a6371735.htm

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

(Mark One)

  X
Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 2010
   
 
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 1-8351

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

Delaware
31-0791746
(State or other jurisdiction of incorporation or
organization)
(IRS Employer Identification No.)
 
 
2600 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio
 
45202
(Address of principal executive offices)
 
(Zip code)
 
(513) 762-6900
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
X
 
No
   

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer
X
 
Accelerated filer
   
Non-accelerated filer
   
Smaller reporting company
   

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class
Amount
Date
     
Capital Stock $1 Par Value
22,787,983 Shares
June 30, 2010
 
 
-1-

 
 
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES



Index

   
Page No.
 
       
       
    3    
           
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    5    
           
    6    
           
    16    
           
    30    
           
    30    
           
         
    30    
           
    30    
           
    31    
           
    31    
           
    31    
           
    31    
           
    31    
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.LAB
EX 101.PRE
EX 101.DEF
 
 
-2-

 
 
 
 
 
UNAUDITED CONSOLIDATED BALANCE SHEET
 
(in thousands, except share and per share data)
 
             
             
   
June 30,
   
December 31,
 
   
2010
   
2009
 
ASSETS
           
Current assets
           
Cash and cash equivalents
  $ 109,080     $ 112,416  
Accounts receivable less allowances of $13,808 (2009 - $12,595)
    101,736       53,461  
Inventories
    7,978       7,543  
Current deferred income taxes
    14,453       13,701  
Prepaid income taxes
    351       749  
Prepaid expenses
    10,423       10,388  
Total current assets
    244,021       198,258  
Investments of deferred compensation plans
    26,282       24,158  
Properties and equipment, at cost, less accumulated depreciation of $123,209 (2009 - $115,181)
    78,437       75,358  
Identifiable intangible assets less accumulated amortization of $26,582 (2009 - $25,349)
    56,620       57,920  
Goodwill
    450,105       450,042  
Other assets
    10,498       13,734  
Total Assets
  $ 865,963     $ 819,470  
                 
 LIABILITIES
               
Current liabilities
               
Accounts payable
  $ 49,131     $ 52,071  
Income taxes
    4,783       63  
Accrued insurance
    34,729       35,161  
Accrued compensation
    41,613       34,662  
Other current liabilities
    11,669       14,127  
Total current liabilities
    141,925       136,084  
Deferred income taxes
    24,353       25,924  
Long-term debt
    155,608       152,127  
Deferred compensation liabilities
    25,374       23,637  
Other liabilities
    5,736       4,536  
Total Liabilities
    352,996       342,308  
                 
 STOCKHOLDERS' EQUITY
               
Capital stock - authorized 80,000,000 shares $1 par; issued 30,202,452 shares (2009 - 29,890,628 shares)
    30,202       29,891  
Paid-in capital
    351,672       335,890  
Retained earnings
    436,098       403,366  
Treasury stock - 7,517,328 shares (2009 - 7,275,070 shares), at cost
    (307,003 )     (293,941 )
Deferred compensation payable in Company stock
    1,998       1,956  
Total Stockholders' Equity
    512,967       477,162  
Total Liabilities and Stockholders' Equity
  $ 865,963     $ 819,470  
                 
   
See accompanying notes to unaudited financial statements.
 
 
 
 
-3-

 
 
 
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
 
(in thousands, except per share data)
 
                         
                         
                         
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
Service revenues and sales
  $ 314,995     $ 295,255     $ 623,808     $ 590,193  
Cost of services provided and goods sold (excluding depreciation)
    223,702       207,337       442,839       414,350  
Selling, general and administrative expenses
    49,956       49,580       98,494       95,373  
Depreciation
    6,194       5,338       11,663       10,663  
Amortization
    1,287       1,618       2,511       3,154  
Other operating expenses
    -       3,444       -       3,989  
Total costs and expenses
    281,139       267,317       555,507       527,529  
Income from operations
    33,856       27,938       68,301       62,664  
Interest expense
    (2,999 )     (3,142 )     (5,951 )     (5,986 )
Other income--net
    10       3,358       196       3,082  
 Income before income taxes
    30,867       28,154       62,546       59,760  
Income taxes
    (12,012 )     (10,904 )     (24,333 )     (23,171 )
Net income
  $ 18,855     $ 17,250     $ 38,213     $ 36,589  
                                 
                                 
Earnings Per Share
                               
Net income
  $ 0.83     $ 0.77     $ 1.69     $ 1.63  
Average number of shares outstanding
    22,644       22,417       22,608       22,406  
                                 
Diluted Earnings Per Share
                               
Net income
  $ 0.82     $ 0.76     $ 1.66     $ 1.61  
Average number of shares outstanding
    23,080       22,672       23,012       22,660  
                                 
Cash Dividends Per Share
  $ 0.12     $ 0.06     $ 0.24     $ 0.12  
                                 
                                 
See accompanying notes to unaudited financial statements.
 
 
 
 
-4-

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

 
 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements

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

We have prepared the accompanying unaudited consolidated financial statements of Chemed in accordance with Rule 10-01 of SEC Regulation S-X.  Consequently, we have omitted certain disclosures required under generally accepted accounting principles in the United States (“GAAP”) for complete financial statements.  The December 31, 2009 balance sheet data were derived from audited financial statements but do not include all disclosures required by GAAP.  However, in our opinion, the financial statements presented herein contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position, results of operations and cash flows.  These financial statements are prepared on the same basis as and should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2009.

2.  Revenue Recognition
Both the VITAS segment and the Roto-Rooter segment recognize service revenues and sales when the earnings process has been completed.  Generally, this occurs when services are provided or products are delivered.  VITAS recognizes revenue at the estimated realizable amount due from third-party payers.  Medicare payments are subject to certain limitations, as described below.

As of June 30, 2010, VITAS has approximately $7.6 million in unbilled revenue included in accounts receivable (December 31, 2009 - $9.9 million).  The unbilled revenue at VITAS relates to hospice programs currently undergoing focused medical reviews (“FMR”).  During FMR, surveyors working on behalf of the U.S. Federal government review certain patient files for compliance with Medicare regulations.  During the time the patient file is under review, we are unable to bill for care provided to those patients.  We make appropriate provisions to reduce our accounts receivable balance for potential denials of patient service revenue due to FMR activity.

We actively monitor each of our hospice programs, by provider number, as to their specific admission, discharge rate and median length of stay data in an attempt to determine whether they are likely to exceed the annual per-beneficiary Medicare cap (“Medicare cap”).  Should we determine that revenues for a program are likely to exceed the Medicare cap based on projected trends, we attempt to institute corrective action to influence the patient mix or to increase patient admissions.  However, should we project our corrective action will not prevent that program from exceeding its Medicare cap, we estimate the amount of revenue recognized during the period that will require repayment to the Federal government under the Medicare cap and record the amount as a reduction to patient revenue.  The Medicare cap measurement period is from September 29 through September 28 of the following year for admissions and from November 1 through October 31 of the following year for revenue.  During the three-month periods ended June 30, 2010 and 2009, we reversed $35,000 and $505,000, respectively of Medicare cap liability recorded during previous quarters due to improved admission trends.  For the six month period ended June 30, 2010, we reversed $1.8 million in Medicare cap liability recorded in the fourth quarter of 2009 for two programs’ projected liability for the 2010 measurement period.  For the six month period ended June 30, 2009, we reversed $235,000 for the 2009 measurement period.

The U.S. government revises hospice reimbursement rates on an annual basis using the Hospice Wage Index (HWI) and the Consumer Price Index plus a phase out of the Budget Neutrality Adjustment Factor (BNAF).  The HWI is geographically adjusted to reflect local differences in wages.  The BNAF is a portion of inflation calculated in prior years that is being eliminated or phased out over a seven year period.  In August 2008, the U.S. government announced a 25% reduction in the BNAF for its fiscal 2009 (October 2008 through September 2009) pursuant to a three year phase-out of the BNAF.  The February 2009 American Recovery and Reinvestment Act mandated a one year delay in the BNAF phase-out.  In August 2009, the Centers for Medicare and Medi caid Services (CMS) revised the phase-out schedule of the BNAF.  CMS reduced the price increase in hospice reimbursement by 10% of the BNAF effective October 1, 2009.  The remaining 90% of the BNAF will be phased out over the next six years by revising the October 1 reimbursement adjustment by 15% of the original BNAF inflation factor.  Based upon this revised schedule, 100% of the BNAF will be eliminated on October 1, 2015.  As a result, included in the six months ended June 30, 2009 results, is $1.95 million of revenue for the retroactive price increase related to services provided by VITAS in the fourth quarter of 2008.
 
 
-6-

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

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

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

4.      Earnings per Share
Earnings per share are computed using the weighted average number of shares of capital stock outstanding.  Earnings and diluted earnings per share for 2010 and 2009 are computed as follows (in thousands, except per share data):

For the Three Months Ended
June 30,
   
Net Income
   
Shares
   
Earnings per
Share
 
2010
                   
Earnings
    $ 18,855       22,644     $ 0.83  
Dilutive stock options
      -       348          
Nonvested stock awards
      -       88          
     Diluted earnings
    $ 18,855       23,080     $ 0.82  
                           
2009
                         
Earnings
    $ 17,250       22,417     $ 0.77  
Dilutive stock options
      -       214          
Nonvested stock awards
      -       41          
     Diluted earnings
    $ 17,250       22,672     $ 0.76  
 
 
 
-7-

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

For the three and six-month periods ended June 30, 2010, 976,000 and 991,000 stock options, respectively were excluded from the computation of diluted earnings per share as their exercise prices were greater than the average market price for most of the period. For the three and six-month periods ended June 30, 2009, 1.8 million stock options were excluded from the computation of diluted earnings per share.

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

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

       
Shares
                      Incremental  
     
Underlying
         
Total Treasury
   
Shares Due
   
Shares Issued/
 
     
1.875%
         
Method
   
to the Company
   
Received by the
 
Share
   
Convertible
   
Warrant
   
Incremental
   
under Notes
   
Company upon
 
Price
   
Notes
   
Shares
   
Shares (a)
   
Hedges
   
 Conversion (b)
 
$ 80.73       11,398       -       11,398       (12,194 )     (796 )
$ 90.73       266,091       -       266,091       (284,657 )     (18,566 )
$ 100.73       470,215       -       470,215       (503,022 )     (32,807 )
$ 110.73       637,470       118,682       756,152       (681,947 )     74,205  
$ 120.73       777,018       314,621       1,091,639       (831,231 )     260,408  
$ 130.73       895,216       480,584       1,375,800       (957,676 )     418,124  
 
a)
Represents the number of incremental shares that must be included in the calculation of fully diluted shares under U.S. GAAP.
b)
Represents the number of incremental shares to be issued by the Company upon conversion of the 1.875% Convertible Notes, assuming concurrent settlement of the note hedges and warrants.
 
-8-

 
 
5.      Long-Term Debt
We are in compliance with all debt covenants as of June 30, 2010.  We have issued $28.3 million in standby letters of credit as of June 30, 2010 for insurance purposes.  Issued letters of credit reduce our available credit under the revolving credit agreement.  As of June 30, 2010, we have approximately $146.7 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility, excluding the expansion feature.

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

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

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


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

   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
Cash interest expense
  $ 1,083     $ 1,346     $ 2,153     $ 2,424  
Non-cash amortization of debt discount
    1,755       1,640       3,480       3,253  
Amortization of debt costs
    161       156       318       309  
Total interest expense
  $ 2,999     $ 3,142     $ 5,951     $ 5,986  
 
The unamortized debt discount will be amortized using the effective interest method over the remaining life of the Notes.  The effective rate on the Notes after adoption of the standard is approximately 6.875%.

6.      Other Operating Expenses
For the three and six-month periods ended June 30, 2010, there were no other operating expenses recorded.  For the three and six-month periods ended June 30, 2009, we recorded pretax expenses of $3.4 million and $4.0 million, respectively, related to the costs of a contested proxy solicitation.

 
-9-

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

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

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

In April 2010, we met the stock price target of our Long-Term Incentive Plan.  The stock price hurdle of $54.00 was achieved during 30 trading days out of a 60 day trading day period. On April 16, 2010, the Compensation/Incentive Committee of the Board of Directors (“CIC”) approved a stock grant of 27,900 shares and the related allocation to participants.  The pretax cost of the stock grant was $1.8 million.

On February 18, 2010, the CIC approved a grant of 47,896 shares of restricted stock to certain key employees.  The restricted shares cliff vest four years from the date of issuance.  The cumulative compensation expense related to the restricted stock award is $2.5 million and will be recognized ratably over the four-year vesting period.  We assumed no forfeitures in determining the cumulative compensation expense of the grant.

On February 18, 2010, the CIC approved a grant of 515,100 stock options to certain employees.  The stock options vest ratably over three years from the date of issuance.  The cumulative compensation expense related to the stock option grant is $7.8 million and will be recognized over the three-year vesting period.  We used the Black-Scholes option valuation method to determine the cumulative compensation expense of the grant.

9.    Independent Contractor Operations
The Roto-Rooter segment sublicenses with sixty-one independent contractors to operate certain plumbing repair and drain cleaning businesses in lesser-populated areas of the United States and Canada.  We had notes receivable from our independent contractors as of June 30, 2010 totaling $1.2 million (December 31, 2009 -$1.3 million).  In most cases these loans are fully or partially secured by equipment owned by the contractor.  The interest rates on the loans range from zero to 8% per annum and the remaining terms of the loans range from two months to 5 years at June 30, 2010.  During the three months ended June 30, 2010, we recorded revenues of $5.6 million (2009 - $5.4 million) and pretax profits of $2.7 million (2009 - $2.4 million) from our independent contractors.  During the six months ended June 30, 2010, we recorded revenues of $11.2 million (2009 - $10.7 million) and pretax profits of $5.1 million (2009 - $4.7 million) from our independent contractors.

10.  Pension and Retirement Plans
All of the Company’s plans that provide retirement and similar benefits are defined contribution plans.  Expenses for the Company’s pension and profit-sharing plans, excess benefit plans and other similar plans were $2.2 million and $5.6 million for the three months ended June 30, 2010 and 2009, respectively. Expenses for the Company’s pension and profit-sharing plans, excess benefit plans and other similar plans were $4.7 million and $7.0 million for the six months ended June 30, 2010 and 2009, respectively.

 
-10-

 
 
11.  Legal and Regulatory Matters

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

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

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

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

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

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

12.      Related Party Agreement
VITAS has pharmacy services agreements ("Agreements") with Omnicare, Inc. and its subsidiaries (“OCR”) whereby OCR provides specified pharmacy services for VITAS and its hospice patients in geographical areas served by both VITAS and OCR.  The Agreements renew automatically for one-year terms.  Either party may cancel the Agreements at the end of any term by giving 90 days prior written notice.  VITAS made purchases from OCR of $8.9 million and $8.2 million for the three months ended June 30, 2010 and 2009, respectively.  VITAS made purchases from OCR of $17.5 million and $16.1 million for the six months ended June 30, 2010 and 2009, respectively.

 
-11-

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

13.  Cash Overdrafts Payable
Included in accounts payable at June 30, 2010 is cash overdrafts payable of $10.4 million (December 31, 2009 - $11.7 million).

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

The following shows the carrying value, fair value and the hierarchy for our financial instruments as of June 30, 2010 (in thousands):
 
         
Fair Value Measure
 
   
Carrying Value
   
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
   
Significant
Other
Observable
Inputs (Level 2)
   
Significant
Unobservable
Inputs (Level 3)
 
Mutual fund investments of deferred
     compensation plans held in trust
  $ 26,282     $ 26,282     $ -     $ -  
Long-term debt
    155,608       172,701       -       -  

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

15.  Capital Stock Transactions
On April 26, 2007, our Board of Directors authorized a $150 million stock repurchase program.  On May 19, 2008, our Board of Directors authorized an additional $56 million to the April 2007 stock repurchase program.  For the quarter ended June 30, 2010, we repurchased 114,900 shares at a weighted average cost per share of $54.99 under the April 2007 program.  For the six months ended June 30, 2010, we repurchased 146,275 shares at a weighted average cost per share of $53.32. For the quarter and six months ended June 30, 2009 there was no stock repurchased.

 
-12-

 

16.  Guarantor Subsidiaries
                             
Our 1.875% Notes are fully and unconditionally guaranteed on an unsecured, jointly and severally liable basis by certain of our 100% owned subsidiaries. The following unaudited, condensed, consolidating financial data presents the composition of the parent company (Chemed), the guarantor subsidiaries and the non-guarantor subsidiaries as of June 30, 2010 and December 31, 2009 for the balance sheet, the three and six months ended June 30, 2010 and June 30, 2009 for the income statement and the six months ended June 30, 2010 and June 30, 2009 for the statement of cash flows (dollars in thousands):
 
                               
June 30, 2010
       
Guarantor
   
Non-Guarantor
 
Consolidating
     
 
 
Parent
   
Subsidiaries
   
Subsidiaries
   
Adjustments
   
Consolidated
 
ASSETS
                             
Cash and cash equivalents
  $ 105,276     $ (1,238 )   $ 5,042     $ -     $ 109,080  
Accounts receivable, less allowances
    560       100,754       422       -       101,736  
Intercompany receivables
    -       149,823       -       (149,823 )     -  
Inventories
    -       7,272       706       -       7,978  
Current deferred income taxes
    (962 )     15,312       103       -       14,453  
Prepaid income taxes
    3,424       (2,939 )     (134 )     -       351  
Prepaid expenses
    1,047       9,326       50       -       10,423  
     Total current assets
    109,345       278,310       6,189       (149,823 )     244,021  
Investments of deferred compensation plans
    -       -       26,282       -       26,282  
Properties and equipment, at cost, less accumulated depreciation
    12,987       63,209       2,241       -       78,437  
Identifiable intangible assets less accumulated amortization
    -       56,620       -       -       56,620  
Goodwill
    -       445,644       4,461       -       450,105  
Other assets
    6,373       2,384       1,741       -       10,498  
Investments in subsidiaries
    677,384       17,356       -       (694,740 )     -  
          Total assets
  $ 806,089     $ 863,523     $ 40,914     $ (844,563 )   $ 865,963  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                 
Accounts payable
  $ (970 )   $ 49,646     $ 455     $ -     $ 49,131  
Intercompany payables
    143,947       -       5,876       (149,823 )     -  
Income taxes
    (969 )     6,199       (447 )     -       4,783  
Accrued insurance
    677       34,052       -       -       34,729  
Accrued compensation
    2,063       39,026       524       -       41,613  
Other current liabilities
    1,215       10,346       108       -       11,669  
      Total current liabilities
    145,963       139,269       6,516       (149,823 )     141,925  
Deferred income taxes
    (11,417 )     43,452       (7,682 )     -       24,353  
Long-term debt
    155,608       -       -       -       155,608  
Deferred compensation liabilities
    -       -       25,374       -       25,374  
Other liabilities
    2,968       2,327       441       -       5,736  
Stockholders' equity
    512,967       678,475       16,265       (694,740 )     512,967  
     Total liabilities and stockholders' equity
  $ 806,089     $ 863,523     $ 40,914     $ (844,563 )   $ 865,963  
                                         
                                         
                                         
                                         
December 31, 2009
         
Guarantor
   
Non-Guarantor
 
Consolidating
       
 
 
Parent
   
Subsidiaries
   
Subsidiaries
   
Adjustments
   
Consolidated
 
ASSETS
                                       
Cash and cash equivalents
  $ 109,331     $ (1,221 )   $ 4,306     $ -     $ 112,416  
Accounts receivable, less allowances
    618       52,303       540       -       53,461  
Intercompany receivables
    -       149,888       -       (149,888 )     -  
Inventories
    -       7,009       534       -       7,543  
Current deferred income taxes
    (378 )     14,048       31       -       13,701  
Prepaid expenses
    (2,457 )     13,706       (112 )     -       11,137  
     Total current assets
    107,114       235,733       5,299       (149,888 )     198,258  
Investments of deferred compensation plans
    -       -       24,158       -       24,158  
Properties and equipment, at cost, less accumulated depreciation
    10,309       62,912       2,137       -       75,358  
Identifiable intangible assets less accumulated amortization
    -       57,920       -       -       57,920  
Goodwill
    -       445,662       4,380       -       450,042  
Other assets
    11,190       2,232       312       -       13,734  
Investments in subsidiaries
    643,572       15,523       -       (659,095 )     -  
          Total assets
  $ 772,185     $ 819,982     $ 36,286     $ (808,983 )   $ 819,470  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                 
Accounts payable
  $ (2,411 )   $ 54,084     $ 398     $ -     $ 52,071  
Intercompany payables
    147,744       -       2,144       (149,888 )     -  
Income taxes
    (2,145 )     2,159       49       -       63  
Accrued insurance
    1,231       33,930       -       -       35,161  
Accrued compensation
    4,235       30,020       407       -       34,662  
Other current liabilities
    1,643       11,367       1,117       -       14,127  
      Total current liabilities
    150,297       131,560       4,115       (149,888 )     136,084  
Deferred income taxes
    (10,549 )     43,183       (6,710 )     -       25,924  
Long-term debt
    152,127       -       -       -       152,127  
Deferred compensation liabilities
    -       -       23,637       -       23,637  
Other liabilities
    3,148       1,388       -       -       4,536  
Stockholders' equity
    477,162       643,851       15,244       (659,095 )     477,162  
     Total liabilities and stockholders' equity
  $ 772,185     $ 819,982     $ 36,286     $ (808,983 )   $ 819,470  
 
 
-13-

 

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

 
For the six months ended June 30, 2010
       
Guarantor
   
Non-Guarantor
       
   
Parent
   
Subsidiaries
   
Subsidiaries
   
Consolidated
 
 Cash Flow from Operating Activities:
                       
 Net cash provided/(used) by operating activities
  $ (3,737 )   $ 24,585     $ (571 )   $ 20,277  
 Cash Flow from Investing Activities:
                               
  Capital expenditures
    (10 )     (11,454 )     (478 )     (11,942 )
  Business combinations, net of cash acquired
    -       83       6       89  
  Proceeds from sale of property and equipment
    -       (30 )     -       (30 )
  Other uses - net
    (89 )     (171 )     (26 )     (286 )
       Net cash used by investing activities
    (99 )     (11,572 )     (498 )     (12,169 )
 Cash Flow from Financing Activities:
                               
  Change in cash overdrafts payable
    1,338       (2,652 )     -       (1,314 )
  Change in intercompany accounts
    9,830       (11,478 )     1,648       -  
  Dividends paid to shareholders
    (5,481 )     -       -       (5,481 )
  Purchases of treasury stock
    (10,083 )     -       (42 )     (10,125 )
  Proceeds from exercise of stock options
    3,475       -       -       3,475  
  Realized excess tax benefit on share based compensation
    702       1,100       -       1,802  
  Other sources - net
    -       -       199       199  
       Net cash provided/ (used) by financing activities
    (219 )     (13,030 )     1,805       (11,444 )
 Net increase/(decrease) in cash and cash equivalents
    (4,055 )     (17 )     736       (3,336 )
 Cash and cash equivalents at beginning of year
    109,331       (1,221 )     4,306       112,416  
 Cash and cash equivalents at end of period
  $ 105,276     $ (1,238 )   $ 5,042     $ 109,080  
                                 
For the six months ended June 30, 2009
         
Guarantor
   
Non-Guarantor
         
   
Parent
   
Subsidiaries
   
Subsidiaries
   
Consolidated
 
 Cash Flow from Operating Activities:
                               
 Net cash provided/(used) by operating activities
  $ (7,802 )   $ 49,192     $ 1,730     $ 43,120  
 Cash Flow from Investing Activities:
                               
  Capital expenditures
    (13 )     (7,912 )     (211 )     (8,136 )
  Business combinations, net of cash acquired
    -       (1,859 )     -       (1,859 )
  Proceeds from sale of property and equipment
    1,280       216       -       1,496  
  Other uses - net
    (365 )     (110 )     -       (475 )
       Net cash provided/(used) by investing activities
    902       (9,665 )     (211 )     (8,974 )
 Cash Flow from Financing Activities:
                               
  Change in cash overdrafts payable
    1,242       (2,023 )     -       (781 )
  Change in intercompany accounts
    39,429       (37,625 )     (1,804 )     -  
  Dividends paid to shareholders
    (2,711 )     -       -       (2,711 )
  Purchases of treasury stock
    (526 )     -       -       (526 )
  Proceeds from exercise of stock options
    68       -       -       68  
  Realized excess tax benefit on share based compensation
    313       -       -       313  
  Repayment of long-term debt
    (17,700 )     (99 )     -       (17,799 )
  Other sources/(uses) - net
    (93 )     148       239       294  
       Net cash provided/ (used) by financing activities
    20,022       (39,599 )     (1,565 )     (21,142 )
 Net increase/(decrease) in cash and cash equivalents
    13,122       (72 )     (46 )     13,004  
 Cash and cash equivalents at beginning of year
    65       202       3,361       3,628  
 Cash and cash equivalents at end of period
  $ 13,187     $ 130     $ 3,315     $ 16,632  
                                 
 
-15-

 

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

Executive Summary
We operate through our two wholly owned subsidiaries, VITAS Healthcare Corporation and Roto-Rooter Group, Inc.  VITAS focuses on hospice care that helps make terminally ill patients’ final days as comfortable as possible.  Through its teams of doctors, nurses, home health aides, social workers, clergy and volunteers, VITAS provides direct medical services to patients, as well as spiritual and emotional counseling to both patients and their families.  Roto-Rooter’s services are focused on providing plumbing and drain cleaning services to both residential and commercial customers.  Through its network of company-owned branches, independent contractors and franchisees, Roto-Rooter offers plumbing and drain cleaning service to over 90% of the U.S. population.

The following is a summary of the key operating results for the three and six months ended June 30, 2010 and 2009 (in thousands except per share amounts):

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

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

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

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

EBITDA and Adjusted EBITDA are not measures derived in accordance with GAAP and exclude components that are important to understanding our financial performance.  We use Adjusted EBITDA as a measure of earnings for our LTIP awards.  We provide EBITDA and Adjusted EBITDA to help readers evaluate our operating results, compare our operating performance with that of similar companies that have different capital structures and help evaluate our ability to meet future debt service, capital expenditure and working capital requirements.  Our EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for comparable measures presented in accordance with GAAP.  A reconciliation of our net income to our Adjusted EBITDA is presented on pages 27 - 28.

VITAS expects to achieve full-year 2010 revenue growth, prior to Medicare cap, of 6.0% to 7.0%.  Admissions are estimated to increase 3.0% to 4.0%.  Adjusted EBITDA margin prior to Medicare cap is estimated to be 15.0% to 15.5%.  Roto-Rooter expects full-year 2010 revenue growth of 4.0% to 4.5%.  The revenue estimate is a result of increased pricing of 3.0%, a favorable mix shift to higher revenue jobs, offset by a job count decline estimated at 2.0% to 4.0%.  Adjusted EBITDA margin for 2010 is estimated to be in the range of 17.5% to 18.0%.  We anticipate that our operating income and cash flows will be sufficient to operate our businesses and meet any commitments for the foreseeable future.

 
-16-

 

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

  
A $48.3 million increase in accounts receivable primarily at VITAS, related to timing of Medicare payments and refund of overpayments from prior years.
•  
A $4.7 million increase in income taxes payable, related to timing of payments.

 Net cash provided by operating activities decreased $22.8 million due primarily to the increase in accounts receivable, partially offset by a decrease in accounts payable and other current liabilities.  Management continually evaluates cash utilization alternatives, including share repurchase, debt repurchase, acquisitions and increased dividends to determine the most beneficial use of available capital resources.

We have issued $28.3 million in standby letters of credit as of June 30, 2010, for insurance purposes.  Issued letters of credit reduce our available credit under the revolving credit agreement.  As of June 30, 2010, we have approximately $146.7 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility, excluding the expansion feature. Management believes its liquidity and sources of capital are satisfactory for the Company’s needs in the foreseeable future.

Commitments and Contingencies
Collectively, the terms of our credit agreements require us to meet various financial covenants, to be tested quarterly.  In connection therewith, we are in compliance with all financial and other debt covenants as of June 30, 2010 and anticipate remaining in compliance throughout 2010.

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

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

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

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

 
-17-

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

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

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

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

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

The increase in plumbing revenues for the second quarter of 2010 versus 2009 is attributable to a 6.4% increase in the average price per job and a 4.5% increase in the number of jobs performed.  The increase in the plumbing price per job was a combination of increased pricing and favorable job mix shift to more expensive jobs such as excavation.  Our excavation job count increased by 18.2% compared to 2009.  Drain cleaning revenues for the second quarter of 2010 versus 2009 reflect a 3.2% decline in the number of jobs, while the average price per job increased 2.5%.  The increase in other revenues is attributable to an increase in our independent contractor operations and an increase in product sales.
 
The consolidated gross margin was 29.0% in the second quarter of 2010 as compared with 29.8% in the second quarter of 2009.  On a segment basis, VITAS’ gross margin was 22.7% in the second quarter of 2010 and 23.3% in the second quarter of 2009.  The decrease in VITAS’ gross margin is attributable to higher labor costs for admissions and Medicare compliance personnel and the opening of inpatient units which carry significant one time start-up costs as capacity begins to ramp-up.  The Roto-Rooter segment’s gross margin was 45.2% for the second quarter of 2010 as compared with 46.2% for the second quarter of 2009.  The decrease in Roto-Rooter’s gross margin was attributable to continued mix shift to excavation which has higher revenue per job but a slightly lower gross margin percentage per job as well as an unfavorable adjustment to casualty insurance.
 
 
-18-

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

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

   
2010
   
2009
 
VITAS
           
Costs associated with the OIG investigation
  $ (74 )   $ (53 )
Roto-Rooter
               
Costs of class action lawsuit
    (63 )     -  
Corporate
               
Stock option expense
    (1,484 )     (1,544 )
Long-term incentive compensation
    (1,124 )     -  
Noncash interest expense related to accounting for
               
conversion feature of the convertible notes
    (1,068 )     (987 )
Expenses of contested proxy solicitation
    -       (2,180 )
Impact of non-deductible losses and non-taxable gains on
               
investments held in deferred compensation trusts
    -       20  
Total
  $ (3,813 )   $ (4,744 )
 
 
-19-

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

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

   
Increase/(Decrease)
 
   
Amount
   
Percent
 
VITAS
  $ 1,159       6.8 %
Roto-Rooter
    62       0.7 %
Corporate
    384       4.4 %
    $ 1,605       9.3 %
 
 
Six months ended June 30, 2010 versus  2009 - Consolidated Results

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

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

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

The increase in plumbing revenues for the first six months of 2010 versus 2009 is attributable to a 7.8% increase in the average price per job and a 0.5% decrease in the number of jobs performed.  The increase in the plumbing price per job was a combination of increased pricing and favorable job mix shift to more expensive jobs such as excavation.  Our excavation job count increased by 15.5% compared to 2009.  Drain cleaning revenues for the first six months of 2010 versus 2009 reflect a 5.7% decline in the number of jobs, while the average price per job increased 2.7%.  The increase in other revenues is attributable to an increase in our independent contractor operations and an increase in product sales.
 
The consolidated gross margin was 29.0% in the first six months of 2010 as compared with 29.8% in the first six months of 2009.  On a segment basis, VITAS’ gross margin was 22.7% in the first six months of 2010 and 23.3% in the first six months of 2009.  The decrease in VITAS’ gross margin is attributable to higher labor costs for admissions and Medicare compliance personnel and the opening of inpatient units which carry significant one time start-up costs as capacity begins to ramp-up. The Roto-Rooter segment’s gross margin was 45.2% for the first six months of 2010 as compared with 45.7% for the first six months of 2009.  The decrease in Roto-Rooter’s gross margin is attributable to continued mix shift to excavation which has higher revenue per job but slightly lower gross margin percentage per job.
 
 
-20-

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

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

   
2010
   
2009
 
VITAS
           
 Costs associated with the OIG investigation
  $ (173 )   $ (61 )
Roto-Rooter
               
Costs of class action lawsuit
    (63 )     -  
Corporate
               
Stock option expense
    (2,782 )     (2,836 )
Long-term incentive compensation
    (1,124 )     -  
  Noncash interest expense related to accounting for
               
conversion feature of the convertible notes
    (2,115 )     (1,955 )
  Expenses of contested proxy solicitation
    -       (2,525 )
  Impact of non-deductible losses and non-taxable gains on
               
investments held in deferred compensation trusts
    -       756  
Total
  $ (6,257 )   $ (6,621 )
 
 
-21-

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

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

   
Increase/(Decrease)
 
   
Amount
   
Percent
 
VITAS
  $ 2,427       7.1 %
Roto-Rooter
    (354 )     -2.1 %
Corporate
    (449 )     -3.0 %
    $ 1,624       4.4 %
 
 
-22-

 
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2010
 (in thousands)(unaudited)
                         
2010 (a)
   
VITAS
     
Roto-Rooter
     
Corporate
   
Chemed
Consolidated
 
Service revenues and sales
  $ 226,638     $ 88,357     $ -     $ 314,995  
Cost of services provided and goods sold
    175,257       48,445       -       223,702  
Selling, general and administrative expenses
    18,404       24,192       7,360       49,956  
Depreciation
    4,103       1,950       141       6,194  
Amortization
    788       132       367       1,287  
Total costs and expenses
    198,552       74,719       7,868       281,139  
Income/(loss) from operations
    28,086       13,638       (7,868 )     33,856  
Interest expense
    (48 )     (64 )     (2,887 )     (2,999 )
Intercompany interest income/(expense)
    1,350       773       (2,123 )     -  
Other income/(expense)—net
    45       14       (49 )     10  
Income/(loss) before income taxes
    29,433       14,361       (12,927 )     30,867  
 Income taxes
    (11,152 )     (5,501 )     4,641       (12,012 )
Net income/(loss)
  $ 18,281     $ 8,860     $ (8,286 )   $ 18,855  
                                 
                                 
(a) The following amounts are included in net income (in thousands):
                 
                         
 
 
   
VITAS
   
Roto-Rooter
   
Corporate
   
Chemed
Consolidated
 
Pretax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (2,346 )   $ (2,346 )
Long-term incentive compensation
    -       -       (1,799 )     (1,799 )
Noncash impact of accounting for convertible debt
    -       -       (1,688 )     (1,688 )
Expenses of class action lawsuit
    -       (105 )     -       (105 )
Expenses incurred in connection with the Office of Inspector
                 
          General investigation
    (118 )     -       -       (118 )
          Total
  $ (118 )   $ (105 )   $ (5,833 )   $ (6,056 )
                                 
   
VITAS
   
Roto-Rooter
   
Corporate
   
Consolidated
 
After-tax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (1,484 )   $ (1,484 )
Long-term incentive compensation
    -       -       (1,124 )     (1,124 )
Noncash impact of accounting for convertible debt
    -       -       (1,068 )     (1,068 )
Expenses of class action lawsuit
    -       (63 )     -       (63 )
Expenses incurred in connection with the Office of Inspector
                 
General investigation
    (74 )     -       -       (74 )
Total
  $ (74 )   $ (63 )   $ (3,676 )   $ (3,813 )
                                 
 
 
-23-

 

 CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 CONSOLIDATING STATEMENT OF INCOME
 FOR THE THREE MONTHS ENDED JUNE 30, 2009
 (in thousands)(unaudited)
 
                     
Chemed
 
   
VITAS
   
Roto-Rooter
   
Corporate
   
Consolidated
 
2009 (a)
                       
Service revenues and sales
  $ 211,303     $ 83,952     $ -     $ 295,255  
Cost of services provided and goods sold
    162,175       45,162       -       207,337  
Selling, general and administrative expenses
    17,877       22,844       8,859       49,580  
Depreciation
    3,256       2,035       47       5,338  
Amortization
    1,187       117       314       1,618  
Other operating expenses
    -       -       3,444       3,444  
Total costs and expenses
    184,495       70,158       12,664       267,317  
Income/(loss) from operations
    26,808       13,794       (12,664 )     27,938  
Interest expense
    (326 )     (59 )     (2,757 )     (3,142 )
Intercompany interest income/(expense)
    1,023       581       (1,604 )     -  
Other income-net
    123       6       3,229       3,358  
Income/(loss) before income taxes
    27,628       14,322       (13,796 )     28,154  
Income taxes
    (10,506 )     (5,524 )     5,126       (10,904 )
Net income/(loss)
  $ 17,122     $ 8,798     $ (8,670 )   $ 17,250  
                                 
(a)   The following amounts are included in net income (in thousands):
                               
 
   
VITAS
    Roto-Rooter     Corporate    
Chemed
Consolidated
 
Pretax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (2,443 )   $ (2,443 )
Noncash impact of accounting for convertible debt
    -       -       (1,561 )     (1,561 )
Expenses associated with contested proxy solicitation
    -       -       (3,444 )     (3,444 )
Expenses incurred in connection with the Office of Inspector
                 
General investigation
    (86 )     -       -       (86 )
Total
  $ (86 )   $ -     $ (7,448 )   $ (7,534 )
 
   
VITAS
    Roto-Rooter     Corporate     Consolidated  
After-tax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (1,544 )   $ (1,544 )
Noncash impact of accounting for convertible debt
    -       -       (987 )     (987 )
Income tax impact of nondeductible losses on investments
                 
          held in deferred compensation trusts
    -       -       20       20  
Expenses associated with contested proxy solicitation
    -       -       (2,180 )     (2,180 )
Expenses incurred in connection with the Office of Inspector
                 
General investigation
    (53 )     -       -       (53 )
Total
  $ (53 )   $ -     $ (4,691 )   $ (4,744 )
                                 
 
-24-

 
 
 CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 CONSOLIDATING STATEMENT OF INCOME
 FOR THE SIX MONTHS ENDED JUNE 30, 2010
 (in thousands)(unaudited)
 
                     
Chemed
 
   
VITAS
   
Roto-Rooter
   
Corporate
   
Consolidated
 
2010 (a)
                       
Service revenues and sales
  $ 449,578     $ 174,230     $ -     $ 623,808  
Cost of services provided and goods sold
    347,350       95,489       -       442,839  
Selling, general and administrative expenses
    36,550       48,950       12,994       98,494  
Depreciation
    7,587       3,901       175       11,663  
Amortization
    1,559       255       697       2,511  
Total costs and expenses
    393,046       148,595       13,866       555,507  
Income/(loss) from operations
    56,532       25,635       (13,866 )     68,301  
Interest expense
    (80 )     (132 )     (5,739 )     (5,951 )
Intercompany interest income/(expense)
    2,639       1,475       (4,114 )     -  
Other income/(expense)—net
    6       24       166       196  
Income/(loss) before income taxes
    59,097       27,002       (23,553 )     62,546  
Income taxes
    (22,378 )     (10,329 )     8,374       (24,333 )
Net income/(loss)
  $ 36,719     $ 16,673     $ (15,179 )   $ 38,213  
 
                                 
(a) The following amounts are included in net income (in thousands):
                 
   
VITAS
    Roto-Rooter     Corporate    
Chemed
Consolidated
 
Pretax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (4,397 )   $ (4,397 )
Long-term incentive compensation
    -       -       (1,799 )     (1,799 )
Noncash impact of accounting for convertible debt
    -       -       (3,343 )     (3,343 )
Expenses of class action lawsuit
    -       (105 )     -       (105 )
Expenses incurred in connection with the Office of Inspector
                 
General investigation
    (278 )     -       -       (278 )
Total
  $ (278 )   $ (105 )   $ (9,539 )   $ (9,922 )
 
   
VITAS
    Roto-Rooter     Corporate     Consolidated  
After-tax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (2,782 )   $ (2,782 )
Long-term incentive compensation
    -       -       (1,124 )     (1,124 )
Noncash impact of accounting for convertible debt
    -       -       (2,115 )     (2,115 )
Expenses of class action lawsuit
    -       (63 )     -       (63 )
Expenses incurred in connection with the Office of Inspector
                 
General investigation
    (173 )     -       -       (173 )
Total
  $ (173 )   $ (63 )   $ (6,021 )   $ (6,257 )
                                 
 
-25-

 
 
 CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 CONSOLIDATING STATEMENT OF INCOME
 FOR THE SIX MONTHS ENDED JUNE 30, 2009
 (in thousands)(unaudited)
   
 VITAS
   
 Roto-Rooter
    Corporate    
Chemed
Consolidated
 
2009 (a)
                       
Service revenues and sales
  $ 419,720     $ 170,473     $ -     $ 590,193  
Cost of services provided and goods sold
    321,807       92,543       -       414,350  
Selling, general and administrative expenses
    35,423       47,219       12,731       95,373  
Depreciation
    6,475       4,089       99       10,663  
Amortization
    2,358       206       590       3,154  
Other operating expenses
    -       -       3,989       3,989  
Total costs and expenses
    366,063       144,057       17,409       527,529  
Income/(loss) from operations
    53,657       26,416       (17,409 )     62,664  
Interest expense
    (365 )     (94 )     (5,527 )     (5,986 )
Intercompany interest income/(expense)
    1,913       1,117       (3,030 )     -  
Other income-net
    120       122       2,840       3,082  
Income/(loss) before income taxes
    55,325       27,561       (23,126 )     59,760  
Income taxes
    (21,033 )     (10,534 )     8,396       (23,171 )
Net income/(loss)
  $ 34,292     $ 17,027     $ (14,730 )   $ 36,589  
                                 
                                 
(a) The following amounts are included in net income (in thousands):
                 
   
VITAS
    Roto-Rooter     Corporate    
Chemed
Consolidated
 
Pretax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (4,485 )   $ (4,485 )
Noncash impact of accounting for convertible debt
    -       -       (3,091 )     (3,091 )
Non-taxable income on certain investments held in deferred
                 
compensation trusts
    -       -       1,211       1,211  
Expenses associated with contested proxy solicitation
    -       -       (3,989 )     (3,989 )
Expenses incurred in connection with the Office of Inspector
                 
General investigation
    (99 )     -       -       (99 )
Total
  $ (99 )   $ -     $ (10,354 )   $ (10,453 )
                                 
 
   
VITAS
   
 Roto-Rooter
    Corporate     Consolidated  
After-tax benefit/(cost):
                       
Stock option expense
  $ -     $ -     $ (2,836 )   $ (2,836 )
Noncash impact of accounting for convertible debt
    -       -       (1,955 )     (1,955 )
Non-taxable income on certain investments held in deferred
                 
compensation trusts
    -       -       1,211       1,211  
Income tax impact of nondeductible losses on investments
                 
held in deferred compensation trusts
    -       -       (455 )     (455 )
Expenses associated with contested proxy solicitation
    -       -       (2,525 )     (2,525 )
Expenses incurred in connection with the Office of Inspector
                 
General investigation
    (61 )     -       -       (61 )
Total
  $ (61 )   $ -     $ (6,560 )   $ (6,621 )
 
-26-

 
 
Consolidating Summary and Reconciliation of Adjusted EBITDA
 
Chemed Corporation and Subsidiary Companies
                   
(in thousands)
                   
Chemed
 
 For the three months ended June 30, 2010
VITAS
   
Roto-Rooter
   
Corporate
   
Consolidated
 
                         
 Net income/(loss)
  $ 18,281     $ 8,860     $ (8,286 )   $ 18,855  
 Add/(deduct):
                               
 Interest expense
    48       64       2,887       2,999  
 Income taxes
    11,152       5,501       (4,641 )     12,012  
 Depreciation
    4,103       1,950       141       6,194  
 Amortization
    788       132       367       1,287  
 EBITDA
    34,372       16,507       (9,532 )     41,347  
 Add/(deduct):
                               
 Legal expenses of OIG investigation
    118       -       -       118  
 Stock option expense
    -       -       2,346       2,346  
 Advertising cost adjustment
    -       (678 )     -       (678 )
 Expenses of class action litigation
    -       105       -       105  
 Long-term incentive compensation
    -       -       1,799       1,799  
 Interest income
    (90 )     (25 )     (35 )     (150 )
 Intercompany interest income/(expense)
    (1,350 )     (773 )     2,123       -  
 Adjusted EBITDA
  $ 33,050     $ 15,136     $ (3,299 )   $ 44,887  
 
 
 
                     
Chemed
 
 For the three months ended June 30, 2009
VITAS
   
Roto-Rooter
   
Corporate
   
Consolidated
 
                         
 Net income/(loss)
  $ 17,122     $ 8,798     $ (8,670 )   $ 17,250  
 Add/(deduct):
                               
 Interest expense
    326       59       2,757       3,142  
 Income taxes
    10,506       5,524       (5,126 )     10,904  
 Depreciation
    3,256       2,035       47       5,338  
 Amortization
    1,187       117       314       1,618  
 EBITDA
    32,397       16,533       (10,678 )     38,252  
 Add/(deduct):
                               
 Expenses associated with contested proxy solicitation
    -       -       3,444       3,444  
 Legal expenses of OIG investigation
    86       -       -       86  
 Stock option expense
    -       -       2,443       2,443  
 Advertising cost adjustment
    -       (368 )     -       (368 )
 Interest income
    (149 )     (18 )     (40 )     (207 )
 Intercompany interest income/(expense)
    (1,023 )     (581 )     1,604       -  
 Adjusted EBITDA
  $ 31,311     $ 15,566     $ (3,227 )   $ 43,650  
                                 
 
 
-27-

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

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

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

Item 3.    Quantitative and Qualitative Disclosures about Market Risk
Our primary market risk exposure relates to interest rate risk exposure through variable interest rate borrowings.  At June 30, 2010, we had no variable rate debt outstanding.  At June 30, 2010, the fair value of the Notes approximates $172.7 million which have a face value of $187.0 million.

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

PART II OTHER INFORMATION
Item 1.    Legal Proceedings

For information regarding the Company’s legal proceedings, see note 11, Legal and Regulatory Matters, under Part I, Item I of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

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

 
-30-

 

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

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

The following table shows the activity related to our share repurchase programs for the first six months of  2010:
 
         
Weighted
    Cumulative Shares    
Dollar Amount
 
   
Total Number
   
Average
   
Repurchased
   
Remaining
 
   
of Shares
   
Price Paid Per
   
Under
   
 Under
 
   
Repurchased
   
Share
   
the Program
   
The Program
 
                         
April 2007 Program
                       
January 1 through January 31, 2010
    31,375     $ 47.17       1,736,972     $ 51,718,696  
February 1 through February 29, 2010
    -     $ -       1,736,972     $ 51,718,696  
March 1 through March 31, 2010
    -     $ -       1,736,972     $ 51,718,696  
                                 
First Quarter Total - April 2007 Program
    31,375     $ 47.17                  
                                 
April 1 through April 30, 2010
    -     $ -       1,736,972     $ 51,718,696  
May 1 through May 31, 2010
    38,492     $ 53.70       1,775,464     $ 49,651,677  
June 1 through June 30, 2010
    76,408     $ 55.65       1,851,872     $ 45,399,865  
                                 
 Second Quarter Total - April 2007 Program
    114,900     $ 54.99                  
 
On April 26, 2007, our Board of Directors authorized a $150 million share repurchase plan with no expiration date.
On May 20, 2008 our Board of Directors authorized an additional $56 million under the April 2007 Program.

Item 3.    Defaults Upon Senior Securities

None

Item 4.    Submission of Matters to a Vote of Security Holders
 
Removed and reserved

Item 5.    Other Information

None

Item 6.    Exhibits

Exhibit No.
 
Description
     
31.1
 
Certification by Kevin J. McNamara pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act of 1934.
     
31.2
 
Certification by David P. Williams pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange  Act of 1934.
     
31.3
 
Certification by Arthur V. Tucker, Jr. pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act of 1934.
     
32.1
 
Certification by Kevin J. McNamara pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2
 
Certification by David P. Williams pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.3
 
Certification by Arthur V. Tucker, Jr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
 101.LAB   XBRL Taxonomy Extension Label Linkbase
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase
     
101.DEF   XBRL Taxonomy Extension Definition Document
 
 
 
-31-

 
SIGNATURES

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


           
Chemed Corporation
           
(Registrant)
             
             
Dated:
 
July 30, 2010
 
By:
 
Kevin J. McNamara
           
Kevin J. McNamara
           
(President and Chief Executive Officer)
             
             
Dated:
 
July 30, 2010
 
By:
 
David P. Williams
           
David P. Williams
           
(Executive Vice President and Chief Financial Officer)
             
             
Dated:
 
July 30, 2010
 
By:
 
Arthur V. Tucker, Jr.
           
Arthur V. Tucker, Jr.
           
(Vice President and Controller)

 
 
-32-


a6371735ex31-1.htm
EXHIBIT 31.1


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

I, Kevin J. McNamara, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Chemed Corporation (“registrant”);

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

 
b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 
Date:
July 30, 2010         
/s/ Kevin J. McNamara
   
Kevin J. McNamara
   
(President and Chief
   
Executive Officer)
 
E-1
a6371735ex31-2.htm
EXHIBIT 31.2


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

I, David P. Williams, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Chemed Corporation (“registrant”);

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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



Date:
July 30, 2010         
/s/ David P. Williams
   
David P. Williams
   
(Executive Vice President and Chief Financial
Officer)
 
E-2
a6371735ex31-3.htm
EXHIBIT 31.3


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

I, Arthur V. Tucker, Jr., certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Chemed Corporation (“registrant”);

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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



Date:
July 30, 2010         
/s/ Arthur V. Tucker, Jr.
   
Arthur V. Tucker, Jr.
   
(Vice President and
   
Controller)
 
E-3
a6371735ex32-1.htm
EXHIBIT 32.1

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


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

 
1)
the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2010 (“Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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



Dated:
July 30, 2010         
/s/ Kevin J. McNamara
   
Kevin J. McNamara
   
(President and Chief
   
Executive Officer)
 
E-4
a6371735ex32-2.htm
EXHIBIT 32.2

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


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

 
1)
the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2010 (“Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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



Dated:
July 30, 2010         
/s/ David P. Williams
   
David P. Williams
   
(Executive Vice President and Chief Financial Officer)
 
E-5
a6371735ex32-3.htm
EXHIBIT 32.3

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


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

 
1)
the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2010 (“Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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



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