- - -------------------------------------------------------------------
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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 June 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 9,857,973 Shares July 29, 1994
$1 Par Value
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Page 1 of 21<PAGE>
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES
Index
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 1994 and
December 31, 1993 3
Consolidated Statement of Income -
Three months and six months ended
June 30, 1994 and 1993 4
Consolidated Statement of Cash Flows
Six months ended
June 30, 1994 and 1993 5
Notes to Unaudited Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9 - 15
PART II. OTHER INFORMATION 16
</TABLE>
Page 2 of 21<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>
June 30, December 31,
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 10,397 $ 14,615
Marketable securities 2,087 1,200
Accounts receivable, less allowances of $2,688 (1993 - $2,391) 77,746 58,350
Current portion of note receivable 5,218 5,627
Inventories
Raw materials 5,798 6,977
Finished goods and general merchandise 49,147 47,768
Other current assets 13,012 10,677
---------- ----------
Total current assets 163,405 145,214
Investment in affiliate 28,394 30,656
Other investments 46,385 37,657
Note receivable 5,455 10,413
Properties and equipment, at cost less accumulated
depreciation of $36,737 (1993 - $33,952) 76,222 70,758
Identifiable intangible assets less accumulated amortization
of $1,405 (1993 - $884) 21,715 22,166
Goodwill less accumulated amortization of $15,682 (1993 - $14,073) 113,403 94,867
Other assets 17,815 18,522
---------- ----------
Total Assets $ 472,794 $ 430,253
========== ==========
LIABILITIES
Current liabilities
Accounts payable $ 26,630 $ 24,124
Bank notes and loans payable 25,000 25,000
Current portion of long-term debt 6,058 5,688
Income taxes 18,321 20,448
Deferred contract revenue 23,259 23,783
Other current liabilities 36,481 28,606
---------- ----------
Total current liabilities 135,749 127,649
Deferred income taxes 1,511 374
Long-term debt 109,414 98,059
Other liabilities and deferred income 40,846 35,009
Minority interest 34,068 32,011
---------- ----------
Total Liabilities 321,588 293,102
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock-authorized 15,000,000 shares $1 par;
issued 12,249,942 (1993 - 12,087,894) shares 12,250 12,088
Paid-in capital 136,302 132,095
Retained earnings 103,505 99,851
Unrealized appreciation on investments 7,397 -
Treasury stock - 2,395,478 (1993 - 2,289,120) shares, at cost (67,494) (63,914)
Unearned compensation - ESOPs (40,754) (42,969)
---------- ----------
Total Stockholders' Equity 151,206 137,151
---------- ----------
Total Liabilities and Stockholders' Equity $ 472,794 $ 430,253
========== ==========
See accompanying notes to unaudited financial statements.
</TABLE>
Page 3 of 21<PAGE>
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
1994 1993 1994 1993
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Continuing Operations
Sales $104,056 $100,311 $201,641 $195,243
Service revenues 57,328 26,930 111,812 52,517
--------- --------- --------- ---------
Total sales and service revenues 161,384 127,241 313,453 247,760
--------- --------- --------- ---------
Cost of goods sold 71,405 69,233 138,525 134,264
Cost of services provided 35,809 14,865 69,847 29,344
Selling and marketing expenses 24,307 22,584 47,614 44,200
General and administrative expenses 20,668 13,142 39,948 26,593
Depreciation 2,729 2,117 5,383 4,167
--------- --------- --------- ---------
Total costs and expenses 154,918 121,941 301,317 238,568
--------- --------- --------- ---------
Income from operations 6,466 5,300 12,136 9,192
Interest expense (2,167) (2,258) (4,214) (4,531)
Other income, net 5,977 4,979 12,290 9,649
--------- --------- --------- ---------
Income before income taxes, equity
earnings and minority interest 10,276 8,021 20,212 14,310
Income taxes (4,342) (2,762) (8,389) (4,726)
Equity in earnings of affiliate 686 478 1,307 957
Minority interest in earnings of
subsidiaries (939) (873) (1,772) (1,599)
--------- --------- --------- ---------
Income from continuing operations 5,681 4,864 11,358 8,942
Discontinued Operations 2,336 687 2,336 687
--------- --------- --------- ---------
Income before cumulative effect of a
change in accounting principle 8,017 5,551 13,694 9,629
Cumulative effect of a change
in accounting principle - - - 1,651
--------- --------- --------- ---------
Net Income $ 8,017 $ 5,551 $ 13,694 $ 11,280
========= ========= ========= =========
Earnings Per Common Share
Income from continuing operations $ .58 $ .50 $ 1.15 $ .92
========= ========= ========= =========
Income before cumulative effect of a
change in accounting principle $ .81 $ .57 $ 1.39 $ .99
========= ========= ========= =========
Net income $ .81 $ .57 $ 1.39 $ 1.15
========= ========= ========= =========
Average Number of Shares Outstanding 9,847 9,770 9,836 9,768
========= ========= ========= =========
Cash Dividends Paid Per Share $ .51 $ .50 $ 1.02 $ 1.00
========= ========= ========= =========
See accompanying notes to unaudited financial statements.
</TABLE>
Page 4 of 21<PAGE>
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
<F1>
1994 1993*
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 13,694 $ 11,280
Adjustments to reconcile net income to net cash
provided by operating activities:
Gains on sale of investments (9,116) (5,776)
Depreciation and amortization 8,088 6,352
Discontinued operations (2,336) (687)
Purchase of trading securities (2,000) -
Minority interest in earnings of subsidiaries 1,772 1,599
Proceeds from sale of trading securities 1,041 -
Provision for uncollectible accounts receivable 804 990
Provision for deferred income taxes (266) 1,228
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 (8,289) (1,079)
(Increase)/decrease in inventories and other
current assets (1,652) 810
Increase in accounts payable,
deferred contract revenue and other
current liabilities 2,785 804
Increase/(decrease) in income taxes 1,245 (2,295)
Other - net (1,091) (1,445)
--------- ---------
Net cash provided by operating activities 4,679 10,130
--------- ---------
Cash Flows From Investing Activities
Proceeds from sale of investments 15,025 6,616
Business combinations, net of cash acquired (14,941) (2,617)
Capital expenditures (11,137) (6,329)
Net proceeds from sale of discontinued operations 3,214 3,264
Purchase of investments (216) (3,032)
Proceeds from sale of marketable securities - 60,754
Purchase of marketable securities - (46,614)
Other - net 1,717 283
--------- ---------
Net cash provided/(used) by investing activities (6,338) 12,325
--------- ---------
Cash Flows From Financing Activities
Dividends paid (10,040) (9,772)
Proceeds from issuance of long-term debt 10,000 -
Issuance of capital stock 4,149 1,477
Purchase of treasury stock (3,580) (1,327)
Repayment of long-term debt (3,553) (253)
Other - net 465 (247)
--------- ---------
Net cash used by financing activities (2,559) (10,122)
--------- ---------
Increase/(Decrease) In Cash And Cash Equivalents (4,218) 12,333
Cash and cash equivalents at beginning of period 14,615 14,527
--------- ---------
Cash and cash equivalents at end of period $ 10,397 $ 26,860
========= =========
See accompanying notes to unaudited financial statements.
<F1>
* Reclassified to conform to 1994 presentation.
</TABLE>
Page 5 of 21<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
June 30, 1994, the Company's investment in Omnicare of
$28,394,000 was $3,109,000 in excess of its 24% equity
interest ($3,451,000 at December 31, 1993). The market value
of the Company's investment at June 30, 1994, based on that
day's closing market price of $33, was $75,803,000. Chemed
received cash dividends totaling $222,000 during the first
six months of 1994 (1993 - $204,000).
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 21<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.
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, $3,338,000, 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 $ 9,528
Goodwill 20,405
Long-term debt (7,493)
Other assets and liabilities - net 2,792
----------
Total net assets 25,232
Less: cash and cash
equivalents acquired (182)
Less: deferred payments (9,609)
Less: capital stock issued (500)
----------
Net cash used $ 14,941
==========
</TABLE>
Unaudited pro forma sales and service revenues, which assume
that the acquisitions of Patient Care and Encore (acquired in
July 1993) were completed on January 1, 1993 are as follows
(in thousands):
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
-------------------- ------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total sales and
service revenues $161,384 $150,157 $313,453 $292,612
======== ======== ======== ========
</TABLE>
Page 7 of 21<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 is expected to be approved during 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 June 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 5.8%
7. During the second quarter of 1994, the Company recorded an
aftertax gain of $2,336,000 ($.23 per share) from the
resolution of various tax issues related to operations
discontinued and sold in the second quarter of 1991.
Page 8 of 21<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 June 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 $3,338,000 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 $46,385,000 at June 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 $11,208,000 of unrealized appreciation on debt and
marketable equity investments at June 30, 1994. The aftertax
impact of this unrealized gain is included in stockholders'
equity and amounts to $7,397,000 at June 30, 1994.
Increases in other current liabilities and other
liabilities and deferred income as of June 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 $2,885,000 at
June 30, 1994 and the non-current portion amounts to $3,386,000.
Also impacting deferred income and other liabilities was the
previously mentioned accrual of a contingent payment relative to
the acquisition of Encore.
At June 30, 1994 Chemed had approximately $36,750,000
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.
Page 9 of 21<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 Six Months Ended
June 30, June 30,
------------------- -----------------
1994 1993 1994 1993
------- -------- -------- -------
<S> <C> <C> <C> <C>
Sales and Service
Revenues
- - -----------------
National Sanitary Supply $ 76,975 $ 75,281 $148,435 $144,628
Roto-Rooter 41,900 28,833 83,436 56,401
Veratex 24,931 23,127 48,897 46,731
Patient Care 17,578 - 32,685 -
-------- ------- -------- --------
Total $161,384 $127,241 $313,453 $247,760
======== ======== ======== ========
Operating Profit
- - ----------------
National Sanitary Supply $ 2,437 $ 2,181 $ 3,924 $ 3,583
Roto-Rooter 3,477 3,188 7,003 5,943
Veratex 1,764 1,350 3,385 2,762
Patient Care 541 - 1,037 -
-------- ------- -------- --------
Total $ 8,219 $ 6,719 $ 15,349 $ 12,288
======== ======== ======== ========
</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 Profit)
---------------- -------------------
1994 vs. 1993 1994 1993
---------------- -------- ---------
<S> <C> <C> <C>
Three Months Ended
June 30,
- - ------------------
National Sanitary Supply 2% 3.2% 2.9%
Roto-Rooter 45 8.3 11.1
Veratex 8 7.1 5.8
Patient Care n.a. 3.1 -
Total 27 5.1 5.3
Six Months Ended
June 30,
- - ------------------
National Sanitary Supply 3% 2.6% 2.5%
Roto-Rooter 48 8.4 10.5
Veratex 5 6.9 5.9
Patient Care n.a. 3.2 -
Total 27 4.9 5.0
</TABLE>
Page 10 of 21<PAGE>
Second Quarter 1994 Versus Second Quarter 1993
- - ----------------------------------------------
Net sales of the National Sanitary Supply segment for
the second quarter of 1994 totaled $76,975,000, an increase of 2%
over sales recorded during the second 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 increased from 2.9%
during the second quarter of 1993 to 3.2% during the second
quarter 1994, largely as a result of tight control over operating
expenses.
Sales and service revenues of the Roto-Rooter segment
for the second quarter of 1994 totaled $41,900,000, an increase
of 45% over the $28,833,000 recorded for the second quarter of
1993. Excluding the sales of Encore Service Systems, Inc. which
was acquired jointly by Chemed and Roto-Rooter in July 1993,
Roto-Rooter's sales increased 12% over sales recorded during the
second quarter of 1993. Plumbing revenues for the second quarter
of 1994, which account for approximately one-fifth of total
revenues, increased 19% 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 declined from 11.1% during the second quarter
of 1993 to 8.3% during the second quarter of 1994. This decline
was primarily a result of lower operating margins in Roto-
Rooter's service contract business. The acquisition of Encore in
July of 1993 contributed to this decline as did higher material
and parts costs per service call in the service contract
business. Another contributing factor to this decline was the
increase in direct sales of air conditioning units which
generates lower profit margins than does the sale of service
contracts. It is expected that in the future the consolidation
of the purchasing function between the existing business and the
recently acquired Encore business will help lower material costs.
Sales of the Veratex segment increased from $23,127,000
during the second quarter of 1993 to $24,931,000 during the
second quarter of 1994, an increase of 8%. The operating margin
of Veratex improved from 5.8% during the second quarter of 1993
to 7.1% during the second quarter of 1994. The improvement in
operating margin was largely attributable to expense control of
overhead expenses combined with the profitability of the recently
acquired recycled paper products business.
Sales of the Patient Care segment acquired in January
1994, for the second quarter of 1994 totaled $17,578,000, an
increase of 35% over the sales Patient Care recorded during the
Page 11 of 21<PAGE>
second quarter of 1993. Patient Care contributed $541,000 to
Chemed's operating profit in the second quarter of 1994.
Total sales and service revenues increased 27% from
$127,241,000 during the second quarter of 1993 to $161,384,000
during the second 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 second
quarter of 1994 increased 5% over amounts recorded in 1993's
second quarter. The total operating margin declined slightly
from 5.3% during the second quarter of 1994 to 5.1% during the
second quarter of 1994 primarily as a result of the decline in
the Roto-Rooter segment operating margin.
Income from operations increased from $5,300,000 during
the second quarter of 1993 to $6,466,000 during the second
quarter of 1994, as a result of the acquisition of Patient Care
and the improved profitability of Roto-Rooter's drain cleaning
business.
Other income for the second quarter of 1994 totaled
$5,977,000 as compared with $4,979,000 for the second quarter of
1993. This increase was attributable to a larger gain on the
sale of investments in the 1994 quarter. During the second
quarter of 1994 the Company realized pretax gains aggregating
$4,289,000 (primarily from the sale of a portion of its
investments in Omnicare and EXEL, Ltd.) as compared with realized
gains of $3,139,000 from the sale of a portion of its investment
in EXEL, Ltd. during the 1993 quarter.
During the second quarter of 1994 the Company's
effective income tax rate was 42.3% as compared with 34.4% during
the comparable period of 1993. The higher rate in 1994 was
attributable to: (a) a lower ESOP dividend tax deduction (as a
percent of pretax income) in the 1994 quarter; (b) lower
favorable tax adjustments in the 1994 period versus those
recorded in the second quarter of 1993; (c) a lower tax basis
(versus book basis) on investments sold in 1994; and, (d) an
adjustment to deferred income taxes recorded on the Company's
share of Omnicare's unremitted earnings.
Chemed's share of the earnings of Omnicare, a 24%-owned
affiliate, increased from $478,000 in the second quarter of 1993
to $686,000 in the second quarter of 1994. This increase was
attributable to Omnicare's progress in its growth strategy, as
Omnicare completed two acquisitions during the second quarter of
1994.
Chemed's income from continuing operations increased
from $4,864,000 ($.50 per share) during the second quarter of
1993 to $5,681,000 ($.58 per share) during the second quarter of
Page 12 of 21<PAGE>
1994. Earnings for 1994 include aftertax gains aggregating
$2,261,000 ($.23 per share) from the sale of several of the
Company's investments during the second quarter of 1994. During
the second quarter of 1993 the Company recorded an aftertax gain
of $1,972,000 ($.20 per share) from the sale of a portion of its
investment in EXEL, Ltd.
Net income for 1994's second quarter totaled $8,017,000
($.81 per share) as compared with $5,551,000 ($.57 per share) for
the second quarter of 1993, an increase of 44%. Net income for
the second quarter of 1994 and 1993 included favorable accrual
adjustments relative to operations discontinued in 1991 amounting
to $2,336,000 ($.23 per share) and $687,000 ($.07 per share),
respectively.
Six Months Ended June 30, 1994 Versus June 30, 1993
- - ---------------------------------------------------
The National Sanitary Supply segment recorded sales of
$148,435,000 during the first six months of 1994, an increase of
3% over amounts recorded over the comparable period of 1993.
National Sanitary's operating margin improved slightly from 2.5%
during the first six months of 1993 to 2.6% during the comparable
period of 1994.
Sales and service revenues of the Roto-Rooter segment
for the first six months of 1994 increased by 48% as compared
with amounts recorded during the first six months of 1993.
Excluding the sales of Encore, this sales growth would have been
14%. This segment's operating margin declined from 10.5% during
the first six months of 1993 to 8.4% during the first six months
of 1994. This decline was attributable to lower margins in Roto-
Rooter's service contract business, as discussed previously. In
addition, partially offsetting this decline was an improvement in
insurance claims experience which had a favorable impact of 1.5%
point on Roto-Rooter's operating margin.
The Veratex segment recorded sales of $48,897,000
during the first six months of 1994, an increase of 5% over sales
during the first six months of 1993. The operating profit margin
of Veratex improved from 5.9% during the first six months of 1993
to 6.9% during the first six months of 1994, primarily as a
result of operating margins and the acquisition of a recycled
paper manufacturer late in 1993.
The Patient Care segment contributed $32,685,000 and
$1,037,000 to sales and operating profit, respectively, during
the first six months of 1994. Compared with its 1993 first six
months results, Patient Care sales increased 31% during the first
six months of 1994.
Page 13 of 21<PAGE>
On a consolidated basis, Chemed sales and service
revenues for the first six months of 1994 increased 27% over
amounts recorded during the first six months of 1993. Excluding
the sales of Encore and Patient Care, sales for the first six
months of 1994 increased by 6% over amounts recorded during the
first six months of 1993. The total operating margin of Chemed
declined slightly from 5.0% during the first six months of 1993
to 4.9% during first six months of 1994.
Income from operations increased from $9,192,000 during
the first six months of 1993 to $12,136,000 during the first six
months of 1994, as a result of the acquisition of Patient Care,
improved operating profit margins at Veratex and National
Sanitary as well as improved profitability of the drain cleaning
business of Roto-Rooter.
Other income for the first six months of 1994 totaled
$12,290,000 as compared with $9,649,000 during the first six
months of 1993. This increase was attributable to larger
realized gains on the sale of a portion of the Company's
investments in the first six months of 1994 versus similar gains
recorded during the first six months of 1993 ($9,116,000 in 1994
versus $5,776,000 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 six months of 1994 the Company's
effective income tax rate was 41.5% 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 six months of 1993; and, (d) an increase in 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 rate, as previously discussed.
Chemed's share of the earnings of Omnicare increased
from $957,000 during the first six months of 1993 to $1,307,000
during the first six months of 1994.
Chemed's income from continuing operations increased
from $8,942,000 ($.92 per share) during the first six months of
1993 to $11,358,000 ($1.15 per share) during the first six months
of 1994. Earnings for the six month periods included aftertax
gains of $4,949,000, or $.50 per share, and $3,713,000 or $.38
per share, in 1994 and 1993, respectively, from the sale of a
portion of the Company's investments during the periods.
Page 14 of 21<PAGE>
Net income for 1994's first six months totaled
$13,694,000 ($1.39 per share) as compared with $11,280,000 ($1.15
per share) for the first six months of 1993. As previously
mentioned, net income for the first six months of 1994 and 1993
included favorable adjustments relative to discontinued
operations amounting to $2,336,000 ($.24 per share) and $687,000
($.07 per share), respectively. In addition, effective January
1, 1993 the Company recorded an aftertax gain of $1,651,000 ($.16
per share) from the adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
Page 15 of 21<PAGE>
PART II -- OTHER INFORMATION
----------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) Chemed held its Annual Meeting of Shareholders on
May 16, 1994.
(b) The names of each director elected at this Annual Meeting
are as follows:
Edward L. Hutton James A. Cunningham
James H. Devlin Charles H. Erhart, Jr.
Joel F. Gemunder J. Peter Grace
William R. Griffin Anthony C. Hutton
Thomas C. Hutton Jon D. Krahulik
Sandra E. Laney Kevin J. McNamara
John M. Mount Timothy S. O'Toole
D. Walter Robbins, Jr. Paul C. Voet
Hugh A. Westbrook
(c) The Stockholders then ratified the selection by the Board of
Directors of Price Waterhouse as independent accountants for
the Company and its consolidated subsidiaries for the year
1994. 8,782,186 votes were cast in favor of the proposal,
19,947 votes were cast against it, 86,712 votes abstained.
With respect to the election of directors, the number of
votes cast for each nominee was as follows:
<TABLE>
<CAPTION>
Votes Votes
Votes For Against Withheld
--------- ------- --------
<S> <C> <C> <C>
E.L. Hutton 8,852,565 36,280 13,600
J.A. Cunningham 8,863,120 25,725 3,045
J.H. Devlin 8,860,465 28,380 5,700
C.H. Erhart, Jr. 8,849,191 39,654 16,974
J.F. Gemunder 8,860,230 28,615 5,935
J.P. Grace 8,832,660 56,185 33,505
W.R. Griffin 8,860,659 28,186 5,506
A.C. Hutton 8,855,986 32,859 10,179
T.C. Hutton 8,854,770 34,075 11,395
J.D. Krahulik 8,856,016 32,829 10,149
S.E. Laney 8,856,808 32,037 9,357
K.J. McNamara 8,860,744 28,101 5,421
J.M. Mount 8,861,240 27,605 4,925
T.S. O'Toole 8,861,761 27,084 4,404
D.W. Robbins, Jr. 8,845,893 42,952 20,272
P.C. Voet 8,861,700 27,145 4,465
H.A. Westbrook 8,863,496 25,349 2,669
</TABLE>
Page 16 of 21<PAGE>
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: August 11, 1994 By Kevin J. McNamara
---------------------- -------------------------
Kevin J. McNamara
President
Dated: August 11, 1994 By Arthur V. Tucker
---------------------- -------------------------
Arthur V. Tucker
Vice President and
Controller (Principal
Accounting Officer)
Page 17 of 21<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 Six Months Ended
June 30, June 30,
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Computation of Earnings Per
Common and Common
<F1>
Equivalent Share (a):
- - ---------------------------
Reported Income $ 5,681 $ 4,864 $11,358 $ 8,942
======== ======== ======== =======
Average number of shares
used to compute earnings
per common share 9,847 9,770 9,836 9,768
Effect of unexercised
stock options 64 36 62 37
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common and common
equivalent share 9,911 9,806 9,898 9,805
======== ======== ======== ========
Earnings per common and
common equivalent share $ 0.57 $ 0.50 $ 1.15 $ 0.91
======== ======== ======== ========
Computation of Earnings Per
Common Share Assuming
<F1>
Full Dilution (a):
- - ---------------------------
Reported Income $ 5,681 $ 4,864 $11,358 $ 8,942
======== ======== ======== ========
Average number of shares
used to compute earnings
per common share 9,847 9,770 9,836 9,768
Effect of unexercised
stock options 78 56 78 56
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common share assuming
full dilution 9,925 9,826 9,914 9,824
======== ======== ======== ========
Earnings per common share
assuming full dilution $ 0.57 $ 0.50 $ 1.15 $ 0.91
======== ======== ======== ========
- - -------------------
<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 21<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 Six Months Ended
June 30, June 30,
-------------------- ------------------
1994 1993 1994 1993
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Computation of Earnings Per
Common and Common
<F2>
Equivalent Share (a):
- - ---------------------------
Reported Income $ 8,017 $ 5,551 $13,694 $ 9,629
======== ======== ======== ========
Average number of shares
used to compute earnings
per common share 9,847 9,770 9,836 9,768
Effect of unexercised
stock options 64 36 62 37
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common and common
equivalent share 9,911 9,806 9,898 9,805
======== ======== ======== ========
Earnings per common and
common equivalent share $ 0.81 $ 0.57 $ 1.38 $ 0.98
======== ======== ======== ========
Computation of Earnings Per
Common Share Assuming
<F2>
Full Dilution (a):
- - ---------------------------
Reported Income $ 8,017 $ 5,551 $13,694 $ 9,629
======== ========= ======== ========
Average number of shares
used to compute earnings
per common share 9,847 9,770 9,836 9,768
Effect of unexercised
stock options 78 56 78 56
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common share assuming
full dilution 9,925 9,826 9,914 9,824
======== ======== ======== ========
Earnings per common share
assuming full dilution $ 0.81 $ 0.56 $ 1.38 $ 0.98
======== ======== ======== ========
- - ------------------
<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 21<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 Six Months Ended
June 30, June 30,
-------------------- ------------------
1994 1993 1994 1993
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Computation of Earnings Per
Common and Common
<F3>
Equivalent Share (a):
- - ---------------------------
Reported Income $ 8,017 $ 5,551 $13,694 $11,280
======== ======== ======== ========
Average number of shares
used to compute earnings
per common share 9,847 9,770 9,836 9,768
Effect of unexercised
stock options 64 36 62 37
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common and common
equivalent share 9,911 9,806 9,898 9,805
======== ======== ======== ========
Earnings per common and
common equivalent share $ 0.81 $ 0.57 $ 1.38 $ 1.15
======== ======== ======== ========
Computation of Earnings Per
Common Share Assuming
<F3>
Full Dilution (a):
- - ---------------------------
Reported Income $ 8,017 $ 5,551 $13,694 $11,280
======== ======== ======== ========
Average number of shares
used to compute earnings
per common share 9,847 9,770 9,836 9,768
Effect of unexercised
stock options 78 56 78 56
-------- -------- -------- --------
Average number of shares
used to compute earnings
per common share assuming
full dilution 9,925 9,826 9,914 9,824
======== ======== ======== ========
Earnings per common share
assuming full dilution $ 0.81 $ 0.56 $ 1.38 $ 1.15
======== ======== ======== ========
- - --------------------
<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 21<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED JUNE 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> JUN-30-1994
<CASH> 10,397
<SECURITIES> 2,087
<RECEIVABLES> 80,434
<ALLOWANCES> (2,688)
<INVENTORY> 54,945
<CURRENT-ASSETS> 163,405
<PP&E> 112,959
<DEPRECIATION> (36,737)
<TOTAL-ASSETS> 472,794
<CURRENT-LIABILITIES> 135,749
<BONDS> 109,414
<COMMON> 12,250
0
0
<OTHER-SE> 138,956
<TOTAL-LIABILITY-AND-EQUITY> 472,794
<SALES> 201,641
<TOTAL-REVENUES> 313,453
<CGS> 138,525
<TOTAL-COSTS> 208,372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 804
<INTEREST-EXPENSE> 4,214
<INCOME-PRETAX> 20,212
<INCOME-TAX> 8,389
<INCOME-CONTINUING> 11,358
<DISCONTINUED> 2,336
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,694
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.39
</TABLE>
