a6265035.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
X  
Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2010
     
   
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.)
     
2600 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio   45202
(Address of principal executive offices)   (Zip code)
 
(513) 762-6900
(Registrant’s telephone number, including area code)

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes
X
 
No
   

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes
 
 
No
   

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
 
X
 
Accelerated
filer
   
Non-accelerated
filer
   
Smaller reporting
company
   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes
 
 
No
X  

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
 
22,834,890 Shares
 
March 31, 2010

 
 
1

 
 
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES



Index

      Page No.
PART I.    FINANCIAL INFORMATION:
 
  Item 1.  Financial Statements  
    Unaudited Consolidated Balance Sheet -
 
    March 31, 2010 and December 31, 2009 3
       
    Unaudited Consolidated Statement of Income -
 
    Three months ended March 31, 2010 and 2009 4
       
    Unaudited Consolidated Statement of Cash Flows -
 
    Three months ended March 31, 2010 and 2009 5
       
    Notes to Unaudited Financial Statements
6
       
  Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
15
       
  Item 3.  Quantitative and Qualitative Disclosures about Market Risk
23
       
  Item 4.  Controls and Procedures
23
       
PART II.   OTHER INFORMATION
 
  Item 1.  Legal Proceedings
23
       
  Item 1A. Risk Factors
23
       
  Item 2.    Unregistered Sales of Equity Securities and Use of  Proceeds
24
       
  Item 3.    Defaults Upon Senior Securities
24
       
  Item 4.    Submission of Matter to a Vote of Security Holders
24
       
  Item 5.    Other Information
24
       
  Item 6.    Exhibits
24
    EX– 31.1  
    EX– 31.2  
    EX– 31.3  
    EX– 32.1  
    EX– 32.2  
    EX– 32.3  
    
 
 
2

 
 
PART I. FINANCIAL INFORMATION
 
Item 1.  Financial Statements
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 
 
(in thousands, except share and per share data)
 
             
             
    March 31,     December 31,  
    2010     2009  
ASSETS
           
Current assets
           
Cash and cash equivalents
  $ 112,119     $ 112,416  
Accounts receivable less allowances of $13,449 (2009 - $12,595)
    87,412       53,461  
Inventories
    7,609       7,543  
Current deferred income taxes
    15,008       13,701  
Prepaid expenses
    9,886       11,137  
Total current assets
    232,034       198,258  
Investments of deferred compensation plans
    25,925       24,158  
Properties and equipment, at cost, less accumulated depreciation of $118,727 (2009 - $115,181)
    75,189       75,358  
Identifiable intangible assets less accumulated amortization of $25,971 (2009 - $25,349)
    57,239       57,920  
Goodwill
    450,149       450,042  
Other assets
    13,692       13,734  
Total Assets
  $ 854,228     $ 819,470  
                 
LIABILITIES
               
Current liabilities
               
Accounts payable
  $ 49,844     $ 52,071  
Income taxes
    12,150       63  
Accrued insurance
    34,478       35,161  
Accrued compensation
    37,613       34,662  
Other current liabilities
    12,439       14,127  
Total current liabilities
    146,524       136,084  
Deferred income taxes
    24,969       25,924  
Long-term debt
    153,853       152,127  
Deferred compensation liabilities
    25,522       23,637  
Other liabilities
    5,374       4,536  
Total Liabilities
    356,242       342,308  
                 
STOCKHOLDERS' EQUITY
               
Capital stock - authorized 80,000,000 shares $1 par; issued 30,087,481 shares (2009 - 29,890,628 shares)
    30,087       29,891  
Paid-in capital
    343,967       335,890  
Retained earnings
    419,985       403,366  
Treasury stock - 7,355,078 shares (2009 - 7,275,070 shares), at cost
    (298,031 )     (293,941 )
Deferred compensation payable in Company stock
    1,978       1,956  
Total Stockholders' Equity
    497,986       477,162  
Total Liabilities and Stockholders' Equity
  $ 854,228     $ 819,470  
 
See accompanying notes to unaudited financial statements.
 
 
3

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 (in thousands, except per share data)
             
             
             
   
Three Months Ended March 31,
 
   
2010
   
2009
 
Service revenues and sales
  $ 308,813       294,938  
Cost of services provided and goods sold (excluding depreciation)
    219,137       207,013  
Selling, general and administrative expenses
    48,538       45,793  
Depreciation
    5,469       5,325  
Amortization
    1,224       1,536  
Other operating expense
    -       545  
Total costs and expenses
    274,368       260,212  
Income from operations
    34,445       34,726  
Interest expense
    (2,952 )     (2,844 )
Other income/(expense)--net
    186       (276 )
Income before income taxes
    31,679       31,606  
Income taxes
    (12,321 )     (12,267 )
Net income
  $ 19,358     $ 19,339  
                 
                 
Earnings Per Share
               
Net income
  $ 0.86     $ 0.86  
Average number of shares outstanding
    22,593       22,394  
                 
Diluted Earnings Per Share
               
Net income
  $ 0.84     $ 0.85  
Average number of shares outstanding
    23,021       22,647  
                 
Cash Dividends Per Share
  $ 0.12     $ 0.06  

See accompanying notes to unaudited financial statements.
 
 
4

 
 
 CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 (in thousands)
             
   
Three Months Ended
 
   
March 31,
 
   
2010
   
2009
 
Cash Flows from Operating Activities
           
Net income
  $ 19,358     $ 19,339  
Adjustments to reconcile net income to net cash provided
               
by operating activities:
               
Depreciation and amortization
    6,693       6,861  
Provision for uncollectible accounts receivable
    2,472       3,071  
Stock option expense
    2,051       2,042  
Provision for deferred income taxes
    (2,282 )     (1,529 )
Amortization of discount on convertible notes
    1,726       1,612  
Changes in operating assets and liabilities, excluding
               
amounts acquired in business combinations:
               
Increase in accounts receivable
    (36,445 )     (12,399 )
Increase in inventories
    (66 )     (514 )
Decrease in prepaid expenses
    502       1,002  
Decrease in accounts payable and other current liabilities
    (381 )     (7,900 )
Increase in income taxes
    13,955       13,056  
Increase in other assets
    (1,672 )     (203 )
Increase in other liabilities
    2,724       486  
Excess tax benefit on share-based compensation
    (1,135 )     (145 )
Other sources
    151       322  
Net cash provided by operating activities
    7,651       25,101  
Cash Flows from Investing Activities
               
Capital expenditures
    (5,424 )     (3,376 )
Business combinations, net of cash acquired
    -       (1,944 )
Proceeds from sales of property and equipment
    27       1,360  
Other uses
    (157 )     (152 )
Net cash used by investing activities
    (5,554 )     (4,112 )
Cash Flows from Financing Activities
               
Purchases of treasury stock
    (2,516 )     (231 )
Proceeds from issuance of capital stock
    2,672       68  
Repayment of long-term debt
    -       (10,799 )
Dividends paid
    (2,739 )     (1,355 )
Decrease in cash overdrafts payable
    (1,216 )     (342 )
Excess tax benefit on share-based compensation
    1,135       145  
Other sources/(uses)
    270       (244 )
Net cash used by financing activities
    (2,394 )     (12,758 )
(Decrease)/Increase in Cash and Cash Equivalents
    (297 )     8,231  
Cash and cash equivalents at beginning of year
    112,416       3,628  
Cash and cash equivalents at end of period
  $ 112,119     $ 11,859  
 
See accompanying notes to unaudited financial statements.
 
 
5

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
Notes to Unaudited 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, 2009 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 present fairly our financial position, results of operations and cash flows.  These financial statements are prepared on the same b asis as and should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2009.

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 delivered.  VITAS recognizes revenue at the estimated realizable amount due from third-party payers.  Medicare payments are subject to certain limitations, as described below.

As of March 31, 2010, VITAS has approximately $9.1 million in unbilled revenue included in accounts receivable (December 31, 2009 - $9.9 million).  The unbilled revenue at VITAS relates to hospice programs currently undergoing focused medical reviews (“FMR”).  During FMR, surveyors working on behalf of the U.S. Federal government review certain patient files for compliance with Medicare regulations.  During the time the patient file is under review, we are unable to bill for care provided to those patients.  We make appropriate provisions to reduce our accounts receivable balance for potential denials of patient service revenue due to FMR activity.

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.  The Medicare cap measurement period is from September 29 through September 28 of the following year for admissions and from November 1 through October 31 of the following year for revenue.  During the three-month period ended March 31, 2010, we  reversed $1.8 million of Medicare cap liability recorded during the fourth quarter of 2009 for two programs’ projected liability for the 2010 measurement period.  This reversal was offset by a $35,000 pretax charge related to one program’s projected liability for the 2010 measurement period.  During the period ended March 31, 2009 we recorded $270,000 in Medicare cap liability for one program’s projected liability for the 2009 measurement period.  This amount was subsequently reversed due to improved admission trends during the second quarter of 2009.
 
The U.S. government revises hospice reimbursement rates on an annual basis using the Hospice Wage Index (HWI) and the Consumer Price Index plus a phase out of the Budget Neutrality Adjustment Factor (BNAF).  The HWI is geographically adjusted to reflect local differences in wages.  The BNAF is a portion of inflation calculated in prior years that is being eliminated or phased out over a seven year period.  In August 2008, the U.S. government announced a 25% reduction in the BNAF for its fiscal 2009 (October 2008 through September 2009) pursuant to a three year phase-out of the BNAF.  The February 2009 American Recovery and Reinvestment Act mandated a one year delay in the BNAF phase-out.  In August 2009, the Centers for Medicare and Medicaid Services (CMS) revised the phase-out schedule of the BNAF.  CMS reduced the price increase in hospice reimbursement by 10% of the BNAF effective October 1, 2009.  The remaining 90% of the BNAF will be phased out over the next six years by revising the October 1 reimbursement adjustment by 15% of the original BNAF inflation factor.  Based upon this revised schedule, 100% of the BNAF will be eliminated on October 1, 2015.  As a result, included in the three months ended March 31, 2009 results, is $1.95 million of revenue for the retroactive price increase related to services provided by VITAS in the fourth quarter of 2008.

 
6

 

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

   
Three months ended
 
   
March 31,
 
   
2010
   
2009
 
Service Revenues and Sales
       
 
 
VITAS
  $ 222,940     $ 208,417  
Roto-Rooter
    85,873       86,521  
Total   $ 308,813     $ 294,938  
                 
After-tax Earnings
               
VITAS
  $ 18,438     $ 17,170  
Roto-Rooter
    7,813       8,229  
Total     26,251       25,399  
Corporate
    (6,893 )     (6,060 )
Net income   $ 19,358     $ 19,339  

We report corporate administrative expenses and unallocated investing and financing income and expense not directly related to either segment as “Corporate”.  Historically, we have recorded stock award amortization as a corporate expense.  In the first quarter of 2010, our chief decision maker determined that this was an on-going expense and should be reported within the appropriate business segment.  Accordingly, stock award amortization has been reclassified to the corresponding business segment for all periods presented.

4.   Earnings per Share
Earnings per share are computed using the weighted average number of shares of capital stock outstanding.  Earnings and diluted earnings per share for 2010 and 2009 are computed as follows (in thousands, except per share data):
 
   
Net Income
 
For the Three Months Ended 
March 31,
 
Income
   
Shares
   
Earnings per Share
 
2010
                 
Earnings
  $ 19,358       22,593     $ 0.86  
Dilutive stock options
    -       346          
Nonvested stock awards
    -       82          
Diluted earnings
  $ 19,358       23,021     $ 0.84  
                         
2009
                       
Earnings
  $ 19,339       22,394     $ 0.86  
Dilutive stock options
    -       216          
Nonvested stock awards
    -       37          
Diluted earnings
  $ 19,339       22,647     $ 0.85  

For the three-month period ended March 31, 2010, 1.3 million stock options were excluded from the computation of diluted earnings per share as their exercise prices were greater than the average market price for most of the period. For the three-month period ended March 31, 2009, 1.7 million stock options were excluded from the computation of diluted earnings per share.

Diluted earnings per share may be impacted in future periods as the result of the issuance of our 1.875% Senior Convertible Notes (the “Notes”) and related purchased call options and sold warrants.  Per FASB’s authoritative guidance on the effect of contingently convertible instruments on diluted earnings per share and convertible bonds with an issuer option to settle for cash upon conversion, we will not include any shares related to the Notes in our calculation of diluted earnings per share until our average stock price for a quarter exceeds the current conversion price.  We would then include in our diluted earnings per share calculation those shares issuable using the treasury stock method.  The amount of shares issuable is based u pon the amount by which the average stock price for the quarter exceeds the conversion price.  The purchased call option does not impact the calculation of diluted earnings per share as it is always anti-dilutive. The sold warrants become dilutive when our average stock price for a quarter exceeds the strike price of the warrant.

 
7

 
 
The following table provides examples of how changes in our stock price impact the number of shares that would be included in our diluted earnings per share calculation.  It also shows the impact on the number of shares issuable upon conversion of the Notes and settlement of the purchased call options and sold warrants:

     
Shares
         
Total Treasury
   
Shares Due
   
Incremental
 
     
Underlying 1.875%
         
Method
   
to the Company
   
Shares Issued/
 
Share
   
Convertible
   
Warrant
   
Incremental
   
under Notes
   
Received by the Company
 
Price
   
Notes
   
Shares
   
Shares (a)
   
Hedges
   
upon Conversion (b)
 
$ 80.73       8,988       -       8,988       (9,615 )     (627 )
$ 90.73       263,947       -       263,947       (282,363 )     (18,416 )
$ 100.73       468,284       -       468,284       (500,956 )     (32,672 )
$ 110.73       635,713       118,682       754,395       (680,067 )     74,328  
$ 120.73       775,406       314,621       1,090,027       (829,507 )     260,520  
$ 130.73       893,728       480,584       1,374,312       (956,084 )     418,228  
 
a) Represents the number of incremental shares that must be included in the calculation of fully diluted shares
under U.S. GAAP.
b) Represents the number of incremental shares to be issued by the Company upon conversion of the 1.875%
Convertible Notes, assuming concurrent settlement of the note hedges and warrants.
 
 
5.   Long-Term Debt
We are in compliance with all debt covenants as of March 31, 2010.  We have issued $28.0 million in standby letters of credit as of March 31, 2010 for insurance purposes.  Issued letters of credit reduce our available credit under the revolving credit agreement.  As of March 31, 2010, we have approximately $147.0 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility, excluding the expansion feature.

In May 2008, the FASB issued authoritative guidance for accounting for convertible debt instruments that may be settled in cash upon conversion including partial cash settlement.  This guidance requires all convertible debentures classified as Instruments B or C to separately account for the debt and equity pieces of the instrument.   Convertible debentures classified as Instruments B may be settled in either stock or cash equivalent to the conversion value and convertible debentures classified as Instruments C must settle the accreted value of the obligation in cash and may satisfy the excess conversion value in either cash or stock.  At inception of the convertible instrument, cash flows related to the convertible instrument are to be discounted using a market rate of interest.  We adopte d the provisions of the guidance on January 1, 2009 and applied the guidance retrospectively.  Upon adoption, the Notes had a discount of approximately $55.1 million.

The following amounts are included in our consolidated balance sheet related to the Notes:

   
March 31,
2010
   
December 31,
2009
 
Principal amount of convertible debentures
  $ 186,956     $ 186,956  
Unamortized debt discount
    (33,103 )     (34,829 )
Carrying amount of convertible debentures
  $ 153,853     $ 152,127  
Additional paid in capital (net of tax)
  $ 31,310     $ 31,310  
 
 
8

 
 
The following amounts comprise interest expense included in our consolidated income statement (in thousands):

   
Three Months Ended
March 31,
 
   
2010
   
2009
 
Cash interest expense
  $ 1,070     $ 1,078  
Non-cash amortization of debt discount
    1,726       1,612  
Amortization of debt costs
    156       154  
Total interest expense
  $ 2,952     $ 2,844  


The unamortized debt discount will be amortized using the effective interest method over the remaining life of the Notes.  The effective rate on the Notes after adoption of the standard is approximately 6.875%.

6.   Other Operating Expenses
For the three-month period ended March 31, 2010, there were no other operating expenses recorded.  For the three-month period ended March 31, 2009, we recorded pretax expenses of $545,000 related to the costs of a contested proxy solicitation.

7.   Other Income/ (Expense) -- Net
Other income/ (expense) -- net comprises the following (in thousands):
 
   
Three Months Ended
March 31,
 
   
2010
   
2009
 
Market value gains/(losses) on assets held in
           
deferred compensation trust
  $ 188     $ (1,614 )
Gain on settlement of company-owned life insurance
    -       1,211  
(Loss)/gain on disposal of property and equipment
    (94 )     24  
Interest income
    75       82  
Other - net
    17       21  
Total other income/(expense)
  $ 186     $ (276 )

 8.   Stock-Based Compensation Plans
On February 18, 2010, the Compensation/Incentive Committee of the Board of Directors (“CIC”) approved a grant of 47,896 shares of restricted stock to certain key employees.  The restricted shares cliff vest four years from the date of issuance.  The cumulative compensation expense related to the restricted stock award is $2.5 million and will be recognized ratably over the four-year vesting period.  We assumed no forfeitures in determining the cumulative compensation expense of the grant.
 
On February 18, 2010, the CIC approved a grant of 515,100 stock options to certain employees.  The stock options vest ratably over three years from the date of issuance.  The cumulative compensation expense related to the stock option grant is $7.8 million and will be recognized over the three-year vesting period.  We used the Black-Scholes option valuation method to determine the cumulative compensation expense of the grant.

9.   Independent Contractor Operations
The Roto-Rooter segment sublicenses with sixty-two independent contractors to operate certain plumbing repair and drain cleaning businesses in lesser-populated areas of the United States and Canada.  We had notes receivable from our independent contractors as of March 31, 2010 totaling $1.2 million (December 31, 2009 -$1.3 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 zero to 8% per annum and the remaining terms of the loans range from two months to 5 years at March 31, 2010.  During the three months ended March 31, 2010, we recorded revenues of $5.7 million (2009 - $5.3 million) and pretax profits of $2.4 million (2009 - $2.3 million) from our independent contractors.

 
9

 

10.  Pension and Retirement Plans
All of the Company’s plans that provide retirement and similar benefits are defined contribution plans.  Expenses for the Company’s pension and profit-sharing plans, excess benefit plans and other similar plans were $2.5 million and $1.5 million for the three months ended March 31, 2010 and 2009, respectively.

11.  Legal and Regulatory Matters

Litigation
VITAS is party to a class action lawsuit filed in the Superior Court of California, Los Angeles County, in September 2006 by Bernadette Santos, Keith Knoche and Joyce White.  This case alleges failure to pay overtime and failure to provide meal and rest periods to a purported class of California admissions nurses, chaplains and sales representatives.  The case seeks payment of penalties, interest and Plaintiffs’ attorney fees.  VITAS contests these allegations.  In December 2009, the trial court denied Plaintiffs’ motion for class certification. The lawsuit is in its early stages and we are unable to estimate our potential liability, if any, with respect to these allegations.

Regardless of outcome, defense of litigation adversely affects us through defense costs, diversion of our time and related publicity.  In the normal course of business, we are a party to various claims and legal proceedings.  We record a reserve for these matters when an adverse outcome is probable and the amount of the potential liability is reasonably estimable.

Regulatory Matters
In April 2005, the Office of Inspector General (“OIG”) for the Department of Health and Human Services served VITAS with civil subpoenas relating to VITAS’ alleged failure to appropriately bill Medicare and Medicaid for hospice services.  As part of this investigation, the OIG selected medical records for 320 past and current patients from VITAS’ three largest programs for review.  It also sought policies and procedures dating back to 1998 covering admissions, certifications, recertifications and discharges.  During the third quarter of 2005 and again in May 2006, the OIG requested additional information from us.  The Court dismissed a related qui tam complaint filed in U.S. District Court for the Southern District of F lorida with prejudice in July 2007.  The plaintiffs appealed this dismissal, which the Court of Appeals affirmed.  The government continues to investigate the complaint’s allegations.  In March 2009, we received a letter from the government reiterating the basis of their investigation.

In May 2009, VITAS received an administrative subpoena from the U.S. Department of Justice requesting VITAS deliver to the OIG documents, patient records, and policy and procedure manuals for headquarters and its Texas programs concerning hospice services provided for the period January 1, 2003 to the date of the letter.  In August 2009, the OIG selected medical records for 59 past and current patients from a Texas program for review.   In February 2010, VITAS received a companion civil investigative demand from the state of Texas Attorney General’s Office, seeking related documents. Based on the early stage of the investigation and the limited information we have at this time, we cannot predict the outcome of this investigation.  We believe that we are in material compliance with Medicare and Medicaid rules and regulations applicable to hospice providers.

The costs to comply with either of these investigations were not material for any period presented.  We are unable to predict the outcome of these matters or the impact, if any, that the investigation may have on our business, results of operations, liquidity or capital resources.  Regardless of outcome, responding to the subpoenas can adversely affect us through defense costs, diversion of our time and related publicity.

12.  Related Party Agreement
VITAS has two pharmacy services agreements ("Agreements") with Omnicare, Inc. and its subsidiaries (“OCR”) whereby OCR provides specified pharmacy services for VITAS and its hospice patients in geographical areas served by both VITAS and OCR.  The Agreements renew automatically for one-year terms.  Either party may cancel the Agreements at the end of any term by giving written notice at least 90 days prior to the end of said term.  VITAS made purchases from OCR of $8.6 million and $7.9 million for the three months ended March 31, 2010 and 2009, respectively.

 Mr. Joel F. Gemunder, President and Chief Executive Officer of OCR and Ms. Andrea Lindell are directors of both OCR and the Company. Mr. Kevin J. McNamara, President, Chief Executive Officer and a director of the Company, is a director emeritus of OCR.  We believe that the terms of these agreements are no less favorable to VITAS than we could negotiate with an unrelated party.
 
 
10

 

13.  Cash Overdrafts Payable
Included in accounts payable at March 31, 2010 is cash overdrafts payable of $10.5 million (December 31, 2009 - $11.7 million).

14.  Financial Instruments
We adopted the provisions of the FASB’s authoritative guidance on fair value measurements.  This statement 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.  There was no impact on our financial position or results of operations upon adoption of this authoritative guidance.

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of March 31, 2010 (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
  $ 25,925     $ 25,925     $ -     $ -  
Long-term debt
    153,853       170,796       -       -  

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.
 
 
15.  Capital Stock Transactions
On April 26, 2007, our Board of Directors authorized a $150 million stock repurchase program.  On May 19, 2008, our Board of Directors authorized an additional $56 million to the April 2007 stock repurchase program.  For the quarter ended March 31, 2010, we repurchased 31,375 shares at a weighted average cost per share of $47.17 under the April 2007 program.  For the quarter ended March 31, 2009 there was no stock repurchased.

16.  Subsequent Events
In April 2010, we met the stock-price target of the Company’s Long-term incentive plan.  The stock price hurdle of $54.00 was achieved during 30 trading days out of any 60 day trading day period. On April 16, 2010, the Compensation/Incentive Committee approved a stock grant of 27,900 shares and the related allocation to participants.  The pretax cost of the stock grant was $1.8 million.

 
11

 

17.  Guarantor Subsidiaries
Our 1.875% Notes are fully and unconditionally guaranteed on an unsecured, jointly and severally liable basis by certain of our 100% owned subsidiaries.  The following unaudited, condensed, consolidating financial data presents the composition of the parent company (Chemed), the guarantor subsidiaries and the non-guarantor subsidiaries as of March 31, 2010 and December 31, 2009 for the balance sheet, the three months ended March 31, 2010 and March 31, 2009 for the income statement and the three months ended March 31, 2010  and  March 31, 2009 for the statement of cash flows (dollars in thousands):
 
March 31, 2010         Guarantor     Non-Guarantor     Consolidating        
 
 
Parent
   
Subsidiaries
   
Subsidiaries
   
Adjustments
   
Consolidated
 
ASSETS
                             
Cash and cash equivalents
  $ 107,572     $ (274 )   $ 4,821     $ -     $ 112,119  
Accounts receivable, less allowances
    623       86,368       421       -       87,412  
Intercompany receivables
    -       158,970       -       (158,970 )     -  
Inventories
    -       6,940       669       -       7,609  
Current deferred income taxes
    (341 )     15,255       94       -       15,008  
Prepaid expenses
    460       9,359       67       -       9,886  
Total current assets
    108,314       276,618       6,072       (158,970 )     232,034  
Investments of deferred compensation plans
    -       -       25,925       -       25,925  
Properties and equipment, at cost, less accumulated depreciation
    10,175       62,797       2,217       -       75,189  
Identifiable intangible assets less accumulated amortization
    -       57,239       -       -       57,239  
Goodwill
    -       445,662       4,487       -       450,149  
Other assets
    11,008       2,345       339       -       13,692  
Investments in subsidiaries
    662,071       16,539       -       (678,610 )     -  
Total assets
  $ 791,568     $ 861,200     $ 39,040     $ (837,580 )   $ 854,228  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                 
Accounts payable
  $ (1,968 )   $ 51,520     $ 292     $ -     $ 49,844  
Intercompany payables
    156,363       -       2,607       (158,970 )     -  
Income taxes
    (10,956 )     21,848       1,258       -       12,150  
Accrued insurance
    434       34,044       -       -       34,478  
Accrued compensation
    966       36,205       442       -       37,613  
Other current liabilities
    2,530       9,783       126       -       12,439  
Total current liabilities
    147,369       153,400       4,725       (158,970 )     146,524  
Deferred income taxes
    (10,985 )     43,400       (7,446 )     -       24,969  
Long-term debt
    153,853       -       -       -       153,853  
Deferred compensation liabilities
    -       -       25,522       -       25,522  
Other liabilities
    3,345       2,029       -       -       5,374  
Stockholders' equity
    497,986       662,371       16,239       (678,610 )     497,986  
Total liabilities and stockholders' equity
  $ 791,568     $ 861,200     $ 39,040     $ (837,580 )   $ 854,228  

 
December 31, 2009
       
Guarantor
   
Non-Guarantor
   
Consolidating
       
 
 
Parent
   
Subsidiaries
   
Subsidiaries
   
Adjustments
   
Consolidated
 
ASSETS
                             
Cash and cash equivalents
  $ 109,331     $ (1,221 )   $ 4,306     $ -     $ 112,416  
Accounts receivable, less allowances
    618       52,303       540       -       53,461  
Intercompany receivables
    -       149,888       -       (149,888 )     -  
Inventories
    -       7,009       534       -       7,543  
Current deferred income taxes
    (378 )     14,048       31       -       13,701  
Prepaid expenses
    (2,457 )     13,706       (112 )     -       11,137  
Total current assets
    107,114       235,733       5,299       (149,888 )     198,258  
Investments of deferred compensation plans
    -       -       24,158       -       24,158  
Properties and equipment, at cost, less accumulated depreciation
    10,309       62,912       2,137       -       75,358  
Identifiable intangible assets less accumulated amortization
    -       57,920       -       -       57,920  
Goodwill
    -       445,662       4,380       -       450,042  
Other assets
    11,190       2,232       312       -       13,734  
Investments in subsidiaries
    643,572       15,523       -       (659,095 )     -  
Total assets
  $ 772,185     $ 819,982     $ 36,286     $ (808,983 )   $ 819,470  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                 
Accounts payable
  $ (2,411 )   $ 54,084     $ 398     $ -     $ 52,071  
Intercompany payables
    147,744       -       2,144       (149,888 )     -  
Income taxes
    (2,145 )     2,159       49       -       63  
Accrued insurance
    1,231       33,930       -       -       35,161  
Accrued compensation
    4,235       30,020       407       -       34,662  
Other current liabilities
    1,643       11,367       1,117       -       14,127  
Total current liabilities
    150,297       131,560       4,115       (149,888 )     136,084  
Deferred income taxes
    (10,549 )     43,183       (6,710 )     -       25,924  
Long-term debt
    152,127       -       -       -       152,127  
Deferred compensation liabilities
    -       -       23,637       -       23,637  
Other liabilities
    3,148       1,388       -       -       4,536  
Stockholders' equity
    477,162       643,851       15,244       (659,095 )     477,162  
Total liabilities and stockholders' equity
  $ 772,185     $ 819,982     $ 36,286     $ (808,983 )   $ 819,470  
 
 
12

 
 
 
For the three months ended March 31, 2010
   
Guarantor
   
Non-Guarantor
   
Consolidating
       
 
 
Parent
   
Subsidiaries
   
Subsidiaries
   
Adjustments
   
Consolidated
 
Continuing Operations
                             
Service revenues and sales
  $ -     $ 303,002     $ 5,811     $ -     $ 308,813  
Cost of services provided and goods sold
    -       216,200       2,937       -       219,137  
Selling, general and administrative expenses
    5,698       41,317       1,523       -       48,538  
Depreciation
    136       5,133       200       -       5,469  
Amortization
    330       894       -       -       1,224  
Total costs and expenses
    6,164       263,544       4,660       -       274,368  
Income/ (loss) from operations
    (6,164 )     39,458       1,151       -       34,445  
Interest expense
    (2,851 )     (101 )     -       -       (2,952 )
Other (expense)/income - net
    3,621       (3,637 )     202       -       186  
Income/ (loss) before income taxes
    (5,394 )     35,720       1,353       -       31,679  
Income tax (provision)/ benefit
    1,744       (13,539 )     (526 )     -       (12,321 )
Equity in net income of subsidiaries
    23,008       826       -       (23,834 )     -  
Net income
  $ 19,358     $ 23,007     $ 827     $ (23,834 )   $ 19,358  
 
 
For the three months ended March 31, 2009
   
Guarantor
   
Non-Guarantor
   
Consolidating
       
 
 
Parent
   
Subsidiaries
   
Subsidiaries
   
Adjustments
   
Consolidated
 
Continuing Operations
                             
Service revenues and sales
  $ -     $ 289,139     $ 5,799     $ -     $ 294,938  
Cost of services provided and goods sold
    -       204,029       2,984       -       207,013  
Selling, general and administrative expenses
    5,485       40,392       (84 )     -       45,793  
Depreciation
    151       5,007       167       -       5,325  
Amortization
    275       1,261       -       -       1,536  
Other operating expenses
    545       -       -       -       545  
Total costs and expenses
    6,456       250,689       3,067       -       260,212  
Income/ (loss) from operations
    (6,456 )     38,450       2,732       -       34,726  
Interest (expense)/income
    (2,770 )     (80 )     6       -       (2,844 )
Other (expense)/income - net
    384       (277 )     (383 )     -       (276 )
Income/ (loss) before income taxes
    (8,842 )     38,093       2,355       -       31,606  
Income tax (provision)/ benefit
    3,270       (14,450 )     (1,087 )     -       (12,267 )
Equity in net income of subsidiaries
    24,911       1,605       -       (26,516 )     -  
Net income
  $ 19,339     $ 25,248     $ 1,268     $ (26,516 )   $ 19,339  
 
 
13

 
 
For the three months ended March 31, 2010
       
Guarantor
   
Non-Guarantor
       
   
Parent
   
Subsidiaries
   
Subsidiaries
   
Consolidated
 
Cash Flow from Operating Activities:
                       
Net cash provided by operating activities
  $ (14,132 )   $ 21,652     $ 131     $ 7,651  
Cash Flow from Investing Activities:
                               
Capital expenditures
    (2 )     (5,176 )     (246 )     (5,424 )
Business combinations, net of cash acquired
    -       -       -       -  
Proceeds from sale of property and equipment
    -       27       -       27  
Other sources/(uses) - net
    (50 )     (107 )     -       (157 )
Net cash provided/(used) by investing activities
    (52 )     (5,256 )     (246 )     (5,554 )
Cash Flow from Financing Activities:
                               
Change in cash overdrafts payable
    473       (1,689 )     -       (1,216 )
Change in intercompany accounts
    13,377       (13,840 )     463       -  
Dividends paid to shareholders
    (2,739 )     -       -       (2,739 )
Purchases of treasury stock
    (2,516 )     -       -       (2,516 )
Proceeds from exercise of stock options
    2,672       -       -       2,672  
Realized excess tax benefit on share based compensation
    1,135       -       -       1,135  
Other sources/(uses) - net
    23       80       167       270  
Net cash provided/ (used) by financing activities
    12,425       (15,449 )     630       (2,394 )
Net increase/(decrease) in cash and cash equivalents
    (1,759 )     947       515       (297 )
Cash and cash equivalents at beginning of year
    109,331       (1,221 )     4,306       112,416  
Cash and cash equivalents at end of period
  $ 107,572     $ (274 )   $ 4,821     $ 112,119  
 
 
For the three months ended March 31, 2009
       
Guarantor
   
Non-Guarantor
       
   
Parent
   
Subsidiaries
   
Subsidiaries
   
Consolidated
 
Cash Flow from Operating Activities:
                       
Net cash provided/(used) by operating activities
  $ (5,656 )   $ 28,627     $ 2,130     $ 25,101  
Cash Flow from Investing Activities:
                               
Capital expenditures
    (7 )     (3,345 )     (24 )     (3,376 )
Business combinations, net of cash acquired
    -       (1,944 )     -       (1,944 )
Proceeds from sale of property and equipment
    1,256       104       -       1,360  
Other sources/(uses) - net
    (198 )     46       -       (152 )
Net cash provided/(used) by investing activities
    1,051       (5,139 )     (24 )     (4,112 )
Cash Flow from Financing Activities:
                               
Change in cash overdrafts payable
    1,343       (1,685 )     -       (342 )
Change in intercompany accounts
    22,357       (20,011 )     (2,346 )     -  
Dividends paid to shareholders
    (1,355 )     -       -       (1,355 )
Purchases of treasury stock
    (231 )     -       -       (231 )
Proceeds from exercise of stock options
    68       -       -       68  
Realized excess tax benefit on share based compensation
    145       -       -       145  
Repayment of long-term debt
    (10,700 )     (99 )     -       (10,799 )
Other sources/(uses) - net
    20       71       (335 )     (244 )
Net cash provided/ (used) by financing activities
    11,647       (21,724 )     (2,681 )     (12,758 )
Net increase/(decrease) in cash and cash equivalents
    7,042       1,764       (575 )     8,231  
Cash and cash equivalents at beginning of year
    65       202       3,361       3,628  
Cash and cash equivalents at end of period
  $ 7,107     $ 1,966     $ 2,786     $ 11,859  
 
 
14

 
 
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 team 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 and drain cleaning 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 for the three months ended March 31, 2010 and 2009 (in thousands except per share amounts):

   
Three Months Ended
March 31,
 
   
2010
   
2009
 
Service revenues and sales
  $ 308,813     $ 294,938  
Net income
  $ 19,358     $ 19,339  
Diluted EPS
  $ 0.84     $ 0.85  
Adjusted EBITDA*
  $ 43,071     $ 42,224  
Adjusted EBITDA as a % of revenue
    13.9 %     14.3 %

*See page 21 for reconciliation to GAAP measures

For the three months ended March 31, 2010, the increase in consolidated service revenues and sales was driven by a 7.0% increase at VITAS while Roto-Rooter revenues decreased by 0.7%.  The increase in service revenues at VITAS was a result of increased average daily census (“ADC”) of 5.1%, driven by an increase in admissions of 4.8%, combined with Medicare price increases of approximately 1.3%.  Roto-Rooter was driven by a 7.0% decrease in job count offset by an approximate 6.3% price and mix shift increase. The Roto-Rooter changes include the impact of acquisitions in 2009, offset by the conversion of one company-owned branch to an independent contractor in 2009.  The impact of these transactions is not material.  Consolidated net income is essentially flat over prior year.  Diluted EPS decreased as the result of the increased number of average shares outstanding. Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased 2.0% from the first quarter of 2009 to the first quarter of 2010.

EBITDA and Adjusted EBITDA are not measures derived in accordance with GAAP and exclude components that are important to understanding our financial performance.  We use Adjusted EBITDA as a measure of earnings for our LTIP awards.  We provide EBITDA and Adjusted EBITDA to help readers evaluate our operating results, compare our operating performance with that of similar companies that have different capital structures and help evaluate our ability to meet future debt service, capital expenditure and working capital requirements.  Our EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for comparable measures presented in accordance with GAAP.  A reconciliation of our net income to our Adjusted EBITDA is presente d on page 21.

VITAS expects to achieve full-year 2010 revenue growth, prior to Medicare cap, of 5.0% to 6.0%.  Admissions are estimated to increase 2.0% to 4.0%.  Adjusted EBITDA margin, prior to Medicare cap is estimated to be 15.0% to 15.5%.  Roto-Rooter expects full-year 2010 revenue growth of 1.0% to 3.0%.  The revenue estimate is a result of increased pricing of 3.0%, a favorable mix shift to higher revenue jobs, offset by a job count decline estimated at 2.0% to 4.0%.  Adjusted EBITDA margin for 2010 is estimated to be in the range of 17.5% to 18.0%.  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, 2009 to March 31, 2010 include the following:

           
A $34.0 million increase in accounts receivable primarily at VITAS, related to timing of Medicare payments and refund of overpayments from prior years.

 
15

 

 Net cash provided by operating activities decreased $17.5 million due primarily to the increase in accounts receivable, partially offset by a decrease in accounts payable and other current liabilities.  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 $28.0 million in standby letters of credit as of March 31, 2010, for insurance purposes.  Issued letters of credit reduce our available credit under the revolving credit agreement.  As of March 31, 2010, we have approximately $147.0 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility, excluding the expansion feature. 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.  In connection therewith, we are in compliance with all financial and other debt covenants as of March 31, 2010 and anticipate remaining in compliance throughout 2010.

VITAS is party to a class action lawsuit filed in the Superior Court of California, Los Angeles County, in September 2006 by Bernadette Santos, Keith Knoche and Joyce White.  This case alleges failure to pay overtime and failure to provide meal and rest periods to a purported class of California admissions nurses, chaplains and sales representatives.  The case seeks payment of penalties, interest and Plaintiffs’ attorney fees.  VITAS contests these allegations.  In December 2009, the trial court denied Plantiffs’ motion for class certification. The lawsuit is in its early stages and we are unable to estimate our potential liability, if any, with respect to these allegations.

In April 2005, the Office of Inspector General (“OIG”) for the Department of Health and Human Services served VITAS with civil subpoenas relating to VITAS’ alleged failure to appropriately bill Medicare and Medicaid for hospice services.  As part of this investigation, the OIG selected medical records for 320 past and current patients from VITAS’ three largest programs for review.  It also sought policies and procedures dating back to 1998 covering admissions, certifications, recertifications and discharges.  During the third quarter of 2005 and again in May 2006, the OIG requested additional information from us.  The Court dismissed a related qui tam complaint filed in U.S. District Court for the Southern District of Fl orida with prejudice in July 2007.  The plaintiffs appealed this dismissal, which the Court of Appeals affirmed.  The government continues to investigate the complaint’s allegations.  In March 2009, we received a letter from the government reiterating the basis of their investigation.

In May 2009, VITAS received an administrative subpoena from the U.S. Department of Justice requesting VITAS deliver to the OIG documents, patient records, and policy and procedure manuals for headquarters and its Texas programs concerning hospice services provided for the period January 1, 2003 to the date of the letter.  In August 2009, the OIG selected medical records for 59 past and current patients from a Texas program for review. In February 2010, VITAS received a companion civil investigative demand from the state of Texas Attorney General’s office, seeking related documents. Based on the early stage of the investigation and the limited information we have at this time, we cannot predict the outcome of this investigation.  We believe that we are in mat erial compliance with Medicare and Medicaid rules and regulations applicable to hospice providers.

We are unable to predict the outcome of these matters or the impact, if any, that the investigation may have on our business, results of operations, liquidity or capital resources.  Regardless of outcome, responding to the subpoenas can adversely affect us through defense costs, diversion of our time and related publicity.

 
16

 

Results of Operations
Three months ended March 31, 2010 versus  2009 - Consolidated Results
Our service revenues and sales for the first quarter of 2010 increased 4.7% versus services and sales revenues for the first quarter of 2009.  Of this increase, $14.5 million was attributable to VITAS offset by a $648,000 decrease at Roto-Rooter.  The following chart shows the components of those changes (dollar amounts in thousands):

   
Increase/(Decrease)
 
   
Amount
   
Percent
 
VITAS
           
Routine homecare     10,151       6.9 %
Continuous care     3,094       8.9 %
General inpatient     1,209       4.8 %
Medicare cap     2,019       747.8 %
BNAF adjustment     (1,950 )     -100.0 %
Roto-Rooter
               
Plumbing     1,128       3.0 %
Drain cleaning     (1,943 )     -5.3 %
Other     167       1.4 %
Total   $ 13,875       4.7 %

The increase in VITAS’ revenues for the first quarter of 2010 versus the first quarter of 2009 was a result of increased ADC of 5.1% driven by an increase in admissions of 4.8%, combined with Medicare reimbursement rate increases of approximately 1.3%.  In excess of 90% of VITAS’ service revenues for the period were from Medicare and Medicaid.

The increase in plumbing revenues for the first quarter of 2010 versus 2009 is attributable to a 9.0% increase in the average price per job and a 5.2% decrease in the number of jobs performed.  The increase in the plumbing price per job was a combination of increased pricing and favorable job mix shift to more expensive jobs such as excavation.  Our excavation job count increased by 12.6% compared to 2009.  Drain cleaning revenues for the first quarter of 2010 versus 2009 reflect an 8.1% decline in the number of jobs, while the average price per job increased 2.9%.  The increase in other revenues is attributable primarily to an increase in our independent contractor operations offset by lower sales in our HVAC operation.
 
The consolidated gross margin was 29.0% in the first quarter of 2010 as compared with 29.8% in the first quarter of 2009.  On a segment basis, VITAS’ gross margin was 22.8% in the first quarter of 2010 and 23.4% in the first quarter of 2009.  The Roto-Rooter segment’s gross margin was 45.2% for the first quarter of 2010 essentially flat with the first quarter of 2009.  The decrease in VITAS’ gross margin is attributable to higher labor costs for admissions and Medicare compliance personnel, the opening of inpatient units which carry significant one time start-up costs as capacity begins to ramp-up and a slight mix shift towards higher acuity care which has a lower gross margin than routine homecare.
 
Selling, general and administrative expenses (“SG&A”) for the first quarter of 2010 were $48.5 million, an increase of $2.7 million (6.0%) versus the first quarter of 2009.  Included in SG&A is a $1.6 million increase related to the increase in our deferred compensation liability due to improved stock market performance.  The offset to the increased liability is recorded in other (non-operating) income and expense. Also in included in the SG&A increase is $147,000 related to OIG expenses.  The remaining change in SG&A is the result of typical cost of living increases for salaries and benefits plus increases in certain selling expenses which vary based on change in revenue.

 Other income increased $462,000 in the first quarter of 2010 to $186,000 due to a $1.8 million gain in the investments of deferred compensation plans which offsets the related expense in SG&A.  This was offset by a $1.2 million decrease related to the settlement of company-owned life insurance that occurred in 2009 but did not recur in 2010.

Our effective income tax rate of 38.9% in the first quarter of 2010 was essentially flat with the first quarter of 2009.

 
17

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

   
Three Months Ended March 31,
 
   
2010
   
2009
 
VITAS
           
Costs associated with the OIG investigation
  $ (99 )   $ (8 )
Corporate
               
Costs related to contested proxy solicitation
    -       (345 )
Stock option expense
    (1,298 )     (1,292 )
Noncash interest expense related to accounting for
               
conversion feature of the convertible notes
    (1,047 )     (968 )
Impact of non-deductible losses and non-taxable gains on
               
investments held in deferred compensation trusts
    -       736  
Total
  $ (2,444 )   $ (1,877 )

 
Three months ended March 31, 2010 versus 2009 - Segment Results
The change in after-tax earnings for the first quarter of 2010 versus the first quarter of 2009 is due to (in thousands):

   
Net Income
 
   
Increase/(Decrease)
 
   
Amount
   
Percent
 
VITAS
  $ 1,268       7.4 %
Roto-Rooter
    (416 )     -5.1 %
Corporate
    (833 )     -13.7 %
    $ 19       0.1 %
 
 
18

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2010
 (in thousands)(unaudited)
                         
                     
Chemed
 
   
VITAS
   
Roto-Rooter
   
Corporate
   
Consolidated
 
2010 (a)
                       
Service revenues and sales
  $ 222,940     $ 85,873     $ -     $ 308,813  
Cost of services provided and goods sold
    172,093       47,044       -       219,137  
Selling, general and administrative expenses
    18,145       24,758       5,635       48,538  
Depreciation
    3,485       1,951       33       5,469  
Amortization
    771       123       330       1,224  
Total costs and expenses
    194,494       73,876       5,998       274,368  
Income/(loss) from operations
    28,446       11,997       (5,998 )     34,445  
Interest expense
    (32 )     (68 )     (2,852 )     (2,952 )
Intercompany interest income/(expense)
    1,289       702       (1,991 )     -  
Other income/(expense)—net
    (39 )     10       215       186  
Income/(loss) before income taxes
    29,664       12,641       (10,626 )     31,679  
Income taxes
    (11,226 )     (4,828 )     3,733       (12,321 )
Net income/(loss)
  $ 18,438     $ 7,813     $ (6,893 )   $ 19,358  
 

(a)   The following amounts are included in net income (in thousands):
 
                     
Chemed
 
   
VITAS
 
Roto-Rooter
   
Corporate
   
Consolidated
 
Pretax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (2,051 )   $ (2,051 )
Noncash impact of accounting for convertible debt
    -       -       (1,655 )     (1,655 )
Expenses incurred in connection with the Office of Inspector                                
General investigation
    (160 )     -       -       (160 )
Total
  $ (160 )   $ -     $ (3,706 )   $ (3,866 )
                                 
                                 
   
VITAS
 
Roto-Rooter
   
Corporate
   
Consolidated
 
After-tax benefit/(cost):
                               
Stock option expense
  $ -     $ -     $ (1,298 )   $ (1,298 )
Noncash impact of accounting for convertible debt
    -       -       (1,047 )     (1,047 )
Expenses incurred in connection with the Office of Inspector                                
General investigation
    (99 )     -       -       (99 )
Total
  $ (99 )   $ -     $ (2,345 )   $ (2,444 )
 
 
19

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2009
 (in thousands)(unaudited)
                         
                     
Chemed
 
   
VITAS
   
Roto-Rooter
   
Corporate
   
Consolidated
 
2009 (a)
                       
Service revenues and sales
  $ 208,417     $ 86,521     $ -     $ 294,938  
Cost of services provided and goods sold
    159,631       47,382       -       207,013  
Selling, general and administrative expenses
    17,546       24,375       3,872       45,793  
Depreciation
    3,219       2,054       52       5,325  
Amortization
    1,172       89       275       1,536  
Other operating expenses
    -       -       545       545  
Total costs and expenses
    181,568       73,900       4,744       260,212  
Income/(loss) from operations
    26,849       12,621       (4,744 )     34,726  
Interest expense
    (39 )     (35 )     (2,770 )     (2,844 )
Intercompany interest income/(expense)
    891       536       (1,427 )     -  
Other income/(expense)—net
    (3 )     116       (389 )     (276 )
Income/(loss) before income taxes
    27,698       13,238       (9,330 )     31,606  
Income taxes
    (10,528 )     (5,009 )     3,270       (12,267 )
Net income/(loss)
  $ 17,170     $ 8,229     $ (6,060 )   $ 19,339  
 

(a)   The following amounts are included in net income (in thousands):
 
                     
Chemed
 
   
VITAS
 
Roto-Rooter
   
Corporate
   
Consolidated
 
Pretax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (2,042 )   $ (2,042 )
Noncash impact of accounting for convertible debt
    -       -       (1,530 )     (1,530 )
Non-taxable income on certain investments held in deferred                                
compensation trusts
    -       -       1,211       1,211  
Expenses associated with contested proxy solicitation
    -       -       (545 )     (545 )
Expenses incurred in connection with the Office of Inspector                                
General investigation
    (13 )     -       -       (13 )
Total
  $ (13 )   $ -     $ (2,906 )   $ (2,919 )
                                 
                                 
   
VITAS
 
Roto-Rooter
   
Corporate
   
Consolidated
 
After-tax benefit/(cost):
                               
Stock option expense
  $ -     $ -     $ (1,292 )   $ (1,292 )
Noncash impact of accounting for convertible debt
    -       -       (968 )     (968 )
Non-taxable income on certain investments held in deferred                                
compensation trusts
    -       -       1,211       1,211  
Income tax impact of nondeductible losses on investments                                
held in deferred compensation trusts
    -       -       (475 )     (475 )
Expenses associated with contested proxy solicitation
    -       -       (345 )     (345 )
Expenses incurred in connection with the Office of Inspector                                
General investigation
    (8 )     -       -       (8 )
Total
  $ (8 )   $ -     $ (1,869 )   $ (1,877 )
 
 
20

 
 
Consolidating Summary and Reconciliation of Adjusted EBITDA
                         
Chemed Corporation and Subsidiary Companies
                       
(in thousands)
                   
Chemed
 
For the three months ended March 31, 2010
VITAS
   
Roto-Rooter
   
Corporate
   
Consolidated
 
                         
Net income/(loss)
  $ 18,438     $ 7,813     $ (6,893 )   $ 19,358  
Add/(deduct):
                               
Interest expense
    32       68       2,852       2,952  
Income taxes
    11,226       4,828       (3,733 )     12,321  
Depreciation
    3,485       1,951       33       5,469  
Amortization
    771       123       330       1,224  
EBITDA
    33,952       14,783       (7,411 )     41,324  
Add/(deduct):
                               
Legal expenses of OIG investigation
    160       -       -       160  
Stock option expense
    -       -       2,051       2,051  
Advertising cost adjustment
    -       (389 )     -       (389 )
Interest income
    (45 )     (2 )     (28 )     (75 )
Intercompany interest income/(expense)
    (1,289 )     (702 )     1,991       -  
Adjusted EBITDA
  $ 32,778     $ 13,690     $ (3,397 )   $ 43,071  
 
 
                     
Chemed
 
For the three months ended March 31, 2009
VITAS
   
Roto-Rooter
   
Corporate
   
Consolidated
 
                         
Net income/(loss)
  $ 17,170     $ 8,229     $ (6,060 )   $ 19,339  
Add/(deduct):
                               
Interest expense
    39       35       2,770       2,844  
Income taxes
    10,528       5,009       (3,270 )     12,267  
Depreciation
    3,219       2,054       52       5,325  
Amortization
    1,172       89       275       1,536  
EBITDA
    32,128       15,416       (6,233 )     41,311  
Add/(deduct):
                               
Non-taxable income from certain investments held in
                               
deferred compensation trusts
    -       -       (1,211 )     (1,211 )
Expenses associated with contested proxy solicitation
    -       -       545       545  
Legal expenses of OIG investigation
    13       -       -       13  
Stock option expense
    -       -       2,042       2,042  
Advertising cost adjustment
    -       (394 )     -       (394 )
Interest income
    (48 )     (19 )     (15 )     (82 )
Intercompany interest income/(expense)
    (891 )     (536 )     1,427       -  
Adjusted EBITDA
  $ 31,202     $ 14,467     $ (3,445 )   $ 42,224  
 
 
21

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(unaudited)
             
             
OPERATING STATISTICS
 
2010
   
2009
 
Net revenue ($000)
           
Homecare
  $ 157,226     $ 147,075  
Inpatient
    26,291       25,082  
Continuous care
    37,674       34,580  
Total before Medicare cap allowance and 2008 BNAF
  $ 221,191     $ 206,737  
Estimated BNAF
    -       1,950  
Medicare cap allowance
    1,749       (270 )
Total
  $ 222,940     $ 208,417  
Net revenue as a percent of total
               
     before Medicare cap allowance
               
Homecare
    71.1 %     71.1 %
Inpatient
    11.9       12.2  
Continuous care
    17.0       16.7  
Total before Medicare cap allowance and 2008 BNAF
    100.0       100.0  
Estimated BNAF
    -       0.9  
Medicare cap allowance
    0.8       (0.1 )
Total
    100.8 %     100.8 %
Average daily census (days)
               
Homecare
    8,112       7,477  
Nursing home
    3,162       3,263  
Routine homecare
    11,274       10,740  
Inpatient
    442       421  
Continuous care
    606       567  
Total
    12,322       11,728  
                 
Total Admissions
    14,844       14,168  
Total Discharges
    14,461       13,865  
Average length of stay (days)
    75.8       76.6  
Median length of stay (days)
    13.0       13.0  
ADC by major diagnosis
               
Neurological
    32.6 %     32.5 %
Cancer
    18.8       19.6  
Cardio
    11.9       12.3  
Respiratory
    6.6       6.7  
Other
    30.1       28.9  
Total
    100.0 %     100.0 %
Admissions by major diagnosis
               
Neurological
    18.6 %     18.6 %
Cancer
    33.5       35.9  
Cardio
    11.6       11.1  
Respiratory
    8.4       7.6  
Other
    27.9       26.8  
Total
    100.0 %     100.0 %
Direct patient care margins
               
Routine homecare
    51.3 %     51.5 %
Inpatient
    15.2       17.4  
Continuous care
    20.7       19.1  
Homecare margin drivers (dollars per patient day)
               
Labor costs
  $ 53.93     $ 52.82  
Drug costs
    7.77       7.65  
Home medical equipment
    6.94       6.68  
Medical supplies
    2.44       2.27  
Inpatient margin drivers (dollars per patient day)
               
Labor costs
  $ 286.81     $ 271.75  
Continuous care margin drivers (dollars per patient day)
               
Labor costs
  $ 526.47     $ 521.30  
Bad debt expense as a percent of revenues
    1.0 %     1.1 %
Accounts receivable --
               
Days of revenue outstanding- excluding unapplied Medicare payments
    43.4       68.4  
Days of revenue outstanding- including unapplied Medicare payments
    29.2       37.5  
 
 
22

 
 
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 o ther 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
Our primary market risk exposure relates to interest rate risk exposure through variable interest rate borrowings.  At March 31, 2010, we had no variable rate debt outstanding.  At March 31, 2010, the fair value of the Notes approximates $170.8 million which have a face value of $187.0 million.

Item 4.   Controls and Procedures
We carried out an evaluation, under the supervision of our President and Chief Executive Officer and with the participation of the Executive Vice President and Chief Financial Officer and the Vice President and Controller, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.  Based on that evaluation, the President and Chief Executive Officer, Executive Vice President and Chief Financial Officer and Vice President and Controller have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.  There has been no change in our internal control over financial reporting that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 
PART II OTHER INFORMATION
Item 1.   Legal Proceedings

For information regarding the Company’s legal proceedings, see note 11, 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 most recent Annual Report on Form 10-K,

 
23

 
 
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 programs for the three months ended March 31, 2010:

         
Weighted
             
   
Total Number
   
Average
   
Cumulative Shares
   
Dollar Amount
 
   
of Shares
   
Price Paid Per
   
Repurchased Under
   
Remaining Under
 
   
Repurchased
   
Share
   
the Program
   
The Program
 
                         
April 2007 Program
                       
January 1 through January 31, 2010
    31,375     $ 47.17       1,736,972     $ 51,718,696  
February 1 through February 28, 2010
    -     $ -       1,736,972     $ 51,718,696  
March 1 through March 31, 2010
    -     $ -       1,736,972     $ 51,718,696  
                                 
First Quarter Total - April 2007 Program
    31,375     $ 47.17                  
 
On April 26, 2007, our Board of Directors authorized a $150 million share repurchase plan with no expiration date.
On May 20, 2008 our Board of Directors authorized an additional $56 million under the April 2007 Program.


Item 3.   Defaults Upon Senior Securities

None

Item 4.   Submission of Matters to a Vote of Security Holders

None

Item 5.   Other Information

None

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. 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. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
24

 
 
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:
April 30, 2010
 
By:
Kevin J. McNamara
 
         
Kevin J. McNamara
 
         
(President and Chief Executive Officer)
 
             
             
 
Dated:
April 30, 2010
 
By:
David P. Williams
 
         
David P. Williams
 
         
(Executive Vice President and Chief Financial Officer)
 
             
             
 
Dated:
April 30, 2010
 
By:
Arthur V. Tucker, Jr.
 
         
Arthur V. Tucker, Jr.
 
         
(Vice President and Controller)
 
 
 
25
a6265035ex31_1.htm
EXHIBIT 31.1


CERTIFICATION PURSUANT TO RULES 13a-14(a)/15d-14(a) OF THE EXCHANGE ACT OF 1934

I, Kevin J. McNamara, certify that:
 
1.    
I have reviewed this quarterly report on Form 10-Q of Chemed Corporation (“registrant”);
 
2.    
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.    
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.    
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c)  evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d)  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter  (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors or persons performing the equivalent function:

 
a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 

 
Date:
April 30, 2010
 
/s/ Kevin J. McNamara
     
Kevin J. McNamara
     
(President and Chief
      Executive Officer)
 
 
 
E-1
 
a6265035ex31_2.htm
EXHIBIT 31.2


CERTIFICATION PURSUANT TO RULES 13a-14(a)/15d-14(a) OF THE EXCHANGE ACT OF 1934

I, David P. Williams, certify that:
 
1.    
I have reviewed this quarterly report on Form 10-Q of Chemed Corporation (“registrant”);
 
2.    
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.    
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c)  evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d)  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.    
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors or persons performing the equivalent function:
 
 
a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:
April 30, 2010
 
/s/ David P. Williams
     
David P. Williams
     
(Executive Vice President and
     
Chief Financial Officer)
 
 
 
E-2
a6265035ex31_3.htm
EXHIBIT 31.3


CERTIFICATION PURSUANT TO RULES 13a-14(a)/15d-14(a) OF THE EXCHANGE ACT OF 1934

I, Arthur V. Tucker, Jr., certify that:
 
1.    
I have reviewed this quarterly report on Form 10-Q of Chemed Corporation (“registrant”);
 
2.    
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.    
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.    
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles,

 
c)  evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d)  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.    
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors or persons performing the equivalent function:

 
a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:
April 30, 2010
 
/s/ Arthur V. Tucker, Jr.
     
Arthur V. Tucker, Jr.
     
(Vice President and
     
Controller)
 
 
 
E-3
 
 
 
 
 
a6265035ex32_1.htm
EXHIBIT 32.1

CERTIFICATION BY KEVIN J. MCNAMARA
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.


Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as President and Chief Executive Officer of Chemed Corporation (“Company”), does hereby certify that:

 
1)
the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2010 (“Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 
2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated:
April 30, 2010
 
/s/ Kevin J. McNamara
     
Kevin J. McNamara
     
(President and Chief
     
Executive Officer)
 
 
 
E-4
a6265035ex32_2.htm
EXHIBIT 32.2

CERTIFICATION BY DAVID P. WILLIAMS
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.


Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Executive Vice President and Chief Financial Officer of Chemed Corporation (“Company”), does hereby certify that:

 
1)
the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2010 (“Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 
2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated:
April 30, 2010
 
/s/ David P. Williams
     
David P. Williams
     
(Executive Vice President and
      Chief Financial Officer)
 
 
 
E-5
a6265035ex32_3.htm
EXHIBIT 32.3

CERTIFICATION BY ARTHUR V. TUCKER, JR.
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.


Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Vice President and Controller of Chemed Corporation (“Company”), does hereby certify that:

 
1)
the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2010 (“Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 
2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated:
April 30, 2010
 
/s/ Arthur V. Tucker, Jr.
     
Arthur V. Tucker, Jr.
     
(Vice President and
      Controller)
 
 
 
E-6