Chemed Reports First-Quarter 2008 Results.

CINCINNATI -- 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, today reported financial results for its first quarter ended March 31, 2008, versus the comparable prior-year period, as follows:

Consolidated operating results:

* Revenue increased 5.5% to $285 million

* Diluted EPS of $.69

* Diluted EPS, excluding special items, of $.73

VITAS segment operating results:

* Net Patient Revenue of $199 million, up 7.9%

* Average Daily Census (ADC) of 11,691, up 3.4%

* Admissions of 15,212, an increase of 7.8%

* Average Length of Stay in the quarter of 71.5 days

* Adjusted EBITDA of $23.6 million, a decline of 9.3%

Roto-Rooter segment operating results:

* Revenue of $87 million, an increase of 0.3%

* Job count of 196,249, a decline of 7.0%

* Adjusted EBITDA of $15.9 million, a decline of 2.7%

VITAS

Net revenue for VITAS was $199 million in the first quarter of 2008, which is an increase of 7.9% over the prior-year period. This revenue growth was the result of increased ADC of 3.4%, a Medicare price increase of approximately 3%, and a favorable shift in revenue mix from routine home care to high acuity care.

Average revenue per patient per day in the quarter was $186.67, which is 3.5% above the prior-year period. Routine home care reimbursement and high acuity care averaged $145.42 and $633.10, respectively, per patient per day in the first quarter of 2008. During the quarter, high acuity days-of-care was 8.5% of total days-of-care. Quarterly high acuity days-of-care had averaged between 8.0% and 8.4% in 2007. Any shift in revenue mix will have a noticeable impact on overall revenue given the significant disparity in reimbursement. However, given the relatively low profitability margin on high acuity care, this favorable mix shift had minimal impact on gross profit and net income in the quarter.

VITAS did not have any billing restrictions related to Medicare Cap for its first-quarter 2008 operating activity. As of March 31, 2008, VITAS has not accrued any Medicare billing restrictions for the 2008 or 2007 Cap years. Of VITAS' 35 unique Medicare provider numbers, 30 provider numbers, or 86%, have a Cap cushion greater than 20% for the 2008 Cap year, four provider numbers are between 10% and 20%, and one provider number has Cap cushion of approximately 4%.

Gross margin in the first quarter of 2008 was 20.0%. This is 257 basis points below the first quarter of 2007, excluding the 2007 benefit from Medicare cap. This margin decline is a combination of increased expenses related to admissions and increased costs for direct patient care labor.

As part of its growth strategy, VITAS has expanded its investment in the admissions process. At the end of the first quarter of 2008, VITAS increased staffing of sales representatives, admissions coordinators and admissions nurses by 18%. This resulted in an additional $2.1 million of admission expense in the quarter and equates to 106 basis points of the decline in gross margin in the quarter.

The remaining margin decline is due to an increase in direct patient care labor. This additional labor is a combination of salary rate increases for existing employees as well as excess staffing relative to current patient census and individual plans of care. In the first quarter of 2008, total field salary increases averaged 4.2% over the prior-year period which is largely commensurate with local market salary requirements. This is above the 3.0% inflation per diem increase VITAS received from CMS in October 2007. Over the past several years the CMS calculated inflation factor has been below the actual inflation on direct patient care costs, primarily wages. Historically, VITAS has been able to offset this inflation adjustment shortfall through scale in management systems and infrastructure.

VITAS continues to refine the process of scheduling direct labor to allow for more daily flexibility with the goal of ensuring proper levels of staffing notwithstanding length of stay and census fluctuations. This involves more efficient utilization of field-based labor management tools designed to meet and respond to hospice team staffing requirements. VITAS anticipates more efficient labor management during the second quarter of 2008 with margins returning to more historical levels in the second half of 2008.

Selling, general and administrative expense was $16.1 million in the first quarter of 2008, which is an increase of 1.5% over the prior year. Adjusted EBITDA totaled $23.6 million, a decline of 9.3% over the prior year and equates to an adjusted EBITDA margin of 11.9%.

Roto-Rooter

Roto-Rooter's plumbing and drain cleaning business generated sales of $87 million for the first quarter of 2008, 0.3% higher than the $86 million reported in the comparable prior-year quarter. Net income for the quarter was $9.1 million. The first-quarter net income includes a $0.4 million aftertax charge for a settlement of litigation relating to a 2003 fire that, for unique technical reasons, was not covered by Roto-Rooter's secondary insurance carrier. Excluding this settlement, net income in the first quarter of 2008 declined approximately 0.6% over the first quarter of 2007. Adjusted EBITDA in the first quarter of 2008 totaled $15.9 million, a decrease of 2.7% over the first quarter of 2007, and equated to an adjusted EBITDA margin of 18.4%.

Job count in the first quarter of 2008 declined 7.0% when compared to the prior-year period. Total residential jobs declined 6.4% and consisted of residential plumbing jobs decreasing 4.9% and residential drain cleaning jobs declining 7.1%, when compared to the first quarter of 2007. Residential jobs represent approximately 70% of total job count. Total commercial jobs declined 8.4% with commercial plumbing job count declining 4.9% and commercial drain cleaning decreasing 9.9%, over the prior-year quarter.

The first quarter of 2008 clearly indicates recessionary pressures impacting demand for certain plumbing and drain cleaning services. This is evidenced by an 11% decline in aggregate call volume tracked in Roto-Rooter's two centralized call centers. This decline in call volume has been partially offset by an increase in call conversion rate to paid jobs.

There is also greater disparity in demand within the United States. The Southeast region has experienced a 14.1% decline in commercial jobs while the Northeast had a modest 1.8% decline in commercial volume. Residential demand is also following a similar pattern in the Southeast, with job count declining 10.1% while the remaining regions have experienced a job count decline ranging between 4.3% and 6.7%.

Guidance for 2008

VITAS is estimated to generate full-year revenue growth from continuing operations, prior to Medicare Cap, of 8% to 10%. Admissions are estimated to increase 5% to 8% and full-year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 13% to 14%. EBITDA margins are forecasted to improve sequentially throughout 2008, with an adjusted EBITDA margin averaging 13.5% to 14.0% in the second half of 2008. This guidance assumes the hospice industry receives a full Medicare basket price increase of 3.0% in the fourth quarter of 2008. Full calendar year 2008 Medicare contractual billing limitations are estimated at $3.75 million.

Roto-Rooter is estimated to generate revenue totaling $343 million to $349 million. This guidance assumes revenue of approximately $83 million to $85 million in the second and third quarters of 2008 and $90 million to $92 million in the fourth quarter of the year. Adjusted EBITDA margin for 2008 is estimated in the range of 18.5% to 19.5%.

Based upon these factors, an effective tax rate of 39% and an average diluted share count of 24.2 million shares, our estimate is that full-year 2008 earnings per diluted share from continuing operations, excluding noncash expenses for stock options and charges or credits not indicative of ongoing operations, will be in the range of $3.05 to $3.20.

Conference Call

Chemed will host a conference call and webcast at 10 a.m., ET, on Friday, April 25, 2008, to discuss the company's quarterly results and provide an update on its business. The dial-in number for the conference call is [phone] for U.S. and Canadian participants and [phone] for international participants. The participant passcode is 12125956. 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 61838951. An archived webcast will also be available at www.chemed.com and will remain available for 14 days following the live call.

Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to over 11,600 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.

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