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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended: June 30, 1996
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 5,172,963 Shares August 13, 1996
$1 Par Value
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Page 1 of 13<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 -
June 30, 1996 and December 31, 1995 3
Consolidated Statement of Income -
Three and Six Months Ended
June 30, 1996 and 1995 4
Consolidated Statement of Cash Flows
Six Months Ended
June 30, 1996 and 1995 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote
of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
Exhibit 11. Computation of Per
Share Earnings E-1
Exhibit 27. Financial Data Schedule E-2
</TABLE>
Page 2 of 13<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands except share and per share data)
UNAUDITED
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 3,844 $ 2,350
Demand Deposits with Chemed Corporation 13,462 12,974
Statutory Deposits 19,505 18,943
Accounts Receivable, Less Allowance
(1996--$1,039; 1995--$1,050) 7,205 6,616
Inventories --
Raw Materials, Supplies, General Merchandise
and In Process 7,867 6,899
Finished Goods 630 924
Deferred Income Taxes 3,100 3,168
Prepaid Expenses and Other Current Assets 2,705 2,741
---------- ----------
Total Current Assets 58,318 54,615
Property and Equipment, at Cost, Less Accumulated
Depreciation (1996--$20,816; 1995--$18,621) 25,156 25,121
Intangible Assets, Less Accumulated Amortization
(1996--$14,078; 1995--$12,883) 64,249 65,515
Other Assets 6,360 4,618
---------- ----------
Total Assets $ 154,083 $ 149,869
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 10,383 $ 8,606
Deferred Contract Revenue 25,043 23,512
Income Taxes 665 851
Other Current Liabilities 22,325 21,762
---------- ----------
Total Current Liabilities 58,416 54,731
Deferred Income Taxes -- 2,696
Deferred Compensation and Other Noncurrent Liabilities5,479 4,979
Long-Term Debt with Chemed Corporation 6,924 8,424
Minority Interest 4,158 4,053
---------- ----------
Total Liabilities 74,977 74,883
---------- ----------
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 1996--5,487,933 Shares
and 1995--5,413,054 Shares) 5,488 5,413
Paid-In Capital 29,524 27,521
Retained Earnings 52,909 49,309
Treasury Stock, at Cost (1996--319,294 Shares and
1995--278,517 Shares) (8,815) (7,257)
---------- ----------
Total Stockholders' Equity 79,106 74,986
---------- ----------
Total Liabilities and Stockholders' Equity $ 154,083 $ 149,869
========== ==========
</TABLE>
See accompanying notes to unaudited financial statements.
Page 3 of 13<PAGE>
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share data)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total Operating Revenues $ 50,038 $ 43,271 $ 97,821 $ 86,998
-------- -------- -------- --------
Cost of Services Provided and
Products Sold 29,282 26,348 58,013 52,994
Selling, General and Administrative
Expenses 14,171 11,329 27,049 22,610
Depreciation and Amortization 1,996 1,874 3,971 3,800
-------- -------- -------- --------
Total Costs and Expenses 45,449 39,551 89,033 79,404
-------- -------- -------- --------
Income from Operations 4,589 3,720 8,788 7,594
Interest Expense (222) (240) (439) (488)
Other Income - Net 470 463 1,016 907
-------- -------- -------- --------
Income before Income Taxes 4,837 3,943 9,365 8,013
Income Taxes 1,999 1,705 3,916 3,455
-------- -------- -------- --------
Income before Minority Interest 2,838 2,238 5,449 4,558
Minority Interest 53 13 105 82
-------- -------- -------- --------
Net Income $ 2,785 $ 2,225 $ 5,344 $ 4,476
======== ======== ======== ========
Earnings Per Common Share $ .54 $ .44 $ 1.04 $ .88
======== ======== ======== ========
Average Number of Shares
Outstanding 5,158 5,088 5,151 5,085
======== ======== ======== ========
Cash Dividends Paid Per Share $ .17 $ .15 $ .34 $ .30
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
Page 4 of 13<PAGE>
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1996 1995*
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 5,344 $ 4,476
Depreciation and Amortization 3,971 3,800
Provision for Deferred Income Taxes (2,336) (310)
Changes in Operating Assets
and Liabilities 2,539 1,127
Change in Statutory Reserve Requirements (562) (1,476)
Other (1,072) (603)
-------- --------
Net Cash Provided by Operating
Activities 7,884 7,014
-------- --------
Cash Flows from Investing Activities:
Capital Expenditures (3,042) (2,137)
Business Combinations (257) (629)
Proceeds from Disposition of Property
and Equipment 321 611
-------- --------
Net Cash Used for Investing Activities (2,978) (2,155)
-------- --------
Cash Flows from Financing Activities:
Dividends Paid (1,744) (1,526)
Repayment of Debt (1,701) (68)
Advances To Chemed Corporation (488) (2,848)
All Other 521 471
-------- --------
Net Cash Used for
Financing Activities (3,412) (3,971)
-------- --------
Net Increase in Cash and
Cash Equivalents 1,494 888
Cash and Cash Equivalents at
Beginning of Period 2,350 937
-------- --------
Cash and Cash Equivalents at End of Period $ 3,844 $ 1,825
======== ========
</TABLE>
*Reclassified to conform to current year presentation.
See accompanying notes to unaudited financial statements
Page 5 of 13<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 o perations 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, 1995.
2. Earnings per common share are computed using the weighted average
number of shares of common stock outstanding during the respective
periods and exclude the dilutive effect of outstanding stock options
as it is not material.
Page 6 of 13
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
FINANCIAL CONDITION
During the first six months of 1996, an Internal
Revenue Service ("IRS") tax audit for the calendar years
1991 through 1993 was completed. The IRS audit resulted
in an additional assessment of $2,940,000, due primarily to
the IRS spreading deductible acquisition related costs over
longer periods than the company had used. The additional
assessment was paid in April 1996. The settlement also
resulted in noncurrent deferred income taxes declining
from $2,696,000 at December 31, 1995 to zero at June 30, 1996.
Additionally, in March 1996, the company repaid $1,500,000
of its long-term debt with Chemed Corporation. Notwithstanding
these changes, the company's cash position and other working
capital were not significantly impacted and management believes
that resources are adequate for the company's needs.
RESULTS OF OPERATIONS
Second Quarter 1996 Versus Second Quarter 1995
----------------------------------------------
In the second quarter of 1996, the company's total
operating revenues grew 15.6%, to $50,038,000, over
second quarter 1995 revenues. Growth in operating revenues
for the second quarter of 1996 was primarily the result
of higher plumbing and sewer and drain cleaning revenues.
Plumbing revenues grew to $12,905,000, an increase of 26.1%
above second quarter 1995 plumbing revenues. Sewer and drain
cleaning revenues grew to $16,087,000, an increase of 15.2%
above second quarter 1995 sewer and drain cleaning revenues.
Service contract revenue for the three months ended June 30,
1996, increased to $13,059,000, 4.7% over that reported in
the comparable prior year period. Combined, plumbing, sewer
and drain cleaning, and service contract revenues accounted
for 84.0% of total second quarter 1996 operating revenues.
The company's gross profit margin increased 2.4 percentage
points to 41.5% for the three month period ending June 30, 1996.
The margin growth was primarily the result of improved margins
on plumbing and service contract revenues.
During the second quarter of 1996, selling, general, and
administrative expense grew 2.1 percentage points, as a percent
Page 7 of 13
of sales, to 28.3% when compared to the second quarter of 1995.
The increase was primarily the result of higher incentive
accruals and professional fees. Roto-Rooter's operating profit
margin for the second quarter of 1996 was 9.2% as compared to the
8.6% reported for the second quarter of 1995.
Other income-net grew 11.2% to $248,000 for the three
months ending June 30, 1996, primarily as a result of higher
interest earnings. An increase in the company's interest-
bearing cash reserves was partially offset by a decline in
the average interest rate received on these reserves during the
second quarter of 1996 as compared to the second quarter of 1995.
The company's effective income tax rate declined from 43.2%
for the three months ended June 30, 1995 to 41.3% for the three
months ended June 30, 1996. The lower effective rate was the
result of lower nondeductible intangibles amortization and a
lower effective state income tax rate as compared to the prior
year.
Net income for the second quarter of 1996 was $2,785,000, a
25.2% increase over the prior year second quarter. Earnings per
share for the second quarter of 1996 were $.54, or 22.7% above
earnings per share reported in the second quarter of 1995.
First Six Months of 1995 versus First Six Months of 1994
--------------------------------------------------------
Total operating revenues for the first six months of 1996
were $97,821,000, a 12.4% increase over revenues of $86,998,000
reported in the first six months of the prior year. Plumbing
and sewer and drain cleaning revenues for the six months ending
June 30, 1996 grew 24.0% and 11.9%, respectively, over the
comparable prior year period. The company's service contract
revenue grew 4.9% in the first six months of 1996 as compared
with the prior year.
The company's gross profit margin grew 1.6 percentage points
to 40.7% during the six months ending June 30, 1996 as compared
to that reported in the comparable prior year. The increased
gross profit margin resulted primarily from higher margins on
plumbing and service contract revenues.
Selling, general and administrative expenses increased from
26.0% of revenues for the first six months of 1995 to 27.7% for
the first six months of 1996. This increase resulted primarily
from higher incentive accruals, professional fees and advertising
costs as a percent of revenues.
Income for operations for the first six months of 1996
increased 15.7% to $8,788,000 from the $7,594,000 reported in
Page 8 of 13
the comparable prior year period. The company's operating profit
margin increased to 9.0% of revenues for the six months ending
June 30, 1996, a 0.3 percentage point increase over the same
period in 1995.
Other Income-Net grew 37.7% for the first six months of 1996
to $577,000, primarily as a result of the following. During the
first six months of 1996, the company's interest-bearing cash
reserves have increased while average interest rates earned on
those reserves have declined as compared with the comparable
prior year period. The increase in cash reserves has more than
offset the effect of a declining average interest rate.
The company's effective income tax rate was 41.8% at June
30, 1996 as compared to 43.1% at June 30, 1995. The lower rate,
was primarily the result of the reduced effect of non-deductible
intangibles amortization and a lower effective state income tax
rate as compared to the prior year.
Net income for the first six months of 1996 of $5,344,000 was
up 19.4% as compared to the prior year. Net income grew at a
faster rate than operating profit as a result of higher interest
income earnings and a lower effective income tax rate for the six
months ending June 30, 1996.
Earnings per share grew 18.2% to $1.04 for the first six
months of 1996 in comparison with the $0.88 reported in the prior
year.
Page 9 of 13
PART II -- OTHER INFORMATION
----------------------------
Item 4. Submission of Matters to a Vote of Security Holders
(a) Roto-Rooter held its Annual Meeting of Stockholders on
May 20, 1996.
(b) The names of directors elected at this Annual Meeting are as
follows:
<TABLE>
<CAPTION>
<C> <C>
Edward L. Hutton Will J. Hoekman
William R. Griffin Thomas C. Hutton
Brian A. Brumm Patrick L. Johnson
James A. Cunningham Sandra E. Laney
Naomi C. Dallob Kevin J. McNamara
Charles H. Erhart, Jr. John M. Mount
Neal Gilliatt Timothy S. O'Toole
Lawrence J. Gillis D. Walter Robbins, Jr.
Douglas B. Harper Donald E. Saunders
George J. Walsh III
</TABLE>
(c) The Stockholders then ratified the selection by the
Board of Directors of Price Waterhouse, LLP as independent
accountants for the Company and its consolidated subsidiaries
for the year 1996. Votes cast in favor of the proposal were
4,606,738 and 5,879 were cast against it. Votes abstained
were 13,621 and zero (0) were broker non-votes.
With respect to the election of directors, the number of votes
cast for each nominee was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Votes Votes Broker
Votes For Against Withheld Non-Votes
--------- -------- --------- ---------
E.L. Hutton 4,601,685 24,553 510 0
W.R. Griffin 4,602,185 24,053 10 0
B.A. Brumm 4,602,185 24,053 10 0
J.A. Cunningham 4,602,185 24,053 10 0
N.C. Dallob 4,601,685 24,553 510 0
C.H. Erhart, Jr. 4,601,685 24,553 510 0
N. Gilliatt 4,601,685 24,553 510 0
L.J. Gillis 4,602,185 24,053 10 0
D.B. Harper 4,602,185 24,053 10 0
W.J. Hoekman 4,602,185 24,053 10 0
T.C. Hutton 4,601,685 24,553 510 0
P.L. Johnson 4,601,685 24,553 510 0
S.E. Laney 4,601,685 24,553 510 0
K.J. McNamara 4,601,685 24,553 510 0
J.M. Mount 4,601,685 24,553 510 0
T.S. O'Toole 4,601,685 24,553 510 0
D.W. Robbins, Jr. 4,601,685 24,553 510 0
D.E. Saunders 4,601,685 24,553 510 0
G.J. Walsh III 4,601,685 24,553 510 0
</TABLE>
Page 10 of 13
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 June 30, 1996.
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: August 13, 1996 By: W.R. Griffin
---------------------- -------------------------
W.R. Griffin
President
Dated: August 13, 1996 By: B.A. Brumm
---------------------- -------------------------
B.A. Brumm
Vice President - Treasurer
and Chief Financial Officer
(Principal Accounting Officer)
Page 11 of 13
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 11
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS (a)
(in thousands except per share amount)
UNAUDITED
<F1>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
1996 1995 1996 1995
------- ------- ------ -------
<S> <C> <C> <C> <C>
Computation of Earnings Per
Common Share and Common
Equivalent Share:
- ---------------------------
Net Income $ 2,785 $ 2,225 $ 5,344 $ 4,476
======= ======= ======= =======
Average Number of Shares Used
to Compute Earnings
per Common Share 5,158 5,088 5,151 5,085
Effect of Unexercised
Stock Options 62 43 56 38
------- ------- ------- -------
Average Number of Shares Used
to Compute Earnings per
Common and Common
Equivalent Share 5,220 5,131 5,207 5,123
======= ======= ======= =======
Earnings per Common and
Common Equivalent Share $ .53 $ .43 $ 1.03 $ .87
======= ======= ======= =======
Computation of Earnings
Per Common Share Assuming
Full Dilution:
- ---------------------------
Net Income $ 2,785 $ 2,225 $ 5,344 $ 4,476
======= ======= ======= =======
Average Number of Shares
Used to Compute Earnings
per Common Share 5,158 5,088 5,151 5,085
Effect of Unexercised
Stock Options 65 51 67 51
------- ------- ------- -------
Average Number of Shares
Used to Compute Earnings
per Common Share Assuming
Full Dilution 5,223 5,139 5,218 5,136
======= ======= ======= =======
Earnings per Common Share
Assuming Full Dilution $ .53 $ .43 $ 1.02 $ .87
======= ======= ======= =======
- ------------------
<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 12 of 13
</TABLE>
[ARTICLE] 5
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 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
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1996
[PERIOD-END] JUN-30-1996
[CASH] 17,306
[SECURITIES] 0
[RECEIVABLES] 8,244
[ALLOWANCES] (1,039)
[INVENTORY] 8,497
[CURRENT-ASSETS] 58,318
[PP&E] 45,972
[DEPRECIATION] (20,816)
[TOTAL-ASSETS] 154,083
[CURRENT-LIABILITIES] 58,416
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 5,488
[OTHER-SE] 73,618
[TOTAL-LIABILITY-AND-EQUITY] 154,083
[SALES] 0
[TOTAL-REVENUES] 97,821
[CGS] 0
[TOTAL-COSTS] 89,033
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] (439)
[INCOME-PRETAX] 9,365
[INCOME-TAX] 3,916
[INCOME-CONTINUING] 5,344
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 5,344
[EPS-PRIMARY] 1.03
[EPS-DILUTED] 1.02
</TABLE>
