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 September 30, 2012	
 
 	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	

Commission File Number: 1-8351

CHEMED CORPORATION
(Exact name of registrant as specified in its charter)

Delaware	 	31-0791746	
(State or other jurisdiction of incorporation or organization)
 	 	(IRS Employer Identification No.)	
 
255 E. Fifth Street, Suite 2600, Cincinnati, Ohio	 	45202	
(Address of principal executive offices)	 	(Zip code)	
 
(513) 762-6500
(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	 	19,288,868 Shares	 	September 30, 2012	

 
 
-1-

 
 
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES

Index

 	 	Page No.	
PART I.    FINANCIAL INFORMATION:	 	 	
 	Item 1.  Financial Statements	 	 	
 	Unaudited Consolidated Balance Sheet -September 30, 2012 and December 31, 2011	 	 
3	
 	 	 	 	
 	Unaudited Consolidated Statement of Income -Three and nine months ended September 30, 2012 and 2011	 	 
4	
 	 	 	 	
 	Unaudited Consolidated Statement of Cash Flows -Nine months ended September 30, 2012 and 2011	 	 
5	
 	 	 	 	
 	Notes to Unaudited Consolidated Financial Statements	 	6	
 	 	 	
 	Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operatios	 	18	
 	 	 	
 	Item 3.  Quantitative and Qualitative Disclosures about Market Risk	 	33	
 	 	 	
 	Item 4.  Controls and Procedures	 	33	
 	 	 	
PART II.   OTHER INFORMATION	 	 	
 	Item 1.    Legal Proceedings	 	33	
 	 	 	 	
 	Item 1A. Risk Factors	 	33	
 	 	 	 	
 	Item 2.    Unregistered Sales of Equity Securities and Use of  Proceeds	 	34	
 	 	 	 	
 	Item 3.    Defaults Upon Senior Securities	 	34	
 	 	 	 	
 	Item 4.    Mine Safety Disclosures	 	34	
 	 	 	 	
 	Item 5.    Other Information	 	34	
 	 	 	 	
 	Item 6.    Exhibits	 	35	
    EX – 31.1
    EX – 31.2
    EX – 31.3
    EX – 32.1
    EX – 32.2
    EX – 32.3
    EX – 101.INS
    EX – 101.SCH
          EX – 101.CAL
    EX – 101.DEF
    EX – 101.LAB
 EX – 101.PRE

-2-

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

 	 	September 30,	 	 	December 31,	 	
 	 	2012	 	 	2011	 	
ASSETS	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	
Cash and cash equivalents	 	$	69,296	 	 	$	38,081	 	
Accounts receivable less allowances of $11,782 (2011 - $11,524)	 	 	101,152	 	 	 	77,924	 	
Inventories - net	 	 	7,639	 	 	 	8,668	 	
Current deferred income taxes	 	 	14,118	 	 	 	12,540	 	
Prepaid income taxes	 	 	3,044	 	 	 	2,131	 	
Prepaid expenses	 	 	9,855	 	 	 	11,409	 	
Total current assets	 	 	205,104	 	 	 	150,753	 	
Investments of deferred compensation plans	 	 	35,053	 	 	 	31,629	 	
Properties and equipment, at cost, less accumulated depreciation of $159,407 (2011 - $146,709)	 	 	90,135	 	 	 	82,951	 	
Identifiable intangible assets less accumulated amortization of $30,035 (2011 - $28,904)	 	 	57,507	 	 	 	58,262	 	
Goodwill	 	 	465,861	 	 	 	460,633	 	
Other assets	 	 	11,127	 	 	 	11,677	 	
Total Assets	 	$	864,787	 	 	$	795,905	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES	 	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	 	
Accounts payable	 	$	44,056	 	 	$	48,225	 	
Income taxes	 	 	1,496	 	 	 	90	 	
Accrued insurance	 	 	39,518	 	 	 	37,147	 	
Accrued compensation	 	 	44,117	 	 	 	41,087	 	
Other current liabilities	 	 	18,494	 	 	 	18,851	 	
Total current liabilities	 	 	147,681	 	 	 	145,400	 	
Deferred income taxes	 	 	24,264	 	 	 	29,463	 	
Long-term debt	 	 	172,812	 	 	 	166,784	 	
Deferred compensation liabilities	 	 	34,626	 	 	 	30,693	 	
Other liabilities	 	 	10,779	 	 	 	9,881	 	
Total Liabilities	 	 	390,162	 	 	 	382,221	 	
 	 	 	 	 	 	 	 	 	
STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	
Capital stock - authorized 80,000,000 shares $1 par; issued 31,450,817 shares (2011 - 30,936,925 shares)	 	 	31,451	 	 	 	30,937	 	
Paid-in capital	 	 	428,232	 	 	 	398,094	 	
Retained earnings	 	 	599,680	 	 	 	546,757	 	
Treasury stock - 12,257,661 shares (2011 - 11,880,051)	 	 	(586,744	)	 	 	(564,091	)	
Deferred compensation payable in Company stock	 	 	2,006	 	 	 	1,987	 	
Total Stockholders' Equity	 	 	474,625	 	 	 	413,684	 	
Total Liabilities and Stockholders' Equity	 	$	864,787	 	 	$	795,905	 	

See accompanying notes to unaudited consolidated financial statements.	 	

-3-

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

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended
September 30,	 	 	Nine Months Ended
September 30,	 	
 	 	2012	 	 	2011	 	 	2012	 	 	2011	 	
Service revenues and sales	 	$	354,353	 	 	$	341,439	 	 	$	1,061,466	 	 	$	1,005,717	 	
Cost of services provided and goods sold (excluding depreciation)	 	 	256,610	 	 	 	245,063	 	 	 	771,423	 	 	 	722,118	 	
Selling, general and administrative expenses	 	 	52,955	 	 	 	47,618	 	 	 	155,892	 	 	 	153,696	 	
Depreciation	 	 	6,557	 	 	 	6,313	 	 	 	19,178	 	 	 	18,959	 	
Amortization	 	 	1,135	 	 	 	1,134	 	 	 	3,375	 	 	 	3,243	 	
Other operating expenses	 	 	1,126	 	 	 	-	 	 	 	1,126	 	 	 	-	 	
Total costs and expenses	 	 	318,383	 	 	 	300,128	 	 	 	950,994	 	 	 	898,016	 	
Income from operations	 	 	35,970	 	 	 	41,311	 	 	 	110,472	 	 	 	107,701	 	
Interest expense	 	 	(3,743	)	 	 	(3,555	)	 	 	(11,032	)	 	 	(10,260	)	
Other income/(expense) - net	 	 	1,840	 	 	 	(1,935	)	 	 	2,965	 	 	 	881	 	
Income before income taxes	 	 	34,067	 	 	 	35,821	 	 	 	102,405	 	 	 	98,322	 	
Income taxes	 	 	(13,222	)	 	 	(13,934	)	 	 	(39,841	)	 	 	(38,048	)	
Net income	 	$	20,845	 	 	$	21,887	 	 	$	62,564	 	 	$	60,274	 	

Earnings Per Share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	1.10	 	 	$	1.06	 	 	$	3.30	 	 	$	2.88	 	
Average number of shares outstanding	 	 	18,960	 	 	 	20,674	 	 	 	18,977	 	 	 	20,934	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted Earnings Per Share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	1.07	 	 	$	1.04	 	 	$	3.23	 	 	$	2.82	 	
Average number of shares outstanding	 	 	19,404	 	 	 	21,055	 	 	 	19,382	 	 	 	21,400	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash Dividends Per Share	 	$	0.18	 	 	$	0.16	 	 	$	0.50	 	 	$	0.44	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to unaudited consolidated financial statements.	 	

-4-

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES	 	
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS	 	
(in thousands)	 	
 	 	 	 	 	 	 	
 	 	Nine Months Ended	 	
 	 	September 30,	 	
 	 	2012	 	 	2011	 	
Cash Flows from Operating Activities	 	 	 	 	 	 	
Net income	 	$	62,564	 	 	$	60,274	 	
Adjustments to reconcile net income to net cash provided	 	 	 	 	 	 	 	 	
by operating activities:	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	22,553	 	 	 	22,202	 	
Deferred income taxes	 	 	(6,808	)	 	 	(1,608	)	
Provision for uncollectible accounts receivable	 	 	7,303	 	 	 	6,640	 	
Amortization of discount on convertible notes	 	 	6,028	 	 	 	5,633	 	
Stock option expense	 	 	6,709	 	 	 	6,903	 	
Noncash long-term incentive compensation	 	 	-	 	 	 	2,595	 	
Changes in operating assets and liabilities, excluding	 	 	 	 	 	 	 	 	
amounts acquired in business combinations:	 	 	 	 	 	 	 	 	
Increase in accounts receivable	 	 	(30,409	)	 	 	(5,991	)	
Decrease/(increase) in inventories	 	 	1,029	 	 	 	(1,160	)	
Decrease in prepaid expenses	 	 	1,554	 	 	 	254	 	
Increase in accounts payable and other current liabilities	 	 	4,454	 	 	 	2,654	 	
Increase in income taxes	 	 	1,292	 	 	 	12,253	 	
Increase in other assets	 	 	(3,944	)	 	 	(3,811	)	
Increase in other liabilities	 	 	6,648	 	 	 	3,567	 	
Excess tax benefit on share-based compensation	 	 	(2,714	)	 	 	(3,368	)	
Other sources	 	 	1,078	 	 	 	899	 	
Net cash provided by operating activities	 	 	77,337	 	 	 	107,936	 	
Cash Flows from Investing Activities	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	(26,489	)	 	 	(23,459	)	
Business combinations, net of cash acquired	 	 	(5,900	)	 	 	(3,689	)	
Other sources/(uses)	 	 	528	 	 	 	(829	)	
Net cash used by investing activities	 	 	(31,861	)	 	 	(27,977	)	
Cash Flows from Financing Activities	 	 	 	 	 	 	 	 	
Dividends paid	 	 	(9,641	)	 	 	(9,393	)	
Purchases of treasury stock	 	 	(15,047	)	 	 	(110,288	)	
Proceeds from issuance of capital stock	 	 	10,483	 	 	 	7,979	 	
Excess tax benefit on share-based compensation	 	 	2,714	 	 	 	3,368	 	
Increase/(decrease) in cash overdrafts payable	 	 	(3,299	)	 	 	2,297	 	
Debt issuance costs	 	 	-	 	 	 	(2,723	)	
Other sources	 	 	529	 	 	 	226	 	
Net cash used by financing activities	 	 	(14,261	)	 	 	(108,534	)	
Increase/(Decrease) in Cash and Cash Equivalents	 	 	31,215	 	 	 	(28,575	)	
Cash and cash equivalents at beginning of year	 	 	38,081	 	 	 	49,917	 	
Cash and cash equivalents at end of period	 	$	69,296	 	 	$	21,342	 	
 	 	 	 	 	 	 	 	 	
See accompanying notes to unaudited consolidated financial statements.	 	

-5-

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
Notes to Unaudited Consolidated Financial Statements

1.  Basis of Presentation
 As used herein, the terms "We," "Company" and "Chemed" refer to Chemed Corporation or Chemed Corporation and its consolidated subsidiaries.

We have prepared the accompanying unaudited consolidated financial statements of Chemed in accordance with Rule 10-01 of SEC Regulation S-X.  Consequently, we have omitted certain disclosures required under generally accepted accounting principles in the United States (“GAAP”) for complete financial statements. The December 31, 2011 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, 2011.

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 September 30, 2012, VITAS has approximately $798,000 in unbilled revenue included in accounts receivable (December 31, 2011 - $720,000).  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 revenue and accounts receivable balance for potential denials of patient service revenue due to FMR activity.

We actively monitor each of our hospice programs, by provider number, as to their specific admission, discharge rate and median length of stay data in an attempt to determine whether they are likely to exceed the annual per-beneficiary Medicare cap (“Medicare cap”).  Should we determine that revenues for a program are likely to exceed the Medicare cap based on projected trends, we attempt to institute corrective action to influence the patient mix or to increase patient admissions.  However, should we project our corrective action will not prevent that program from exceeding its Medicare cap, we estimate the amount of revenue recognized during the period that will require repayment to the Federal government under the Medicare cap and record the amount as a reduction to patient revenue.  The Medicare cap measurement period is from September 29 through September 28 of the following year for admissions and from November 1 through October 31 of the following year for revenue.

During the three-month period ended September 30, 2012, we did not record any Medicare cap liability.  During the nine-month period ended September 30, 2012, we reversed Medicare cap liability for amounts recorded in the fourth quarter of 2011 for three programs’ projected 2012 measurement period liability.  We reversed these amounts as improving admissions trends in these programs indicate that the liability had been eliminated.

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

 	 	September 30,	 	
 	 	2012	 	 	2011	 	
Beginning balance January 1,	 	$	2,965	 	 	$	1,371	 	
Reversal - 2012 measurement period	 	 	(2,577	)	 	 	-	 	
Reversal -  2011 measurement period	 	 	-	 	 	 	(829	)	
Other	 	 	-	 	 	 	(198	)	
Ending balance September 30,	 	$	388	 	 	$	344	 	

-6-

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

Three months ended	 	 	Nine months ended	 	
September 30,	 	 	September 30,	 	
2012	 	 	2011	 	 	2012	 	 	2011	 	
$	1,983	 	 	$	1,775	 	 	$	6,021	 	 	$	5,298	 	

3.      Segments
Service revenues and sales and after-tax earnings by business segment are as follows (in thousands):
 
 	 	Three months ended	 	 	Nine months ended	 	
 	 	September 30,	 	 	September 30,	 	
 	 	2012	 	 	2011	 	 	2012	 	 	2011	 	
Service Revenues and Sales	 	 	 	 	 	 	 	 	 	 	 	 	
VITAS	 	$	267,990	 	 	$	252,944	 	 	$	794,050	 	 	$	731,712	 	
Roto-Rooter	 	 	86,363	 	 	 	88,495	 	 	 	267,416	 	 	 	274,005	 	
Total	 	$	354,353	 	 	$	341,439	 	 	$	1,061,466	 	 	$	1,005,717	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
After-tax Earnings	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
VITAS	 	$	21,940	 	 	$	20,970	 	 	$	61,999	 	 	$	57,684	 	
Roto-Rooter	 	 	6,145	 	 	 	8,016	 	 	 	21,715	 	 	 	25,618	 	
Total	 	 	28,085	 	 	 	28,986	 	 	 	83,714	 	 	 	83,302	 	
Corporate	 	 	(7,240	)	 	 	(7,099	)	 	 	(21,150	)	 	 	(23,028	)	
Net income	 	$	20,845	 	 	$	21,887	 	 	$	62,564	 	 	$	60,274	 	

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

4.      Earnings per Share
Earnings per share (“EPS”) are computed using the weighted average number of shares of capital stock outstanding.  Earnings and diluted earnings per share are computed as follows (in thousands, except per share data):
 
 	 	 	Net Income	 	
For the Three Months Ended September 30,	 	Income	 	 	Shares	 	 	Earnings per
Share	 	
2012	 	 	 	 	 	 	 	 	 	 	
 	Earnings	 	$	20,845	 	 	 	18,960	 	 	$	1.10	 	
 	Dilutive stock options	 	 	-	 	 	 	341	 	 	 	 	 	
 	Nonvested stock awards	 	 	-	 	 	 	103	 	 	 	 	 	
 	Diluted earnings	 	$	20,845	 	 	 	19,404	 	 	$	1.07	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2011	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Earnings	 	$	21,887	 	 	 	20,674	 	 	$	1.06	 	
 	Dilutive stock options	 	 	-	 	 	 	293	 	 	 	 	 	
 	Nonvested stock awards	 	 	-	 	 	 	88	 	 	 	 	 	
 	Diluted earnings	 	$	21,887	 	 	 	21,055	 	 	$	1.04	 	

-7-

 
 
 	 	 	Net Income	 	
For the Nine Months Ended September 30,	 	Income	 	 	Shares	 	 	Earnings per
Share	 	
2012	 	 	 	 	 	 	 	 	 	 	
 	Earnings	 	$	62,564	 	 	 	18,977	 	 	$	3.30	 	
 	Dilutive stock options	 	 	-	 	 	 	313	 	 	 	 	 	
 	Nonvested stock awards	 	 	-	 	 	 	92	 	 	 	 	 	
 	Diluted earnings	 	$	62,564	 	 	 	19,382	 	 	$	3.23	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2011	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Earnings	 	$	60,274	 	 	 	20,934	 	 	$	2.88	 	
 	Dilutive stock options	 	 	-	 	 	 	379	 	 	 	 	 	
 	Nonvested stock awards	 	 	-	 	 	 	87	 	 	 	 	 	
 	Diluted earnings	 	$	60,274	 	 	 	21,400	 	 	$	2.82	 	

For the three and nine-month periods ended September 30, 2012, 1.4 million stock options were excluded from the computation of diluted earnings per share as their exercise prices were greater than the average market price for most of the period. For the three and nine-month period ended September 30, 2011, 1.5 million and 980,000, respectively, stock options were excluded from the computation of diluted earnings per share.

Diluted earnings per share may be impacted in the future 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 at September 30, 2012.  It also shows the impact on the number of shares issuable upon conversion of the Notes and settlement of the purchased call options and sold warrants:
 
 	 	 	Shares	 	 	 	 	 	Total Treasury	 	 	Shares Due	 	 	Incremental	 	
 	 	 	Underlying 1.875%	 	 	 	 	 	Method	 	 	to the Company	 	 	Shares Issued/	 	
Share	 	 	Convertible	 	 	Warrant	 	 	Incremental	 	 	under Notes	 	 	Received by the Company	 	
Price	 	 	Notes	 	 	Shares	 	 	Shares (a)	 	 	Hedges	 	 	upon Conversion (b)	 	
$	80.73	 	 	 	44,670	 	 	 	-	 	 	 	44,670	 	 	 	(47,786	)	 	 	(3,116	)	
$	90.73	 	 	 	299,912	 	 	 	-	 	 	 	299,912	 	 	 	(320,837	)	 	 	(20,925	)	
$	100.73	 	 	 	504,477	 	 	 	-	 	 	 	504,477	 	 	 	(539,674	)	 	 	(35,197	)	
$	110.73	 	 	 	672,093	 	 	 	120,638	 	 	 	792,731	 	 	 	(718,985	)	 	 	73,746	 	
$	120.73	 	 	 	811,941	 	 	 	319,805	 	 	 	1,131,746	 	 	 	(868,591	)	 	 	263,155	 	
$	130.73	 	 	 	930,395	 	 	 	488,502	 	 	 	1,418,897	 	 	 	(995,309	)	 	 	423,588	 	

 	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.	

-8-

 
 
5.      Long-Term Debt
On March 1, 2011, we replaced our existing credit agreement with our Revolving Credit Facility (“2011 Credit Agreement”).  Terms of the 2011 Credit Agreement consist of a five-year, $350 million revolving credit facility.  This 2011 Credit Agreement has a floating interest rate that is currently LIBOR plus 175 basis points.  The 2011 Credit Agreement also includes a $150 million expansion feature.  The 2011 Credit Agreement contains the following quarterly financial covenants:
 
Description	 	Requirement	
 	 	 	
Leverage Ratio (Consolidated Indebtedness/Consolidated  Adj. EBITDA)	 	< 3.50 to 1.00	
 	 	 	
Fixed Charge Coverage Ratio (Consolidated Free Cash Flow/Consolidated Fixed Charges)	 	> 1.50 to 1.00	
 	 	 	
Annual Operating Lease Commitment	 	< $30.0 million	

We are in compliance with all debt covenants as of September 30, 2012.  We have issued $29.2 million in standby letters of credit as of September 30, 2012 for insurance purposes.  Issued letters of credit reduce our available credit under the 2011 Credit Agreement.  As of September 30, 2012, we have approximately $320.8 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility, excluding the $150 million expansion feature.

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

 	 	September 30, 2012	 	 	December 31, 2011	 	
Principal amount of convertible debentures	 	$	186,956	 	 	$	186,956	 	
Unamortized debt discount	 	 	(14,144	)	 	 	(20,172	)	
Carrying amount of convertible debentures	 	$	172,812	 	 	$	166,784	 	
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 September 30,	 	 	Nine months ended September 30,	 	
 	 	2012	 	 	2011	 	 	2012	 	 	2011	 	
Cash interest expense	 	$	1,381	 	 	$	1,345	 	 	$	4,064	 	 	$	3,786	 	
Non-cash amortization of debt discount	 	 	2,043	 	 	 	1,910	 	 	 	6,028	 	 	 	5,633	 	
Amortization of debt costs	 	 	319	 	 	 	300	 	 	 	940	 	 	 	841	 	
Total interest expense	 	$	3,743	 	 	$	3,555	 	 	$	11,032	 	 	$	10,260	 	
 
The unamortized debt discount is being amortized using the effective interest method over the remaining life of the Notes.  The effective rate on the Notes is approximately 6.875% as of September 30, 2012.

-9-

 
 
6.      Other Income/(Expense) -- Net
Other income/(expense) -- net comprises the following (in thousands):
 
 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
 	 	2012	 	 	2011	 	 	2012	 	 	2011	 	
Market value gains/(losses) on assets held in	 	 	 	 	 	 	 	 	 	 	 	 	
deferred compensation trust	 	$	1,576	 	 	$	(2,011	)	 	$	2,761	 	 	$	796	 	
Loss on disposal of property and equipment	 	 	(80	)	 	 	(79	)	 	 	(228	)	 	 	(68	)	
Interest income	 	 	291	 	 	 	74	 	 	 	401	 	 	 	197	 	
Other - net	 	 	53	 	 	 	81	 	 	 	31	 	 	 	(44	)	
     Other income/(expense) - net	 	$	1,840	 	 	$	(1,935	)	 	$	2,965	 	 	$	881	 	

 7.      Stock-Based Compensation Plans
On February 17, 2012, the Compensation/Incentive Committee of the Board of Directors (“CIC”) approved a grant of 35,969 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 $2.3 million and will be recognized ratably over the 4 year vesting period.  We assumed no forfeitures in determining the cumulative compensation expense of the grant.

      On February 17, 2012, the CIC approved a grant of 442,350 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 $7.1 million and will be recognized over the 3 year vesting period.  We used the Black-Scholes option valuation method to determine the cumulative compensation expense of the grant.
 
8.    Independent Contractor Operations
The Roto-Rooter segment sublicenses with 66 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 September 30, 2012 totaling $1.2 million (December 31, 2011 - $1.1 million).  In most cases these loans are fully or partially secured by equipment owned by the contractor.  The interest rates on the loans range from 0% to 8% per annum and the remaining terms of the loans range from 2 months to 5 years at September 30, 2012.  We recorded the following from our independent contractors (in thousands):
 
 	Three months ended September 30,	 	Nine months ended September 30,	 	
 	2012	 	2011	 	2012	 	2011	 	
Revenues	 	$	6,942	 	 	$	6,575	 	 	$	20,434	 	 	$	19,614	 	
Pretax profits	 	 	3,611	 	 	 	3,236	 	 	 	10,424	 	 	 	9,625	 	
 
9.  Pension and Retirement Plans
All of the Company’s plans that provide retirement and similar benefits are defined contribution plans.  These expenses include the impact of market gains and losses on assets held in deferred compensation plans.  Expenses for the Company’s pension and profit-sharing plans, excess benefit plans and other similar plans are as follows (in thousands):
 
Three months ended September 30,	 	 	Nine months ended September 30,	 	
2012	 	 	2011	 	 	2012	 	 	2011	 	
$	2,646	 	 	$	105	 	 	$	8,501	 	 	$	7,058	 	

-10-

 
 
10.      Legal and Regulatory Matters
The VITAS segment of the Company’s business operates in a heavily-regulated industry.  As a result, the Company is subjected to inquiries and investigations by various government agencies, as well as to lawsuits, including  qui tam actions.  The following sections describe the various ongoing lawsuits and investigations of which the Company is currently aware.  It is not possible at this time for us to estimate either the timing or outcome of any of those matters, or whether any potential loss, or range of potential losses, is probable or estimable.

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,  Morangelli et al. v. Chemed Corporation , et al., 1-10-cv-00876-BMC, 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 September 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.
  
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,  Bernadette Santos, et al. v. Vitas Healthcare Corporation of California , BC359356.  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.  We contest these allegations.  In December 2009, the trial court denied Plaintiffs’ motion for class certification.  In July 2011, the Court of Appeals affirmed denial of class certification on the travel time, meal and rest period claims, and reversed the trial court’s denial on the off-the-clock and sales representation exemption claims.  Plaintiffs filed an appeal of this decision.  In September 2012, in response to an order of reconsideration, the Court of Appeals reiterated its previous rulings.  

On January 12, 2012, the Greater Pennsylvania Carpenters Pension Fund filed a putative class action lawsuit in the U.S. District Court for the Southern District of Ohio against the Company, Kevin McNamara, David Williams, and Timothy O’Toole.  On April 9, 2012, the Court issued orders (a) renaming the suit as  In re Chemed Corp. Securities Litigation , Civil Action No. 1:12-cv-28 (S.D. Ohio); (b) appointing the Greater Pennsylvania Carpenters Pension Fund and the Electrical Workers Pension Fund, Local 103, I.B.E.W. as Lead Plaintiffs; and (c) approving Lead Plaintiffs’ selection of Labaton Sucharow LLP and Robbins Geller Rudman & Dowd LLP as Co-Lead Counsel.  On June 18, 2012, Lead Plaintiffs filed an amended complaint alleging violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 against all Defendants, and violation of Section 20(a) of the Securities Exchange Act of 1934 against Messrs. McNamara, Williams, and O’Toole.  The suit’s allegations concern the VITAS hospice segment of the Company’s business.  Lead Plaintiffs seek, on behalf of a putative class of purchasers of Chemed Capital Stock between February 15, 2010 and November 16, 2011, compensatory damages in an unspecified amount and attorneys’ fees and expenses, arising from Defendants’ failure to disclose an alleged fraudulent scheme to enroll ineligible hospice patients and to fraudulently obtain payments from the federal government.  Defendants filed motions to dismiss the amended complaint on August 17, 2012, which are continuing to be briefed.  Defendants believe the claims are without merit, and intend to defend vigorously against them.
 
Regardless of the outcome of any of the preceding matters, litigation adversely affects us through defense costs, diversion of management time, and related publicity.

Regulatory Matters
In April 2005, VITAS received a subpoena from the Office of the Inspector General (“OIG”) of the U.S. Department of Health and Human Services requesting that VITAS produce various categories of documents from 1998 through the date of the subpoena in connection with an investigation into an alleged failure to appropriately bill Medicare and Medicaid for hospice services.  The requested categories of documents included patient medical and billing records for 320 past and then current patients from VITAS’s three largest programs; policy and procedure manuals; information concerning patient admissions, certifications, discharges, and lengths of stay; and census information.  In the third quarter of 2005, the OIG requested additional information from us.  In May 2006, VITAS received another subpoena from OIG seeking certain information concerning employees and their compensation from 1999 through 2004.   In 2004, two former VITAS employees filed a related qui tam suit in U.S. District Court for the Southern District of Florida,  United States, et al. ex rel. Barys v. Vitas Healthcare Corp. , 1:04-cv-21431.  The complaint asserted violations of the federal False Claims Act against VITAS and certain of its affiliates, based on the alleged fraudulent admissions and recertification of ineligible patients.  In July 2007, the district court dismissed the suit with prejudice.  The U.S. Court of Appeals for the Eleventh Circuit affirmed the dismissal in November 2008.  In March 2009, VITAS received a letter from the Department of Justice indicating that its investigation of VITAS’s Florida programs is ongoing.

-11-

 
 
In July 2012, VITAS received an investigative subpoena from the Florida Attorney General seeking documents previously produced in the course of prior government investigations as well as, for the period January 1, 2007 through the date of production, billing records and procedures; information concerning business results, plans, and strategies; documents concerning patient eligibility for hospice care; and certain information concerning employees and their compensation.  We are conferring with the Attorney General regarding those document requests.
 
In May 2009, VITAS received an administrative subpoena from the U.S. Department of Justice requesting that VITAS deliver to OIG various categories of documents for its headquarters and Texas programs from January 1, 2003 through the date of the subpoena.  The requested categories included policy and procedure manuals and information concerning Medicare and Medicaid billing and the provision of hospice services; patient medical records; information concerning business plans, strategies, and results and VITAS’s affiliated entities and referral sources; and certain information concerning employees and their compensation.  In August 2009, the OIG selected medical records for 59 past and current patients from a Texas program for review.  In September 2010, VITAS received a second administrative subpoena from the Department of Justice seeking electronic documents of 10 current and former employees.  In April 2011, the U.S. Attorney provided the Company with a copy of a  qui tam  complaint filed under seal in the U.S. District Court for the Northern District of Texas, United States, et al. ex rel. Rehfeldt v. Vitas Healthcare Corp. , 3:09-cv-0203.  In November 2011, the complaint was unsealed.  The U.S. Attorney and the Attorney General for the State of Texas filed notices in November 2011 stating that they had decided not to intervene in the case at that time but indicating that they continue to investigate the allegations.  The complaint asserts violations of the federal False Claims Act and the Texas Medicaid Fraud Prevention Act based on the alleged admission and re-certification of ineligible patients, conspiracy to admit ineligible patients, and backdating patient revocations.  The suit was brought by Michael Rehfeldt, a former general manager of VITAS’s San Antonio program, against VITAS, the San Antonio program’s former Regional Vice-President, Keith Becker, and former Medical Director, Justo Cisneros, and their respective then-current employers: Wellmed Medical Management, Care Level Management, LLC, Inspiris Hospice, LLC, and Inspiris, Inc.  The plaintiff dismissed all claims against their then-current employers in March and April of 2012.  The complaint has yet to be served on any of the VITAS entities.
 
In February 2010, VITAS received a companion civil investigative demand (“CID”) from the Texas Attorney General seeking documents from January 1, 2002 through the date of the CID, and interrogatory responses in connection with a related investigation of possible fraudulent submission of Medicaid claims for non-qualifying patients and fraudulent shifting of costs from VITAS to the State of Texas and the United States.  The CID requested similar information sought by the Department of Justice’s May 2009 administrative subpoena, together with information concerning record-keeping and retention practices, and medical records concerning 117 patients.  In September 2010, VITAS received a second CID from the Texas Attorney General seeking additional documents concerning business plans and results, revocation forms for certain patients, and electronic documents of 10 current and former employees.
 
In June 2011, the U.S. Attorney provided the Company with a partially unsealed qui tam complaint filed under seal in the U.S. District Court for the Western District of Texas,  United States, et al. ex rel. Urick v. Vitas HME Solutions, Inc. et al. , 5:08-cv-0663.  The U.S. Attorney filed a notice in May 2012 stating that it had decided not to intervene in the case at that time but indicating that it continues to investigate the allegations.  In June 2012, the complaint was unsealed.  The complaint asserts violations of the federal False Claims Act and the Texas Medicaid Fraud Prevention Act based on allegations of a conspiracy to submit to Medicare and Medicaid false claims involving hospice services for ineligible patients, unnecessary medical supplies, failing to satisfy certain prerequisites for payment, and altering patient records, including backdating patient revocations.  The suit was brought by Barbara Urick, a registered nurse in VITAS’s San Antonio program, against VITAS, certain of its affiliates, and several former VITAS employees, including physicians Justo Cisneros and Antonio Cavasos and nurses Sally Schwenk, Diane Anest, and Edith Reed.  In September 2012, the plaintiff dismissed all claims against the individual defendants.  The complaint has yet to be served on any of the VITAS entities.

Also in June 2011, the U.S. Attorney provided the Company with a partially unsealed qui tam complaint filed under seal in the U.S. District Court for the Northern District of Illinois,  United States, et al. ex rel. Spottiswood v. Chemed Corp. , 1:07-cv-4566.  In April 2012, the complaint was unsealed.  The U.S. Attorney and Attorney General for the State of Illinois filed notices in April and May 2012, respectively, stating that they had decided not to intervene in the case at that time but indicating that they continue to investigate the allegations.  The complaint asserts violations of the federal False Claims Act and the Illinois Whistleblower Reward and Protection Act based on allegations that VITAS fraudulently billed Medicare and Medicaid for providing unwarranted continuous care services.  The suit was brought by Laura Spottiswood, a former part-time pool registered nurse at VITAS, against Chemed, VITAS, and a VITAS affiliate.  The complaint has yet to be served.

-12-

 
 
In June 2012, VITAS received an administrative subpoena from OIG in connection with an investigation of possible improper claims submitted to the Medicare and Medicaid programs.  It seeks production of various categories of documents concerning the provision of hospice services, for headquarters and its Southern California programs, for the period January 1, 2007 through the date of the subpoena.  The categories of documents include policy, procedure and training manuals; documents concerning patient eligibility for hospice care, including referrals, admissions, certifications, revocations and census information; documents concerning claims submitted to government programs; certain information concerning employees and their compensation; and documents concerning VITAS’s financial performance.  In August 2012, the OIG also subpoenaed medical records for 268 patients from three Southern California programs.  We are conferring with the U.S. Attorney’s Office for the Central District of California regarding those document requests.

In September 2012, VITAS received an administrative subpoena from OIG seeking production of medical records for 102 patients in 10 states who received continuous care between 2004 and 2009.  We are conferring with OIG regarding those requests.

The costs to comply with these investigations were not material for any period presented.  Regardless of the outcome of any of the preceding matters, responding to the subpoenas and dealing with the various regulatory agencies can adversely affect us through defense costs, diversion of management time, and related publicity.

11.  Concentration of Risk
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 $10.6 million and $10.0 million for the three months ended September 30, 2012 and 2011, respectively.  VITAS made purchases from OCR of $30.9 million and $29.2 million for the nine months ended September 30, 2012 and 2011, respectively.  For the three and nine month periods ending September 30, 2012 and 2011, respectively, purchases from this vendor represent over 90% of all pharmacy services used by VITAS.

12.  Cash Overdrafts and Cash Equivalents
Included in accounts payable at September 30, 2012 is cash overdrafts payable of $7.0 million (December 31, 2011 - $10.3 million).

From time to time throughout the year, we invest excess cash in money market funds with major commercial banks. We closely monitor the creditworthiness of the institutions with which we invest our overnight funds.  We had $57.2 million in cash equivalents as of September 30, 2012.  There was $32.5 million in cash equivalents as of December 31, 2011.  The weighted average rate of return for our cash equivalents was 0.2% for September 30, 2012 and 0.1% for December 31, 2011.

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

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of September 30, 2012 (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	 	$	35,053	 	 	$	35,053	 	 	$	-	 	 	$	-	 	
Long-term debt	 	 	172,812	 	 	 	197,126	 	 	 	-	 	 	 	-	 	

-13-

 
 
For cash and cash equivalents, accounts receivable and accounts payable, the carrying amount is a reasonable estimate of fair value because of the liquidity and short-term nature of these instruments.

14.  Capital Stock Transactions
We repurchased the following capital stock for the three and nine-months ended September 30, 2012 and 2011:

 	Three months ended September 30,	 	Nine months ended September 30,	 	
 	2012	 	2011	 	2012	 	2011	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares repurchased	 	 	9,334	 	 	 	1,530,030	 	 	 	209,234	 	 	 	1,871,543	 	
Weighted average price per share	 	$	62.75	 	 	$	55.39	 	 	$	56.03	 	 	$	60.30	 	

15.  Business Combinations
In the first nine months of 2012, we completed four business combinations within our Roto-Rooter segment for $5.9 million in cash to increase our market penetration in Ft. Lauderdale, Florida: Bend, Oregon; Shreveport, Louisiana; and Boise, Idaho.  A substantial portion of this aggregate purchase price was allocated to goodwill.  The operating results of these business combinations have been included in our results of operations since the acquisition date and are not material for the three and nine-month periods ended September 30, 2012 nor for the comparable prior year periods.

16.  Recent Accounting  Statements
In July 2012, the FASB issued Accounting Standards Update “ASU” No. 2012-02 – Intangibles Goodwill and Other which provides additional guidance related to the impairment testing of indefinite-lived intangible assets.  ASU No. 2012–02 allows an entity to first assess qualitative factors to determine whether it is necessary to perform further impairment testing.  The revised guidance is effective for fiscal years beginning after September 15, 2012 but early adoption is permitted.  Our impairment testing date is October 1 of each year and we adopted the new guidelines in the third quarter of 2012.  There was no impact as a result of the adoption.

17. HVAC Exit Activities
In August 2012, Roto-Rooter management made the decision to shut-down its one remaining heating, ventilation and air conditioning (HVAC) business located in Baltimore, Maryland.  The HVAC business was a portion of a larger business which included plumbing operations.  The plumbing and HVAC businesses shared facilities and administrative functions.  The costs or related cash flows of these shared facilities and administrative functions were not separately tracked or allocated for the HVAC operation.  As a result, the HVAC business does not qualify for discontinued operation treatment under US GAAP.  The operating results of the HVAC operation are reported in continuing operations in the consolidated financial statements for all periods presented.  The pretax costs incurred in conjunction with the shut-down were $1.1 million and are recorded in other operating expenses.  The costs are comprised mainly of severance and lease termination costs.

-14-

 
 
18. 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 September 30, 2012 and December 31, 2011 for the balance sheet, the three and nine months ended September 30, 2012 and September 30, 2011 for the income statement and the nine months ended September 30, 2012 and September 30, 2011 for the statement of cash flows (dollars in thousands):
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
September 30, 2012	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	 	Consolidating	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Adjustments	 	 	Consolidated	 	
ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	58,449	 	 	$	3,010	 	 	$	7,837	 	 	$	-	 	 	$	69,296	 	
Accounts receivable, less allowances	 	 	955	 	 	 	99,639	 	 	 	558	 	 	 	-	 	 	 	101,152	 	
Intercompany receivables	 	 	-	 	 	 	298,490	 	 	 	-	 	 	 	(298,490	)	 	 	-	 	
Inventories - net	 	 	-	 	 	 	6,946	 	 	 	693	 	 	 	-	 	 	 	7,639	 	
Current deferred income taxes	 	 	(1,628	)	 	 	15,512	 	 	 	234	 	 	 	-	 	 	 	14,118	 	
Prepaid income taxes	 	 	5,251	 	 	 	(1,799	)	 	 	(408	)	 	 	-	 	 	 	3,044	 	
Prepaid expenses	 	 	730	 	 	 	8,935	 	 	 	190	 	 	 	-	 	 	 	9,855	 	
     Total current assets	 	 	63,757	 	 	 	430,733	 	 	 	9,104	 	 	 	(298,490	)	 	 	205,104	 	
Investments of deferred compensation plans	 	 	-	 	 	 	-	 	 	 	35,053	 	 	 	-	 	 	 	35,053	 	
Properties and equipment, at cost, less accumulated depreciation	 	 	11,132	 	 	 	76,273	 	 	 	2,730	 	 	 	-	 	 	 	90,135	 	
Identifiable intangible assets less accumulated amortization	 	 	-	 	 	 	57,507	 	 	 	-	 	 	 	-	 	 	 	57,507	 	
Goodwill	 	 	-	 	 	 	461,277	 	 	 	4,584	 	 	 	-	 	 	 	465,861	 	
Other assets	 	 	6,396	 	 	 	1,765	 	 	 	2,966	 	 	 	-	 	 	 	11,127	 	
Investments in subsidiaries	 	 	852,204	 	 	 	24,205	 	 	 	-	 	 	 	(876,409	)	 	 	-	 	
          Total assets	 	$	933,489	 	 	$	1,051,760	 	 	$	54,437	 	 	$	(1,174,899	)	 	$	864,787	 	
LIABILITIES AND STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	(5,239	)	 	$	48,934	 	 	$	361	 	 	$	-	 	 	$	44,056	 	
Intercompany payables	 	 	294,307	 	 	 	-	 	 	 	4,183	 	 	 	(298,490	)	 	 	-	 	
Income taxes	 	 	(818	)	 	 	601	 	 	 	1,713	 	 	 	-	 	 	 	1,496	 	
Accrued insurance	 	 	1,288	 	 	 	38,230	 	 	 	-	 	 	 	-	 	 	 	39,518	 	
Accrued compensation	 	 	3,075	 	 	 	40,595	 	 	 	447	 	 	 	-	 	 	 	44,117	 	
Other current liabilities	 	 	3,124	 	 	 	15,017	 	 	 	353	 	 	 	-	 	 	 	18,494	 	
      Total current liabilities	 	 	295,737	 	 	 	143,377	 	 	 	7,057	 	 	 	(298,490	)	 	 	147,681	 	
Deferred income taxes	 	 	(12,830	)	 	 	47,968	 	 	 	(10,874	)	 	 	-	 	 	 	24,264	 	
Long-term debt	 	 	172,812	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	172,812	 	
Deferred compensation liabilities	 	 	-	 	 	 	33	 	 	 	34,593	 	 	 	-	 	 	 	34,626	 	
Other liabilities	 	 	3,145	 	 	 	6,875	 	 	 	759	 	 	 	-	 	 	 	10,779	 	
Stockholders' equity	 	 	474,625	 	 	 	853,507	 	 	 	22,902	 	 	 	(876,409	)	 	 	474,625	 	
     Total liabilities and stockholders' equity	 	$	933,489	 	 	$	1,051,760	 	 	$	54,437	 	 	$	(1,174,899	)	 	$	864,787	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2011	 	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	 	Consolidating	 	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Adjustments	 	 	Consolidated	 	
ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	32,470	 	 	$	(1,422	)	 	$	7,033	 	 	$	-	 	 	$	38,081	 	
Accounts receivable, less allowances	 	 	606	 	 	 	76,816	 	 	 	502	 	 	 	-	 	 	 	77,924	 	
Intercompany receivables	 	 	-	 	 	 	273,413	 	 	 	-	 	 	 	(273,413	)	 	 	-	 	
Inventories - net	 	 	-	 	 	 	8,032	 	 	 	636	 	 	 	-	 	 	 	8,668	 	
Current deferred income taxes	 	 	(650	)	 	 	13,059	 	 	 	131	 	 	 	-	 	 	 	12,540	 	
Prepaid income taxes	 	 	(114	)	 	 	1,689	 	 	 	556	 	 	 	-	 	 	 	2,131	 	
Prepaid expenses	 	 	503	 	 	 	10,757	 	 	 	149	 	 	 	-	 	 	 	11,409	 	
     Total current assets	 	 	32,815	 	 	 	382,344	 	 	 	9,007	 	 	 	(273,413	)	 	 	150,753	 	
Investments of deferred compensation plans	 	 	-	 	 	 	-	 	 	 	31,629	 	 	 	-	 	 	 	31,629	 	
Properties and equipment, at cost, less accumulated depreciation	 	 	11,641	 	 	 	68,755	 	 	 	2,555	 	 	 	-	 	 	 	82,951	 	
Identifiable intangible assets less accumulated amortization	 	 	-	 	 	 	58,262	 	 	 	-	 	 	 	-	 	 	 	58,262	 	
Goodwill	 	 	-	 	 	 	456,183	 	 	 	4,450	 	 	 	-	 	 	 	460,633	 	
Other assets	 	 	7,616	 	 	 	1,552	 	 	 	2,509	 	 	 	-	 	 	 	11,677	 	
Investments in subsidiaries	 	 	793,277	 	 	 	21,148	 	 	 	-	 	 	 	(814,425	)	 	 	-	 	
          Total assets	 	$	845,349	 	 	$	988,244	 	 	$	50,150	 	 	$	(1,087,838	)	 	$	795,905	 	
LIABILITIES AND STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	(683	)	 	$	48,490	 	 	$	418	 	 	$	-	 	 	$	48,225	 	
Intercompany payables	 	 	269,042	 	 	 	-	 	 	 	4,371	 	 	 	(273,413	)	 	 	-	 	
Income taxes	 	 	-	 	 	 	-	 	 	 	90	 	 	 	-	 	 	 	90	 	
Accrued insurance	 	 	489	 	 	 	36,658	 	 	 	-	 	 	 	-	 	 	 	37,147	 	
Accrued compensation	 	 	3,828	 	 	 	36,655	 	 	 	604	 	 	 	-	 	 	 	41,087	 	
Other current liabilities	 	 	1,719	 	 	 	15,728	 	 	 	1,404	 	 	 	-	 	 	 	18,851	 	
      Total current liabilities	 	 	274,395	 	 	 	137,531	 	 	 	6,887	 	 	 	(273,413	)	 	 	145,400	 	
Deferred income taxes	 	 	(12,330	)	 	 	51,601	 	 	 	(9,808	)	 	 	-	 	 	 	29,463	 	
Long-term debt	 	 	166,784	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	166,784	 	
Deferred compensation liabilities	 	 	-	 	 	 	-	 	 	 	30,693	 	 	 	-	 	 	 	30,693	 	
Other liabilities	 	 	2,816	 	 	 	4,630	 	 	 	2,435	 	 	 	-	 	 	 	9,881	 	
Stockholders' equity	 	 	413,684	 	 	 	794,482	 	 	 	19,943	 	 	 	(814,425	)	 	 	413,684	 	
     Total liabilities and stockholders' equity	 	$	845,349	 	 	$	988,244	 	 	$	50,150	 	 	$	(1,087,838	)	 	$	795,905	 	

-15-

 
 
For the three months ended September 30, 2012	 	 	 	Guarantor	 	Non-Guarantor	 	Consolidating	 	 	
 	 	Parent	 	Subsidiaries	 	Subsidiaries	 	Adjustments	 	Consolidated	
Continuing Operations	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$                               - 	 	$                   347,384 	 	$                       6,969 	 	$                               - 	 	$                   354,353 	
Cost of services provided and goods sold	 	 -	 	 252,688 	 	 3,922 	 	 -	 	 256,610 	
Selling, general and administrative expenses	 	 5,991 	 	 43,992 	 	 2,972 	 	 -	 	 52,955 	
Depreciation	 	 237 	 	 6,099 	 	 221 	 	 -	 	 6,557 	
Amortization	 	 486 	 	 649 	 	 -	 	 -	 	 1,135 	
Other operating expenses	 	 -	 	 1,126 	 	 -	 	 -	 	 1,126 	
     Total costs and expenses	 	 6,714 	 	 304,554 	 	 7,115 	 	 -	 	 318,383 	
     Income/ (loss) from operations	 	 (6,714)	 	 42,830 	 	 (146)	 	 -	 	 35,970 	
Interest expense	 	 (3,517)	 	 (211)	 	 (15)	 	 -	 	 (3,743)	
Other (expense)/income - net	 	 4,450 	 	 (4,184)	 	 1,574 	 	 -	 	 1,840 	
     Income/ (loss) before income taxes	 	 (5,781)	 	 38,435 	 	 1,413 	 	 -	 	 34,067 	
Income tax (provision)/ benefit	 	 1,877 	 	 (14,560)	 	 (539)	 	 -	 	 (13,222)	
Equity in net income of subsidiaries	 	 24,749 	 	 885 	 	 -	 	 (25,634)	 	 -	
Net income	 	$                     20,845 	 	$                     24,760 	 	$                          874 	 	$                   (25,634)	 	$                     20,845 	

For the three months ended September 30, 2011	 	 	 	Guarantor	 	Non-Guarantor	 	Consolidating	 	 	
 	 	Parent	 	Subsidiaries	 	Subsidiaries	 	Adjustments	 	Consolidated	
Continuing Operations	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$                               - 	 	$                   334,937 	 	$                       6,502 	 	$                               - 	 	$                   341,439 	
Cost of services provided and goods sold	 	 -	 	 241,604 	 	 3,459 	 	 -	 	 245,063 	
Selling, general and administrative expenses	 	 5,678 	 	 42,595 	 	 (655)	 	 -	 	 47,618 	
Depreciation	 	 235 	 	 5,870 	 	 208 	 	 -	 	 6,313 	
Amortization	 	 467 	 	 667 	 	 -	 	 -	 	 1,134 	
     Total costs and expenses	 	 6,380 	 	 290,736 	 	 3,012 	 	 -	 	 300,128 	
     Income/ (loss) from operations	 	 (6,380)	 	 44,201 	 	 3,490 	 	 -	 	 41,311 	
Interest expense	 	 (3,361)	 	 (194)	 	 -	 	 -	 	 (3,555)	
Other (expense)/income - net	 	 4,379 	 	 (4,301)	 	 (2,013)	 	 -	 	 (1,935)	
     Income/ (loss) before income taxes	 	 (5,362)	 	 39,706 	 	 1,477 	 	 -	 	 35,821 	
Income tax (provision)/ benefit	 	 1,677 	 	 (15,029)	 	 (582)	 	 -	 	 (13,934)	
Equity in net income of subsidiaries	 	 25,572 	 	 953 	 	 -	 	 (26,525)	 	 -	
Net income	 	$                     21,887 	 	$                     25,630 	 	$                          895 	 	$                   (26,525)	 	$                     21,887 	
 	 	 	 	 	 	 	 	 	 	 	
For the nine months ended Septmber 30, 2012	 	 	 	Guarantor	 	Non-Guarantor	 	Consolidating	 	 	
 	 	Parent	 	Subsidiaries	 	Subsidiaries	 	Adjustments	 	Consolidated	
Continuing Operations	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$                               - 	 	$                1,040,015 	 	$                     21,451 	 	$                               - 	 	$                1,061,466 	
Cost of services provided and goods sold	 	 -	 	 759,549 	 	 11,874 	 	 -	 	 771,423 	
Selling, general and administrative expenses	 	 17,124 	 	 131,695 	 	 7,073 	 	 -	 	 155,892 	
Depreciation	 	 704 	 	 17,816 	 	 658 	 	 -	 	 19,178 	
Amortization	 	 1,437 	 	 1,938 	 	 -	 	 -	 	 3,375 	
Other operating expenses	 	 -	 	 1,126 	 	 -	 	 -	 	 1,126 	
     Total costs and expenses	 	 19,265 	 	 912,124 	 	 19,605 	 	 -	 	 950,994 	
     Income/ (loss) from operations	 	 (19,265)	 	 127,891 	 	 1,846 	 	 -	 	 110,472 	
Interest expense	 	 (10,437)	 	 (551)	 	 (44)	 	 -	 	 (11,032)	
Other (expense)/income - net	 	 13,196 	 	 (12,982)	 	 2,751 	 	 -	 	 2,965 	
     Income/ (loss) before income taxes	 	 (16,506)	 	 114,358 	 	 4,553 	 	 -	 	 102,405 	
Income tax (provision)/ benefit	 	 5,376 	 	 (43,442)	 	 (1,775)	 	 -	 	 (39,841)	
Equity in net income of subsidiaries	 	 73,694 	 	 2,857 	 	 -	 	 (76,551)	 	 -	
Net income	 	$                     62,564 	 	$                     73,773 	 	$                       2,778 	 	$                   (76,551)	 	$                     62,564 	

For the nine months ended September 30, 2011	 	 	 	Guarantor	 	Non-Guarantor	 	Consolidating	 	 	
 	 	Parent	 	Subsidiaries	 	Subsidiaries	 	Adjustments	 	Consolidated	
Continuing Operations	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$                               - 	 	$                   985,500 	 	$                     20,217 	 	$                               - 	 	$                1,005,717 	
Cost of services provided and goods sold	 	 -	 	 711,335 	 	 10,783 	 	 -	 	 722,118 	
Selling, general and administrative expenses	 	 17,936 	 	 130,617 	 	 5,143 	 	 -	 	 153,696 	
Depreciation	 	 711 	 	 17,651 	 	 597 	 	 -	 	 18,959 	
Amortization	 	 1,287 	 	 1,956 	 	 -	 	 -	 	 3,243 	
     Total costs and expenses	 	 19,934 	 	 861,559 	 	 16,523 	 	 -	 	 898,016 	
     Income/ (loss) from operations	 	 (19,934)	 	 123,941 	 	 3,694 	 	 -	 	 107,701 	
Interest expense	 	 (9,814)	 	 (446)	 	 -	 	 -	 	 (10,260)	
Other (expense)/income - net	 	 12,011 	 	 (11,918)	 	 788 	 	 -	 	 881 	
     Income/ (loss) before income taxes	 	 (17,737)	 	 111,577 	 	 4,482 	 	 -	 	 98,322 	
Income tax (provision)/ benefit	 	 5,863 	 	 (42,164)	 	 (1,747)	 	 -	 	 (38,048)	
Equity in net income of subsidiaries	 	 72,148 	 	 2,861 	 	 -	 	 (75,009)	 	 -	
Net income	 	$                     60,274 	 	$                     72,274 	 	$                       2,735 	 	$                   (75,009)	 	$                     60,274 	

-16-

 
 
For the nine months ended September 30, 2012	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Consolidated	 	
Cash Flow from Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	$	1,486	 	 	$	74,206	 	 	$	1,645	 	 	$	77,337	 	
Cash Flow from Investing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Capital expenditures	 	 	(196	)	 	 	(25,491	)	 	 	(802	)	 	 	(26,489	)	
 Business combinations, net of cash acquired	 	 	-	 	 	 	(5,900	)	 	 	-	 	 	 	(5,900	)	
 Other sources/(uses) - net	 	 	201	 	 	 	359	 	 	 	(32	)	 	 	528	 	
      Net cash used by investing activities	 	 	5	 	 	 	(31,032	)	 	 	(834	)	 	 	(31,861	)	
Cash Flow from Financing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Change in cash overdrafts payable	 	 	(4,580	)	 	 	1,281	 	 	 	-	 	 	 	(3,299	)	
 Change in intercompany accounts	 	 	40,489	 	 	 	(40,022	)	 	 	(467	)	 	 	-	 	
 Dividends paid to shareholders	 	 	(9,641	)	 	 	-	 	 	 	-	 	 	 	(9,641	)	
 Purchases of treasury stock	 	 	(14,960	)	 	 	-	 	 	 	(87	)	 	 	(15,047	)	
 Proceeds from exercise of stock options	 	 	10,483	 	 	 	-	 	 	 	-	 	 	 	10,483	 	
 Realized excess tax benefit on share based compensation	 	 	2,714	 	 	 	-	 	 	 	-	 	 	 	2,714	 	
 Other sources/(uses) - net	 	 	(17	)	 	 	(1	)	 	 	547	 	 	 	529	 	
      Net cash provided/(used) by financing activities	 	 	24,488	 	 	 	(38,742	)	 	 	(7	)	 	 	(14,261	)	
Net increase in cash and cash equivalents	 	 	25,979	 	 	 	4,432	 	 	 	804	 	 	 	31,215	 	
Cash and cash equivalents at beginning of year	 	 	32,470	 	 	 	(1,422	)	 	 	7,033	 	 	 	38,081	 	
Cash and cash equivalents at end of period	 	$	58,449	 	 	$	3,010	 	 	$	7,837	 	 	$	69,296	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
For the nine months ended September 30, 2011	 	 	 	 	 	Guarantor	 	 	Non-Guarantor	 	 	 	 	 	
 	 	Parent	 	 	Subsidiaries	 	 	Subsidiaries	 	 	Consolidated	 	
Cash Flow from Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	$	21,558	 	 	$	83,903	 	 	$	2,475	 	 	$	107,936	 	
Cash Flow from Investing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Capital expenditures	 	 	(23	)	 	 	(22,378	)	 	 	(1,058	)	 	 	(23,459	)	
 Business combinations, net of cash acquired	 	 	-	 	 	 	(3,689	)	 	 	-	 	 	 	(3,689	)	
 Other sources/(uses) - net	 	 	(150	)	 	 	(713	)	 	 	34	 	 	 	(829	)	
      Net cash used by investing activities	 	 	(173	)	 	 	(26,780	)	 	 	(1,024	)	 	 	(27,977	)	
Cash Flow from Financing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Purchases of treasury stock	 	 	(110,221	)	 	 	-	 	 	 	(67	)	 	 	(110,288	)	
 Change in cash overdrafts payable	 	 	208	 	 	 	2,089	 	 	 	-	 	 	 	2,297	 	
 Change in intercompany accounts	 	 	60,028	 	 	 	(59,090	)	 	 	(938	)	 	 	-	 	
 Proceeds from exercise of stock options	 	 	7,979	 	 	 	-	 	 	 	-	 	 	 	7,979	 	
 Dividends paid to shareholders	 	 	(9,393	)	 	 	-	 	 	 	-	 	 	 	(9,393	)	
 Debt issuance costs	 	 	(2,723	)	 	 	-	 	 	 	-	 	 	 	(2,723	)	
 Realized excess tax benefit on share based compensation	 	 	3,368	 	 	 	-	 	 	 	-	 	 	 	3,368	 	
 Other sources/(uses) - net	 	 	(5	)	 	 	-	 	 	 	231	 	 	 	226	 	
      Net cash used by financing activities	 	 	(50,759	)	 	 	(57,001	)	 	 	(774	)	 	 	(108,534	)	
Net increase/(decrease) in cash and cash equivalents	 	 	(29,374	)	 	 	122	 	 	 	677	 	 	 	(28,575	)	
Cash and cash equivalents at beginning of year	 	 	45,324	 	 	 	(1,571	)	 	 	6,164	 	 	 	49,917	 	
Cash and cash equivalents at end of period	 	$	15,950	 	 	$	(1,449	)	 	$	6,841	 	 	$	21,342	 	

-17-

 
 
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 (in thousands except per share amounts):
 
 	 	Three months ended September 30,	 	Nine months ended September 30,	 	
 	 	 	2012	 	 	 	2011	 	 	 	2012	 	 	 	2011	 	
Service revenues and sales	 	$	354,353	 	 	$	341,439	 	 	$	1,061,466	 	 	$	1,005,717	 	
Net income	 	$	20,845	 	 	$	21,887	 	 	$	62,564	 	 	$	60,274	 	
Diluted EPS	 	$	1.07	 	 	$	1.04	 	 	$	3.23	 	 	$	2.82	 	
Adjusted EBITDA	 	$	49,020	 	 	$	49,556	 	 	$	143,533	 	 	$	141,831	 	
Adjusted EBITDA as a % of revenue	 	 	13.8	%	 	 	14.5	%	 	 	13.5	%	 	 	14.1	%	

Earnings before interest, taxes and depreciation and amortization (“EBITDA”) and Adjusted EBITDA are not measures derived in accordance with GAAP.  We use Adjusted EBITDA as a measure of earnings for our long-term incentive plan 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 EBITDA and Adjusted EBITDA is presented on pages 30 and 31.

For the three months ended September 30, 2012, the increase in consolidated service revenues and sales was driven by a 5.9% increase at VITAS partially offset by a 2.4% decrease at Roto-Rooter.  The increase in service revenues at VITAS was a result of increased average daily census (“ADC”) of 4.5%, driven by an increase in admissions of 4.4%, increased discharges of 4.5% and Medicare price increases of approximately 2.5%.  The decrease in service revenues at Roto-Rooter was driven by a 3.0% decrease in job count offset by an increase in price and mix shift.  Consolidated net income decreased 4.8%.  Diluted EPS increased 2.9% as a result of a lower number of shares outstanding.  Adjusted EBITDA as a percent of revenue decreased 70 basis points as a result of the decrease in service revenues at Roto-Rooter.  See page 32 for additional VITAS operating metrics.

For the nine months ended September 30, 2012, the increase in consolidated service revenues and sales was driven by a 8.5% increase at VITAS partially offset by a 2.4% decrease at Roto-Rooter.  The increase in service revenues at VITAS was a result of increased average daily census (“ADC”) of 5.5%, driven by an increase in admissions of 3.9%, increased discharges of 4.3% and Medicare price increases of approximately 2.5%.  The decrease in service revenues at Roto-Rooter was driven by a 3.4% decrease in job count partially offset by a 2.0% price and mix shift increase.  Consolidated net income increased 3.8%.  Diluted EPS increased 14.5% as a result of the increase in net income and a lower number of shares outstanding.  Adjusted EBITDA as a percent of revenue decreased 60 basis points as a result of the decrease in service revenues at Roto-Rooter.  See page 32 for additional VITAS operating metrics.

VITAS expects to achieve full-year 2012 revenue growth, prior to Medicare cap, of 7.5% to 8.0%.  Admissions are estimated to increase approximately 4.0% to 4.5%.  Adjusted EBITDA margin, prior to Medicare cap, is estimated to be 14.5% to 15.0%.  Roto-Rooter expects full-year 2012 revenue 2.0% below the prior year.  The revenue estimate is a result of increased pricing of approximately 1.5%, a favorable mix shift to higher revenue jobs, with job count estimated to decrease 3.0% to 4.0%.  Adjusted EBITDA margin for 2012 is estimated to be in the range of 15.8% to 16.3%.  We anticipate that our operating income and cash flows will be sufficient to operate our businesses and meet any commitments for the foreseeable future.

-18-

 
 
Financial Condition
Liquidity and Capital Resources
Material changes in the balance sheet accounts from December 31, 2011 to September 30, 2012 include the following:

 	•	A $23.2 million increase in accounts receivable related to the timing of receipts.	

 	•	A $7.2 million increase in properties and equipment due to the opening of the Florida home medical equipment location, a data center relocation and the opening of in-patient units.	

 	•	A $5.2 million increase in goodwill due to Roto-Rooter acquisitions.	

 	•	A $4.2 million decrease in accounts payable related to timing of payments.	

 	•	A $3.0 million decrease in accrued compensation related to the timing of payments of incentive compensation.	

Net cash provided by operating activities decreased by $30.6 million due primarily to the increase in accounts receivable and the decrease in accounts payable.  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 $29.2 million in standby letters of credit as of September 30, 2012, for insurance purposes.  Issued letters of credit reduce our available credit under the revolving credit agreement.  As of September 30, 2012, we have approximately $320.8 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility, excluding the $150 million 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.  We are in compliance with all financial and other debt covenants as of September 30, 2012 and anticipate remaining in compliance throughout 2012.

The VITAS segment of the Company’s business operates in a heavily-regulated industry.  As a result, the Company is subjected to inquiries and investigations by various government agencies, as well as to lawsuits, including  qui tam  actions.  The following sections describe the various ongoing lawsuits and investigations of which the Company is currently aware.  It is not possible at this time for us to estimate either the timing or outcome of any of those matters, or whether any potential loss, or range of potential losses, is probable or estimable.

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,  Morangelli et al. v. Chemed Corporation , et al., 1-10-cv-00876-BMC, 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 September 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.
  
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,  Bernadette Santos, et al. v. Vitas Healthcare Corporation of California , BC359356.  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.  We contest these allegations.  In December 2009, the trial court denied Plaintiffs’ motion for class certification.  In July 2011, the Court of Appeals affirmed denial of class certification on the travel time, meal and rest period claims, and reversed the trial court’s denial on the off-the-clock and sales representation exemption claims.  Plaintiffs filed an appeal of this decision.  In September 2012, in response to an order of reconsideration, the Court of Appeals reiterated its previous rulings.  

On January 12, 2012, the Greater Pennsylvania Carpenters Pension Fund filed a putative class action lawsuit in the U.S. District Court for the Southern District of Ohio against the Company, Kevin McNamara, David Williams, and Timothy O’Toole.  On April 9, 2012, the Court issued orders (a) renaming the suit as  In re Chemed Corp. Securities Litigation , Civil Action No. 1:12-cv-28 (S.D. Ohio); (b) appointing the Greater Pennsylvania Carpenters Pension Fund and the Electrical Workers Pension Fund, Local 103, I.B.E.W. as Lead Plaintiffs; and (c) approving Lead Plaintiffs’ selection of Labaton Sucharow LLP and Robbins Geller Rudman & Dowd LLP as Co-Lead Counsel.  On June 18, 2012, Lead Plaintiffs filed an amended complaint alleging violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 against all Defendants, and violation of Section 20(a) of the Securities Exchange Act of 1934 against Messrs. McNamara, Williams, and O’Toole.  The suit’s allegations concern the VITAS hospice segment of the Company’s business.  Lead Plaintiffs seek, on behalf of a putative class of purchasers of Chemed Capital Stock between February 15, 2010 and November 16, 2011, compensatory damages in an unspecified amount and attorneys’ fees and expenses, arising from Defendants’ failure to disclose an alleged fraudulent scheme to enroll ineligible hospice patients and to fraudulently obtain payments from the federal government.  Defendants filed motions to dismiss the amended complaint on August 17, 2012, which are continuing to be briefed.  Defendants believe the claims are without merit, and intend to defend vigorously against them.

-19-

 
 
Regardless of the outcome of any of the preceding matters, litigation adversely affects us through defense costs, diversion of management time, and related publicity.

In April 2005, VITAS received a subpoena from the Office of the Inspector General (“OIG”) of the U.S. Department of Health and Human Services requesting that VITAS produce various categories of documents from 1998 through the date of the subpoena in connection with an investigation into an alleged failure to appropriately bill Medicare and Medicaid for hospice services.  The requested categories of documents included patient medical and billing records for 320 past and then current patients from VITAS’s three largest programs; policy and procedure manuals; information concerning patient admissions, certifications, discharges, and lengths of stay; and census information.  In the third quarter of 2005, the OIG requested additional information from us.  In May 2006, VITAS received another subpoena from OIG seeking certain information concerning employees and their compensation from 1999 through 2004.   In 2004, two former VITAS employees filed a related qui tam suit in U.S. District Court for the Southern District of Florida,  United States, et al. ex rel. Barys v. Vitas Healthcare Corp. , 1:04-cv-21431.  The complaint asserted violations of the federal False Claims Act against VITAS and certain of its affiliates, based on the alleged fraudulent admissions and recertification of ineligible patients.  In July 2007, the district court dismissed the suit with prejudice.  The U.S. Court of Appeals for the Eleventh Circuit affirmed the dismissal in November 2008.  In March 2009, VITAS received a letter from the Department of Justice indicating that its investigation of VITAS’s Florida programs is ongoing.

In July 2012, VITAS received an investigative subpoena from the Florida Attorney General seeking documents previously produced in the course of prior government investigations as well as, for the period January 1, 2007 through the date of production, billing records and procedures; information concerning business results, plans, and strategies; documents concerning patient eligibility for hospice care; and certain information concerning employees and their compensation.  We are conferring with the Attorney General regarding those document requests.
 
In May 2009, VITAS received an administrative subpoena from the U.S. Department of Justice requesting that VITAS deliver to OIG various categories of documents for its headquarters and Texas programs from January 1, 2003 through the date of the subpoena.  The requested categories included policy and procedure manuals and information concerning Medicare and Medicaid billing and the provision of hospice services; patient medical records; information concerning business plans, strategies, and results and VITAS’s affiliated entities and referral sources; and certain information concerning employees and their compensation.  In August 2009, the OIG selected medical records for 59 past and current patients from a Texas program for review.  In September 2010, VITAS received a second administrative subpoena from the Department of Justice seeking electronic documents of 10 current and former employees.  In April 2011, the U.S. Attorney provided the Company with a copy of a  qui tam  complaint filed under seal in the U.S. District Court for the Northern District of Texas,  United States, et al. ex rel. Rehfeldt v. Vitas Healthcare Corp. , 3:09-cv-0203.  In November 2011, the complaint was unsealed.  The U.S. Attorney and the Attorney General for the State of Texas filed notices in November 2011 stating that they had decided not to intervene in the case at that time but indicating that they continue to investigate the allegations.  The complaint asserts violations of the federal False Claims Act and the Texas Medicaid Fraud Prevention Act based on the alleged admission and re-certification of ineligible patients, conspiracy to admit ineligible patients, and backdating patient revocations.  The suit was brought by Michael Rehfeldt, a former general manager of VITAS’s San Antonio program, against VITAS, the San Antonio program’s former Regional Vice-President, Keith Becker, and former Medical Director, Justo Cisneros, and their respective then-current employers: Wellmed Medical Management, Care Level Management, LLC, Inspiris Hospice, LLC, and Inspiris, Inc.  The plaintiff dismissed all claims against their then-current employers in March and April of 2012.  The complaint has yet to be served on any of the VITAS entities.
 
In February 2010, VITAS received a companion civil investigative demand (“CID”) from the Texas Attorney General seeking documents from January 1, 2002 through the date of the CID, and interrogatory responses in connection with a related investigation of possible fraudulent submission of Medicaid claims for non-qualifying patients and fraudulent shifting of costs from VITAS to the State of Texas and the United States.  The CID requested similar information sought by the Department of Justice’s May 2009 administrative subpoena, together with information concerning record-keeping and retention practices, and medical records concerning 117 patients.  In September 2010, VITAS received a second CID from the Texas Attorney General seeking additional documents concerning business plans and results, revocation forms for certain patients, and electronic documents of 10 current and former employees.

-20-

 
 
In June 2011, the U.S. Attorney provided the Company with a partially unsealed qui tam complaint filed under seal in the U.S. District Court for the Western District of Texas,  United States, et al. ex rel. Urick v. Vitas HME Solutions, Inc. et al. , 5:08-cv-0663.  The U.S. Attorney filed a notice in May 2012 stating that it had decided not to intervene in the case at that time but indicating that it continues to investigate the allegations.  In June 2012, the complaint was unsealed.  The complaint asserts violations of the federal False Claims Act and the Texas Medicaid Fraud Prevention Act based on allegations of a conspiracy to submit to Medicare and Medicaid false claims involving hospice services for ineligible patients, unnecessary medical supplies, failing to satisfy certain prerequisites for payment, and altering patient records, including backdating patient revocations.  The suit was brought by Barbara Urick, a registered nurse in VITAS’s San Antonio program, against VITAS, certain of its affiliates, and several former VITAS employees, including physicians Justo Cisneros and Antonio Cavasos and nurses Sally Schwenk, Diane Anest, and Edith Reed.  In September 2012, the plaintiff dismissed all claims against the individual defendants.  The complaint has yet to be served on any of the VITAS entities.

Also in June 2011, the U.S. Attorney provided the Company with a partially unsealed qui tam complaint filed under seal in the U.S. District Court for the Northern District of Illinois,  United States, et al. ex rel. Spottiswood v. Chemed Corp. , 1:07-cv-4566.  In April 2012, the complaint was unsealed.  The U.S. Attorney and Attorney General for the State of Illinois filed notices in April and May 2012, respectively, stating that they had decided not to intervene in the case at that time but indicating that they continue to investigate the allegations.  The complaint asserts violations of the federal False Claims Act and the Illinois Whistleblower Reward and Protection Act based on allegations that VITAS fraudulently billed Medicare and Medicaid for providing unwarranted continuous care services.  The suit was brought by Laura Spottiswood, a former part-time pool registered nurse at VITAS, against Chemed, VITAS, and a VITAS affiliate.  The complaint has yet to be served.

In June 2012, VITAS received an administrative subpoena from OIG in connection with an investigation of possible improper claims submitted to the Medicare and Medicaid programs.  It seeks production of various categories of documents concerning the provision of hospice services, for headquarters and its Southern California programs, for the period January 1, 2007 through the date of the subpoena.  The categories of documents include policy, procedure and training manuals; documents concerning patient eligibility for hospice care, including referrals, admissions, certifications, revocations and census information; documents concerning claims submitted to government programs; certain information concerning employees and their compensation; and documents concerning VITAS’s financial performance.  In August 2012, the OIG also subpoenaed medical records for 268 patients from three Southern California programs.  We are conferring with the U.S. Attorney’s Office for the Central District of California regarding those document requests.

In September 2012, VITAS received an administrative subpoena from OIG seeking production of medical records for 102 patients in 10 states who received continuous care between 2004 and 2009.  We are conferring with OIG regarding those requests.

The costs to comply with these investigations were not material for any period presented.  Regardless of the outcome of any of the preceding matters, responding to the subpoenas and dealing with the various regulatory agencies can adversely affect us through defense costs, diversion of management time, and related publicity.

Results of Operations
Three months ended September 30, 2012 versus  2011 - Consolidated Results
Our service revenues and sales for the third quarter of 2012 increased 3.8% versus services and sales revenues for the third quarter of 2011.  Of this increase, $15.0 million was attributable to VITAS partially offset by a $2.1 million decrease at Roto-Rooter.  The following chart shows the components of those changes (in thousands):

 	 	Increase/(Decrease)	
 	 	Amount	 	Percent	
VITAS	 	 	 	 	 	
Routine homecare	 	$	 13,609	 	 7.4	
Continuous care	 	 	 2,031	 	 5.1	
General inpatient	 	 	 (210)	 	 (0.7)	
Medicare cap	 	 	 (384)	 	 (100.0)	
Roto-Rooter	 	 	 	 	 	
Plumbing	 	 	 (1,119)	 	 (2.6)	
Drain cleaning	 	 	 (133)	 	 (0.4)	
Contractor Operations	 	 	 368	 	 5.6	
Other	 	 	 (1,248)	 	 (19.0)	
Total	 	$	12,914	 	 3.8	

-21-

 
 
The increase in VITAS’ revenues for the third quarter of 2012 versus the third quarter of 2011 was a result of increased ADC of 4.5% driven by an increase in admissions of 4.4%, increased discharges of 4.5% and Medicare reimbursement rate increases of approximately 2.5%.  The ADC increase was driven by a 4.7% increase in routine homecare, an increase of 0.9% in general inpatient and an increase of a 3.7% in continuous care.  In excess of 90% of VITAS’ service revenues for the period were from Medicare and Medicaid.

The decrease in plumbing revenues for the third quarter of 2012 versus 2011 is attributable to a 1.8% decrease in job count and a 0.4% decrease in the average price per job.  Our excavation job count was essentially flat when compared to 2011.  Drain cleaning revenues for the third quarter of 2012 versus 2011 reflect a 3.5% decrease in the number of jobs perfomed partially offset by a 3.4% increase in the price per job.  The decrease in the Other category relates mainly to the shut-down of Roto-Rooter’s one remaining HVAC operation, as discussed in Footnote 17 to the unaudited consolidated financial statements.  Contractor operations revenue increased 5.6% for the third quarter of 2012.
 
The consolidated gross margin was 27.6% in the third quarter of 2012 as compared with 28.2% in the third quarter of 2011.  On a segment basis, VITAS’ gross margin was 22.2% in the third quarter of 2012 and 22.4% in the third quarter of 2011.  The Roto-Rooter segment’s gross margin was 44.3% for the third quarter of 2012 as compared with 45.0% for the third quarter of 2011.  The decrease in Roto-Rooter’s gross margin is primarily the result of increased medical costs combined with lower revenue.
 
Selling, general and administrative expenses (“SG&A”) comprise (in thousands):

 	Three months ended September 30,	 	
 	2012	 	2011	 	
SG&A expenses before the impact of market gains	 	 	 	 	 	 	
of deferred compensation plans	 	$	51,379	 	 	$	49,629	 	
Impact of market value gains/(losses) on liabilities	 	 	 	 	 	 	 	 	
held in deferred compensation trusts	 	 	1,576	 	 	 	(2,011	)	
Total SG&A expenses	 	$	52,955	 	 	$	47,618	 	

Normal salary increases and revenue related expense increases between periods account for the 3.5% increase in SG&A expenses before long-term incentive compensation and the impact of market gains of deferred compensation plans.

Interest expense increased 5.3% between periods primarily as a result of the increase in amortization of bond discount expense.
 
Other income/(expense) - net comprise (in thousands):
 	Three months ended September 30,	 	
 	2012	 	2011	 	
Market value gains/(losses) on assets held in deferred	 	 	 	 	 	 	
compensation trusts	 	$	1,576	 	 	$	(2,011	)	
Loss on disposal of property and equipment	 	 	(80	)	 	 	(79	)	
Interest income	 	 	291	 	 	 	74	 	
Other	 	 	53	 	 	 	81	 	
Total other income/(expense) - net	 	$	1,840	 	 	$	(1,935	)	

Our effective income tax rate decreased to 38.8% in the third quarter of 2012 from 38.9% when compared with the third quarter of 2011.

-22-

 
 
Net income for both periods included the following after-tax items/adjustments that reduced after-tax earnings (in thousands):
 
 	 	Three Months Ended September 30,	 	
 	 	2012	 	 	2011	 	
VITAS	 	 	 	 	 	 	
Legal expenses of OIG investigation	 	$	(300	)	 	$	(131	)	
Acquisition expenses	 	 	(1	)	 	 	(2	)	
Roto-Rooter	 	 	 	 	 	 	 	 	
HVAC shut-down costs	 	 	(649	)	 	 	-	 	
Expenses of class action litigation	 	 	(70	)	 	 	(467	)	
Acquisition expenses	 	 	(52	)	 	 	-	 	
Corporate	 	 	 	 	 	 	 	 	
Stock option expense	 	 	(1,516	)	 	 	(1,523	)	
Noncash impact of change in accounting for convertible debt	 	 	(1,272	)	 	 	(1,177	)	
Expenses of class action litigation	 	 	(44	)	 	 	-	 	
Total	 	$	(3,904	)	 	$	(3,300	)	

Three months ended September 30, 2012 versus 2011 - Segment Results

The change in after-tax earnings for the third quarter of 2012 versus the third quarter of 2011 is due to (in thousands):

 	Increase/(Decrease)	 	
 	Amount	 	 	Percent	 	
VITAS	 	$	970	 	 	 	4.6	 	
Roto-Rooter	 	 	(1,871	)	 	 	(23.3	)	
Corporate	 	 	(141	)	 	 	(2.0	)	
 	 	$	(1,042	)	 	 	(4.8	)	

Results of Operations
Nine months ended September 30, 2012 versus  2011 - Consolidated Results
Our service revenues and sales for the first nine months of 2012 increased 5.5% versus services and sales revenues for the first nine months of 2011.  Of this increase, $62.3 million was attributable to VITAS partially offset by a $6.6 million decrease at Roto-Rooter.  The following chart shows the components of those changes (in thousands):

 	 	Increase/(Decrease)	
 	 	Amount	 	Percent	
VITAS	 	 	 	 	 	
Routine homecare	 	$	 47,637	 	 9.0	
Continuous care	 	 	 9,531	 	 8.1	
General inpatient	 	 	 3,620	 	 4.4	
Medicare cap	 	 	 1,550	 	 150.9	
Roto-Rooter	 	 	 	 	 	
Plumbing	 	 	 (3,058)	 	 (2.3)	
Drain cleaning	 	 	 (2,275)	 	 (2.2)	
Contractor Operations	 	 	 820	 	 4.2	
Other	 	 	 (2,076)	 	 (10.3)	
Total	 	$	 55,749	 	 5.5	

The increase in VITAS’ revenues for the first nine months of 2012 versus the first nine months of 2011 was a result of increased ADC of 5.5% driven by an increase in admissions of 3.9%, increased discharges of 4.3% and Medicare reimbursement rate increases of approximately 2.5%.  The ADC increase was driven by a 5.6% increase in routine homecare, an increase of 3.3% in general inpatient and an increase of a 4.8% in continuous care. The reversal of previously recorded Medicare cap reserves increased 150.9% as a result of improving admissions trends.  In excess of 90% of VITAS’ service revenues for the period were from Medicare and Medicaid.

-23-

 
 
The decrease in plumbing revenues for the first nine months of 2012 versus 2011 is attributable to a 0.2% decrease in the number of jobs performed as well as a 1.2% decrease in the average price per job.  Our excavation job count increased by 5.6% compared to 2011.  Drain cleaning revenues for the first nine months of 2012 versus 2011 reflect a 5.0% decrease in the number of jobs perfomed partially offset by a 3.7% increase in the price per job.  The decrease in the Other category relates mainly of the shut-down of Roto-Rooter’s one remaining HVAC operation, as discussed in Footnote 17 to the unaudited consolidated financial statements.  Contractor operations revenue increased 4.2% for the first nine months of 2012.
 
The consolidated gross margin was 27.3% for the first nine months of 2012 as compared with 28.2% for the first nine months of 2011.  On a segment basis, VITAS’ gross margin was 21.7% for the first nine months of 2012 and 22.0% for the first nine months of 2011.  The Roto-Rooter segment’s gross margin was 44.1% for the first nine months of 2012 as compared with 44.7% for the first nine months of 2011.  The decrease in Roto-Rooter’s gross margin is primarily the result of increased medical costs combined with lower revenue.
 
Selling, general and administrative expenses (“SG&A”) comprise (in thousands):

 	Nine months ended September 30,	 	
 	2012	 	2011	 	
SG&A expenses before long-term incentive	 	 	 	 	 	 	
compensation and the impact of market gains and	 	 	 	 	 	 	
losses of deferred compensation plans	 	$	153,131	 	 	$	149,888	 	
Long-term incentive compensation	 	 	-	 	 	 	3,012	 	
Impact of market value gains on liabilities held in	 	 	 	 	 	 	 	 	
deferred compensation trusts	 	 	2,761	 	 	 	796	 	
Total SG&A expenses	 	$	155,892	 	 	$	153,696	 	
 
Normal salary increases and revenue related expense increases between periods account for the 2.2% increase in SG&A expenses before long-term incentive compensation and the impact of market gains of deferred compensation plans.
 
Interest expense increased 7.5% between periods as a result of the debt refinancing that took place in the first quarter of 2011 and to the increase in amortization of bond discount expense.

Other income/(expense) - net comprise (in thousands):
 
 	Nine months ended September 30,	 	
 	2012	 	2011	 	
Market value gains on assets held in deferred	 	 	 	 	 	 	
compensation trusts	 	$	2,761	 	 	$	796	 	
Loss on disposal of property and equipment	 	 	(228	)	 	 	(68	)	
Interest income	 	 	401	 	 	 	197	 	
Other	 	 	31	 	 	 	(44	)	
Total other income/(expense) - net	 	$	2,965	 	 	$	881	 	

Our effective income tax rate increased to 38.9% for the first nine months of 2012 from 38.7% when compared with the first nine months of 2011.

-24-

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

 	 	Nine Months Ended September 30,	 	
 	 	2012	 	 	2011	 	
VITAS	 	 	 	 	 	 	
Legal expenses of OIG investigation	 	$	(465	)	 	$	(749	)	
Acquisition expenses	 	 	(1	)	 	 	(73	)	
Roto-Rooter	 	 	 	 	 	 	 	 	
HVAC shut-down costs	 	 	(649	)	 	 	-	 	
Expenses of class action litigation	 	 	(512	)	 	 	(881	)	
Acquisition expenses	 	 	(73	)	 	 	4	 	
Corporate	 	 	 	 	 	 	 	 	
Stock option expense	 	 	(4,243	)	 	 	(4,366	)	
Noncash impact of change in accounting for convertible debt	 	 	(3,744	)	 	 	(3,464	)	
Expenses of securities litigation	 	 	(168	)	 	 	-	 	
Long-term incentive compensation	 	 	-	 	 	 	(1,880	)	
Total	 	$	(9,855	)	 	$	(11,409	)	

Nine months ended September 30, 2012 versus 2011 - Segment Results

The change in after-tax earnings for the first nine months of 2012 versus the first nine months of 2011 is due to (in thousands)
 
 	Increase/(Decrease)	 	
 	Amount	 	 	Percent	 	
VITAS	$	4,315	 	 	 	7.5	 	
Roto-Rooter	 	(3,903	)	 	 	(15.2	)	
Corporate	 	1,878	 	 	 	8.2	 	
 	$	2,290	 	 	 	3.8	 	

-25-

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES	 	
CONSOLIDATING STATEMENT OF INCOME	 	
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012	 	
(in thousands)(unaudited)	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
2012 (a)	 	 	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$	267,990	 	 	$	86,363	 	 	$	-	 	 	$	354,353	 	
Cost of services provided and goods sold	 	 	208,473	 	 	 	48,137	 	 	 	-	 	 	 	256,610	 	
Selling, general and administrative expenses	 	 	20,148	 	 	 	25,350	 	 	 	7,457	 	 	 	52,955	 	
Depreciation	 	 	4,333	 	 	 	2,093	 	 	 	131	 	 	 	6,557	 	
Amortization	 	 	489	 	 	 	160	 	 	 	486	 	 	 	1,135	 	
Other operating expenses	 	 	-	 	 	 	1,126	 	 	 	-	 	 	 	1,126	 	
Total costs and expenses	 	 	233,443	 	 	 	76,866	 	 	 	8,074	 	 	 	318,383	 	
Income/(loss) from operations	 	 	34,547	 	 	 	9,497	 	 	 	(8,074	)	 	 	35,970	 	
Interest expense	 	 	(62	)	 	 	(150	)	 	 	(3,531	)	 	 	(3,743	)	
Intercompany interest income/(expense)	 	 	795	 	 	 	396	 	 	 	(1,191	)	 	 	-	 	
Other income/(expense)—net	 	 	176	 	 	 	63	 	 	 	1,601	 	 	 	1,840	 	
Income/(expense) before income taxes	 	 	35,456	 	 	 	9,806	 	 	 	(11,195	)	 	 	34,067	 	
Income taxes	 	 	(13,516	)	 	 	(3,661	)	 	 	3,955	 	 	 	(13,222	)	
Net income/(loss)	 	$	21,940	 	 	$	6,145	 	 	$	(7,240	)	 	$	20,845	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(a) The following amounts are included in net income (in thousands):	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	 	VITAS	 	 	 	Roto-Rooter	 	 	 	Corporate	 	 	 	Consolidated	 	
Pretax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(2,397	)	 	$	(2,397	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(2,011	)	 	 	(2,011	)	
Expenses of class action litigation	 	 	-	 	 	 	(116	)	 	 	-	 	 	 	(116	)	
Expenses of securities litigation	 	 	-	 	 	 	-	 	 	 	(68	)	 	 	(68	)	
Acquisition expenses	 	 	(2	)	 	 	(85	)	 	 	-	 	 	 	(87	)	
Legal expenses of OIG investigation	 	 	(483	)	 	 	-	 	 	 	-	 	 	 	(483	)	
HVAC shut down costs	 	 	-	 	 	 	(1,126	)	 	 	-	 	 	 	(1,126	)	
Total	 	$	(485	)	 	$	(1,327	)	 	$	(4,476	)	 	$	(6,288	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	 	VITAS	 	 	 	Roto-Rooter	 	 	 	Corporate	 	 	 	Consolidated	 	
After-tax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	$	-	 	 	$	-	 	 	$	(1,516	)	 	$	(1,516	)	
Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(1,272	)	 	 	(1,272	)	
Expenses of class action litigation	 	 	-	 	 	 	(70	)	 	 	-	 	 	 	(70	)	
Expenses of securities litigation	 	 	-	 	 	 	-	 	 	 	(44	)	 	 	(44	)	
Acquisition expenses	 	 	(1	)	 	 	(52	)	 	 	-	 	 	 	(53	)	
Legal expenses of OIG investigation	 	 	(300	)	 	 	-	 	 	 	-	 	 	 	(300	)	
HVAC shut down costs	 	 	-	 	 	 	(649	)	 	 	-	 	 	 	(649	)	
Total	 	$	(301	)	 	$	(771	)	 	$	(2,832	)	 	$	(3,904	)	

-26-

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES	 	
CONSOLIDATING STATEMENT OF INCOME	 	
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011	 	
(in thousands)(unaudited)	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
2011 (a)	 	 	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$	252,944	 	 	$	88,495	 	 	$	-	 	 	$	341,439	 	
Cost of services provided and goods sold	 	 	196,407	 	 	 	48,656	 	 	 	-	 	 	 	245,063	 	
Selling, general and administrative expenses	 	 	18,945	 	 	 	25,057	 	 	 	3,616	 	 	 	47,618	 	
Depreciation	 	 	4,123	 	 	 	2,058	 	 	 	132	 	 	 	6,313	 	
Amortization	 	 	510	 	 	 	156	 	 	 	468	 	 	 	1,134	 	
Total costs and expenses	 	 	219,985	 	 	 	75,927	 	 	 	4,216	 	 	 	300,128	 	
Income/(loss) from operations	 	 	32,959	 	 	 	12,568	 	 	 	(4,216	)	 	 	41,311	 	
Interest expense	 	 	(62	)	 	 	(132	)	 	 	(3,361	)	 	 	(3,555	)	
Intercompany interest income/(expense)	 	 	834	 	 	 	451	 	 	 	(1,285	)	 	 	-	 	
Other income/(expense)—net	 	 	62	 	 	 	(7	)	 	 	(1,990	)	 	 	(1,935	)	
Income/(expense) before income taxes	 	 	33,793	 	 	 	12,880	 	 	 	(10,852	)	 	 	35,821	 	
Income taxes	 	 	(12,823	)	 	 	(4,864	)	 	 	3,753	 	 	 	(13,934	)	
Net income/(loss)	 	$	20,970	 	 	$	8,016	 	 	$	(7,099	)	 	$	21,887	 	

(a) The following amounts are included in net income (in thousands):	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	 	VITAS	 	 	 	Roto-Rooter	 	 	 	Corporate	 	 	 	Consolidated	 	
Pretax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Stock option expense	 	$	-	 	 	$	-	 	 	$	(2,408	)	 	$	(2,408	)	
     Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(1,861	)	 	 	(1,861	)	
     Expenses of class action litigation	 	 	-	 	 	 	(770	)	 	 	-	 	 	 	(770	)	
     Acquisition expenses	 	 	(2	)	 	 	-	 	 	 	-	 	 	 	(2	)	
     Legal expenses of OIG investigation	 	 	(212	)	 	 	-	 	 	 	-	 	 	 	(212	)	
          Total	 	$	(214	)	 	$	(770	)	 	$	(4,269	)	 	$	(5,253	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	 	VITAS	 	 	 	Roto-Rooter	 	 	 	Corporate	 	 	 	Consolidated	 	
After-tax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Stock option expense	 	$	-	 	 	$	-	 	 	$	(1,523	)	 	$	(1,523	)	
     Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(1,177	)	 	 	(1,177	)	
     Expenses of class action litigation	 	 	-	 	 	 	(467	)	 	 	-	 	 	 	(467	)	
     Acquisition expenses	 	 	(2	)	 	 	-	 	 	 	-	 	 	 	(2	)	
     Legal expenses of OIG investigation	 	 	(131	)	 	 	-	 	 	 	-	 	 	 	(131	)	
          Total	 	$	(133	)	 	$	(467	)	 	$	(2,700	)	 	$	(3,300	)	

-27-

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES	 	
CONSOLIDATING STATEMENT OF INCOME	 	
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012	 	
(in thousands)(unaudited)	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
2012 (a)	 	 	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$	794,050	 	 	$	267,416	 	 	$	-	 	 	$	1,061,466	 	
Cost of services provided and goods sold	 	 	621,933	 	 	 	149,490	 	 	 	-	 	 	 	771,423	 	
Selling, general and administrative expenses	 	 	60,367	 	 	 	75,875	 	 	 	19,650	 	 	 	155,892	 	
Depreciation	 	 	12,521	 	 	 	6,264	 	 	 	393	 	 	 	19,178	 	
Amortization	 	 	1,467	 	 	 	471	 	 	 	1,437	 	 	 	3,375	 	
Other operating expenses	 	 	-	 	 	 	1,126	 	 	 	-	 	 	 	1,126	 	
Total costs and expenses	 	 	696,288	 	 	 	233,226	 	 	 	21,480	 	 	 	950,994	 	
Income/(loss) from operations	 	 	97,762	 	 	 	34,190	 	 	 	(21,480	)	 	 	110,472	 	
Interest expense	 	 	(188	)	 	 	(364	)	 	 	(10,480	)	 	 	(11,032	)	
Intercompany interest income/(expense)	 	 	2,361	 	 	 	1,221	 	 	 	(3,582	)	 	 	-	 	
Other income/(expense)—net	 	 	144	 	 	 	9	 	 	 	2,812	 	 	 	2,965	 	
Income/(expense) before income taxes	 	 	100,079	 	 	 	35,056	 	 	 	(32,730	)	 	 	102,405	 	
Income taxes	 	 	(38,080	)	 	 	(13,341	)	 	 	11,580	 	 	 	(39,841	)	
Net income/(loss)	 	$	61,999	 	 	$	21,715	 	 	$	(21,150	)	 	$	62,564	 	

(a) The following amounts are included in net income (in thousands):	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	 	VITAS	 	 	 	Roto-Rooter	 	 	 	Corporate	 	 	 	Consolidated	 	
Pretax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Stock option expense	 	$	-	 	 	$	-	 	 	$	(6,709	)	 	$	(6,709	)	
     Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(5,919	)	 	 	(5,919	)	
     Expenses of class action litigation	 	 	-	 	 	 	(843	)	 	 	-	 	 	 	(843	)	
     Expenses of securities litigation	 	 	-	 	 	 	-	 	 	 	(265	)	 	 	(265	)	
     Acquisition expenses	 	 	(2	)	 	 	(120	)	 	 	-	 	 	 	(122	)	
     Legal expenses of OIG investigation	 	 	(749	)	 	 	-	 	 	 	-	 	 	 	(749	)	
     HVAC shut-down costs	 	 	-	 	 	 	(1,126	)	 	 	-	 	 	 	(1,126	)	
          Total	 	$	(751	)	 	$	(2,089	)	 	$	(12,893	)	 	$	(15,733	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	 	VITAS	 	 	 	Roto-Rooter	 	 	 	Corporate	 	 	 	Consolidated	 	
After-tax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Stock option expense	 	$	-	 	 	$	-	 	 	$	(4,243	)	 	$	(4,243	)	
     Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(3,744	)	 	 	(3,744	)	
     Expenses of class action litigation	 	 	-	 	 	 	(512	)	 	 	-	 	 	 	(512	)	
     Expenses of securities litigation	 	 	-	 	 	 	-	 	 	 	(168	)	 	 	(168	)	
     Acquisition expenses	 	 	(1	)	 	 	(73	)	 	 	-	 	 	 	(74	)	
     Legal expenses of OIG investigation	 	 	(465	)	 	 	-	 	 	 	-	 	 	 	(465	)	
     HVAC shut-down costs	 	 	-	 	 	 	(649	)	 	 	-	 	 	 	(649	)	
          Total	 	$	(466	)	 	$	(1,234	)	 	$	(8,155	)	 	$	(9,855	)	

 
-28-

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES	 	
CONSOLIDATING STATEMENT OF INCOME	 	
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011	 	
(in thousands)(unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
2011 (a)	 	 	 	 	 	 	 	 	 	 	 	 	
Service revenues and sales	 	$	731,712	 	 	$	274,005	 	 	$	-	 	 	$	1,005,717	 	
Cost of services provided and goods sold	 	 	570,648	 	 	 	151,470	 	 	 	-	 	 	 	722,118	 	
Selling, general and administrative expenses	 	 	57,392	 	 	 	76,181	 	 	 	20,123	 	 	 	153,696	 	
Depreciation	 	 	12,489	 	 	 	6,067	 	 	 	403	 	 	 	18,959	 	
Amortization	 	 	1,513	 	 	 	443	 	 	 	1,287	 	 	 	3,243	 	
Total costs and expenses	 	 	642,042	 	 	 	234,161	 	 	 	21,813	 	 	 	898,016	 	
Income/(loss) from operations	 	 	89,670	 	 	 	39,844	 	 	 	(21,813	)	 	 	107,701	 	
Interest expense	 	 	(172	)	 	 	(274	)	 	 	(9,814	)	 	 	(10,260	)	
Intercompany interest income/(expense)	 	 	3,263	 	 	 	1,742	 	 	 	(5,005	)	 	 	-	 	
Other income/(expense)—net	 	 	3	 	 	 	(2	)	 	 	880	 	 	 	881	 	
Income/(expense) before income taxes	 	 	92,764	 	 	 	41,310	 	 	 	(35,752	)	 	 	98,322	 	
Income taxes	 	 	(35,080	)	 	 	(15,692	)	 	 	12,724	 	 	 	(38,048	)	
Net income/(loss)	 	$	57,684	 	 	$	25,618	 	 	$	(23,028	)	 	$	60,274	 	

(a) The following amounts are included in net income (in thousands):	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
Pretax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Long-term incentive compensation	 	$	-	 	 	$	-	 	 	$	(6,903	)	 	$	(6,903	)	
     Stock option expense	 	 	-	 	 	 	-	 	 	 	(3,012	)	 	 	(3,012	)	
     Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(5,476	)	 	 	(5,476	)	
     Expenses of class action litigation	 	 	-	 	 	 	(1,451	)	 	 	-	 	 	 	(1,451	)	
     Acquisition expenses	 	 	(117	)	 	 	6	 	 	 	-	 	 	 	(111	)	
     Legal expenses of OIG investigation	 	 	(1,209	)	 	 	-	 	 	 	-	 	 	 	(1,209	)	
          Total	 	$	(1,326	)	 	$	(1,445	)	 	$	(15,391	)	 	$	(18,162	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
 	 	VITAS	 	 	Roto-Rooter	 	 	Corporate	 	 	Consolidated	 	
After-tax benefit/(cost):	 	 	 	 	 	 	 	 	 	 	 	 	 	$	 	 	
     Long-term incentive compensation	 	 	-	 	 	 	-	 	 	 	(4,366	)	 	 	(4,366	)	
     Stock option expense	 	 	-	 	 	 	-	 	 	 	(1,880	)	 	 	(1,880	)	
     Noncash impact of accounting for convertible debt	 	 	-	 	 	 	-	 	 	 	(3,464	)	 	 	(3,464	)	
     Expenses of class action litigation	 	 	-	 	 	 	(881	)	 	 	-	 	 	 	(881	)	
     Acquisition expenses	 	 	(73	)	 	 	4	 	 	 	-	 	 	 	(69	)	
     Legal expenses of OIG investigation	 	 	(749	)	 	 	-	 	 	 	-	 	 	 	(749	)	
          Total	 	$	(822	)	 	$	(877	)	 	$	(9,710	)	 	$	(11,409	)	

-29-

 
 
Consolidating Summary and Reconciliation of  Adjusted EBITDA	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Chemed Corporation and Subsidiary Companies	 	 	 	 	
(in thousands)	 	 	 	 	 	 	 	 	 	Chemed	 	
For the three months ended September 30, 2012	VITAS	 	Roto-Rooter	 	Corporate	 	Consolidated	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income/(loss)	 	$	21,940	 	 	$	6,145	 	 	$	(7,240	)	 	$	20,845	 	
Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	62	 	 	 	150	 	 	 	3,531	 	 	 	3,743	 	
Income taxes	 	 	13,516	 	 	 	3,661	 	 	 	(3,955	)	 	 	13,222	 	
Depreciation	 	 	4,333	 	 	 	2,093	 	 	 	131	 	 	 	6,557	 	
Amortization	 	 	489	 	 	 	160	 	 	 	486	 	 	 	1,135	 	
EBITDA	 	 	40,340	 	 	 	12,209	 	 	 	(7,047	)	 	 	45,502	 	
Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Intercompany interest expense/(income)	 	 	(795	)	 	 	(396	)	 	 	1,191	 	 	 	-	 	
Interest income	 	 	(256	)	 	 	(12	)	 	 	(23	)	 	 	(291	)	
Legal expenses of OIG investigation	 	 	483	 	 	 	-	 	 	 	-	 	 	 	483	 	
Acquisition expenses	 	 	2	 	 	 	85	 	 	 	-	 	 	 	87	 	
HVAC shut-down costs	 	 	-	 	 	 	1,126	 	 	 	-	 	 	 	1,126	 	
Advertising cost adjustment	 	 	-	 	 	 	(468	)	 	 	-	 	 	 	(468	)	
Expenses of class action litigation	 	 	-	 	 	 	116	 	 	 	-	 	 	 	116	 	
Stock option expense	 	 	-	 	 	 	-	 	 	 	2,397	 	 	 	2,397	 	
Expenses of securities litigation	 	 	-	 	 	 	-	 	 	 	68	 	 	 	68	 	
Adjusted EBITDA	 	$	39,774	 	 	$	12,660	 	 	$	(3,414	)	 	$	49,020	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
For the three months ended September 30, 2011	VITAS	 	Roto-Rooter	 	Corporate	 	Consolidated	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income/(loss)	 	$	20,970	 	 	$	8,016	 	 	$	(7,099	)	 	$	21,887	 	
Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	62	 	 	 	132	 	 	 	3,361	 	 	 	3,555	 	
Income taxes	 	 	12,823	 	 	 	4,864	 	 	 	(3,753	)	 	 	13,934	 	
Depreciation	 	 	4,123	 	 	 	2,058	 	 	 	132	 	 	 	6,313	 	
Amortization	 	 	510	 	 	 	156	 	 	 	468	 	 	 	1,134	 	
EBITDA	 	 	38,488	 	 	 	15,226	 	 	 	(6,891	)	 	 	46,823	 	
Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Intercompany interest expense/(income)	 	 	(834	)	 	 	(451	)	 	 	1,285	 	 	 	-	 	
Interest income	 	 	(43	)	 	 	(12	)	 	 	(19	)	 	 	(74	)	
Legal expenses of OIG investigation	 	 	212	 	 	 	-	 	 	 	-	 	 	 	212	 	
Acquisition expenses	 	 	2	 	 	 	-	 	 	 	-	 	 	 	2	 	
Advertising cost adjustment	 	 	-	 	 	 	(585	)	 	 	-	 	 	 	(585	)	
Expenses of class action litigation	 	 	-	 	 	 	770	 	 	 	-	 	 	 	770	 	
Stock option expense	 	 	-	 	 	 	-	 	 	 	2,408	 	 	 	2,408	 	
Adjusted EBITDA	 	$	37,825	 	 	$	14,948	 	 	$	(3,217	)	 	$	49,556	 	

-30-

 
 
Consolidating Summary and Reconciliation of Adjusted EBITDA	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Chemed Corporation and Subsidiary Companies	 	 	 	 	
(in thousands)	 	 	 	 	 	 	 	 	 	Chemed	 	
For the nine months ended September 30, 2012	VITAS	 	Roto-Rooter	 	Corporate	 	Consolidated	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income/(loss)	 	$	61,999	 	 	$	21,715	 	 	$	(21,150	)	 	$	62,564	 	
Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	188	 	 	 	364	 	 	 	10,480	 	 	 	11,032	 	
Income taxes	 	 	38,080	 	 	 	13,341	 	 	 	(11,580	)	 	 	39,841	 	
Depreciation	 	 	12,521	 	 	 	6,264	 	 	 	393	 	 	 	19,178	 	
Amortization	 	 	1,467	 	 	 	471	 	 	 	1,437	 	 	 	3,375	 	
EBITDA	 	 	114,255	 	 	 	42,155	 	 	 	(20,420	)	 	 	135,990	 	
Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Intercompany interest expense/(income)	 	 	(2,361	)	 	 	(1,221	)	 	 	3,582	 	 	 	-	 	
Interest income	 	 	(328	)	 	 	(22	)	 	 	(51	)	 	 	(401	)	
Legal expenses of OIG investigation	 	 	749	 	 	 	-	 	 	 	-	 	 	 	749	 	
Acquisition expenses	 	 	2	 	 	 	120	 	 	 	-	 	 	 	122	 	
HVAC shut-down costs	 	 	-	 	 	 	1,126	 	 	 	-	 	 	 	1,126	 	
Advertising cost adjustment	 	 	-	 	 	 	(1,870	)	 	 	-	 	 	 	(1,870	)	
Expenses of class action litigation	 	 	-	 	 	 	843	 	 	 	-	 	 	 	843	 	
Stock option expense	 	 	-	 	 	 	-	 	 	 	6,709	 	 	 	6,709	 	
Expenses of securities litigation	 	 	-	 	 	 	-	 	 	 	265	 	 	 	265	 	
Adjusted EBITDA	 	$	112,317	 	 	$	41,131	 	 	$	(9,915	)	 	$	143,533	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	Chemed	 	
For the nine months ended September 30, 2011	VITAS	 	Roto-Rooter	 	Corporate	 	Consolidated	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income/(loss)	 	$	57,684	 	 	$	25,618	 	 	$	(23,028	)	 	$	60,274	 	
Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	172	 	 	 	274	 	 	 	9,814	 	 	 	10,260	 	
Income taxes	 	 	35,080	 	 	 	15,692	 	 	 	(12,724	)	 	 	38,048	 	
Depreciation	 	 	12,489	 	 	 	6,067	 	 	 	403	 	 	 	18,959	 	
Amortization	 	 	1,513	 	 	 	443	 	 	 	1,287	 	 	 	3,243	 	
EBITDA	 	 	106,938	 	 	 	48,094	 	 	 	(24,248	)	 	 	130,784	 	
Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Intercompany interest expense/(income)	 	 	(3,263	)	 	 	(1,742	)	 	 	5,005	 	 	 	-	 	
Interest income	 	 	(86	)	 	 	(28	)	 	 	(83	)	 	 	(197	)	
Legal expenses of OIG investigation	 	 	1,209	 	 	 	-	 	 	 	-	 	 	 	1,209	 	
Acquisition expenses	 	 	117	 	 	 	(6	)	 	 	-	 	 	 	111	 	
Advertising cost adjustment	 	 	-	 	 	 	(1,442	)	 	 	-	 	 	 	(1,442	)	
Expenses of class action litigation	 	 	-	 	 	 	1,451	 	 	 	-	 	 	 	1,451	 	
Stock option expense	 	 	-	 	 	 	-	 	 	 	6,903	 	 	 	6,903	 	
Long-term incentive compensation	 	 	-	 	 	 	-	 	 	 	3,012	 	 	 	3,012	 	
Adjusted EBITDA	 	$	104,915	 	 	$	46,327	 	 	$	(9,411	)	 	$	141,831	 	

-31-

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES	 	
OPERATING STATISTICS FOR VITAS SEGMENT	 	
(unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended September 30,	 	 	Nine Months Ended September 30,	 	
OPERATING STATISTICS	 	2012	 	 	2011	 	 	2012	 	 	2011	 	
Net revenue ($000)	 	 	 	 	 	 	 	 	 	 	 	 	
Homecare	 	$	197,764	 	 	$	184,155	 	 	$	577,511	 	 	$	529,874	 	
Inpatient	 	 	28,082	 	 	 	28,292	 	 	 	86,481	 	 	 	82,861	 	
Continuous care	 	 	42,144	 	 	 	40,113	 	 	 	127,481	 	 	 	117,950	 	
Total before Medicare cap allowance	 	$	267,990	 	 	$	252,560	 	 	$	791,473	 	 	$	730,685	 	
Medicare cap allowance	 	 	-	 	 	 	384	 	 	 	2,577	 	 	 	1,027	 	
Total	 	$	267,990	 	 	$	252,944	 	 	$	794,050	 	 	$	731,712	 	
Net revenue as a percent of total	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
before Medicare cap allowance	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Homecare	 	 	73.8	%	 	 	72.9	%	 	 	73.0	%	 	 	72.5	%	
Inpatient	 	 	10.5	 	 	 	11.2	 	 	 	10.9	 	 	 	11.3	 	
Continuous care	 	 	15.7	 	 	 	15.9	 	 	 	16.1	 	 	 	16.2	 	
Total before Medicare cap allowance	 	 	100.0	 	 	 	100.0	 	 	 	100.0	 	 	 	100.0	 	
Medicare cap allowance	 	 	-	 	 	 	0.2	 	 	 	0.3	 	 	 	0.1	 	
Total	 	 	100.0	%	 	 	100.2	%	 	 	100.3	%	 	 	100.1	%	
Average daily census (days)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Homecare	 	 	10,123	 	 	 	9,485	 	 	 	9,904	 	 	 	9,185	 	
Nursing home	 	 	3,073	 	 	 	3,118	 	 	 	3,031	 	 	 	3,062	 	
Routine homecare	 	 	13,196	 	 	 	12,603	 	 	 	12,935	 	 	 	12,247	 	
Inpatient	 	 	460	 	 	 	456	 	 	 	466	 	 	 	451	 	
Continuous care	 	 	621	 	 	 	599	 	 	 	630	 	 	 	601	 	
Total	 	 	14,277	 	 	 	13,658	 	 	 	14,031	 	 	 	13,299	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Admissions	 	 	15,539	 	 	 	14,879	 	 	 	47,773	 	 	 	45,971	 	
Total Discharges	 	 	15,340	 	 	 	14,682	 	 	 	47,064	 	 	 	45,104	 	
Average length of stay (days)	 	 	78.5	 	 	 	80.1	 	 	 	78.3	 	 	 	78.7	 	
Median length of stay (days)	 	 	15.0	 	 	 	15.0	 	 	 	15.0	 	 	 	14.0	 	
ADC by major diagnosis	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Neurological	 	 	33.9	%	 	 	34.3	%	 	 	34.1	%	 	 	34.4	%	
Cancer	 	 	17.3	 	 	 	17.5	 	 	 	17.6	 	 	 	17.7	 	
Cardio	 	 	11.2	 	 	 	11.3	 	 	 	11.4	 	 	 	11.6	 	
Respiratory	 	 	6.7	 	 	 	6.6	 	 	 	6.7	 	 	 	6.8	 	
Other	 	 	30.9	 	 	 	30.3	 	 	 	30.2	 	 	 	29.5	 	
Total	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	
Admissions by major diagnosis	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Neurological	 	 	19.3	%	 	 	19.0	%	 	 	19.3	%	 	 	19.3	%	
Cancer	 	 	34.0	 	 	 	34.7	 	 	 	33.3	 	 	 	33.1	 	
Cardio	 	 	10.5	 	 	 	10.4	 	 	 	11.1	 	 	 	10.9	 	
Respiratory	 	 	7.4	 	 	 	7.8	 	 	 	8.1	 	 	 	8.5	 	
Other	 	 	28.8	 	 	 	28.1	 	 	 	28.2	 	 	 	28.2	 	
Total	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	
Direct patient care margins	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Routine homecare	 	 	52.5	%	 	 	52.4	%	 	 	51.8	%	 	 	52.0	%	
Inpatient	 	 	9.2	 	 	 	12.4	 	 	 	12.0	 	 	 	12.9	 	
Continuous care	 	 	19.0	 	 	 	20.7	 	 	 	19.6	 	 	 	20.5	 	
Homecare margin drivers (dollars per patient day)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Labor costs	 	$	54.69	 	 	$	53.13	 	 	$	55.64	 	 	$	53.88	 	
Drug costs	 	 	8.11	 	 	 	8.26	 	 	 	8.25	 	 	 	8.14	 	
Home medical equipment	 	 	7.03	 	 	 	6.64	 	 	 	6.88	 	 	 	6.65	 	
Medical supplies	 	 	2.77	 	 	 	2.81	 	 	 	2.77	 	 	 	2.80	 	
Inpatient margin drivers (dollars per patient day)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Labor costs	 	$	326.95	 	 	$	312.72	 	 	$	320.79	 	 	$	310.25	 	
Continuous care margin drivers (dollars per patient day)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Labor costs	 	$	575.21	 	 	$	555.63	 	 	$	571.56	 	 	$	550.09	 	
Bad debt expense as a percent of revenues	 	 	0.8	%	 	 	0.8	%	 	 	0.8	%	 	 	0.7	%	
Accounts receivable --	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Days of revenue outstanding- excluding unapplied Medicare payments	 	 	35.4	 	 	 	38.9	 	 	n.a	 	 	n.a	 	
  Days of revenue outstanding- including unapplied Medicare payments	 	 	27.9	 	 	 	34.6	 	 	n.a	 	 	n.a	 	

-32-

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

Certain statements contained in this report are “forward-looking statements” 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 September 30, 2012, we had no variable rate debt outstanding.  At September 30, 2012, the fair value of the Notes approximates $197.1 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 10, Legal and Regulatory Matters, under Part I, Item I of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

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

-33-

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

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

The following table shows the activity related to our share repurchase program for the first nine months of 2012:

 	 	Total Number	 	 	Weighted Average	 	 	Cumulative Shares	 	 	Dollar Amount	 	
 	 	of Shares	 	 	Price Paid Per	 	 	Repurchased Under	 	 	Remaining Under	 	
 	 	Repurchased	 	 	Share	 	 	the Program	 	 	The Program	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
February 2011 Program	 	 	 	 	 	 	 	 	 	 	 	 	
January 1 through January 31, 2012	 	 	-	 	 	$	-	 	 	 	2,602,513	 	 	$	75,268,254	 	
February 1 through February 29, 2012	 	 	-	 	 	 	-	 	 	 	2,602,513	 	 	 	75,268,254	 	
March 1 through March 31, 2012	 	 	-	 	 	 	-	 	 	 	2,602,513	 	 	$	75,268,254	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
First Quarter Total	 	 	-	 	 	$	-	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
April 1 through April 30, 2012	 	 	-	 	 	$	-	 	 	 	2,602,513	 	 	$	75,268,254	 	
May 31 through May 31, 2012	 	 	168,812	 	 	 	55.77	 	 	 	2,771,325	 	 	 	65,853,060	 	
June 1 through June 30, 2012	 	 	31,088	 	 	 	55.42	 	 	 	2,802,413	 	 	$	64,130,136	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Second Quarter Total	 	 	199,900	 	 	$	55.72	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
July 1 through July 31, 2012	 	 	-	 	 	$	-	 	 	 	-	 	 	$	64,130,136	 	
August 1 through August 31, 2012	 	 	9,334	 	 	 	62.75	 	 	 	2,811,747	 	 	 	63,544,438	 	
September 1 through September 30, 2012	 	 	-	 	 	 	-	 	 	 	-	 	 	$	63,544,438	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Third Quarter Total	 	 	9,334	 	 	$	62.75	 	 	 	 	 	 	 	 	 	
 
Item 3.                      Defaults Upon Senior Securities

None

Item 4.                      Mine Safety Disclosures

None

Item 5.                      Other Information

None

-34-

 
 
Item 6.  Exhibits

Exhibit No.	 	Description	
 	 	 	
31.1	 	Certification by Kevin J. McNamara pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act of 1934.	
 	 	 	
31.2	 	Certification by David P. Williams pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange  Act of 1934.	
 	 	 	
31.3	 	Certification by Arthur V. Tucker, Jr. 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.DEF	 	XBRL Taxonomy Extension Definition Linkbase
 	
101.LAB	 	XBRL Taxonomy Extension Label Linkbase	
 	 	 	
101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase	

SIGNATURES

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

Dated:	 	November 2, 2012	 	By:	 	/s/ Kevin J. McNamara	
 	 	 	 	 	 	Kevin J. McNamara	
 	 	 	 	 	 	(President and Chief Executive Officer)	

Dated:	 	November 2, 2012	 	By:	 	/s/ David P. Williams	
 	 	 	 	 	 	David P. Williams	
 	 	 	 	 	 	(Executive Vice President and Chief Financial Officer)	

Dated:	 	November 2, 2012	 	By:	 	/s/ Arthur V. Tucker, Jr.	
 	 	 	 	 	 	Arthur V. Tucker, Jr.	
 	 	 	 	 	 	(Vice President and Controller)	

-35-

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:	November 2, 2012	/s/ Kevin J. McNamara	
 	 	Kevin J. McNamara	
 	 	 (President and Chief	
 	 	Executive Officer)	

 
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:	November 2, 2012	/s/ David P. Williams	
 	 	David P. Williams	
 	 	(Executive Vice President and Chief Financial Officer)	

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:	November 2, 2012	/s/ Arthur V. Tucker, Jr.	
 	 	Arthur V. Tucker, Jr.	
 	 	 (Vice President and	
 	 	Controller)	

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 September 30, 2012 (“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:	November 2, 2012	/s/ Kevin J. McNamara	
 	 	Kevin J. McNamara	
 	 	(President and Chief	
 	 	Executive Officer)	

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 September 30, 2012 (“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.	

Date:	November 2, 2012	/s/ David P. Williams	
 	 	David P. Williams	
 	 	(Executive Vice President and Chief Financial Officer)	

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 September 30, 2012 (“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.	

Date:	November 2, 2012	/s/ Arthur V. Tucker, Jr.	
 	 	Arthur V. Tucker, Jr.	
 	 	 (Vice President and	
 	 	Controller)