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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1994
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)
2600 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
(513) 762-6900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
---- ----
Indicate 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 9,888,300 Shares October 31, 1994
$1 Par Value
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Page 1 of 20<PAGE>
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES
Index
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
September 30, 1994 and
December 31, 1993 3
Consolidated Statement of Income -
Three months and nine months ended
September 30, 1994 and 1993 4
Consolidated Statement of Cash Flows
Nine months ended
September 30, 1994 and 1993 5
Notes to Unaudited Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10 - 16
PART II. OTHER INFORMATION 17
</TABLE>
Page 2 of 20<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands except share and per share data)
UNAUDITED
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 15,699 $ 14,615
Marketable securities 2,073 1,200
Accounts receivable, less allowances of $2,666 (1993 - $2,391) 80,012 58,350
Current portion of note receivable 5,479 5,627
Inventories
Raw materials 5,871 6,977
Finished goods and general merchandise 51,277 47,768
Other current assets 12,939 10,677
---------- ----------
Total current assets 173,350 145,214
Investment in affiliate 27,769 30,656
Other investments 45,308 37,657
Note receivable 5,455 10,413
Properties and equipment, at cost less accumulated
depreciation of $38,479 (1993 - $33,952) 76,736 70,758
Identifiable intangible assets less accumulated amortization
of $1,660 (1993 - $884) 21,460 22,166
Goodwill less accumulated amortization of $16,516 (1993 - $14,073) 113,198 94,867
Other assets 18,495 18,522
---------- ----------
Total Assets $ 481,771 $ 430,253
========== ==========
LIABILITIES
Current liabilities
Accounts payable $ 29,829 $ 24,124
Bank notes and loans payable 30,000 25,000
Current portion of long-term debt 6,218 5,688
Income taxes 18,052 20,448
Deferred contract revenue 22,915 23,783
Other current liabilities 37,915 28,606
---------- ----------
Total current liabilities 144,929 127,649
Deferred income taxes 1,758 374
Long-term debt 108,072 98,059
Other liabilities and deferred income 40,582 35,009
Minority interest 34,942 32,011
---------- ----------
Total Liabilities 330,283 293,102
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock-authorized 15,000,000 shares $1 par;
issued 12,366,785 (1993 - 12,087,894) shares 12,367 12,088
Paid-in capital 138,674 132,095
Retained earnings 103,568 99,851
Unrealized appreciation on investments 6,895 -
Treasury stock - 2,479,679 (1993 - 2,289,120) shares, at cost (70,405) (63,914)
Unearned compensation - ESOPs (39,611) (42,969)
---------- ----------
Total Stockholders' Equity 151,488 137,151
---------- ----------
Total Liabilities and Stockholders' Equity $ 481,771 $ 430,253
========== ==========
See accompanying notes to unaudited financial statements.
</TABLE>
Page 3 of 20<PAGE>
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
1994 1993 1994 1993
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Continuing Operations
Sales $124,962 $103,510 $359,288 $298,753
Service revenues 41,127 36,314 120,254 88,831
--------- --------- --------- ---------
Total sales and service revenues 166,089 139,824 479,542 387,584
--------- --------- --------- ---------
Cost of goods sold 85,613 71,470 244,178 205,734
Cost of services provided 25,254 22,636 75,061 51,980
Selling and marketing expenses 24,604 22,835 72,218 67,035
General and administrative expenses 19,914 13,513 59,862 40,106
Depreciation 2,651 2,284 8,034 6,451
Nonrecurring expenses 1,705 - 1,705 -
--------- --------- --------- ---------
Total costs and expenses 159,741 132,738 461,058 371,306
--------- --------- --------- ---------
Income from operations 6,348 7,086 18,484 16,278
Interest expense (2,304) (2,311) (6,518) (6,842)
Other income, net 2,640 1,974 14,930 11,623
--------- --------- --------- ---------
Income before income taxes, equity
earnings and minority interest 6,684 6,749 26,896 21,059
Income taxes (2,287) (2,230) (10,676) (6,956)
Equity in earnings of affiliate 413 689 1,720 1,646
Minority interest in earnings of
subsidiaries (1,187) (1,050) (2,959) (2,649)
--------- --------- --------- ---------
Income from continuing operations 3,623 4,158 14,981 13,100
Discontinued Operations 1,471 - 3,807 687
--------- --------- --------- ---------
Income before cumulative effect of a
change in accounting principle 5,094 4,158 18,788 13,787
Cumulative effect of a change
in accounting principle - - - 1,651
--------- --------- --------- ---------
Net Income $ 5,094 $ 4,158 $ 18,788 $ 15,438
========= ========= ========= =========
Earnings Per Common Share
Income from continuing operations $ .37 $ .43 $ 1.52 $ 1.34
========= ========= ========= =========
Income before cumulative effect of a
change in accounting principle $ .52 $ .43 $ 1.91 $ 1.41
========= ========= ========= =========
Net income $ .52 $ .43 $ 1.91 $ 1.58
========= ========= ========= =========
Average Number of Shares Outstanding 9,867 9,781 9,846 9,773
========= ========= ========= =========
Cash Dividends Paid Per Share $ .51 $ .50 $ 1.53 $ 1.50
========= ========= ========= =========
See accompanying notes to unaudited financial statements.
</TABLE>
Page 4 of 20<PAGE>
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
<F1>
1994 1993*
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 18,788 $ 15,438
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,816 9,828
Gains on sale of investments (10,235) (6,023)
Discontinued operations (3,807) (687)
Purchase of trading securities (2,000) -
Minority interest in earnings of subsidiaries 2,959 2,649
Proceeds from sale of trading securities 1,041 -
Provision for uncollectible accounts receivable 1,210 1,413
Provision for deferred income taxes (603) 789
Cumulative effect of a change in
accounting principle - (1,651)
Changes in operating assets and liabilities,
excluding amounts acquired in business combinations
Increase in accounts receivable (10,992) (3,279)
Increase in inventories and other current assets (3,408) (1,596)
Increase in accounts payable,
deferred contract revenue and other
current liabilities 8,982 4,530
Increase/(decrease) in income taxes 2,210 (2,628)
Other - net (1,514) (3,435)
--------- ---------
Net cash provided by operating activities 14,447 15,348
--------- ---------
Cash Flows From Investing Activities
Business combinations, net of cash acquired (17,199) (21,057)
Proceeds from sale of investments 16,788 7,947
Capital expenditures (14,485) (9,375)
Net proceeds from sale of discontinued operations 2,554 3,500
Purchase of investments (453) (3,836)
Proceeds from sale of marketable securities - 67,962
Purchase of marketable securities - (47,114)
Other - net 1,818 442
--------- ---------
Net cash used by investing activities (10,977) (1,531)
--------- ---------
Cash Flows From Financing Activities
Dividends paid (15,071) (14,664)
Proceeds from issuance of long-term debt 10,000 -
Issuance of capital stock 7,524 2,992
Purchase of treasury stock (6,491) (2,715)
Proceeds from issuance of bank notes and loans payable 5,000 -
Repayment of long-term debt (3,592) (304)
Other - net 244 (412)
--------- ---------
Net cash used by financing activities (2,386) (15,103)
--------- ---------
Increase/(Decrease) In Cash And Cash Equivalents 1,084 (1,286)
Cash and cash equivalents at beginning of period 14,615 14,527
--------- ---------
Cash and cash equivalents at end of period $ 15,699 $ 13,241
========= =========
See accompanying notes to unaudited financial statements.
<F1>
* Reclassified to conform to 1994 presentation.
</TABLE>
Page 5 of 20<PAGE>
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with Rule 10-01 of SEC
Regulation S-X. Consequently, they do not include all the
disclosures required under generally accepted accounting
principles for complete financial statements. However, in
the opinion of the management of Chemed Corporation (the
"Company"), the financial statements presented herein contain
all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial
position, results of operations and cash flows of the Company
and its consolidated subsidiaries ("Chemed"). For further
information regarding Chemed's accounting policies, refer to
the consolidated financial statements and notes included in
Chemed's Annual Report on Form 10-K for the year ended
December 31, 1993.
2. Earnings per common share are computed using the weighted
average number of shares of capital stock outstanding and
exclude the dilutive effect of outstanding stock options as
it is not material.
3. Equity in earnings of affiliate represents Chemed's aftertax
share of the net income of Omnicare, Inc. ("Omnicare"), a
public company operating in the health care industry whose
stock is traded on the New York Stock Exchange. At
September 30, 1994, the Company's investment in Omnicare of
$27,769,000 was $3,109,000 in excess of its 21% equity
interest ($3,451,000 at December 31, 1993). The market value
of the Company's investment at September 30, 1994, based on
that day's closing market price of $40 1/8, was $92,169,000.
Chemed received cash dividends totaling $325,000 during the
first nine months of 1994 (1993 - $305,000).
During the first quarter of 1994, Chemed sold 149,900 shares
of its investment in Omnicare, realizing a pretax gain of
$3,184,000 ($1,817,000 aftertax). Similarly, Chemed sold
90,000 shares of its investment in Omnicare during the second
quarter of 1994, realizing a pretax gain of $1,750,000
($603,000 aftertax).
Thus, during the second quarter of 1994, Chemed increased the
estimated rate used to record deferred income taxes on its
share of Omnicare's earnings to recognize the fact that a
portion of the unremitted earnings ultimately will be
realized in the form of capital gains rather than as
dividends. The cumulative effect of that adjustment relative
Page 6 of 20<PAGE>
to the book/tax basis difference in its investment in
Omnicare resulted in a charge of $380,000 to the income tax
provision in the second quarter of 1994.
During the third quarter of 1994 Omnicare incurred one-time
expenses of $1,860,000 aftertax primarily in conjunction with
a pooling-of-interests acquisition completed in September
1994. Chemed's aftertax share of these expenses totals
$352,000 ($.04 per share).
4. Effective January 1, 1994, Chemed acquired all of the capital
stock of Patient Care Inc. ("Patient Care") for cash payments
aggregating $20,582,000, including deferred payments with a
present value of $6,271,000, plus 17,500 shares of Chemed
Capital Stock. Additional cash payments of up to $10,400,000
may be made, the amount being contingent upon the earnings of
Patient Care during the three-year period ended
December 31, 1995. Patient Care emphasizes personal care in
the home, with services including skilled nursing; medical
and social work; nutrition; and other specialized services.
During the second quarter of 1994 the Company recorded an
adjustment to the purchase price of Encore Services Systems,
Inc. ("Encore") to recognize the accrual of a $3,800,000
contingent payment due in June 1996. The present value of
this payment, $3,315,000, was recorded as increases to
goodwill and other noncurrent liabilities.
The aggregate purchase price of Patient Care and other
purchase business combinations has been allocated as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Working capital $ 9,717
Goodwill 20,986
Long-term debt (7,493)
Other assets and liabilities - net 2,362
----------
Total net assets 25,572
Less: cash and cash
equivalents acquired (182)
Less: deferred payments (7,691)
Less: capital stock issued (500)
----------
Net cash used $ 17,199
==========
</TABLE>
Page 7 of 20<PAGE>
These acquisitions did not materially impact income before
cumulative effect of a change in accounting principle for
1993 or 1994. In conjunction with the purchase of Patient
Care, an application for the transfer of ownership of one
region of Patient Care has been made with a state regulatory
agency and final approval is expected to be received during
November 1994.
5. Effective January 1, 1994, Chemed adopted Statement of
Financial Accounting Standards No. 115 ("SFAS 115"),
"Accounting for Certain Investments in Debt and Equity
Securities." Accordingly, the Company has classified its
cash equivalents and marketable securities as "trading
securities" under SFAS 115 and its investments included in
other investments as "available for sale." The resultant
cumulative effect of adopting SFAS 115 on the Company's
statement of income in 1994 was immaterial. The cumulative
effect of adopting SFAS 115 on the Company's balance sheet as
of January 1, 1994 was to increase stockholders' equity by
$12,975,000.
As a result of adopting SFAS 115, investments in debt and
marketable equity instruments are recorded at their fair
value at September 30, 1994 and nonmarketable equity
investments are recorded at cost. Such investments at
December 31, 1993 were recorded at amortized cost.
In computing realized gains or losses on the sale of
investments, the Company uses the "specific identification"
method to determine the cost of investments sold.
6. On March 4, 1994, the Company entered into a $10,000,000 term
loan agreement ("Agreement") with Fifth Third Bank. The
interest rate is variable and is based on current market
conditions, or at the option of the Company, the rate may be
fixed based on a stipulated formula. The loan matures on
March 4, 1999 and may be prepaid without penalty. The
current variable interest rate is 6.4%
7. As a result of reevaluating the adequacy of accrued
liabilities related to operations discontinued and sold in
the second quarter of 1991, the Company recorded aftertax
gains of $2,336,000 ($.24 per share) and $1,471,000 ($.15 per
share), from the resolution of various tax and other issues
during the second and third quarters of 1994, respectively.
8. Nonrecurring expenses of $1,705,000 ($1,107,000 aftertax or
$.11 per share) were recorded in the third quarter of 1994 as
the result of downsizing staffs at various locations and
refocussing marketing efforts at Veratex.
Page 8 of 20<PAGE>
9. During the third quarter of 1994, the Company recorded a
favorable adjustment of $208,000 to its income tax provision.
This amount represents the cumulative adjustment for the
period December 1992 through June 1994 arising from the
Company's retroactive election in September 1994 relative to
the amortization of intangible assets under the federal tax
law changes enacted in August 1993.
Page 9 of 20<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Financial Condition
- -------------------
Increases in accounts receivable, goodwill and accounts
payable from recorded amounts at December 31, 1993 to balances as
of September 30, 1994 are primarily attributable to the Company's
acquisition of Patient Care Inc. ("Patient Care") effective
January 1, 1994. In addition, goodwill was increased in 1994 by
the accrual of a $3,315,000 contingent payment due in June 1996
relative to the July 1993 acquisition of Encore Service Systems
Inc. ("Encore"). The increase in other investments from
$37,657,000 at December 31, 1993 to $45,308,000 at
September 30, 1994 is primarily attributable to the Company's
adoption of Statement of Financial Standards No. 115 ("SFAS 115")
effective January 1, 1994. Such investments are classified as
"available for sale" and include $10,447,000 of unrealized
appreciation on debt and marketable equity investments at
September 30, 1994. The aftertax impact of this unrealized gain
is included in stockholders' equity and amounts to $6,895,000 at
September 30, 1994.
Increases in other current liabilities and other
liabilities and deferred income as of September 30, 1994 versus
balances at December 31, 1993 are primarily attributable to the
recording of deferred payments for the purchase of Patient Care
in January 1994. The current portion of these payments included
in other current liabilities amounts to $1,856,000 at
September 30, 1994 and the non-current portion amounts to
$2,520,000. Also impacting deferred income and other liabilities
was the previously mentioned accrual of a contingent payment
relative to the acquisition of Encore.
At September 30, 1994 Chemed had approximately
$31,750,000 of unused lines of credit with various banks. To
assist with financing the purchase of Patient Care, the Company
entered into a credit agreement with the Fifth Third Bank of
Cincinnati, Ohio in March 1994 to borrow $10,000,000 for a period
of five years. Management believes that the Company's lines of
credit, along with cash generated from operating activities and
periodic sales of investments, will be sufficient to meet the
Company's anticipated financing requirements.
Page 10 of 20<PAGE>
Results of Operations
- ---------------------
Sales and service revenues and operating profit from
continuing operations by business segment follow (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------
1994 1993 1994 1993
------- -------- -------- -------
Sales and Service
Revenues
- -----------------
<S> <C> <C> <C> <C>
National Sanitary Supply $ 81,232 $ 78,598 $229,667 $223,226
Roto-Rooter 43,057 38,290 126,493 94,691
Veratex 24,068 22,936 72,965 69,667
Patient Care 17,732 - 50,417 -
-------- ------- -------- --------
Total $166,089 $139,824 $479,542 $387,584
======== ======== ======== ========
Operating Profit
- ----------------
National Sanitary Supply $ 3,184 $ 3,032 $ 7,108 $ 6,615
Roto-Rooter 4,199 3,706 11,202 9,649
<F2>
Veratex 720* 1,581 4,105* 4,343
Patient Care 732 - 1,769 -
-------- ------- -------- --------
Total $ 8,835 $ 8,319 $ 24,184 $ 20,607
======== ======== ======== ========
__________________
<F2>
* Includes $648,000 of nonrecurring charges during the third quarter of 1994.
</TABLE>
Data relating to (a) growth in sales and service revenues and
(b) operating profit as a percent of sales and service revenues
for each segment are set forth below:
<TABLE>
<CAPTION>
Sales and Operating Profit
Service Revenues as a % of Sales
% Increase (Operating Margin)
---------------- -------------------
1994 vs. 1993 1994 1993
---------------- -------- ---------
Three Months Ended
September 30,
- ------------------
<S> <C> <C> <C>
National Sanitary Supply 3% 3.9% 3.9%
Roto-Rooter 12 9.8 9.7
Veratex 5 3.0 6.9
Patient Care n.a. 4.1 n.a.
Total 19 5.3 5.9
Nine Months Ended
September 30,
- ------------------
National Sanitary Supply 3% 3.1% 3.0%
Roto-Rooter 34 8.9 10.2
Veratex 5 5.6 6.2
Patient Care n.a. 3.5 n.a.
Total 24 5.0 5.3
</TABLE>
Page 11 of 20<PAGE>
Third Quarter 1994 Versus Third Quarter 1993
- ----------------------------------------------
Net sales of the National Sanitary Supply segment for
the third quarter of 1994 totaled $81,232,000, an increase of 3%
over sales recorded during the third quarter of 1993. This sales
growth included sales gains in many locations throughout the
United States, including the large Southern California market.
The operating margin of this segment was 3.9% during 1994 and
1993.
Sales and service revenues of the Roto-Rooter segment
for the third quarter of 1994 totaled $43,057,000, an increase of
12% over the $38,290,000 recorded for the third quarter of 1993.
Plumbing revenues for the third quarter of 1994, which account
for approximately one-fifth of total revenues, increased 18% over
amounts recorded during the comparable quarter of 1993. Most of
the remainder of this revenue increase was accounted for by Roto-
Rooter's sewer and drain cleaning business. The operating profit
margin of the Roto-Rooter segment improved from 9.7% during the
third quarter of 1993 to 9.8% during the third quarter of 1994.
This increase in operating margin was attributable to a decline
in insurance costs as a percent of sales and service revenues in
1994, offset partially by higher material costs (as a percent of
revenues) in Roto-Rooter's plumbing and service contract
businesses.
Sales of the Veratex segment increased from $22,936,000
during the third quarter of 1993 to $24,068,000 during the third
quarter of 1994, an increase of 5%. The operating margin of
Veratex declined from 6.9% during the third quarter of 1993 to
3.0% during the third quarter of 1994. Included in 1994's
results are nonrecurring charges aggregating $648,000 for the
cost of staff reductions and refocussing marketing efforts at
Veratex. Excluding these charges, the operating margin during
the third quarter of 1994 was 5.7%. In addition, these actions
are expected to generate approximately $730,000 of cost savings
annually and improve Veratex's profit performance.
Sales of the Patient Care segment acquired in January
1994, for the third quarter of 1994 totaled $17,732,000, an
increase of 29% over the sales Patient Care recorded during the
third quarter of 1993. Patient Care contributed $732,000 to
Chemed's operating profit in the third quarter of 1994.
Total sales and service revenues increased 19% from
$139,824,000 during the third quarter of 1993 to $166,089,000
during the third quarter of 1994. Excluding the sales of Encore,
acquired in July of 1993, and of Patient Care, acquired in
January of 1994, sales and service revenues for the third quarter
of 1994 increased 6% over amounts recorded in 1993's third
Page 12 of 20<PAGE>
quarter. The total operating margin declined from 5.9% during
the third quarter of 1994 to 5.3% during the third quarter of
1994 primarily as a result of the nonrecurring charges recorded
by Veratex during the third quarter of 1994.
Income from operations declined from $7,086,000 during
the third quarter of 1993 to $6,348,000 during the third quarter
of 1994, as a result of $1,705,000 nonrecurring charges recorded
at Veratex and Chemed headquarters, offset partially by the
acquisition of Patient Care.
Other income for the third quarter of 1994 totaled
$2,640,000 as compared with $1,974,000 for the third quarter of
1993. This increase was primarily attributable to larger gains
on the sales of investments in the 1994 quarter. During the
third quarter of 1994 the Company realized pretax gains on the
sales of investments aggregating $1,119,000 as compared with
realized gains of $247,000 during the 1993 quarter.
During the third quarter of 1994 the Company's
effective income tax rate was 34.2% as compared with 33.0% during
the comparable period of 1993. The higher rate in 1994 was
primarily attributable to a higher effective state and local rate
in 1994 and a lower ESOP dividend tax deduction in 1994 as
compared with 1993, partially offset by a favorable adjustment to
deferred taxes in 1994 relating to the amortization of
intangibles.
Chemed's share of the earnings of Omnicare, a 21%-owned
affiliate, declined from $689,000 in the third quarter of 1993 to
$413,000 in the third quarter of 1994. This decline was
attributable to Omnicare's incurring one-time expenses totaling
$1,860,000 aftertax during the third quarter of 1994, in
conjunction with a pooling-of-interests acquisition in
September 1994. Chemed's aftertax share of these expenses totals
$352,000 ($.04 per Chemed share).
Chemed's income from continuing operations declined
from $4,158,000 ($.43 per share) during the third quarter of 1993
to $3,623,000 ($.37 per share) during the third quarter of 1994.
Earnings for the third quarter of 1994 include a $1,107,000
aftertax charge ($.11 per share) for nonrecurring expenses plus a
reduction of $352,000 aftertax ($.04 per share) in Chemed's
equity earnings of Omnicare related to one-time expenses incurred
by Omnicare. In addition, earnings for 1994 include aftertax
gains aggregating $735,000 ($.08 per share) from the sales of
several of the Company's investments during the third quarter of
1994. During the third quarter of 1993 the Company recorded an
aftertax gain of $152,000 ($.02 per share) from the sales of
investments. Excluding these nonrecurring charges, one-time
expenses and investment gains, income from continuing operations
Page 13 of 20<PAGE>
for the third quarter of 1994 increased 8.5% to $4,347,000 ($.44
per share) as compared with $4,006,000 ($.41 per share) in the
third quarter of 1993. Furthermore, it is expected that the
downsizings of staffs which took place during the third quarter
of 1994 will generate annual cost savings of approximately
$770,000 aftertax ($.08 per share).
Net income for 1994's third quarter totaled $5,094,000
($.52 per share) as compared with $4,158,000 ($.43 per share) for
the third quarter of 1993, an increase of 23%. Net income for
the third quarter of 1994 included favorable accrual adjustments
relative to operations discontinued in 1991 amounting to
$1,471,000 ($.15 per share). Given the long-term nature of these
accruals, it is likely that additional adjustments may be
necessary.
Nine Months Ended September 30, 1994 Versus September 30, 1993
- --------------------------------------------------------------
The National Sanitary Supply segment recorded sales of
$229,667,000 during the first nine months of 1994, an increase of
3% over amounts recorded over the comparable period of 1993.
National Sanitary's operating margin improved slightly from 3.0%
during the first nine months of 1993 to 3.1% during the
comparable period of 1994.
Sales and service revenues of the Roto-Rooter segment
for the first nine months of 1994 increased by 34% as compared
with amounts recorded during the first nine months of 1993.
Excluding the sales of Encore, this sales growth would have been
13%. This segment's operating margin declined from 10.2% during
the first nine months of 1993 to 8.9% during the first nine
months of 1994. This decline was attributable to lower margins
in Roto-Rooter's service contract business primarily due to the
Encore acquisition, which as expected, has lower margins than
those achieved in Roto-Rooter's other repair and maintenance
business, and to higher material and labor costs as a percent of
revenues. It is expected that the future consolidation of the
purchasing functions of Encore and the existing service contract
business will help lower material costs. In addition, partially
offsetting this decline was an improvement in insurance claims
experience which had a favorable impact of 1.5% points on Roto-
Rooter's operating margin.
The Veratex segment recorded sales of $72,965,000
during the first nine months of 1994, an increase of 5% over
sales during the first nine months of 1993. The operating profit
margin of Veratex declined from 6.2% during the first nine months
of 1993 to 5.6% during the first nine months of 1994, primarily
as a result of the aforementioned nonrecurring charges.
Excluding these nonrecurring charges, Veratex's operating margin
for the 1994 period was 6.5%.
Page 14 of 20<PAGE>
The Patient Care segment contributed $50,417,000 and
$1,769,000 to sales and operating profit, respectively, during
the first nine months of 1994. Compared with its 1993 first nine
months results, Patient Care sales increased 30% during the first
nine months of 1994.
On a consolidated basis, Chemed sales and service
revenues for the first nine months of 1994 increased 24% over
amounts recorded during the first nine months of 1993. Excluding
the sales of Encore and Patient Care, sales for the first nine
months of 1994 increased by 6% over amounts recorded during the
first nine months of 1993. The total operating margin of Chemed
declined slightly from 5.3% during the first nine months of 1993
to 5.0% during first nine months of 1994.
Income from operations increased from $16,278,000
during the first nine months of 1993 to $18,484,000 during the
first nine months of 1994, as a result of the acquisitions of
Patient Care and Encore, partially offset by previously mentioned
nonrecurring expenses ($1,705,000) in 1994.
Other income for the first nine months of 1994 totaled
$14,930,000 as compared with $11,623,000 during the first nine
months of 1993. This increase was attributable to larger
realized gains on the sales of portions of the Company's
investments in the first nine months of 1994 versus investment
gains recorded during the first nine months of 1993 ($10,235,000
in 1994 versus $6,023,000 in 1993), partially offset by lower
interest income (due primarily to lower interest rates on cash
and cash equivalents and marketable securities in 1994).
For the first nine months of 1994 the Company's
effective income tax rate was 39.7% as compared with 33.0% during
the comparable period of 1993. The higher rate in 1994 was
attributable primarily to: (a) a lower ESOP tax credit (as a
percent of pretax income) in the 1994 period; (b) a lower tax
basis (versus book basis) on investments sold in 1994; (c)
lower favorable tax adjustments in 1994 versus those recorded in
the first nine months of 1993; and, (d) an adjustment to increase
the deferred income tax provision relative to the Company's share
of Omnicare's unremitted earnings, as a result of a change of the
estimated tax rate.
Chemed's share of the earnings of Omnicare increased
from $1,646,000 during the first nine months of 1993 to
$1,720,000 during the first nine months of 1994. Excluding
Chemed's share of Omnicare's one-time expenses, Chemed's share of
Omnicare's earnings in the 1994 period would have been
$2,072,000.
Page 15 of 20<PAGE>
Chemed's income from continuing operations increased
from $13,100,000 ($1.34 per share) during the first nine months
of 1993 to $14,981,000 ($1.52 per share) during the first nine
months of 1994. Earnings for the nine month periods included
aftertax gains of $5,684,000, or $.58 per share, and $3,865,000
or $.40 per share, in 1994 and 1993, respectively, from the sale
of a portion of the Company's investments during the periods.
Excluding the previously mentioned nonrecurring charges and one-
time expenses as well as the investment gains, income from
continuing operations increased 16.5% from $9,235,000 ($.94 per
share) during the first nine months of 1993 to $10,756,000 ($1.09
per share) in the comparable period of 1994.
Net income for 1994's first nine months totaled
$18,788,000 ($1.91 per share) as compared with $15,438,000 ($1.58
per share) for the first nine months of 1993. Net income for the
first nine months of 1994 and 1993 included favorable adjustments
relative to discontinued operations amounting to $3,807,000 ($.39
per share) and $687,000 ($.07 per share), respectively. In
addition, effective January 1, 1993 the Company recorded an
aftertax gain of $1,651,000 ($.17 per share) from the adoption of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
Page 16 of 20<PAGE>
PART II -- OTHER INFORMATION
----------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
<TABLE>
<CAPTION>
Exhibit SK 601 Page
No. Ref. No. Description No.
------- -------- ------------------ ----------
<C> <C> <S> <C>
1 (11) Statement re:
Computation of Per
Share Earnings E-1 - E-3
2 (27) Financial Data
Schedule E-4
</TABLE>
(b) Reports on Form 8-K - None.
---------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Chemed Corporation
-------------------------
(Registrant)
Dated: November 11, 1994 By Naomi C. Dallob
---------------------- -------------------------
Naomi C. Dallob
Vice President and
Secretary
Dated: November 11, 1994 By Arthur V. Tucker
---------------------- -------------------------
Arthur V. Tucker
Vice President and
Controller (Principal
Accounting Officer)
Page 17 of 20<PAGE>
EXHIBIT 11
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share data)
<TABLE>
<CAPTION>
Income from Continuing Operations
-----------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1993 1994 1993 1994
-------- -------- -------- -------
Computation of Earnings Per
Common and Common
<F1>
Equivalent Share (a):
- ---------------------------
<S> <C> <C> <C> <C>
Reported Income $ 4,158 $ 3,623 $13,100 $14,981
======== ======== ======== =======
Average number of shares
used to compute earnings
per common share 9,781 9,867 9,773 9,846
Effect of unexercised
stock options 51 63 41 62
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common and common
equivalent share 9,832 9,930 9,814 9,908
======== ======== ======== ========
Earnings per common and
common equivalent share $ 0.42 $ 0.36 $ 1.33 $ 1.51
======== ======== ======== ========
Computation of Earnings Per
Common Share Assuming
<F1>
Full Dilution (a):
- ---------------------------
Reported Income $ 4,158 $ 3,623 $13,100 $14,981
======== ======== ======== ========
Average number of shares
used to compute earnings
per common share 9,781 9,867 9,773 9,846
Effect of unexercised
stock options 59 68 59 76
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common share assuming
full dilution 9,840 9,935 9,832 9,922
======== ======== ======== ========
Earnings per common share
assuming full dilution $ 0.42 $ 0.36 $ 1.33 $ 1.51
======== ======== ======== ========
- -------------------
<F1>
(a) This calculation is submitted in accordance with Regulation S-K Item 601
(11) although it is not required by APB Opinion No. 15 because it results
in dilution of less than 3%.
</TABLE>
E - 1
Page 18 of 20<PAGE>
EXHIBIT 11
(continued)
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share data)
<TABLE>
<CAPTION>
Income Before Cumulative Effect
of a Change in Accounting Principle
-----------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
1993 1994 1993 1994
-------- -------- -------- -------
Computation of Earnings Per
Common and Common
<F2>
Equivalent Share (a):
- ---------------------------
<S> <C> <C> <C> <C>
Reported Income $ 4,158 $ 5,094 $13,787 $18,788
======== ======== ======== ========
Average number of shares
used to compute earnings
per common share 9,781 9,867 9,773 9,846
Effect of unexercised
stock options 51 63 41 62
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common and common
equivalent share 9,832 9,930 9,814 9,908
======== ======== ======== ========
Earnings per common and
common equivalent share $ 0.42 $ 0.51 $ 1.40 $ 1.90
======== ======== ======== ========
Computation of Earnings Per
Common Share Assuming
<F2>
Full Dilution (a):
- ---------------------------
Reported Income $ 4,158 $ 5,094 $13,787 $18,788
======== ========= ======== ========
Average number of shares
used to compute earnings
per common share 9,781 9,867 9,773 9,846
Effect of unexercised
stock options 59 68 59 76
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common share assuming
full dilution 9,840 9,935 9,832 9,922
======== ======== ======== ========
Earnings per common share
assuming full dilution $ 0.42 $ 0.51 $ 1.40 $ 1.89
======== ======== ======== ========
- ------------------
<F2>
(a) This calculation is submitted in accordance with Regulation S-K Item 601
(11) although it is not required by APB Opinion No. 15 because it results
in dilution of less than 3%.
</TABLE>
E - 2
Page 19 of 20<PAGE>
EXHIBIT 11
(continued)
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share data)
<TABLE>
<CAPTION>
Net Income
-----------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
1993 1994 1993 1994
-------- -------- -------- -------
Computation of Earnings Per
Common and Common
<F3>
Equivalent Share (a):
- ---------------------------
<S> <C> <C> <C> <C>
Reported Income $ 4,158 $ 5,094 $15,438 $18,788
======== ======== ======== ========
Average number of shares
used to compute earnings
per common share 9,781 9,867 9,773 9,846
Effect of unexercised
stock options 51 63 41 62
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common and common
equivalent share 9,832 9,930 9,814 9,908
======== ======== ======== ========
Earnings per common and
common equivalent share $ 0.42 $ 0.51 $ 1.57 $ 1.90
======== ======== ======== ========
Computation of Earnings Per
Common Share Assuming
<F3>
Full Dilution (a):
- ---------------------------
Reported Income $ 4,158 $ 5,094 $15,438 $18,788
======== ======== ======== ========
Average number of shares
used to compute earnings
per common share 9,781 9,867 9,773 9,846
Effect of unexercised
stock options 59 68 59 76
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common share assuming
full dilution 9,840 9,935 9,832 9,922
======== ======== ======== ========
Earnings per common share
assuming full dilution $ 0.42 $ 0.51 $ 1.57 $ 1.89
======== ======== ======== ========
- --------------------
<F3>
(a) This calculation is submitted in accordance with Regulation S-K Item 601
(11) although it is not required by APB Opinion No. 15 because it results
in dilution of less than 3%.
</TABLE>
E - 3
Page 20 of 20<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1994 FOR CHEMED CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000019584
<NAME> CHEMED CORPORATION
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 15,699
<SECURITIES> 2,073
<RECEIVABLES> 82,678
<ALLOWANCES> (2,666)
<INVENTORY> 57,148
<CURRENT-ASSETS> 173,350
<PP&E> 115,215
<DEPRECIATION> (38,479)
<TOTAL-ASSETS> 481,771
<CURRENT-LIABILITIES> 144,929
<BONDS> 108,072
<COMMON> 12,367
0
0
<OTHER-SE> 139,121
<TOTAL-LIABILITY-AND-EQUITY> 481,771
<SALES> 359,288
<TOTAL-REVENUES> 479,542
<CGS> 244,178
<TOTAL-COSTS> 319,239
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,210
<INTEREST-EXPENSE> 6,518
<INCOME-PRETAX> 26,896
<INCOME-TAX> 10,676
<INCOME-CONTINUING> 14,981
<DISCONTINUED> 3,807
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,788
<EPS-PRIMARY> 1.91
<EPS-DILUTED> 1.91
</TABLE>
