Chemed Reports Third-Quarter 2010 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, 2010, versus the comparable prior-year period, as follows:

Consolidated operating results:

• Revenue increased 8.0% to $320.5 million
• Net Income increased 9.3% to $21.0 million
• Adjusted Net Income increased 8.0% to $23.6 million

VITAS segment operating results:

• Net Patient Revenue of $234.0 million, an increase of 7.8%
• Average Daily Census (ADC) of 12,857, an increase of 6.1%
• Admissions of 14,483, an increase of 5.4%
• Net Income of $19.8 million, an increase of 9.1%
• Adjusted EBITDA of $35.6 million, an increase of 8.3%
• Adjusted EBITDA margin of 15.2%, an increase of 7 basis points

Roto-Rooter segment operating results:

• Revenue of $86.5 million, an increase of 8.5%
• Job count of 160,250, a decrease of 0.4%
• Net Income of $7.7 million, a decrease of 2.4%
• Adjusted EBITDA of $13.7 million, a decrease of 0.5%
• Adjusted EBITDA margin of 15.9%, a decrease of 144 basis points

VITAS

Net revenue for VITAS was $234.0 million in the third quarter of 2010, which is an increase of 7.8% over the prior-year period. This revenue growth was the result of increased ADC of 6.1%, driven by an increase in admissions of 5.4%, combined with Medicare price increases of approximately 1.3%. The remaining growth was driven by geographic mix shift of the patient base.

The 5.4% admissions growth in the third quarter of 2010 compares favorably to the 3.1% increase in admissions in the prior-year quarter and a 0.7% decline in admissions for full-year 2009.

Average revenue per patient per day in the quarter, excluding the impact of Medicare Cap, was $197.90, which is 1.6% above the prior-year period. Routine home care reimbursement and high acuity care averaged $155.49 and $689.30, respectively, per patient per day in the third quarter of 2010. During the quarter, high acuity days of care were 7.9% of total days of care. This is essentially equal to the prior-year quarter.

In the third quarter of 2010, VITAS recorded a Medicare Cap billing limitation of $117,000 for one program with an average daily census of 126.

Of VITAS’ 33 unique Medicare provider numbers, 30 provider numbers, or 91%, have a Medicare Cap cushion greater than 10% for the most recent twelve-month period. Three provider numbers have Medicare Cap cushion below 5%. VITAS generated an aggregate Medicare Cap cushion of $199 million, or 24.1%, during the trailing twelve-month period.

The third quarter of 2010 gross margin, excluding the impact of Medicare Cap, was 23.1%, which is 36 basis points lower than the third quarter of 2009. Increased expenses relating to field-based admissions, expansion of inpatient units and increased documentation requirements in Medicare certification all contributed to this margin decline.

Selling, general and administrative expense was $18.4 million in the third quarter of 2010, which is an increase of 0.8% when compared to the prior-year quarter. Adjusted EBITDA totaled $35.6 million in the quarter, an increase of 8.3% over the prior-year period. Adjusted EBITDA margin, excluding the impact from Medicare Cap, was 15.2% in the quarter which was slightly above the prior-year quarter.

Roto-Rooter

Roto-Rooter’s plumbing and drain cleaning business generated sales of $86.5 million for the third quarter of 2010, an increase of 8.5% over the prior-year quarter. Roto-Rooter’s gross margin was 44.6% in the quarter, a 184 basis point decline when compared to the third quarter of 2009. Adjusted EBITDA in the third quarter of 2010 totaled $13.7 million, a decline of 0.5%, and the Adjusted EBITDA margin was 15.9% in the quarter, a decline of 144 basis points, when compared to the prior-year quarter.

Job count in the third quarter of 2010 declined a modest 0.4% when compared to the prior-year period. During the third quarter of 2010, total residential jobs declined 1.5%, as residential plumbing jobs increased 2.3% and residential drain cleaning jobs declined 3.6%, when compared to the third quarter of 2009. Residential jobs represented 71% of total job count in the quarter. Total commercial jobs increased 2.3%, with commercial plumbing/excavation job count increasing 5.9% and commercial drain cleaning increasing 0.8% when compared to the prior-year quarter. The "Other” job category increased 0.1%.

Management continues to have meaningful discussions with existing franchisees to acquire Roto-Rooter franchise territories. This 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. Management will be highly disciplined in terms of valuation, risk assessment and overall return on investment of any potential acquisition. However, the timing or actual completion of any acquisition cannot be predicted.

Chemed Consolidated Debt and Cash Flows

Chemed had total debt of $157.4 million at September 30, 2010. This debt is net of the discount taken as a result of convertible debt accounting requirements. Excluding this discount, aggregate debt is $187.0 million and is due in May 2014. Chemed’s total debt equates to less than one times trailing twelve-month adjusted EBITDA.

Chemed’s $175.0 million revolving credit facility expires in May 2012. At September 30, 2010, this credit facility had approximately $146.8 million of undrawn borrowing capacity after deducting $28.2 million for letters of credit issued under this facility to secure the Company’s workers’ compensation insurance.

Capital expenditures for the third quarter of 2010 aggregated $7.2 million and compares favorably to depreciation and amortization during the same period of $7.6 million.

Total cash and cash equivalents as of September 30, 2010, was $137 million, which represents 49.8% of total current assets. Net cash provided from operations in the third quarter of 2010 aggregated $37.7 million.

The Company increased its quarterly dividend per share in the third quarter of 2010, from $0.12 per share to $0.14 per share. The company did not purchase any treasury stock in the past quarter and has approximately $45 million of remaining authorization under its previously announced share repurchase program. 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.

Guidance for 2010

VITAS expects to achieve full-year 2010 revenue growth, prior to Medicare Cap and BNAF, of 7.5% to 8.2%. Admissions in 2010 are estimated to increase 4.0% to 5.0% and full-year Adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 15.3% to 15.6%. Effective October 1, 2010, Medicare increased average hospice reimbursement rates by approximately 2.1%. Our 2010 full-year guidance includes $1.25 million of estimated Medicare contractual billing limitations for the fourth quarter of 2010.

Roto-Rooter expects to achieve full-year 2010 revenue growth of 4.5% to 5.5%. The revenue estimate is a result of increased pricing of approximately 3.0%, a favorable mix shift to higher revenue jobs, offset by a job count decline estimated at 2.0% to 3.0%. Adjusted EBITDA margin for 2010 is estimated in the range of 17.5% to 18.5%.

Based upon these factors, an effective tax rate of 39.0% and a full-year average diluted share count of 23.0 million shares, management estimates 2010 earnings per diluted share from continuing operations, excluding non-cash expenses for stock options, the non-cash increase in interest expense related to the accounting change for convertible debt and other items not indicative of ongoing operations will be in the range of $4.10 to $4.20.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., EDT, on Tuesday, October 26, 2010, to discuss the Company's quarterly results and to provide an update on its business. The dial-in number for the conference call is (800) 510-9834 for U.S. and Canadian participants and (617) 614-3669 for international participants. The participant passcode is 37703938. 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 24 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 10769905. 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, Adjusted EBITDA and Adjusted Diluted EPS, which are not measures derived in accordance with GAAP and which exclude components that are important to understanding Chemed’s financial performance. In reporting its operating results, Chemed provides EBITDA, Adjusted EBITDA and Adjusted Diluted EPS measures to help investors and others evaluate the Company’s 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 management similarly uses EBITDA, Adjusted EBITDA and Adjusted Diluted EPS to assist it in evaluating the performance of the Company across fiscal periods and in assessing how its performance compares to its peer companies. These measures also help Chemed’s management to estimate the resources required to meet Chemed’s future financial obligations and expenditures. Chemed’s EBITDA, Adjusted EBITDA and Adjusted Diluted EPS should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. We calculated Adjusted EBITDA Margin by dividing Adjusted EBITDA by service revenue and sales. A reconciliation of Chemed’s net income to its EBITDA, Adjusted EBITDA and Adjusted Diluted EPS 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,
									2010				2009				2010				2009
Service revenues and sales									$	320,451			$	296,794			$	944,259			$	886,987
Cost of services provided and goods sold										227,915				208,888				670,754				623,238
Selling, general and administrative expenses (aa)										48,200				48,148				146,694				143,521
Depreciation										6,385				5,361				18,048				16,024
Amortization										1,196				1,611				3,707				4,765
Other operating expenses (bb)										-				-				-				3,989
	Total costs and expenses									283,696				264,008				839,203				791,537
	Income from operations									36,755				32,786				105,056				95,450
Interest expense										(2,995	)			(2,853	)			(8,946	)			(8,839	)
Other income--net (cc)										222				1,733				418				4,815
	Income before income taxes									33,982				31,666				96,528				91,426
Income taxes										(12,994	)			(12,456	)			(37,327	)			(35,627	)
Net income									$	20,988			$	19,210			$	59,201			$	55,799
Earnings Per Share
	Net income								$	0.93			$	0.86			$	2.62			$	2.49
	Average number of shares outstanding									22,597				22,461				22,604				22,425
Diluted Earnings Per Share
	Net income								$	0.91			$	0.84			$	2.57			$	2.46
	Average number of shares outstanding									22,996				22,744				23,006				22,679
(aa)	Selling, general and administrative ("SG&A") expenses comprise (in thousands):
									Three Months Ended September 30,								Nine Months Ended September 30,
									2010				2009				2010				2009
		SG&A expenses before long-term incentive compensation and the impact of market gains of deferred compensation plans							$	47,957			$	46,359			$	144,547			$	140,147
		Long-term incentive compensation								-				-				1,799				-
		Market value gains on assets held in deferred compensation trust								243				1,789				348				3,374
			Total SG&A expenses						$	48,200			$	48,148			$	146,694			$	143,521
(bb)	Amount represents expenses associated with contested proxy solicitation.
(cc)	Other income/(expense)--net comprises (in thousands):
									Three Months Ended September 30,								Nine Months Ended September 30,
									2010				2009				2010				2009
		Market value gains on assets held in deferred compensation trust							$	243			$	1,789			$	348			$	3,374
		Loss on disposal of property and equipment								(141	)			(159	)			(293	)			(213	)
		Interest income								109				86				334				375
		Gain on settlement of company-owned life insurance								-				-				-				1,211
		Other								11				17				29				68
			Total other income--net						$	222			$	1,733			$	418			$	4,815

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
												September 30,
												2010				2009
Assets
	Current assets
		Cash and cash equivalents										$	137,457			$	42,047
		Accounts receivable less allowances											105,686				106,667
		Inventories											7,951				8,071
		Current deferred income taxes											14,650				16,648
		Prepaid income taxes											337				52
		Prepaid expenses											9,925				8,527
			Total current assets										276,006				182,012
	Investments of deferred compensation plans held in trust												26,022				22,441
	Properties and equipment, at cost less accumulated depreciation												78,982				73,918
	Identifiable intangible assets less accumulated amortization												56,097				58,853
	Goodwill												450,095				450,130
	Other assets												11,190				14,049
				Total Assets								$	898,392			$	801,403
Liabilities
	Current liabilities
		Accounts payable										$	52,552			$	47,788
		Current portion of long-term debt											-				70
		Income taxes											4,575				8,022
		Accrued insurance											34,320				34,955
		Accrued compensation											45,183				41,383
		Other current liabilities											15,637				12,992
			Total current liabilities										152,267				145,210
	Deferred income taxes												23,045				22,389
	Long-term debt												157,392				150,431
	Deferred compensation liabilities												25,508				21,962
	Other liabilities												6,624				4,435
				Total Liabilities									364,836				344,427
Stockholders' Equity
	Capital stock												30,207				29,763
	Paid-in capital												354,473				327,918
	Retained earnings												453,886				388,109
	Treasury stock, at cost												(306,977	)			(290,748	)
	Deferred compensation payable in Company stock												1,967				1,934
				Total Stockholders' Equity									533,556				456,976
				Total Liabilities and Stockholders' Equity								$	898,392			$	801,403

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
												Nine Months Ended September 30,
												2010				2009
Cash Flows from Operating Activities
	Net income											$	59,201			$	55,799
	Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation and amortization										21,755				20,789
			Provision for uncollectible accounts receivable										7,248				8,297
			Stock option expense										6,365				6,699
			Amortization of discount on convertible notes										5,265				4,921
			Provision for deferred income taxes										(3,886	)			(1,336	)
			Noncash long-term incentive compensation										1,580				-
			Changes in operating assets and liabilities, excluding amounts acquired in business combinations:
					Increase in accounts receivable								(59,528	)			(16,936	)
					Increase in inventories								(408	)			(499	)
					Decrease in prepaid expenses								463				1,406
					Increase/(decrease) in accounts payable and other current liabilities								12,479				(4,584	)
					Increase in income taxes								6,729				8,657
					Increase in other assets								(2,180	)			(103	)
					Increase/(decrease) in other liabilities								3,960				(1,632	)
			Excess tax benefit on share-based compensation										(1,823	)			(1,519	)
			Other sources										770				588
				Net cash provided by operating activities									57,990				80,547
Cash Flows from Investing Activities
	Capital expenditures												(19,107	)			(14,471	)
	Proceeds from sales of property and equipment												182				1,519
	Business combinations, net of cash acquired												(30	)			(1,859	)
	Other uses												(630	)			(950	)
				Net cash used by investing activities									(19,585	)			(15,761	)
Cash Flows from Financing Activities
	Purchases of treasury stock												(10,140	)			(1,684	)
	Dividends paid												(8,682	)			(5,429	)
	Proceeds from issuance of capital stock												3,632				486
	Excess tax benefit on share-based compensation												1,823				1,519
	Increase/(decrease) in cash overdrafts payable												(184	)			943
	Repayment of long-term debt												-				(14,599	)
	Net decrease in revolving line of credit												-				(8,200	)
	Other sources												187				597
				Net cash used by financing activities									(13,364	)			(26,367	)
Increase in Cash and Cash Equivalents													25,041				38,419
Cash and cash equivalents at beginning of year													112,416				3,628
Cash and cash equivalents at end of period												$	137,457			$	42,047

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(in thousands)(unaudited)
																		Chemed
						VITAS				Roto-Rooter				Corporate				Consolidated
2010
Service revenues and sales						$	233,964			$	86,487			$	-			$	320,451
Cost of services provided and goods sold							179,997				47,918				-				227,915
Selling, general and administrative expenses (a)							18,370				24,573				5,257				48,200
Depreciation							4,321				1,925				139				6,385
Amortization							694				133				369				1,196
	Total costs and expenses						203,382				74,549				5,765				283,696
	Income/(loss) from operations						30,582				11,938				(5,765	)			36,755
Interest expense (a)							(48	)			(55	)			(2,892	)			(2,995	)
Intercompany interest income/(expense)							1,139				651				(1,790	)			-
Other income/(expense)—net							(92	)			11				303				222
	Income/(loss) before income taxes						31,581				12,545				(10,144	)			33,982
Income taxes (a)							(11,778	)			(4,798	)			3,582				(12,994	)
	Net income/(loss)					$	19,803			$	7,747			$	(6,562	)		$	20,988
2009 (f)
Service revenues and sales						$	217,067			$	79,727			$	-			$	296,794
Cost of services provided and goods sold							166,183				42,705				-				208,888
Selling, general and administrative expenses (b)							18,227				22,740				7,181				48,148
Depreciation							3,292				2,005				64				5,361
Amortization							1,179				117				315				1,611
	Total costs and expenses						188,881				67,567				7,560				264,008
	Income/(loss) from operations						28,186				12,160				(7,560	)			32,786
Interest expense (b)							(51	)			(43	)			(2,759	)			(2,853	)
Intercompany interest income/(expense)							1,178				684				(1,862	)			-
Other income/(expense)—net							(86	)			15				1,804				1,733
	Income/(loss) before income taxes						29,227				12,816				(10,377	)			31,666
Income taxes (b)							(11,079	)			(4,881	)			3,504				(12,456	)
	Net income/(loss)					$	18,148			$	7,935			$	(6,873	)		$	19,210

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, 2010 AND 2009
(in thousands)(unaudited)
																		Chemed
						VITAS				Roto-Rooter				Corporate				Consolidated
2010
Service revenues and sales						$	683,542			$	260,717			$	-			$	944,259
Cost of services provided and goods sold							527,347				143,407				-				670,754
Selling, general and administrative expenses (a)							54,920				73,523				18,251				146,694
Depreciation							11,909				5,826				313				18,048
Amortization							2,253				388				1,066				3,707
	Total costs and expenses						596,429				223,144				19,630				839,203
	Income/(loss) from operations						87,113				37,573				(19,630	)			105,056
Interest expense (a)							(127	)			(187	)			(8,632	)			(8,946	)
Intercompany interest income/(expense)							3,778				2,126				(5,904	)			-
Other income/(expense)—net							(85	)			35				468				418
	Income/(loss) before income taxes						90,679				39,547				(33,698	)			96,528
Income taxes (a)							(34,156	)			(15,127	)			11,956				(37,327	)
	Net income/(loss)					$	56,523			$	24,420			$	(21,742	)		$	59,201
2009 (f)
Service revenues and sales						$	636,787			$	250,200			$	-			$	886,987
Cost of services provided and goods sold							487,990				135,248				-				623,238
Selling, general and administrative expenses (b)							53,650				69,959				19,912				143,521
Depreciation							9,767				6,094				163				16,024
Amortization							3,537				323				905				4,765
Other operating expenses (b)							-				-				3,989				3,989
	Total costs and expenses						554,944				211,624				24,969				791,537
	Income/(loss) from operations						81,843				38,576				(24,969	)			95,450
Interest expense (b)							(415	)			(138	)			(8,286	)			(8,839	)
Intercompany interest income/(expense)							3,091				1,801				(4,892	)			-
Other income/(expense)—net (b)							35				137				4,643				4,815
	Income/(loss) before income taxes						84,554				40,376				(33,504	)			91,426
Income taxes (b)							(32,112	)			(15,414	)			11,899				(35,627	)
	Net income/(loss)					$	52,442			$	24,962			$	(21,605	)		$	55,799

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, 2010 AND 2009
(in thousands)(unaudited)
																				Chemed
								VITAS				Roto-Rooter				Corporate				Consolidated
2010
Net income/(loss)								$	19,803			$	7,747			$	(6,562	)		$	20,988
Add/(deduct):
		Interest expense							48				55				2,892				2,995
		Income taxes							11,778				4,798				(3,582	)			12,994
		Depreciation							4,321				1,925				139				6,385
		Amortization							694				133				369				1,196
			EBITDA						36,644				14,658				(6,744	)			44,558
Add/(deduct):
		Intercompany interest expense/(income)							(1,139	)			(651	)			1,790				-
		Interest income							(37	)			(10	)			(62	)			(109	)
		Expenses of OIG investigation							112				-				-				112
		Advertising cost adjustment (c)							-				(571	)			-				(571	)
		Expenses of class action litigation							-				322				-				322
		Stock option expense							-				-				1,968				1,968
			Adjusted EBITDA					$	35,580			$	13,748			$	(3,048	)		$	46,280
2009 (f)
Net income/(loss)								$	18,148			$	7,935			$	(6,873	)		$	19,210
Add/(deduct):
		Interest expense							51				43				2,759				2,853
		Income taxes							11,079				4,881				(3,504	)			12,456
		Depreciation							3,292				2,005				64				5,361
		Amortization							1,179				117				315				1,611
			EBITDA						33,749				14,981				(7,239	)			41,491
Add/(deduct):
		Intercompany interest expense/(income)							(1,178	)			(684	)			1,862				-
		Interest income							(53	)			(9	)			(24	)			(86	)
		Expenses of OIG investigation							343				-				-				343
		Advertising cost adjustment (c)							-				(466	)			-				(466	)
		Stock option expense							-				-				2,214				2,214
			Adjusted EBITDA					$	32,861			$	13,822			$	(3,187	)		$	43,496

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, 2010 AND 2009
(in thousands)(unaudited)
																					Chemed
									VITAS				Roto-Rooter				Corporate				Consolidated
2010
Net income/(loss)									$	56,523			$	24,420			$	(21,742	)		$	59,201
Add/(deduct):
		Interest expense								127				187				8,632				8,946
		Income taxes								34,156				15,127				(11,956	)			37,327
		Depreciation								11,909				5,826				313				18,048
		Amortization								2,253				388				1,066				3,707
			EBITDA							104,968				45,948				(23,687	)			127,229
Add/(deduct):
		Intercompany interest expense/(income)								(3,778	)			(2,126	)			5,904				-
		Interest income								(172	)			(37	)			(125	)			(334	)
		Expenses of OIG investigation								390				-				-				390
		Advertising cost adjustment (c)								-				(1,639	)			-				(1,639	)
		Expenses of class action litigation								-				427				-				427
		Stock option expense								-				-				6,365				6,365
		Long-term incentive compensation								-				-				1,799				1,799
			Adjusted EBITDA						$	101,408			$	42,573			$	(9,744	)		$	134,237
2009 (f)
Net income/(loss)									$	52,442			$	24,962			$	(21,605	)		$	55,799
Add/(deduct):
		Interest expense								415				138				8,286				8,839
		Income taxes								32,112				15,414				(11,899	)			35,627
		Depreciation								9,767				6,094				163				16,024
		Amortization								3,537				323				905				4,765
			EBITDA							98,273				46,931				(24,150	)			121,054
Add/(deduct):
		Intercompany interest expense/(income)								(3,091	)			(1,801	)			4,892				-
		Interest income								(250	)			(44	)			(81	)			(375	)
		Expenses of OIG investigation								442				-				-				442
		Advertising cost adjustment (c)								-				(1,228	)			-				(1,228	)
		Stock option expense								-				-				6,699				6,699
		Expenses associated with contested proxy solicitation								-				-				3,989				3,989
		Non-taxable income from certain investments held in deferred compensation trusts								-				-				(1,211	)			(1,211	)
			Adjusted EBITDA						$	95,374			$	43,858			$	(9,862	)		$	129,370

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, 2010 AND 2009
(in thousands, except per share data)(unaudited)
								Three Months Ended							Nine Months Ended
								September 30,							September 30,
								2010			2009 (f)				2010			2009 (f)
Net income as reported								$	20,988		$	19,210			$	59,201		$	55,799
Add/(deduct) after-tax impact of:
		Stock option expense							1,244			1,401				4,026			4,237
		Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes							1,088			1,006				3,203			2,961
		Expenses of class action litigation							194			-				257			-
		Expenses of OIG investigation							69			213				242			274
		Long-term incentive compensation							-			-				1,124			-
		Expenses associated with contested proxy solicitation							-			-				-			2,525
		Non-deductible losses and non-taxable gains on investments held in deferred compensation trusts							-			-				-			(756	)
Adjusted net income								$	23,583		$	21,830			$	68,053		$	65,040
Earnings Per Share As Reported
		Net income						$	0.93		$	0.86			$	2.62		$	2.49
		Average number of shares outstanding							22,597			22,461				22,604			22,425
Diluted Earnings Per Share As Reported
		Net income						$	0.91		$	0.84			$	2.57		$	2.46
		Average number of shares outstanding							22,996			22,744				23,006			22,679
Adjusted Earnings Per Share
		Net income						$	1.04		$	0.97			$	3.01		$	2.90
		Average number of shares outstanding							22,597			22,461				22,604			22,425
Adjusted Diluted Earnings Per Share
		Net income						$	1.03		$	0.96			$	2.96		$	2.87
		Average number of shares outstanding							22,996			22,744				23,006			22,679

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, 2010 AND 2009
(unaudited)
							Three Months Ended September 30,									Nine Months Ended September 30,
OPERATING STATISTICS							2010				2009					2010				2009
	Net revenue ($000) (d)
		Homecare					$	169,306			$	157,079				$	490,044			$	456,160
		Inpatient						25,963				24,057					78,244				72,806
		Continuous care						38,812				35,974					113,588				105,679
			Total before Medicare cap allowance and 2008 BNAF*				$	234,081			$	217,110				$	681,876			$	634,645
		Estimated BNAF* Accrual Q4 2008						-				-					-				1,950
		Medicare cap allowance						(117	)			(43	)				1,666				192
			Total				$	233,964			$	217,067				$	683,542			$	636,787
	Net revenue as a percent of total
	before Medicare cap allowance and 2008 BNAF*
		Homecare						72.3		%		72.3		%			71.8		%		71.8		%
		Inpatient						11.1				11.1					11.5				11.5
		Continuous care						16.6				16.6					16.7				16.7
			Total before Medicare cap allowance and 2008 BNAF*					100.0				100.0					100.0				100.0
		Estimated BNAF* Accrual Q4 2008						-				-					-				0.3
		Medicare cap allowance						(0.1	)			-					0.2				-
			Total					99.9		%		100.0		%			100.2		%		100.3		%
	Average daily census ("ADC") (days)
		Homecare						8,586				7,835					8,350				7,661
		Nursing home						3,250				3,316					3,212				3,291
			Routine homecare					11,836				11,151					11,562				10,952
		Inpatient						425				404					433				406
		Continuous care						596				562					595				565
			Total					12,857				12,117					12,590				11,923
	Total Admissions							14,483				13,735					43,750				41,743
	Total Discharges							14,076				13,441					42,767				41,064
	Average length of stay (days)							78.2				78.0					77.1				75.0
	Median length of stay (days)							15.0				14.0					14.0				14.0
	ADC by major diagnosis
		Neurological						33.4		%		33.1		%			33.2		%		33.0		%
		Cancer						18.5				19.1					18.4				19.2
		Cardio						11.9				12.2					11.9				12.2
		Respiratory						6.5				6.2					6.6				6.5
		Other						29.7				29.4					29.9				29.1
			Total					100.0		%		100.0		%			100.0		%		100.0		%
	Admissions by major diagnosis
		Neurological						18.4		%		17.9		%			18.6		%		17.9		%
		Cancer						35.8				36.8					34.6				35.6
		Cardio						11.1				11.1					11.3				11.8
		Respiratory						7.5				6.8					8.1				7.5
		Other						27.2				27.4					27.4				27.2
			Total					100.0		%		100.0		%			100.0		%		100.0		%
	Direct patient care margins (e)
		Routine homecare						52.7		%		51.7		%			52.2		%		51.8		%
		Inpatient						12.3				12.8					13.3				15.7
		Continuous care						21.1				20.6					21.0				20.3
	Homecare margin drivers (dollars per patient day)
		Labor costs					$	51.97			$	52.56				$	52.79			$	52.40
		Drug costs						7.89				7.59					7.78				7.65
		Home medical equipment						6.54				7.03					6.71				6.85
		Medical supplies						2.66				2.48					2.53				2.37
	Inpatient margin drivers (dollars per patient day)
		Labor costs					$	304.42			$	294.24				$	297.63			$	282.74
	Continuous care margin drivers (dollars per patient day)
		Labor costs					$	536.83			$	530.88				$	531.14			$	524.84
	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							39.7				52.8					n.a.				n.a.
	Days of revenue outstanding- including unapplied Medicare payments							34.9				37.0					n.a.				n.a.

* Budget Neutrality Adjustment Factor.

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, 2010 AND 2009
(unaudited)
(a)	Included in the results of operations 2010 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):
									Three Months Ended September 30, 2010
									VITAS				Roto-Rooter				Corporate				Consolidated
	Selling, general and administrative expenses:
		Expenses of OIG investigation							$	(112	)		$	-			$	-			$	(112	)
		Expenses of class action litigation								-				(322	)			-				(322	)
		Stock option expense								-				-				(1,968	)			(1,968	)
	Interest expense:
		Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes								-				-				(1,721	)			(1,721	)
			Pretax impact on earnings							(112	)			(322	)			(3,689	)			(4,123	)
	Income tax benefit on the above									43				128				1,357				1,528
			After-tax impact on earnings						$	(69	)		$	(194	)		$	(2,332	)		$	(2,595	)
									Nine Months Ended September 30, 2010
									VITAS				Roto-Rooter				Corporate				Consolidated
	Selling, general and administrative expenses:
		Expenses of OIG investigation							$	(390	)		$	-			$	-			$	(390	)
		Expenses of class action litigation								-				(427	)			-				(427	)
		Stock option expense								-				-				(6,365	)			(6,365	)
		Long-term incentive compensation								-				-				(1,799	)			(1,799	)
	Interest expense:
		Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes								-				-				(5,064	)			(5,064	)
			Pretax impact on earnings							(390	)			(427	)			(13,228	)			(14,045	)
	Income tax benefit on the above									148				170				4,875				5,193
			After-tax impact on earnings						$	(242	)		$	(257	)		$	(8,353	)		$	(8,852	)
(b)	Included in the results of operations 2009 are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):
													Three Months Ended September 30, 2009
													VITAS				Corporate				Consolidated
	Selling, general and administrative expenses:
		Expenses of OIG investigation											$	(343	)		$	-			$	(343	)
		Stock option expense												-				(2,214	)			(2,214	)
	Interest expense:
		Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes												-				(1,591	)			(1,591	)
			Pretax impact on earnings											(343	)			(3,805	)			(4,148	)
	Income tax benefit on the above													130				1,398				1,528
			After-tax impact on earnings										$	(213	)		$	(2,407	)		$	(2,620	)
													Nine Months Ended September 30, 2009
													VITAS				Corporate				Consolidated
	Selling, general and administrative expenses:
		Expenses of OIG investigation											$	(442	)		$	-			$	(442	)
		Stock option expense												-				(6,699	)			(6,699	)
	Other operating expenses:
		Expenses associated with contested proxy solicitation												-				(3,989	)			(3,989	)
	Interest expense:
		Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes												-				(4,682	)			(4,682	)
	Other income/(expense) -- net:
		Non-taxable income from certain investments held in deferred compensation trusts												-				1,211				1,211
			Pretax impact on earnings											(442	)			(14,159	)			(14,601	)
	Income tax benefit on the above													168				5,647				5,815
	Income tax impact of non-deductible net market losses on investments held in deferred compensation trusts													-				(455	)			(455	)
			After-tax impact on earnings										$	(274	)		$	(8,967	)		$	(9,241	)

(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 2010 and 2009, GAAP advertising expense for Roto-Rooter totaled $5,579,000 and $5,674,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the third quarters of 2010 and 2009 would total $6,150,000 and $6,140,000, respectively. Similarly, for the first nine months of 2010 and 2009, GAAP advertising expense for Roto-Rooter totaled $16,815,000 and $17,202,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the first nine months of 2010 and 2009 would total $18,454,000 and $18,430,000, respectively.
(d)	VITAS has 6 large (greater than 450 ADC), 18 medium (greater than 200 but less than 450 ADC) and 21 small (less than 200 ADC) hospice programs. There are two programs as of September 30, 2010, with Medicare cap cushion of less than 10% for the most recent 12-month period. Additionally, one small program has a projected Medicare cap liability of $117,000 for the 2010 measurement period.
(e)	Amounts exclude indirect patient care and administrative costs, as well as Medicare Cap billing limitation.
(f)	Reclassified to agree with 2010 presentation. Prior to 2010, we recorded stock award amortization as a corporate expense. In the first quarter of 2010, we decided that since this expense was an ongoing expense it should be reported within the appropriate segment. Accordingly, stock award amortization has been allocated to the corresponding business segments for all periods presented.