Chemed Reports Third-Quarter 2008 Results

Chemed Corporation (Chemed) (NYSE:CHE), which operates VITAS Healthcare Corporation (VITAS), the nation’s largest provider of end-of-life care, and Roto-Rooter, the nation’s largest commercial and residential plumbing and drain cleaning services provider, reported financial results for its third quarter ended September 30, 2008, versus the comparable prior-year period, as follows:

Consolidated operating results:

• Revenue increased 5.8% to $288 million
• Diluted EPS of $.79
• Diluted EPS, excluding stock options and certain tax items, of $.90

VITAS segment operating results:

• Net Patient Revenue of $205 million, up 8.7%
• Average Daily Census (ADC) of 12,033, up 4.4%
• Admissions of 13,317, a decline of 0.9%
• Average Length of Stay in the quarter of 74.1 days
• Adjusted EBITDA of $31.1 million, an increase of 26.1%
• Adjusted EBITDA margin of 15.2%

Roto-Rooter segment operating results:

• Revenue of $83.4 million, a decline of 0.8%
• Job count of 175,433, a decline of 11.6%
• Adjusted EBITDA of $13.7 million, a decline of 12.1%
• Adjusted EBITDA margin of 16.4%

VITAS

Net revenue for VITAS was $205 million in the third quarter of 2008, which is an increase of 8.7% over the prior-year period. This revenue growth was the result of increased ADC of 4.4% and a Medicare price increase of approximately 3.2%. The remaining difference is attributed to revenue mix and the impact of a modest Medicare Cap limitation in the prior year.

Average revenue per patient per day in the quarter was $185.13, which is 3.8% above the prior-year period. Routine home care reimbursement and high acuity care averaged $146.57 and $645.75, respectively, per patient per day in the third quarter of 2008. During the quarter, high acuity days-of-care was 7.7% of total days-of-care. Quarterly high acuity days-of-care averaged between 8.0% and 8.4% in 2007.

VITAS did not have any billing restrictions related to Medicare Cap for its third-quarter 2008 operating activity. As of September 30, 2008, VITAS has not accrued any Medicare billing restrictions for the 2008 or 2007 Cap years. Of VITAS’ 36 unique Medicare provider numbers, 30 provider numbers, or 83%, have a Cap cushion greater than 20% for the 2008 Cap year, three provider numbers are between 10% and 20%, and three provider numbers have Cap cushion of less than 10%.

Gross margin in the third quarter of 2008 was 23.6%. This is 190 basis points above the third quarter of 2007, after eliminating the modest impact of Medicare Cap in 2007. This margin increase is a result of improved management in scheduled labor. VITAS continues to focus on more efficient scheduling of direct labor. This involves utilization of field-based labor management tools designed to meet and respond to hospice team staffing requirements.

Selling, general and administrative expense was $17.1 million in the third quarter of 2008, which is an increase of 9.3% over the prior-year quarter and a 5.7% increase on a year-to-date basis. Adjusted EBITDA totaled $31.1 million, an increase of 26.1% over the prior year and equates to an adjusted EBITDA margin of 15.2%.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $83 million for the third quarter of 2008, 0.8% lower than the $84 million reported in the comparable prior-year quarter. Adjusted EBITDA in the third quarter of 2008 totaled $13.7 million, a decrease of 12.1% over the third quarter of 2007, and equated to an adjusted EBITDA margin of 16.4%.

Job count in the third quarter of 2008 declined 11.6% when compared to the prior-year period. Total residential jobs declined 12.0% and consisted of residential plumbing jobs decreasing 10.3% and residential drain cleaning jobs declining 12.9%, when compared to the third quarter of 2007. Residential jobs represent approximately 70% of total job count. Total commercial jobs declined 10.6% with commercial plumbing job count declining 9.6% and commercial drain cleaning decreasing 10.8%, over the prior-year quarter.

The third quarter of 2008 continues to indicate recessionary pressure impacting demand for certain discretionary plumbing and drain cleaning services. This is evidenced by a 13% decline in call volume in Roto-Rooter’s centralized call centers. This decline has been substantially offset by increased pricing, favorable job mix shift to excavation work and increased conversion rates of calls to paid jobs.

There continues to be substantial disparity in demand for Roto-Rooter services within the United States. The South region has experienced a 16.9% year-to-date decline in commercial jobs while the Northeast Region had a modest 1.8% decline in commercial volume. Residential demand is also following a similar pattern in the South, with job count declining 12.0% while the remaining regions have experienced a job count decline ranging between 5% and 10%.

Management is in preliminary discussions, as well as final negotiations, to acquire a number of Roto-Rooter franchise territories. This significant increase in activity is attributed to the current state of the capital markets, the potential increase in tax rates and the recessionary difficulties our franchisees are experiencing. The timing or actual completion of these acquisitions cannot be predicted, however, management intends to be highly disciplined in terms of valuation and risk to ensure these acquisitions will be accretive to shareholders.

Chemed Consolidated Debt and Cash Flows

Chemed’s long-term debt aggregated $217 million at September 30, 2008, $200 million of which carries an interest rate of 1.875% and is due in May 2014. The remaining debt consists of a bank term loan with a current interest rate of approximately 4.7%. Chemed’s total debt divided by the trailing four quarters of Adjusted EBITDA reflects a debt leverage ratio of 1.35.

Chemed has a $175 million revolving credit facility that expires in May 2012. At September 30, 2008, this credit facility had approximately $148 million of undrawn borrowing capacity after deducting for $27 million of letters of credit issued under this facility to secure the Company’s workers’ compensation insurance. The credit facility carries a varying interest rate at prime or at LIBOR plus a borrowing spread which is currently 100 basis points. Letters of credit issued against the credit facility are charged the LIBOR borrowing spread.

Year-to-date net cash provided from operations aggregated $90 million. Capital expenditures for the first nine month of 2008 aggregated $13.1 million and compares favorably to Chemed’s $20.7 million of depreciation and amortization.

Guidance for 2008

VITAS is estimated to generate full-year revenue growth, prior to Medicare Cap, of 8.0% to 8.5%. Admissions are estimated to increase 4% and full-year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 14.1% to 14.3%. This guidance assumes VITAS will receive a Medicare basket price increase of 2.6% effective October 1, 2008. Full calendar year 2008 Medicare contractual billing limitations are estimated at $1.25 million.

Roto-Rooter is estimated to generate full-year 2008 revenue totaling $340 million to $344 million. Adjusted EBITDA margin for 2008 is estimated in the range of 17.7% to 18.0%. This guidance does not include any Roto-Rooter franchise acquisitions that may be completed in the fourth quarter of 2008.

Chemed’s effective tax rate has increased to 42.9% in the third quarter and is estimated at approximately 40.1% for the full-year 2008. This unusually high tax rate is a direct result of the interplay of severe volatility in the stock market as it relates to certain deferred compensation investments and required GAAP tax accounting. This stock market volatility does not have any material impact on Chemed’s reported pretax earnings. Excluding the impact of taxes associated with this deferred compensation issue, Chemed’s effective tax rate in the third quarter and for the full-year 2008, is estimated at 39%.

Based upon these factors and a full-year average diluted share count of 23.4 million shares, management estimates 2008 earnings per diluted share from continuing operations, excluding noncash expenses for stock options, the tax rate impact from deferred compensation investments and charges or credits not indicative of ongoing operations, will be in the range of $3.35 to $3.40.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Wednesday, October 22, 2008, to discuss the company's quarterly results and provide an update on its business. The dial-in number for the conference call is (866) 831-6243 for U.S. and Canadian participants and (617) 213-8855 for international participants. The participant passcode is 89856449. A live webcast of the call can be accessed on Chemed's website at www.chemed.com by clicking on Investor Relations Home.

A taped replay of the conference call will be available beginning approximately two hours after the call's conclusion. It can be accessed by dialing (888) 286-8010 for U.S. and Canadian callers and (617) 801-6888 for international callers and will be available for one week following the live call. The replay passcode is 56673754. An archived webcast will also be available at www.chemed.com.

Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to approximately 12,000 patients with severe, life-limiting illnesses. This type of care is focused on making the terminally ill patient's final days as comfortable and pain-free as possible.

Chemed operates in the residential and commercial plumbing and drain cleaning industry under the brand name Roto-Rooter. Roto-Rooter provides plumbing and drain service through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in Indonesia, Singapore, Japan, and the Philippines.

This press release contains information about Chemed’s EBITDA and adjusted EBITDA, which are not measures derived in accordance with generally accepted accounting principles and which exclude components that are important to understanding Chemed’s financial performance. Chemed provides EBITDA and adjusted EBITDA to help investors and others evaluate its operating results, compare its operating performance with that of similar companies that have different capital structures and evaluate its ability to meet its future debt service, capital expenditures and working capital requirements. Chemed’s EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. A reconciliation of Chemed’s net income to its adjusted EBITDA is presented in the tables following the text of this press release.

Forward-Looking Statements

Certain statements contained in this press release and the accompanying tables 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. Chemed does not undertake and specifically disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause Chemed's actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties arise from, among other things, possible changes in regulations governing the hospice care or plumbing and drain cleaning industries; periodic changes in reimbursement levels and procedures under Medicare and Medicaid programs; difficulties predicting patient length of stay and estimating potential Medicare reimbursement obligations; challenges inherent in Chemed's growth strategy; the current shortage of qualified nurses, other healthcare professionals and licensed plumbing and drain cleaning technicians; Chemed’s dependence on patient referral sources; and other factors detailed under the caption "Description of Business by Segment" or "Risk Factors" in Chemed’s most recent report on form 10-Q or 10-K and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
											Three Months Ended								Nine Months Ended
											September 30,								September 30,
											2008				2007				2008				2007
Continuing Operations
		Service revenues and sales									$	288,312			$	272,503			$	856,736			$	814,329
		Cost of services provided and goods sold (aa)										202,446				192,882				609,397				569,845
		Selling, general and administrative expenses (aa)										44,022				42,526				133,070				136,686
		Depreciation										5,441				5,220				16,249				14,897
		Amortization										1,494				1,292				4,433				3,901
		Other operating expense/(income) (aa)										-				-				-				(1,138	)
			Total costs and expenses									253,403				241,920				763,149				724,191
			Income from operations									34,909				30,583				93,587				90,138
		Interest expense										(1,570	)			(2,515	)			(4,589	)			(9,657	)
		Loss on extinguishment of debt (aa)										-				(83	)			-				(13,798	)
		Other income--net										(1,908	)			11				(2,211	)			3,068
			Income before income taxes									31,431				27,996				86,787				69,751
		Income taxes (aa)										(13,483	)			(11,080	)			(34,769	)			(27,181	)
			Income from continuing operations									17,948				16,916				52,018				42,570
Discontinued Operations (bb)												-				1,201				-				1,201
Net Income											$	17,948			$	18,117			$	52,018			$	43,771
Earnings Per Share
		Income from continuing operations									$	0.80			$	0.71			$	2.23			$	1.72
		Net income									$	0.80			$	0.76			$	2.23			$	1.77
		Average number of shares outstanding										22,503				23,933				23,285				24,711
Diluted Earnings Per Share
		Income from continuing operations									$	0.79			$	0.69			$	2.20			$	1.69
		Net income									$	0.79			$	0.74			$	2.20			$	1.73
		Average number of shares outstanding										22,818				24,466				23,620				25,249
(aa)	Amounts include the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):
											Three Months Ended September 30,								Nine Months Ended September 30,
											2008				2007				2008				2007
		Cost of services provided and goods sold:
			Unreserved prior-year's insurance claim								$	-			$	-			$	(597	)		$	-
		Selling, general and administrative expenses:
			Stock option expense									(2,102	)			(1,592	)			(5,084	)			(3,074	)
			Costs associated with OIG investigation									(2	)			(48	)			(44	)			(188	)
			Long-term incentive compensation									-				-				-				(7,067	)
			Other									-				-				-				467
		Other operating expense/(income):
			Gain on sale of property									-				-				-				1,138
		Loss on extinguishment of debt										-				(83	)			-				(13,798	)
				Pretax impact on earnings								(2,104	)			(1,723	)			(5,725	)			(22,522	)
		Income tax benefit/(charge) on the above										769				630				2,112				8,268
		Income tax impact of non-deductible market losses on investments of deferred compensation trusts
												(1,237	)			(123	)			(1,237	)			(123	)
		Income tax credit related to prior years										-				-				322				-
				After-tax impact on earnings							$	(2,572	)		$	(1,216	)		$	(4,528	)		$	(14,377	)
(bb)	Discontinued operations represents accrual adjustments related to VITAS' Phoenix operations, discontinued in 2006.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
														September 30,
														2008				2007 (cc)
Assets
		Current assets
			Cash and cash equivalents											$	6,804			$	16,730
			Accounts receivable less allowances												88,206				79,915
			Inventories												7,494				6,824
			Current deferred income taxes												15,500				20,344
			Prepaid expenses and other current assets												7,702				6,983
				Total current assets											125,706				130,796
		Investments of deferred compensation plans held in trust													28,897				28,824
		Notes receivable													-				14,701
		Properties and equipment, at cost less accumulated depreciation													70,970				73,285
		Identifiable intangible assets less accumulated amortization													62,152				66,186
		Goodwill													439,909				436,262
		Other assets													16,042				16,382
					Total Assets									$	743,676			$	766,436
Liabilities
		Current liabilities
			Accounts payable											$	46,187			$	44,586
			Current portion of long-term debt												10,166				10,161
			Income taxes												2,736				9,854
			Accrued insurance												34,567				37,725
			Accrued compensation												38,385				37,147
			Other current liabilities												13,412				20,972
				Total current liabilities											145,453				160,445
		Deferred income taxes													4,849				3,370
		Long-term debt													207,070				224,735
		Deferred compensation liabilities													29,133				28,407
		Other liabilities													6,123				5,818
					Total Liabilities										392,628				422,775
Stockholders' Equity
		Capital stock													29,446				29,206
		Paid-in capital													277,602				264,374
		Retained earnings													326,002				259,578
		Treasury stock, at cost													(284,436	)			(211,959	)
		Deferred compensation payable in Company stock													2,434				2,462
					Total Stockholders' Equity										351,048				343,661
					Total Liabilities and Stockholders' Equity									$	743,676			$	766,436
Book Value Per Share														$	15.69			$	14.36
(cc)	Reclassified to conform to 2007 presentation.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
												Nine Months Ended
												September 30,
												2008				2007 (cc)
Cash Flows from Operating Activities
	Net income											$	52,018			$	43,771
	Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation and amortization										20,682				18,798
			Provision for uncollectible accounts receivable										7,101				6,025
			Stock option expense										5,084				3,074
			Provision for deferred income taxes										(2,257	)			(1,388	)
			Amortization of debt issuance costs										760				970
			Discontinued operations										-				(1,201	)
			Write off unamortized debt issuance costs										-				7,235
			Noncash long-term incentive compensation										-				6,154
			Changes in operating assets and liabilities, excluding amounts acquired in business combinations:
					Decrease in accounts receivable								5,846				4,796
					Increase in inventories								(851	)			(246	)
					Decrease in prepaid expenses and other current assets
													2,804				2,964
					Decrease in accounts payable and other current liabilities								(875	)			(9,873	)
					Increase/(decrease) in income taxes								(329	)			11,825
					Increase in other assets								(547	)			(3,109	)
					Increase in other liabilities								674				3,908
			Excess tax benefit on share-based compensation										(1,234	)			(2,506	)
			Other sources/(uses)										654				(1,054	)
				Net cash provided by operating activities									89,530				90,143
Cash Flows from Investing Activities
	Capital expenditures												(13,103	)			(20,145	)
	Net uses from disposals of discontinued operations												8,980				(6,121	)
	Business combinations, net of cash acquired												(1,578	)			(1,079	)
	Proceeds from sales of property and equipment												200				3,072
	Other uses												(421	)			(1,415	)
			Net cash used by investing activities										(5,922	)			(25,688	)
Cash Flows from Financing Activities
	Purchases of treasury stock												(69,136	)			(130,873	)
	Repayment of long-term debt												(7,595	)			(215,644	)
	Dividends paid												(4,352	)			(4,441	)
	Increase in cash overdraft payable												(1,913	)			2,554
	Excess tax benefit on share-based compensation												1,234				2,506
	Issuance of capital stock												290				2,429
	Proceeds from issuance of long-term debt												-				300,000
	Purchases of note hedges												-				(55,093	)
	Proceeds from issuance of warrants												-				27,614
	Debt issuance costs												-				(6,887	)
	Other sources												(320	)			836
			Net cash used by financing activities										(81,792	)			(76,999	)
Increase/(Decrease) in Cash and Cash Equivalents													1,816				(12,544	)
Cash and cash equivalents at beginning of year													4,988				29,274
Cash and cash equivalents at end of period												$	6,804			$	16,730
(cc) Reclassified to conform to 2008 presentation.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(in thousands)(unaudited)
																								Chemed
								VITAS						Roto-Rooter						Corporate				Consolidated
2008
Service revenues and sales							$			204,956				$	83,356					$	-			$	288,312
Cost of services provided and goods sold										156,685					45,761						-				202,446
Selling, general and administrative expenses (a)										17,100					23,576						3,346				44,022
Depreciation										3,256					2,102						83				5,441
Amortization										996					11						487				1,494
	Total costs and expenses									178,037					71,450						3,916				253,403
	Income/(loss) from operations									26,919					11,906						(3,916	)			34,909
Interest expense										(35		)			(56	)					(1,479	)			(1,570	)
Intercompany interest income/(expense)										1,435					1,026						(2,461	)			-
Other income—net										(59		)			45						(1,894	)			(1,908	)
	Income/(loss) before income taxes									28,260					12,921						(9,750	)			31,431
Income taxes (a)										(10,699		)			(4,964	)					2,180				(13,483	)
	Net income/(loss)						$			17,561				$	7,957					$	(7,570	)		$	17,948
2007 (f)
Service revenues and sales							$			188,474				$	84,029					$	-			$	272,503
Cost of services provided and goods sold										148,225					44,657						-				192,882
Selling, general and administrative expenses (b)										15,651					23,272						3,603				42,526
Depreciation										3,063					2,080						77				5,220
Amortization										996					13						283				1,292
	Total costs and expenses									167,935					70,022						3,963				241,920
	Income/(loss) from operations									20,539					14,007						(3,963	)			30,583
Interest expense										(36		)			(317	)					(2,162	)			(2,515	)
Intercompany interest income/(expense)										1,909					1,337						(3,246	)			-
Loss on extinguishment of debt (b)										-					-						(83	)			(83	)
Other income—net										(3		)			226						(212	)			11
	Income/(loss) before income taxes									22,409					15,253						(9,666	)			27,996
Income taxes (b)										(8,488		)			(6,017	)					3,425				(11,080	)
	Income/(loss) from continuing operations									13,921					9,236						(6,241	)			16,916
Discontinued operations, net of income taxes										1,201					-						-				1,201
	Net income/(loss)						$			15,122				$	9,236					$	(6,241	)		$	18,117
The "Footnotes to Financial Statements" are integral parts of this financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(in thousands)(unaudited)
																								Chemed
								VITAS						Roto-Rooter						Corporate				Consolidated
2008
Service revenues and sales							$			602,589				$	254,147					$	-			$	856,736
Cost of services provided and goods sold										471,018					138,379						-				609,397
Selling, general and administrative expenses (a)										50,520					70,710						11,840				133,070
Depreciation										9,769					6,249						231				16,249
Amortization										2,988					36						1,409				4,433
	Total costs and expenses									534,295					215,374						13,480				763,149
	Income/(loss) from operations									68,294					38,773						(13,480	)			93,587
Interest expense										(118		)			(216	)					(4,255	)			(4,589	)
Intercompany interest income/(expense)										3,862					2,832						(6,694	)			-
Other income—net										(48		)			58						(2,221	)			(2,211	)
	Income/(loss) before income taxes									71,990					41,447						(26,650	)			86,787
Income taxes (a)										(26,810		)			(16,002	)					8,043				(34,769	)
	Net income/(loss)						$			45,180				$	25,445					$	(18,607	)		$	52,018
2007 (f)
Service revenues and sales							$			558,224				$	256,105					$	-			$	814,329
Cost of services provided and goods sold										434,959					134,886						-				569,845
Selling, general and administrative expenses (b)										47,815					70,195						18,676				136,686
Depreciation										8,377					6,290						230				14,897
Amortization										2,988					41						872				3,901
Other operating expense/(income) (b)										-					-						(1,138	)			(1,138	)
	Total costs and expenses									494,139					211,412						18,640				724,191
	Income/(loss) from operations									64,085					44,693						(18,640	)			90,138
Interest expense										(103		)			(496	)					(9,058	)			(9,657	)
Intercompany interest income/(expense)										5,352					3,676						(9,028	)			-
Loss on extinguishment of debt (b)										-					-						(13,798	)			(13,798	)
Other income—net										(34		)			344						2,758				3,068
	Income/(loss) before income taxes									69,300					48,217						(47,766	)			69,751
Income taxes (b)										(26,238		)			(18,984	)					18,041				(27,181	)
	Income/(loss) from continuing operations									43,062					29,233						(29,725	)			42,570
Discontinued operations, net of income taxes										1,201					-						-				1,201
	Net income/(loss)						$			44,263				$	29,233					$	(29,725	)		$	43,771
The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(in thousands)(unaudited)
																				Chemed
								VITAS				Roto-Rooter				Corporate				Consolidated
2008
Net income/(loss)								$	17,561			$	7,957			$	(7,570	)		$	17,948
Add/(deduct):
		Interest expense							35				56				1,479				1,570
		Income taxes							10,699				4,964				(2,180	)			13,483
		Depreciation							3,256				2,102				83				5,441
		Amortization							996				11				487				1,494
			EBITDA						32,547				15,090				(7,701	)			39,936
Add/(deduct):
		Legal expenses of OIG investigation							2				-				-				2
		Stock option expense							-				-				2,102				2,102
		Advertising cost adjustment (c)							-				(351	)			-				(351	)
		Interest income							(58	)			(51	)			(50	)			(159	)
		Intercompany interest income/(expense)							(1,435	)			(1,026	)			2,461				-
			Adjusted EBITDA					$	31,056			$	13,662			$	(3,188	)		$	41,530
2007 (f)
Net income/(loss)								$	15,122			$	9,236			$	(6,241	)		$	18,117
Add/(deduct):
		Discontinued operations, net of income taxes							(1,201	)			-				-				(1,201	)
		Interest expense							36				317				2,162				2,515
		Income taxes							8,488				6,017				(3,425	)			11,080
		Depreciation							3,063				2,080				77				5,220
		Amortization							996				13				283				1,292
			EBITDA						26,504				17,663				(7,144	)			37,023
Add/(deduct):
		Legal expenses of OIG Investigation							48				-				-				48
		Stock option expense							-				-				1,592				1,592
		Loss on extinguishment of debt							-				-				83				83
		Advertising cost adjustment (c)							-				(535	)			-				(535	)
		Interest income							(11	)			(247	)			(639	)			(897	)
		Intercompany interest income/(expense)							(1,909	)			(1,337	)			3,246				-
			Adjusted EBITDA					$	24,632			$	15,544			$	(2,862	)		$	37,314
The "Footnotes to Financial Statements" are integral parts of this financial information.
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(in thousands)(unaudited)
																				Chemed
								VITAS				Roto-Rooter				Corporate				Consolidated
2008
Net income/(loss)								$	45,180			$	25,445			$	(18,607	)		$	52,018
Add/(deduct):
		Interest expense							118				216				4,255				4,589
		Income taxes							26,810				16,002				(8,043	)			34,769
		Depreciation							9,769				6,249				231				16,249
		Amortization							2,988				36				1,409				4,433
			EBITDA						84,865				47,948				(20,755	)			112,058
Add/(deduct):
		Unreserved insurance claim							-				597				-				597
		Legal expenses of OIG investigation							44				-				-				44
		Stock option expense							-				-				5,084				5,084
		Advertising cost adjustment (c)							-				(1,176	)			-				(1,176	)
		Interest income							(109	)			(91	)			(402	)			(602	)
		Intercompany interest income/(expense)							(3,862	)			(2,832	)			6,694				-
			Adjusted EBITDA					$	80,938			$	44,446			$	(9,379	)		$	116,005
2007 (f)
Net income/(loss)								$	44,263			$	29,233			$	(29,725	)		$	43,771
Add/(deduct):
		Discontinued operations, net of income taxes							(1,201	)			-				-				(1,201	)
		Interest expense							103				496				9,058				9,657
		Income taxes							26,238				18,984				(18,041	)			27,181
		Depreciation							8,377				6,290				230				14,897
		Amortization							2,988				41				872				3,901
			EBITDA						80,768				55,044				(37,606	)			98,206
Add/(deduct):
		Long-term incentive compensation							-				-				7,067				7,067
		Gain on sale of property							-				-				(1,138	)			(1,138	)
		Legal expenses of OIG investigation							188				-				-				188
		Stock option expense							-				-				3,074				3,074
		Loss on extinguishment of debt							-				-				13,798				13,798
		Advertising cost adjustment (c)							-				(931	)			-				(931	)
		Interest income							(90	)			(358	)			(2,160	)			(2,608	)
		Intercompany interest income/(expense)							(5,352	)			(3,676	)			9,028				-
		Other							-				-				(467	)			(467	)
			Adjusted EBITDA					$	75,514			$	50,079			$	(8,404	)		$	117,189
The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(in thousands, except per share data)(unaudited)
								Three Months Ended							Nine Months Ended
								September 30,							September 30,
								2008			2007				2008				2007
Net income as reported								$	17,948		$	18,117			$	52,018			$	43,771
Add/(deduct):
		Discontinued operations							-			(1,201	)			-				(1,201	)
		After-tax cost of long-term incentive compensation							-			-				-				4,427
		After-tax cost of legal expenses of OIG investigation							1			30				27				117
		After-tax stock option expense							1,334			1,011				3,228				1,952
		After-tax gain on sale of property							-			-				-				(724	)
		After-tax other							-			-				-				(296	)
		After-tax loss on extinguishment of debt							-			52				-				8,778
		Income tax impact of non-deductible market losses on investments of deferred compensation trusts
									1,237			123				1,237				123
		Income tax credit related to prior years							-			-				(322	)			-
		After-tax unreserved insurance cost							-			-				358				-
Adjusted net income								$	20,520		$	18,132			$	56,546			$	56,947
Earnings Per Share As Reported
		Net income						$	0.80		$	0.76			$	2.23			$	1.77
		Average number of shares outstanding							22,503			23,933				23,285				24,711
Diluted Earnings Per Share As Reported
		Net income						$	0.79		$	0.74			$	2.20			$	1.73
		Average number of shares outstanding							22,818			24,466				23,620				25,249
Adjusted Earnings Per Share
		Net income						$	0.91		$	0.76			$	2.43			$	2.30
		Average number of shares outstanding							22,503			23,933				23,285				24,711
Adjusted Diluted Earnings Per Share
		Net income						$	0.90		$	0.74			$	2.39			$	2.26
		Average number of shares outstanding							22,818			24,466				23,620				25,249
The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(unaudited)
						Three Months Ended September 30,								Nine Months Ended September 30,
OPERATING STATISTICS						2008				2007				2008				2007
Net revenue ($000) (d)
	Homecare					$	149,732			$	137,406			$	436,075			$	403,748
	Inpatient						24,155				22,861				74,497				69,068
	Continuous care						31,069				28,921				92,017				85,650
		Total before Medicare cap allowance					204,956				189,188				602,589				558,466
	Medicare cap allowance						-				(714	)			-				(242	)
		Total				$	204,956			$	188,474			$	602,589			$	558,224
Net revenue as a percent of total before Medicare cap allowance
	Homecare						73.0		%		72.6		%		72.4		%		72.3		%
	Inpatient						11.8				12.1				12.3				12.4
	Continuous care						15.2				15.3				15.3				15.3
		Total before Medicare cap allowance					100.0				100.0				100.0				100.0
	Medicare cap allowance						-				(0.4	)			-				-
		Total					100.0		%		99.6		%		100.0		%		100.0		%
Average daily census ("ADC") (days)
	Homecare						7,534				7,039				7,346				6,914
	Nursing home						3,570				3,567				3,562				3,572
		Routine homecare					11,104				10,606				10,908				10,486
	Inpatient						410				412				429				417
	Continuous care						519				511				521				512
		Total					12,033				11,529				11,858				11,415
Total Admissions							13,317				13,436				42,485				41,204
Total Discharges							13,279				13,403				41,992				40,823
Average length of stay (days)							74.1				76.7				72.9				76.7
Median length of stay (days)							15.0				14.0				14.0				13.0
ADC by major diagnosis
	Neurological						32.5		%		32.8		%		32.5		%		33.1		%
	Cancer						19.9				20.3				19.9				19.9
	Cardio						12.8				14.2				12.9				14.5
	Respiratory						6.5				6.8				6.7				6.9
	Other						28.3				25.9				28.0				25.6
		Total					100.0		%		100.0		%		100.0		%		100.0		%
Admissions by major diagnosis
	Neurological						18.2		%		18.2		%		18.4		%		18.5		%
	Cancer						37.6				37.5				35.6				35.9
	Cardio						11.3				12.1				11.8				12.8
	Respiratory						7.0				7.1				7.8				7.6
	Other						25.9				25.1				26.4				25.2
		Total					100.0		%		100.0		%		100.0		%		100.0		%
Direct patient care margins (e)
	Routine homecare						52.4		%		51.0		%		51.2		%		50.9		%
	Inpatient						16.6				15.9				17.9				18.3
	Continuous care						18.0				16.9				17.4				18.2
Homecare margin drivers (dollars per patient day)
	Labor costs					$	48.59			$	48.86			$	50.16			$	48.98
	Drug costs						7.85				7.88				7.70				7.95
	Home medical equipment						6.28				5.65				6.22				5.73
	Medical supplies						2.17				2.22				2.35				2.16
Inpatient margin drivers (dollars per patient day)
	Labor costs					$	262.98			$	274.64			$	263.71			$	263.11
Continuous care margin drivers (dollars per patient day)
	Labor costs					$	512.04			$	490.94			$	511.81			$	479.83
Bad debt expense as a percent of revenues							1.0		%		0.9		%		1.0		%		0.9		%
Accounts receivable -- days of revenue outstanding
							46.9				39.6				N.A.				N.A.
The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
FOOTNOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(unaudited)
(a)	Included in the results of operations for the three and nine months ended September 30, 2008, are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):
										Three Months Ended September 30, 2008
										VITAS				Corporate					Consolidated
	Selling, general and administrative expenses
		Stock option expense								$	-			$	(2,102	)			$	(2,102	)
		Legal expenses of OIG investigation									(2	)			-					(2	)
			Pretax impact on earnings								(2	)			(2,102	)				(2,104	)
	Income tax benefit/(charge) on the above										1				768					769
	Income tax impact of non-deductible market losses on investments of deferred compensation trusts
											-				(1,237	)				(1,237	)
			After-tax impact on earnings							$	(1	)		$	(2,571	)			$	(2,572	)
										Nine Months Ended September 30, 2008
										VITAS				Roto-Rooter					Corporate				Consolidated
	Cost of services provided and goods sold
		Unreserved prior-year's insurance claim								$	-			$	(597	)			$	-			$	(597	)
	Selling, general and administrative expenses
		Stock option expense									-				-					(5,084	)			(5,084	)
		Legal expenses of OIG investigation									(44	)			-					-				(44	)
			Pretax impact on earnings								(44	)			(597	)				(5,084	)			(5,725	)
	Income tax benefit/(charge) on the above										17				239					1,856				2,112
	Income tax impact of non-deductible market losses on investments of deferred compensation trusts
											-				-					(1,237	)			(1,237	)
	Income tax credit related to prior years										322				-					-				322
			After-tax impact on earnings							$	295			$	(358	)			$	(4,465	)		$	(4,528	)
(b)	Included in the results of operations for the three and nine months ended September 30, 2007, are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):
										Three Months Ended September 30, 2007
										VITAS				Corporate					Consolidated
	Selling, general and administrative expenses
		Legal expenses of OIG investigation								$	(48	)		$	-				$	(48	)
		Stock option expense									-				(1,592	)				(1,592	)
	Loss on extinguishment of debt										-				(83	)				(83	)
			Pretax impact on earnings								(48	)			(1,675	)				(1,723	)
	Income tax benefit/(charge) on the above										18				612					630
	Income tax impact of non-deductible market losses on investments of deferred compensation trusts
											-				(123	)				(123	)
			After-tax impact on earnings							$	(30	)		$	(1,186	)			$	(1,216	)
										Nine Months Ended September 30, 2007
										VITAS				Corporate					Consolidated
	Selling, general and administrative expenses
		Long-term incentive compensation								$	-			$	(7,067	)			$	(7,067	)
		Legal expenses of OIG investigation									(188	)			-					(188	)
		Stock option expense									-				(3,074	)				(3,074	)
		Other									-				467					467
	Other operating expenses/(income)
		Gain on sale of property									-				1,138					1,138
	Loss on extinguishment of debt										-				(13,798	)				(13,798	)
			Pretax impact on earnings								(188	)			(22,334	)				(22,522	)
	Income tax benefit/(charge) on the above										71				8,197					8,268
	Income tax impact of non-deductible market losses on investments of deferred compensation trusts
											-				(123	)				(123	)
			After-tax impact on earnings							$	(117	)		$	(14,260	)			$	(14,377	)
(c)	Under Generally Accepted Accounting Principles ("GAAP"), the Roto-Rooter segment expenses all advertising, including the cost of telephone directories, immediately upon the initial release of the advertising. Telephone directories are generally in circulation 12 months. If a directory is in circulation for a time period greater or less than 12 months, the publisher adjusts the directory billing for the change in billing period. The timing of when a telephone directory is published can and does fluctuate significantly on a quarterly basis. This "direct expensing" results in significant fluctuations in quarterly advertising expense. In the third quarters of 2008 and 2007, GAAP advertising expense for Roto-Rooter totaled $5,498,000 and $5,008,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the third quarters of 2008 and 2007 would total $5,849,000 and $5,543,000, respectively. For the nine months ended September 30, 2008 and 2007, GAAP advertising expense for Roto-Rooter totaled $16,656,000 and $15,650,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the nine months ended September 30, 2008 and 2007, would total $17,832,000 and $16,581,000, respectively.
(d)	VITAS has 6 large (greater than 450 ADC), 17 medium (greater than 200 but less than 450 ADC) and 23 small (less than 200 ADC) hospice programs. There are three programs as of September 30, 2008, with Medicare cap cushion of less than 10% for the 2008 measurement period.
(e)	Amounts exclude indirect patient care and administrative costs, as well as Medicare Cap billing limitation.
(f)	Reclassified to conform to 2008 presentation.