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

(Mark One)

  X	Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 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	X	 	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	22,787,983 Shares	June 30, 2010	

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CHEMED CORPORATION AND
SUBSIDIARY COMPANIES

Index

 	 	Page No.	 	
PART I.    FINANCIAL INFORMATION:	 	 	 	 	
Item 1.  Financial Statements	 	 	 	 	
Unaudited Consolidated Balance Sheet -June 30, 2010 and December 31, 2009	 	 	3	 	 	
 	 	 	 	 	 	
Unaudited Consolidated Statement of Income -Three and six months ended June 30, 2010 and 2009	 	 	4	 	 	
 	 	 	 	 	 	
Unaudited Consolidated Statement of Cash Flows -Six months ended June 30, 2010 and 2009	 	 	5	 	 	
 	 	 	 	 	 	
Notes to Unaudited Financial Statements	 	 	6	 	 	
 	 	 	 	 	 	
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	 	 	16	 	 	
 	 	 	 	 	 	
Item 3.  Quantitative and Qualitative Disclosures about Market Risk	 	 	30	 	 	
 	 	 	 	 	 	
Item 4.  Controls and Procedures	 	 	30	 	 	
 	 	 	 	 	 	
PART II.   OTHER INFORMATION	 	 	 	 	 	
Item 1.    Legal Proceedings	 	 	30	 	 	
 	 	 	 	 	 	
Item 1A. Risk Factors	 	 	30	 	 	
 	 	 	 	 	 	
Item 2.    Unregistered Sales of Equity Securities and Use of  Proceeds	 	 	31	 	 	
 	 	 	 	 	 	
Item 3.    Defaults Upon Senior Securities	 	 	31	 	 	
 	 	 	 	 	 	
Item 4.    Submission of Matters to a Vote of Security Holders	 	 	31	 	 	
 	 	 	 	 	 	
Item 5.    Other Information	 	 	31	 	 	
 	 	 	 	 	 	
Item 6.    Exhibits	 	 	31	 	 	
EX – 31.1EX – 31.2EX – 31.3EX – 32.1EX – 32.2EX – 32.3
EX – 101.INS
EX – 101.SCH
EX – 101.CAL
EX – 101.LAB
EX – 101.PRE
EX – 101.DEF

-2-

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

 	 	June 30,	 	 	December 31,	 	
 	 	2010	 	 	2009	 	
ASSETS	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	
Cash and cash equivalents	 	$	109,080	 	 	$	112,416	 	
Accounts receivable less allowances of $13,808 (2009 - $12,595)	 	 	101,736	 	 	 	53,461	 	
Inventories	 	 	7,978	 	 	 	7,543	 	
Current deferred income taxes	 	 	14,453	 	 	 	13,701	 	
Prepaid income taxes	 	 	351	 	 	 	749	 	
Prepaid expenses	 	 	10,423	 	 	 	10,388	 	
Total current assets	 	 	244,021	 	 	 	198,258	 	
Investments of deferred compensation plans	 	 	26,282	 	 	 	24,158	 	
Properties and equipment, at cost, less accumulated depreciation of $123,209 (2009 - $115,181)	 	 	78,437	 	 	 	75,358	 	
Identifiable intangible assets less accumulated amortization of $26,582 (2009 - $25,349)	 	 	56,620	 	 	 	57,920	 	
Goodwill	 	 	450,105	 	 	 	450,042	 	
Other assets	 	 	10,498	 	 	 	13,734	 	
Total Assets	 	$	865,963	 	 	$	819,470	 	
 	 	 	 	 	 	 	 	 	
 LIABILITIES	 	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	 	
Accounts payable	 	$	49,131	 	 	$	52,071	 	
Income taxes	 	 	4,783	 	 	 	63	 	
Accrued insurance	 	 	34,729	 	 	 	35,161	 	
Accrued compensation	 	 	41,613	 	 	 	34,662	 	
Other current liabilities	 	 	11,669	 	 	 	14,127	 	
Total current liabilities	 	 	141,925	 	 	 	136,084	 	
Deferred income taxes	 	 	24,353	 	 	 	25,924	 	
Long-term debt	 	 	155,608	 	 	 	152,127	 	
Deferred compensation liabilities	 	 	25,374	 	 	 	23,637	 	
Other liabilities	 	 	5,736	 	 	 	4,536	 	
Total Liabilities	 	 	352,996	 	 	 	342,308	 	
 	 	 	 	 	 	 	 	 	
 STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	
Capital stock - authorized 80,000,000 shares $1 par; issued 30,202,452 shares (2009 - 29,890,628 shares)	 	 	30,202	 	 	 	29,891	 	
Paid-in capital	 	 	351,672	 	 	 	335,890	 	
Retained earnings	 	 	436,098	 	 	 	403,366	 	
Treasury stock - 7,517,328 shares (2009 - 7,275,070 shares), at cost	 	 	(307,003	)	 	 	(293,941	)	
Deferred compensation payable in Company stock	 	 	1,998	 	 	 	1,956	 	
Total Stockholders' Equity	 	 	512,967	 	 	 	477,162	 	
Total Liabilities and Stockholders' Equity	 	$	865,963	 	 	$	819,470	 	

See accompanying notes to unaudited financial statements.	 	

 
-3-

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

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Service revenues and sales	 	$	314,995	 	 	$	295,255	 	 	$	623,808	 	 	$	590,193	 	
Cost of services provided and goods sold (excluding depreciation)	 	 	223,702	 	 	 	207,337	 	 	 	442,839	 	 	 	414,350	 	
Selling, general and administrative expenses	 	 	49,956	 	 	 	49,580	 	 	 	98,494	 	 	 	95,373	 	
Depreciation	 	 	6,194	 	 	 	5,338	 	 	 	11,663	 	 	 	10,663	 	
Amortization	 	 	1,287	 	 	 	1,618	 	 	 	2,511	 	 	 	3,154	 	
Other operating expenses	 	 	-	 	 	 	3,444	 	 	 	-	 	 	 	3,989	 	
Total costs and expenses	 	 	281,139	 	 	 	267,317	 	 	 	555,507	 	 	 	527,529	 	
Income from operations	 	 	33,856	 	 	 	27,938	 	 	 	68,301	 	 	 	62,664	 	
Interest expense	 	 	(2,999	)	 	 	(3,142	)	 	 	(5,951	)	 	 	(5,986	)	
Other income--net	 	 	10	 	 	 	3,358	 	 	 	196	 	 	 	3,082	 	
 Income before income taxes	 	 	30,867	 	 	 	28,154	 	 	 	62,546	 	 	 	59,760	 	
Income taxes	 	 	(12,012	)	 	 	(10,904	)	 	 	(24,333	)	 	 	(23,171	)	
Net income	 	$	18,855	 	 	$	17,250	 	 	$	38,213	 	 	$	36,589	 	

Earnings Per Share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	0.83	 	 	$	0.77	 	 	$	1.69	 	 	$	1.63	 	
Average number of shares outstanding	 	 	22,644	 	 	 	22,417	 	 	 	22,608	 	 	 	22,406	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted Earnings Per Share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	0.82	 	 	$	0.76	 	 	$	1.66	 	 	$	1.61	 	
Average number of shares outstanding	 	 	23,080	 	 	 	22,672	 	 	 	23,012	 	 	 	22,660	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash Dividends Per Share	 	$	0.12	 	 	$	0.06	 	 	$	0.24	 	 	$	0.12	 	

See accompanying notes to unaudited financial statements.	 	

 
-4-

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES	 	
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS	 	
(in thousands)	 	
 	 	 	 	 	 	 	
 	 	Six Months Ended	 	
 	 	June 30,	 	
 	 	2010	 	 	2009	 	
Cash Flows from Operating Activities	 	 	 	 	 	 	
Net income	 	$	38,213	 	 	$	36,589	 	
Adjustments to reconcile net income to net cash provided	 	 	 	 	 	 	 	 	
by operating activities:	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	14,174	 	 	 	13,817	 	
Provision for uncollectible accounts receivable	 	 	4,863	 	 	 	5,459	 	
Stock option expense	 	 	4,397	 	 	 	4,485	 	
Amortization of discount on convertible notes	 	 	3,481	 	 	 	3,253	 	
Provision for deferred income taxes	 	 	(2,364	)	 	 	317	 	
Noncash long-term incentive compensation	 	 	1,580	 	 	 	-	 	
Changes in operating assets and liabilities, excluding	 	 	 	 	 	 	 	 	
amounts acquired in business combinations:	 	 	 	 	 	 	 	 	
Increase in accounts receivable	 	 	(53,169	)	 	 	(11,575	)	
Increase in inventories	 	 	(435	)	 	 	(668	)	
Decrease/(increase) in prepaid expenses	 	 	(35	)	 	 	902	 	
Increase/(decrease) in accounts payable and other current liabilities	 	 	3,035	 	 	 	(4,005	)	
Increase/(decrease) in income taxes	 	 	6,902	 	 	 	(4,267	)	
Decrease/(increase) in other assets	 	 	(1,935	)	 	 	2,264	 	
Increase/(decrease) in other liabilities	 	 	2,938	 	 	 	(3,481	)	
Excess tax benefit on share-based compensation	 	 	(1,802	)	 	 	(313	)	
Other sources	 	 	434	 	 	 	343	 	
Net cash provided by operating activities	 	 	20,277	 	 	 	43,120	 	
Cash Flows from Investing Activities	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	(11,942	)	 	 	(8,136	)	
Proceeds from sales of property and equipment	 	 	89	 	 	 	1,496	 	
Business combinations, net of cash acquired	 	 	(30	)	 	 	(1,859	)	
Other uses	 	 	(286	)	 	 	(475	)	
Net cash used by investing activities	 	 	(12,169	)	 	 	(8,974	)	
Cash Flows from Financing Activities	 	 	 	 	 	 	 	 	
Purchases of treasury stock	 	 	(10,125	)	 	 	(526	)	
Dividends paid	 	 	(5,481	)	 	 	(2,711	)	
Proceeds from issuance of capital stock	 	 	3,475	 	 	 	68	 	
Excess tax benefit on share-based compensation	 	 	1,802	 	 	 	313	 	
Decrease in cash overdrafts payable	 	 	(1,314	)	 	 	(781	)	
Repayment of long-term debt	 	 	-	 	 	 	(9,599	)	
Net decrease in revolving line of credit	 	 	-	 	 	 	(8,200	)	
Other sources	 	 	199	 	 	 	294	 	
Net cash used by financing activities	 	 	(11,444	)	 	 	(21,142	)	
(Decrease)/Increase in Cash and Cash Equivalents	 	 	(3,336	)	 	 	13,004	 	
Cash and cash equivalents at beginning of year	 	 	112,416	 	 	 	3,628	 	
Cash and cash equivalents at end of period	 	$	109,080	 	 	$	16,632	 	
 	 	 	 	 	 	 	 	 	
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 basis 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 June 30, 2010, VITAS has approximately $7.6 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 periods ended June 30, 2010 and 2009, we reversed $35,000 and $505,000, respectively of Medicare cap liability recorded during previous quarters due to improved admission trends.  For the six month period ended June 30, 2010, we reversed $1.8 million in Medicare cap liability recorded in the fourth quarter of 2009 for two programs’ projected liability for the 2010 measurement period.  For the six month period ended June 30, 2009, we reversed $235,000 for the 2009 measurement period.

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 six months ended June 30, 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	 	 	Six months ended	 	
 	 	 	June 30,	 	 	June 30,	 	
 	 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Service Revenues and Sales	 	 	 	 	 	 	 	 	 	 	 	 	
VITAS	 	 	$	226,638	 	 	$	211,303	 	 	$	449,578	 	 	$	419,720	 	
Roto-Rooter	 	 	 	88,357	 	 	 	83,952	 	 	 	174,230	 	 	 	170,473	 	
 	Total	 	$	314,995	 	 	$	295,255	 	 	$	623,808	 	 	$	590,193	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
After-tax Earnings	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
VITAS	 	 	$	18,281	 	 	$	17,122	 	 	$	36,719	 	 	$	34,292	 	
Roto-Rooter	 	 	 	8,860	 	 	 	8,798	 	 	 	16,673	 	 	 	17,027	 	
 	Total	 	 	27,141	 	 	 	25,920	 	 	 	53,392	 	 	 	51,319	 	
Corporate	 	 	 	(8,286	)	 	 	(8,670	)	 	 	(15,179	)	 	 	(14,730	)	
 	Net income	 	$	18,855	 	 	$	17,250	 	 	$	38,213	 	 	$	36,589	 	

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):

For the Three Months Ended
June 30,	 	 	Net Income	 	 	Shares	 	 	Earnings per
Share	 	
2010	 	 	 	 	 	 	 	 	 	 	
Earnings	 	 	$	18,855	 	 	 	22,644	 	 	$	0.83	 	
Dilutive stock options	 	 	 	-	 	 	 	348	 	 	 	 	 	
Nonvested stock awards	 	 	 	-	 	 	 	88	 	 	 	 	 	
     Diluted earnings	 	 	$	18,855	 	 	 	23,080	 	 	$	0.82	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2009	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings	 	 	$	17,250	 	 	 	22,417	 	 	$	0.77	 	
Dilutive stock options	 	 	 	-	 	 	 	214	 	 	 	 	 	
Nonvested stock awards	 	 	 	-	 	 	 	41	 	 	 	 	 	
     Diluted earnings	 	 	$	17,250	 	 	 	22,672	 	 	$	0.76	 	

 
-7-

 
 
For the Six Months Ended 
June 30,	 	Net Income	 	 	Shares	 	 	Earnings per
Share	 	
2010	 	 	 	 	 	 	 	 	 	
Earnings	 	$	38,213	 	 	 	22,608	 	 	$	1.69	 	
Dilutive stock options	 	 	-	 	 	 	319	 	 	 	 	 	
Nonvested stock awards	 	 	-	 	 	 	85	 	 	 	 	 	
Diluted earnings	 	$	38,213	 	 	 	23,012	 	 	$	1.66	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
2009	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings	 	$	36,589	 	 	 	22,406	 	 	$	1.63	 	
Dilutive stock options	 	 	-	 	 	 	216	 	 	 	 	 	
Nonvested stock awards	 	 	-	 	 	 	38	 	 	 	 	 	
Diluted earnings	 	$	36,589	 	 	 	22,660	 	 	$	1.61	 	

For the three and six-month periods ended June 30, 2010, 976,000 and 991,000 stock options, respectively 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 and six-month periods ended June 30, 2009, 1.8 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 upon 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.

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	 	 	 	 	 	 	 	 	 	 	 	Incremental	 	
 	 	 	Underlying	 	 	 	 	 	Total Treasury	 	 	Shares Due	 	 	Shares Issued/	 	
 	 	 	1.875%	 	 	 	 	 	Method	 	 	to the Company	 	 	Received by the	 	
Share	 	 	Convertible	 	 	Warrant	 	 	Incremental	 	 	under Notes	 	 	Company upon	 	
Price	 	 	Notes	 	 	Shares	 	 	Shares (a)	 	 	Hedges	 	 	 Conversion (b)	 	
$	80.73	 	 	 	11,398	 	 	 	-	 	 	 	11,398	 	 	 	(12,194	)	 	 	(796	)	
$	90.73	 	 	 	266,091	 	 	 	-	 	 	 	266,091	 	 	 	(284,657	)	 	 	(18,566	)	
$	100.73	 	 	 	470,215	 	 	 	-	 	 	 	470,215	 	 	 	(503,022	)	 	 	(32,807	)	
$	110.73	 	 	 	637,470	 	 	 	118,682	 	 	 	756,152	 	 	 	(681,947	)	 	 	74,205	 	
$	120.73	 	 	 	777,018	 	 	 	314,621	 	 	 	1,091,639	 	 	 	(831,231	)	 	 	260,408	 	
$	130.73	 	 	 	895,216	 	 	 	480,584	 	 	 	1,375,800	 	 	 	(957,676	)	 	 	418,124	 	
 
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.	
 
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5.      Long-Term Debt
We are in compliance with all debt covenants as of June 30, 2010.  We have issued $28.3 million in standby letters of credit as of June 30, 2010 for insurance purposes.  Issued letters of credit reduce our available credit under the revolving credit agreement.  As of June 30, 2010, we have approximately $146.7 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 adopted 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:

 	 	June 30,
 2010	 	 	December 31,
2009	 	
Principal amount of convertible debentures	 	$	186,956	 	 	$	186,956	 	
Unamortized debt discount	 	 	(31,348	)	 	 	(34,829	)	
Carrying amount of convertible debentures	 	$	155,608	 	 	$	152,127	 	
Additional paid in capital (net of tax)	 	$	31,310	 	 	$	31,310	 	

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

 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Cash interest expense	 	$	1,083	 	 	$	1,346	 	 	$	2,153	 	 	$	2,424	 	
Non-cash amortization of debt discount	 	 	1,755	 	 	 	1,640	 	 	 	3,480	 	 	 	3,253	 	
Amortization of debt costs	 	 	161	 	 	 	156	 	 	 	318	 	 	 	309	 	
Total interest expense	 	$	2,999	 	 	$	3,142	 	 	$	5,951	 	 	$	5,986	 	
 
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 and six-month periods ended June 30, 2010, there were no other operating expenses recorded.  For the three and six-month periods ended June 30, 2009, we recorded pretax expenses of $3.4 million and $4.0 million, respectively, related to the costs of a contested proxy solicitation.

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7.      Other Income -- Net
Other income -- net comprises the following (in thousands):

 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Market value gains/(losses) on assets held in	 	 	 	 	 	 	 	 	 	 	 	 	
    deferred compensation trust	 	$	(83	)	 	$	3,199	 	 	$	105	 	 	$	1,585	 	
Gain on settlement of company-owned life insurance	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,211	 	
Loss on disposal of property and equipment	 	 	(58	)	 	 	(78	)	 	 	(152	)	 	 	(54	)	
Interest income	 	 	150	 	 	 	207	 	 	 	225	 	 	 	289	 	
Other - net	 	 	1	 	 	 	30	 	 	 	18	 	 	 	51	 	
     Total other income	 	$	10	 	 	$	3,358	 	 	$	196	 	 	$	3,082	 	

 8.      Stock-Based Compensation Plans
On May 17, 2010 the stockholders approved the adoption of the Company’s 2010 Stock Incentive Plan.  The Stock Incentive Plan authorizes the issuance or transfer of a maximum of 1,750,000 shares of capital stock pursuant to stock incentives granted to key employees of the Company.  Stock incentives granted under the Stock Plan may be in the form of options to purchase capital stock or in the form of capital stock awards.

In April 2010, we met the stock price target of our Long-Term Incentive Plan.  The stock price hurdle of $54.00 was achieved during 30 trading days out of a 60 day trading day period. On April 16, 2010, the Compensation/Incentive Committee of the Board of Directors (“CIC”) 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.

On February 18, 2010, the 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-one 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 June 30, 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 June 30, 2010.  During the three months ended June 30, 2010, we recorded revenues of $5.6 million (2009 - $5.4 million) and pretax profits of $2.7 million (2009 - $2.4 million) from our independent contractors.  During the six months ended June 30, 2010, we recorded revenues of $11.2 million (2009 - $10.7 million) and pretax profits of $5.1 million (2009 - $4.7 million) from our independent contractors.

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 $2.2 million and $5.6 million for the three months ended June 30, 2010 and 2009, respectively. Expenses for the Company’s pension and profit-sharing plans, excess benefit plans and other similar plans were $4.7 million and $7.0 million for the six months ended June 30, 2010 and 2009, respectively.

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11.  Legal and Regulatory Matters

Litigation
On March 1, 2010 Anthony Morangelli and Frank Ercole filed a class action lawsuit in federal district court for the Eastern District of New York seeking unpaid minimum wages and overtime service technician compensation from Roto-Rooter and Chemed.  They also seek payment of penalties, interest and plaintiffs’ attorney fees.  We contest these allegations.  In June 2010, the Court conditionally certified a nationwide class of service technicians, excluding those who signed dispute resolution agreements in which they agreed to arbitrate claims arising out of their employment.  There has been no final determination of the merits of collective treatment of the case.  The lawsuit is in its early stage and we are unable to estimate our potential liability, if any, with respect to these allegations.

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 Florida 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 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 90 days prior written notice.  VITAS made purchases from OCR of $8.9 million and $8.2 million for the three months ended June 30, 2010 and 2009, respectively.  VITAS made purchases from OCR of $17.5 million and $16.1 million for the six months ended June 30, 2010 and 2009, respectively.

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 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 the Agreements are no less favorable to VITAS than we could negotiate with an unrelated party.

13.  Cash Overdrafts Payable
Included in accounts payable at June 30, 2010 is cash overdrafts payable of $10.4 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.

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of June 30, 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	 	$	26,282	 	 	$	26,282	 	 	$	-	 	 	$	-	 	
Long-term debt	 	 	155,608	 	 	 	172,701	 	 	 	-	 	 	 	-	 	

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 June 30, 2010, we repurchased 114,900 shares at a weighted average cost per share of $54.99 under the April 2007 program.  For the six months ended June 30, 2010, we repurchased 146,275 shares at a weighted average cost per share of $53.32. For the quarter and six months ended June 30, 2009 there was no stock repurchased.

-12-

 

16.  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 June 30, 2010 and December 31, 2009 for the balance sheet, the three and six months ended June 30, 2010 and June 30, 2009 for the income statement and the six months ended June 30, 2010 and June 30, 2009 for the statement of cash flows (dollars in thousands):	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
June 30, 2010	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	Consolidating	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Adjustments	 	 	Consolidated	 	
ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	105,276	 	 	$	(1,238	)	 	$	5,042	 	 	$	-	 	 	$	109,080	 	
Accounts receivable, less allowances	 	 	560	 	 	 	100,754	 	 	 	422	 	 	 	-	 	 	 	101,736	 	
Intercompany receivables	 	 	-	 	 	 	149,823	 	 	 	-	 	 	 	(149,823	)	 	 	-	 	
Inventories	 	 	-	 	 	 	7,272	 	 	 	706	 	 	 	-	 	 	 	7,978	 	
Current deferred income taxes	 	 	(962	)	 	 	15,312	 	 	 	103	 	 	 	-	 	 	 	14,453	 	
Prepaid income taxes	 	 	3,424	 	 	 	(2,939	)	 	 	(134	)	 	 	-	 	 	 	351	 	
Prepaid expenses	 	 	1,047	 	 	 	9,326	 	 	 	50	 	 	 	-	 	 	 	10,423	 	
     Total current assets	 	 	109,345	 	 	 	278,310	 	 	 	6,189	 	 	 	(149,823	)	 	 	244,021	 	
Investments of deferred compensation plans	 	 	-	 	 	 	-	 	 	 	26,282	 	 	 	-	 	 	 	26,282	 	
Properties and equipment, at cost, less accumulated depreciation	 	 	12,987	 	 	 	63,209	 	 	 	2,241	 	 	 	-	 	 	 	78,437	 	
Identifiable intangible assets less accumulated amortization	 	 	-	 	 	 	56,620	 	 	 	-	 	 	 	-	 	 	 	56,620	 	
Goodwill	 	 	-	 	 	 	445,644	 	 	 	4,461	 	 	 	-	 	 	 	450,105	 	
Other assets	 	 	6,373	 	 	 	2,384	 	 	 	1,741	 	 	 	-	 	 	 	10,498	 	
Investments in subsidiaries	 	 	677,384	 	 	 	17,356	 	 	 	-	 	 	 	(694,740	)	 	 	-	 	
          Total assets	 	$	806,089	 	 	$	863,523	 	 	$	40,914	 	 	$	(844,563	)	 	$	865,963	 	
LIABILITIES AND STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	(970	)	 	$	49,646	 	 	$	455	 	 	$	-	 	 	$	49,131	 	
Intercompany payables	 	 	143,947	 	 	 	-	 	 	 	5,876	 	 	 	(149,823	)	 	 	-	 	
Income taxes	 	 	(969	)	 	 	6,199	 	 	 	(447	)	 	 	-	 	 	 	4,783	 	
Accrued insurance	 	 	677	 	 	 	34,052	 	 	 	-	 	 	 	-	 	 	 	34,729	 	
Accrued compensation	 	 	2,063	 	 	 	39,026	 	 	 	524	 	 	 	-	 	 	 	41,613	 	
Other current liabilities	 	 	1,215	 	 	 	10,346	 	 	 	108	 	 	 	-	 	 	 	11,669	 	
      Total current liabilities	 	 	145,963	 	 	 	139,269	 	 	 	6,516	 	 	 	(149,823	)	 	 	141,925	 	
Deferred income taxes	 	 	(11,417	)	 	 	43,452	 	 	 	(7,682	)	 	 	-	 	 	 	24,353	 	
Long-term debt	 	 	155,608	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	155,608	 	
Deferred compensation liabilities	 	 	-	 	 	 	-	 	 	 	25,374	 	 	 	-	 	 	 	25,374	 	
Other liabilities	 	 	2,968	 	 	 	2,327	 	 	 	441	 	 	 	-	 	 	 	5,736	 	
Stockholders' equity	 	 	512,967	 	 	 	678,475	 	 	 	16,265	 	 	 	(694,740	)	 	 	512,967	 	
     Total liabilities and stockholders' equity	 	$	806,089	 	 	$	863,523	 	 	$	40,914	 	 	$	(844,563	)	 	$	865,963	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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	 	

-13-

 

For the three months ended June 30, 2010	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	 	Consolidating	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Adjustments	 	 	Consolidated	 	
 Continuing Operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Service revenues and sales	 	$	-	 	 	$	308,825	 	 	$	6,170	 	 	$	-	 	 	$	314,995	 	
 Cost of services provided and goods sold	 	 	-	 	 	 	220,455	 	 	 	3,247	 	 	 	-	 	 	 	223,702	 	
 Selling, general and administrative expenses	 	 	6,508	 	 	 	42,302	 	 	 	1,146	 	 	 	-	 	 	 	49,956	 	
 Depreciation	 	 	244	 	 	 	5,749	 	 	 	201	 	 	 	-	 	 	 	6,194	 	
 Amortization	 	 	366	 	 	 	921	 	 	 	-	 	 	 	-	 	 	 	1,287	 	
      Total costs and expenses	 	 	7,118	 	 	 	269,427	 	 	 	4,594	 	 	 	-	 	 	 	281,139	 	
      Income/ (loss) from operations	 	 	(7,118	)	 	 	39,398	 	 	 	1,576	 	 	 	-	 	 	 	33,856	 	
 Interest expense	 	 	(2,888	)	 	 	(111	)	 	 	-	 	 	 	-	 	 	 	(2,999	)	
 Other (expense)/income - net	 	 	3,670	 	 	 	(3,562	)	 	 	(98	)	 	 	-	 	 	 	10	 	
      Income/ (loss) before income taxes	 	 	(6,336	)	 	 	35,725	 	 	 	1,478	 	 	 	-	 	 	 	30,867	 	
 Income tax (provision)/ benefit	 	 	2,150	 	 	 	(13,567	)	 	 	(595	)	 	 	-	 	 	 	(12,012	)	
 Equity in net income of subsidiaries	 	 	23,041	 	 	 	994	 	 	 	-	 	 	 	(24,035	)	 	 	-	 	
 Net income	 	$	18,855	 	 	$	23,152	 	 	$	883	 	 	$	(24,035	)	 	$	18,855	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
For the three months ended June 30, 2009	 	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	 	Consolidating	 	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Adjustments	 	 	Consolidated	 	
 Continuing Operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Service revenues and sales	 	$	-	 	 	$	289,382	 	 	$	5,873	 	 	$	-	 	 	$	295,255	 	
 Cost of services provided and goods sold	 	 	-	 	 	 	204,416	 	 	 	2,921	 	 	 	-	 	 	 	207,337	 	
 Selling, general and administrative expenses	 	 	5,783	 	 	 	39,586	 	 	 	4,211	 	 	 	-	 	 	 	49,580	 	
 Depreciation	 	 	148	 	 	 	5,016	 	 	 	174	 	 	 	-	 	 	 	5,338	 	
 Amortization	 	 	315	 	 	 	1,303	 	 	 	-	 	 	 	-	 	 	 	1,618	 	
 Other operating expenses	 	 	3,444	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	3,444	 	
      Total costs and expenses	 	 	9,690	 	 	 	250,321	 	 	 	7,306	 	 	 	-	 	 	 	267,317	 	
      Income/ (loss) from operations	 	 	(9,690	)	 	 	39,061	 	 	 	(1,433	)	 	 	-	 	 	 	27,938	 	
 Interest expense	 	 	(2,757	)	 	 	(385	)	 	 	-	 	 	 	-	 	 	 	(3,142	)	
 Other income - net	 	 	106	 	 	 	38	 	 	 	3,214	 	 	 	-	 	 	 	3,358	 	
      Income/ (loss) before income taxes	 	 	(12,341	)	 	 	38,714	 	 	 	1,781	 	 	 	-	 	 	 	28,154	 	
 Income tax (provision)/ benefit	 	 	4,148	 	 	 	(14,766	)	 	 	(286	)	 	 	-	 	 	 	(10,904	)	
 Equity in net income of subsidiaries	 	 	25,443	 	 	 	1,295	 	 	 	-	 	 	 	(26,738	)	 	 	-	 	
 Net income	 	$	17,250	 	 	$	25,243	 	 	$	1,495	 	 	$	(26,738	)	 	$	17,250	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
For the six months ended June 30, 2010	 	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	Consolidating	 	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Adjustments	 	 	Consolidated	 	
 Continuing Operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Service revenues and sales	 	$	-	 	 	$	611,827	 	 	$	11,981	 	 	$	-	 	 	$	623,808	 	
 Cost of services provided and goods sold	 	 	-	 	 	 	436,655	 	 	 	6,184	 	 	 	-	 	 	 	442,839	 	
 Selling, general and administrative expenses	 	 	12,206	 	 	 	83,619	 	 	 	2,669	 	 	 	-	 	 	 	98,494	 	
 Depreciation	 	 	380	 	 	 	10,882	 	 	 	401	 	 	 	-	 	 	 	11,663	 	
 Amortization	 	 	696	 	 	 	1,815	 	 	 	-	 	 	 	-	 	 	 	2,511	 	
      Total costs and expenses	 	 	13,282	 	 	 	532,971	 	 	 	9,254	 	 	 	-	 	 	 	555,507	 	
      Income/ (loss) from operations	 	 	(13,282	)	 	 	78,856	 	 	 	2,727	 	 	 	-	 	 	 	68,301	 	
 Interest expense	 	 	(5,739	)	 	 	(212	)	 	 	-	 	 	 	-	 	 	 	(5,951	)	
 Other (expense)/income - net	 	 	7,291	 	 	 	(7,199	)	 	 	104	 	 	 	-	 	 	 	196	 	
      Income/ (loss) before income taxes	 	 	(11,730	)	 	 	71,445	 	 	 	2,831	 	 	 	-	 	 	 	62,546	 	
 Income tax (provision)/ benefit	 	 	3,894	 	 	 	(27,106	)	 	 	(1,121	)	 	 	-	 	 	 	(24,333	)	
 Equity in net income of subsidiaries	 	 	46,049	 	 	 	1,820	 	 	 	-	 	 	 	(47,869	)	 	 	-	 	
 Net income	 	$	38,213	 	 	$	46,159	 	 	$	1,710	 	 	$	(47,869	)	 	$	38,213	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
For the six months ended June 30, 2009	 	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	 	Consolidating	 	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Adjustments	 	 	Consolidated	 	
 Continuing Operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Service revenues and sales	 	$	-	 	 	$	578,521	 	 	$	11,672	 	 	$	-	 	 	$	590,193	 	
 Cost of services provided and goods sold	 	 	-	 	 	 	408,445	 	 	 	5,905	 	 	 	-	 	 	 	414,350	 	
 Selling, general and administrative expenses	 	 	11,268	 	 	 	79,978	 	 	 	4,127	 	 	 	-	 	 	 	95,373	 	
 Depreciation	 	 	299	 	 	 	10,023	 	 	 	341	 	 	 	-	 	 	 	10,663	 	
 Amortization	 	 	590	 	 	 	2,564	 	 	 	-	 	 	 	-	 	 	 	3,154	 	
 Other operating expenses	 	 	3,989	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	3,989	 	
      Total costs and expenses	 	 	16,146	 	 	 	501,010	 	 	 	10,373	 	 	 	-	 	 	 	527,529	 	
      Income/ (loss) from operations	 	 	(16,146	)	 	 	77,511	 	 	 	1,299	 	 	 	-	 	 	 	62,664	 	
 Interest (expense)/income	 	 	(5,527	)	 	 	(465	)	 	 	6	 	 	 	-	 	 	 	(5,986	)	
 Other (expense)/income - net	 	 	490	 	 	 	(239	)	 	 	2,831	 	 	 	-	 	 	 	3,082	 	
      Income/ (loss) before income taxes	 	 	(21,183	)	 	 	76,807	 	 	 	4,136	 	 	 	-	 	 	 	59,760	 	
 Income tax (provision)/ benefit	 	 	7,418	 	 	 	(29,216	)	 	 	(1,373	)	 	 	-	 	 	 	(23,171	)	
 Equity in net income of subsidiaries	 	 	50,354	 	 	 	2,900	 	 	 	-	 	 	 	(53,254	)	 	 	-	 	
 Net income	 	$	36,589	 	 	$	50,491	 	 	$	2,763	 	 	$	(53,254	)	 	$	36,589	 	

-14-

 
For the six months ended June 30, 2010	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Consolidated	 	
 Cash Flow from Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 Net cash provided/(used) by operating activities	 	$	(3,737	)	 	$	24,585	 	 	$	(571	)	 	$	20,277	 	
 Cash Flow from Investing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Capital expenditures	 	 	(10	)	 	 	(11,454	)	 	 	(478	)	 	 	(11,942	)	
  Business combinations, net of cash acquired	 	 	-	 	 	 	83	 	 	 	6	 	 	 	89	 	
  Proceeds from sale of property and equipment	 	 	-	 	 	 	(30	)	 	 	-	 	 	 	(30	)	
  Other uses - net	 	 	(89	)	 	 	(171	)	 	 	(26	)	 	 	(286	)	
       Net cash used by investing activities	 	 	(99	)	 	 	(11,572	)	 	 	(498	)	 	 	(12,169	)	
 Cash Flow from Financing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Change in cash overdrafts payable	 	 	1,338	 	 	 	(2,652	)	 	 	-	 	 	 	(1,314	)	
  Change in intercompany accounts	 	 	9,830	 	 	 	(11,478	)	 	 	1,648	 	 	 	-	 	
  Dividends paid to shareholders	 	 	(5,481	)	 	 	-	 	 	 	-	 	 	 	(5,481	)	
  Purchases of treasury stock	 	 	(10,083	)	 	 	-	 	 	 	(42	)	 	 	(10,125	)	
  Proceeds from exercise of stock options	 	 	3,475	 	 	 	-	 	 	 	-	 	 	 	3,475	 	
  Realized excess tax benefit on share based compensation	 	 	702	 	 	 	1,100	 	 	 	-	 	 	 	1,802	 	
  Other sources - net	 	 	-	 	 	 	-	 	 	 	199	 	 	 	199	 	
       Net cash provided/ (used) by financing activities	 	 	(219	)	 	 	(13,030	)	 	 	1,805	 	 	 	(11,444	)	
 Net increase/(decrease) in cash and cash equivalents	 	 	(4,055	)	 	 	(17	)	 	 	736	 	 	 	(3,336	)	
 Cash and cash equivalents at beginning of year	 	 	109,331	 	 	 	(1,221	)	 	 	4,306	 	 	 	112,416	 	
 Cash and cash equivalents at end of period	 	$	105,276	 	 	$	(1,238	)	 	$	5,042	 	 	$	109,080	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
For the six months ended June 30, 2009	 	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Consolidated	 	
 Cash Flow from Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Net cash provided/(used) by operating activities	 	$	(7,802	)	 	$	49,192	 	 	$	1,730	 	 	$	43,120	 	
 Cash Flow from Investing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Capital expenditures	 	 	(13	)	 	 	(7,912	)	 	 	(211	)	 	 	(8,136	)	
  Business combinations, net of cash acquired	 	 	-	 	 	 	(1,859	)	 	 	-	 	 	 	(1,859	)	
  Proceeds from sale of property and equipment	 	 	1,280	 	 	 	216	 	 	 	-	 	 	 	1,496	 	
  Other uses - net	 	 	(365	)	 	 	(110	)	 	 	-	 	 	 	(475	)	
       Net cash provided/(used) by investing activities	 	 	902	 	 	 	(9,665	)	 	 	(211	)	 	 	(8,974	)	
 Cash Flow from Financing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Change in cash overdrafts payable	 	 	1,242	 	 	 	(2,023	)	 	 	-	 	 	 	(781	)	
  Change in intercompany accounts	 	 	39,429	 	 	 	(37,625	)	 	 	(1,804	)	 	 	-	 	
  Dividends paid to shareholders	 	 	(2,711	)	 	 	-	 	 	 	-	 	 	 	(2,711	)	
  Purchases of treasury stock	 	 	(526	)	 	 	-	 	 	 	-	 	 	 	(526	)	
  Proceeds from exercise of stock options	 	 	68	 	 	 	-	 	 	 	-	 	 	 	68	 	
  Realized excess tax benefit on share based compensation	 	 	313	 	 	 	-	 	 	 	-	 	 	 	313	 	
  Repayment of long-term debt	 	 	(17,700	)	 	 	(99	)	 	 	-	 	 	 	(17,799	)	
  Other sources/(uses) - net	 	 	(93	)	 	 	148	 	 	 	239	 	 	 	294	 	
       Net cash provided/ (used) by financing activities	 	 	20,022	 	 	 	(39,599	)	 	 	(1,565	)	 	 	(21,142	)	
 Net increase/(decrease) in cash and cash equivalents	 	 	13,122	 	 	 	(72	)	 	 	(46	)	 	 	13,004	 	
 Cash and cash equivalents at beginning of year	 	 	65	 	 	 	202	 	 	 	3,361	 	 	 	3,628	 	
 Cash and cash equivalents at end of period	 	$	13,187	 	 	$	130	 	 	$	3,315	 	 	$	16,632	 	

-15-

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

Executive Summary
We operate through our two wholly owned subsidiaries, VITAS Healthcare Corporation and Roto-Rooter Group, Inc.  VITAS focuses on hospice care that helps make terminally ill patients’ final days as comfortable as possible.  Through its teams of doctors, nurses, home health aides, social workers, clergy and volunteers, VITAS provides direct medical services to patients, as well as spiritual and emotional counseling to both patients and their families.  Roto-Rooter’s services are focused on providing plumbing 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 and six months ended June 30, 2010 and 2009 (in thousands except per share amounts):

 	 	Three Months Ended 
June 30,	 	 	Six Months Ended 
June 30,	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Service revenues and sales	 	$	314,995	 	 	$	295,255	 	 	$	623,808	 	 	$	590,193	 	
Net income	 	$	18,855	 	 	$	17,250	 	 	$	38,213	 	 	$	36,589	 	
Diluted EPS	 	$	0.82	 	 	$	0.76	 	 	$	1.66	 	 	$	1.61	 	
Adjusted EBITDA*	 	$	44,887	 	 	$	43,650	 	 	$	87,957	 	 	$	85,874	 	
Adjusted EBITDA as a % of revenue	 	 	14.3	%	 	 	14.8	%	 	 	14.1	%	 	 	14.6	%	

*See pages 27 - 28 for reconciliation to GAAP measures.

For the three months ended June 30, 2010, the increase in consolidated service revenues and sales was driven by a 7.3% increase at VITAS while Roto-Rooter revenues increased by 5.2%.  The increase in service revenues at VITAS was a result of increased average daily census (“ADC”) of 5.6%, driven by an increase in admissions of 4.2%, combined with Medicare price increases of approximately 1.3%.  Roto-Rooter was driven by an approximate 6.0% price and mix shift increase offset by a 0.7% decrease in job count. Consolidated net income increased 9.3% mainly as a result of the increase in revenues and lower corporate expenses due to the 2009 costs associated with the contested proxy solicitation.  Diluted EPS increased as the result of increased earnings.  Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased 2.8% from the second quarter of 2009 to the second quarter of 2010.

For the six months ended June 30, 2010, the increase in consolidated service revenues and sales was driven by a 7.1% increase at VITAS and a 2.2% increase at Roto-Rooter.  The increase in service revenues at VITAS was a result of increased average daily census (“ADC”) of 5.3%, driven by an increase in admissions of 4.5%, combined with Medicare price increases of approximately 1.3%.  Roto-Rooter was driven by an approximate 6.3% price and mix shift increase offset by a 4.0% decrease in job count. Consolidated net income increased 4.4% over prior year.  Diluted EPS increased as a result of increased earnings.  Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased 2.4% for the six month period ended June 30, 2010 compared to the same period in 2009.

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 presented on pages 27 - 28.

VITAS expects to achieve full-year 2010 revenue growth, prior to Medicare cap, of 6.0% to 7.0%.  Admissions are estimated to increase 3.0% 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 4.0% to 4.5%.  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.

-16-

 

Financial Condition
Liquidity and Capital Resources
Material changes in the balance sheet accounts from December 31, 2009 to June 30, 2010 include the following:

•  	A $48.3 million increase in accounts receivable primarily at VITAS, related to timing of Medicare payments and refund of overpayments from prior years.	

•  	A $4.7 million increase in income taxes payable, related to timing of payments.	

 Net cash provided by operating activities decreased $22.8 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 $28.3 million in standby letters of credit as of June 30, 2010, for insurance purposes.  Issued letters of credit reduce our available credit under the revolving credit agreement.  As of June 30, 2010, we have approximately $146.7 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 June 30, 2010 and anticipate remaining in compliance throughout 2010.

On March 1, 2010 Anthony Morangelli and Frank Ercole filed a class action lawsuit in federal district court for the Eastern District of New York seeking unpaid minimum wages and overtime service technician compensation from Roto-Rooter and Chemed.  They also seek payment of penalties, interest and Plaintiffs’ attorney fees.  We contest these allegations.  In June 2010, the Court conditionally certified a nationwide class of service technicians, excluding those who signed dispute resolution agreements in which they agreed to arbitrate claims arising out of their employment.  There has been no final determination of the merits of collective treatment of the case.  The lawsuit is in its early stage and we are unable to estimate our potential liability, if any with respect to these allegations.

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 Florida 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.

-17-

 
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.

Results of Operations
Three months ended June 30, 2010 versus  2009 - Consolidated Results

Our service revenues and sales for the second quarter of 2010 increased 6.7% versus services and sales revenues for the second quarter of 2009.  Of this increase, $15.3 million was attributable to VITAS and $4.4 million was attributable to Roto-Rooter.  The following chart shows the components of those changes (dollar amounts in thousands):

 	 	 	 	Increase/(Decrease)	 	
 	 	 	 	Amount	 	 	Percent	 	
VITAS	 	 	 	 	 	 	 	 	
 	Routine homecare	 	 	11,506	 	 	 	7.6	%	
 	Continuous care	 	 	1,977	 	 	 	5.6	%	
 	General inpatient	 	 	2,322	 	 	 	9.8	%	
 	Medicare cap	 	 	(470	)	 	 	-93.1	%	
Roto-Rooter	 	 	 	 	 	 	 	 	 	
 	Plumbing	 	 	 	4,039	 	 	 	10.6	%	
 	Drain cleaning	 	 	(245	)	 	 	-0.7	%	
 	Other	 	 	 	611	 	 	 	5.1	%	
 	 	Total	 	$	19,740	 	 	 	6.7	%	

The increase in VITAS’ revenues for the second quarter of 2010 versus the second quarter of 2009 was a result of increased ADC of 5.6% driven by an increase in admissions of 4.2%, combined with Medicare reimbursement rate increases of approximately 1.3%.  The ADC increase was driven by a 5.5% increase in routine homecare, an increase of 9.9% in general inpatient and a 3.0% increase in continuous care. In excess of 90% of VITAS’ service revenues for the period were from Medicare and Medicaid.

The increase in plumbing revenues for the second quarter of 2010 versus 2009 is attributable to a 6.4% increase in the average price per job and a 4.5% increase 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 18.2% compared to 2009.  Drain cleaning revenues for the second quarter of 2010 versus 2009 reflect a 3.2% decline in the number of jobs, while the average price per job increased 2.5%.  The increase in other revenues is attributable to an increase in our independent contractor operations and an increase in product sales.
 
The consolidated gross margin was 29.0% in the second quarter of 2010 as compared with 29.8% in the second quarter of 2009.  On a segment basis, VITAS’ gross margin was 22.7% in the second quarter of 2010 and 23.3% in the second quarter of 2009.  The decrease in VITAS’ gross margin is attributable to higher labor costs for admissions and Medicare compliance personnel and the opening of inpatient units which carry significant one time start-up costs as capacity begins to ramp-up.  The Roto-Rooter segment’s gross margin was 45.2% for the second quarter of 2010 as compared with 46.2% for the second quarter of 2009.  The decrease in Roto-Rooter’s gross margin was attributable to continued mix shift to excavation which has higher revenue per job but a slightly lower gross margin percentage per job as well as an unfavorable adjustment to casualty insurance.

-18-

 
 
Selling, general and administrative expenses ("SG&A") for the second quarter of 2010 and 2009 comprise (in thousands):
 
 	 	2010	 	 	2009	 	
SG&A expenses before long-term incentive	 	 	 	 	 	 	
compensation and the impact of market gains and	 	 	 	 	
losses of deferred compensation plans	 	 	48,240	 	 	 	46,381	 	
Long-term incentive compensation	 	 	1,799	 	 	 	-	 	
Impact of market value gains/(losses) on liabilities	 	 	 	 	 	 	 	 	
held in deferred compensation trusts	 	 	(83	)	 	 	3,199	 	
Total SG&A expenses	 	$	49,956	 	 	$	49,580	 	
 
Normal salary increases and revenue related expense increases between periods account for the change in SG&A from $46.4 million in the second quarter of 2009 to $48.2 million in the second quarter of 2010.
 
Depreciation expense increased $856,000 to $6.2 million in the second quarter of 2010 due to the installation of patient capture software at our VITAS segment.
 
Other income for the second quarter of 2010 and 2009 comprise (in thousands):
 
 	 	2010	 	 	2009	 	
Interest income	 	 	150	 	 	 	207	 	
Market value gains/(losses) on assets held in deferred	 	 	 	 	 	 	 	 	
compensation trusts	 	 	(83	)	 	 	3,199	 	
Loss on disposal of property and equipment	 	 	(58	)	 	 	(78	)	
Other	 	 	1	 	 	 	30	 	
Total other income	 	$	10	 	 	$	3,358	 	
 
Our effective income tax rate of 38.9% in the second quarter of 2010 was essentially flat with the second quarter of 2009.

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

 	 	2010	 	 	2009	 	
VITAS	 	 	 	 	 	 	
Costs associated with the OIG investigation	 	$	(74	)	 	$	(53	)	
Roto-Rooter	 	 	 	 	 	 	 	 	
Costs of class action lawsuit	 	 	(63	)	 	 	-	 	
Corporate	 	 	 	 	 	 	 	 	
Stock option expense	 	 	(1,484	)	 	 	(1,544	)	
Long-term incentive compensation	 	 	(1,124	)	 	 	-	 	
Noncash interest expense related to accounting for	 	 	 	 	 	 	 	 	
conversion feature of the convertible notes	 	 	(1,068	)	 	 	(987	)	
Expenses of contested proxy solicitation	 	 	-	 	 	 	(2,180	)	
Impact of non-deductible losses and non-taxable gains on	 	 	 	 	 	 	 	 	
investments held in deferred compensation trusts	 	 	-	 	 	 	20	 	
Total	 	$	(3,813	)	 	$	(4,744	)	

-19-

 
 
Three months ended June 30, 2010 versus 2009 - Segment Results

The change in after-tax earnings for the second quarter of 2010 versus the second quarter of 2009 is due to (dollars in thousands):

 	 	Increase/(Decrease)	 	
 	 	Amount	 	 	Percent	 	
VITAS	 	$	1,159	 	 	 	6.8	%	
Roto-Rooter	 	 	62	 	 	 	0.7	%	
Corporate	 	 	384	 	 	 	4.4	%	
 	 	$	1,605	 	 	 	9.3	%	

Six months ended June 30, 2010 versus  2009 - Consolidated Results

Our service revenues and sales for the first six months of 2010 increased 5.7% versus services and sales revenues for the first six months of 2009.  Of this increase, $29.8 million was attributable to VITAS and $3.8 million was attributable to Roto-Rooter.  The following chart shows the components of those changes (dollars in thousands):

 	 	 	 	Increase/(Decrease)	 	
 	 	 	 	Amount	 	 	Percent	 	
VITAS	 	 	 	 	 	 	 	 	
 	Routine homecare	 	$	21,678	 	 	 	7.2	%	
 	Continuous care	 	 	5,060	 	 	 	7.3	%	
 	General inpatient	 	 	3,522	 	 	 	7.2	%	
 	Medicare cap	 	 	1,548	 	 	 	658.7	%	
 	BNAF	 	 	 	(1,950	)	 	 	-100.0	%	
Roto-Rooter	 	 	 	 	 	 	 	 	 	
 	Plumbing	 	 	 	5,167	 	 	 	6.8	%	
 	Drain cleaning	 	 	(2,188	)	 	 	-3.1	%	
 	Other	 	 	 	778	 	 	 	3.2	%	
 	 	Total	 	$	33,615	 	 	 	5.7	%	

The increase in VITAS’ revenues for the first six months of 2010 versus the first six months of 2009 was a result of increased ADC of 5.3% driven by an increase in admissions of 4.5%, combined with Medicare reimbursement rate increases of approximately 1.3%.  The ADC increase was driven by a 5.3% increase in routine homecare, an increase of 7.6% in general inpatient and a 4.8% increase in continuous care. In excess of 90% of VITAS’ service revenues for the period were from Medicare and Medicaid.

The increase in plumbing revenues for the first six months of 2010 versus 2009 is attributable to a 7.8% increase in the average price per job and a 0.5% 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 15.5% compared to 2009.  Drain cleaning revenues for the first six months of 2010 versus 2009 reflect a 5.7% decline in the number of jobs, while the average price per job increased 2.7%.  The increase in other revenues is attributable to an increase in our independent contractor operations and an increase in product sales.
 
The consolidated gross margin was 29.0% in the first six months of 2010 as compared with 29.8% in the first six months of 2009.  On a segment basis, VITAS’ gross margin was 22.7% in the first six months of 2010 and 23.3% in the first six months of 2009.  The decrease in VITAS’ gross margin is attributable to higher labor costs for admissions and Medicare compliance personnel and the opening of inpatient units which carry significant one time start-up costs as capacity begins to ramp-up. The Roto-Rooter segment’s gross margin was 45.2% for the first six months of 2010 as compared with 45.7% for the first six months of 2009.  The decrease in Roto-Rooter’s gross margin is attributable to continued mix shift to excavation which has higher revenue per job but slightly lower gross margin percentage per job.

-20-

 
 
Selling, general and administrative expenses ("SG&A") for the six months of 2010 and 2009 comprise (in thousands):
 
 	 	2010	 	 	2009	 	
SG&A expenses before long-term incentive	 	 	 	 	 	 	
compensation and the impact of market gains and	 	 	 	 	
losses of deferred compensation plans	 	$	96,590	 	 	$	93,788	 	
Long-term incentive compensation	 	 	1,799	 	 	 	-	 	
Impact of market value gains/(losses) on liabilities	 	 	 	 	 	 	 	 	
held in deferred compensation trusts	 	 	105	 	 	 	1,585	 	
Total SG&A expenses	 	$	98,494	 	 	$	95,373	 	
 
Normal salary increases and revenue related expense increases between periods account for the change in SG&A from $93.8 million for the first six months of 2009 to $96.6 million of the first six months of 2010.
 
Depreciation expense increased $1.0 million in the first six months of 2010 to $11.7 million due to the installation of patient capture software at our VITAS segment.
 
Other income for the first six months of 2010 and 2009 comprise (in thousands):
 
 	 	2010	 	 	2009	 	
Interest income	 	 	225	 	 	 	289	 	
Market value gains/(losses) on assets held in deferred	 	 	 	 	 	 	 	 	
compensation trusts	 	 	105	 	 	 	1,585	 	
Loss on disposal of property and equipment	 	 	(152	)	 	 	(54	)	
Non-taxable income from certain investments held	 	 	 	 	 	 	 	 	
deferred compensation trusts	 	 	-	 	 	 	1,211	 	
Other	 	 	18	 	 	 	51	 	
Total other income	 	$	196	 	 	$	3,082	 	
  
Our effective income tax rate of 38.9% in the first six months of 2010 was essentially flat with the first six months of 2009.

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

 	 	2010	 	 	2009	 	
VITAS	 	 	 	 	 	 	
 Costs associated with the OIG investigation	 	$	(173	)	 	$	(61	)	
Roto-Rooter	 	 	 	 	 	 	 	 	
Costs of class action lawsuit	 	 	(63	)	 	 	-	 	
Corporate	 	 	 	 	 	 	 	 	
Stock option expense	 	 	(2,782	)	 	 	(2,836	)	
Long-term incentive compensation	 	 	(1,124	)	 	 	-	 	
  Noncash interest expense related to accounting for	 	 	 	 	 	 	 	 	
conversion feature of the convertible notes	 	 	(2,115	)	 	 	(1,955	)	
  Expenses of contested proxy solicitation	 	 	-	 	 	 	(2,525	)	
  Impact of non-deductible losses and non-taxable gains on	 	 	 	 	 	 	 	 	
investments held in deferred compensation trusts	 	 	-	 	 	 	756	 	
Total	 	$	(6,257	)	 	$	(6,621	)	

-21-

 
 
Six months ended June 30, 2010 versus 2009 - Segment Results

The change in after-tax earnings for the first six months of 2010 versus the first six months of 2009 is due to (dollars in thousands):

 	 	Increase/(Decrease)	 	
 	 	Amount	 	 	Percent	 	
VITAS	 	$	2,427	 	 	 	7.1	%	
Roto-Rooter	 	 	(354	)	 	 	-2.1	%	
Corporate	 	 	(449	)	 	 	-3.0	%	
 	 	$	1,624	 	 	 	4.4	%	

-22-

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES	
CONSOLIDATING STATEMENT OF INCOME	
FOR THE THREE MONTHS ENDED JUNE 30, 2010	
 (in thousands)(unaudited)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
2010 (a)	 	 
VITAS	 	 	 
Roto-Rooter	 	 	 
Corporate	 	 	Chemed Consolidated	 	
Service revenues and sales	 	$	226,638	 	 	$	88,357	 	 	$	-	 	 	$	314,995	 	
Cost of services provided and goods sold	 	 	175,257	 	 	 	48,445	 	 	 	-	 	 	 	223,702	 	
Selling, general and administrative expenses	 	 	18,404	 	 	 	24,192	 	 	 	7,360	 	 	 	49,956	 	
Depreciation	 	 	4,103	 	 	 	1,950	 	 	 	141	 	 	 	6,194	 	
Amortization	 	 	788	 	 	 	132	 	 	 	367	 	 	 	1,287	 	
Total costs and expenses	 	 	198,552	 	 	 	74,719	 	 	 	7,868	 	 	 	281,139	 	
Income/(loss) from operations	 	 	28,086	 	 	 	13,638	 	 	 	(7,868	)	 	 	33,856	 	
Interest expense	 	 	(48	)	 	 	(64	)	 	 	(2,887	)	 	 	(2,999	)	
Intercompany interest income/(expense)	 	 	1,350	 	 	 	773	 	 	 	(2,123	)	 	 	-	 	
Other income/(expense)—net	 	 	45	 	 	 	14	 	 	 	(49	)	 	 	10	 	
Income/(loss) before income taxes	 	 	29,433	 	 	 	14,361	 	 	 	(12,927	)	 	 	30,867	 	
 Income taxes	 	 	(11,152	)	 	 	(5,501	)	 	 	4,641	 	 	 	(12,012	)	
Net income/(loss)	 	$	18,281	 	 	$	8,860	 	 	$	(8,286	)	 	$	18,855	 	

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

 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Chemed Consolidated	 	
Pretax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(2,346	)	 	$	(2,346	)	
Long-term incentive compensation	 	 	-	 	 	 	-	 	 	 	(1,799	)	 	 	(1,799	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(1,688	)	 	 	(1,688	)	
Expenses of class action lawsuit	 	 	-	 	 	 	(105	)	 	 	-	 	 	 	(105	)	
Expenses incurred in connection with the Office of Inspector	 	 	 	 	 	 	 	 	 	
          General investigation	 	 	(118	)	 	 	-	 	 	 	-	 	 	 	(118	)	
          Total	 	$	(118	)	 	$	(105	)	 	$	(5,833	)	 	$	(6,056	)	

 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
After-tax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(1,484	)	 	$	(1,484	)	
Long-term incentive compensation	 	 	-	 	 	 	-	 	 	 	(1,124	)	 	 	(1,124	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(1,068	)	 	 	(1,068	)	
Expenses of class action lawsuit	 	 	-	 	 	 	(63	)	 	 	-	 	 	 	(63	)	
Expenses incurred in connection with the Office of Inspector	 	 	 	 	 	 	 	 	 	
General investigation	 	 	(74	)	 	 	-	 	 	 	-	 	 	 	(74	)	
Total	 	$	(74	)	 	$	(63	)	 	$	(3,676	)	 	$	(3,813	)	

 
-23-

 

 CHEMED CORPORATION AND SUBSIDIARY COMPANIES	
 CONSOLIDATING STATEMENT OF INCOME	
 FOR THE THREE MONTHS ENDED JUNE 30, 2009	
 (in thousands)(unaudited)	

 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
2009 (a)	 	 	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$	211,303	 	 	$	83,952	 	 	$	-	 	 	$	295,255	 	
Cost of services provided and goods sold	 	 	162,175	 	 	 	45,162	 	 	 	-	 	 	 	207,337	 	
Selling, general and administrative expenses	 	 	17,877	 	 	 	22,844	 	 	 	8,859	 	 	 	49,580	 	
Depreciation	 	 	3,256	 	 	 	2,035	 	 	 	47	 	 	 	5,338	 	
Amortization	 	 	1,187	 	 	 	117	 	 	 	314	 	 	 	1,618	 	
Other operating expenses	 	 	-	 	 	 	-	 	 	 	3,444	 	 	 	3,444	 	
Total costs and expenses	 	 	184,495	 	 	 	70,158	 	 	 	12,664	 	 	 	267,317	 	
Income/(loss) from operations	 	 	26,808	 	 	 	13,794	 	 	 	(12,664	)	 	 	27,938	 	
Interest expense	 	 	(326	)	 	 	(59	)	 	 	(2,757	)	 	 	(3,142	)	
Intercompany interest income/(expense)	 	 	1,023	 	 	 	581	 	 	 	(1,604	)	 	 	-	 	
Other income-net	 	 	123	 	 	 	6	 	 	 	3,229	 	 	 	3,358	 	
Income/(loss) before income taxes	 	 	27,628	 	 	 	14,322	 	 	 	(13,796	)	 	 	28,154	 	
Income taxes	 	 	(10,506	)	 	 	(5,524	)	 	 	5,126	 	 	 	(10,904	)	
Net income/(loss)	 	$	17,122	 	 	$	8,798	 	 	$	(8,670	)	 	$	17,250	 	

(a)   The following amounts are included in net income (in thousands):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Chemed
Consolidated	 	
Pretax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(2,443	)	 	$	(2,443	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(1,561	)	 	 	(1,561	)	
Expenses associated with contested proxy solicitation	 	 	-	 	 	 	-	 	 	 	(3,444	)	 	 	(3,444	)	
Expenses incurred in connection with the Office of Inspector	 	 	 	 	 	 	 	 	 	
General investigation	 	 	(86	)	 	 	-	 	 	 	-	 	 	 	(86	)	
Total	 	$	(86	)	 	$	-	 	 	$	(7,448	)	 	$	(7,534	)	
 
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
After-tax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(1,544	)	 	$	(1,544	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(987	)	 	 	(987	)	
Income tax impact of nondeductible losses on investments	 	 	 	 	 	 	 	 	 	
          held in deferred compensation trusts	 	 	-	 	 	 	-	 	 	 	20	 	 	 	20	 	
Expenses associated with contested proxy solicitation	 	 	-	 	 	 	-	 	 	 	(2,180	)	 	 	(2,180	)	
Expenses incurred in connection with the Office of Inspector	 	 	 	 	 	 	 	 	 	
General investigation	 	 	(53	)	 	 	-	 	 	 	-	 	 	 	(53	)	
Total	 	$	(53	)	 	$	-	 	 	$	(4,691	)	 	$	(4,744	)	

-24-

 
 
 CHEMED CORPORATION AND SUBSIDIARY COMPANIES	
 CONSOLIDATING STATEMENT OF INCOME	
 FOR THE SIX MONTHS ENDED JUNE 30, 2010	
 (in thousands)(unaudited)	

 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
2010 (a)	 	 	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$	449,578	 	 	$	174,230	 	 	$	-	 	 	$	623,808	 	
Cost of services provided and goods sold	 	 	347,350	 	 	 	95,489	 	 	 	-	 	 	 	442,839	 	
Selling, general and administrative expenses	 	 	36,550	 	 	 	48,950	 	 	 	12,994	 	 	 	98,494	 	
Depreciation	 	 	7,587	 	 	 	3,901	 	 	 	175	 	 	 	11,663	 	
Amortization	 	 	1,559	 	 	 	255	 	 	 	697	 	 	 	2,511	 	
Total costs and expenses	 	 	393,046	 	 	 	148,595	 	 	 	13,866	 	 	 	555,507	 	
Income/(loss) from operations	 	 	56,532	 	 	 	25,635	 	 	 	(13,866	)	 	 	68,301	 	
Interest expense	 	 	(80	)	 	 	(132	)	 	 	(5,739	)	 	 	(5,951	)	
Intercompany interest income/(expense)	 	 	2,639	 	 	 	1,475	 	 	 	(4,114	)	 	 	-	 	
Other income/(expense)—net	 	 	6	 	 	 	24	 	 	 	166	 	 	 	196	 	
Income/(loss) before income taxes	 	 	59,097	 	 	 	27,002	 	 	 	(23,553	)	 	 	62,546	 	
Income taxes	 	 	(22,378	)	 	 	(10,329	)	 	 	8,374	 	 	 	(24,333	)	
Net income/(loss)	 	$	36,719	 	 	$	16,673	 	 	$	(15,179	)	 	$	38,213	 	

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

 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Chemed
Consolidated	 	
Pretax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(4,397	)	 	$	(4,397	)	
Long-term incentive compensation	 	 	-	 	 	 	-	 	 	 	(1,799	)	 	 	(1,799	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(3,343	)	 	 	(3,343	)	
Expenses of class action lawsuit	 	 	-	 	 	 	(105	)	 	 	-	 	 	 	(105	)	
Expenses incurred in connection with the Office of Inspector	 	 	 	 	 	 	 	 	 	
General investigation	 	 	(278	)	 	 	-	 	 	 	-	 	 	 	(278	)	
Total	 	$	(278	)	 	$	(105	)	 	$	(9,539	)	 	$	(9,922	)	
 
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
After-tax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(2,782	)	 	$	(2,782	)	
Long-term incentive compensation	 	 	-	 	 	 	-	 	 	 	(1,124	)	 	 	(1,124	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(2,115	)	 	 	(2,115	)	
Expenses of class action lawsuit	 	 	-	 	 	 	(63	)	 	 	-	 	 	 	(63	)	
Expenses incurred in connection with the Office of Inspector	 	 	 	 	 	 	 	 	 	
General investigation	 	 	(173	)	 	 	-	 	 	 	-	 	 	 	(173	)	
Total	 	$	(173	)	 	$	(63	)	 	$	(6,021	)	 	$	(6,257	)	

-25-

 
 
 CHEMED CORPORATION AND SUBSIDIARY COMPANIES	
 CONSOLIDATING STATEMENT OF INCOME	
 FOR THE SIX MONTHS ENDED JUNE 30, 2009	
 (in thousands)(unaudited)	

 	 	 VITAS	 	 	 Roto-Rooter	 	 	Corporate	 	 	Chemed
Consolidated	 	
2009 (a)	 	 	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$	419,720	 	 	$	170,473	 	 	$	-	 	 	$	590,193	 	
Cost of services provided and goods sold	 	 	321,807	 	 	 	92,543	 	 	 	-	 	 	 	414,350	 	
Selling, general and administrative expenses	 	 	35,423	 	 	 	47,219	 	 	 	12,731	 	 	 	95,373	 	
Depreciation	 	 	6,475	 	 	 	4,089	 	 	 	99	 	 	 	10,663	 	
Amortization	 	 	2,358	 	 	 	206	 	 	 	590	 	 	 	3,154	 	
Other operating expenses	 	 	-	 	 	 	-	 	 	 	3,989	 	 	 	3,989	 	
Total costs and expenses	 	 	366,063	 	 	 	144,057	 	 	 	17,409	 	 	 	527,529	 	
Income/(loss) from operations	 	 	53,657	 	 	 	26,416	 	 	 	(17,409	)	 	 	62,664	 	
Interest expense	 	 	(365	)	 	 	(94	)	 	 	(5,527	)	 	 	(5,986	)	
Intercompany interest income/(expense)	 	 	1,913	 	 	 	1,117	 	 	 	(3,030	)	 	 	-	 	
Other income-net	 	 	120	 	 	 	122	 	 	 	2,840	 	 	 	3,082	 	
Income/(loss) before income taxes	 	 	55,325	 	 	 	27,561	 	 	 	(23,126	)	 	 	59,760	 	
Income taxes	 	 	(21,033	)	 	 	(10,534	)	 	 	8,396	 	 	 	(23,171	)	
Net income/(loss)	 	$	34,292	 	 	$	17,027	 	 	$	(14,730	)	 	$	36,589	 	

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

 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Chemed
Consolidated	 	
Pretax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(4,485	)	 	$	(4,485	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(3,091	)	 	 	(3,091	)	
Non-taxable income on certain investments held in deferred	 	 	 	 	 	 	 	 	 	
compensation trusts	 	 	-	 	 	 	-	 	 	 	1,211	 	 	 	1,211	 	
Expenses associated with contested proxy solicitation	 	 	-	 	 	 	-	 	 	 	(3,989	)	 	 	(3,989	)	
Expenses incurred in connection with the Office of Inspector	 	 	 	 	 	 	 	 	 	
General investigation	 	 	(99	)	 	 	-	 	 	 	-	 	 	 	(99	)	
Total	 	$	(99	)	 	$	-	 	 	$	(10,354	)	 	$	(10,453	)	

 	 	VITAS	 	 	 Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
After-tax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(2,836	)	 	$	(2,836	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(1,955	)	 	 	(1,955	)	
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	 	 	-	 	 	 	-	 	 	 	(455	)	 	 	(455	)	
Expenses associated with contested proxy solicitation	 	 	-	 	 	 	-	 	 	 	(2,525	)	 	 	(2,525	)	
Expenses incurred in connection with the Office of Inspector	 	 	 	 	 	 	 	 	 	
General investigation	 	 	(61	)	 	 	-	 	 	 	-	 	 	 	(61	)	
Total	 	$	(61	)	 	$	-	 	 	$	(6,560	)	 	$	(6,621	)	
 
-26-

 
 
Consolidating Summary and Reconciliation of Adjusted EBITDA	
 
Chemed Corporation and Subsidiary Companies	 	 	 	 	 	 	 	 	 	 	
(in thousands)	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 For the three months ended June 30, 2010	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 Net income/(loss)	 	$	18,281	 	 	$	8,860	 	 	$	(8,286	)	 	$	18,855	 	
 Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Interest expense	 	 	48	 	 	 	64	 	 	 	2,887	 	 	 	2,999	 	
 Income taxes	 	 	11,152	 	 	 	5,501	 	 	 	(4,641	)	 	 	12,012	 	
 Depreciation	 	 	4,103	 	 	 	1,950	 	 	 	141	 	 	 	6,194	 	
 Amortization	 	 	788	 	 	 	132	 	 	 	367	 	 	 	1,287	 	
 EBITDA	 	 	34,372	 	 	 	16,507	 	 	 	(9,532	)	 	 	41,347	 	
 Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Legal expenses of OIG investigation	 	 	118	 	 	 	-	 	 	 	-	 	 	 	118	 	
 Stock option expense	 	 	-	 	 	 	-	 	 	 	2,346	 	 	 	2,346	 	
 Advertising cost adjustment	 	 	-	 	 	 	(678	)	 	 	-	 	 	 	(678	)	
 Expenses of class action litigation	 	 	-	 	 	 	105	 	 	 	-	 	 	 	105	 	
 Long-term incentive compensation	 	 	-	 	 	 	-	 	 	 	1,799	 	 	 	1,799	 	
 Interest income	 	 	(90	)	 	 	(25	)	 	 	(35	)	 	 	(150	)	
 Intercompany interest income/(expense)	 	 	(1,350	)	 	 	(773	)	 	 	2,123	 	 	 	-	 	
 Adjusted EBITDA	 	$	33,050	 	 	$	15,136	 	 	$	(3,299	)	 	$	44,887	 	

 
 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 For the three months ended June 30, 2009	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 Net income/(loss)	 	$	17,122	 	 	$	8,798	 	 	$	(8,670	)	 	$	17,250	 	
 Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Interest expense	 	 	326	 	 	 	59	 	 	 	2,757	 	 	 	3,142	 	
 Income taxes	 	 	10,506	 	 	 	5,524	 	 	 	(5,126	)	 	 	10,904	 	
 Depreciation	 	 	3,256	 	 	 	2,035	 	 	 	47	 	 	 	5,338	 	
 Amortization	 	 	1,187	 	 	 	117	 	 	 	314	 	 	 	1,618	 	
 EBITDA	 	 	32,397	 	 	 	16,533	 	 	 	(10,678	)	 	 	38,252	 	
 Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Expenses associated with contested proxy solicitation	 	 	-	 	 	 	-	 	 	 	3,444	 	 	 	3,444	 	
 Legal expenses of OIG investigation	 	 	86	 	 	 	-	 	 	 	-	 	 	 	86	 	
 Stock option expense	 	 	-	 	 	 	-	 	 	 	2,443	 	 	 	2,443	 	
 Advertising cost adjustment	 	 	-	 	 	 	(368	)	 	 	-	 	 	 	(368	)	
 Interest income	 	 	(149	)	 	 	(18	)	 	 	(40	)	 	 	(207	)	
 Intercompany interest income/(expense)	 	 	(1,023	)	 	 	(581	)	 	 	1,604	 	 	 	-	 	
 Adjusted EBITDA	 	$	31,311	 	 	$	15,566	 	 	$	(3,227	)	 	$	43,650	 	

 
-27-

 
 
Consolidating Summary and Reconciliation of Adjusted EBITDA	
 
Chemed Corporation and Subsidiary Companies	 	 	 	 	 	 	 	 	 	 	
(in thousands)	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 For the six months ended June 30, 2010	VITAS	 	Roto-Rooter	Corporate	 	Consolidated	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 Net income/(loss)	 	$	36,719	 	 	$	16,673	 	 	$	(15,179	)	 	$	38,213	 	
 Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Interest expense	 	 	80	 	 	 	132	 	 	 	5,739	 	 	 	5,951	 	
 Income taxes	 	 	22,378	 	 	 	10,329	 	 	 	(8,374	)	 	 	24,333	 	
 Depreciation	 	 	7,587	 	 	 	3,901	 	 	 	175	 	 	 	11,663	 	
 Amortization	 	 	1,559	 	 	 	255	 	 	 	697	 	 	 	2,511	 	
 EBITDA	 	 	68,323	 	 	 	31,290	 	 	 	(16,942	)	 	 	82,671	 	
 Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Legal expenses of OIG investigation	 	 	278	 	 	 	-	 	 	 	-	 	 	 	278	 	
 Stock option expense	 	 	-	 	 	 	-	 	 	 	4,397	 	 	 	4,397	 	
 Advertising cost adjustment	 	 	-	 	 	 	(1,068	)	 	 	-	 	 	 	(1,068	)	
 Expenses of class action litigation	 	 	-	 	 	 	105	 	 	 	-	 	 	 	105	 	
 Long-term incentive compensation	 	 	-	 	 	 	-	 	 	 	1,799	 	 	 	1,799	 	
 Interest income	 	 	(135	)	 	 	(27	)	 	 	(63	)	 	 	(225	)	
 Intercompany interest income/(expense)	 	 	(2,639	)	 	 	(1,475	)	 	 	4,114	 	 	 	-	 	
 Adjusted EBITDA	 	$	65,827	 	 	$	28,825	 	 	$	(6,695	)	 	$	87,957	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 For the six months ended June 30, 2009	VITAS	 	Roto-Rooter	Corporate	 	Consolidated	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Net income/(loss)	 	$	34,292	 	 	$	17,027	 	 	$	(14,730	)	 	$	36,589	 	
 Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Interest expense	 	 	365	 	 	 	94	 	 	 	5,527	 	 	 	5,986	 	
 Income taxes	 	 	21,033	 	 	 	10,534	 	 	 	(8,396	)	 	 	23,171	 	
 Depreciation	 	 	6,475	 	 	 	4,089	 	 	 	99	 	 	 	10,663	 	
 Amortization	 	 	2,358	 	 	 	206	 	 	 	590	 	 	 	3,154	 	
 EBITDA	 	 	64,523	 	 	 	31,950	 	 	 	(16,910	)	 	 	79,563	 	
 Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Non-taxable income from certain investments held in	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 deferred compensation trusts	 	 	-	 	 	 	-	 	 	 	(1,211	)	 	 	(1,211	)	
 Expenses associated with contested proxy solicitation	 	 	-	 	 	 	-	 	 	 	3,989	 	 	 	3,989	 	
 Legal expenses of OIG investigation	 	 	99	 	 	 	-	 	 	 	-	 	 	 	99	 	
 Stock option expense	 	 	-	 	 	 	-	 	 	 	4,485	 	 	 	4,485	 	
 Advertising cost adjustment	 	 	-	 	 	 	(762	)	 	 	-	 	 	 	(762	)	
 Interest income	 	 	(197	)	 	 	(36	)	 	 	(56	)	 	 	(289	)	
 Intercompany interest income/(expense)	 	 	(1,913	)	 	 	(1,117	)	 	 	3,030	 	 	 	-	 	
 Adjusted EBITDA	 	$	62,512	 	 	$	30,035	 	 	$	(6,673	)	 	$	85,874	 	

 
-28-

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

 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
OPERATING STATISTICS	 	2010	 	2009	 	 	2010	 	2009	 	
Net revenue ($000)	 	 	 	 	 	 	 	 	 	 	 	 	
Homecare	 	$	163,512	 	 	$	152,006	 	 	$	320,738	 	 	$	299,060	 	
Inpatient	 	 	25,989	 	 	 	23,667	 	 	 	52,281	 	 	 	48,759	 	
Continuous care	 	 	37,102	 	 	 	35,125	 	 	 	74,776	 	 	 	69,716	 	
Total before Medicare cap allowance and 2008 BNAF	 	$	226,603	 	 	$	210,798	 	 	$	447,795	 	 	$	417,535	 	
Estimated BNAF	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,950	 	
Medicare cap allowance	 	 	35	 	 	 	505	 	 	 	1,783	 	 	 	235	 	
Total	 	$	226,638	 	 	$	211,303	 	 	$	449,578	 	 	$	419,720	 	
Net revenue as a percent of total	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     before Medicare cap allowance	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Homecare	 	 	72.1	%	 	 	72.1	%	 	 	71.6	%	 	 	71.6	%	
Inpatient	 	 	11.5	 	 	 	11.2	 	 	 	11.7	 	 	 	11.7	 	
Continuous care	 	 	16.4	 	 	 	16.7	 	 	 	16.7	 	 	 	16.7	 	
Total before Medicare cap allowance and 2008 BNAF	 	 	100.0	 	 	 	100.0	 	 	 	100.0	 	 	 	100.0	 	
Estimated BNAF	 	 	-	 	 	 	-	 	 	 	-	 	 	 	0.5	 	
Medicare cap allowance	 	 	-	 	 	 	0.2	 	 	 	0.4	 	 	 	-	 	
Total	 	 	100.0	%	 	 	100.2	%	 	 	100.4	%	 	 	100.5	%	
Average daily census (days)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Homecare	 	 	8,345	 	 	 	7,668	 	 	 	8,229	 	 	 	7,573	 	
Nursing home	 	 	3,223	 	 	 	3,292	 	 	 	3,193	 	 	 	3,277	 	
Routine homecare	 	 	11,568	 	 	 	10,960	 	 	 	11,422	 	 	 	10,850	 	
Inpatient	 	 	433	 	 	 	394	 	 	 	438	 	 	 	407	 	
Continuous care	 	 	583	 	 	 	566	 	 	 	594	 	 	 	567	 	
Total	 	 	12,584	 	 	 	11,920	 	 	 	12,454	 	 	 	11,824	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Admissions	 	 	14,423	 	 	 	13,840	 	 	 	29,267	 	 	 	28,008	 	
Total Discharges	 	 	14,132	 	 	 	13,740	 	 	 	28,685	 	 	 	27,605	 	
Average length of stay (days)	 	 	77.4	 	 	 	73.4	 	 	 	76.6	 	 	 	75.0	 	
Median length of stay (days)	 	 	14.0	 	 	 	14.0	 	 	 	14.0	 	 	 	14.0	 	
ADC by major diagnosis	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Neurological	 	 	32.8	%	 	 	32.8	%	 	 	32.8	%	 	 	32.7	%	
Cancer	 	 	18.1	 	 	 	19.2	 	 	 	18.5	 	 	 	19.3	 	
Cardio	 	 	12.0	 	 	 	12.1	 	 	 	11.9	 	 	 	12.2	 	
Respiratory	 	 	6.5	 	 	 	6.6	 	 	 	6.6	 	 	 	6.6	 	
Other	 	 	30.6	 	 	 	29.3	 	 	 	30.2	 	 	 	29.2	 	
Total	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	
Admissions by major diagnosis	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Neurological	 	 	18.5	%	 	 	17.3	%	 	 	18.6	%	 	 	17.9	%	
Cancer	 	 	33.8	 	 	 	35.4	 	 	 	33.8	 	 	 	34.9	 	
Cardio	 	 	11.2	 	 	 	11.9	 	 	 	11.4	 	 	 	12.1	 	
Respiratory	 	 	8.5	 	 	 	7.7	 	 	 	8.5	 	 	 	7.8	 	
Other	 	 	28.0	 	 	 	27.7	 	 	 	27.7	 	 	 	27.3	 	
Total	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	
Direct patient care margins	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Routine homecare	 	 	52.5	%	 	 	52.1	%	 	 	51.9	%	 	 	51.9	%	
Inpatient	 	 	12.3	 	 	 	16.6	 	 	 	13.7	 	 	 	17.1	 	
Continuous care	 	 	21.2	 	 	 	20.2	 	 	 	21.0	 	 	 	20.2	 	
Homecare margin drivers (dollars per patient day)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Labor costs	 	$	52.52	 	 	$	51.83	 	 	$	53.21	 	 	$	52.32	 	
Drug costs	 	 	7.67	 	 	 	7.71	 	 	 	7.72	 	 	 	7.68	 	
Home medical equipment	 	 	6.66	 	 	 	6.82	 	 	 	6.80	 	 	 	6.75	 	
Medical supplies	 	 	2.46	 	 	 	2.36	 	 	 	2.45	 	 	 	2.32	 	
Inpatient margin drivers (dollars per patient day)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Labor costs	 	$	301.81	 	 	$	282.46	 	 	$	294.27	 	 	$	276.96	 	
Continuous care margin drivers (dollars per patient day)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Labor costs	 	$	530.05	 	 	$	522.27	 	 	$	528.23	 	 	$	521.79	 	
Bad debt expense as a percent of revenues	 	 	0.9	%	 	 	1.1	%	 	 	0.9	%	 	 	1.1	%	
 Accounts receivable --	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Days of revenue outstanding- excluding unapplied Medicare payments	 	 	42.3	 	 	 	55.9	 	 	n.a.	 	 	n.a.	 	
 Days of revenue outstanding- including unapplied Medicare payments	 	 	34.1	 	 	 	36.7	 	 	n.a.	 	 	n.a.	 	

 
-29-

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

Item 3.    Quantitative and Qualitative Disclosures about Market Risk
Our primary market risk exposure relates to interest rate risk exposure through variable interest rate borrowings.  At June 30, 2010, we had no variable rate debt outstanding.  At June 30, 2010, the fair value of the Notes approximates $172.7 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.

-30-

 

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 first six months of  2010:
 
 	 	 	 	 	Weighted	 	 	Cumulative Shares	 	 	Dollar Amount	 	
 	 	Total Number	 	 	Average	 	 	Repurchased	 	 	Remaining	 	
 	 	of Shares	 	 	Price Paid Per	 	 	Under	 	 	 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 29, 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	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
April 1 through April 30, 2010	 	 	-	 	 	$	-	 	 	 	1,736,972	 	 	$	51,718,696	 	
May 1 through May 31, 2010	 	 	38,492	 	 	$	53.70	 	 	 	1,775,464	 	 	$	49,651,677	 	
June 1 through June 30, 2010	 	 	76,408	 	 	$	55.65	 	 	 	1,851,872	 	 	$	45,399,865	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Second Quarter Total - April 2007 Program	 	 	114,900	 	 	$	54.99	 	 	 	 	 	 	 	 	 	
 
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
 
Removed and reserved
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.	
 	 	 	
101.INS	 	XBRL Instance Document	
 	 	 	
101.SCH	 	XBRL Taxonomy Extension Schema	
 	 	 	
101.CAL	 	XBRL Taxonomy Extension Calculation Linkbase	
 	 	 	
 101.LAB	 	XBRL Taxonomy Extension Label Linkbase	
 	 	 	
101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase	
 	 	 	
101.DEF	 	XBRL Taxonomy Extension Definition Document	

 
-31-

 
SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 	 	 	 	 	 	Chemed Corporation	
 	 	 	 	 	 	(Registrant)	

Dated:	 	July 30, 2010	 	By:	 	Kevin J. McNamara	
 	 	 	 	 	 	Kevin J. McNamara	
 	 	 	 	 	 	(President and Chief Executive Officer)	

Dated:	 	July 30, 2010	 	By:	 	David P. Williams	
 	 	 	 	 	 	David P. Williams	
 	 	 	 	 	 	(Executive Vice President and Chief Financial Officer)	

Dated:	 	July 30, 2010	 	By:	 	Arthur V. Tucker, Jr.	
 	 	 	 	 	 	Arthur V. Tucker, Jr.	
 	 	 	 	 	 	(Vice President and Controller)	

 
-32-

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:	July 30, 2010         	/s/ Kevin J. McNamara	
 	 	Kevin J. McNamara	
 	 	(President and Chief	
 	 	Executive Officer)	
 
E-1

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:	July 30, 2010         	/s/ David P. Williams	
 	 	David P. Williams	
 	 	(Executive Vice President and Chief Financial
Officer)	
 
E-2

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:	July 30, 2010         	/s/ Arthur V. Tucker, Jr.	
 	 	Arthur V. Tucker, Jr.	
 	 	(Vice President and	
 	 	Controller)	
 
E-3

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 June 30, 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:	July 30, 2010         	/s/ Kevin J. McNamara	
 	 	Kevin J. McNamara	
 	 	(President and Chief	
 	 	Executive Officer)	
 
E-4

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 June 30, 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:	July 30, 2010         	/s/ David P. Williams	
 	 	David P. Williams	
 	 	(Executive Vice President and Chief Financial Officer)	
 
E-5

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