Good morning, ladies and gentlemen. Welcome to the Chemed Corporation’s Second Quarter 2012 Conference Call. My name is Shannon, and I’ll be your conference call facilitator today. Please note that today’s call is being recorded. [Operator Instructions] After the speakers’ remarks, there will be a question-and-answer period. I would now like to turn the call over to Ms. Sherri Warner with Chemed Investor Relations. Please proceed.

Good morning. Our conference call this morning will review the financial results for the second quarter of 2012 ended June 30, 2012. Before we begin, let me remind you that the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call. During the course of this call, the company will make various remarks concerning management’s expectations, predictions, plans and prospects that constitute forward-looking statements. Actual results may differ materially from those projected by these forward-looking statements as a result of a variety of factors, including those identified in the company’s news release of July 25th and in various other filings with the SEC. You are cautioned that any forward-looking statements reflect management’s current view only and that the company undertakes no obligation to revise or update such statements in the future. In addition, management may also discuss non-GAAP operating performance results during today’s call, including earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company’s press release dated July 25th, which is available on the company’s website at chemed.com. I would now like to introduce our speakers for today, Kevin McNamara, President and Chief Executive Officer of Chemed Corporation; Dave Williams, Executive Vice President and Chief Financial Officer of Chemed; and Tim O’Toole, Chief Executive Officer of Chemed’s VITAS Healthcare Corporation Subsidiary. I will now turn the call over to Kevin McNamara.

Thank you, Sherri. Good morning. Welcome to Chemed Corporation’s second quarter 2012 conference call. I will begin with some highlights for the quarter and David and Tim will follow with additional operating detail. I will then open the call up for questions. Chemed consolidated revenue in the quarter totaled $354 million and net income was $21.3 million. If you adjust for certain non-cash items and items that are not indicative of ongoing operations, adjusted net income for the quarter totaled $24.3 million and equated to adjusted earnings per diluted share of $1.26. This is an increase of 15.6% when compared to adjusted earnings per diluted share in the second quarter of 2011. During the quarter, our hospice business segment generated revenue of $265 million, an increase of 9.1% over the comparable year period and provided adjusted EBITDA of $37.1 million. This equated to an adjusted EBITDA margin prior to Medicare Cap of 14%. Admissions in the quarter totaled 15,912, an increase of 4% over the prior year. We have 4 new start initiatives in process that have reported aggregate losses of $1 million. These loses negatively impacted the quarterly margins by 36 basis points. We opened 2 inpatient units in the quarter and have 2 additional units under development. Of VITAS’s 35 Medicare provider numbers, 30 provider numbers have a Medicare Cap cushion of 10% or greater during the first 8 months of the 2012 Medicare Cap year. Two provider numbers have a Medicare Cap cushion between 5% and 10%, and 3 provider numbers have a cap cushion between 0% and 5%. VITAS’ generated an aggregate cap cushion of $203 million during the most recent 12 month period. On the litigation front, we had no significant developments on pre-existing claims. However, in June 2012, we received administrative subpoena from the…

Thanks, Kevin. As Kevin noted, the net revenue for VITAS was $265 million in the second quarter of 2012, which is an increase of 9.1% over the prior year period. Excluding the impact of the Medicare Cap, our revenue increased 8.9%. The revenue growth was a result of increased average daily census of 6%, driven by an increase in admissions of 4%, increased discharges of 4.4% and Medicare price increases of approximately 2.5%. Our revenue growth was further enhanced by a geographic mix shift within the patient phase and a favorable comparison of Medicare Cap. Average revenue per patient per day in the quarter, excluding the impact of Medicare Cap was $206.54, which is 2.8% above the prior year period. Routine home care reimbursement and high acuity care averaged $163.18 and $717.63, respectively, per patient per day in the second quarter of 2012. During the quarter, high acuity care, days of care were 7.8% of total days of care, 6 basis points lower than the prior year quarter. The second quarter of 2012 gross margin, excluding the impact of Medicare Cap was 21.6%, which is a decline of 35 basis points from the second quarter of 2011. Our home care direct gross margin was 52.4% in the quarter, essentially equal to the second quarter of 2011. Direct inpatient margins in the quarter were 12.7%, which compares to 13.3% in the prior year. Occupancy of our inpatient units averaged 75.1% in the quarter, compares to 74.2% occupancy in the second quarter of 2011. Continuous care had a direct gross margin of 19.7%, a decline of 50 basis points when compared to the prior year. Our average hours billed for a day of continuous care worked got to be 18.9% in the quarter, a 2.2% decline over the average hours billed in…

Thank you, David. We continue to put a high priority on the education, training and overall expansion of our field base sales and marketing personnel. These individuals are critical in providing our referral network with the latest information and education on hospice and VITAS. As of June 30, 2012, we have 335 field sales and marketing personnel, 164 admissions coordinators, 366 admission nurses, 84 community liaisons, 23 long-term care liaisons and 37 admissions liaisons. VITAS generated 15,912 admissions in the second quarter of 2012, an increase of 4% over the prior-year period. Admissions increased in each of our 4 largest referral categories. During the second quarter, home-based admissions increased 6.9% and our hospital-referred admissions increased 6.7%. Assisted living facilities increased 0.4% in the quarter and nursing home admissions increased 1.2%. VITAS’s average length of stay in the quarter was 74 days, which compares to 77.1 days in the prior year quarter and 79.0 in the fourth quarter of 2011. Average length of stay is calculated using total discharges during the quarter. Median length of stay was 14 days in the quarter. Median length of stay is a key indicator of our penetration into the high acuity sector of the market. Our days of care totaled 1,284,105 days in the quarter, an increase of 6% over the comparable prior-year period. Non-nursing home routine home care days increased 8% in the quarter and nursing home routine home care was flat in the second quarter. Nursing home days of care currently represent 21.5% of our total days of care. On any given day, approximately 22% of our average daily census or about 3,000 patients reside in a skilled nursing facility. Approximately, 80% of our total nursing home-based hospice patients reside in skilled nursing facility where we have 3 or less patients within that nursing home. This illustrates our diverse referral network. Continuous care days increased 6.1% and in-patient days of care increased 4.1%, when compared to the second quarter of 2011. At June 30, 2012, we had 4 programs classified as startups. Total operating losses for these startups totaled $1 million in the quarter, and compares to losses of $366,000 for locations classified as startups in the prior year period. With that, I’ll turn the call back over to Kevin.

Thank you, Tim. I’ll now open this teleconference to questions.

[Operator Instructions] And your first line of questioning comes from Darren Lehrich with Deutsche Bank.

Couple of questions here, I guess just maybe starting out with Roto-Rooter. I know you’ve described the geographic impact and we can clearly surmise there's macro-economic links here. I guess I just wanted to be sure that there isn’t any other factor or turnover of plumbers, anything associated with just sort of overall business and how its - how those regions stack up?

Darren, that’s a good question. It’s something, we’ve looked at very closely and as indicated in kind of our presentation, we’re relieved in many respects. As you drill down the details as much as we hate to say well, it sounds like an excuse, I’d say. As we drill down, we see a couple of factors. Number one, it’s a tough operating environment with respect to consumer demand, unemployment is over 8% and the real number when you add, people added to disability and or out of the job market, but there are high numbers. I mean, we would predict a tough consumer demand in that regard. When you look at the fact that in the MidWest and East, we had virtually no freezing pipes and then an unusually dry spring for those periods. It is not that surprising that we have that slackening in demand in those markets, I’d say that again, our biggest relief is that with regard to the markets that are less subject to those variables, we see pretty good execution and probably we see a lot of it. Activity of the commercial front, we see good close rate and the answer to one of your specific questions, we got the retention of employees, at or near historic best[ph]. Now that’s the positive side of the economic situation. But no, there is nothing, there is nothing -strictly alarming from our perspective to further down we drill, although it’s certainly - again, it’s not a positive question. No question of that, I’ll just say one comment that speaking generally as you get into the months of, let’s say the summer months which are, say, Roto-Rooter's best. We would have expected to see more normal comparisons to past periods with -- no demand, consumer demand and we’re seeing that. So that’s -- it’s another validation of our call it a foregone conclusion on that point.

And Darren, David Williams, I’d also add we -- commercial business is showing some great strength. Obviously all the Roto-Rooter franchisees are hungry so they are searching for commercial business. And that’s why we are seeing the strength. Again the fact that our job balance is 69% to 70% historically with residential is basically impossible to offset with commercial business all of the soft residential demand due to this bizarre temperate weather. But they’ve actually done a pretty good job on that regard. So I’d say we are certainly disappointed that we’re going to be probably be closer to a $60 million EBITDA for full year 2012, which will probably make it roughly tight for the third best year ever. But the fact is, given the softness of -- I’ll call it emergency based demand business, we actually are very pleased with whatever the numbers are holding up and still producing pretty good cash flow. And I guess arguably we said up, pretty done good comparison to 2013.

Yeah. That makes sense. And if I could just shift gears to hospice, a few questions, if I could. The first -- as it relates to the administrative subpoenas you received, do you have any visibility as to whether it's an industry wide type of investigation. And maybe if you could just clarify what the difference that you think is between what you got in Southern California versus what you got in Florida?

Well, let me start by saying that we don’t know. The answer to your first question we don’t know anything more than we said. We’ve seen move very slowly. For instance the 2009 matter in Texas in the key tab[ph] action. And we still haven’t been served with it, serving these things to have to very slowly. I have that from -- having just said that I don’t note too much I would say that there are every indication the Southern California one-- is just a -- is not just a, but it’s a key tab probably, not based on likely with any broader approach from that. In Florida, we don’t know. I would say that one point of reference is part of all these because they takes so long. But something that was tolling agreements which are supplied. We’ve got a different fall of a tolling agreement which -- in Florida which probably indicates that the previous tolling agreement they gave on in all matters are looking at in Florida, but somebody probably questioned one of those. So it’s a -- but it’s a caution and very leased on their part. So other than that and obviously that is part speculation, part information, but everything we know on those and we’re not likely to know much more for a matter of years. But again I don’t want to leave the subject for that saying that VITAS is -- as I mentioned in the call, lot of money out of administrative practices and support for documentation. We're little bit unusual in that approximately 95% , even higher back in the periods we’re talking about, 95% of the patient referrals came from entities that have no connection with VITAS, not admin -- not admitting nurses, not part-time physicians, generally the john q public. And when you combine that with the fact that you know I think we have good systems, it’s not surprising that we’ve never made a settlement. We’ve never paid a dollar in settlement of one of these matters. So this part and parcel we’re in a business where 95% of the sales approximately are to the Federal Government directly or indirectly. And we know that we’re always going to be under microscope. We have been working for years basically to prepare all our records and documents to support that business. And you know it’s expensive to defend it but we see -- we'll just watch it play out. But again it’s -- I expect, to the extent that this continues the 10 years, we’ll have 10 more investigations or key 10 actions. It’s just --its part and parcel of the business.

Now it made sense. Last thing, just a question for Tim if I could. You do seem like you are growing faster than market in hospice and obviously that’s part of your infrastructure that you build out there. But you know just any commentary on what you are seeing in the environment in terms of growth. What do you think market is right now and you know, how much better do you think you grow in the market?

Well, it’s hard to say and again when we talk about markets, markets are very different in different parts of the country, various regions and so forth. But I think we’re -- I think we’re probably are going higher than the market. I think we’re putting a lot of resources into the company that other competition, other hospice companies have not matched. I think our quality of the care we provide is second to none, which is the number one reason we’re growing faster than the market. And we have an excellent management team that’s doing the job. So, it’s hard to say what market is. We’re probably growing a little faster. But we’re very pleased.

Your next line of question comes from Jim Barrett, C.L. King.

Kevin, is Yellow Page advertising still the primary form of marketing or advertising for Roto-Rooter?

Jim, let me say, glad you asked that question. Glad, you raised that general issue. The answer is yes. It’s declining and there is one element which again as we look as an explanation of some of the issues on consumer demand involves part of that. And that is yes Yellow Pages is still dominant. However, 40% of our calls come in on numbers that only appear on the Internet. And we said that in the past. And I say, it’s not going up as fast as it was but I mean again it’s still trending up. So 40%, yes remember even though I think we have far away the best strategy for Internet placement. When you compare having the number one listing on the Internet where you might be listed number 1 of 5 and have a point on a map. It so appeals in the comparison to what you have when have to repeat the first ad on a 3 page ad in a section of the column section in the yellow pages. So there is a lot of free riders right now on the Google -- on the Google Searches, that is, it seems like with a different mom and pop every month or so that appears as number two and number three but their ads looks pretty similar on the Internet to ours. I’d put it that way. And so it’s an issue we are dealing with but make no mistake, I mean I’d say when you say, it's 40% basically 60% comes from the Yellow Pages.

And Jim, there is another unusual phenomenon happening in terms of Yellow Pages, at Yellow Pages and Yellow Book where we actually see it inevitable and the industry has already started going to paying for a per call basis. And longer calls. So it hasn’t kicked in yet but we actually see it phasing in and starting in about 12 months in various books where it’s going to become more variable cost model related to long phone calls and not short ones.

We are very happy about that. We are very happy about paying per call from the Yellow Pages. It’s a little more difficult to pay for per-click on the Internet because anybody familiar with the subject knows that what the clicks means is an open question. You can get a crazy number of clicks that doesn’t necessarily relate to jobs.

And the other thing relating to this is what’s driving the phone call is amazing. Well, a new book phonebook will drop. We’ll put a different phone in that book from the prior year and a significant portion of the phone numbers we have received are coming from the prior year's book. So what’s happened is people in lot of cases, the phonebooks are even making into the homes. They are making to the trash can, except they are utilizing book, it’s an older book. And that’s also driving this phenomenon of how telephone directories are going to keep up in the 21st century.

Okay. On a related note, can you tell you what percentage of your marketing or advertising budget is represented by Yellow Pages currently? Since presumably you are spending something on the internet.

Yeah. I’ll tell you what -- the internet number is dwarfed by the Yellow Pages, it’s probably 80% yellow pages. And internet, it’s just a limit of what you can spend. I mean if we -- to be honest, we can actually be telling that quickly we have kind of -- I hope there is nobody from Roto-Rooter listening but we have a kind of open budget on that. Internet spending to make sure -- to make sure that we have the best strategy and frankly because we are in a mom and pop industry, we don’t have a lot of professional competition in this regard. We’ve got great success in getting and maintaining excellent internet positioning.

Good. Okay. And then again you’ve touched upon it already Kevin, but the -- in terms of Roto-Rooter, the last segment that I thought would decline during the difficult economy would be doing clean due to its non-discretionary nature. I mean are you getting anecdotal commentaries from your plumbers that people are simply maybe getting bids, but are choosing not to clean their drains?

Jim, I’d tell you that the anecdotal information -- first of all, it’s not -- we say -- we always say its recession resistant not recession proof and its down. I think that when you asked me if you adjust for weather it would probably been down 4%, instead of 10% as far as calls -- order of magnitude. I mean, it’s down. If you ask for the biggest anecdotal response I can give you is, when things get tough, do the people clean their own drains? I was surprised when volunteers said that as far as rental places who have rental equipment, the busiest piece of equipment were drain cleaning. So is the do-it-yourself market issue and continues to be an issue and even more so in tough times? The answer is yes. But you know again often times, the inside scuttlebutt at Roto-Rooter is that just pay me now or pay me later type of thing but other than clogs maybe, something work done by non-professionals tend to be a short-term solutions.

But, Jim on a comparison basis, from prior year to this year and then since we bifurcated locations in temperate climates versus one that have more extreme freezing and then a lot of rain in the spring, Clearly that is substantially weather related, but related to terms of not getting people conscious, you know taking out bids our call volume was down 10%. It’s that when some people call, they got the price and they said no, the phone just didn’t ring, which goes directly to residential demand. They didn’t have the need for getting the drain clean, because of wasn’t raining cats and dogs to allow the clogs to happen.

We are premium price service intentionally so and in tough economic times, that, that’s not necessarily the -- most advantageous short term strategy.

Your next line of questioning comes from Frank Morgan, RBC Capital Markets.

Two questions. First back on the VITAS side of the business. I was hopeful that you could provide some color on the admission growth trends. Were there any particular areas in the country was strong or weak or what you see as the opportunity there in terms of admission growth and census growth. And then secondly on these administrative subpoenas, it sounds like this -- did I hear honestly and you say long linked of say, patients, who is where the issues has been risen and wasn’t there sort of a big push and rack audits several years ago about this whole issue of non-cancer link long need-to-stay patients and you think it’s any way related to that?

I’m going to over Tim, let me talk about admissions. Let me say that -- let me, ultimately most of the controversy around hospice of patients if you involve long length of stay patients. In other words, I mean in our case, we get a patient who is declared terminal by his own doctor or her own doctor. We look at them, we admit them, when we start the recertification process we know, a couple of factors with both these consistent in all our branches and the national averages as we see them. About 11% of the patients that we have in the national statistics live longer than 6 months. At that point, as we recertified and we know notice that, half of those remaining patients are discharged every 6 months. When you do the math, you have long stay patients and what’s always, it’s a bit paradoxical, counter-intuitive, but to the extent that these are sick patients who are just assisted long lives. That is always ultimately kind of the -- a spotlight of these investigation. I would say, to answer the question, if I too early to tell. Although, ultimately that the issue. It’s hard to prove. It’s hard to prove, because you have the doctor, the standard is in the doctor’s professional opinion was the patient, who has been very sick in and be terminal by their own doctor is that, is that doctor opinion wrong? That’s a tough standard. And so to the extent, if you read the Voyager’s settlement, there’s an effort sometimes to say, well you had practices, you’re incentivizing doctors to change their opinion. Or you made it difficult for doctors to render their opinion. That’s why there is always an emphasis on the easy approach which is, do you have policies or…

Our patients...

Well, thank you for your question on admissions and ADC growth and as we reported admissions up 4% in the quarter and good strong growth in Florida. As you know, Florida is one of our vocal points because of the Medicare Cap management. So we’re very aggressive in Florida with our inpatient units with expanding our palliative to care, initiatives and all of our sales efforts there. So we’re happy to see those are working for us and at the same time, the census' grown about 5% to 6% in Florida as well. California, up about 1% or 2% on admissions and census a little stronger. We’re happy to see Illinois increased at about 4% to 5% rate, our Illinois market in the quarter and that had been a market that’s couple of years ago was lagging, it’s stabilized. It seems to be moving ahead for us now. And the Texas market is pretty soft. It’s increasing at 1% or 2%. So, that gives us an overall 4% admissions rate and our ADC was up at 6%. Keep in mind, that we’re still getting a lot of short stay patients with our medium length of stay under 14 days which helps -- helps both admissions and census growth. So our programs are working and those trends have been about what we have seen all year and they are healthy trends. So we feel good about it.

And if you could one final and I’ll hop, in those same markets can you kind of give us a view over what you’re seeing in terms of new entrants into the market is there any particular state or region where people are coming in more than others or what’s the -- what you seeing on the…

No. I think we’re seeing pretty much softening of new entrants in the marketplace. I think some of the markets are all highly penetrated now. As very underserved markets and in the last several years there’s been an increased level of the regulatory scheme which really raises the bar and presents some barrier to entry for new participants to come in. So we’re not seen a lot of new entrants. We are seeing you know, the local competition in many cases, very strong, very complete in the marketplace. So no big change, but we’re not seeing a lot of new entrants.

Okay. I guess that -- I see no more questions in the queue. So at that point we’ll terminate the call and I thank you for your interest.

This concludes today’s conference. You may now disconnect. And have a great day.