<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X] THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
or
Transition Report Pursuant to Section 13 or 15(d) of the
[ ] Securities Exchange Act of 1934 (No Fee Required)
For the Transition period from _______________ to ______________
Commission File Number: 1-8351
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0791746
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2600 Chemed Center, 255 East Fifth Street, Cincinnati, Ohio 45202-4726
(Address of principal executive offices) (Zip Code)
(513) 762-6900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Capital Stock - Par Value $1 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing price of said stock on the New York
Stock Exchange - Composite Transaction Listing on March 20, 1995 ($31.875 per
share), was $308,650,210.
At March 20, 1995, 9,932,148 shares of Chemed Corporation Capital Stock
(par value $1 per share) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
-------- ------------------
1994 Annual Report to Stockholders (Specified Portions) Parts I, II and IV
Proxy Statement for Annual Meeting Part III
to be held May 15, 1995.
<PAGE> 2
CHEMED CORPORATION
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business.............................................................1
Item 2. Properties...........................................................4
Item 3. Legal Proceedings....................................................7
Item 4. Submission of Matters to a Vote of Security Holders..................7
- -- Executive Officers of the Registrant.................................7
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters..................................................8
Item 6. Selected Financial Data..............................................8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................9
Item 8. Financial Statements and Supplementary Data..........................9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................9
PART III
Item 10. Directors and Executive Officers of the Registrant...................9
Item 11. Executive Compensation...............................................9
Item 12. Security Ownership of Certain Beneficial Owners and
Management...........................................................9
Item 13. Certain Relationships and Related Transactions.......................9
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K..........................................................9
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Chemed Corporation was incorporated in Delaware in 1970 as a subsidiary of
W. R. Grace & Co. and succeeded to the business of W. R. Grace & Co.'s
Specialty Products Group as of April 30, 1971 and remained a subsidiary of W.
R. Grace & Co. until March 10, 1982. As used herein, "Company" refers to
Chemed Corporation, "Chemed" refers to Chemed Corporation and its subsidiaries
and "Grace" refers to W. R. Grace & Co. and its subsidiaries.
On March 10, 1982, the Company transferred to Dearborn Chemical Company, a
wholly owned subsidiary of the Company, the business and assets of the
Company's Dearborn Group, including the stock of certain subsidiaries within
the Dearborn Group, plus $185 million in cash, and Dearborn Chemical Company
assumed the Dearborn Group's liabilities. Thereafter, on March 10, 1982 the
Company transferred all of the stock of Dearborn Chemical Company to Grace in
exchange for 16,740,802 shares of the capital stock of the Company owned by
Grace with the result that Grace no longer has any ownership interest in the
Company.
On December 31, 1986, the Company completed the sale of substantially all
of the business and assets of Vestal Laboratories, Inc., a wholly owned
subsidiary ("Vestal"). The Company received cash payments aggregating
approximately $67.4 million over the four-year period following the closing,
the substantial portion of which was received on December 31, 1986.
On April 2, 1991, the Company completed the sale of DuBois Chemicals, Inc.
("DuBois"), a wholly owned subsidiary, to the Diversey Corporation
("Diversey"), a subsidiary of The Molson Companies Ltd. Under the terms of the
sale, Diversey agreed to pay the Company net cash payments aggregating
$223,386,000, including deferred payments aggregating $32,432,000. As of
December 31, 1994, the Company had received cash payments totaling
$209,738,000.
On December 21, 1992, the Company acquired The Veratex Corporation and
related businesses ("Veratex Group") from Omnicare, Inc., a publicly traded
company in which Chemed currently maintains a 5.8%-ownership interest. The
purchase price was $62,120,000 in cash paid at closing, plus a post-closing
payment of $1,514,000 (paid in April 1993) based on the net assets of Veratex.
Effective January 1, 1994, the Company acquired all the capital stock of
Patient Care, Inc. ("Patient Care"), for cash payments aggregating $20,582,000,
including deferred payments with a present value of $6,582,000, plus 17,500
shares of the Company's Capital Stock. Additional cash payments of up to
$2,000,000 may be made, the amount being contingent upon the earnings of
Patient Care.
During 1994, the Company conducted its business operations in four
segments: National Sanitary Supply Company ("National Sanitary Supply"),
Roto-Rooter, Inc. ("Roto-Rooter"), Veratex Group ("Veratex") and Patient Care.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The required segment and geographic data for the Company's continuing
operations (as described below) for the three years ended December 31, 1992,
1993 and 1994, are shown in the "Sales and Profit Statistics by Business
Segment" and the "Additional Segment Data" on pages 32, 33 and 36 of the 1994
Annual Report to Stockholders and are incorporated herein by reference.
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DESCRIPTION OF BUSINESS BY SEGMENT
The information called for by this item is included within Note 1 of the
Notes to Financial Statements appearing on page 23 of the 1994 Annual Report to
Stockholders and is incorporated herein by reference.
PRODUCT AND MARKET DEVELOPMENT
Each segment of Chemed's business engages in a continuing program for the
development and marketing of new products. While new product and new market
development are important factors for the growth of each active segment of
Chemed's business, Chemed does not expect that any new product or marketing
effort, including those in the development stage, will require the investment
of a material amount of Chemed's assets.
RAW MATERIALS
The principal raw materials needed for each active segment of Chemed's
United States manufacturing operations are purchased from United States
sources. No segment of Chemed experienced any material raw material shortages
during 1994, although such shortages may occur in the future. Products
manufactured and sold by Chemed's active business segments generally may be
reformulated to avoid the adverse impact of a specific raw material shortage.
PATENTS, SERVICE MARKS AND LICENSES
The Roto-Rooter(R) trademark and service mark have been used and advertised
since 1935 by Roto-Rooter Corporation, a wholly owned subsidiary of
Roto-Rooter, Inc., a 59%-owned subsidiary of the Company. The Roto-Rooter(R)
marks are among the most highly recognized trademarks and service marks in the
United States. Chemed considers the Roto-Rooter(R) marks to be a valuable
asset and a significant factor in the marketing of Roto-Rooter's franchises,
products and services and the products and services provided by its
franchisees.
INVENTORIES
Chemed maintains local warehousing and delivery arrangements throughout the
United States to provide prompt delivery service to its customers. Inventories
on hand for each active segment are not considered high in relation to industry
standards for the business involved. In general, terms and conditions of sale
for each segment follow usual and customary industry standards.
COMPETITION
NATIONAL SANITARY SUPPLY
Chemed considers National Sanitary Supply (with its subsidiaries Century
Papers, Inc. and NSS Development) to be a leader in the janitorial maintenance
supply distribution market in the western, southwestern and midwestern United
States (Arizona, California, Colorado, Indiana, Louisiana, Michigan,
Mississippi, Missouri, Nevada, New Mexico, Ohio, Oklahoma, Oregon, Tennessee,
Texas, Utah and Washington). This subsidiary markets a broad line of cleaning
chemicals, paper goods, plastic products, waste handling products and other
janitorial supplies to a wide range of customers. The market for sanitary
maintenance and paper supplies is highly competitive and entry is relatively
easy. Competition is, however, highly fragmented in most geographic markets.
In the United States, approximately 9,000 firms compete in the sanitary
maintenance supply distribution business on a local or regional basis. The
principal competitive factors in this market are the level of service provided;
range of products offered; speed, efficiency and reliability of delivery; and
price. There are a number of local janitorial supply companies that compete
with National Sanitary Supply in its market. The principal competitive factors
in the janitorial supply market in order of importance are breadth of product
line, prompt delivery and price. While remaining price competitive, National
Sanitary Supply maintains a product line that is generally broader than its
competitors and has earned an excellent reputation for prompt delivery and
customer service.
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Federal, state and local governmental agencies accounted for approximately
6 percent of National Sanitary Supply's total sales for 1994. These sales are
attributable to over 4,000 different agencies whose purchasing decisions are
made separately. While it is believed that the loss of the sales to these
agencies in the aggregate would be material, the decentralized purchasing
decisions make the loss of a significant number of such accounts at any given
time unlikely. National Sanitary Supply also had sales to one customer, Sonic
Corporation, which comprised approximately 14 percent of sales in 1994. This
customer is a fast-food restaurant chain consisting of approximately 1,250
franchises and 150 company-owned restaurants. Sales to this customer consisted
primarily of low-margin food-service products such as paper napkins, plates and
cups. Other than sales to the aforementioned entities, no one customer
accounts for more than two percent of net sales.
ROTO-ROOTER
All aspects of the sewer, drain, and pipe cleaning, and appliance and
plumbing repair businesses are highly competitive. Competition is, however,
fragmented in most markets with local and regional firms providing the primary
competition. The principal methods of competition are advertising, range of
services provided, speed and quality of customer service, service guarantees,
and pricing.
No individual customer or market group is critical to the total sales of
this segment.
VERATEX
In distributing medical and dental products, Veratex competes with numerous
mail-order businesses; medical, dental and veterinary supply houses; and
manufacturers of disposable paper, cotton and gauze products. Veratex competes
in this market on the basis of customer service, product quality and price. At
times, its pricing policy has been subject to considerable competitive
pressures, limiting the ability to implement price increases.
No individual customer or market group is critical to the total sales of
this segment.
PATIENT CARE
The home healthcare services industry and, in particular, the nursing and
personal care segment is highly competitive. Patient Care competes with
numerous local, regional and national home healthcare services companies.
Patient Care competes on the basis of quality, cost- effectiveness and its
ability to service its referral base quickly throughout its regional markets.
Patient Care has contracts with several customers, the loss of any one or
more of which could have a material adverse effect on this segment.
RESEARCH AND DEVELOPMENT
Chemed engages in a continuous program directed toward the development of
new products and processes, the improvement of existing products and processes,
and the development of new and different uses of existing products. The
research and development expenditures from continuing operations have not been
nor are they expected to be material.
ENVIRONMENTAL MATTERS
Chemed's operations are subject to various federal, state and local laws
and regulations regarding the environmental aspects of the manufacture and
distribution of chemical products. Chemed, to the best of its knowledge, is
currently in compliance in all material respects with the environmental laws
and regulations affecting its operations. Such environmental laws, regulations
and enforcement proceedings have not required Chemed to make material increases
in or modifications to its capital expenditures and they have not had a
material adverse effect on sales or net income.
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In connection with the sale of DuBois to the Diversey Corporation, the
Company contractually assumed for a period of ten years the estimated liability
for potential environmental cleanup and related costs arising from the sale of
DuBois up to a maximum of $25,500,000. The Company has accrued $15,500,000
with respect to these potential liabilities. Prior to the sale of DuBois,
DuBois had been designated as a Potentially Responsible Party ("PRP") at
fourteen Superfund sites by the U.S. Environmental Protection Agency ("USEPA").
With respect to all of these sites, the Company has been unable to locate any
records indicating it disposed of waste of any kind at such sites.
Nevertheless, it settled claims at five such sites at minimal cost. In
addition, because there were a number of other financially responsible
companies designated as PRPs relative to these sites, management believes that
it is unlikely that such actions will have a material effect on the Company's
financial condition or results of operations. With respect to one of these
sites, the Company's involvement is based on the location of one of its
manufacturing plants. Currently, the USEPA and the state governmental agency
are attempting to resolve jurisdictional issues, and action against PRPs is not
proceeding.
Capital expenditures for the purposes of complying with environmental laws
and regulations during 1995 and 1996 with respect to continuing operations are
not expected to be material in amount; there can be no assurance, however, that
presently unforeseen legislative or enforcement actions will not require
additional expenditures.
EMPLOYEES
On December 31, 1994, Chemed had a total of 6,602 employees; 6,549 were
located in the United States and 53 were in Canada.
ITEM 2. PROPERTIES
Chemed has plants and offices in various locations in the United States.
The major facilities operated by Chemed are listed below by industry segment.
All "owned" property is held in fee and is not subject to any major
encumbrance. Except as otherwise shown, the leases have terms ranging from one
year to thirteen years. Management does not foresee any difficulty in renewing
or replacing the remainder of its current leases. Chemed considers all of its
major operating properties to be maintained in good operating condition and to
be generally adequate for present and anticipated needs.
<TABLE>
<CAPTION>
Location Type Owned Leased
-------- ---- ----- ------
NATIONAL SANITARY SUPPLY COMPANY
<S> <C> <C> <C>
Los Angeles, CA Office, manufacturing and 190,000 sq. ft. --
distribution center
Tempe, AZ Office and distribution 69,000 sq. ft. --
center
San Francisco Office and distribution -- 66,000 sq. ft.
(Area), CA center
Denver, CO Office and distribution -- 53,000 sq. ft.
center
Marion, IN Office and distribution 30,000 sq. ft. --
center
Jackson, MS Office and distribution -- 19,000 sq. ft.
center
Tupelo, MS Office and distribution -- 33,000 sq. ft.
center
Kansas City, MO Office and distribution -- 25,000 sq. ft.
center
</TABLE>
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<TABLE>
<CAPTION>
Location Type Owned Leased
-------- ---- ----- ------
(NATIONAL SANITARY SUPPLY COMPANY - CONTINUED)
<S> <C> <C> <C>
St. Louis, MO Office and distribution -- 16,000 sq. ft.
center
Las Vegas, NV Office and distribution 24,000 sq. ft. --
center
Albuquerque, NM Office and distribution -- 38,000 sq. ft.
center
Fairfield, OH Office and distribution -- 38,000 sq. ft.
center
Toledo, OH Office and distribution -- 65,000 sq. ft.
center
Oklahoma City, Office and distribution 14,000 sq. ft. 77,000 sq. ft.
OK center
Portland, OR Office and distribution 56,000 sq. ft. --
center
Memphis, TN Office and distribution -- 66,000 sq. ft.
center
Knoxville, TN Office and distribution -- 17,000 sq. ft.
center
Amarillo, TX Office and distribution -- 25,000 sq. ft.
center
Beaumont, TX Office and distribution -- 14,000 sq. ft.
center
Corpus Christi, Office and distribution -- 58,000 sq. ft.
TX center
Dallas, TX Office and distribution 54,000 sq. ft. --
center
El Paso, TX Office and distribution 18,000 sq. ft. --
center
Houston, TX Office and distribution -- 102,000 sq. ft.
center
Laredo, TX Office and distribution -- 10,000 sq. ft.
center
McAllen, TX Office and distribution -- 9,000 sq. ft.
center
New Braunfels, Office and distribution -- 54,000 sq. ft.
TX center
Salt Lake City, Office and distribution -- 20,000 sq. ft.
UT center
Seattle, WA Office and distribution -- 15,000 sq. ft.
center
</TABLE>
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<TABLE>
<CAPTION>
Location Type Owned Leased
-------- ---- ----- ------
(NATIONAL SANITARY SUPPLY COMPANY - CONTINUED)
<S> <C> <C> <C>
Branch Sales Branch sales offices 3,000 sq. ft. 184,000 sq. ft.
Offices (1)
ROTO-ROOTER, INC.
Cincinnati, OH Office and service 19,000 sq. ft. 24,000 sq. ft.
facilities
West Des Moines Office, manufacturing and 29,000 sq. ft. --
IA distribution facilities
Northeastern Office and service 42,000 sq. ft. 21,000 sq. ft.
U.S. Area (2) facilities
Central U.S. Office and service 36,000 sq. ft. 23,000 sq. ft.
Area (3) facilities
Mid-Atlantic Office and service 57,000 sq. ft. 87,000 sq. ft.
U.S. Area (4) facilities
Western U.S. Office and service 19,000 sq. ft. 38,000 sq. ft.
Area (5) facilities
Canada (6) Office and service -- 7,000 sq. ft.
facilities
VERATEX
Troy, MI Office and distribution -- 81,000 sq. ft.
center
Detroit, MI Manufacturing facility 64,000 sq. ft. --
Lexington, KY Office and distribution -- 157,000 sq. ft.
center
Lakeland, FL Office, manufacturing and -- 76,000 sq. ft.
distribution center
Rialto, CA (7) Office, manufacturing and 132,000 sq. ft. --
distribution center
PATIENT CARE
New Jersey (8) Office - 55,000 sq. ft.
Connecticut (9) Office - 7,000 sq. ft.
New York(10) Office - 27,000 sq. ft.
CORPORATE
CORPORATE (11)
- --------------
Cincinnati, OH Corporate offices and -- 48,000 sq. ft.
related facilities
________________________
6
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<FN>
- ---------------
(1) Comprising forty-three separate branch sales offices located throughout the
western, midwestern, and southwestern United States.
(2) Comprising locations in Baltimore and Jessup, Maryland; Stoughton and
Woburn, Massachusetts; Stratford and Bloomfield, Connecticut; West Seneca,
West Hempstead, Bayside and Hawthorne, New York; and Cranston, Rhode
Island.
(3) Comprising locations in Atlanta, Georgia; Birmingham, Alabama; Charlotte,
North Carolina; Hilliard and Cleveland, Ohio; Memphis and Nashville,
Tennessee; Wilmerding, Pennsylvania; and St. Louis, Missouri.
(4) Comprising locations in Pennsauken and North Brunswick, New Jersey;
Jacksonville, Medley, Pompano Beach, Ft. Myers, St. Petersburg, Boca Raton,
Daytona Beach and Orlando, Florida; Virginia Beach and Fairfax, Virginia;
Levittown, Pennsylvania; Raleigh, North Carolina; and Newark, Delaware.
(5) Comprising locations in Houston and San Antonio, Texas; Addison, Elk Grove
Village and Posen, Illinois; Denver, Colorado; Honolulu, Hawaii;
Minneapolis, Minnesota; Tacoma, Washington; and Phoenix, Arizona.
(6) Comprising locations in Delta, British Columbia and Boucherville, Quebec.
(7) Excludes 36,000 square feet of office, manufacturing and warehouse
facilities in Pomona, California that are sublet to an outside third party.
(8) Comprising locations in Camden, Englewood, Milburn, Princeton, Ridgewood,
Somerville, Spring Lake, Trenton, Upper Montclair, Westfield, and West
Orange, New Jersey.
(9) Comprising locations in Greenwich, Hartford, and Madison, Connecticut.
(10) Comprising locations in Brooklyn, Manhattan, Queens, and Staten Island,
New York.
(11) Excludes 93,000 square feet in current Cincinnati, Ohio office facilities
that are sublet to outside parties - portions of this space may revert to
the Company beginning 2000. Includes 38,000 square feet leased for the
Company's corporate office facilities.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office First Elected
- ------------------ --- ------------------------------------ ---------------
<S> <C> <C>
Edward L. Hutton 75 Chairman and Chief Executive Officer November 3, 1993 (1)
Kevin J. McNamara 41 President August 2, 1994 (2)
Paul C. Voet 48 Executive Vice President May 20, 1991 (3)
Timothy S. O'Toole 39 Executive Vice President and May 18, 1992 (4)
Treasurer
Sandra E. Laney 51 Senior Vice President and Chief November 3, 1993 (5)
Administrative Officer
Arthur V. Tucker 45 Vice President and Controller May 20, 1991 (6)
<FN>
(1) Mr. E. L. Hutton is the Chairman and Chief Executive Officer of the
Company and has held these positions since November 1993. Previously,
from April 1970 to November 1993, Mr. E. L. Hutton held the positions
of President and Chief Executive Officer of the Company. Mr. E. L.
Hutton is the father of Mr. T. C. Hutton, a director and a Vice
President of the Company.
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<PAGE> 10
(2) Mr. K. J. McNamara is President of the Company and has held this
position since August 1994. Previously, he served as an Executive
Vice President, Secretary and General Counsel of the Company, since
November 1993, August 1986 and August 1986, respectively. He
previously held the position of Vice President of the Company, from
August 1986 to May 1992.
(3) Mr. P. C. Voet is an Executive Vice President of the Company and has
held this position since May 1991. From May 1988 to November 1993, he
served the Company as Vice Chairman. Mr. Voet is President and Chief
Executive Officer of National Sanitary Supply.
(4) Mr. T. S. O'Toole is an Executive Vice President and the Treasurer of
the Company and has held these positions since May 1992 and February
1989, respectively.
(5) Ms. S. E. Laney is Senior Vice President and the Chief Administrative
Officer of the Company and has held these positions since November
1993 and May 1991, respectively. Previously, from May 1984 to
November 1993, she held the position of Vice President of the Company.
(6) Mr. A. V. Tucker is a Vice President and Controller of the Company and
has held these positions since February 1989. From May 1983 to
February 1989, he held the position of Assistant Controller of the
Company.
</TABLE>
Each executive officer holds office until the annual election at the next
annual organizational meeting of the Board of Directors of the Company which is
scheduled to be held on May 15, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Capital Stock (par value $1 per share) is traded on the New
York Stock Exchange under the symbol CHE. The range of the high and low sale
prices on the New York Stock Exchange and dividends paid per share for each
quarter of 1993 and 1994 are set forth below.
<TABLE>
<CAPTION>
Closing
-------
Dividends Paid
High Low Per Share
----------------------------------------------------------------------------
<S> <C> <C> <C>
1994
First Quarter $34-3/4 $30-5/8 $.51
Second Quarter 35-3/4 31-5/8 .51
Third Quarter 36 32-1/2 .51
Fourth Quarter 35-1/2 31 .51
1993
First Quarter $29-1/2 $26-1/4 $.50
Second Quarter 30-7/8 25-3/4 .50
Third Quarter 31-3/4 29-7/8 .50
Fourth Quarter 32-3/4 29-3/4 .51
</TABLE>
Future dividends are necessarily dependent upon the Company's earnings and
financial condition, compliance with certain debt covenants and other factors
not presently determinable.
As of March 20, 1995, there were approximately 6,766 stockholders of record
of the Company's Capital Stock. This number only includes stockholders of
record and does not include stockholders with shares beneficially held for them
in nominee name or within clearinghouse positions of brokers, banks or other
institutions.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item for the five years ended December 31,
1994 is set forth on pages 34 and 35 of the 1994 Annual Report to Stockholders
and the
8
<PAGE> 11
information for each of the five years in the period ending December 31, 1994
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information called for by this Item is set forth on pages 37 through 40
of the 1994 Annual Report to Stockholders and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the report thereon of
Price Waterhouse dated February 1, 1995, appearing on pages 17 through 30 of
the 1994 Annual Report to Stockholders, along with the Supplementary Data
(Unaudited Summary of Quarterly Results) appearing on page 31, are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors of the Company are:
<TABLE>
<S> <C>
J. Peter Grace Sandra E. Laney
Edward L. Hutton Kevin J. McNamara
James A. Cunningham John M. Mount
James H. Devlin Timothy S. O'Toole
Charles H. Erhart, Jr. D. Walter Robbins, Jr.
Joel F. Gemunder Paul C. Voet
William R. Griffin Hugh A. Westbrook
Thomas C. Hutton
</TABLE>
Except with respect to the age and business experience of Mr. Westbrook, the
additional information required under this Item with respect to directors and
executive officers is set forth in the Company's 1995 Proxy Statement and in
Part I hereof under the caption "Executive Officers of the Registrant" and is
incorporated herein by reference. The information with respect to Mr.
Westbrook is set forth below:
Mr. Westbrook is Chairman and Chief Executive Officer of Vitas Healthcare
Corporation, Miami, Florida (comprehensive health care for terminally ill
persons and their families). He has held these positions since September 1983.
Mr. Westbrook is fifty years old.
ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth in the Company's 1995 Proxy
Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required under this Item is set forth in the Company's 1995 Proxy
Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item is set forth in the Company's 1995 Proxy
Statement, which is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
EXHIBITS
9
<PAGE> 12
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of Chemed Corporation.*
3.2 By-Laws of Chemed Corporation.*
10.1 Agreement and Plan of Merger among Diversey U.S. Holdings, Inc., D. C. Acquisition Inc., Chemed Corporation and DuBois
Chemicals, Inc., dated as of February 25, 1991.*
10.2 Stock Purchase Agreement between Omnicare, Inc. and Chemed Corporation, dated as of August 5, 1992.*
10.3 1978 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.4 1981 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.5 1983 Incentive Stock Option Plan, as amended through May 20, 1991.*,**
10.6 1986 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.7 1988 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.8 1993 Stock Incentive Plan.*,**
10.9 Executive Salary Protection Plan, as amended through November 3, 1988.*,**
10.10 Excess Benefits Plan, as amended effective November 1, 1985.*,**
10.11 Non-Employee Directors' Deferred Compensation Plan.*,**
10.12 Directors Emeriti Plan.*,**
10.13 Employment Contracts with Executives.*,**
10.14 Amendment No. 6 to Employment Contracts with Executives.**
11. Statement re: Computation of Earnings Per Common Share.
13. 1994 Annual Report to Stockholders.
21. Subsidiaries of Chemed Corporation.
23. Consent of Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule
<FN>
* This exhibit is being filed by means of incorporation by reference (see Index
to Exhibits on page E-1). Each other exhibit is being filed with this Annual
Report on Form 10-K.
** Management contract or compensatory plan or arrangement.
</TABLE>
FINANCIAL STATEMENT SCHEDULE
See Index to Financial Statements and Financial Statement Schedule on page
S-1.
REPORTS ON FORM 8-K
A report on Form 8-K was filed dated November 30, 1994 reporting the sale of
1,570,000 shares of the capital stock of Omnicare, Inc. This report included
an unaudited pro forma consolidated balance sheet of Chemed as of September 30,
1994 and unaudited pro forma statements of income of Chemed for the nine months
ended September 30, 1994 and for the year ended December 31, 1993.
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 28, 1995 By /s/ Edward L. Hutton
------------------------------------
Edward L. Hutton
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Edward L. Hutton Chairman and Chief Executive Officer -------------|
------------------------- and a Director (Principal Executive |
Edward L. Hutton Officer) |
|
/s/ Timothy S. O'Toole Executive Vice President and Treasurer |
----------------------- and a Director |
Timothy S. O'Toole (Principal Financial Officer) |
|
/s/ Arthur V. Tucker Vice President and Controller | March 28, 1995
----------------------- (Principal Accounting Officer) |
Arthur V. Tucker |
|
J. Peter Grace* Sandra E. Laney* -------------| |
James A. Cunningham* Kevin J. McNamara* | |
James H. Devlin* John M. Mount* | |
Charles H. Erhart, Jr.* D. Walter Robbins, Jr.* | --Directors |
Joel F. Gemunder* Paul C. Voet* | |
William R. Griffin* Hugh A. Westbrook* | |
Thomas C. Hutton* -------------| -------------|
________________________
* Naomi C. Dallob by signing her name hereto signs this document on behalf of
each of the persons indicated above pursuant to powers of attorney duly
executed by such persons and filed with the Securities and Exchange
Commission.
</TABLE>
March 28, 1995 /s/ Naomi C. Dallob
- ------------------ ----------------------
Date Naomi C. Dallob
(Attorney-in-Fact)
11
<PAGE> 14
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
1992, 1993 AND 1994
<TABLE>
<CAPTION>
CHEMED CORPORATION CONSOLIDATED FINANCIAL PAGE(S)
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<S> <C>
Report of Independent Accountants............................... 17*
Statement of Accounting Policies................................ 18*
Consolidated Statement of Income................................ 19*
Consolidated Balance Sheet...................................... 20*
Consolidated Statement of Cash Flows............................ 21*
Consolidated Statement of Changes in Stockholders' Equity....... 22*
Notes to Financial Statements................................... 23-30*
Sales and Profit Statistics by Business Segment................. 32-33*
Additional Segment Data......................................... 36*
Report of Independent Accountants on Financial Statement
Schedule....................................................... S-2
Schedule VIII -- Valuation and Qualifying Accounts.............. S-3
<FN>
* Indicates page numbers in Chemed Corporation 1994 Annual Report to Stockholders.
________________________
The consolidated financial statements of Chemed Corporation listed above,
appearing in the 1994 Annual Report to Stockholders, are incorporated herein by
reference. The Financial Statement Schedule should be read in conjunction with
the consolidated financial statements listed above. Schedules not included
have been omitted because they are not applicable or the required information
is shown in the financial statements or notes thereto as listed above.
</TABLE>
S-1
<PAGE> 15
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Chemed Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 1, 1995 appearing on page 17 of the 1994 Annual Report to
Stockholders of Chemed Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14 of
this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
February 1, 1995
S-2
<PAGE> 16
SCHEDULE VIII
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS (a)
(in thousands)
Dr/(Cr)
<TABLE>
<CAPTION>
Additions
-----------------------------------
(Charged) Applicable
Credited (Charged) to
Balance at to Costs Credited Companies Balance
Beginning and to Other Acquired Deductions at End
Description of Period Expenses Accounts in Period (b) of Period
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allowances for doubtful
accounts (c) -
For the year 1994......... $ (2,391) $(1,774) $ - $ (218) $ 1,409 $ (2,974)
========= ======== ======== ========= ======== =========
For the year 1993......... $ (1,837) $(1,766) $ - $ ( 19) $ 1,231 $ (2,391)
========= ======== ======== ========= ======== =========
For the year 1992......... $ (1,910) $(1,616) $ - $ (222) $ 1,911 $ (1,837)
========= ======== ======== ========= ======== =========
Allowances for doubtful
accounts - notes
receivable (d) -
For the year 1994......... $ (493) $ (81) $ - $ - $ 307 $ (267)
========= ======== ======== ========= ======== =========
For the year 1993......... $ (312) $ (253) $ - $ - $ 72 $ (493)
========= ======== ======== ========= ======== =========
For the year 1992......... $ (319) $ - $ - $ - $ 7 $ (312)
========= ======== ======== ========= ======== =========
_________________________
<FN>
(a) Amounts are presented on a continuing operations basis.
(b) Deductions include accounts considered uncollectible or written off,
payments, companies divested, etc. With respect to marketable
securities, deductions relate to the sale of securities.
(c) Classified in consolidated balance sheet as a reduction of accounts
receivable.
(d) Classified in consolidated balance sheet as a reduction of other assets.
</TABLE>
S-3
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
------- ------------ -----------
<S> <C> <C> <C>
3.1 Certificate of Incorporation of Chemed Form S-3 4.1
Corporation Reg. No. 33-44177
11/26/91
3.2 By-Laws of Chemed Corporation Form 10-K 3
3/23/89
10.1 Agreement and Plan of Merger among Diversey U. Form 8-K 1
S. Holdings, Inc., D. C. Acquisition Inc., 3/11/91
Chemed Corporation and DuBois Chemicals, Inc.,
dated as of February 25, 1991
10.2 Stock Purchase Agreement between Omnicare, Inc. Form 10-K 5
and Chemed Corporation dated as of August 5, 3/25/93
1992
10.3 1978 Stock Incentive Plan, as amended through Form 10-K 6
May 20, 1991 3/27/92
10.4 1981 Stock Incentive Plan, as amended through Form 10-K 7
May 20, 1991 3/27/92
10.5 1983 Incentive Stock Option Plan, as amended Form 10-K 8
through May 20, 1991 3/27/92
10.6 1986 Stock Incentive Plan, as amended through Form 10-K 9
May 20, 1991 3/27/92
10.7 1988 Stock Incentive Plan, as amended through Form 10-K 10
May 20, 1991 3/27/92
10.8 1993 Stock Incentive Plan Form 10-K 10.8
3/29/94
10.9 Executive Salary Protection Plan, as amended Form 10-K 11
through November 3, 1988 3/28/89
10.10 Excess Benefits Plan, as amended effective Form 10-Q 3
November 1, 1985 11/12/85
10.11 Non-Employee Directors' Deferred Compensation Form 10-K 12
Plan 3/24/88
10.12 Directors Emeriti Plan Form 10-Q 2
5/12/88
10.13 Employment Contracts with Executives Form 10-K 18
3/28/89
10.14 Amendment No. 6 to Employment Contracts with *
Executives
<PAGE> 18
<S> <C> <C>
11 Statement re: Computation of Earnings Per *
Common Share
13 1994 Annual Report to Stockholders *
21 Subsidiaries of Chemed Corporation *
23 Consent of Independent Accountants *
24 Powers of Attorney *
27 Financial Data Schedule *
________________________
<FN>
* Filed herewith
</TABLE>
<PAGE> 1
EXHIBIT 10.14
AMENDMENT NO. 6
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 16, 1994 between _________________
("Employee") and Chemed Corporation (the "Company").
WHEREAS, Employee and the Company have entered into an
Employment Agreement dated as of May 2, 1988 and amended May 15, 1989, May 21,
1990, May 20, 1991, May 18, 1992 and May 17, 1993 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to further amend the
Employment Agreement in certain respects.
NOW, THEREFORE, Employee and the Company mutually agree that
the Employment Agreement shall be amended, effective as of May 16, 1994, as
follows:
A. The date, amended as of May 17, 1993, set forth in Section 1.2
of the Employment Agreement, is hereby deleted and the date of
May 3, 1999 is hereby substituted therefor.
B. The amount of unrestricted stock award recognized in lieu of
incentive compensation in 1993 is $_________________.
Except as specifically amended in this Amendment No. 6 to
Employment Agreement, the Employment Agreement, as amended, shall continue in
full force and effect in accordance with its terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of the date first above written.
EMPLOYEE
_____________________
CHEMED CORPORATION
_____________________
Kevin J. McNamara
Executive Vice President,
Secretary and General Counsel
<PAGE> 2
SCHEDULE TO EXHIBIT 10.14
<TABLE>
<CAPTION>
Minimum Current
Annual Current (a) Expiration
Base Salary Stock Award Date of
Name and Position and Bonus Compensation Agreement
- ----------------- ----------- ------------ ----------
<S> <C> <C> <C>
Edward L. Hutton $500,000 $273,217 5/3/99
Chairman and Chief 246,000
Executive Officer
Kevin J. McNamara 146,000 16,557 5/3/99
President 35,750
Paul C. Voet 240,500 10,778 5/3/99
Executive Vice President 85,000
Timothy S. O'Toole 105,000 30,860 5/3/99
Executive Vice President 22,300
and Treasurer
Sandra E. Laney 100,000 18,669 5/3/99
Senior Vice President and 32,500
Chief Administrative Officer
Arthur V. Tucker 90,000 3,933 5/3/99
Vice President and Controller 16,000
______________________________
<FN>
(a) Amount of unrestricted stock award recognized in lieu of incentive
compensation in 1994.
</TABLE>
<PAGE> 1
EXHIBIT 11
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE AS SHOWN
IN ANNUAL REPORT ON FORM 10-K
(in thousands except per share data)
<TABLE>
<CAPTION>
================================================================================================================================
1992
---------------------------
Income from
Continuing
Operations Net Income
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computation of Earnings per Common and Common Equivalent Share: (a)
Reported income. . . . . . . . . . . . . . . . . . . . $ 12,506 $ 15,651
======== ========
Average number of shares used to compute
earnings per common share. . . . . . . . . . . . . . 9,803 9,803
Effect of unexercised stock options. . . . . . . . . . 41 41
-------- -------
Average number of shares used to compute earnings per
common and common equivalent share . . . . . . . . . $ 9,844 $ 9,844
======== ========
Earnings per common and common
equivalent share . . . . . . . . . . . . . . . . . . $ 1.27 $ 1.59
======== ========
Computation of Earnings per Common Share Assuming Full Dilution: (a)
Reported income. . . . . . . . . . . . . . . . . . . . $ 12,506 $ 15,651
======== ========
Average number of shares used to compute
earnings per common share. . . . . . . . . . . . . . 9,803 9,803
Effect of unexercised stock options. . . . . . . . . . 48 48
-------- --------
Average number of shares used to compute
earnings per common share assuming full dilution. . 9,851 9,851
======== ========
Earnings per share assuming full dilution . . . . . . $ 1.27 $ 1.59
======== ========
________________________
<FN>
(a) This calculation is submitted in accordance
with Regulation S-K Item 601(b)(11) although
not required by APB Opinion No. 15 because it
results in dilution of less than 3%.
</TABLE>
<PAGE> 2
EXHIBIT 11
(Continued)
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE AS SHOWN
IN ANNUAL REPORT ON FORM 10-K
(in thousands except per share data)
<TABLE>
<CAPTION>
=================================================================================================================================
1993
---------------------------
Income from
Continuing
Operations Net Income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computation of Earnings per Common and Common Equivalent Share: (a)
Reported income. . . . . . . . . . . . . . . . . . . . $ 14,843 $ 19,480
======== ========
Average number of shares used to compute
earnings per common share. . . . . . . . . . . . . . 9,778 9,778
Effect of unexercised stock options. . . . . . . . . . 52 52
-------- -------
Average number of shares used to compute earnings per
common and common equivalent share . . . . . . . . . $ 9,830 $ 9,830
======== ========
Earnings per common and common
equivalent share . . . . . . . . . . . . . . . . . . $ 1.51 $ 1.98
======== ========
Computation of Earnings per Common Share Assuming Full Dilution: (a)
Reported income. . . . . . . . . . . . . . . . . . . $ 14,843 $ 19,480
======== ========
Average number of shares used to compute
earnings per common share. . . . . . . . . . . . . 9,778 9,778
Effect of unexercised stock options. . . . . . . . . 59 59
-------- --------
Average number of shares used to compute
earnings per common share assuming full dilution. . 9,837 9,837
======== ========
Earnings per share assuming full dilution . . . . . . $ 1.51 $ 1.98
======== ========
________________________
<FN>
(a) This calculation is submitted in accordance
with Regulation S-K Item 601(b)(11) although
not required by APB Opinion No. 15 because it
results in dilution of less than 3%.
</TABLE>
<PAGE> 3
EXHIBIT 11
(Continued)
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE AS SHOWN
IN ANNUAL REPORT ON FORM 10-K
(in thousands except per share data)
<TABLE>
<CAPTION>
=================================================================================================================================
1994
---------------------------
Income from
Continuing
Operations Net Income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computation of Earnings per Common and Common Equivalent Share: (a)
Reported income. . . . . . . . . . . . . . . . . . . . $14,532 $43,922
======= ========
Average number of shares used to compute
earnings per common share. . . . . . . . . . . . . . 9,856 9,856
Effect of unexercised stock options. . . . . . . . . . 59 59
------- -------
Average number of shares used to compute earnings per
common and common equivalent share . . . . . . . . . $ 9,915 $ 9,915
======= =======
Earnings per common and common
equivalent share . . . . . . . . . . . . . . . . . . $ 1.47 $ 4.43
======= =======
Computation of Earnings per Common Share Assuming Full Dilution: (a)
Reported income. . . . . . . . . . . . . . . . . . . . $14,532 $43,922
======= =======
Average number of shares used to compute
earnings per common share. . . . . . . . . . . . . . 9,856 9,856
Effect of unexercised stock options. . . . . . . . . . 68 68
------- -------
Average number of shares used to compute
earnings per common share assuming full dilution. . 9,924 9,924
======= =======
Earnings per share assuming full dilution . . . . . . $ 1.46 $ 4.43
======= =======
________________________
<FN>
(a) This calculation is submitted in accordance
with Regulation S-K Item 601(b)(11) although
not required by APB Opinion No. 15 because it
results in dilution of less than 3 percent.
</TABLE>
<PAGE> 1
Exhibit 13
FINANCIAL REVIEW
CONTENTS
18 Statement of Accounting Policies
- ------------------------------------------
19 Consolidated Statement of Income
- ------------------------------------------
20 Consolidated Balance Sheet
- ------------------------------------------
21 Consolidated Statement of Cash Flows
- ------------------------------------------
22 Consolidated Statement of Changes
in Stockholders' Equity
- ------------------------------------------
23 Notes to Financial Statements
- ------------------------------------------
31 Unaudited Summary of Quarterly Results
- ------------------------------------------
32 Sales and Profit Statistics
by Business Segment
- ------------------------------------------
34 Selected Financial Data
- ------------------------------------------
36 Additional Segment Data
- ------------------------------------------
37 Management's Discussion and
Analysis of Financial Condition
and Results of Operations
PRICE WATERHOUSE LLP [Price Waterhouse Logo]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Chemed Corporation
In our opinion, the consolidated financial statements appearing on pages 18
through 30 and pages 32, 33 and 36 of this report present fairly, in all
material respects, the financial position of Chemed Corporation and its
subsidiaries ("the Company") at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in the Statement of Accounting Policies and Note 6 of the Notes
to Financial Statements, the Company changed its method of accounting for income
taxes in 1993.
/s/ Price Waterhouse LLP
Cincinnati, Ohio
February 1, 1995
17
<PAGE> 2
STATEMENT OF ACCOUNTING POLICIES
Chemed Corporation and Subsidiary Companies
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. All significant intercompany transactions
have been eliminated. Long-term investments in affiliated companies
representing ownership interests of 20% to 50% are accounted for using the
equity method.
CASH EQUIVALENTS
Cash equivalents comprise short-term, highly liquid investments that have
been purchased within three months of their date of maturity.
MARKETABLE SECURITIES AND OTHER INVESTMENTS
Marketable securities and other investments at December 31, 1994, are
recorded at their estimated fair value in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which was adopted effective January
1, 1994. Prior to 1994, such investments were recorded at the lower of cost or
market.
In calculating realized gains and losses on the sales of investments,
the specific identification method is used to determine the cost of investments
sold.
INVENTORIES
Inventories are stated at the lower of cost or market. For determining the
value of inventories, the average cost method is used by the National Sanitary
Supply segment, and the first-in, first-out ("FIFO") method is used by the
Roto-Rooter and Veratex segments.
DEPRECIATION AND PROPERTIES AND EQUIPMENT
Depreciation of properties and equipment is computed using the straight-line
method over the estimated useful lives of the assets. Expenditures for
maintenance, repairs, renewals and betterments that do not materially prolong
the useful lives of the assets are expensed. The cost of property retired or
sold and the related accumulated depreciation are removed from the accounts and
the resulting gain or loss is reflected currently in income.
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
Goodwill and identifiable intangible assets arise from business combinations
accounted for as purchase transactions and are amortized using the
straight-line method over the estimated useful lives but not in excess of 40
years.
<TABLE>
The lives of the Company's intangible assets at December 31, 1994, are
as follows (in thousands):
<S> <C>
1 - 10 years $ 1,426
11 - 20 years 1,980
21 - 30 years 7,454
31 - 40 years 123,749
</TABLE>
The Company periodically makes an estimation and valuation of the
future benefits of its intangible assets based on key financial indicators. If
the projected undiscounted cash flows of a major business unit indicate that
goodwill or identifiable intangible assets have been impaired, a write-down to
fair value is made.
REVENUE RECOGNITION
Revenues received under prepaid contractual service agreements are
recognized on a straight-line basis over the life of the contract. All other
sales and service revenues are recognized when the products are delivered or
the services are provided.
INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes." For 1992, income taxes were accounted for under rules specified
in SFAS No. 96, "Accounting for Income Taxes."
COMPUTATION OF EARNINGS PER SHARE
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.
PENSIONS AND RETIREMENT PLANS
The Company's major pension and retirement plans and other similar employee
benefit plans are defined contribution plans. Contributions are based on
employees' compensation and are funded currently.
EMPLOYEE STOCK OWNERSHIP PLANS ("ESOPS")
Contributions to the Company's ESOPs are based on established debt repayment
schedules and approximate contributions previously made to other employee
benefit plans. The Company's policy is to record its ESOP expense by applying
the transition rule under the level principal amortization concept.
RECLASSIFICATIONS
Certain amounts in the 1993 and 1992 financial statements have been
reclassified to conform with the 1994 presentation.
18
<PAGE> 3
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
Chemed Corporation and Subsidiary Companies
<CAPTION>
(in thousands, except per share data)
For the Years Ended December 31, 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Continuing Operations
Sales $415,807 $401,372 $305,301
Service revenues 229,220 123,721 95,661
-------- -------- --------
Total sales and service revenues 645,027 525,093 400,962
-------- -------- --------
Cost of goods sold 284,973 269,284 208,679
Cost of services provided 142,696 79,909 53,766
Selling and marketing expenses 96,144 89,784 71,800
General and administrative expenses 81,417 54,136 45,189
Depreciation 10,686 8,817 6,348
Nonrecurring expenses (Note 3) 1,705 -- --
-------- -------- --------
Total costs and expenses 617,621 501,930 385,782
-------- -------- --------
Income from operations 27,406 23,163 15,180
Interest expense (8,807) (8,889) (5,732)
Other income--net (Note 5) 11,175 13,656 12,736
-------- -------- --------
Income before income taxes and minority interest 29,774 27,930 22,184
Income taxes (Note 6) (10,954) (9,278) (6,531)
Minority interest in earnings of subsidiaries (Note 1) (4,288) (3,809) (3,147)
-------- -------- --------
Income from continuing operations 14,532 14,843 12,506
Discontinued Operations (Note 4) 29,390 2,986 3,145
-------- -------- --------
Income before cumulative effect of a change in accounting principle 43,922 17,829 15,651
Cumulative effect of a change in accounting principle (Note 6) -- 1,651 --
-------- -------- --------
Net Income $ 43,922 $ 19,480 $ 15,651
======== ======== ========
Earnings Per Common Share
Income from continuing operations $ 1.47 $ 1.52 $ 1 .28
======== ======== ========
Income before cumulative effect of a change
in accounting principle $ 4.46 $ 1.82 $ 1.60
======== ======== ========
Net income $ 4.46 $ 1.99 $ 1.60
======== ======== ========
Average number of shares outstanding 9,856 9,778 9,803
======== ======== ========
<FN>
The Statement of Accounting Policies and the accompanying Notes to
Financial Statements are integral parts of this statement.
</TABLE>
19
<PAGE> 4
<TABLE>
CONSOLIDATED BALANCE SHEET
Chemed Corporation and Subsidiary Companies
<CAPTION>
(in thousands, except share and per share data)
December 31, 1994 1993
---------- ----------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents (Note 7) $ 4,722 $ 14,615
Marketable securities (Note 7) 19,517 1,200
Accounts receivable less allowances of $2,974 (1993--$2,391) 81,822 58,350
Current portion of note receivable (Note 8) 5,740 5,627
Inventories (Note 9) 60,273 54,745
Other current assets 11,245 10,677
-------- --------
Total current assets 183,319 145,214
Investment in affiliate (Note 4) -- 30,656
Other investments (Note 16) 85,073 37,657
Properties and equipment, at cost less accumulated depreciation (Note 10) 77,116 70,758
Note receivable (Note 8) 5,455 10,413
Identifiable intangible assets less accumulated amortization of $1,928
(1993--$884) 21,192 22,166
Goodwill less accumulated amortization of $17,346 (1993--$14,073) 113,417 94,867
Other assets 19,911 18,522
-------- --------
Total Assets $505,483 $430,253
======== ========
Liabilities
Current liabilities
Accounts payable $ 31,386 $ 24,124
Bank notes and loans payable (Note 11) 25,000 25,000
Current portion of long-term debt (Note 12) 6,391 5,688
Income taxes (Note 6) 17,233 20,448
Deferred contract revenue 22,630 23,783
Other current liabilities (Note 13) 40,026 28,606
-------- --------
Total current liabilities 142,666 127,649
Deferred income taxes (Note 6) 7,606 374
Long-term debt (Note 12) 92,133 98,059
Other liabilities and deferred income (Note 13) 40,564 35,009
Minority interest (Note 1) 36,194 32,011
-------- --------
Total Liabilities 319,163 293,102
-------- --------
Stockholders' Equity
Capital stock--authorized 15,000,000 shares $1 par;
issued 12,369,212 shares (1993--12,087,894 shares) 12,369 12,088
Paid-in capital 138,733 132,095
Retained earnings 123,993 99,851
Treasury stock, at cost--2,504,641 shares (1993--2,289,120 shares) (71,230) (63,914)
Unearned compensation--ESOPs (Note 14) (38,486) (42,969)
Unrealized appreciation on investments (Note 16) 20,941 --
-------- --------
Total Stockholders' Equity 186,320 137,151
-------- --------
Commitments and contingencies (Notes 2, 13 and 15)
Total Liabilities and Stockholders' Equity $505,483 $430,253
======== ========
<FN>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
</TABLE>
20
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Chemed Corporation and Subsidiary Companies
<CAPTION>
(in thousands)
For the Years Ended December 31, 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 43,922 $ 19,480 $ 15,651
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 15,807 13,123 9,234
Gains on sales of investments (Note 5) (5,471) (6,695) (2,877)
Minority interest in earnings of subsidiaries (Note 1) 4,288 3,809 3,147
Proceeds from sales of trading securities 2,984 -- --
Purchases of trading securities (2,000) -- --
Provision for uncollectible accounts receivable 1,855 2,018 1,616
Provision for deferred income taxes (Note 6) 1,101 1,327 (1,583)
Discontinued operations (Note 4) (29,390) (2,986) (3,145)
Cumulative effect of a change in accounting
principle (Note 6) -- (1,651) --
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations:
Increase in accounts receivable (13,300) (4,588) (4,896)
(Increase)/decrease in inventories and other
current assets (6,610) (4,932) 831
Increase in accounts payable, deferred contract
revenue and other current liabilities 12,219 3,397 1,986
Decrease in income taxes (Note 6) (1,037) (1,828) (187)
Other--net (1,686) (3,195) (4,214)
------- ------- -------
Net cash provided by continuing operations 22,682 17,279 15,563
Net cash provided by discontinued operations 428 407 357
------- ------- -------
Net cash provided by operating activities 23,110 17,686 15,920
------- ------- -------
Cash Flows from Investing Activities
Net proceeds from sale of discontinued operations (Note 4) 49,496 1,468 1,366
Purchases of investments (29,788) (4,396) (903)
Capital expenditures (18,400) (13,851) (8,232)
Business combinations, net of cash acquired (Note 2) (18,383) (25,762) (68,247)
Proceeds from sales of investments 9,196 9,193 2,133
Proceeds from sales of marketable securities -- 78,858 239,820
Purchases of marketable securities -- (47,114) (195,800)
Other--net 2,449 834 2,399
------- ------- -------
Net cash used by investing activities (5,430) (770) (27,464)
------- ------- -------
Cash Flows from Financing Activities
Dividends paid (20,114) (19,659) (19,603)
Repayment of long-term debt (Note 12) (18,232) (21,452) (1,644)
Proceeds from issuance of long-term debt (Note 12) 10,000 -- 50,825
Issuances of capital stock (Note 17) 7,592 4,263 2,345
Purchases of treasury stock (7,316) (3,837) (6,433)
Increase/(decrease) in bank notes and loans payable
(Note 11) -- 25,000 (5,000)
Other--net 497 (1,143) (278)
------- ------- -------
Net cash provided/(used) by financing activities (27,573) (16,828) 20,212
------- ------- -------
Increase/(decrease) in cash and cash equivalents (9,893) 88 8,668
Cash and cash equivalents at beginning of year 14,615 14,527 5,859
------- ------- -------
Cash and cash equivalents at end of year $ 4,722 $ 14,615 $ 14,527
======= ======= =======
<FN>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
</TABLE>
21
<PAGE> 6
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
Chemed Corporation and Subsidiary Companies
(in thousands, except per share data)
<CAPTION>
Unrealized
Unearned Appreci-
Treasury Compen- ation on
Capital Paid-in Retained Stock-- sation-- Invest-
Stock Capital Earnings at Cost ESOPs ments Total
------- -------- -------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $11,830 $126,209 $103,982 $(53,644) $(48,970) $ -- $139,407
Net income -- -- 15,651 -- -- -- 15,651
Dividends paid ($2.00 per share) -- -- (19,603) -- -- -- (19,603)
Purchases of treasury stock -- -- -- (6,433) -- -- (6,433)
Stock awards and exercise of
stock options (Note 17) 92 2,253 -- -- -- -- 2,345
Decrease in unearned compensation
--ESOPs (Note 14) -- -- -- -- 2,164 -- 2,164
Other -- (20) -- -- -- -- (20)
------- -------- -------- -------- -------- ------- --------
Balance at December 31, 1992 11,922 128,442 100,030 (60,077) (46,806) -- 133,511
Net income -- -- 19,480 -- -- -- 19,480
Dividends paid ($2.01 per share) -- -- (19,659) -- -- -- (19,659)
Stock awards and exercise of
stock options (Note 17) 166 4,097 -- -- -- -- 4,263
Purchases of treasury stock -- -- -- (3,837) -- -- (3,837)
Decrease in unearned compensation
--ESOPs (Note 14) -- -- -- -- 3,837 -- 3,837
Other -- (444) -- -- -- -- (444)
------- -------- -------- -------- -------- ------- --------
Balance at December 31, 1993 12,088 132,095 99,851 (63,914) (42,969) -- 137,151
Net income -- -- 43,922 -- -- -- 43,922
Dividends paid ($2.04 per share) -- -- (20,114) -- -- -- (20,114)
Stock awards and exercise of
stock options (Note 17) 263 7,329 -- -- -- -- 7,592
Purchases of treasury stock -- -- -- (7,316) -- -- (7,316)
Decrease in unearned compensation
--ESOPs (Note 14) -- -- -- -- 4,483 -- 4,483
Increase in unrealized
appreciation on
investments (Note 16) -- -- -- -- -- 20,941 20,941
Other 18 (691) 334 -- -- -- (339)
------- -------- -------- -------- -------- ------- --------
Balance at December 31, 1994 $12,369 $138,733 $123,993 $(71,230) $ (38,486) $20,941 $186,320
======= ======== ======== ======== ======== ======= ========
<FN>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
</TABLE>
22
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
Chemed Corporation and Subsidiary Companies
1. SEGMENTS OF THE BUSINESS
The continuing operations of the Company are
classified in the following business segments, the definitions of which are
based primarily on the operating structure of the Company:
--The National Sanitary Supply segment includes the consolidated operations
of National Sanitary Supply Company ("National Sanitary Supply"), an 85%-owned
subsidiary, which sells and distributes sanitary maintenance and paper supplies
including cleaners, floor finishes, hand soaps, paper towels and tissues,
cleaning equipment, packaging supplies, business paper and general maintenance
products used by commercial, institutional and industrial businesses.
--The Roto-Rooter segment includes the consolidated operations of
Roto-Rooter Inc. ("Roto-Rooter"), a 59%-owned subsidiary, which provides repair
and maintenance services to residential and commercial accounts. Such services
include sewer, drain and pipe cleaning, plumbing services and appliance repair
and maintenance and are delivered through both company-owned and franchised
locations. Roto-Rooter also manufactures and sells certain products and
equipment used to provide such services.
--The Veratex segment includes the combined operations of the businesses
comprising the Company's Veratex Group, which manufactures and distributes
medical, dental and veterinary supplies to office-based physicians, dentists
and veterinarians and to medical and dental dealers. Products include
disposable paper, cotton and gauze proprietary products and various other
dental, medical, veterinary and pharmaceutical products.
--The Patient Care segment includes the consolidated operations of the
businesses comprising the Company's Patient Care Group, which offers complete,
professional home healthcare services, currently in the New York-New Jersey-
Connecticut area. Services provided to patients at home include skilled
nursing; home health aides; speech, physical and occupational therapies;
medical social work; nutrition; and other specialized services.
Financial data by business segment are shown on pages 32, 33 and 36 of this
annual report. The segment data for 1994, 1993 and 1992 are an integral part
of these financial statements.
Substantially all of the Company's sales and service revenues from
continuing operations are generated from business within the United States. The
Company's risk to credit loss is well-spread based on the diversity of the
Company's customer base and the geographic areas which the Company serves.
Nevertheless, management establishes policies regarding the extension of credit
and monitors compliance therewith.
2. BUSINESS COMBINATIONS
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 $2,000,000
may be made, the amount being contingent upon the earnings of Patient Care for
the period ending December 31, 1995.
Also during 1994, five other business combinations were completed within the
Roto-Rooter and National Sanitary segments for aggregate purchase prices of
$1,795,000 in cash.
On July 16, 1993, Service America Systems Inc. ("Service America"--formerly
Convenient Home Services Inc.) (30%-owned by the Company and 70%-owned by
Roto-Rooter) completed the acquisition of 100% of the outstanding common shares
of Encore Services Systems Inc.("Encore"). Encore principally provides
residential air conditioning and appliance repair services through service
warranty contracts in Florida and Arizona.
The purchase price paid by Service America was $17,000,000 in cash at
closing, plus contingent payments based upon achievement of certain sales and
earnings objectives during the 36-month period following the closing of the
transaction (up to a maximum of $8,800,000). During 1994, the Company recorded
an adjustment to the purchase price of Encore to recognize the accrual of the
entire sales-based contingent payment due in 1996. The present value of this
$3,800,000 payment, $3,315,000, was recorded as increases to goodwill and other
noncurrent liabilities.
Also during 1993, nine other business combinations were completed within the
Roto-Rooter, National Sanitary and Veratex segments for aggregate purchase
prices of $8,762,000 in cash.
Effective December 1, 1992, the Company acquired The Veratex Corporation and
seven related businesses ("Veratex") from Omnicare Inc. ("Omnicare") for
$63,634,000 in cash. Also in 1992, Roto-Rooter acquired four independently
owned franchises, engaged primarily in the sewer-, drain- and pipe-cleaning
services business, and National Sanitary Supply acquired four janitorial supply
businesses.
23
<PAGE> 8
<TABLE>
Unaudited pro forma financial data, which assume that the above-mentioned
business combinations were completed at the beginning of the year preceding
the year of acquisition, are summarized as follows (in thousands, except per
share data):
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Total sales and
service revenues $647,168 $610,268 $532,351
Income from
continuing
operations 14,579 15,809 13,912
Earnings per
share--income
from continuing
operations 1.48 1.61 1.42
</TABLE>
<TABLE>
The excess of the purchase price over the fair value of the net assets
acquired in business combinations is classified as goodwill. A summary of the
fair values of net assets acquired in business combinations, all of which have
been recorded under purchase accounting rules, follows (in thousands):
<CAPTION>
<CAPTION>
December 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Working capital $8,646 $(13,767) $24,363
Properties and
equipment 451 3,633 18,454
Identifiable intangible
assets -- 11,100 7,994
Goodwill 22,051 19,700 16,869
Deferred income taxes 3,649 (412) 937
Long-term debt (7,492) -- --
Other--net (507) 6,214 (370)
------- ------- -------
Total net assets 26,798 26,468 68,247
Less--cash and
cash equivalents
acquired (182) (706) --
--capital stock
issued (500) -- --
--deferred
payments (7,733) -- --
------- ------- -------
Net cash used $18,383 $25,762 $68,247
======= ======= =======
</TABLE>
3. NONRECURRING EXPENSES
Nonrecurring expenses of $1,705,000 ($1,107,000 aftertax or $.12 per share)
were recorded in the third quarter of 1994 as the result of downsizing staffs
at various locations and refocusing marketing efforts at Veratex.
4. DISCONTINUED OPERATIONS
On November 30, 1994, the Company sold 1,570,000 shares of the capital stock
of Omnicare Inc. ("Omnicare"), a publicly traded affiliate in which Chemed
previously had maintained an equity interest, by participating in a public
offering. Also, during the first six months of 1994, the Company sold a total
of 239,900 shares of Omnicare stock. As a result, the Company recorded gains
aggregating $23,358,000 (net of income taxes of $20,248,000) during 1994. These
gains and the equity earnings in Omnicare prior to December 1, 1994, have been
classified as discontinued operations. The Company continues to hold 722,000
shares, or 6%, of the Omnicare capital stock. During 1994, this investment was
reclassified to "other investments" and is accounted for using the cost basis
of accounting.
Following the resolution of various issues pertaining to the Company's
accruals for tax and other liabilities relative to the sale of DuBois Chemicals
Inc. ("DuBois") in April 1991, the Company recorded adjustments to discontinued
operations in 1992, 1993 and 1994.
<TABLE>
Discontinued operations, as shown on the accompanying consolidated statement
of income, comprise the following (in thousands):
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Gains on sales of
Omnicare stock $23,358 -- --
Equity earnings in
Omnicare prior to
December 1, 1994 2,225 2,299 1,745
Adjustment to the
tax provision on
the gain on the
sale of DuBois 3,236 -- 1,400
Adjustment to the
expense accruals
related to the gain
on the sale of DuBois 571 687 --
------- ------- -------
Total discontinued
operations $29,390 $ 2,986 $ 3,145
======= ======= =======
</TABLE>
<TABLE>
5. OTHER INCOME--NET
Other income--net comprises the following (in thousands):
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Gain on sales of
investments $ 5,471 $ 6,695 $ 2,877
Interest income 2,739 3,763 5,882
Dividend income 3,057 3,113 3,457
Other--net (92) 85 520
------- ------- -------
Total other income
--net $11,175 $13,656 $12,736
======= ======= =======
</TABLE>
24
<PAGE> 9
<TABLE>
6. INCOME TAXES
The provision for income taxes comprises the following (in thousands):
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Continuing Operations:
Current
U.S. federal $ 7,517 $ 6,243 $ 7,278
U.S. state and local 2,336 1,708 836
Deferred U.S. federal 1,101 1,327 (1,583)
------- ------- -------
Total $10,954 $ 9,278 $ 6,531
======= ======= =======
Discontinued Operations:
Current
U.S. federal $19,820 $ 170 $ (678)
U.S. state and local (2,850) -- --
Deferred U.S. federal (323) 183 (722)
------- ------- -------
Total $16,647 $ 353 $(1,400)
======= ======= =======
</TABLE>
<TABLE>
A summary of the significant temporary differences that give rise
to deferred income tax assets/(liabilities) follows (in thousands):
<CAPTION>
December 31,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
Payments related to
discontinued operations $ 5,359 $ 4,773
Accrued insurance expense 4,733 5,006
Bad debt allowances 1,139 871
Employee benefit accruals 1,134 882
Deferred compensation 877 765
Amortization of intangible assets 689 --
Other 4,473 3,629
------- -------
Gross deferred income tax assets 18,404 15,926
------- -------
Market valuation of investments (10,788) --
Accelerated tax depreciation (5,387) (5,505)
Unremitted earnings of affiliate (1,342) (799)
Cash to accrual adjustments (1,014) (869)
Gain on subsidiary's sale of stock (659) (659)
Amortization of intangible assets -- (1,246)
Other (2,243) (1,906)
------- -------
Gross deferred income
tax liabilities (21,433) (10,984)
------- -------
Net deferred income tax
assets/(liabilities) $(3,029) $ 4,942
======= =======
</TABLE>
Based on the Company's history of prior operating earnings and its
expectations for future growth, management has determined that the operating
income of the Company will more likely than not be sufficient to ensure the
full realization of the gross deferred tax assets.
Included in other current assets at December 31, 1994, are deferred income
tax assets of $4,577,000 (December 31, 1993--$5,316,000).
<TABLE>
The difference between the effective tax rate for continuing operations and
the statutory U.S. federal income tax rate is explained as follows:
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Statutory U.S. federal
income tax rate 34.0% 34.0% 34.0%
State and local income taxes,
less federal income tax
benefit 5.2 3.9 2.4
Nondeductible amortization
of goodwill 3.1 3.1 3.0
Domestic dividend exclusion (2.3) (2.4) (3.1)
Tax benefit on dividends
paid to ESOPs (2.1) (3.4) (4.3)
Favorable tax adjustments (1.0) (2.5) (3.6)
Other--net (0.1) 0.5 1.0
---- ---- ----
Effective tax rate 36.8% 33.2% 29.4%
==== ==== ====
</TABLE>
Effective January 1, 1993, the Company adopted SFAS No. 109 and realized a
gain from the cumulative effect of a change in accounting principle in the
amount of $1,651,000 ($.17 per share) during the first quarter of 1993.
Provision has not been made for additional taxes on $26,252,000 of
undistributed consolidated earnings of Roto-Rooter Inc. (a 59%-owned domestic
subsidiary), including $19,601,000 relating to periods prior to 1993. Those
earnings have been and will continue to be reinvested. Should Chemed elect to
sell its interest in Roto-Rooter rather than to effect a tax-free liquidation,
additional taxes amounting to $9,188,000 would be incurred based on current
income tax rates.
The total amount of income taxes paid during the year ended December 31,
1994, was $28,533,000 (1993--$9,913,000; 1992--$10,970,000).
7. CASH EQUIVALENTS AND MARKETABLE SECURITIES
Included in cash and cash equivalents at December 31, 1994, are cash
equivalents in the amount of $4,535,000 (1993--$14,538,000). The cash
equivalents at both dates consist of investments in various money market funds
and repurchase agreements yielding interest at a weighted average rate of 6.2%
in 1994 and 3.6% in 1993.
25
<PAGE> 10
From time to time throughout the year, the Company invests its excess cash in
repurchase agreements directly with major commercial banks. Although the
collateral is not physically held by the Company, the term of such repurchase
agreements is less than 10 days. Investments of significant amounts are spread
among a number of banks and the amounts invested in each bank are varied
constantly.
<TABLE>
A summary of marketable securities follows (in thousands):
<CAPTION>
December 31,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
U.S. Treasury Notes, maturing
in 1995, with a weighted
average yield of 7.0% $19,417 $ --
Various adjustable-rate securities
funds, with a weighted
average yield of 6.8% -- 1,000
All other 100 200
------- -------
Total marketable securities $19,517 $ 1,200
======= =======
</TABLE>
8. NOTE RECEIVABLE
<TABLE>
As a part of the agreement to sell DuBois in 1991, the Company recorded a
note receivable from the buyer in the gross amount of $30,000,000, payments for
which began on April 2, 1992, in five annual installments of $6,000,000 each.
As no rate of interest was specified in the note, interest has been imputed at
10% per annum. The balance of the note receivable comprises the following (in
thousands):
<CAPTION>
December 31,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
Gross amount of note
receivable outstanding $12,000 $18,000
Less amount representing
imputed interest (805) (1,960)
------- -------
Present value of note receivable 11,195 16,040
Less current portion (5,740) (5,627)
------- -------
Note receivable,
less current portion $ 5,455 $10,413
======= =======
</TABLE>
9. INVENTORIES
<TABLE>
A summary of inventories follows (in thousands):
<CAPTION>
December 31,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
Raw materials $ 8,086 $ 6,977
Finished goods and general
merchandise 52,187 47,768
------- -------
Total inventories $60,273 $54,745
======= =======
</TABLE>
10. PROPERTIES AND EQUIPMENT
<TABLE>
A summary of properties and equipment follows (in thousands):
<CAPTION>
December 31,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
Land $ 8,072 $ 6,340
Buildings 29,963 25,560
Furniture and fixtures 25,666 22,552
Machinery and equipment 27,911 24,657
Transportation equipment 23,340 23,598
Projects under construction 2,539 2,003
-------- --------
Total properties
and equipment 117,491 104,710
Less accumulated depreciation (40,375) (33,952)
-------- --------
Net properties
and equipment $ 77,116 $ 70,758
======= =======
</TABLE>
11. BANK NOTES AND LOANS PAYABLE
In December 1993, the Company entered into a revolving credit/term loan
agreement ("RT Agreement") with PNC Bank, Ohio, National Association to borrow
up to $20,000,000 at any time during the three- year period ending December 31,
1996. At that date, the outstanding borrowings must be either repaid or
converted to a term loan repayable in four equal semiannual installments. The
interest rate is based on various stipulated market rates of interest.
During 1990, the Company entered into a revolving credit agreement ("Credit
Agreement") with Bank of America to borrow up to $25,000,000 at any time during
the five-year period ending August 23, 1995. The interest rate is based on
various stipulated market rates of interest.
At December 31, 1994, the Company had $15,000,000 (1993--$25,000,000) of
borrowings outstanding under the Credit Agreement and $10,000,000 (1993--none)
under the RT Agreement. In addition to these agreements, the Company had
$14,250,000 of unused lines of credit with various banks at December 31, 1994.
The Company's short-term borrowings provide temporary capital for
operations. Borrowings under the RT and Credit Agreements are subject to
maintaining certain financial covenants, with which the Company has complied.
There are no restrictions on any cash balances maintained at the banks. The
weighted average interest rate on short-term borrowings at December 31, 1994,
was 6.6% (December 31, 1993--3.8%).
26
<PAGE> 11
12. LONG-TERM DEBT
<TABLE>
A summary of the Company's long-term debt follows (in thousands):
<CAPTION>
December 31,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
Senior Notes:
8.15%, due 2000 - 2004 $ 50,000 $ 50,000
Series B--10.67%, due
1994 - 2003 9,000 10,000
Employee Stock Ownership
Plans Loan Guarantees:
6.71% (1993--6.65%),
due 1994 - 2000 38,486 42,969
Other 1,038 778
-------- --------
Subtotal 98,524 103,747
Less current portion (6,391) (5,688)
-------- --------
Long-term debt, less
current portion $ 92,133 $ 98,059
======== ========
</TABLE>
SENIOR NOTES
On December 22, 1992, the Company borrowed $50,000,000 from several
insurance companies. Principal is repayable in five annual installments of
$10,000,000 beginning on December 15, 2000, and bears interest at the rate of
8.15% per annum. Interest is payable on June 15 and December 15 of each year.
On November 10, 1988, the Company borrowed $31,000,000 from a consortium of
insurance companies. Of this amount, $21,000,000 was due and paid on November
1, 1993, and $1,000,000 was due and paid on November 1, 1994. The remaining
$9,000,000 bears interest at the rate of 10.67% with annual principal payments
of $1,000,000 due on November 1, 1995 through 2003. Interest on both series of
notes is payable on May 1 and November 1 of each year.
EMPLOYEE STOCK OWNERSHIP PLANS ("ESOPs") LOAN GUARANTEES
In connection with the adoption and subsequent modification of two ESOPs
during the years 1987 through 1990, the Company guaranteed loans from The Fifth
Third Bank (Cincinnati, Ohio) to the ESOPs. In January 1992, the Company
refinanced $44,157,000 of these loans with various institutional lenders at
reduced interest rates. Payments by the ESOPs, including both principal and
interest, are to be made in quarterly installments over the next six years, the
final payments being due on June 30, 2000. The loans, secured in part by the
unallocated shares of the Company's capital stock held by the ESOP trusts,
currently bear interest at an average annual rate of 6.71% (1993--6.65%). Such
rates are subject to adjustments for changes in interest rates of specified
U.S. Treasury obligations, U.S. federal statutory income tax rates and certain
federal tax law changes.
The market value of the unallocated shares of the Company's capital stock
held by the ESOPs at December 31, 1994, based on that day's closing price of
$33.375 was $30,331,000 as compared with aggregate loan guarantees of
$38,486,000.
OTHER
Other long-term debt has arisen from the assumption of loans in connection
with various acquisitions. Interest rates range from 5% to 15%, and the
obligations are due on various dates through 2004.
<TABLE>
The following is a schedule by year of required long-term debt payments as
of December 31, 1994 (in thousands):
<S> <C>
1995 $ 6,391
1996 7,074
1997 12,474
1998 10,575
1999 6,435
After 1999 55,575
-------
Total long-term debt $98,524
=======
</TABLE>
The various short-term and long-term loan agreements contain certain
covenants which could restrict the amount of cash dividend payments, treasury
stock purchases and certain other transactions of the Company. Under the most
restrictive of these covenants, the Company is limited to incurring additional
debt of $91,828,000, cannot permit its net worth to fall below $149,526,000 and
is limited to incurring additional annual net rentals under operating leases
with terms of three years or more aggregating $7,195,000.
The total amount of interest paid during the year ended December 31, 1994,
was $8,562,000 (1993--$8,893,000; 1992--$5,371,000).
13. OTHER LIABILITIES
At December 31, 1994, other current liabilities included accrued insurance
liabilities of $17,495,000 (1993--$10,929,000).
<TABLE>
Liabilities for estimated expenses related to the sale of DuBois during 1991
are included in the following accounts on the consolidated balance sheet (in
thousands):
<CAPTION>
December 31,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
Other current liabilities $ 2,507 $ 4,195
Other liabilities and deferred
income 25,067 26,895
------- -------
Total $27,574 $31,090
======= =======
</TABLE>
Included in other liabilities and deferred income at December 31,
1994, is an accrual of $14,170,000 (1993--$14,723,000) for the Company's
estimated liability for potential environmental cleanup and related costs
arising from the sale of DuBois. The Company is contingently liable for
additional DuBois-related environmental cleanup and related costs up to a
maximum of $10,000,000. On the basis of a continuing evaluation of the
Company's potential liability by the
27
<PAGE> 12
Company's environmental attorney, management believes that it is not probable
this additional liability will be paid. Accordingly, no provision for this
contingent liability has been recorded.
14. PENSION AND RETIREMENT PLANS
Retirement obligations under various plans cover substantially all full-time
employees who meet age and/or service eligibility requirements. The major plans
providing retirement benefits to the Company's employees are defined
contribution plans.
The Company has established two ESOPs which purchased a total of $56,000,000
of the Company's capital stock. As a result of the sale of DuBois in 1991, the
ESOPs, which formerly covered substantially all Chemed headquarters and DuBois
employees not covered by collective bargaining agreements, covered only Chemed
headquarters employees during the last nine months of 1991. In 1992,
substantially all employees of National Sanitary Supply not covered by
collective bargaining agreements became participants in one of the ESOPs.
Similarly, in 1993, qualifying employees of Veratex became participants in the
Company's ESOPs. A portion of the excess cost of the ESOPs, which arose due to
the withdrawal of the DuBois employees from the ESOPs, was charged against the
gain on the sale of discontinued operations.
<TABLE>
Expenses charged to continuing operations for the Company's pension and
profit-sharing plans, ESOPs (including amounts classified as interest expense)
and other similar plans comprise the following (in thousands):
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
ESOPs:
Principal payments $ 4,483 $ 3,837 $ 2,164
Interest payments 2,682 2,968 3,255
Dividends received
by the ESOP
trusts (2,820) (2,819) (2,818)
Interest income
earned by the
ESOP trusts (5) (4) (5)
------- ------- -------
Subtotal 4,340 3,982 2,596
Less ESOP costs
allocated to
discontinued
operations (542) (350) --
Pension, profit
sharing and other
similar plans 2,518 1,813 2,221
------- ------- -------
Total $ 6,316 $ 5,445 $ 4,817
------- ------- -------
ESOP costs classified
as compensation $ 2,476 $ 2,141 $ 1,038
======= ======= =======
</TABLE>
At December 31, 1994, there were 457,725 allocated shares (December 31, 1993
- --344,347 shares) and 908,796 unallocated shares (December 31, 1993--1,052,499
shares) in the ESOP trusts.
15. LEASE ARRANGEMENTS
The Company, as lessee, has operating leases which cover its corporate
office headquarters; various plant, warehouse and office facilities; office
equipment; and plant and transportation equipment. The remaining terms of these
leases range from one year to 12 years and, in most cases, management expects
that these leases will be renewed or replaced by other leases in the normal
course of business. All major plants and warehouses and substantially all
equipment are either owned by the Company or covered by an option to purchase
at a fixed price.
<TABLE>
The following is a summary of future minimum rental payments and sublease
rentals to be received under operating leases that have initial or remaining
noncancelable terms in excess of one year at December 31, 1994 (in thousands):
<S> <C>
1995 $ 11,145
1996 10,473
1997 7,302
1998 5,592
1999 4,753
AFTER 1999 25,593
--------
TOTAL MINIMUM RENTAL PAYMENTS 64,858
LESS MINIMUM SUBLEASE RENTALS (18,675)
--------
NET MINIMUM RENTAL PAYMENTS $ 46,183
========
</TABLE>
<TABLE>
Total rental expense incurred under operating leases follows (in
thousands):
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Total rental payments $12,451 $ 9,216 $ 7,057
Less sublease rentals (3,446) (3,440) (3,268)
------- ------- -------
Net rental expense $ 9,005 $ 5,776 $ 3,789
======= ======= =======
</TABLE>
28
<PAGE> 13
16. FINANCIAL INSTRUMENTS
The following methods and assumptions are used in estimating the fair value
of each class of the Company's financial instruments:
-- For cash and cash equivalents, accounts receivable and accounts payable,
the carrying amount is a reasonable estimate of fair value because of the
liquidity and short-term nature of these instruments.
-- For marketable securities, fair value is based upon quoted market prices.
-- For other investments and other assets, fair value is based upon quoted
market prices for these or similar securities, if available. Included in other
investments is the Company's investment in privately held Vitas Healthcare
Corporation ("Vitas"), which provides noncurative care to chronically ill
patients. The market values of Vitas Common Stock Purchase Warrants are based
on the difference between Chemed's exercise price and an appraisal of the value
of the underlying common stock. The value of the Vitas 9% Cumulative Preferred
Stock is based on the present value of the mandatory redemption payments, using
an interest rate of 10.7% (1993--7.5%), a rate which management believes is
reasonable in view of current market conditions.
-- For the note receivable, the fair value is determined by discounting the
remaining future installment payments using a rate of 8.6% (1993--6.0%), a rate
considered by management to reflect current market conditions.
-- The fair value of the Company's long-term debt is estimated by
discounting the future cash outlays associated with each debt instrument using
interest rates currently available to the Company for debt issues with similar
terms and remaining maturities.
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 December 31, 1993
--------------------- ---------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Marketable securities $19,517 $19,517 $ 1,200 $ 1,193
Other investments 85,073 88,303 37,657 61,071
Restricted deposits included in other assets 14,408 14,408 13,176 13,176
Note receivable:
Current portion 5,740 5,873 5,627 5,910
Noncurrent portion 5,455 5,408 10,413 10,836
Long-term debt, including current portion 98,524 95,545 103,747 105,174
</TABLE>
In accordance with current accounting rules, the Company has classified its
investments in equity securities and certain debt securities as either trading
or available-for-sale. The trading category includes those investments which
are held principally for the purpose of selling them in the near term and is
included in current assets. All other investments are included in the
available-for-sale category and are classified as current or long term based on
when they are expected to be realized in cash. There are no investments
classified as held-to-maturity. Currently, investments in cash equivalents are
considered to be trading securities, while investments included in either
marketable securities or other investments are considered to be
available-for-sale.
<TABLE>
Disclosures regarding the Company's investments classified as available-for-
sale at December 31, 1994, are summarized below (in thousands):
<S> <C>
Aggregate fair value:
Obligations of the U.S. Treasury $29,035
Equity securities 75,455
Gross unrealized holding gains:
Obligations of the U.S. Treasury --
Equity securities 31,975
Gross unrealized holding losses:
Obligations of the U.S. Treasury (129)
Equity securities (117)
Amortized cost:
Obligations of the U.S. Treasury 29,164
Equity securities 43,597
</TABLE>
29
<PAGE> 14
<TABLE>
The chart below summarizes information with respect to available-for-sale
securities sold during 1994 (in thousands):
<S> <C>
Proceeds from sale $ 9,196
Gross realized gains 5,589
Gross realized losses (2)
</TABLE>
Included in marketable securities are two U.S. Treasury Notes--$9,704,000,
maturing December 31, 1995, and $9,713,000, maturing November 30, 1995.
Included in other investments is a U.S. Treasury Note with a fair value of
$9,618,000, maturing January 31, 1996. Also included in other investments is
Vitas mandatorily redeemable preferred stock with a fair value of $26,200,000,
maturing between 1996 and 1998.
17. STOCK INCENTIVE PLANS
The Company has six Stock Incentive Plans under which 2,150,000 shares of
Chemed Capital Stock may be or have been issued to key employees pursuant to
the grant of stock awards and/or options to purchase such shares. Options to
purchase 553,472 shares were outstanding at December 31, 1994, and options or
other stock incentives covering 109,004 shares were then available for
issuance. All options granted under these plans provide for a purchase price
equal to the market value of the stock at the date of grant. The latest plan,
covering 250,000 shares, was adopted in May 1993.
Under the plan adopted in 1983, both nonstatutory and incentive stock
options have been granted. Incentive stock options granted under the 1983
plan become exercisable in full six months following the date of the grant;
nonstatutory options granted under the 1983 plan become exercisable in four
annual installments commencing six months after the date of grant.
The other plans are not qualified, restricted or incentive stock option
plans under the Internal Revenue Code. Additional options may not be granted
under the plans adopted in 1978, 1981 and 1983 covering a total of 1,150,000
shares, but a number of options granted under those plans remains outstanding.
Options granted under the 1986, 1988 and 1993 plans become exercisable six
months following the date of grant in either three or four equal annual
installments.
<TABLE>
The changes in outstanding stock options and other data follow:
<CAPTION>
1994 1993
------------------- ----------------------
NUMBER Number
OF AVERAGE of Average
SHARES PRICE Shares Price
--------- ------- -------- --------
<S> <C> <C> <C> <C>
Options outstanding at January 1 628,967 $27.04 573,474 $25.57
Options granted 260,650 32.13 250,950 28.56
Options exercised (247,845) 26.17 (165,055) 23.34
Options terminated or canceled (88,300) 29.91 (30,402) 31.90
------- -------
Options outstanding at December 31 553,472 29.38 628,967 27.04
------- -------
Options exercisable at December 31 280,193 332,978
------- -------
Shares available for grant of stock awards and stock options 109,004 300,827
======= =======
</TABLE>
During 1994, the Company granted stock awards covering 15,946
(1993--650) shares under its Stock Incentive Plans. Also during 1994, 973
restricted shares previously awarded were forfeited. The shares of capital
stock were issued to directors and key employees at no cost and generally are
restricted as to the transfer of ownership. Restrictions covering either
one-fourth or one-third of each holder's shares lapse annually commencing one
year after the date of grant.
30
<PAGE> 15
UNAUDITED SUMMARY OF QUARTERLY RESULTS
Chemed Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
(in thousands, except per share data)
First Second Third Fourth Total
1994 Quarter Quarter Quarter Quarter Year
- ---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Continuing Operations
Total sales and service revenues $152,069 $161,384 $166,089 $165,485 $645,027
-------- -------- -------- -------- --------
Gross profit 50,911 $ 54,170 $ 55,222 $ 57,055 $217,358
-------- -------- -------- -------- --------
Income from operations $5,670 $6,579 6,348 $ 8,809 $ 27,406
Interest expense (2,047) (2,167) (2,304) (2,289) (8,807)
Other income--net 3,129 4,158 2,640 1,248 11,175
-------- -------- -------- -------- --------
Income before income taxes
and minority interest 6,752 8,570 6,684 7,768 29,774
Income taxes (2,680) (3,205) (2,287) (2,782) (10,954)
Minority interest in earnings
of subsidiaries (833) (939) (1,187) (1,329) (4,288)
-------- -------- -------- -------- --------
Income from continuing operations 3,239 4,426 3,210 3,657 14,532
Discontinued Operations 2,438 3,591 1,884 21,477 29,390
-------- -------- -------- -------- --------
Net Income $ 5,677 $ 8,017 $5,094 $ 25,134 $ 43,922
======== ======== ======== ======== ========
Earnings Per Common Share
Income from continuing operations $ .33 $ .45 $ .33 $ .37 $ 1.47
======== ======== ======== ======== ========
Net income $ .58 $ .81 $ .52 $ 2.54 $ 4.46
======== ======== ======== ======== ========
Average number of shares outstanding 9,824 9,847 9,867 9,884 9,856
======== ======== ======== ======== ========
1993
- ----
Continuing Operations
Total sales and service revenues $120,519 $127,241 $139,824 $137,509 $525,093
-------- -------- -------- -------- --------
Gross profit $ 41,009 $ 43,143 $ 45,718 $ 46,030 $175,900
-------- -------- -------- -------- --------
Income from operations $ 3,892 $ 5,300 $ 7,086 $ 6,885 $ 23,163
Interest expense (2,273) (2,258) (2,311) (2,047) (8,889)
Other income--net 4,670 4,979 1,974 2,033 13,656
-------- -------- -------- -------- --------
Income before income taxes
and minority interest 6,289 8,021 6,749 6,871 27,930
Income taxes (1,964) (2,762) (2,230) (2,322) (9,278)
Minority interest in earnings
of subsidiaries (726) (873) (1,050) (1,160) (3,809)
-------- -------- -------- -------- --------
Income from continuing operations 3,599 4,386 3,469 3,389 14,843
Discontinued Operations 479 1,165 689 653 2,986
-------- -------- -------- -------- --------
Income before cumulative effect of
a change in accounting principle 4,078 5,551 4,158 4,042 17,829
Cumulative effect of a change
in accounting principle 1,651 -- -- -- 1,651
-------- -------- -------- -------- --------
Net Income $ 5,729 $ 5,551 $ 4,158 $ 4,042 $19,480
======== ======== ======== ======== ========
Earnings Per Common Share
Income from continuing operations $ .37 $ .45 $ .35 $ .35 $ 1.52
======== ======== ======== ======== ========
Income before cumulative effect of
a change in accounting principle $ .42 $ .57 $ .43 $ .41 $ 1.82
======== ======== ======== ======== ========
Net income $ .59 $ .57 $ .43 $ .41 $ 1.99
======== ======== ======== ======== ========
Average number of shares outstanding 9,766 9,770 9,781 9,794 9,778
======== ======== ======== ======== ========
</TABLE>
31
<PAGE> 16
<TABLE>
SALES AND PROFIT STATISTICS BY BUSINESS SEGMENT(a)
Chemed Corporation and Subsidiary Companies
<CAPTION>
(in thousands, except percentages and footnote data)
% Of % of
Total Total
1994 1985 1994 1993
------ ------ -------- --------
<S> <C> <C> <C> <C>
Sales and Service Revenues from Continuing Operations(b)
National Sanitary Supply 48% 64% $308,280 $296,865
Roto-Rooter 26 36 171,930 136,428(d)
Veratex 15 -- 95,753 91,800
Patient Care 11 -- 69,064 --
---- ---- -------- --------
Total 100% 100% $645,027 $525,093
==== ==== ======== ========
Operating Profit from Continuing Operations(c)
National Sanitary Supply 30% 50% $ 10,291 $ 9,093
Roto-Rooter 46 50 15,967 14,371(d)
Veratex 16 -- 5,415(e) 5,660
Patient Care 8 -- 2,790 --
---- ---- -------- --------
Total 100% 100% $ 34,463 $ 29,124
==== ==== ======== ========
<FN>
(a) The data are presented on a continuing operations basis, thus excluding
DuBois Chemicals Inc., sold in April 1991, and Vestal Laboratories Inc., sold
in December 1986. The data for 1994, 1993 and 1992 are covered by the report of
independent accountants.
(b) Intersegment sales are not material. Total sales by segment consist of
sales and services to unaffiliated companies. The Company does not derive 10% or
more of its sales and service revenues from any one customer.
(c) Operating profit is total sales and service revenues less operating
expenses and includes 100% of all consolidated operations. In computing
operating profit, none of the following items has been added or deducted:
general corporate expenses; interest expense; other income--net; income taxes;
minority interest in earnings of subsidiaries; discontinued operations;
extraordinary items; and cumulative effect of changes in accounting principles.
</TABLE>
32
<PAGE> 17
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986 1985
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$288,731 $267,508 $265,424 $262,351 $179,191(d) $ 92,618 $ 80,010(d) $ 63,777
104,688 84,774(d) 75,230 66,842 62,255 55,233 45,292 36,306
7,543 -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
$400,962 $352,282 $340,654 $329,193 $241,446 $147,851 $125,302 $100,083
======== ======== ======== ======== ======== ======== ======== ========
$ 9,171 $ 8,504 $ 10,165 $ 10,762 $ 8,507(d) $ 6,157 $ 5,966(d) $ 5,665
11,253 8,499(d) 8,049 7,762 8,267 7,573 6,849 5,581
607 -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
$ 21,031 $ 17,003 $ 18,214 $ 18,524 $ 16,774 $ 13,730 $ 12,815 $ 11,246
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
(d) The following significant business combinations, all in the United States, have been accounted for as purchase transactions:
Amounts Reported
in Year Acquired
----------------------------------
Business Effective Date Sales and Operating
Name Segment of Acquisition Service Revenues Profit
- ---------------------- ----------------------- ------------------ ----------------- ----------
<S> <C> <C> <C> <C>
Encore Service
Systems Inc. Roto-Rooter July 1993 $18,576,000 $784,000
Service America
Systems Inc. Roto-Rooter August 1991 5,557,000 773,000
Century Papers Inc. National Sanitary Supply July 1988 71,650,000 --*
National Sanitary Supply
acquisitions National Sanitary Supply Various 1986 9,778,000 --*
<FN>
*Operations were integrated into existing operations and amounts are not
determinable.
(e) Amount includes nonrecurring charges of $648,000 related to the cost of
staff reductions and refocusing marketing efforts.
</TABLE>
33
<PAGE> 18
<TABLE>
SELECTED FINANCIAL DATA
Chemed Corporation and Subsidiary Companies
<CAPTION>
(in thousands, except per share data, employee numbers, footnote data,
ratios and percentages)
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Summary of Operations
Continuing operations
Total sales and service revenues $645,027 $525,093 $400,962
Gross profit 217,358 175,900 138,517
Depreciation 10,686 8,817 6,348
Income from operations 27,406 23,163 15,180
Income/(loss) from continuing operations 14,532 14,843 12,506
Discontinued operations(a) 29,390 2,986 3,145
Extraordinary gain -- -- --
Cumulative effect of changes in accounting principles -- 1,651 --
Net income 43,922 19,480 15,651
Earnings per common share:
Assuming full dilution--
Income/(loss) from continuing operations(b) 1.47 1.52 1.28
Net income 4.46 1.99 1.60
Primary--
Income/(loss) from continuing operations(b) 1.47 1.52 1.28
Net income 4.46 1.99 1.60
Average number of shares outstanding:
Assuming full dilution 9,856 9,778 9,803
Primary 9,856 9,778 9,803
Dividends per share $ 2.04 $ 2.01 $ 2.00
Financial Position--Year-End
Cash, cash equivalents and marketable securities $ 24,239 $ 15,815 $ 47,704
Working capital 40,653 17,565 57,929
Properties and equipment, at cost less accumulated
depreciation 77,116 70,758 62,872
Total assets 505,483 430,253 404,944
Long-term debt 92,133 98,059 103,778
Stockholders' equity 186,320 137,151 133,511
Book value per share:
Assuming full dilution 18.89 14.00 13.68
Primary 18.89 14.00 13.68
Other Statistics--Continuing Operations
Net cash provided/(used) by continuing operations $ 22,682 $ 17,279 $ 15,563
Capital expenditures 18,400 13,851 8,232
Number of employees 6,602 4,834 3,856
Number of sales and service representatives 3,919 2,552 1,790
Dividend payout ratio(d) 45.7% 101.0% 125.0%
Debt to total capital ratio:
Total debt basis 35.7 43.2 44.3
Senior debt basis 35.7 43.2 44.3
Return on average equity(d) 28.4 14.3 11.6
Return on average total capital employed(d) 16.4 9.7 8.7
Current ratio 1.28 1.14 1.56
<FN>
(a) Discontinued operations data include Omnicare Inc., discontinued in 1994;
accrual adjustments in 1992, 1993 and 1994 related to the gain on the sale
of DuBois Chemicals Inc. ("DuBois"); DuBois, sold in April 1991; adjustments to
accruals in 1991 and 1988 related to operations discontinued in 1986; and Vestal
Laboratories Inc., sold in December 1986.
(b) Earnings per share assuming full dilution from continuing operations for
years prior to 1989 are greater than the corresponding primary amounts due to
the antidilutive impact of the convertible debt on earnings per common share
from continuing operations.
</TABLE>
34
<PAGE> 19
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$352,282 $340,654 $329,193 $241,446 $147,851 $125,302 $100,083
123,077 118,235 110,618 87,071 65,577 57,145 45,267
5,899 5,413 4,811 3,738 3,049 2,484 1,958
9,500 11,147 11,281 9,529 7,636 6,259 5,928
9,858 3,616 2,908 416 632 (4,930)(c) 2,021
43,109 12,938 23,274 22,972 19,730 42,351 19,837
-- -- -- -- -- 212 --
-- -- -- 732 -- -- --
52,967 16,554 26,182 24,120 20,362 37,633(c) 21,858
.98 .35 .29 .29 .35 (.18)(c) .46
5.27 1.60 2.61 2.47 2.15 3.68(c) 2.27
.98 .35 .29 .04 .07 (.55)(c) .23
5.27 1.60 2.61 2.60 2.28 4.21(c) 2.49
10,059 10,371 10,042 10,879 11,006 11,008 10,946
10,059 10,371 10,042 9,280 8,939 8,946 8,787
$ 1.97 $ 1.96 $ 1.84 $ 1.72 $ 1.60 $ 1.56 $ 1.52
$ 83,044 $ 775 $ 5,346 $ 4,033 $ 4,387 $ 26,165 $ 5,845
78,663 14,377 28,236 24,740 10,064 22,108 16,264
44,391 36,802 38,574 36,335 25,034 22,882 18,160
364,335 277,169 285,600 276,276 218,314 234,984 195,932
77,928 82,151 85,834 90,405 46,504 47,328 57,373
139,407 109,504 119,121 109,276 111,754 120,392 93,540
14.08 10.75 11.61 13.19 14.69 15.22 12.90
14.08 10.75 11.61 11.65 12.71 13.41 10.56
$ 19,572 $ 13,505 $ 9,333 $ 7,589 $ (6,335) $ (4,817) $ 737
11,416 7,128 7,723 10,259 5,597 6,475 4,476
3,325 2,965 2,851 2,633 1,796 1,657 1,221
1,665 1,409 1,356 1,223 967 853 626
37.4% 122.5% 70.5% 66.2% 70.2% 37.1% 61.0%
34.5 42.4 40.3 43.5 29.3 26.5 37.1
34.5 42.4 34.9 29.2 3.8 1.5 8.6
42.5 13.8 22.3 20.6 17.0 38.7 26.0
24.4 9.8 14.0 14.9 13.5 24.1 17.1
1.93 1.27 1.61 1.55 1.32 1.56 1.60
<FN>
(c) Included in income from continuing operations, net income and the
corresponding earnings per share amounts for 1986 is an aftertax loss of
$3,635,000 for the cost of terminating interest rate exchange arrangements.
(d) These computations are based on the net income and, with respect to return
on average capital employed, various related adjustments.
</TABLE>
35
<PAGE> 20
<TABLE>
ADDITIONAL SEGMENT DATA(a)
Chemed Corporation and Subsidiary Companies
<CAPTION>
(in thousands)
For the Years Ended December 31, 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Identifiable Assets
National Sanitary Supply $122,175 $109,952 $110,337
Roto-Rooter 127,602 125,280 79,997
Veratex 84,682 78,468 67,770
Patient Care 38,857 -- --
-------- -------- --------
Total identifiable assets 373,316 313,700 258,104
Corporate assets(b) 132,167 116,553 146,840
-------- -------- --------
Total assets $505,483 $430,253 $404,944
======== ======== ========
Capital Expenditures
National Sanitary Supply $ 6,715 $ 2,688 $ 3,949
Roto-Rooter 6,214 6,885 3,698
Veratex 2,079 3,743 448
Patient Care 2,541 -- --
-------- -------- --------
Subtotal 17,549 13,316 8,095
Corporate assets 851 535 137
-------- -------- --------
Total capital expenditures $ 18,400 $ 13,851 $ 8,232
======== ======== ========
Depreciation and Amortization(c)
National Sanitary Supply $ 4,525 $ 4,752 $ 4,716
Roto-Rooter 7,227 5,169 3,831
Veratex 2,643 2,113 162
Patient Care 718 -- --
-------- -------- --------
Subtotal 15,113 12,034 8,709
Corporate assets 694 1,089 525
-------- -------- --------
Total depreciation and amortization $ 15,807 $ 13,123 $ 9,234
======== ======== ========
Reconciliation of Operating Profit to Income
Before Income Taxes and Minority Interest
Total operating profit $ 34,463 $ 29,124 $ 21,031
Interest expense (8,807) (8,889) (5,732)
Corporate expenses, net of investment income(d) 4,118 7,695 6,885
-------- -------- --------
Income before income taxes and minority interest $ 29,774 $ 27,930 $ 22,184
======== ======== ========
<FN>
(a) The Additional Segment Data are covered by the report of independent
accountants.
(b) Corporate assets consist primarily of cash and cash equivalents, marketable
securities, properties and equipment, investment in affiliate and other
investments.
(c) Depreciation and amortization include amortization of identifiable
intangible assets, goodwill and other assets.
(d) Amounts are not allocable to segments and are included in various
categories in the Consolidated Statement of Income.
</TABLE>
36
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Chemed Corporation and Subsidiary Companies
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Significant transactions impacting the Company's consolidated cash flows
during 1994 and financial position at December 31, 1994, include the following:
--During 1994, the Company sold a total of 1.81 million shares of the capital
stock of Omnicare Inc. ("Omnicare"), a publicly traded affiliate in which
Chemed had maintained an equity interest. Aftertax cash proceeds from these
sales totaled approximately $47.3 million;
--During 1994, the Company completed the acquisition of Patient Care Inc.
("Patient Care") and five other purchase business combinations for cash
outlays aggregating $18.4 million; and
--During 1994, the Company generated net proceeds of $9.2 million from the
sale of various investments.
As a result, the Company's current ratio increased to 1.3:1 at December 31,
1994, as compared with 1.1:1 at the end of 1993. Additionally, the ratio of
total debt to total capital declined from 43% at December 31, 1993, to 36% at
the end of 1994. Excluding the debt guarantees of the ESOPs, the total debt to
total capital ratios were 25% and 29%, respectively, at December 31, 1994 and
1993.
Including the unused portion of its committed credit lines with Bank of
America and PNC Bank, the Company had $34.3 million of unused lines of
short-term credit with various banks at December 31, 1994.
CASH FLOW
<TABLE>
The Company's cash flows for 1994 and 1993 may be summarized as follows (in
millions):
<CAPTION>
For the Years Ended
December 31,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
Cash provided by operating
activities $ 23.1 $ 17.7
Capital expenditures (18.4) (13.9)
------ ------
Cash available for dividends
before other financing and
investing activities 4.7 3.8
Cash dividends (20.1) (19.7)
Net other investing/financing
activities 5.5 16.0
------ ------
Increase/(decrease) in cash
and cash equivalents $ (9.9) $ .1
====== ======
</TABLE>
The increase in cash provided by operating activities from $17.7 million in
1993 to $23.1 million in 1994 is largely attributable to increased operating
cash flow at Roto-Rooter during 1994. The increase in capital expenditures for
1994 was largely attributable to National Sanitary Supply, which exercised an
option to purchase its Los Angeles warehouse for $3.3 million. In addition,
expenditures for 1994 include $2.5 million of capital outlays by Patient Care,
acquired on January 1, 1994.
Based on recent cash and earnings projections, cash flow from operating
activities is expected to continue to grow in 1995 and later years, while the
increase in capital expenditures is expected to moderate. Management views the
Company's investment portfolio as a potential source of cash during the interim
period in which the Company's dividend payout ratio exceeds 100%. Should
favorable market conditions continue, it is anticipated that additional sales
of investments will be made in 1995. At December 31, 1994, unrealized gains on
the Company's available-for-sale investments amounted to $20.9 million
aftertax.
The Board of Directors declared a quarterly dividend of $.51 per share of
capital stock in February 1995, payable in March 1995 (the same rate paid in
each of the prior five quarters). The dividend rate is set each quarter with a
long-term perspective taking into consideration the Company's financial
position, earnings and cash flow, as well as interest rates, market conditions
and other economic factors.
COMMITMENTS
The Company's lease for corporate and general office facilities covers the
period from April 1991 to April 2006 and includes space which has been
subleased to the Company's former DuBois Chemicals Inc. subsidiary ("DuBois")
for varying terms expiring in the years 1998 through 2003. The Company had net
lease commitments aggregating $46.2 million at December 31, 1994.
Because Company contributions previously made to other benefit or retirement
plans have been used to fund ESOP debt requirements, the loss of DuBois'
contributions to the ESOPs initially had a significant impact on the funding of
the ESOPs. Since 1991, however, qualifying employees of National Sanitary
Supply and Veratex have become participants in the Company's ESOPs, and a major
portion of the ESOP loans was refinanced in January 1992 at lower interest
rates. Therefore, on both a short- and long-term basis, it is not anticipated
that the funding of ESOP contributions will have a significant impact on the
Company's ability to satisfy its long-term obligations.
37
<PAGE> 22
As a part of the DuBois sale agreement between the Company and Diversey
Corporation ("Diversey"), the Company agreed to reimburse Diversey up to a
maximum of $25.5 million for environmental cleanup and related costs arising
from the operations of DuBois prior to the sale date. At the time of the sale,
Chemed's environmental attorney estimated the extent of Chemed's liability
under the environmental indemnification sections of the sale agreement with
Diversey to be in the range of $9.5 million to $18.5 million. Furthermore, this
attorney opined that the single best estimate of Chemed's liability was $15.5
million. Accordingly, the Company accrued $15.5 million in 1991 for its
estimated share of these costs and is contingently liable for additional
cleanup and related costs up to a maximum of $10.0 million, for which no
provision has been recorded. Through December 31, 1994, the Company has
reimbursed Diversey $1.3 million for prior years' environmental and related
costs of DuBois.
The Company's various loan agreements and guarantees of indebtedness contain
certain restrictive covenants; however, management believes that such covenants
will not adversely affect the operations of the Company. Under the most
restrictive of these covenants at December 31, 1994, the Company would be
limited to incurring additional debt totaling $91,828,000 and could not permit
its net worth to fall below $149,526,000 (versus a balance of $186,320,000 at
December 31, 1994). Additionally, the Company is limited to incurring net
rentals under operating leases with terms of three years or more aggregating
$13,974,000 as compared with such rentals totaling $6,779,000 during 1994.
It is management's opinion that the Company has no long-range commitments
which would have a significant impact on its liquidity, financial condition or
the results of its operations. Due to the nature of the environmental
liabilities, it is not possible to forecast the timing of cash payments
relative to these potential liabilities. Based on the Company's available
credit lines, sources of borrowing and liquid investments, management believes
its sources of capital and liquidity are satisfactory for the Company's needs
for the foreseeable future.
RESULTS OF OPERATIONS
<TABLE>
Set forth below by business segment are data relating to growth in sales and
service revenues and operating profit margin:
<CAPTION>
Percent Increase in Sales
and Service Revenues
-------------------------
1994 1993
vs. 1993 vs. 1992
-------- --------
<S> <C> <C>
National Sanitary Supply 4% 3%
Roto-Rooter 26 30
Veratex 4 n.a.
Patient Care n.a. n.a.
Total 23 31
Operating Profit
as a Percent of Sales
and Service Revenues
(Operating Margin)
------------------------
1994 1993 1992
---- ---- ----
National Sanitary Supply 3.3% 3.1% 3.2%
Roto-Rooter 9.3 10.5 10.7
Veratex 5.7 6.2 8.0
Patient Care 4.0 n.a. n.a.
Total 5.3 5.5 5.2
</TABLE>
1994 VERSUS 1993
Sales of the National Sanitary Supply segment increased 4% to $308,280,000
in 1994. This sales increase resulted from stronger sales during the last six
months of 1994 due to an improved economic climate, especially in Southern
California, and to improved product pricing, particularly in paper and plastic
products. As a result of tight expense controls over personnel costs and other
operating expenses, the operating margin of this segment improved to 3.3%
during 1994 as compared with 3.1% in 1993.
Sales and service revenues of the Roto-Rooter segment for 1994 totaled
$171,930,000, an increase of 26% over the revenues recorded in 1993. Excluding
Encore, acquired by Roto-Rooter's and Chemed's jointly owned Service America
Systems Inc. ("Service America" -- formerly Convenient Home Services Inc.)
subsidiary, total revenues of this segment for 1994 increased 14% over revenues
recorded in 1993. Also during 1994, plumbing revenues rose 20% to $37,048,000
and drain cleaning revenues grew 9% to $52,793,000 as compared with revenues
recorded in 1993. The operating margin of the Roto-Rooter segment declined from
10.5% during
38
<PAGE> 23
1993 to 9.3% in 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 businesses. Higher material and
labor costs as a percent of sales and revenues also contributed to the lower
margins in 1994. Service America is enhancing training programs for new service
technicians to reduce material usage on service calls. The higher labor costs
resulted from expansion of the service labor force at a faster rate than the
growth rate in service contracts. During the last half of 1994, Service America
was able to bring the growth rate of the labor force into line with the growth
rate in service contracts. The trend of higher labor costs as a percent of
sales and service revenues is not expected to continue in 1995. Partially
offsetting this margin decline was continued improvement in Roto-Rooter's
insurance claims experience which had a favorable impact of 1.5 percentage
points on this segment's operating margin.
Sales of the Veratex segment for 1994 totaled $95,753,000, an increase
of 4% over sales for 1993. The operating margin of the Veratex segment declined
from 6.2% in 1993 to 5.7% in 1994 primarily due to nonrecurring expenses
aggregating $648,000 for the cost of staff reductions and refocusing marketing
efforts. Excluding these charges, the operating margin during 1994 was 6.3%.
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, totaled
$69,064,000, an increase of 29% over the revenues Patient Care recorded during
1993. Patient Care contributed $2,790,000 to the Company's operating profit in
1994.
Consolidated sales and service revenues for 1994 totaled $645,027,000,
an increase of 23% over revenues recorded in 1993. Excluding the sales of
Patient Care and Encore, total sales and service revenues for 1994 increased 6%
over revenues recorded in 1993. The consolidated operating margin for 1994 was
5.3% as compared with 5.5% in 1993.
Income from operations increased 18% from $23,163,000 in 1993 to
$27,406,000 in 1994, primarily as a result of the acquisition of Patient Care
and higher levels of operating profits in the Roto-Rooter and National Sanitary
Supply segments. Partially offsetting these increases were nonrecurring charges
of $1,705,000 in 1994.
Other income--net for 1994 totaled $11,175,000 as compared with
$13,656,000 for 1993, a decline of $2,481,000. This decline was attributable to
smaller gains on the sales of investments ($5,471,000 in 1994 versus $6,695,000
in 1993) and lower interest income in 1994 due to a lower average balance in
cash and marketable securities.
For 1994, the Company's effective tax rate was 36.8% as compared with 33.2%
in 1993, primarily due to a higher effective state and local tax rate in 1994.
In addition, a lower ESOP dividend tax credit and lower favorable tax
adjustments (as a percent of pretax income) in 1994 contributed to the higher
effective rate.
Income from continuing operations declined slightly from $14,843,000 ($1.52
per share) in 1993 to $14,532,000 ($1.47 per share) in 1994, largely as a
result of the previously mentioned nonrecurring expenses ($1,107,000 aftertax
or $.12 per share). Excluding these expenses, income from continuing
operations increased 5% from $14,843,000 ($1.52 per share) in 1993 to
$15,639,000 ($1.59 per share) in 1994.
Net income for 1994 increased 125% to $43,922,000 ($4.46 per share)
from $19,480,000 ($1.99 per share) in 1993, primarily as the result of the
gains on sales of Omnicare stock recorded in 1994 ($23,358,000 or $2.37 per
share).
1993 VERSUS 1992
Sales of the National Sanitary Supply segment increased 3% to $296,865,000 in
1993. This sales advance was achieved by a unit volume increase of 5%, offset
in part by industry-wide deflationary pricing. As a result of tight expense
controls over personnel costs and bad debt expenses, the operating margin of
this segment declined only slightly during 1993.
Sales and services revenues of the Roto-Rooter segment for 1993 totaled
$136,428,000, an increase of 30% over the revenues recorded in 1992. Excluding
the Encore acquisition, total revenues of this segment for 1993 increased 13%
over revenues recorded in 1992. Also during 1993, plumbing revenues rose 21% to
$30,749,000 and drain cleaning revenues increased 10% to $48,384,000 as
compared with revenues recorded in 1992. The operating margin of the
Roto-Rooter segment declined slightly from 10.7% during 1992 to 10.5% in 1993,
primarily due to the acquisition of Encore, which has lower operating margins
than Roto-Rooter's other businesses.
39
<PAGE> 24
Sales of the Veratex segment, acquired effective December 1, 1992, for 1993
totaled $91,800,000, an increase of 8% over full-year sales for 1992. During
1993, Veratex contributed $5,660,000 to the Company's operating profit as
compared with $607,000 for the month of December 1992. The operating margin of
8.0% recorded in December 1992 was unusually high due to three extra selling
days falling in that month.
Consolidated sales and service revenues for 1993 totaled $525,093,000,
an increase of 31% over revenues recorded in 1992. Excluding the sales of
Veratex and Encore, total sales and service revenues for 1993 increased 5% over
revenues recorded in 1992. The improvement of the total operating margin from
5.2% in 1992 to 5.5% in 1993 was largely attributable to the acquisition of
Veratex late in 1992.
Income from operations increased 53% from $15,180,000 in 1992 to
$23,163,000 in 1993, primarily as a result of the acquisitions of Veratex and
Encore.
Interest expense increased by $3,157,000 from $5,732,000 in 1992 to
$8,889,000 in 1993, largely as a result of the issuance in December 1992 of the
$50,000,000 8.15% Senior Notes, due 2004. Lower interest expense on the ESOP
debt, coupled with the scheduled repayment of $21,000,000 of Series A and B
Senior Notes (which carried interest rates slightly in excess of 10% per
annum), partially offset the increased interest expense of the 8.15% Senior
Notes.
Other income--net for 1993 totaled $13,656,000 as compared with
$12,736,000 for 1992, an increase of $920,000. This increase was attributable
to larger gains on the sales of investments ($6,695,000 in 1993 versus
$2,877,000 in 1992), partially offset by lower interest income in 1993. The
decline in interest income primarily was due to lower interest rates on cash
equivalents and marketable securities in 1993.
For 1993, the Company's effective tax rate was 33.2% as compared with 29.4%
in 1992, primarily due to a higher effective state and local tax rate in 1993.
In addition, a lower ESOP dividend tax credit and a lower domestic dividend
exclusion (as a percent of pretax income) in 1993 contributed to the higher
effective rate.
Income from continuing operations increased 19% from $12,506,000 ($1.28 per
share) in 1992 to $14,843,000 ($1.52 per share) in 1993, as a result of the
higher level of investment gains in 1993 ($4,274,000 after taxes or $.44 per
share in 1993 versus $1,899,000 after taxes or $.20 per share in 1992).
Net income for 1993 increased 24% to $19,480,000 ($1.99 per share) from
$15,651,000 ($1.60 per share). Earnings for 1993 included $1,651,000 ($.17 per
share) from the cumulative effect of adopting Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes."
REPORTING ON ADVERTISING COSTS
In December 1993, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") No. 93-7, "Reporting on Advertising Costs," which
requires that advertising costs, except costs of direct response advertising,
be expensed no later than the period in which the advertising first takes
place. Adoption of this statement is required for fiscal years beginning after
June 15, 1994.
Because substantially all of the Company's advertising costs relate to
either direct response advertising or are expensed within the period in which
the advertising first appears, adoption of SOP No. 93-7 in 1995 will not
materially impact the Company's results of operations or financial position.
40
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CHEMED CORPORATION
The following is a list of subsidiaries of the Company as of
December 31, 1994. Other subsidiaries which have been omitted from the list
would not, when considered in the aggregate, constitute a significant
subsidiary. Each of the companies is incorporated under the laws of the state
following its name. The percentage given for each company represents the
percentage of voting securities of such company owned by the Company or, where
indicated, subsidiaries of the Company as at December 31, 1994.
All of the majority owned companies listed below are included
in the consolidated financial statements as of December 31, 1994. All 20% to
50%-owned companies listed below are included in the consolidated financial
statements on an equity basis, except as noted below.
Alan Home Health Agency, Inc. (New Jersey, 100% by Patient
Care, Inc.)
Amira Services, Inc. (Florida, 100% by Service America Systems,
Inc.)
Cardinal Paper Company (Oklahoma, 100% by Century Papers, Inc.)
Century Papers, Inc. (Texas, 100% by National Sanitary Supply
Company)
Encore Service Systems, Inc. (Florida, 100% by Service America
Systems, Inc.)
Encore Maintenance and Management, Inc. (Florida, 100% by
Encore Service Systems, Inc.)
Jet Resource, Inc. (Delaware, 100%)
National Home Care, Inc. (New York, 100% by Patient Care, Inc.)
National Sanitary Supply Company (Delaware, 88%)
National Sanitary Supply Development, Inc. (Delaware, 100% by
National Sanitary Supply Company)
Nurotoco of Massachusetts, Inc. (Massachusetts, 100% by
Roto-Rooter Services Company)
Nurotoco of New Jersey, Inc. (Delaware, 80% by Roto-Rooter
Services Company)
OCR Holding Company (Nevada, 100%)
Omnia, Inc. (Delaware, 100% by OCR Holding Company)
Patient Care, Inc. (Delaware, 100% by Chemed Corporation)
Patient Care Medical Services, Inc. (New Jersey, 100% by
Patient Care)
Roto-Rooter Corporation (Iowa, 100% by Roto-Rooter, Inc.)
Roto-Rooter Development Company (Delaware, 100% by Roto-Rooter
Corporation)
Roto-Rooter, Inc. (Delaware, 60%)
Roto-Rooter Management Company (Delaware, 100% by Roto-Rooter,
Inc.)
Roto-Rooter Services Company (Iowa, 100% by Roto-Rooter, Inc.)
RR Plumbing Services Corporation (New York, 49% by Roto-Rooter
Services Company; included within the consolidated financial
statements as a consolidated subsidiary)
Service America Systems, Inc. (Florida, 70% by Roto-Rooter,
Inc. and 30% by Chemed)
Tidi Products, Inc. (Delaware, 100% by OCR Holding Company)
Unidisco, Inc. (Delaware, 100% by OCR Holding Company)
The Veratex Corporation (Delaware, 100% by OCR Holding Company)
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-28594, 33-9549, 2-87202, 2-80712 and 33-65244)
of Chemed Corporation of our report dated February 1, 1995 appearing on page 17
of the 1994 Annual Report to Stockholders which is incorporated in this Annual
Report on Form 10-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears on page S-2 of this
Form 10-K.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
March 28, 1995
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 18, 1995
/s/ J. Peter Grace
----------------------------------
J. Peter Grace
<PAGE> 2
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 14, 1995
/s/ James A. Cunningham
----------------------------
James A. Cunningham
<PAGE> 3
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 15, 1995
/s/ James H. Devlin
----------------------------
James H. Devlin
<PAGE> 4
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 18, 1995
/s/ Charles H. Erhart, Jr.
----------------------------
Charles H. Erhart, Jr.
<PAGE> 5
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 22, 1995
/s/ Joel F. Gemunder
-------------------------------
Joel F. Gemunder
<PAGE> 6
<PAGE> 7
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 10, 1995
/s/ William R. Griffin
----------------------------
William R. Griffin
<PAGE> 8
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 17, 1995
/s/ Thomas C. Hutton
---------------------------
Thomas C. Hutton
<PAGE> 9
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as her true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 20, 1995
/s/ Sandra E. Laney
----------------------------
Sandra E. Laney
<PAGE> 10
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 14, 1995
/s/ Kevin J. McNamara
-----------------------------
Kevin J. McNamara
<PAGE> 11
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 16, 1995
/s/ John M. Mount
-----------------------------
John M. Mount
<PAGE> 12
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 13, 1995
/s/ D. Walter Robbins, Jr.
----------------------------------
D. Walter Robbins, Jr.
<PAGE> 13
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 13, 1995
/s/ Paul C. Voet
--------------------------
Paul C. Voet
<PAGE> 14
POWER OF ATTORNEY
-----------------
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true
and lawful attorneys-in-fact for the purpose of signing the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and all amendments
thereto, to be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 10, 1995
/s/ Hugh A. Westbrook
-----------------------------
Hugh A. Westbrook
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1994 FOR CHEMED CORPORATION AND IS QUALILFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000019584
<NAME> CHEMED CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,722
<SECURITIES> 19,517
<RECEIVABLES> 84,796
<ALLOWANCES> (2,974)
<INVENTORY> 60,273
<CURRENT-ASSETS> 183,319
<PP&E> 117,491
<DEPRECIATION> (40,375)
<TOTAL-ASSETS> 505,483
<CURRENT-LIABILITIES> 142,666
<BONDS> 92,133
<COMMON> 12,369
0
0
<OTHER-SE> 173,951
<TOTAL-LIABILITY-AND-EQUITY> 505,483
<SALES> 415,807
<TOTAL-REVENUES> 645,027
<CGS> 284,973
<TOTAL-COSTS> 427,669
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,855
<INTEREST-EXPENSE> 8,807
<INCOME-PRETAX> 29,774
<INCOME-TAX> 10,954
<INCOME-CONTINUING> 14,532
<DISCONTINUED> 29,390
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,922
<EPS-PRIMARY> 4.46
<EPS-DILUTED> 4.46
</TABLE>
