CHE Chemed Corporation

Commission File Number: 1-8351

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

 Delaware 31-0791746
 (State or other jurisdiction of (IRS Employer Identification No.)
 incorporation or organization)

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

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

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

Class Amount Date

Capital Stock $1 Par Value 22,906,177 Shares June 30, 2008

 CHEMED CORPORATION AND
 SUBSIDIARY COMPANIES



 Index

 Page No.
PART I. FINANCIAL INFORMATION: --------
 Item 1. Financial Statements
 Unaudited Consolidated Balance Sheet -
 June 30, 2008 and December 31, 2007 3

 Unaudited Consolidated Statement of Income -
 Three and six months ended June 30, 2008 and 2007 4

 Unaudited Consolidated Statement of Cash Flows -
 Six months ended June 30, 2008 and 2007 5

 Notes to Unaudited Financial Statements 6

 Item 2. Management's Discussion and Analysis of Financial Condition and Results
 of Operations 16


 Item 3. Quantitative and Qualitative Disclosures about Market Risk 23

 Item 4. Controls and Procedures 23

PART II. OTHER INFORMATION
 Item 2(c). Purchases of Equity Securities by Issuer and Affiliated Purchasers 23

 Item 4. Submission of Matters to a Vote of Security Holders 23

 Item 6. Exhibits 24

 PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements
 CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 UNAUDITED CONSOLIDATED BALANCE SHEET
 (in thousands except share and per share data)


 June 30, December 31,
 2008 2007
 -------------- -------------
ASSETS
 Current assets
 Cash and cash equivalents $ 1,525 $ 4,988
 Accounts receivable less
 allowances of $9,638 (2007 - $9,746) 101,403 101,170
 Inventories 7,588 6,596
 Current deferred income taxes 14,855 14,212
 Prepaid income taxes 2,370 -
 Prepaid expenses and other current assets 9,323 10,496
 -------------- -------------
 Total current assets 137,064 137,462
 Investments of deferred compensation plans held in trust 30,630 29,417
 Notes receivable - 9,701
 Properties and equipment, at cost, less accumulated
 depreciation of $95,562 (2007 - $88,639) 72,276 74,513
 Identifiable intangible assets less accumulated
 amortization of $19,262 (2007 - $17,245) 63,160 65,177
 Goodwill 439,216 438,689
 Other assets 15,870 15,411
 -------------- -------------
 Total Assets $ 758,216 $ 770,370
 ============== =============

LIABILITIES
 Current
 liabilities
 Accounts payable $ 50,760 $ 46,168
 Current portion of long-term debt 10,166 10,162
 Income taxes 863 4,221
 Accrued insurance 34,501 36,337
 Accrued compensation 34,492 40,072
 Other current liabilities 13,230 13,929
 -------------- -------------
 Total current liabilities 144,012 150,889
 Deferred income taxes 4,762 5,802
 Long-term debt 217,870 214,669
 Deferred compensation liabilities 30,752 29,149
 Other liabilities 5,819 5,512
 -------------- -------------
 Total Liabilities 403,215 406,021
 -------------- -------------

STOCKHOLDERS' EQUITY
 Capital stock - authorized 80,000,000 shares $1 par;
 issued 29,389,606 shares (2007 - 29,260,791 shares) 29,390 29,261
 Paid-in capital 273,812 267,312
 Retained earnings 309,506 278,336
 Treasury stock - 6,483,429 shares (2007 - 5,299,056
 shares), at cost (260,122) (213,041)
 Deferred compensation payable in Company stock 2,415 2,481
 ------------ -------------
 Total Stockholders' Equity 355,001 364,349
 -------------- -------------
 Total Liabilities and Stockholders' Equity $ 758,216 $ 770,370
 ============== =============


 See accompanying notes to unaudited financial statements.

 CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 UNAUDITED CONSOLIDATED STATEMENT OF INCOME
 (in thousands, except per share data)



 Three Months Ended June 30, Six Months Ended June 30,
 ------------------------------ -----------------------------
 2008 2007 2008 2007
 --------------- -------------- ------------- ---------------
Service revenues and sales $ 283,156 $ 271,387 $ 568,424 $ 541,826
 --------------- -------------- ------------- ---------------
Cost of services provided and goods sold
 (excluding depreciation) 201,139 188,716 406,951 376,963
Selling, general and administrative expenses 46,321 46,090 89,048 94,160
Depreciation 5,370 4,962 10,808 9,677
Amortization 1,489 1,294 2,939 2,609
Other operating expense/(income) - - - (1,138)
 --------------- -------------- ------------- ---------------
 Total costs and expenses 254,319 241,062 509,746 482,271
 --------------- -------------- ------------- ---------------
 Income from operations 28,837 30,325 58,678 59,555
Interest expense (1,422) (3,400) (3,019) (7,142)
Loss on extinguishment of debt - (13,715) - (13,715)
Other income--net 886 2,188 (303) 3,057
 --------------- -------------- ------------- ---------------
 Income before income taxes 28,301 15,398 55,356 41,755
Income taxes (11,051) (5,965) (21,286) (16,101)
 --------------- -------------- ------------- ---------------
Net income $ 17,250 $ 9,433 $ 34,070 $ 25,654
 =============== ============== ============= ===============

Earnings Per Share
 Net income $ 0.73 $ 0.38 $ 1.44 $ 1.02
 =============== ============== ============= ===============
 Average number of shares outstanding 23,486 24,506 23,681 25,108
 =============== ============== ============= ===============

Diluted Earnings Per Share
 Net income $ 0.73 $ 0.38 $ 1.42 $ 1.00
 =============== ============== ============= ===============
 Average number of shares outstanding 23,759 25,080 24,026 25,684
 =============== ============== ============= ===============

Cash Dividends Per Share $ 0.06 $ 0.06 $ 0.12 $ 0.12
 =============== ============== ============= ===============



 See accompanying notes to unaudited financial statements.

 CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
 (in thousands)

 Six Months Ended
 June 30,
 --------------------------------
 2008 2007
 ----------------- -------------
Cash Flows from Operating Activities
 Net income $ 34,070 $ 25,654
 Adjustments to reconcile net income to net cash provided
 by operating activities:
 Depreciation and amortization 13,747 12,286
 Provision for uncollectible accounts receivable 4,351 4,009
 Stock option expense 2,982 1,482
 Provision for deferred income taxes (1,694) 376
 Amortization of debt issuance costs 507 751
 Write off unamortized debt issuance costs - 7,153
 Noncash long-term incentive compensation - 6,154
 Changes in operating assets and liabilities, excluding
 amounts acquired in business combinations
 Increase in accounts receivable (4,652) (11,352)
 Increase in inventories (953) (174)
 Decrease in prepaid expenses and
 other current assets 1,179 1,377
 Decrease in accounts payable and other current liabilities (2,248) (14,794)
 Increase/(decrease) in income taxes (4,903) 69
 Increase in other assets (1,906) (3,932)
 Increase in other liabilities 1,910 4,540
 Excess tax benefit on share-based compensation (825) (2,370)
 Other sources/(uses) 206 (1,005)
 ----------------- -------------
 Net cash provided by operating activities 41,771 30,224
 ----------------- -------------
Cash Flows from Investing Activities
 Net proceeds/(uses) from discontinued operations 9,439 (5,905)
 Capital expenditures (8,715) (13,908)
 Business combinations, net of cash acquired (577) (62)
 Proceeds from sales of property and equipment 71 3,003
 Other uses (306) (564)
 ----------------- -------------
 Net cash used by investing activities (88) (17,436)
 ----------------- -------------
Cash Flows from Financing Activities
 Purchases of treasury stock (45,791) (130,748)
 Net increase in revolving line of credit 8,300 13,300
 Repayment of long-term debt (5,095) (185,643)
 Dividends paid (2,900) (2,997)
 Increase/(decrease) in cash overdrafts payable (655) 166
 Excess tax benefit on share-based compensation 825 2,370
 Issuance of capital stock 116 2,069
 Proceeds from issuance of long-term debt - 300,000
 Purchase of note hedges - (54,939)
 Proceeds from issuance of warrants - 27,614
 Debt issuance costs - (6,395)
 Other sources 54 610
 ----------------- -------------
 Net cash used by financing activities (45,146) (34,593)
 ----------------- -------------
Decrease in Cash and Cash Equivalents (3,463) (21,805)
Cash and cash equivalents at beginning of year 4,988 29,274
 ----------------- -------------
Cash and cash equivalents at end of period $ 1,525 $ 7,469
 ================= =============


 See accompanying notes to unaudited financial statements.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

Notes to Unaudited Financial Statements

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

We have prepared the accompanying unaudited consolidated financial statements of Chemed in accordance with Rule 10-01 of SEC Regulation S-X. Consequently, we have omitted certain disclosures required under generally accepted accounting principles in the United States ("GAAP") for complete financial statements. The December 31, 2007 balance sheet data were derived from audited financial statements but do not include all disclosures required by GAAP. However, in our opinion, the financial statements presented herein contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position, results of operations and cash flows. These financial statements are prepared on the same basis as and should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2007. Certain 2007 amounts have been reclassified to conform with current period presentation on the balance sheet related to the presentation of Medicaid nursing home pass-through activity at our VITAS subsidiary.

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

As of June 30, 2008, VITAS has approximately $12.2 million in unbilled revenue included in accounts receivable (December 31, 2007 - $9.5 million). The unbilled revenue at VITAS relates to hospice programs currently undergoing focused medical reviews (FMR). During FMR, surveyors working on behalf of the U.S. Federal government review certain patient files for compliance with Medicare regulations. During the time the patient file is under review, we are unable to bill for care provided to those patients. During the past year, the pace of FMR activity has increased industry-wide, resulting in our significant unbilled revenue balances. We make appropriate provisions to reduce our accounts receivable balance for potential denials of patient service revenue due to FMR activity.

We actively monitor each of our hospice programs, by provider number, as to their specific admission, discharge rate and median length of stay data in an attempt to determine whether they are likely to exceed the annual per-beneficiary Medicare cap ("Medicare cap"). Should we determine that revenues for a program are likely to exceed the Medicare cap based on projected trends, we attempt to institute corrective action to influence the patient mix or to increase patient admissions. However, should we project our corrective action will not prevent that program from exceeding its Medicare cap, we estimate the amount of revenue recognized during the period that will require repayment to the Federal government under the Medicare cap and record the amount as a reduction to patient revenue. The Medicare cap measurement period is from September 29 through September 28 of the following year for admissions and from November 1 through October 31 of the following year for revenue. As of the date of this filing, for the 2007 and 2008 measurement periods, we estimate that no programs have a required Medicare billing reduction. Our current estimates for the projected full year 2007 and 2008 measurement periods anticipate no programs with a Medicare cap billing limitation. Therefore, no revenue reduction for Medicare cap has been recorded for the three or six-month periods ended June 30, 2008.

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

 Three months ended Six months ended
 June 30, June 30,
 -------------------------------- ------------------------------
 2008 2007 2008 2007
 -------------- -------------- -------------- -------------

Service Revenues and Sales
--------------------------
VITAS $ 199,048 $ 185,701 $397,633 $369,750
Roto-Rooter 84,108 85,686 170,791 172,076
 -------------- -------------- ------------- -------------
 Total $ 283,156 $ 271,387 $568,424 $541,826
 ============== ============== ============= =============

After-tax Earnings
------------------
VITAS $ 14,321 $ 14,154 $ 27,619 $ 29,141
Roto-Rooter 8,393 10,491 17,488 19,997
 -------------- -------------- ------------- -------------
 Total 22,714 24,645 45,107 49,138
Corporate (5,464) (15,212) (11,037) (23,484)
 -------------- -------------- ------------- -------------
 Net income $ 17,250 $ 9,433 $ 34,070 $ 25,654
 ============== ============== ============= =============

Beginning on January 1, 2008, the income statement impact of our deferred compensation plans covering Roto-Rooter employees has been classified as a Corporate activity. Historically, the income statement impact has been recorded as a Roto-Rooter activity. Due to the volatility in the capital markets, Roto-Rooter's operational results were being distorted in our management reporting as a result of the activity of the deferred compensation plans. Our Chief Operating Decision Maker, Kevin McNamara, determined that the income statement impact of Roto-Rooter's deferred compensation plans is more appropriately classified as a Corporate activity. Our internal management reporting documents have been changed to reflect this determination. The comparable prior-year period has been reclassified to conform to the current-year presentation.

4. Earnings per Share Earnings per share are computed using the weighted average number of shares of capital stock outstanding. Earnings and diluted earnings per share for 2008 and 2007 are computed as follows (in thousands, except per share data):

 For the Three Months Ended Net Earnings
 June 30, Income Shares per Share
------------------------------------- ------------- ------------- ------------
2008
 Earnings $ 17,250 23,486 $ 0.73
 ============
 Dilutive stock options - 247
 Nonvested stock awards - 26
 ------------- -------------
 Diluted earnings $ 17,250 23,759 $ 0.73
 ============= ============= ============
2007
 Earnings $ 9,433 24,506 $ 0.38
 ============
 Dilutive stock options - 481
 Nonvested stock awards - 93
 ------------- -------------
 Diluted earnings $ 9,433 25,080 $ 0.38
 ============= ============= ============

 For the Six Months Ended Net Earnings
 June 30, Income Shares per Share
------------------------------------- ------------- ------------- ------------
2008
 Earnings $ 34,070 23,681 $ 1.44
 ============
 Dilutive stock options - 315
 Nonvested stock awards - 30
 ------------- -------------
 Diluted earnings $ 34,070 24,026 1.42
 ============= ============= ============
2007
 Earnings $ 25,654 25,108 $ 1.02
 ============
 Dilutive stock options - 459
 Nonvested stock awards - 117
 ------------- -------------
 Diluted earnings $ 25,654 25,684 1.00
 ============= ============= ============

For the three and six month periods ended June 30, 2008, 1,084,267 and 832,267 stock options, respectively were excluded from the computation of diluted earnings per share as their exercise prices were greater than the average market price for most of the quarter. No stock options were excluded for the comparable period in 2007.

Diluted earnings per share may be impacted in future periods as the result of the issuance of our $200 million Convertible Notes and related purchased call options and sold warrants. Under EITF 04-8 "The Effect of Contingently Convertible Instruments on Diluted Earnings per Share" and EITF 90-19, we will not include any shares related to the Notes in our calculation of diluted earnings per share until our average stock price for a quarter exceeds the conversion price of $80.73. We would then include in our diluted earnings per share calculation those shares issuable using the treasury stock method. The amount of shares issuable is based upon the amount by which the average stock price for the quarter exceeds the conversion price. The purchased call option does not impact the calculation of diluted earnings per share as it is always anti-dilutive. The sold warrants become dilutive when our average stock price for a quarter exceeds the strike price of the warrant.

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

 Shares Total Treasury Shares Due Incremental
 Underlying 1.875% Method to the Company Shares Issued by
 Share Convertible Warrant Incremental under Notes the Company
 Price Notes Shares Shares (a) Hedges upon Conversion (b)
----------------- ---------------------- ------------- ------------------- -------------------- -----------------------
 $ 80.73 - - - - -
 $ 90.73 273,061 - 273,061 (273,061) -
 $ 100.73 491,905 - 491,905 (491,905) -
 $ 110.73 671,222 118,359 789,581 (671,222) 118,359
 $ 120.73 820,833 313,764 1,134,597 (820,833) 313,764
 $ 130.73 947,556 479,274 1,426,830 (947,556) 479,274

 (a) Represents the number of incremental shares that must be
 included in the calculation of fully diluted shares
 under U.S. GAAP.
 (b) Represents the number of incremental shares to be issued by
 the Company upon conversion of the 1.875% Convertible Notes,
 assuming concurrent settlement of the note hedges and
 warrants.

5. Long-Term Debt We are in compliance with all debt covenants as of June 30, 2008. We have issued $27.5 million in standby letters of credit as of June 30, 2008 mainly for insurance purposes. Issued letters of credit reduce our available credit under the revolving credit agreement. As of June 30, 2008, we have approximately $139.2 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility, excluding the expansion feature.

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

 Three Months Ended Six Months Ended
 June 30, June 30,
 ---------------------------- -------------------------
 2008 2007 2008 2007
 ------------- ------------- ----------- ------------
Interest income $ 106 $ 944 $ 443 $1,711
(Loss)/gain on trading investments of
 employee benefit trust 841 1,237 (681) 1,450
Loss on disposal of property and equipment (84) (56) (113) (193)
Other - net 23 63 48 89
 ------------- ------------- ----------- ------------
 Total other income $ 886 $2,188 $ (303) $3,057
 ============= ============= =========== ============

7. Other Current Liabilities Other current liabilities as of June 30, 2008 and December 31, 2007 consist of the following (in thousands):

 2008 2007
 ------------ ------------
Accrued legal settlements $ 2,106 $ 2,393
Accrued divestiture expenses 844 845
Accrued Medicare cap estimate 500 500
Other 9,780 10,191
 ------------ ------------

 Total other current liabilities $13,230 $13,929
 ============ ============

8. Stock-Based Compensation Awards On May 19, 2008, the Compensation/Incentive Committee of the Board of Directors ("CIC") approved a grant of 508,600 stock options to certain employees. The stock options vest ratably over three years from the date of issuance. The cumulative compensation expense related to the stock option grant is $5.3 million and will be recognized ratably over the three year vesting period. We used the Black-Scholes option valuation method to determine the cumulative compensation expense of the grant.

On February 13, 2008, the CIC approved a grant of 40,315 shares of restricted stock to certain key employees. The restricted shares cliff vest four years from the date of issuance. The cumulative compensation expense related to the restricted stock award is $2.1 million and will be recognized ratably over the four-year vesting period. We assumed no forfeitures in determining the cumulative compensation expense of the grant.

9. Loans Receivable from Independent Contractors The Roto-Rooter segment sublicenses with approximately sixty-two independent contractors to operate certain plumbing repair and drain cleaning businesses in lesser-populated areas of the United States and Canada. As of June 30, 2008, we had notes receivable from our independent contractors totaling $1.6 million (December 31, 2007 -$1.6 million). In most cases these loans are fully or partially secured by equipment owned by the contractor. The interest rates on the loans range from zero to 8% per annum and the remaining terms of the loans range from 2 months to 5 years at June 30, 2008. During the three months ended June 30, 2008, we recorded revenues of $5.6 million (2007 - $5.4 million) and pretax profits of $2.4 million (2007 - $2.3 million) from our independent contractors. During the six months ended June 30, 2008, we recorded revenues of $11.2 million (2007
- $10.8 million) and pretax profits of $5.1 million (2007 - $4.7 million) from our independent contractors.

We have 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 our contractual relationships with the independent contractors. FIN 46R requires the primary beneficiary of a Variable Interest Entity ("VIE") to consolidate the accounts of the VIE. We have evaluated our relationships with our independent contractors based upon guidance provided in FIN 46R and have concluded that some of the contractors who have loans payable to us may be VIE's. We believe consolidation, if required, of the accounts of any VIE's for which we might be the primary beneficiary would not materially impact our financial position, results of operations or cash flows.

10. Pension and Retirement Plans All of the Company's plans that provide retirement and similar benefits are defined contribution plans. Expenses for the Company's pension and profit-sharing plans, excess benefit plans and other similar plans were $3.8 million and $4.1 million for the three months ended June 30, 2008 and 2007, respectively. Expenses for the Company's pension and profit-sharing plans, excess benefit plans and other similar plans were $5.5 million and $7.7 million for the six months ended June 30, 2008 and 2007, respectively.

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

In April 2007, our Roto-Rooter subsidiary was named in a class action lawsuit filed in San Mateo Superior Court by Stanley Ita ("Ita") alleging class-wide wage and hour violations at one California branch. This suit alleges failure to provide meal and break periods, credit for work time beginning from the first call to dispatch rather than arrival at first assignment and improper calculations of work time and overtime. The case sought payment of penalties, interest and Plaintiffs' attorney fees. After the suit was filed, we offered a settlement to certain members of the class and paid approximately $200,000. In January 2008, we agreed to a tentative settlement with the remaining members of the class for approximately $1.8 million. The tentative settlement was preliminarily approved by the court in May 2008. We anticipate final approval and payment to be made during the third quarter of 2008. The settlement was accrued in the fourth quarter of 2007.

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

12. OIG Investigation In April 2005, the Office of Inspector General ("OIG") for the Department of Health and Human Services served VITAS with civil subpoenas relating to VITAS' alleged failure to appropriately bill Medicare and Medicaid for hospice services. As part of this investigation, the OIG selected medical records for 320 past and current patients from VITAS' three largest programs for review. It also sought policies and procedures dating back to 1998 covering admissions, certifications, recertifications and discharges. During the third quarter of 2005 and again in May 2006, the OIG requested additional information from us. The Court dismissed a related qui tam complaint filed in U.S. District Court for the Southern District of Florida with prejudice in July 2007. The plaintiffs are appealing this dismissal. Pretax expenses related to complying with OIG requests were immaterial for the three and six months ended June 30, 2008 and 2007.

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 our business, results of operations, liquidity or capital resources. Regardless of outcome, responding to the subpoenas and defending the litigation can adversely affect us through defense costs, diversion of our time and related publicity.

13. Related Party Agreement In October 2004, VITAS entered into a pharmacy services agreement ("Agreement") with Omnicare, Inc. ("OCR") whereby OCR provides 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 for one-year terms. Either party may cancel the Agreement at the end of any term by giving written notice at least 90 days prior to the end of said term. In June 2004, VITAS entered into a pharmacy services agreement with excelleRx. The agreement has a one-year term and automatically renews unless either party provides a 90-day written termination notice. Subsequent to June 2004, OCR acquired excelleRx. Under both agreements, VITAS made purchases of $8.3 million for each of the three months ended June 30, 2008 and 2007. Under both agreements, VITAS made purchases of $16.5 million and $16.6 million for the six months ended June 30, 2008 and 2007, respectively. VITAS has accounts payable to OCR of $731,000 at June 30, 2008.

Mr. E. L. Hutton is non-executive Chairman of the Board and a director of the Company. He was a director of OCR until his retirement in the first quarter of 2008 at which time he assumed the honorary post of Chairman Emeritus of OCR's Board. Mr. Joel F. Gemunder, President and Chief Executive Officer of OCR., Ms. Andrea Lindell and Ms. Sandra Laney are directors of both OCR and the Company. Mr. Kevin J. McNamara, President, Chief Executive Officer and a director of the Company, is a director emeritus of OCR. We believe that the terms of these agreements are no less favorable to VITAS than we could negotiate with an unrelated party.

14. Cash Overdrafts Payable Included in accounts payable at June 30, 2008 is cash overdrafts payable of $9.0 million (December 31, 2007 - $9.5 million).

15. Capital Stock Transactions On May 19, 2008 our Board of Directors authorized an additional $56 million to the April 2007 stock repurchase program. For the three months ended June 30, 2008 and 2007, we repurchased approximately 830,000 shares at a weighted average cost of $35.46 per share and 1.5 million shares at a weighted average cost of $65.26 per share, respectively. For the six months ended June 30, 2008 and 2007, we repurchased approximately 1.1 million shares at a weighted average cost of $39.11 per share and 2.1 million shares at a weighted average cost of $59.82 per share, respectively.

16. Fair Value Measurements On January 1, 2008, we partially adopted the provisions of Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"). This statement defines a hierarchy which prioritizes the inputs in fair value measurements. Level 1 measurements are measurements using quoted prices in active markets for identical assets or liabilities. Level 2 measurements use significant other observable inputs. Level 3 measurements are measurements using significant unobservable inputs which require a company to develop its own assumptions. In recording the fair value of assets and liabilities, companies must use the most reliable measurement available. There was no impact on our financial position or results of operations upon adoption of SFAS 157. We have elected to partially defer adoption of SFAS 157 related to our goodwill and indefinite lived intangible assets in accordance with FASB Staff Position No. 157-2.

As of June 30, 2008, we hold $30.6 million of investments in mutual funds and company owned life insurance policies in a Rabbi Trust related to certain of our deferred compensation plans. These investments are valued using quoted prices in active markets for identical investments (Level 1).

17. Recent Accounting Statements In June 2008, the EITF reached a consensus on EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock". The consensus provides additional guidance when determining whether an option or warrant on an entity's own shares are eligible for the equity classification provided for in EITF 00-19. The consensus is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact of this consensus on our outstanding options and warrants issued in connection with our 2007 convertible debt transaction.

In May 2008, the FASB issued Staff Position No. APB 14-1, "Accounting for Convertible Debt Instruments that may be Settled in Cash Upon Conversion (Including Partial Cash Settlement)." This new guidance requires all convertible debentures classified as Instruments B or C under EITF 90-19 to separately account for the debt and equity pieces of the instrument. At inception of the convertible instrument, cash flows related to the convertible instrument are to be discounted using a market rate of interest. This will create a discount at inception to be recorded in equity. The debt portion is to be accreted to its face value, through interest expense, over the life of the instrument using the effective interest method. This will result in higher interest expense over the life of the instrument and an increase in equity at the inception of the instrument. Debt issuance costs are also to be allocated between the debt and equity components using a rationale method. Finally, the FSP requires that the Company value any embedded features of the instrument, other than the conversion option, as a part of the liability. The new standard is effective for all fiscal years (and interim periods) beginning after December 15, 2008. As such, we will adopt the new standard on January 1, 2009. The FSP is to be applied retrospectively. Upon adoption, our preliminary estimate is that our $200 million, 1.875% Convertible Debentures issued in May 2007 will have a discount of between $50 million and $60 million.

In May 2008, the FASB issued Statement of Financial Accounting Standard No. 162 "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). The purpose of this standard is to provide a consistent framework for determining what accounting principles should be used when preparing U.S. GAAP financial statements. SFAS 162 categorizes accounting pronouncements in a descending order of authority. In the instance of potentially conflicting accounting principles, the standard in the highest category must be used. This statement will be effective 60 days after the SEC approves the Public Company Accounting and Oversight Board's related amendments. We believe that SFAS 162 will have no impact on our existing accounting methods.

In December 2007, the FASB issued Statement of Financial Accounting Standard No. 141(R) "Business Combinations (revised 2007)" ("SFAS 141(R)"), which changes certain aspects of the accounting for business combinations. This Statement retains the fundamental requirements in Statement No. 141 that the purchase method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141(R) modifies existing accounting guidance in the areas of deal and restructuring costs, acquired contingencies, contingent consideration, in-process research and development, accounting for subsequent tax adjustments and assessing the valuation date. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. There will be no impact on our financial statements as a result of the adoption of SFAS 141(R); however our accounting for all business combinations after adoption will comply with the new standard.

In December 2007, the FASB issued Statement of Financial Accounting Standard No. 160 "Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" ("SFAS 160"), which requires ownership interests in subsidiaries held by others to be clearly identified, labeled and presented in the consolidated balance sheet within equity but separate from the parent company's equity. SFAS 160 also affects the accounting requirements when the parent company either purchases a higher ownership interest or deconsolidates the equity investment. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. We currently do not have non-controlling interests in our consolidated financial statements.

18. Guarantor Subsidiaries

Our 1.875% Notes are fully and unconditionally guaranteed on an unsecured, joint and severally liable basis by certain of our 100% owned subsidiaries. The following unaudited, condensed, consolidating financial data presents the composition of the parent company (Chemed), the guarantor subsidiaries and the non-guarantor subsidiaries as of June 30, 2008 and December 31, 2007 for the balance sheet and the three and six months ended June 30, 2008 and 2007 for the income statement and the statement of cash flows (dollars in thousands):

As of June 30, 2008 Guarantor Non-Guarantor Consolidating
 Parent Subsidiaries Subsidiaries Adjustments Consolidated
 ------------ ------------- --------------- ------------ ------------
ASSETS
Cash and cash equivalents $ 310 $ (1,283) $ 2,498 $ - $ 1,525
Accounts receivable, less allowances 926 99,780 697 - 101,403
Intercompany receivables 15,151 - (4,702) (10,449) -
Inventories - 6,902 686 - 7,588
Prepaid income taxes 1,823 - 547 - 2,370
Current deferred income taxes (438) 15,158 135 - 14,855
Prepaid expenses and other current assets 1,582 7,652 89 - 9,323
 ------------------------------------------------------- ------------
 Total current assets 19,354 128,209 (50) (10,449) 137,064
 ------------------------------------------------------- ------------
Investments of deferred compensation plans held in trust - - 30,630 - 30,630
Properties and equipment, at cost, less accumulated
 depreciation 4,118 65,985 2,173 - 72,276
Identifiable intangible assets less accumulated
 amortization - 63,159 1 - 63,160
Goodwill - 434,442 4,774 - 439,216
Other assets 13,011 2,557 302 - 15,870
Investments in subsidiaries 533,801 12,898 - (546,699) -
 ------------ ------------- --------------- ------------ ------------
 Total assets $ 570,284 $707,250 $ 37,830 $ (557,148) $758,216
 ======================================================= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 3,610 $ 46,802 $ 348 $ - $ 50,760
Intercompany payables - 7,314 3,135 (10,449) -
Current portion of long-term debt 10,000 166 - - 10,166
Income taxes (1,409) 1,962 310 - 863
Accrued insurance 509 33,992 - - 34,501
Accrued salaries and wages 1,581 32,377 534 - 34,492
Other current liabilities 2,454 10,583 193 - 13,230
Deferred income taxes (22,990) 38,637 (10,885) - 4,762
Long-term debt 217,800 70 - - 217,870
Deferred compensation liabilities - - 30,752 - 30,752
Other liabilities 3,728 2,072 19 - 5,819
Stockholders' equity 355,001 533,275 13,424 (546,699) 355,001
 ------------------------------------------------------- ------------
 Total liabilities and stockholders' equity $ 570,284 $707,250 $ 37,830 $ (557,148) $758,216
 ======================================================= ============

as of December 31, 2007 Guarantor Non-Guarantor Consolidating
 Parent Subsidiaries Subsidiaries Adjustments Consolidated
 ------------ ------------- --------------- ------------ ------------
ASSETS
Cash and cash equivalents $ 3,877 $ (1,584) $ 2,695 $ - $ 4,988
Accounts receivable, less allowances 706 99,900 564 - 101,170
Intercompany receivables 42,241 - (3,925) (38,316) -
Inventories - 6,116 480 - 6,596
Current deferred income taxes 130 13,964 118 - 14,212
Prepaid expenses and other current assets 884 9,521 91 - 10,496
 ------------ ------------- --------------- ------------ ------------
 Total current assets 47,838 127,917 23 (38,316) 137,462
 ------------ ------------- --------------- ------------ ------------
Investments of deferred compensation plans held in trust - - 29,417 - 29,417
Note receivable 9,701 - - - 9,701
Properties and equipment, at cost, less accumulated
 depreciation 4,306 68,303 1,904 - 74,513
Identifiable intangible assets less accumulated
 amortization - 65,176 1 - 65,177
Goodwill - 433,946 4,743 - 438,689
Other assets 12,658 2,450 303 - 15,411
Investments in subsidiaries 500,952 11,005 - (511,957) -
 ------------ ------------- --------------- ------------ ------------
 Total assets $ 575,455 $708,797 $ 36,391 $ (550,273) $770,370
 ============ ============= =============== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ (1,236) $ 47,035 $ 369 $ - $ 46,168
Intercompany payables - 34,992 3,324 (38,316) -
Current portion of long-term debt 10,000 162 - - 10,162
Income taxes 1,137 3,034 50 - 4,221
Accrued insurance 255 36,082 - - 36,337
Accrued salaries and wages 3,882 35,505 685 - 40,072
Other current liabilities 2,047 10,486 1,396 - 13,929
Deferred income taxes (23,174) 39,247 (10,271) - 5,802
Long-term debt 214,500 169 - - 214,669
Deferred compensation liabilities - - 29,149 - 29,149
Other liabilities 3,695 1,797 20 - 5,512
Stockholders' equity 364,349 500,288 11,669 (511,957) 364,349
 ------------ ------------- --------------- ------------ ------------
 Total liabilities and stockholders' equity $ 575,455 $708,797 $ 36,391 $ (550,273) $770,370
 ============ ============= =============== ============ ============

For the three months ended June 30, 2008 Guarantor Non-Guarantor Consolidating
 Parent Subsidiaries Subsidiaries Adjustments Consolidated
 ------------ -------------- -------------- ------------ --------------
 Net sales and service revenues $ - $ 276,973 $ 6,183 $ - $ 283,156
 ------------ -------------- -------------- ------------ --------------
 Cost of services provided and goods sold - 198,098 3,041 - 201,139
 Selling, general and administrative expenses 4,479 39,742 2,100 - 46,321
 Depreciation 118 5,084 168 - 5,370
 Amortization 481 1,008 - - 1,489
 ------------ -------------- -------------- ------------ --------------
 Total costs and expenses 5,078 243,932 5,309 - 254,319
 ------------ -------------- -------------- ------------ --------------
 Income/ (loss) from operations (5,078) 33,041 874 - 28,837
 Interest expense (1,313) (109) - - (1,422)
 Other income - net 1,506 (1,489) 869 - 886
 ------------ -------------- -------------- ------------ --------------
 Income/ (loss) before income taxes (4,885) 31,443 1,743 - 28,301
 Income tax (provision)/ benefit 1,302 (11,980) (373) - (11,051)
 Equity in net income of subsidiaries 20,833 1,302 - (22,135) -
 ------------ -------------- -------------- ------------ --------------
 Net Income $ 17,250 $ 20,765 $ 1,370 $ (22,135) $ 17,250
 ============ ============== ============== ============ ==============

For the three months ended June 30, 2007 Guarantor Non-Guarantor Consolidating
 Parent Subsidiaries Subsidiaries Adjustments Consolidated
 ------------ -------------- -------------- ------------ --------------
 Net sales and service revenues $ - $ 265,235 $ 6,152 $ - $ 271,387
 ------------ -------------- -------------- ------------ --------------
 Cost of services provided and goods sold - 185,671 3,045 - 188,716
 Selling, general and administrative expenses 4,713 40,438 939 - 46,090
 Depreciation 121 4,687 154 - 4,962
 Amortization 284 1,010 - - 1,294
 ------------ -------------- -------------- ------------ --------------
 Total costs and expenses 5,118 231,806 4,138 - 241,062
 ------------ -------------- -------------- ------------ --------------
 Income/ (loss) from operations (5,118) 33,429 2,014 - 30,325
 Interest expense (3,273) (126) (1) - (3,400)
 Loss on extinguishment of debt (13,715) - - - (13,715)
 Other income - net 4,492 (2,343) 39 - 2,188
 ------------ -------------- -------------- ------------ --------------
 Income/ (loss) before income taxes (17,614) 30,960 2,052 - 15,398
 Income tax (provision)/ benefit 6,518 (11,644) (839) - (5,965)
 Equity in net income of subsidiaries 20,529 1,213 - (21,742) -
 ------------ -------------- -------------- ------------ --------------
 Net Income $ 9,433 $ 20,529 $ 1,213 $ (21,742) $ 9,433
 ============ ============== ============== ============ ==============

For the six months ended June 30, 2008 Guarantor Non-Guarantor Consolidating
 Parent Subsidiaries Subsidiaries Adjustments Consolidated
 ------------ -------------- -------------- ------------ --------------
 Net sales and service revenues $ - $ 555,835 $ 12,589 $ - $ 568,424
 ------------ -------------- -------------- ------------ --------------
 Cost of services provided and goods sold - 400,802 6,149 - 406,951
 Selling, general and administrative expenses 8,529 78,530 1,989 - 89,048
 Depreciation 242 10,233 333 - 10,808
 Amortization 922 2,017 - - 2,939
 ------------ -------------- -------------- ------------ --------------
 Total costs and expenses 9,693 491,582 8,471 - 509,746
 ------------ -------------- -------------- ------------ --------------
 Income/ (loss) from operations (9,693) 64,253 4,118 - 58,678
 Interest expense (2,776) (242) (1) - (3,019)
 Other income - net 2,874 (2,545) (632) - (303)
 ------------ -------------- -------------- ------------ --------------
 Income/ (loss) before income taxes (9,595) 61,466 3,485 - 55,356
 Income tax (provision)/ benefit 3,360 (22,959) (1,687) - (21,286)
 Equity in net income of subsidiaries 40,305 2,001 - (42,306) -
 ------------ -------------- -------------- ------------ --------------

 Net Income $ 34,070 $ 40,508 $ 1,798 $ (42,306) $ 34,070
 ============ ============== ============== ============ ==============

For the six months ended June 30, 2007 Guarantor Non-Guarantor Consolidating
 Parent Subsidiaries Subsidiaries Adjustments Consolidated
 ------------ -------------- -------------- ------------ --------------
 Net sales and service revenues $ - $ 529,530 $ 12,296 $ - $ 541,826
 ------------ -------------- -------------- ------------ --------------

 Cost of services provided and goods sold - 370,776 6,187 - 376,963
 Selling, general and administrative expenses 10,358 81,642 2,160 - 94,160
 Depreciation 243 9,135 299 - 9,677
 Amortization 589 2,020 - - 2,609
 Impairment, restructuring and similar expenses (1,138) - - - (1,138)
 ------------ -------------- -------------- ------------ --------------
 Total costs and expenses 10,052 463,573 8,646 - 482,271
 ------------ -------------- -------------- ------------ --------------
 Income/ (loss) from operations (10,052) 65,957 3,650 - 59,555
 Interest expense (6,896) (245) (1) - (7,142)
 Loss on extinguishment of debt (13,715) - - - (13,715)
 Other income - net 9,598 (6,627) 86 - 3,057
 ------------ -------------- -------------- ------------ --------------
 Income/ (loss) before income taxes (21,065) 59,085 3,735 - 41,755
 Income tax (provision)/ benefit 7,869 (22,433) (1,537) - (16,101)
 Equity in net income of subsidiaries 38,850 2,198 - (41,048) -
 ------------ -------------- -------------- ------------ --------------
 Net Income $ 25,654 $ 38,850 $ 2,198 $ (41,048) $ 25,654
 ============ ============== ============== ============ ==============

For the six months ended June 30, 2008 Guarantor Non-Guarantor
-------------------------------------- Parent Subsidiaries Subsidiaries Consolidated
 ------------- ------------- ------------ ---------------
 Cash Flow from Operating Activities:
 ------------------------------------
 Net cash provided by/(used in) operating activities $ (3,607) $ 45,529 $ (151) $ 41,771
 ------------- ------------- ------------ ---------------
 Cash Flow from Investing Activities:
 ------------------------------------
 Capital expenditures (62) (8,042) (611) (8,715)
 Business combinations, net of cash acquired (1) (576) - (577)
 Net proceeds from discontinued operations 9,439 - - 9,439
 Proceeds from sale of property and equipment 10 43 18 71
 Other sources and uses - net (323) 17 - (306)
 ------------- ------------- ------------ ---------------
 Net cash provided/ (used) by investing activities 9,063 (8,558) (593) (88)
 ------------- ------------- ------------ ---------------
 Cash Flow from Financing Activities:
 ------------------------------------
 Increase/(decrease) in cash overdrafts payable 826 (1,481) - (655)
 Change in intercompany accounts 34,654 (35,241) 587 -
 Dividends paid to shareholders (2,900) - - (2,900)
 Purchases of treasury stock (45,791) - - (45,791)
 Proceeds from exercise of stock options 116 - - 116
 Realized excess tax benefit on share based compensation 825 - - 825
 Net change in revolving credit facility 8,300 - - 8,300
 Repayment of long-term debt (5,000) (95) - (5,095)
 Other sources and uses - net (53) 147 (40) 54
 ------------- ------------- ------------ ---------------
 Net cash provided/ (used) by financing activities (9,023) (36,670) 547 (45,146)
 ------------- ------------- ------------ ---------------
 Net increase/(decrease) in cash and cash equivalents (3,567) 301 (197) (3,463)
 Cash and cash equivalents at beginning of year 3,877 (1,584) 2,695 4,988
 ------------- ------------- ------------ ---------------
 Cash and cash equivalents at end of period $ 310 $ (1,283) $2,498 $ 1,525
 ============= ============= ============ ===============

For the six months ended June 30, 2007 Guarantor Non-Guarantor
-------------------------------------- Parent Subsidiaries Subsidiaries Consolidated
 ------------- ------------- ------------ ---------------
 Cash Flow from Operating Activities:
 ------------------------------------
 Net cash provided/(used) by operating activities $ (5,430) $ 34,957 $ 697 $ 30,224
 ------------- ------------- ------------ ---------------
 Cash Flow from Investing Activities:
 ------------------------------------
 Capital expenditures (156) (13,437) (315) (13,908)
 Business combinations, net of cash acquired - (62) - (62)
 Net payments from discontinued operations (2,166) (3,739) - (5,905)
 Proceeds from sale of property and equipment 2,962 35 6 3,003
 Other sources and uses - net (450) (114) - (564)
 ------------- ------------- ------------ ---------------
 Net cash provided/ (used) by investing activities 190 (17,317) (309) (17,436)
 ------------- ------------- ------------ ---------------
 Cash Flow from Financing Activities:
 ------------------------------------
 Increase/(decrease) in cash overdrafts payable 784 (618) - 166
 Change in intercompany accounts 16,723 (16,696) (27) -
 Dividends paid to shareholders (2,997) - - (2,997)
 Purchases of treasury stock (130,748) - - (130,748)
 Proceeds from exercise of stock options 2,069 - - 2,069
 Realized excess tax benefit on share based compensation 2,370 - - 2,370
 Purchase of note hedges (54,939) - - (54,939)
 Proceeds from issuance of warrants 27,614 - - 27,614
 Net change in revolving credit facility 13,300 - - 13,300
 Proceeds from issuance of long-term debt 300,000 - - 300,000
 Debt issuance costs (6,395) - - (6,395)
 Repayment of long-term debt (185,500) (143) - (185,643)
 Other sources and uses - net 19 (1) 592 610
 ------------- ------------- ------------ ---------------
 Net cash provided/ (used) by financing activities (17,700) (17,458) 565 (34,593)
 ------------- ------------- ------------ ---------------
 Net increase/(decrease) in cash and cash equivalents (22,940) 182 953 (21,805)
 Cash and cash equivalents at beginning of year 25,258 (1,314) 5,330 29,274
 ------------- ------------- ------------ ---------------
 Cash and cash equivalents at end of period $ 2,318 $ (1,132) $6,283 $ 7,469
 ============= ============= ============ ===============

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

The following is a summary of the key operating results for the three and six months ended June 30, 2008 and 2007 (in thousands except per share amounts):

 Three Months Ended Six Months Ended
 June 30, June 30,
 ------------------------ -----------------------
 2008 2007 2008 2007
 ----------- ----------- ---------- -----------
Consolidated service revenues and sales $283,156 $271,387 $568,424 $541,826

Consolidated net income $ 17,250 $ 9,433 $ 34,070 $ 25,654

Diluted EPS $ 0.73 $ 0.38 $ 1.42 $ 1.00

For the three months ended June 30, 2008 and 2007, the increase in consolidated service revenues and sales was driven by a 7% increase at VITAS offset by a 2% decline at Roto-Rooter. The increase at VITAS was primarily the result of a 4% increase in average daily census (ADC) from the second quarter of 2007 and the October 1, 2007 Medicare reimbursement rate increase of approximately 3%. Roto-Rooter was driven by a 10% decrease in job count offset by an 8% price and mix shift increase. Consolidated net income for the three months ended June 30, 2007 includes a $13.7 million pretax loss on extinguishment of debt which did not recur for the same time period of 2008. Diluted EPS increased as the result of increased earnings and a reduction of diluted share count due to our stock repurchase program.

For the six months ended June 30, 2008 and 2007, the increase in consolidated service revenues and sales was driven by an 8% increase at VITAS offset by a 1% decline at Roto-Rooter. The increase at VITAS was primarily the result of a 4% increase in ADC, the October 1, 2007 Medicare reimbursement rate increase and a slight shift in mix of service provided. Roto-Rooter was driven by a 9% decrease in job count offset by an 8% increase in price and mix shift increase. Consolidated net income for the six months ended June 30, 2007 includes a $13.7 million pretax loss on extinguishment of debt which did not recur for the same time period of 2008. Diluted EPS increased as the result of increased earnings and a reduction of diluted share count due to our stock repurchase program.

Significant changes in the balance sheet accounts from December 31, 2007 to June 30, 2008 include the following:

o The notes receivable due from Patient Care were collected in full during the first quarter of 2008.

o The increase in treasury stock relates to the repurchase of approximately 1.1 million shares under the 2007 Share Repurchase Program since year end.

Net cash provided by operations increased $11.5 million due primarily to the increase in net income. Capital expenditures for the first six months of 2008 decreased by $5.2 million compared to the same period in 2007 due mainly to the development of a patient information capture software system in 2007 at VITAS.

We have issued $27.5 million in standby letters of credit as of June 30, 2008 mainly for insurance purposes. Issued letters of credit reduce our available credit under the revolving credit agreement. As of June 30, 2008, we have approximately $139.2 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility, excluding the expansion feature. Management believes its liquidity and sources of capital are satisfactory for the Company's needs in the foreseeable future.

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

In April 2007, our Roto-Rooter subsidiary was named in a class action lawsuit filed in San Mateo Superior Court by Stanley Ita ("Ita") alleging class-wide wage and hour violations at one California branch. This suit alleges failure to provide meal and break periods, credit for work time beginning from the first call to dispatch rather than arrival at first assignment and improper calculations of work time and overtime. The case sought payment of penalties, interest and Plaintiffs' attorney fees. After the suit was filed, we offered a settlement to certain members of the class and paid approximately $200,000. In January 2008, we agreed to a tentative settlement with the remaining members of the class for approximately $1.8 million. The tentative settlement was preliminarily approved by the court in May 2008. We anticipate final approval and payment to be made during the third quarter of 2008. The settlement was accrued in the fourth quarter of 2007.

In April 2005, the Office of Inspector General ("OIG") for the Department of Health and Human Services served VITAS with civil subpoenas relating to VITAS' alleged failure to appropriately bill Medicare and Medicaid for hospice services. As part of this investigation, the OIG selected medical records for 320 past and current patients from VITAS' three largest programs for review. It also sought policies and procedures dating back to 1998 covering admissions, certifications, recertifications and discharges. During the third quarter of 2005 and again in May 2006, the OIG requested additional information from us. The Court dismissed a related qui tam complaint filed in U.S. District Court for the Southern District of Florida with prejudice in July 2007. The plaintiffs are appealing this dismissal. Pretax expenses related to complying with OIG requests were immaterial for the three and six months ended June 30, 2008 and 2007.

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 our business, results of operations, liquidity or capital resources. Regardless of outcome, responding to the subpoenas and defending the litigation can adversely affect us through defense costs, diversion of our time and related publicity.

 Increase/(Decrease)
 ---------------------------
 Amount Percent
 -------------- ---------
VITAS
 Routine homecare $ 9,932 7.4%

 Continuous care 1,789 6.3%

 General inpatient 1,626 7.1%
Roto-Rooter

 Plumbing (91) -0.3%

 Drain cleaning (1,072) -2.9%

 Other (415) -3.3%
 --------------
 Total $ 11,769 4.3%
 ==============

The increase in VITAS' revenues for the second quarter of 2008 versus the second quarter of 2007 is attributable to an increase in ADC of 4.1% for routine homecare, a 2.2% increase in general inpatient and a 0.6% increase in continuous care. ADC is a key measure we use to monitor volume growth in our hospice business. Changes in total program admissions and average length of stay

for our patients are the main drivers of changes in ADC. The remainder of the revenue increase is due primarily to the annual increase in Medicare reimbursement rates in the fourth quarter of 2007. In excess of 90% of VITAS' revenues for the period were from Medicare and Medicaid.

The decrease in the plumbing revenues for the second quarter of 2008 versus 2007 comprises a 7.4% decrease in the number of jobs performed offset by increased prices and job mix. The decrease in drain cleaning revenues for the second quarter of 2008 versus 2007 comprised a 10.8% decline in the number of jobs offset by an 8% increase caused by increased prices and job mix. The decrease in other revenues is attributable primarily to lower sales of drain cleaning products and plumbing parts. These sales are highly dependent upon revenues in our other Roto-Rooter service lines.

The consolidated gross margin was 29.0% in the second quarter of 2008 as compared to 30.5% in the second quarter of 2007. On a segment basis, VITAS' gross margin was 21.9% in the second quarter of 2008 and 22.1% in the second quarter of 2007. The Roto-Rooter segment's gross margin was 45.8% in the second quarter of 2008 and 48.6% in the second quarter of 2007. The decrease in Roto-Rooter's gross margin in 2008 is primarily attributable to lower service revenues and sales which did not allow Roto-Rooter to cover as much of its fixed overhead costs, as well as higher medical and casualty insurance expense caused by an increase in claims experience.

Selling, general and administrative expenses ("SG&A") for the second quarter of 2008 were $46.3 million, an increase of $231,000 (0.5%) versus the second quarter of 2007. The increase is due to higher revenue, which increased our variable selling expenses offset by a $1.6 million LTIP pay-out in May 2007. There was no similar LTIP pay out in 2008.

Interest expense, substantially all of which is incurred at Corporate, declined from $3.4 million in the second quarter of 2007 to $1.4 million in the second quarter of 2008. This decline is due primarily to the refinancing transactions in May 2007. Additionally, the 2007 loss on extinguishment of debt is the result of the May 2007 refinancing transactions.

Other income-net decreased from $2.2 million in the second quarter of 2007 to $886,000 in the second quarter of 2008. The decrease is attributable mainly to market losses from investments held in our deferred compensation benefit plans and lower interest income.

Our effective income tax rate was 38.7% in the second quarter of 2007 compared to 39.0% in the second quarter of 2008. Net income for both periods included the following after-tax special items/adjustments that (increased)/reduced after-tax earnings (in thousands):

 Three Months Ended
 June 30,
 --------------------------
 2008 2007
 ----------- -------------
Stock option expense $1,010 $ 570
Legal expenses of OIG Investigation 35 46
Loss on extinguishment of debt - 8,726
Long-term incentive compensation award - 1,013
 ----------- -------------
 $1,045 $10,355
 =========== =============

 Net Income
 Increase/(Decrease)
 -----------------------------
 Amount Percent
 ----------------- ----------
VITAS $ 167 1.2%
Roto-Rooter (2,098) -20.0%
Corporate 9,748 64.1%
 -----------------
 $ 7,817 82.9%
 =================

Our service revenues and sales for the first six months of 2008 increased 4.9% versus revenues for the first six months of 2007. Of this increase, $27.9 million was attributable to VITAS offset by a $1.3 million decline at Roto-Rooter, as follows: (dollars in thousands):

 Increase/(Decrease)
 ---------------------------
 Amount Percent
 -------------- ---------
VITAS
 Routine homecare $ 20,002 7.5%

 Continuous care 4,218 7.4%

 General inpatient 4,135 8.9%

 Medicare cap (472) -100%
Roto-Rooter

 Plumbing 279 0.4%

 Drain cleaning (1,092) -1.4%

 Other (472) -1.9%
 --------------

 Total $ 26,598 4.9%
 ==============

The increase in VITAS' revenues for the first six months of 2008 versus the first six months of 2007 is attributable to an increase in ADC of 3.7% for routine homecare, 4.5% for general inpatient care and 1.4% in continuous care. ADC is a key measure we use to monitor volume growth in our hospice business. Changes in total program admissions and average length of stay for our patients are the main drivers of changes in ADC. The remainder of the revenue increases is due primarily to the annual increase in Medicare reimbursement rates in the fourth quarter of 2007. In excess of 90% of VITAS' revenues for the period were from Medicare and Medicaid. We did not record a Medicare cap liability during the first six months of 2008.

The change in the plumbing revenues for the first six months of 2008 versus 2007 comprises a 6.2% decrease in the number of jobs performed offset by increased prices and job mix. The decrease in drain cleaning revenues for the first six months of 2008 versus 2007 comprised a 9.3% decline in the number of jobs offset by an 8% increase due to increased price and job mix. The decrease in other revenues is attributable primarily to lower sales of drain cleaning products and plumbing parts. These sales are highly dependent upon revenues in our other Roto-Rooter service lines.

The consolidated gross margin was 28.4% in the first six months of 2008 as compared with 30.4% in the first six months of 2007. On a segment basis, VITAS' gross margin was 20.9% in the first six months of 2008 and 22.5% in the first six months of 2007. The decrease in VITAS' gross margin in 2008 is primarily attributable to increases in staffing at the admissions level and increased direct patient care labor. VITAS gross margin was down 2.8% during the first three months of 2008 but has returned to more historical levels during the second quarter. The Roto-Rooter segment's gross margin was 45.8% in the first six months of 2008 as compared to 47.6% in the first six months of 2007. The decrease in Roto-Rooter's gross margin in 2008 is primarily attributable to lower service revenues and sales which did not allow Roto-Rooter to cover as much of its fixed overhead costs, as well as higher medical and casualty insurance expense caused by an increase in claims experience.

SG&A for the first six months of 2008 were $89.0 million, a decrease of $5.1 million (5.4%) versus the first six months of 2007. The decrease is largely due to the $7.0 million LTIP grant made in May 2007. There was no such LTIP grant made in 2008.

Interest expense, substantially all of which is incurred at Corporate, declined from $7.1 million in the first six months of 2007 to $3.0 million in the first six months of 2008. This decline is due to the refinancing transactions in May 2007. Additionally, the loss on extinguishment of debt in 2007 is the result of the May 2007 refinancing transactions.

Other income-net decreased from $3.1 million in the first six months of 2007 to a loss of $303,000 in the first six months of 2008. The decrease is attributable mainly to market losses from investments held in our deferred compensation benefit plans and lower interest income.

Our effective income tax rate was 38.5% for the first six months of 2008 as compared to 38.6% for the same period of 2007. Net income for both periods included the following after-tax special items/adjustments that (increased)/reduced after-tax earnings (in thousands):

 Six Months Ended
 June 30,
 ----------------------------
 2008 2007
 ------------ --------------
Stock option expense $1,894 $ 941
Unreserved prior year insurance claim 358 -
Legal expenses of OIG investigation 26 87
Tax credits related to prior years (322) -
Loss on extinguishment of debt - 8,726
Long-term incentive compensation award - 4,427
Gain on sale of Florida call center - (724)
Other - (296)
 ------------ --------------
 $1,956 $13,161
 ============ ==============

 Net Income
 Increase/(Decrease)
 ----------------------------
 Amount Percent
 ---------------- ----------
VITAS $ (1,522) -5.2%
Roto-Rooter (2,509) -12.5%
Corporate 12,447 53.0%
 ----------------
 $ 8,416 32.8%
 ================

The following chart updates historical unaudited financial and operating data of VITAS (dollars in thousands, except dollars per patient day):

 CHEMED CORPORATION AND SUBSIDIARY COMPANIES
 OPERATING STATISTICS FOR VITAS SEGMENT
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
 (unaudited)

 Three Months Ended June 30, Six Months Ended June 30,
 ----------------------------- ------------------------------
 OPERATING STATISTICS 2008 2007 2008 2007
 ------------- ------------- -------------- -------------
 Net revenue
 Homecare $ 144,726 $ 134,794 $ 286,343 $ 266,341
 Inpatient 24,371 22,745 50,342 46,207
 Continuous care 29,951 28,162 60,948 56,730
 ------------- ------------- -------------- -------------
 Total before Medicare cap allowance 199,048 185,701 397,633 369,278
 Medicare cap allowance - - - 472
 ------------- ------------- -------------- -------------
 Total $ 199,048 $ 185,701 $ 397,633 $ 369,750
 ============= ============= ============== =============
 Net revenue as a percent of total
 before Medicare cap allowance
 Homecare 72.8% 72.6% 72.0% 72.0%
 Inpatient 12.2 12.2 12.7 12.5
 Continuous care 15.0 15.2 15.3 15.4
 ------------- ------------- -------------- -------------
 Total before Medicare cap allowance 100.0 100.0 100.0 99.9
 Medicare cap allowance - - - 0.1
 ------------- ------------- -------------- -------------
 Total 100.0% 100.0% 100.0% 100.0%
 ============= ============= ============== =============
 Average daily census ("ADC") (days)
 Homecare 7,347 6,915 7,251 6,851
 Nursing home 3,570 3,574 3,559 3,574
 ------------- ------------- -------------- -------------
 Routine homecare 10,917 10,489 10,810 10,425
 Inpatient 422 413 438 419
 Continuous care 507 504 521 514
 ------------- ------------- -------------- -------------
 Total 11,846 11,406 11,769 11,358
 ============= ============= ============== =============

 Total Admissions 13,956 13,658 29,168 27,768
 Total Discharges 13,707 13,359 28,704 27,416
 Average length of stay (days) 73.2 76.6 72.3 76.8
 Median length of stay (days) 13.0 13.0 13.0 13.0
 ADC by major diagnosis
 Neurological 32.1% 33.0% 32.3% 33.2%
 Cancer 20.0 19.7 20.0 19.7
 Cardio 12.9 14.6 13.0 14.6
 Respiratory 6.7 6.9 6.8 6.9
 Other 28.3 25.8 27.9 25.6
 ------------- ------------- -------------- -------------
 Total 100.0% 100.0% 100.0% 100.0%
 ============= ============= ============== =============
 Admissions by major diagnosis
 Neurological 17.7% 18.0% 18.5% 18.6%
 Cancer 35.7 35.9 34.6 35.0
 Cardio 12.0 12.9 12.0 13.1
 Respiratory 7.9 7.7 8.2 7.8
 Other 26.7 25.5 26.7 25.5
 ------------- ------------- -------------- -------------
 Total 100.0% 100.0% 100.0% 100.0%
 ============= ============= ============== =============
 Direct patient care margins
 Routine homecare 51.5% 51.1% 50.5% 50.9%
 Inpatient 17.8 18.9 18.6 19.5
 Continuous care 17.6 17.7 17.1 18.9
 Homecare margin drivers (dollars per patient day)
 Labor costs $ 49.72 $ 48.96 $ 50.98 $ 49.04
 Drug costs 7.74 7.82 7.62 7.99
 Home medical equipment 6.20 5.78 6.19 5.77
 Medical supplies 2.32 2.11 2.44 2.14
 Inpatient margin drivers (dollars per patient day)
 Labor costs $ 261.79 $ 262.37 $ 264.06 $ 257.35
 Continuous care margin drivers (dollars per
 patient day)
 Labor costs $ 513.89 $ 484.13 $ 511.70 $ 474.21
 Bad debt expense as a percent of revenues 1.0% 0.9% 1.0% 0.9%
 Accounts receivable --
 days of revenue outstanding 45.3 37.5 N.A. N.A.

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

 VITAS has 5 large (greater than 450 ADC), 17 medium (greater than 200 but less than 450 ADC) and 24 small (less
 than 200 ADC) hospice programs. There are two programs continuing at June 30, 2008 with Medicare cap cushion of
 less than 10% for the 2008 measurement period.

 Direct patient care margins exclude indirect patient care and administrative costs, as well as Medicare Cap billing
 limitation.

In May 2008, the FASB issued Staff Position No. APB 14-1, "Accounting for Convertible Debt Instruments that may be Settled in Cash Upon Conversion (Including Partial Cash Settlement)." This new guidance requires all convertible debentures classified as Instruments B or C under EITF 90-19 to separately account for the debt and equity pieces of the instrument. At inception of the convertible instrument, cash flows related to the convertible instrument are to be discounted using a market rate of interest. This will create a discount at inception to be recorded in equity. The debt portion is to be accreted to its face value, through interest expense, over the life of the instrument using the effective interest method. This will result in higher interest expense over the life of the instrument and an increase in equity at the inception of the instrument. Debt issuance costs are also to be allocated between the debt and equity components using a rationale method. Finally, the FSP requires that the Company value any embedded features of the instrument, other than the conversion option, as a part of the liability. The new standard is effective for all fiscal years (and interim periods) beginning after December 15, 2008. As such, we will adopt the new standard on January 1, 2009. The FSP is to be applied retrospectively. Upon adoption, our preliminary estimate is that our $200 million, 1.875% Convertible Debentures issued in May 2007 will have a discount of between $50 million and $60 million.

In May 2008, the FASB issued Statement of Financial Accounting Standard No. 162 "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). The purpose of this standard is to provide a consistent framework for determining what accounting principles should be used when preparing U.S. GAAP financial statements. SFAS 162 categorizes accounting pronouncements in a descending order of authority. In the instance of potentially conflicting accounting principles, the standard in the highest category must be used. This statement will be effective 60 days after the SEC approves the Public Company Accounting and Oversight Board's related amendments. We believe that SFAS 162 will have no impact on our existing accounting methods.

In December 2007, the FASB issued Statement of Financial Accounting Standard No. 141(R) "Business Combinations (revised 2007)" ("SFAS 141(R)"), which changes certain aspects of the accounting for business combinations. This Statement retains the fundamental requirements in Statement No. 141 that the purchase method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141(R) modifies existing accounting guidance in the areas of deal and restructuring costs, acquired contingencies, contingent consideration, in-process research and development, accounting for subsequent tax adjustments and assessing the valuation date. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. There will be no impact on our financial statements as a result of the adoption of SFAS 141(R); however our accounting for all business combinations after adoption will comply with the new standard.

In December 2007, the FASB issued Statement of Financial Accounting Standard No. 160 "Non-controlling Interests in Consolidated Financial Statements
- an amendment of ARB No. 51" ("SFAS 160"), which requires ownership interests in subsidiaries held by others to be clearly identified, labeled and presented in the consolidated balance sheet within equity but separate from the parent company's equity. SFAS 160 also affects the accounting requirements when the parent company either purchases a higher ownership interest or deconsolidates the equity investment. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. We currently do not have non-controlling interests in our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our primary market risk exposure relates to interest rate risk exposure through variable interest rate borrowings. At June 30, 2008, we had $28.0 million of variable rate debt outstanding. A 1% change in the interest rate on our variable interest rate borrowings would have a $280,360 full-year impact on our interest expense. At June 30, 2008, the fair value of our Senior Convertible Notes approximates $151.5 million.

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

PART II. OTHER INFORMATION

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

Purchasers
The following table shows the activity related to our share repurchase programs for the six months ended June 30, 2008:

 Weighted Cumulative
 Total Average Shares Dollar Amount
 Number of Price Paid Repurchased Remaining
 Shares Per Under Under
 Repurchased Share the Program The Program
 ------------- ------------ ----------------- ----------------
April 2007 Program
------------------
 January 1 through January 31, 2008 - $ - 1,293,250 $65,004,906
 February 1 through February 29, 2008 300,000 $ 49.19 1,593,250 $50,247,480
 March 1 through March 31, 2008 - $ - 1,593,250 $50,247,480
 ------------- ================= ================
 First Quarter Total 300,000 $ 49.19
 ============= ============

 April 1 through April 30, 2008 - $ - 1,593,250 $50,247,480
 May 1 through May 31, 2008 382,629 $ 34.66 1,975,879 $93,047,996
 June 1 through June 30, 2008 447,068 $ 36.15 2,422,947 $76,887,912
 ------------- ================= ================
 Second Quarter Total 829,697 $ 35.46
 ============= ============

Item 4. Submission of Matters to a Vote of Security Holders
A. Chemed Corporation held its annual meeting of stockholders on May 19, 2008.

B. The names of directors elected at this annual meeting are as follows:

Edward L. Hutton Thomas C. Hutton Timothy S. O'Toole
Kevin J. McNamara Walter L. Krebs Donald E. Saunders
Joel F. Gemunder Sandra E. Laney George J. Walsh III
Patrick P. Grace Andrea R. Lindell Frank E. Wood

C. The stockholders ratified the selection by the Board of Directors of PricewaterhouseCoopers LLP as independent accountants for the Company and its consolidated subsidiaries for the year 2008:
22,578,802.072 votes were cast in favor of the proposal, 189,943.069 votes were cast against it, 33,427.196 votes abstained, and there were no broker non-votes.

With respect to the election of directors, the number of votes cast for each nominee was as follows:

 For Withheld
 --------------------------------------
 Edward L. Hutton 22,147,906.116 654,266.241
 Kevin J. McNamara 22,238,365.813 563,806.544
 Joel F. Gemunder 22,285,398.695 516,773.662
 Patrick P. Grace 22,416,033.688 386,138.669
 Thomas C. Hutton 22,161,084.898 641,087.459
 Walter L. Krebs 22,451,963.771 350,208.586
 Sandra E. Laney 22,143,304.891 658,867.466
 Andrea R. Lindell 22,474,147.083 328,025.274
 Timothy S. O'Toole 21,749,464.105 1,052,708.252
 Donald E. Saunders 22,446,378.496 355,793.861
 George J. Walsh III 21,996,517.267 805,655.090
 Frank E. Wood 22,457,556.593 344,615.764

Item 6. Exhibits

 Exhibit No. Description
 ----------- --------------------------------------------------

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

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

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

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

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

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

SIGNATURES

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

Dated: July 30, 2008 By: Kevin J. McNamara
 ------------------- -----------------------------------------
 Kevin J. McNamara
 (President and Chief Executive Officer)


Dated: July 30, 2008 By: David P. Williams
 ------------------- -----------------------------------------
 David P. Williams
 (Executive Vice President and Chief
 Financial Officer)


Dated: July 30, 2008 By: Arthur V. Tucker, Jr.
 ------------------- -----------------------------------------
 Arthur V. Tucker, Jr.
 (Vice President and Controller)

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