<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
[X] THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the
[ ] Securities Exchange Act of 1934
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.
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 19, 1997 ($36.37 per share),
was $356,412,720.
At March 19, 1997, 10,032,289 shares of Chemed Corporation Capital Stock
(par value $1 per share) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
DOCUMENT WHERE INCORPORATED
<S> <C>
1996 Annual Report to Stockholders (Specified Portions) Parts I, II and IV
Proxy Statement for Annual Meeting Part III
to be held May 19, 1997.
</TABLE>
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CHEMED CORPORATION
1996 FORM 10-K ANNUAL REPORT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
PART I
<S> <C>
Item 1. Business............................................................. 1
Item 2. Properties........................................................... 5
Item 3. Legal Proceedings.................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders.................. 9
Executive Officers of the Registrant................................. 9
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.................................................. 10
Item 6. Selected Financial Data.............................................. 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 10
Item 8. Financial Statements and Supplementary Data.......................... 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................................. 11
PART III
Item 10. Directors and Executive Officers of the Registrant.................... 11
Item 11. Executive Compensation................................................ 11
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................................ 11
Item 13. Certain Relationships and Related Transactions........................ 11
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K........................................................... 12
</TABLE>
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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, 1996, the Company had received cash payments totaling $221,738,000.
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 1 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. An additional cash payment of $1,000,000
was made on March 31, 1996 and another payment of $1,000,000 will be made on
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
for which payment was received in December 1995.
Effective September 17, 1996, the Company completed a merger of a
subsidiary of the Company, Chemed Acquisition Corp., and Roto-Rooter, Inc.
pursuant to a Tender Offer
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commenced on August 8, 1996 to acquire any and all of the outstanding shares of
Common Stock of Roto-Rooter, Inc. for $41.00 per share in cash.
During 1996, the Company conducted its business operations in four
segments: National Sanitary Supply Company ("National Sanitary Supply"),
Roto-Rooter Group ("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, 1994,
1995 and 1996, are shown in the "Sales and Profit Statistics by Business
Segment" and the "Additional Segment Data" on pages 34, 35 and 38 of the 1996
Annual Report to Stockholders and are incorporated herein by reference.
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 25 of the 1996 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
1996, 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 100 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
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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 is 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 8 percent of National Sanitary Supply's total sales for 1996.
These sales are 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. Other than sales to the aforementioned entities, in
1996 no one customer accounted for more than 4 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.
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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 environmental cleanup and related costs arising from the sale of
DuBois up to a maximum of $25,500,000. Based upon an updated assessment of the
Company's environmental-related liability by the Company's environmental
adviser, the Company has accrued a total of $10,835,000 for this potential
liability, of which $3,430,000 has been paid to Diversey Corporation through
December 31, 1996. 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 was 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 1997 and 1998 with respect to continuing operations
are not expected
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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, 1996, Chemed had a total of 7,886 employees; 7,808 were
located in the United States and 78 were in Canada.
ITEM 2. PROPERTIES
Chemed has plants and offices in various locations in the United States
and Canada. 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 ten 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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ROTO-ROOTER GROUP
<S> <C> <C> <C>
Cincinnati, OH (1) Office and service 16,000 sq. ft. 23,000 sq. ft.
facilities
West Des Moines, IA Office, manufacturing and 29,000 sq. ft. --
distribution center facilities
Northeastern Office and service facilities 32,000 sq. ft. 43,000 sq. ft.
U.S. Area (2)
Central U.S. Office and service facilities 17,000 sq. ft. 24,000 sq. ft.
Area (3)
Mid-Atlantic Office and service facilities 18,000 sq. ft. 23,000 sq. ft.
U.S. Area (4)
Midwestern U.S. Office and service facilities 10,000 sq. ft. 25,000 sq. ft.
Area (5)
Southeastern U.S. Office and service facilities 46,000 sq. ft. 80,000 sq. ft.
Area (6)
Western U.S. Office and service facilities 19,000 sq. ft. 43,000 sq. ft.
Area (7)
Canada (8) Office and service facilities -- 13,000 sq. ft.
NATIONAL SANITARY SUPPLY COMPANY
Los Angeles, CA Office, manufacturing and 145,000 sq. ft. 76,000 sq. ft.
distribution center
</TABLE>
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<TABLE>
<CAPTION>
Location Type Owned Leased
-------- ---- ----- ------
(NATIONAL SANITARY SUPPLY COMPANY - CONTINUED)
<S> <C> <C> <C>
San Francisco, Office and distribution -- 67,000 sq. ft.
CA (Area) center
Tempe, AZ Office and distribution 69,000 sq. ft. --
center
Denver, CO Office and distribution -- 53,000 sq. ft.
center
Marion, IN Office and distribution 30,000 sq. ft. --
center
Tupelo, MS Office and distribution -- 33,000 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
Portland, OR Office and distribution 56,000 sq. ft. --
center
Memphis, TN Office and distribution -- 66,000 sq. ft.
center
Amarillo, TX Office and distribution -- 28,000 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
</TABLE>
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<TABLE>
<CAPTION>
Location Type Owned Leased
-------- ---- ----- ------
(NATIONAL SANITARY SUPPLY COMPANY - CONTINUED)
<S> <C> <C> <C>
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
Oklahoma City, OK Office and distribution -- 75,000 sq. ft.
center
Kansas City, MO Office and distribution -- 25,000 sq. ft.
center
Salt Lake City, Office and distribution -- 20,000 sq. ft.
UT center
Seattle, WA Office and distribution -- 15,000 sq. ft.
center
Western, Branch sales offices 3,000 sq. ft. 187,000 sq. ft.
Midwestern and
Southwestern
U.S. (9)
OMNIA
Troy, MI (10) Office -- 68,000 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 (11) Office, manufacturing and 132,000 sq. ft. --
distribution center
PATIENT CARE
New Jersey (12) Office -- 57,000 sq. ft.
Connecticut (13) Office -- 9,000 sq. ft.
</TABLE>
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<TABLE>
<CAPTION>
Location Type Owned Leased
-------- ---- ----- ------
(PATIENT CARE - CONTINUED)
<S> <C> <C> <C>
New York (11) Office -- 43,000 sq. ft.
Louisville, KY Office -- 6,000 sq. ft.
CORPORATE
CORPORATE (15)
- --------------
Cincinnati, OH Corporate offices and -- 48,000 sq. ft.
related facilities
<FN>
- ----------
(1) Excludes 6,000 square feet that formerly housed a service facility. This
location is now leased to an outside third party.
(2) Comprising locations in 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 Decatur, Georgia; Birmingham, Alabama;
Little Rock, Arkansas; Memphis and Nashville, Tennessee; Charlotte, North
Carolina; and St. Louis, Missouri.
(4) Comprising locations in Pennsauken and North Brunswick, New Jersey;
Levittown, Pennsylvania; Fairfax, Virginia; Newark, Delaware; and
Baltimore and Jessup, Maryland.
(5) Comprising locations in Cleveland and Columbus, Ohio; Newnan, Georgia; and
Wilmerding, Pennsylvania.
(6) Comprising locations in Jacksonville, Longwood, Pompano Beach, Miami, Fort
Myers, St. Petersburg, Boca Raton, Dayton Beach, and Orlando, Florida;
Raleigh, North Carolina; and Virginia Beach, Virginia.
(7) Comprising locations in Houston and San Antonio, Texas; Addison,
Schaumburg and Posen, Illinois; Commerce City, Colorado; Honolulu, Hawaii;
Minneapolis, Minnesota; Tacoma, Washington; Phoenix and Tucson, Arizona;
and Fresno, California.
(8) Comprising locations in Delta, British Columbia; Boucherville, Quebec; and
Winnipeg, Manitoba.
(9) Comprising facilities in Anaheim, Bakersfield, Baldwin Park, Chatsworth,
Chico, Colton, Fresno, Grover Beach, Palm Springs, Sacramento, San Diego,
Santa Barbara and Santa Rosa, California; Tucson and Yuma, Arizona;
Farmington, Gallup and Santa Fe, New Mexico; St. George, Utah; Bend,
Eugene, Pendleton and Salem, Oregon; Eagle, Fort Collins, Grand Junction
and Colorado Springs, Colorado; Dayton, Ohio; Austin, Bryan, Freeport, Fort
Worth, Lubbock, Lufkin, Tyler and Victoria, Texas; Columbus, Mississippi;
Baton Rouge, Lake Charles and Lafayette, Louisiana; Indianapolis and Fort
Wayne, Indiana; and Ann Arbor and Detroit, Michigan.
</TABLE>
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(10) Excludes 28,000 square feet of office space that housed the Veratex
Retail operation which was sold in July 1995. The lease on these
facilities expires in 1997. Approximately 4,000 square feet of this
space have been sublet to an outside third party and the remainder is
vacant as of December 31, 1996.
(11) Excludes 36,000 square feet of office, manufacturing and warehouse
facilities in Pomona, California that are leased to an outside third
party.
(12) Comprising locations in Princeton, Ridgewood, Montclair, Orange,
Providence, Westfield and West Orange, New Jersey.
(13) Comprising locations in Greenwich, Madison and Newington, Connecticut.
(14) Comprising locations in Brooklyn, Manhattan, Queens, Bronx and Staten
Island, New York.
(15) 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.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Name Age Office First Elected
---- --- ------ -------------
<S> <C> <C> <C>
Edward L. Hutton 77 Chairman and Chief Executive Officer November 3, 1993 (1)
Kevin J. McNamara 43 President August 2, 1994 (2)
Paul C. Voet 50 Executive Vice President May 20, 1991 (3)
Timothy S. O'Toole 41 Executive Vice President and May 18, 1992 (4)
Treasurer
Sandra E. Laney 53 Senior Vice President and Chief November 3, 1993 (5)
Administrative Officer
Arthur V. Tucker, 47 Vice President and Controller May 20, 1991 (6)
Jr.
<FN>
(1) Mr. E. L. Hutton is the Chairman and Chief Executive Officer of the
Company and has held these positions since November 1993. Previously,
from April 1970 to November 1993, Mr. E. L. Hutton held the positions
of President and Chief Executive Officer of the Company. Mr. E. L.
Hutton is the father of Mr. T. C. Hutton, a director and a Vice
President of the Company.
(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.
</TABLE>
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(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 19, 1997.
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 1995 and 1996 are set forth below.
<TABLE>
<CAPTION>
Closing
------- Dividends Paid
High Low Per Share
1996 ---- --- --------------
----
<S> <C> <C> <C>
First Quarter $40-1/8 $36-7/8 $.52
Second Quarter 39 35-7/8 .52
Third Quarter 39-1/8 35-1/2 .52
Fourth Quarter 39 35-1/8 .52
1995
----
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
</TABLE>
Future dividends are necessarily dependent upon the Company's earnings
and financial condition, compliance with certain debt covenants and other
factors not presently determinable.
As of March 19, 1997, there were approximately 5,633 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, 1996 is set forth on pages 36 and 37 of the 1996 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 40 through
43 of the 1996 Annual Report to Stockholders and is incorporated herein by
reference.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the report thereon
of Price Waterhouse dated February 4, 1997, appearing on pages 19 through 35 and
38 of the 1996 Annual Report to Stockholders, along with the Supplementary Data
(Unaudited Summary of Quarterly Results) appearing on page 39, 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.
<TABLE>
<CAPTION>
The directors of the Company are:
<S> <C>
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
Lawrence J. Gillis D. Walter Robbins, Jr.
Patrick P. Grace Paul C. Voet
Thomas C. Hutton George J. Walsh III
</TABLE>
Except for information relating to Mr. Cunningham, the additional
information required under this Item with respect to the directors and executive
officers is set forth in the Company's 1997 Proxy Statement and in Part I hereof
under the caption "Executive Officers of the Registrant" and is incorporated
herein by reference. Mr. Cunningham, who is 52 years old, is a Senior Chemical
Adviser with Schroder Wertheim & Co. Incorporated, New York, New York (an
investment banking, asset management and securities firm) and has held this
position since March 1992. Previously, he was Managing Director of Furman Selz
Incorporated, New York, New York (an institutional investment company) and held
this position from October 1990 to March 1992. Mr. Cunningham is a director of
National Sanitary Supply Company.
ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth in the Company's 1997
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 1997
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 1997
Proxy Statement, which is incorporated herein by reference.
11
<PAGE> 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
EXHIBITS
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 Excess Benefits Plan, as amended effective November 1, 1985.*,**
10.10 Non-Employee Directors' Deferred Compensation Plan.*,**
10.11 Directors Emeriti Plan.*,**
10.12 Employment Contracts with Executives.*,**
10.13 Amendment No. 8 to Employment Contracts with Executives.**
10.14 1995 Stock Incentive Plan.*,**
10.15 Split Dollar Agreement with Executives.*,**
10.16 Split Dollar Agreement with Edward L. Hutton.*,**
10.17 Split Dollar Agreement with Paul C. Voet.*,**
10.18 Amendment No. 7 to Employment Agreement with Edward L.
Hutton.**
11. Statement re: Computation of Earnings Per Common Share.
13. 1996 Annual Report to Stockholders.
21. Subsidiaries of Chemed Corporation.
12
<PAGE> 15
23. Consent of Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule +
* This exhibit is being filed by means of incorporation by reference (see
Index to Exhibits on page E-1). Each other exhibit is being filed with
this Annual Report on Form 10-K.
** Management contract or compensatory plan or arrangement.
+ Not filed herewith.
FINANCIAL STATEMENT SCHEDULE
See Index to Financial Statements and Financial Statement Schedule on page
S-1.
REPORTS ON FORM 8-K
A Form 8-K was filed October 2, 1996 announcing Chemed
Corporation's acquisition of all the outstanding shares of Common Stock of
Roto-Rooter, Inc. for $41.00 per share in cash.
13
<PAGE> 16
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 27, 1997 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> <C>
/s/ Edward L. Hutton Chairman and Chief ----
- ------------------------ Executive Officer and a
Edward L. Hutton Director (Principal
Executive Officer)
/s/ Timothy S. O'Toole Executive Vice President
- ------------------------ and Treasurer and a
Timothy S. O'Toole Director
(Principal Financial
Officer)
/s/ Arthur V.Tucker, Jr. Vice President and March 27, 1997
- ----------------------- Controller
Arthur V. Tucker, Jr. (Principal Accounting
Officer)
----
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
Lawrence J. Gillis* D. Walter Robbins, Jr.*
Patrick P. Grace* Paul C. Voet*
Thomas C. Hutton* George J. Walsh III* ---- ----
<FN>
- ----------
* 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 27, 1997 /s/ Naomi C. Dallob
- --------------------- -----------------------
Date Naomi C. Dallob
(Attorney-in-Fact)
</TABLE>
14
<PAGE> 17
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
1994, 1995 AND 1996
<TABLE>
<CAPTION>
CHEMED CORPORATION CONSOLIDATED FINANCIAL PAGE(S)
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<S> <C>
Report of Independent Accountants............................... 19*
Statement of Accounting Policies.................................20*
Consolidated Statement of Income.................................21*
Consolidated Balance Sheet.......................................22*
Consolidated Statement of Cash Flows.............................23*
Consolidated Statement of Changes in Stockholders' Equity........24*
Notes to Financial Statements....................................25-33*
Sales and Profit Statistics by Business Segment..................34-35*
Additional Segment Data..........................................38*
Report of Independent Accountants on Financial Statement
Schedule.......................................................S-2
Schedule II -- Valuation and Qualifying Accounts.................S-3
<FN>
* Indicates page numbers in Chemed Corporation 1996 Annual Report to
Stockholders.
</TABLE>
- ----------------
The consolidated financial statements of Chemed Corporation listed above,
appearing in the 1996 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> 18
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 4, 1997 appearing on page 19 of the 1996 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 4, 1997
S-2
<PAGE> 19
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 1996......... $ (3,519) $(1,511) $ (78) $ ( 16) $ 2,199 $ (2,925)
========= ======== ======= ========= ======== =========
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)
========= ======== ======= ========= ======== =========
Allowances for doubtful
accounts - notes
receivable (d) -
For the year 1996......... $ (247) $ 8 $ 78 $ - $ 41 $ (120)
========= ======== ======== ========= ======== =========
For the year 1995......... $ (267) $ (64) $ 72 $ - $ 12 $ (247)
========= ======== ======== ========= ======== =========
For the year 1994......... $ (493) $ (81) $ - $ - $ 307 $ (267)
========= ======== ======== ========= ======== =========
</TABLE>
S-3
<PAGE> 20
(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-4
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number
or
Incorporation by Reference
------------------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------ ----------- -----------
<S> <C> <C> <C>
3.1 Certificate of Incorporation of Form S-3 4.1
Chemed Corporation Reg. No. 33-44177
11/26/91
3.2 By-Laws of Chemed Corporation Form 10-K 2
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 Excess Benefits Plan, as amended Form 10-Q 10.10
effective November 1, 1985 11/12/85
10.10 Non-Employee Directors' Deferred Form 10-K 10.11
Compensation Plan 3/24/88
10.11 Directors Emeriti Plan Form 10-Q 10.12
5/12/88
</TABLE>
1
<PAGE> 22
<TABLE>
<CAPTION>
Page Number
or
Incorporation by Reference
------------------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------ ----------- -----------
<S> <C> <C> <C>
10.12 Employee Contracts with Form 10-K 10.13
Executives 3/28/89
10.13 Amendment No. 8 to Employment *
Contracts with Executives
10.14 1995 Stock Incentive Plan Form 10-K 10.15
3/28/96
10.15 Split Dollar Agreements Form 10-K 10.16
3/28/96
10.16 Split Dollar Agreement with Form 10-K 10.17
Edward L. Hutton 3/28/96
10.17 Split Dollar Agreement with Form 10-K 10.18
Paul C. Voet 3/28/96
10.18 Amendment No. 7 to Employment *
Agreement with Edward L. Hutton
11 Statement re: Computation of *
Earnings Per Common Share
13 1996 Annual Report to Stockholders *
21 Subsidiaries of Chemed Corporation *
23 Consent of Independent Accountants *
24 Powers of Attorney *
27 Financial Data Schedule *
- --------------
* Filed herewith.
+ Not filed herewith.
</TABLE>
2
<PAGE> 1
EXHIBIT 10.13
AMENDMENT NO. 8
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 20, 1996 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, May 16, 1994 and May 15, 1995
("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 20, 1996, as follows:
A. The date, amended as of May 15, 1995, set forth in Section 1.2
of the Employment Agreement, is hereby deleted and the date of
May 3, 2001 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 1995 is $____________.
D. Section 3.4(b)(iii) is hereby amended to read as follows:
Section 3.4(b)(iii) The fair market value of all shares of
Chemed Corporation capital stock and its subsidiaries' common
stock subject to stock awards granted to Employee under one or
more stock incentive plans of Chemed Corporation or of any of
its subsidiaries which have vesting during the 12 months prior
to the Employee's
<PAGE> 2
termination, such fair market value to be determined as of the
date of vesting of any such shares. Such monthly severance
payments shall be made for a period equal to the balance of the
term of employment provided in Section 1.2.
Except as specifically amended in this Amendment No. 8 to Employment
Agreement, the Employment Agreement, as amended, shall continue in full force
and effect in accordance with its terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of the date first above written.
EMPLOYEE
---------------------
CHEMED CORPORATION
---------------------
Kevin J. McNamara
President
<PAGE> 3
<TABLE>
<CAPTION>
SCHEDULE TO EXHIBIT 10.13
Minimum Current
Annual Current (a) Expiration
Base Salary Stock Award Date of
Name and Position and Bonus Compensation Agreement
- ----------------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Kevin J. McNamara 270,180,00 25,680.24 5/3/2001
President 179,467.00
Paul C. Voet 285,344.00 -0- 5/3/2001
Executive Vice President 135,210.00
Timothy S. O'Toole 161,666.80 32,263.22 5/3/2001
Executive Vice President 70,447.00
and Treasurer
Sandra E. Laney 162,583.48 24,215.94 5/3/2001
Senior Vice President and 174,033.00
Chief Administrative Officer
Arthur V. Tucker 107,250.08 8,044.89 5/3/2001
Vice President and Controller 48,123.00
- ---------------
(a) Amount of unrestricted stock award recognized in lieu of incentive
compensation in 1995.
</TABLE>
<PAGE> 1
EXHIBIT 10.18
AMENDMENT NO. 7
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 20, 1996 between Edward L. Hutton
("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 20, 1996, as
follows:
A. The amount of unrestricted stock award recognized in
lieu of incentive compensation in 1995 is
$370,076.50.
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
$550,000 per annum is hereby substituted.
C. Section 3.4(b)(iii) is hereby amended to read as
follows: ss.3.4(b)(iii) The fair market value of
all shares of Chemed Corporation capital stock and
its subsidiaries' common stock subject to stock
awards granted to Employee under one or more stock
incentive plans of Chemed Corporation or of any of
1
<PAGE> 2
its subsidiaries which have vested during the 12
months prior to the Employee's termination, such
fair market value to be determined as of the date of
vesting of any such shares. Such monthly severance
payments shall be made for a period equal to the
balance of the term of employment provided in
ss.1.2.
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.
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of the date first above written.
EMPLOYEE
---------------------
Edward L. Hutton
CHEMED CORPORATION
---------------------
Kevin J. McNamara
President
2
<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>
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> 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>
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
======= =======
- ---------------
(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>
1996
--------------------------
Income from
Continuing
Operations Net Income
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Computation of Earnings per Common and Common Equivalent
Share: (a)
Reported income ........................................ $31,728 $32,328
======= =======
Average number of shares used to compute
earnings per common share ............................ 9,836 9,836
Effect of unexercised stock options .................... 59 59
------- -------
Average number of shares used to compute earnings per
common and common equivalent share ..................... 9,895 9,895
======= =======
Earnings per common and common
equivalent share ..................................... $ 3.21 $ 3.27
======= =======
Computation of Earnings per Common Share Assuming Full
Dilution: (a)
Reported income ........................................ $31,728 $32,328
======= =======
Average number of shares used to compute
earnings per common share ............................ 9,836 9,836
Effect of unexercised stock options .................... 60 60
------- -------
Average number of shares used to compute
earnings per common share assuming full dilution ..... 9,896 9,896
======= =======
Earnings per share assuming full dilution .............. $ 3.21 $ 3.27
======= =======
</TABLE>
- --------------
(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.
<PAGE> 1
FINANCIAL REVIEW
CONTENTS
20 STATEMENT OF ACCOUNTING POLICIES
21 CONSOLIDATED STATEMENT OF INCOME
22 CONSOLIDATED BALANCE SHEET
23 CONSOLIDATED STATEMENT OF CASH FLOWS
24 CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
25 NOTES TO FINANCIAL STATEMENTS
34 SALES AND PROFIT STATISTICS
BY BUSINESS SEGMENT
36 SELECTED FINANCIAL DATA
38 ADDITIONAL SEGMENT DATA
39 UNAUDITED SUMMARY OF QUARTERLY RESULTS
40 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
[PRICE WATERHOUSE LLP 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 20
through 35 and on page 38 of this report present fairly, in all material
respects, the financial position of Chemed Corporation and its subsidiaries
("the Company") at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, 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.
/s/ Price Waterhouse LLP
Cincinnati, Ohio
February 4, 1997
19
<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, 1996, are
(in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1 - 10 years $ 3,101
11 - 20 years 2,370
21 - 30 years 4,931
31 - 40 years 223,095
</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.
STOCK-BASED COMPENSATION PLANS
The Company has elected to continue using Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, to account for stock-based
compensation plans.
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 1995 and 1994 financial statements have been
reclassified to conform with the 1996 presentation.
20
<PAGE> 3
CONSOLIDATED STATEMENT OF INCOME
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
For the Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTINUING OPERATIONS
Sales...................................................... $ 399,776 $ 444,301 $ 415,807
Service revenues........................................... 284,041 254,864 229,220
--------- --------- ---------
Total sales and service revenues........................ 683,817 699,165 645,027
--------- --------- ---------
Cost of goods sold......................................... 271,885 306,345 284,973
Cost of services provided.................................. 171,397 157,461 142,696
Selling and marketing expenses............................. 99,038 99,162 96,144
General and administrative expenses........................ 98,155 91,416 81,417
Depreciation............................................... 11,960 11,819 10,686
Nonrecurring expenses (Note 3)............................. -- 538 1,705
--------- --------- ---------
Total costs and expenses................................ 652,435 666,741 617,621
--------- --------- ---------
Income from operations..................................... 31,382 32,424 27,406
Interest expense........................................... (8,950) (8,466) (8,807)
Other income--net (Note 5)................................. 34,953 17,001 11,175
--------- --------- ---------
Income before income taxes and minority interest........ 57,385 40,959 29,774
Income taxes (Note 6)...................................... (21,866) (15,614) (10,954)
Minority interest in earnings of subsidiaries (Notes 1 and 2) (3,791) (4,906) (4,288)
--------- --------- ---------
Income from continuing operations.......................... 31,728 20,439 14,532
DISCONTINUED OPERATIONS (Note 4).................................... 600 2,743 29,390
--------- --------- ---------
NET INCOME.......................................................... $ 32,328 $ 23,182 $ 43,922
========= ========= =========
EARNINGS PER COMMON SHARE
Income from continuing operations.......................... $ 3.23 $ 2.07 $ 1.47
========= ========= =========
Net income................................................. $ 3.29 $ 2.35 $ 4.46
========= ========= =========
Average number of shares outstanding....................... 9,836 9,861 9,856
========= ========= =========
</TABLE>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
21
<PAGE> 4
CONSOLIDATED BALANCE SHEET
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
December 31, 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (Note 7) .................................. $ 11,935 $ 19,187
Marketable securities (Note 7) ...................................... -- 10,094
Accounts receivable less allowances of $2,925 (1995--$3,519) ........ 77,622 87,177
Inventories (Note 8) ................................................ 52,388 58,251
Statutory deposits .................................................. 19,962 18,943
Other current assets (Notes 6 and 15) ............................... 30,452 25,785
--------- ---------
Total current assets ............................................. 192,359 219,437
Other investments (Note 15) ............................................ 62,098 90,176
Properties and equipment, at cost less accumulated depreciation (Note 9) 83,259 77,131
Identifiable intangible assets less accumulated amortization of $3,977
(1995--$2,886) 17,295 18,140
Goodwill less accumulated amortization of $25,292 (1995--$20,978) ...... 186,933 119,486
Other assets ........................................................... 17,406 7,498
--------- ---------
Total Assets ............................................... $ 559,350 $ 531,868
========= =========
LIABILITIES
Current liabilities
Accounts payable .................................................... $ 25,747 $ 28,411
Bank notes and loans payable (Note 10) .............................. 5,000 25,000
Current portion of long-term debt (Note 11) ......................... 12,550 7,089
Income taxes (Note 6) ............................................... 5,209 11,965
Deferred contract revenue ........................................... 24,735 23,512
Other current liabilities (Note 12) ................................. 51,307 49,027
--------- ---------
Total current liabilities ........................................ 124,548 145,004
Deferred income taxes (Note 6) ......................................... 6,650 15,819
Long-term debt (Note 11) ............................................... 158,168 85,368
Other liabilities (Note 12) ............................................ 41,273 36,030
Minority interest (Notes 1 and 2) ...................................... 10,820 40,990
--------- ---------
Total Liabilities .......................................... 341,459 323,211
--------- ---------
STOCKHOLDERS' EQUITY
Capital stock--authorized 15,000,000 shares $1 par;
issued 12,767,565 shares (1995--12,598,418 shares) .................. 12,768 12,598
Paid-in capital ........................................................ 150,296 145,290
Retained earnings ...................................................... 139,262 127,141
Treasury stock--2,815,655 shares (1995--2,748,192 shares), at cost ..... (82,943) (79,996)
Unearned compensation--ESOPs (Note 13) ................................. (27,554) (33,355)
Unrealized appreciation on investments (Note 15) ....................... 26,062 36,979
--------- ---------
Total Stockholders' Equity ................................. 217,891 208,657
--------- ---------
Commitments and contingencies (Notes 12 and 14)
Total Liabilities and Stockholders' Equity ................. $ 559,350 $ 531,868
========= =========
</TABLE>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
22
<PAGE> 5
CONSOLIDATED STATEMENT OF CASH FLOWS
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................................... $ 32,328 $ 23,182 $ 43,922
Adjustments to reconcile net income to net cash
provided by operations:
Gains on sales of investments (Note 5) ....................... (28,166) (9,078) (5,471)
Depreciation and amortization ................................ 18,847 18,205 15,807
Minority interest in earnings
of subsidiaries (Notes 1 and 2) ........................... 3,791 4,906 4,288
Provision for deferred income taxes (Note 6) ................. (2,152) (846) 1,101
Provision for uncollectible accounts receivable .............. 1,503 2,507 1,855
Discontinued operations (Note 4) ............................. (600) (2,743) (29,390)
Changes in operating assets and liabilities, excluding amounts
acquired in business combinations:
Decrease/(increase) in accounts receivable ............. 8,010 (6,660) (13,300)
Increase in statutory reserve requirements ............. (1,019) (4,535) (1,232)
Decrease/(increase) in inventories and
other current assets ................................ 5,831 (2,237) (6,610)
Increase in accounts payable, deferred contract
revenue and other current liabilities ............... 660 1,113 11,679
Decrease in income taxes (Note 6) ...................... (2,199) (2,160) (426)
Other--net ................................................... (1,069) (2,818) 1,149
-------- -------- --------
Net cash provided by operating activities .................... 35,765 18,836 23,372
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Roto-Rooter minority interest .......................... (96,247) -- --
Proceeds from sales of investments (Notes 5 and 15) ................ 42,501 32,437 9,196
Capital expenditures ............................................... (19,026) (15,413) (18,400)
Business combinations, net of cash acquired (Note 2) ............... (9,933) (11,928) (18,383)
Net proceeds from sale of discontinued operations (Note 4) ......... (2,140) 2,401 49,496
Purchases of investments ........................................... (8) (1,948) (29,788)
Net proceeds from sale of divested operations (Note 4) ............. -- 14,046 --
Other--net ......................................................... 469 228 2,449
-------- -------- --------
Net cash provided/(used) by investing activities ............. (84,384) 19,823 (5,430)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt (Note 11) ................. 85,000 -- 10,000
Dividends paid ..................................................... (20,440) (20,319) (20,114)
Decrease in bank notes and loans payable (Note 10) ................. (20,000) -- --
Purchases of treasury stock ........................................ (3,653) (2,966) (771)
Repayment of long-term debt (Note 11) .............................. (1,288) (1,252) (18,232)
Issuance of capital stock (Note 16) ................................ 533 868 786
Other--net ......................................................... 1,215 (525) 496
-------- -------- --------
Net cash provided/(used) by financing activities ............. 41,367 (24,194) (27,835)
-------- -------- --------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ............................ (7,252) 14,465 (9,893)
Cash and cash equivalents at beginning of year .............................. 19,187 4,722 14,615
-------- -------- --------
Cash and cash equivalents at end of year .................................... $ 11,935 $ 19,187 $ 4,722
======== ======== ========
</TABLE>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
23
<PAGE> 6
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
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, 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)
Increase in unrealized appreciation
on investments (Note 15) ....... -- -- -- -- -- 20,941 20,941
Stock awards and exercise
of stock options (Note 16) ..... 263 7,329 -- (6,545) -- -- 1,047
Purchases of treasury stock ....... -- -- -- (771) -- -- (771)
Decrease in unearned compensation
--ESOPs (Note 13) ............... -- -- -- -- 4,483 -- 4,483
Other ............................. 18 (691) 334 -- -- -- (339)
------- --------- --------- -------- -------- -------- ---------
Balance, 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)
Increase in 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, DECEMBER 31, 1995 .. 12,598 145,290 127,141 (79,996) (33,355) 36,979 208,657
NET INCOME ........................ -- -- 32,328 -- -- -- 32,328
DIVIDENDS PAID ($2.08 PER SHARE) .. -- -- (20,440) -- -- -- (20,440)
DECREASE IN UNREALIZED
APPRECIATION ON INVESTMENTS
(NOTE 15) ...................... -- -- -- -- -- (10,917) (10,917)
DECREASE IN UNEARNED
COMPENSATION--ESOPS (NOTE 13) .. -- -- -- -- 5,801 -- 5,801
RECLASSIFICATION OF EMPLOYEE
BENEFIT TRUST ASSETS (NOTE 13) . -- -- -- 5,085 -- -- 5,085
PURCHASES OF TREASURY STOCK ....... -- -- -- (3,653) -- -- (3,653)
STOCK AWARDS AND EXERCISE
OF STOCK OPTIONS (NOTE 16) ..... 170 5,382 -- (4,379) -- -- 1,173
OTHER ............................. -- (376) 233 -- -- -- (143)
------- --------- --------- -------- -------- -------- ---------
BALANCE, DECEMBER 31, 1996 .. $12,768 $ 150,296 $ 139,262 $(82,943) $(27,554) $ 26,062 $ 217,891
======= ========= ========= ======== ======== ======== =========
</TABLE>
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
24
<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
plumbing, drain cleaning, and residential appliance and air-conditioning repair
(Roto-Rooter); sanitary-maintenance-product distribution services (National
Sanitary Supply); home healthcare services (Patient Care); and medical and
dental disposable-product supply and supportive services for the primary, acute
and long-term care markets (Omnia). Relative contributions to operating profit
are 50%, 26%, 15% and 9%, respectively. The business segments are defined as
follows:
-The Roto-Rooter segment includes the combined operations of the Roto-Rooter
Group ("Roto-Rooter"), a group of 100%-owned businesses, which provide 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 National Sanitary Supply segment includes the consolidated operations
of National Sanitary Supply Company ("National Sanitary Supply"), an 83%-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 Patient Care segment includes the consolidated operations of the
100%-owned businesses comprising the Company's Patient Care Group ("Patient
Care"), which offers complete, professional home-healthcare services primarily
in the New York-New Jersey-Connecticut area. Services provided to patients at
home include skilled nursing; home health aid; physical, speech, respiratory and
occupational therapies; medical social work; nutrition; and other specialized
services.
-The Omnia segment includes the combined operations of the 100%-owned
businesses comprising the Company's Omnia Group ("Omnia"), which manufactures
medical and dental supplies and distributes them to dealers throughout the
United States. Products include disposable paper, cotton and gauze proprietary
items and various other dental and medical supplies.
Substantially all of the Company's sales and service revenues from continuing
operations are generated from business within the United States. The Company's
risk 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 34, 35 and 38 of this
annual report. The segment data for 1996, 1995 and 1994 are an integral part of
these financial statements.
2. BUSINESS COMBINATIONS
Effective September 1, 1996, the Company acquired all of the outstanding
shares of Roto-Rooter Inc. it did not already own (approximately 2,261,000
shares) for $41 per share in cash. As a result, the Company's ownership interest
in Roto-Rooter increased from 58% to 100%. The aggregate estimated purchase
price of $102,100,000, including acquisition-related expenses, represents a
premium of $67,900,000 (goodwill) over the fair value of the net assets
acquired.
Also during 1996, seven business combinations were completed within the
Roto-Rooter, National Sanitary Supply and Patient Care segments for aggregate
purchase prices of $9,933,000 in cash. The results of operations of these
businesses were not material in relation to the Company's results of operations
in either 1996 or 1995.
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. 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. Half of this amount was
paid in March 1996 and half is payable in March 1997.
Also during 1994, five business combinations were completed within the
Roto-Rooter and National Sanitary Supply segments for aggregate purchase prices
of $1,795,000 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.
25
<PAGE> 8
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
The following data present the unaudited pro forma consolidated results of
the Company, assuming the 42% minority interest in Roto-Rooter had been acquired
on January 1 of each period presented (in thousands, except per share data):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Income from continuing operations $31,781 $19,475
Net income 32,381 22,218
Earnings per share:
Income from
continuing operations 3.23 1.97
Net income 3.29 2.26
</TABLE>
The excess of the purchase price over the fair value of the net assets
acquired in business combinations is classified as goodwill. A summary of net
assets acquired in business combinations, all of which have been recorded under
purchase accounting rules, follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Working capital $ 4,367 $ (1,238) $ 8,646
Properties and
equipment 246 621 451
Identifiable intangible
assets 246 969 --
Goodwill 4,220 9,607 22,051
Deferred income taxes (716) (762) 3,649
Long-term debt (350) (316) (7,492)
Other assets and
liabilities--net 1,934 5,150 (507)
------- -------- --------
Total net assets 9,947 14,031 26,798
Less--cash and
cash equivalents
acquired (14) (103) (182)
-capital stock
issued -- -- (500)
-present value
of deferred
payments -- (2,000) (7,733)
------- -------- --------
Net cash used $ 9,933 $ 11,928 $ 18,383
======= ======== ========
</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 6,280,000 shares (adjusted for
Omnicare's two-for-one stock split in June 1996) 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 959,600 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 2,888,000 shares, or 6%, of the Omnicare
capital stock. The Company currently holds shares representing less than 1% of
the Omnicare capital stock outstanding at December 31, 1996.
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 1996, 1995 and 1994.
Discontinued operations, as shown on the accompanying consolidated statement
of income, comprise the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Adjustments to the
tax provision on
the gain on the
sale of DuBois $ 823 $ 2,743 $ 3,236
Gains on sales of
Omnicare stock -- -- 23,358
Equity earnings in
Omnicare prior to
December 1, 1994 -- -- 2,225
Adjustment to the
expense accruals
related to the gain
on the sale of DuBois (223) -- 571
---------- ---------- ----------
Total discontinued
operations $ 600 $ 2,743 $29,390
========== ========== ==========
</TABLE>
26
<PAGE> 9
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
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. for
$14,046,000 in cash. This sale resulted in an immaterial gain which was recorded
in 1995.
5. OTHER INCOME--NET
Other income--net comprises the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Gain on sales of
investments $28,166 $ 9,078 $ 5,471
Interest income 3,191 4,203 2,739
Dividend income 3,110 3,190 3,057
Other--net 486 530 (92)
---------- ---------- ----------
Total other income
-net $34,953 $17,001 $11,175
========== ========== ==========
</TABLE>
6. INCOME TAXES
The provision for income taxes comprises the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CONTINUING OPERATIONS:
Current
U.S. federal $21,055 $14,272 $ 7,517
U.S. state and local 2,963 2,188 2,336
Deferred U.S. federal (2,152) (846) 1,101
---------- ---------- ----------
Total $21,866 $15,614 $10,954
========== ========== ==========
DISCONTINUED OPERATIONS:
Current
U.S. federal $ 1,000 $ 2,461 $19,820
U.S. state and local (1,247) (4,156) (2,850)
Deferred U.S. federal (691) (1,048) (323)
---------- ---------- ----------
Total $ (938) $(2,743) $16,647
========== ========== ==========
</TABLE>
A summary of the significant temporary differences
that give rise to deferred income tax assets/(liabilities) follows
(in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Accruals related to
discontinued operations $ 7,123 $ 6,544
Accrued insurance expense 6,423 5,803
Deferred compensation 3,512 1,187
Severance payments 2,674 285
Employee benefit accruals 1,544 1,457
Bad debt allowances 1,015 1,235
Other 4,086 4,625
-------- --------
Gross deferred income
tax assets 26,377 21,136
-------- --------
Market valuation of investments (14,034) (19,050)
Accelerated tax depreciation (6,639) (6,440)
Cash to accrual adjustments (1,305) (1,209)
Investment basis difference (1,132) (1,691)
Other (1,673) (2,576)
-------- --------
Gross deferred income
tax liabilities (24,783) (30,966)
-------- --------
Net deferred income
tax assets/(liabilities) $ 1,594 $(9,830)
======== ========
</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, 1996, are deferred income
tax assets of $8,244,000 (December 31, 1995--$5,989,000).
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,
----------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Statutory U.S. federal
income tax rate 35.0% 35.0% 35.0%
State and local income taxes,
less federal income tax
benefit 3.2 3.6 5.2
Nondeductible amortization
of goodwill 2.1 2.6 3.1
Domestic dividend exclusion (1.2) (1.7) (2.3)
Tax benefit on dividends
paid to ESOPs (1.2) (1.6) (2.1)
Other--net .2 .2 (2.1)
------ ------ ------
Effective tax rate 38.1% 38.1% 36.8%
====== ====== ======
</TABLE>
27
<PAGE> 10
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
The total amount of income taxes paid during the year ended December 31,
1996, was $26,513,000 (1995--$18,253,000; 1994--$28,533,000).
7. CASH EQUIVALENTS AND
MARKETABLE SECURITIES
Included in cash and cash equivalents at December 31, 1996, are cash
equivalents in the amount of $11,122,000 (1995--$8,804,000). 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 5.2%
in 1996 and 5.4% in 1995.
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.
Included in marketable securities at December 31, 1995, was a U.S. Treasury
Note with a value of $9,994,000 yielding 7.2%, which matured in 1996.
8. INVENTORIES
A summary of inventories follows (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Raw materials $ 6,515 $ 7,921
Finished goods and general
merchandise 45,873 50,330
-------- --------
Total inventories $52,388 $58,251
======== ========
</TABLE>
9. PROPERTIES AND EQUIPMENT
A summary of properties and equipment follows (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1995
---------- ----------
<S> <C> <C>
Land $ 8,039 $ 8,035
Buildings 31,273 29,567
Furniture and fixtures 31,212 26,301
Machinery and equipment 35,573 30,900
Transportation equipment 26,915 24,198
Projects under construction 6,900 5,204
---------- ----------
Total properties
and equipment 139,912 124,205
Less accumulated depreciation (56,653) (47,074)
---------- ----------
Net properties
and equipment $ 83,259 $ 77,131
========== ==========
</TABLE>
10. BANK NOTES AND LOANS PAYABLE
At December 31, 1996, the Company had $5,000,000 of borrowings outstanding
under an uncommitted line of credit with Sanwa Bank Ltd. At December 31, 1995,
the Company had $25,000,000 of borrowings outstanding under a credit agreement
with Bank of America. In addition, the Company had approximately $27,298,000 of
unused lines of credit with various banks at December 31, 1996.
The Company's short-term borrowings provide temporary capital for operations.
Borrowings under the credit agreement were subject to maintaining certain
financial covenants, with which the Company 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, 1996, was 6.2% (December 31,
1995--6.1%).
11. LONG-TERM DEBT
A summary of the Company's long-term debt follows (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1995
---------- ----------
<S> <C> <C>
Revolving Credit:
6.00%, due 2001 $ 85,000 $ --
Senior Notes:
8.15%, due 2000 - 2004 50,000 50,000
10.67%, due 1996 - 2003 7,000 8,000
Employee Stock Ownership
Plans Loan Guarantees:
6.83% (1995--6.80%),
due 1996 - 2000 27,554 33,355
Other 1,164 1,102
---------- ----------
Subtotal 170,718 92,457
Less current portion (12,550) (7,089)
---------- ----------
Long-term debt, less
current portion $158,168 $ 85,368
========== ==========
</TABLE>
REVOLVING CREDIT AGREEMENT
In June 1996, the Company entered into an amended revolving credit agreement
with Bank of America National Trust and Savings Association to borrow up to
$85,000,000 at any time during the five-year period ending June 20, 2001. Unpaid
principal is due on June 20, 2001. The interest rate is based on various
stipulated market rates of interest.
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.
28
<PAGE> 11
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
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, 1995 and 1996. The remaining $7,000,000 bears interest at the rate of
10.67% with annual principal payments of $1,000,000 due on November 1, 1997
through 2003. Interest is payable on May 1 and November 1 of each year.
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 four 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 6.83% (1995--6.80%). 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, 1996, based on that day's closing price of
$36.50 was $21,849,000 as compared with aggregate loan guarantees of
$27,554,000.
OTHER
Other long-term debt has arisen from the assumption of loans in connection
with various acquisitions. Interest rates range from 5% to 9%, 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, 1996 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $ 12,550
1998 10,653
1999 6,522
2000 12,500
2001 96,157
After 2001 32,336
-----------
Total long-term debt $170,718
===========
</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 $77,537,000, cannot permit
its net worth to fall below $164,673,000 and is limited to incurring additional
annual net rentals under operating leases with terms of three years or more
aggregating $7,703,000. Also, the Company must maintain an interest coverage
ratio (defined as the ratio of earnings before interest and taxes to interest
expense) of at least 3.0. At December 31, 1996, the Company's interest coverage
ratio was 4.3.
The total amount of interest paid during the year ended December 31, 1996,
was $10,705,000 (1995--$7,972,000; 1994--$8,562,000).
12. OTHER LIABILITIES
At December 31, 1996, other current liabilities included accrued insurance
liabilities of $19,395,000 and accrued wages of $7,249,000 (1995--$19,470,000
and $6,258,000, respectively).
Included in other liabilities at December 31, 1996, is an accrual of
$7,405,000 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 $14,665,000. 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 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 other defined
contribution plans.
29
<PAGE> 12
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
Expenses charged to continuing operations for the Company's pension and
profit-sharing plans, ESOPs, excess benefit plans and other similar plans
comprise the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
ESOPs:
Interest expense $ 824 $1,217 $1,322
Compensation cost 2,807 2,782 2,476
Pension, profit-sharing
and other similar plans 4,112 3,391 2,518
------ ------ ------
Total $7,743 $7,390 $6,316
====== ====== ======
Dividends on ESOP shares
used for debt service $2,676 $2,758 $2,820
====== ====== ======
</TABLE>
At December 31, 1996, there were 668,471 allocated shares (December 31,
1995--555,687 shares) and 598,611 unallocated shares (December 31, 1995--757,437
shares) in the ESOP trusts.
The Company has a directors' deferred compensation plan and an excess benefit
plan for key employees whose participation in the ESOPs is limited by ERISA
rules. Accrued benefits are payable in shares of the Company's stock. The value
of these benefits is invested in shares of the Company's stock, which are held
by grantor trusts. The trusts' assets are included in other assets at December
31, 1996, and the corresponding liability is included in other liabilities.
Prior to November 1996, the trusts' investments in Company shares were included
in treasury stock, since securities laws made it impractical to pay out these
benefits in shares of stock. At December 31, 1996, these trusts held 145,453
shares of the Company's stock (December 31, 1995--115,534 shares).
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 10 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, 1996 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $12,491
1998 9,586
1999 7,692
2000 6,850
2001 5,870
After 2001 18,113
---------
TOTAL MINIMUM RENTAL PAYMENTS 60,602
LESS MINIMUM SUBLEASE RENTALS (8,940)
---------
NET MINIMUM RENTAL PAYMENTS $51,662
=========
</TABLE>
Total rental expense incurred under operating leases follows (in
thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Total rental payments $14,988 $13,353 $12,451
Less sublease rentals (3,915) (3,591) (3,446)
---------- ---------- ----------
Net rental expense $11,073 $ 9,762 $ 9,005
========== ========== ==========
</TABLE>
30
<PAGE> 13
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
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, statutory deposits 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, carrying value and fair value are 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 value of Vitas Common Stock Purchase Warrants at December
31, 1995, was based on the difference between Chemed's exercise price and an
appraisal of the value of the underlying common stock. Since it is not
practicable to obtain an updated appraisal, it has been assumed that the market
value of the Vitas warrants is equal to book value at December 31, 1996
($1,500,000). 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 15.0% (1995--8.2%), rates which management believes are reasonable in view of
risk factors attendant to the investment.
-The fair value of the Company's long-term debt is estimated by discounting
the future cash outlays associated with each debt instrument using interest
rates currently available to the Company for debt issues with similar terms and
remaining maturities.
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 December 31, 1995
---------------------- ----------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Other investments(a) ................. $ 78,541 $ 78,541 $ 98,438 $101,668
Note receivable(b) ................... -- -- 5,864 5,909
Long-term debt ....................... 170,718 172,225 92,457 94,992
<FN>
----------------
(a) Amounts for 1996 include $16,443,000 representing the current portion of Vitas preferred
stock, which is recorded in other current assets on the balance sheet (1995--$8,262,000).
(b) The note receivable is included in other current assets.
</TABLE>
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,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Aggregate fair value:
Obligations of the U.S. Treasury ..................... $ -- $ 9,994
Equity securities .................................... 78,541 98,438
Gross unrealized holding gains:
Obligations of the U.S. Treasury ..................... -- 20
Equity securities .................................... 41,422 56,010
Gross unrealized holding losses of equity securities .... 1,326 --
Amortized cost:
Obligations of the U.S. Treasury ..................... -- 9,974
Equity securities .................................... 38,445 42,428
</TABLE>
31
<PAGE> 14
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
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,
-------------------------------
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Proceeds from sale .................. $42,501 $32,437 $ 9,196
Gross realized gains ................ 28,188 9,088 5,589
Gross realized losses ............... (22) (10) (2)
</TABLE>
Included in marketable securities at December 31, 1995, is a Treasury Note
with a fair value of $9,994,000, which matured in January 1996. Included in
other investments is the noncurrent portion of the Company's investment in Vitas
mandatorily redeemable preferred stock with a fair value of $9,150,000 at
December 31, 1996 (December 31, 1995--$19,236,000).
16. STOCK INCENTIVE PLANS
The Company has seven Stock Incentive Plans under which 2,650,000 shares of
Chemed Capital Stock are 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, 1983 and 1986 covering a total of 1,400,000 shares,
but a number of options granted under those plans remains outstanding. Options
granted under the 1988, 1993 and 1995 plans become exercisable six months
following the date of grant in either three or four equal annual installments.
Data relating to the Company's stock issued to employees follow:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
NUMBER Number Number
OF AVERAGE of Average of Average
SHARES PRICE Shares Price Shares Price
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Stock Options:
Outstanding at January 1 ... 627,666 $31.05 553,472 $29.38 628,967 $27.04
Granted .................... 180,900 38.74 291,650 32.57 260,650 32.13
Exercised .................. (148,903) 28.61 (208,668) 28.77 (247,845) 26.17
Forfeited .................. (14,888) 33.96 (7,738) 30.81 (87,300) 29.92
Expired .................... (750) 36.38 (1,050) 31.81 (1,000) 28.94
-------- -------- --------
Outstanding at December 31 . 644,025 33.70 627,666 31.05 553,472 29.38
======== ======== ========
Exercisable at December 31 . 320,467 32.34 325,385 30.03 280,193 28.32
======== ======== ========
Stock awards issued ........... 20,791 39.63 20,538 33.55 15,946 30.94
======== ======== ========
</TABLE>
The weighted average contractual life of options outstanding at December 31,
1996, was 8.1 years. The range of exercise prices for these options was from
$21.94 to $38.75. At December 31, 1996, there were 114,923 shares available for
granting of stock options and awards.
32
<PAGE> 15
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
Total compensation cost recognized for stock awards, including awards granted
by two of the Company's subsidiaries, National Sanitary Supply (83% owned) and
Roto-Rooter Inc. (58% owned prior to September 1996), was $1,561,000 in 1996
(1995--$1,316,000; 1994--$1,032,000). The shares of capital stock were issued to
key employees and directors 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.
Summarized below are the pro forma results of operations of Chemed assuming
the provisions of the fair-value-based method of valuing stock options,
described in Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, had been applied to options granted in 1995 and 1996
by the Company and by National Sanitary Supply (in thousands, except per share
data):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------
1996 1995
---------- ----------
<S> <C> <C>
Net income:
As reported ....................................... $32,328 $23,182
Pro forma ......................................... 31,689 22,798
Primary earnings per share:
As reported ....................................... 3.29 2.35
Pro forma ......................................... 3.22 2.31
Per share average fair value of options granted:
The Company ....................................... 6.93 5.31
National Sanitary Supply .......................... 4.82 4.95
</TABLE>
In view of the fact that the fair value method of accounting is applied to
option grants issued only during 1995 and 1996, the above pro forma data do not
reflect the full impact of applying such fair value method to Chemed's stock
options.
The fair values of employee stock options were estimated using the
Black-Scholes option pricing model and following key assumptions:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------
1996 1995
---------- ----------
<S> <C> <C>
The Company:
Average risk-free interest rate ...... 6.5% 7.1%
Expected volatility .................. 22.3 22.5
National Sanitary Supply:
Average risk-free interest rate ...... 5.9 6.9
Expected volatility .................. 42.5 42.5
</TABLE>
For both the Company's and National Sanitary Supply's options, it has been
assumed that the options have an expected life of six years. For the Company's
options, it was assumed that the annual dividend was increased $.04 per share
per year every other year beginning in 1997. For National Sanitary Supply
options, it was assumed that the dividend was increased $.02 per share per year
every year. These assumptions should not be construed to be an indication of
future dividend amounts to be paid by the Company or by National Sanitary
Supply.
33
<PAGE> 16
SALES AND PROFIT STATISTICS BY BUSINESS SEGMENT(a)
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(in thousands, except percentages and footnote data)
% OF % of
TOTAL Total
1996 1987 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES AND SERVICE REVENUES FROM CONTINUING OPERATIONS(b)
Roto-Rooter ....................... 29% 37% $201,648 $179,722
National Sanitary Supply .......... 45 63 310,125 340,913
Patient Care ...................... 15 -- 99,565 90,727
Omnia ............................. 11 -- 72,479 87,803
--- --- -------- --------
Total .......................... 100% 100% $683,817 $699,165
=== === ======== ========
OPERATING PROFIT FROM CONTINUING OPERATIONS(c)
Roto-Rooter ....................... 50% 55% $ 19,115 $ 15,908(e)
National Sanitary Supply .......... 26 45 9,988 11,847
Patient Care ...................... 15 -- 5,632 4,989
Omnia ............................. 9 -- 3,226 5,957
--- --- -------- --------
Total .......................... 100% 100% $ 37,961 $ 38,701
=== === ======== ========
<FN>
(a) The data are presented on a continuing operations basis, thus excluding DuBois Chemicals Inc.,
sold in April 1991. The data for 1996, 1995 and 1994 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.
</TABLE>
34
<PAGE> 17
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$171,930 $136,428(d) $104,688 $ 84,774(d) $ 75,230 $ 66,842 $ 62,255 $ 55,233
308,280 296,865 288,731 267,508 265,424 262,351 179,191(d) 92,618
69,064 -- -- -- -- -- -- --
95,753 91,800 7,543 -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
$645,027 $525,093 $400,962 $352,282 $340,654 $329,193 $241,446 $147,851
========= ========= ========= ========= ========= ========= ========= =========
$ 15,967 $ 14,371(d) $ 11,253 $ 8,499(d) $ 8,049 $ 7,762 $ 8,267 $ 7,573
10,291 9,093 9,171 8,504 10,165 10,762 8,507(d) 6,157
2,790 -- -- -- -- -- -- --
5,415(f) 5,660 607 -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
$ 34,463 $ 29,124 $ 21,031 $ 17,003 $ 18,214 $ 18,524 $ 16,774 $ 13,730
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
(d) The following significant business combinations, all in the United States, have been accounted for as purchase transactions:
<CAPTION>
Amounts Reported
in Year Acquired
----------------------------------
Business Effective Date Sales and Operating
Name Segment of Acquisition Service Revenues Profit
------------ -------------------- -------------------- ----------------- ----------
<S> <C> <C> <C> <C>
Service America
Network 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 --*
<FN>
*Operations were integrated into existing operations and amount is 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.
</TABLE>
35
<PAGE> 18
SELECTED FINANCIAL DATA
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(in thousands, except per share data, employee numbers,
ratios and percentages)
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Continuing operations
Total sales and service revenues ................. $683,817 $699,165 $645,027
Gross profit ..................................... 240,535 235,359 217,358
Depreciation ..................................... 11,960 11,819 10,686
Income from operations ........................... 31,382 32,424 27,406
Income from continuing operations ................ 31,728 20,439 14,532
Discontinued operations(a) .......................... 600 2,743 29,390
Cumulative effect of changes in accounting principles -- -- --
Net income .......................................... 32,328 23,182 43,922
Earnings per common share:
Assuming full dilution--
Income from continuing operations(b) .......... 3.23 2.07 1.47
Net income .................................... 3.29 2.35 4.46
Primary--
Income from continuing operations(b) .......... 3.23 2.07 1.47
Net income .................................... 3.29 2.35 4.46
Average number of shares outstanding:
Assuming full dilution ........................... 9,836 9,861 9,856
Primary .......................................... 9,836 9,861 9,856
Cash dividends per share ............................ $ 2.08 $ 2.06 $ 2.04
FINANCIAL POSITION--YEAR-END
Cash, cash equivalents and marketable securities .... $ 11,935 $ 29,281 $ 24,239
Working capital ..................................... 67,811 74,433 55,061
Properties and equipment, at cost less accumulated
depreciation ..................................... 83,259 77,131 77,116
Total assets ........................................ 559,350 531,868 505,483
Long-term debt ...................................... 158,168 85,368 92,133
Stockholders' equity ................................ 217,891 208,657 186,320
Book value per share:
Assuming full dilution ........................... 21.89 21.18 18.89
Primary .......................................... 21.89 21.18 18.89
OTHER STATISTICS--CONTINUING OPERATIONS
Net cash provided/(used) by continuing operations ... $ 35,765 $ 18,836 $ 23,372
Capital expenditures ................................ 19,026 15,413 18,400
Number of employees ................................. 7,886 7,335 6,602
Number of sales and service representatives ......... 4,976 4,500 3,919
Dividend payout ratio(c) ............................ 63.2% 87.7% 45.7%
Debt to total capital ratio:
Total debt basis ................................. 43.4 32.0 35.7
Senior debt basis ................................ 43.4 32.0 35.7
Return on average equity(c) ......................... 16.5 11.9 28.4
Return on average total capital employed(c) ......... 11.6 9.3 16.4
Current ratio ....................................... 1.54 1.51 1.39
<FN>
(a) Discontinued operations data include Omnicare Inc., discontinued in 1994; accrual adjustments from 1992 through 1996
related to the gain on the sale of DuBois Chemicals Inc. ("DuBois"); DuBois, sold in April 1991; and adjustments to
accruals in 1991 and 1988 related to operations discontinued in 1986.
(b) Earnings per share assuming full dilution from continuing operations for years prior to 1989 are greater than the
corresponding primary amounts due to the antidilutive impact of the convertible debt on earnings per common share
from continuing operations.
</TABLE>
36
<PAGE> 19
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$525,093 $400,962 $352,282 $340,654 $329,193 $241,446 $ 147,851
175,900 138,517 123,077 118,235 110,618 87,071 65,577
8,817 6,348 5,899 5,413 4,811 3,738 3,049
23,163 15,180 9,500 11,147 11,281 9,529 7,636
14,843 12,506 9,858 3,616 2,908 416 632
2,986 3,145 43,109 12,938 23,274 22,972 19,730
1,651 -- -- -- -- 732 --
19,480 15,651 52,967 16,554 26,182 24,120 20,362
1.52 1.28 .98 .35 .29 .29 .35
1.99 1.60 5.27 1.60 2.61 2.47 2.15
1.52 1.28 .98 .35 .29 .04 .07
1.99 1.60 5.27 1.60 2.61 2.60 2.28
9,778 9,803 10,059 10,371 10,042 10,879 11,006
9,778 9,803 10,059 10,371 10,042 9,280 8,939
$ 2.01 $ 2.00 $ 1.97 $ 1.96 $ 1.84 $ 1.72 $ 1.60
$ 15,815 $ 47,704 $ 83,044 $ 775 $ 5,346 $ 4,033 $ 4,387
30,741 62,452 82,675 14,377 28,236 24,740 10,064
70,758 62,872 44,391 36,802 38,574 36,335 25,034
430,253 404,944 364,335 277,169 285,600 276,276 218,314
98,059 103,778 77,928 82,151 85,834 90,405 46,504
137,151 133,511 139,407 109,504 119,121 109,276 111,754
14.00 13.68 14.08 10.75 11.61 13.19 14.69
14.00 13.68 14.08 10.75 11.61 11.65 12.71
$ 17,715 $ 15,563 $ 19,572 $ 13,505 $ 9,333 $ 7,589 $ (6,335)
13,851 8,232 11,416 7,128 7,723 10,259 5,597
4,834 3,856 3,325 2,965 2,851 2,633 1,796
2,552 1,790 1,665 1,409 1,356 1,223 967
101.0% 125.0% 37.4% 122.5% 70.5% 66.2% 70.2%
43.2 44.3 34.5 42.4 40.3 43.5 29.3
43.2 44.3 34.5 42.4 34.9 29.2 3.8
14.3 11.6 42.5 13.8 22.3 20.6 17.0
9.7 8.7 24.4 9.8 14.0 14.9 13.5
1.24 1.60 1.98 1.27 1.61 1.55 1.32
<FN>
(c) These computations are based on the net income and, with respect to return
on average capital employed, various related adjustments.
</TABLE>
37
<PAGE> 20
ADDITIONAL SEGMENT DATA(a)
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Roto-Rooter $ 208,345 $ 134,891 $ 127,602
National Sanitary Supply 111,445 121,427 122,175
Patient Care 47,494 46,211 38,857
Omnia 78,682 83,697 84,682
--------- --------- ---------
Total identifiable assets 445,966 386,226 373,316
Corporate assets(b) 113,384 145,642 132,167
--------- --------- ---------
Total assets $ 559,350 $ 531,868 $ 505,483
========= ========= =========
CAPITAL EXPENDITURES
Roto-Rooter $ 6,920 $ 5,544 $ 6,214
National Sanitary Supply 3,996 3,393 6,715
Patient Care 2,484 2,608 2,541
Omnia 4,042 2,801 2,079
--------- --------- ---------
Subtotal 17,442 14,346 17,549
Corporate assets 1,584 1,067 851
--------- --------- ---------
Total capital expenditures $ 19,026 $ 15,413 $ 18,400
========= ========= =========
DEPRECIATION AND AMORTIZATION(c)
Roto-Rooter $ 8,832 $ 7,646 $ 7,227
National Sanitary Supply 4,859 4,848 4,525
Patient Care 1,609 1,463 718
Omnia 2,210 2,727 2,643
--------- --------- ---------
Subtotal 17,510 16,684 15,113
Corporate assets 1,337 1,521 694
--------- --------- ---------
Total depreciation and amortization $ 18,847 $ 18,205 $ 15,807
========= ========= =========
RECONCILIATION OF OPERATING PROFIT TO INCOME
BEFORE INCOME TAXES AND MINORITY INTEREST
Total operating profit $ 37,961 $ 38,701 $ 34,463
Interest expense (8,950) (8,466) (8,807)
Investment income, net of corporate expenses(d) 28,374 10,724 4,118
--------- --------- ---------
Income before income taxes and minority interest $ 57,385 $ 40,959 $ 29,774
========= ========= =========
<FN>
(a) The Additional Segment Data are covered by the report of independent accountants.
(b) Corporate assets consist primarily of cash and cash equivalents, marketable securities, properties and equipment and
other investments.
(c) Depreciation and amortization include amortization of identifiable intangible assets, goodwill and other assets.
(d) Amounts are not allocable to segments and are included in various categories in the Consolidated Statement of
Income.
</TABLE>
38
<PAGE> 21
UNAUDITED SUMMARY OF QUARTERLY RESULTS
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
First Second Third Fourth Total
1996 Quarter Quarter Quarter Quarter Year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS
TOTAL SALES AND SERVICE REVENUES . $ 167,461 $ 170,471 $ 173,715 $ 172,170 $ 683,817
========= ========= ========= ========= =========
GROSS PROFIT ..................... $ 57,758 $ 60,095 $ 60,378 $ 62,304 $ 240,535
========= ========= ========= ========= =========
INCOME FROM OPERATIONS ........... $ 7,011 $ 8,030 $ 8,696 $ 7,645 $ 31,382
INTEREST EXPENSE ................. (1,931) (1,900) (2,241) (2,878) (8,950)
OTHER INCOME--NET ................ 16,298 5,181 1,633 11,841 34,953
--------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST ...... 21,378 11,311 8,088 16,608 57,385
INCOME TAXES ..................... (7,974) (4,237) (3,200) (6,455) (21,866)
MINORITY INTEREST IN EARNINGS
OF SUBSIDIARIES ............... (1,207) (1,386) (1,024) (174) (3,791)
--------- --------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 12,197 5,688 3,864 9,979 31,728
DISCONTINUED OPERATIONS ............. -- -- 600 -- 600
--------- --------- --------- --------- ---------
NET INCOME .......................... $ 12,197 $ 5,688 $ 4,464 $ 9,979 $ 32,328
========= ========= ========= ========= =========
EARNINGS PER COMMON SHARE
INCOME FROM CONTINUING OPERATIONS $ 1.24 $ .58 $ .39 $ 1.01 $ 3.23
========= ========= ========= ========= =========
NET INCOME ....................... $ 1.24 $ .58 $ .46 $ 1.01 $ 3.29
========= ========= ========= ========= =========
AVERAGE NUMBER OF SHARES OUTSTANDING 9,867 9,837 9,790 9,850 9,836
========= ========= ========= ========= =========
1995
- -----------------------------------------------------------------------------------------------------------------------
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>
39
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Significant factors affecting the Company's consolidated cash flows during
1996 and financial position at December 31, 1996, include the following:
-The Company acquired all of the outstanding shares of Roto-Rooter Inc. that
it did not already own, using approximately $96.2 million of cash;
-The Company increased its borrowings by $63.7 million to finance, in part,
the acquisition of the Roto-Rooter minority interest;
-Proceeds from sales of investments aggregated $42.5 million;
-Cash generated by operations totaled $35.8 million; and
-Purchase business combinations completed in 1996 required cash outlays
aggregating $9.9 million.
As a result of the foregoing, the ratio of total debt to total capital
increased from 32% at December 31, 1995, to 43% at the end of 1996. Excluding
the debt guarantees of the Employee Stock Ownership Plans ("ESOPs"), the total
debt to total capital ratios were 35% and 23%, respectively, at December 31,
1996 and 1995. The Company's current ratio at December 31, 1996, remained at
1.5, the same as at December 31, 1995.
The Company had $27.3 million of unused lines of short-term credit with
various banks at December 31, 1996.
CASH FLOW
The Company's cash flows for 1996 and 1995 are summarized as follows (in
millions):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Proceeds from sale of investments $ 42.5 $ 32.4
Cash from operations 35.8 18.8
Cash dividends (20.4) (20.3)
Capital expenditures (19.0) (15.4)
------- -------
Cash excess after capital
requirements and dividends 38.9 15.5
Purchase of Roto-Rooter
minority interest (96.2) --
Net change in long- and short-term
debt (excluding ESOP guarantees) 63.7 (1.3)
Business combinations (9.9) (11.9)
Proceeds from sale
of divested operations -- 16.4
Other--net (3.8) (4.2)
------- -------
Increase/(decrease) in cash
and cash equivalents $ (7.3) $ 14.5
======= =======
</TABLE>
For 1996, cash generated by operations, combined with the proceeds from the
sales of investments, aggregated $78.3 million as compared with aggregate cash
dividends and capital expenditures of $39.4 million. The excess cash after
capital expenditures and dividends ($38.9 million), coupled with proceeds from
increased borrowings ($63.7 million), provided funding for the purchase of the
Roto-Rooter minority interest and other business combinations.
The increased level of cash generated by operations in 1996 was attributable,
in part, to lower balances of accounts receivable and inventories resulting from
the loss of a major customer in the National Sanitary Supply segment. Based on
recent cash and earnings projections, it is expected that cash flow from
operations will continue to be supplemented by sales of investments in 1997 (and
to a lesser extent in later years) to fund the dividend and ordinary capital
expenditure requirements of the Company's operations. 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 amounted to $26.0 million
at December 31, 1996 ($37.0 million at December 31, 1995).
In February 1997, the Board of Directors declared a quarterly dividend of
$.52 per share of capital stock, payable in March 1997 (the same rate paid in
each of the prior six 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 AND CONTINGENCIES
The Company's lease for corporate and general office facilities covers the
period from April 1991 to April 2006. As a part of the 1991 sale of the
Company's former DuBois Chemicals Inc. subsidiary ("DuBois") to Diversey
Corporation ("Diversey"), a portion of this space was subleased to DuBois for
varying terms expiring in the years 1998 through 2004. At December 31, 1996, the
Company had net lease commitments aggregating $51.7 million.
In connection with the sale of DuBois, the Company provided allowances and
reserves relating to several long-term costs associated with DuBois, including
income tax matters, lease commitments and environmental costs. In the aggregate,
the Company believes these allowances and reserves are adequate as of December
31, 1996.
40
<PAGE> 23
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
Based on an updated assessment of Chemed's environmental-related liability
under the DuBois sale agreement, Chemed's adviser has estimated Chemed's
liability to be $10.8 million. Accordingly, at December 31, 1996, the Company is
contingently liable for additional cleanup and related costs up to a maximum of
$14.7 million, for which no provision has been recorded. Through December 31,
1996, the Company has reimbursed Diversey $3.4 million for environmental and
related costs of DuBois.
The Company's various loan agreements and guarantees of indebtedness contain
certain restrictive covenants; however, management believes that such covenants
will not adversely affect the operations of the Company. Under the most
restrictive of these covenants at December 31, 1996, the Company would be
limited to incurring additional debt totaling $77.5 million and could not permit
its net worth to fall below $164.7 million (versus a balance of $217.9 million
at December 31, 1996). Also, the Company must maintain an interest coverage
ratio of 3.0, and the Company is limited to incurring net rentals under
operating leases with terms of three years or more aggregating $16.3 million. At
December 31, 1996, the Company's interest coverage ratio was 4.3, and rentals
under operating leases with terms of three or more years totaled $8.6 million
for 1996.
Since 1991, the Company has carried an investment in the mandatorily
redeemable preferred stock ($27 million par value) of Vitas Healthcare
Corporation ("Vitas"), a privately held provider of hospice services to the
terminally ill. Vitas is currently encountering reduced liquidity and is
exploring long-term financing alternatives to increase its liquidity. Vitas'
debt covenants did not permit the payment of the preferred dividend ($1,215,000)
due to Chemed on January 15, 1997. Also, in December 1996, Vitas and the Company
agreed to reschedule to June 1997 the mandatory redemption of preferred stock
due in December 1996 ($8,262,000).
Vitas is in the process of restructuring its operations and financial
position. On the basis of information currently available, management believes
its investment in Vitas is fully recoverable and that no permanent impairment
exists.
It is management's opinion that the Company has no long-range commitments
that 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 for
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 the growth in sales and service
revenues and operating profit margin:
<TABLE>
<CAPTION>
Percent Increase/(Decrease)
in Sales and Service Revenues
-----------------------------
1996 1995
vs. 1995 vs. 1994
---------- ----------
<S> <C> <C>
Roto-Rooter 12% 5%
National Sanitary Supply (9) 11
Patient Care 10 31
Omnia (17) (8)
Total (2) 8
<CAPTION>
Operating Profit
as a Percent of Sales
and Service Revenues
(Operating Margin)
-----------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Roto-Rooter 9.5% 8.9% 9.3%
National Sanitary Supply 3.2 3.5 3.3
Patient Care 5.7 5.5 4.0
Omnia 4.5 6.8 5.7
Total 5.6 5.5 5.3
</TABLE>
1996 VERSUS 1995
The Roto-Rooter segment recorded sales and service revenues of $201,648,000
during 1996, an increase of 12% versus revenues of $179,722,000 in 1995. This
growth was attributable primarily to revenue increases of 20% and 12%,
respectively, in Roto-Rooter's plumbing and sewer and drain cleaning businesses
for the 1996 period. Plumbing and sewer and drain cleaning revenues account for
26% and 32%, respectively, of this segment's total revenues. Roto-Rooter's
operating margin increased from 8.9% in 1995 to 9.5% in 1996, partially as the
result of $538,000 of nonrecurring expenses recorded in 1995. Improved
profitability of the service contract business in 1996 also contributed to this
increase in operating margin.
The National Sanitary Supply segment recorded sales of $310,125,000 during
1996, a decline of 9% versus sales of $340,913,000 in 1995. Also, National
Sanitary Supply's operating margin declined from 3.5% during 1995 to 3.2% during
1996. The sales and margin declines primarily resulted from the loss of a large
fast-food customer during the first quarter of 1996.
Revenues of the Patient Care segment increased
10% from $90,727,000 in 1995 to $99,565,000 in 1996, largely as a result of
continued geographic expansion. In addition, the operating margin of this
segment increased from 5.5% during 1995 to 5.7% during 1996.
41
<PAGE> 24
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
The Omnia segment recorded sales of $72,479,000 during 1996, a decline of 17%
versus sales of $87,803,000 recorded in 1995. Excluding sales of Omnia's retail
division (sold in July 1995), this segment's sales for 1996 increased 7% as
compared with sales for 1995. The operating margin of this segment declined from
6.8% during 1995 to 4.5% during 1996, due primarily to rapid reductions in paper
prices in mid-1996.
Income from operations declined from $32,424,000 in 1995 to $31,382,000 in
1996, primarily as a result of operating profit declines in the Omnia and
National Sanitary Supply segments, partially offset by operating profit
increases in the Roto-Rooter and Patient Care segments.
Interest expense for 1996 totaled $8,950,000, an increase of $484,000 versus
expense of $8,466,000 recorded in 1995. This increase was attributable to
additional debt incurred to finance the purchase of the Roto-Rooter minority
interest in 1996.
Other income increased from $17,001,000 in 1995 to $34,953,000 in 1996,
primarily as a result of larger gains on the sales of investments recorded in
1996.
The Company's effective income tax rate was 38.1% in both 1996 and 1995.
Minority interest in earnings of subsidiaries declined from $4,906,000 in
1995 to $3,791,000 in 1996, largely as the result of the purchase of the
Roto-Rooter minority interest in 1996.
Income from continuing operations increased 55% from $20,439,000 ($2.07 per
share) in 1995 to $31,728,000 ($3.23 per share) in 1996. Excluding realized
investment gains ($17,731,000 in 1996 and $5,882,000 in 1995) and nonrecurring
charges ($208,000 in 1995), income from continuing operations declined 5% from
$14,765,000 ($1.50 per share) in 1995 to $13,997,000 ($1.42 per share) in 1996.
Net income increased from $23,182,000 ($2.35 per share) in 1995 to
$32,328,000 ($3.29 per share) in 1996. Net income included adjustments to the
accruals related to operations discontinued in 1991 of $600,000 ($.06 per share)
in 1996 and $2,743,000 ($.28 per share) in 1995.
1995 VERSUS 1994
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 Service America Systems
Inc.'s ("Service America") 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 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 volume 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.
Revenues of the Patient Care segment increased 31% from $69,064,000 in 1994
to $90,727,000 in 1995. This is primarily attributable to internal growth
resulting from Patient Care's expanded training programs in 1995. As a result of
the significant revenue growth, Patient Care was able to leverage its fixed
costs and improve its operating margin from 4.0% in 1994 to 5.5% in 1995.
42
<PAGE> 25
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
Sales of the Omnia 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 in 1994, the operating margin
would have been 6.3%. 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.
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.
ACCOUNTING FOR ENVIRONMENTAL
REMEDIATION LIABILITIES
In October 1996, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position No. 96-1
("SOP 96-1"), Environmental Remediation Liabilities. SOP 96-1 is effective for
financial statements covering fiscal years commencing after December 31, 1996.
Since the Company's accounting policy for recording environmental liabilities
substantially complies with SOP 96-1, the adoption of this statement is not
expected to materially impact the Company's statement of financial position or
results of operations.
43
<PAGE> 26
OFFICERS AND DIRECTORS
OFFICERS
EDWARD L. HUTTON
Chairman & Chief Executive Officer
KEVIN J. MCNAMARA
President
TIMOTHY S. O'TOOLE
Executive Vice President & Treasurer
PAUL C. VOET
Executive Vice President
SANDRA E. LANEY
Senior Vice President & Chief Administrative Officer
ARTHUR V. TUCKER, JR.
Vice President & Controller
NAOMI C. DALLOB
Vice President & Secretary
JAMES H. DEVLIN
Vice President
LAWRENCE J. GILLIS
Vice President
THOMAS C. HUTTON
Vice President
D. MICHAEL LANEY
Vice President
DAVID J. LOHBECK
Vice President
DAVID G. SPARKS
Vice President
JANELLE M. JESSIE
Assistant Vice President
ANTHONY D. VAMVAS III
Assistant Vice President
PAULA W. KITTNER
Assistant Treasurer
MARK W. STEPHENS
Assistant Treasurer
MARIANNE LAMEY
Assistant Controller
LAURA A. VOLKER
Assistant Controller
JOYCE A. LAWRENCE
Assistant Secretary
DIRECTORS
EDWARD L. HUTTON
Chairman & Chief Executive Officer
of Chemed Corporation
KEVIN J. MCNAMARA
President of Chemed Corporation
JAMES A. CUNNINGHAM
Senior Chemical Adviser, Schroder Wertheim
& Company Inc.
JAMES H. DEVLIN
Vice President of Chemed Corporation; Chairman
& Chief Executive Officer of The Omnia Group
CHARLES H. ERHART, JR.
Former President of W.R. Grace & Co. (retired)
JOEL F. GEMUNDER
President of Omnicare Inc.
LAWRENCE J. GILLIS
Vice President of Chemed Corporation;
President of the Roto-Rooter Group
PATRICK P. GRACE
Consultant and investment adviser
THOMAS C. HUTTON
Vice President of Chemed Corporation
WALTER L. KREBS
Director--Financial Services of DiverseyLever Inc.
(Specialty Chemicals, Detroit, Mich.) (retired)
SANDRA E. LANEY
Senior Vice President & Chief Administrative Officer
of Chemed Corporation
JOHN M. MOUNT
Principal, Lynch-Mount Associates
(Management Consulting, Cincinnati, Ohio)
TIMOTHY S. O'TOOLE
Executive Vice President & Treasurer
of Chemed Corporation; Chairman
& Chief Executive Officer of Patient Care Inc.
D. WALTER ROBBINS, JR.
Consultant and former Vice Chairman
of W.R. Grace & Co. (retired)
PAUL C. VOET
Executive Vice President of Chemed Corporation;
President & Chief Executive Officer
of National Sanitary Supply Company
GEORGE J. WALSH III
Corporate & Real Estate Partner, Gould & Wilkie
(Law Firm, New York, N.Y.)
DIRECTORS EMERITI
NEAL GILLIATT
LEON LEVY
HERMAN B. WELLS
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CHEMED CORPORATION
The following is a list of subsidiaries of the Company as of December
31, 1996. 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, 1996.
All of the majority owned companies listed below are included in the
consolidated financial statements as of December 31, 1996.
Century Papers, Inc. (Texas, 100% by National Sanitary Supply
Company)
Elder Care Solutions, Inc. (Kentucky, 100% by Patient Care, 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%)
Omnia I, Inc. (Delaware, 100% by OCR Holding Company)
The Omnia Corporation (Delaware, 100% by OCR Holding Company)
OnCall Craftsmen, Inc. (Ohio, 100% by Roto-Rooter Services Company)
Patient Care, Inc. (Delaware, 100% by Chemed Corporation)
Patient Care Medical Services, Inc. (New Jersey, 100% by Patient
Care, Inc.)
Roto-Rooter Corporation (Iowa, 100% by Roto-Rooter, Inc.)
Roto-Rooter Development Company (Delaware, 100% by Roto-Rooter
Corporation)
Roto-Rooter, Inc. (Delaware, 100% by Chemed Corporation)
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 Network, Inc. (Florida, 100% by Service America
Systems, Inc.)
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)
<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 4, 1997 appearing
on page 19 of the 1996 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.
PRICE WATERHOUSE LLP
Cincinnati, Ohio
March 27, 1997
<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, 1996, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 10, 1997
/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, 1996, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 10, 1997
/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, 1996, 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 5, 1997
/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, 1996, 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 3, 1997
/s/ LAWRENCE J. GILLIS
----------------------
Lawrence J. Gillis
<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, 1996, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 17, 1997
/s/ PATRICK P. GRACE
--------------------
Patrick P. Grace
<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, 1996, 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 4, 1997
/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, 1996, 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, 1997
/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 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, 1996, 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 3, 1997
/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, 1996, 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, 1997
/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, 1996, 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, 1997
/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, 1996, 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 5, 1997
/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, 1996, 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 3, 1997
/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, 1996, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 10, 1997
/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, 1996 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> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,935
<SECURITIES> 0
<RECEIVABLES> 80,547
<ALLOWANCES> (2,925)
<INVENTORY> 52,388
<CURRENT-ASSETS> 192,359
<PP&E> 139,912
<DEPRECIATION> (56,653)
<TOTAL-ASSETS> 559,350
<CURRENT-LIABILITIES> 124,548
<BONDS> 158,168
<COMMON> 12,768
0
0
<OTHER-SE> 205,123
<TOTAL-LIABILITY-AND-EQUITY> 559,350
<SALES> 399,776
<TOTAL-REVENUES> 683,817
<CGS> 271,885
<TOTAL-COSTS> 443,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,503
<INTEREST-EXPENSE> 8,950
<INCOME-PRETAX> 57,385
<INCOME-TAX> 21,866
<INCOME-CONTINUING> 31,728
<DISCONTINUED> 600
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,328
<EPS-PRIMARY> 3.29
<EPS-DILUTED> 3.29
</TABLE>
