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<SEC-DOCUMENT>0000950152-06-002164.txt : 20060316
<SEC-HEADER>0000950152-06-002164.hdr.sgml : 20060316
<ACCEPTANCE-DATETIME>20060316094012
ACCESSION NUMBER:		0000950152-06-002164
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		13
CONFORMED PERIOD OF REPORT:	20051231
FILED AS OF DATE:		20060316
DATE AS OF CHANGE:		20060316

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CHEMED CORP
		CENTRAL INDEX KEY:			0000019584
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-HOME HEALTH CARE SERVICES [8082]
		IRS NUMBER:				310791746
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08351
		FILM NUMBER:		06690154

	BUSINESS ADDRESS:	
		STREET 1:		2600 CHEMED CTR
		STREET 2:		255 E FIFTH ST
		CITY:			CINCINNATI
		STATE:			OH
		ZIP:			45202
		BUSINESS PHONE:		(513)762-6900

	MAIL ADDRESS:	
		STREET 1:		2600 CHEMED CTR
		STREET 2:		255 E FIFTH STREET
		CITY:			CINCINNATI
		STATE:			OH
		ZIP:			45202

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ROTO-ROOTER INC
		DATE OF NAME CHANGE:	20030613

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CHEMED CORP
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>l18258ae10vk.txt
<DESCRIPTION>CHEMED CORPORATION                 FORM 10-K
<TEXT>
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

[X]  For the fiscal year ended December 31, 2005

                                       or

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

     For the Transition period from _______________ to ______________

                         Commission File Number: 1-8351

                               CHEMED CORPORATION

             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                       <C>
           DELAWARE                                             31-0791746
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)
</TABLE>

<TABLE>
<S>                                                                   <C>
2600 Chemed Center, 255 East Fifth Street, Cincinnati, Ohio           45202-4726
          (Address of principal executive offices)                    (Zip Code)
</TABLE>

                                 (513) 762-6900
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                          Name of each exchange
          Title of each class                              on which registered
          -------------------                            -----------------------
<S>                                                      <C>
Capital Stock - Par Value $1 Per Share                   New York Stock Exchange
</TABLE>

        Securities registered pursuant to Section 12(g) of the Act: None

     Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes   X   No
                                                  -----    -----

     Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes       No   X
                                                        -----    -----

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes   X   No
                                              -----    -----

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes       No   X
               -----    -----

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. Large accelerated filer   X
                                                                          -----
Accelerated filer _____ Non-accelerated filer ______

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

     The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the average bid and asked price of said stock on the
New York Stock Exchange - Composite Transaction Listing on June 30, 2005 ($41.37
per share), was $1,046,013,477.

     At March 8, 2006, 26,236,872 shares of Chemed Capital Stock (par value $1
per share) were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
                         DOCUMENT                             WHERE INCORPORATED
                         --------                             ------------------
<S>                                                           <C>
2005 Annual Report to Stockholders (specified portions)       Parts I, II and IV
Proxy Statement for Annual Meeting to be held May 15, 2006    Part III
</TABLE>

<PAGE>

                               CHEMED CORPORATION

                          2005 FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
                                  PART I

Item 1.  Business........................................................     1
Item 1A. Risk Factors....................................................    15
Item 1B. Unresolved Staff Comments.......................................    26
Item 2.  Properties......................................................    26
Item 3.  Legal Proceedings...............................................    27
Item 4.  Submission of Matters to a Vote of Security Holders.............    27
 --      Executive Officers of the Registrant............................    27

                                 PART II

Item 5.  Market for the Registrant's Common Equity, Related
         Stockholder Matters and Issuer Purchases of Equity Securities...    28
Item 6.  Selected Financial Data.........................................    29
Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.............................    29
Item 7A. Quantitative and Qualitative Disclosures About Market Risk......    30
Item 8.  Financial Statements and Supplementary Data.....................    30
Item 9.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure.............................    30
Item 9A. Controls and Procedures.........................................    30
Item 9B. Other Information...............................................    31

                                 PART III

Item 10. Directors and Executive Officers of the Registrant..............    31
Item 11. Executive Compensation..........................................    31
Item 12. Security Ownership of Certain Beneficial Owners and
         Management and Related Stockholder Matters......................    31
Item 13. Certain Relationships and Related Transactions..................    31
Item 14. Principal Accountant Fees and Services..........................    31

                                 PART IV

Item 15. Exhibits and Financial Statement Schedules......................    33
</TABLE>

<PAGE>

ITEM 1. BUSINESS

GENERAL

     The Company was incorporated in Delaware in 1970 as a subsidiary of W. R.
Grace & Co. and succeeded to the business of W. R. Grace & Co.'s Specialty
Products Group as of April 30, 1971 and remained a subsidiary of W. R. Grace &
Co. until March 10, 1982. As used herein, "Company" refers to Chemed
Corporation, and its subsidiaries and "Grace" refers to W. R. Grace & Co. and
its subsidiaries.

     On March 10, 1982, the Company transferred to Dearborn Chemical Company, a
wholly owned subsidiary of the Company, the business and assets of the Company's
Dearborn Group, including the stock of certain subsidiaries within the Dearborn
Group, plus $185 million in cash, and Dearborn Chemical Company assumed the
Dearborn Group's liabilities. Thereafter, on March 10, 1982 the Company
transferred all of the stock of Dearborn Chemical Company to Grace in exchange
for 33,481,604 shares of the capital stock of the Company owned by Grace with
the result that Grace no longer has any ownership interest in the Company.

     On December 31, 1986, the Company completed the sale of substantially all
of the business and assets of Vestal Laboratories, Inc., a wholly owned
subsidiary. The Company received cash payments aggregating approximately $67.4
million over the four-year period following the closing, the substantial portion
of which was received on December 31, 1986.

     On April 2, 1991, the Company completed the sale of DuBois Chemicals, Inc.
("DuBois"), a wholly owned subsidiary, to the Diversey Corporation ("Diversey"),
then a subsidiary of The Molson Companies Ltd. Under the terms of the sale,
Diversey agreed to pay the Company net cash payments aggregating $223,386,000,
including deferred payments aggregating $32,432,000.

     On December 21, 1992, the Company acquired The Veratex Corporation and
related businesses ("Veratex Group") from Omnicare, Inc. The purchase price was
$62,120,000 in cash paid at closing, plus a post-closing payment of $1,514,000
(paid in April 1993) based on the net assets of Veratex.

     Effective January 1, 1994, the Company acquired all the capital stock of
Patient Care, Inc. ("Patient Care"), for cash payments aggregating $20,582,000,
plus 35,000 shares of the Company's Capital Stock. An additional cash payment of
$1,000,000 was made on March 31, 1996 and another payment of $1,000,000 was made
on March 31, 1997.

     In July 1995, the Company's Omnia Group (formerly Veratex Group) completed
the sale of the business and assets of its Veratex Retail division to Henry
Schein, Inc. ("HSI") for $10 million in cash plus a $4.1 million note for which
payment was received in December 1995.

     Effective September 17, 1996, the Company completed a merger of a
subsidiary of the Company, Chemed Acquisition Corp., and Roto-Rooter, Inc.
pursuant to a Tender Offer commenced on August 8, 1996 to acquire any and all of
the outstanding shares of Common Stock of Roto-Rooter, Inc. for $41.00 per share
in cash.

     On September 24, 1997, the Company completed the sale of its wholly owned
businesses comprising the Omnia Group to Banta Corporation for $50 million in
cash and $2.3 million in deferred payments.

     Effective September 30, 1997, the Company completed a merger between its
81-percent-owned subsidiary, National Sanitary Supply Company, and a wholly
owned subsidiary of Unisource Worldwide, Inc. for $21.00 per share, with total
payments of $138.3 million.

     Effective October 11, 2002, the Company sold its Patient Care subsidiary
("Patient Care") to an investor group that included Schroder Ventures Life
Sciences Group, Oak Investment Partners, Prospect Partners and Salix Ventures.
Patient Care provides home-healthcare services primarily in the New York-New
Jersey-Connecticut area. The cash proceeds to the Company totaled $57,500,000,
of which $5,000,000 was placed in escrow pending settlement of Patient Care's
receivables with third-party payers. Of this amount, $2,500,000 was distributed
as of October 2003 and the remainder, except for $769,042 was


                                       1

<PAGE>

distributed as of October 2004. The Company is also entitled to additional funds
based on the estimated balance sheet valuation. This claim is currently in
litigation. In addition, the Company received a senior subordinated note
receivable ("Note") for $12,500,000 and a common stock purchase warrant
("Warrant") for 2% of the outstanding stock of the purchasing company. The Note
is due October 11, 2007, and bears interest at the annual rate of 7.5% through
September 30, 2004, 8.5% from October 1, 2004, through September 30, 2005, and
9.5% thereafter. The Warrant has an estimated fair value of $1,445,000.

     Effective February 24, 2004, The Company completed a merger of its wholly
owned indirect subsidiary, Marlin Merger Corp., and Vitas Healthcare
Corporation. Under the terms of the merger agreement, Vitas stockholders
received cash of $30.00 per share. The transaction, including the refinancing of
existing Vitas debt and other payments made in connection with the merger,
totaled approximately $415 million in cash. In order to complete the merger the
Company sold four million shares of its Capital Stock in a private placement at
a price of $25.00 per share, issued $110 million principal amount of floating
rate senior secured notes due 2010 ("Floating Rate Notes"), issued $150 million
principal amount of 8.75% Senior Notes due 2011 ("Fixed Rate Notes"), and
entered into new $135 million senior secured credit facilities. These
obligations were restated on February 24, 2005. More information with respect to
the Company's merger with Vitas is included within Note 7 of the Notes to
Consolidated Financial Statements appearing on pages 23-25 of the Annual Report
to Stockholders and incorporated herein by reference.

     On December 22, 2004, the Board of Directors authorized the discontinuance
of the operations of the Company's Service America segment, through an asset
sale to employees of Service America. The acquiring corporation purchased a
substantial majority of Service America's assets in exchange for assuming
substantially all of Service America's liabilities in May 2005. Included in the
assets acquired was a receivable from the Company for approximately $4.7
million. The Company paid $1 million of the receivable upon closing and the
remainder is payable over the following year in 11 equal monthly installments.

     During 2005 the Company conducted its business operations in two segments:
Vitas Group ("Vitas") and Roto-Rooter Group ("Roto-Rooter").

FORWARD LOOKING STATEMENTS

     This Annual Report contains or incorporates by reference certain forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The Company intends such statements to be subject to the
safe harbors created by that legislation. Such statements involve risks and
uncertainties that could cause actual results of operations to differ materially
from these forward looking statements.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

     The required segment and geographic data for the Company's continuing
operations (as described below) for the three years ended December 31, 2003,
2004 and 2005 are shown in Note 2 of the Notes to Consolidated Financial
Statements on pages 17-19 of the 2005 Annual Report to Stockholders and are
incorporated herein by reference.

DESCRIPTION OF BUSINESS BY SEGMENT

     The information called for by this item is included within Note 2 of the
Notes to Consolidated Financial Statements appearing on pages 17-19 of the 2005
Annual Report to Stockholders and is incorporated herein by reference.

PRODUCT AND MARKET DEVELOPMENT

     Each segment of the Company's business engages in a continuing program for
the development and marketing of new services and products. While new products
and services and new market development are important factors for the growth of
each active segment of


                                       2

<PAGE>

the Company's business, the Company does not expect that any new products and
services or marketing effort, including those in the development stage, will
require the investment of a material amount of the Company's assets.

RAW MATERIALS

     The principal raw materials needed for the Company's manufacturing
operations are purchased from United States sources. No segment of the Company
experienced any material raw material shortages during 2005, although such
shortages may occur in the future. Products manufactured and sold by the
Company's Roto-Rooter segment generally may be reformulated to avoid the adverse
impact of a specific raw material shortage.

PATENTS, SERVICE MARKS AND LICENSES

     The Roto-Rooter(R) trademarks and service marks have been used and
advertised since 1935 by Roto-Rooter Corporation, a wholly owned indirect
subsidiary of the Company. The Roto-Rooter(R) marks are among the most highly
recognized trademarks and service marks in the United States. The Company
considers the Roto-Rooter(R) marks to be a valuable asset and a significant
factor in the marketing of Roto-Rooter's franchises, products and services and
the products and services provided by its franchisees.

     "Vitas" and "Innovative Hospice Care" are trademarks and servicemarks of
Vitas Healthcare Corporation. The Company and its subsidiaries also own certain
trade secrets including training manuals, pricing information, customer
information and software source codes.

COMPETITION

                                   ROTO-ROOTER

     All aspects of the sewer, drain, and pipe cleaning, HVAC services and
plumbing repair businesses are highly competitive. Competition is, however,
fragmented in most markets with local and regional firms providing the primary
competition. The principal methods of competition are advertising, range of
services provided, name recognition, speed and quality of customer service,
service guarantees, and pricing.

     No individual customer or market group is critical to the total sales of
this segment.

                                      VITAS

     Hospice care in the United States is competitive. Because payments for
hospice services are generally uniform, Vitas competes primarily on the basis of
its ability to deliver quality, responsive services. Vitas is the nation's
largest provider of hospice services in a market dominated by small, non-profit,
community-based hospices. Approximately 60% of all hospices are not-for-profit.
Because the hospice care market is highly fragmented, Vitas competes with a
large number of organizations.

     Vitas also competes with a number of national and regional hospice
providers, including Odyssey Healthcare, Inc. and VistaCare, Inc., hospitals,
nursing homes, home health agencies and other health care providers. Many
providers offer home care to patients who are terminally ill, and some actively
market palliative care and hospice-like programs. In addition, various health
care companies have diversified into the hospice market. Some of these health
care companies may have greater financial resources than Vitas.

     Relatively few barriers to entry exist in the markets served by Vitas.
Accordingly, other companies that are not currently providing hospice care may
enter these markets and expand the variety of services offered.


                                       3
<PAGE>

RESEARCH AND DEVELOPMENT

     The Company engages in a continuous program directed toward the development
of new services, products and processes, the improvement of existing services,
products and processes, and the development of new and different uses of
existing products. The research and development expenditures from continuing
operations have not been nor are they expected to be material.

GOVERNMENT REGULATIONS

                                   ROTO-ROOTER

     Roto-Rooter's franchising activities are subject to various federal and
state franchising laws and regulations, including the rules and regulations of
the Federal Trade Commission (the "FTC") regarding the offering or sale of
franchises. The rules and regulations of the FTC require that Roto-Rooter
provide all prospective franchisees with specific information regarding the
franchise program and Roto-Rooter in the form of a detailed franchise offering
circular. In addition, a number of states require Roto-Rooter to register its
franchise offering prior to offering or selling franchises in the state. Various
state laws also provide for certain rights in favor of franchisees, including
(i) limitations on the franchisor's ability to terminate a franchise except for
good cause, (ii) restrictions on the franchisor's ability to deny renewal of a
franchise, (iii) circumstances under which the franchisor may be required to
purchase certain inventory of franchisees when a franchise is terminated or not
renewed in violation of such laws, and (iv) provisions relating to arbitration.
Roto-Rooter's ability to engage in the plumbing repair business is also subject
to certain limitations and restrictions imposed by state and local licensing
laws and regulations.

                                      VITAS

     General. The health care industry and Vitas' hospice programs are subject
to extensive federal and state regulation. Vitas' hospices are licensed as
required under state law as either hospices or home health agencies, or both,
depending on the regulatory requirements of each particular state. In addition,
Vitas' hospices are required to meet certain conditions of participation to be
eligible to receive payments as hospices under the Medicare and Medicaid
programs. All of Vitas' hospices, other than those currently in development, are
certified for participation as hospices in the Medicare program, and are also
eligible to receive payments as hospices from the Medicaid program in each of
the states in which Vitas operates. Vitas' hospices are subject to periodic
survey by governmental authorities or private accrediting entities to assure
compliance with state licensing, certification and accreditation requirements,
as the case may be.

     Medicare Conditions of Participation. Federal regulations require that a
hospice program satisfy certain conditions of participation to be certified and
receive Medicare payment for the services it provides. Failure to comply with
the conditions of participation may result in sanctions, up to and including
decertification from the Medicare program. See "Surveys and Audits" below.

     The Medicare conditions of participation for hospice programs include the
following:

          Governing Body. Each hospice must have a governing body that assumes
     full responsibility for the policies and the overall operation of the
     hospice and for ensuring that all services are provided in a manner
     consistent with accepted standards of practice. The governing body must
     designate one individual who is responsible for the day-to-day management
     of the hospice.

          Medical Director. Each hospice must have a medical director who is a
     physician and who assumes responsibility for overseeing the medical
     component of the hospice's patient care program.


                                       4

<PAGE>

          Direct Provision of Core Services. Medicare limits those services for
     which the hospice may use individual independent contractors or contract
     agencies to provide care to patients. Specifically, substantially all
     nursing, social work, and counseling services must be provided directly by
     hospice employees meeting specific educational and professional standards.
     During periods of peak patient loads or under extraordinary circumstances,
     the hospice may be permitted to use contract workers, but the hospice must
     agree in writing to maintain professional, financial and administrative
     responsibility for the services provided by those individuals or entities.

          Professional Management of Non-Core Services. A hospice may arrange to
     have non-core services such as therapy services, home health aide services,
     medical supplies or drugs provided by a non-employee or outside entity. If
     the hospice elects to use an independent contractor to provide non-core
     services, however, the hospice must retain professional management
     responsibility for the arranged services and ensure that the services are
     furnished in a safe and effective manner by qualified personnel, and in
     accordance with the patient's plan of care.

          Plan of Care. The patient's attending physician, the medical director
     or designated hospice physician, and the interdisciplinary team must
     establish an individualized written plan of care prior to providing care to
     any hospice patient. The plan must assess the patient's needs and identify
     services to be provided to meet those needs and must be reviewed and
     updated at specified intervals.

          Continuation of Care. A hospice may not discontinue or reduce care
     provided to a Medicare beneficiary if the individual becomes unable to pay
     for that care.

          Informed Consent. The hospice must obtain the informed consent of the
     hospice patient, or the patient's legal representative, that specifies the
     type of care services that may be provided as hospice care.

          Training. A hospice must provide ongoing training for its employees.

          Quality Assurance. A hospice must conduct ongoing and comprehensive
     self-assessments of the quality and appropriateness of care it provides and
     that its contractors provide under arrangements to hospice patients.

          Interdisciplinary Team. A hospice must designate an interdisciplinary
     team to provide or supervise hospice care services. The interdisciplinary
     team develops and updates plans of care, and establishes policies governing
     the day-to-day provision of hospice services. The team must include at
     least a physician, registered nurse, social worker and spiritual or other
     counselor. A registered nurse must be designated to coordinate the plan of
     care.

          Volunteers. Hospice programs are required to recruit and train
     volunteers to provide patient care services or administrative services.
     Volunteer services must be provided in an amount equal to at least five
     percent of the total patient care hours provided by all paid hospice
     employees and contract staff.

          Licensure. Each hospice and all hospice personnel must be licensed,
     certified or registered in accordance with applicable federal, state and
     local laws and regulations.

          Central Clinical Records. Hospice programs must maintain clinical
     records for each hospice patient that are organized in such a way that they
     may be easily retrieved. The clinical records must be complete and accurate
     and protected against loss, destruction, and unauthorized use.

     Surveys and Audits. Hospice programs are subject to periodic survey by
federal and state regulatory authorities and private accrediting entities to
ensure compliance with applicable licensing and certification requirements and
accreditation standards.


                                       5

<PAGE>

Regulators conduct periodic surveys of hospice programs and provide reports
containing statements of deficiencies for alleged failure to comply with various
regulatory requirements. Survey reports and statements of deficiencies are
common in the healthcare industry. In most cases, the hospice program and
regulatory authorities will agree upon any steps to be taken to bring the
hospice into compliance with applicable regulatory requirements. In some cases,
however, a state or federal regulatory authority may take a number of adverse
actions against a hospice program, including the imposition of fines, temporary
suspension of admission of new patients to the hospice's service or, in extreme
circumstances, de-certification from participation in the Medicare or Medicaid
programs or revocation of the hospice's license.

     From time to time Vitas receives survey reports containing statements of
deficiencies. Vitas reviews such reports and takes appropriate corrective
action. Vitas believes that its hospices are in material compliance with
applicable licensure and certification requirements. If a Vitas hospice were
found to be out of compliance and actions were taken against a Vitas hospice,
they could materially adversely affect the hospice's ability to continue to
operate, to provide certain services and to participate in the Medicare and
Medicaid programs, which could materially adversely affect Vitas.

     Billing Audits/ Claims Reviews. The Medicare program and its fiscal
intermediaries and other payors periodically conduct pre-payment or post-payment
reviews and other reviews and audits of health care claims, including hospice
claims. There is pressure from state and federal governments and other payors to
scrutinize health care claims to determine their validity and appropriateness.
In order to conduct these reviews, the payor requests documentation from Vitas
and then reviews that documentation to determine compliance with applicable
rules and regulations, including the eligibility of patients to receive hospice
benefits, the appropriateness of the care provided to those patients and the
documentation of that care. During the past several years, Vitas' claims have
been subject to review and audit.

     Certificate of Need Laws and Other Restrictions. Some states, including
Florida, have certificate of need or similar health planning laws that apply to
hospice care providers. These states may require some form of state agency
review or approval prior to opening a new hospice program, to adding or
expanding hospice services, to undertaking significant capital expenditures or
under other specified circumstances. Approval under these certificate of need
laws is generally conditioned on the showing of a demonstrable need for services
in the community. Vitas may seek to develop, acquire or expand hospice programs
in states having certificate of need laws. To the extent that state agencies
require Vitas to obtain a certificate of need or other similar approvals to
expand services at existing hospice programs or to make acquisitions or develop
hospice programs in new or existing geographic markets, Vitas' plans could be
adversely affected by a failure to obtain such certificate or approval. In
addition, competitors may seek administratively or judicially to challenge such
an approval or proposed approval by the state agency, and Vitas has been
defending against such a challenge in connection with the development of its
Palm Beach County, Florida hospice program. Such a challenge, whether or not
ultimately successful, could adversely affect Vitas.

     Limitations on For-Profit Ownership. A few states have laws that restrict
the development and expansion of for-profit hospice programs. For example,
Florida law does not permit the operation of a hospice by a for-profit
corporation unless it was operated in that capacity on or before July 1, 1978,
although under certain circumstances a for-profit corporation may be permitted
to purchase a grandfathered hospice program and continue to operate it. In New
York, a hospice generally cannot be owned by a corporation that has another
corporation as a stockholder. These types of restrictions could affect Vitas'
ability to expand in Florida or into New York, or in other jurisdictions with
similar restrictions.

     Limits on the Acquisition or Conversion of Non-Profit Health Care
Organizations. An increasing number of states have enacted laws that restrict
the ability of for-profit entities to acquire or otherwise assume the operations
of a non-profit health care provider. Some states may require government review,
public hearings, and/or government approval of transactions in which a
for-profit entity proposes to purchase certain non-


                                       6

<PAGE>

profit healthcare organizations. Heightened scrutiny of these transactions may
significantly increase the costs associated with future acquisitions of
non-profit hospice programs in some states, otherwise increase the difficulty in
completing those acquisitions or prevent them entirely. Vitas cannot assure that
it will not encounter regulatory or governmental obstacles in connection with
any proposed acquisition of non-profit hospice programs in the future.

     Professional Licensure and Participation Agreements. Many hospice employees
are subject to federal and state laws and regulations governing the ethics and
practice of their profession, including physicians, physical, speech and
occupational therapists, social workers, home health aides, pharmacists and
nurses. In addition, those professionals who are eligible to participate in the
Medicare, Medicaid or other federal health care programs as individuals must not
have been excluded from participation in those programs at any time.

     State Licensure of Hospice. Each of Vitas' hospices must be licensed in the
state in which it operates. State licensure rules and regulations require that
Vitas' hospices maintain certain standards and meet certain requirements, which
may vary from state to state. Vitas believes that its hospices are in material
compliance with applicable licensure requirements. If a Vitas hospice were found
to be out of compliance and actions were taken against a Vitas hospice, they
could materially adversely affect the hospice's ability to continue to operate,
to provide certain services and to participate in the Medicare and Medicaid
programs, which could materially adversely affect Vitas.

     Overview of Government Payments -- General. Over 90% of Vitas' revenue
consisted of payments from the Medicare and Medicaid programs. Such payments are
made primarily on a "per diem" basis. Under the per diem reimbursement
methodology, Vitas is essentially at risk for the cost of eligible services
provided to hospice patients. Profitability is therefore largely dependent upon
Vitas' ability to manage the costs of providing hospice services to patients.
Increases in operating costs, such as labor and supply costs that are subject to
inflation and other increases, without a compensating increase in Medicare and
Medicaid rates, could have a material adverse effect on Vitas' business in the
future. The Medicare and Medicaid programs are increasing pressure to control
health care costs and to decrease or limit increases in reimbursement rates for
health care services. As with most government programs, the Medicare and
Medicaid programs are subject to statutory and regulatory changes, possible
retroactive and prospective rate and payment adjustments, administrative
rulings, freezes and funding reductions, all of which may adversely affect the
level of program payments and could have a material adverse effect on Vitas'
business. Vitas' levels of revenues and profitability will be subject to the
effect of legislative and regulatory changes, including possible reductions in
coverage or payment rates, or changes in methods of payment, by the Medicare and
Medicaid programs.

Overview of Government Payments -- Medicare

     Medicare Eligibility Criteria. To receive Medicare payment for hospice
services, the hospice medical director and, if the patient has one, the
patient's attending physician, must certify that the patient has a life
expectancy of six months or less if the illness runs its normal course. This
determination is made based on the physician's clinical judgment. Due to the
uncertainty of such prognoses, however, it is likely and expected that some
percentage of hospice patients will not die within six months of entering a
hospice program. The Medicare program (among other third-party payors)
recognizes that terminal illnesses often do not follow an entirely predictable
course, and therefore the hospice benefit remains available to beneficiaries so
long as the hospice physician or the patient's attending physician continues to
certify that the patient's life expectancy remains six months or less.
Specifically, the Medicare hospice benefit provides for two initial 90-day
benefit periods followed by an unlimited number of 60-day periods. In order to
qualify for hospice care, a Medicare beneficiary must elect hospice care and
waive any right to other Medicare benefits related to his or her terminal
illness. A Medicare beneficiary may revoke his or her election of the Medicare
hospice benefit at any time and resume receiving regular Medicare benefits. The
patient may elect the hospice benefit again at a later date so long as he or she
remains


                                       7

<PAGE>

eligible. Increased regulatory scrutiny of compliance with the Medicare
six-month eligibility rule has impacted the hospice industry. The Medicare
program, however, has reaffirmed that Medicare hospice beneficiaries are not
limited to six months of coverage and that there is no limit on how long a
Medicare beneficiary can continue to receive hospice benefits and services,
provided that the beneficiary continues to meet the eligibility criteria under
the Medicare hospice program. In addition, the Medicare, Medicaid and SCHIP
Benefits Improvement and Protection Act of 2000 requires HHS to conduct a study
to examine the appropriateness of the current physician certification
requirement required before a Medicare beneficiary is eligible to receive the
Medicare hospice benefit.

     Levels of Care. Medicare pays for hospice services on a prospective payment
system basis under which Vitas receives an established payment rate for each day
that it provides hospice services to a Medicare beneficiary. These rates are
subject to annual adjustments for inflation and vary based upon the geographic
location where the services are provided. The rate Vitas receives depends on
which of the following four levels of care is being provided to the beneficiary:

          Routine Home Care. The routine home care rate is paid for each day
          that a patient is in a hospice program and is not receiving one of the
          other categories of hospice care. The routine home care rate does not
          vary based upon the volume or intensity of services provided by the
          hospice program.

          General Inpatient Care. The general inpatient care rate is paid when a
          patient requires inpatient services for a short period for pain
          control or symptom management which cannot be managed in other
          settings. General inpatient care services must be provided in a
          Medicare or Medicaid certified hospital or long-term care facility or
          at a freestanding inpatient hospice facility with the required
          registered nurse staffing.

          Continuous Home Care. Continuous home care is provided to patients
          while at home, during periods of crisis when intensive monitoring and
          care, primarily nursing care, is required in order to achieve
          palliation or management of acute medical symptoms. Continuous home
          care requires a minimum of 8 hours of care within a 24-hour day, which
          begins and ends at midnight. The care must be predominantly nursing
          care provided by either a registered nurse or licensed practical
          nurse. While the published Medicare continuous home care rates are
          daily rates, Medicare actually pays for continuous home care services
          on an hourly basis. This hourly rate is calculated by dividing the
          daily rate by 24.

          Respite Care. Respite care permits a hospice patient to receive
          services on an inpatient basis for a short period of time in order to
          provide relief for the patient's family or other caregivers from the
          demands of caring for the patient. A hospice can receive payment for
          respite care for a given patient for up to five consecutive days at a
          time, after which respite care is reimbursed at the routine home care
          rate.

     Medicare Payment for Physician Services. Payment for direct patient care
physician services delivered by hospice physicians is billed separately by the
hospice to the Medicare intermediary and paid at the lesser of the actual charge
or the Medicare allowable charge for these services. This payment is in addition
to the daily rates Vitas receives for hospice care. Payment for hospice
physicians' administrative and general supervisory activities is included in the
daily rates discussed above. Payments for attending physician professional
services (other than services furnished by hospice physicians) are not paid to
the hospice, but rather are paid directly to the attending physician by the
Medicare carrier. For fiscal 2005, 1.7% of Vitas' net revenue was attributable
to physician services.

     Medicare Limits on Hospice Care Payments. Medicare payments for hospice
services are subject to two additional limits or "caps." Each of Vitas' hospice
programs is separately subject to both of these "caps." Both of these "caps" are
determined on an annual basis for the period running from November 1 through
October 31 of each year.


                                       8

<PAGE>

     First, under a Medicare rule known as the "80-20" rule applicable to
Medicare inpatient services, if the number of inpatient care days furnished by a
hospice to Medicare beneficiaries exceeds 20% of the total days of hospice care
furnished by such hospice to Medicare beneficiaries, Medicare payments to the
hospice for inpatient care days exceeding the inpatient cap are reduced to the
routine home care rate. Vitas has never exceeded the inpatient cap.

     Second, Medicare payments to a hospice are also subject to a separate cap
based on overall average payments per admission. Any payments exceeding this
overall hospice cap must be refunded by the hospice. This cap was set at $19,778
per admission through the twelve-month period ended on October 31, 2005, and is
adjusted annually to account for inflation. There can be no assurance that
Vitas' hospices will not be subject to future payment reductions or recoupments
as the result of this cap. In 2005, we determined Vitas' Phoenix, AZ facility
has exceeded this cap for the period ended October 31, 2005.

     Medicare Managed Care Programs. The Medicare program has entered into
contracts with managed care companies to provide a managed care benefit to
Medicare beneficiaries who elect to participate in managed care programs. These
managed care programs are commonly referred to as Medicare HMOs, Medicare +
Choice or Medicare risk products. Vitas provides hospice care to Medicare
beneficiaries who participate in these managed care programs, and Vitas is paid
for services provided to these beneficiaries in the same way and at the same
rates as those of other Medicare beneficiaries who are not in a Medicare managed
care program. Under current Medicare policy, Medicare pays the hospice directly
for services provided to these managed care program participants and then
reduces the standard per-member, per-month payment that the managed care program
otherwise receives.

Overview of Government Payments -- Medicaid

     Medicaid Coverage and Reimbursement. State Medicaid programs are another
source of Vitas' net patient revenue. Medicaid is a state-administered program
financed by state funds and matching federal funds to provide medical assistance
to the indigent and certain other eligible persons. In 1986, hospice services
became an optional state Medicaid benefit. For those states that elect to
provide a hospice benefit, the Medicaid program is required to pay the hospice
at rates at least equal to the rates provided under Medicare and calculated
using the same methodology. States maintain flexibility to establish their own
hospice election procedures and to limit the number and duration of benefit
periods for which they will pay for hospice services.

     Nursing Home Residents. For Vitas' patients who receive nursing home care
under a state Medicaid program and who elect hospice care under Medicare or
Medicaid, Vitas contracts with nursing homes for the nursing homes' provision of
room and board services. In addition to the applicable Medicare or Medicaid
hospice daily or hourly rate, the state generally must pay Vitas an amount equal
to at least 95% of the Medicaid daily nursing home rate for room and board
services furnished to the patient by the nursing home. Under Vitas' standard
nursing home contracts, Vitas pays the nursing home for these room and board
services at the Medicaid daily nursing home rate.

     Adjustments to Medicare and Medicaid Payment Rates. Payment rates under the
Medicare and Medicaid programs are adjusted annually based upon the Hospital
Market Basket Index; however, the adjustments have historically been less than
actual inflation. On October 1, 2003, the base Medicare payment rates for
hospice care increased by approximately 3.4% over the base rates in effect in
the prior year. On October 1, 2004 the rates increased by 3.3%. On October 1,
2005 the rates increased by 3.4%. These base rates are further modified by the
Hospice Wage Index to reflect local differences in wages according to the
revised wage index. It is possible that there will be further modifications to
the rate structure under which the Medicare or Medicaid programs pay for hospice
care services. Any future reductions in the rate of increase in Medicare and
Medicaid payments may have an adverse impact on Vitas' net patient service
revenue and profitability.


                                       9

<PAGE>

                          OTHER HEALTHCARE REGULATIONS

     Federal and State Anti-Kickback Laws and Safe Harbor Provisions. The
federal Anti-Kickback Law makes it a felony to knowingly and willfully offer,
pay, solicit or receive any form of remuneration in exchange for referring,
recommending, arranging, purchasing, leasing or ordering items or services
covered by a federal health care program including Medicare or Medicaid. The
Anti-Kickback Law applies regardless of whether the remuneration is provided
directly or indirectly, in cash or in kind. Although the anti-kickback statute
does not prohibit all financial transactions or relationships that providers of
healthcare items or services may have with each other, interpretations of the
law have been very broad. Under current law, courts and federal regulatory
authorities have stated that this law is violated if even one purpose (as
opposed to the sole or primary purpose) of the arrangement is to induce
referrals.

     Violations of the Anti-Kickback Law carry potentially severe penalties
including imprisonment of up to five years, criminal fines of up to $25,000 per
act, civil money penalties of up to $50,000 per act, and additional damages of
up to three times the amounts claimed or remuneration offered or paid. Federal
law also authorizes exclusion from the Medicare and Medicaid programs for
violations of the Anti-Kickback Law.

     The Anti-Kickback Law contains several statutory exceptions to the broad
prohibition. In addition, Congress authorized the Office of Inspector General
("OIG") to publish numerous "safe harbors" that exempt some practices from
enforcement action under the Anti-Kickback Law and related laws. These statutory
exceptions and regulatory safe harbors protect various bona fide employment
relationships, contracts for the rental of space or equipment, personal service
arrangements, and management contracts, among other things, provided that
certain conditions set forth in the statute or regulations are satisfied. The
safe harbor regulations, however, do not comprehensively describe all lawful
relationships between healthcare providers and referral sources, and the failure
of an arrangement to satisfy all of the requirements of a particular safe harbor
does not mean that the arrangement is unlawful. Failure to comply with the safe
harbor provisions, however, may mean that the arrangement will be subject to
scrutiny. It is possible for healthcare providers to request an advisory opinion
from the OIG regarding an existing or proposed business arrangement and the
possible anti-kickback concerns raised by that arrangement.

     Many states, including states where Vitas does business, have adopted
similar prohibitions against payments that are intended to induce referrals of
patients, regardless of the source of payment. Some of these state laws lack
explicit "safe harbors" that may be available under federal law. Sanctions under
these state anti-kickback laws may include civil money penalties, license
suspension or revocation, exclusion from the Medicare or Medicaid programs, and
criminal fines or imprisonment. Little precedent exists regarding the
interpretation or enforcement of these statutes.

     Vitas is required under the Medicare conditions of participation and some
state licensing laws to contract with numerous healthcare providers and
practitioners, including physicians, hospitals and nursing homes, and to arrange
for these individuals or entities to provide services to Vitas' patients. In
addition, Vitas has contracts with other suppliers, including pharmacies,
ambulance services and medical equipment companies. Some of these individuals or
entities may refer, or be in a position to refer, patients to Vitas, and Vitas
may refer, or be in a position to refer, patients to these individuals or
entities. These arrangements may not qualify for a safe harbor. Vitas from time
to time seeks guidance from regulatory counsel as to the changing and evolving
interpretations and the potential applicability of these anti-kickback laws to
its programs, and in response thereto, takes such actions as it deems
appropriate. The Company generally believes that Vitas' contracts and
arrangements with providers, practitioners and suppliers do not violate
applicable anti-kickback laws. However, the Company cannot assure that such laws
will ultimately be interpreted in a manner consistent with Vitas' practices.

     HIPAA Anti-Fraud Provisions. HIPAA includes several revisions to existing
health care fraud laws by permitting the imposition of civil monetary penalties
in cases involving violations of the anti-kickback statute or contracting with
excluded


                                       10

<PAGE>

providers. In addition, HIPAA created new statutes making it a federal felony to
engage in fraud, theft, embezzlement, or the making of false statements with
respect to healthcare benefit programs, which include private, as well as
government programs. In addition, for the first time, federal enforcement
officials have the ability to exclude from the Medicare and Medicaid programs
any investors, officers and managing employees associated with business entities
that have committed healthcare fraud, even if the investor, officer or employee
had no actual knowledge of the fraud.

     OIG Fraud Alerts, Advisory Opinions and Other Program Guidance. In 1976,
Congress established the OIG to, among other things, identify and eliminate
fraud, abuse and waste in HHS programs. To identify and resolve such problems,
the OIG conducts audits, investigations and inspections across the country and
issues public pronouncements identifying practices that may be subject to
heightened scrutiny. In the last several years, there have been a number of
hospice related audits and reviews conducted. These reviews and recommendations
have included:

          -    better ensuring that Medicare hospice eligibility determinations
               are made in accordance with the Medicare regulations; and

          -    revising the annual cap on hospice benefits to better reflect the
               cost of care provided.

     From time to time, various federal and state agencies, such as HHS and the
OIG, issue a variety of pronouncements, including fraud alerts, the OIG's Annual
Work Plan and other reports, identifying practices that may be subject to
heightened governmental scrutiny. The Company cannot predict what, if any
changes may be implemented in coverage, reimbursement, or enforcement policies
as a result of these OIG reviews and recommendations.

     On April 7, 2005 the Company announced the Office of Inspector General
("OIG") for the Department of Health and Human Services served Vitas with civil
subpoenas relating to Vitas' alleged failure to appropriately bill Medicare and
Medicaid for hospice services. As part of this investigation, the OIG selected
medical records for 320 past and current patients from Vitas' three largest
programs for review. It also sought policies and procedures dating back to 1998
to present covering admissions, certifications, recertifications, and
discharges. During the third quarter of 2005, the OIG requested additional
information of the Company. The U.S. Attorney has since provided the Company
with a copy of a qui tam complaint filed under seal in U.S. District Court for
the Southern District of Florida. The complaint and all filings in the qui tam
action remain under seal. We are conferring with the U.S. Attorney regarding the
Company's defenses to the complaint allegations. The U.S. Attorney has not
decided whether to intervene in the qui tam action. The Company has recorded
pretax expense related to complying with OIG requests of $310,000 and $564,000
for the three and nine month periods ended September 30, 2005, respectively.

     The government continues to investigate the complaint's allegations. We are
unable to predict the outcome of this matter or the impact, if any, that it may
have on the business, results of operations, liquidity or capital resources.
Regardless of outcome, responding to this matter can adversely affect the
Company through defense costs, diversion of management's time and related
publicity.

     Federal False Claims Acts. The federal law includes several criminal and
civil false claims provisions, which provide that knowingly submitting claims
for items or services that were not provided as represented may result in the
imposition of multiple damages, administrative civil money penalties, criminal
fines, imprisonment, and/or exclusion from participation in federally funded
healthcare programs, including Medicare and Medicaid. In addition, the OIG may
impose extensive and costly corporate integrity requirements upon a healthcare
provider that is the subject of a false claims judgment or settlement. These
requirements may include the creation of a formal compliance program, the
appointment of a government monitor, and the imposition of annual reporting
requirements and audits conducted by an independent review organization to
monitor compliance with the terms of the agreement and relevant laws and
regulations.


                                       11

<PAGE>

     The Civil False Claims Act prohibits the known filing of a false claim or
the known use of false statements to obtain payments. Penalties for violations
include fines ranging from $5,500 to $11,000, plus treble damages, for each
claim filed. Provisions in the Civil False Claims Act also permit individuals to
bring actions against individuals or businesses in the name of the government as
so called "qui tam" relators. If a qui tam relator's claim is successful, he or
she is entitled to share in the government's recovery.

     Both direct enforcement activity by the government and qui tam actions have
increased significantly in recent years and have increased the risk that a
healthcare company may have to defend a false claims action, pay fines or be
excluded from the Medicare and/or Medicaid programs as a result of an
investigation arising out of this type of an action. Because of the complexity
of the government regulations applicable to the healthcare industry, the Company
cannot assure that Vitas will not be the subject of an action under the False
Claims Act.

     State False Claims Laws. At least 10 states and the District of Columbia,
including states in which Vitas currently operates, have adopted state false
claims laws that mirror to some degree the federal false claims laws. While
these statutes vary in scope and effect, the penalties for violating these false
claims laws include administrative, civil and/or criminal fines and penalties,
imprisonment, and the imposition of multiple damages.

     The Stark Law and State Physician Self-Referral Laws. Section 1877 of the
Social Security Act, commonly known as the "Stark Law," prohibits physicians
from referring Medicare or Medicaid patients for "designated health services" to
entities in which they hold an ownership or investment interest or with whom
they have a compensation arrangement, subject to a number of statutory and
regulatory exceptions. Penalties for violating the Stark Law are severe and
include:

          -    denial of payment;

          -    civil monetary penalties of $15,000 per referral or $1,000,000
               for "circumvention schemes;"

          -    assessments equal to 200% of the dollar value of each such
               service provided; and

          -    exclusion from the Medicare and Medicaid programs.

     Hospice care itself is not specifically listed as a designated health
service; however, certain services that Vitas provides, or in the future may
provide, are among the services identified as designated health services for
purposes of the self-referral laws. The Company cannot assure that future
regulatory changes will not result in hospice services becoming subject to the
Stark Law's ownership, investment or compensation prohibitions in the future.

     Many states where Vitas operates have laws similar to the Stark Law, but
with broader effect because they apply regardless of the source of payment for
care. Penalties similar to those listed above as well as the loss of state
licensure may be imposed in the event of a violation of these state
self-referral laws. Little precedent exists regarding the interpretation or
enforcement of these statutes.

     Civil Monetary Penalties. The Civil Monetary Penalties Statute provides
that civil penalties ranging between $10,000 and $50,000 per claim or act may be
imposed on any person or entity that knowingly submits improperly filed claims
for federal health benefits or that offers or makes payments to induce a
beneficiary or provider to reduce or limit the use of health care services or to
use a particular provider or supplier. Civil monetary penalties may be imposed
for violations of the anti-kickback statute and for the failure to return known
overpayments, among other things.


                                       12

<PAGE>

     Prohibition on Employing or Contracting with Excluded Providers. The Social
Security Act and federal regulations state that individuals or entities that
have been convicted of a criminal offense related to the delivery of an item or
service under the Medicare or Medicaid programs or that have been convicted,
under state or federal law, of a criminal offense relating to neglect or abuse
of residents in connection with the delivery of a healthcare item or service
cannot participate in any federal health care programs, including Medicare and
Medicaid. Additionally, individuals and entities convicted of fraud, that have
had their licenses revoked or suspended, or that have failed to provide services
of adequate quality also may be excluded from the Medicare and Medicaid
programs. Federal regulations prohibit Medicare providers, including hospice
programs, from submitting claims for items or services or their related costs if
an excluded provider furnished those items or services. The OIG maintains a list
of excluded persons and entities. Nonetheless, it is possible that Vitas might
unknowingly bill for services provided by an excluded person or entity with whom
it contracts. The penalty for contracting with an excluded provider may range
from civil monetary penalties of $50,000 and damages of up to three times the
amount of payment that was inappropriately received.

     Corporate Practice of Medicine and Fee Splitting. Most states have laws
that restrict or prohibit anyone other than a licensed physician, including
business entities such as corporations, from employing physicians and/or
prohibit payments or fee-splitting arrangements between physicians and
corporations or unlicensed individuals. Penalties for violations of corporate
practice of medicine and fee-splitting laws vary from state to state, but may
include civil or criminal penalties, the restructuring or termination of the
business arrangements between the physician and unlicensed individual or
business entity, or even the loss of the physician's license to practice
medicine. These laws vary widely from state to state both in scope and origin
(e.g. statute, regulation, Attorney General opinion, court ruling, agency
policy) and in most instances have been subject to only limited interpretation
by the courts or regulatory bodies.

     Vitas employs or contracts with physicians to provide medical direction and
patient care services to its patients. Vitas has made efforts in those states
where certain contracting or fee arrangements are restricted or prohibited to
structure those arrangements in compliance with the applicable laws and
regulations. Despite these efforts, however, the Company cannot assure that
agency officials charged with enforcing these laws will not interpret Vitas'
contracts with employed or independent contractor physicians as violating the
relevant laws or regulations. Future determinations or interpretations by
individual states with corporate practice of medicine or fee splitting
restrictions may force Vitas to restructure its arrangements with physicians in
those locations.

     Health Information Practices. There currently are numerous legislative and
regulatory initiatives at both the state and federal levels that address patient
privacy concerns. In particular, federal regulations issued under the Health
Insurance Portability and Accountability Act of 1996 ("HIPAA") require Vitas to
protect the privacy and security of patients' individual health information. HHS
published final regulations addressing patient privacy on December 28, 2000,
which were modified on August 14, 2002 (the "Privacy Rule"). Vitas was required
to comply with the Privacy Rule by April 14, 2003, and Vitas believes that it is
in material compliance. Additionally, HIPAA does not automatically preempt
applicable state laws and regulations concerning Vitas' use, disclosure and
maintenance of patient health information, which means that Vitas is subject to
a complex regulatory scheme that, in many instances, requires Vitas to comply
with both federal and state laws and regulations.

     In August 2000, HHS published final regulations establishing health care
transaction standards and code sets for the electronic transmission of health
care information in connection with certain transactions, such as billing or
health plan eligibility (the "Transactions Standard"). The official deadline for
compliance with the Transactions Standard for covered entities such as Vitas was
October 16, 2003. The Centers for Medicare and Medicaid Services ("CMS") is the
division of HHS that is responsible for interpreting and enforcing the
Transactions Standard. Failure to comply with the Transactions Standard may
subject covered entities, including Vitas, to civil monetary penalties and
possibly to criminal penalties. Vitas believes that it has made


                                       13

<PAGE>

significant and appropriate good faith efforts to comply with the Transactions
Standard and to develop an appropriate contingency plan as encouraged by CMS. It
is unclear, however, how CMS will regulate providers in general or Vitas in
particular with respect to compliance with the Transactions Standard.
Consequently, it also is unclear whether Vitas would be found to be in material
compliance with the Transactions Standard if CMS were to review Vitas'
electronic claims submissions and assess Vitas' electronic transactions, or
whether Vitas would be required to expend substantial sums on acquiring and
implementing new information systems, or would otherwise be affected in a manner
that would negatively impact its profitability.

     On May 31, 2002, HHS published its final rule regarding the HIPAA Unique
Employer Identifier Standard, which establishes a standard for identifying
employers in healthcare transactions where information about the employer is
transmitted electronically, as well as requirements concerning its use by HIPAA
covered entities. The deadline for compliance with the Unique Employer
Identifier Standard rule was July 30, 2004. Additionally, HHS published final
regulations addressing the security of such health information on February 20,
2003 (the "Security Rule"), and Vitas was required to and did substantially,
comply with the Security Rule by April 21, 2005. Also, HHS published its final
rule adopting the HIPAA Standard Unique Health Identifier for health care
providers on January 23, 2004, and Vitas' compliance deadline for that rule is
May 23, 2007. Because compliance with the final rules regarding the HIPAA Unique
Employer Identifier Standard and the Standard Unique Health Identifier is not
yet required, the Company cannot predict the total financial or other impact of
any of these final regulations on Vitas' operations, including any need for
Vitas to expend financial resources on acquiring and implementing new
information systems or any other negative impact on Vitas' profitability.

     Additional Federal and State Regulation. Federal and state governments also
regulate various aspects of the hospice industry. In particular, Vitas'
operations are subject to federal and state health regulatory laws covering
professional services, the dispensing of drugs and certain types of hospice
activities. Some of Vitas' employees are subject to state laws and regulations
governing the ethics and professional practice of medicine, respiratory therapy,
pharmacy and nursing.

     Compliance with Health Regulatory Laws. Vitas maintains an internal
regulatory compliance review program and from time to time retains regulatory
counsel for guidance on compliance matters. The Company cannot assure, however,
that Vitas' practices, if reviewed, would be found to be in compliance with
applicable health regulatory laws, as such laws ultimately may be interpreted,
or that any non-compliance with such laws would not have a material adverse
effect on Vitas.

ENVIRONMENTAL MATTERS

     Roto-Rooter's operations are subject to various federal, state, and local
laws and regulations regarding environmental matters and other aspects of the
operation of a sewer and drain cleaning, HVAC and plumbing services business.
For certain other activities, such as septic tank and grease trap pumping,
Roto-Rooter is subject to state and local environmental health and sanitation
regulations.

     At December 31, 2005, the Company's accrual for its estimated liability for
potential environmental cleanup and related costs arising from the sale of
DuBois Chemicals Inc. ("DuBois") amounted to $3.0 million. Of this balance, $1.1
million is included in other liabilities and $1.9 million is included in other
current liabilities. The Company is contingently liable for additional
DuBois-related environmental cleanup and related costs up to a maximum of
$15,999,000. On the basis of a continuing evaluation of the Company's potential
liability, and in consultation with the Company's environmental attorney,
management believes that it is not probable this additional liability will be
paid. Accordingly, no provision for this contingent liability has been recorded.
Although it is not presently possible to reliably project the timing of payments
related to the Company's potential liability for environmental costs, management
believes that any adjustments to its recorded liability will not materially
adversely affect its financial position or results of operations.


                                       14

<PAGE>

     The Company, to the best of its knowledge, is currently in compliance in
all material respects with the environmental laws and regulations affecting its
operations. Such environmental laws, regulations and enforcement proceedings
have not required the Company to make material increases in or modifications to
its capital expenditures and they have not had a material adverse effect on
sales or net income. Capital expenditures for the purposes of complying with
environmental laws and regulations during 2006 and 2007 with respect to
continuing operations are not expected to be material in amount; there can be no
assurance, however, that presently unforeseen legislative or enforcement actions
will not require additional expenditures.

SEASONALITY

     Advertising costs for Roto-Rooter inordinately impact the Company's
fourth-quarter results. Roto-Rooter recognizes telephone directory costs
immediately upon distribution of a directory by its publisher into the
community. Since a large number of directories are distributed in the fourth
quarter, this direct expense accounting policy results in fourth-quarter
earnings including a disproportionately large share of Roto-Rooter's full-year
telephone directory advertising expense. In the fourth quarter 2005, Roto-Rooter
expensed $6.3 million of total advertising costs that represented 33.5% of the
aggregate advertising costs for the full-year 2005.

EMPLOYEES

     On December 31, 2005, Chemed Corporation had a total of 10,881 employees.

AVAILABLE INFORMATION

     The Company's Internet address is www.chemed.com. The Company's annual
report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form
8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act are electronically available through the SEC
(http://www.sec.gov) or the Company's website as soon as reasonably practicable
after such reports are filed with, or furnished to, the SEC.

     Annual reports, press releases, Board Committee charters, Code of Ethics,
Corporate governance guidelines and other printed materials may be obtained from
the website or from Chemed Investor Relations without charge by writing to 2600
Chemed Center, 255 East Fifth Street, Cincinnati, Ohio 45202 or by calling
800-2CHEMED or 513-762-6429.

ITEM 1A. RISK FACTORS

     You should carefully consider the risks described below. They are not the
only ones facing the Company. Other risks and uncertainties not currently known
to us or that we deem to be immaterial may also materially and adversely affect
our business, financial condition, or results of operations.

GENERAL

     WE HAVE INCURRED DEBT TO FINANCE THE OPERATIONS OF THE COMPANY. OUR
LEVERAGE WILL LIMIT CASH FLOW AVAILABLE FOR OUR OPERATIONS, COULD ADVERSELY
AFFECT OUR ABILITY TO SERVICE OUR DEBT OR OBTAIN ADDITIONAL FINANCING AND COULD
ADVERSELY AFFECT OUR FINANCIAL HEALTH AND OUR ABILITY TO REACT TO CHANGES IN OUR
BUSINESS.

     The Company has debt service obligations that may restrict our operating
flexibility. We cannot assure you that our cash flow from operations will be
sufficient to service our debt, which may require us to borrow additional funds,
or restructure or otherwise refinance our debt. In addition, the Company has the
ability to expand its debt and borrowing capacity subject to various
restrictions and covenants defined by its


                                       15

<PAGE>

creditors. The interest rate the Company pays will fluctuate from time to time
based upon a number of factors including current LIBOR rates and Company
operating performance. Significant changes in these factors could result in a
material change in the Company's interest expense.

     Our indebtedness could have important consequences for our business. Among
other things, our indebtedness may:

          -    limit our ability to obtain additional financing;

          -    limit our flexibility in planning for, or reacting to, changes in
               the markets in which we compete;

          -    place us at a competitive disadvantage relative to our
               competitors with less indebtedness;

          -    increase our exposure to interest rate increases due to variable
               interest rates on certain borrowings;

          -    limit our ability to complete future acquisitions;

          -    limit our ability to make capital expenditures;

          -    render us more vulnerable to general adverse economic and
               industry conditions; and

          -    require us to dedicate a substantial portion of our cash flow to
               service and repay our debt.

Servicing our indebtedness will require a significant amount of cash, and our
ability to generate cash depends on many factors beyond our control.

     Our ability to repay or to refinance our indebtedness and to pay interest
on our indebtedness will depend on our operating performance, which may be
affected by factors beyond our control. These factors could include operating
difficulties, increased operating costs, our competitors' actions and regulatory
developments. Our ability to meet our debt service and other obligations may
depend in significant part on the extent to which we successfully implement our
business strategy. We cannot assure you that we will be able to implement our
strategy fully or that the anticipated results of our strategy will be realized.

     If our cash flows and capital resources are insufficient to fund our debt
service obligations, we may be forced to reduce or delay capital expenditures,
sell assets, seek additional equity capital or restructure our debt. We cannot
assure you that our cash flows and capital resources will be sufficient to make
scheduled payments of principal and interest on our indebtedness in the future
or that alternative measures would successfully meet our debt service
obligations.

     As certain of our obligations under our credit facilities and certain other
borrowings bear interest at floating rates, an increase in interest rates could
further increase our debt service costs and adversely affect our cash flows.

THE AGREEMENTS AND INSTRUMENTS GOVERNING OUR OUTSTANDING DEBT CONTAIN
RESTRICTIONS AND LIMITATIONS THAT COULD SIGNIFICANTLY IMPACT OUR ABILITY TO
OPERATE OUR BUSINESS AND ADVERSELY AFFECT THE PRICE OF OUR CAPITAL STOCK.

     The operating and financial restrictions and covenants in our instruments
of indebtedness restrict our ability to:

          -    incur additional debt;


                                       16

<PAGE>

          -    pay dividends, make redemptions and purchases of Capital Stock
               and make other restricted payments;

          -    issue and sell capital stock of subsidiaries;

          -    sell assets;

          -    engage in transactions with affiliates;

          -    restrict distributions from subsidiaries;

          -    incur liens;

          -    engage in businesses other than permitted businesses;

          -    engage in sale/leaseback transactions;

          -    engage in mergers or consolidations;

          -    make capital expenditures;

          -    make guarantees;

          -    make investments and acquisitions;

          -    enter into operating leases;

          -    hedge interest rates; and

          -    prepay other debt.

     Moreover, if we are unable to meet the terms of the financial covenants or
if we breach any of these covenants, a default could result under one or more of
these agreements. A default, if not waived by our lenders, could accelerate
repayment of our outstanding indebtedness. If acceleration occurs, we may not be
able to repay our debt and it is unlikely that we would be able to borrow
sufficient additional funds to refinance such debt on acceptable terms. In the
event of any default under our credit facilities, the lenders thereunder could
elect to declare all outstanding borrowings, together with accrued and unpaid
interest and other fees, to be due and payable, to require us to apply all of
our available cash to repay these borrowings, any of which would be an event of
default.

WE DEPEND ON OUR MANAGEMENT TEAM AND THE LOSS OF THEIR SERVICE COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

     Our success depends to a large extent upon the continued services of our
executive management team. The loss of key personnel could have a material
adverse effect on our business, financial condition, results of operations and
cash flows. Additionally, we cannot assure you that we will be able to attract
or retain other skilled personnel in the future.

ENVIRONMENTAL COMPLIANCE COSTS AND LIABILITIES COULD INCREASE OUR EXPENSES AND
ADVERSELY AFFECT OUR FINANCIAL CONDITION.

     Our operations are subject to numerous environmental, health and safety
laws and regulations that prohibit or restrict the discharge of pollutants into
the environment and regulate employee exposure to hazardous substances in the
workplace. Failure to comply with these laws could subject us to material costs
and liabilities, including civil and criminal fines, costs to cleanup
contamination we cause and, in some circumstances, costs to cleanup
contamination we discover on our own property but did not cause.


                                       17

<PAGE>

     Because we use and generate hazardous materials in some of our operations,
we are potentially subject to material liabilities relating to the cleanup of
contamination and personal injury claims. In addition, we have retained certain
environmental liabilities in connection with the sale of former businesses. We
are currently funding the cleanup of historical contamination at one of our
former properties and contributing to the cleanup of third-party sites as a
result of our sale of Dubois Chemicals Inc. Although we have established a
reserve for these liabilities, actual cleanup costs may exceed our current
estimates due to factors beyond our control, such as the discovery of additional
contamination or the enforcement of more stringent cleanup requirements. New
laws and regulations or their stricter enforcement, the discovery of presently
unknown conditions or the receipt of additional claims for indemnification could
require us to incur costs or become the basis for new or increased liabilities
that could have a material adverse effect on our business, financial condition
and results of operations.

WE ARE SUBJECT TO CERTAIN ANTI-TAKEOVER STATUES THAT MIGHT MAKE IT MORE
DIFFICULT TO EFFECT A CHANGE IN CONTROL OF THE COMPANY.

     We are subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 could have the effect of delaying or preventing a
change of control that could be advantageous to stockholders.

AN ADVERSE RULING AGAINST US IN CERTAIN LITIGATION COULD HAVE AN ADVERSE EFFECT
ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     We are involved in litigation incidental to the conduct of our business
currently and from time to time. The damages claimed against us in some of these
cases are substantial.

     See the "Legal Proceedings" section of this 10-K for discussion of
particular matters.

     We cannot assure you that we will prevail in pending cases. Regardless of
the outcome, such litigation is costly to manage, investigate and defend, and
the related defense costs, diversion of management's time and related publicity
may adversely affect the conduct of our business and the results of our
operations.

ROTO-ROOTER

WE FACE INTENSE COMPETITION FROM NUMEROUS, FRAGMENTED COMPETITORS. IF WE DO NOT
COMPETE EFFECTIVELY, OUR BUSINESS MAY SUFFER.

     We face intense competition from numerous competitors, many of whom have
less leverage than we do. The sewer, drain and pipe cleaning, and plumbing
repair businesses are highly fragmented, with the bulk of the industries
consisting of local and regional competitors. We compete primarily on the basis
of advertising, range of services provided, name recognition, speed and quality
of customer service, service guarantees and pricing. Our competitors may succeed
in developing new or enhanced products and services more successful than ours
and in marketing and selling existing and new products and services better than
us. In addition, new competitors may emerge. We cannot make any assurances that
we will continue to be able to compete successfully with any of these companies.

OUR OPERATIONS ARE SUBJECT TO NUMEROUS LAWS AND REGULATIONS, EXPOSING US TO
POTENTIAL CLAIMS AND COMPLIANCE COSTS THAT COULD ADVERSELY AFFECT OUR BUSINESS.

     We are subject to federal, state and local laws and regulations relating to
franchising, insurance and other aspects of our business. These are discussed in
greater detail under "Government Regulations" in the Description of Business
section hereof. If we fail to comply with existing or future laws and
regulations, we may be


                                       18

<PAGE>

subject to governmental or judicial fines and sanctions. Our franchising
activities are subject to various federal and state franchising laws and
regulations, including the rules and regulations of the Federal Trade Commission
(the "FTC") regarding the offering or sale of franchises. The rules and
regulations of the FTC require us to provide all of our prospective franchisees
with specific information regarding us and our franchise program in the form of
a detailed franchise offering circular. In addition, a number of states require
us to register our franchise offering prior to offering or selling franchises in
such states. Various state laws also provide for certain rights in favor of
franchisees, including (i) limitations on the franchisor's ability to terminate
a franchise except for good cause, (ii) restrictions on the franchisor's ability
to deny renewal of a franchise; (iii) circumstances under which the franchisor
may be required to purchase certain inventory of franchisees when a franchise is
terminated or not renewed in violation of such laws and (iv) provisions relating
to arbitration. The ability to engage in the plumbing repair business is also
subject to certain limitations and restrictions imposed by state and local
licensing laws and regulations. We cannot predict what legislation or
regulations affecting our business will be enacted in the future, how existing
or future laws or regulations will be enforced, administered and interpreted, or
the amount of future expenditures that may be required to comply with these laws
or regulations. Compliance costs associated with governmental regulations could
have material adverse effect on our business, financial condition and results of
operations.

VITAS

VITAS IS HIGHLY DEPENDENT ON PAYMENTS FROM MEDICARE AND MEDICAID. IF THERE ARE
CHANGES IN THE RATES OR METHODS GOVERNING THESE PAYMENTS, VITAS' NET PATIENT
SERVICE REVENUE AND PROFITS COULD MATERIALLY DECLINE.

     Approximately 95% of Vitas' net patient service revenue consists of
payments from the Medicare and Medicaid programs. Such payments are made
primarily on a "per diem" basis, subject to annual reimbursement caps. Because
Vitas receives a per diem fee to provide eligible services to all patients,
Vitas' profitability is largely dependent upon its ability to manage the costs
of providing hospice services to patients. Increases in operating costs, such as
labor and supply costs that are subject to inflation, without a compensating
increase in Medicare and Medicaid rates, could have a material adverse effect on
Vitas' business in the future. Medicare and Medicaid currently adjust the
various hospice payment rates annually based on the increase or decrease of the
hospital wage index basket, regionally adjusted. However, the increases may be
less than actual inflation. Vitas' profitability could be negatively impacted if
this adjustment were eliminated or reduced, or if Vitas' costs of providing
hospice services increased more than the annual adjustment. In addition, cost
pressures resulting from shorter patient lengths of stay and the use of more
expensive forms of palliative care, including drugs and drug delivery systems,
could negatively impact Vitas' profitability. Many payors are increasing
pressure to control health care costs. In addition, both public and private
payors are increasing pressure to decrease, or limit increases in, reimbursement
rates for health care services. Vitas' levels of revenues and profitability will
be subject to the effect of possible reductions in coverage or payment rates by
third-party payors, including payment rates from Medicare and Medicaid.

     Each state that maintains a Medicaid program has the option to provide
reimbursement for hospice services at reimbursement rates generally required to
be at least as much as Medicare rates. All states in which Vitas operates cover
Medicaid hospice services; however, we cannot assure you that the states in
which Vitas is presently operating or states into which Vitas could expand
operations will continue to cover Medicaid hospice services. In addition, the
Medicare and Medicaid programs are subject to statutory and regulatory changes,
retroactive and prospective rate and payment adjustments, administrative
rulings, freezes and funding reductions, all of which may adversely affect the
level of program payments and could have a material adverse effect on Vitas'
business. We cannot assure you that Medicare and /or Medicaid payments to
hospices will not decrease. Reductions in amounts paid by government programs
for services or changes in methods or regulations governing payments could cause
Vitas' net patient service revenue and profits to materially decline.


                                       19

<PAGE>

APPROXIMATELY ONE-THIRD OF VITAS' HOSPICE PATIENTS RESIDE IN NURSING HOMES.
CHANGES IN THE LAWS AND REGULATIONS REGARDING PAYMENTS FOR HOSPICE SERVICES AND
"ROOM AND BOARD" PROVIDED TO VITAS' HOSPICE PATIENTS RESIDING IN NURSING HOMES
COULD REDUCE ITS NET PATIENT SERVICE REVENUE AND PROFITABILITY.

     For Vitas' hospice patients receiving nursing home care under certain state
Medicaid programs who elect hospice care under Medicare and Medicaid, the state
generally must pay Vitas, in addition to the applicable Medicare or Medicaid
hospice per diem rate, an amount equal to at least 95% of the Medicaid per diem
nursing home rate for "room and board" furnished to the patient by the nursing
home. Vitas contracts with various nursing homes for the nursing homes'
provision of certain "room and board" services that the nursing homes would
otherwise provide Medicaid nursing home patients. Vitas bills and collects from
the applicable state Medicaid program an amount equal to approximately 95% of
the amount that would otherwise have been paid directly to the nursing home
under the state's Medicaid plan. Under Vitas' standard nursing home contracts,
it pays the nursing home for these "room and board" services at approximately
100% of the Medicaid per diem nursing home rate.

     The reduction or elimination of Medicare and Medicaid payments for hospice
patients residing in nursing homes would reduce Vitas' net patient service
revenue and profitability. In addition, changes in the way nursing homes are
reimbursed for "room and board" services provided to hospice patients residing
in nursing homes could effect Vitas' ability to serve patients in nursing homes.

IF VITAS IS UNABLE TO MAINTAIN RELATIONSHIPS WITH EXISTING PATIENT REFERRAL
SOURCES OR TO ESTABLISH NEW REFERRAL SOURCES, VITAS' GROWTH AND PROFITABILITY
COULD BE ADVERSELY AFFECTED.

     Vitas' success is heavily dependent on referrals from physicians, long-term
care facilities, hospitals and other institutional health care providers,
managed care companies, insurance companies and other patient referral sources
in the communities that its hospice locations serve, as well as on its ability
to maintain good relations with these referral sources. Vitas' referral sources
may refer their patients to other hospice care providers or not to a hospice
provider at all. Vitas' growth and profitability depend significantly on its
ability to establish and maintain close working relationships with these patient
referral sources and to increase awareness and acceptance of hospice care by its
referral sources and their patients. We cannot assure you that Vitas will be
able to maintain its existing relationships or that it will be able to develop
and maintain new relationships in existing or new markets. Vitas' loss of
existing relationships or its failure to develop new relationships could
adversely affect its ability to expand or maintain its operations and operate
profitably. Moreover, we cannot assure you that awareness or acceptance of
hospice care will increase or remain at current levels.

VITAS OPERATES IN AN INDUSTRY THAT IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION
AND CLAIMS REVIEWS, AND CHANGES IN LAW AND REGULATORY INTERPRETATIONS COULD
REDUCE ITS NET PATIENT SERVICE REVENUE AND PROFITABILITY AND ADVERSELY AFFECT
ITS FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     The health care industry is subject to extensive federal, state and local
laws, rules and regulations relating to, among others:

          -    payment for services;

          -    conduct of operations, including fraud and abuse, anti-kickback
               prohibitions, self-referral prohibitions and false claims;

          -    privacy and security of medical records;

          -    employment practices; and


                                       20

<PAGE>

          -    various state approval requirements, such as facility and
               professional licensure, certificate of need, compliance surveys
               and other certification or recertification requirements.

     Changes in these laws, rules and regulations or in interpretations thereof
could reduce Vitas' net patient service revenue and profitability. See the
"Government Regulations" section of this 10-K for a greater description of these
matters.

     Fraud and Abuse Laws. Vitas contracts with a significant number of health
care providers and practitioners, including physicians, hospitals and nursing
homes and arranges for these entities to provide services to Vitas' patients.
Some of these health care providers and practitioners may refer, or be in a
position to refer, patients to Vitas (or Vitas may refer patients to them).
These arrangements may not qualify for a safe harbor. Vitas from time to time
seeks guidance from regulatory counsel as to the changing and evolving
interpretations and the potential applicability of the Anti-Kickback Law to its
programs, and in response thereto, takes such actions as it deems appropriate.
Vitas generally believes that its contracts and arrangements with providers,
practitioners and suppliers should not be found to violate the Anti-Kickback
Law. However, we cannot assure you that such laws will ultimately be interpreted
in a manner consistent with Vitas' practices.

     Several health care reform proposals have included an expansion of the
Anti-Kickback Law to include referrals of any patients regardless of payor
source, which is similar to the scope of certain laws that have been enacted at
the state level. In addition, a number of states in which Vitas operates have
laws, which vary from state to state, prohibiting certain direct or indirect
remuneration or fee-splitting arrangements between health care providers,
regardless of payor source, for the referral of patients to a particular
provider.

     The federal Ethics in Patient Referral Act, Section 1877 of the Social
Security Act (commonly know an the "Stark Law") prohibits physicians from
referring Medicare or Medicaid patients for "designated health services" to
entities in which they hold an ownership or investment interest or with whom
they have a compensation arrangement, subject to certain statutory or regulatory
exceptions. We cannot assure you that future statutory or regulatory changes
will not result in hospice services being subject to the Stark Law's ownership,
investment, compensation or referral prohibitions. Several states in which Vitas
operates have similar laws which likewise are subject to change. Any such
changes could adversely affect the business, financial condition and operating
results of Vitas.

     Further, under separate statutes, submission of claims for items or
services that are "not provided as claimed" may lead to civil money penalties,
criminal fines and imprisonment and/or exclusion from participation in Medicare,
Medicaid and other federally funded state health care programs. These false
claims statutes include the federal False Claims Act, which allows any person to
bring suit on behalf of the federal government, known as a qui tam action,
alleging false or fraudulent Medicare or Medicaid claims or other violations of
the statute and to share in any amounts paid by the entity to the government in
fines or settlement. Any entity found to be violating the False Claims Act may
be liable for up to $11,000 per false claim and treble the amount of damages the
federal government is found to have sustained because of the false claims.

     Certificate of Need Laws. Many states, including Florida, have certificate
of need laws or other similar health planning laws that apply to hospice care
providers. These states may require some form of state agency review or approval
prior to opening a new hospice program, to adding or expanding hospice services,
to undertaking significant capital expenditures or under other specified
circumstances. Approval under these certificate of need laws is generally
conditioned on the showing of a demonstrable need for services in the community.
Vitas may seek to develop, acquire or expand hospice programs in states having
certificate of need laws. To the extent that state agencies require Vitas to
obtain a certificate of need or other similar approvals to expand services at
existing hospice programs or to make acquisitions or develop hospice programs in
new or existing geographical markets, Vitas' plans could be adversely affected
by a failure to obtain a certificate or approval. In addition, competitors may
seek administratively or judicially to challenge such an approval or proposed
approval


                                       21

<PAGE>

by the state agency, and Vitas has been defending against such a challenge in
connection with the development of its Palm Beach County, Florida hospice
program. Such a challenge, whether or not ultimately successful, could adversely
affect Vitas.

     Other Federal and State Regulations. The federal government and all states
regulate various aspects of the hospice industry and Vitas' business. In
particular, Vitas' operations are subject to federal and state health regulatory
laws, including those covering professional services, the dispensing of drugs
and certain types of hospice activities. Certain of Vitas' employees are subject
to state laws and regulations governing professional practice. Vitas' operations
are subject to periodic survey by governmental authorities and private
accrediting entities to assure compliance with applicable state licensing, and
Medicare and Medicaid certification and accreditation standards, as the case may
be. From time to time in the ordinary course of business, Vitas receives survey
reports noting deficiencies for alleged failure to comply with applicable
requirements. Vitas reviews such reports and takes appropriate corrective
action. The failure to effect such action could result in one of Vitas' hospice
programs being terminated from the Medicare hospice program. Any termination of
one or more of Vitas' hospice locations from the Medicare hospice program could
adversely affect Vitas' net patient service revenue and profitability and
adversely affect its financial condition and results of operations. The failure
to obtain, renew or maintain any of the required regulatory approvals,
certifications or licenses could materially adversely affect Vitas' business and
could prevent the programs involved from offering products and services to
patients. In addition, laws and regulations often are adopted to regulate new
products, services and industries. We cannot assure you that either the states
or the federal government will not impose additional regulations on Vitas'
activities, which might materially adversely affect Vitas.

     Claims Review. The Medicare and Medicaid programs and their fiscal
intermediaries and other payors periodically conduct pre-payment or post-payment
reviews and other reviews and audits of health care claims, including hospice
claims. As a result of such reviews or audits, Vitas could be required to return
any amounts found to be overpaid, or amounts found to be overpaid could be
recouped through reductions in future payments. There is pressure from state and
federal governments and other payors to scrutinize health care claims to
determine their validity and appropriateness. During the past several years,
Vitas' claims have been subject to review and audit. We cannot assure you that
reviews and/or similar audits of Vitas' claims will not result in material
recoupments, denials or other actions that could have a material adverse effect
on Vitas' business, financial condition and results of operations. See the
discussion of OIG investigation pending against Vitas under Other Health Care
Regulations, above.

     Regulation and Provision of Continuous Home Care. Vitas provides continuous
home care to patients requiring such care. Continuous home care is provided to
patients while at home, during periods of crisis when intensive monitoring and
care, primarily nursing care, is required in order to achieve palliation or
management of acute medical symptoms. Continuous home care requires a minimum of
8 hours of care within a 24-hour day, which begins and ends at midnight. The
care must be predominantly nursing care provided by either a registered nurse or
licensed practical nurse.

     Continuous home care can be challenging for a hospice to provide for a
number of reasons, including the need to have available sufficient skilled and
trained staff to furnish such care, the need to manage the staffing and
provision of such care, and a shortage of nurses that can make it particularly
difficult to attract and retain nurses that are required to furnish a majority
of such care. Medicare reimbursement for continuous home care is calculated by
multiplying the applicable continuous home care hourly rate by the number of
hours of care provided.

     Medicare reimbursement for continuous home care is subject to a number of
requirements posing further challenges for a hospice providing such care. For
example, if a patient requires skilled interventions for palliation or symptom
management that can be accomplished in less than 8 aggregate hours within the
24-hour period, if the majority of care can be accomplished by someone other
than a registered nurse or a licensed practical nurse (e.g., if a majority of
care is furnished by a home health aide or homemaker), or if for any reason less
than 8 hours of direct care are provided (such as when a patient dies before 8
AM even if 7 or more hours of care has been provided),


                                       22

<PAGE>

the care rendered cannot be reimbursed by Medicare at the continuous home care
rate (although the care instead may be eligible for Medicare reimbursement at
the reduced routine home care day rate). As a result of such requirements, Vitas
may incur the costs of providing services intended to be continuous home care
services yet be unable to bill or be reimbursed for such services at the
continuous home care rate. We cannot assure you that challenges in providing
continuous home care will not cause Vitas' net patient service revenue and
profits to materially decline or that reviews and/or similar audits of Vitas'
claims will not result in material recoupments, denials or other actions that
could have a material adverse effect on Vitas' business, financial condition and
results of operations.

     Compliance. Vitas maintains an internal regulatory compliance review
program and from time to time retains regulatory counsel for guidance on
compliance matters. We cannot assure you, however, that Vitas' practices, if
reviewed, would be found to be in compliance with applicable health regulatory
laws, as such laws ultimately may be interpreted, or that any non-compliance
with such laws would not have a material adverse effect on Vitas.

FEDERAL AND STATE LEGISLATIVE AND REGULATORY INITIATIVES RELATING TO PATIENT
PRIVACY COULD REQUIRE VITAS TO EXPEND SUBSTANTIAL SUMS ON ACQUIRING,
IMPLEMENTING AND SUPPORTING NEW INFORMATION SYSTEMS, WHICH COULD NEGATIVELY
IMPACT ITS PROFITABILITY.

     There are currently numerous legislative and regulatory initiatives at both
the state and federal levels that address patient privacy concerns. In
particular, regulations issued under the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA") require Vitas to protect the privacy and
security of patients' individual health information. We cannot predict the total
financial or other impact of the regulations on Vitas' operations. In addition,
although Vitas' management believes it is in compliance with the requirement of
patient privacy regulations, we cannot assure you that Vitas will not be found
to have violated state and federal laws, rules or guidelines surrounding patient
privacy. Compliance with current and future HIPAA requirements or any other
federal or state privacy initiatives could require Vitas to make substantial
investments, which could negatively impact its profitability and cash flows.

VITAS' GROWTH STRATEGIES MAY NOT BE SUCCESSFUL, WHICH COULD ADVERSELY AFFECT ITS
BUSINESS.

     A significant element of Vitas' growth strategy is expected to include
expansion of its business by developing new hospice locations in new and
existing markets. This aspect of Vitas' growth strategy may not be successful,
which could adversely impact its growth and profitability. We cannot assure you
that Vitas will be able to:

          -    identify markets that meet its selection criteria for new hospice
               locations;

          -    hire and retain qualified management teams to operate each of its
               new hospice locations;

          -    manage a large and geographically diverse group of hospice
               locations;

          -    become Medicare and Medicaid certified in new markets;

          -    generate sufficient hospice admissions in new markets to operate
               profitably in these new markets;

          -    compete effectively with existing hospices in new markets; or

          -    obtain state licensure and/or a certificate of need from
               appropriate state agencies in new markets.

     In addition to growing existing locations and developing new hospice
locations, Vitas' growth strategy is expected to include expansion through
acquisition of other


                                       23

<PAGE>

hospices. We cannot assure you that Vitas' acquisition strategy will be
successful. The success of Vitas' acquisition strategy depends upon a number of
factors, including:

          -    its ability to identify suitable acquisition candidates;

          -    its ability to negotiate favorable acquisition terms, including
               purchase price, which may be adversely affected due to increased
               competition with other buyers;

          -    the availability of financing on favorable terms, or at all;

          -    its ability to integrate effectively the systems and operations
               of acquired hospices;

          -    its ability to retain key personnel of acquired hospices; and

          -    its ability to obtain required regulatory approvals.

     Acquisitions involve a number of other risks, including diversion of
management's attention from other business concerns and assuming known or
unknown liabilities of acquired hospices, including liabilities for failure to
comply with health care laws and regulations. Integrating acquired hospices may
place significant strains on Vitas' current operating and financial systems and
controls. Vitas may not successfully overcome these risks or any other problems
encountered in connection with its acquisition strategy.

     In addition, since 1990, Vitas has acquired hospice programs, some of which
involved acquisitions of hospice programs from not-for-profit entities. Vitas
believes that acquisitions of not-for-profit programs are generally more complex
than acquisitions from for-profit entities and that a substantial number of
acquisition opportunities are likely to involve acquisitions from not-for-profit
entities. Such acquisitions are subject to provisions of the Internal Revenue
Code and, in certain states, state attorney general powers, which have been
interpreted to require that the consideration paid for the assets purchased be
at fair market value and, where applicable, that any fees paid for services be
reasonable. In many states there is no mechanism for state attorney general
pre-clearance of transactions to assure that applicable standards have been met.
Entities that acquire not-for-profit hospices could face potential liability if
the acquisition transaction is not structured to comply with Internal Revenue
Code and state law requirements, and in some cases the transaction could be
enjoined or subject to rescission. The acquisition of not-for-profit businesses,
including the fairness of the purchase price paid, has received increasing
regulatory scrutiny by state attorneys general and other regulatory authorities.
Although Vitas believes that reasonable actions have been taken to date to
establish the fair market value of assets purchased in prior acquisitions of
hospice operations from not-for-profit entities and the reasonableness of fees
paid for services, we cannot assure you that such transactions or any future
similar transactions will not be challenged or that, if challenged, the results
of such challenge would not have a material adverse effect on Vitas' business.

VITAS' LOSS OF KEY MANAGEMENT PERSONNEL OR ITS INABILITY TO HIRE AND RETAIN
SKILLED EMPLOYEES COULD ADVERSELY AFFECT ITS BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

     Vitas' future success significantly depends upon the continued service of
its senior management personnel. The loss of one or more of Vitas' key senior
management personnel or its inability to hire and retain new skilled employees
could negatively impact Vitas' ability to maintain or increase patient
referrals, a key aspect of its growth strategy, and could adversely affect its
future operating results.

     Competition for skilled employees is intense, and the process of locating
and recruiting skilled employees with the combination of qualifications and
attributes required to care effectively for terminally ill patients and their
families can be difficult and lengthy. We cannot assure you that Vitas will be
successful in


                                       24
<PAGE>

attracting, retaining or training highly skilled nursing, management, community
education, operations, admissions and other personnel. Vitas' business could be
disrupted and its growth and profitability negatively impacted if it is unable
to attract and retain skilled employees.

A NATIONWIDE SHORTAGE OF QUALIFIED NURSES COULD ADVERSELY AFFECT VITAS'
PROFITABILITY, GROWTH AND ABILITY TO CONTINUE TO PROVIDE QUALITY, RESPONSIVE
HOSPICE SERVICES TO ITS PATIENTS AS NURSING WAGES AND BENEFITS INCREASE.

     The substantial majority of Vitas' workforce is nurses. Vitas depends on
qualified nurses to provide quality, responsive hospice services to its
patients. The current nationwide shortage of qualified nurses impacts some of
the markets in which Vitas provides hospice services. In response to this
shortage, Vitas has adjusted its wages and benefits to recruit and retain nurses
and to engage contract nurses. Vitas' inability to attract and retain qualified
nurses could adversely affect its ability to provide quality, responsive hospice
services to its patients and its ability to increase or maintain patient census
in those markets. Increases in the wages and benefits required to attract and
retain qualified nurses or an increase in reliance on contract nurses could
negatively impact profitability.

VITAS MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST OTHER HOSPICE PROVIDERS,
AND COMPETITIVE PRESSURES MAY LIMIT ITS ABILITY TO MAINTAIN OR INCREASE ITS
MARKET POSITION AND ADVERSELY AFFECT ITS PROFITABILITY, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

     Hospice care in the United States is highly competitive. In many areas in
which Vitas' hospices are located, they compete with a large number of
organizations, including:

          -    community-based hospice providers;

          -    national and regional companies;

          -    hospital-based hospice and palliative care programs;

          -    physician groups;

          -    nursing homes;

          -    home health agencies;

          -    infusion therapy companies; and

          -    nursing agencies

     Various health care companies have diversified into the hospice market.
Other companies, including hospitals and health care organizations that are not
currently providing hospice care, may enter the markets Vitas serves and expand
the variety of services offered to include hospice care. We cannot assure you
that Vitas will not encounter increased competition in the future that could
limit its ability to maintain or increase its market position, including
competition from parties in a position to impact referrals to Vitas. Such
increased competition could have a material adverse effect on Vitas' business,
financial condition and results of operations.

CHANGES IN RATES OR METHODS OF PAYMENT FOR VITAS' SERVICES COULD ADVERSELY
AFFECT ITS REVENUES AND PROFITS.

     Managed care organizations have grown substantially in terms of the
percentage of the population that is covered by such organizations and in terms
of their control over an increasing portion of the health care economy. Managed
care organizations have continued to consolidate to enhance their ability to
influence the delivery of health care services and to exert pressure to control
health care costs. Vitas has a number of contractual arrangements with managed
care organizations and other similar parties.


                                       25

<PAGE>

     Vitas provides hospice care to many Medicare beneficiaries who receive
their non-hospice health care services from health maintenance organizations
("HMOs") under Medicare risk contracts. Under such contracts between HMOs and
the federal Department of Health and Human Services, the Medicare payments for
hospice services are excluded from the per-member, per-month payment from
Medicare to HMOs and instead are paid directly by Medicare to the hospices. As a
result, Vitas' payments for Medicare beneficiaries enrolled in Medicare risk
HMOs are processed in the same way with the same rates as other Medicare
beneficiaries. We cannot assure, however, that payment for hospice services will
continue to be excluded from HMO payment under Medicare risk contracts and
similar Medicare managed care plans or that if not excluded, managed care
organizations or other large third-party payors would not use their power to
influence and exert pressure on health care providers to reduce costs in a
manner that could have a material adverse effect on Vitas' business, financial
condition and results of operations.

LIABILITY CLAIMS MAY HAVE AN ADVERSE EFFECT ON VITAS, AND ITS INSURANCE COVERAGE
MAY BE INADEQUATE.

     Participants in the hospice industry are subject to lawsuits alleging
negligence, product liability or other similar legal theories, many of which
involve large claims and significant defense costs. From time to time, Vitas is
subject to such and other types of lawsuits. See the description below under
Legal Proceedings. The ultimate liability for claims, if any, could have a
material adverse effect on its financial condition or operating results.
Although Vitas currently maintains liability insurance intended to cover the
claims, we cannot assure you that the coverage limits of such insurance policies
will be adequate or that all such claims will be covered by the insurance. In
addition, Vitas' insurance policies must be renewed annually and may be subject
to cancellation during the policy period. While Vitas has been able to obtain
liability insurance in the past, such insurance varies in cost, is difficult to
obtain and may not be available in the future on terms acceptable to Vitas, if
at all.

     A successful claim in excess of the insurance coverage could have a
material adverse effect on Vitas. Claims, regardless of their merit or eventual
outcome, also may have a material adverse effect on Vitas' business and
reputation due to the costs of litigation, diversion of management's time and
related publicity.

     Vitas procures professional liability coverage on a claims-made basis. The
insurance contracts specify that coverage is available only during the term of
each insurance contract. Vitas' management intends to renew or replace the
existing claims-made policy annually but such coverage is difficult to obtain,
may be subject to cancellation and may be written by carriers that are unable,
or unwilling to pay claims. During fiscal 2001, Vitas was notified that one of
its prior carriers was ordered into rehabilitation, and in early fiscal 2002,
into liquidation, creating the possibility that certain prior year claims could
be underinsured or uninsured. Certain claims have been asserted where the
coverage would be the responsibility of this prior carrier and/or other carriers
that may not have the financial wherewithal to satisfy the claims. Additionally,
some risks and liabilities, including claims for punitive damages, are not
covered by insurance.

ITEM 1B. UNRESOLVED STAFF COMMENTS

          None.

ITEM 2. PROPERTIES

     The Company's corporate offices and the headquarters for the Roto-Rooter
Group are located in Cincinnati, Ohio. Roto-Rooter has manufacturing and
distribution center facilities in West Des Moines, Iowa and has 72 office and
service facilities in 26 states. Vitas, headquartered in Miami, operates 39
programs from 69 leased facilities in 15 states.


                                       26

<PAGE>

     All "owned" property is held in fee and is subject to the security
interests of the holders of our debt instruments issued in connection with the
Company's merger with Vitas. The leased properties have lease terms ranging from
one year to fourteen years. Management does not foresee any difficulty in
renewing or replacing the remainder of its current leases. The Company considers
all of its major operating properties to be maintained in good operating
condition and to be generally adequate for present and anticipated needs.

ITEM 3. LEGAL PROCEEDINGS

     The Company is party to a class action lawsuit filed in the Third Judicial
Circuit Court of Madison County, Illinois in June of 2000 by Robert Harris,
alleging certain Roto-Rooter plumbing was performed by unlicensed employees. The
Company contests these allegations and believes them without merit. Plaintiff
moved for certification of a class of customers in 32 states who allegedly paid
for plumbing work performed by unlicensed employees. Plaintiff also moved for
partial summary judgment on grounds the licensed apprentice plumber who
installed his faucet did not work under the direct personal supervision of a
licensed master plumber. On June 19, 2002, the trial judge certified an
Illinois-only plaintiffs class and granted summary judgment for the named party
Plaintiff on the issue of liability, finding violation of the Illinois Plumbing
License Act and the Illinois Consumer Fraud Act, through Roto-Rooter's
representation of the licensed apprentice as a plumber. The court has not ruled
on certification of a class in the remaining 31 states. In December 2004, the
Company reached a resolution of this matter with the plaintiff. This proposed
settlement has been preliminarily approved by the court. We expect the parties
to request final approval later in 2006. We have accrued $3.1 million as the
anticipated cost of settling this litigation.

     Vitas Healthcare Corporation is party to a class action lawsuit filed in
the Superior Court of California, Los Angeles County, in April of 2004 by Ann
Marie Costa, Ana Jimenez, Mariea Ruteaya and Gracetta Wilson alleging failure to
pay overtime wages and to provide meal and break periods to California nurses,
home health aides and licensed clinical social workers. The Company contests
these allegations and believes them without merit. Plaintiffs moved for class
certification, and Vitas opposed this motion. We have reached an agreement,
subject to court approval, with the Plaintiff class to resolve this matter for
$19 million, inclusive of Plaintiffs' class attorneys' fees and the costs of
settlement administration.

     Regardless of outcome, such litigation can adversely affect the Company
through defense costs, diversion of management's time, and related publicity.

     See also the OIG investigation pending against Vitas under Other Health
Care Regulations, above.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

EXECUTIVE OFFICERS OF THE COMPANY

<TABLE>
<CAPTION>
        Name           Age                     Office                        First Elected
- --------------------   ---   ------------------------------------------   ------------------
<S>                    <C>   <C>                                          <C>
Kevin J. McNamara       52   President and Chief Executive Officer        August 2, 1994 (1)
Timothy S. O'Toole      50   Executive Vice President                     May 18, 1992 (2)
Spencer S. Lee          50   Executive Vice President                     May 15, 2000 (3)
David P. Williams       45   Vice President and Chief Financial Officer   March 5, 2004 (4)
Arthur V. Tucker,Jr.    56   Vice President and Controller                May 20, 1991 (5)
</TABLE>

(1)  Mr. K. J. McNamara is President and Chief Executive Officer of the Company
     and has held these positions since August 1994 and May 2001, respectively.
     Previously, he


                                       27

<PAGE>

     served as an Executive Vice President, Secretary and General Counsel of the
     Company, since November 1993, August 1986 and August 1986, respectively. He
     previously held the position of Vice President of the Company, from August
     1986 to May 1992.

(2)  Mr. T. S. O'Toole is an Executive Vice President of the Company and has
     held this position since May 1992. He is also Chief Executive Officer of
     Vitas, a wholly owned subsidiary of the Company, and has held this position
     since February 24, 2004. Previously, from May 1992 to February 24, 2004, he
     also served the Company as Treasurer.

(3)  Mr. S. S. Lee is an Executive Vice President of the Company and has held
     this position since May 15, 2000. Mr. Lee is also Chairman and Chief
     Executive Officer of Roto-Rooter Services Company, a wholly owned
     subsidiary of the Company, and has held this position since January 1999.
     Previously, he served as a Senior Vice President of Roto-Rooter Services
     Company from May 1997 to January 1999.

(4)  Mr. D. P. Williams is Vice President and Chief Financial Officer of the
     Company and has held these positions since March 5, 2004. Mr. Williams is
     also Senior Vice President and Chief Financial Officer of Roto-Rooter
     Group, Inc. and has held these positions since January 1999.

(5)  Mr. A. V. Tucker, Jr. is a Vice President and Controller of the Company and
     has held these positions since February 1989. From May 1983 to February
     1989, he held the position of Assistant Controller of the Company.

     Each executive officer holds office until the annual election at the next
annual organizational meeting of the Board of Directors of the Company which is
scheduled to be held on May 15, 2006.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
     AND ISSUER PURCHASES OF EQUITY SECURITIES

     The Company's Capital Stock (par value $1 per share) is traded on the New
York Stock Exchange under the symbol CHE. The range of the high and low sale
prices on the New York Stock Exchange and dividends paid per share for each
quarter of 2004 and 2005 adjusted for a 2-for-1 stock split occurring May 11,
2005, are set forth below.

<TABLE>
<CAPTION>
                              Closing
                 --------------------------------
                                   Dividends Paid
                  High      Low       Per Share
                 ------   ------   --------------
<S>              <C>      <C>      <C>
2004
First Quarter    $33.48   $24.48        $.06
Second Quarter    27.65    21.55         .06
Third Quarter     28.13    21.36         .06
Fourth Quarter    33.72    27.56         .06

2005
First Quarter    $38.63   $32.55        $.06
Second Quarter    43.83    34.57         .06
Third Quarter     44.90    39.32         .06
Fourth Quarter    54.00    40.13         .06
</TABLE>

     Future dividends are necessarily dependent upon the Company's earnings and
financial condition, compliance with certain debt covenants and other factors
not presently determinable.


                                       28

<PAGE>

     As of March 1, 2006, there were approximately 3,158 stockholders of record
of the Company's Capital Stock. This number only includes stockholders of record
and does not include stockholders with shares beneficially held in nominee name
or within clearinghouse positions of brokers, banks or other institutions.

     As of December 31, 2005, the number of stock options outstanding under the
Company's equity compensation plans, the weighted average exercise price of
outstanding options, and the number of securities remaining available for
issuance were as follows:

                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                                                                      Number of securities
                                                                                     remaining available for
                                                                                      future issuance under
                                Number of Securities to     Weighted-average           equity compensation
                                be issued upon exercise    exercise price of            plans [excluding
                                of outstanding warrants   outstanding options,       securities reflected in
                                      and rights          warrants and rights              column (a)]
Plan Category                             (a)                     (b)                          (c)
- -------------                   -----------------------   --------------------   -------------------------------
<S>                             <C>                       <C>                    <C>
Equity Compensation plans
approved by stockholders              1,671,462                  $23.70                     137,035
Equity Compensation plans not
approved by stockholders (1)             70,371                   20.61                       1,588
                                      ---------                  ------                     -------
TOTAL                                 1,741,833                   23.57                     138,623
                                      ---------                  ------                     -------
</TABLE>

(1)  In May 1999 the Board of Directors adopted the 1999 Long-Term Employee
     Incentive Plan without stockholder approval. This plan permits the Company
     to grant up to 500,000 shares of non-qualified options and stock awards to
     a broad base of salaried and hourly employees (excluding officers and
     directors) of the Company. Except for the exclusion of officers and
     directors, this plan has the same general terms and provisions as the 2004
     Stock Incentive Plan. In addition, pursuant to this plan no individual may
     be granted more than 50,000 stock options in a calendar year, the aggregate
     number of the shares of Capital Stock which may be issued pursuant to stock
     incentives in the form of Stock Awards shall not be more than 270,000, and
     no stock incentives shall be granted under the plan after May 17, 2009.

ITEM 6. SELECTED FINANCIAL DATA

     The information called for by this Item for the five years ended December
31, 2005 is set forth on page 40 of the 2005 Annual Report to Stockholders and
is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS


                                       29

<PAGE>

     The information called for by this Item is set forth on pages 41 through 54
of the 2005 Annual Report to Stockholders and is incorporated herein by
reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's primary market risk exposure relates to interest rate risk
exposure through its variable interest rate borrowings. At December 31, 2005 the
Company had a total of $84.4 million of variable rate debt outstanding. In
February 2005, the Company called its Floating Rate Notes, restructured its
revolving credit/ term loan agreement with JPMorgan Chase and reduced its
variable rate debt to $88.5 million at February 28, 2005. Should the interest
rate on this debt increase or decrease 100 basis points (1% point), the
Company's annual interest expense would increase or decrease $844,000.

     The Company continually evaluates this interest rate exposure and
periodically weighs the cost versus the benefit of fixing the variable interest
rates through a variety of hedging techniques.

     The market value of the Company's long-term debt at December 31, 2005 is
approximately $244.1 million versus a carrying value of $235.1 million.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated March 16, 2006, appearing on pages 5 through 37
of the 2005 Annual Report to Stockholders, along with the Supplementary Data
(Unaudited Summary of Quarterly Results) appearing on pages 38-39, are
incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
     FINANCIAL DISCLOSURE

     None.

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

     The Company's management, under the supervision of and with the
participation of the Company's President and Chief Executive Officer, Vice
President and Chief Financial Officer and Vice President and Controller, has
evaluated the effectiveness of the Company's disclosure controls and procedures,
as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the
period covered by this report. Based on such evaluation, the Company's President
and Chief Executive Officer, Vice President and Chief Financial Officer and Vice
President and Controller have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective and are reasonably
designed to ensure that all material information relating to the Company
required to be included in the Company's reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange
Commission and that such information is accumulated and communicated to
management, including the President and Chief Executive Officer, Vice President
and Chief Financial Officer and Vice President and Controller, as appropriate,
to allow timely decisions regarding required disclosure.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

          Refer to Management's Report on Internal Control over Financial
Reporting and Report of Independent Registered Public Accounting Firm on pages 5
and 6 of the Company's 2005 Annual Report to Stockholders, which are
incorporated herein by reference.


                                       30

<PAGE>

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     There have not been any changes in the Company's internal control over
financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act during the Company's fiscal quarter ended December 31,
2005 that have materially affected, or are reasonable likely to materially
affect the Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

     Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The directors of the Company are:

          Edward L. Hutton
          Kevin J. McNamara
          Donald Breen, Jr.
          Charles H. Erhart, Jr.
          Joel F. Gemunder
          Patrick P. Grace
          Thomas C. Hutton
          Walter L. Krebs
          Sandra E. Laney
          Timothy S. O'Toole
          Donald E. Saunders
          George J. Walsh III
          Frank E. Wood

The additional information required under this Item with respect to the
directors and executive officers is set forth in the Company's 2006 Proxy
Statement and in Part I hereof under the caption "Executive Officers of the
Registrant" and is incorporated herein by reference.

     The Company has adopted a Code of Ethics that applies to the Company's
principal executive officer, principal financial officer, principal accounting
officer, directors and employees. A copy of this Code of Ethics is incorporated
with this Report as Exhibit 14 and it is also posted on the Company's Web site,
www.chemed.com.

ITEM 11. EXECUTIVE COMPENSATION

     Information required under this Item is set forth in the Company's 2006
Proxy Statement, which is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information required under this Item is set forth in the Company's 2006
Proxy Statement, which is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information required under this Item is set forth in the Company's 2006
Proxy Statement, which is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     AUDIT FEES


                                       31

<PAGE>

          PricewaterhouseCoopers LLP billed the company $1,989,000 in 2004 and
$1,485,000 in 2005. These fees were for professional services rendered for the
integrated audit of the Company's annual financial statements and of its
internal control over financial reporting, review of the financial statements
included in the Company's Forms 10-Q and review of documents filed with the SEC.

     AUDIT-RELATED FEES

          PricewaterhouseCoopers LLP billed the company $1,446,000 and $189,000
in 2004 and 2005, respectively for audit-related services. In 2004, $1,115,000
of these fees related to audits of significant subsidiaries of the Company for
years 2001, 2002, and 2003 financial statements for the purpose of registering
the Company's floating rate notes, $205,000 for review of the Private Placement
Memorandum related to the acquisition of VITAS, $59,000 for consultation
concerning financial accounting and reporting standards and the remaining
$67,000 was related primarily to the audit of the Company's employee benefit
plans. In 2005, $75,000 was related to the audit of the employee benefit plans
and $114,000 was related to audits of Vitas' Florida subsidiaries.

     TAX FEES

          No such services were rendered in 2004 or 2005.

     ALL OTHER FEES

          PricewaterhouseCoopers LLP billed the Company $2,300 and $2,400,
respectively, in aggregate fees for services rendered by PricewaterhouseCoopers
LLP, other than the services described above, for the years 2004 and 2005.

     The Audit Committee has adopted a policy which requires the Committee's
pre-approval of audit and non-audit services performed by the independent
auditor to assure that the provision of such services does not impair the
auditor's independence. The Audit Committee pre-approved all of the audit and
non-audit services rendered by PricewaterhouseCoopers LLP as listed above.


                                       32
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBITS

3.1   Certificate of Incorporation of Chemed Corporation.*

3.2   Certificate of Amendment to Certificate of Incorporation.*

3.3   By-Laws of Chemed Corporation.*

4.1   Indenture, dated as of February 24, 2004, between Roto-Rooter, Inc. and
      LaSalle Bank National Association.*

4.2   Indenture, dated as of February 24, 2004, among Roto-Rooter, Inc., the
      subsidiary guarantors listed on Schedule I thereto and Wells Fargo Bank,
      N.A.*

10.1  Agreement and Plan of Merger among Diversey U.S. Holdings, Inc., D. C.
      Acquisition Inc., Chemed Corporation and DuBois Chemicals, Inc., dated as
      of February 25, 1991.*

10.2  Agreement and Plan of Merger among National Sanitary Supply Company,
      Unisource Worldwide, Inc. and TFBD, Inc. dated as of August 11, 1997.*

10.3  Stock Purchase Agreement dated as of May 8, 2002 by and between PCI
      Holding Corp. and Chemed Corporation. *

10.4  Amendment No. 1 to Stock Purchase Agreement dated as of October 11, 2002
      by and among PCI Holding Corp., PCI-A Holding Corp. and Chemed
      Corporation. *

10.5  Senior Subordinated Promissory Note dated as of October 11, 2002 by and
      among PCI Holding Corp. and Chemed Corporation. *

10.6  Common Stock Purchase Warrant dated as of October 11, 2002 by and between
      PCI Holding Corp. and Chemed Corporation. *

10.7  1995 Stock Incentive Plan.*,**

10.8  1997 Stock Incentive Plan.*,**

10.9  1999 Stock Incentive Plan.*,**

10.10 1999 Long-Term Employee Incentive Plan as amended through May 20,
      2002.*,**

10.11 2002 Stock Incentive Plan.*,**

10.12 2002 Executive Long-Term Incentive Plan, as amended May 18, 2004.*,**

10.13 2004 Stock Incentive Plan.*,**

10.14 Employment Contracts with Executives.*,**

10.15 Amendment to Employment Agreements with Kevin J. McNamara, Thomas C.
      Hutton and Sandra E. Laney dated August 7, 2002.*,**

10.16 Amendment to Employment Agreements with Timothy S. O'Toole and Arthur V.
      Tucker dated August 7, 2002.*,**

10.17 Amendment to Employment Agreement with Spencer S. Lee dated May 19,
      2003.*,**

10.18 Amendment to Employment Agreements with Executives dated January 1,
      2002.*,**


                                       33

<PAGE>

10.19 Amendment No. 16 to Employment Agreement with Sandra E. Laney dated March
      1, 2003.*,**

10.20 Amendment No. 16 to Employment Agreement with Kevin J. McNamara dated May
      18, 2004.*,**

10.21 Employment Agreement with David P. Williams dated May 16, 1994; Amendment
      dated May 21, 2001, and Amendment dated May 19, 2003.*,**

10.22 Excess Benefits Plan, as restated and amended, effective June 1, 2001.*,**

10.23 Amendment No. 1 to Excess Benefits Plan, effective July 1, 2002.*,**

10.24 Amendment No. 2 to Excess Benefits Plan, effective November 7, 2003.*,**

10.25 Non-Employee Directors' Deferred Compensation Plan.*,**

10.26 Chemed/Roto-Rooter Savings & Retirement Plan, effective January 1,
      1999.*,**

10.27 First Amendment to Chemed/Roto-Rooter Savings & Retirement Plan, effective
      September 6, 2000.*,**

10.28 Second Amendment to Chemed/Roto-Rooter Savings & Retirement Plan,
      effective January 1, 2001.*,**

10.29 Third Amendment to Chemed/Roto-Rooter Savings & Retirement Plan, effective
      December 12, 2001.*,**

10.30 Directors Emeriti Plan.*,**

10.31 Second Amendment to Split Dollar Agreement with Executives.*,**

10.32 Split Dollar Agreement with Executives.*,**

10.33 Split Dollar Agreement with Edward L. Hutton.*,**

10.34 Promissory Note under the Executive Stock Purchase Plan with Kevin J.
      McNamara.*,**

10.35 Schedule to Promissory Note under the Executive Stock Purchase Plan with
      Kevin J. McNamara.**

10.36 Roto-Rooter Deferred Compensation Plan No. 1, as amended January
      1,1998.*,**

10.37 Roto-Rooter Deferred Compensation Plan No. 2.*,**

10.38 Agreement and Plan of Merger, dated as of December 18, 2003, Among
      Roto-Rooter, Inc., Marlin Merger Corp. and Vitas Healthcare Corporation.*

10.39 Credit Agreement, dated as of February 24, 2004, among Roto-Rooter, Inc.,
      the lenders from time to time parties thereto and Bank One, NA, as
      Administrative Agent.*

10.40 Amended and Restated Credit Agreement, dated as of February 24, 2005,
      among Chemed Corporation, the lenders from time to time parties thereto
      and JP Morgan Chase Bank, NA, as Administrative Agent.*

10.41 Pledge and Security Agreement, dated as of February 24, 2004, among
      Roto-Rooter, Inc., the subsidiaries of Roto-Rooter, Inc. listed on the
      signature pages thereto and Bank One, NA, as Collateral Agent.*

10.42 Guaranty Agreement, dated as of February 24, 2004, among the subsidiaries
      of Roto-Rooter, Inc. listed on the signature pages thereto and Bank One,
      NA, as Administrative Agent.*


                                       34

<PAGE>

10.43 Collateral Sharing Agreement, dated as of February 24, 2004, among Bank
      One, NA, as Collateral Agent and Administrative Agent, Wells Fargo Bank,
      NA, as Trustee, and Roto-Rooter, Inc.*

10.44 Form of Restricted Stock Award.*,**

10.45 Form of Stock Option Grant.*,**

10.46 Assets Purchase Agreement of April 1, 2005 between Service America
      Network, Inc. and Service America Enterprise, Inc.*

12    Computation of Ratio of Earnings to Fixed Charges.

13    2005 Annual Report to Stockholders.

14    Policies on Business Ethics of Chemed Corporation.*

21    Subsidiaries of Chemed Corporation.

23    Consent of Independent Registered Public Accounting Firm.

24    Powers of Attorney.

31.1  Certification by Kevin J. McNamara pursuant to Rule 13a-14(a)/15d-14(a) of
      the Exchange Act of 1934.

31.2  Certification by David P. Williams pursuant to Rule 13a-14(a)/15d-14(a) of
      the Exchange Act of 1934.

31.3  Certification by Arthur V. Tucker, Jr. pursuant to Rule
      13a-14(a)/15d-14(a) of the Exchange Act of 1934.

32.1  Certification by Kevin J. McNamara pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.

32.2  Certification by David P. Williams pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.

32.3  Certification by Arthur V. Tucker, Jr. pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.

*    This exhibit is being filed by means of incorporation by reference (see
     Index to Exhibits on page E-1). Each other exhibit is being filed with this
     Annual Report on Form 10-K.

**   Management contract or compensatory plan or arrangement.

FINANCIAL STATEMENT SCHEDULE

 See Index to Financial Statements and Financial Statement Schedule on page S-1.


                                       35

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        CHEMED CORPORATION


March 13, 2006                          By /s/ Kevin J. McNamara
                                           -------------------------------------
                                           Kevin J. McNamara
                                           President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
         Signature                       Title                                      Date
         ---------                       -----                                      ----
<S>                          <C>                                               <C>


/s/ Kevin J. McNamara        President and Chief Executive                 ]
- --------------------------   Officer and a Director                        ]
Kevin J. McNamara            (Principal Executive Officer)                 ]
                                                                           ]
                                                                           ]
/s/ David P. Williams        Vice President and Chief                      ]
- --------------------------   Financial Officer                             ]
David P. Williams            (Principal Financial Officer)                 ]
                                                                           ]
                                                                           ]
/s/ Arthur V. Tucker, Jr.    Vice President and                            ]   March 13, 2006
- --------------------------   Controller (Principal                         ]
Arthur V. Tucker, Jr.        Accounting Officer)                           ]
                                                                           ]
Edward L. Hutton*            Walter L. Krebs*            ]                 ]
Donald Breen, Jr.*           Sandra E. Laney*            ]                 ]
Charles H. Erhart, Jr.*      Timothy S. O'Toole*         ]   --Directors   ]
Joel F. Gemunder*            Donald E. Saunders*         ]                 ]
Patrick P. Grace*            George J. Walsh III*        ]                 ]
Thomas C. Hutton*            Frank E. Wood*              ]                 ]
</TABLE>

- ----------
*    Naomi C. Dallob by signing her name hereto signs this document on behalf of
     each of the persons indicated above pursuant to powers of attorney duly
     executed by such persons and filed with the Securities and Exchange
     Commission.


March 13, 2006                          /s/ Naomi C. Dallob
Date                                    ----------------------------------------
                                        Naomi C. Dallob
                                        (Attorney-in-Fact)


                                       36




<PAGE>

                   CHEMED CORPORATION AND SUBSIDIARY COMPANIES

         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

                               2003, 2004 AND 2005

<TABLE>
<CAPTION>
                                                                                                   PAGE(s)
<S>                                                                                                <C>
CHEMED CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

  Report of Independent Registered Public Accounting Firm.....................................         6*
  Consolidated Statement of Operations........................................................         7*
  Consolidated Balance Sheet..................................................................         8*
  Consolidated Statement of Cash Flows........................................................         9*
  Consolidated Statement of Changes in Stockholders' Equity...................................     10-11*
  Consolidated Statement of Comprehensive Income/(Loss).......................................        10*
  Notes to Consolidated Financial Statements..................................................        12*

  Report of Independent Registered Public Accounting Firm on Financial Statement Schedule.....       S-2
  Schedule II -- Valuation and Qualifying Accounts............................................       S-3
</TABLE>

* Indicates page numbers in Chemed Corporation 2005 Annual Report to
  Stockholders.

      The consolidated financial statements of Chemed Corporation listed above,
appearing in the 2005 Annual Report to Stockholders, are incorporated herein by
reference. The Financial Statement Schedule should be read in conjunction with
the consolidated financial statements listed above. Schedules not included have
been omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto as listed above.

                                       S-1
<PAGE>

               Report of Independent Registered Public Accounting
                      Firm on Financial Statement Schedule

To the Board of Directors
of Chemed Corporation

Our audits of the consolidated financial statements, of management's assessment
of the effectiveness of internal control over financial reporting and of the
effectiveness of internal control over financial reporting referred to in our
report dated March 16, 2006 appearing in the 2005 Annual Report to Stockholders
of Chemed Corporation (which report, consolidated financial statements and
assessment are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Cincinnati, Ohio
March 16, 2006

                                       S-2
<PAGE>

                                                                     SCHEDULE II

                   CHEMED CORPORATION AND SUBSIDIARY COMPANIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
                                     DR/(CR)

<TABLE>
<CAPTION>
                                                      ADDITIONS
                                              ------------------------
                                              (CHARGED)                     APPLICABLE
                                              CREDITED       (CHARGED)          TO
                             BALANCE AT       TO COSTS       CREDITED        COMPANIES                           BALANCE
                             BEGINNING           AND          TO OTHER       ACQUIRED          DEDUCTIONS        AT END
      DESCRIPTION            OF PERIOD        EXPENSES       ACCOUNTS        IN PERIOD           (b)            OF PERIOD
- -----------------------      ----------       ---------      ---------      ----------         ----------       ---------
<S>                          <C>              <C>            <C>            <C>                <C>              <C>
Allowances for doubtful
accounts (c)

  For the year 2005          $   (7,544)      $ (7,224)      $       -      $        -         $    6,355       $  (8,413)
                             ==========       ========       =========      ==========         ==========       =========

  For the year 2004 (a)      $   (2,646)      $ (5,983)      $       -      $   (4,946)        $    6,031       $  (7,544)
                             ==========       ========       =========      ==========         ==========       =========

  For the year 2003 (a)      $   (3,337)      $ (1,497)      $       -      $        -         $    2,188       $  (2,646)
                             ==========       ========       =========      ==========         ==========       =========

Allowances for doubtful
accounts - notes
receivable (d)

  For the year 2005          $        -       $      -       $       -      $        -         $        -       $       -
                             ==========       ========       =========      ==========         ==========       =========

  For the year 2004          $     (323)      $    323       $       -      $        -         $        -       $       -
                             ==========       ========       =========      ==========         ==========       =========

  For the year 2003          $     (422)      $     99       $       -      $        -         $        -       $    (323)
                             ==========       ========       =========      ==========         ==========       =========

Valuation allowance for
available-for-sale
securities (e)

  For the year 2005          $        -       $      -       $       -      $        -         $        -       $       -
                             ==========       ========       =========      ==========         ==========       =========

  For the year 2004          $        -       $      -       $       -      $        -         $        -       $       -
                             ==========       ========       =========      ==========         ==========       =========

  For the year 2003          $    5,668       $      -       $    (278)     $        -         $   (5,390)      $       -
                             ==========       ========       =========      ==========         ==========       =========
</TABLE>

(a)   Amounts were reclassified for operations discontinued in 2004.

(b)   With respect to allowances for doubtful accounts, deductions include
      accounts considered uncollectible or written off, payments, companies
      divested, etc. With respect to valuation allowance for available-for-sale
      securities, deductions comprise net realized gains on sales of
      investments.

(c)   Classified in consolidated balance sheet as a reduction of accounts
      receivable.

(d)   Classified in consolidated balance sheet as a reduction of other assets.

(e)   With respect to the valuation allowance for available-for-sale securities,
      amounts charged or credited to other accounts comprise net unrealized
      holding gains arising during the period.

                                       S-3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.35
<SEQUENCE>2
<FILENAME>l18258aexv10w35.txt
<DESCRIPTION>EX-10.35
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .
                                  EXHIBIT 10.35

                            Schedule to Exhibit 10.40

<TABLE>
<CAPTION>
Employee           Title                                   Amount as of 2/21/06
- --------           -----                                   --------------------
<S>                <C>                                     <C>
Kevin J. McNamara  President and Chief Executive Officer        $484,186.00

                              Paid in full 2/22/06
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>3
<FILENAME>l18258aexv12.txt
<DESCRIPTION>EX-12
<TEXT>
<PAGE>

                                                                      EXHIBIT 12

                               CHEMED CORPORATION
                COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                          (IN THOUSANDS, EXCEPT RATIOS)

<TABLE>
<CAPTION>
                                                        2001           2002             2003           2004         2005
                                                      --------       --------         --------       --------     --------
<S>                                                   <C>            <C>              <C>            <C>          <C>
Pretax income/ (loss) from continuing operations
before equity in earnings/ loss of affiliate          $(15,478)      $ 17,140         $ 16,446       $ 37,087     $ 57,283

Additions:
     Fixed charges                                      12,642          5,621            4,801         28,597       30,737
     Amortization of capitalized interest                    -              -                -              1            2

Deductions:
     Capitalized interest                                    -              -                -            (72)        (380)
                                                      --------       --------         --------       --------     --------

          Adjusted income/ (loss)                     $ (2,836)      $ 22,761         $ 21,247       $ 65,613     $ 87,642
                                                      ========       ========         ========       ========     ========

Fixed Charges:
     Interest expense                                 $  6,537       $  4,007         $  3,211       $ 21,167     $ 21,264
     Capitalized interest                                    -              -                -             72          380
     Interest component of rental expense                3,488          1,614            1,590          4,028        5,122
     Loss on extinguishment of debt (a), (b), (c)        2,617              -                -          3,330        3,971
                                                      --------       --------         --------       --------     --------

          Fixed charges                               $ 12,642       $  5,621         $  4,801       $ 28,597     $ 30,737
                                                      ========       ========         ========       ========     ========

Ratio of earnings to fixed charges (d)                    n.a.            4.0 x            4.4 x          2.3 x        2.9 x
                                                      ========       ========         ========       ========     ========

Additional earnings needed to achieve 1:1 ratio
coverage (e)                                            15,478           n.a.             n.a.           n.a.         n.a.
                                                      ========       ========         ========       ========     ========
</TABLE>

- ---------------

(a)   The year ended December 31, 2001 includes interest penalties related to
      the prepayment of the Company's 8.15% senior notes due 2002 through 2004
      and its 10.67% senior notes due 2002 through 2003.

(b)   The year ended December 31, 2004 includes interest penalties related to
      the retirement of the Company's 7.31% senior notes due 2005 through 2009.
      Refer to Note 12 in the Notes to Consolidated Financial Statements for
      further discussion.

(c)   The year ended December 31, 2005 includes interest penalties related to
      the retirement of the Company's floating rate notes due 2010. Refer to
      Note 12 in the Notes to Consolidated Financial Statements for further
      discussion.

(d)   For purposes of computing the ratio of earnings to fixed charges, pretax
      income/ (loss) from continuing operations before equity in earnings/
      (loss) of affiliate has been added to fixed charges and adjusted for
      capitalized interest to derive adjusted income/ (loss). Fixed charges
      consist of interest expense on debt (including the amortization of
      deferred financing costs), capitalized interest, prepayment penalties on
      the early extinguishment of debt and one-third (the proportion deemed
      representative of the interest component) of rental expense. Fixed charge
      amounts include interest from both continuing and discontinued operations.

(e)   In the year ended December 31, 2001 earnings were insufficient to cover
      fixed charges. Additional earnings of $15,478,000 must be generated to
      achieve a coverage ratio of 1:1.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>4
<FILENAME>l18258aexv13.txt
<DESCRIPTION>EX-13
<TEXT>
<PAGE>

                                                                      EXHIBIT 13

                                                                               1

FRONT COVER

                                 [CHEMED LOGO]

CHEMED CORPORATION                                           2005 ANNUAL REPORT

<PAGE>

                                                                               2

INSIDE FRONT COVER

LOGOS: CHEMED CORPORATION, VITAS, AND ROTO-ROOTER

PROFILE:

      Publicly traded on the New York Stock Exchange under the symbol CHE,
Chemed Corporation operates through two wholly owned subsidiaries, VITAS
Healthcare Corporation and Roto-Rooter. VITAS is the nation's largest provider
of end-of-life hospice care, and Roto-Rooter is North America's largest provider
of plumbing and drain cleaning services.

      VITAS focuses on noncurative hospice care that helps make terminally ill
patients' final days as comfortable and pain-free as possible. Through its teams
of nurses, home health aides, doctors, social workers, clergy, and volunteers,
VITAS provides direct medical services to patients, as well as spiritual and
emotional counseling to both patients and their families. At year-end 2005,
VITAS cared for more than 10,400 patients daily in 15 states, primarily in the
patients' own homes, but also in VITAS' inpatient units located in hospitals,
nursing homes, and assisted-living/residential-care facilities for the elderly.

      Roto-Rooter operates through more than 110 company-owned branches and
independent contractors and approximately 500 franchisees. The total Roto-Rooter
system offers services to more than 91% of the U.S. population and approximately
43% of the Canadian population. Roto-Rooter also has licensed master franchisees
in China, including Hong Kong; the republics of Indonesia and Singapore; Japan;
Mexico; the Philippines; and the United Kingdom.

      Founded in 1971, Chemed is headquartered in Cincinnati, Ohio.

<PAGE>

                                                                               3

FINE PRINT:

Roto-Rooter(R) is a registered trademark of Roto-Rooter Corporation.

VITAS(R) and Innovative Hospice Care(R) are registered trademarks of VITAS

Healthcare Corporation.

TABLE OF CONTENTS:

CONTENTS

<TABLE>
<S>                                           <C>
Letter to Shareholders                        1-4
Financial Review                              5-54
Officers and Directors
Listing and Corporate
Information                                   IBC
</TABLE>

<PAGE>

CHEMED LETTER TO SHAREHOLDERS
V3
03.02.06

To Our Fellow Shareholders

In last year's Letter to Shareholders we stated "The outlook for Chemed in terms
of future opportunity and financial performance has never looked better." We are
extremely pleased to report that our optimism has materialized into excellent
2005 financial results for both of our companies (VITAS Healthcare Corporation
and Roto-Rooter Group Inc.)

These robust operating results are derived from successfully executing our
business philosophy - strive to be the best, most efficient operator in our
industries. We have achieved best-in-class status by developing business models
around market leaders with significant investment in a scalable management
infrastructure.

This model provides opportunities for increased efficiencies and competitive
advantage in terms of cost and quality of service in existing markets as well as
new territories. Furthermore, this operating model provides increased
flexibility to manage changes, complications and paradigm shifts that
continually challenge every business.

FINANCIAL RESULTS*

In 2005, Chemed had net service revenue and sales from continuing operations, in
accordance with Generally Accepted Accounting Principles (GAAP), of $926 million
- - an increase of 26% over the previous year. Income from continuing operations
was $38 million, an increase of 97% compared to 2004. Diluted earnings per share
from continuing operations increased more than 83% to $1.43.

Our 2005 comparative financial results are enhanced by not owning 100% of VITAS
in the prior year. This is why we internally measure operating results on an
adjusted pro forma basis. Adjusted pro forma assumes we owned VITAS effective
January 1, 2004 and eliminates certain transaction expenses related to the VITAS
merger as well as other special items that we believe are not indicative of
ongoing operations (Adjusted Pro Forma). Although this

<PAGE>

perspective is on a non-GAAP basis, we believe this two-year Adjusted Pro Forma
comparison appropriately reflects the fundamental performance of our operations.
All of the following comments are based upon this Adjusted Pro Forma
perspective.

On an Adjusted Pro Forma basis, service revenues and sales in 2005 increased 15%
to $926 million. Adjusted Pro Forma earnings before interest, taxes,
depreciation and amortization (Adjusted Pro Forma EBITDA) were $124 million, up
26%. Adjusted Pro Forma EBITDA margins increased 122 basis points to 13.3%, and
Adjusted Pro Forma net income was $51 million, up 56%.

VITAS HEALTHCARE CORPORATION*

VITAS produced record revenue and operating results in 2005. Adjusted Pro Forma
revenue was $629 million, an increase of 18% compared to 2004. Adjusted Pro
Forma EBITDA was $83 million, an increase of 28%. Net income was $46 million,
which increased 34% over the prior year. Over 50,000 patients were admitted into
VITAS' hospice programs during the year, we provided 3.8 million days of care,
95% of which was provided directly in patients' homes.

The VITAS growth strategy is focused on a three-pronged approach. First and
foremost is to garner increased market penetration in established programs. This
is accomplished by providing quality hospice care to all of our patients and
their families. We believe that market recognition of VITAS' high level of care
will positively impact our ability to attract referrals and admissions earlier
in a patient's terminal diagnosis.

Our second area of growth opportunity at VITAS is through our new-start
programs. This strategy begins by identifying communities with unmet hospice
needs. We enter the communities with hospice care teams and commence the process
of obtaining state and federal certification. This strategy generates operating
losses as the new programs are established. Over the long term, however, we
believe this will provide shareholders with significant return on capital once
the programs are established.

A third area of growth is acquisitions. We continue to search for hospice
providers who will complement our existing culture of compassion and deeply
committed approach to end-of-life care. Ideally, these acquisitions

<PAGE>

will allow VITAS to enter new geographic regions that will provide stable
platforms for future organic and new-start growth. This type of growth results
in significant capital expenditures. At the same time, acquisitions provide the
opportunity to immediately penetrate markets with established work forces,
federal and state licensure, and established referral networks.

VITAS' future performance depends upon the successful execution of all three of
these expansion strategies. We believe VITAS is uniquely positioned to achieve
such success through our market leadership, highly dedicated and focused
personnel supported with an integrated management systems infrastructure.

ROTO-ROOTER*

Roto-Rooter completed 2005 with another record year. Service revenue and sales
were $297 million, an increase of 7% compared to the prior year. Adjusted pro
forma net income totaled $25 million, a 21% increase over 2004.

Roto-Rooter operates in a very mature, fragmented industry with relatively low
organic growth. The unusually strong earnings growth Roto-Rooter generated in
2005 was the result of efficiencies derived from re-engineering initiatives
completed in 2004. These changes included centralizing call and dispatch
locations, as well as instituting standardized procedures throughout the
organization. This centralization provided the opportunity for efficient
monitoring of technician scheduling and job backlog. It also removed significant
non value-added administrative work from Roto-Rooter branches.

In the future, Roto-Rooter will continue its focus on providing a high level of
service to our residential and commercial customers in existing territories. In
addition, we will continue to evaluate opportunities to acquire franchise
territories that are reasonably valued and can be leveraged into Roto-Rooter's
existing infrastructure.

Perpetuating leadership within our industry segments requires commitment, vision
and risk. Chemed eagerly accepts this challenge and is forging ahead with ideas
and solutions that will enhance our services and provide significant benefits to
our patients, customers and shareholders.

<PAGE>

Kevin J. McNamara                                          Edward L. Hutton
President and                                              Chairman of the Board
Chief Executive Office

* A reconciliation of GAAP earnings to Adjusted Pro Forma earnings can be found
in Chemed Corporation's fourth-quarter 2005 earnings press release, dated
February 21, 2006, which is available on the Chemed web site at www.chemed.com.

<PAGE>

FINANCIAL REVIEW

CONTENTS

<TABLE>
<S>                                                           <C>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM        6
CONSOLIDATED STATEMENT OF OPERATIONS                           7
CONSOLIDATED BALANCE SHEET                                     8
CONSOLIDATED STATEMENT OF CASH FLOWS                           9
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY     10
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/(LOSS)         10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                    12
UNAUDITED SUMMARY OF QUARTERLY RESULTS                        38
SELECTED FINANCIAL DATA                                       40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
   AND RESULTS OF OPERATIONS                                  41
</TABLE>

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     The Company's management is responsible for establishing and maintaining
adequate internal control over financial reporting, as that term is defined in
Exchange Act Rules 13a-15(f) and 15d-15(f). A company's internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     The Company's management, including the President and Chief Executive
Officer, Vice President and Chief Financial Officer and Vice President and
Controller, has conducted an evaluation of the effectiveness of its internal
control over financial reporting as of December 31, 2005 based on the framework
established in Internal Control--Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this
evaluation, management concluded that internal control over financial reporting
was effective as of December 31, 2005 based on criteria in Internal
Control--Integrated Framework issued by COSO. Management's assessment of the
effectiveness of internal control over financial reporting as of December 31,
2005 has been audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm.


                                                                               5

<PAGE>

(PRICEWATERHOUSECOOPERS LOGO)

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Chemed Corporation:

We have completed integrated audits of Chemed Corporation's 2005 and 2004
consolidated financial statements and of its internal control over financial
reporting as of December 31, 2005, and an audit of its 2003 consolidated
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions, based on our audits,
are presented below.

Consolidated financial statements

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statement of operations, cash flows, changes in stockholders'
equity and comprehensive income/(loss) present fairly, in all material respects,
the financial position of Chemed Corporation and its subsidiaries at December
31, 2005 and 2004, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2005 in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit of financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management's assessment, included in Management's Report
on Internal Control Over Financial Reporting appearing on page 5, that the
Company maintained effective internal control over financial reporting as of
December 31, 2005 based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects, based on those
criteria. Furthermore, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2005 based on criteria established in Internal Control - Integrated Framework
issued by the COSO. The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting. Our
responsibility is to express opinions on management's assessment and on the
effectiveness of the Company's internal control over financial reporting based
on our audit. We conducted our audit of internal control over financial
reporting in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. An audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial reporting,
evaluating management's assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other
procedures as we consider necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.


/s/ PricewaterhouseCoopers LLP

Cincinnati, Ohio
March 16, 2006


6
<PAGE>

CONSOLIDATED STATEMENT OF OPERATIONS

Chemed Corporation and Subsidiary Companies

<TABLE>
<CAPTION>
(in thousands, except per share data)
For the Years Ended December 31,                              2005       2004       2003
- -------------------------------------                       --------   --------   --------
<S>                                                         <C>        <C>        <C>
CONTINUING OPERATIONS
   Service revenues and sales ...........................   $926,477   $735,341   $260,776
                                                            --------   --------   --------
   Cost of services provided and goods sold (excluding
      depreciation) .....................................    651,841    507,078    146,818
   Selling, general and administrative expenses .........    151,670    138,285     95,363
   Depreciation .........................................     16,179     14,542      9,519
   Amortization .........................................      5,322      3,779        302
   Other expenses (Note 5) ..............................     22,081     13,551         --
                                                            --------   --------   --------
      Total costs and expenses ..........................    847,093    677,235    252,002
                                                            --------   --------   --------
      Income from operations ............................     79,384     58,106      8,774
   Interest expense .....................................    (21,264)   (21,158)    (3,177)
   Loss on extinguishment of debt (Note 12) .............     (3,971)    (3,330)        --
   Other income--net (Note 8) ...........................      3,134      3,469     10,849
                                                            --------   --------   --------
      Income before income taxes ........................     57,283     37,087     16,446
   Income taxes (Note 9) ................................    (19,578)   (13,796)    (6,180)
   Equity in earnings/(loss) of affiliate (Note 3) ......         --     (4,105)       922
                                                            --------   --------   --------
      Income from continuing operations .................     37,705     19,186     11,188
DISCONTINUED OPERATIONS, NET OF INCOME TAXES (NOTE 6) ...     (1,888)     8,326    (14,623)
                                                            --------   --------   --------
NET INCOME/(LOSS) .......................................   $ 35,817   $ 27,512   $ (3,435)
                                                            ========   ========   ========

EARNINGS/(LOSS) PER SHARE (NOTES 17 AND 25)
   Income from continuing operations ....................   $   1.48   $   0.80   $   0.56
                                                            ========   ========   ========
   Net Income/(Loss) ....................................   $   1.40   $   1.14   $  (0.17)
                                                            ========   ========   ========
DILUTED EARNINGS/(LOSS) PER SHARE (NOTES 17 AND 25)
   Income from continuing operations ....................   $   1.43   $   0.78   $   0.56
                                                            ========   ========   ========
   Net Income/(Loss) ....................................   $   1.36   $   1.12   $  (0.17)
                                                            ========   ========   ========
AVERAGE NUMBER OF SHARES OUTSTANDING (NOTES 17 AND 25)
   Earnings/(loss) per share ............................     25,552     24,120     19,848
                                                            ========   ========   ========
   Diluted earnings/(loss) per share ....................     26,299     24,636     19,908
                                                            ========   ========   ========
</TABLE>

The Notes to Consolidated Financial Statements are integral parts of this
statement.


                                                                               7

<PAGE>

CONSOLIDATED BALANCE SHEET

Chemed Corporation and Subsidiary Companies

<TABLE>
<CAPTION>
(in thousands, except shares and per share data)
December 31,                                                                         2005       2004
- ------------------------------------------------                                   --------   --------
<S>                                                                                <C>        <C>
ASSETS
   Current assets
      Cash and cash equivalents (Note 10) ......................................   $ 57,133   $ 71,448
      Accounts receivable less allowances of $8,413 (2004 - $7,544) ............     95,063     64,663
      Inventories ..............................................................      6,499      7,019
      Prepaid income taxes .....................................................      9,096         --
      Current deferred income taxes (Note 9) ...................................     26,691     31,250
      Current assets of discontinued operations (Note 6) .......................         --     13,397
      Prepaid expenses and other current assets ................................      9,768      9,842
                                                                                   --------   --------
         Total current assets ..................................................    204,250    197,619
   Investments of deferred compensation plans held in trust (Note 14) ..........     21,105     18,317
   Other investments (Notes 6 and 16) ..........................................      1,445      1,445
   Note receivable (Notes 6 and 16) ............................................     12,500     12,500
   Properties and equipment, at cost, less accumulated depreciation (Note 11) ..     65,449     55,796
   Identifiable intangible assets less accumulated amortization of $9,612
      (2004 - $5,174) (Notes 4 and 7) ..........................................     75,358     76,924
   Goodwill (Notes 4 and 7) ....................................................    433,756    432,732
   Noncurrent assets of discontinued operations (Note 6) .......................         --      5,705
   Other assets ................................................................     21,222     24,528
                                                                                   --------   --------
            Total Assets .......................................................   $835,085   $825,566
                                                                                   ========   ========

LIABILITIES
   Current liabilities
      Accounts payable .........................................................   $ 43,626   $ 37,777
      Current portion of long-term debt (Note 12) ..............................      1,045     12,185
      Income taxes payable .....................................................      3,916     10,944
      Accrued insurance ........................................................     38,894     26,350
      Accrued salaries and wages ...............................................     19,952     17,030
      Current liabilities of discontinued operations (Note 6) ..................         --     22,117
      Other current liabilities (Note 13) ......................................     61,462     42,777
                                                                                   --------   --------
         Total current liabilities .............................................    168,895    169,180
   Deferred income taxes (Note 9) ..............................................     22,304     16,814
   Long-term debt (Note 12) ....................................................    234,058    279,510
   Deferred compensation liabilities (Note 14) .................................     21,275     18,311
   Noncurrent liabilities of discontinued operations (Note 6) ..................         --        811
   Other liabilities ...........................................................      4,378      8,848
   Commitments and contingencies (Notes 13, 15, 19, 22, 23)
                                                                                   --------   --------
            Total Liabilities ..................................................    450,910    493,474
                                                                                   --------   --------

STOCKHOLDERS' EQUITY
   Capital stock - authorized 40,000,000 shares $1 par; issued 28,373,872
      shares (2004 - 13,491,341 pre-split shares) ..............................     28,374     13,491
   Paid-in capital .............................................................    237,917    212,691
   Retained earnings ...........................................................    171,188    141,542
   Treasury stock - 2,394,272 shares (2004 - 983,128 pre-split shares), at
      cost .....................................................................    (52,127)   (33,873)
   Unearned compensation (Note 14) .............................................     (3,007)    (3,590)
   Deferred compensation payable in Company stock (Note 14) ....................      2,379      2,375
   Notes receivable for shares sold (Note 18) ..................................       (549)      (544)
                                                                                   --------   --------
            Total Stockholders' Equity .........................................    384,175    332,092
                                                                                   --------   --------
            Total Liabilities and Stockholders' Equity .........................   $835,085   $825,566
                                                                                   ========   ========
</TABLE>

The Notes to Consolidated Financial Statements are integral parts of this
statement.


8
<PAGE>

CONSOLIDATED STATEMENT OF CASH FLOWS

Chemed Corporation and Subsidiary Companies

<TABLE>
<CAPTION>
(in thousands) For the Years Ended December 31,                                          2005        2004       2003
- -----------------------------------------------                                       ---------   ---------   --------
<S>                                                                                   <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income/(loss) ..............................................................   $  35,817   $  27,512   $ (3,435)
   Adjustments to reconcile net income/(loss) to net cash provided by operations:
      Depreciation and amortization ...............................................      21,501      18,321      9,821
      Provision for uncollectible accounts receivable .............................       7,224       6,155      1,497
      Noncash portion of long-term incentive compensation .........................       4,813       4,988         --
      Provision for deferred income taxes (Note 9) ................................      (3,682)      5,002      1,214
      Write-off of unamortized debt issuance costs ................................       2,871          --         --
      Amortization of debt issuance costs .........................................       1,834       1,861         --
      Discontinued operations (Note 6) ............................................       1,888      (8,326)    14,623
      Equity in loss/(earnings) of affiliate (Note 3) .............................          --       4,105       (922)
      Gains on redemption and sales of available-for-sale investments .............          --          --     (5,390)
      Changes in operating assets and liabilities, excluding
         amounts acquired in business combinations:
         Increase in accounts receivable ..........................................     (37,753)     (6,534)    (1,843)
         Decrease/(increase) in inventories .......................................         520        (986)      (618)
         Decrease/(increase) in prepaid expenses and other current assets .........          76      11,659       (801)
         Increase/(decrease) in accounts payable and other current liabilities ....      33,036      (2,497)       502
         Increase in income taxes .................................................      14,112      21,374      2,972
         Decrease/(increase) in other assets ......................................      (2,003)      5,607     (2,041)
         Increase/(decrease) in other liabilities .................................      (1,142)       (627)     2,842
      Noncash expense of internally financed ESOPs ................................       1,060       1,894      1,740
      Other sources/(uses) ........................................................       1,400      (1,044)     1,129
                                                                                      ---------   ---------   --------
         Net cash provided by continuing operations ...............................      81,572      88,464     21,290
         Net cash (used)/provided by discontinued operations (Note 6)                    (1,559)      4,426      2,487
                                                                                      ---------   ---------   --------
         Net cash provided by operating activities ................................      80,013      92,890     23,777
                                                                                      ---------   ---------   --------
CASH FLOWS FROM INVESTING ACTIVITIES
   Capital expenditures ...........................................................     (25,956)    (18,290)   (10,381)
   Net proceeds/(uses) from sale of discontinued operations (Note 6) ..............      (9,367)       (759)     1,091
   Business combinations, net of cash acquired (Note 7) ...........................      (6,207)   (344,727)    (3,850)
   Proceeds from sales of property and equipment ..................................         157         772        555
   Deposit to secure merger offer .................................................          --      10,000    (10,000)
   Proceeds from redemption of available-for-sale securities (Note 3) .............          --          --     27,270
   Proceeds from sales of investments .............................................          --          --      4,493
   Purchase of equity investment in affiliate (VITAS) (Note 3) ....................          --          --    (17,999)
   Investing activities of discontinued operations (Note 6) .......................          --         (98)     1,396
   Other uses .....................................................................        (369)       (107)      (357)
                                                                                      ---------   ---------   --------
      Net cash used by investing activities .......................................     (41,742)   (353,209)    (7,782)
                                                                                      ---------   ---------   --------
CASH FLOWS FROM FINANCING ACTIVITIES
   Repayment of long-term debt (Note 12) ..........................................    (141,592)    (96,940)       (92)
   Proceeds from issuance of long-term debt (Note 12) .............................      85,000     295,000         --
   Proceeds from exercise of stock options (Note 18) ..............................      12,327       3,721      3,287
   Purchases of treasury stock ....................................................      (7,401)     (2,654)      (637)
   Increase/(decrease) in cash overdraft payable ..................................       6,752       1,265       (925)
   Dividends paid .................................................................      (6,172)     (5,718)    (4,761)
   Debt issuance costs ............................................................      (1,755)    (14,447)        --
   Issuance of capital stock, net of costs (Note 7) ...............................          --      95,102         --
   Collection of stock subscription note receivable ...............................          --       8,053         --
   Financing activities of discontinued operations (Note 6) .......................          --        (255)      (317)
   Redemption of convertible junior subordinated securities (Note 20) .............          --      (2,735)        --
   Other sources ..................................................................         255         687        568
                                                                                      ---------   ---------   --------
      Net cash provided/(used) by financing activities ............................     (52,586)    281,079     (2,877)
                                                                                      ---------   ---------   --------
INCREASE IN CASH AND CASH EQUIVALENTS .............................................     (14,315)     20,760     13,118
Cash and cash equivalents at beginning of year ....................................      71,448      50,688     37,570
                                                                                      ---------   ---------   --------
Cash and cash equivalents at end of year ..........................................   $  57,133   $  71,448   $ 50,688
                                                                                      =========   =========   ========
</TABLE>

The Notes to Consolidated Financial Statements are integral parts of this
statement.


                                                                               9

<PAGE>

CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY

Chemed Corporation and Subsidiary Companies

<TABLE>
<CAPTION>
(in thousands,                 Capital   Paid-in  Retained
except per share data)          Stock    Capital  Earnings
- ----------------------         -------  --------  --------
<S>                            <C>      <C>       <C>
   Balance at December 31,
      2002 ................... $13,448  $168,299  $127,938
Net loss .....................      --        --    (3,435)
Dividends paid ($0.48 per
   share - pre-split) ........      --        --    (4,761)
Decrease in unearned
   compensation (Note 14) ....      --        --        --
Stock awards and exercise of
   stock options (Note 18) ...       3     1,620        --
Other comprehensive loss .....      --        --        --
Decrease in notes receivable
   (Note 18) .................      --        --        --
Purchases of treasury stock ..      --        --        --
Distribution of assets to
   settle deferred
   compensation liabilities ..      --        --        --
Other ........................       2       582         4
                               -------  --------  --------
   Balance at December 31,
      2003 ...................  13,453   170,501   119,746
Net income ...................      --        --    27,512
Dividends paid ($0.48 per
   share - pre-split) ........      --        --    (5,718)
Stock awards and exercise of
   stock options (Note 18) ...     130    10,650        --
Retirement of treasury
   shares ....................    (400)  (12,076)       --
Issuance of common shares
   (Note 7) ..................      --    32,722        --
Decrease in notes receivable
   (Note 18) .................      --        --        --
Purchases of treasury stock ..      --        --        --
Conversion of convertible
   preferred securities ......     308    10,639        --
Other ........................      --       255         2
                               -------  --------  --------
   BALANCE AT DECEMBER 31,
      2004 ...................  13,491   212,691   141,542
NET INCOME ...................      --        --    35,817
DIVIDENDS PAID ($0.24 PER
   SHARE) . ..................      --        --    (6,172)
STOCK AWARDS AND EXERCISE OF
   STOCK OPTIONS (NOTE 18) ...   1,028    38,860        --
DECREASE IN NOTES RECEIVABLE
   (NOTE 18) .................      --        --        --
PURCHASES OF TREASURY STOCK ..      --        --        --
IMPACT OF COMMON SHARE SPLIT
   (NOTE 25) .................  13,855   (13,855)       --
OTHER ........................      --       221         1
                               -------  --------  --------
   BALANCE AT DECEMBER 31,
      2005 ................... $28,374  $237,917  $171,188
                               =======  ========  ========
</TABLE>

The Notes to Consolidated Financial Statements are integral parts of this
statement.

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME/(LOSS)

Chemed Corporation and Subsidiary Companies

<TABLE>
<CAPTION>
(in thousands) For the Years Ended December 31,                          2005      2004      2003
- -----------------------------------------------                        -------   -------   -------
<S>                                                                    <C>       <C>       <C>
Net income/(loss) ..................................................   $35,817   $27,512   $(3,435)
                                                                       -------   -------   -------
Other comprehensive income/(loss), net of income tax:
   Unrealized holding gains/(losses) on available-for-sale
      investments arising during the period ........................        --        --      (334)
   Less: Reclassification adjustment for gains on available-for-sale
      investments arising during the period ........................        --        --    (3,351)
                                                                       -------   -------   -------
      Total ........................................................        --        --    (3,685)
                                                                       -------   -------   -------
Comprehensive income/(loss) ........................................   $35,817   $27,512   $(7,120)
                                                                       =======   =======   =======
</TABLE>

The Notes to Consolidated Financial Statements are integral parts of this
statement.


10


<PAGE>
<TABLE>
<CAPTION>
                          Deferred
                        Compensation  Accumulated     Notes
 Treasury                Payable in      Other     Receivable
  Stock-     Unearned      Company   Comprehensive for Shares
 at Cost   Compensation     Stock        Income       Sold      Total
- ---------  ------------ ------------ ------------- ---------- --------
<S><C>        <C>          <C>          <C>           <C>        <C>

$(111,582)   $(4,694)      $2,280       $ 3,685     $  (952)  $198,422
       --         --           --            --          --     (3,435)

       --         --           --            --          --     (4,761)

       --      1,740           --            --          --      1,740

    2,216         --           --            --          --      3,839
       --         --           --        (3,685)         --     (3,685)

      (23)        --           --            --          18         (5)
      (69)        --           --            --          --        (69)


       31         --          (31)           --          --         --
       --         --           59            --          --        647
- ---------    -------       ------       -------     -------   --------

 (109,427)    (2,954)       2,308            --        (934)   192,693
       --         --           --            --          --     27,512

       --         --           --            --          --     (5,718)

      771     (2,530)          --            --          --      9,021

   12,476         --           --            --          --         --

   62,380         --           --            --          --     95,102

      (10)        --           --            --         390        380
      (63)     1,894           --            --          --      1,831

       --         --           --            --          --     10,947
       --         --           67            --          --        324
- ---------    -------       ------       -------     -------   --------

  (33,873)    (3,590)       2,375            --        (544)   332,092
       --         --           --            --          --     35,817

       --         --           --            --          --     (6,172)

  (18,204)      (477)          --            --          --     21,207

       (9)        --           --            --          (5)       (14)
      (41)     1,060           --            --          --      1,019

       --         --           --            --          --         --
       --         --            4            --          --        226
- ---------    -------       ------       -------     -------   --------

$ (52,127)   $(3,007)      $2,379       $    --     $  (549)  $384,175
=========    =======       ======       =======     =======   ========
</TABLE>

                                                                              11
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Chemed Corporation and Subsidiary Companies

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

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

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Chemed
Corporation and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated. Long-term investments in affiliated companies
representing ownership interests of 20% to 50% were accounted for using the
equity method.

     Effective January 1, 2004, we adopted the provisions of Financial
Accounting Standards Board ("FASB") Interpretation No. 46R "Consolidation of
Variable Interest Entities--an interpretation of Accounting Research Bulletin
No. 51 (revised)" ("FIN 46R") relative to contractual relationships with our
independent contractors and franchisees. FIN 46R requires the primary
beneficiary of a Variable Interest Entity ("VIE") to consolidate the accounts of
the VIE. We have evaluated the relationships with our independent contractors
and franchisees based upon guidance provided in FIN 46R and have concluded that
certain of the independent contractors may be VIEs. Based on our evaluation, the
franchisees are not VIEs. We believe consolidation, if required, of the accounts
of any independent contractor for which we might be the primary beneficiary
would not materially impact our financial position or results of operations.

CASH EQUIVALENTS

     Cash equivalents comprise short-term, highly liquid investments that have
been purchased within three months of their dates of maturity.

ACCOUNTS AND LOANS RECEIVABLE AND CONCENTRATION OF RISK

     Accounts and loans receivable are recorded at the principal balance
outstanding less estimated allowances for uncollectible accounts. For the
Roto-Rooter segment, allowances for trade accounts receivable are generally
provided for accounts more than 90 days past due, although collection efforts
continue beyond that time. Due to the small number of loans receivable
outstanding, allowances for loan losses are determined on a case-by-case basis.
For the VITAS segment, allowances for patient accounts receivable are generally
provided on accounts more than 240 days old plus an appropriate percentage of
accounts not yet 240 days old. Final write-off of overdue accounts or loans
receivable is made when all reasonable collection efforts have been made and
payment is not forthcoming. We closely monitor our receivables and periodically
review procedures for granting credit to attempt to hold losses to a minimum.

     As of December 31, 2005 and 2004, approximately 65% and 56%, respectively
of VITAS' total accounts receivable balance were due from Medicare and 27% and
32%, respectively of VITAS' total accounts receivable balance were due from
various state Medicaid programs. We closely monitor our programs to ensure
compliance with Medicare and Medicaid regulations.

INVENTORIES

     Substantially all of the inventories are either general merchandise or
finished goods. Inventories are stated at the lower of cost or market. For
determining the value of inventories, cost methods that reasonably approximate
the first-in, first-out ("FIFO") method are used.

OTHER INVESTMENTS

     At December 31, 2005 and 2004, other investments, which are classified as
available-for-sale, comprise a common stock purchase warrant in privately held
Patient Care Inc. ("Patient Care"), our former subsidiary. As further discussed
in Note 16, our investment in the Patient Care warrant is carried at cost,
subject to write-down for impairment.

     All investments are reviewed periodically for impairment based on available
market and financial data. If the market value or net realizable value of the
investment is less than our cost and the decline is determined to be other than
temporary, a write-down to fair value is made, and a realized loss is recorded
in the statement of operations. In calculating realized gains and losses on the
sales of investments, the specific-identification method is used to determine
the cost of investments sold.


12

<PAGE>

Chemed Corporation and Subsidiary Companies

DEPRECIATION AND PROPERTIES AND EQUIPMENT

     Depreciation of properties and equipment is computed using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the lesser of the remaining lease terms
(excluding option terms) or their useful lives. Expenditures for maintenance,
repairs, renewals and betterments that do not materially prolong the useful
lives of the assets are expensed as incurred. The cost of property retired or
sold and the related accumulated depreciation are removed from the accounts, and
the resulting gain or loss is reflected currently in income.

     Expenditures for major software purchases and software developed for
internal use are capitalized and depreciated using the straight-line method over
the estimated useful lives of the assets. For software developed for internal
use, external direct costs for materials and services and certain internal
payroll and related fringe benefit costs are capitalized in accordance with
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use."

     The weighted average lives of our property and equipment at December 31,
2005, were:

<TABLE>
<S>                        <C>
Buildings                  17.1 yrs.
Transportation equipment    5.9
Machinery and equipment     6.1
Computer software           4.5
Furniture and fixtures      5.1
</TABLE>

GOODWILL AND INTANGIBLE ASSETS

     Identifiable, definite-lived intangible assets arise from purchase business
combinations and are amortized using either an accelerated method or the
straight-line method over the estimated useful lives of the assets. The
selection of an amortization method is based on which method best reflects the
economic pattern of usage of the asset. The VITAS trade name is considered to
have an indefinite life. Goodwill and the VITAS trade name are tested at least
annually for impairment.

     The weighted average lives of our identifiable, definite-lived intangible
assets at December 31, 2005, were:

<TABLE>
<S>                         <C>
Covenants not to compete    6.3 yrs.
Referral networks           9.9
Customer lists             13.3
</TABLE>

LONG-LIVED ASSETS

     We periodically make an estimation and valuation of the future benefits of
our long-lived assets (other than goodwill and the VITAS trade name) based on
key financial indicators. If the projected undiscounted cash flows of a major
business unit indicate that property and equipment or identifiable,
definite-lived intangible assets have been impaired, a write-down to fair value
is made. No events occurred during the year ended December 31, 2005 that
indicated an impairment assessment was required.

OTHER ASSETS

     Debt issuance costs are included in other assets and are amortized using
the effective interest method over the life of the debt.

REVENUE RECOGNITION

     For both the Roto-Rooter and VITAS segments, service revenues and sales are
recognized when the earnings process has been completed. Generally, this occurs
when services are provided or products are delivered. VITAS recognizes revenue
at the estimated net realizable amount due from third-party payers, which are
primarily Medicare and Medicaid. Payers may deny payment for services in whole
or in part on the basis that such services are not eligible for coverage and do
not qualify for reimbursement. We estimate denials each period and make adequate
provision in the financial statements.

     VITAS is subject to certain limitations on Medicare payments for services.
Specifically, if the number of inpatient care days any hospice program provides
to Medicare beneficiaries exceeds 20% of the total days of hospice care such
program provided to all Medicare patients for an annual period beginning
September 28, the days in excess of the 20% figure may be reimbursed only at the
routine homecare rate. None of VITAS' hospice programs exceeded the payment
limits on inpatient services in 2005 or 2004.


                                                                              13

<PAGE>

Chemed Corporation and Subsidiary Companies

     VITAS is also subject to a Medicare annual per-beneficiary cap ("Medicare
Cap"). Compliance with the Medicare Cap is measured by comparing the total
Medicare payments received under a Medicare provider number with respect to
services provided to all Medicare hospice care beneficiaries in the program or
programs covered by that Medicare provider number between November 1 of each
year and October 31 of the following year with the product of the
per-beneficiary cap amount and the number of Medicare beneficiaries electing
hospice care for the first time from that hospice program or programs from
September 28 through September 27 of the following year.

     We actively monitor each of our hospice programs, by provider number, for
their Medicare revenue, admissions, discharge rate and average length of stay
data in an attempt to determine whether they are likely to exceed the Medicare
Cap. Should we determine a provider number is likely to exceed the Medicare Cap
based on projected trends, we attempt to institute corrective action to
influence the patient mix or to increase patient admissions. However, should we
project our corrective action will not prevent that program from exceeding its
Medicare Cap, we estimate the amount we will be required to repay at the end of
the measurement year and accrue that amount, which is proportional to the number
of months elapsed in the Medicare Cap year, as a reduction of patient revenue.

     As discussed in Note 7, during the second quarter of 2005, we determined
that the Phoenix, AZ facility, which was acquired in December 2004, had exceeded
the Medicare Cap for the measurement period ended October 31, 2005. An estimated
liability of $1.0 million was recorded at that time. We increased the liability
in the fourth quarter of 2005 to $2.4 million based on revised estimates. The
increase in the estimated liability from the second quarter to the fourth
quarter is the result of a change in the discharge trends for patients admitted
prior to our acquisition of the Phoenix facility. Because the estimated Medicare
Cap liability is related to patients being cared for at the time of acquisition,
this liability was recorded as an assumed liability. None of VITAS' other
programs exceeded the Medicare Cap in 2005 or 2004.

GUARANTEES

     In the normal course of business, we enter into various guarantees and
indemnifications in our relationships with customers and others. Examples of
these arrangements include guarantees of services for periods ranging from one
day to one year and product satisfaction guarantees. Our experience indicates
guarantees and indemnifications do not materially impact our financial condition
or results of operations. Based on our experience, no liability for guarantees
has been recorded as of December 31, 2005 or 2004.

OPERATING EXPENSES

     Cost of services provided and goods sold (excluding depreciation) includes
salaries, wages and benefits of service providers and field personnel, material
costs, medical supplies and equipment, pharmaceuticals, insurance costs, service
vehicle costs and other expenses directly related to providing service revenues
or generating sales. Selling, general and administrative expenses include
salaries, wages and benefits of selling, marketing and administrative employees,
advertising expenses, communications and branch telephone expenses, office rent
and operating costs, legal, banking and professional fees and other
administrative costs.

ADVERTISING

     We expense the production costs of advertising the first time the
advertising takes place. Costs of yellow pages listings are expensed when the
directories are placed in circulation. These directories are generally in
circulation for approximately one year, at which point they are replaced by the
publisher with a new directory. We do not control the timing of when a new
directory is placed in circulation. Other advertising costs are expensed as
incurred. Advertising expense for continuing operations for the year ended
December 31, 2005, was $21.2 million (2004--$20.0 million; 2003--$16.4 million).

COMPUTATION OF EARNINGS PER SHARE

     Earnings per share are computed using the weighted average number of shares
of capital stock outstanding. Diluted earnings per share reflect the dilutive
impact of our outstanding stock options and nonvested stock awards. Diluted
earnings per share also assumed the conversion of the Convertible Junior
Subordinated Debentures ("CJSD") into capital stock prior to the redemption of
the CJSD in 2004, only when the impact was dilutive on earnings per share from
continuing operations. Stock options whose exercise price are greater than the
average market price of our stock are excluded from the computation of diluted
earnings per share.

EMPLOYEE STOCK OWNERSHIP PLANS

     Contributions to our Employee Stock Ownership Plans ("ESOP") are based on
established debt repayment schedules. Shares are allocated to participants based
on the principal and interest payments made during the period. Our policy is to
record ESOP expense by applying the transition rule under the level-principal
amortization concept.


14

<PAGE>

Chemed Corporation and Subsidiary Companies

STOCK-BASED COMPENSATION PLANS

     We use Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting
for Stock Issued to Employees", to account for stock-based compensation. Since
our stock options qualify as fixed options under APB 25 and since the option
price equals the market price on the date of grant, there is no compensation
cost recorded for stock options. Restricted stock is recorded as compensation
cost over the requisite vesting periods on a straight-line basis, based on the
market value on the date of grant.

     The following table illustrates the effect on net income/(loss) and
earnings/(loss) per share if we had applied the fair-value-recognition
provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation"
(in thousands, except per share data):

<TABLE>
<CAPTION>
                                          For the Years Ended December 31,
                                          --------------------------------
                                               2005      2004      2003
                                             -------   -------   -------
<S>                                       <C>          <C>       <C>
Net income/(loss), as reported               $35,817   $27,512   $(3,435)
Add: stock-based compensation expense
   included in the determination of net
   income/(loss), net of income taxes          4,314     3,940        95
Deduct: total stock-based employee
   compensation determined under
   a fair-value-based method for all
   stock options and awards, net of
   related income taxes                       (8,519)   (8,259)     (952)
                                             -------   -------   -------
      Pro forma net income/(loss)            $31,612   $23,193   $(4,292)
                                             =======   =======   =======
Earnings/(loss) per share
   As reported                               $  1.40   $  1.14   $ (0.17)
                                             =======   =======   =======
   Pro forma                                 $  1.24   $  0.96   $ (0.22)
                                             =======   =======   =======
Diluted earnings/(loss) per share
   As reported                               $  1.36   $  1.12   $ (0.17)
                                             =======   =======   =======
   Pro forma                                 $  1.20   $  0.94   $ (0.22)
                                             =======   =======   =======
</TABLE>

     The above pro forma data were calculated using the Black-Scholes option
valuation method to value our stock options granted in 2005 and prior years. Key
assumptions include:

<TABLE>
<CAPTION>
                                   For the Years Ended December 31,
                                   --------------------------------
                                        2005     2004     2003
                                       ------   ------   ------
<S>                                <C>          <C>      <C>
Weighted average grant-date fair
   value of options granted            $12.43   $ 6.80   $ 5.07
Risk-free interest rate                   4.0%     3.9%     3.2%
Expected volatility                      30.9%    30.3%    27.8%
Expected life of options                5 yrs.   5 yrs.   6 yrs.
</TABLE>

     For options granted in 2003, it was assumed that we would increase the
annual dividend $0.005 per share per quarter biannually in the fourth quarter.
For options granted in 2005 and 2004, it was assumed that the annual dividend
would remain at $0.24 per share for the life of the options. These assumptions
were based on the facts and circumstances that existed at the time options were
granted and should not be construed to be an indication of any future dividend
amounts to be paid.

INSURANCE ACCRUALS

     For our Roto-Rooter segment and Corporate Office, we self-insure for all
casualty insurance claims (workers' compensation, auto liability and general
liability). As a result, we closely monitor and frequently evaluate our
historical claims experience to estimate the appropriate level of accrual for
self-insured claims. Our third-party administrator ("TPA") processes and reviews
claims on a monthly basis. Currently, our exposure on any single claim is capped
at $500,000. For most of the prior years, the caps for general liability and
workers' compensation were between $250,000 and $500,000 per claim. In
developing our estimates, we accumulate historical claims data for the previous
10 years to calculate loss


                                                                              15

<PAGE>

Chemed Corporation and Subsidiary Companies

development factors ("LDF") by insurance coverage type. LDFs are applied to
known claims to estimate the ultimate potential liability for known and unknown
claims for each open policy year. LDFs are updated annually. Because this
methodology relies heavily on historical claims data, the key risk is whether
the historical claims are an accurate predictor of future claims exposure. The
risk also exists that certain claims have been incurred and not reported on a
timely basis. To mitigate these risks, in conjunction with our TPA, we closely
monitor claims to ensure timely accumulation of data and compare claims trends
with the industry experience of our TPA.

     For the VITAS segment, we self-insure for workers' compensation exposures.
Currently, VITAS' exposure on any single claim is capped at $500,000. For most
of the prior years, the caps for workers' compensation were between $250,000 and
$500,000 per claim. For VITAS' self-insurance accruals for workers'
compensation, we obtained an actuarial valuation of the liability as of the date
of acquisition and as of November 30, 2005 and 2004. The valuation methods used
by the actuary are similar to those used internally for our other business
units.

TAXES ON INCOME

     Deferred taxes are provided on an asset and liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss carry-forwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amount of assets and liabilities and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in our opinion, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in laws and rates on the date of enactment.

     We are subject to income taxes in Canada, the U.S. Federal and most state
jurisdictions. Significant judgment is required to determine our provision for
income taxes. We are periodically audited by various taxing authorities. We
establish liabilities for possible assessments by taxing authorities resulting
from exposures including, but not limited to, the deductibility of certain
expenses and the tax treatment of acquisitions and divestitures. While it is
often difficult to predict the final outcome or the timing of resolution of any
particular tax matter, we believe our tax reserves reflect the probable outcome
of known contingencies, including interest and penalties, if applicable.

     On June 30, 2005, the State of Ohio enacted significant changes to its tax
system. The impact was required to be accounted for in all annual and interim
periods ending on or after June 30, 2005. Changes include the phasing out of the
Ohio income tax and the Ohio personal property tax. Additionally, a new
Commercial Activity Tax ("CAT"), which is based on gross receipts, was
introduced. Since the corporate income tax was replaced by the CAT, which is not
an income tax under generally accepted accounting principles, entities with
businesses in the State of Ohio must account for the phase-out of the corporate
income tax as a change in enacted tax rate as of June 30, 2005. We historically
recorded a valuation allowance on all significant deferred tax amounts in the
State of Ohio, primarily net operating loss carry-forwards, because we believed
it was more likely than not that the benefit would expire unutilized. As such,
there was no significant impact to us for the year ended December 31, 2005.

ESTIMATES

     The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and assumptions that affect amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates. Disclosures of aftertax expenses and adjustments are based on
estimates of the effective income tax rates for the applicable segments.

RECLASSIFICATIONS

     Certain prior year amounts have been reclassified to conform to the 2005
presentation. As discussed in Note 25, prior period share and per share data has
been restated to retroactively reflect the impact of the capital stock split in
May 2005. The shares outstanding and in treasury reflected on the balance sheet
prior to May 11, 2005 have not been restated. Cash overdrafts payable have been
reclassified as a separate component of cash flow from financing activities in
the statement of cash flows for 2004 and 2003 to conform to the 2005
presentation.

RECENT ACCOUNTING STATEMENTS

     In December 2004, the Financial Accounting Standards Board ("FASB") issued
FASB Statement No. 123 (revised 2004) "Share-Based Payment" ("FASB123R"), which
requires companies to recognize in the income statement the grant-date fair
value of stock options and other equity-based compensation issued to employees
and disallows the use of the intrinsic value method of accounting for stock
options, but expresses no preference for a type of valuation model. This
statement supersedes APB No. 25, but does not change the accounting guidance for
share-based payment transactions with parties other than employees provided in
FASB 123 as originally issued. FASB123R is effective as of January 1, 2006. In
March 2005, the Board of Directors approved immediate vesting of all unvested
stock options to avoid recognizing approximately $951,000 of pretax expense that
would have been charged to income under FASB123R beginning on January 1, 2006.
The pretax expense from continuing operations of accelerating the vesting of
these stock options, which were


16

<PAGE>

Chemed Corporation and Subsidiary Companies

scheduled to vest in November 2005 and November 2006, was approximately $215,000
and was recorded in the first quarter of 2005. We adopted FASB 123R on January
1, 2006 using the modified prospective method. Therefore, historical financial
information will not be restated. There was no significant impact on our
financial condition, results of operations or cash flow as a result of adoption
of FASB 123R.

     In May 2005, the FASB issued FASB Statement No. 154, "Accounting for
Changes and Error Corrections--a replacement of APB Opinion No. 20 and FASB
Statement No. 3." FASB 154 changes the requirements with regard to the
accounting for and reporting of a change in an accounting principle. The
provisions of FASB 154 require, unless impracticable, retrospective application
to prior periods presented in financial statements for all voluntary changes in
an accounting principle and changes required by the adoption of a new accounting
pronouncement in the unusual instance that the new pronouncement does not
indicate a specific transition method. FASB 154 also requires that a change in
depreciation, amortization or depletion method for long-lived, non-financial
assets be accounted for as a change in an accounting estimate, which requires
prospective application of the new method. FASB 154 is effective for all changes
in an accounting principle made in fiscal years beginning after December 15,
2005. We adopted FASB 154 with our fiscal year beginning January 1, 2006. There
was no impact on our financial condition, results of operations or cash flows
upon adoption.

     In February 2006, the FASB issued FASB Statement No. 155, "Accounting for
Certain Hybrid Financial Instruments", which nullifies and amends various
accounting guidance relating to accounting for derivative instruments and
securitization transactions. In general, these changes will reduce the
operational complexity associated with bifurcating embedded derivatives, and
increase the number of beneficial interests in securitization transactions. This
statement is effective for all financial instruments acquired or issued after
the beginning of our first fiscal year that begins after September 15, 2006.
Because we do not have any material derivative instruments or securitization
transactions, we believe there will be no material impact on our financial
condition, results of operations or cash flows upon adoption.

2. SEGMENTS AND NATURE OF THE BUSINESS

     Our segments comprise the VITAS segment and the Roto-Rooter segment
(formerly the Plumbing and Drain Cleaning segment). Service America has been
reclassified to discontinued operations for all periods presented. Relative
contributions of each segment to service revenues and sales were 68% and 32%,
respectively, in 2005. Relative contributions of each segment to service
revenues and sales were 62% and 38%, respectively, in 2004.

     The reportable segments have been defined along service lines which is
consistent with the way the businesses are managed. In determining reportable
segments, the Roto-Rooter Services; and Roto-Rooter Franchising and Products
operating units of the Roto-Rooter segment have been aggregated on the basis of
possessing similar operating and financial characteristics. The characteristics
of these operating segments and the basis for aggregation are reviewed annually.
Accordingly, the reportable segments are defined as follows:

          -    The VITAS segment provides hospice services for patients with
               severe, life-limiting illnesses. This type of care is aimed at
               making the terminally ill patient's final days as comfortable and
               pain-free as possible. Hospice care is typically available to
               patients who have been initially certified as terminally ill
               (i.e., a prognosis of six months or less) by their attending
               physician, if any, and the hospice physician. VITAS offers all
               levels of hospice care in a given market, including routine home
               care, inpatient care and continuous care. Over 90% of VITAS'
               revenues are derived through Medicare and Medicaid reimbursement
               programs.

          -    The Roto-Rooter segment provides repair and maintenance services
               to residential and commercial accounts using the Roto-Rooter
               registered service mark. Such services include plumbing and
               sewer, drain and pipe cleaning. They are delivered through
               company-owned and operated territories, independent
               contractor-operated territories and franchised locations. This
               segment also manufactures and sells products and equipment used
               to provide such services.

          -    We report corporate administrative expenses and unallocated
               investing and financing income and expense not directly related
               to either segment as "Corporate". Corporate administrative
               expense includes the stewardship, accounting and reporting,
               legal, tax and other costs of operating a publicly held
               corporation. Corporate investing and financing income and
               expenses include the costs and income associated with corporate
               debt and investment arrangements.

     The vast majority of our service revenues and sales from continuing
operations are generated from business within the United States.


                                                                              17

<PAGE>

Chemed Corporation and Subsidiary Companies

     Segment data for our continuing operations are set forth below (in
thousands, except footnote data):

<TABLE>
<CAPTION>
                                                          For the Years Ended December 31,
                                                          --------------------------------
                                                             2005       2004       2003
                                                           --------   --------   --------
<S>                                                       <C>         <C>        <C>
REVENUES BY TYPE OF SERVICE
   VITAS
      Routine homecare                                     $436,596   $317,010   $     --
      Continuous care                                       106,417     78,669         --
      General inpatient                                      86,127     63,051         --
                                                           --------   --------   --------
         Total segment                                      629,140    458,730         --
                                                           --------   --------   --------
   Roto-Rooter
      Sewer and drain cleaning                              116,918    111,867    106,127
      Plumbing repair and maintenance                       118,625    107,642    101,590
      Industrial and municipal sewer and drain cleaning      17,420     16,075     15,581
      Contractors                                            18,070     16,360     14,125
      HVAC repair and maintenance                             3,624      3,111      3,044
      Other products and services                            22,680     21,556     20,309
                                                           --------   --------   --------
         Total segment                                      297,337    276,611    260,776
                                                           --------   --------   --------
            Total service revenues and sales               $926,477   $735,341   $260,776
                                                           ========   ========   ========
AFTERTAX SEGMENT EARNINGS/ (LOSS)  (A) (B) (C)
   VITAS                                                   $ 33,587   $ 29,139   $     --
   Roto-Rooter                                               26,960     18,795     13,176
                                                           --------   --------   --------
      Total segment earnings                                 60,547     47,934     13,176
   Corporate                                                (22,842)   (24,643)    (2,910)
   Equity in VITAS earnings/(loss)                               --     (4,105)       922
   Discontinued operations                                   (1,888)     8,326    (14,623)
                                                           --------   --------   --------
      Net income/ (loss)                                   $ 35,817   $ 27,512   $ (3,435)
                                                           ========   ========   ========
INTEREST INCOME
   VITAS                                                   $  2,804   $  1,091   $     --
   Roto-Rooter                                                2,391      1,180        863
                                                           --------   --------   --------
      Subtotal                                                5,195      2,271        863
   Corporate                                                  1,809      1,403      2,155
   Intercompany eliminations                                 (4,794)    (1,800)      (595)
                                                           --------   --------   --------
      Total interest income                                $  2,210   $  1,874   $  2,423
                                                           ========   ========   ========
</TABLE>

(a)  2005 includes the estimated cost for the anticipated settlement of a
     lawsuit of $10,757,000 aftertax (VITAS), payouts under our 2002 Executive
     Long-term Incentive Plan ("LTIP") of $1,774,000 aftertax (Corporate),
     $1,043,000 aftertax (VITAS) and $617,000 aftertax (Roto-Rooter), the
     prepayment penalty incurred on the early extinguishment of debt of
     $2,523,000 aftertax (Corporate), a favorable adjustment of $1,014,000
     aftertax (Roto-Rooter) for casualty insurance related to prior periods'
     experience, legal expenses of $397,000 aftertax (VITAS) incurred in
     connection with the Office of Inspector General ("OIG") investigation,
     additional favorable VITAS transaction adjustments of $961,000 aftertax
     (Corporate), the cost of accelerating vesting of stock options of $137,000
     aftertax (Corporate) and favorable tax adjustments and settlements from
     prior year returns of $835,000 aftertax (Corporate) and $1,126,000
     (Roto-Rooter).

(b)  2004 includes payouts under our LTIP of $4,455,000 aftertax (Corporate) and
     $982,000 aftertax (Roto-Rooter), the prepayment penalty incurred on the
     early extinguishment of debt of $2,030,000 aftertax (Corporate), the
     estimated cost for the anticipated settlement of a lawsuit of $1,897,000
     aftertax (Roto-Rooter), expenses related to debt registration of $727,000
     aftertax (Corporate), our aftertax share of VITAS' charges related to the
     acquisition of VITAS amounting to $4,621,000 (Equity in VITAS
     earnings/(loss)), additional VITAS transaction costs and adjustments of a
     charge of $1,008,000 aftertax (VITAS) and a credit of $786,000 aftertax
     (Corporate), and favorable tax adjustments and settlements from prior year
     returns of $990,000 aftertax (Corporate) and $630,000 (Roto-Rooter).

(c)  2003 includes severance charges of $2,358,000 aftertax (Corporate) and
     aftertax capital gains on the sales and redemption of investments
     (Corporate) amounting to $3,351,000.


18
<PAGE>

Chemed Corporation and Subsidiary Companies

<TABLE>
<CAPTION>
                                            For the Years Ended December 31,
                                            --------------------------------
                                               2005       2004       2003
                                             --------   --------   --------
<S>                                         <C>         <C>        <C>
INTEREST EXPENSE
   VITAS                                     $    153   $    128   $     --
   Roto-Rooter                                    563        206        170
                                             --------   --------   --------
      Subtotal                                    716        334        170
   Corporate                                   20,548     20,824      3,007
                                             --------   --------   --------
      Total interest expense                 $ 21,264   $ 21,158   $  3,177
                                             ========   ========   ========
INCOME TAX PROVISION (D) (E)
   VITAS                                     $ 20,394   $ 20,030   $     --
   Roto-Rooter                                 15,635     10,611      8,054
                                             --------   --------   --------
      Subtotal                                 36,029     30,641      8,054
   Corporate                                  (16,451)   (16,845)    (1,874)
                                             --------   --------   --------
      Total income tax provision             $ 19,578   $ 13,796   $  6,180
                                             ========   ========   ========
IDENTIFIABLE ASSETS
   VITAS                                     $532,299   $502,810   $     --
   Roto-Rooter                                179,063    174,310    172,257
                                             --------   --------   --------
      Total identifiable assets               711,362    677,120    172,257
   Corporate (f)                              123,723    129,344    129,664
   Discontinued operations                         --     19,102     26,537
                                             --------   --------   --------
      Total assets                           $835,085   $825,566   $328,458
                                             ========   ========   ========
ADDITIONS TO LONG-LIVED ASSETS (G)
   VITAS                                     $ 24,462   $434,509   $     --
   Roto-Rooter                                  7,938      8,690     12,610
                                             --------   --------   --------
      Subtotal                                 32,400    443,199     12,610
   Corporate (f)                                  443        785      1,621
                                             --------   --------   --------
      Total additions                        $ 32,843   $443,984   $ 14,231
                                             ========   ========   ========
DEPRECIATION AND AMORTIZATION (H)
   VITAS                                     $ 11,932   $  9,061   $     --
   Roto-Rooter                                  8,361      8,702      9,481
                                             --------   --------   --------
      Subtotal                                 20,293     17,763      9,481
   Corporate                                    1,208        558        340
                                             --------   --------   --------
      Total depreciation and amortization    $ 21,501   $ 18,321   $  9,821
                                             ========   ========   ========
</TABLE>

(d)  2005 includes favorable tax adjustments and settlements from prior year
     returns of $835,000 (Corporate) and $1,126,000 (Roto-Rooter).

(e)  2004 includes favorable tax adjustments and settlements from prior year
     returns of $990,000 (Corporate) and $630,000 (Roto-Rooter).

(f)  Corporate assets consist primarily of cash and cash equivalents, marketable
     securities, properties and equipment and other investments.

(g)  Long-lived assets include goodwill, identifiable intangible assets and
     property and equipment.

(h)  Depreciation and amortization include amortization of identifiable,
     definite-lived intangible assets and stock awards.

3.   EQUITY INTEREST IN AFFILIATE (VITAS)

     Until February 23, 2004, we held a 37% interest in privately held VITAS. On
August 18, 2003, VITAS retired our investment in the 9% Redeemable Preferred
Stock of VITAS. Cash proceeds to us totaled $27.3 million, and we realized a
pretax gain of $1.8 million ($1.2 million aftertax) on the redemption of
preferred stock in the third quarter of 2003. During 2003, the dividends and
amortization of preferred stock discount on this investment contributed $1.6
million to our aftertax earnings. On October 14, 2003, we exercised two of our
three warrants to purchase 4,158,000 common shares of VITAS, or 37%, for $18
million in cash. See Note 7 regarding the acquisition of the 63% of VITAS we did
not own in 2003.


                                                                              19

<PAGE>

Chemed Corporation and Subsidiary Companies

     During the period January 1 through February 23, 2004, VITAS recognized a
net loss of $18.3 million due to the recognition of approximately $20.9 million
of aftertax costs related to VITAS' sale of its business to us. Our aftertax
share of VITAS' loss for this period was $ 4.1 million. Included in the aftertax
costs related to VITAS' sale of its business are the following (in thousands):

<TABLE>
<S>                                                                     <C>
Accrual for potential severance costs under key employment agreements   $10,975
Legal and valuation costs                                                 6,665
Loss on write-off of VITAS' deferred debt issuance costs                  2,698
Other                                                                       592
                                                                        -------
   Total                                                                $20,930
                                                                        =======
</TABLE>

4.   GOODWILL AND INTANGIBLE ASSETS

     Amortization of definite-lived intangible assets from continuing operations
was (in thousands):

<TABLE>
<CAPTION>
For the Years Ended December 31,
- --------------------------------
       2005     2004    2003
      ------   ------   ----
<S>            <C>      <C>
      $4,438   $3,468   $130
</TABLE>

     The following is a schedule by year of projected amortization expense for
definite-lived intangible assets (in thousands):

<TABLE>
<S>    <C>
2006   $4,412
2007    4,378
2008    4,371
2009    4,363
2010    3,788
</TABLE>

     The balance in identifiable intangible assets comprises the following (in
thousands):

<TABLE>
<CAPTION>
                                            Gross     Accumulated   Net Book
                                            Asset    Amortization     Value
                                           -------   ------------   --------
<S>                                        <C>       <C>            <C>
DECEMBER 31, 2005

REFERRAL NETWORKS                          $23,772     $(5,510)      $18,262
COVENANTS NOT TO COMPETE                     8,676      (3,236)        5,440
CUSTOMER LISTS                               1,222        (866)          356
                                           -------     -------       -------
   SUBTOTAL - DEFINITE-LIVED INTANGIBLES    33,670      (9,612)       24,058
VITAS TRADE NAME                            51,300          --        51,300
                                           -------     -------       -------
   TOTAL                                   $84,970     $(9,612)      $75,358
                                           =======     =======       =======
December 31, 2004

Referral network                           $20,900     $(2,348)      $18,552
Covenants not to compete                     8,676      (2,043)        6,633
Customer lists                               1,222        (783)          439
                                           -------     -------       -------
   Subtotal - definite-lived intangibles    30,798      (5,174)       25,624
VITAS trade name                            51,300          --        51,300
                                           -------     -------       -------
   Total                                   $82,098     $(5,174)      $76,924
                                           =======     =======       =======
</TABLE>


20

<PAGE>

Chemed Corporation and Subsidiary Companies

     The changes in the carrying amount of goodwill for the years ended December
31, 2004 and 2005 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                 Roto-
                                      VITAS     Rooter      Total
                                    --------   --------   --------
<S>                                 <C>        <C>        <C>
December 31, 2003                   $     --   $105,335   $105,335
Acquired in business combinations    324,330      2,918    327,248
Other adjustments                         --        149        149
                                    --------   --------   --------
   DECEMBER 31, 2004                 324,330    108,402    432,732
ACQUIRED IN BUSINESS COMBINATIONS        414        498        912
OTHER ADJUSTMENTS                         --        112        112
                                    --------   --------   --------
   DECEMBER 31, 2005                $324,744   $109,012   $433,756
                                    ========   ========   ========
</TABLE>

     We performed impairment tests of goodwill for all of our reporting units
and for the VITAS trade name as of December 31, 2005 and 2004. For all reporting
units included in continuing operations, these tests indicated that our goodwill
and VITAS trade name are not impaired. For the purpose of impairment testing, we
consider the reporting units to be VITAS, Roto-Rooter Services (plumbing and
drain cleaning services) and Roto-Rooter Franchising and Products (franchising
and manufacturing and sale of plumbing and drain cleaning products). Service
America, which was reclassified to discontinued operations in 2004, recognized a
goodwill impairment loss of $10.0 million in 2003 largely due to declining
revenues and poor operating results for several years.

5.   OTHER EXPENSES

     Other expenses from continuing operations include the following pretax
charges (in thousands):

<TABLE>
<CAPTION>
                                                                         For the Years Ended December 31,
                                                                         --------------------------------
                                                                                   2005      2004
                                                                                 -------   -------
<S>                                                                      <C>               <C>
Long-term incentive compensation (Note 19)                                       $ 5,477   $ 8,783
Accrual for lawsuit settlement (Note 22)                                          17,350     3,135
VITAS transaction costs and adjustments (Note 7)                                    (961)      442
Cost of accelerating the vesting of outstanding stock options (Note 1)               215        --
Professional fees incurred to register Floating Rate Notes (Note 12)                  --     1,191
                                                                                 -------   -------
   Total other expenses                                                          $22,081   $13,551
                                                                                 =======   =======
</TABLE>


                                                                              21
<PAGE>

Chemed Corporation and Subsidiary Companies

6. DISCONTINUED OPERATIONS

     Discontinued operations comprise (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                                            --------------------------------
                                                                                 2005     2004      2003
                                                                               -------   ------   --------
<S>                                                                         <C>          <C>      <C>
Service America (2004):
   Income/(loss) before income taxes                                           $   576   $ (535)  $(16,118)
   Income taxes                                                                   (241)     222      1,431
                                                                               -------   ------   --------
   Income/(loss) from operations, net of income taxes                              335     (313)   (14,687)
   (Loss)/gain on disposal, net of income tax benefit of $165
      and $14,230, respectively                                                 (2,148)   8,872         --
                                                                               -------   ------   --------
      Total Service America                                                     (1,813)   8,559    (14,687)
                                                                               -------   ------   --------
Adjustment to accruals of operations discontinued in prior years:
   Legal accruals (2002)                                                          (120)      --         --
   Environmental and sublease accruals (1991)                                       --     (700)        --
   Allowance for uncollectible notes receivable and other accruals (2001)
                                                                                    --      383         99
                                                                               -------   ------   --------
   Gain/(loss) before income taxes                                                (120)    (317)        99
   All other income taxes                                                           45       84        (35)
                                                                               -------   ------   --------
      Total adjustments                                                            (75)    (233)        64
                                                                               -------   ------   --------
         Total discontinued operations                                         $(1,888)  $8,326   $(14,623)
                                                                               =======   ======   ========
Earnings/(loss) per share                                                      $ (0.08)  $ 0.34   $  (0.73)
                                                                               =======   ======   ========
Diluted earnings/(loss) per share                                              $ (0.07)  $ 0.34   $  (0.73)
                                                                               =======   ======   ========
</TABLE>

     In December 2004, the Board of Directors authorized the discontinuance of
our Service America segment through an asset sale to employees of Service
America. The disposal was completed in May 2005. Our decision to dispose of
Service America, which provides major-appliance and heating/air conditioning
repair, maintenance and replacement services, was based on declining operating
results and projected operating losses. The acquiring corporation purchased the
substantial majority of Service America's assets in exchange for assuming
substantially all of Service America's liabilities. The loss on disposal of
Service America in 2005 arises from the finalization of asset and liability
values and related tax benefits resulting from the consummation of the sale
transaction. Included in the assets acquired is a receivable from us for
approximately $4.7 million. We paid $1 million of the amount upon closing and
the remainder is due over the following year in 11 equal installments. The
balance due Service America as of December 31, 2005 is $1.3 million. We
recognized a tax benefit of approximately $14.2 million on this disposal in
2004, primarily due to the recognition of non-deductible goodwill impairment
losses in prior years.

     During 2004, we increased our accrual for environmental liabilities related
to the disposal of DuBois Chemicals, Inc. ("DuBois") in 1991 by $700,000. The
adjustment is based on an assessment by our environmental attorney and ongoing
discussions with the U.S. Environmental Protection Agency.

     The $383,000 and $99,000 reductions to the allowance for uncollectible
notes receivable from Cadre Computer Resources Co. ("Cadre Computer") (sold in
2001) in 2004 and 2003, respectively, are attributable to Cadre Computer's
experiencing better-than-anticipated financial results and to the expiration of
$350,000 of Cadre Computer's line of credit with us.

     We sold Patient Care to an investor group that included Schroder Ventures
Life Sciences Group, Oak Investment Partners, Prospect Partners and Salix
Ventures in 2002. We have a $12.5 million senior subordinated note receivable
from Patient Care ("Note") due October 11, 2007, that bears interest at the
annual rate of 7.5% through September 30, 2004, 8.5% from October 1, 2004
through September 30, 2005, and 9.5% thereafter. The Note is presented on a
separate line in the consolidated balance sheet. At the time of sale, $5 million
was placed in escrow and is subject to the collection of Patient Care's
receivables with third-party payers. Of this amount, $2.5 million was
distributed to us in October 2003 and $1.7 million was distributed to us in
2004. No amounts were distributed in 2005. The remaining $769,000 was withheld,
pending settlement of a pre-acquisition receivable. Based on the previous
collection experience of Patient Care, we expect to collect substantially all of
the funds remaining in escrow. We also received a common stock purchase warrant
that permits us to purchase up to 2% of Patient Care. The warrant was recorded
at its estimated fair value on the date acquired and is included in other
investments in the consolidated balance sheet. Patient Care has not provided us
with financial statements since the first quarter of 2004. When, and if, the
current Patient Care financial information is provided, it is


22

<PAGE>

Chemed Corporation and Subsidiary Companies

possible that we may have to recognize an impairment loss on our investment in
Patient Care for all or a portion of the carrying value of the warrant. Our
current receivables from Patient Care (total of $3.2 million at December 31,
2005) are currently in litigation in which Patient Care alleges our acquisition
of VITAS violates a non-compete agreement. The sale and related non-compete
agreement specifically exempt our investment in VITAS. Therefore, we believe our
receivable is valid and their allegations have no merit.

     Revenues generated by discontinued operations comprise (in thousands):

<TABLE>
<CAPTION>
                  For the Years Ended December 31,
                  --------------------------------
                       2005      2004      2003
                     -------   -------   -------
<S>               <C>          <C>       <C>
Service America      $10,716   $38,986   $48,095
</TABLE>

     At December 31, 2005, other current liabilities include accruals of $5.5
million and other liabilities include accruals of $2.1 million for costs related
to discontinued operations. The estimated timing of payments of these
liabilities, relating primarily to sublease and environmental liabilities,
follows (in thousands):

<TABLE>
<S>          <C>
2006         $5,533
2007            638
2008            522
2009            522
2010            337

AFTER 2010       59
             ------
  TOTAL      $7,611
             ======
</TABLE>

     Our Chairman of the Board, President and Chief Executive Officer and our
former Chief Administrative Officer (currently a director of our company) are
directors of Cadre Computer. In addition, our former Chief Administrative
Officer holds a 51% equity ownership interest in Cadre Computer at December 31,
2005 and is Chairman and Chief Executive Officer of Cadre Computer.

7. BUSINESS COMBINATIONS

     During 2005, we completed one business combination within the Roto-Rooter
segment and two within the VITAS segment for an aggregate purchase price of $6.2
million in cash. The acquisitions were completed mainly to increase our market
penetration. The VITAS businesses acquired provide hospice services in the
Pittsburgh, PA and Philadelphia, PA areas and the Roto-Rooter business acquired
provides drain cleaning and plumbing services using the Roto-Rooter name in
Greensboro, NC. The results of operations of these businesses are included in
our results of operations from the date of acquisition. The purchase price
allocations for the 2005 business combinations are preliminary and will be
finalized during 2006.

     On February 24, 2004, we completed the acquisition of the 63% of VITAS
common stock we did not previously own for cash consideration of $323.8 million.
The total investment in VITAS, including $3.1 million of acquisition expenses
and our $18.0 million prior investment in VITAS, was $366.2 million. We have
completed the purchase price allocation and the excess of the purchase price
over the fair value of the net assets acquired in purchase business combinations
is classified as goodwill.


                                                                              23

<PAGE>

Chemed Corporation and Subsidiary Companies

     A summary of net assets acquired in the VITAS transaction follows (in
thousands):

<TABLE>
<S>                                 <C>
Cash and cash equivalents           $ 24,377
Accounts receivable, net              49,762
Current deferred income taxes         13,449
Prepaid income taxes                  13,399
Other current assets                  25,299
Property and equipment                19,073
VITAS trade name                      51,300
Referral network                      20,900
Covenants not to compete               7,600
Goodwill                             306,298
Other assets                          10,401
Accounts payable                     (40,554)
Current portion of long-term debt     (7,940)
Accrued expenses                     (43,169)
Long-term debt                       (59,571)
Deferred income taxes                (21,171)
Other liabilities                     (3,259)
                                    --------
   Total net assets                  366,194
Less: prior investment in VITAS      (18,032)
Less-cash and cash equivalents
   acquired                          (24,377)
                                    --------
   Net cash used                    $323,785
                                    ========
</TABLE>

     We began including the consolidated VITAS results of operations in our
financial statements as of February 24, 2004.

     To fund the acquisition and retire VITAS' and our long-term debt, we
completed the following transactions on February 24, 2004:

          -    We borrowed $75.0 million under a new $135 million revolving
               credit/term loan agreement at an initial weighted average
               interest rate of 4.5%.

          -    We sold 4 million shares of our capital stock in a private
               placement at a price of $25 per share, before expenses.

          -    We issued $110 million principal amount of floating rate senior
               secured notes due February 2010 at an initial interest rate of
               4.88%.

          -    We issued $150 million principal amount of 8.75% fixed rate
               senior notes due February 2011.

          -    We incurred estimated financing and transaction fees and expenses
               of approximately $19.3 million.

     During 2004, we completed two business combinations within the Roto-Rooter
segment and two within the VITAS segment for an aggregate purchase price of
$20.9 million in cash. The VITAS businesses acquired provide hospice services in
the Phoenix, AZ and the Atlanta, GA areas, and the Roto-Rooter businesses
acquired provide drain cleaning and plumbing services using the Roto-Rooter name
in Harrisburg, PA and Spokane, WA. The results of operations of all of these
businesses are included in our results of operations from the date of
acquisition.

     The purchase price allocation for the Phoenix, AZ hospice business was
completed in the fourth quarter of 2005. In connection with the final purchase
price allocation, an identifiable, definite-lived intangible asset of $2.9
million for the referral network acquired was recorded. The referral network
acquired will be amortized on an accelerated basis over a nine year estimated
useful life. A liability of $2.4 million was recorded based on the most recent
estimate related to the Medicare cap liability for the 2005 measurement period,
as further described in Note 1.

     The excess of the purchase price over the fair value of the net assets
acquired in purchase business combinations is classified as goodwill. The
purchase price of all businesses (except VITAS) acquired during the year
indicated has been


24
<PAGE>

Chemed Corporation and Subsidiary Companies

allocated as follows (in thousands)(2005 is preliminary):

<TABLE>
<CAPTION>
                                    For the Years Ended December 31,
                                    --------------------------------
                                        2005      2004     2003
                                       ------   -------   ------
<S>                                 <C>         <C>       <C>
Working capital                        $   --   $    --   $ (114)
Identifiable intangible assets          2,870        --       --
Goodwill                                  911    20,950    4,246
Other assets and liabilities-net        2,426        (8)    (282)
                                       ------   -------   ------
   Total net assets                    $6,207   $20,942   $3,850
                                       ======   =======   ======
</TABLE>

     Approximately $20.9 million of the goodwill related to the VITAS
acquisition and all of the goodwill related to business combinations completed
in 2005, 2004 and 2003 is expected to be deductible for income tax purposes.

     The unaudited pro forma results of operations, assuming purchase business
combinations completed in 2005 and 2004 were completed on January 1, 2004 are
presented below (in thousands, except per share data):

<TABLE>
<CAPTION>
                             For the Years Ended December 31,
                             --------------------------------
                                      2005       2004
                                    --------   --------
<S>                          <C>               <C>
Service revenues and sales          $927,170   $820,315
Net income                            35,854     34,508
Earnings per share                      1.40       1.43
Diluted earnings per share              1.36       1.40
</TABLE>

8.   OTHER INCOME--NET

     Other income--net from continuing operations comprises the following (in
thousands):

<TABLE>
<CAPTION>
                                               For the Years Ended December 31,
                                               --------------------------------
                                                    2005     2004      2003
                                                   ------   ------   -------
<S>                                            <C>          <C>      <C>
Interest income                                    $2,210   $1,874   $ 2,423
Market value gains on trading investments of
   employee benefit trusts                            863    1,859     1,580
Loss on disposal of property and equipment           (131)    (350)     (253)
Dividend income                                        --       --     1,540
Gains on sales and redemption of investments           --       --     5,390
Other - net                                           192       86       169
                                                   ------   ------   -------
   Total other income - net                        $3,134   $3,469   $10,849
                                                   ======   ======   =======
</TABLE>


                                                                              25

<PAGE>

Chemed Corporation and Subsidiary Companies

9.   INCOME TAXES

     The provision for income taxes comprises the following (in thousands):

<TABLE>
<CAPTION>
                                            For the Years Ended December 31,
                                            --------------------------------
                                                2005       2004       2003
                                              --------   --------   -------
<S>                                         <C>          <C>        <C>
Continuing Operations:
   Current
      U.S. federal                            $ 21,155   $  7,065   $ 3,611
      U.S. state and local                       1,586      1,214     1,102
      Foreign                                      519        515       253
   Deferred
      U.S. federal, state and local             (3,578)     5,093     1,230
      Foreign                                     (104)       (91)      (16)
                                              --------   --------   -------
         Total                                $ 19,578   $ 13,796   $ 6,180
                                              ========   ========   =======
Discontinued Operations:
   Current U.S. federal                       $(14,452)  $ (2,373)  $  (442)
   Current U.S. state and local                 (1,036)       (60)       77
   Deferred U.S. federal, state and local       15,519    (12,104)   (1,031)
                                              --------   --------   -------
         Total                                $     31   $(14,537)  $(1,396)
                                              ========   ========   =======
</TABLE>

     A summary of the significant temporary differences for continuing
operations that give rise to deferred income tax assets/(liabilities) follows
(in thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                                            -------------------
                                                              2005       2004
                                                            --------   --------
<S>                                                         <C>        <C>
Accrued liabilities                                         $ 34,661   $ 40,683
Allowance for uncollectible accounts receivable                2,952      2,715
State net operating loss carryforwards                         1,878      2,671
Deferred financing costs                                         856      1,225
Other                                                          1,671      1,672
                                                            --------   --------
   Deferred income tax assets                                 42,018     48,966
   Valuation allowance                                            --     (1,403)
                                                            --------   --------
   Deferred income tax assets, net of valuation allowance     42,018     47,563
                                                            --------   --------

Amortization of intangible assets                            (26,357)   (23,172)
Accelerated tax depreciation                                  (8,425)    (6,746)
Current assets                                                (1,832)    (1,906)
Other                                                           (518)      (949)
                                                            --------   --------
   Deferred income tax liabilities                           (37,132)   (32,773)
                                                            --------   --------
   Net deferred income tax assets                           $  4,886   $ 14,790
                                                            ========   ========
</TABLE>

     Included in other assets at December 31, 2005, are deferred income tax
assets of $499,000 (December 31, 2004--$354,000). At December 31, 2005 and 2004,
state net operating loss carryforwards were $39.6 million and $36.1 million,
respectively. These net operating losses will expire, in varying amounts,
between 2009 and 2025. Deferred income tax assets as of December 31, 2004 were
reduced by a valuation allowance comprising 100% of the potential deferred tax
benefits on net operating losses relating to the State of Ohio. As a result of
the enactment of the Ohio CAT, which will preclude us from utilizing State of
Ohio net operating losses, the deferred tax asset and related valuation
allowance for the State of Ohio net operating losses were reversed as of
December 31, 2005. Based on our history of operating earnings, we have
determined that our operating income will, more likely than not, be sufficient
to ensure realization of our deferred income tax assets, net of the valuation
allowance. We believe no net operating losses will be lost due to the continuity
of business requirement.


26

<PAGE>
Chemed Corporation and Subsidiary Companies

     The difference between the actual income tax provision for continuing
operations and the income tax provision calculated at the statutory U.S. federal
tax rate is explained as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  For the Years Ended December 31,
                                                                  --------------------------------
                                                                       2005      2004     2003
                                                                     -------   -------   ------
<S>                                                               <C>          <C>       <C>
Income tax provision calculated using the statutory rate of 35%      $20,049   $12,980   $5,756
State and local income taxes, less federal income tax effect           2,139     2,511      717
Tax accrual adjustments                                               (2,403)   (2,009)     102
Domestic dividend exclusion                                               --        --     (441)
Other--net                                                              (207)      314       46
                                                                     -------   -------   ------
   Income tax provision                                              $19,578   $13,796   $6,180
                                                                     =======   =======   ======
   Effective tax rate                                                   34.2%     37.2%    37.6%
                                                                     =======   =======   ======
</TABLE>

     Income tax benefits attributable to the exercise of non-qualified employee
stock options were $10.8 million during the year ended December 31, 2005
(2004--$1.9 million; 2003--$960,000) and were credited directly to additional
paid-in capital.

     Income taxes included in the components of other comprehensive
income/(loss) are as follows (in thousands):

<TABLE>
<CAPTION>
                              For the Years Ended December 31,
                              --------------------------------
                                    2005   2004     2003
                                    ----   ----   -------
<S>                          <C>           <C>    <C>
Unrealized holding losses            $--    $--   $  (180)
Reclassification adjustment           --     --    (2,039)
</TABLE>

     Summarized below are the total amounts of income taxes paid/(refunded)
during the years ended December 31 (in thousands):

<TABLE>
<S>    <C>
2005   $  9,923
2004    (13,131)
2003      2,715
</TABLE>

     Provision has not been made for additional taxes on $35.1 million of
undistributed earnings of our domestic subsidiaries. Should we elect to sell our
interest in all of these businesses rather than to effect a tax-free
liquidation, additional taxes amounting to approximately $12.8 million would be
incurred based on current income tax rates.

10.  CASH OVERDRAFTS AND CASH EQUIVALENTS

     Included in accounts payable are cash overdrafts of $8.0 million and $1.3
million as of December 31, 2005 and 2004, respectively.

     Included in cash and cash equivalents at December 31, 2005, are cash
equivalents in the amount of $53.2 million (2004-$63.0 million). The cash
equivalents at both dates consist of investments in various money market funds
and repurchase agreements yielding interest at a weighted average rate of 4.1%
in 2005 and 2.0% in 2004.

     From time to time throughout the year, we invest our excess cash in
repurchase agreements directly with major commercial banks. We do not physically
hold the collateral, but the term of such repurchase agreements is less than 10
days. Investments of significant amounts are spread among a number of banks, and
the amounts invested in each bank are varied constantly.


                                                                              27
<PAGE>

Chemed Corporation and Subsidiary Companies

11. PROPERTIES AND EQUIPMENT

     A summary of properties and equipment follows (in thousands):

<TABLE>
<CAPTION>
                                        December 31,
                                    -------------------
                                      2005       2004
                                    --------   --------
<S>                                 <C>        <C>
Land                                $  1,713   $  1,713
Buildings                             22,997     20,803
Transportation equipment              12,696     13,114
Machinery and equipment               40,452     36,290
Computer software                     19,568     17,050
Furniture and fixtures                26,407     17,201
Projects under development             8,271      3,122
                                    --------   --------
   Total properties and equipment    132,104    109,293
Less accumulated depreciation        (66,655)   (53,497)
                                    --------   --------
   Net properties and equipment     $ 65,449   $ 55,796
                                    ========   ========
</TABLE>

12. LONG-TERM DEBT AND LINES OF CREDIT

     A summary of our long-term debt follows (in thousands):

<TABLE>
<CAPTION>
                                              December 31,
                                          -------------------
                                            2005       2004
                                          --------   --------
<S>                                       <C>        <C>
Fixed rate notes due 2011                 $150,000   $150,000
Floating rate notes due 2010                    --    110,000
Term loan due 2005 - 2009                   84,363     30,487
Other                                          740      1,208
                                          --------   --------
   Subtotal                                235,103    291,695
Less current portion                        (1,045)   (12,185)
                                          --------   --------
   Long-term debt, less current portion   $234,058   $279,510
                                          ========   ========
</TABLE>

     The average interest rate for our long-term debt was 7.5% and 7.0% for the
years ended December 31, 2005 and 2004, respectively.

2005 CREDIT FACILITY

     In February 2005, we amended our bank credit facility with JPMorgan Chase
Bank. The Amended and Restated Credit Agreement ("ARCA") provides for an
increase in the term loan ("TL") from $35 million to $85 million at a current
rate of LIBOR plus 2.0% and an increase of the revolving credit facility ("RCF")
from $100 million to $175 million at a current rate of LIBOR plus 2.5%. The TL
has 21 quarterly principal payments of $212,500, beginning on June 30, 2005,
with the balance due August 24, 2010. The RCF has a termination date of February
24, 2010. Commitment fees include an annual fee of $100,000 plus a fee of .375%
per annum of the unused RCF, payable quarterly.

     Loans under the ARCA are collateralized by substantially all of our assets.
Should we generate excess cash flow ("ECF") during a year, as defined in ARCA,
an additional principal payment must be made. Generally, ECF represents the
excess of Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") less net working capital requirements, less income taxes paid, less
capital expenditures, less interest expense, less principal payments on the TL,
less cash used for acquisitions and less cash dividends paid. Based on our
results as of and for the year ended December 31, 2005 and 2004, no additional
term loan payments have been required.

     Also in February 2005, we used proceeds from borrowings under the ARCA ($85
million TL and $3.5 million RCF) plus $54.4 million of our cash balances to
retire our previous term loan ($30.5 million), to redeem the entire $110 million
aggregate principal amount of our Floating Rate Notes due 2010, to pay $1.1
million prepayment penalty for the Floating Rate Notes and to pay $1.4 million
of fees for the ARCA.


28

<PAGE>

Chemed Corporation and Subsidiary Companies

2004 CREDIT AGREEMENTS

     On February 24, 2004, in conjunction with our acquisition of the VITAS
shares not previously owned, we retired our senior notes due 2005 through 2009
and canceled our revolving credit agreement with Bank One, N.A. ("Bank One"). To
fund this acquisition and retire the Senior Notes, we issued 4 million shares of
capital stock in a private placement and borrowed $335 million as follows:

          -    $150 million from the issuance of privately placed 8.75% senior
               notes ("Fixed Rate Notes") due 2011. Semiannual interest payments
               began in August 2004 and payment of unpaid principal and interest
               will be due February 2011. The Fixed Rate Notes are unsecured and
               are effectively subordinated to our secured indebtedness. In the
               second quarter of 2004, we filed a registration statement
               covering up to $150 million principal amount of new 8.75% senior
               notes due 2011 ("New Fixed Rate Notes"). Except for the lack of
               transfer restrictions, the terms of the New Fixed Rate Notes are
               substantially identical to those of the Fixed Rate Notes.
               Pursuant to our exchange offer, all holders of the Fixed Rate
               Notes exchanged their notes for like principal amounts of the New
               Fixed Rate Notes.

               Prior to February 24, 2007, up to a maximum of 35% of the
               principal of the New Fixed Rate Notes may be redeemed under
               specified circumstances at a price of 108.75% plus accrued
               interest. After February 24, 2007, the New Fixed Rate Notes may
               be redeemed, in whole or in part, at redemption prices ranging
               from 104.375% (beginning on February 24, 2007) to 100% (beginning
               on February 24, 2010) plus accrued interest.

          -    $110 million from the issuance of privately placed floating rate
               senior secured notes ("Floating Rate Notes") due 2010 which were
               redeemed in 2005.

          -    $75 million drawn down under a $135 million secured revolving
               credit/term loan facility ("2004 Credit Facility") with JPMorgan
               Chase Bank. The facility comprised a $35 million term loan and
               $100 million revolving credit facility, including up to $40
               million in letters of credit. This facility was replaced in 2005
               with the ARCA.

OTHER

     Other long-term debt has arisen from loans in connection with acquisitions
of various businesses and properties. Interest rates range from 5% to 8%, and
the obligations are due on various dates through December 2009.

     The following is a schedule by year of required long-term debt payments as
of December 31, 2005 (in thousands):

<TABLE>
<S>                       <C>
2006                      $  1,045
2007                         1,058
2008                         1,009
2009                         1,016
2010                           862
AFTER 2010                 230,113
                          --------
   TOTAL LONG-TERM DEBT   $235,103
                          ========
</TABLE>

     Summarized below are the total amounts of interest paid during the years
ended December 31 (in thousands):

<TABLE>
<S>    <C>
2005   $20,368
2004    17,255
2003     3,197
</TABLE>

     During 2005 and 2004, interest totaling $380,000 and $72,000, respectively,
was capitalized. No interest was capitalized during the year ended December 31,
2003.

DEBT COVENANTS

     Collectively, the ARCA and the New Fixed Rate Notes provide for affirmative
and restrictive covenants including, without limitation, requirements or
restrictions (subject to exceptions) related to the following:

     -    use of proceeds of loans,

     -    restricted payments, including payments of dividends and retirement of
          stock (permitting $.24 per share dividends so long as the aggregate
          amount of dividends in any fiscal year does not exceed $7.0 million),
          with exceptions for existing employee benefit plans and stock option
          plans,


                                                                              29

<PAGE>

Chemed Corporation and Subsidiary Companies

     -    mergers and dissolutions,

     -    sales of assets,

     -    investments and acquisitions,

     -    liens,

     -    transactions with affiliates,

     -    hedging and other financial contracts,

     -    restrictions on subsidiaries,

     -    contingent obligations,

     -    operating leases,

     -    guarantors,

     -    collateral,

     -    sale and leaseback transactions,

     -    prepayments of indebtedness,

     -    maximum annual limit for acquisitions of $80 million (no single
          acquisition to exceed $50 million),

     -    maximum annual expenditures for operating leases of $30 million, and

     -    maximum annual capital expenditures of $30 million.

     In addition, the credit agreements provide that the Company will be
required to meet minimum net worth requirements, maximum leverage requirements,
maximum senior leverage requirements and minimum fixed charge requirements, to
be tested quarterly. The ARCA also contains cross-default provisions. We are in
compliance with all debt covenants as of December 31, 2005. As of December 31,
2005, we have approximately $147 million of unused lines of credit available and
eligible to be drawn down under the RCF.

     In connection with the February 2005 transaction, we recorded a loss on the
extinguishment of debt of $4.0 million that comprised a prepayment penalty of
$1.1 million on the Floating Rate Notes and the write-off of $2.9 million of
unamortized debt issuance costs for the Floating Rate Notes and the previous
term loan. In connection with the February 2004 transaction, we incurred a
prepayment penalty of $3.3 million on the senior notes.

13. OTHER LIABILITIES

     At December 31, 2005 and 2004, other current liabilities comprised the
following (in thousands):

<TABLE>
<CAPTION>
                                        December 31,
                                     -----------------
                                       2005      2004
                                     -------   -------
<S>                                  <C>       <C>
Accrued incentive compensation       $ 9,719   $ 8,115
Accrued legal settlements             23,108     3,989
Accrued divestiture expenses           3,895     4,232
Accrued savings and retirement
   contribution                        3,243     2,639
Other                                 21,497    23,802
                                     -------   -------
   Total other current liabilities   $61,462   $42,777
                                     =======   =======
</TABLE>

     At December 31, 2005 and 2004, the accrual for our estimated liability for
potential environmental cleanup and related costs arising from the sale of
DuBois amounted to $3.0 million. Of the 2005 balance, $1.1 million is included
in other liabilities and $1.9 million is included in other current liabilities.
We are contingently liable for additional DuBois-related environmental cleanup
and related costs up to a maximum of $16 million. On the basis of a continuing
evaluation of the potential liability, we believe it is not probable this
additional liability will be paid. Accordingly, no provision for this contingent
liability has been recorded. The potential liability is not insured, and the
recorded liability does not assume the recovery of insurance proceeds. Also, the
environmental liability has not been discounted because it is not possible to
reliably project the timing of payments. We believe that any adjustments to our
recorded liability will not materially adversely affect our financial position
or results of operations.

     At December 31, 2005, our accrual for losses on subleases of office space
formerly occupied by DuBois amounted to $388,000 (2004--$1.6 million), all of
which is included in other current liabilities. The accrual is based on the
expectation that space currently unoccupied will not be sublet during the
remainder of the lease term, which ends April 2006.


30
<PAGE>

Chemed Corporation and Subsidiary Companies

14.  PENSION AND RETIREMENT PLANS

     Retirement obligations under various plans cover substantially all
full-time employees who meet age and/or service eligibility requirements. The
major plans providing retirement benefits to our employees are defined
contribution plans.

     We established two employee stock ownership plans ("ESOPs") that purchased
a total of $56.0 million of our capital stock. In December 1997, we restructured
the ESOP loans and internally financed $16.2 million of the $21.8 million ESOP
loans outstanding at December 31, 1997. Substantially all eligible employees of
the Roto-Rooter segment and the Corporate Office participate in the ESOPs.
Eligible employees are also covered by other defined contribution plans.

     Expenses charged to continuing operations for our retirement and
profit-sharing plans, ESOPs, excess benefit plans and other similar plans
comprise the following (in thousands):

<TABLE>
<CAPTION>
                             For the Years Ended December 31,
                             --------------------------------
                                   2005     2004     2003
                                 -------   ------   ------
<S>                          <C>           <C>      <C>
Compensation cost of ESOPs       $ 1,324   $1,811   $1,138
Pension, profit-sharing
   and other similar plans         9,004    5,639    3,674
                                 -------   ------   ------
   Total                         $10,328   $7,450   $4,812
                                 =======   ======   ======
Dividends on ESOP shares
   used for debt service         $   122   $  129   $  138
                                 =======   ======   ======
</TABLE>

     At December 31, 2005, there were 502,036 allocated shares (2004--487,434
shares) and no unallocated shares (2004--37,216 shares) in the ESOP trusts. As
all shares have been allocated as of December 31, 2005, the ESOP trusts will be
terminated and participant balances transferred to the retirement plan in the
first quarter of 2006.

     We have excess benefit plans for key employees whose participation in the
qualified plans is limited by U.S. Employee Retirement Income Security Act
requirements. Benefits are determined based on theoretical participation in the
qualified ESOPs. Prior to September 1, 1998, the value of these benefits was
invested in shares of our stock and in mutual funds, which were held by grantor
trusts. Currently, benefits are only invested in mutual funds, and participants
are not permitted to diversify accumulated benefits in shares of our stock.
Trust assets invested in shares of our stock are included in treasury stock, and
the corresponding liability is included in a separate component of shareholders'
equity. At December 31, 2005, these trusts held 133,870 shares or $2.4 million
of our stock (December 31, 2004--136,626 shares or $2.4 million). The
diversified assets of our excess benefit and deferred compensation plans, all of
which are invested in either company-owned life insurance or various mutual
funds, totaled $21.1 million at December 31, 2005 (December 31, 2004--$18.3
million).

15.  LEASE ARRANGEMENTS

     We have operating leases that cover our corporate office headquarters,
various warehouse and office facilities, office equipment and transportation
equipment. The remaining terms of these leases range from one year to 14 years,
and in most cases, we expect that these leases will be renewed or replaced by
other leases in the normal course of business. We have no significant capital
leases as of December 31, 2005 or 2004.

     The following is a summary of future minimum rental payments and sublease
rentals to be received under operating leases that have initial or remaining
noncancelable terms in excess of one year at December 31, 2005 (in thousands):

<TABLE>
<S>                                <C>
2006                               $17,360
2007                                13,514
2008                                10,426
2009                                 8,978
2010                                 4,702
AFTER 2010                           9,447
                                   -------
   TOTAL MINIMUM RENTAL PAYMENTS    64,427
LESS: MINIMUM SUBLEASE RENTALS        (351)
                                   -------
   NET MINIMUM RENTAL PAYMENTS     $64,076
                                   =======
</TABLE>


                                                                              31

<PAGE>

Chemed Corporation and Subsidiary Companies

     Total rental expense incurred under operating leases for continuing
operations follows (in thousands):

<TABLE>
<CAPTION>
                        For the Years Ended December 31,
                        --------------------------------
                            2005      2004      2003
                          -------   -------   -------
<S>                     <C>         <C>       <C>
Total rental payments     $17,027   $13,569   $ 5,776
Less sublease rentals      (1,659)   (1,640)   (1,603)
                          -------   -------   -------
   Net rental expense     $15,368   $11,929   $ 4,173
                          =======   =======   =======
</TABLE>

16.  FINANCIAL INSTRUMENTS

     The following methods and assumptions are used in estimating the fair value
of each class of our financial instruments:

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

     -    The carrying values of our investment in the Patient Care warrant and
          the Note receivable due from Patient Care are considered to be the
          best indicator of fair value available at the present time. Patient
          Care is privately held and we have been able to obtain only minimal
          current financial data since February 2004. In addition, we are
          currently in litigation with Patient Care over the collection of other
          amounts due us. Patient Care is current on its payments of interest on
          its note payable to us. Nonetheless, when additional information
          becomes available such data could indicate the fair value of these
          investments is less than their respective carrying values. It is also
          possible that such decline could be considered other than temporary.
          In those circumstances, a write down to fair value would be required.

     -    For long-term debt, we calculated the fair value based either on
          market quotations received from financial institutions or discounted
          cash flow analysis.

     The estimated fair values of our financial instruments are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                       December 31,
                                        -----------------------------------------
                                                2005                  2004
                                        -------------------   -------------------
                                        CARRYING     FAIR     Carrying     Fair
                                         AMOUNT      VALUE     Amount      Value
                                        --------   --------   --------   --------
<S>                                     <C>        <C>        <C>        <C>
Other investments--
   Investment in Patient Care warrant   $  1,445   $  1,445   $  1,445   $  1,445
   Note receivable                        12,500     12,500     12,500     12,500
                                        --------   --------   --------   --------
      Total other investments           $ 13,945   $ 13,945   $ 13,945   $ 13,945
                                        ========   ========   ========   ========
Long-term debt                          $235,103   $244,091   $291,695   $306,328
</TABLE>

     The chart below summarizes information with respect to available-for-sale
securities sold during the year ended December 31, 2003 (in thousands):

<TABLE>
<S>                                  <C>
Proceeds from redemption and sales   $31,763
Gross realized gains                   7,157
Gross realized losses                  1,767
</TABLE>

     There were no available for sale securities sold during the years ended
December 31, 2005 or 2004.


32

<PAGE>

Chemed Corporation and Subsidiary Companies

17.  EARNINGS/(LOSS) PER SHARE

     The computation of earnings/(loss) per share follows:

<TABLE>
<CAPTION>
                                Income from Continuing Operations         Net Income/(Loss)
                                ---------------------------------   ----------------------------
                                                       Income                           Income
                                    Income   Shares   Per Share      Income   Shares   Per Share
                                   -------   ------   ---------     -------   ------   ---------
<S>                             <C>          <C>      <C>           <C>       <C>      <C>
2005
   Earnings                        $37,705   25,552     $1.48       $35,817   25,552    $ 1.40
                                                        =====                           ======
   Dilutive stock options               --      666                      --      666
   Nonvested stock awards               --       81                      --       81
                                   -------   ------                 -------   ------
      Diluted earnings             $37,705   26,299     $1.43       $35,817   26,299    $ 1.36
                                   =======   ======     =====       =======   ======    ======
2004
   Earnings                        $19,186   24,120     $0.80       $27,512   24,120    $ 1.14
                                                        =====                           ======
   Dilutive stock options               --      502                      --      502
   Nonvested stock awards               --       14                      --       14
                                   -------   ------                 -------   ------
      Diluted earnings             $19,186   24,636     $0.78       $27,512   24,636    $ 1.12
                                   =======   ======     =====       =======   ======    ======
2003
   Earnings/(loss)                 $11,188   19,848     $0.56       $(3,435)  19,848    $(0.17)
                                                        =====                           ======
   Dilutive stock options               --       60                      --       60
                                   -------   ------                 -------   ------
      Diluted earnings/(loss)      $11,188   19,908     $0.56       $(3,435)  19,908    $(0.17)
                                   =======   ======     =====       =======   ======    ======
</TABLE>

     The impact of the CJSDs was excluded from the above computations in 2004
and 2003 because it was antidilutive to earnings per share for all periods. All
of the remaining CJSDs were either converted or retired as of May 18, 2004. The
debentures were convertible into an average of 274,000 shares for the year ended
December 31, 2004 (2003--766,000).

     During 2003, certain stock options, whose exercise prices were greater than
the average market price during most of the year, were excluded from the
computation of diluted earnings per share. Those options comprise the following:

<TABLE>
<CAPTION>
             Exercise   Number of
Grant Date    Price       Shares
- ----------   --------   ---------
<S>          <C>        <C>
May 2002      $18.45      513,600
March 1998     19.57      261,400
May 1996       19.38      235,250
April 1998     20.27       24,000
                        ---------
   Total                1,034,250
                        =========
</TABLE>

     During 2005 and 2004, there were no options outstanding whose exercise
price exceeded the average market price for the year.

18.  STOCK INCENTIVE PLANS

     We have eight Stock Incentive Plans under which 7,700,000 shares of our
stock are issued to key employees pursuant to the grant of stock awards and/or
options to purchase such shares. All options granted under these plans provide
for a purchase price equal to the market value of the stock at the date of
grant. The latest plan, covering a total of 1,400,000 shares, was adopted in May
2004.

     The stock option plans are not qualified, restricted or incentive stock
option plans under the Internal Revenue Code. Options granted under these plans
prior to 2004 generally become exercisable in four annual installments
commencing six months after the date of grant. Options granted in 2004 generally
become exercisable in full six months after the date of grant. As discussed in
Note 1, options granted in 2005 became immediately exercisable along with any
other unvested options. Under one plan, originally adopted in 1999, up to
500,000 shares may be issued to employees who are not our officers or directors.


                                                                              33
<PAGE>

Chemed Corporation and Subsidiary Companies

     Data relating to our stock issued to employees is as follows:

<TABLE>
<CAPTION>
                                        2005                    2004                   2003
                                ---------------------   --------------------   --------------------
                                  NUMBER     WEIGHTED     Number    Weighted     Number    Weighted
                                    OF        AVERAGE       of       Average       of       Average
                                  SHARES       PRICE      Shares      Price      Shares      Price
                                ----------   --------   ---------   --------   ---------   --------
<S>                             <C>          <C>        <C>         <C>        <C>         <C>
Stock options:
   Outstanding at January 1      2,662,804    $19.34    2,345,730    $17.96    2,487,200    $17.75
   Granted                         346,600     38.11      803,068     22.32      482,200     17.93
   Exercised                    (1,243,571)    18.67     (463,994)    17.63     (490,368)    16.55
   Forfeited                       (24,000)    17.97      (22,000)    17.76         (600)    14.28
   Expired                              --        --           --        --     (132,702)    19.12
                                ----------              ---------              ---------
   Outstanding at December 31    1,741,833     23.57    2,662,804     19.34    2,345,730     17.96
                                ==========              =========              =========
   Exercisable at December 31    1,741,833     23.57    2,295,322     19.53    1,720,374     17.90
                                ==========              =========              =========
Stock awards issued                147,619     43.27      296,712     26.38        9,212     17.36
                                ==========              =========              =========
</TABLE>

     Options outstanding at December 31, 2005, comprise the following:

<TABLE>
<CAPTION>
                                                      Range of Exercise Prices
                                                -----------------------------------
                                                $16.10 to $21.78   $25.39 to $41.55
                                                ----------------   ----------------
<S>                                             <C>                <C>
Options outstanding                               1,331,233           410,600
Average exercise price of options outstanding    $    19.63          $  36.32
Average contractual life                                6.2 yrs.          9.1 yrs.
Options exercisable                               1,331,233           410,600
Average exercise price of options exercisable    $    19.63          $  36.32
</TABLE>

     There were 138,623 shares available for granting of stock options and
awards at December 31, 2005.

     In March 2005, the Board of Directors approved immediate vesting of all
unvested stock options to avoid recognizing approximately $951,000 of pretax
expense that would have been charged to income under SFAS No. 123R. The $215,000
pretax charge for accelerating the vesting of these options is included in
operating income for the year ended December 31, 2005.

     Total compensation cost recognized for stock awards for continuing
operations was $5.7 million in 2005 (2004--$6.0 million; 2003--$147,000). The
shares of stock were issued to key employees and directors at no cost and
generally are restricted as to the transfer of ownership.

     During 1999, we purchased 203,000 shares of our stock in open-market
transactions and sold these shares to certain employees at fair market value in
exchange for interest-bearing recourse notes secured by the shares. Interest
rates on these notes are set at the beginning of each year based on rates used
by the Internal Revenue Service for demand loans (2.81% for 2005; 1.70% for
2004; and 1.80% for 2003).

     The notes receivable have no maturity date but become immediately due and
payable at our option upon the occurrence of any of the following: (a) we, as
noteholder, deem ourselves inadequately secured, (b) the death, insolvency,
assignment for the benefit of creditors, or the commencement of any bankruptcy
or insolvency proceedings of, or against, the employee, (c) any attempted
transfer by the employee of the shares of stock purchased by the employee with
the notes, or (d) termination of employment. The terms of the notes receivable
place restrictions upon the sale of the underlying shares of stock, but the
shares of stock are not physically restricted from sale. Should we demand
payment of the notes and the value of the underlying shares is insufficient to
satisfy the remaining liability, the employee would be required to pay us the
difference in cash.


34

<PAGE>

Chemed Corporation and Subsidiary Companies

     Activity in the notes receivable accounts, which are presented as a
reduction of stockholders' equity in the consolidated balance sheet, is
summarized below (in thousands):

<TABLE>
<S>                            <C>
Balance at December 31, 2002   $ 952
Accrual of interest               16
Cash payments                    (11)
Value of shares surrendered      (23)
                               -----
Balance at December 31, 2003     934
Accrual of interest               10
Cash payments                   (391)
Value of shares surrendered       (9)
                               -----
BALANCE AT DECEMBER 31, 2004     544
ACCRUAL OF INTEREST               15
VALUE OF SHARES SURRENDERED      (10)
                               -----
BALANCE AT DECEMBER 31, 2005   $ 549
                               =====
</TABLE>

     Shares surrendered in payment of notes receivable are valued at their fair
market value on the date of surrender.

19. EXECUTIVE LONG-TERM INCENTIVE PLAN

     In May 2002, our shareholders approved the adoption of the LTIP covering
our officers and key employees. The LTIP is administered by the
Compensation/Incentive Committee ("CIC") of the Board of Directors and was
adopted to replace the restricted stock program, which was terminated at the end
of 2001. Based on guidelines established by the CIC, the LTIP covers the
granting of cash and stock awards based on two independent elements: 1) a
totally discretionary award based on our operating performance covering a period
greater than one year and less than four years and 2) an award based on the
attainment of a target stock price of $25 per share during 10 consecutive
trading days prior to the fourth anniversary of the plan.

     During January 2004, the price of our stock exceeded $25 per share for more
than 10 consecutive trading days. In February 2004, the CIC approved a payout
under the LTIP in the aggregate amount of $7.8 million ($2.8 million in cash and
169,266 shares of capital stock). The pretax expense of this award, including
payroll taxes and benefit costs, totaled $9.1 million. Of this amount, $8.8
million relates to continuing operations and is included in other expenses for
2004 ($5.4 million aftertax).

     During June 2004, the CIC approved guidelines covering the establishment of
a pool of 250,000 capital shares ("2004 LTIP Pool") to be distributed to
eligible members of management upon attainment of the following hurdles during
the period January 1, 2004 through December 31, 2007:

     -    88,000 shares will be awarded if our cumulative pro forma adjusted
          EBITDA (including the results of VITAS beginning January 1, 2004)
          reaches $365 million within the four-year period.

     -    88,000 shares will be awarded if our stock price reaches the following
          hurdles during any 30 trading days out of any 60-trading-day period
          during the four-year period:

          -    22,000 shares for a stock price of $35.00.

          -    an additional 33,000 shares for a stock price of $38.75.

          -    an additional 33,000 shares for a stock price of $42.50.

     -    44,000 shares represent a retention element, subject to a four-year,
          time-based vesting.

     -    30,000 shares may be awarded at the discretion of the CIC.

     On June 22, 2004, the CIC awarded 44,000 restricted shares of stock to key
employees under the retention component of the 2004 LTIP Pool. These shares vest
on December 31, 2007, for all participants still employed by us. The total cost
of these awards is $1.1 million, based on the fair value of the stock on June
22, 2004. Of this amount, $1.0 million relates to continuing operations and is
being amortized on a straight-line basis over the 42-month period ending
December 31, 2007.

     During the first quarter of 2005, the price of our stock exceeded $35 per
share for 30 trading days, fulfilling one of the performance targets set forth
in the LTIP. On March 11, 2005, the CIC approved a payout of 25,000 shares of
capital stock under the LTIP. The pretax expense of this award from continuing
operations, including payroll taxes and benefit costs, was $1.1 million
($695,000 aftertax).

     During the second quarter of 2005, the price of our stock exceeded $38.75
per share for 30 trading days, fulfilling one of the performance targets set
forth in the LTIP. On July 11, 2005, the CIC approved a payout of 37,500 shares
of


                                                                              35

<PAGE>

Chemed Corporation and Subsidiary Companies

capital stock under the LTIP. The pretax expense of this award from continuing
operations, including payroll taxes and benefit costs, was $1.8 million ($1.2
million aftertax).

     During the fourth quarter of 2005, the price of our stock exceeded $42.50
per share for 30 trading days, fulfilling one of the performance requirements
set forth in the LTIP. On December 2, 2005, the CIC approved a payout of 43,500
shares of capital stock under the LTIP. The pretax expense of this award from
continuing operations, including payroll taxes and benefit costs, was $2.5
million ($1.6 million aftertax).

     As of December 31, 2005, no accrual for the cost of possible awards under
the remaining components of the 2004 LTIP Pool was made since it was not
probable at that time any of the awards would be earned and paid. As of December
31, 2005, a total of 100,000 shares may be earned under the EBITDA and
contingent hurdles of the 2004 LTIP pool.

20. CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES

     Effective February 1, 2000, we completed an Exchange Offer whereby
stockholders exchanged 1,151,006 shares of capital stock for shares of Preferred
Securities of the wholly owned Chemed Capital Trust ("CCT") on a one-for-one
basis.

     On April 7, 2004, we announced the call of all Preferred Securities
outstanding as of May 18, 2004, at face value ($27.00 per security) plus accrued
dividends ($.35 per security). As a result, during the second quarter of 2004,
417,256 Preferred Securities were redeemed for 609,194 shares of stock and
101,282 Preferred Securities were redeemed for $2.7 million in cash. As a
result, at December 31, 2004, there are no CJSDs or Preferred Securities
outstanding.

     The number of Preferred Securities purchased and converted and shares of
capital stock issued upon conversion are summarized below:

<TABLE>
<CAPTION>
                                          For the Years
                                              Ended
                                           December 31,
                                         ---------------
                                           2004     2003
                                         -------   -----
<S>                                      <C>       <C>
Preferred Securities purchased           101,282      --
Preferred Securities converted           422,002   2,229
Shares of Capital Stock issued upon
   conversion of Preferred Securities    615,958   3,252
</TABLE>

21. LOANS RECEIVABLE FROM INDEPENDENT CONTRACTORS

     At December 31, 2005, we had contractual arrangements with 59 independent
contractors to provide plumbing repair and drain cleaning services under
sublicensing agreements using the Roto-Rooter name in lesser-populated areas of
the United States and Canada. The arrangements give the independent contractors
the right to conduct a plumbing and drain cleaning business using the
Roto-Rooter name in a specified territory in exchange for a royalty based on a
percentage of cash labor sales, generally approximately 40%. We also pay for
yellow pages advertising in these areas, provide certain capital equipment and
provide operating manuals to be used as guidelines for operating a plumbing and
drain cleaning business. The contracts are generally cancelable upon 90 days'
written notice (without cause) or upon a few days' notice (with cause). The
independent contractors are responsible for running the businesses as they
believe best.

     Our maximum exposure to loss from arrangements with our independent
contractors at December 31, 2005, is approximately $2.6 million ($2.8 million at
December 31, 2004). The exposure to loss is mainly the result of loans given to
the independent contractors. In most cases, these loans are partially secured by
equipment owned by the independent contractor. The interest rates on the loans
range from zero to 8% per annum, and the remaining terms of the loans range from
2.5 months to 5.5 years at December 31, 2005. During 2005, we recorded revenues
of $18.1 million (2004--$16.4 million; 2003--$14.1 million) and pretax profits
of $6.0 million (2004--$5.1 million; 2003--$4.4 million) from all of our
independent contractors.

22. LITIGATION

     We are party to a class action lawsuit filed in the Third Judicial Circuit
Court of Madison County, Illinois in June of 2000 by Robert Harris, alleging
certain Roto-Rooter plumbing was performed by unlicensed employees. We contest
these allegations and believe them without merit. Plaintiff moved for
certification of a class of customers in 32 states who allegedly paid for
plumbing work performed by unlicensed employees. Plaintiff also moved for
partial summary judgment on grounds the licensed apprentice plumber who
installed his faucet did not work under the direct personal supervision of a
licensed master plumber. On June 19, 2002, the trial judge certified an
Illinois-only plaintiffs class and granted summary judgment for the named party
Plaintiff on the issue of liability, finding violation of the Illinois Plumbing
License Act and the Illinois Consumer Fraud Act through Roto-Rooter's
representation of the licensed apprentice as a plumber. The court has not ruled
on certification of a class in the remaining 31 states. In December 2004, we
reached a resolution of this matter


36
<PAGE>

Chemed Corporation and Subsidiary Companies

with the Plaintiff. This proposed settlement has been preliminarily approved by
the court. We expect the parties to request final approval during 2006. We
accrued $3.1 million in 2004 as the anticipated cost of settling this
litigation.

     Like other large California employers, our VITAS subsidiary faces
allegations of purported class-wide wage and hour violations. It is party to a
class action lawsuit filed in the Superior Court of California, Los Angeles
County, in April of 2004 by Ann Marie Costa, Ana Jimenez, Mariea Ruteaya and
Gracetta Wilson. This case alleges failure to pay overtime wages for hours
worked "off the clock" on administrative tasks, including voicemail retrieval,
time entry, travel to and from work, and pager response. This case also alleges
VITAS failed to provide meal and break periods to a purported class of
California nurses, home health aides and licensed clinical social workers. The
case also seeks payment of penalties, interest, and Plaintiffs' attorney fees.
VITAS contested these allegations.

     Plaintiff moved for class certification, and VITAS opposed this motion. We
have reached an agreement, which is subject to court approval, with the
Plaintiff class in order to avoid the uncertainty of litigation and the
diversion of resources and personnel resulting from the litigation. In
connection with our acquisition of VITAS in February 2004, we recorded a
liability of $2.3 million on VITAS' opening balance sheet for this case. At that
time, this represented our best estimate of our exposure in the matter. As a
result of the tentative resolution, we recorded a pretax charge of $17.4 million
($10.8 million aftertax), representing the portion of this settlement not
accounted for on Vitas' opening balance sheet. These amounts are inclusive of
Plaintiffs' class attorneys' fees and the costs of settlement administration.

     In the normal course of business, we are a party to various claims and
legal proceedings. We record a reserve for these matters when an adverse outcome
is probable and the amount of the potential liability is reasonably estimable.

23.  OIG INVESTIGATION

     On April 7, 2005, we announced the Office of Inspector General ("OIG") for
the Department of Health and Human Services served VITAS with civil subpoenas
relating to VITAS' alleged failure to appropriately bill Medicare and Medicaid
for hospice services. As part of this investigation, the OIG selected medical
records for 320 past and current patients from VITAS' three largest programs for
review. It also sought policies and procedures dating back to 1998 covering
admissions, certifications, recertifications and discharges. During the third
quarter of 2005, the OIG requested additional information from us. The U.S.
Attorney General has since provided us with a copy of a qui tam complaint filed
under seal in U.S. District Court for the Southern District of Florida. The
complaint and all filings in the qui tam action remain under seal. We are
conferring with the U.S. Attorney regarding our defenses to the complaint
allegations. The U.S. Attorney has not decided whether to intervene in the qui
tam action. We have incurred pretax expense related to complying with OIG
requests of $637,000 for the year ended December 31, 2005.

     The government continues to investigate the complaint's allegations. We are
unable to predict the outcome of this matter or the impact, if any, that the
investigation may have on the business, results of operations, liquidity or
capital resources. Regardless of outcome, responding to the subpoenas can
adversely affect us through defense costs, diversion of our time and related
publicity.

24.  RELATED PARTY TRANSACTIONS

     In October 2004, VITAS entered into a pharmacy services agreement
("Agreement") with Omnicare, Inc. ("OCR") whereby OCR will provide specified
pharmacy services for VITAS and its hospice patients in geographical areas
served by both VITAS and OCR. The Agreement has an initial term of three years
that renews automatically thereafter for one-year terms. Either party may cancel
the Agreement at the end of said term. Under the Agreement, VITAS made purchases
of $16.2 million and $344,000 from OCR during 2005 and 2004, respectively.

     Mr. E. L. Hutton is nonexecutive Chairman of the Board and a director of
Chemed and of OCR. Mr. Joel F. Gemunder, President and Chief Executive Officer
of OCR, Mr. Charles H. Erhart and Ms. Sandra E. Laney are directors of both
Chemed and OCR. Mr. Kevin J. McNamara, our President, Chief Executive Officer
and director, is a director emeritus of OCR. Nonetheless, we believe that the
terms of the Agreement are no less favorable to VITAS than we could negotiate
with an unrelated party.

25.  CAPITAL STOCK SPLIT

     On March 11, 2005, the Board of Directors approved a 2-for-1 stock split in
the form of a 100% stock dividend to shareholders of record at the close of
business on April 22, 2005. The stock split was paid May 11, 2005. Under
Delaware law, the par value of the stock remained $1 per share. Prior period
share and per share data has been restated to retroactively reflect the impact
of the stock split. The shares outstanding and in treasury reflected on the
balance sheet prior to May 11, 2005 have not been restated.


                                                                              37

<PAGE>

UNAUDITED SUMMARY OF QUARTERLY RESULTS

Chemed Corporation and Subsidiary Companies
(in thousands, except per share data)

<TABLE>
<CAPTION>
                                                 FIRST     SECOND      THIRD     FOURTH      TOTAL
FOR THE YEAR ENDED DECEMBER 31, 2005            QUARTER    QUARTER    QUARTER    QUARTER     YEAR
- ------------------------------------           --------   --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>        <C>
CONTINUING OPERATIONS
   TOTAL SERVICE REVENUES AND SALES ........   $218,637   $226,309   $233,328   $248,203   $926,477
                                               ========   ========   ========   ========   ========
   GROSS PROFIT ............................   $ 65,685   $ 65,189   $ 68,099   $ 75,663   $274,636
                                               ========   ========   ========   ========   ========
   INCOME FROM OPERATIONS ..................   $ 22,654   $ 22,062   $ 24,472   $ 10,196   $ 79,384
   INTEREST EXPENSE ........................     (5,835)    (5,039)    (5,147)    (5,243)   (21,264)
   LOSS ON EXTINGUISHMENT OF DEBT ..........     (3,971)        --         --         --     (3,971)
   OTHER INCOME--NET .......................        727        600      1,317        490      3,134
                                               --------   --------   --------   --------   --------
      INCOME BEFORE INCOME TAXES ...........     13,575     17,623     20,642      5,443     57,283
   INCOME TAXES ............................     (5,670)    (6,512)    (6,010)    (1,386)   (19,578)
                                               --------   --------   --------   --------   --------
   INCOME FROM CONTINUING OPERATIONS (A) ...      7,905     11,111     14,632      4,057     37,705
DISCONTINUED OPERATIONS ....................        211     (2,226)        --        127     (1,888)
                                               --------   --------   --------   --------   --------
NET INCOME (A) .............................   $  8,116   $  8,885   $ 14,632   $  4,184   $ 35,817
                                               ========   ========   ========   ========   ========
EARNINGS PER SHARE (A)
   INCOME FROM CONTINUING OPERATIONS .......   $   0.31   $   0.44   $   0.57   $   0.16   $   1.48
                                               ========   ========   ========   ========   ========
   NET INCOME ..............................   $   0.32   $   0.35   $   0.57   $   0.16   $   1.40
                                               ========   ========   ========   ========   ========
DILUTED EARNINGS PER SHARE (A)
   INCOME FROM CONTINUING OPERATIONS .......   $   0.31   $   0.42   $   0.55   $   0.15   $   1.43
                                               ========   ========   ========   ========   ========
   NET INCOME ..............................   $   0.31   $   0.34   $   0.55   $   0.16   $   1.36
                                               ========   ========   ========   ========   ========
AVERAGE NUMBER OF SHARES OUTSTANDING
   EARNINGS PER SHARE ......................    25,152     25,489     25,719     25,858     25,552
                                               ========   ========   ========   ========   ========
   DILUTED EARNINGS PER SHARE ..............    25,910     26,214     26,401     26,590     26,299
                                               ========   ========   ========   ========   ========
</TABLE>

- ----------
(A)  THE FOLLOWING AMOUNTS ARE INCLUDED IN INCOME FROM CONTINUING OPERATIONS
     DURING THE RESPECTIVE QUARTER (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                                  FIRST     SECOND    THIRD     FOURTH    TOTAL
                                                                 QUARTER   QUARTER   QUARTER   QUARTER     YEAR
                                                                 -------   -------   -------   -------   -------
<S>                                                              <C>       <C>       <C>       <C>       <C>
PRETAX COST/(BENEFIT):
   LONG-TERM INCENTIVE PLAN PAYOUT                               $ 1,109    $1,837   $    --   $ 2,531   $ 5,477
   PROPOSED SETTLEMENT OF LAWSUIT                                     --        --        --    17,350    17,350
   LEGAL EXPENSES INCURRED IN CONNECTION WITH THE OFFICE
      OF INSPECTOR GENERAL INVESTIGATION                              --       254       310        73       637
   ADJUSTMENT TO CASUALTY INSURANCE RELATED TO PRIOR PERIODS
      EXPERIENCE                                                  (1,663)       --        --        --    (1,663)
   PREPAYMENT PENALTY AND WRITE-OFF OF DEBT ISSUANCE COSTS
      RELATED TO EARLY EXTINGUISHMENT AND REFINANCING OF DEBT      3,971        --        --        --     3,971
   ADJUSTMENT OF TRANSACTION-RELATED EXPENSES
      OF THE VITAS ACQUISITION                                        --      (671)     (130)     (160)     (961)
   COST OF ACCELERATING VESTING OF STOCK OPTIONS                     215        --        --        --       215
                                                                 -------    ------   -------   -------   -------
      TOTAL                                                      $ 3,632    $1,420   $   180   $19,794   $25,026
                                                                 =======    ======   =======   =======   =======
AFTERTAX COST/(BENEFIT):
   LONG-TERM INCENTIVE PLAN PAYOUT                               $   695    $1,152   $    --   $ 1,587   $ 3,434
   PROPOSED SETTLEMENT OF LAWSUIT                                     --        --        --    10,757    10,757
   LEGAL EXPENSES INCURRED IN CONNECTION WITH THE OFFICE
      OF INSPECTOR GENERAL INVESTIGATION                              --       160       192        45       397
   ADJUSTMENT TO CASUALTY INSURANCE RELATED TO PRIOR PERIODS
      EXPERIENCE                                                  (1,014)       --        --        --    (1,014)
   PREPAYMENT PENALTY AND WRITE-OFF OF DEBT ISSUANCE COSTS
      RELATED TO EARLY EXTINGUISHMENT AND REFINANCING OF DEBT      2,523        --        --        --     2,523
   TAX ADJUSTMENTS AND SETTLEMENTS FROM PRIOR YEAR RETURNS            --        --    (1,787)     (174)   (1,961)
   ADJUSTMENT OF TRANSACTION-RELATED EXPENSES
      OF THE VITAS ACQUISITION                                        --      (671)     (130)     (160)     (961)
   COST OF ACCELERATING VESTING OF STOCK OPTIONS                     137        --        --        --       137
                                                                 -------    ------   -------   -------   -------
      TOTAL                                                      $ 2,341    $  641   $(1,725)  $12,055   $13,312
                                                                 =======    ======   =======   =======   =======
</TABLE>


38

<PAGE>


UNAUDITED SUMMARY OF QUARTERLY RESULTS

Chemed Corporation and Subsidiary Companies
(in thousands, except per share data)

<TABLE>
<CAPTION>
                                                        First     Second      Third     Fourth     Total
For the Year Ended December 31, 2004                   Quarter    Quarter    Quarter    Quarter     Year
- ------------------------------------                  --------   --------   --------   --------   --------
<S>                                                   <C>        <C>        <C>        <C>        <C>
Continuing Operations
   Total service revenues and sales ...............   $120,340   $199,135   $201,885   $213,981   $735,341
                                                      ========   ========   ========   ========   ========
   Gross profit ...................................   $ 41,491   $ 59,065   $ 59,755   $ 67,952   $228,263
                                                      ========   ========   ========   ========   ========
   Income from operations .........................   $    974   $ 20,763   $ 20,289   $ 16,080   $ 58,106
   Interest expense ...............................     (2,900)    (6,204)    (6,083)    (5,971)   (21,158)
   Loss on extinguishment of debt .................     (3,330)        --         --         --     (3,330)
   Other income--net ..............................      1,479        149        336      1,505      3,469
                                                      --------   --------   --------   --------   --------
      Income/(loss) before income taxes ...........     (3,777)    14,708     14,542     11,614     37,087
   Income taxes ...................................        626     (6,381)    (3,805)    (4,236)   (13,796)
   Equity in loss of affiliate ....................     (4,105)        --         --         --     (4,105)
                                                      --------   --------   --------   --------   --------
   Income/(loss) from continuing operations (a) ...     (7,256)     8,327     10,737      7,378     19,186
Discontinued Operations ...........................        146         (9)      (125)     8,314      8,326
                                                      --------   --------   --------   --------   --------
Net Income/(Loss) (a) .............................   $ (7,110)  $  8,318   $ 10,612   $ 15,692   $ 27,512
                                                      ========   ========   ========   ========   ========
Earnings/(Loss) Per Share (a)
   Income/(loss) from continuing operations .......   $  (0.33)  $   0.34   $   0.43   $   0.30   $   0.80
                                                      ========   ========   ========   ========   ========
   Net income/(loss) ..............................   $  (0.33)  $   0.34   $   0.43   $   0.63   $   1.14
                                                      ========   ========   ========   ========   ========
Diluted Earnings/(Loss) Per Share (a)
   Income/(loss) from continuing operations .......   $  (0.33)  $   0.33   $   0.42   $   0.29   $   0.78
                                                      ========   ========   ========   ========   ========
   Net income/(loss) ..............................   $  (0.33)  $   0.33   $   0.42   $   0.61   $   1.12
                                                      ========   ========   ========   ========   ========
Average number of shares outstanding
   Earnings/(loss) per share ......................     21,824     24,650     24,940     24,994     24,120
                                                      ========   ========   ========   ========   ========
   Diluted earnings/(loss) per share ..............     21,824     25,354     25,402     25,672     24,636
                                                      ========   ========   ========   ========   ========
</TABLE>

- ----------
(a)  The following amounts are included in income/(loss) from continuing
     operations during the respective quarter (in thousands):

<TABLE>
<CAPTION>
                                                                 First     Second    Third     Fourth     Total
                                                                Quarter   Quarter   Quarter   Quarter      Year
                                                                -------   -------   -------   -------   --------
<S>                                                             <C>       <C>       <C>       <C>       <C>
Pretax cost/(benefit):
   Long-term incentive plan payout                              $ 8,783   $    --   $    --    $   --   $  8,783
   Proposed settlement of a lawsuit                                  --        --        --     3,135      3,135
   Prepayment penalty and write-off of debt issuance costs
      related to early extinguishment and refinancing of debt     3,330        --        --        --      3,330
   Expenses related to debt registration                             --        --        --     1,191      1,191
   Adjustment of transaction-related expenses
      of the VITAS acquisition                                       --    (1,368)     (219)    2,029        442
                                                                -------   -------   -------    ------   --------
      Total                                                     $12,113   $(1,368)  $  (219)   $6,355   $ 16,881
                                                                =======   =======   =======    ======   ========

Aftertax cost/(benefit):
   Long-term incentive plan payout                              $ 5,723   $    --   $  (286)   $   --   $  5,437
   Proposed settlement of a lawsuit                                            --        --     1,897      1,897
   Prepayment penalty and write-off of debt issuance costs
      related to early extinguishment and refinancing of debt     2,164        --      (134)       --      2,030
   Expenses related to debt registration                             --        --        --       727        727
   Tax adjustments and settlements from prior year returns           --        --    (1,020)     (600)    (1,620)
   Equity in loss of VITAS prior to the acquistion                4,105        --        --        --      4,105
   Adjustment of transaction-related expenses
      of the VITAS acquisition                                       --      (821)     (131)    1,174        222
                                                                -------   -------   -------    ------   --------
      Total                                                     $11,992   $  (821)  $(1,571)   $3,198   $ 12,798
                                                                =======   =======   =======    ======   ========
</TABLE>


                                                                              39
<PAGE>

SELECTED FINANCIAL DATA

Chemed Corporation and Subsidiary Companies

(in thousands, except per share and footnote data, ratios, percentages and
personnel)

<TABLE>
<CAPTION>
                                                             2005     2004 (b)     2003       2002       2001
                                                           --------   --------   --------   --------   --------
<S>                                                        <C>        <C>        <C>        <C>        <C>
SUMMARY OF OPERATIONS
   Continuing operations (a)
      Service revenues and sales .......................   $926,477   $735,341   $260,776   $253,687   $269,353
      Gross profit (excluding depreciation) ............    274,636    228,263    113,958    112,741    117,800
      Depreciation .....................................     16,179     14,542      9,519     10,424     10,750
      Amortization .....................................      5,322      3,779        302        152      3,737
      Income/(loss) from operations ....................     79,384     58,106      8,774     17,141    (10,609)
      Income/(loss) from continuing operations (c) .....     37,705     19,186     11,188     11,107    (10,052)
      Net income/(loss) (c) ............................     35,817     27,512     (3,435)    (2,545)   (12,185)
   Earnings/(loss) per share
      Income/(loss) from continuing operations .........   $   1.48   $   0.80   $   0.56   $   0.57   $  (0.52)
      Net income/(loss) ................................       1.40       1.14      (0.17)     (0.13)     (0.63)
      Average number of shares outstanding .............     25,552     24,120     19,848     19,716     19,428
   Diluted earnings/ (loss) per share
      Income/ (loss) from continuing operations ........   $   1.43   $   0.78   $   0.56   $   0.56   $  (0.52)
      Net income/ (loss) ...............................       1.36       1.12      (0.17)     (0.13)     (0.63)
      Average number of shares outstanding .............     26,299     24,636     19,908     19,770     19,428
   Cash dividends per share ............................   $   0.24   $   0.24   $   0.24   $   0.23   $   0.22
   Net income/(loss) excluding goodwill amortization (d)
      Net income/(loss) ................................   $ 35,817   $ 27,512   $ (3,435)  $ (2,545)  $ (7,564)
      Earnings/(loss) per share ........................       1.40       1.14      (0.17)     (0.13)     (0.39)
      Diluted earnings/(loss) per share ................       1.36       1.12      (0.17)     (0.13)     (0.39)

FINANCIAL POSITION--YEAR-END
   Cash and cash equivalents ...........................   $ 57,133   $ 71,448   $ 50,688   $ 37,570   $  8,348
   Working capital .....................................     35,355     28,439     32,778     20,075      9,732
   Current ratio .......................................       1.21       1.17       1.48       1.28       1.11
   Properties and equipment, at cost less
      accumulated depreciation .........................   $ 65,449   $ 55,796   $ 31,440   $ 30,912   $ 36,728
   Total assets ........................................    835,085    825,566    328,458    337,822    399,560
   Long-term debt ......................................    234,058    279,510     25,931     25,348     60,439
   Convertible junior subordinated debentures ..........         --         --     14,126     14,186     14,239
   Stockholders' equity ................................    384,175    332,092    192,693    198,422    204,160

OTHER STATISTICS--CONTINUING OPERATIONS
   Capital expenditures ................................   $ 25,956   $ 18,290   $ 10,381   $  8,440   $  9,761
   Number of employees .................................     10,881      9,822      2,894      2,736      3,035
</TABLE>

- ----------
(a)  Continuing operations exclude Service America, discontinued in 2004,
     Patient Care, discontinued in 2002, and Cadre Computer Resources,
     discontinued in 2001.

(b)  The financial results of VITAS are included in the consolidated results of
     the Company beginning on February 24, 2004, the date the Company acquired
     the remaining 63% of VITAS it did not own, bringing its ownership in VITAS
     to 100%.

(c)  The following amounts are included in income from continuing operations
     during the respective year (in thousands):

<TABLE>
<CAPTION>
                                                                 2005     2004     2003    2002    2001
                                                                ------   ------   ------   ----   ------
<S>                                                             <C>      <C>      <C>      <C>    <C>
Aftertax cost/(benefit):
   Long-term incentive plan payout                               3,434    5,437       --     --       --
   Legal expenses incurred in connection with the Office
      of Inspector General investigation                           397       --       --     --       --
   Adjustment to casualty insurance related to prior periods
      experience                                                (1,014)      --       --     --       --
   Prepayment penalty and write-off of debt issuance costs
      related to early extinguishment and refinancing of debt    2,523    2,030       --     --    1,701
   Tax adjustments and settlements from prior year returns      (1,961)  (1,620)      --     --       --
   Adjustment of transaction-related expenses
      of the VITAS acquisition                                    (961)     222       --     --       --
   Cost of accelerating vesting of stock options                   137       --       --     --       --
   Proposed settlement of lawsuit                               10,757    1,897       --     --       --
   Equity in (earnings) loss of VITAS                               --    4,105     (922)    --       --
   Expenses related to debt registration                            --      727       --     --       --
   Severance and restructuring costs                                --       --    2,358     --   15,271
   Capital gains on sale of investments                             --       --   (3,351)  (775)    (703)
   Amortization of goodwill (d)                                     --       --       --     --    3,081
                                                                ------   ------   ------   ----   ------
      Total                                                     13,312   12,798   (1,915)  (775)  19,350
                                                                ======   ======   ======   ====   ======
</TABLE>

(d)  In accordance with FASB Statement No. 142, amortization of goodwill ceased
     December 31, 2001. Aftertax amortization of goodwill for all operations for
     2001, including discontinued operations, was $4,621,000.


40

<PAGE>

Chemed Corporation and Subsidiary Companies

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

EXECUTIVE SUMMARY

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

     The following is a summary of the key operating results for the years ended
December 31, 2005, 2004 and 2003 (in thousands except per share amounts):

<TABLE>
<CAPTION>
                                            2005       2004       2003
                                          --------   --------   --------
<S>                                       <C>        <C>        <C>
Consolidated service revenues and sales   $926,477   $735,341   $260,776
Consolidated income from continuing
   operations                               37,705     19,186     11,188
Diluted EPS from continuing operations        1.43       0.78       0.56
</TABLE>

2005 VERSUS 2004

     The increase in consolidated service revenues and sales from 2004 to 2005
was driven by a 37% increase at VITAS and a 7% increase at Roto-Rooter. The
increase at VITAS was the result of an increase in average daily census ("ADC")
of 15%, the annual Medicare price increase of approximately 3% and a full year
of revenue in 2005 versus a partial year in 2004 due to our acquisition of VITAS
in February 2004. The increase at Roto-Rooter was driven by an increase in
plumbing revenue of 15% and an increase in sewer and drain cleaning revenue of
6%. Consolidated income from continuing operations and diluted EPS from
continuing operations increased in 2005 as a result of the higher service
revenues and sales, which allowed us to further leverage our current cost
structure. The increase was partially offset by a $17.4 million pretax charge
($10.8 million aftertax) at VITAS for the anticipated settlement of a class
action lawsuit. Consolidated income from continuing operations as a percent of
service revenues and sales was 4.1% for 2005 versus 2.6% for 2004.

2004 VERSUS 2003

     The increase in consolidated service revenues and sales from 2003 to 2004
was driven by the February 24, 2004 acquisition of VITAS and a 6% increase at
Roto-Rooter. The increase at Roto-Rooter was driven primarily by a 6% increase
in plumbing revenue and a 5% increase in sewer and drain cleaning revenue.
Consolidated income from continuing operations and diluted EPS from continuing
operations increased as a result of the VITAS acquisition.

LIQUIDITY AND CAPITAL RESOURCES

     Significant factors affecting our cash flows during 2005 and financial
position at December 31, 2005 include the following:

     -    Our continuing operations generated cash of $81.6 million;

     -    We spent net cash of $6.2 million on business combinations;

     -    We borrowed $85 million in long-term debt;

     -    We repaid $141.6 million to reduce long-term debt; and

     -    We spent $26.0 million on capital expenditures.

     The ratio of total debt to total capital was 38.0% at December 31, 2005
compared with 46.8% at December 31, 2004. Our current ratio was 1.2 at both
December 31, 2005 and 2004.

     Our current credit agreements restrict annual payments for dividends, stock
repurchases, acquisitions and capital expenditures. Should we generate excess
cash flow during a year, as defined in the credit agreements, an additional
principal payment may be required. No additional payment is required for the
year ended December 31, 2005. We had $147 million of unused eligible lines of
credit at December 31, 2005. We believe our cash flow from operating activities
and our unused eligible lines of credit are sufficient to fund our business in
the near term.


                                                                              41

<PAGE>

Chemed Corporation and Subsidiary Companies

CASH FLOW

     Our cash flows for 2005, 2004 and 2003 are summarized as follows (in
millions):

<TABLE>
<CAPTION>
                                                            For the Years Ended December 31,
                                                            --------------------------------
                                                                 2005      2004     2003
                                                               -------   -------   ------
<S>                                                         <C>          <C>       <C>
Net cash provided by operating activities                      $  80.0   $  92.9   $ 23.8
Capital expenditures                                             (26.0)    (18.3)   (10.4)
                                                               -------   -------   ------
   Operating cash excess after capital expenditures               54.0      74.6     13.4
Repayment of long-term debt                                     (141.6)    (96.9)      --
Proceeds from issuance of long-term debt, net of costs            83.2     280.6       --
Issuance of capital stock, net of costs                           12.3      98.8      3.3
Net proceeds/(uses) from sale of discontinued operations          (9.4)     (0.8)     1.1
Dividends paid                                                    (6.2)     (5.7)    (4.8)
Business combinations                                             (6.2)   (344.7)    (3.9)
Return/(payment) of VITAS merger deposit                            --      10.0    (10.0)
Proceeds from redemption of available-for-sale securities           --        --     27.3
Investment in VITAS equity interest                                 --        --    (18.0)
Other--net                                                        (0.4)      4.9      4.7
                                                               -------   -------   ------
   (Decrease)/increase in cash and cash equivalents            $ (14.3)  $  20.8   $ 13.1
                                                               =======   =======   ======
</TABLE>

     For 2005, the operating cash excess after capital expenditures was $54.0
million as compared with $74.6 million in 2004 and $13.4 million in 2003. This
excess was used mainly to reduce long-term debt in 2005 and 2004. In 2003, this
excess, along with the proceeds from the redemption of VITAS preferred stock,
was used to purchase 37% of VITAS common stock, to place a deposit of $10.0
million to secure our merger offer for VITAS' remaining common stock, to pay
cash dividends and to increase our available cash and cash equivalents.

COMMITMENTS AND CONTINGENCIES

     In connection with the sale of DuBois Chemicals, Inc. ("DuBois") in 1991,
we provided allowances and accruals relating to several long-term costs,
including income tax matters, lease commitments and environmental costs. Also,
in conjunction with the sales of The Omnia Group ("Omnia") and National Sanitary
Supply Company in 1997, the sale of Cadre Computer Resources, Inc. ("Cadre
Computer") in 2001 and the sale of Service America Network Inc. ("Service
America") in 2005, we provided long-term allowances and accruals relating to
costs of severance arrangements, lease commitments and income tax matters.
Additionally, we retained liability for Service America's casualty insurance
claims that were incurred prior to the disposal date. In the aggregate, we
believe these allowances and accruals are adequate as of December 31, 2005.
Based on reviews of our environmental-related liabilities under the DuBois sale
agreement, we have estimated our remaining liability to be $3.0 million. As of
December 31, 2005, we are contingently liable for additional cleanup and related
costs up to a maximum of $16.0 million, for which no provision has been recorded
in accordance with the applicable accounting guidance.

     In connection with the sale of Patient Care in 2002, $5.0 million of the
cash purchase price was placed in escrow pending collection of third-party payer
receivables on Patient Care's balance sheet at the sale date. To date, $4.2
million has been returned and the remainder is being withheld pending the
settlement of certain third-party payer claims. Based on Patient Care's
collection history, we believe that the significant majority of the disputed
amounts will be resolved in Patient Care's favor and most of the withheld escrow
will be returned to us. We have a long-term note receivable from Patient Care of
$12.5 million as of December 31, 2005. Patient Care is current with all payments
due related to the long-term note receivable. We also have current accounts
receivable from Patient Care for the post-closing balance sheet valuation ($1.3
million) and for expenses paid by us after closing on Patient Care's behalf
($1.9 million). We are in litigation with Patient Care over various issues,
including the collection of these amounts. We believe these balances represent
valid claims, are fairly stated and are fully collectible; nonetheless, an
unfavorable determination by the courts could result in the write-off of all or
a portion of these balances.

     Our various loan agreements and guarantees of indebtedness as of December
31, 2005, contain certain restrictive covenants. In addition, certain agreements
contain cross-default provisions. We are in compliance with all of the covenants
at December 31, 2005 and anticipate continued compliance throughout 2006.

     We are party to a class action lawsuit filed in the Third Judicial Circuit
Court of Madison County, Illinois in June of 2000 by Robert Harris, alleging
certain Roto-Rooter plumbing was performed by unlicensed employees. We contest
these allegations and believe them without merit. Plaintiff moved for
certification of a class of customers in 32 states who


42
<PAGE>

Chemed Corporation and Subsidiary Companies

allegedly paid for plumbing work performed by unlicensed employees. Plaintiff
also moved for partial summary judgment on grounds the licensed apprentice
plumber who installed his faucet did not work under the direct personal
supervision of a licensed master plumber. On June 19, 2002, the trial judge
certified an Illinois-only plaintiffs class and granted summary judgment for the
named party Plaintiff on the issue of liability, finding violation of the
Illinois Plumbing License Act and the Illinois Consumer Fraud Act through
Roto-Rooter's representation of the licensed apprentice as a plumber. The court
has not ruled on certification of a class in the remaining 31 states. In
December 2004, we reached a resolution of this matter with the Plaintiff. This
proposed settlement has been preliminarily approved by the court. We expect the
parties to request final approval during 2006. We accrued $3.1 million in 2004
as the anticipated cost of settling this litigation.

     Like other large California employers, our VITAS subsidiary faces
allegations of purported class-wide wage and hour violations. It is party to a
class action lawsuit filed in the Superior Court of California, Los Angeles
County, in April of 2004 by Ann Marie Costa, Ana Jimenez, Mariea Ruteaya and
Gracetta Wilson. This case alleges failure to pay overtime wages for hours
worked "off the clock" on administrative tasks, including voicemail retrieval,
time entry, travel to and from work, and pager response. This case also alleges
VITAS failed to provide meal and break periods to a purported class of
California nurses, home health aides and licensed clinical social workers. The
case also seeks payment of penalties, interest, and Plaintiffs' attorney fees.
VITAS contested these allegations.

     Plaintiff moved for class certification, and VITAS opposed this motion. We
have reached an agreement, which is subject to court approval, with the
Plaintiff class in order to avoid the uncertainty of litigation and the
diversion of resources and personnel resulting from the litigation. In
connection with our acquisition of VITAS in February 2004, we recorded a
liability of $2.3 million on VITAS' opening balance sheet for this case. At that
time, this represented our best estimate of our exposure in the matter. As a
result of the tentative resolution, we recorded a pretax charge of $17.4 million
($10.8 million aftertax), representing the portion of this settlement not
accounted for on Vitas' opening balance sheet. These amounts are inclusive of
Plaintiffs' class attorneys' fees and the costs of settlement administration.

     On April 7, 2005, we announced the Office of Inspector General ("OIG") for
the Department of Health and Human Services served VITAS with civil subpoenas
relating to VITAS' alleged failure to appropriately bill Medicare and Medicaid
for hospice services. As part of this investigation, the OIG selected medical
records for 320 past and current patients from VITAS' three largest programs for
review. It also sought policies and procedures dating back to 1998 covering
admissions, certifications, recertifications and discharges. During the third
quarter of 2005, the OIG requested additional information from us. The U.S.
Attorney General has since provided us with a copy of a qui tam complaint filed
under seal in U.S. District Court for the Southern District of Florida. The
complaint and all filings in the qui tam action remain under seal. We are
conferring with the U.S. Attorney regarding our defenses to the complaint
allegations. The U.S. Attorney has not decided whether to intervene in the qui
tam action. We have incurred pretax expense related to complying with OIG
requests of $637,000 for the year ended December 31, 2005.

     The government continues to investigate the complaint's allegations. We are
unable to predict the outcome of this matter or the impact, if any, that the
investigation may have on the business, results of operations, liquidity or
capital resources. Regardless of outcome, responding to the subpoenas can
adversely affect us through defense costs, diversion of our time and related
publicity.

CONTRACTUAL OBLIGATIONS

     The table below summarizes our debt and contractual obligations as of
December 31, 2005 (in thousands):

<TABLE>
<CAPTION>
                                                                Less Than                                 After
                                                       Total      1 Year    1 - 3 Years   4 - 5 Years    5 Years
                                                     --------   ---------   -----------   -----------   --------
<S>                                                  <C>        <C>         <C>           <C>           <C>
Long-term debt obligations, excluding interest (a)   $235,103   $ 1,045       $ 2,067       $ 1,878     $230,113
Operating lease obligations                            64,427    17,360        23,940        13,680        9,447
Severance obligations                                   3,094     2,128           484           482           --
Purchase obligations (b)                               43,626    43,626            --            --           --
Other current obligations (c)                          19,952    19,952            --            --           --
Other long-term obligations (d)                        24,687        --         1,364         1,365       21,958
                                                     --------   -------       -------       -------     --------
   Total contractual cash obligations                $390,889   $84,111       $27,855       $17,405     $261,518
                                                     ========   =======       =======       =======     ========
</TABLE>

- ----------
(a)  Estimated interest payments on long-term debt amount to $19.6 million in
     less than 1 year, $38.9 million in years 1-3, $36.6 million in years 4-5
     and $6.6 million after 5 years.

(b)  Purchase obligations primarily consist of accounts payable at December 31,
     2005.

(c)  Other current obligations consist of accrued salaries and wages at December
     31, 2005.

(d)  Other long-term obligations comprise largely pension and excess benefit
     obligations.


                                                                              43

<PAGE>

Chemed Corporation and Subsidiary Companies

RESULTS OF OPERATIONS
2005 VERSUS 2004 - CONSOLIDATED RESULTS

     Set forth below are the year-to-year changes in the components of the
statement of operations relating to continuing operations for 2005 versus 2004
(in thousands, except percentages):

<TABLE>
<CAPTION>
                                               Increase/(Decrease)
                                               -------------------
                                                 Amount    Percent
                                                --------   -------
<S>                                            <C>         <C>
Service revenues and sales
   VITAS                                        $170,410      37%
   Roto-Rooter                                    20,726       7
                                                --------
      Total                                      191,136      26
Cost of services provided and goods sold         144,763      29
Selling, general and administrative expenses      13,385      10
Depreciation                                       1,637      11
Amortization                                       1,543      41
Other expenses                                     8,530      63
                                                --------
Income from operations                            21,278      37
Interest expense                                     106       1
Loss on extinguishment of debt                       641      19
Other income--net                                   (335)    (10)
                                                --------
Income before income taxes                        20,196      54
Income taxes                                       5,782      42
Equity in loss of affiliate                        4,105     100
                                                --------
   Income from continuing operations            $ 18,519      97%
                                                ========
</TABLE>

     Our service revenues and sales for the year ended December 31, 2005
increased $191 million, or 26%, versus revenues for the year ended December 31,
2004. The VITAS segment, acquired in February 2004, accounted for $170 million
of this increase and Roto-Rooter accounted for the remaining $21 million of the
increase.

     The increase in VITAS' revenues for 2005 versus 2004 is attributable to the
following (dollars in thousands):

<TABLE>
<CAPTION>
                     Amount    Percent
                    --------   -------
<S>                 <C>        <C>
Routine Homecare    $119,586    37.7%
Continuous Care       27,748    36.6
General Inpatient     23,076    35.3
                    --------
   Total revenues   $170,410    37.2%
                    ========
</TABLE>

     The revenue increases for VITAS resulted from the annual price increase in
the Medicare reimbursement rate of approximately 3% and the impact of a full
year of revenue in 2005 versus a partial year in 2004 due to our acquisition of
VITAS in February 2004. In addition, the Average Daily Census ("ADC") for
routine homecare, continuous care and general inpatient increased 16%, 12% and
11% respectively from 2004. ADC is a key measure we use to monitor volume growth
in our hospice programs. Changes in total program admissions and average length
of stay for our patients are the main drivers of changes in ADC. A comparison of
VITAS' 2005 revenues to full year pro-forma revenues for 2004 indicates
increases of 20%, 16% and 15%, respectively, for routine homecare, continuous
care and general inpatient revenues.

     The increase in Roto-Rooter's service revenues and sales for 2005 versus
2004 is attributable to the following (in thousands):

<TABLE>
<CAPTION>
                            Amount   Percent
                           -------   -------
<S>                        <C>       <C>
Plumbing                   $10,983     9.8%
Sewer and drain cleaning     5,051     4.5
Other                        4,692     8.2
                           -------
   Total revenues          $20,726     7.5%
                           =======
</TABLE>


44
<PAGE>

Chemed Corporation and Subsidiary Companies

     Plumbing revenues for 2005 increased from 2004 due to a 5% increase in the
number of jobs performed and a 5% increase in the average price per job. Sewer
and drain cleaning revenues for 2005 increased from 2004 due to a 1% decrease in
the number of jobs offset by a 6% increase in the average price per job. The
increase in the price per job for both plumbing and sewer and drain cleaning was
driven by a shift in job mix from residential to commercial. Generally,
commercial jobs produce more revenue on a per job basis. The increase in other
revenues is attributable primarily to increases in independent contractor
operations.

     The consolidated gross margin was 29.6% in 2005 versus 31.0% in 2004. The
slight decrease is due to the acquisition of VITAS in February 2004. On a
segment basis, VITAS' gross margin was 22% in 2005 and 2004. Roto-Rooter's gross
margin was 46% in 2005 and 2004.

     Selling, general and administrative expenses ("SG&A") for 2005 increased
$13.4 million (10%) versus 2004 mainly as a result of a full year of VITAS
expense and the impact of higher revenues on variable selling costs such as
commissions. The change in SG&A by segment is summarized below (in thousands):

<TABLE>
<S>                               <C>
Increase in VITAS expense         $11,860
Increase in Roto-Rooter expense     2,410
Decrease in Corporate expense        (885)
                                  -------
   Total increase                 $13,385
                                  =======
</TABLE>

     Depreciation for 2005 increased $1.6 million, or 11%, versus 2004 primarily
as a result of the VITAS acquisition. Similarly, most of the $1.5 million
increase in amortization is attributable to the amortization of VITAS'
intangible assets, including the referral networks and the covenant not to
compete.

     Income from operations for 2005 increased $21.3 million (37%) versus 2004
as summarized below (in thousands):

<TABLE>
<S>                                                                            <C>
Increase in gross margin from VITAS                                            $ 35,237
Increase in gross margin from Roto-Rooter                                        11,136
Increase in SG&A expenses, depreciation and amortization                        (16,565)
Anticipated cost in 2005 of settling VITAS class action litigation              (17,350)
Favorable variance in compensation expense from the LTIP in 2005 versus 2004      3,306
Anticipated cost in 2004 of settling Roto-Rooter litigation                       3,135
Favorable variance in VITAS transaction related costs and adjustments             1,403
Professional fees in 2004 incurred to register Floating Rate Notes                1,191
Cost of accelerating the vesting of outstanding stock options in 2005              (215)
                                                                               --------
   Total increase                                                              $ 21,278
                                                                               ========
</TABLE>

     Our effective income tax rate was 34.2% in 2005 versus 37.2% in 2004. The
decrease in our effective tax rate relates to certain state income tax planning
strategies implemented in 2005 and the impact of a full year of VITAS activity.

     Income from continuing operations for 2005 increased $18.5 million (97%)
versus 2004 as summarized below (in thousands):

<TABLE>
<S>                                                              <C>
Increase in income from operations                               $21,278
Increase in income tax expense                                    (5,782)
Equity in loss of VITAS prior to the February 2004 acquisition     4,105
Other                                                             (1,082)
                                                                 -------
   Total increase                                                $18,519
                                                                 =======
</TABLE>

     Income/(loss) from discontinued operations for 2005, 2004 and 2003 follows
(in thousands):

<TABLE>
<CAPTION>
                                                        For the Years Ended
                                                           December 31,
                                                   ---------------------------
                                                     2005     2004       2003
                                                   -------   ------   --------
<S>                                                <C>       <C>      <C>
Service America                                    $(1,813)  $8,559   $(14,687)
   Adjustment to accruals of operations
      discontinued in prior years                      (75)    (233)        64
                                                   -------   ------   --------
      Income/(loss) from discontinued operations   $(1,888)  $8,326   $(14,623)
                                                   =======   ======   ========
</TABLE>


                                                                              45

<PAGE>

Chemed Corporation and Subsidiary Companies

     The disposal of Service America was completed in May 2005. The loss on
disposal of Service America in 2005 arises from the finalization of asset and
liability values and related tax benefits resulting from the consummation of the
sale transaction. For 2004, the gain for Service America includes an estimated
tax benefit on the disposal of approximately $14.2 million, primarily due to the
recognition of non-deductible goodwill impairment losses in prior years. For
2003, the loss from Service America includes aftertax impairment charges of
$14.4 million. Of this amount, $10.0 million was for goodwill impairment and the
remainder was for impairment of computer software and identifiable intangible
assets.

     The adjustments to accruals related to operations discontinued in prior
years primarily include favorable adjustments to accruals for note receivable
losses on the sale of Cadre Computer (discontinued in 2001) and unfavorable
adjustments to accruals related to the sale of DuBois in 1991. Cadre Computer
has been operating profitably since 2001 and is current on all amounts due the
Company. As a result, we reduced our allowance to $323,000 at December 31, 2003
and to nil at December 31, 2004. Adjustments to the DuBois accruals relate to
environmental liabilities we retained upon the sale of DuBois in 1991. We
believe amounts accrued are reasonable under the circumstances, but due to the
nature of the liabilities, we could be required to increase the accrual in
future years to cover additional charges.

2005 VERSUS 2004 - SEGMENT RESULTS

     During 2005, VITAS net income increased $4.4 million (15%) from $29.1
million during 2004 to $33.5 million during 2005, as summarized below (in
thousands):

<TABLE>
<S>                                                     <C>
Increase in gross margin in 2005                        $ 35,237
Increase in SG&A, depreciation and amortization          (14,731)
Anticipated cost in 2005 of settling VITAS litigation    (17,350)
Increase in income tax expense                              (364)
Other                                                      1,656
                                                        --------
   Total increase                                       $  4,448
                                                        ========
</TABLE>

     Roto-Rooter's net income increased $8.2 million (43%) from $18.8 million
during 2004 to $27.0 million during 2005 as summarized below (in thousands):

<TABLE>
<S>                                                           <C>
Increase in gross margin in 2005                              $11,136
Increase in SG&A, depreciation and amortization                (2,069)
Increase in income tax expense                                 (5,024)
Anticipated cost in 2004 of settling Roto-Rooter litigation     3,135
Other                                                             987
                                                              -------
   Total increase                                             $ 8,165
                                                              =======
</TABLE>

     Net Corporate aftertax expenses decreased $1.8 million (7%) from $24.6
million in 2004 to $22.9 million in 2005 as summarized below (in thousands):

<TABLE>
<S>                                                                            <C>
Favorable variance in LTIP costs in 2005 versus 2004                           $ 2,681
Unfavorable variance in intercompany interest expense in 2005 versus 2004       (2,013)
Favorable variance in Corporate overhead expenses in 2005 versus 2004            1,176
Professional fees in 2004 incurred to register Floating Rate Notes                 727
Unfavorable variance on loss from extinguishment of debt in 2005 versus 2004      (493)
Favorable variance in VITAS transaction related costs and adjustments              175
Cost of accelerating the vesting of outstanding stock options in 2005             (137)
Other                                                                             (315)
                                                                               -------
   Total decrease                                                              $ 1,801
                                                                               =======
</TABLE>


46
<PAGE>

Chemed Corporation and Subsidiary Companies

2004 VERSUS 2003 - CONSOLIDATED RESULTS

     Set forth below are the year-to-year changes in the components of the
statement of operations relating to continuing operations for 2004 versus 2003
(in thousands, except percentages):

<TABLE>
<CAPTION>
                                               Increase/(Decrease)
                                               -------------------
                                                Amount     Percent
                                               --------   --------
<S>                                            <C>        <C>
Service revenues and sales
   VITAS                                       $458,730     n.a.%
   Roto-Rooter                                   15,835        6
                                               --------
      Total                                     474,565      182
Cost of services provided and goods sold        360,260      245
Selling, general and administrative expenses     42,922       45
Depreciation                                      5,023       53
Amortization                                      3,477    1,151
Other expenses                                   13,551     n.a.
                                               --------
Income from operations                           49,332      562
Interest expense                                 17,981      566
Loss on extinguishment of debt                    3,330     n.a.
Other income--net                                (7,380)     (68)
                                               --------
Income before income taxes                       20,641      126
Income taxes                                      7,616      123
Equity in loss of affiliate                      (5,027)    n.a.
                                               --------
      Income from continuing operations        $  7,998       71%
                                               ========
</TABLE>

     Our service revenues and sales for the year ended December 31, 2004
increased $474.6 million, or 182%, versus revenues for the year ended December
31, 2003. The VITAS segment, acquired in February 2004, accounted for $458.7
million of this increase and Roto-Rooter accounted for the remaining $15.8
million of the increase. VITAS' revenues for 2004 comprised the following (in
thousands):

<TABLE>
<S>                 <C>
Routine homecare    $316,374
Continuous care       78,669
General inpatient     63,051
Other                    636
                    --------
   Total revenues   $458,730
                    ========
</TABLE>

     The increase in Roto-Rooter's service revenues and sales for 2004 versus
2003 is attributable to the following (in thousands):

<TABLE>
<S>                        <C>
Plumbing                   $ 6,052
Sewer and drain cleaning     5,740
Other                        4,043
                           -------
   Total increase          $15,835
                           =======
</TABLE>

     Plumbing revenues for 2004 increased $6.0 million, or 6.0%, versus revenues
for 2003 due to a 4.4% increase in the number of jobs performed and a 1.6%
increase in the average price per job. Sewer and drain cleaning revenues
increased $5.7 million or 5.4%, versus revenues for 2003 due to a .5% decline in
the number of jobs which was more than offset by a 5.9% increase in the average
price per job. On a same-store basis, the number of plumbing jobs increased 4.9%
and the number of sewer and drain cleaning jobs declined .7%. The increase in
other revenues is attributable primarily to increases in independent contractor
operations and other services.

     The consolidated gross margin was 31.0% in 2004 as compared with 43.7% in
2003 largely due to the acquisition of VITAS in 2004. On a segment basis, VITAS'
gross margin was 22.2% and Roto-Rooter's gross margin increased from


                                                                              47

<PAGE>

Chemed Corporation and Subsidiary Companies

43.7% in 2003 to 45.7% in 2004. This increase is largely due to lower training
wages as a percent of revenues in 2004 versus 2003 and lower health insurance
costs as a percent of revenues in 2004.

     Selling, general and administrative expenses ("SG&A") for 2004 increased
$42.9 million versus 2003 as summarized below (in thousands):

<TABLE>
<S>                                                 <C>
VITAS SG&A for 2004                                 $42,946
Corporate severance in 2003                          (3,627)
Professional fees at the Corporate Office related
   to complying with the internal controls
   provisions of the Sarbanes-Oxley Act               2,301
Higher Roto-Rooter advertising costs in 2004          2,226
Other                                                  (924)
                                                    -------
     Total increase                                 $42,922
                                                    =======
</TABLE>

     Depreciation for 2004 increased $5.0 million, or 53%, versus 2003 primarily
as a result of the VITAS acquisition. Similarly, most of the increase in
amortization is attributable to the amortization of VITAS' intangible assets,
including the referral network and the covenant not to compete.

     Income from operations for 2004 increased $49.3 million versus 2003 as
summarized below (in thousands):

<TABLE>
<S>                                                                 <C>
VITAS income from operations for 2004                                $48,242
Higher gross profit of the Roto-Rooter segment in 2004                12,377
Long-term incentive compensation in 2004                              (8,783)
Corporate Office severance in 2003                                     3,627
Anticipated cost in 2004 of settling Roto-Rooter litigation           (3,135)
Professional fees at the Corporate Office related to complying
   with the internal controls provisions of the Sarbanes-Oxley Act    (2,301)
Other                                                                   (695)
                                                                     -------
   Total increase                                                    $49,332
                                                                     =======
</TABLE>

     Our effective income tax rate was 37.2% in 2004 versus 37.6% in 2003.
Favorable income tax adjustments in 2004 related to prior-period tax issues
reduced our effective rate by 4.7 percentage points. Our effective state and
local income tax rate for 2004 was 6.1% as compared with 4.4% for 2003. This
increase is due largely to the higher effective state and local tax rate of
VITAS.

     Income from continuing operations for 2004 increased $8.0 million versus
2003 as summarized below (in thousands):

<TABLE>
<S>                                                                                                <C>
Net income of VITAS in 2004                                                                        $ 29,139
Higher net income of Roto-Rooter                                                                      5,619
Higher interest costs in 2004 related to debt incurred to fund the acquisition of VITAS             (11,314)
Long-term incentive compensation for the Corporate Office in 2004                                    (4,455)
Equity in the loss of VITAS prior to the merger in 2004                                              (4,105)
Capital gains on the sales and redemption of available-for-sale investments in 2003                  (3,351)
Income from VITAS' preferred dividend and equity earnings in 2003                                    (2,507)
Corporate severance in 2003                                                                           2,358
Loss on extinguishment of debt in 2004                                                               (2,030)
Professional fees at the Corporate Office related to complying with the internal controls
   provisions of the Sarbanes-Oxley Act                                                              (1,461)
Favorable income tax adjustments in 2004 for the Corporate Office related to prior years' issues        990
Professional fees related to registering debt in 2004                                                  (727)
Other                                                                                                  (158)
                                                                                                   --------
   Total increase                                                                                  $  7,998
                                                                                                   ========
</TABLE>


48

<PAGE>

Chemed Corporation and Subsidiary Companies

Income/(loss) from discontinued operations for 2004 and 2003 follows (in
thousands):

<TABLE>
<CAPTION>
                                                                   For the Years Ended
                                                                       December 31,
                                                                   -------------------
                                                                     2004       2003
                                                                   -------   ---------
<S>                                                                <C>       <C>
Service America                                                      8,559    (14,687)
Adjustment to accruals of operations discontinued in prior years      (233)        64
                                                                    ------   --------
   Income/(loss) from discontinued operations                       $8,326   $(14,623)
                                                                    ======   ========
</TABLE>

     For 2004, the gain for Service America includes an estimated tax benefit on
the disposal of approximately $14.2 million, primarily due to the recognition of
non-deductible goodwill impairment losses in prior years. For 2003, the loss
from Service America includes aftertax impairment charges of $14.4 million. Of
this amount, $10.0 million was for goodwill impairment and the remainder was for
impairment of computer software and identifiable intangible assets.

     The adjustments to accruals related to operations discontinued in prior
years primarily include favorable adjustments to accruals for note receivable
losses on the sale of Cadre Computer (discontinued in 2001) and unfavorable
adjustments to accruals related to the sale of DuBois in 1991. Cadre Computer
has been operating profitably since 2001 and is current on all amounts due the
Company. As a result, we reduced our allowances for losses on these notes
receivable from $422,000 at December 31, 2002 to $323,000 at December 31, 2003
and to nil at December 31, 2004. Adjustments to the DuBois accruals relate to
environmental liabilities we retained upon the sale of DuBois in 1991. We
believe amounts accrued are reasonable under the circumstances, but due to the
nature of the liabilities, we could be required to increase the accrual in
future years to cover additional charges.

2004 VERSUS 2003 - SEGMENT RESULTS

     During 2004, VITAS generated net income of $29.1 million. These earnings
included aftertax transaction expenses totaling $1.0 million related to our
acquisition of VITAS in 2004. VITAS' average daily census ("ADC") during 2004
increased from 7,979 during the fourth quarter of 2003 to 9,134 during the
fourth quarter of 2004. During that same period, the quarterly average length of
stay increased from 59.0 days to 64.1 days, and the median length of stay was
12.0 days during the fourth quarters of both 2004 and 2003.

     Roto-Rooter's net income increased $5.6 million (43%) from $13.2 million
during 2003 to $18.8 million during 2004 as summarized below (in thousands):

<TABLE>
<S>                                                                       <C>
Aftertax impact of higher gross profit in 2004                            $ 7,649
Anticipated cost in 2004 of settling litigation                            (1,897)
Roto-Rooter's share of long-term compensation in 2004                        (982)
Favorable income tax adjustments in 2004 related to prior years' issues       630
Other                                                                         219
                                                                          -------
   Total increase                                                         $ 5,619
                                                                          =======
</TABLE>

     Net Corporate aftertax expenses increased $21.7 million from $2.9 million
in 2003 to $24.6 million in 2004 as summarized below (in thousands):

<TABLE>
<S>                                                                                                <C>
Higher interest costs in 2004 related to debt incurred to fund the acquisition of VITAS            $11,314
Corporate Office share of long-term compensation in 2004                                             4,455
Capital gains on the sales and redemption of available-for-sale investments in 2003                  3,351
Corporate severance in 2003                                                                         (2,358)
Loss on extinguishment of debt in 2004                                                               2,030
Income from VITAS preferred dividend in 2003                                                         1,585
Professional fees at the Corporate Office related to complying with the
   internal controls provisions of the Sarbanes-Oxley Act                                            1,461
Favorable income tax adjustments in 2004 for the Corporate Office related to prior years' issues      (990)
Professional fees related to registering debt in 2004
                                                                                                       727
Other                                                                                                  158
                                                                                                   -------
   Total increase                                                                                  $21,733
                                                                                                   =======
</TABLE>


                                                                              49
<PAGE>

Chemed Corporation and Subsidiary Companies

CRITICAL ACCOUNTING POLICIES
REVENUE RECOGNITION

     For both the Roto-Rooter and VITAS segments, service revenues and sales are
recognized when the earnings process has been completed. Generally, this occurs
when services are provided or products are delivered. VITAS recognizes revenue
at the estimated net realizable amount due from third-party payers, which are
primarily Medicare and Medicaid. Payers may deny payment for services in whole
or in part on the basis that such services are not eligible for coverage and do
not qualify for reimbursement. We estimate denials each period and make adequate
provision in the financial statements.

     VITAS is subject to certain limitations on Medicare payments for services.
Specifically, if the number of inpatient care days any hospice program provides
to Medicare beneficiaries exceeds 20% of the total days of hospice care such
program provides to all patients for an annual period beginning September 28,
the days in excess of the 20% figure may be reimbursed only at the routine
homecare rate. None of VITAS' hospice programs exceeded the payment limits on
inpatient services in 2005 or 2004.

     VITAS is also subject to a Medicare annual per-beneficiary cap ("Medicare
cap"). Compliance with the Medicare cap is measured by comparing the total
Medicare payments received under a Medicare provider number with respect to
services provided to all Medicare hospice care beneficiaries in the program or
programs covered by that Medicare provider number between November 1 of each
year and October 31 of the following year with the product of the
per-beneficiary cap amount and the number of Medicare beneficiaries electing
hospice care for the first time from that hospice program or programs during the
relevant period.

     We actively monitor each of our hospice programs, by provider number, as to
their specific admissions, discharge rate and average length of stay data in an
attempt to determine whether they are likely to exceed the Medicare cap. Should
we determine that a provider number is likely to exceed the Medicare cap based
on projected trends, we attempt to institute corrective action to influence the
patient mix or to increase patient admissions. However, should we project our
corrective action will not prevent that program from exceeding its Medicare cap,
we estimate the amount we will be required to repay at the end of the
measurement year and accrue that amount, which is proportional to the number of
months elapsed in the Medicare cap year, as a reduction of patient revenue.

INSURANCE ACCRUALS

     For the Roto-Rooter segment and Chemed's Corporate Office, we self-insure
for all casualty insurance claims (workers' compensation, auto liability and
general liability). As a result, we closely monitor and frequently evaluate our
historical claims experience to estimate the appropriate level of accrual for
self-insured claims. Our third-party administrator ("TPA") processes and reviews
claims on a monthly basis. Currently, our exposure on any single claim is capped
at $500,000. For most of the prior years, the caps for general liability and
workers' compensation were between $250,000 and $500,000 per claim. In
developing our estimates, we accumulate historical claims data for the previous
10 years to calculate loss development factors ("LDF") by insurance coverage
type. LDFs are applied to known claims to estimate the ultimate potential
liability for known and unknown claims for each open policy year. LDFs are
updated annually. Because this methodology relies heavily on historical claims
data, the key risk is whether the historical claims are an accurate predictor of
future claims exposure. The risk also exists that certain claims have been
incurred and not reported on a timely basis. To mitigate these risks, in
conjunction with our TPA, we closely monitor claims to ensure timely
accumulation of data and compare claims trends with the industry experience of
our TPA.

     For the VITAS segment, we self insure for workers' compensation exposures.
Currently, VITAS' exposure on any single claim is capped at $500,000. For most
of the prior years, the caps for workers' compensation were between $250,000 and
$500,000 per claim. For VITAS' self-insurance accruals for workers'
compensation, we obtained an actuarial valuation of the liability as of the date
of acquisition and as of November 30, 2005 and 2004. The valuation methods used
by the actuary are similar to those used internally for our other business
units.

     As an indication of the sensitivity of the accrued liability to reported
claims, our analysis indicates that a 1% across-the-board increase or decrease
in the amount of projected losses for all of our continuing operations would
increase or decrease the accrued insurance liability at December 31, 2005, by
$1,157,000 or 3%.

INCOME TAXES

     Deferred taxes are provided on an asset and liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss carry-forwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amount of assets and liabilities and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in our opinion, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in laws and rates on the date of enactment.

     We are subject to income taxes in the U.S. Federal and most state
jurisdictions. Significant judgment is required to determine our provision for
income taxes. We are periodically audited by various taxing authorities. We
establish liabilities for possible assessments by taxing authorities resulting
from exposures including, but not limited to, the deductibility of


50

<PAGE>

Chemed Corporation and Subsidiary Companies

certain expenses and the tax treatment of acquisitions and divestitures. While
it is often difficult to predict the final outcome or the timing of resolution
of any particular tax matter, we believe our tax reserves reflect the probable
outcome of known contingencies.

     On June 30, 2005, significant changes to the tax system of the State of
Ohio were enacted. The impact was required to be accounted for in all annual and
interim periods ending on or after June 30, 2005. Changes in the Ohio tax
legislation include the phasing out of the Ohio income tax and the Ohio personal
property tax. Additionally, a new Commercial Activity Tax ("CAT"), which is
based on gross receipts, was introduced. Since the corporate income tax is being
replaced by the CAT, which is not an income tax under generally accepted
accounting principles, entities with businesses in the State of Ohio must
account for the phase-out of the corporate income tax as a change in enacted tax
rate as of June 30, 2005. We recorded a valuation allowance on all significant
deferred tax amounts in the State of Ohio, mainly net operating loss
carry-forwards, because management believed that it was more likely than not
that the benefit would expire unutilized. As such, there was no significant
impact to us for the year ended December 31, 2005.

GOODWILL AND INTANGIBLE ASSETS

     Identifiable, definite-lived intangible assets arise from purchase business
combinations and are amortized using either an accelerated method or the
straight-line method over the estimated useful lives of the assets. The
selection of an amortization method is based on which method best reflects the
economic pattern of usage of the asset. The VITAS trade name is considered to
have an indefinite life. Goodwill and the VITAS trade name are tested at least
annually for impairment. The valuation of goodwill and the VITAS trade name is
dependent upon many factors, some of which are market-driven and beyond our
control. The valuation of goodwill and the VITAS trade name indicate that the
fair value exceeds the carrying value at December 31, 2005.

RECENT ACCOUNTING STATEMENTS
FASB NO. 123R

     In December 2004, the FASB issued FASB Statement No. 123 (revised 2004)
"Share-Based Payment" ("FASB123R"), which requires companies to recognize in the
income statement the grant-date fair value of stock options and other
equity-based compensation issued to employees and disallows the use of the
intrinsic value method of accounting for stock options, but expresses no
preference for a type of valuation model. This statement supersedes APB No. 25,
but does not change the accounting guidance for share-based payment transactions
with parties other than employees provided in FASB 123 as originally issued.
FASB123R is effective as of January 1, 2006. In March 2005, the Board of
Directors approved immediate vesting of all unvested stock options to avoid
recognizing approximately $951,000 of pretax expense that would have been
charged to income under FASB123R beginning on January 1, 2006. The pretax
expense from continuing operations of accelerating the vesting of these stock
options, which were scheduled to vest in November 2005 and November 2006, was
approximately $215,000 and recorded in the first quarter of 2005.

     We adopted FASB 123R on January 1, 2006 using the modified prospective
method. Therefore, historical financial information will not be restated. There
was no significant impact on our financial condition, results of operations or
cash flow as a result of adoption of FASB 123R.

FASB NO. 154

     In May 2005, the FASB issued FASB Statement No. 154, "Accounting for
Changes and Error Corrections--a replacement of APB Opinion No. 20 and FASB
Statement No. 3" (FASB 154). FASB 154 changes the requirements with regard to
the accounting for and reporting of a change in an accounting principle. The
provisions of FASB 154 require, unless impracticable, retrospective application
to prior periods presented in financial statements for all voluntary changes in
an accounting principle and changes required by the adoption of a new accounting
pronouncement in the unusual instance that the new pronouncement does not
indicate a specific transition method. FASB 154 also requires that a change in
depreciation, amortization or depletion method for long-lived, non-financial
assets be accounted for as a change in an accounting estimate, which requires
prospective application of the new method. FASB 154 is effective for all changes
in an accounting principle made in fiscal years beginning after December 15,
2005. We adopted FASB 154 with our fiscal year beginning January 1, 2006. There
was no impact on our financial condition, results of operations or cash flows
upon adoption.

FASB NO. 155

     In February 2006, the FASB issued FASB Statement No. 155, "Accounting for
Certain Hybrid Financial Instruments" (FASB 155), which nullifies and amends
various accounting guidance relating to accounting for derivative instruments
and securitization transactions. In general, these changes will reduce the
operational complexity associated with bifurcating embedded derivatives, and
increase the number of beneficial interests in securitization transactions. This
statement is effective for all financial instruments acquired or issued after
the beginning of our first fiscal year that begins after September 15, 2006.
Because we do not have any material derivative instruments or securitization
transactions, we believe there will be no material impact on our financial
condition, results of operations or cash flows upon adoption.


                                                                              51

<PAGE>

UNAUDITED SUPPLEMENTARY DATA (VITAS)

To provide background in analyzing the quarterly operations of the VITAS
segment, we are providing the following financial and operating data (in
thousands, except percentages, days and dollars per day):

<TABLE>
<CAPTION>
                                                            2004                               2005
                                          ----------------------------------------   -----------------------
                                                   First Quarter
                                          -----------------------------
                                           January 1      February 24
                                               to              to          Fourth     Fourth    Year-to-date
                                          February 23   September 30(a)    Quarter    Quarter     December
                                          -----------   ---------------   --------   --------   ------------
<S>                                       <C>           <C>               <C>        <C>        <C>
STATEMENT OF OPERATIONS
   Service revenues and sales             $ 72,870         $316,453       $142,277   $168,994     $629,140
                                          --------         --------       --------   --------     --------
   Cost of services provided
      (excluding depreciation)              58,848          247,971        108,830    130,271      491,974
   Selling, general and administrative
      expenses                               8,182           29,940         13,006     14,097       54,806
   Depreciation                                836            3,078          2,634      2,108        7,585
   Amortization                                  4            2,995            354      1,384        4,347
   Other expense                            24,956(b)            --          1,680     18,150       19,031
                                          --------         --------       --------   --------     --------
      Total costs and expenses              92,826          283,984        126,504    166,010      577,743
                                          --------         --------       --------   --------     --------
      Income/(loss) from operations        (19,956)          32,469         15,773      2,984       51,397
   Interest expense                           (919)             (90)           (38)       (49)        (153)
   Loss on extinguishment of debt           (4,497)(b)           --             --         --           --
   Other income--net                            41              589            466        834        2,737
                                          --------         --------       --------   --------     --------
      Income/(loss) before income taxes    (25,331)          32,968         16,201      3,769       53,981
   Income taxes                              6,996          (13,489)        (6,541)    (1,264)     (20,394)
                                          --------         --------       --------   --------     --------
         Net income/(loss)                $(18,335)        $ 19,479       $  9,660   $  2,505     $ 33,587
                                          ========         ========       ========   ========     ========
EBITDA (c)
   Net income/(loss)                      $(18,335)        $ 19,479       $  9,660   $  2,505     $ 33,587
   Add/(deduct)
      Interest expense                         919               90             38         49          153
      Income taxes                          (6,996)          13,489          6,541      1,264       20,394
      Depreciation                             836            3,078          2,634      2,108        7,585
      Amortization                               4            2,995            354      1,384        4,347
                                          --------         --------       --------   --------     --------
         EBITDA                           $(23,572)        $ 39,131       $ 19,227   $  7,310     $ 66,066
                                          ========         ========       ========   ========     ========
</TABLE>

- ----------
(a)  We acquired VITAS on February 24, 2004 and recorded estimated purchase
     accounting adjustments to the value of VITAS' assets as of that date.

(b)  Costs related to the sale of VITAS totaled $29,453,000 pretax ($20,930,000
     aftertax) for January 1 through February 23, 2004.

(c)  EBITDA is income before interest expense, income taxes, depreciation and
     amortization. We use EBITDA, in addition to net income and income/(loss)
     from operations, to assess our performance and believe it is important for
     investors to be able to evaluate us using the same measures used by
     management. We believe EBITDA is an important supplemental measure of
     operating performance because it provides investors with an indication of
     our performance independent of our debt and equity structure and related
     costs. We also believe EBITDA is a supplemental measurement tool used by
     analysts and investors to help evaluate a company's overall operating
     performance by including only transactions related to core cash operating
     business activities. EBITDA as calculated by us is not necessarily
     comparable to similarly titled measures reported by other companies. In
     addition, EBITDA is not prepared in accordance with accounting principles
     generally accepted in the United States ("GAAP"), and should not be
     considered an alternative for net income, income from operations or other
     financial information determined under GAAP, and should not be considered
     as a measure of profitability or liquidity. We believe the line on the
     consolidated statement of operations entitled net income/(loss) is the most
     directly comparable GAAP measure to EBITDA. EBITDA, as calculated above,
     includes interest income, loss on extinguishment of debt, costs related to
     the sale of VITAS to the Company and costs related to the settlement of
     class action litigation as follows (in thousands):

<TABLE>
<CAPTION>
                                                            2004                             2005
                                          ---------------------------------------   ----------------------
                                                   First Quarter
                                          -----------------------------
                                           January 1      February 24
                                               to              to          Fourth    Fourth   Year-to-date
                                          February 23   September 30(a)   Quarter   Quarter     December
                                          -----------   ---------------   -------   -------   ------------
<S>                                       <C>           <C>               <C>       <C>        <C>
Interest income                             $    41           $610        $  481    $   842      $ 2,803
Loss on extinguishment of debt                4,497             --            --         --           --
Costs related to sale of business            24,956             --         1,680         --           --
Settlement of class action litigation            --             --            --     17,350       17,350
</TABLE>


52
<PAGE>

<TABLE>
<CAPTION>
                                                         2004                       2005
                                               -----------------------   -------------------------
                                                Fourth    Year-to-Date    Fourth      Year-to-Date
                                                Quarter     December      Quarter        December
                                               --------   ------------   --------     ------------
<S>                                            <C>        <C>            <C>           <C>
OPERATING STATISTICS
   Net revenue
      Homecare                                 $ 98,746     $364,962     $117,154       $436,596
      Inpatient                                  19,131       74,905       22,828         86,127
      Continuous care                            24,400       91,733       29,012        106,417
                                               --------     --------     --------       --------
         Total                                 $142,277     $531,600     $168,994       $629,140
                                               ========     ========     ========       ========
   Net revenue as a percent of total
      Homecare                                     69.4%        68.7%        69.3%          69.4%
      Inpatient                                    13.4         14.1         13.5           13.7
      Continuous care                              17.2         17.2         17.2           16.9
                                               --------     --------     --------       --------
         Total                                    100.0%       100.0%       100.0%         100.0%
                                               ========     ========     ========       ========
   Average daily census ("ADC") (days)
      Homecare                                    5,053        4,763        6,030          5,797
      Nursing home                                3,241        3,107        3,417          3,312
                                               --------     --------     --------       --------
         Routine homecare                         8,294        7,870        9,447          9,109
      Inpatient                                     366          367          421            408
      Continuous care                               474          457          544            513
                                               --------     --------     --------       --------
         Total                                    9,134        8,694       10,412         10,030
                                               ========     ========     ========       ========
   Total Admissions                              11,558       46,537       12,487         50,456
   Average length of stay (days)                   64.1         60.0         70.0(a)        67.4
   Median length of stay (days)                    12.0         12.0         13.0           12.0
   ADC by major diagnosis
      Neurological                                 31.4%        31.2%        32.5%          32.1%
      Cancer                                       21.9         22.7         21.0           21.3
      Cardio                                       15.0         14.6         14.9           15.0
      Respiratory                                   7.1          7.3          7.0            7.1
      Other                                        24.6         24.2         24.6           24.5
                                               --------     --------     --------       --------
      Total                                       100.0%       100.0%       100.0%         100.0%
                                               ========     ========     ========       ========
   Admissions by major diagnosis
      Neurological                                 18.3%        18.7%        19.3%          18.9%
      Cancer                                       37.0         37.0         37.5           36.8
      Cardio                                       13.2         13.2         12.4           13.2
      Respiratory                                   6.6          7.2          6.7            7.1
      Other                                        24.9         23.9         24.1           24.0
                                               ---------    --------     --------       --------
      Total                                       100.0%       100.0%       100.0%         100.0%
                                               ========     ========     ========       ========
   Direct patient care margins (b)
      Routine homecare                             51.2%        50.0%        50.8%          50.2%
      Inpatient                                    23.9         24.4         23.7           22.7
      Continuous care                              18.6         18.8         20.4           18.9
   Homecare margin drivers
      (dollars per patient day)
      Labor costs                              $  44.08     $  42.96     $  47.13       $  45.98
      Drug costs                                   7.63         8.48         7.31           7.60
      Home medical equipment                       5.56         5.71         5.46           5.48
      Medical supplies                             1.98         1.98         2.14           2.17
   Inpatient margin drivers
      (dollars per patient day)
      Labor costs                              $ 235.01     $ 213.28     $ 238.26       $ 240.00
   Continuous care margin drivers
      (dollars per patient day)
      Labor costs                              $ 437.43     $ 426.46     $ 442.28       $ 441.95
   Bad debt expense as a percent of revenues        0.9%         1.0%         0.9%           0.9%
      Accounts receivable --
         days of revenue outstanding               38.1         38.1         41.8           41.8
</TABLE>

- ----------
(a)  VITAS has five large (greater than 450 ADC), 16 medium (greater than 200
     but less than 450 ADC) and 18 small (less than 200 ADC) hospice programs. 2
     programs, including the Phoenix program, have estimated Medicare Cap
     cushion of less than 10% for the 2006 measurement period.

(b)  Amounts exclude indirect patient care and administrative costs.


                                                                              53

<PAGE>

Chemed Corporation and Subsidiary Companies

CORPORATE GOVERNANCE

     We submitted our Annual Certification of the Chief Executive Officer to the
New York Stock Exchange ("NYSE") regarding the NYSE corporate governance listing
standards on May 18, 2005. We also filed our Certifications of the President and
Chief Executive Officer, the Vice President and Chief Financial Officer and the
Vice President and Controller pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 as Exhibits 31.1, 31.2 and 31.3, respectively, to our Annual Report on
Form 10-K for the year ended December 31, 2005.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
REGARDING FORWARD-LOOKING INFORMATION

     In addition to historical information, this report contains forward-looking
statements and performance trends that are based upon assumptions subject to
certain known and unknown risks, uncertainties, contingencies and other factors.
Such forward-looking statements and trends include, but are not limited to, the
impact of laws and regulations on our operations, our estimate of future
effective income tax rates and the recoverability of deferred tax assets.
Variances in any or all of the risks, uncertainties, contingencies, and other
factors from our assumptions could cause actual results to differ materially
from these forward-looking statements and trends. Our ability to deal with the
unknown outcomes of these events, many of which are beyond our control, may
affect the reliability of our projections and other financial matters.


54

<PAGE>

                                                                               4

CORPORATE OFFICERS

EDWARD L. HUTTON
Chairman of the Board

KEVIN J. MCNAMARA
President & Chief Executive Officer

DAVID P. WILLIAMS
Vice President & Chief Financial Officer

TIMOTHY S. O'TOOLE
Executive Vice President

SPENCER S. LEE
Executive Vice President

ARTHUR V. TUCKER, JR.
Vice President & Controller

NAOMI C. DALLOB
Vice President & Secretary

THOMAS C. HUTTON
Vice President

THOMAS J. REILLY
Vice President

LISA A. DITTMAN
Assistant Secretary

DIRECTORS

EDWARD L. HUTTON
Chairman of the Board, Chemed Corporation

KEVIN J. MCNAMARA
President & Chief Executive Officer,
Chemed Corporation

DONALD BREEN, JR.(2)
President, Castle Hill Ventures LLC
(management consulting and investments)

<PAGE>

                                                                               5

CHARLES H. ERHART, JR. (1, 2*, 3*)
Former President, W.R. Grace & Co. (retired)

JOEL F. GEMUNDER (3)
President & Chief Executive Officer, Omnicare Inc.

PATRICK P. GRACE (1, 3)
President, MLP Capital Inc. (real estate and mining)

THOMAS C. HUTTON
Vice President, Chemed Corporation

WALTER L. KREBS (1)
Former Senior Vice President - Finance,
Chief Financial Officer and Treasurer,
Service America Systems Inc. (retired)

SANDRA E. LANEY
Chairman & Chief Executive Officer,
Cadre Computer Resources Co.

TIMOTHY S. O'TOOLE
Executive Vice President, Chemed Corporation;
President & Chief Executive Officer,
VITAS Healthcare Corporation

DONALD E. SAUNDERS (1*)
Markley Visiting Professor,
Farmer School of Business Administration,
Miami University (Ohio)

GEORGE J. WALSH III
Partner, Thompson Hine LLP
(law firm, New York, New York)

FRANK E. WOOD (2)
President and Chief Executive Officer,
Secret Communications LLC (radio stations);
Principal, The Darwin Group (venture capital);
and Chairman, 8e6 Technologies Corporation
(software development)

1)  Audit Committee
2)  Compensation/Incentive Committee
3)  Nominating Committee
*   Committee Chairman

<PAGE>

                                                                               6

INSIDE BACK COVER

TEXT:

CORPORATE INFORMATION

CORPORATE HEADQUARTERS
Chemed Corporation
Suite 2600
255 East Fifth Street
Cincinnati, Ohio  45202-4726
513-762-6900
www.chemed.com

TRANSFER AGENT & REGISTRAR

      Individuals of record needing address changes, account balances, account
consolidations, replacement of lost certificates or lost checks, dividend
reinvestment plan statements or cost-basis data, 1099s, or assistance with other
administrative matters relating to their Chemed Capital Stock should direct
their inquiries to:

                   Wells Fargo Bank, N.A., Shareowner Services
                                 P.O. Box 64854
                         St. Paul, Minnesota 55164-0854
                       Telephone: 800-468-9716 (TOLL-FREE)
                 Web site: www.wellsfargo.com/shareownerservices

All questions relating to administration of Chemed stock must be handled by
Wells Fargo.

CORPORATE INQUIRIES

      Annual reports, press releases, corporate governance guidelines, Board
committee charters, Policies on Business Ethics, the Annual Report on Form 10-K,
and other printed materials may be obtained from Chemed Investor Relations
without charge by writing or by calling 800-2CHEMED or 800-224-3633. Printed
materials may also be viewed and downloaded from Chemed's Web site at
www.chemed.com.

<PAGE>

                                                                               7

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
Cincinnati, Ohio  45202

DIVIDEND REINVESTMENT PLAN FOR HOLDERS OF 25 OR MORE SHARES

      The Chemed Automatic Dividend Reinvestment Plan is available to
shareholders of record owning a minimum of 25 shares of Chemed Capital Stock. A
plan brochure, including fee schedule, and enrollment information are available
from the Dividend Reinvestment Agent, Wells Fargo Bank, N.A., at the address
listed above.

ANNUAL MEETING

      The Annual Meeting of Shareholders of Chemed Corporation, will be held on
Monday, May 15, 2006, at 11 a.m. in the Lower Level Conference Center of The
Queen City Club, 331 East Fourth Street, Cincinnati, Ohio.

NUMBER OF SHAREHOLDERS

      The approximate number of shareholders of record of Chemed Capital Stock
was 3,174 on December 31, 2005. (This number does not include shareholders with
shares held under beneficial ownership or within clearinghouse positions of
brokerage firms and banks.)

STOCK EXCHANGE LISTINGS

      Chemed Capital Stock is listed on the New York Stock Exchange under the
ticker symbol CHE.

CAPITAL STOCK & DIVIDEND DATA


<PAGE>

                                                                               8
      The high and low closing prices for Chemed Capital Stock and dividends per
share paid by quarter, each adjusted for a 2-for-1 stock split occurring May 11,
2005, follow:

<TABLE>
<CAPTION>
                                 Closing
                          ---------------------    Dividends
                           High          Low         Paid
                          -------      --------    ---------
<S>                       <C>          <C>         <C>
2005
FIRST QUARTER ..........  $ 38.63      $  32.55      $ 0.06
SECOND QUARTER .........    43.83         34.57        0.06
THIRD QUARTER ..........    44.90         39.32        0.06
FOURTH QUARTER .........    54.00         40.13        0.06

2004
First Quarter ..........  $ 33.48      $  24.48      $ 0.06
Second Quarter .........    27.65         21.55        0.06
Third Quarter ..........    28.13         21.36        0.06
Fourth Quarter .........    33.72         27.56        0.06
</TABLE>

<PAGE>

                                                                               9

BACK COVER:

Chemed Corporation
2600 Chemed Center
255 East Fifth Street
Cincinnati, Ohio  45202-4726

Visit our Web sites at www.chemed.com, www.rotorooter.com, and www.vitas.com.

RECYCLED PAPER LOGO

Printed on recycled paper
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>5
<FILENAME>l18258aexv21.txt
<DESCRIPTION>EX-21
<TEXT>
<PAGE>

                                   EXHIBIT 21
                       SUBSIDIARIES OF CHEMED CORPORATION

      The following is a list of subsidiaries of the Company as of December 31,
2005: Other subsidiaries which have been omitted from the list would not, when
considered in the aggregate, constitute a significant subsidiary. Each of the
companies is incorporated under the laws of the state following its name. The
percentage given for each company represents the percentage of voting securities
of such company owned by the Company or, where indicated, subsidiaries of the
Company as of December 31, 2005.

      All of the majority owned companies listed below are included in the
consolidated financial statements as of December 31, 2005.

      CCR of Ohio, Inc. (Delaware, 100%)

      Comfort Care Holdings Co. (Nevada, 100%)

      Complete Plumbing Services, Inc. (New York, 49% by Roto-Rooter Services
      Company; included within the consolidated financial statements as a
      consolidated subsidiary)

      Consolidated HVAC, Inc. (Ohio, 100% by Roto-Rooter Services Company)

      Jet Resource, Inc. (Delaware, 100%)

      Nurotoco of Massachusetts, Inc. (Massachusetts, 100% by Roto-Rooter
      Services Company)

      Nurotoco of New Jersey, Inc. (Delaware, 80% by Roto-Rooter Services
      Company)

      Roto-Rooter Canada, Ltd. (British Columbia, 100% by Roto-Rooter Services
      Company)

      Roto-Rooter Corporation (Iowa, 100% by Roto-Rooter Group, Inc.)

      Roto-Rooter Development Company (Delaware, 100% by Roto-Rooter
      Corporation)

      Roto-Rooter Group, Inc. (Delaware, 100%)

      Roto-Rooter Services Company (Iowa, 100% by Roto-Rooter Group, Inc.)

      RR Plumbing Services Corporation (New York, 49% by Roto-Rooter Group,
      Inc.; included within the consolidated financial statements as a
      consolidated subsidiary)

      R.R. UK, Inc. (Delaware, 100% by Roto-Rooter Group, Inc.)

      VITAS Healthcare Corporation (Delaware, 100% by Comfort Care Holdings Co.)

      VITAS Hospice Services, L.L.C. (Delaware, 100% by VITAS Healthcare
      Corporation)

      VITAS Healthcare Corporation of Arizona (Delaware, 100% by Vitas Hospice
      Services, L.L.C.)

      VITAS Healthcare Corporation of California (Delaware, 100% by VITAS
      Hospice Services, L.L.C.)

      VITAS Healthcare Corporation of Illinois (Delaware, 100% by VITAS Hospice
      Services, L.L.C.)

      VITAS Healthcare Corporation of Central Florida (Delaware, 100% by VITAS
      Hospice Services, L.L.C.)

      VITAS Healthcare Corporation of Florida (Delaware, 100% by VITAS Hospice
      Services, L.L.C.)

      VITAS Healthcare Corporation of Ohio (Delaware, 100% by VITAS Hospice
      Services, L.L.C.)

      VITAS Healthcare Corporation Atlantic (Delaware, 100% by VITAS Hospice
      Services, L.L.C.)

<PAGE>

      VITAS Healthcare of Texas, L.P. (Texas, 99% by VITAS Holdings Corporation,
      the limited partner, 1% by VITAS Hospice Services, L.L.C., the general
      partner)

      VITAS Healthcare Corporation Midwest (Delaware, 100% by VITAS Hospice
      Services, L.L.C.)

      VITAS Healthcare Corporation of Georgia (Delaware, 100% by VITAS Hospice
      Services, L.L.C.)

      VITAS Healthcare Corporation of North Florida, Inc. (Florida, 100% by
      VITAS Hospice Services, L.L.C.)

      VITAS HME Solutions, Inc. (Delaware, 100% by VITAS Hospice Services,
      L.L.C.)

      Hospice Care Incorporated (Delaware, 100% by VITAS Hospice Services,
      L.L.C.)

      Hospice, Inc. (Florida, 100% by VITAS Hospice Services, L.L.C.)

      VITAS Holdings Corporation (Delaware, 100% by VITAS Hospice Services,
      L.L.C.)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>6
<FILENAME>l18258aexv23.txt
<DESCRIPTION>EX-23
<TEXT>
<PAGE>

                                   EXHIBIT 23

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-115270) and Form S-8 (Nos. 2-87202, 2-80712,
33-65244, 33-61063, 333-109104, 333-118714, 333-34525, 333-87071, 333-34525 and
333-87073) of Chemed Corporation of our report dated March 13, 2006 relating to
the financial statements, management's assessment of the effectiveness of
internal control over financial reporting and the effectiveness of internal
control over financial reporting, which appears in the Annual Report to
Shareholders, which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report dated March 16, 2006
relating to the financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Cincinnati, Ohio
March 16, 2006
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>7
<FILENAME>l18258aexv24.txt
<DESCRIPTION>EX-24
<TEXT>
<PAGE>
                                   EXHIBIT 24




                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 3, 2006


                                                /s/ Donald Breen, Jr.
                                                -----------------------------
                                                Donald Breen, Jr.






<PAGE>




                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 8, 2006


                                                /s/ Charles H. Erhart, Jr.
                                                -----------------------------
                                                Charles H. Erhart, Jr.


<PAGE>



                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 10, 2006


                                                /s/ Joel F. Gemunder
                                                -----------------------------
                                                Joel F. Gemunder


<PAGE>



                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 8, 2006


                                                /s/ Patrick P. Grace
                                                -----------------------------
                                                Patrick P. Grace


<PAGE>




                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 6, 2006


                                                /s/ Edward L. Hutton
                                                -----------------------------
                                                Edward L. Hutton




<PAGE>



                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 3, 2006


                                                /s/ Thomas C. Hutton
                                                -----------------------------
                                                Thomas C. Hutton


<PAGE>




                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as her true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 3, 2006


                                                /s/ Sandra E. Laney
                                                -----------------------------
                                                Sandra E. Laney


<PAGE>



                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 7, 2006


                                                /s/ Timothy S. O'Toole
                                                -----------------------------
                                                Timothy S. O'Toole


<PAGE>



                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 9, 2006


                                                /s/ Donald E. Saunders
                                                -----------------------------
                                                Donald E. Saunders



<PAGE>



                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 3, 2006


                                                /s/ George J. Walsh III
                                                -----------------------------
                                                George J. Walsh III


<PAGE>



                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 6, 2006


                                                /s/ Frank E. Wood
                                                -----------------------------
                                                Frank E. Wood


<PAGE>



                                POWER OF ATTORNEY



         The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and
lawful attorneys-in-fact for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 2005, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.

Dated: March 3, 2006


                                                /s/ Walter L. Krebs
                                                -----------------------------
                                                Walter L. Krebs


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>8
<FILENAME>l18258aexv31w1.txt
<DESCRIPTION>EX-31.1
<TEXT>
<PAGE>

                                  EXHIBIT 31.1

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

I, Kevin J. McNamara, certify that:

     1. I have reviewed this annual report on Form 10-K of Chemed Corporation
     ("registrant");

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

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

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

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

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

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

          d) Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          fourth quarter in 2005 that has materially affected, or is reasonably
          likely to materially affect, the registrant's internal control over
          financial reporting.

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

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

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

Date: March 13, 2006                       /s/ Kevin J. McNamara
                                           -------------------------------------
                                           Kevin J. McNamara
                                           (President & Chief Executive Officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>9
<FILENAME>l18258aexv31w2.txt
<DESCRIPTION>EX-31.2
<TEXT>
<PAGE>

                                  EXHIBIT 31.2

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

I, David P. Williams, certify that:

     1. I have reviewed this annual report on Form 10-K of Chemed Corporation
     ("registrant");

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

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

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

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

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

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

          d) Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          fourth quarter in 2005 that has materially affected, or is reasonably
          likely to materially affect, the registrant's internal control over
          financial reporting.

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

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

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

Date: March 13, 2006                /s/ David P. Williams
                                    -------------------------------------------
                                    David P. Williams
                                    (Vice President and Chief Financial Officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.3
<SEQUENCE>10
<FILENAME>l18258aexv31w3.txt
<DESCRIPTION>EX-31.3
<TEXT>
<PAGE>

                                  EXHIBIT 31.3

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

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

     1. I have reviewed this annual report on Form 10-K of Chemed Corporation
     ("registrant");

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

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

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

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

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

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

          d) Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          fourth quarter in 2005 that has materially affected, or is reasonably
          likely to materially affect, the registrant's internal control over
          financial reporting.

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

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

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

Date: March 13, 2006                        /s/ Arthur V. Tucker, Jr.
                                            -------------------------------
                                            Arthur V. Tucker, Jr.
                                            (Vice President and Controller)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>11
<FILENAME>l18258aexv32w1.txt
<DESCRIPTION>EX-32.1
<TEXT>
<PAGE>

                                  EXHIBIT 32.1

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

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

     1)   the Company's Annual Report on Form 10-K for the year ending December
          31, 2005 ("Report"), fully complies with the requirements of Section
          13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

Dated: March 13, 2006                    /s/ Kevin J. McNamara
                                         ---------------------------------------
                                         Kevin J. McNamara
                                         (President and Chief Executive Officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>12
<FILENAME>l18258aexv32w2.txt
<DESCRIPTION>EX-32.2
<TEXT>
<PAGE>

                                  EXHIBIT 32.2

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

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

     1)   the Company's Annual Report on Form 10-K for the year ending December
          31, 2005 ("Report"), fully complies with the requirements of Section
          13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

Dated: March 13, 2006                      /s/ David P. Williams
                                           ---------------------
                                           David P. Williams
                                           (Vice President and
                                           Chief Financial Officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.3
<SEQUENCE>13
<FILENAME>l18258aexv32w3.txt
<DESCRIPTION>EX-32.3
<TEXT>
<PAGE>

                                  EXHIBIT 32.3

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

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

     1)   the Company's Annual Report on Form 10-K for the year ending December
          31, 2005 ("Report"), fully complies with the requirements of Section
          13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

Dated: March 13, 2006                      /s/ Arthur V. Tucker, Jr.
                                           -------------------------------
                                           Arthur V. Tucker, Jr.
                                           (Vice President and Controller)
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
