CHEMED CORP

Chemed Corporation operates in two distinct industries: hospice and palliative care services through its VITAS segment, and plumbing, drain cleaning, excavation, water restoration and other related services through its Roto-Rooter segment. The hospice care industry in the United States is highly competitive and dominated primarily by small, community-based hospices, with approximately 20% of all hospice providers being not-for-profit. The sewer, drain and pipe cleaning, plumbing repair, excavation and water restoration businesses are also highly competitive and fragmented, with local and regional firms providing the primary competition, and private equity businesses have recently made significant investments in home service companies, including plumbing.

VITAS is one of the nation's largest providers of hospice services in an industry dominated primarily by small, community-based hospices. VITAS competes with a large number of organizations, including community-based hospice providers, national and regional companies, hospital-based hospice and palliative care programs, physician groups, nursing homes, home health agencies, infusion therapy companies, and nursing agencies. Roto-Rooter's principal methods of competition are advertising, range of services provided, name recognition, emergency-service availability, speed and quality of customer service, service guarantees, and pricing. The Roto-Rooter marks are among the most highly recognized trademarks and service marks in the United States, and the Company considers them a valuable asset and a significant factor in marketing.

Chemed generates revenue through two segments: VITAS provides hospice and palliative care services to its patients through a network of physicians, registered nurses, home health aides, social workers, clergy and volunteers, with over 95% of VITAS' revenue consisting of payments from the Medicare and Medicaid programs on a per diem basis. Roto-Rooter provides plumbing, drain cleaning, excavation, water restoration and other related services to residential and commercial customers. The Company's day to day operating businesses are managed on a decentralized basis with few integrated business functions between the operating units and Chemed, while Chemed's corporate office management participates in long term strategic planning, significant capital allocation decisions, investment activities, financial reporting, tax, legal and the selection of key executives.

VITAS operates 33 Medicare provider numbers across 59 programs from 182 leased and owned facilities and 28 inpatient units in 17 states and the District of Columbia. VITAS provides four levels of care: Routine Home Care, Continuous Care (referred to as Intensive Comfort Care), Inpatient Care, and Respite Care. The routine home care rate is 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, and there is a Service Intensity Add-on payment covering direct home care visits in the last seven days of a patient's life. For fiscal 2025, less than 2% of VITAS' net revenue was attributable to physician services. Reimbursement from state Medicaid programs in 2025 accounted for approximately 3% of VITAS' revenues.

Roto-Rooter has manufacturing and distribution center facilities in West Des Moines, Iowa and has 356 leased and owned office and service facilities in 34 states. Roto-Rooter's franchising activities are subject to various federal and state franchising laws and regulations, including FTC rules regarding the offering or sale of franchises. Roto-Rooter's ability to engage in the plumbing repair, excavation and water restoration businesses is subject to limitations and restrictions imposed by state and local licensing laws and regulations.

In 2025, Roto-Rooter completed the acquisition of one franchise in Michigan for $225,000 ¹ in cash. In 2024, Roto-Rooter completed the acquisition of one franchise in New Jersey for $5.8 million ² in cash, one franchise in Texas for $1.5 million ³ in cash, and one franchise in Kentucky for $5.1 million ⁴ in cash. VITAS completed the purchase of all hospice operations and an assisted living facility from Covenant Health and Community Services, Inc d/b/a Covenant Care for an aggregated purchase price of $85.0 million ⁵ in cash. In 2023, Roto-Rooter completed the acquisition of one franchise in South Carolina for $305,000 ⁶ in cash and one franchise in Georgia for $3.689 million ⁷ in cash. During 2025, the Company repurchased 932,500 ⁸ shares of Capital Stock under the February 2011 Repurchase Program at a weighted average price of $465.51 ⁹ per share, and in August 2025, the Board of Directors authorized an additional $300 million ¹⁰ under the February 2011 Repurchase Program. As of December 31, 2025, the Company did not have long-term debt ¹¹. On October 24, 2025, VITAS learned that an account belonging to a third-party vendor attempted to deploy a tool often used by threat actors in VITAS' information technology environment, and VITAS successfully negotiated with the threat actor, made a payment, and obtained assurances that the PHI was not provided to any other third parties and has since been destroyed; cyber insurance has covered all costs incurred by VITAS above its $500,000 ¹² deductible.

For the fiscal year ended December 31, 2025, total service revenues and sales were $2,529,978,000 ¹³, compared to $2,431,287,000 ¹⁴ in 2024 and $2,264,417,000 ¹⁵ in 2023. Net income was $265,238,000 ¹⁶ in 2025, compared to $301,999,000 ¹⁷ in 2024 and $272,509,000 ¹⁸ in 2023. Diluted earnings per share were $18.34 ¹⁹ in 2025, compared to $19.89 ²⁰ in 2024 and $17.93 ²¹ in 2023. Income from operations was $338,246,000 ²² in 2025, compared to $366,493,000 ²³ in 2024 and $340,569,000 ²⁴ in 2023.

A significant element of VITAS' growth strategy is expected to include expansion of its business in new and existing markets. VITAS may seek to develop, acquire or expand hospice programs in states having Certificate of Need laws, and to the extent that state agencies require VITAS to obtain a Certificate of Need or other similar approvals to expand services at existing hospice programs or to make acquisitions or develop hospice programs in new or existing geographic markets, VITAS' plans could be adversely affected by a failure to obtain such certificate or approval. Additionally, if any state or federal agency places a moratorium on new hospices or hospice expansion in any geography, it could adversely affect VITAS growth potential. VITAS cannot assure that it will not encounter regulatory or governmental obstacles in connection with any proposed acquisition of non-profit hospice programs in the future.

Roto-Rooter's growth strategy includes maintaining or increasing customer calls and jobs, which depends significantly upon the continued service of its senior management personnel and its ability to hire and retain skilled employees, particularly licensed plumbers. Competition for skilled employees is intense, and the process of locating and recruiting skilled employees can be difficult and lengthy. Roto-Rooter's revenue and operating results are impacted by significant weather patterns across the United States, and significant changes in precipitation or temperatures in areas where it has company-owned and Independent Contractor operations will generally affect its revenue and operating results.

The filing does not contain explicit margin or cost outlook figures or targets.

The filing does not contain explicit operational outlook details regarding supply chain, manufacturing capacity, technology infrastructure investments, or headcount strategy beyond the general discussion of hiring and retention.

The filing does not contain explicit R&D spending levels, capital expenditure plans, or dividend policy figures for the upcoming period. As of December 31, 2025, the dollar amount remaining under the February 2011 Repurchase Program was $127,282,674 ²⁵.

VITAS' levels of revenues and profitability are subject to the effect of legislative and regulatory changes, including possible reductions in coverage or payment rates, increased scrutiny of claims necessitating additional resources to respond, or changes in methods of payment, by the Medicare and Medicaid programs. The Medicare and Medicaid programs are increasing pressure to control health care costs and to decrease or limit increases in reimbursement rates for health care services. The U.S. federal budget remains in flux, which could cut Medicare payments to providers, and within the Medicare program the hospice benefit is often specifically targeted for cuts. Significant tariffs on certain products, such as steel for Roto-Rooter's cabling machines and pharmaceuticals utilized by VITAS, could materially increase costs, and these additional costs in the case of VITAS cannot be passed along to patients because of the structure of hospice reimbursement.

VITAS' profitability is largely dependent upon its ability to manage the costs of providing hospice services to patients, and increases in operating costs, such as labor, pharmaceutical and supply costs that are subject to inflation and other increases related to tariffs or other tax increases, without a compensating increase in Medicare and Medicaid rates, could have a material adverse effect on VITAS' business. The Medicare and Medicaid programs are subject to statutory and regulatory changes, possible retroactive and prospective rate and payment adjustments, administrative rulings, freezes and funding reductions, all of which may adversely affect the level of program payments. The Medicare cap per admission was set at $34,465.34 ²⁶ per admission for the twelve month period ended on September 30, 2025, increased to $35,361.44 ²⁷ for the twelve month period ending on September 30, 2026, and is adjusted annually to account for inflation.

VITAS is highly dependent on payments from Medicare and Medicaid, with over 95% of its net patient service revenue consisting of payments from these programs, and any changes in the rate or methods governing these payments could materially affect its net patient service revenue and profits. The Medicare cap per admission was set at $34,465.34 ²⁸ for the twelve month period ended September 30, 2025, and increased to $35,361.44 ²⁹ for the twelve month period ending September 30, 2026, and because the actual reimbursement increase is calculated on a county-by-county basis and may vary significantly from the national average, there is a risk that VITAS could incur a significant cap limitation in one or more of its programs. VITAS experienced a cybersecurity attack in October 2025 where a threat actor accessed a significant amount of Protected Health Information, and while cyber insurance has covered all costs above a $500,000 ³⁰ deductible, a subsequent successful attack could have even greater consequences. Significant tariffs on products such as steel for Roto-Rooter's cabling machines and pharmaceuticals utilized by VITAS could materially increase costs, and in the case of VITAS these costs cannot be passed along to patients because of the structure of hospice reimbursement. The Company is contingently liable for additional DuBois-related environmental cleanup costs up to a maximum of $14.9 million ³¹.

Management's message emphasizes that Chemed purchases, operates and divests subsidiaries engaged in diverse business activities for the purposes of maximizing shareholder value, and that the Company's day to day operating businesses are managed on a decentralized basis.The strategic priorities emphasized include long term strategic planning, significant capital allocation decisions, investment activities, financial reporting, tax, legal and the selection of key executives of each operating business. Management also highlights the importance of human capital, noting that as of December 31, 2025, the Company had a total of 15,811 ³² employees, and that the attraction and retention of top talent, as well as the training and promotion of that talent, must be key focuses of the businesses.