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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, 1995
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 11, 1996 ($37.625 per
share), was $362,985,080.
At March 11, 1996, 9,880,122 shares of Chemed Corporation Capital Stock
(par value $1 per share) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
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1995 Annual Report to Stockholders (Specified Portions) Parts I, II and IV
Proxy Statement for Annual Meeting Part III
to be held May 20, 1996.
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CHEMED CORPORATION
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
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PAGE
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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.............................................. 9
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........................................................... 10
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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, 1995, the Company had received cash payments totaling
$215,738,000.
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 2.8 percent 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 aggregating
$2,000,000 will be made in equal amounts on March 31, 1996 and March 31, 1997.
In July 1995, the Company's Omnia Group (formerly Veratex Group) completed
the sale of the business and assets of its Veratex Retail division to Henry
Schein, Inc. ("HSI") for $10 million in cash plus a $4.1 million note payment
for which was received in December 1995. An additional payment of up to $2
million, contingent upon the combined sales of Veratex Retail and HSI's retail
group for the year-ended July 7, 1996, may be due from HSI in 1996.
During 1995, the Company conducted its business operations in four
segments: National Sanitary Supply Company ("National Sanitary Supply"),
Roto-Rooter, Inc. ("Roto-Rooter"), Omnia Group ("Omnia") 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, 1993,
1994 and 1995, are shown in the "Sales and Profit Statistics by Business
Segment" and the "Additional Segment Data" on pages 32, 33 and 36 of the 1995
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 1995 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 1995, 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 58 percent-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.
Federal, state and local governmental agencies accounted for approximately
6 percent of National Sanitary Supply's total sales for 1995. These sales are
2
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attributable to over 1,200 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 15 percent of sales in 1995. This
customer is a fast-food restaurant chain consisting of approximately 1,370
franchises and 130 company-owned restaurants. Sales to this customer consisted
primarily of low-margin food-service products such as paper napkins, plates and
cups. On November 22, 1995, the Company announced the expected loss of a
majority of sales to Sonic Corporation during the first quarter of 1996. 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.
OMNIA
In distributing medical and dental products, Omnia competes with
manufacturers and distributors of disposable paper, cotton and gauze products.
Omnia 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.
Omnia has contracts with several customers, the loss of any one or more of
which could have a material adverse effect on 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.
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
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environmental cleanup and related costs arising from the sale of DuBois up to a
maximum of $25,500,000. The Company had 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 1996 and 1997 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, 1995, Chemed had a total of 7,335 employees; 7,278 were
located in the United States and 57 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 eleven 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
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NATIONAL SANITARY SUPPLY COMPANY
<S> <C> <C> <C>
Los Angeles, CA Office, manufacturing and 165,000 sq. ft. 25,000 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 -- 26,000 sq. ft.
center
Tupelo, MS Office and distribution -- 33,000 sq. ft.
center
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<TABLE>
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Location Type Owned Leased
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(NATIONAL SANITARY SUPPLY COMPANY - CONTINUED)
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Kansas City, MO Office and distribution -- 25,000 sq. ft.
center
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 -- 21,000 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 -- 75,000 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>
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Location Type Owned Leased
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(NATIONAL SANITARY SUPPLY COMPANY - CONTINUED)
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Branch Sales Branch sales offices 3,000 sq. ft. 182,000 sq. ft.
Offices (1)
ROTO-ROOTER, INC.
Cincinnati, OH Office and service 24,000 sq. ft. 24,000 sq. ft.
facilities
West Des Moines Office, manufacturing and 29,000 sq. ft. --
IA distribution facilities
Northeastern Office and service 43,000 sq. ft. 47,000 sq. ft.
U.S. Area (2) facilities
Central U.S. Office and service 27,000 sq. ft. 41,000 sq. ft.
Area (3) facilities
Mid-Atlantic Office and service 54,000 sq. ft. 81,000 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 -- 13,000 sq. ft.
facilities
OMNIA
Troy, MI (7) Office -- 15,000 sq. ft.
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 (8) Office, manufacturing and 132,000 sq. ft. --
distribution center
PATIENT CARE
New Jersey (9) Office - 60,000 sq. ft.
Connecticut (10) Office - 11,000 sq. ft.
New York (11) Office - 34,000 sq. ft.
CORPORATE
CORPORATE (12)
- --------------
Cincinnati, OH Corporate offices and -- 48,000 sq. ft.
related facilities
</TABLE>
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<TABLE>
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(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, Staten Island, Rochester, Farmingdale and Hawthorne, New York; and Cranston,
Rhode Island.
(3) Comprising locations in Atlanta and Decator, Georgia; Birmingham, Alabama; 0Charlotte, North Carolina; Hilliard and
Cleveland, Ohio; Memphis and Nashville, Tennessee; Wilmerding, Pennsylvania; St. Louis, Missouri; and Little Rock, Arkansas.
(4) Comprising locations in Pennsauken and North Brunswick, New Jersey; Jacksonville, Medley, Pompano Beach, Ft. Myers, St.
Petersburg, Boca Raton, Daytona Beach, Miami 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; Winnipeg, Manitoba; and Boucherville, Quebec.
(7) Excludes 81,000 square feet of office and distribution facilities that housed the Veratex Retail operation, which was sold
in July 1995. The lease on these facilities expires in 1997. These facilities are vacant as of December 31, 1995, while
opportunities to sublet the property are explored.
(8) Excludes 36,000 square feet of office, manufacturing and warehouse facilities in Pomona, California that are sublet to an
outside third party.
(9) Comprising locations in Milburn, Princeton, Ridgewood, Somerville, Spring Lake, Trenton, Montclair, Upper Montclair,
Westfield, Orange and West Orange, New Jersey.
(10) Comprising locations in Greenwich, Madison, Newington and Danbury, Connecticut.
(11) Comprising locations in Brooklyn, Manhattan, Queens, Bronx and Staten Island, New York.
(12) Excludes 92,000 square feet in current Cincinnati, Ohio office facilities that are sublet to outside parties - portions of
this space may revert to the Company beginning in the year 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.
EXECUTIVE OFFICERS OF THE COMPANY
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Name Age Office First Elected
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Edward L. Hutton 76 Chairman and Chief Executive Officer November 3, 1993 (1)
Kevin J. McNamara 42 President August 2, 1994 (2)
Paul C. Voet 49 Executive Vice President May 20, 1991 (3)
Timothy S. O'Toole 40 Executive Vice President and May 18, 1992 (4)
Treasurer
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Sandra E. Laney 52 Senior Vice President and Chief November 3, 1993 (5)
Administrative Officer
Arthur V. Tucker, 46 Vice President and Controller May 20, 1991 (6)
Jr.
(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.
(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. Mr. O'Toole is Chairman and Chief Executive
Officer of Patient Care, Inc. and has held these positions since April
1995.
(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, Jr. 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.
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 20, 1996.
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 1994 and 1995 are set forth below.
<TABLE>
<CAPTION>
Closing
-------
Dividends Paid
High Low Per Share
----------------------------------------------------------------------------
1995
----
<S> <C> <C> <C>
First Quarter $33-7/8 $31-1/4 $.51
Second Quarter 35-7/8 30-3/4 .51
Third Quarter 36-1/2 33-1/2 .52
Fourth Quarter 40-1/8 34-5/8 .52
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
</TABLE>
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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 11, 1996, there were approximately 5,950 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,
1995 is set forth on pages 34 and 35 of the 1995 Annual Report to Stockholders
and 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 1995 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 5, 1996, appearing on pages 17 through 30 of
the 1995 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:
Edward L. Hutton Walter L. Krebs
James A. Cunningham Sandra E. Laney
James H. Devlin Kevin J. McNamara
Charles H. Erhart, Jr. John M. Mount
Joel F. Gemunder Timothy S. O'Toole
William R. Griffin D. Walter Robbins, Jr.
Thomas C. Hutton Paul C. Voet
George J. Walsh III
The additional information required under this Item with respect to the
directors and executive officers is set forth in the Company's 1996 Proxy
Statement and in Part I hereof under the caption "Executive Officers of the
Registrant" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth in the Company's 1996 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 1996 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 1996 Proxy
Statement, which is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
EXHIBITS
<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.*
10.4 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. 7 to Employment Contracts with Executives.**
10.15 1995 Stock Incentive Plan.**
10.16 Split Dollar Agreement with Executives.**
10.17 Split Dollar Agreement with Edward L. Hutton.**
10.18 Split Dollar Agreement with Paul C. Voet.**
10.19 Amendment No. 6 to Employment Agreement with Edward L. Hutton.*,**
11. Statement re: Computation of Earnings Per Common Share.
13. 1995 Annual Report to Stockholders.
21. Subsidiaries of Chemed Corporation.
23. Consent of Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule +
</TABLE>
* This exhibit is being filed by means of incorporation by reference
(see Index to Exhibits on page E-1). Each other exhibit is being file
with this Annual Report on Form 10-K.
** Management contract or compensatory plan or arrangement.
+ Not filed herewith.
10
<PAGE> 13
FINANCIAL STATEMENT SCHEDULE
See Index to Financial Statements and Financial Statement Schedule on page
S-1.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 1995.
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 26, 1996 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> <C>
/s/ Edward L. Hutton Chairman and Chief
----------------------- Executive Officer
Edward L. Hutton and a Director (Principal Executive
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,Jr. Vice President and Controller March 26, 1996
----------------------- (Principal Accounting Officer)
Arthur V. Tucker, Jr.
James A. Cunningham* Walter L. Krebs*
James H. Devlin* Sandra E. Laney*
Charles H. Erhart, Jr.* Kevin J. McNamara*
Joel F. Gemunder* John M. Mount* --Directors
William R. Griffin* D. Walter Robbins, Jr.*
Thomas C. Hutton* Paul C. Voet*
George J. Walsh III*
- ------------------------
</TABLE>
* 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.
March 26, 1996 /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
1993, 1994 AND 1995
CHEMED CORPORATION CONSOLIDATED FINANCIAL PAGE(S)
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
<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 II -- Valuation and Qualifying Accounts................ S-3
</TABLE>
*
Indicates page numbers in Chemed Corporation 1995 Annual Report to Stockholders.
________________________
The consolidated financial statements of Chemed Corporation listed above,
appearing in the 1995 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.
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 5, 1996 appearing on page 17 of the 1995 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 5, 1996
S-2
<PAGE> 16
SCHEDULE II
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 1995......... $ (2,974) $(2,443) $ (72) $ - $ 1,970 $ (3,519)
========= ======== ======= ========= ======== =========
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)
========= ======== ======= ========= ======== =========
Allowances for doubtful
accounts - notes
receivable (d) -
For the year 1995......... $ (267) $ (64) $ 72 $ - $ 12 $ (247)
========= ======== ======== ========= ======== =========
For the year 1994......... $ (493) $ (81) $ - $ - $ 307 $ (267)
========= ======== ======== ========= ======== =========
For the year 1993......... $ (312) $ (253) $ - $ - $ 72 $ (493)
========= ======== ======== ========= ======== =========
</TABLE>
_________________________
(a) Amounts are presented on a continuing operations basis.
(b) Deductions include accounts considered uncollectible or written off,
payments, companies divested, etc.
(c) Classified in consolidated balance sheet as a reduction of accounts
receivable.
(d) Classified in consolidated balance sheet as a reduction of other assets.
S-3
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number
or
Incorporation by Reference
--------------------------------
Exhibit File No. and Previous
Number Filing Date Exhibt No.
- ------- ------------ -----------
<S> <C> <C> <C>
3.1 Certificate of Incorporation of Form S-3 4.1
Chemed Corporation Reg. No. 33-44177
11/26/91
3.2 By-Laws of Chemed Corporation Form 10-K 3
3/28/89
10.1 Agreement and Plan of Merger Form 8-K 1
among Diversey U.S. Holdings, 3/11/91
Inc., D.C. Acquisition Inc.,
Chemed Corporation and DuBois
Chemicals, Inc., dated as of
February 25, 1991
10.2 Stock Purchase Agreement between Form 10-K 5
Omnicare, Inc. and Chemed 3/25/93
Corporation dated as of August 5,
1992
10.4 1981 Stock Incentive Plan, as Form 10- K 7
amended through May 20, 1991 3/27/92
10.5 1983 Incentive Stock Option Plan, Form 10-K 8
as amended through May 20, 1991 3/27/92
10.6 1986 Stock Incentive Plan, as Form 10-K 9
amended through May 20, 1991 3/27/92
10.7 1988 Stock Incentive Plan, as Form 10-K 10
amended through 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 Form 10-K 11
Plan, as amended through 3/28/89
November 3, 1988
10.10 Excess Benefits Plan, as amended Form 10-Q 3
effective November 1, 1985 11/12/85
10.11 Non-Employee Directors' Deferred Form 10-K 12
Compensation Plan 3/24/88
10.12 Directors Emeriti Plan Form 10-Q 2
5/12/88
10.13 Employee Contracts with Form 10-K 18
Executives 3/28/89
10.14 Amendment No. 7 to Employment *
Contracts with Executives
10.15 1995 Stock Incentive Plan *
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Page Number
or
Incorporation by Reference
-----------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
<S> <C> <C> <C>
10.16 Split Dollar Agreements *
10.17 Split Dollar Agreement with *
Edward L. Hutton
10.18 Split Dollar Agreement with *
Paul C. Voet
10.19 Amendment No. 6 to Employment Form 10-K 10.14
Agreement with Edward L. Hutton 3/28/95
11 Statement re: Computation of *
Earnings Per Common Share
13 1995 Annual Report to Stockholders *
21 Subsidiaries of Chemed Corporation *
23 Consent of Independent Accountants *
24 Powers of Attorney *
27 Financial Data Schedule +
- --------------------
</TABLE>
* Filed herewith.
+ Not filed herewith.
2
<PAGE> 1
EXHIBIT 10.14
AMENDMENT NO. 7
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 15, 1995 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, May 17, 1993 and May 16, 1994
("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 15, 1995, as
follows:
A. The date, amended as of May 16, 1994, set forth in Section 1.2
of the Employment Agreement, is hereby deleted and the date of
May 3, 2000 is hereby substituted therefor.
B. The base salary amount set forth in the first sentence of
Section 2.1 of the Employment Agreement is hereby deleted and
the base salary amount of $________ per annum is hereby
substituted.
C. The amount of unrestricted stock award recognized in lieu of
incentive compensation in 1994 is $____________.
D. Section 3.1(b) is hereby deleted and Section 3.1(c) is
renumbered as Section 3.1(b) reading as follows:
Section 3.1(b) The termination by the Company of the
Employee's employment for Cause pursuant to Section 3.3. The
termination by the Company of Employee's employment hereunder
for any reason other than those specified in paragraphs (a)
and (b) above shall hereinafter be referred to as a
termination "Without Cause". Any disability of an Employee
shall not be grounds for termination.
E. Section 3.2 is hereby deleted.
Except as specifically amended in this Amendment No. 7 to
Employment Agreement, the Employment Agreement, as amended, shall continue in
full force and effect in accordance with its terms, conditions and provisions.
<PAGE> 2
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of the date first above written.
EMPLOYEE
_____________________
CHEMED CORPORATION
_____________________
<PAGE> 3
SCHEDULE TO EXHIBIT 10.14
<TABLE>
<CAPTION>
Current
Current Current (a) Expiration
Salary and Stock Award Date of
Name and Position Age Bonus Compensation Agreement
- ----------------- --- ---------- ------------ ----------
<S> <C> <C> <C> <C>
K. J. McNamara 42 $246,000 $18,025 5/3/2000
President 35,750
P. C. Voet 49 264,500 88,219 5/3/2000
Executive Vice President 85,000
T. C. Hutton 45 147,700 11,069 5/3/2000
Vice President 15,200
T. S. O'Toole 40 150,000 33,217 5/3/2000
Executive Vice President 22,300
and Treasurer
D. M. Laney 54 112,500 -- 5/3/2000
Vice President 17,200
S. E. Laney 52 148,000 20,025 5/3/2000
Senior Vice President 32,500
and Chief Administrative
Officer
A. V. Tucker 46 98,500 4,112 5/3/2000
Vice President and 16,000
Controller
____________________________
</TABLE>
(a) Amount of unrestricted stock award recognized in lieu of incentive
compensation in 1994.
<PAGE> 1
EXHIBIT 10.15
===============================================================================
CHEMED CORPORATION
1995 STOCK INCENTIVE PLAN
MAY 15, 1995
===============================================================================
<PAGE> 2
CHEMED CORPORATION
1995 STOCK INCENTIVE PLAN
1. PURPOSES: The purposes of this Plan are (a) to secure for the
Corporation the benefits of incentives inherent in ownership of Capital Stock
by Key Employees, (b) to encourage Key Employees to increase their interest in
the future growth and prosperity of the Corporation and to stimulate and
sustain constructive and imaginative thinking by Key Employees, (c) to further
the identification of interest of those who hold positions of major
responsibility in the Corporation and its Subsidiaries with the interests of
the Corporation's stockholders, (d) to induce the employment or continued
employment of Key Employees and (e) to enable the Corporation to compete with
other organizations offering similar or other incentives in obtaining and
retaining the services of competent executives.
2. DEFINITIONS: Unless otherwise required by the context, the
following terms when used in this Plan shall have the meanings set forth in
this section 2.
BOARD OF DIRECTORS: The Board of Directors of the Corporation.
CAPITAL STOCK: The Capital Stock of the Corporation, par value
$1.00 per share, or such other class of shares or other securities as may be
applicable pursuant to the provisions of section 8.
CORPORATION: Chemed Corporation, a Delaware corporation.
FAIR MARKET VALUE: As applied to any date, the mean between the
high and low sales prices of a share of Capital Stock on the principal stock
exchange on which the Corporation is listed, or, if it is not so listed, the
mean between the bid and the ask prices of a share of Capital Stock in the
over-the-counter market as reported by the National Association of Securities
Dealers Automated Quotation System on such date or, if no such sales or prices
were made or quoted on such date, on the next preceding date on which there
were sales or quotes of Capital Stock on such exchange or market, as the case
may be; provided, however, that, if the Capital Stock is not so listed or
quoted, Fair Market Value shall be determined in accordance with the method
approved by the Incentive Committee, and, provided further, if any of the
foregoing methods of determining Fair Market Value shall not be consistent with
the regulations of the Secretary of the Treasury or his delegate at the time
applicable to a Stock Incentive of the type involved, Fair Market Value in the
case of such Stock Incentive shall be determined in accordance with such
regulations and shall mean the value as so determined.
<PAGE> 3
INCENTIVE COMMITTEE: The Incentive Committee designated to
administer this Plan pursuant to the provisions of section 10.
INCENTIVE COMPENSATION: Bonuses, extra and other compensation
payable in addition to a salary or other base amount, whether contingent or
discretionary or required to be paid pursuant to an agreement, resolution or
arrangement, and whether payable currently or on a deferred basis, in cash,
Capital Stock or other property, awarded by the Corporation or a Subsidiary
prior or subsequent to the date of the approval and adoption of this Plan by
the stockholders of the Corporation.
KEY EMPLOYEE: An employee of the Corporation or of a Subsidiary
who in the opinion of the Incentive Committee can contribute significantly to
the growth and successful operations of the Corporation or a Subsidiary. The
grant of a Stock Incentive to an employee by the Incentive Committee shall be
deemed a determination by the Incentive Committee that such employee is a Key
Employee. For the purposes of this Plan, a director or officer of the
Corporation or of a Subsidiary shall be deemed an employee regardless of
whether or not such director or officer is on the payroll of, or otherwise paid
for services by, the Corporation or a Subsidiary.
OPTION: An option to purchase shares of Capital Stock.
PERFORMANCE UNIT: A unit representing a share of Capital Stock,
subject to a Stock Award, the issuance, transfer or retention of which is
contingent, in whole or in part, upon attainment of a specified performance
objective or objectives, including, without limitation, objectives determined
by reference to or changes in (a) the Fair Market Value, book value or earnings
per share of Capital Stock, or (b) sales and revenues, income, profits and
losses, return on capital employed, or net worth of the Corporation (on a
consolidated or unconsolidated basis) or of any one or more of its groups,
divisions, Subsidiaries or departments, or (c) a combination of two or more of
the foregoing factors.
PLAN: The 1995 Stock Incentive Plan herein set forth as the
same may from time to time be amended.
STOCK AWARD: An issuance or transfer of shares of Capital Stock
at the time the Stock Incentive is granted or as soon thereafter as
practicable, or an undertaking to issue or transfer such shares in the future,
including, without limitation, such an issuance, transfer or undertaking with
respect to Performance Units.
STOCK INCENTIVE: A stock incentive granted under this Plan in
one of the forms provided for in section 3.
2
<PAGE> 4
SUBSIDIARY: A corporation or other form of business association
of which shares (or other ownership interests) having 50% or more of the voting
power are owned or controlled, directly or indirectly, by the Corporation.
3. GRANTS OF STOCK INCENTIVES:
(a) Subject to the provisions of this Plan, the Incentive
Committee may at any time, or from time to time, grant Stock Incentives under
this Plan to, and only to, Key Employees.
(b) Stock Incentives may be granted in the following forms:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) and (d) of this
section 4 and of section 8, the aggregate number of shares of Capital Stock
which may be issued or transferred pursuant to Stock Incentives granted under
this Plan shall not exceed 500,000 shares.
(b) The maximum aggregate number of shares of Capital Stock
which may be issued or transferred under the Plan to directors of the
Corporation or of a Subsidiary shall not exceed 100,000 shares.
(c) Authorized but unissued shares of Capital Stock and shares
of Capital Stock held in the treasury, whether acquired by the Corporation
specifically for use under this Plan or otherwise, may be used, as the
Incentive Committee may from time to time determine, for purposes of this Plan,
provided, however, that any shares acquired or held by the Corporation for the
purposes of this Plan shall, unless and until transferred to a Key Employee in
accordance with the terms and conditions of a Stock Incentive, be and at all
times remain treasury shares of the Corporation, irrespective of whether such
shares are entered in a special account for purposes of this Plan, and shall be
available for any corporate purpose.
(d) If any shares of Capital Stock subject to a Stock Incentive
shall not be issued or transferred and shall cease to be issuable or
transferable because of the termination, in whole or in part, of such Stock
Incentive or for any other reason, or if any such shares shall, after issuance
or transfer, be reacquired by the Corporation or a Subsidiary because of an
employee's failure to comply with the terms and conditions of a
3
<PAGE> 5
Stock Incentive, the shares not so issued or transferred, or the shares so
reacquired by the Corporation or a Subsidiary shall no longer be charged
against any of the limitations provided for in paragraphs (a) or (b) of this
section 4 and may again be made subject to Stock Incentives.
5. STOCK AWARDS: Stock Incentives in the form of Stock Awards shall
be subject to the following provisions:
(a) A Stock Award shall be granted only in payment of Incentive
Compensation that has been earned or as Incentive Compensation to be earned,
including, without limitation, Incentive Compensation awarded concurrently with
or prior to the grant of the Stock Award.
(b) For the purposes of this Plan, in determining the value of
a Stock Award, all shares of Capital Stock subject to such Stock Award shall be
valued at not less than 100% of the Fair Market Value of such shares on the
date such Stock Award is granted, regardless of whether or when such shares are
issued or transferred to the Key Employee and whether or not such shares are
subject to restrictions which affect their value.
(c) Shares of Capital Stock subject to a Stock Award may be
issued or transferred to the Key Employee at the time the Stock Award is
granted, or at any time subsequent thereto, or in installments from time to
time, as the Incentive Committee shall determine. In the event that any such
issuance or transfer shall not be made to the Key Employee at the time the
Stock Award is granted, the Incentive Committee may provide for payment to such
Key Employee, either in cash or in shares of Capital Stock from time to time or
at the time or times such shares shall be issued or transferred to such Key
Employee, of amounts not exceeding the dividends which would have been payable
to such Key Employee in respect of such shares (as adjusted under section 8) if
they had been issued or transferred to such Key Employee at the time such Stock
Award was granted. Any amount payable in shares of Capital Stock under the
terms of a Stock Award may, at the discretion of the Corporation, be paid in
cash, on each date on which delivery of shares would otherwise have been made,
in an amount equal to the Fair Market Value on such date of the shares which
would otherwise have been delivered.
(d) A Stock Award shall be subject to such terms and
conditions, including, without limitation, restrictions on sale or other
disposition of the Stock Award or of the shares issued or transferred pursuant
to such Stock Award, as the Incentive Committee shall determine; provided,
however, that upon the issuance or transfer of shares pursuant to a Stock
Award, the recipient shall, with respect to such shares, be and become a
stockholder of the Corporation fully entitled to receive
4
<PAGE> 6
dividends, to vote and to exercise all other rights of a stockholder except to
the extent otherwise provided in the Stock Award. Each Stock Award shall be
evidenced by a written instrument in such form as the Incentive Committee shall
determine, provided the Stock Award is consistent with this Plan and
incorporates it by reference.
6. OPTIONS: Stock Incentives in the form of Options shall be subject
to the following provisions:
(a) Upon the exercise of an Option, the purchase price shall be
paid in cash or, if so provided in the Option or in a resolution adopted by the
Incentive Committee (and subject to such terms and conditions as are specified
in the Option or by the Incentive Committee), in shares of Capital Stock or in
a combination of cash and such shares. Shares of Capital Stock thus delivered
shall be valued at their Fair Market Value on the date of exercise. Subject to
the provisions of section 8, the purchase price per share shall be not less
than 100% of the Fair Market Value of a share of Capital Stock on the date the
Option is granted.
(b) Each Option shall be exercisable in full or in part one
year after the date the Option is granted, or may become exercisable in one or
more installments and at such time or times, as the Incentive Committee shall
determine. Unless otherwise provided in the Option, an Option, to the extent it
is or becomes exercisable, may be exercised at any time in whole or in part
until the expiration or termination of the Option. Subject to the first
sentence of this paragraph, any term or provision in any outstanding Option
specifying when the Option is exercisable or that it be exercisable in
installments may be modified at any time during the life of the Option by the
Incentive Committee, provided, however, no such modification of an outstanding
Option shall, without the consent of the optionee, adversely affect any Option
theretofore granted to him. Subject to the preceding provisions of this
paragraph, an Option will become immediately exercisable in full if at any time
during the term of the Option the Corporation obtains actual knowledge that any
of the following events has occurred, irrespective of the applicability of any
limitation on the number of shares then exercisable under the Option: (1) any
person within the meaning of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), other than the Corporation or any of its
subsidiaries, has become the beneficial owner, within the meaning of Rule 13d-3
under the 1934 Act, of 30 percent or more of the combined voting power of the
Corporation's then outstanding voting securities; (2) the expiration of a
tender offer or exchange offer, other than an offer by the Corporation,
pursuant to which 20 percent or more of the shares of the Corporation's Capital
Stock have been purchased; (3) the stockholders of the Corporation have
approved (i) an agreement to merge or
5
<PAGE> 7
consolidate with or into another corporation and the Corporation is not the
surviving corporation or (ii) an agreement to sell or otherwise dispose of all
or substantially all of the assets of the Corporation (including a plan of
liquidation); or (4) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors cease for
any reason to constitute at least a majority thereof, unless the nomination for
the election by the Corporation's stockholders of each new director was
approved by a vote of at least one-half of the persons who were directors at
the beginning of the two-year period.
(c) Each Option shall be exercisable during the life of the
optionee only by him or a transferee or assignee permitted by paragraph (f) of
this section (6) and, after his death, only by his estate or by a person who
acquired the right to exercise the Option pursuant to one of the provisions of
paragraph (f) of this section (6). An Option, to the extent that it shall not
have been exercised, shall terminate when the optionee ceases to be an employee
of the Corporation or a Subsidiary, unless he ceases to be an employee because
of his resignation with the consent of the Incentive Committee (which consent
may be given before or after resignation), or by reason of his death,
incapacity or retirement under a retirement plan of the Corporation or a
Subsidiary. Except as provided in the next sentence, if the optionee ceases to
be an employee by reason of such resignation, the Option shall terminate three
months after he ceases to be an employee. If the optionee ceases to be an
employee by reason of such death, incapacity or retirement, or if he should die
during the three-month period referred to in the preceding sentence, the Option
shall terminate fifteen months after he ceases to be an employee. Where an
Option is exercised more than three months after the optionee ceased to be an
employee, the Option may be exercised only to the extent it could have been
exercised three months after he ceased to be an employee. A leave of absence
for military or governmental service or for other purposes shall not, if
approved by the Incentive Committee, be deemed a termination of employment
within the meaning of this paragraph (c); provided, however, that an Option may
not be exercised during any such leave of absence. Notwithstanding the
foregoing provisions of this paragraph (c) or any other provision of this Plan,
no Option shall be exercisable after expiration of the term for which the
Option was granted, which shall in no event exceed ten years. Where an Option
is granted for a term of less than ten years, the Incentive Committee, may, at
any time prior to the expiration of the Option, extend its term for a period
ending not later than ten years from the date the Option was granted. Such an
extension shall not be deemed the grant of an Option under this Plan.
(d) Options shall be granted for such lawful consideration as the
Incentive Committee shall determine.
6
<PAGE> 8
(e) Neither the Corporation nor any Subsidiary may directly or
indirectly lend any money to any person for the purpose of assisting him to
purchase or carry shares of Capital Stock issued or transferred upon the
exercise of an Option.
(f) No Option nor any right thereunder may be assigned or transferred
by the optionee except:
(i) by will or the laws of descent and distribution;
(ii) pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986, as
amended, or by the Employee Retirement Income
Security Act of 1974, as amended, or the rules
thereunder;
(iii) by an optionee who, at the time of the transfer, is
not subject to the provisions of Section 16 of the
1934 Act, provided such transfer is to or for the
benefit of (including but not limited to trusts for
the benefit of) the optionee's spouse or lineal
descendants of the optionee's parents; or
(iv) by an optionee who, at the time of the transfer, is
subject to the provisions of Section 16 of the 1934
Act, to the extent, if any, such transfer would be
permitted under Securities and Exchange Commission
Rule 16b-3 or any successor rule thereto, as such
rule or any successor rule thereto may be in effect
at the time of the transfer.
If so provided in the Option or if so authorized by the Incentive
Committee and subject to such terms and conditions as are specified in the
Option or by the Incentive Committee, the Corporation may, upon or without the
request of the holder of the Option and at any time or from time to time,
cancel all or a portion of the Option then subject to exercise and either (i)
pay the holder an amount of money equal to the excess, if any, of the Fair
Market Value, at such time or times, of the shares subject to the portion of
the Option so canceled over the aggregate purchase price of such shares, or
(ii) issue or transfer shares of Capital Stock to the holder with a Fair Market
Value, at such time or times, equal to such excess.
(g) Each Option shall be evidenced by a written instrument, which
shall contain such terms and conditions, and shall be in such form, as the
Incentive Committee may determine, provided the Option is consistent with this
Plan and incorporates it by reference. Notwithstanding the preceding sentence,
an Option, if so granted by the Incentive Committee, may include restrictions
7
<PAGE> 9
and limitations in addition to those provided for in this Plan.
(h) Any federal, state or local withholding taxes payable by an
optionee or awardee upon the exercise of an Option or upon the removal of
restrictions of a Stock Award shall be paid in cash or in such other form as
the Incentive Committee may authorize from time to time, including the
surrender of shares of Capital Stock or the withholding of shares of Capital
Stock to be issued to the optionee or awardee. All such shares so surrendered
or withheld shall be valued at Fair Market Value on the date such are
surrendered to the Corporation or authorized to be withheld.
7. COMBINATIONS OF STOCK AWARDS AND OPTIONS: Stock Incentives
authorized by paragraph (b)(iii) of section 3 in the form of combinations of
Stock Awards and Options shall be subject to the following provisions:
(a) A Stock Incentive may be a combination of any form of Stock
Award with any form of Option; provided, however, that the terms and conditions
of such Stock Incentive pertaining to a Stock Award are consistent with section
5 and the terms and conditions of such Stock Incentive pertaining to an Option
are consistent with section 6.
(b) Such combination Stock Incentive shall be subject to such
other terms and conditions as the Incentive Committee may determine, including,
without limitation, a provision terminating in whole or in part a portion
thereof upon the exercise in whole or in part of another portion thereof. Such
combination Stock Incentive shall be evidenced by a written instrument in such
form as the Incentive Committee shall determine, provided it is consistent with
this Plan and incorporates it by reference.
8. ADJUSTMENT PROVISIONS: In the event that any recapitalization, or
reclassification, split-up or consolidation of shares of Capital Stock shall be
effected, or the outstanding shares of Capital Stock are, in connection with a
merger or consolidation of the Corporation or a sale by the Corporation of all
or a part of its assets, exchanged for a different number or class of shares of
stock or other securities of the Corporation or for shares of the stock or
other securities of any other corporation, or a record date for determination
of holders of Capital Stock entitled to receive a dividend payable in Capital
Stock shall occur (a) the number and class of shares or other securities that
may be issued or transferred pursuant to Stock Incentives, (b) the number and
class of shares or other securities which have not been issued or transferred
under outstanding Stock Incentives, (c) the purchase price to be paid per share
or other security under outstanding Options, and (d) the price to be paid per
share or other security by the Corporation or a Subsidiary for shares or other
securities issued or transferred pursuant to Stock Incentives which are subject
to
8
<PAGE> 10
a right of the Corporation or a Subsidiary to reacquire such shares or other
securities, shall in each case be equitably adjusted.
9. TERM: This Plan shall be deemed adopted and shall become
effective on the date it is approved and adopted by the stockholders of the
Corporation. No Stock Incentives shall be granted under this Plan after May
15, 2005.
10. ADMINISTRATION:
(a) The Plan shall be administered by the Incentive Committee,
which shall consist of no fewer than three persons designated by the Board of
Directors. Grants of Stock Incentives may be made by the Incentive Committee
either in or without consultation with employees, but, anything in this Plan to
the contrary notwithstanding, the Incentive Committee shall have full authority
to act in the matter of selection of all Key Employees and in determining the
number of Stock Incentives to be granted to them.
(b) The Incentive Committee may establish such rules and
regulations, not inconsistent with the provisions of this Plan, as it deems
necessary to determine eligibility to participate in this Plan and for the
proper administration of this Plan, and may amend or revoke any rule or
regulation so established. The Incentive Committee may make such
determinations and interpretations under or in connection with this Plan as it
deems necessary or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Corporation, its
Subsidiaries, its stockholders and all employees, and upon their respective
legal representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them.
(c) Members of the Board of Directors and members of the
Incentive Committee acting under this Plan shall be fully protected in relying
in good faith upon the advice of counsel and shall incur no liability except
for gross negligence or willful misconduct in the performance of their duties.
11. GENERAL PROVISIONS:
(a) Nothing in this Plan nor in any instrument executed
pursuant hereto shall confer upon any employee any right to continue in the
employ of the Corporation or a Subsidiary, or shall affect the right of the
Corporation or of a Subsidiary to terminate the employment of any employee with
or without cause.
(b) No shares of Capital Stock shall be issued or transferred
pursuant to a Stock Incentive unless and until all legal requirements
applicable to the issuance or transfer of such
9
<PAGE> 11
shares, in the opinion of counsel to the Corporation, have been complied with.
In connection with any such issuance or transfer, the person acquiring the
shares shall, if requested by the Corporation, give assurances, satisfactory to
counsel to the Corporation, that the shares are being acquired for investment
and not with a view to resale or distribution thereof and assurances in respect
of such other matters as the Corporation or a Subsidiary may deem desirable to
assure compliance with all applicable legal requirements.
(c) No employee (individually or as a member of a group), and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any shares of Capital Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Incentive except
as to such shares of Capital Stock, if any, as shall have been issued or
transferred to him.
(d) The Corporation or a Subsidiary may, with the approval of
the Incentive Committee, enter into an agreement or other commitment to grant a
Stock Incentive in the future to a person who is or will be a Key Employee at
the time of grant, and, notwithstanding any other provision of this Plan, any
such agreement or commitment shall not be deemed the grant of a Stock Incentive
until the date on which the Company takes action to implement such agreement or
commitment.
(e) In the case of a grant of a Stock Incentive to an employee
of a Subsidiary, such grant may, if the Incentive Committee so directs, be
implemented by the Corporation issuing or transferring the shares, if any,
covered by the Stock Incentive to the Subsidiary, for such lawful consideration
as the Incentive Committee may specify, upon the condition or understanding
that the Subsidiary will transfer the shares to the employee in accordance with
the terms of the Stock Incentive specified by the Incentive Committee pursuant
to the provisions of this Plan. Notwithstanding any other provision hereof,
such Stock Incentive may be issued by and in the name of the Subsidiary and
shall be deemed granted on the date it is approved by the Incentive Committee,
on the date it is delivered by the Subsidiary or on such other date between
said two dates, as the Incentive Committee shall specify.
(f) The Corporation or a Subsidiary may make such provisions as
it may deem appropriate for the withholding of any taxes which the Corporation
or a Subsidiary determines it is required to withhold in connection with any
Stock Incentive.
(g) Nothing in this Plan is intended to be a substitute for, or
shall preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or fringe benefits to
employees generally, or to any
10
<PAGE> 12
class or group of employees, which the Corporation or any Subsidiary or other
affiliate now has or may hereafter lawfully put into effect, including, without
limitation, any retirement, pension, group insurance, stock purchase, stock
bonus or stock option plan.
12. AMENDMENTS AND DISCONTINUANCE:
(a) This Plan may be amended by the Board of Directors upon the
recommendation of the Incentive Committee, provided that, without the approval
of the stockholders of the Corporation, no amendment shall be made which (i)
increases the aggregate number of shares of Capital Stock that may be issued or
transferred pursuant to Stock Incentives as provided in paragraph (a) of
section 4, (ii) increases the maximum aggregate number of shares of Capital
Stock that may be issued or transferred under the Plan to directors of the
Corporation or of a Subsidiary as provided in paragraph (b) of section 4, (iii)
withdraws the administration of this Plan from the Incentive Committee, (iv)
permits any person who is not at the time a Key Employee of the Corporation or
of a Subsidiary to be granted a Stock Incentive, (v) permits any Option to be
exercised more than ten years after the date it is granted, (vi) amends section
9 to extend the date set forth therein or (vii) amends this section 12.
(b) Notwithstanding paragraph (a) of this section 12, the Board
of Directors may amend the Plan to take into account changes in applicable
securities laws, federal income tax laws and other applicable laws. Should the
provisions of Rule 16b-3, or any successor rule, under the Securities Exchange
Act of 1934 be amended, the Board of Directors may amend the Plan in accordance
therewith.
(c) The Board of Directors may by resolution adopted by a
majority of the entire Board of Directors discontinue this Plan.
(d) No amendment or discontinuance of this Plan by the Board of
Directors or the stockholders of the Corporation shall, without the consent of
the employee, adversely affect any Stock Incentive theretofore granted to him.
11
<PAGE> 1
EXHIBIT 10.16
CHEMED
SPLIT DOLLAR AGREEMENT
This Agreement, made on June 1, 1995, by and between Chemed
Corporation ("the Corporation"), a Delaware corporation with offices at 2600
Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202 and
_________________ (the "Employee"), who is an employee of the Corporation.
1. PREMISES
1.1 The Employee is a valuable employee of the
Corporation. He/she wishes to provide adequate
protection for his/her family by insuring his/her
life. The Corporation will assist the Employee in
providing this insurance coverage by payment of
part of the premiums under a split dollar
arrangement, whereby the Employee will be the
owner of a life insurance policy which will be
collaterally assigned to the Corporation as
security for amounts the Corporation will
contribute for the premium payments.
2. APPLICATION FOR INSURANCE
2.1 The Employee has applied to Phoenix Home Life
Mutual Insurance Company for an Executive Equity
Life Insurance Plan on the life of the Employee
for $_______ ("Policy").
3. POLICY OWNERSHIP
3.1 The Employee shall own the Policy and may
exercise all rights of ownership with respect to
<PAGE> 2
it, subject only to the security interest of the Corporation
as expressed in this Agreement and the collateral assignment
of the Policy to the Corporation.
4. PAYMENT OF PREMIUMS
4.1 On or before the due date of each annual premium
on the Policy, the Corporation will pay to Phoenix Home Life
Mutual Insurance Company an amount equal to the greater of 80
percent of the annual premium or the annual premium less the
economic benefit cost received by the Employee (as measured by
the Phoenix Home Life term insurance rates) for the portion of
the insurance which the beneficiary or beneficiaries named by
the Employee or their transferee would be entitled to receive
if the Employee died during the policy year for which the
annual premium is paid.
4.2 On or before the due date of each annual premium on the
Policy, the Corporation will pay to Phoenix Home Life Mutual
Insurance Company, on behalf of the Employee, the remainder
of the annual premium. This payment will constitute
compensation to the Employee in the form of a bonus and will
be considered paid by the
2
<PAGE> 3
Employee for purposes of the Assignment (as
defined in Article 5).
4.3 These premium advances by the Corporation
shall apply specifically to annual premiums due
under the Policy up to the Employee's age of 65.
However, additional premium advances may be made
by mutual agreement of the parties.
5. ASSIGNMENT OF POLICY
5.1 The Employee shall collaterally assign the
Policy to the Corporation so as to reflect the
respective interests of the parties under this
Agreement, said collateral assignment
("Assignment") having been executed by the parties
on the date of this Split Dollar Agreement, and
thus made a part of such Policy and this
Agreement.
6. USE OF DIVIDENDS
6.1 The dividends declared by Phoenix Home Life
Mutual Insurance Company on the Policy will be
used to purchase Option Term with the balance used
to purchase paid-up insurance.
6.2 The dividend option which is specified in
paragraph 6.1 of this Article will not be
terminated or changed without a conforming
amendment to this Agreement and unless such change
is done in accordance with the provisions
3
<PAGE> 4
of Part D "Joint Rights" section of the
Assignment.
7. SURRENDER OF POLICY
7.1 The Employee shall have the sole and
exclusive right to surrender the Policy.
7.2 If the Policy is surrendered, the Employee
shall direct the insurance company in writing to
draw a check payable to the Corporation in an
amount equal to the "Assignee's Cash Value
Rights", as defined within the provisions of Part A
"Definitions" section of the Assignment.
7.3 If there is a delay in the surrender of the
Policy by either party to this Agreement, and if
such delay results in diminished policy values
being available to either party, neither party to
this Agreement shall hold the insurance company
liable for such diminution in Policy values.
8. DEATH CLAIMS
8.1 Upon the death of the Employee, the
Corporation shall have an interest in the proceeds
of the Policy equal to the "Assignee's Death
Benefit Share", as defined within the provisions
of Part A "Definitions" section of the Assignment.
The balance of proceeds remaining shall be paid
directly by the
4
<PAGE> 5
insurance company to the beneficiary or
beneficiaries designated in the Policy.
9. TERMINATION OF AGREEMENT
9.1 This Agreement shall terminate upon surrender
of the Policy by the Employee or upon thirty (30)
days' written notice of termination given by
either party to the other by registered mail at
the party's last known address.
9.2 Prior to termination of this Agreement, the
Employee shall direct the insurance company in
writing to draw a check payable to the Corporation
for an amount equal to the "Assignee's Cash Value
Interest", as defined within the provisions of
Part A "Definitions" section of the Assignment.
Upon receipt of this amount, the Corporation shall
release the security interest of the Corporation
expressed in this Agreement and the Assignment.
10. SPECIAL PROVISIONS
The following provisions are part of this Plan and
are intended to meet the requirements of the
Employee Retirement Income Security Act of 1974:
10.01 - The named fiduciary: The
Secretary of the Company
10.02 - The funding policy under this
Plan is that all premiums on the
Policy
5
<PAGE> 6
be remitted to the Insurer when
due.
10.03 - Direct payment by the
Insurer is the basis of payment
of benefits under this Plan, with
those benefits in turn being based
on the payment of premiums as
provided in the Plan.
10.04 - For claims procedure purposes,
the "Claims Manager" shall be the
Secretary of the Company.
(a) If for any reason a claim
for benefits under this Plan
is denied by the Company, the
Claims Manager shall deliver
to the claimant a written
explanation setting forth
the specific reasons for the
denial, pertinent references
to the Plan section on which
the denial is based, such
other data as may be
pertinent and information on
the procedures to be followed
by the claimant in obtaining
a review of his claim, all
6
<PAGE> 7
written in a manner calculated to be
understood by the claimant. For this
purpose:
(1) The claimant's claim shall be
deemed filed when presented
orally or in writing to the Claims
Manager.
(2) The Claims Manager's explanation
shall be in writing delivered to
the claimant within 90 days of
the date the claim is filed.
(b) The claimant shall have 60 days
following his/her receipt of the
denial of the claim to file with the
Claims Manager a written request for
review of the denial. For such review,
the claimant or his/her representative
may submit pertinent documents and
written issues and comments.
(c) The Claims Manager shall decide the
issue on review and
7
<PAGE> 8
furnish the claimant with a copy within
60 days of receipt of the
claimant's request for review of
his/her claim. The decision on review
shall be in writing and shall include
specific reasons for the decision
written in a manner calculated to be
understood by the claimant, as well as
specific references to the pertinent
Plan provisions on which the decision
is based. If a copy of the decision is
not so furnished to the claimant within
such 60 days, the claims shall be
deemed denied on review.
11. AMENDMENT AND BINDING EFFECT
11.1 This embodies all agreements by the parties
made with respect to the Policy. The Agreement
shall not be modified or amended except by a
writing signed by the parties. The Agreement
shall be binding upon the parties, their heirs,
legal representatives, successors and assigns.
8
<PAGE> 9
12. GOVERNING LAW
12.1 This Agreement shall be subject to and shall
be construed under the laws of the State of Ohio.
Executed by the parties at Cincinnati, Ohio, as of June 1, 1995.
CHEMED CORPORATION
________________________ By: __________________________
Witness Signature, Corporate Title
________________________ By: ___________________________
Witness Employee/Insured
9
<PAGE> 10
SCHEDULE TO EXHIBIT 10.16
<TABLE>
<CAPTION>
Name Position Policy Face Amount
- ---- -------- ------------------
<S> <C> <C>
Kevin J. McNamara President $1,968,000
James H. Devlin Vice President 1,489,390
Timothy S. O'Toole Executive Vice President 1,200,000
and Treasurer
Sandra E. Laney Senior Vice President and 1,184,000
and Chief Administrative
Officer
Thomas C. Hutton Vice President 1,033,900
Arthur V. Tucker Vice President and 689,500
Controller
</TABLE>
10
<PAGE> 1
EXHIBIT 10.17
SPLIT DOLLAR AGREEMENT
This Agreement, made on February 28, 1995, by and between
Chemed Corporation ("the Corporation"), a Delaware corporation with offices at
2600 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202, and Edward A.
Hutton, Thomas C. Hutton and Jenny Hutton Jacoby ("the Trustees"), as Trustees
under the Kathryn Jane Hutton and Edward L. Hutton Irrevocable Insurance Trust
Agreement dated January 25, 1990 ("the Trust").
1. PREMISES
1.1 Edward L. Hutton is an employee of the
Corporation and has created the Trust. The
Trustees wish to insure the lives of Mr. Hutton
and his wife, Kathryn J. Hutton, for the benefit
and protection of their family. The Corporation
will help the Trustees provide this insurance
coverage by payment of part of the premiums under
a split dollar arrangement, whereby the Trustees
will be the owner of a life insurance policy which
will be collaterally assigned to the Corporation
as security for amounts the Corporation will
contribute for the premium payments.
2. APPLICATION FOR INSURANCE
2.1 The Trustees have applied to Phoenix Home
Life Mutual Insurance Company for a Survivorship
Whole Life Policy on the lives of Edward L.
<PAGE> 2
Hutton and Kathryn J. Hutton for $5,000,000
("Policy").
3. POLICY OWNERSHIP
3.1 The Trustees shall own the Policy and may
exercise all rights of ownership with respect to
it, subject only to the security interest of the
Corporation as expressed in this Agreement and the
collateral assignment of the Policy to the
Corporation.
4. PAYMENT OF PREMIUMS
4.1 On or before the due date of each annual
premium on the Policy, the Corporation will pay to
Phoenix Home Life Mutual Insurance Company an
amount equal to the lesser of 84 percent of the
annual premium or the annual premium less the cost
(calculated by application of P. S. No. 38 or P.
S. No. 58 or Phoenix Home Life individual term
rates, whichever is applicable) of the portion of
the insurance which the beneficiary or
beneficiaries named by the Trustees would be
entitled to receive if the survivor of Mr. Hutton
and Mrs. Hutton died during the policy year for
which the annual premium is paid.
4.2 On or before the due date of each annual
premium on the Policy, the Corporation will pay
to Phoenix Home Life Mutual Insurance Company,
2
<PAGE> 3
on behalf of the Trustees, the remainder of the
annual premium. This payment will constitute
compensation to Mr. Hutton in the form of a bonus
during his lifetime and in the form of deferred
compensation after his death if he dies before
Mrs. Hutton, and will be considered paid by the
Trustees for purposes of the Assignment (as
defined in Article 5).
4.3 These premium advances by the Corporation
shall apply specifically to the first ten annual
premiums due under the Policy. However,
additional premium advances may be made by mutual
agreement of the parties.
5. ASSIGNMENT OF POLICY
5.1 The Trustees shall collaterally assign the
Policy to the Corporation so as to reflect the
respective interests of the parties under this
Agreement, said collateral assignment
("Assignment") having been executed by the parties
on the date of this Split Dollar Agreement, and
thus made a part of such Policy and this
Agreement.
6. USE OF DIVIDENDS
6.1 The dividends declared by Phoenix Home Life
Mutual Insurance Company on the Policy will be
used to purchase paid-up insurance.
3
<PAGE> 4
6.2 The dividend option which is specified in
paragraph 6.1 of this Article will not be
terminated or changed without a conforming
amendment to this Agreement and unless such change
is done in accordance with the provisions of Part
D "Joint Rights" section of the Assignment.
7. SURRENDER OF POLICY
7.1 The Trustees shall have the sole and
exclusive right to surrender the Policy.
7.2 If the Policy is surrendered, the Trustees
shall direct the insurance company in writing to
draw a check payable to the Corporation in an
amount equal to the "Assignee's Cash Value
Rights", as defined within the provisions of Part
A "Definitions" section of the Assignment.
7.3 If there is a delay in the surrender of the
Policy by either party to this Agreement, and if
such delay results in diminished policy values
being available to either party, neither
party to this Agreement shall hold the insurance
company liable for such diminution in Policy
values.
8. DEATH CLAIMS
8.1 Upon the death of the last to die of Mr. and
Mrs. Hutton, the Corporation shall have an
4
<PAGE> 5
interest in the proceeds of the Policy equal to
the "Assignee's Death Benefit Share", as defined
within the provisions of Part A "Definitions"
section of the Assignment. The balance of
proceeds remaining shall be paid directly by the
insurance company to the beneficiary or
beneficiaries designated in the Policy.
9. TERMINATION OF AGREEMENT
9.1 This Agreement shall terminate upon surrender
of the Policy by the Trustees or upon thirty (30)
days' written notice of termination given by
either party to the other by registered mail at
the party's last known address; provided, however,
that the Corporation shall not exercise such
termination right before February 28, 2005.
9.2 Prior to termination of this Agreement, the
Trustees shall direct the insurance company in
writing to draw a check payable to the Corporation
for an amount equal to the "Assignee's Cash Value
Interest", as defined within the provisions of
Part A "Definitions" section of the Assignment.
Upon receipt of this amount, the Corporation shall
release the security interest of the Corporation
expressed in this Agreement and the Assignment.
5
<PAGE> 6
10. SPECIAL PROVISIONS
The following provisions are part of this Plan and
are intended to meet the requirements of the
Employee Retirement Income Security Act of 1974:
10.01 - The named fiduciary: The
Secretary of the Company
10.02 - The funding policy under
this Plan is that all premiums on
the Policy be remitted to the
Insurer when due.
10.03 - Direct payment by the
Insurer is the basis of payment of
benefits under this Plan, with
those benefits in turn being based
on the payment of premiums as
provided in the Plan.
10.04 - For claims procedure
purposes, the "Claims Manager"
shall be the Secretary of
the Company.
(a) If for any reason a
claim for benefits under this
Plan is denied by the
Company, the
Claims Manager shall deliver
to the claimant a written
explanation setting forth the
specific reasons for the
6
<PAGE> 7
denial, pertinent references
to the Plan section on which
the denial is based, such
other data as may be pertinent
and information on the
procedures to be followed by
the claimant in obtaining a
review of his claim, all
written in a manner calculated
to be understood by the
claimant. For this
purpose:
(1) The claimant's claim
shall be deemed filed when
presented orally or in
writing to the Claims Manager.
(2) The Claims Manager's
explanation shall be in
writing delivered
to the claimant within 90 days
of the date the claim is
filed.
(b) The claimant shall have 60
days following his/her receipt
of the denial of the claim to
file with the Claims Manager a
7
<PAGE> 8
written request for review
of the denial. For such
review, the claimant or
his/her representative may
submit pertinent documents
and written issues and
comments.
(c) The Claims Manager shall
decide the issue on review
and furnish the claimant with
a copy within 60 days of
receipt of the claimant's
request for review of his/her
claim. The decision on
review shall be in writing
and shall include specific
reasons for the decision
written in a manner
calculated to be understood
by the claimant, as well as
specific references to the
pertinent Plan provisions on
which the decision is based.
If a copy of the decision is
not so furnished to the
claimant within such 60 days,
the claims shall be deemed
denied on review.
8
<PAGE> 9
11. AMENDMENT AND BINDING EFFECT
11.1 This embodies all agreements by the parties
made with respect to the Policy. The Agreement
shall not be modified or amended except by a
writing signed by the parties. The Agreement
shall be binding upon the parties, their heirs,
legal representatives, successors and assigns.
12. GOVERNING LAW
12.1 This Agreement shall be subject to and shall
be construed under the laws of the State of Ohio.
Executed by the parties at Cincinnati, Ohio, as of
February 28, 1995.
CHEMED CORPORATION
/s/ Mary R. Busam By: /s/ David G. Sparks, V.P.
- --------------------- --------------------------
Witness Signature, Corporate Title
TRUSTEES
/s/ Sandra Laney By: /s/ Edward A. Hutton
- --------------------- --------------------------
Witness Edward A. Hutton
/s/ Joyce A. Lawrence By: /s/ Thomas C. Hutton
- --------------------- --------------------------
Witness Thomas C. Hutton
/s/ Joan P. Chard By: /s/ Jenny Hutton Jacoby
- --------------------- --------------------------
Witness Jenny Hutton Jacoby
9
<PAGE> 1
EXHIBIT 10.18
SPLIT DOLLAR AGREEMENT
This Agreement, made on June 1, 1995, by and between Chemed
Corporation ("the Corporation"), a Delaware corporation with offices at 2600
Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202, and Judy A. Voet
("the Trustee"), as Trustee under The Paul C. Voet Irrevocable Insurance Trust
Agreement dated August 18, 1994 ("the Trust").
1. PREMISES
1.1 Paul C. Voet is an employee of the
Corporation and has created the Trust. The
Trustee wishes to insure the life of Mr. Voet for
the benefit and protection of Mr. Voet's family.
The Corporation will help the Trustee provide this
insurance coverage by payment of part of the
premiums under a split dollar arrangement, whereby
the Trustee will be the owner of a life insurance
policy which will be collaterally assigned to the
Corporation as security for amounts the
Corporation will contribute for the premium
payments.
2. APPLICATION FOR INSURANCE
2.1 The Trustee has applied to Phoenix Home Life
Mutual Insurance Company for an Executive Equity
Life Insurance Plan on the life of Mr. Voet for
$2,116,000 ("Policy").
<PAGE> 2
3. POLICY OWNERSHIP
3.1 The Trustee shall own the Policy and may
exercise all rights of ownership with respect to
it, subject only to the security interest of the
Corporation as expressed in this Agreement and the
collateral assignment of the Policy to the
Corporation.
4. PAYMENT OF PREMIUMS
4.1 On or before the due date of each annual
premium on the Policy, the Corporation will pay to
Phoenix Home Life Mutual Insurance Company an
amount equal to the greater of 80 percent of the
annual premium or the annual premium less the cost
(calculated by application of Internal Revenue
Service Table PS-58) of the portion of the
insurance which the beneficiary or beneficiaries
named by Mr. Voet or their transferee would be
entitled to receive if Mr. Voet died during the
policy year for which the annual premium is paid.
4.2 On or before the due date of each annual
premium on the Policy, the Corporation will pay to
Phoenix Home Life Mutual Insurance Company, on
behalf of the Trustee, the remainder of the annual
premium. This payment will constitute
compensation to Mr. Voet in the form of a bonus
2
<PAGE> 3
and will be considered paid by the Trustee for
purposes of the Assignment (as defined in Article
5).
4.3 These premium advances by the Corporation
shall apply specifically to annual premiums due
under the Policy up to Mr. Voet's age of 65.
However, additional premium advances may be made
by mutual agreement of the parties.
5. ASSIGNMENT OF POLICY
5.1 The Trustee shall collaterally assign the
Policy to the Corporation so as to reflect the
respective interests of the parties under this
Agreement, said collateral assignment
("Assignment") having been executed by the parties
on the date of this Split Dollar Agreement, and
thus made a part of such Policy and this
Agreement.
6. USE OF DIVIDENDS
6.1 The dividends declared by Phoenix Home Life
Mutual Insurance Company on the Policy will be
used to purchase Option Term with the balance used
to purchase paid-up insurance.
6.2 The dividend option which is specified in
paragraph 6.1 of this Article will not be
terminated or changed without a conforming
amendment to this Agreement and unless such
3
<PAGE> 4
change is done in accordance with the provisions
of Part D "Joint Rights" section of the
Assignment.
7. SURRENDER OF POLICY
7.1 The Trustee shall have the sole and exclusive
right to surrender the Policy.
7.2 If the Policy is surrendered, the Trustee
shall direct the insurance company in writing to
draw a check payable to the Corporation in an
amount equal to the "Assignee's Cash Value
Rights", as defined within the provisions of Part
A "Definitions" section of the Assignment.
7.3 If there is a delay in the surrender of the
Policy by either party to this Agreement, and if
such delay results in diminished policy values
being available to either party, neither party to
this Agreement shall hold the insurance company
liable for such diminution in Policy values.
8. DEATH CLAIMS
8.1 Upon the death of Mr. Voet the Corporation
shall have an interest in the proceeds of the
Policy equal to the "Assignee's Death Benefit
Share", as defined within the provisions of Part A
"Definitions" section of the Assignment. The
balance of proceeds remaining shall be paid
4
<PAGE> 5
directly by the insurance company to the
beneficiary or beneficiaries designated in the
Policy.
9. TERMINATION OF AGREEMENT
9.1 This Agreement shall terminate upon surrender
of the Policy by the Trustee or upon thirty (30)
days' written notice of termination given by
either party to the other by registered mail at
the party's last known address.
9.2 Prior to termination of this Agreement, the
Trustee shall direct the insurance company in
writing to draw a check payable to the Corporation
for an amount equal to the "Assignee's Cash
Value Interest", as defined within the provisions
of Part A "Definitions" section of the Assignment.
Upon receipt of this amount, the Corporation shall
release the security interest of the Corporation
expressed in this Agreement and the Assignment.
10. SPECIAL PROVISIONS
The following provisions are part of this Plan and
are intended to meet the requirements of the
Employee Retirement Income Security Act of 1974:
10.01 - The named fiduciary: The
Secretary of the Company
5
<PAGE> 6
10.02 - The funding policy under
this Plan is that all
premiums on the Policy be
remitted to the Insurer when
due.
10.03 - Direct payment by the
Insurer is the basis of
payment of benefits under
this Plan, with those
benefits in turn being based
on the payment of premiums as
provided in the Plan.
10.04 - For claims procedure
purposes, the "Claims Manager"
shall be the Secretary of the
Company.
(a) If for any reason a claim for
benefits under this Plan is
denied by the Company, the
Claims Manager shall deliver
to the claimant a written
explanation setting forth the
specific reasons for the
denial, pertinent references
to the Plan section on which
the denial is based, such
other data as may be
pertinent and information on
the procedures to be followed
by
6
<PAGE> 7
the claimant in obtaining a review of
his claim, all written in a manner
calculated to be understood by the
claimant. For this purpose:
(1) The claimant's claim shall be
deemed filed when presented
orally or in writing to the
Claims Manager.
(2) The Claims Manager's
explanation shall be in
writing delivered to the
claimant within 90 days of
the date the claim is filed.
(b) The claimant shall have 60 days
following his/her receipt of the denial
of the claim to file with the Claims
Manager a written request for review of
the denial. For such review, the
claimant or his/her representative may
submit pertinent documents and written
issues and comments.
7
<PAGE> 8
(c) The Claims Manager shall decide
the issue on review and furnish the
claimant with a copy within 60 days
of receipt of the claimant's
request for review of his/her
claim. The decision on review
shall be in writing and shall
include specific reasons for the
decision written in a manner
calculated to be understood by the
claimant, as well as specific
references to the pertinent Plan
provisions on which the decision is
based. If a copy of the decision is
not so furnished to the claimant
within such 60 days, the claims
shall be deemed denied on
review.
11. AMENDMENT AND BINDING EFFECT
11.1 This embodies all agreements by the parties
made with respect to the Policy. The Agreement
shall not be modified or amended except by a
writing signed by the parties. The Agreement
shall be binding upon the parties,
8
<PAGE> 9
their heirs, legal representatives, successors
and assigns.
12. GOVERNING LAW
12.1 This Agreement shall be subject to and shall
be construed under the laws of the State of Ohio.
Executed by the parties at Cincinnati, Ohio, as of June 1, 1995.
CHEMED CORPORATION
/s/ Sandra Kraus By: /s/ Naomi C. Dallob, Secretary
- ------------------------ ------------------------------
Witness Signature, Corporate Title
/s/ Nancy A. Zink By: /s/ Judy J. Voet, Trustee
- ------------------------ ------------------------------
Witness Trustee
9
<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>
=========================================================================================================
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 percent.
</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>
=========================================================================================================
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> 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>
=========================================================================================================
1995
-------------------------------
Income from
Continuing
Operations Net Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computation of Earnings per Common and Common Equivalent
Share: (a)
Reported Income . . . . . . . . . . . . . . . . . . . . $ 20,439 $ 23,182
========== ==========
Average number of shares used to compute
earnings per common share . . . . . . . . . . . . . . 9,861 9,861
Effect of unexercised stock options . . . . . . . . . . 50 50
---------- ----------
Average number of shares used to compute earnings per
common and common equivalent share. . . . . . . . . . . $ 9,911 $ 9,911
========== ==========
Earnings per common and common
equivalent share . . . . . . . . . . . . . . . . . . $ 2.06 $ 2.34
========== ==========
Computation of Earnings per Common Share Assuming Full
Dilution: (a)
Reported income . . . . . . . . . . . . . . . . . . . . $ 20,439 $ 23,182
========== ==========
Average number of shares used to compute
earnings per common share . . . . . . . . . . . . . . 9,861 9,861
Effect of unexercised stock options . . . . . . . . . . 83 83
---------- ----------
Average number of shares used to compute
earnings per common share assuming full dilution. . . 9,944 9,944
========== ==========
Earnings per share assuming full dilution . . . . . . . $ 2.06 $ 2.33
========== ==========
<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
FINANCIAL REVIEW
CONTENTS
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
Unaudited Summary of Quarterly Results 31
Sales and Profit Statistics
by Business Segment 32
Selected Financial Data 34
Additional Segment Data 36
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 37
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, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, 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 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 5, 1996
17
<PAGE> 2
STATEMENT OF ACCOUNTING POLICIES
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Chemed
Corporation and its majority-owned subsidiaries. All significant intercompany
transactions have been eliminated.
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 are recorded at their estimated
fair values. 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 Omnia 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 as incurred. 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.
INTANGIBLE ASSETS
Goodwill and identifiable intangible assets arise from purchase business
combinations and are amortized using the straight-line method over the estimated
useful lives of the assets, but not in excess of 40 years.
The lives of the Company's gross intangible assets at December 31, 1995,
are (in thousands):
<TABLE>
<S> <C>
1 - 10 years $ 2,855
11 - 20 years 2,370
21 - 30 years 4,931
31 - 40 years 151,334
</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.
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
Contributions to the Company's Employee Stock Ownership Plans ("ESOPs") are
based on established debt repayment schedules. Shares are allocated to
participants based on the principal and interest payments made during the
period. The Company's policy is to record its ESOP expense by applying the
transition rule under the level principal amortization concept.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1994 and 1993 financial statements have been
reclassified to conform with the 1995 presentation.
18
<PAGE> 3
CONSOLIDATED STATEMENT OF INCOME
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTINUING OPERATIONS
Sales.................................................... $ 444,301 $ 415,807 $ 401,372
Service revenues......................................... 254,864 229,220 123,721
--------- --------- ---------
Total sales and service revenues...................... 699,165 645,027 525,093
--------- --------- ---------
Cost of goods sold....................................... 306,345 284,973 269,284
Cost of services provided................................ 157,461 142,696 79,909
Selling and marketing expenses........................... 99,162 96,144 89,784
General and administrative expenses...................... 91,416 81,417 54,136
Depreciation............................................. 11,819 10,686 8,817
Nonrecurring expenses (Note 3)........................... 538 1,705 --
--------- --------- ---------
Total costs and expenses.............................. 666,741 617,621 501,930
--------- --------- ---------
Income from operations................................... 32,424 27,406 23,163
Interest expense......................................... (8,466) (8,807) (8,889)
Other income -- net (Note 5)............................. 17,001 11,175 13,656
--------- --------- ---------
Income before income taxes and minority interest...... 40,959 29,774 27,930
Income taxes (Note 6).................................... (15,614) (10,954) (9,278)
Minority interest in earnings of subsidiaries (Note 1)... (4,906) (4,288) (3,809)
--------- --------- ---------
Income from continuing operations........................ 20,439 14,532 14,843
DISCONTINUED OPERATIONS (Note 4)..................................... 2,743 29,390 2,986
--------- --------- ---------
Income before cumulative effect of a change in accounting principle.. 23,182 43,922 17,829
Cumulative effect of a change in accounting principle (Note 6)....... -- -- 1,651
--------- --------- ---------
NET INCOME........................................................... $ 23,182 $ 43,922 $ 19,480
========= ========= =========
EARNINGS PER COMMON SHARE
Income from continuing operations........................ $ 2.07 $ 1.47 $ 1.52
========= ========= =========
Income before cumulative effect of a change
in accounting principle............................... $ 2.35 $ 4.46 $ 1.82
========= ========= =========
Net income............................................... $ 2.35 $ 4.46 $ 1.99
========= ========= =========
Average number of shares outstanding..................... 9,861 9,856 9,778
========= ========= =========
</TABLE>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
19
<PAGE> 4
CONSOLIDATED BALANCE SHEET
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31, 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (Note 7) ................................ $ 19,187 $ 4,722
Marketable securities (Note 7) .................................... 10,094 19,517
Accounts receivable less allowances of $3,519 (1994 -- $2,974) .... 87,177 81,822
Inventories (Note 8) .............................................. 58,251 60,273
Statutory deposits ................................................ 18,943 14,408
Other current assets (Notes 6 and 15) ............................. 25,785 16,985
--------- ---------
Total current assets ........................................... 219,437 197,727
Other investments (Note 15) .......................................... 90,176 85,073
Properties and equipment, at cost less accumulated depreciation
(Note 9) .......................................................... 77,131 77,116
Identifiable intangible assets less accumulated amortization
of $2,886 (1994 -- $1,928) ....................................... 18,140 21,192
Goodwill less accumulated amortization of $20,978 (1994 -- $17,346) .. 119,486 113,417
Other assets ......................................................... 7,498 10,958
--------- ---------
Total Assets ............................................. $ 531,868 $ 505,483
========= =========
LIABILITIES
Current liabilities
Accounts payable .................................................. $ 28,411 $ 31,386
Bank notes and loans payable (Note 10) ............................ 25,000 25,000
Current portion of long-term debt (Note 11) ....................... 7,089 6,391
Income taxes (Note 6) ............................................. 11,965 17,233
Deferred contract revenue ......................................... 23,512 22,630
Other current liabilities (Note 12) ............................... 49,027 40,026
--------- ---------
Total current liabilities ...................................... 145,004 142,666
Deferred income taxes (Note 6) ....................................... 15,819 7,606
Long-term debt (Note 11) ............................................. 85,368 92,133
Other liabilities and deferred income (Note 12) ...................... 36,030 40,564
Minority interest (Note 1) ........................................... 40,990 36,194
--------- ---------
Total Liabilities ........................................ 323,211 319,163
--------- ---------
STOCKHOLDERS' EQUITY
Capital stock -- authorized 15,000,000 shares $1 par;
issued 12,598,418 shares (1994 -- 12,369,212 shares) ............. 12,598 12,369
Paid-in capital ..................................................... 145,290 138,733
Retained earnings ................................................... 127,141 123,993
Treasury stock -- 2,748,192 shares (1994 -- 2,504,641 shares),
at cost ......................................................... (79,996) (71,230)
Unearned compensation -- ESOPs (Note 13) ............................ (33,355) (38,486)
Unrealized appreciation on investments (Note 15) .................... 36,979 20,941
--------- ---------
Total Stockholders' Equity .............................. 208,657 186,320
--------- ---------
Commitments and contingencies (Notes 2, 12 and 14)
Total Liabilities and Stockholders' Equity .............. $ 531,868 $ 505,483
========= =========
</TABLE>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
20
<PAGE> 5
CONSOLIDATED STATEMENT OF CASH FLOWS
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................ $ 23,182 $ 43,922 $ 19,480
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization ....................... 18,205 15,807 13,123
Gains on sales of investments ....................... (9,078) (5,471) (6,695)
Minority interest in earnings of
subsidiaries (Note 1) ............................. 4,906 4,288 3,809
Proceeds from sales of trading securities ........... -- 2,984 --
Purchases of trading securities ..................... -- (2,000) --
Provision for uncollectible accounts receivable ..... 2,507 1,855 2,018
Provision for deferred income taxes (Note 6) ........ (846) 1,101 1,327
Discontinued operations (Note 4) .................... (2,743) (29,390) (2,986)
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 ............... (6,660) (13,300) (4,588)
Increase in statutory reserve requirements .... (4,535) (1,232) (2,378)
Increase in inventories and other
current assets .............................. (2,237) (6,610) (4,932)
Increase in accounts payable, deferred contract
revenue and other current liabilities ...... 1,113 11,679 3,045
Decrease in income taxes (Note 6) ............. (2,160) (426) (1,447)
Other -- net ........................................ (2,818) 165 (410)
-------- -------- --------
Net cash provided by operating activities ........... 18,836 23,372 17,715
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investments ........................ 32,437 9,196 9,193
Net proceeds from sale of divested operations (Note 4) .... 14,046 -- --
Capital expenditures ...................................... (15,413) (18,400) (13,851)
Business combinations, net of cash acquired (Note 2) ...... (11,928) (18,383) (25,762)
Purchases of investments .................................. (1,948) (29,788) (4,396)
Proceeds from sales of marketable securities .............. -- -- 78,858
Purchases of marketable securities ........................ -- -- (47,114)
Net proceeds from sale of discontinued
operations (Note 4) ..................................... 2,401 49,496 1,468
Other -- net .............................................. 228 2,449 834
-------- -------- --------
Net cash provided/(used) by investing activities .... 19,823 (5,430) (770)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ............................................ (20,319) (20,114) (19,659)
Purchases of treasury stock ............................... (2,966) (771) (54)
Repayments of long-term debt (Note 11) .................... (1,252) (18,232) (21,452)
Proceeds from issuance of long-term debt (Note 11) ........ -- 10,000 --
Issuances of capital stock (Note 16) ...................... 868 786 451
Increase in bank notes and loans payable (Note 10) ........ -- -- 25,000
Other -- net .............................................. (525) 496 (1,143)
-------- -------- --------
Net cash used by financing activities .............. (24,194) (27,835) (16,857)
-------- -------- --------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ...................... 14,465 (9,893) 88
Cash and cash equivalents at beginning of year ........................ 4,722 14,615 14,527
-------- -------- --------
Cash and cash equivalents at end of year .............................. $ 19,187 $ 4,722 $ 14,615
======== ======== ========
</TABLE>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
21
<PAGE> 6
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
(in thousands, except per share data)
<TABLE>
<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, 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)
Decrease in unearned compensation
-- ESOPs (Note 13)............... -- -- -- -- 3,837 -- 3,837
Stock awards and exercise
of stock options (Note 16)........ 166 4,097 -- (3,783) -- -- 480
Purchases of treasury stock.......... -- -- -- (54) -- -- (54)
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)
Unrealized appreciation
on investments (Note 15).......... -- -- -- -- -- 20,941 20,941
Decrease in unearned compensation
-- ESOPs (Note 13)............... -- -- -- -- 4,483 -- 4,483
Stock awards and exercise
of stock options (Note 16)........ 263 7,329 -- (6,545) -- -- 1,047
Purchases of treasury stock.......... -- -- -- (771) -- -- (771)
Other................................ 18 (691) 334 -- -- -- (339)
------- --------- --------- -------- -------- ------ ---------
BALANCE AT DECEMBER 31, 1994... 12,369 138,733 123,993 (71,230) (38,486) 20,941 186,320
NET INCOME........................... -- -- 23,182 -- -- -- 23,182
DIVIDENDS PAID ($2.06 PER SHARE)..... -- -- (20,319) -- -- -- (20,319)
UNREALIZED APPRECIATION
ON INVESTMENTS (NOTE 15).......... -- -- -- -- -- 16,038 16,038
DECREASE IN UNEARNED
COMPENSATION
-- ESOPS (NOTE 13)............... -- -- -- -- 5,131 -- 5,131
PURCHASES OF TREASURY STOCK.......... -- -- -- (2,966) -- -- (2,966)
STOCK AWARDS AND EXERCISE
OF STOCK OPTIONS (NOTE 16)......... 229 6,972 -- (5,800) -- -- 1,401
OTHER................................. -- (415) 285 -- -- -- (130)
------- --------- --------- -------- -------- ------- ---------
BALANCE AT DECEMBER 31, 1995... $12,598 $ 145,290 $ 127,141 $(79,996) $(33,355) $36,979 $ 208,657
======= ========= ========= ======== ======== ======= =========
</TABLE>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
22
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
1. SEGMENTS AND NATURE OF THE BUSINESS
Chemed is a diversified public corporation with strategic positions in
sanitary-maintenance-product distribution services (National Sanitary Supply);
plumbing, drain cleaning, and residential appliance and air-conditioning repair
(Roto-Rooter); medical and dental disposable-product supply for the
alternate-care and hospital markets (Omnia); and home healthcare services
(Patient Care). Relative contributions to operating profit are 31%, 41%, 15% and
13%, respectively. The business segments are defined as follows:
-- The National Sanitary Supply segment includes the consolidated
operations of National Sanitary Supply Company ("National Sanitary Supply"), an
84%-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 58%-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 Omnia segment (formerly Veratex) includes the combined operations of
the 100%-owned businesses comprising the Company's Omnia Group, which
manufactures medical and dental supplies and distributes them to dealers
throughout the United States. Products include disposable paper, cotton and
gauze proprietary products and various other dental and medical supplies.
-- The Patient Care segment includes the consolidated operations of the
100%-owned businesses comprising the Company's Patient Care Group, which offers
complete, professional home-healthcare services in the New York-New
Jersey-Connecticut area. Services provided to patients at home include skilled
nursing; home health aides; physical, speech, respiratory and occupational
therapies; medical social work; nutrition; and other specialized services.
Substantially all of the Company's sales and service revenues from
continuing operations is generated from business within the United States. The
Company's risk of significant credit loss is not concentrated due to the
diversity of the Company's customer base and the broad geographic areas the
Company serves. Nevertheless, management establishes policies regarding the
extension of credit and compliance therewith.
Financial data by business segment are shown on pages 32, 33 and 36 of this
annual report. The segment data for 1995, 1994 and 1993 are an integral part of
these financial statements.
2. BUSINESS COMBINATIONS
During the second quarter of 1995, Omnia acquired the business and assets
of the medical division of Central States Diversified Inc. ("CSDM") for
$7,650,000 in cash. CSDM manufactures and distributes disposable paper products
marketed under the Pro-Tex-Mor brand.
Also during 1995, five business combinations were completed in the
Roto-Rooter segment for aggregate purchase prices of $2,490,000 in cash.
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. In December 1995, the Company recorded an
additional $2,000,000 arising from contingent consideration associated with the
purchase transaction. This additional purchase price was recorded as goodwill
and is payable in two equal installments, due in March 1996 and 1997.
Also during 1994, five business combinations were completed within the
Roto-Rooter and National Sanitary segments for aggregate purchase prices of
$1,795,000 in cash.
During the third quarter of 1993, Service America Systems Inc. ("Service
America") (30% owned by the Company and 70% owned by Roto-Rooter) completed the
acquisition of 100% of the outstanding common shares of Encore Service Systems
Inc. ("Encore"). Encore principally provides residential air-conditioning and
appliance repair services through service 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 ending in July 1996 (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 the $3,800,000 payment,
$3,315,000, was recorded as increases in goodwill and other noncurrent
liabilities.
Also during 1993, nine business combinations were completed within the
Roto-Rooter, National Sanitary and Omnia segments for aggregate purchase prices
of $8,762,000 in cash.
The results of business combinations completed in 1995 and 1994 were not
material to the Company's results of operations in either 1995 or 1994.
Unaudited pro forma financial data for 1993, which assume that the 1994 and
1993 business combinations were completed on January 1, 1993, are summarized as
follows (in thousands, except per share data):
<TABLE>
<S> <C>
Total sales and service revenues $610,268
Income from continuing operations 15,809
Earnings per share -- income
from continuing operations 1.61
</TABLE>
23
<PAGE> 8
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
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 net
assets acquired in business combinations, all of which have been recorded under
purchase accounting rules, follows (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Working capital $ (1,238) $ 8,646 $(13,767)
Properties and
equipment 621 451 3,633
Identifiable intangible
assets 969 -- 11,100
Goodwill 9,607 22,051 19,700
Deferred income taxes (762) 3,649 (412)
Long-term debt (316) (7,492) --
Other assets
and liabilities -- net 5,150 (507) 6,214
-------- -------- --------
Total net assets 14,031 26,798 26,468
Less -- cash and
cash equivalents
acquired (103) (182) (706)
-- capital stock
issued -- (500) --
-- present value
of deferred
payments (2,000) (7,733) --
-------- -------- --------
Net cash used $ 11,928 $ 18,383 $ 25,762
======== ======== ========
</TABLE>
3. NONRECURRING EXPENSES
Nonrecurring expenses amounting to $538,000 pretax ($355,000 aftertax;
$208,000 or $.02 per share after minority interest) were incurred by Roto-Rooter
in the third quarter of 1995 as a result of discussions related to Chemed's
proposal to acquire the 42% minority interest in Roto-Rooter common stock. The
discussions were terminated in August 1995.
In the third quarter of 1994, nonrecurring expenses of $1,705,000
($1,107,000 aftertax or $.12 per share) were recorded as the result of reducing
staff at various locations and refocusing marketing efforts within the Omnia
segment.
4. DISCONTINUED AND DIVESTED OPERATIONS
DISCONTINUED OPERATIONS
On November 30, 1994, the Company sold 3,140,000 shares (adjusted for
Omnicare's two-for-one stock split in June 1995) of the capital stock of
Omnicare Inc. ("Omnicare"), a publicly traded affiliate in which Chemed
previously had maintained an equity interest. Also, during the first six months
of 1994, the Company sold a total of 479,800 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, are classified as discontinued operations. At
December 31, 1994, the Company held 1,444,000 shares, or 6%, of the Omnicare
capital stock (December 31, 1995 -- 1,110,000 shares, or 4%).
As a result of settling various issues and periodically reevaluating the
adequacy of the Company's accruals for tax and other liabilities relative to the
sale of DuBois Chemicals Inc. ("DuBois") in April 1991, the Company recorded
favorable adjustments to discontinued operations in 1995, 1994 and 1993.
Discontinued operations, as shown on the accompanying consolidated
statement of income, comprise the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------------------
1995 1994 1993
------ ------- ------
<S> <C> <C> <C>
Adjustments to the
tax provision on
the gain on the
sale of DuBois $2,743 $ 3,236 $ --
Gains on sales of
Omnicare stock -- 23,358 --
Equity earnings in
Omnicare prior to
December 1, 1994 -- 2,225 2,299
Adjustment to the
expense accruals
related to the gain
on the sale of DuBois -- 571 687
------ ------- ------
Total discontinued
operations $2,743 $29,390 $2,986
====== ======= ======
</TABLE>
DIVESTED OPERATIONS
During the third quarter of 1995, The Omnia Group completed the sale of the
business and assets of its Veratex Retail division to Henry Schein Inc. ("HSI")
for $14,046,000 in cash. An additional payment of up to $2,000,000, contingent
upon the combined sales of Veratex Retail and HSI's retail group for the year
ended July 7, 1996, may be due from HSI in 1996.
The sale of Veratex Retail resulted in the recording of an immaterial gain
in 1995.
5. OTHER INCOME -- NET
Other income -- net comprises the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------------------
1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Gains on sales of
investments $ 9,078 $ 5,471 $ 6,695
Interest income 4,203 2,739 3,763
Dividend income 3,190 3,057 3,113
Other -- net 530 (92) 85
------- -------- -------
Total other income
-- net $17,001 $ 11,175 $13,656
======= ======== =======
</TABLE>
24
<PAGE> 9
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
6. INCOME TAXES
The provision for income taxes comprises the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------------------
1995 1994 1993
-------- -------- ------
<S> <C> <C> <C>
Continuing Operations:
Current
U.S. federal $ 14,272 $ 7,517 $6,243
U.S. state and local 2,188 2,336 1,708
Deferred U.S. federal (846) 1,101 1,327
-------- -------- ------
Total $ 15,614 $ 10,954 $9,278
======== ======== ======
Discontinued Operations:
Current
U.S. federal $ 2,461 $ 19,820 $ 170
U.S. state and local (4,156) (2,850) --
Deferred U.S. federal (1,048) (323) 183
-------- -------- ------
Total $ (2,743) $ 16,647 $ 353
======== ======== ======
</TABLE>
A summary of the significant temporary differences that give rise to
deferred income tax assets/(liabilities) follows (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
-------- --------
<S> <C> <C>
Accruals related to
discontinued operations $ 6,544 $ 5,359
Accrued insurance expense 5,803 4,733
Employee benefit accruals 1,457 1,134
Bad debt allowances 1,235 1,139
Deferred compensation 1,187 877
Amortization of intangible assets -- 689
Other 4,910 4,473
-------- --------
Gross deferred income tax assets 21,136 18,404
-------- --------
Market valuation of investments (19,050) (10,788)
Accelerated tax depreciation (6,440) (5,387)
Cash to accrual adjustments (1,209) (1,014)
Unremitted earnings of affiliate (1,032) (1,342)
Gain on subsidiary's sale of stock (659) (659)
Other (2,576) (2,243)
-------- --------
Gross deferred income
tax liabilities (30,966) (21,433)
-------- --------
Net deferred income
tax liabilities $ (9,830) $ (3,029)
======== ========
</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 income tax assets.
Included in other current assets at December 31, 1995, are deferred income
tax assets of $5,989,000 (December 31, 1994 -- $4,577,000).
The difference between the effective tax rate for continuing operations and
the statutory U.S. federal income tax rate is explained as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------------
1995 1994 1993
---- ---- ----
<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 3.6 5.2 3.9
Nondeductible amortization
of goodwill 2.6 3.1 3.1
Domestic dividend exclusion (1.7) (2.3) (2.4)
Tax benefit on dividends
paid to ESOPs (1.6) (2.1) (3.4)
Favorable tax adjustments (0.1) (1.0) (2.5)
Other -- net 1.3 (0.1) 0.5
---- ---- ----
Effective tax rate 38.1% 36.8% 33.2%
==== ==== ====
</TABLE>
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 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 $29,977,000 of
undistributed consolidated earnings of Roto-Rooter Inc. (a 58%-owned domestic
subsidiary), including $19,601,000 relating to periods prior to the adoption of
SFAS 109. 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 $10,492,000 would be
incurred based on current income tax rates.
The total amount of income taxes paid during the year ended December 31,
1995, was $18,253,000 (1994 -- $28,533,000; 1993 -- $9,913,000).
7. CASH EQUIVALENTS AND MARKETABLE SECURITIES
Included in cash and cash equivalents at December 31, 1995, are cash
equivalents in the amount of $8,804,000 (1994 -- $4,535,000). 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 5.4%
in 1995 and 6.2% in 1994.
From time to time throughout the year, the Company invests its excess cash
in repurchase agreements directly with major commercial banks. The collateral is
not physically held by the Company, but 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.
25
<PAGE> 10
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
A summary of marketable securities follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
------- -------
<S> <C> <C>
U.S. Treasury Notes, maturing
in the subsequent year, with a
weighted average yield of 7.2%
(1994 -- 7.0%) $ 9,994 $19,417
All other 100 100
------- -------
Total marketable securities $10,094 $19,517
======= =======
</TABLE>
8. INVENTORIES
A summary of inventories follows (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
------- -------
<S> <C> <C>
Raw materials $ 7,921 $ 8,086
Finished goods and general
merchandise 50,330 52,187
------- -------
Total inventories $58,251 $60,273
======= =======
</TABLE>
9. PROPERTIES AND EQUIPMENT
A summary of properties and equipment follows (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1994
--------- ---------
<S> <C> <C>
Land $ 8,035 $ 8,072
Buildings 29,567 29,963
Furniture and fixtures 26,301 25,666
Machinery and equipment 30,900 27,911
Transportation equipment 24,198 23,340
Projects under construction 5,204 2,539
--------- ---------
Total properties
and equipment 124,205 117,491
Less accumulated depreciation (47,074) (40,375)
--------- ---------
Net properties
and equipment $ 77,131 $ 77,116
========= =========
</TABLE>
10. BANK NOTES AND LOANS PAYABLE
In December 1995, the Company entered into a revolving credit agreement
("Credit Agreement") with Bank of America to borrow up to $30,000,000 at any
time during the five-year period ending December 15, 2000. The interest rate is
based on various stipulated market rates of interest.
In December 1993, the Company entered into a revolving credit/term loan
agreement ("RT Agreement") with PNC Bank, Ohio, N.A., 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.
At December 31, 1995, the Company had $25,000,000 (1994 -- $15,000,000) of
borrowings outstanding under the Credit Agreement and nil (1994 -- $10,000,000)
under the RT Agreement. In addition to these agreements, the Company had
approximately $43,100,000 of unused lines of credit with various banks at
December 31, 1995.
The Company's short-term borrowings provide temporary capital for
operations. Borrowings under the Credit and RT 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, 1995,
was 6.1% (December 31, 1994 -- 6.6%).
11. LONG-TERM DEBT
A summary of the Company's long-term debt follows (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
-------- --------
<S> <C> <C>
Senior Notes:
8.15%, due 2000 - 2004 $ 50,000 $ 50,000
10.67%, due 1995 - 2003 8,000 9,000
Employee Stock Ownership
Plans Loan Guarantees:
6.80% (1994 -- 6.71%),
due 1995 - 2000 33,355 38,486
Other 1,102 1,038
-------- --------
Subtotal 92,457 98,524
Less current portion (7,089) (6,391)
-------- --------
Long-term debt, less
current portion $ 85,368 $ 92,133
======== ========
</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 annual installments of $1,000,000 were due and paid on November 1,
1994 and 1995. The remaining $8,000,000 bears interest at the rate of 10.67%
with annual principal payments of $1,000,000 due on November 1, 1996 through
2003. Interest is payable on May 1 and November 1 of each year.
26
<PAGE> 11
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
EMPLOYEE STOCK OWNERSHIP PLANS ("ESOPS") LOAN GUARANTEES
The Company has guaranteed ESOP loans made by various institutional
lenders. Payments by the ESOPs, including both principal and interest, are to be
made in quarterly installments over the next five 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 6.80% (1994 -- 6.71%). 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, 1995, based on that day's closing price of
$38.875 was $29,445,000 as compared with aggregate loan guarantees of
$33,355,000.
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 2009.
The following is a schedule by year of required long-term debt payments as
of December 31, 1995 (in thousands):
<TABLE>
<S> <C>
1996 $ 7,089
1997 12,485
1998 10,592
1999 6,453
2000 12,425
After 2000 43,413
-------
Total long-term debt $92,457
=======
</TABLE>
The various 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 $99,147,000, cannot permit
its net worth to fall below $171,979,000 and is limited to incurring additional
annual net rentals under operating leases with terms of three years or more
aggregating $7,892,000.
The total amount of interest paid during the year ended December 31, 1995,
was $7,972,000 (1994 -- $8,562,000; 1993 -- $8,893,000).
12. OTHER LIABILITIES
At December 31, 1995, other current liabilities included accrued insurance
liabilities of $19,470,000 (1994 -- $17,495,000).
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):
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
------- -------
<S> <C> <C>
Amounts included in:
Other current liabilities $ 1,943 $ 2,507
Other liabilities and
deferred income 23,757 25,067
------- -------
Total $25,700 $27,574
======= =======
</TABLE>
Included in other liabilities and deferred income at December 31, 1995, is an
accrual of $13,670,000 (1994 -- $14,170,000) 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
Company's environmental adviser, management believes that it is not probable
this additional liability will be paid. Accordingly, no provision for this
contingent liability has been recorded. Although it is not presently possible to
reliably project the timing of payments related to the Company's potential
liability for environmental costs, management believes that any adjustments to
its recorded liability will not materially adversely affect its financial
position or results of operations.
13. 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 have purchased a total of
$56,000,000 of the Company's capital stock. Substantially all Chemed
headquarters and Omnia employees and substantially all employees of National
Sanitary Supply, not covered by collective bargaining agreements, are
participants in the ESOPs. Eligible employees of Roto-Rooter and Patient Care
are covered by defined contribution plans.
27
<PAGE> 12
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
Expenses charged to continuing operations for the Company's pension and
profit-sharing plans, ESOPs and other similar plans comprise the following (in
thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------------------
1995 1994 1993
------ ------ ------
ESOPs:
<S> <C> <C> <C>
Interest expense $1,217 $1,322 $1,491
Compensation cost 2,782 2,476 2,141
Pension, profit
sharing and other
similar plans 3,391 2,518 1,813
------ ------ ------
Total $7,390 $6,316 $5,445
====== ====== ======
Dividends on ESOP
shares used for
debt service $2,758 $2,820 $2,819
====== ====== ======
</TABLE>
At December 31, 1995, there were 555,687 allocated shares (December 31,
1994 -- 457,725 shares) and 757,437 unallocated shares (December 31, 1994 --
908,796 shares) in the ESOP trusts.
14. 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 11 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 owned by the Company.
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, 1995 (in thousands):
<TABLE>
<S> <C>
1996 $ 12,805
1997 9,945
1998 7,015
1999 5,714
2000 4,983
After 2000 22,369
--------
Total minimum rental payments 62,831
Less minimum sublease rentals (15,980)
--------
Net minimum rental payments $ 46,851
========
</TABLE>
Total rental expense incurred under operating leases follows (in
thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Total rental payments $ 13,353 $ 12,451 $ 9,216
Less sublease rentals (3,591) (3,446) (3,440)
-------- -------- -------
Net rental expense $ 9,762 $ 9,005 $ 5,776
======== ======== =======
</TABLE>
15. 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 8.2% (1994 -- 10.7%), rates which management believes are
reasonable in view of market conditions.
-- For the note receivable, the fair value is determined by discounting the
remaining future installment payments using a rate of 6.1% (1994 -- 8.6%), rates
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.
28
<PAGE> 13
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
-------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Marketable securities ........... $10,094 $ 10,094 $19,517 $19,517
Other investments(a) ............ 98,438 101,668 85,073 88,303
Statutory deposits .............. 18,943 18,943 14,408 14,408
Note receivable(b) .............. 5,864 5,909 11,195 11,281
Long-term debt .................. 92,457 94,992 98,524 95,545
</TABLE>
- ----------------
(a) Amounts for 1995 include the current portion of Vitas preferred stock
($8,262,000), which is recorded in other current assets on the balance
sheet.
(b) The current portion of the note receivable is included in other current
assets and the noncurrent portion is included in other assets.
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. All other investments are classified in the
available-for-sale category. Investments included in cash equivalents are
considered to be trading securities and all other investments are considered to
be available-for-sale.
Disclosures regarding the Company's investments which are classified as
available-for-sale are summarized below (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
------- --------
<S> <C> <C>
Aggregate fair value:
Obligations of the U.S. Treasury ................. $ 9,994 $ 29,035
Equity securities ................................ 98,438 75,455
Gross unrealized holding gains:
Obligations of the U.S. Treasury ................. 20 --
Equity securities ................................ 56,010 31,975
Gross unrealized holding losses:
Obligations of the U.S. Treasury ................. -- (129)
Equity securities ................................ -- (117)
Amortized cost:
Obligations of the U.S. Treasury ................. 9,974 29,164
Equity securities ................................ 42,428 43,597
</TABLE>
The chart below summarizes information with respect to available-for-sale
securities sold during the period (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------
1995 1994
-------- -------
<S> <C> <C>
Proceeds from sale ............................. $ 32,437 $ 9,196
Gross realized gains ........................... 9,088 5,589
Gross realized losses .......................... (10) (2)
</TABLE>
Included in marketable securities at December 31, 1995, is a Treasury Note
with a fair value of $9,994,000, maturing in January 1996 (December 31, 1994 --
$19,417,000, maturing in 1995). Included in other investments is the noncurrent
portion of the Company's investment in Vitas mandatorily redeemable preferred
stock with a fair value of $19,236,000 at December 31, 1995 (December 31, 1994
- -- $26,200,000). Also included in other investments at December 31, 1994, is a
U.S. Treasury Note with a fair value of $9,618,000.
29
<PAGE> 14
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
16. STOCK INCENTIVE PLANS
The Company has seven Stock Incentive Plans under which 2,650,000 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. 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 500,000 shares, was
adopted in May 1995.
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, 1993 and 1995 plans become exercisable six
months following the date of grant in either three or four equal annual
installments.
The changes in outstanding stock options and other data follow:
<TABLE>
<CAPTION>
1995 1994
----------------------- -----------------------
Number Number
of Average of Average
Shares Price Shares Price
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Options outstanding at January 1 .............................. 553,472 $29.38 628,967 $27.04
Options granted ............................................... 291,650 32.57 260,650 32.13
Options exercised ............................................. (208,668) 28.77 (247,845) 26.17
Options terminated or canceled ................................ (8,788) 30.93 (88,300) 29.91
------- -------
Options outstanding at December 31 ............................ 627,666 31.05 553,472 29.38
======= =======
Options exercisable at December 31 ............................ 325,385 280,193
======= =======
Shares available for grant of stock awards and stock options .. 303,359 109,004
======= =======
</TABLE>
During 1995, the Company granted stock awards covering 20,538 shares (1994
- -- 15,946 shares) under its Stock Incentive Plans. 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 between 20%
and 33% 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
- --------------------------------------------------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
First Second Third Fourth Total
1995 Quarter Quarter Quarter Quarter Year
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Continuing Operations
Total sales and service revenues .............. $169,858 $177,344 $177,554 $174,409 $699,165
======== ======== ======== ======== ========
Gross profit .................................. $ 57,092 $ 59,302 $ 59,223 $ 59,742 $235,359
======== ======== ======== ======== ========
Income from operations ........................ $ 6,696 $ 7,851 $ 8,681 $ 9,196 $ 32,424
Interest expense .............................. (2,103) (2,119) (2,117) (2,127) (8,466)
Other income -- net ........................... 5,649 4,727 4,775 1,850 17,001
-------- -------- -------- -------- --------
Income before income taxes
and minority interest ................... 10,242 10,459 11,339 8,919 40,959
Income taxes .................................. (3,814) (4,027) (4,379) (3,394) (15,614)
Minority interest in earnings
of subsidiaries ............................ (1,043) (1,127) (1,252) (1,484) (4,906)
-------- ------- ------- ------- --------
Income from continuing operations ............. 5,385 5,305 5,708 4,041 20,439
Discontinued Operations .......................... 901 -- 1,842 -- 2,743
-------- -------- -------- -------- --------
Net Income ....................................... $ 6,286 $ 5,305 $ 7,550 $ 4,041 $ 23,182
======== ======== ======== ======== ========
Earnings Per Common Share
Income from continuing operations ............. $ .55 $ .54 $ .58 $ .41 $ 2.07
======== ======== ======== ======== ========
Net income .................................... $ .64 $ .54 $ .77 $ .41 $ 2.35
======== ======== ======== ======== ========
Average number of shares outstanding .......... 9,863 9,869 9,866 9,848 9,861
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1994
<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
======== ======== ======== ======== ========
31
</TABLE>
<PAGE> 16
SALES AND PROFIT STATISTICS BY BUSINESS SEGMENT(a)
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
(in thousands, except percentages and footnote data)
<TABLE>
<CAPTION>
% of % of
Total Total
1995 1986 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES AND SERVICE REVENUES FROM CONTINUING OPERATIONS(B)
National Sanitary Supply ............................ 49% 64% $340,913 $308,280
Roto-Rooter ......................................... 26 36 179,722 171,930
Omnia ............................................... 12 -- 87,803 95,753
Patient Care ........................................ 13 -- 90,727 69,064
--- --- -------- --------
Total ............................................ 100% 100% $699,165 $645,027
=== === ======== ========
OPERATING PROFIT FROM CONTINUING OPERATIONS(C)
National Sanitary Supply ............................ 31% 47% $ 11,847 $ 10,291
Roto-Rooter ......................................... 41 53 15,908(e) 15,967
Omnia ............................................... 15 -- 5,957 5,415(f)
Patient Care ........................................ 13 -- 4,989 2,790
--- --- -------- --------
Total ............................................ 100% 100% $ 38,701 $ 34,463
=== === ======== ========
</TABLE>
(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 1995, 1994 and 1993 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, and other income -- net.
32
<PAGE> 17
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
$296,865 $288,731 $267,508 $265,424 $262,351 $179,191(d) $ 92,618 $ 80,010(d)
136,428(d) 104,688 84,774(d) 75,230 66,842 62,255 55,233 45,292
91,800 7,543 -- -- -- -- -- --
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
$525,093 $400,962 $352,282 $340,654 $329,193 $241,446 $147,851 $125,302
======== ======== ======== ======== ======== ======== ======== ========
$ 9,093 $ 9,171 $ 8,504 $ 10,165 $ 10,762 $ 8,507(d) $ 6,157 $ 5,966(d)
14,371(d) 11,253 8,499(d) 8,049 7,762 8,267 7,573 6,849
5,660 607 -- -- -- -- -- --
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
$ 29,124 $ 21,031 $ 17,003 $ 18,214 $ 18,524 $ 16,774 $ 13,730 $ 12,815
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
(d) The following significant business combinations, all in the United States,
have been accounted for as purchase transactions:
<TABLE>
<CAPTION>
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 -- *
</TABLE>
*Operations were integrated into existing operations and amounts are
not determinable.
(e) Amount includes nonrecurring charges of $538,000 incurred as a result of
discussions related to Chemed's proposal to acquire the 42% minority interest
in Roto-Rooter.
(f) Amount includes nonrecurring charges of $648,000 related to the cost of
staff reductions and refocusing marketing efforts.
33
<PAGE> 18
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data, employee numbers, footnote data,
ratios and percentages)
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Continuing operations
Total sales and service revenues ............................. $699,165 $645,027 $525,093
Gross profit ................................................. 235,359 217,358 175,900
Depreciation ................................................. 11,819 10,686 8,817
Income from operations ....................................... 32,424 27,406 23,163
Income/(loss) from continuing operations ..................... 20,439 14,532 14,843
Discontinued operations(a) ...................................... 2,743 29,390 2,986
Extraordinary gain .............................................. -- -- --
Cumulative effect of changes in accounting principles ........... -- -- 1,651
Net income ...................................................... 23,182 43,922 19,480
Earnings per common share:
Assuming full dilution --
Income/(loss) from continuing operations(b) ............... 2.07 1.47 1.52
Net income ................................................ 2.35 4.46 1.99
Primary --
Income/(loss) from continuing operations(b) ............... 2.07 1.47 1.52
Net income ................................................ 2.35 4.46 1.99
Average number of shares outstanding:
Assuming full dilution ....................................... 9,861 9,856 9,778
Primary ...................................................... 9,861 9,856 9,778
Cash dividends per share ........................................ $ 2.06 $ 2.04 $ 2.01
FINANCIAL POSITION -- YEAR-END
Cash, cash equivalents and marketable securities ................ $ 29,281 $ 24,239 $ 15,815
Working capital ................................................. 74,433 55,061 30,741
Properties and equipment, at cost less accumulated
depreciation ................................................. 77,131 77,116 70,758
Total assets .................................................... 531,868 505,483 430,253
Long-term debt .................................................. 85,368 92,133 98,059
Stockholders' equity ............................................ 208,657 186,320 137,151
Book value per share:
Assuming full dilution ....................................... 21.18 18.89 14.00
Primary ...................................................... 21.18 18.89 14.00
OTHER STATISTICS -- CONTINUING OPERATIONS
Net cash provided/(used) by continuing operations ............... $ 18,836 $ 23,372 $ 17,715
Capital expenditures ............................................ 15,413 18,400 13,851
Number of employees ............................................. 7,335 6,602 4,834
Number of sales and service representatives ..................... 4,500 3,919 2,552
Dividend payout ratio(d) ........................................ 87.7% 45.7% 101.0%
Debt to total capital ratio:
Total debt basis ............................................. 32.0 35.7 43.2
Senior debt basis ............................................ 32.0 35.7 43.2
Return on average equity(d) ..................................... 11.9 28.4 14.3
Return on average total capital employed(d) ..................... 9.3 16.4 9.7
Current ratio ................................................... 1.51 1.39 1.24
</TABLE>
(a) Discontinued operations data include Omnicare Inc., discontinued
in 1994; accrual adjustments from 1992 through 1995 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.
34
<PAGE> 19
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$400,962 $352,282 $340,654 $329,193 $241,446 $147,851 $125,302
138,517 123,077 118,235 110,618 87,071 65,577 57,145
6,348 5,899 5,413 4,811 3,738 3,049 2,484
15,180 9,500 11,147 11,281 9,529 7,636 6,259
12,506 9,858 3,616 2,908 416 632 (4,930)(c)
3,145 43,109 12,938 23,274 22,972 19,730 42,351
-- -- -- -- -- -- 212
-- -- -- -- 732 -- --
15,651 52,967 16,554 26,182 24,120 20,362 37,633(c)
1.28 .98 .35 .29 .29 .35 (.18)(c)
1.60 5.27 1.60 2.61 2.47 2.15 3.68(c)
1.28 .98 .35 .29 .04 .07 (.55)(c)
1.60 5.27 1.60 2.61 2.60 2.28 4.21(c)
9,803 10,059 10,371 10,042 10,879 11,006 11,008
9,803 10,059 10,371 10,042 9,280 8,939 8,946
$ 2.00 $ 1.97 $ 1.96 $ 1.84 $ 1.72 $ 1.60 $ 1.56
$ 47,704 $ 83,044 $ 775 $ 5,346 $ 4,033 $ 4,387 $ 26,165
62,452 82,675 14,377 28,236 24,740 10,064 22,108
62,872 44,391 36,802 38,574 36,335 25,034 22,882
404,944 364,335 277,169 285,600 276,276 218,314 234,984
103,778 77,928 82,151 85,834 90,405 46,504 47,328
133,511 139,407 109,504 119,121 109,276 111,754 120,392
13.68 14.08 10.75 11.61 13.19 14.69 15.22
13.68 14.08 10.75 11.61 11.65 12.71 13.41
$ 15,563 $ 19,572 $ 13,505 $ 9,333 $ 7,589 $ (6,335) $ (4,817)
8,232 11,416 7,128 7,723 10,259 5,597 6,475
3,856 3,325 2,965 2,851 2,633 1,796 1,657
1,790 1,665 1,409 1,356 1,223 967 853
125.0% 37.4% 122.5% 70.5% 66.2% 70.2% 37.1%
44.3 34.5 42.4 40.3 43.5 29.3 26.5
44.3 34.5 42.4 34.9 29.2 3.8 1.5
11.6 42.5 13.8 22.3 20.6 17.0 38.7
8.7 24.4 9.8 14.0 14.9 13.5 24.1
1.60 1.98 1.27 1.61 1.55 1.32 1.56
</TABLE>
(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.
35
<PAGE> 20
ADDITIONAL SEGMENT DATA(a)
<TABLE>
<CAPTION>
Chemed Corporation and Subsidiary Companies
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
National Sanitary Supply ........................................ $121,427 $122,175 $109,952
Roto-Rooter ..................................................... 134,891 127,602 125,280
Omnia ........................................................... 83,697 84,682 78,468
Patient Care .................................................... 46,211 38,857 --
-------- -------- --------
Total identifiable assets .................................... 386,226 373,316 313,700
Corporate assets(b) ............................................. 145,642 132,167 116,553
-------- -------- --------
Total assets .............................................. $531,868 $505,483 $430,253
======== ======== ========
CAPITAL EXPENDITURES
National Sanitary Supply ........................................ $ 3,393 $ 6,715 $ 2,688
Roto-Rooter ..................................................... 5,544 6,214 6,885
Omnia ........................................................... 2,801 2,079 3,743
Patient Care .................................................... 2,608 2,541 --
-------- -------- --------
Subtotal ..................................................... 14,346 17,549 13,316
Corporate assets ................................................ 1,067 851 535
-------- -------- --------
Total capital expenditures ................................ $ 15,413 $ 18,400 $ 13,851
======== ======== ========
DEPRECIATION AND AMORTIZATION(c)
National Sanitary Supply ........................................ $ 4,848 $ 4,525 $ 4,752
Roto-Rooter ..................................................... 7,646 7,227 5,169
Omnia ........................................................... 2,727 2,643 2,113
Patient Care .................................................... 1,463 718 --
-------- -------- --------
Subtotal ..................................................... 16,684 15,113 12,034
Corporate assets ................................................ 1,521 694 1,089
-------- -------- --------
Total depreciation and amortization ....................... $ 18,205 $ 15,807 $ 13,123
======== ======== ========
RECONCILIATION OF OPERATING PROFIT TO INCOME
BEFORE INCOME TAXES AND MINORITY INTEREST
Total operating profit .......................................... $ 38,701 $ 34,463 $ 29,124
Interest expense ................................................ (8,466) (8,807) (8,889)
Corporate expenses, net of investment income(d) ................. 10,724 4,118 7,695
-------- -------- --------
Income before income taxes and minority interest .......... $ 40,959 $ 29,774 $ 27,930
======== ======== ========
</TABLE>
(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.
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 factors affecting the Company's consolidated cash flows during
1995 and financial position at December 31, 1995, include the following:
-- Proceeds from sales of investments aggregated $32.4 million;
-- Cash generated by operations totaled $18.8 million;
-- The sale of the Veratex Retail division generated cash proceeds of
$14.1 million; and
-- Purchase business combinations completed in 1995 required cash outlays
aggregating $11.9 million.
As a result of the foregoing, the Company's current ratio improved to 1.5
at December 31, 1995, as compared with 1.4 at the end of 1994. Additionally, the
ratio of total debt to total capital declined from 36% at December 31, 1994, to
32% at the end of 1995. Excluding the debt guarantees of the Employee Stock
Ownership Plans ("ESOPs"), the total debt to total capital ratios were 23% and
25%, respectively, at December 31, 1995 and 1994.
Including the unused portion of its committed credit lines with Bank of
America and PNC Bank, the Company had $43.1 million of unused lines of
short-term credit with various banks at December 31, 1995.
CASH FLOW
The Company's cash flows for 1995 and 1994 may be summarized as follows (in
millions):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------
1995 1994
---- ----
<S> <C> <C>
Proceeds from sale of investments $ 32.4 $ 9.2
Proceeds from sale
of divested operations 16.5 49.5
Purchase of investments (1.9) (29.8)
------ -------
Net activity from investments 47.0 28.9
Cash from operations 18.8 23.4
Cash dividends (20.3) (20.1)
Capital expenditures (15.4) (18.4)
Business combinations (11.9) (18.4)
Other -- net (3.7) (5.3)
------ -------
Increase/(decrease) in cash
and cash equivalents $ 14.5 $ (9.9)
====== =======
</TABLE>
For 1995, net cash generated from the sales of investments and divested
operations ($47.0 million), coupled with cash generated by operations ($18.8
million), was more than sufficient to cover the Company's cash dividends,
capital expenditures and business combinations (total outlays of $47.6 million).
Based on recent cash and earnings projections, cash flow from operations is
expected to increase in 1996 and later years, and the level of gains generated
by sales of investments should decline moderately. Management views the
Company's investment portfolio as a potential source of cash during the interim
period in which the Company's dividend exceeds its core earnings from continuing
operations (i.e., excluding gains on sales of investments). Unrealized aftertax
gains on the Company's available-for-sale investments, including $28.3 million
relating to the Company's investment in Omnicare, amounted to $37.0 million at
December 31, 1995 ($20.9 million at December 31, 1994). In February 1996, the
Company sold approximately one-third of its investment in Omnicare, realizing an
aftertax gain of approximately $9 million.
The Board of Directors declared a quarterly dividend of $.52 per share of
capital stock in February 1996, payable in March 1996 (the same rate paid in
each of the prior two 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 2004. As a result, the Company had net
lease commitments aggregating $46.9 million at December 31, 1995.
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 adviser 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 adviser
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, 1995, the Company has reimbursed Diversey $1.8
million for prior years' environmental and related costs of DuBois.
37
<PAGE> 22
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
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, 1995, the Company would be
limited to incurring additional debt totaling $99.1 million and could not permit
its net worth to fall below $172.0 million (versus a balance of $208.7 million
at December 31, 1995). Additionally, the Company is limited to incurring net
rentals under operating leases with terms of three years or more aggregating
$15.6 million as compared with such rentals totaling $7.8 million during 1995.
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 the 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
Set forth below by business segment are data relating to growth in sales
and service revenues and operating profit margin:
<TABLE>
<CAPTION>
Percent Increase/(Decrease)
in Sales and Service Revenues
-----------------------------
1995 1994
vs. 1994 vs. 1993
-------- --------
<S> <C> <C>
National Sanitary Supply 11% 4%
Roto-Rooter 5 26
Omnia (8) 4
Patient Care 31 n.a.
Total 8 23
</TABLE>
<TABLE>
<CAPTION>
Operating Profit
as a Percent of Sales
and Service Revenues
(Operating Margin)
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
National Sanitary Supply 3.5% 3.3% 3.1%
Roto-Rooter 8.9 9.3 10.5
Omnia 6.8 5.7 6.2
Patient Care 5.5 4.0 n.a.
Total 5.5 5.3 5.5
</TABLE>
1995 VERSUS 1994
Sales of the National Sanitary Supply segment increased 11% from
$308,280,000 for 1994 to $340,913,000 for 1995. Most locations throughout the
United States experienced sales increases resulting from enhanced sales and
marketing efforts such as a full-line product catalog and promotional programs.
A substantial portion of the sales growth was achieved through improved product
pricing. The operating margin of this segment improved to 3.5% during 1995 from
3.3% during 1994, largely as a result of continued tight expense control during
1995.
Sales and service revenues of the Roto-Rooter segment for 1995 totaled
$179,722,000, an increase of 5% over the $171,930,000 of revenues recorded for
1994. Plumbing revenues increased 17% to $43,209,000 and drain cleaning revenues
increased 10% to $58,149,000 in 1995 versus revenues recorded in 1994. Service
contract revenues increased .3% to $50,241,000 in 1995, when compared with
revenues recorded in 1994. Excluding the revenues of its maintenance and
management subsidiary, which was sold effective March 31, 1995, Roto-Rooter's
revenues for 1995 were 8% greater than revenues recorded in 1994. The operating
margin of the Roto-Rooter segment declined from 9.3% in 1994 to 8.9% in 1995,
largely as a result of $538,000 of nonrecurring costs incurred by Roto-Rooter in
evaluating Chemed's proposal to acquire the 42% minority interest in Roto-Rooter
(the proposal was withdrawn in August 1995). In addition, Roto-Rooter's
operating margin was unfavorably impacted by declining margins of Service
America, as a result of a higher-than-expected number of service calls in 1995.
Sales of the Omnia segment (formerly the Veratex segment) declined from
$95,753,000 in 1994 to $87,803,000 in 1995, primarily as a result of the sale of
the Veratex Retail division in July 1995. Excluding the sales of the retail
division and of the medical division of Central States Diversified ("CSDM")
(acquired in May 1995), the sales of Omnia for 1995 increased 8% over sales for
1994. The operating margin of this segment increased from 5.7% in 1994 to 6.8%
in 1995. Excluding $648,000 of nonrecurring severance and marketing costs, the
operating margin would have been 6.3% in 1994. The 1995 operating margin was
also favorably impacted by the CSDM acquisition and the higher profit margins of
Omnia's core wholesale and manufacturing business.
38
<PAGE> 23
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
Revenues of the Patient Care segment increased 31% from $69,064,000 in 1994
to $90,727,000 in 1995. This revenue increase is attributable to increased
referrals from new and existing contracts with freestanding and hospital-based
home-healthcare agencies and from government programs. Additionally, 1994
revenues were adversely impacted by the severe winter weather conditions
experienced in the northeastern United States. As a result of the significant
revenue growth and increased emphasis on higher-margin personal care services,
Patient Care was able to improve its operating margin from 4.0% in 1994 to 5.5%
in 1995.
Income from operations increased from $27,406,000 in 1994 to $32,424,000 in
1995, primarily as a result of increases in operating profit by all segments. In
addition, the income-from-operations comparison for 1995 versus 1994 was aided
by a lower level of nonrecurring expenses in 1995 as compared with such expenses
in 1994 ($538,000 versus $1,705,000, respectively).
Other income increased from $11,175,000 in 1994 to $17,001,000 in 1995,
primarily as a result of larger gains on the sales of investments during 1995 as
compared with gains recorded in 1994. In addition, increased interest income for
1995, due primarily to higher cash and marketable securities balances,
contributed to this growth.
The effective tax rate for 1995 was 38.1% as compared with 36.8% for 1994.
The increase was attributable to lower favorable tax adjustments and ESOP
dividend tax credits (as a percentage of pretax income) in 1995.
Chemed's income from continuing operations increased 41% from $14,532,000
($1.47 per share) to $20,439,000 ($2.07 per share) in 1995 as a result of 18%
growth in income from operations, coupled with larger gains from the sales of
investments in 1995 as compared with 1994. Excluding nonrecurring expenses
($208,000 in 1995 and $1,107,000 in 1994) and realized investment gains
($5,882,000 in 1995 and $3,377,000 in 1994), income from continuing operations
increased 20% from $12,262,000 ($1.24 per share) in 1994 to $14,765,000 ($1.50
per share) in 1995.
Net income for 1995 included discontinued operations of $2,743,000 ($.28
per share) from favorable adjustments to the tax accruals related to the sale of
DuBois in 1991. Net income for 1994 included discontinued operations of
$29,390,000 ($2.99 per share), largely from the Company's equity investment in
Omnicare, which was discontinued in November 1994.
1994 versus 1993
Sales of the National Sanitary Supply segment increased 4% to $308,280,000
in 1994. This 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 Service Systems Inc. ("Encore"), acquired by Roto-Rooter's and Chemed's
jointly owned Service America subsidiary, total revenues of this segment for
1994 increased 14% as compared with 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
this segment declined from 10.5% during 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 service revenues also
contributed to the lower margins in 1994. The higher labor costs resulted from
expansion of the service labor force at a faster rate than the growth rate in
service contracts. 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 Omnia segment for 1994 totaled $95,753,000, an increase of 4%
over sales for 1993. The operating margin of the Omnia 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%.
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.
39
<PAGE> 24
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------
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. Excluding nonrecurring
expenses ($1,107,000 in 1994) and realized investment gains ($3,377,000 in 1994
and $4,274,000 in 1993), income from continuing operations increased 16% from
$10,569,000 ($1.08 per share) in 1993 to $12,262,000 ($1.24 per share) in 1994.
Net income for 1994 increased to $43,922,000 ($4.46 per share) from
$19,480,000 ($1.99 per share) in 1993. Earnings for 1994 included discontinued
operations of $29,390,000 ($2.99 per share), primarily relating to the Company's
equity investment in Omnicare, which was discontinued in 1994.
OUTLOOK FOR 1996
During the fourth quarter of 1995, a major customer of National Sanitary
Supply gave notice that it would begin phasing out most of its purchases from
National Sanitary during the first half of 1996. Sales to this customer
represented approximately 15% of National Sanitary's sales in 1995 and consisted
primarily of low-margin paper and promotional items.
Nonetheless, because the rest of National Sanitary's business has been
growing rapidly, management anticipates that earnings of this segment for 1996
will increase as compared with earnings for 1995, albeit at a smaller rate of
increase. Plans have been made to accelerate the growth of National Sanitary's
field sales through increased geographic expansion via either grass-root
start-ups or acquisitions.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), Accounting for
Stock-Based Compensation. SFAS 123 establishes a fair-value-based method of
accounting for stock-based compensation plans and is required to be adopted in
1996 for all stock-based compensation plans other than those that are within the
scope of Accounting Principles Board Opinion No. 25 ("APBO 25"), Accounting for
Stock Issued to Employees. Adoption of SFAS 123 for employees' stock-based
compensation plans is optional.
Because the Company plans to continue using APBO 25 to account for its
stock-based compensation plans, the adoption of the remaining provisions of SFAS
123 in 1996 (primarily increased disclosures) is not anticipated to have a
material effect on the Company's financial position or results of operations.
40
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CHEMED CORPORATION
The following is a list of subsidiaries of the Company as of
December 31, 1995. 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, 1995.
All of the majority owned companies listed below are included
in the consolidated financial statements as of December 31, 1995.
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.)
Jet Resource, Inc. (Delaware, 100%)
National Home Care, Inc. (New York, 100% by Patient Care,
Inc.)
National Sanitary Supply Company (Delaware, 84%)
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%)
OnCall Craftsmen, Inc. (Ohio, 100% by Roto-Rooter Services
Company)
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, 58%)
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 Omnia Group (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, 33-65244
and 33-61063) of Chemed Corporation of our report dated February 5, 1996
appearing on page 17 of the 1995 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, 1996
<PAGE> 1
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, 1995, 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 6, 1996
/s/ James A. Cunningham
--------------------------
James A. Cunningham
<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, 1995, 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, 1996
/s/ James H. Devlin
--------------------------
James H. Devlin
<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, 1995, 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 7, 1996
/s/ Charles H. Erhart, Jr.
--------------------------
Charles H. Erhart, Jr.
<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, 1995, 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, 1996
/s/ Joel F. Gemunder
--------------------------
Joel F. Gemunder
<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, 1995, 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 7, 1996
/s/ William R. Griffin
--------------------------
William R. Griffin
<PAGE> 6
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, 1995, 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, 1996
/s/ Thomas C. Hutton
--------------------------
Thomas C. Hutton
<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, 1995, 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 19, 1996
/s/ Walter L. Krebs
--------------------------
Walter L. Krebs
<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 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, 1995, 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 6, 1996
/s/ Sandra E. Laney
--------------------------
Sandra E. Laney
<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 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, 1995, 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, 1996
/s/ Kevin J. McNamara
--------------------------
Kevin J. McNamara
<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, 1995, 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 12, 1996
/s/ John M. Mount
--------------------------
John M. Mount
<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, 1995, 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 6, 1996
/s/ D. Walter Robbins, Jr.
--------------------------
D. Walter Robbins, Jr.
<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, 1995, 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 11, 1996
/s/ Paul C. Voet
--------------------------
Paul C. Voet
<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, 1995, 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 8, 1996
/s/ George J. Walsh III
--------------------------
George J. Walsh III
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995 FOR CHEMED CORPORATION AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000019584
<NAME> CHEMED CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 19,187
<SECURITIES> 10,094
<RECEIVABLES> 90,696
<ALLOWANCES> (3,519)
<INVENTORY> 58,251
<CURRENT-ASSETS> 219,437
<PP&E> 124,205
<DEPRECIATION> (47,074)
<TOTAL-ASSETS> 531,868
<CURRENT-LIABILITIES> 145,004
<BONDS> 85,368
<COMMON> 12,598
0
0
<OTHER-SE> 196,059
<TOTAL-LIABILITY-AND-EQUITY> 531,868
<SALES> 444,301
<TOTAL-REVENUES> 699,165
<CGS> 306,345
<TOTAL-COSTS> 463,806
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,507
<INTEREST-EXPENSE> 8,466
<INCOME-PRETAX> 40,959
<INCOME-TAX> 15,614
<INCOME-CONTINUING> 20,439
<DISCONTINUED> 2,743
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,182
<EPS-PRIMARY> 2.35
<EPS-DILUTED> 2.35
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 FOR CHEMED CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
<CIK> 0000019584
<NAME> CHEMED CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<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> 197,727
<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>
