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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended: March 31, 1995
Commission File Number: 0-13821
ROTO-ROOTER, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1078130
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2500 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
(513) 762-6690
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Amount Date
Common Stock 5,087,728 Shares April 28, 1995
$1 Par Value
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Page 1 of 12<PAGE>
ROTO-ROOTER, INC. AND
SUBSIDIARY COMPANIES
Index
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1995 and December 31, 1994 3
Consolidated Statement of Income -
Three Months Ended
March 31, 1995 and 1994 4
Consolidated Statement of Cash Flows
Three Months Ended
March 31, 1995 and 1994 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Exhibit 11. Computation of Per
Share Earnings E-1
Exhibit 27. Financial Data Schedule E-2
</TABLE>
Page 2 of 11<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
UNAUDITED
(in thousands except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994*
--------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 853 $ 937
Demand Deposits with Chemed Corporation 11,000 9,037
Accounts Receivable, Less Allowance
(1995--$1,017; 1994--$884) 6,471 6,593
Inventories --
Raw Materials, Supplies, General Merchandise
and In Process 6,695 6,382
Finished Goods 887 781
Deferred Income Taxes 3,041 2,956
Statutory Deposits 15,610 14,408
Prepaid Advertising and Other Current Assets 2,553 2,597
---------- ----------
Total Current Assets 47,110 43,691
Property and Equipment, at Cost, Less Accumulated
Depreciation (1995--$15,493; 1994--$14,638) 24,678 25,213
Intangible Assets, Less Accumulated Amortization
(1995--$11,122; 1994--$10,371) 66,160 65,204
Other Assets 3,730 3,275
---------- ----------
Total Assets $ 141,678 $ 137,383
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 5,548 $ 6,513
Deferred Contract Revenue 23,962 22,631
Income Taxes 2,671 739
Other Current Liabilities 16,221 17,082
---------- ----------
Total Current Liabilities 48,402 46,965
Deferred Income Taxes 2,846 2,234
Deferred Compensation and Other
Noncurrent Liabilities 8,435 8,046
Long-Term Debt with Chemed Corporation 8,424 8,424
Minority Interest 4,036 3,967
---------- ----------
Total Liabilities 72,143 69,636
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock - Authorized 1,000,000 Shares,
$1.00 Par Value (None Issued) -- --
Common Stock - Authorized 10,000,000 Shares,
$1.00 Par Value (Issued 1995--5,294,966 Shares
and 1994--5,276,404 Shares) 5,295 5,276
Paid-In Capital 24,671 24,290
Retained Earnings 44,398 42,918
Treasury Stock, at Cost (1995--208,638 Shares and
1994--205,084 Shares) (4,829) (4,737)
---------- ----------
Total Stockholders' Equity 69,535 67,747
---------- ----------
Total Liabilities and Stockholders' Equity $ 141,678 $ 137,383
========== ==========
*Reclassified to conform to current year presentation.
</TABLE>
See accompanying notes to unaudited financial statements.
Page 3 of 11<PAGE>
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share data)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Total Operating Revenues $ 43,727 $ 41,536
-------- --------
Cost of Services Provided and
Products Sold 26,646 25,946
Selling, General and Administrative
Expenses 11,281 10,276
Depreciation and Amortization 1,926 1,788
-------- --------
Total Costs and Expenses 39,853 38,010
-------- --------
Income from Operations 3,874 3,526
Interest Expense (169) (144)
Other Income - Net 365 62
-------- --------
Income before Income Taxes 4,070 3,444
Income Taxes 1,750 1,536
-------- --------
Income before Minority Interest 2,320 1,908
Minority Interest 69 59
-------- --------
Net Income $ 2,251 $ 1,849
======== ========
Earnings Per Common Share $ .44 $ .37
======== ========
Average Number of Shares Outstanding 5,081 5,055
======== ========
Cash Dividends Paid Per Share $ .15 $ .14
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
Page 4 of 11<PAGE>
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1995 1994
-------- -------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 2,251 $ 1,849
Depreciation and Amortization 1,926 1,788
Provision for Deferred Income Taxes (223) 67
Changes in Operating Assets
and Liabilities 1,190 (1,158)
Change in Statutory Reserve Requirements (1,202) 690
Other (481) (478)
--------- ---------
Net Cash Provided by Operating
Activities 3,461 2,758
--------- ---------
Cash Flows from Investing Activities:
Capital Expenditures (834) (2,880)
Business Combinations (732) --
Proceeds from Disposition of Property
and Equipment 458 155
-------- ---------
Net Cash Used for Investing
Activities (1,108) (2,725)
-------- ---------
Cash Flows from Financing Activities:
Dividends Paid (763) (709)
Proceeds from Issuance of Long-Term Debt -- --
Minority Investment in Subsidiary -- --
Advances To Chemed Corporation (1,963) (333)
All Other 289 633
-------- ---------
Net Cash Used for
Financing Activities (2,437) (409)
-------- ---------
Net Decrease in Cash and
Cash Equivalents (84) (376)
Cash and Cash Equivalents at
Beginning of Period 937 5,754
-------- --------
Cash and Cash Equivalents at End of Period $ 853 $ 5,378
======== ========
</TABLE>
See accompanying notes to unaudited financial statements
Page 5 of 11<PAGE>
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements
1. The accompanying unaudited consolidated financial statements
have been prepared in accor dance with Rule 10-01 of SEC
Regulation S-X. Consequently, they do not include all the
disclosures required under generally accepted accounting
principles for complete financial statements. However, in the
opinion of the management of Roto-Rooter, Inc., the financial
statements presented herein contain all adjustments (consisting
of only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and
cash flows of the company and its consolidated subsidiaries.
For further information regarding Roto-Rooter's accounting policies
and other financial information, refer to the consolidated
financial statements and footnotes included in Roto-Rooter's Annual
Report on Form 10-K for the year ended December 31, 1994.
2. Earnings per common share are computed on the basis of the
weighted average number of shares of common stock outstanding
during the respective periods.
Page 6 of 11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
There were no material changes in Roto-Rooter's financial
position, liquidity, or capital resources and requirements during
the first three months of 1995.
RESULTS OF OPERATIONS
First Quarter 1995 Versus First Quarter 1994
----------------------------------------------
For the three months ended March 31, 1995, total operating
revenues increased to $43,727,000, a 5% increase over the
$41,536,000 reported in the first quarter of 1994. Roto-Rooter's
growth in revenues in the first quarter of 1995 resulted
primarily from increased sewer and drain cleaning and plumbing
revenue growth. Sewer and drain cleaning revenues increased to
$14,327,000, which was 12% above first quarter 1994 revenues of
$12,757,000. Plumbing revenues increased to $9,965,000, an
increase of 12% over the $8,885,000 reported in the first three
months of 1994. In addition, revenues from providing repair and
maintenance appliance and air conditioning repair services were
$12,338,000, which were essentially equal to the $12,369,000
reported in the first quarter of 1994. Roto-Rooter expects
moderate sales growth throughout the remainder of 1995, primarily
resulting from the sale of its Maintenance and Management
business, operated by its Service America subsidiary and sold
effective March 31, 1995. The Maintenance and Management
business generated $6,288,000 in revenues for the full year 1994.
The sale of this business will allow Service America's management
to focus on its core appliance and air conditioning repair and
maintenance business.
The company's gross profit margin increased from 37.5% in the
first quarter of 1994 to 39.1% in the first quarter of 1995 as a
result of good expense management which resulted in improving
gross profit margins in almost all major lines of business.
Selling, General and Administrative Expenses increased from
24.7% in the first three months of 1994 to 25.8% in the first
three months of 1995, primarily as a result of increased accruals
for its incentive-based benefit plans, and higher travel and
advertising costs.
Page 7 of 11
For the first quarter of 1995, Roto-Rooter's operating profit
margin was 8.9% versus 8.5% for the first three months of 1994, a
0.4 percentage point improvement over the prior year. This
operating profit margin improvement resulted primarily from the
higher gross profit margin offset, in part, by higher operating
expenses.
Along with improving operating profit margins, one of the
company's goals for 1995 is to rebuild cash reserves by
generating excellent cash flow from operations. The company
began this task following the acquisition of Encore Service
Systems, Inc. in July 1993 and continued this trend throughout
1994 and the end of the first quarter of 1995. The company's
interest earning cash accounts totaled $27,463,000 at March 31,
1995 which compares with interest earning cash balances of
$18,957,000 at March 31, 1994. This increase, coupled with
higher interest rates earned, resulted in Other Income--Net
increasing to $365,000 for the first three months of 1995 as
compared with $62,000 in the first three months of 1994. The
higher interest income, coupled with improving operating profit
margins, has produced a significant improvement in Roto-Rooter's
pretax profit margin. The company's pretax margin for the first
three months of 1995 was 9.3% as compared with 8.3% for the first
three months of 1994, a one percentage point improvement.
The company's effective income tax rate for the first quarter
of 1995 was 43.0%, a 1.6% decrease as compared to 44.6% for the
three month period ending March 31, 1994. The higher rate for
first quarter of 1994 was due primarily to net operating losses
from Roto-Rooter's start-up Canadian operations. These losses
will be carried forward to offet future income. The effective
tax rate for the first quarter of 1995 was comparable to the full
year 1994 effective tax rate of 42.7%.
Net income for the first quarter 1995 was $2,251,000, a 22%
increase over the $1,849,000 reported in the first quarter of
1994. Earnings per share for the first quarter of 1995 were 44
cents, or 19% above the prior year's first quarter earnings per
share of 37 cents. The increases in net income and earnings per
share were primarily attributable to higher sales, improving
operating margins and higher interest earnings on the company's
interest earning cash balances.
Page 8 of 11
PART II -- OTHER INFORMATION
----------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
<TABLE>
<CAPTION>
Exhibit SK 601
No. Ref. No. Description Page No.
------- -------- ------------------ ----------
<C> <C> <S> <C>
1 (11) Statement re:
Computation of Per
Share Earnings E-1
2 (27) Financial Data
Schedule E-2
</TABLE>
(b) Reports on Form 8-K
--------------------
No reports on Form 8-K were filed during the quarter
ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
ROTO-ROOTER, INC.
-------------------------
(Registrant)
Dated: May 3, 1995 By: W.R. Griffin
---------------------- -------------------------
W.R. Griffin
President
Dated: May 3, 1995 By: B.A. Brumm
---------------------- -------------------------
B.A. Brumm
Vice President - Treasurer
and Chief Financial Officer
(Principal Accounting Officer)
Page 9 of 11
EXHIBIT 11
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS (a)
(in thousands except per share amount)
unaudited
<F1>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1995 1994
-------- -------
<S> <C> <C>
Computation of Earnings Per
Common Share and Common
Equivalent Share:
- ---------------------------
Net Income $ 2,251 $1,849
======= =======
Average Number of Shares Used
to Compute Earnings
per Common Share 5,081 5,055
Effect of Unexercised
Stock Options 33 72
------- -------
Average Number of Shares Used
to Compute Earnings per
Common and Common
Equivalent Share 5,114 5,127
======= =======
Earnings per Common and
Common Equivalent Share $ .44 $ .36
======= =======
Computation of Earnings
Per Common Share Assuming
Full Dilution:
- ---------------------------
Net Income $ 2,251 $1,849
======= =======
Average Number of Shares
Used to Compute Earnings
per Common Share 5,081 5,055
Effect of Unexercised
Stock Options 46 77
------- -------
Average Number of Shares
Used to Compute Earnings
per Common Share Assuming
Full Dilution 5,127 5,132
======= =======
Earnings per Common Share
Assuming Full Dilution $ .44 $ .36
======= =======
</TABLE>
- ------------------
<F1>
(a) This calculation is submitted in accordance with Regulation S-K, Item
601(b)(11), although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%,
including fractional cents per share.
E - 1
Page 10 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 FOR ROTO-ROOTER, INC. AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000755548
<NAME> ROTO-ROOTER, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 853
<SECURITIES> 0
<RECEIVABLES> 7,488
<ALLOWANCES> (1,017)
<INVENTORY> 7,582
<CURRENT-ASSETS> 47,110
<PP&E> 40,171
<DEPRECIATION> (15,493)
<TOTAL-ASSETS> 141,678
<CURRENT-LIABILITIES> 48,402
<BONDS> 0
<COMMON> 5,295
0
0
<OTHER-SE> 64,240
<TOTAL-LIABILITY-AND-EQUITY> 141,678
<SALES> 43,727
<TOTAL-REVENUES> 43,727
<CGS> 26,646
<TOTAL-COSTS> 39,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (169)
<INCOME-PRETAX> 4,070
<INCOME-TAX> 1,750
<INCOME-CONTINUING> 3,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,251
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
