UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
SCHEDULE 14A
INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment
No. )
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Definitive
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Definitive
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Soliciting
Material Pursuant to 240.14a-12
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Chemed
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Safe Harbor and Regulation G
Statement
This presentation contains
information about Chemed’s EBITDA, Adjusted EBITDA, EBIT, Adjusted EBIT,
Adjusted Net Income and Adjusted
Diluted EPS, which are not measures derived in accordance with GAAP and which exclude components that are important to understanding
Chemed’s financial performance. In reporting its operating results, Chemed provides EBITDA, Adjusted EBITDA, EBIT, Adjusted EBIT, Adjusted
Net Income and Adjusted Diluted EPS measures to help investors and others evaluate the Company’s operating results, compare its operating
performance with that of similar companies that have different capital structures and evaluate its ability to meet its future debt service, capital
expenditures and working capital requirements. Chemed’s management similarly uses EBITDA, Adjusted EBITDA, EBIT, Adjusted EBIT,
Adjusted Net Income and Adjusted Diluted EPS to assist it in evaluating the performance of the Company across fiscal periods and in assessing
how its performance compares to its peer companies. These measures also help Chemed’s management estimate the resources required to
meet Chemed’s future financial obligations and expenditures. Chemed’s EBITDA, Adjusted EBITDA, EBIT, Adjusted EBIT, Adjusted Net Income
and Adjusted Diluted EPS should not be considered in isolation or as a substitute for comparable measures calculated and presented in
accordance with GAAP. We calculated Adjusted EBITDA margin by dividing Adjusted EBITDA by service revenues and sales. We calculated
Adjusted EBIT margin by dividing Adjusted EBIT by service revenues and sales. Adjusted Diluted EPS is calculated by dividing Adjusted Net
Income by the number of diluted average shares outstanding, and Diluted EPS is calculated by dividing Net Income by the number of diluted
average shares outstanding. A reconciliation of Chemed’s net income to its EBITDA, Adjusted EBITDA, EBIT, Adjusted EBIT and Adjusted Net
Income is presented in appendix tables located in the back of this presentation.
Diluted EPS, which are not measures derived in accordance with GAAP and which exclude components that are important to understanding
Chemed’s financial performance. In reporting its operating results, Chemed provides EBITDA, Adjusted EBITDA, EBIT, Adjusted EBIT, Adjusted
Net Income and Adjusted Diluted EPS measures to help investors and others evaluate the Company’s operating results, compare its operating
performance with that of similar companies that have different capital structures and evaluate its ability to meet its future debt service, capital
expenditures and working capital requirements. Chemed’s management similarly uses EBITDA, Adjusted EBITDA, EBIT, Adjusted EBIT,
Adjusted Net Income and Adjusted Diluted EPS to assist it in evaluating the performance of the Company across fiscal periods and in assessing
how its performance compares to its peer companies. These measures also help Chemed’s management estimate the resources required to
meet Chemed’s future financial obligations and expenditures. Chemed’s EBITDA, Adjusted EBITDA, EBIT, Adjusted EBIT, Adjusted Net Income
and Adjusted Diluted EPS should not be considered in isolation or as a substitute for comparable measures calculated and presented in
accordance with GAAP. We calculated Adjusted EBITDA margin by dividing Adjusted EBITDA by service revenues and sales. We calculated
Adjusted EBIT margin by dividing Adjusted EBIT by service revenues and sales. Adjusted Diluted EPS is calculated by dividing Adjusted Net
Income by the number of diluted average shares outstanding, and Diluted EPS is calculated by dividing Net Income by the number of diluted
average shares outstanding. A reconciliation of Chemed’s net income to its EBITDA, Adjusted EBITDA, EBIT, Adjusted EBIT and Adjusted Net
Income is presented in appendix tables located in the back of this presentation.
Forward-Looking Statements
Certain statements contained in this
presentation and the accompanying tables are "forward-looking statements" within
the meaning of the
Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope," "anticipate," "plan" and similar expressions identify
forward-looking statements, which speak only as of the date the statement was made. Chemed does not undertake and specifically disclaims
any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause
Chemed's actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties arise from, among
other things, possible changes in regulations governing the hospice care or plumbing and drain cleaning industries; periodic changes in
reimbursement levels and procedures under Medicare and Medicaid programs; difficulties predicting patient length of stay and estimating
potential Medicare reimbursement obligations; challenges inherent in Chemed's growth strategy; the current shortage of qualified nurses, other
healthcare professionals and licensed plumbing and drain cleaning technicians; Chemed’s dependence on patient referral sources; and other
factors detailed under the caption "Description of Business by Segment" or "Risk Factors" in Chemed’s most recent report on form 10-Q or 10-K
and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking
statements and there are no assurances that the matters contained in such statements will be achieved.
Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope," "anticipate," "plan" and similar expressions identify
forward-looking statements, which speak only as of the date the statement was made. Chemed does not undertake and specifically disclaims
any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause
Chemed's actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties arise from, among
other things, possible changes in regulations governing the hospice care or plumbing and drain cleaning industries; periodic changes in
reimbursement levels and procedures under Medicare and Medicaid programs; difficulties predicting patient length of stay and estimating
potential Medicare reimbursement obligations; challenges inherent in Chemed's growth strategy; the current shortage of qualified nurses, other
healthcare professionals and licensed plumbing and drain cleaning technicians; Chemed’s dependence on patient referral sources; and other
factors detailed under the caption "Description of Business by Segment" or "Risk Factors" in Chemed’s most recent report on form 10-Q or 10-K
and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking
statements and there are no assurances that the matters contained in such statements will be achieved.
2
Important Information
Chemed filed with the SEC, on April
29, 2009, a definitive proxy statement in connection with its 2009 annual
meeting, and is mailing the
definitive proxy statement to its stockholders. Investors and security holders are urged to read the definitive proxy statement relating to the 2009
Annual Meeting and any other relevant documents filed with the SEC (when available) because they contain important information. Investors
and security holders may obtain a free copy of the definitive proxy statement and other documents that Chemed files with the SEC (when
available) at the SEC’s website at www.sec.gov and Chemed’s website at www.chemed.com. In addition, the definitive proxy statement and
other documents filed by Chemed with the SEC (when available) may be obtained from Chemed free of charge by directing a request to
Chemed Corporation, Attn: Investor Relations, Chemed Corporation, 2600 Chemed Center, 255 East Fifth Street, Cincinnati, OH 45202-4726.
definitive proxy statement to its stockholders. Investors and security holders are urged to read the definitive proxy statement relating to the 2009
Annual Meeting and any other relevant documents filed with the SEC (when available) because they contain important information. Investors
and security holders may obtain a free copy of the definitive proxy statement and other documents that Chemed files with the SEC (when
available) at the SEC’s website at www.sec.gov and Chemed’s website at www.chemed.com. In addition, the definitive proxy statement and
other documents filed by Chemed with the SEC (when available) may be obtained from Chemed free of charge by directing a request to
Chemed Corporation, Attn: Investor Relations, Chemed Corporation, 2600 Chemed Center, 255 East Fifth Street, Cincinnati, OH 45202-4726.
Certain Information Regarding
Participants
Chemed, its directors and certain
executive officers and employees are participants in the solicitation of
Chemed’s security holders in
connection with its 2009 Annual Meeting. Security holders may obtain information regarding the names, affiliations and interests of such
individuals in Chemed’s Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the SEC on February 27,
2009, and its definitive proxy statement for the 2009 Annual Meeting, which was filed with the SEC on April 29, 2009. To the extent holdings of
Chemed securities have changed since the amounts printed in the definitive proxy statement for the 2009 Annual Meeting, such changes have
been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. These documents may be obtained free of
charge (when available) from the SEC’s website at www.sec.gov and Chemed’s website at www.chemed.com.
connection with its 2009 Annual Meeting. Security holders may obtain information regarding the names, affiliations and interests of such
individuals in Chemed’s Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the SEC on February 27,
2009, and its definitive proxy statement for the 2009 Annual Meeting, which was filed with the SEC on April 29, 2009. To the extent holdings of
Chemed securities have changed since the amounts printed in the definitive proxy statement for the 2009 Annual Meeting, such changes have
been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. These documents may be obtained free of
charge (when available) from the SEC’s website at www.sec.gov and Chemed’s website at www.chemed.com.
Safe Harbor and Regulation G
Statement
(Continued)
(Continued)
3
EPS and Stock
Price History
(1)
(1)
Adjusted Diluted EPS; see Appendix at
the back of this presentation for reconciliation from GAAP reported results to
adjusted (non-GAAP) results
adjusted (non-GAAP) results
(2)
Adjusted for stock
splits
(2)
Chemed has delivered strong and
consistent EPS to
stockholders since 2003, 53% 5-year CAGR
stockholders since 2003, 53% 5-year CAGR
4
Chemed – Consolidated Summary of
Operations
For the years ended December 31, 2003
through 2008
(in thousands, except per share
data)
5
Adj. Diluted EPS is calculated by
dividing Adj. Net Income by Diluted Average Shares Outstanding, and Diluted EPS
is calculated by
dividing Net Income by Diluted Average Shares Outstanding
dividing Net Income by Diluted Average Shares Outstanding
(d)
See footnote (d) below and the
Appendix at the back of this presentation for reconciliation from GAAP reported
results to adjusted (non-
GAAP) results
GAAP) results
(c)
Restated for the retrospective
adoption of FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt
Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement),” effective January 1, 2009
Settled in Cash upon Conversion (Including Partial Cash Settlement),” effective January 1, 2009
(b)
Continuing operations
(a)
Consolidated Balance Sheet
Since Acquisition of VITAS in February 2004
Since Acquisition of VITAS in February 2004
Significantly reduced debt and
leverage ratio
February 2004 Debt of $335.9 million
Debt/LTM Adjusted EBITDA =
4.5
March 2009 Debt of $159.2 million
Debt/LTM Adjusted EBITDA = 0.95
Purchased $210.6 million of Chemed
stock
Annualized cash Interest Expense
February 2004 = $21.4 million
March 2009 = $3.9 million
(a)
(a) See Appendix at the
back of this presentation for reconciliation from GAAP reported results to
adjusted
(Non-GAAP) results
(Non-GAAP) results
6
Chemed
Operating
Segments
Segments
Chemed Corporation
Revenue
2008
Chemed
Adjusted EBITDA
14.1%
Chemed
Central Support
1.2%
Roto-Rooter
Central Support
8.3%
Roto-Rooter
COS
16.1%
5.9%
VITAS
Central
Support
54.4%
VITAS
COS
Roto-Rooter
VITAS
2007
Chemed
Adjusted EBITDA
14.7%
Chemed
Central Support
1.1%
Roto-Rooter
Central Support
8.6%
Roto-Rooter
COS
16.2%
6.1%
VITAS
Central
Support
53.3%
VITAS
COS
Roto-Rooter
VITAS
69%
31%
70%
30%
(a)
(a)
(a)
See Appendix at the back of this
presentation for reconciliation of EBITDA and Adjusted EBITDA to Net
Income
8
Roto-Rooter
Acquired Roto-Rooter from founder’s
heirs in 1980:
Minimal company-owned territories
Viewed as an under-leveraged brand
Poor economic rent for brand
value
Methodical roll-up of franchise
territories:
Today, 50% of the United States
population resides in company-
owned territories
owned territories
Developed centralized infrastructure
to manage 100 territories
Call Centers
Information Technologies/software
Replicable and Scalable
Five-year net income CAGR of
21%
10
Roto-Rooter Company
Overview
Largest provider of plumbing and
drain cleaning services in North America
Provides plumbing services to
approximately 90% of the United States and 40% of the
Canadian population
Canadian population
Provides plumbing and drain cleaning
services in more than 110 company-owned
territories and approximately 500 franchise territories
territories and approximately 500 franchise territories
Maintains an estimated 15% of the
drain cleaning market and 2-3% share of the
same-day service plumbing market
same-day service plumbing market
Residential customers represent 57%
of revenues, while commercial customers
represent 33% of revenues
represent 33% of revenues
Adjusted
EBITDA (2008)
Revenues (2008)
(a)
(a) See Appendix at the
back of this presentation for reconciliation of EBITDA and Adjusted EBITDA to
Net Income
11
Chemed Growth Strategy –
Roto-Rooter
Continue to increase efficiency
Acquire franchisee territories at
reasonable valuations
$175 - $200 million in franchise
street sales
Purchase at 4-5 times EBITDA
Minimal capital expenditure
Focus on earnings and cash
flow
Company-owned
Territories
12
Roto-Rooter – Summary of
Operations
For The Years Ended December 31, 2003 through 2008
(in thousands, except percentages)
For The Years Ended December 31, 2003 through 2008
(in thousands, except percentages)
(a)
Continuing Operations
(b)
See Appendix at the back of this
presentation for reconciliation from GAAP reported results to adjusted
(non-GAAP) results
13
Roto-Rooter Versus the
Competition
Net Income from Continuing Operations (in millions)
Net Income from Continuing Operations (in millions)
*
*ServiceMaster went private in
2007
14
Future of
Roto-Rooter
Continue to Consolidate Franchises
Purchase at reasonable multiples
Avoid over-paying for current
acquisitions
Inflates expectations/demands of
remaining franchisees
Utilize Cash Flow for:
Purchase of franchises
Acquisition of hospices
Debt pay-down, share buy-back,
increased dividends
Roto-Rooter Divestiture
Considerations:
If arbitrage of buying at low
multiples is exhausted
If after-tax proceeds can be
reinvested at higher return, risk adjusted
If Chemed’s capital structure and
cash flow without Roto-Rooter
provide it significant flexibility to support continued growth of VITAS
provide it significant flexibility to support continued growth of VITAS
If tax-free spin-off creates
stockholder value
15
VITAS Acquisition
Chemed Invested in VITAS Preferred
Stock in 1991
Active in VITAS’ Corporate Governance
Since 1991
Board Position
Audit Committee
Compensation Committee
Obtained Several Warrant Tranches
1991-2002
Converted Warrants to 37% Common
Stock Ownership in 2003
Purchased 100% of VITAS in February
2004
17
VITAS Healthcare Company
Overview
General
Inpatient
Care
Continuous
Home
Care
Routine
Home
Care
Adjusted EBITDA
2008
Hospice
Program –
Indirect
19.6%
Hospice
Program –
Direct
57.7%
EBITDA
14.3%
Central
Support
Support
8.4%
Medicare Cap
0.03%
Revenues 2008 (Before
Cap)
72%
12%
16%
(a)
See Appendix at the back of this
presentation for reconciliation of EBITDA and Adjusted EBITDA to Net
Income
(a)
Largest provider of hospice services
for patients with severe, life-limiting illnesses with approximately 8%
of the U.S. market share
of the U.S. market share
Operates a comprehensive range of
hospice services through 45 operating programs in 15 states and the
District of Columbia
District of Columbia
Utilizes a standardized model for
patient care which is intended to maximize quality and enhance patient
satisfaction
satisfaction
Operating statistics:
Service revenues and sales: $208
million (Q1 2009)
Average daily census per established
program: approximately 280 ADC, largest approximately 1,300
(Q1 2009)
(Q1 2009)
Average length of
stay: 76.6 days (Q1 2009)
Total of 9,200 employees, including
approximately 3,800 nurses and more than 3,200 home health aides
and other direct caregivers (Q1 2009)
and other direct caregivers (Q1 2009)
18
Washington, DC
VITAS – Locations &
ADC (as of March 31, 2009)
Inland Empire
(San Bernardino/
Palm Springs)
Orange County
Dallas
Fort Worth
San Antonio
Houston
Central Florida
Brevard
Palm Beach
Dade
Broward
Cincinnati
Philadelphia
New Jersey North
New Jersey West
New Jersey Shore
Delaware
Milwaukee
Chicagoland
Central
Chicagoland South
Chicagoland
Northwest
Sacramento
Oakland
San Francisco
San Diego
San Gabriel Cities
(Covina)
San Fernando
(Los Angeles & Ventura
County, Encino)
Coastal Cities
(Torrance)
Atlanta
Waterbury, CT
Hartford, CT
Fairfield, CT
Daytona
Pittsburgh
Kansas City
St. Louis
Northern Virginia
Detroit
Richmond
Cleveland
Collier
LaSalle
Columbus
Dayton
19
New Starts (Revenue
< 12 Mos.)
3
Large (450+
ADC)
8
Medium (200 – 449
ADC)
17
Small (1 – 199
ADC)
20
VITAS – Summary of Operations
For The Years Ended December 31, 2003 through 2008
For The Years Ended December 31, 2003 through 2008
(a)
(a)
Assumes VITAS was purchased on
January 1, 2003
(b)
See Appendix at the back of this
presentation for reconciliation from GAAP reported results to adjusted
(non-GAAP) results
20
(in thousands, except
percentages)
* Vistacare results for
2004 are annualized from the reported nine-month period ended September 30,
2004;
Vistacare was
purchased by Odyssey during their fiscal 2008
VITAS Versus the
Competition*
Net Income from Continuing Operations (in millions)
Net Income from Continuing Operations (in millions)
21
Chemed
Corporate
Overhead
Overhead
Corporate
Overhead
Majority of Chemed’s corporate
overhead costs are unavoidable
as a public company
as a public company
Functions as Strategic Planning and
Execution
Business Model Developments
Acquisitions and Divestitures
Growth Strategies
Manages Public Reporting Issues
Accounting
Tax
Treasury
Investor
Relations
Legal
SOX / Internal Audit
Insurance
Governance
24
2008 Corporate
Overhead
(a)
Cash expenses. See
Appendix at the back of this presentation for a reconciliation of cash and
non-cash expenses to reported Chemed Corporate SG&A expenses.
non-cash expenses to reported Chemed Corporate SG&A expenses.
(a)
25
Corporate Overhead
(Continued)
Significant increase / duplication in
costs if Roto-Rooter and
VITAS were separate public companies:
VITAS were separate public companies:
CEO / CFO
Audit / SOX
Accounting / Public Reporting
Legal
Directors Fees
Investor Relations
Treasury
Tax
26
Chemed Valuation
Chemed Valuation
Sum of the parts
JP Morgan / Lazard
evaluation
Chemed Divestitures
Status of tax-free spin-offs
History of divestures
27
Sum-of-the-Parts Analysis – Market
Implied Roto-Rooter
(in millions, except per share
data)
Note: Chemed financial based on
broker research
(a) Allocation based on
percentage of sales
(b) See Appendix at the
back of this presentation for reconciliation of EBITDA and Adjusted EBITDA to
Net Income
(b)
29
JP Morgan / Lazard
Evaluation
In the current market environment
there has been a flight to security
Smaller cap companies should
continue to experience significant volatility
Healthcare services sector has
experienced significant volatility given uncertainty regarding government
policy on reimbursement
policy on reimbursement
Industrial services broadly seen as
correlated to macroeconomic trends with significant cyclicality risk
While VITAS has requisite
characteristics for independence, a standalone Roto-Rooter would face
significant pressure in the current market environment
significant pressure in the current market environment
Small cap discount
Lack of meaningful peer group
Lack of analyst coverage or market
makers
Difficult market conditions for the
seasoning period
VITAS and Roto-Rooter businesses are
inherently different and do not yield traditional synergies to
each other
each other
However, existing capital structure
allows for significant flexibility in capital allocations to support
acquisition growth strategy
acquisition growth strategy
Stronger combined credit profile
could benefit company if a transformative deal were identified, especially
in weaker credit markets
in weaker credit markets
In current environment, JP Morgan
and Lazard believe that the multiple arbitrage necessary to justify
a spin-off of Roto-Rooter does not exist
a spin-off of Roto-Rooter does not exist
Chemed should continue to evaluate
the market environment for a separation and be willing to
opportunistically engage if circumstances warrant
opportunistically engage if circumstances warrant
30
Tax-Free Spin-Off
Chemed acquired control of VITAS on
February 24, 2004, in a taxable
purchase of stock
purchase of stock
Tax-free spin-offs are governed by
IRC §355
The earliest a tax-free spin-off of
Roto-Rooter or VITAS could be
completed under IRC §355 was February 25, 2009
completed under IRC §355 was February 25, 2009
Now is not the right time for a
separation of Roto-Rooter and VITAS
(a) A basic requirement
under §355(b)(2) is the active business requirement:
Both the distributing and controlled
corporation are engaged in the active conduct of a trade or business,
The trade or businesses (meaning
both VITAS and Roto-Rooter) must have been actively conducted throughout the
five-year
period ending on the date of distribution, and
period ending on the date of distribution, and
Control of a business which was
conducting such trade or business was not acquired in a taxable transaction
within the five-
year period
year period
(a)
31
Chemed Has a History of
Divestitures
Chemed’s Board of Directors has
approved:
14 significant divestiture /
transactions
Generating $711,000,000 in proceeds
Resulting in $284,000,000 in pre-tax
gains
Four divestitures in the last 12
years
Divested Patient Care in 2002, a
significant business segment. This
transaction resulted in reducing:
transaction resulted in reducing:
Chemed revenue by 29%
Operating profit by 15%
Total employee headcount by 50%
32
Summary of Significant Divestitures
and Spin-Offs
33
2009 Annual
Meeting of
Stockholders
Executive Summary
MMI Investments, L.P. (MMI), a
dissident hedge fund, has nominated its own slate of
five director candidates to stand for election to Chemed’s Board at our upcoming
Annual Meeting
five director candidates to stand for election to Chemed’s Board at our upcoming
Annual Meeting
Chemed believes MMI’s true motivation
is to pursue an ill-timed, irresponsible separation of
the Company’s businesses
the Company’s businesses
Chemed’s Board is highly qualified
and has demonstrated its commitment to
delivering value to all Chemed stockholders
delivering value to all Chemed stockholders
History of success in delivering
solid return and unlocking value through spin-offs and
other strategy transactions
other strategy transactions
Regular review of the Company’s
strategy and structure (most recently with the Company’s
outside financial and legal advisors)
outside financial and legal advisors)
Chemed’s Board nominees are the right
choice to continue building value for
stockholders
stockholders
2 new, independent director
candidates to add valuable experience
Chemed is structured to facilitate a
spin-off of either operating segment. Chemed has
consistently stated it would separate Roto-Rooter and VITAS if a separation would
create stockholder value
consistently stated it would separate Roto-Rooter and VITAS if a separation would
create stockholder value
35
Corporate
Governance
Governance rating score better than:
94.8% of S&P 600 companies
94.8% of Health Care Equipment &
Services companies
No poison pill
Election of entire Board conducted
annually
Nine of 11 nominees independent
All key committees comprised solely
of independent directors
Separate Chairman and Chief Executive
Officer
Chairman of the Board is independent
director
Three new independent
director/nominees in the last two years
Incentive compensation aligned with
performance and stockholder
value creation
value creation
36
Chemed Director
Independence
Chemed’s Board is in full compliance
with both the spirit and letter of the director-
independence requirements of the NYSE and SEC
independence requirements of the NYSE and SEC
None of the independent directors has
been an employee or director of any
Chemed affiliate for a minimum of nearly 10 years
Chemed affiliate for a minimum of nearly 10 years
The “significant funding” Mr. Walsh’s
law firm (Thompson Hine LLP) received:
Was $6,549 in 2007, the last year in
which any fees were paid to the firm by Chemed
(and $107,149 in the aggregate from 2004 through 2006). The law firm had total
revenues of over $188 million in 2007
(and $107,149 in the aggregate from 2004 through 2006). The law firm had total
revenues of over $188 million in 2007
Were paid for a matter originally
referred to a Dayton, Ohio, law firm with which Mr.
Walsh was never affiliated. The Ohio firm later merged with Thompson Hine, and
only subsequent to that merger did Mr. Walsh’s own firm merge with Thompson
Hine in 2002, approximately seven years after Mr. Walsh became a Chemed director
Walsh was never affiliated. The Ohio firm later merged with Thompson Hine, and
only subsequent to that merger did Mr. Walsh’s own firm merge with Thompson
Hine in 2002, approximately seven years after Mr. Walsh became a Chemed director
The “significant funding” Ms.
Lindell’s employer, the University of Cincinnati,
received:
received:
Consisted of charitable contributions
of $93,975 from the Chemed Foundation from
1994 – 2008. (As of June 2007, the University of Cincinnati had an endowment in
excess of $1 billion.) The Chemed Foundation donated funds to 267 different
organizations in the 1994 – 2008 period. Ms. Lindell joined the Chemed Board in
2008
1994 – 2008. (As of June 2007, the University of Cincinnati had an endowment in
excess of $1 billion.) The Chemed Foundation donated funds to 267 different
organizations in the 1994 – 2008 period. Ms. Lindell joined the Chemed Board in
2008
37
Chemed – Board of Directors
Composition
Chemed has a long history of
independent directors
38
Nominating Two New Independent
Directors in 2009
Six Potential Nominees Considered
Three were proposed by one of
Chemed’s largest stockholders
One proposed by an advisor
One proposed by the Chief Executive
Officer
One proposed by the Chairman of the
Board
Board’s Nominating Committee reviewed
the background of each potential nominee. Based upon this
review, the Nominating Committee recommended:
review, the Nominating Committee recommended:
Mr. Rice – Recommended by a large
stockholder of Chemed
Mr. Rice has been both a director and executive officer of several companies in the healthcare
industry. Since 1993, he has served at various times as Chief Executive Officer and a director of
Andrx Corporation; President and Chief Executive Officer and a director of Chesapeake
Biological Laboratories, Inc. and Executive Vice President and Chief Operating Officer and also
as Chief Financial Officer and a director of Circa Pharmaceuticals, Inc.
Mr. Rice has been both a director and executive officer of several companies in the healthcare
industry. Since 1993, he has served at various times as Chief Executive Officer and a director of
Andrx Corporation; President and Chief Executive Officer and a director of Chesapeake
Biological Laboratories, Inc. and Executive Vice President and Chief Operating Officer and also
as Chief Financial Officer and a director of Circa Pharmaceuticals, Inc.
Mr. Mrozek – Recommended by the Chief
Executive Officer
Mr. Mrozek worked with the ServiceMaster Company for over 20 years, serving at various times as
its Vice Chairman, President, Chief Financial Officer and Chief Operating Officer and as a Group
President and Chief Operating Officer. During Mr. Mrozek’s term, ServiceMaster’s businesses
included not only its current residential and commercial cleaning, home warranty and inspection,
furniture repair, lawn service and pest control businesses, but also plumbing and drain cleaning
and home health care and assisted living businesses
Mr. Mrozek worked with the ServiceMaster Company for over 20 years, serving at various times as
its Vice Chairman, President, Chief Financial Officer and Chief Operating Officer and as a Group
President and Chief Operating Officer. During Mr. Mrozek’s term, ServiceMaster’s businesses
included not only its current residential and commercial cleaning, home warranty and inspection,
furniture repair, lawn service and pest control businesses, but also plumbing and drain cleaning
and home health care and assisted living businesses
39
MMI Investments
MMI’s Approach
No substantive discussions prior to
public letter
No nominations submitted to the
Nominating Committee
Misleads investors that they have
been a long-term stockholder
MMI’s Credibility
Mischaracterizations regarding a
potential spin-off
Misleading information regarding
affiliations of Chemed’s directors
Misinformation regarding Chemed’s
corporate staff and overhead
MMI’s and Nominees’ Track Record –
Significant Value Destruction
MMI’s reported assets under
management have declined from approximately $900
million to approximately $200 million over the past two years
million to approximately $200 million over the past two years
Since nominee Lifflander assumed
directorship at Unysis, UIS stock price has
declined approximately 67%*
declined approximately 67%*
Since nominee Michel has been
President, CEO and Board Member of iSECUREtrac,
the company’s stock price has declined approximately 71%*
the company’s stock price has declined approximately 71%*
During nominee Wetzel’s tenure on the
Board of Brink’s, BCO stock price declined
approximately 29%
approximately 29%
* As of the close of
business on May 6, 2009
40
MMI Investments (Continued)
41
Qualifications of MMI’s Five Nominees
2 have no public company board
experience
1 is a professional activist hedge
fund manager
2 serve as limited partners of the
same activist hedge fund
Only 1 has any professional
experience in healthcare
Only 1 has any professional
experience in residential and commercial cleaning services
MMI’s Plan is Not Right at This Time
Chemed’s most recent review,
conducted during March and April 2009 with outside
financial and legal advisors, concluded executing the separation advocated by MMI
would be risky and could impair value
financial and legal advisors, concluded executing the separation advocated by MMI
would be risky and could impair value
Wall Street
Journal Quote
“Another activist favorite,
pressuring companies to break up or sell themselves, also
could be a challenge. Financing markets remain in disarray and valuations are
distressed in many cases.”
could be a challenge. Financing markets remain in disarray and valuations are
distressed in many cases.”
Gregory Zuckerman,
The Wall Street
Journal, April 27, 2009
Chemed Response to
MMI
Criticizes Chemed’s Board of
Directors
Has not raised any claims of
operational under
performance
performance
Has not offered evidence to the claim
that Chemed
lags its peers on operating metrics
lags its peers on operating metrics
Criticizes Chemed overhead in vague
and general
terms
terms
Has not provided evidence that Chemed
directors
and management are unwilling to divest Roto-
Rooter or VITAS to create stockholder value
and management are unwilling to divest Roto-
Rooter or VITAS to create stockholder value
MMI
Chemed
Management
42
Chemed’s nominees are in full
compliance with the NYSE
and SEC director-independence requirements and have a
demonstrated track record of building value for
and SEC director-independence requirements and have a
demonstrated track record of building value for
stockholders
Strong consolidated operating results
over 1, 3 and 5
years
years
VITAS and Roto-Rooter have out-
performed competition
Roto-Rooter and VITAS would incur
significant overhead
expense if they were separate, publicly traded entities;
Chemed overhead is only 1.4% of revenue
expense if they were separate, publicly traded entities;
Chemed overhead is only 1.4% of revenue
Chemed has a long history of
divesting operations to
enhance stockholder value; Chemed has consistently
stated it would separate Roto-Rooter and VITAS if a
separation would create stockholder value
enhance stockholder value; Chemed has consistently
stated it would separate Roto-Rooter and VITAS if a
separation would create stockholder value
Chemed’s Nominees are the Right
Choice
Chemed’s Nominees are the Right
Choice
Superior long-term value creation and
financial performance
Track record of successful
divestitures and other strategic
transactions
transactions
Highly qualified Board is committed
to delivering value for
stockholders through the execution of prudent strategies, NOT
through the blind pursuit of any one strategy
stockholders through the execution of prudent strategies, NOT
through the blind pursuit of any one strategy
Support the Chemed Board
Vote the WHITE Proxy
Card
43
Appendix
