of market value adjustments related to assets held in deferred compensation trusts for the ~~third~~second quarter of ~~2016~~2017 were up ~~1.6%~~10.8% when compared to the ~~third~~second quarter of ~~2015.~~2016. This increase was mainly a result of the increase in variable expenses caused by increased revenue, particularly in the Roto-Rooter segment, increased advertising expense at Roto-Rooter and normal salary increases in 2017.

Other operating expenses were $90.6 million in the second quarter of 2017 due to $90.0 million related to a potential litigation settlement and $636,000 due to the closure of the programs in one state at Vitas. $4.5 million related to early retirement expenses were included in other operating expenses in the second quarter of 2016.

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

Three months ended September 30,
2016 2015
Market value adjustment on assets held in
deferred compensation trusts $ 1,656 $ (2,328 )
Loss on disposal of property and equipment (134 ) (116 )
Interest income - net 119 77
Other (1 ) 12
Total other income/(expense) - net $ 1,640 $ (2,355 )

	Three months ended June 30,
	2017			2016
Market value adjustment on assets held in
deferred compensation trusts	$	1,587		$	3,188
Interest income		161			85
Loss on disposal of property and equipment		(98	)		(57	)
Other		3			1
Total other income/(expense) - net	$	1,653		$	3,217

Our effective income tax rate was ~~38.3%~~43.6% in the ~~third~~second quarter of ~~2016~~2017 (tax benefit) compared to ~~38.5%~~38.7% (tax expense) during the ~~third~~second quarter of ~~2015.~~2016. The change in the effective income tax rate is a result of the adoption of ASU No. 2016-09 – Compensation – Stock Compensation in 2017 which requires that the excess tax benefits from stock based compensation now be recorded in the income tax provision on the statements of income.

~~-19-~~

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


	Three months ended June 30,
	2017			2016
VITAS
Potential litigation settlement	$	(55,800	)	$	-
Expenses related to OIG investigation		(1,292	)		(722	)
Program closure expenses		(385	)		-
Medicare cap sequestration adjustment		(65	)		-
Early retirement expenses		-			(2,840	)
Roto-Rooter
Expenses related to litigation settlements		(129	)		(27	)
Corporate
Excess tax benefits on stock compensation		2,643			-
Stock option expense		(1,931	)		(1,440	)
Long-term incentive compensation		(604	)		(316	)
Expenses related to securities litigation		-			2
Total	$	(57,563	)	$	(5,343	)

Three months ended September 30,
2016 2015
VITAS
Expenses related to OIG investigation $ (370 ) $ (711 )
Medicare cap sequestration adjustment (141 ) -
Roto-Rooter
Acquisition expenses - (18 )
Corporate
Stock option expense (897 ) (509 )
Long-term incentive compensation (406 ) (863 )
Total $ (1,814 ) $ (2,101 )

- 21 -

Three months ended ~~September~~June 30, ~~2016~~2017 versus ~~2015~~2016 - Segment Results

The change in ~~after-tax earnings~~net income/(loss) for the ~~third~~second quarter of ~~2016~~2017 versus the ~~third~~second quarter of ~~2015~~2016 is due to (in thousands):

	Increase/(Decrease)						Increase/(Decrease)
	Amount			Percent			Amount			Percent
VITAS	$	(4,820	)		(18.7	)	$	(50,804	)		(273.9	)
Roto-Rooter		1,894			17.3			3,717			27.9
Corporate		922			11.7			546			7.8
	$	(2,004	)		(7.0	)	$	(46,541	)		(187.0	)

VITAS’ ~~after-tax earnings were negatively impacted in 2016 compared to 2015 by~~net loss was the result of a ~~$2.1~~$55.8 million decrease in revenue, and a $5.9 million increase in cost of services provided and goods sold. After-tax earnings as a percent of revenue in the third quarter of 2016 were 7.4%, a decrease of 1.6% over the third quarter of 2015.(after-tax) potential litigation settlement.

Roto-Rooter’s ~~after-tax earnings were~~net income was positively impacted in ~~2016~~2017 compared to ~~2015~~2016 primarily by ~~a $3.7~~an $8.8 million revenue increase in Roto-Rooter’s water restoration line of business, a ~~$2.9~~$6.5 million increase in plumbing revenue and a ~~$1.4~~$3.4 million increase in ~~sewer and drain cleaning revenue.~~all other revenue types. After-tax earnings as a percent of revenue at Roto-Rooter in ~~2016 were 11.7%~~the second quarter of 2017 was 13.1% as compared to ~~10.8%~~11.9% in ~~2015.~~the second quarter of 2016.

The improvement at Corporate is due mainly to the impact of the adoption of ASU 2016-09 which positively impacted the Company’s tax provision by approximately $2.6 million.

Results of Operations

~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2017 versus ~~2015~~2016 - Consolidated Results

Our service revenues and sales for the first ~~nine~~six months of ~~2016~~2017 increased ~~2.5%~~5.1% versus services and sales revenues for the first ~~nine~~six months of ~~2015.~~2016. Of this increase, ~~$8.1~~a $10.8 million increase was attributable to VITAS and ~~$20.6~~$29.4 million increase was attributable to Roto-Rooter. The following chart shows the components of those changes (in thousands):



	Increase/(Decrease)						Increase/(Decrease)
	Amount			Percent			Amount			Percent
VITAS
Routine homecare	$	18,610			2.9		$	22,665			5.2
Continuous care		(7,538	)		(6.6	)		(7,575	)		(10.5	)
General inpatient		(2,629	)		(3.4	)		(4,083	)		(8.2	)
Medicare cap		(393	)		(238.2	)		(247	)		-
Roto-Rooter
Plumbing		6,997			5.1			9,591			9.9
Drain cleaning		3,822			3.7			2,011			2.8
Water restoration		8,770			31.6			14,388			58.5
Contractor operations		1,342			4.8			2,548			13.0
Other		(375	)		(2.4	)		827			8.1
Total	$	28,606			2.5		$	40,125			5.1

~~-20-~~

The increase in VITAS’ revenues for the first ~~nine~~six months of 2017 versus the first six months of 2016 ~~versus the first nine months~~was comprised of ~~2015 was a primarily a result of~~an average net Medicare reimbursement ~~rates~~rate increasing approximately ~~0.6%~~1.7%, a ~~4.7%~~2.6% increase in days of care offset by acuity mix shift which negatively impacted revenue ~~1.8% and changes in Medicare hospice reimbursement which negatively impacted revenue 2.1%.~~when compared to the prior year period.

Days of care during the ~~first nine~~six months ended ~~September~~June 30 were as follows:


	Days of Care				Increase/(Decrease)			Days of Care				Increase/(Decrease)
	2016		2015		Percent			2017		2016		Percent

Routine homecare		4,109,775		3,899,900		5.4			2,798,388		2,702,152		3.6
Continuous care		145,327		155,742		(6.7	)		88,525		98,745		(10.3	)
General inpatient		111,323		115,700		(3.8	)		65,236		75,082		(13.1	)
Total days of care		4,366,425		4,171,342		4.7			2,952,149		2,875,979		2.6

- 22 -

Over 90% of VITAS’ service revenues for the period were from Medicare and Medicaid.

The increase in plumbing revenues for the first ~~nine~~six months of ~~2016~~2017 versus ~~2015~~2016 is attributable to a 0.3% decrease in job count and a 5.4% increase in a combination of price and service mix shift. Drain cleaning revenues for the first nine months of 2016 versus 2015 reflect a 0.1% decrease in the number of jobs performed offset by an9.5% increase in price and service mix shift as well as a 0.4% increase in job count. Drain cleaning revenues for the first six months of ~~3.8%.~~2017 versus 2016 reflect a 6.4% increase in price and service mix shift offset by a 3.6% decrease in job count. Water restoration for the first ~~nine~~six months of 2017 versus 2016 ~~versus 2015~~ increased ~~31.6%~~58.5% as a result of continued expansion of this service offering ~~into other~~in all Roto-Rooter locations. Contractor operations increased ~~4.8% and Other Roto-Rooter revenue decreased 2.4%.~~13.0% mainly due to their expansion into water restoration.

The consolidated gross margin was ~~28.7%~~30.4% in the first ~~nine~~six months of ~~2016~~2017 as compared with ~~29.1%~~29.0% in the first ~~nine~~six months of ~~2015.~~2016. On a segment basis, VITAS’ gross margin was ~~21.1%~~22.1% in the first ~~nine~~six months of ~~2016~~2017 as compared with ~~22.2%~~21.3%, in the first ~~nine~~six months of ~~2015.~~2016. The ~~decline~~increase in ~~VITAS~~VITAS’ gross margin is ~~mainly~~ the result of ~~lower revenues in the high acuity service-lines. There are generally higher fixed costs associated with high acuity care.~~labor and ancillary cost management. The Roto-Rooter segment’s gross margin was ~~48.0%~~49.0% for the first ~~nine~~six months of ~~2016~~2017 compared with ~~47.5%~~48.0% in the first ~~nine~~six months of ~~2015.~~2016. The increase in the Roto-Rooter gross margin is the result mainly of higher revenues, particularly in water restoration, allowing more fixed costs to be covered.

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

	Nine months ended September 30,					Six months ended June 30,
	2016		2015			2017		2016
SG&A expenses before market value adjustments of deferred compensation
plans, long-term incentive compensation, and OIG investigation expenses	$	174,183	$	166,555		$	127,750	$	117,708
Long-term incentive compensation		901		3,755
Expenses related to OIG investigation		4,105		3,837			4,243		3,506
Impact of market value adjustments related to assets held in deferred
compensation trusts		1,857		(880	)		4,202		201
Long-term incentive compensation							1,917		258
Total SG&A expenses	$	181,046	$	173,267		$	138,112	$	121,673

SG&A expenses before long-term incentive compensation, expenses related to OIG investigation and the impact of market ~~gains/(losses) of~~value adjustments related to assets held in deferred compensation ~~plans~~trusts for the first ~~nine~~six months of ~~2016~~2017 were up ~~4.6%~~8.5% when compared to the first ~~nine~~six months of ~~2015. The~~2016. This increase was mainly a result of the increase in variable expenses caused by increased revenue, ~~as well as~~particularly in the in the Roto-Rooter segment, increased advertising expense at Roto-Rooter and normal salary increases ~~and higher bad debt expense~~ in ~~our VITAS segment in 2016.~~

2017.

~~-21-~~Other operating expenses were $91.5 million during the first six months of 2017 related to a $90.0 million potential litigation settlement and $1.5 million related to the closure of the programs in one state at Vitas. During the first six months of 2016, the Company recorded $4.5 million related to early retirement expenses.

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

	Nine months ended September 30,						Six months ended June 30,
	2016			2015			2017			2016
Market value adjustment on assets held in
deferred compensation trusts	$	1,857		$	(880	)	$	4,202		$	201
Loss on disposal of property and equipment		(224	)		(131	)		(334	)		(90	)
Interest income - net		301			207
Interest income								245			182
Other		(1	)		(452	)		3			-
Total other income/(expense) - net	$	1,933		$	(1,256	)	$	4,116		$	293

Our effective income tax rate was ~~38.6%~~81.7% in the first ~~nine~~six months of ~~2016~~2017 compared to 38.8% ~~for~~during the first ~~nine~~six months of ~~2015.~~2016. The change in the effective income tax rate is due to the adoption of ASU No. 2016-09 – Compensation – Stock Compensation which requires that the excess tax benefits from stock based compensation now be recorded in the income tax provision on the statements of income.

- 23 -

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

	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
VITAS
Legal expenses of OIG investigation	$	(2,535	)	$	(2,369	)
Potential litigation settlement							$	(55,800	)	$	-
Expenses related to OIG investigation								(2,620	)		(2,165	)
Program closure expenses								(898	)		-
Medicare cap sequestration adjustment								(65	)		-
Early retirement expenses		(2,840	)		-			-			(2,840	)
Medicare cap sequestration adjustment		(141	)		-
Roto-Rooter
Expenses related to litigation settlements		(27	)		(3	)		(129	)		(27	)
Acquisition expenses		-			(98	)
Corporate
Excess tax benefits on stock compensation								6,338			-
Stock option expense		(3,958	)		(2,268	)		(3,828	)		(3,061	)
Long-term incentive compensation		(570	)		(2,375	)		(1,212	)		(164	)
Expenses of securities litigation		-			(23	)
Total	$	(10,071	)	$	(7,136	)	$	(58,214	)	$	(8,257	)

~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2017 versus ~~2015~~2016 - Segment Results

The change in ~~after-tax earnings~~net income/(loss) for the first ~~nine~~six months of ~~2016~~2017 versus the first ~~nine~~six months of ~~2015~~2016 is due to (in thousands):

	Increase/(Decrease)						Increase/(Decrease)
	Amount			Percent			Amount				Percent
VITAS	$	(8,301	)		(12.4	)		$	(49,294	)		(131.0	)
Roto-Rooter		4,094			11.7				5,323			20.2
Corporate		416			1.9				2,434			17.1
	$	(3,791	)		(4.7	)		$	(41,537	)		(83.5	)

VITAS’ ~~after-tax earnings were negatively impacted in 2016 compared to 2015 by a $2.8 million increase in other operating expense related to~~2017 net loss was the ~~early retirement of the Chief Executive Officer of Vitas and a $15.6 million increase in cost of services provided and goods sold. Gross margin decreased mainly as a~~ result of ~~lower revenues in the high acuity service lines. After-tax earnings as~~ a ~~percent of revenue in the first nine months of 2016 were 7.0%, a decrease of 1.0% over the first nine months of 2015.~~$55.8 million (after-tax) potential ligation settlement.

Roto-Rooter’s ~~after-tax earnings were~~net income was positively impacted in ~~2016~~2017 compared to ~~2015~~2016 primarily by ~~an $8.8~~a $14.4 million revenue increase in Roto-Rooter’s water restoration line of business, a ~~$7.0~~$9.6 million increase in plumbing revenue and a ~~$3.8~~$5.4 million increase in sewer and drain cleaning revenue. Gross margin improved mainly as a result of mix shift in Roto-Rooter’s lines of business. SG&A decreased as a percent of sales due mainly to leveraging fixed costs.all other revenue types. After-tax earnings as a percent of revenue at Roto-Rooter in ~~the first nine months of 2016~~2017 were ~~11.7%~~12.5% as compared to ~~11.2%~~11.7% in 2016.

The improvement at Corporate is due mainly to the ~~first nine months~~impact of ~~2015.~~the adoption of ASU 2016-09 which positively impacted the Company’s tax provision by approximately $6.3 million.

~~-22-~~

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

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

(a) The following amounts are included in net income (in thousands):

VITAS Roto-Rooter Corporate
Chemed
Consolidated

Pretax benefit/(cost):
Stock option expense $ - $ - $ (1,419 ) $ (1,419 )
Long-term incentive compensation - - (643 ) (643 )
Medicare cap sequestration adjustment (228 ) - - (228 )
Expenses related to OIG investigation (599 ) - - (599 )
Total $ (827 ) $ - $ (2,062 ) $ (2,889 )

VITAS Roto-Rooter Corporate
Chemed
Consolidated

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

~~-23-~~

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands)(unaudited)

Chemed
VITAS Roto-Rooter Corporate Consolidated
2015 (a)
Service revenues and sales $ 285,008 $ 101,218 $ - $ 386,226
Cost of services provided and goods sold 218,528 53,561 - 272,089
Selling, general and administrative expenses 22,367 27,523 5,898 55,788
Depreciation 4,631 3,300 144 8,075
Amortization 60 86 - 146
Total costs and expenses 245,586 84,470 6,042 336,098
Income/(loss) from operations 39,422 16,748 (6,042 ) 50,128
Interest expense (54 ) (80 ) (774 ) (908 )
Intercompany interest income/(expense) 1,979 858 (2,837 ) -
Other income/(expense)—net (11 ) (15 ) (2,329 ) (2,355 )
Income/(expense) before income taxes 41,336 17,511 (11,982 ) 46,865
Income taxes (15,613 ) (6,550 ) 4,131 (18,032 )
Net income/(loss) $ 25,723 $ 10,961 $ (7,851 ) $ 28,833

(a) The following amounts are included in net income (in thousands):

VITAS Roto-Rooter Corporate
Chemed
Consolidated

Pretax benefit/(cost):
Stock option expense $ - $ - $ (813 ) $ (813 )
Long-term incentive compensation - - (1,364 ) (1,364 )
Acquisition expenses - (30 ) - (30 )
Expenses related to OIG investigation (1,151 ) - - (1,151 )
Total $ (1,151 ) $ (30 ) $ (2,177 ) $ (3,358 )

VITAS Roto-Rooter Corporate
Chemed
Consolidated

After-tax benefit/(cost):
Stock option expense $ - $ - $ (509 ) $ (509 )
Long-term incentive compensation - - (863 ) (863 )
Acquisition expenses - (18 ) - (18 )
Expenses related to OIG investigation (711 ) - - (711 )
Total $ (711 ) $ (18 ) $ (1,372 ) $ (2,101 )

~~-24-~~

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

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

(a) The following amounts are included in net income (in thousands):

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

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

~~-25-~~

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands)(unaudited)

Chemed
VITAS Roto-Rooter Corporate Consolidated
2015 (a)
Service revenues and sales $ 831,081 $ 313,718 $ - $ 1,144,799
Cost of services provided and goods sold 646,801 164,836 - 811,637
Selling, general and administrative expenses 66,792 84,620 21,855 173,267
Depreciation 14,141 9,598 450 24,189
Amortization 180 227 - 407
Total costs and expenses 727,914 259,281 22,305 1,009,500
Income/(loss) from operations 103,167 54,437 (22,305 ) 135,299
Interest expense (164 ) (274 ) (2,408 ) (2,846 )
Intercompany interest income/(expense) 5,461 2,501 (7,962 ) -
Other income/(expense)—net (395 ) 19 (880 ) (1,256 )
Income/(expense) before income taxes 108,069 56,683 (33,555 ) 131,197
Income taxes (41,230 ) (21,561 ) 11,939 (50,852 )
Net income/(loss) $ 66,839 $ 35,122 $ (21,616 ) $ 80,345

(a) The following amounts are included in net income (in thousands):

Chemed
VITAS Roto-Rooter Corporate Consolidated
Pretax benefit/(cost):
Stock option expense $ - $ - $ (3,600 ) $ (3,600 )
Long-term incentive compensation - - (3,755 ) (3,755 )
Expenses related to litigation settlements - (5 ) - (5 )
Expenses related to securities litigation - - (37 ) (37 )
Acquisition expenses - (161 ) - (161 )
Expenses related to OIG investigation (3,837 ) - - (3,837 )
Total $ (3,837 ) $ (166 ) $ (7,392 ) $ (11,395 )

Chemed
VITAS Roto-Rooter Corporate Consolidated
After-tax benefit/(cost):
Stock option expense $ - $ - $ (2,268 ) $ (2,268 )
Long-term incentive compensation - - (2,375 ) (2,375 )
Expenses related to litigation settlements - (3 ) - (3 )
Expenses related to securities litigation - - (23 ) (23 )
Acquisition expenses - (98 ) - (98 )
Expenses related to OIG investigation (2,369 ) - - (2,369 )
Total $ (2,369 ) $ (101 ) $ (4,666 ) $ (7,136 )

~~-26-~~- 24 -

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

										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
2017 (a)
Service revenues and sales	$	284,710		$	130,349		$	-		$	415,059
Cost of services provided and goods sold		219,769			66,083			-			285,852
Selling, general and administrative expenses		24,531			33,763			10,360			68,654
Depreciation		4,741			4,070			22			8,833
Amortization		-			32			-			32
Other operating expenses		90,636			-			-			90,636
Total costs and expenses		339,677			103,948			10,382			454,007
Income/(loss) from operations		(54,967	)		26,401			(10,382	)		(38,948	)
Interest expense		(53	)		(87	)		(981	)		(1,121	)
Intercompany interest income/(expense)		2,826			1,346			(4,172	)		-
Other income/(expense)—net		71			(4	)		1,586			1,653
Income/(expense) before income taxes		(52,123	)		27,656			(13,949	)		(38,416	)
Income taxes		19,869			(10,598	)		7,489			16,760
Net income/(loss)	$	(32,254	)	$	17,058		$	(6,460	)	$	(21,656	)

(a) The following amounts are included in net income (in thousands):

Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

Chemed Corporation and Subsidiary Companies
(in thousands) Chemed
For the three months ended September 30, 2016 VITAS Roto-Rooter Corporate Consolidated

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

Chemed
For the three months ended September 30, 2015 VITAS Roto-Rooter Corporate Consolidated

Net income/(loss) $ 25,723 $ 10,961 $ (7,851 ) $ 28,833
Add/(deduct):
Interest expense 54 80 774 908
Income taxes 15,613 6,550 (4,131 ) 18,032
Depreciation 4,631 3,300 144 8,075
Amortization 60 86 - 146
EBITDA 46,081 20,977 (11,064 ) 55,994
Add/(deduct):
Intercompany interest expense/(income) (1,979 ) (858 ) 2,837 -
Interest income (68 ) (9 ) - (77 )
Amortization of stock awards 126 86 379 591
Expenses related to OIG investigation 1,151 - - 1,151
Advertising cost adjustment - (456 ) - (456 )
Acquisition Expenses - 30 - 30
Long-term incentive compensation - - 1,364 1,364
Stock option expense - - 813 813
Adjusted EBITDA $ 45,311 $ 19,770 $ (5,671 ) $ 59,410

										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
Pretax benefit/(cost):
Potential litigation settlement	$	(90,000	)	$	-		$	-		$	(90,000	)
Medicare cap sequestration adjustment		(105	)		-			-			(105	)
Stock option expense		-			-			(3,054	)		(3,054	)
Long-term incentive compensation		-			-			(956	)		(956	)
Expenses related to litigation setlements		-			(213	)		-			(213	)
Program closure expenses		(636	)		-			-			(636	)
Expenses related to OIG investigation		(2,093	)		-			-			(2,093	)
Total	$	(92,834	)	$	(213	)	$	(4,010	)	$	(97,057	)

										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
After-tax benefit/(cost):
Potential litigation settlement	$	(55,800	)	$	-		$	-		$	(55,800	)
Medicare cap sequestration adjustment		(65	)		-			-			(65	)
Stock option expense		-			-			(1,931	)		(1,931	)
Long-term incentive compensation		-			-			(604	)		(604	)
Expenses related to litigation setlements		-			(129	)		-			(129	)
Program closure expenses		(385	)		-			-			(385	)
Expenses related to OIG investigation		(1,292	)		-			-			(1,292	)
Excess tax benefits on stock compensation		-			-			2,643			2,643
Total	$	(57,542	)	$	(129	)	$	108		$	(57,563	)

~~-27-~~- 25 -

CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2016
(in thousands)(unaudited)

										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
2016 (a)
Service revenues and sales	$	278,739		$	111,670		$	-		$	390,409
Cost of services provided and goods sold		218,694			57,561			-			276,255
Selling, general and administrative expenses		22,638			29,448			10,542			62,628
Depreciation		4,814			3,628			139			8,581
Amortization		14			77			-			91
Other operating expenses		4,491			-			-			4,491
Total costs and expenses		250,651			90,714			10,681			352,046
Income/(loss) from operations		28,088			20,956			(10,681	)		38,363
Interest expense		(59	)		(92	)		(820	)		(971	)
Intercompany interest income/(expense)		1,927			866			(2,793	)		-
Other income/(expense)—net		38			(12	)		3,191			3,217
Income/(expense) before income taxes		29,994			21,718			(11,103	)		40,609
Income taxes		(11,444	)		(8,377	)		4,097			(15,724	)
Net income/(loss)	$	18,550		$	13,341		$	(7,006	)	$	24,885

(a) The following amounts are included in net income (in thousands):
										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
Pretax benefit/(cost):
Early retirement expenses	$	(4,491	)	$	-		$	-		$	(4,491	)
Stock option expense		-			-			(2,277	)		(2,277	)
Long-term incentive compensation		-			-			(499	)		(499	)
Expenses related to securities litigation		-			-			3			3
Expenses related to litigation settlements		-			(44	)		-			(44	)
Expenses related to OIG investigation		(1,170	)		-			-			(1,170	)
Total	$	(5,661	)	$	(44	)	$	(2,773	)	$	(8,478	)

										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
After-tax benefit/(cost):
Early retirement expenses	$	(2,840	)	$	-		$	-		$	(2,840	)
Stock option expense		-			-			(1,440	)		(1,440	)
Long-term incentive compensation		-			-			(316	)		(316	)
Expenses related to securities litigation		-			-			2			2
Expenses related to litigation settlements		-			(27	)		-			(27	)
Expenses related to OIG investigation		(722	)		-			-			(722	)
Total	$	(3,562	)	$	(27	)	$	(1,754	)	$	(5,343	)

Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

Chemed Corporation and Subsidiary Companies
(in thousands) Chemed
For the nine months ended September 30, 2016 VITAS Roto-Rooter Corporate Consolidated

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

Chemed
For the nine months ended September 30, 2015 VITAS Roto-Rooter Corporate Consolidated

Net income/(loss) $ 66,839 $ 35,122 $ (21,616 ) $ 80,345
Add/(deduct):
Interest expense 164 274 2,408 2,846
Income taxes 41,230 21,561 (11,939 ) 50,852
Depreciation 14,141 9,598 450 24,189
Amortization 180 227 - 407
EBITDA 122,554 66,782 (30,697 ) 158,639
Add/(deduct):
Intercompany interest expense/(income) (5,461 ) (2,501 ) 7,962 -
Interest income (179 ) (27 ) (1 ) (207 )
Expenses related to OIG investigation 3,837 - - 3,837
Acquisition expenses - 161 - 161
Advertising cost adjustment - (1,367 ) - (1,367 )
Stock award amortization 343 181 964 1,488
Expenses related to litigation settlements - 5 - 5
Long-term incentive compensation - - 3,755 3,755
Stock option expense - - 3,600 3,600
Expenses related to securities litigation - - 37 37
Adjusted EBITDA $ 121,094 $ 63,234 $ (14,380 ) $ 169,948

- 26 -

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



										Chemed
	VITAS			Roto-Rooter			Corporate			Consolidated
2017 (a)
Service revenues and sales	$	567,026		$	253,897		$	-		$	820,923
Cost of services provided and goods sold		441,446			129,546			-			570,992
Selling, general and administrative expenses		48,825			67,223			22,064			138,112
Depreciation		9,519			8,054			153			17,726
Amortization		14			64			-			78
Other operating expenses		91,509			-			-			91,509
Total costs and expenses		591,313			204,887			22,217			818,417
Income/(loss) from operations		(24,287	)		49,010			(22,217	)		2,506
Interest expense		(108	)		(185	)		(1,823	)		(2,116	)
Intercompany interest income/(expense)		5,528			2,656			(8,184	)		-
Other income/(expense)—net		(9	)		(77	)		4,202			4,116
Income/(expense) before income taxes		(18,876	)		51,404			(28,022	)		4,506
Income taxes		7,219			(19,722	)		16,185			3,682
Net income/(loss)	$	(11,657	)	$	31,682		$	(11,837	)	$	8,188


(a) The following amounts are included in net income (in thousands):


											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated
Pretax benefit/(cost):
Potential litigation settlement	$	(90,000	)	$	-		$	-		$	(90,000	)
Medicare cap sequestration adjustments		(105	)		-			-			(105	)
Stock option expense		-			-			(6,055	)		(6,055	)
Long-term incentive compensation		-			-			(1,917	)		(1,917	)
Expenses related to litigation settlements		-			(213	)		-			(213	)
Program closure expenses		(1,509	)		-			-			(1,509	)
Expenses related to OIG investigation		(4,243	)		-			-			(4,243	)
Total	$	(95,857	)	$	(213	)	$	(7,972	)	$	(104,042	)



After-tax benefit/(cost):											Chemed
		VITAS			Roto-Rooter			Corporate			Consolidated

Potential litigation settlement	$	(55,800	)	$	-		$	-		$	(55,800	)
Medicare cap sequestration adjustments		(65	)		-			-			(65	)
Stock option expense		-			-			(3,828	)		(3,828	)
Long-term incentive compensation		-			-			(1,212	)		(1,212	)
Expenses related to litigation settlements		-			(129	)		-			(129	)
Program closure expenses		(898	)		-			-			(898	)
Expenses related to OIG investigation		(2,620	)		-			-			(2,620	)
Excess tax benefits on stock compensation		-			-			6,338			6,338
Total	$	(59,383	)	$	(129	)	$	1,298		$	(58,214	)

~~-28-~~- 27 -



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



											Chemed
		VITAS			Roto-Rooter			Corporate				Consolidated
2016 (a)
Service revenues and sales	$	556,266		$	224,532		$	-			$	780,798
Cost of services provided and goods sold		437,960			116,730			-				554,690
Selling, general and administrative expenses		47,422			59,255			14,996				121,673
Depreciation		9,595			7,129			281				17,005
Amortization		27			156			-				183
Other operating expenses		4,491			-			-				4,491
Total costs and expenses		499,495			183,270			15,277				698,042
Income/(loss) from operations		56,771			41,262			(15,277	)			82,756
Interest expense		(117	)		(186	)		(1,510	)			(1,813	)
Intercompany interest income/(expense)		4,030			1,813			(5,843	)			-
Other income/(expense)—net		78			12			203				293
Income/(expense) before income taxes		60,762			42,901			(22,427	)			81,236
Income taxes		(23,125	)		(16,542	)		8,156				(31,511	)
Net income/(loss)	$	37,637		$	26,359		$	(14,271	)		$	49,725


(a) The following amounts are included in net income (in thousands):

										Chemed
		VITAS			Roto-Rooter			Corporate				Consolidated
Pretax benefit/(cost):
Stock option expense	$	-		$	-		$	(4,840	)		$	(4,840	)
Long-term incentive compensation		-			-			(258	)			(258	)
Early retirement expenses		(4,491	)		-			-				(4,491	)
Expenses related to litigation settlements		-			(44	)		-				(44	)
Expenses related to OIG investigation		(3,506	)		-			-				(3,506	)
Total	$	(7,997	)	$	(44	)	$	(5,098	)		$	(13,139	)


										Chemed
		VITAS			Roto-Rooter			Corporate				Consolidated
After-tax benefit/(cost):
Stock option expense	$	-		$	-		$	(3,061	)		$	(3,061	)
Long-term incentive compensation		-			-			(164	)			(164	)
Early retirement expenses		(2,840	)		-			-				(2,840	)
Expenses related to litigation settlements		-			(27	)		-				(27	)
Expenses related to OIG investigation		(2,165	)		-			-				(2,165	)
Total	$	(5,005	)	$	(27	)	$	(3,225	)		$	(8,257	)

- 28 -


Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

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

Net income/(loss)	$	(32,254	)	$	17,058		$	(6,460	)	$	(21,656	)
Add/(deduct):
Interest expense		53			87			981			1,121
Income taxes		(19,869	)		10,598			(7,489	)		(16,760	)
Depreciation		4,741			4,070			22			8,833
Amortization		-			32			-			32
EBITDA		(47,329	)		31,845			(12,946	)		(28,430	)
Add/(deduct):
Intercompany interest expense/(income)		(2,826	)		(1,346	)		4,172			-
Interest income		(149	)		(12	)		-			(161	)
Potential litigation settlement		90,000			-			-			90,000
Expenses related to OIG investigation		2,093			-			-			2,093
Program closure expenses		636			-			-			636
Medicare cap sequestration adjustment		105			-			-			105
Amortization of stock awards		71			66			166			303
Advertising cost adjustment		-			(272	)		-			(272	)
Expenses related to litigation settlements		-			213			-			213
Stock option expense		-			-			3,054			3,054
Long-term incentive compensation		-			-			956			956
Adjusted EBITDA	$	42,601		$	30,494		$	(4,598	)	$	68,497


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

Net income/(loss)	$	18,550		$	13,341		$	(7,006	)	$	24,885
Add/(deduct):
Interest expense		59			92			820			971
Income taxes		11,444			8,377			(4,097	)		15,724
Depreciation		4,814			3,628			139			8,581
Amortization		14			77			-			91
EBITDA		34,881			25,515			(10,144	)		50,252
Add/(deduct):
Intercompany interest expense/(income)		(1,927	)		(866	)		2,793			-
Interest income		(69	)		(16	)		-			(85	)
Expenses related to OIG investigation		1,170			-			-			1,170
Amortization of stock awards		85			74			276			435
Early retirement expenses		4,491			-			-			4,491
Expenses related to litigation settlements		-			44			-			44
Expenses related to securities litigation		-			-			(3	)		(3	)
Advertising cost adjustment		-			(557	)		-			(557	)
Stock option expense		-			-			2,277			2,277
Long-term incentive compensation		-			-			499			499
Adjusted EBITDA	$	38,631		$	24,194		$	(4,302	)	$	58,523

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

Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Net income as reported $ 26,829 $ 28,833 $ 76,554 $ 80,345

Add/(deduct) after-tax cost of:
Stock option expense 897 509 3,958 2,268
Long-term incentive compensation 406 863 570 2,375
Expenses of OIG investigation 370 711 2,535 2,369
Medicare cap sequestration adjustment 141 - 141 -
Early retirement expenses - - 2,840 -
Expenses related to litigation settlements - - 27 3
Expenses related to securities settlements - - - 23
Acquisition expenses - 18 - 98
Adjusted net income $ 28,643 $ 30,934 $ 86,625 $ 87,481

Diluted Earnings Per Share As Reported
Net income $ 1.62 $ 1.65 $ 4.54 $ 4.61
Average number of shares outstanding 16,559 17,422 16,851 17,430

Adjusted Diluted Earnings Per Share
Adjusted net income $ 1.73 $ 1.78 $ 5.14 $ 5.02
Adjusted average number of shares outstanding 16,559 17,422 16,851 17,430

~~-29-~~- 29 -


Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

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

Net income/(loss)		$	(11,657	)		$	31,682			$	(11,837	)		$	8,188
Add/(deduct):
Interest expense			108				185				1,823				2,116
Income taxes			(7,219	)			19,722				(16,185	)			(3,682	)
Depreciation			9,519				8,054				153				17,726
Amortization			14				64				-				78
EBITDA			(9,235	)			59,707				(26,046	)			24,426
Add/(deduct):
Intercompany interest expense/(income)			(5,528	)			(2,656	)			8,184				-
Interest income			(219	)			(26	)			-				(245	)
Potential litigation settlements			90,000				-				-				90,000
Medicare cap sequestration adjustment			105				-				-				105
Program closure expenses			1,509				-				-				1,509
Expenses related to OIG investigation			4,243				-				-				4,243
Stock award amortization			148				136				354				638
Advertising cost adjustment			-				(545	)			-				(545	)
Expenses related to litigation settlements			-				213				-				213
Stock option expense			-				-				6,055				6,055
Long-term incentive compensation			-				-				1,917				1,917
Adjusted EBITDA		$	81,023			$	56,829			$	(9,536	)		$	128,316

													Chemed
For the six months ended June 30, 2016	VITAS				Roto-Rooter				Corporate				Consolidated

Net income/(loss)		$	37,637			$	26,359			$	(14,271	)		$	49,725
Add/(deduct):
Interest expense			117				186				1,510				1,813
Income taxes			23,125				16,542				(8,156	)			31,511
Depreciation			9,595				7,129				281				17,005
Amortization			27				156				-				183
EBITDA			70,501				50,372				(20,636	)			100,237
Add/(deduct):
Intercompany interest expense/(income)			(4,030	)			(1,813	)			5,843				-
Interest income			(148	)			(34	)			-				(182	)
Expenses related to OIG investigation			3,506				-				-				3,506
Early retirement expenses			4,491				-				-				4,491
Advertising cost adjustment			-				(1,165	)			-				(1,165	)
Stock award amortization			216				155				603				974
Expenses related to litigation settlements			-				44				-				44
Long-term incentive compensation			-				-				258				258
Stock option expense			-				-				4,840				4,840
Adjusted EBITDA		$	74,536			$	47,559			$	(9,092	)		$	113,003

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
OPERATING STATISTICS 2016 2015 2016 2015
Net revenue ($000)
Homecare $ 225,348 $ 222,952 $ 659,477 $ 640,867
Inpatient 23,850 24,271 73,856 76,485
Continuous care 33,895 37,785 106,026 113,564
Total before Medicare cap allowance $ 283,093 $ 285,008 $ 839,359 $ 830,916
Medicare cap allowance (228 ) - (228 ) 165
Total $ 282,865 $ 285,008 $ 839,131 $ 831,081
Net revenue as a percent of total before Medicare cap allowances
Homecare 79.6 % 78.2 % 78.6 % 77.1 %
Inpatient 8.4 8.5 8.8 9.2
Continuous care 12.0 13.3 12.6 13.7
Total before Medicare cap allowance 100.0 100.0 100.0 100.0
Medicare cap allowance (0.1 ) - - -
Total 99.9 % 100.0 % 100.0 % 100.0 %
Average daily census (days)
Homecare 12,223 11,607 11,972 11,259
Nursing home 3,077 3,150 3,028 3,026
Routine homecare 15,300 14,757 15,000 14,285
Inpatient 394 404 406 424
Continuous care 507 561 530 571
Total 16,201 15,722 15,936 15,280
Total Admissions 16,157 16,131 49,205 50,082
Total Discharges 15,690 15,949 48,403 48,979
Average length of stay (days) 87.7 78.6 85.2 78.9
Median length of stay (days) 16.0 16.0 16.0 15.0
ADC by major diagnosis
Cerebro 32.9 % 28.8 % 32.2 % 28.6 %
Neurological 20.7 22.9 21.3 23.3
Cancer 15.5 16.6 15.3 16.7
Cardio 17.1 17.4 17.3 17.5
Respiratory 7.8 7.9 7.8 7.9
Other 6.0 6.4 6.1 6.0
Total 100.0 % 100.0 % 100.0 % 100.0 %
Admissions by major diagnosis
Cerebro 21.2 18.7 % 20.9 % 18.8 %
Neurological 11.0 12.5 11.0 12.3
Cancer 33.3 33.3 31.9 32.1
Cardio 14.4 14.5 15.3 15.3
Respiratory 9.0 9.2 10.1 10.0
Other 11.1 11.8 10.8 11.5
Total 100.0 % 100.0 % 100.0 % 100.0 %
Direct patient care margins
Routine homecare 51.4 % 53.7 % 51.8 % 52.9 %
Inpatient (2.4 ) 3.8 2.7 6.1
Continuous care 12.2 15.7 13.7 16.1
Homecare margin drivers (dollars per patient day)
Labor costs $ 56.53 $ 54.92 $ 56.51 $ 56.14
Combined drug, HME and medical supplies 16.30 16.12 15.90 16.18
Inpatient margin drivers (dollars per patient day)
Labor costs $ 360.35 $ 355.30 $ 346.61 $ 347.52
Continuous care margin drivers (dollars per patient day)
Labor costs $ 618.15 $ 596.39 $ 609.08 $ 591.26
Bad debt expense as a percent of revenues 1.2 % 1.0 % 1.2 % 1.0 %
Accounts receivable -- Days of revenue outstanding- excluding unapplied
Medicare payments 38.4 38.1 n.a. n.a.
Accounts receivable -- Days of revenue outstanding- including unapplied
Medicare payments 20.7 32.3 n.a. n.a.

~~-30-~~- 30 -

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net income/(loss) as reported	$	(21,656	)	$	24,885		$	8,188		$	49,725

Add/(deduct) after-tax cost of:
Potential litigation settlement		55,800			-			55,800			-
Excess tax benefits on stock compensation		(2,643	)		-			(6,338	)		-
Stock option expense		1,931			1,440			3,828			3,061
Expenses of OIG investigation		1,292			722			2,620			2,165
Long-term incentive compensation		604			316			1,212			164
Program closure expenses		385			-			898			-
Expenses related to litigation settlements		129			27			129			27
Medicare cap sequestration adjustment		65			-			65			-
Early retirement expenses		-			2,840			-			2,840
Expenses related to securities settlements		-			(2	)		-			-
Adjusted net income	$	35,907		$	30,228		$	66,402		$	57,982

Diluted Earnings Per Share As Reported
Net income/(loss)	$	(1.35	)	$	1.48		$	0.49		$	2.93
Average number of shares outstanding		16,010			16,831			16,758			16,999

Adjusted Diluted Earnings Per Share
Adjusted net income	$	2.15		$	1.80		$	3.96		$	3.41
Adjusted average number of shares outstanding		16,702			16,831			16,758			16,999

- 31 -


CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
OPERATING STATISTICS	2017			2016			2017			2016
Net revenue ($000)
Homecare	$	231,258		$	219,280		$	456,794		$	434,129
Inpatient		22,000			24,489			45,923			50,006
Continuous care		31,699			34,970			64,556			72,131
Total before Medicare cap allowance	$	284,957		$	278,739		$	567,273		$	556,266
Medicare cap allowance		(247	)		-			(247	)		-
Total	$	284,710		$	278,739		$	567,026		$	556,266
Net revenue as a percent of total before Medicare cap allowances
Homecare		81.2	%		78.7	%		80.5	%		78.0	%
Inpatient		7.7			8.8			8.1			9.0
Continuous care		11.1			12.5			11.4			13.0
Total before Medicare cap allowance		100.0			100.0			100.0			100.0
Medicare cap allowance		(0.1	)		-			-			-
Total		99.9	%		100.0	%		100.0	%		100.0	%
Average daily census (days)
Homecare		12,446			12,007			12,368			11,844
Nursing home		3,135			3,015			3,093			3,003
Routine homecare		15,581			15,022			15,461			14,847
Inpatient		343			405			360			412
Continuous care		474			525			489			543
Total		16,398			15,952			16,310			15,802
Total Admissions		16,311			16,180			33,874			33,048
Total Discharges		16,124			15,960			33,344			32,707
Average length of stay (days)		85.2			84.2			87.1			83.9
Median length of stay (days)		16.0			16.0			16.0			16.0
ADC by major diagnosis
Cerebro		34.8	%		31.9	%		34.7	%		31.7	%
Neurological		19.5			21.3			19.6			21.7
Cardio		16.5			17.6			16.5			17.4
Cancer		14.9			15.2			15.0			15.3
Respiratory		7.9			7.8			7.9			7.8
Other		6.4			6.2			6.3			6.1
Total		100.0	%		100.0	%		100.0	%		100.0	%
Admissions by major diagnosis
Cerebro		21.4			20.5	%		21.7	%		20.7	%
Neurological		10.7			10.8			10.8			11.0
Cancer		31.5			31.6			30.4			31.1
Cardio		15.1			15.7			15.1			15.7
Respiratory		10.2			10.2			11.0			10.6
Other		11.1			11.2			11.0			10.9
Total		100.0	%		100.0	%		100.0	%		100.0	%
Direct patient care margins
Routine homecare		52.8	%		51.9	%		52.1	%		52.0	%
Inpatient		3.7			4.6			4.8			5.1
Continuous care		18.0			13.8			16.8			14.5
Homecare margin drivers (dollars per patient day)
Labor costs	$	56.55		$	56.29		$	57.58		$	56.50
Combined drug, HME and medical supplies		14.51			15.92			14.82			15.69
Inpatient margin drivers (dollars per patient day)
Labor costs	$	377.13		$	341.29		$	373.41		$	339.98
Continuous care margin drivers (dollars per patient day)
Labor costs	$	583.87		$	610.58		$	587.39		$	604.80
Bad debt expense as a percent of revenues		1.1	%		1.2	%		1.1	%		1.3	%
Accounts receivable -- Days of revenue outstanding- excluding unapplied Medicare payments		34.5			37.7		n.a.			n.a.
Accounts receivable -- Days of revenue outstanding- including unapplied Medicare payments		28.0			26.6		n.a.			n.a.

- 32 -

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”~~"forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words ~~“believe”~~"believe", ~~“expect”~~"expect", ~~“hope”~~"hope", ~~“anticipate”~~"anticipate", ~~“plan”~~"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~~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~~Company's primary market risk exposure relates to interest rate risk exposure through its variable interest line of credit. At ~~September~~June 30, ~~2016,~~2017, the Company had ~~$110.6~~$125.0 million of variable rate debt outstanding. For each $10 million dollars borrowed under the credit facility, an increase or decrease of 100 basis points (1% point), increases or decreases the ~~Company’s~~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~~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 material changes from the risk factors previously disclosed in the ~~Company’s~~Company's most recent Annual Report on Form 10-K.

~~-31-~~- 33 -

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

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

The following table shows the activity related to our share repurchase program for the first ~~nine~~six months of ~~2016:~~2017:

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, 2016 - $ - 6,535,584 $ 52,485,644
February 1 through February 29, 2016 153,997 129.22 6,689,581 32,585,505
March 1 through March 31, 2016 246,003 132.35 6,935,584 $ 100,025,990

First Quarter Total 400,000 $ 131.15

April 1 through April 30, 2016 - $ - 6,935,584 $ 100,025,990
May 31 through May 31, 2016 93,607 127.15 7,029,191 88,123,961
June 1 through June 30, 2016 286,527 132.45 7,315,718 $ 50,173,009

Second Quarter Total 380,134 $ 131.15

July 1 through July 31, 2016 - $ - 7,315,718 $ 50,173,009
August 1 through August 31, 2016 - - 7,315,718 50,173,009
September 1 through September 30, 2016 - - 7,315,718 $ 50,173,009

Third Quarter Total - $ -

On March 14, 2016 our Board of Directors authorized an additional $100 million under the February 2011 Repurchase Program.



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

February 2011 Program
January 1 through January 31, 2017		-	$	-		7,315,718	$	50,173,009
February 1 through February 28, 2017		104,358		178.39		7,420,076		31,556,555
March 1 through March 31, 2017		195,642		182.20		7,615,718	$	95,910,768

First Quarter Total		300,000	$	180.87

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

Second Quarter Total		150,000	$	205.34

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

Item 3. Defaults Upon Senior Securities

~~None~~None.

Item 4. Mine Safety Disclosures

~~None~~None.

Item 5. Other Information

None.

~~-32-~~- 34 -

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.

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

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

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

32.3		Certification by ~~Arthur V. Tucker, Jr.~~Michael D. Witzeman pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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:	~~November 1, 2016~~July 31, 2017	By:	/s/ Kevin J. McNamara
			Kevin J. McNamara
			(President and Chief Executive Officer)


Dated:	~~November 1, 2016~~July 31, 2017	By:	/s/ David P. Williams
			David P. Williams
			(Executive Vice President and Chief Financial Officer)


Dated:	~~November 1, 2016~~July 31, 2017	By:	/s/ ~~Arthur V. Tucker, Jr.~~Michael D. Witzeman
			~~Arthur V. Tucker, Jr.~~Michael D. Witzeman
			(Vice President and Controller)

- 35 -

~~-33-~~

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Service revenues and sales	$	392,607		$	386,226		$	1,173,405		$	1,144,799
Cost of services provided and goods sold (excluding depreciation)		281,658			272,089			836,348			811,637
Selling, general and administrative expenses		59,373			55,788			181,046			173,267
Depreciation		8,614			8,075			25,619			24,189
Amortization		91			146			274			407
Other operating expenses		-			-			4,491			-
Total costs and expenses		349,736			336,098			1,047,778			1,009,500
Income from operations		42,871			50,128			125,627			135,299
Interest expense		(1,018	)		(908	)		(2,831	)		(2,846	)
Other income/(expense) - net		1,640			(2,355	)		1,933			(1,256	)
Income before income taxes		43,493			46,865			124,729			131,197
Income taxes		(16,664	)		(18,032	)		(48,175	)		(50,852	)
Net income	$	26,829		$	28,833		$	76,554		$	80,345

Earnings Per Share
Net income	$	1.66		$	1.71		$	4.66		$	4.76
Average number of shares outstanding		16,166			16,865			16,443			16,887

Diluted Earnings Per Share
Net income	$	1.62		$	1.65		$	4.54		$	4.61
Average number of shares outstanding		16,559			17,422			16,851			17,430

Cash Dividends Per Share	$	0.26		$	0.24		$	0.74		$	0.68

See accompanying notes to unaudited consolidated financial statements.


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

	Nine Months Ended September 30,
	2016			2015
Cash Flows from Operating Activities
Net income	$	76,554		$	80,345
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		25,893			24,596
Provision for uncollectible accounts receivable		12,132			11,100
Stock option expense		6,259			3,600
Benefit for deferred income taxes		(5,530	)		(2,694	)
Noncash early retirement expense		1,747			-
Amortization of restricted stock awards		1,415			1,488
Noncash long-term incentive compensation		837			3,755
Noncash directors' compensation		541			540
Amortization of debt issuance costs		390			392
Changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable		8,061			(10,110	)
Decrease/(increase) in inventories		213			(373	)
Decrease/(increase) in prepaid expenses		(1,646	)		68
Increase/(decrease) in accounts payable and other current liabilities		(5,471	)		5,416
Increase in income taxes		8,587			3,049
Increase in other assets		(5,694	)		(605	)
Increase in other liabilities		6,835			524
Excess tax benefit on share-based compensation		(2,974	)		(8,474	)
Other sources		204			467
Net cash provided by operating activities		128,353			113,084
Cash Flows from Investing Activities
Capital expenditures		(29,708	)		(30,194	)
Business combinations, net of cash acquired		-			(6,614	)
Other sources/(uses)		(114	)		396
Net cash used by investing activities		(29,822	)		(36,412	)
Cash Flows from Financing Activities
Proceeds from revolving line of credit		110,200			103,200
Purchases of treasury stock		(102,313	)		(36,682	)
Payments on revolving line of credit		(85,200	)		(108,200	)
Dividends paid		(12,215	)		(11,542	)
Capital stock surrendered to pay taxes on stock-based compensation		(7,051	)		(11,226	)
Payments on other long-term debt		(5,625	)		(4,375	)
Proceeds from exercise of stock options		4,625			11,193
Excess tax benefit on share-based compensation		2,974			8,474
Increase/(decrease) in cash overdrafts payable		2,092			(1,745	)
Other sources/(uses)		540			(1,451	)
Net cash used by financing activities		(91,973	)		(52,354	)
Increase in Cash and Cash Equivalents		6,558			24,318
Cash and cash equivalents at beginning of year		14,727			14,132
Cash and cash equivalents at end of period	$	21,285		$	38,450

See accompanying notes to unaudited consolidated financial statements.

Revolver	$	25,000
Term loan		85,625
Total		110,625
Current portion of long-term debt		(8,125	)
Long-term debt	$	102,500

			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	$	55,158	$	55,158	$	-	$	-
Long-term debt		110,625		-		110,625		-

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

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


(a) The following amounts are included in net income (in thousands):