# Chemed Corp: Form 10-Q for the period ended Mar 31, 2022

- Company: [Chemed Corp](/companies/che.md) (CIK 19584)
- Form: 10-Q
- Filed: 2022-04-29
- Accepted by EDGAR: Apr 29, 2022, 10:13 ET
- Period: 2022-03-31
- Accession: 0001562762-22-000197
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/19584/000156276222000197/che-20220331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/19584/000156276222000197/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $299.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-01-01 to 2022-03-31 | $336.6m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2022-01-01 to 2022-03-31 | $90.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | $89.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $810.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $20.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | $64.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | $4.22 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | $4.28 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 15,192,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | $101.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $12.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2022-01-01 to 2022-03-31 | $5.3m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2022-01-01 to 2022-03-31 | $27.8m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-03-31 | $18.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $184.8m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $1.31bn | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $279.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-03-31 | $639.1m | us-gaap:Liabilities |
| Long-term debt | at 2022-03-31 | $120.0m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2022-03-31 | $666.7m | us-gaap:StockholdersEquity |
| Shares outstanding | at 2022-03-31 | 14,967,917 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 33,656 characters.

### 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 March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Service revenues and sales | **$530,549** | $527,360 |
| Net income | **$64,169** | $65,400 |
| Diluted EPS | **$4.22** | $4.01 |
| Adjusted net income | **$72,780** | $72,370 |
| Adjusted diluted EPS | **$4.79** | $4.44 |
| Adjusted EBITDA | **$110,208** | $108,519 |
| Adjusted EBITDA as a % of revenue | **20.8%** | 20.6% |

Adjusted net income, adjusted diluted EPS, earnings before interest, taxes and depreciation and amortization (“EBITDA”), Adjusted EBITDA and Adjusted EBITDA as a percent of revenue are not measures derived in accordance with US GAAP. We provide non-GAAP measures to help readers evaluate our operating results and to compare our operating performance with that of similar companies that have different capital structures. Our non-GAAP measures should not be considered in isolation or as a substitute for comparable measures presented in accordance with GAAP. A reconciliation of our non-GAAP measures is presented on pages 27-28.

For the three months ended March 31, 2022, the increase in consolidated service revenues and sales was driven by a 9.4% increase at Roto-Rooter offset by a 5.3% 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 is comprised primarily of a 4.1% decrease in days-of-care offset by a geographically weighted average Medicare reimbursement rate increase (including the suspension of sequestration on May 1, 2020) of approximately 1.3%. Acuity mix shift had a net impact of reducing revenue approximately $7.1 million, or 2.2% in the quarter when compared to the prior year revenue and level-of-care mix. The combination of an increase in Medicare cap and other contra revenue changes negatively impacted revenue growth by approximately 30 basis points. See page 29 for additional VITAS operating metrics.

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

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

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

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

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

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

VITAS anticipates that senior housing will continue to have weak occupancy rates at least through the first half of 2022. Accordingly, VITAS anticipates senior housing hospice referrals will not have meaningful growth until the second half of 2022. Labor cost increases and related margin pressure are anticipated to continue through all of 2022 with some moderation starting with the next reimbursement increase on October 1, 2022.

Based upon the above discussion, VITAS 2022 revenue, prior to Medicare Cap, is estimated to decline 1.5% to 2.5% when compared to 2021. A portion of the estimated revenue reduction, approximately $15 million, is the result of the phase out of sequestration relief over the first half of 2022 compared to a full year of sequestration relief in 2021. ADC is estimated to decline 1.0% to 1.5%. Full year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 15.5% to 16.0%. We are currently estimating $12 million for Medicare Cap billing limitations in calendar year 2022.

Roto-Rooter is forecasted to achieve full-year 2022 revenue growth of 8.0% to 9.5%. Roto-Rooter’s adjusted EBITDA margin for 2022 is expected to be 28.5% to 29.5%.

Based upon the above, full-year 2022 earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, costs related to litigation and other discrete items, is estimated to be in the range of $19.10 to $19.50. This 2022 guidance assumes an effective corporate tax rate on adjusted earnings of 25.1% and a diluted share count of 15.25 million shares. Chemed’s 2021 reported adjusted earnings per diluted share was $19.33.

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

### Financial Condition

### Liquidity and Capital Resources

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

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

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

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

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

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

A $65.0 million decrease in long-term debt due to repayments.

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

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

Net cash provided by operating activities decreased $5.6 million from March 31, 2021 to March 31, 2022. The main drivers of the decrease are a decrease in net income of $1.2 million, coupled with changes in current assets and liabilities. Significant changes in our accounts receivable balances are typically driven by the timing of payments received from the Federal government at our VITAS subsidiary. We typically receive a payment in excess of $40.0 million from the Federal government for hospice services every other Friday. The timing of a period end will have a significant impact on the accounts receivable at VITAS. These changes generally normalize over a two year period, as cash flow variations in one year are offset in the following year.

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

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

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

### Commitments and Contingencies

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

We are subject to various lawsuits and claims in the normal course of our business. In addition, we periodically receive communications from governmental and regulatory agencies concerning compliance with Medicare and Medicaid billing requirements at our VITAS subsidiary. We establish reserves for specific, uninsured liabilities in connection with regulatory and legal action that we deem to be probable and estimable. We disclose the existence of regulatory and legal actions when we believe it is reasonably possible that a loss could occur in connection with the specific action. In most instances, we are unable to make a reasonable estimate of any reasonably possible liability due to the uncertainty of the outcome and stage of litigation. We record legal fees associated with legal and regulatory actions as the costs are incurred.

See Note 10 in the Notes to the Unaudited Consolidated Financial Statements in Item 1 above for a description of current material legal matters.

### Results of Operations

### Three months ended March 31, 2022 versus 2021 - Consolidated Results

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

| VITAS | Three months ended March 31, 2022 | 2021 | Increase/(Decrease) Percent |
| --- | ---: | ---: | ---: |
| Routine homecare | **$257,636** | $263,754 | (2.3) |
| Continuous care | **19,578** | 27,349 | (28.4) |
| General inpatient | **26,570** | 29,156 | (8.9) |
| Other | **3,007** | 2,938 | 2.3 |
| Medicare cap adjustment | **(2,500)** | (1,500) | 66.7 |
| Room and board - net | **(2,117)** | (2,665) | (20.6) |
| Implicit price concessions | **(2,985)** | (3,244) | (8.0) |
| Roto-Rooter |  |  |  |
| Drain cleaning - short term core | **66,687** | 61,756 | 8.0 |
| Plumbing - short term core | **47,672** | 41,313 | 15.4 |
| Subtotal | **114,359** | 103,069 | 11.0 |
| Excavation - short term core | **55,188** | 51,993 | 6.1 |
| Water restoration | **40,360** | 37,435 | 7.8 |
| Independent Contractors | **21,418** | 18,760 | 14.2 |
| Outside franchisee fees | **1,317** | 1,327 | (0.8) |
| Other - short term core | **165** | 288 | (42.7) |
| Other | **4,191** | 3,945 | 6.2 |
| Implicit price concessions | **(5,638)** | (5,245) | 7.5 |
| Total | **$530,549** | $527,360 | 0.6 |

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

|  | Days of Care 2022 | 2021 | Increase/(Decrease) Percent |
| --- | ---: | ---: | ---: |
| Routine homecare | **1,258,672** | 1,329,892 | (5.4) |
| Nursing home | **248,468** | 232,783 | 6.7 |
| Respite | **5,368** | 4,840 | 10.9 |
| Subtotal routine homecare and respite | **1,512,508** | 1,567,515 | (3.5) |
| Continuous care | **24,587** | 27,674 | (11.2) |
| General inpatient | **21,082** | 29,300 | (28.0) |
| Total days of care | **1,558,177** | 1,624,489 | (4.1) |

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

The increase in plumbing revenues for the first quarter of 2022 versus 2021 is attributable to a 1.8% increase in job count and to a 13.6% increase in price and service mix shift. Drain cleaning revenues for the first quarter of 2022 versus 2021 reflect an 11.9% increase in price and service mix shift offset by a 3.9% decrease in job count. Excavation and water restoration jobs are generally sold as a result of initial calls from customers regarding drain cleaning issues. As a result, the 6.1% increase in excavation revenue and the 7.8% increase in water restoration revenue are mainly a function of the numbers and size of drain cleaning issues we encounter on a quarterly basis. Independent Contractor revenue increased 14.2% due mainly to increased expansion into water restoration.

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

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

|  | Three months ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts | **$92,578** | $86,668 |
| Impact of market value adjustments related to assets held in deferred compensation trusts | **(3,934)** | 3,038 |
| Long-term incentive compensation | **1,310** | 1,893 |
| Total SG&A expenses | **$89,954** | $91,599 |

SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts for the first quarter of 2022 were up 6.8% when compared to the first quarter of 2021. This increase was mainly a result of the increase in variable selling and general administrative expenses and due to normal salary increases.

Amortization for the first quarter of 2022 was flat when compared to the first quarter of 2021. Quarterly amortization of intangible assets is mainly driven by two Roto-Rooter franchise acquisitions completed in 2019. The total purchase price of these acquisitions was $138.0 million. As part of the purchase price allocation, approximately $59.2 million was determined to be the value of reacquired franchise rights which are being amortized over the remaining life of each franchise agreement. The average remaining life on the reacquired franchise agreements was approximately seven years. Quarterly amortization of reacquired franchise rights for these two acquisitions is approximately $2.0 million ($8.1 million annualized through 2026). This contrasts to quarterly franchise fees historically collected from these two franchisees of approximately $470,000 ($1.9 million annualized).

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

|  | Three months ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Market value adjustment on assets held in deferred compensation trusts | **$(3,934)** | $3,038 |
| Interest income | **73** | 92 |
| Other | **(1)** | 472 |
| Total (expense)/other income - net | **$(3,862)** | $3,602 |

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

|  | Three months ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Income tax provision calculated at the statutory federal rate | **$17,787** | $17,569 |
| Stock compensation tax benefits | **(1,441)** | (3,238) |
| State and local income taxes | **3,299** | 2,956 |
| Other--net | **888** | 975 |
| Income tax provision | **$20,533** | $18,262 |
| Effective tax rate | 24.2% | 21.8% |

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

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

- 23-

### Three months ended March 31, 2022 versus 2021 - Segment Results

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

|  | Three months ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| VITAS | **36,481** | $40,770 |
| Roto-Rooter | **43,937** | 37,177 |
| Corporate | **(16,249)** | (12,547) |
|  | **$64,169** | $65,400 |

VITAS’ after-tax earnings decreased primarily due to lower revenue in the first quarter of 2022 when compared to the first quarter of 2021. After-tax earnings as a percent of revenue at VITAS in the first quarter of 2022 was 12.2% as compared to 12.9% in the first quarter of 2021.

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

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

*CHEMED CORPORATION AND SUBSIDIARY COMPANIES*

*CONSOLIDATING STATEMENTS OF INCOME*

*FOR THE THREE MONTHS ENDED MARCH 31, 2022*

*(in thousands)(unaudited)*

| 2022 (a) | VITAS | Roto-Rooter | Corporate | Chemed Consolidated |
| --- | ---: | ---: | ---: | ---: |
| **Service revenues and sales** | **$299,189** | **$231,360** | **$-** | **$530,549** |
| **Cost of services provided and goods sold** | **227,240** | **109,312** | **-** | **336,552** |
| **Selling, general and administrative expenses** | **22,453** | **56,954** | **10,547** | **89,954** |
| **Depreciation** | **5,551** | **6,569** | **18** | **12,138** |
| **Amortization** | **24** | **2,494** | **-** | **2,518** |
| **Other operating expense/(income)** | **(148)** | **161** | **-** | **13** |
| **Total costs and expenses** | **255,120** | **175,490** | **10,565** | **441,175** |
| **Income/(loss) from operations** | **44,069** | **55,870** | **(10,565)** | **89,374** |
| **Interest expense** | **(52)** | **(115)** | **(643)** | **(810)** |
| **Intercompany interest income/(expense)** | **4,656** | **2,176** | **(6,832)** | **-** |
| **Other income—net** | **37** | **35** | **(3,934)** | **(3,862)** |
| **Income/(expense) before income taxes** | **48,710** | **57,966** | **(21,974)** | **84,702** |
| **Income taxes** | **(12,229)** | **(14,029)** | **5,725** | **(20,533)** |
| **Net income/(loss)** | **$36,481** | **$43,937** | **$(16,249)** | **$64,169** |
| **(a) The following amounts are included in net income (in thousands):** |  |  |  |  |
|  |  |  |  | **Chemed** |
|  | **VITAS** | **Roto-Rooter** | **Corporate** | **Consolidated** |
| **Pretax benefit/(cost):** |  |  |  |  |
| **Stock option expense** | **$-** | **$-** | **$(7,451)** | **$(7,451)** |
| **Amortization of reacquired franchise agreements** | **-** | **(2,352)** | **-** | **(2,352)** |
| **Direct costs related to COVID-19** | **(391)** | **(961)** | **-** | **(1,352)** |
| **Long-term incentive compensation** | **-** | **-** | **(1,310)** | **(1,310)** |
| **Total** | **$(391)** | **$(3,313)** | **$(8,761)** | **$(12,465)** |
|  |  |  |  | **Chemed** |
|  | **VITAS** | **Roto-Rooter** | **Corporate** | **Consolidated** |
| **After-tax benefit/(cost):** |  |  |  |  |
| **Stock option expense** | **$-** | **$-** | **$(6,166)** | **$(6,166)** |
| **Amortization of reacquired franchise agreements** | **-** | **(1,729)** | **-** | **(1,729)** |
| **Long-term incentive compensation** | **-** | **-** | **(1,159)** | **(1,159)** |
| **Direct costs related to COVID-19** | **(292)** | **(706)** | **-** | **(998)** |
| **Excess tax benefits on stock compensation** | **-** | **-** | **1,441** | **1,441** |
| **Total** | **$(292)** | **$(2,435)** | **$(5,884)** | **$(8,611)** |

*CHEMED CORPORATION AND SUBSIDIARY COMPANIES*

*CONSOLIDATING STATEMENTS OF INCOME*

*FOR THE THREE MONTHS ENDED MARCH 31, 2021*

*(in thousands)(unaudited)*

| 2021 (a) | VITAS | Roto-Rooter | Corporate | Chemed Consolidated |
| --- | ---: | ---: | ---: | ---: |
| Service revenues and sales | $315,788 | $211,572 | $- | $527,360 |
| Cost of services provided and goods sold | 238,667 | 101,806 | - | 340,473 |
| Selling, general and administrative expenses | 22,090 | 53,322 | 16,187 | 91,599 |
| Depreciation | 5,338 | 6,353 | 24 | 11,715 |
| Amortization | 18 | 2,492 | - | 2,510 |
| Other operating expense | 502 | 120 | - | 622 |
| Total costs and expenses | 266,615 | 164,093 | 16,211 | 446,919 |
| Income/(loss) from operations | 49,173 | 47,479 | (16,211) | 80,441 |
| Interest expense | (42) | (89) | (250) | (381) |
| Intercompany interest income/(expense) | 4,525 | 1,620 | (6,145) | - |
| Other income—net | 533 | 31 | 3,038 | 3,602 |
| Income/(expense) before income taxes | 54,189 | 49,041 | (19,568) | 83,662 |
| Income taxes | (13,419) | (11,864) | 7,021 | (18,262) |
| Net income/(loss) | $40,770 | $37,177 | $(12,547) | $65,400 |
| (a) The following amounts are included in net income (in thousands): |  |  |  |  |
|  |  |  |  | **Chemed** |
|  | **VITAS** | **Roto-Rooter** | **Corporate** | **Consolidated** |
| Pretax benefit/(cost): |  |  |  |  |
| Stock option expense | $- | $- | $(6,106) | $(6,106) |
| Amortization of reacquired franchise agreements | - | (2,352) | - | (2,352) |
| Direct costs related to COVID-19 | (1,753) | (553) | (38) | (2,344) |
| Long-term incentive compensation | - | - | (1,893) | (1,893) |
| Total | $(1,753) | $(2,905) | $(8,037) | $(12,695) |
|  |  |  |  | **Chemed** |
|  | **VITAS** | **Roto-Rooter** | **Corporate** | **Consolidated** |
| After-tax benefit/(cost): |  |  |  |  |
| Stock option expense | $- | $- | $(5,066) | $(5,066) |
| Direct costs related to COVID-19 | (1,308) | (407) | (28) | (1,743) |
| Amortization of reacquired franchise agreements | - | (1,729) | - | (1,729) |
| Long-term incentive compensation | - | - | (1,670) | (1,670) |
| Excess tax benefits on stock compensation | - | - | 3,238 | 3,238 |
| Total | $(1,308) | $(2,136) | $(3,526) | $(6,970) |

*Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA*

*(in thousands)*

| Chemed Corporation and Subsidiary Companies For the three months ended March 31, 2022 | VITAS | Roto-Rooter | Corporate | Chemed Consolidated |
| --- | ---: | ---: | ---: | ---: |
| **Net income/(loss)** | $36,481 | **$43,937** | **$(16,249)** | **$64,169** |
| **Add/(deduct):** |  |  |  |  |
| **Interest expense** | **52** | **115** | **643** | **810** |
| **Income taxes** | **12,229** | **14,029** | **(5,725)** | **20,533** |
| **Depreciation** | **5,551** | **6,569** | **18** | **12,138** |
| **Amortization** | **24** | **2,494** | **-** | **2,518** |
| **EBITDA** | **54,337** | **67,144** | **(21,313)** | **100,168** |
| **Add/(deduct):** |  |  |  |  |
| **Intercompany interest expense/(income)** | **(4,656)** | **(2,176)** | **6,832** | **-** |
| **Interest income** | **(37)** | **(36)** | **-** | **(73)** |
| **Stock option expense** | **-** | **-** | **7,451** | **7,451** |
| **Direct costs related to COVID-19** | **391** | **961** | **-** | **1,352** |
| **Long-term incentive compensation** | **-** | **-** | **1,310** | **1,310** |
| **Adjusted EBITDA** | **$50,035** | **$65,893** | **$(5,720)** | **$110,208** |
|  |  |  |  | Chemed |
| For the three months ended March 31, 2021 | VITAS | Roto-Rooter | Corporate | Consolidated |
| Net income/(loss) | $40,770 | $37,177 | $(12,547) | $65,400 |
| Add/(deduct): |  |  |  |  |
| Interest expense | 42 | 89 | 250 | 381 |
| Income taxes | 13,419 | 11,864 | (7,021) | 18,262 |
| Depreciation | 5,338 | 6,353 | 24 | 11,715 |
| Amortization | 18 | 2,492 | - | 2,510 |
| EBITDA | 59,587 | 57,975 | (19,294) | 98,268 |
| Add/(deduct): |  |  |  |  |
| Intercompany interest expense/(income) | (4,525) | (1,620) | 6,145 | - |
| Interest (income) | (61) | (31) | - | (92) |
| Stock option expense | - | - | 6,106 | 6,106 |
| Direct costs related to COVID-19 | 1,753 | 553 | 38 | 2,344 |
| Long-term incentive compensation | - | - | 1,893 | 1,893 |
| Adjusted EBITDA | $56,754 | $56,877 | $(5,112) | $108,519 |

*RECONCILIATION OF ADJUSTED NET INCOME*

*(in thousands, except per share data)(unaudited)*

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net income as reported | **$64,169** | $65,400 |
| Add/(deduct) pre-tax cost of: |  |  |
| Stock option expense | **7,451** | 6,106 |
| Amortization of reacquired franchise agreements | **2,352** | 2,352 |
| Direct costs related to COVID-19 | **1,352** | 2,344 |
| Long-term incentive compensation | **1,310** | 1,893 |
| Add/(deduct) tax impacts: |  |  |
| Tax impact of the above pre-tax adjustments (1) | **(2,413)** | (2,487) |
| Excess tax benefits on stock compensation | **(1,441)** | (3,238) |
| Adjusted net income | **$72,780** | $72,370 |
| Diluted Earnings Per Share As Reported |  |  |
| Net income | **$4.22** | $4.01 |
| Average number of shares outstanding | **15,192** | 16,310 |
| Adjusted Diluted Earnings Per Share |  |  |
| Adjusted net income | **$4.79** | $4.44 |
| Adjusted average number of shares outstanding | **15,192** | 16,310 |
| (1) The tax impact of pre-tax adjustments was calculated using the effective tax rate of the operating unit for which each adjustment is associated. |  |  |

*CHEMED CORPORATION AND SUBSIDIARY COMPANIES*

*OPERATING STATISTICS FOR VITAS SEGMENT*

*(unaudited)*

| OPERATING STATISTICS Net revenue ($000) | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Homecare | **$257,636** | $263,754 |
| Inpatient | **26,570** | 29,156 |
| Continuous care | **19,578** | 27,349 |
| Other | **3,007** | 2,938 |
| Subtotal | **$306,791** | $323,197 |
| Room and board, net | **(2,117)** | (2,665) |
| Contractual allowances | **(2,985)** | (3,244) |
| Medicare cap allowance | **(2,500)** | (1,500) |
| Total | **$299,189** | $315,788 |
| Net revenue as a percent of total before Medicare cap allowances |  |  |
| Homecare | **84.0%** | 81.6% |
| Inpatient | **8.7** | 9.0 |
| Continuous care | **6.4** | 8.5 |
| Other | **0.9** | 0.9 |
| Subtotal | **100.0** | 100.0 |
| Room and board, net | **(0.7)** | (0.8) |
| Contractual allowances | **(1.0)** | (1.0) |
| Medicare cap allowance | **(0.8)** | (0.5) |
| Total | **97.5%** | 97.7% |
| Days of care |  |  |
| Homecare | **1,258,672** | 1,329,892 |
| Nursing home | **248,468** | 232,783 |
| Respite | **5,368** | 4,840 |
| Subtotal routine homecare and respite | **1,512,508** | 1,567,515 |
| Inpatient | **24,587** | 27,674 |
| Continuous care | **21,082** | 29,300 |
| Total | **1,558,177** | 1,624,489 |
| Number of days in relevant time period | **90** | 90 |
| Average daily census (days) |  |  |
| Homecare | **13,985** | 14,777 |
| Nursing home | **2,761** | 2,586 |
| Respite | **60** | 54 |
| Subtotal routine homecare and respite | **16,806** | 17,417 |
| Inpatient | **273** | 307 |
| Continuous care | **234** | 326 |
| Total | **17,313** | 18,050 |
| Total Admissions | **16,530** | 18,135 |
| Total Discharges | **16,862** | 18,516 |
| Average length of stay (days) | **104.8** | 94.4 |
| Median length of stay (days) | **14.0** | 12.0 |
| ADC by major diagnosis |  |  |
| Cerebro | **36.7%** | 35.9% |
| Neurological | **22.9** | 22.1 |
| Cancer | **11.1** | 12.2 |
| Cardio | **15.9** | 15.8 |
| Respiratory | **7.4** | 7.8 |
| Other | **6.0** | 6.2 |
| Total | **100.0%** | 100.0% |
| Admissions by major diagnosis |  |  |
| Cerebro | **22.9** | 21.4% |
| Neurological | **12.9** | 12.3 |
| Cancer | **24.9** | 25.0 |
| Cardio | **14.1** | 14.2 |
| Respiratory | **11.1** | 11.0 |
| Other | **14.1** | 16.1 |
| Total | **100.0%** | 100.0% |
| Estimated uncollectible accounts as a percent of revenues | **1.0%** | 1.0% |
| Accounts receivable -- |  |  |
| Days of revenue outstanding- excluding unapplied Medicare payments | **33.6** | 37.8 |
| Days of revenue outstanding- including unapplied Medicare payments | **23.9** | 26.9 |

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

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

## Market risk

As filed, 572 characters.

The Company’s primary market risk exposure relates to interest rate risk exposure through its variable interest line of credit. At March 31, 2022, the Company had no variable rate debt outstanding. For each $10 million borrowed under the credit facility, an increase or decrease of 100 basis points (1%), increases or decreases the Company’s annual interest expense by $100,000.

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

## Controls and procedures

As filed, 900 characters.

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.

## Risk factors

As filed, 141 characters.

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

Filed Apr 29, 2022.
Source: SEC EDGAR, the filing index for accession 0001562762-22-000197. Last ingested by Listed: Nov 5, 2026, 15:55 ET. No prices; not investment advice.