<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, 1995
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the Transition period from to
--------------- --------------
Commission File Number: 0-13821
ROTO-ROOTER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1078130
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2500 Chemed Center, 255 East Fifth Street, Cincinnati, Ohio 45202-4726
(Address of principal executive offices) (Zip Code)
(513) 762-6690
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1 Per Share
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 NASDAQ
National Market on March 11, 1996 ($31.50 per share), was $60,561,711.
At March 11, 1996, 5,153,006 shares of Roto-Rooter, Inc.
Common Stock (par value $1 per share) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
DOCUMENT WHERE INCORPORATED
-------- ------------------
<S> <C>
1995 Annual Report to Stockholders (Specified Portions) Parts I, II and IV
Proxy Statement for Annual Meeting Part III
to be held May 20, 1996.
</TABLE>
<PAGE> 2
ROTO-ROOTER, INC.
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I
Item 1. Business............................................. 1
Item 2. Properties........................................... 3
Item 3. Legal Proceedings.................................... 4
Item 4. Submission of Matters to a Vote of Security Holders.. 5
-- Executive Officers of the Registrant................. 5
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters................................. 6
Item 6. Selected Financial Data.............................. 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 6
Item 8. Financial Statements and Supplementary Data.......... 6
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 7
PART III
Item 10. Directors and Executive Officers of the Registrant... 7
Item 11. Executive Compensation............................... 7
Item 12. Security Ownership of Certain Beneficial Owners
and Management...................................... 7
Item 13. Certain Relationships and Related Transactions....... 7
PART IV
Item 14. Exhibits, Financial Statement Schedule and
Reports on Form 8-K................................. 7
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS.
GENERAL
Roto-Rooter, Inc. was incorporated in Delaware in 1983 as a wholly owned
subsidiary of Chemed Corporation, a Delaware corporation, and on August 31, 1984
succeeded to the business of Chemed's Roto-Rooter Group, the substantial portion
of which business Chemed acquired in 1980. As used herein, "Company" and
"Roto-Rooter" refers to Roto-Rooter, Inc. and its subsidiaries and "Chemed"
refers to Chemed Corporation and its subsidiaries.
In September 1984, the Company sold in a private placement 719,991 shares
of its common stock, par value $1 per share (the "Common Stock"), and in June
1985, Chemed sold in a public offering 1,100,000 shares of Common Stock. Chemed
owns 2,990,333 shares of Common Stock or approximately 58 percent of the
outstanding shares of Common Stock.
Roto-Rooter conducts its business in one business segment. All significant
revenues relate to providing repair and maintenance services to residential,
commercial, industrial and municipal customers through both company-owned and
franchised operations.
DESCRIPTION OF BUSINESS
Roto-Rooter is the nation's largest provider of sewer and drain cleaning
services. The Company provides sewer and drain cleaning and plumbing repair and
maintenance services through company-owned operations and franchised operations
located in all 50 states, Canada and Japan. The Company also manufactures and
purchases for resale sewer and drain cleaning equipment, cable, and other
products and accessories for its company-owned operations and for sale to its
independent franchisees. Roto-Rooter is one of the oldest franchising businesses
in the United States, having established its first franchise in 1936. In August
1991, the Company and Chemed, respectively, purchased 70% and 30% of Convenient
Home Services, Inc., which changed its name to Service America Systems, Inc. in
July of 1994 ("Service America"). Service America is engaged primarily in the
air conditioning and appliance maintenance and repair business in Florida
primarily through the sale of service contracts which generally cover a one-year
period. In July 1993, Service America completed the acquisition of all the
outstanding shares of common stock of Encore Service Systems, Inc. ("Encore"),
which is also principally engaged in the air conditioning and appliance
maintenance and repair business through service contracts in Florida and
Arizona. As a percent of total operating revenue, sewer and drain cleaning
repair and maintenance services represent 32 percent, plumbing repair and
maintenance services represent 24 percent, air conditioning and appliance repair
and maintenance services represent 32 percent, and all other classes represent
12 percent. Other information called for by this item is included within Note 2
of the Notes to Consolidated Financial Statements appearing on page 14 of the
1995 Annual Report to Stockholders and is incorporated herein by reference.
PRODUCT AND MARKET DEVELOPMENT
Roto-Rooter engages in a continuing program for the development and
marketing of new products and services under the Roto-Rooter name.
Since 1981, the Company has developed and introduced four drain-care
products for residential and commercial use which are distributed principally
through the Roto-Rooter service technicians directly to residential customers
and commercial accounts.
Plumbing repair services were first introduced in a company-owned service
location in 1981. These services are provided primarily to residential and
commercial accounts
1
<PAGE> 4
by licensed plumbers who are Company employees. The Company has been able to use
its existing staff and facilities in the development of its plumbing repair
businesses. All company-owned operations are providing plumbing repair and
maintenance services to the markets they serve, except for some company-owned
contractor operations. The Company does not presently plan to enter the plumbing
contracting business for new construction.
Cleaning of large diameter pipes is an additional service provided to
industrial and municipal customers by several company-owned operations. The
types of pipes cleaned include sanitary and storm sewer pipes and pipes used for
industrial processes. These pipes are cleaned by a variety of methods using
mechanical equipment and high-pressure water jets. Although the drain pipes in
homes generally are four to six inches in diameter, the diameters of pipes used
in industrial and municipal systems are as large as six feet.
FRANCHISE AGREEMENTS
The Company maintains written franchise agreements with its independent
franchisees. The form of franchise agreement in general use by the Company since
early 1990 provides that the franchisee is licensed and franchised to perform
and sell services relating to sewer and drain cleaning under the Roto-Rooter(R)
and related trademarks and service marks in accordance with specified methods,
techniques, and standards only within a designated geographic area. The
franchisee is not permitted to use any of the Company's marks in connection with
the sale of any products or the performance of other services except as
expressly authorized by the Company. A franchisee is required to actively and
continuously advertise, promote, and sell sewer and drain cleaning services
under the Roto-Rooter(R) service mark; to maintain an office and service
facility only within his territory; and to comply at all times with quality and
service standards specified by the Company.
Generally, franchise agreements provide for a five-year term and, upon
expiration, each franchisee has the right to enter into a new franchise
agreement with Roto-Rooter upon the terms and conditions as are then being
offered by Roto-Rooter to other renewing franchisees. Under Roto-Rooter's
current franchising program, a new franchisee pays an initial franchise fee of
$5,000. Thereafter, each franchisee pays a monthly fee to Roto-Rooter which is
based upon the population within his territory.
The franchise agreement provides for a Base Monthly Franchise Fee according
to Roto-Rooter's current fee schedule which (i) is determined by the current
population in the territory, and (ii) is thereafter adjusted annually during the
term of the agreement to reflect increases or decreases in the Consumer Price
Index. This form of franchise agreement enables Roto-Rooter's franchise fee
income from continuing franchisees to increase in proportion to inflation during
the life of each agreement.
SERVICE MARKS AND TRADEMARKS
The Company regards its corporate name, service marks, and trademarks to be
important to its identification and of significant value in the conduct of the
business. The Company owns the following names, phrases, and designs which are
registered on the Principal Register of the United States Patent and Trademark
Office: "Roto-Rooter," the Roto-Rooter logo, and "And Away Go Troubles Down the
Drain."
The Company vigorously polices the uses and practices associated with its
service marks and trademarks. The Company is unaware of any ongoing
infringements which may have a material adverse effect on its overall business
or the validity of any such mark.
COMPETITION
All aspects of the sewer, drain, and pipe cleaning, and appliance and
plumbing repair and maintenance businesses are highly competitive. Competition
is, however,
2
<PAGE> 5
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.
SEASONALITY
Roto-Rooter's total operating revenues have minimal seasonality.
GOVERNMENT REGULATIONS
Roto-Rooter's franchising activities are subject to various federal and
state franchising laws and regulations, including the rules and regulations of
the Federal Trade Commission (the "FTC") regarding the offering or sale of
franchises. The rules and regulations of the FTC require that Roto-Rooter
provide all prospective franchisees with specific information regarding the
franchise program and Roto-Rooter in the form of a detailed franchise offering
circular. In addition, a number of states require Roto-Rooter to register its
franchise offering prior to offering or selling franchises in the state. Various
state laws also provide for certain rights in favor of franchisees, including
(i) limitations on the franchisor's ability to terminate a franchise except for
good cause, (ii) restrictions on the franchisor's ability to deny renewal of a
franchise, (iii) circumstances under which the franchisor may be required to
purchase certain inventory of franchisees when a franchise is terminated or not
renewed in violation of such laws, and (iv) provisions relating to arbitration.
Roto-Rooter's operations are also subject to various federal, state, and
local laws and regulations regarding environmental matters and other aspects of
the operation of a sewer and drain cleaning and plumbing services business. For
certain other activities, such as septic tank pumping, Roto-Rooter is subject to
state and local environmental health and sanitation regulations. Compliance with
federal, state and local laws governing discharge of materials into the
environment have not had nor are expected to have a material effect upon the
operations of the Company. Roto-Rooter's ability to engage in the plumbing
repair business is also subject to certain limitations and restrictions imposed
by state and local licensing laws and regulations.
Service America's operations are regulated by the Florida and Arizona
Departments of Insurance. In accordance with certain Florida regulatory
requirements, Service America maintains cash with the Department of Insurance
and is also required to maintain additional unencumbered reserves. In addition,
Service America's air conditioning and appliance repair and maintenance business
is also subject to certain limitations imposed by state and local business laws
and regulations.
Roto-Rooter, to the best of its knowledge, is currently in compliance in
all material respects with the laws and regulations affecting its operations.
While Roto-Rooter cannot currently predict the effect which any future
legislation, regulations, or interpretations may have upon its operations, it
does not anticipate any changes that would have a material adverse impact on its
operations.
EMPLOYEES
On December 31, 1995, Roto-Rooter had a total of 2,599 employees; 2,542
were located in the United States and 57 were located in Canada.
ITEM 2. PROPERTIES.
The major facilities operated by Roto-Rooter are listed below:
<TABLE>
<CAPTION>
Location Type Owned Leased
- ------------------- ----------------------- -------------- --------------
<S> <C> <C> <C>
Cincinnati, OH Office and service 24,000 sq. ft. 24,000 sq. ft.
facilities
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
Location Type Owned Leased
- ------------------- ----------------------- -------------- --------------
<S> <C> <C> <C>
West Des Moines, IA Office, manufacturing 29,000 sq. ft. --
and distribution center
facilities
Northeastern U.S. Office and service 43,000 sq. ft. 47,000 sq. ft.
Area (1) facilities
Central U.S. Area Office and service 27,000 sq. ft. 41,000 sq. ft.
(2) facilities
Mid-Atlantic U.S. Office and service 54,000 sq. ft. 81,000 sq. ft.
Area (3) facilities
Western U.S. Office and service 19,000 sq. ft. 38,000 sq. ft.
Area (4) facilities
Canada (5) Office and service -- 13,000 sq. ft.
facilities
</TABLE>
- --------------------
(1) Comprising locations in Baltimore and Jessup, Maryland; Stoughton and
Woburn, Massachusetts; Stratford and Bloomfield, Connecticut; West
Seneca, West Hempstead, Staten Island, Rochester, Farmingdale and
Hawthorne, New York; and Cranston, Rhode Island.
(2) Comprising locations in Atlanta and Decator, Georgia; Birmingham,
Alabama; Charlotte, North Carolina; Hilliard and Cleveland, Ohio;
Memphis and Nashville, Tennessee; Wilmerding, Pennsylvania; St. Louis,
Missouri; and Little Rock, Arkansas.
(3) Comprising locations in Pennsauken and North Brunswick, New Jersey;
Jacksonville, Medley, Pompano Beach, Ft. Myers, St. Petersburg, Boca
Raton, Daytona Beach, Miami and Orlando, Florida; Virginia Beach and
Fairfax, Virginia; Levittown, Pennsylvania; Raleigh, North Carolina;
and Newark, Delaware.
(4) Comprising locations in Houston and San Antonio, Texas; Addison, Elk
Grove Village and Posen, Illinois; Denver, Colorado; Honolulu, Hawaii;
Minneapolis, Minnesota; Tacoma, Washington; and Phoenix, Arizona.
(5) Comprising locations in Delta, British Columbia; Winnipeg, Manitoba;
and Boucherville, Quebec.
- --------------------
All "owned" property is held in fee and is not subject to any major
encumbrance. "Leased" properties are occupied under rental agreements having
terms ranging up to eleven years and providing, in some instances, for payment
by Roto-Rooter of insurance, property taxes, and building operating expenses.
Roto-Rooter considers all of these facilities to be in good operating condition
and generally adequate for its present and currently anticipated needs.
ITEM 3. LEGAL PROCEEDINGS.
On July 18, 1995, an association of certain Roto-Rooter franchisees filed a
lawsuit in the United States District Court for the Southern District of
Florida, Miami Division, against Roto-Rooter Corporation, Roto-Rooter, Inc. and
Chemed Corporation. In January 1996, this proceeding was transferred to the
United States District Court for the Southern District of Iowa, Central
Division. Plaintiffs allege that the defendants breached the franchise
agreements and the implied covenant of good faith and fair dealing by requiring
that renewing franchisees execute the franchise agreements
4
<PAGE> 7
with certain revised provisions. These provisions cover fees, advertising
expenditures, territorial rights, termination, trademarks and sales reporting.
Plaintiffs seek a declaratory judgment that these are unreasonable revisions
which are impermissible under the terms of the franchise agreement. Plaintiffs
also seek unspecified amounts of compensatory damages, lost profits, lost future
profits, lost goodwill, costs and attorneys' fees. The Company disputes these
claims and will vigorously defend its rights under the franchise agreement. The
Company believes that the disposition of this matter will not have a material
effect on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Office First Elected
- ------------------ --- ----------------------------- --------------------
<S> <C> <C> <C>
Edward L. Hutton 76 Chairman December 30, 1983(1)
Kevin J. McNamara 42 Vice Chairman August 2, 1994(2)
William R. Griffin 52 President and Chief Executive May 13, 1985(3)
Officer
Douglas B. Harper 52 Executive Vice President May 18, 1992(4)
Patrick L. Johnson 42 Vice President December 30, 1983(5)
Brian A. Brumm 41 Vice President, Treasurer May 13, 1985(6)
and Chief Financial Officer
Lawrence J. Gillis 61 Vice President May 20, 1991(7)
</TABLE>
(1) Mr. E. L. Hutton is Chairman of the Company and, since November 1993,
has served as Chairman and Chief Executive Officer of Chemed.
Previously, from 1970 to November 1993, he served as President and
Chief Executive Officer of Chemed. He is the father of Mr. Thomas C.
Hutton, a director of the Company.
(2) Mr. K. J. McNamara is Vice Chairman of the Company and is President of
Chemed and has held these positions since August 1994. From August 1986
to August 1994, he served as Secretary and General Counsel of the
Company. Previously, he served as an Executive Vice President,
Secretary and General Counsel of Chemed from November 1993, August 1986
and August 1986 to August 1994, respectively. From May 1992 to November
1993, he held the position of Vice Chairman of Chemed; and from August
1986 to May 1992, he served as Vice President of Chemed.
(3) Mr. W. R. Griffin is President and Chief Executive Officer of the
Company, after having previously (May 1984-May 1985) served as its
President. He is also an Executive Vice President of Chemed and has
held this position since May 1991.
(4) Mr. D. B. Harper is the Executive Vice President of the Company, after
having previously (December 1983 - May 1992) served as Vice President.
Since October 1980, Mr. Harper has served as President of Roto-Rooter
Corporation, a subsidiary.
(5) Mr. P. L. Johnson is a Vice President of the Company and is also
President and Chief Executive Officer of Service America and has held
these positions since December 1983 and April 1993, respectively.
Previously, from August 1991 to April 1993 he was Vice Chairman and
Chief Executive Officer of Service America. From September 1986 to
September 1993 he also served as Senior Vice President of Roto-Rooter
Services Company. From January 1984 to September 1986, he was a Vice
President of Roto-Rooter Services Company.
(6) Mr. B. A. Brumm is a Vice President and the Treasurer and Chief
Financial Officer of the Company and has held these positions since
1985.
5
<PAGE> 8
(7) Mr. L. J. Gillis is a Vice President of the Company and has held this
position since May 20, 1991. Since October 1994, he has served as
President of Roto- Rooter Services Company. Previously, he served as
its Senior Vice President- Operations from February 1991 to October
1994. From November 1983 to February 1991, he served as a Vice
President of Roto-Rooter Services Company.
- --------------------
Each executive officer holds office until the annual election at the next
annual organizational meeting of the Board of Directors of the Company which is
scheduled to be held on May 20, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock (par value $1 per share) is included in the
NASDAQ Stock Market and is traded under the symbol ROTO. The range of the high
and low market prices for the Company's Common Stock and dividends paid per
share for each quarter of 1994 and of 1995 is set forth below.
<TABLE>
<CAPTION>
CLOSING
Dividends Paid
High Low Per Share
------------------------------------------------------------------
<S> <C>
------------------------------------------------------------------
1995
------------------------------------------------------------------
First Quarter $28 $19-1/2 $.15
Second Quarter 28-1/2 24-1/2 .15
Third Quarter 37 28 .17
Fourth Quarter 37-3/4 30-1/2 .17
1994
------------------------------------------------------------------
First Quarter $32 $28 $.14
Second Quarter 32 24 .14
Third Quarter 26-1/2 22-1/2 .15
Fourth Quarter 25-3/4 19-1/2 .15
</TABLE>
Future dividends are necessarily dependent upon Roto-Rooter's earnings and
financial condition and other factors not presently determinable.
As of March 11, 1996, there were approximately 197 stockholders of record
of the Company's Common Stock. This number only includes stockholders of record
and does not include stockholders with shares beneficially held for those in
nominee name or within clearinghouse positions of brokers, banks or other
institutions. The Company believes its stockholders number more than 900.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item for the five years ended December
31, 1995 is set forth on pages 22 and 23 of the Company's 1995 Annual Report to
Stockholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information called for by this Item is set forth on pages 19 through 21
of the Company's 1995 Annual Report to Stockholders and is incorporated herein
by reference.
6
<PAGE> 9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the report thereon of
Price Waterhouse LLP dated February 1, 1996, appearing on pages 9 through 18 of
the Company's 1995 Annual Report to Stockholders and the Unaudited Quarterly
Financial Data appearing on page 18 of the Company's 1995 Annual Report to
Stockholders 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 COMPANY.
The Directors of the Company are:
Edward L. Hutton Douglas B. Harper
William R. Griffin Will J. Hoekman
Brian A. Brumm Thomas C. Hutton
James A. Cunningham Patrick L. Johnson
Naomi C. Dallob Sandra E. Laney
Charles H. Erhart, Jr. Kevin J. McNamara
Neal Gilliatt Timothy S. O'Toole
Lawrence J. Gillis D. Walter Robbins, Jr.
Jerome E. Schnee
Except for the information relating to Mr. Schnee, the additional
information required under this Item with respect to directors and executive
officers is set forth in the Company's 1996 Proxy Statement and in Part I hereof
under the caption "Executive Officers of the Registrant" and is incorporated
herein by reference. Mr. Schnee, who is 54 years old, is a Professor of
Management at the University of Cincinnati College of Business Administration
("College") and has held this position since September 1988. From September 1988
to May 1994, he also served as Dean of the College. He is also a director of
National Sanitary Supply Company.
ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth in the Company's 1996
Proxy Statement which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required under this Item is set forth in the Company's 1996
Proxy Statement which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item is set forth in the Company's 1996
Proxy Statement which is incorporated herein by reference.
7
<PAGE> 10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
2. Exchange Agreement, dated August 31, 1984, between Chemed
Corporation and Roto-Rooter, Inc.*
3.1 Certificate of Incorporation of Roto-Rooter, Inc.*
3.2 By-Laws of Roto-Rooter, Inc.*
10.1 Executive Salary Protection Plan of Roto-Rooter, Inc., as
amended May 17, 1993.*,**
10.2 1984 Stock Incentive Plan of Roto-Rooter, Inc., as amended
through May 20, 1991.*,**
10.3 1978 Stock Incentive Plan of Chemed Corporation, as amended
through May 20, 1991.*,**
10.4 1981 Stock Incentive Plan of Chemed Corporation, as amended
through May 20, 1991.*,**
10.5 1983 Incentive Stock Option Plan of Chemed Corporation, as
amended through May 20, 1991.*,**
10.6 1986 Stock Incentive Plan of Chemed Corporation, as amended
through May 20, 1991.*,**
10.7 1988 Stock Incentive Plan of Chemed Corporation, as amended
through May 20, 1991.*,**
10.8 Service America Systems, Inc. Retirement and Savings Plan.*,**
10.9 Roto-Rooter Management Company Deferred Compensation Plan.*,**
10.10 Amendment No. 1 to Roto-Rooter Management Company Deferred
Compensation Plan, effective January 1, 1993.*,**
10.11 Roto-Rooter Management Company Deferred Compensation Plan No.
2, effective October 1, 1993.*,**
10.12 Roto-Rooter 1987 Stock Incentive Plan, as amended through May
20, 1991.*,**
10.13 1990 Stock Incentive Plan of Roto-Rooter, as amended through
May 20, 1991.*,**
10.14 1993 Stock Incentive Plan of Roto-Rooter, effective May 17,
1993.*,**
10.15 1991 Convenient Home Services Stock Option Plan.*,**
10.16 Service America Deferred Compensation Plan.*,**
10.17 1990 Standard Form of Roto-Rooter Franchise Agreement.*
10.18 1995 Standard Form of Roto-Rooter Franchise Agreement.*
10.19 Employment Agreements with Executives.*,**
10.20 Amendment No. 5 to Employment Agreement with William R.
Griffin.**
</TABLE>
8
<PAGE> 11
<TABLE>
<S> <C>
10.21 Amendment No. 5 to Employment Agreement with Douglas B. Harper.
**
10.22 Amendment No. 5 to Employment Agreement with Lawrence Gillis.**
10.23 Amendment No. 5 to Employment Agreement with Patrick L.
Johnson.**
10.24 Amendment No. 5 to Employment Agreement with Brian A. Brumm.**
10.25 License Agreement between Roto-Rooter Corporation and
Roto-Rooter Services Company.*
10.26 Roto-Rooter 1995 Stock Incentive Plan**
10.27 Split Dollar Agreements with Executives.**
11. Computation of Per Share Earnings
13. 1995 Annual Report to Stockholders.
21. Subsidiaries of Roto-Rooter, Inc.
23. Consent of Independent Accountants
24. Powers of Attorney
27. Financial Data Schedule +
</TABLE>
* This exhibit is being filed by means of incorporation by reference (see
Index to Exhibits). Each other exhibit is being filed with this report.
** 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
No reports on Form 8-K were filed during the quarter ended December 31,
1995.
9
<PAGE> 12
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.
ROTO-ROOTER, INC.
March 26, 1996 By /s/ William R. Griffin
----------------------------
William R. Griffin
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Edward L. Hutton Chairman and a Director )
- ---------------------- )
Edward L. Hutton )
)
)
)
/s/ William R. Griffin President and Chief Executive )
- ---------------------- Officer and a Director (Principal )
William R. Griffin Executive Officer) )
)
)
/s/ Brian A. Brumm Vice President, Treasurer )-March 26, 1996
- ------------------ and Chief Financial Officer )
Brian A. Brumm and a Director (Principal )
Financial and Accounting Officer) )
)
)
James A. Cunningham* Thomas C. Hutton* ) )
Charles H. Erhart, Jr.* Patrick L. Johnson* ) )
Neal Gilliatt* Sandra E. Laney* ) )
Lawrence J. Gillis* Kevin J. McNamara*- )-Directors )
Douglas B. Harper* Timothy S. O'Toole* ) )
Will J. Hoekman* D. Walter Robbins, Jr.* ) )
Jerome E. Schnee* ) )
</TABLE>
- --------------------
* Naomi C. Dallob, General Counsel and Secretary of the Company, by signing her
name hereto signs this document on behalf of each of the persons indicated
above pursuant to powers of attorney duly executed by such persons and filed
with the Securities and Exchange Commission.
March 26, 1996 /s/ Naomi C. Dallob
- -------------- ---------------------------------
Date Naomi C. Dallob
(Attorney-in-Fact and a Director)
10
<PAGE> 13
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
1993, 1994 AND 1995
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
ROTO-ROOTER, INC. CONSOLIDATED FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants......................... 9 *
Consolidated Statement of Income.......................... 10 *
Consolidated Balance Sheet................................ 11 *
Consolidated Statement of Cash Flows...................... 12 *
Consolidated Statement of Stockholders' Equity............ 13 *
Notes to Consolidated Financial Statements................ 14-18*
Report of Independent Accountants on Financial Statement
Schedule................................................ S-2
Schedule II -- Valuation and Qualifying Accounts.......... S-3
</TABLE>
*Indicates page numbers in the Roto-Rooter, Inc. 1995 Annual Report to
Stockholders.
The consolidated financial statements of Roto-Rooter, Inc. listed
above, appearing in the accompanying Roto-Rooter, Inc. 1995 Annual Report to
Stockholders, are incorporated herein by reference. The financial statement
schedule should be read in conjunction with the consolidated financial
statements listed above. Schedules not included have been omitted because they
are not applicable or the required information is shown in the financial
statements or notes thereto as listed above.
S-1
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Roto-Rooter, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 1, 1996 appearing on page 9 of the 1995 Annual Report to
Stockholders of Roto-Rooter, Inc. (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.
- -----------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
February 1, 1996
S-2
<PAGE> 15
SCHEDULE II
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)
<TABLE>
<CAPTION>
=============================================================================================================
Additions
Balance at Charged to Balance at
Beginning Costs and Deductions End of
Descriptions of Period Expenses (a) Period
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Qualifying Accounts Deducted
from Assets:
Allowance for Doubtful Accounts:
For the Year 1993 $468 $538 $(354) $ 652
==== ==== ====== ======
For the Year 1994 $652 $610 $(378) $ 884
==== ==== ====== ======
For the Year 1995 $884 $672 $(506) $1,050
==== ==== ====== ======
</TABLE>
- --------------------
(a) Deductions include accounts considered uncollectible or written off,
net of recoveries.
S-3
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
<S> <C> <C>
2. Exchange Agreement dated August S-1 2
13, 1984 between Chemed Registration
Corporation and Roto-Rooter, Inc. No. 2-97456
5/2/85
3.1 Certificate of Incorporation of Form 10-K 2
Roto-Rooter, Inc. 3/27/92
3.2 By-Laws of Roto-Rooter, Inc. Form 10-K 3
3/27/93
10.1 Executive Salary Protection Plan Form 10-K 10.2
of Roto-Rooter, Inc., as amended 3/30/94
May 17, 1993
10.2 1984 Stock Incentive Plan of Roto- Form 10-K 6
Rooter, Inc., as amended through 3/27/92
May 20, 1991
10.4 1981 Stock Incentive Plan of Form 10-K 9
Chemed Corporation, as amended 3/27/92
through May 20, 1991
10.5 1983 Incentive Stock Option Plan Form 10-K 10
of Chemed Corporation, as amended 3/27/92
through May 20, 1991
10.6 1986 Stock Incentive Plan of Form 10-K 11
Chemed Corporation, as amended 3/27/92
through May 20, 1991
10.7 1988 Stock Incentive Plan of Form 10-K 12
Chemed Corporation, as amended 3/27/92
through May 20, 1991
10.8 Service America Systems, Inc. Form 10-K 10.8
Retirement and Savings Plan 3/28/95
10.9 Roto-Rooter Management Company Form 10-K 14
Deferred Compensation Plan 3/24/88
10.10 Amendment No. 1 to Roto-Rooter Form 10-K 10.11
Management Company Deferred 3/30/94
Compensation Plan, effective
January 1, 1993
</TABLE>
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
<S> <C> <C>
10.11 Roto-Rooter Management Company Form 10-K 10.12
Deferred Compensation Plan, No. 2, 3/30/94
effective October 1, 1993
10.12 1987 Stock Incentive Plan of Roto- Form 10-K 14
Rooter, Inc., as amended through 3/27/92
May 20, 1991
10.13 1990 Stock Incentive Plan of Roto- Form 10-K 15
Rooter, Inc., as amended through 3/27/92
May 20, 1991
10.14 1993 Stock Incentive Plan of Roto- Form 10-K 10.15
Rooter, Inc., effective May 17, 3/30/94
1993
10.15 1991 Convenient Home Services Form 10-K 18
Stock Option Plan 3/25/93
10.16 Service America Deferred Form 10-K 10.26
Compensation Plan 3/28/95
10.17 1990 Standard Form of Roto-Rooter Form 10-K 17
Franchise Agreement 3/27/92
10.18 1995 Standard Form of Roto-Rooter Form 10-K 10.18
Franchise Agreement 3/28/95
10.19 Employment Agreement with Form 10-K 18
Executives 3/25/91
10.20 Amendment No. 5 to Employment *
Agreement with William R. Griffin
10.21 Amendment No. 5 to Employment *
Agreement with Douglas B. Harper
10.22 Amendment No. 5 to Employment *
Agreement with Lawrence Gillis
10.23 Amendment No. 5 to Employment *
Agreement with Patrick L. Johnson
10.24 Amendment No. 5 to Employment *
Agreement with Brian A. Brumm
10.25 License Agreement between Roto- Form 10-K 21
Rooter Corporation and Roto-Rooter 3/25/93
Services Company
10.26 Roto-Rooter 1995 Stock Incentive *
Plan
10.27 Split Dollar Agreements *
</TABLE>
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
<S> <C> <C>
11. Statement re: Computation of Per *
Share Earnings
13. 1995 Annual Report to Stockholders *
21. Subsidiaries of Roto-Rooter, Inc. *
23. Consent of Independent Accountants *
24. Powers of Attorney *
27. Financial Data Schedule *
</TABLE>
- --------------------
* Filed herewith
<PAGE> 1
EXHIBIT 10.20
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of November 1, 1995 between William R. Griffin
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated November 1, 1990 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to 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 November 1, 1995 as
follows:
A. The date of October 31, 1999 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of October
31, 2000 is hereby substituted therefor.
B. The base salary amount of $291,000 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is
hereby deleted and the base salary amount of $310,000 per annum
is hereby substituted therefor.
Except as specifically amended by this Amendment No. 5 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ William R. Griffin
----------------------------------
ROTO-ROOTER, INC.
/s/ Edward L. Hutton
----------------------------------
<PAGE> 1
EXHIBIT 10.21
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of November 1, 1995 between Douglas B. Harper
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated November 1, 1990 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to 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 November 1, 1995 as
follows:
A. The date of October 31, 1999 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of October
31, 2000 is hereby substituted therefor.
B. The base salary amount of $184,500 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is
hereby deleted and the base salary amount of $193,700 per annum
is hereby substituted therefor.
Except as specifically amended by this Amendment No. 5 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ Douglas B. Harper
-------------------------------------
ROTO-ROOTER, INC.
/s/ William R. Griffin
-------------------------------------
<PAGE> 1
EXHIBIT 10.22
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of November 1, 1995 between Lawrence J. Gillis
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated December 11, 1991 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to 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 November 1, 1995 as
follows:
A. The date of November 6, 1997 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of November
6, 1998 is hereby substituted therefor.
B. The base salary amount of $177,000 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is
hereby deleted and the base salary amount of $191,000 per annum
is hereby substituted therefor.
Except as specifically amended by this Amendment No. 5 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ Lawrence J. Gillis
------------------------------------
ROTO-ROOTER, INC.
/s/ William R. Griffin
------------------------------------
<PAGE> 1
EXHIBIT 10.23
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of November 1, 1995 between Patrick L. Johnson
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated November 1, 1990 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to 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 November 1, 1995 as
follows:
A. The date of October 31, 1997 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of October
31, 1998 is hereby substituted therefor.
B. The base salary amount of $160,500 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is
hereby deleted and the base salary amount of $165,500 per annum
is hereby substituted therefor.
Except as specifically amended by this Amendment No. 5 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ Patrick L. Johnson
-------------------------------------
ROTO-ROOTER, INC.
/s/ William R. Griffin
-------------------------------------
<PAGE> 1
EXHIBIT 10.24
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of November 1, 1995 between Brian A. Brumm
("Employee") and Roto-Rooter, Inc. (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated November 1, 1990 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to 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 November 1, 1995 as
follows:
A. The date of October 31, 1997 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of
October 31, 1998 is hereby substituted therefor.
B. The base salary amount of $111,000 per annum as set forth in the
first sentence of Section 2.1 of the Employment Agreement is
hereby deleted and the base salary amount of $118,200 per annum
is hereby substituted therefor.
Except as specifically amended by this Amendment No. 5 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
/s/ Brian A. Brumm
------------------------------------
ROTO-ROOTER, INC.
/s/ William R. Griffin
-------------------------------------
<PAGE> 1
EXHIBIT 10.26
==================================================================
__________________________________________________________________
ROTO-ROOTER, INC.
1995 STOCK INCENTIVE PLAN
___________________________________________________________________
===================================================================
<PAGE> 2
ROTO-ROOTER, INC.
1995 STOCK INCENTIVE PLAN
1. PURPOSES: The purposes of this Plan are (a) to secure for the
Corporation the benefits of incentives inherent in ownership of Common Stock by
Key Employees, (b) to encourage Key Employees to increase their interest in the
future growth and prosperity of the Corporation and to stimulate and sustain
constructive and imaginative thinking by Key Employees, (c) to further the
identity of interest of those who hold positions of major responsibility in the
Corporation and its Subsidiaries with the interests of the Corporation's
stockholders, (d) to induce the employment or continued employment of Key
Employees and (e) to enable the Corporation to compete with other organizations
offering similar or other incentives in obtaining and retaining the services of
competent executives.
2. DEFINITIONS: Unless otherwise required by the context, the
following terms when used in this Plan shall have the meanings set forth in
this section 2.
BOARD OF DIRECTORS: The Board of Directors of the Corporation.
COMMON STOCK: The Common Stock of the Corporation, par value
$1.00 per share, or such other class of shares or other securities as may be
applicable pursuant to the provisions of section 8.
CORPORATION: Roto-Rooter, Inc., a Delaware corporation.
FAIR MARKET VALUE: As applied to any date, the last trading
price of a share of Common Stock on the principal stock exchange on which the
Common Stock is listed or, if it is not so listed, as reported by the National
Association of Securities Dealers on such date or, if no sales were made on
such date, on the next preceding date on which there were sales of Common
Stock; provided, however, that, if the Common Stock is not so listed or quoted,
Fair Market Value shall be determined in accordance with the method approved by
the Incentive Committee, and, provided further, if any of the foregoing methods
of determining Fair Market Value shall not be consistent with the regulations
of the Secretary of the Treasury or his delegate at the time applicable to a
Stock Incentive of the type involved, Fair Market Value in the case of such
Stock Incentive shall be determined in accordance with such regulations and
shall mean the value as so determined.
INCENTIVE COMMITTEE: The Incentive Committee designated to
administer this Plan pursuant to the provisions of section 10.
INCENTIVE COMPENSATION: Bonuses, extra and other compensation
payable in addition to a salary or other base
<PAGE> 3
amount, whether contingent or discretionary or required to be paid pursuant to
an agreement, resolution or arrangement, and whether payable currently or on a
deferred basis, in cash, Common Stock or other property, awarded by the
Corporation or a Subsidiary prior or subsequent to the date of the approval and
adoption of this Plan by the stockholders of the Corporation.
KEY EMPLOYEE: An employee of the Corporation or of a
Subsidiary who in the opinion of the Incentive Committee can contribute
significantly to the growth and successful operations of the Corporation
or a Subsidiary. The grant of a Stock Incentive to an employee by the
Incentive Committee shall be deemed a determination by the Incentive Committee
that such employee is a Key Employee. For the purposes of this Plan, a
director or officer of the Corporation or of a Subsidiary shall be deemed an
employee regardless of whether or not such director or officer is on the
payroll of, or otherwise paid for services by, the Corporation or a Subsidiary.
OPTION: An option to purchase shares of Common Stock.
PERFORMANCE UNIT: A unit representing a share of Common Stock,
subject to a Stock Award, the issuance, transfer or retention of which is
contingent, in whole or in part, upon attainment of a specified performance
objective or objectives, including, without limitation, objectives determined
by reference to or changes in (a) the Fair Market Value, book value or earnings
per share of Common Stock, or (b) sales and revenues, income, profits and
losses, return on capital employed, or net worth of the Corporation (on a
consolidated or unconsolidated basis) or of any one or more of its groups,
divisions, Subsidiaries or departments, or (c) a combination of two or more of
the foregoing factors.
PLAN: The 1995 Stock Incentive Plan herein set forth as the
same may from time to time be amended.
STOCK AWARD: An issuance or transfer of shares of Common Stock
at the time the Stock Incentive is granted or as soon thereafter as
practicable, or an undertaking to issue or transfer such shares in the future,
including, without limitation, such an issuance, transfer or undertaking with
respect to Performance Units.
STOCK INCENTIVE: A stock incentive granted under this Plan in
one of the forms provided for in section 3.
SUBSIDIARY: A corporation or other form of business
association of which shares (or other ownership interests) having 50% or more
of the voting power are owned or controlled, directly or indirectly,
by the Corporation.
2
<PAGE> 4
3. GRANTS OF STOCK INCENTIVES:
(a) Subject to the provisions of this Plan, the Incentive
Committee may at any time, or from time to time, grant Stock Incentives under
this Plan to, and only to, Key Employees.
(b) Stock Incentives may be granted in the following forms:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) and (d) of this
section 4 and of section 8, the aggregate number of shares of Common Stock
which may be issued or transferred pursuant to Stock Incentives granted under
this Plan shall not exceed 200,000 shares.
(b) The maximum aggregate number of shares of Common Stock
which may be issued or transferred under the Plan to directors of the
Corporation or of a Subsidiary shall not exceed 100,000 shares.
(c) Authorized but unissued shares of Common Stock and shares
of Common Stock held in the treasury, whether acquired by the Corporation
specifically for use under this Plan or otherwise, may be used, as the
Incentive Committee may from time to time determine, for purposes of this Plan,
provided, however, that any shares acquired or held by the Corporation for the
purposes of this Plan shall, unless and until transferred to a Key Employee in
accordance with the terms and conditions of a Stock Incentive, be and at all
times remain treasury shares of the Corporation, irrespective of whether such
shares are entered in a special account for purposes of this Plan, and shall be
available for any corporate purpose.
(d) If any shares of Common Stock subject to a Stock Incentive
shall not be issued or transferred and shall cease to be issuable or
transferable because of the termination, in whole or in part, of such Stock
Incentive or for any other reason, or if any such shares shall, after issuance
or transfer, be reacquired by the Corporation or a Subsidiary because of an
employee's failure to comply with the terms and conditions of a Stock
Incentive, the shares not so issued or transferred, or the shares so reacquired
by the Corporation or a Subsidiary shall no longer be charged against any of
the limitations provided for in paragraphs (a) or (b) of this section 4 and may
again be made subject to Stock Incentives.
3
<PAGE> 5
5. STOCK AWARDS: Stock Incentives in the form of Stock Awards shall
be subject to the following provisions:
(a) A Stock Award shall be granted only in payment of Incentive
Compensation that has been earned or as Incentive Compensation to be earned,
including, without limitation, Incentive Compensation awarded concurrently with
or prior to the grant of the Stock Award.
(b) For the purposes of this Plan, in determining the value of
a Stock Award, all shares of Common Stock subject to such Stock Award shall be
valued at not less than 100% of the Fair Market Value of such shares on the
date such Stock Award is granted, regardless of whether or when such shares are
issued or transferred to the Key Employee and whether or not such shares are
subject to restrictions which affect their value.
(c) Shares of Common Stock subject to a Stock Award may be
issued or transferred to the Key Employee at the time the Stock Award is
granted, or at any time subsequent thereto, or in installments from time to
time, as the Incentive Committee shall determine. In the event that any such
issuance or transfer shall not be made to the Key Employee at the time the
Stock Award is granted, the Incentive Committee may provide for payment to such
Key Employee, either in cash or in shares of Common Stock from time to time or
at the time or times such shares shall be issued or transferred to such Key
Employee, of amounts not exceeding the dividends which would have been payable
to such Key Employee in respect of such shares (as adjusted under section 8) if
they had been issued or transferred to such Key Employee at the time such Stock
Award was granted. Any amount payable in shares of Common Stock under the
terms of a Stock Award may, at the discretion of the Corporation, be paid in
cash, on each date on which delivery of shares would otherwise have been made,
in an amount equal to the Fair Market Value on such date of the shares which
would otherwise have been delivered.
(d) A Stock Award shall be subject to such terms and
conditions, including, without limitation, restrictions on sale or other
disposition of the Stock Award or of the shares issued or transferred pursuant
to such Stock Award, as the Incentive Committee shall determine; provided,
however, that upon the issuance or transfer of shares pursuant to a Stock
Award, the recipient shall, with respect to such shares, be and become a
stockholder of the Corporation fully entitled to receive dividends, to vote and
to exercise all other rights of a stockholder except to the extent otherwise
provided in the Stock Award. Each Stock Award shall be evidenced by a written
instrument in such form as the Incentive Committee shall determine, provided
the Stock Award is consistent with this Plan and incorporates it by reference.
4
<PAGE> 6
6. OPTIONS: Stock Incentives in the form of Options shall be subject
to the following provisions:
(a) Upon the exercise of an Option, the purchase price shall be
paid in cash or, if so provided in the Option or in a resolution adopted by the
Incentive Committee (and subject to such terms and conditions as are specified
in the Option or by the Incentive Committee), in shares of Common Stock or in a
combination of cash and such shares. Shares of Common Stock thus delivered
shall be valued at their Fair Market Value on the date of exercise. Subject to
the provisions of section 8, the purchase price per share shall be not less
than 100% of the Fair Market Value of a share of Common Stock on the date the
Option is granted.
(b) Each Option shall be exercisable in full or in part one
year after the date the Option is granted, or may become exercisable in one or
more installments and at such time or times, as the Incentive Committee shall
determine. Unless otherwise provided in the Option, an Option, to the extent it
is or becomes exercisable, may be exercised at any time in whole or in part
until the expiration or termination of the Option. Subject to the first
sentence of this paragraph, any term or provision in any outstanding Option
specifying when the Option is exercisable or that it be exercisable in
installments may be modified at any time during the life of the Option by the
Incentive Committee, provided, however, no such modification of an outstanding
Option shall, without the consent of the optionee, adversely affect any Option
theretofore granted to him. Subject to the preceding provisions of this
paragraph, an Option will become immediately exercisable in full if at any time
during the term of the Option the Corporation obtains actual knowledge that any
of the following events has occurred, irrespective of the applicability of any
limitation on the number of shares then exercisable under the Option: (1) any
person within the meaning of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), other than Chemed Corporation or the
Corporation or any of its subsidiaries, has become the beneficial owner, within
the meaning of Rule 13d-3 under the 1934 Act, of 30 percent or more of the
combined voting power of the Corporation's then outstanding voting securities;
(2) the expiration of a tender offer or exchange offer, other than an offer by
the Corporation or Chemed Corporation, pursuant to which 20 percent or more of
the shares of the Corporation's Common Stock or Chemed Corporation's Capital
Stock have been purchased; (3) the stockholders of the Corporation or Chemed
Corporation have approved (i) an agreement to merge or consolidate with or into
another corporation and the Corporation or Chemed Corporation is not the
surviving corporation or (ii) an agreement to sell or otherwise dispose of all
or substantially all of the assets of Chemed Corporation or the Corporation
(including a plan of liquidation); or (4) during any period of two consecutive
years,
5
<PAGE> 7
individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least a majority thereof,
unless the nomination for the election by the Corporation's stockholders of
each new director was approved by a vote of at least one-half of the persons
who were directors at the beginning of the two-year period.
(c) Each Option shall be exercisable during the life of the
optionee only by him or a transferee or assignee permitted by paragraph (f) of
this section (6) and, after his death, only by his estate or by a person who
acquired the right to exercise the Option pursuant to one of the provisions of
paragraph (f) of this section (6). An Option, to the extent that it shall not
have been exercised, shall terminate when the optionee ceases to be an employee
of the Corporation or a Subsidiary, unless he ceases to be an employee because
of his resignation with the consent of the Incentive Committee (which consent
may be given before or after resignation), or by reason of his death,
incapacity or retirement under a retirement plan of the Corporation or a
Subsidiary. Except as provided in the next sentence, if the optionee ceases to
be an employee by reason of such resignation, the Option shall terminate three
months after he ceases to be an employee. If the optionee ceases to be an
employee by reason of such death, incapacity or retirement, or if he should die
during the three-month period referred to in the preceding sentence, the Option
shall terminate fifteen months after he ceases to be an employee. Where an
Option is exercised more than three months after the optionee ceased to be an
employee, the Option may be exercised only to the extent it could have been
exercised three months after he ceased to be an employee. A leave of absence
for military or governmental service or for other purposes shall not, if
approved by the Incentive Committee, be deemed a termination of employment
within the meaning of this paragraph (c); provided, however, that an Option may
not be exercised during any such leave of absence. Notwithstanding the
foregoing provisions of this paragraph (c) or any other provision of this Plan,
no Option shall be exercisable after expiration of the term for which the
Option was granted, which shall in no event exceed ten years. Where an Option
is granted for a term of less than ten years, the Incentive Committee, may, at
any time prior to the expiration of the Option, extend its term for a period
ending not later than ten years from the date the Option was granted. Such an
extension shall not be deemed the grant of an Option under this Plan.
(d) Options shall be granted for such lawful consideration as the
Incentive Committee shall determine.
(e) Neither the Corporation nor any Subsidiary may directly or
indirectly lend any money to any person for the purpose of assisting him to
purchase or carry shares of Common Stock issued or transferred upon the
exercise of an Option.
6
<PAGE> 8
(f) No Option nor any right thereunder may be assigned or transferred
by the optionee except:
(i) by will or the laws of descent and distribution;
(ii) pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986, as amended, or by the
Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder;
(iii) by an optionee who, at the time of the transfer, is not subject
to the provisions of Section 16 of the 1934 Act, provided such
transfer is to or for the benefit of (including but not limited
to trusts for the benefit of) the optionee's spouse or lineal
descendants of the optionee's parents; or
(iv) by an optionee who, at the time of transfer, is subject to the
provisions of Section 16 of the 1934 Act, to the extent, if any,
such transfer would be permitted under Securities and Exchange
Commission Rule 16b-3 or any successor rule thereto, as such
rule or any successor rule thereto may be in effect at the time
of the transfer.
If so provided in the Option or if so authorized by the Incentive Committee and
subject to such terms and conditions as are specified in the Option or by the
Incentive Committee, the Corporation may, upon or without the request of the
holder of the Option and at any time or from time to time, cancel all or a
portion of the Option then subject to exercise and either (i) pay the holder an
amount of money equal to the excess, if any, of the Fair Market Value, at such
time or times, of the shares subject to the portion of the Option so cancelled
over the aggregate purchase price of such shares, or (ii) issue or transfer
shares of Common Stock to the holder with a Fair Market Value, at such time or
times, equal to such excess.
(g) Each Option shall be evidenced by a written instrument, which
shall contain such terms and conditions, and shall be in such form, as the
Incentive Committee may determine, provided the Option is consistent with this
Plan and incorporates it by reference. Notwithstanding the preceding sentence,
an Option, if so granted by the Incentive Committee, may include restrictions
and limitations in addition to those provided for in this Plan.
(h) Any federal, state or local withholding taxes payable by an
optionee or awardee upon the exercise of an Option or upon the removal of
restrictions of a Stock Award shall be paid in cash or
7
<PAGE> 9
in such other form as the Incentive Committee may authorize from time to time,
including the surrender of shares of Common Stock or the withholding of shares
of Common Stock to be issued to the optionee or awardee. All such shares so
surrendered or withheld shall be valued at Fair Market Value on the date such
are surrendered to the Corporation or authorized to be withheld.
7. COMBINATIONS OF STOCK AWARDS AND OPTIONS: Stock Incentives
authorized by paragraph (b)(iii) of section 3 in the form of combinations of
Stock Awards and Options shall be subject to the following provisions:
(a) A Stock Incentive may be a combination of any form of Stock
Award with any form of Option; provided, however, that the terms and conditions
of such Stock Incentive pertaining to a Stock Award are consistent with section
5 and the terms and conditions of such Stock Incentive pertaining to an Option
are consistent with section 6.
(b) Such combination Stock Incentive shall be subject to such
other terms and conditions as the Incentive Committee may determine, including,
without limitation, a provision terminating in whole or in part a portion
thereof upon the exercise in whole or in part of another portion thereof. Such
combination Stock Incentive shall be evidenced by a written instrument in such
form as the Incentive Committee shall determine, provided it is consistent with
this Plan and incorporates it by reference.
8. ADJUSTMENT PROVISIONS: In the event that any recapitalization, or
reclassification, split-up or consolidation of shares of Common Stock shall be
effected, or the outstanding shares of Common Stock are, in connection with a
merger or consolidation of the Corporation or a sale by the Corporation of all
or a part of its assets exchanged for a different number or class of shares of
stock or other securities of the Corporation or for shares of the stock or
other securities of any other corporation, or a record date for determination
of holders of Common Stock entitled to receive a dividend payable in Common
Stock shall occur (a) the number and class of shares or other securities that
may be issued or transferred pursuant to Stock Incentives, (b) the number and
class of shares or other securities which have not been issued or transferred
under outstanding Stock Incentives, (c) the purchase price to be paid per share
or other security under outstanding Options, and (d) the price to be paid per
share or other security by the Corporation or a Subsidiary for shares or other
securities issued or transferred pursuant to Stock Incentives which are subject
to a right of the Corporation or a Subsidiary to reacquire such shares or other
securities, shall in each case be equitably adjusted.
8
<PAGE> 10
9. TERM: This Plan shall be deemed adopted and shall become
effective on the date it is approved and adopted by the stockholders of the
Corporation. No Stock Incentives shall be granted under this Plan after
May 15, 2005.
10. ADMINISTRATION:
(a) The Plan shall be administered by the Incentive Committee,
which shall consist of no fewer than three persons designated by the Board of
Directors. Grants of Stock Incentives may be made by the Incentive Committee
either in or without consultation with employees, but, anything in this Plan to
the contrary notwithstanding, the Incentive Committee shall have full authority
to act in the matter of selection of all Key Employees and in determining the
number of Stock Incentives to be granted to them.
(b) The Incentive Committee may establish such rules and
regulations, not inconsistent with the provisions of this Plan, as it deems
necessary to determine eligibility to participate in this Plan and for the
proper administration of this Plan, and may amend or revoke any rule or
regulation so established. The Incentive Committee may make such
determinations and interpretations under or in connection with this Plan as it
deems necessary or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Corporation, its
Subsidiaries, its stockholders and all employees, and upon their respective
legal representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them.
(c) Members of the Board of Directors and members of the
Incentive Committee acting under this Plan shall be fully protected in relying
in good faith upon the advice of counsel and shall incur no liability except
for gross negligence or willful misconduct in the performance of their duties.
11. GENERAL PROVISIONS:
(a) Nothing in this Plan nor in any instrument executed
pursuant hereto shall confer upon any employee any right to continue in the
employ of the Corporation or a Subsidiary, or shall affect the right of the
Corporation or of a Subsidiary to terminate the employment of any employee with
or without cause.
(b) No shares of Common Stock shall be issued or transferred
pursuant to a Stock Incentive unless and until all legal requirements
applicable to the issuance or transfer of such shares, in the opinion of
counsel to the Corporation, have been complied with. In connection with any
such issuance or transfer, the person acquiring the shares shall, if requested
by the Corporation, give assurances, satisfactory to counsel to the
9
<PAGE> 11
Corporation, that the shares are being acquired for investment and not with a
view to resale or distribution thereof and assurances in respect of such other
matters as the Corporation or a Subsidiary may deem desirable to assure
compliance with all applicable legal requirements.
(c) No employee (individually or as a member of a group), and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any shares of Common Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Incentive except
as to such shares of Common Stock, if any, as shall have been issued or
transferred to him.
(d) The Corporation or a Subsidiary may, with the approval of
the Incentive Committee, enter into an agreement or other commitment to grant a
Stock Incentive in the future to a person who is or will be a Key Employee at
the time of grant, and, notwithstanding any other provision of this Plan, any
such agreement or commitment shall not be deemed the grant of a Stock Incentive
until the date on which the Company takes action to implement such agreement or
commitment.
(e) In the case of a grant of a Stock Incentive to an employee
of a Subsidiary, such grant may, if the Incentive Committee so directs, be
implemented by the Corporation issuing or transferring the shares, if any,
covered by the Stock Incentive to the Subsidiary, for such lawful consideration
as the Incentive Committee may specify, upon the condition or understanding
that the Subsidiary will transfer the shares to the employee in accordance with
the terms of the Stock Incentive specified by the Incentive Committee pursuant
to the provisions of this Plan. Notwithstanding any other provision hereof,
such Stock Incentive may be issued by and in the name of the Subsidiary and
shall be deemed granted on the date it is approved by the Incentive Committee,
on the date it is delivered by the Subsidiary or on such other date between
said two dates, as the Incentive Committee shall specify.
(f) The Corporation or a Subsidiary may make such provisions as
it may deem appropriate for the withholding of any taxes which the Corporation
or a Subsidiary determines it is required to withhold in connection with any
Stock Incentive.
(g) Nothing in this Plan is intended to be a substitute for, or
shall preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or fringe benefits to
employees generally, or to any class or group of employees, which the
Corporation or any Subsidiary or other affiliate now has or may hereafter
lawfully
10
<PAGE> 12
put into effect, including, without limitation, any retirement, pension, group
insurance, stock purchase, stock bonus or stock option plan.
12. AMENDMENTS AND DISCONTINUANCE:
(a) This Plan may be amended by the Board of Directors upon the
recommendation of the Incentive Committee, provided that, without the approval
of the stockholders of the Corporation, no amendment shall be made which (i)
increases the aggregate number of shares of Common Stock that may be issued or
transferred pursuant to Stock Incentives as provided in paragraph (a) of
section 4, (ii) increases the maximum aggregate number of shares of Common
Stock that may be issued or transferred under the Plan to directors of the
Corporation or of a Subsidiary as provided in paragraph (b) of section 4, (iii)
withdraws the administration of this Plan from the Incentive Committee, (iv)
permits any person who is not at the time a Key Employee of the Corporation or
of a Subsidiary to be granted a Stock Incentive, (v) permits any Option to be
exercised more than ten years after the date it is granted, (vi) amends section
9 to extend the date set forth therein or (vii) amends this section 12.
(b) Notwithstanding paragraph (a) of this section 12, the Board
of Directors may amend the Plan to take into account changes in applicable
securities laws, federal income tax laws and other applicable laws. Should the
provisions of Rule 16b-3, or any successor rule, under the Securities Exchange
Act of 1934 be amended, the Board of Directors may amend the Plan in accordance
therewith.
(c) The Board of Directors may by resolution adopted by a
majority of the entire Board of Directors discontinue this Plan.
(d) No amendment or discontinuance of this Plan by the Board of
Directors or the stockholders of the Corporation shall, without the consent of
the employee, adversely affect any Stock Incentive theretofore granted to him.
11
<PAGE> 1
EXHIBIT 10.27
ROTO-ROOTER, INC.
SPLIT DOLLAR AGREEMENT
This Agreement, made on June 1, 1995, by and between
Roto-Rooter, Inc. ("the Corporation"), a Delaware corporation with offices at
2500 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202 and
____________________ ("the Employee"), who is an employee of the Corporation.
1. PREMISES
1.1 The Employee is a valuable employee of the
Corporation. He/she wishes to provide adequate
protection for his/her family by insuring his/her
life. The Corporation will assist the Employee in
providing this insurance coverage by payment of
part of the premiums under a split dollar
arrangement, whereby the Employee will be the
owner of a life insurance policy which will be
collaterally assigned to the Corporation as
security for amounts the Corporation will
contribute for the premium payments.
2. APPLICATION FOR INSURANCE
2.1 The Employee has applied to Phoenix Home Life
Mutual Insurance Company for an Executive Equity
Life Insurance Plan on the life of the Employee
for $_________ ("Policy").
3. POLICY OWNERSHIP
3.1 The Employee shall own the Policy and may
exercise all rights of ownership with respect to
<PAGE> 2
it, subject only to the security interest of the
Corporation as expressed in this Agreement and the
collateral assignment of the Policy to the
Corporation.
4. PAYMENT OF PREMIUMS
4.1 On or before the due date of each annual
premium on the Policy, the Corporation will pay to
Phoenix Home Life Mutual Insurance Company an
amount equal to the greater of 80 percent of the
annual premium or the annual premium less the
economic benefit cost received by the Employee (as
measured by the Phoenix Home Life term insurance
rates) for the portion of the insurance which the
beneficiary or beneficiaries named by the Employee
or their transferee would be entitled to receive
if the Employee died during the policy year for
which the annual premium is paid.
4.2 On or before the due date of each annual
premium on the Policy, the Corporation will pay to
Phoenix Home Life Mutual Insurance Company, on
behalf of the Employee, the remainder of the
annual premium. This payment will constitute
compensation to the Employee in the form of a
bonus and will be considered paid by the
2
<PAGE> 3
Employee for purposes of the Assignment (as
defined in Article 5).
4.3 These premium advances by the Corporation
shall apply specifically to annual premiums due
under the Policy up to the Employee's age of 65.
However, additional premium advances may be made
by mutual agreement of the parties.
5. ASSIGNMENT OF POLICY
5.1 The Employee shall collaterally assign the
Policy to the Corporation so as to reflect the
respective interests of the parties under this
Agreement, said collateral assignment
("Assignment") having been executed by the parties
on the date of this Split Dollar Agreement, and
thus made a part of such Policy and this
Agreement.
6. USE OF DIVIDENDS
6.1 The dividends declared by Phoenix Home Life
Mutual Insurance Company on the Policy will be
used to purchase Option Term with the balance used
to purchase paid-up insurance.
6.2 The dividend option which is specified in
paragraph 6.1 of this Article will not be
terminated or changed without a conforming
amendment to this Agreement and unless such change
is done in accordance with the provisions
3
<PAGE> 4
of Part D "Joint Rights" section of the
Assignment.
7. SURRENDER OF POLICY
7.1 The Employee shall have the sole and
exclusive right to surrender the Policy.
7.2 If the Policy is surrendered, the Employee
shall direct the insurance company in writing to
draw a check payable to the Corporation in an
amount equal to the "Assignee's Cash Value
Rights", as defined within the provisions of Part
A "Definitions" section of the Assignment.
7.3 If there is a delay in the surrender of the
Policy by either party to this Agreement, and if
such delay results in diminished policy values
being available to either party, neither party to
this Agreement shall hold the insurance company
liable for such diminution in Policy values.
8. DEATH CLAIMS
8.1 Upon the death of the Employee, the
Corporation shall have an interest in the proceeds
of the Policy equal to the "Assignee's Death
Benefit Share", as defined within the provisions
of Part A "Definitions" section of the Assignment.
The balance of proceeds remaining shall be paid
directly by the
4
<PAGE> 5
insurance company to the beneficiary or
beneficiaries designated in the Policy.
9. TERMINATION OF AGREEMENT
9.1 This Agreement shall terminate upon surrender
of the Policy by the Employee or upon thirty (30)
days' written notice of termination given by
either party to the other by registered mail at
the party's last known address.
9.2 Prior to termination of this Agreement, the
Employee shall direct the insurance company in
writing to draw a check payable to the Corporation
for an amount equal to the "Assignee's Cash Value
Interest", as defined within the provisions of
Part A "Definitions" section of the Assignment.
Upon receipt of this amount, the Corporation shall
release the security interest of the Corporation
expressed in this Agreement and the Assignment.
10. SPECIAL PROVISIONS
The following provisions are part of this Plan and
are intended to meet the requirements of the
Employee Retirement Income Security Act of 1974:
10.01 - The named fiduciary: The
Secretary of the Company
10.02 - The funding policy under
this Plan is that all
premiums on the Policy
5
<PAGE> 6
be remitted to the Insurer
when due.
10.03 - Direct payment by the
Insurer is the basis of
payment of benefits under
this Plan, with those
benefits in turn being based
on the payment of premiums as
provided in the Plan.
10.04 - For claims procedure
purposes, the "Claims
Manager" shall be the
Secretary of the Company.
(a) If for any reason
a claim for
benefits under this
Plan is denied by the
Company, the Claims
Manager shall deliver
to the claimant a
written explanation
setting forth the
specific reasons for
the denial, pertinent
references to the
Plan section on which
the denial is based,
such other data as may be
pertinent and
information on the
procedures to be
followed by the
claimant in obtaining a
review of his claim, all
6
<PAGE> 7
written in a manner calculated to be
understood by the claimant. For this
purpose:
(1) The claimant's claim shall be
deemed filed when presented
orally or in writing to the
Claims Manager.
(2) The Claims Manager's
explanation shall be in
writing delivered to the
claimant within 90 days of
the date the claim is filed.
(b) The claimant shall have 60
days following his/her
receipt of the denial of the
claim to file with the Claims
Manager a written request for
review of the denial. For
such review, the claimant or
his/her representative may
submit pertinent documents
and written issues and
comments.
(c) The Claims Manager shall
decide the issue on review and
7
<PAGE> 8
furnish the claimant with a
copy within 60 days of
receipt of the claimant's
request for review of
his/her claim. The decision
on review shall be in
writing and shall include
specific reasons for the
decision written in a manner
calculated to be understood
by the claimant, as well as
specific references to the
pertinent Plan provisions on
which the decision is based.
If a copy of the decision is
not so furnished to the
claimant within such 60 days,
the claims shall be deemed
denied on review.
11. AMENDMENT AND BINDING EFFECT
11.1 This embodies all agreements by the parties
made with respect to the Policy. The Agreement
shall not be modified or amended except by a
writing signed by the parties. The Agreement
shall be binding upon the parties, their heirs,
legal representatives, successors and assigns.
8
<PAGE> 9
12. GOVERNING LAW
12.1 This Agreement shall be subject to and shall
be construed under the laws of the State of
Ohio.
Executed by the parties at Cincinnati, Ohio, as of June 1, 1995.
ROTO-ROOTER, INC.
By:
- -------------------------- -----------------------------------
Witness Signature, Corporate Title
By:
- -------------------------- -----------------------------------
Witness Employee/Insured
9
<PAGE> 10
SCHEDULE TO EXHIBIT 10.27
<TABLE>
<CAPTION>
Name Position Policy Face Amount
- ---- -------- ------------------
<S> <C> <C>
William R. Griffin President and Chief $2,328,000
Executive Officer
Douglas B. Harper Executive Vice President 1,476,000
Patrick L. Johnson Vice President 1,284,000
Brian A. Brumm Vice President, Treasurer 888,000
and Chief Financial Officer
</TABLE>
10
<PAGE> 1
EXHIBIT 11
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
Computation of Per Share Earnings (a)
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
Computation of Earnings per Common and 1993 1994 1995
Common Equivalent Share: ------ ------ ------
<S> <C> <C> <C>
Reported Income before Minority Interest $8,387 $9,015 $9,763
Minority Interest 414 244 86
------ ------ ------
Net Income $7,973 $8,771 $9,677
====== ====== ======
Average Number of Shares Used to
Compute Earnings Per Common Share 5,027 5,066 5,101
Effect of Unexercised Stock Options 59 48 52
------ ------ ------
Average Number of Shares Used to Compute
Earnings Per Common and Common
Equivalent Share 5,086 5,114 5,153
====== ====== ======
Earnings Per Common and Common
Equivalent Share $ 1.57 $ 1.72 $ 1.88
====== ====== ======
Computation of Earnings Per Common Share
Assuming Full Dilution:
Reported Income before Minority Interest $8,387 $9,015 $9,763
Minority Interest 414 244 86
------ ------ ------
Net Income $7,973 $8,771 $9,677
====== ====== ======
Average Number of Shares Used to
Compute Earnings Per Common Share 5,027 5,066 5,101
Effect of Unexercised Stock Options 99 48 80
------ ------ ------
Average Number of Shares Used to Compute
Earnings Per Common Share Assuming
Full Dilution 5,126 5,114 5,181
====== ====== ======
Earnings Per Common Share Assuming
Full Dilution $ 1.56 $ 1.72 $ 1.87
====== ====== ======
</TABLE>
(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.
<PAGE> 1
FINANCIAL HIGHLIGHTS:
<TABLE>
<CAPTION>
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------------------------------------------------------------------------------
For the Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Operating
Revenues
(in thousands) $45,292 $55,233 $62,255 $66,842 $75,230 $84,774 $104,688 $136,428 $171,930 $179,722
Earnings
(in thousands) 3,594 4,516 5,504 5,623 5,705 5,880 6,625 7,973 8,771 10,032(a)
Earnings Per
Common Share
before Accounting
Changes
(in dollars) 0.74 0.93 1.13 1.14 1.15 1.18 1.33 1.59 1.73 1.97(a)
Cash Provided by
Operating
Activities
(in thousands) 5,526 6,083 10,520 9,259 10,641 11,482 15,052 12,523 12,506 14,598
</TABLE>
(a) Excluding nonrecurring charges of $355,000 aftertax of 7 cents per share.
1
<PAGE> 2
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<S> <C>
10 Consolidated Statement of Income
11 Consolidated Balance Sheet
12 Consolidated Statement of Cash Flows
13 Consolidated Statement of Stockholders' Equity
14 Notes to Consolidated Financial Statements
18 Unaudited Quarterly Financial Data
19 Management's Discussion and Analysis of Financial
Condition and Results of Operations
22 Selected Financial Data
</TABLE>
PRICE WATERHOUSE LLP
Report of Independent Accountants
To the Board of Directors and Stockholders of Roto-Rooter, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Roto-Rooter, Inc. (a
58%-owned subsidiary of Chemed Corporation) and its subsidiaries at December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Cincinnati, Ohio
February 1, 1996
9
<PAGE> 3
CONSOLIDATED STATEMENT OF INCOME
(amounts in thousands except per share data)
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Operating Revenues $179,722 $171,930 $136,428
-------- -------- --------
Cost of Services Provided and Products Sold 108,778 106,111 80,867
Selling, General and Administrative Expenses 46,851 42,625 36,021
Depreciation and Amortization 7,646 7,227 5,169
Nonrecurring Expenses (Note 8) 538 -- --
-------- -------- --------
Total Costs and Expenses 163,813 155,963 122,057
-------- -------- --------
Income from Operations 15,909 15,967 14,371
Interest Expense (984) (839) (444)
Other Income -- Net 1,912 601 431
-------- -------- --------
Income before Income Taxes and Minority Interest 16,837 15,729 14,358
Income Taxes (Note 11) 7,074 6,714 5,971
-------- -------- --------
Income before Minority Interest 9,763 9,015 8,387
Minority Interest 86 244 414
-------- -------- --------
NET INCOME $ 9,677 $ 8,771 $ 7,973
======== ======== ========
EARNINGS PER COMMON SHARE $ 1.90 $ 1.73 $ 1.59
======== ======== ========
Average Number of Shares Outstanding 5,101 5,066 5,027
======== ======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
10
<PAGE> 4
CONSOLIDATED BALANCE SHEET
(amounts in thousands except per share data)
<TABLE>
<CAPTION>
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------------------------------------------------
December 31,
1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 2,350 $ 937
Demand Deposits with Chemed Corporation (Note 12) 12,974 9,037
Statutory Deposits (Note 3) 18,943 14,408
Accounts Receivable, Less Allowance (1995 -- $1,050; 1994 -- $884) 6,616 6,593
Inventories (Note 6) 7,823 7,163
Deferred Income Taxes (Note 11) 3,168 2,956
Prepaid Expenses and Other Current Assets (Note 4) 2,741 2,597
-------- --------
Total Current Assets 54,615 43,691
Property and Equipment, at Cost, Less Accumulated Depreciation (Note 7) 25,121 25,213
Intangible Assets, Less Accumulated Amortization (Note 14) 65,515 65,204
Other Assets 4,618 3,275
-------- --------
Total Assets $149,869 $137,383
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 8,606 $ 7,186
Deferred Contract Revenue 23,512 22,631
Income Taxes (Note 11) 851 739
Other Current Liabilities (Note 10) 21,762 16,409
-------- --------
Total Current Liabilities 54,731 46,965
Deferred Income Taxes (Note 11) 2,696 2,234
Deferred Compensation and Other Noncurrent Liabilities 4,979 8,046
Long-Term Debt with Chemed Corporation (Note 9) 8,424 8,424
Minority Interest (Note 9) 4,053 3,967
-------- --------
Total Liabilities 74,883 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 -- 5,413,054 Shares; 1994 -- 5,276,404 Shares) 5,413 5,276
Paid-In Capital 27,521 24,290
Retained Earnings 49,309 42,918
Treasury Stock, at Cost (1995 -- 278,517 Shares; 1994 -- 205,084 Shares) (7,257) (4,737)
-------- --------
Total Stockholders' Equity 74,986 67,747
-------- --------
Commitments and Contingencies (Note 15)
Total Liabilities and Stockholders' Equity $149,869 $137,383
======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
11
<PAGE> 5
CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------------------------------
For the Year Ended December 31,
1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 9,677 $ 8,771 $ 7,973
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 7,646 7,227 5,169
Provision for Deferred Income Taxes (311) (316) (574)
Changes in Operating Assets and Liabilities Excluding
Amounts Acquired in Business Combinations:
Statutory Deposits (4,535) (1,232) (2,419)
Accounts Receivable (23) (275) (913)
Inventories (599) (383) (1,116)
Prepaid Expenses and Other Current Assets (122) 343 236
Accounts Payable 1,420 (1,417) 3,016
Deferred Contract Revenue 684 (1,217) (376)
Income Taxes 112 335 (1,466)
Other Current Liabilities 1,674 111 1,769
Other (1,025) 559 1,224
------- -------- --------
Net Cash Provided by Operating Activities 14,598 12,506 12,523
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (5,544) (6,214) (6,885)
Business Combinations, Net of Cash Acquired (Note 9) (2,490) (1,624) (20,011)
Other 995 911 80
------- -------- --------
Net Cash Used for Investing Activities (7,039) (6,927) (26,816)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (3,286) (2,939) (2,666)
Proceeds from Issuance of Long-Term Debt 447 492 4,224
Minority Investment in Subsidiary -- -- 1,056
Demand Deposits with Chemed Corporation (3,937) (8,277) 12,701
Other 630 328 215
------- -------- --------
Net Cash (Used for)/Provided by Financing Activities (6,146) (10,396) 15,530
------- -------- --------
Net Increase/(Decrease) in Cash and Cash Equivalents 1,413 (4,817) 1,237
Cash and Cash Equivalents at Beginning of Year 937 5,754 4,517
------- -------- --------
Cash and Cash Equivalents at End of Year $ 2,350 $ 937 $ 5,754
======= ======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
12
<PAGE> 6
CONSOLIDATED STATEMENT
OF STOCKHOLDERS' EQUITY
(amounts in thousands except per share data)
<TABLE>
<CAPTION>
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- ------------------------------------------------------------------------------------------
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $5,145 $21,564 $31,779 $(2,648) $55,840
Net Income -- -- 7,973 -- 7,973
Dividends ($.53 per share) -- -- (2,666) -- (2,666)
Treasury Stock Purchased -- -- -- (1,701) (1,701)
Stock Awards and Exercise
of Stock Options (Note 5) 91 1,973 -- -- 2,064
------ ------- ------- ------- -------
Balance, December 31, 1993 5,236 23,537 37,086 (4,349) 61,510
Net Income -- -- 8,771 -- 8,771
Dividends ($.58 per share) -- -- (2,939) -- (2,939)
Treasury Stock Purchased -- -- -- (388) (388)
Stock Awards and Exercise
of Stock Options (Note 5) 40 753 -- -- 793
------ ------- ------- ------- -------
Balance, December 31, 1994 5,276 24,290 42,918 (4,737) 67,747
Net Income -- -- 9,677 -- 9,677
Dividends ($.64 per share) -- -- (3,286) -- (3,286)
Treasury Stock Purchased -- -- -- (2,520) (2,520)
Stock Awards and Exercise
of Stock Options (Note 5) 137 3,231 -- -- 3,368
------ ------- ------- ------- -------
Balance, December 31, 1995 $5,413 $27,521 $49,309 $(7,257) $74,986
====== ======= ======= ======= =======
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
13
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of Consolidation:
The accompanying consolidated financial statements present the financial
position, results of operations and cash flows of Roto-Rooter, Inc. and all
subsidiary companies ("Roto-Rooter" or "Company"). All significant intercompany
transactions and balances have been eliminated.
Chemed Corporation ("Chemed") owned 58% of the Company's outstanding common
stock on December 31, 1995.
Cash and Cash Equivalents:
Cash and cash equivalents include cash on hand and short-term investments
with maturities of three months or less. These investments are stated at cost
which approximates market value.
Inventories:
Inventories are stated at the lower of cost or market. Cost is generally
determined using the first-in, first-out (FIFO) method.
Depreciation of Properties and Equipment:
Depreciation of properties and equipment is computed using the straight-line
method over the estimated useful lives of the assets, which range from two to 30
years. Expenditures for maintenance, repairs, renewals and betterments that do
not materially prolong the useful lives of the assets are expensed. The cost of
property retired or sold and the related accumulated depreciation are removed
from the accounts and any resulting gain or loss is reflected currently in
income.
Intangible Assets:
Intangible assets include specifically identifiable intangible assets arising
principally from business acquisitions accounted for as purchase transactions,
as well as the excess of cost over the fair value of tangible and identifiable
intangible assets acquired. These assets are amortized on a straight-line basis
over the periods to be benefited, which is currently estimated to be between
five and 40 years.
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 any of
the intangible assets have been impaired, a write-down to fair value is made.
Revenue Recognition:
Revenue is recognized when services are provided or products are shipped.
Revenue arising from prepaid service contracts is recorded as deferred revenue
and amortized to income on a straight-line basis over the term of the contract.
Franchise fees, which are primarily ongoing fees, are recognized on a monthly
basis in accordance with the individual contracts. Initial franchise fees are
not material.
Earnings Per Common Share:
Earnings per common share in the accompanying Consolidated Statement of
Income have been computed based on the weighted average number of shares
outstanding in each year. Common stock equivalents are not material.
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 financial statements and accompanying notes. Actual
results could differ from those estimates.
Reclassifications:
Certain reclassifications of prior-year amounts have been made to conform
with the current-year presentation.
- --------------------------------------------------------------------------------
NOTE 2. SEGMENT INFORMATION
The Company operates in one business segment. All significant revenues relate
to providing repair and maintenance services to residential, commercial,
industrial and municipal customers through both company-owned and franchised
operations. The Company also manufactures and sells some of the equipment used
to provide such services.
Summarized below are operating revenues and direct costs which resulted from
services provided and products sold by the Company to its independently-owned
franchised locations (amounts in thousands):
<TABLE>
<CAPTION>
For the Year Ended
December 31,
--------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Operating Revenues $6,948 $7,171 $6,601
====== ====== ======
Direct Costs $2,662 $3,002 $2,942
====== ====== ======
</TABLE>
The Company does not derive more than 1% of its operating revenues from any
individual foreign or domestic customer, government agency or from export sales.
- --------------------------------------------------------------------------------
NOTE 3. STATUTORY DEPOSITS
In connection with the Company's service contract business and in accordance
with certain regulatory requirements, the Company maintains cash and
certificates of deposits with certain regulatory agencies. The Company is also
required to maintain additional unencumbered reserves. The Company is in
compliance with these requirements.
- --------------------------------------------------------------------------------
NOTE 4. PREPAID EXPENSES AND OTHER
CURRENT ASSETS
At December 31, 1995, prepaid expenses and other current assets included
prepaid yellow pages expense of $1,921,000 (1994 -- $1,817,000).
14
<PAGE> 8
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
NOTE 5. STOCK INCENTIVE PLANS
The Company has five Stock Incentive Plans covering options to purchase up to
1,050,000 shares of its common stock. The latest plan, covering 200,000 shares,
was adopted in May 1995. Under these plans, Roto-Rooter Common Stock may be
issued to key employees pursuant to the grant of stock awards and/or options to
purchase such shares. Options are granted at a price equal to the market value
on the date of grant and become exercisable beginning one year following the
date of grant in four approximately equal annual installments. The changes in
outstanding stock options follow:
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
NUMBER Number
OF AVG. of Avg.
SHARES PRICE Shares Price
<S> <C> <C> <C> <C>
Options Outstanding
at Beginning of Year 429,286 $22.27 378,797 $20.86
Options Granted -- -- 83,050 27.00
Options Exercised (119,188) 19.64 (23,861) 15.33
Options Terminated
or Cancelled (10,188) 25.16 (8,700) 24.91
-------- -------
Options Outstanding
at End of Year 299,910 $23.22 429,286 $22.27
======== =======
</TABLE>
At December 31, 1995, options for 162,514 shares were exercisable and 229,528
(December 31, 1994 -- 37,852) shares were available for granting of additional
stock options and stock awards.
During 1995, the Company granted stock awards covering 17,462 shares (1994 --
16,246) under its Stock Incentive Plans. The shares of common stock were issued
to key employees at no cost and generally are restricted as to the transfer of
ownership. Restrictions covering one-third of each holder's shares lapse
annually, commencing one year after the date of grant.
- --------------------------------------------------------------------------------
NOTE 6. INVENTORIES
A summary of inventories follows (amounts in thousands):
<TABLE>
<CAPTION>
December 31,
------------------
1995 1994
------ ------
<S> <C> <C>
Raw Materials, Supplies and
General Merchandise $6,866 $6,353
In Process 33 29
Finished Goods 924 781
------ ------
Total Inventories $7,823 $7,163
====== ======
</TABLE>
NOTE 7. PROPERTY AND EQUIPMENT
A summary of property and equipment follows (amounts in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
-------- --------
<S> <C> <C>
Land $ 2,070 $ 2,098
Buildings 9,415 9,193
Machinery and Equipment 22,954 20,492
Furniture, Fixtures and Other 9,303 8,068
-------- --------
Total Property and Equipment 43,742 39,851
Accumulated Depreciation (18,621) (14,638)
-------- --------
Net Property and Equipment $ 25,121 $ 25,213
======== ========
</TABLE>
Depreciation expense for the year ended December 31, 1995 was $5,154,000
(1994 -- $5,013,000; 1993 -- $3,465,000).
The Company has operating leases which cover various plant, warehouse and
office facilities, office equipment, and plant and transportation equipment. The
remaining terms of these leases range from approximately one to 11 years and, in
most cases, management expects that these leases will be renewed or replaced by
other leases in the normal course of business.
The following is a schedule, by year, of future minimum rental payments
required under operating leases that have initial or remaining noncancellable
terms in excess of one year at December 31, 1995 (amounts in thousands):
<TABLE>
<S> <C>
1996 $1,704
1997 1,304
1998 1,078
1999 852
2000 659
Thereafter 3,076
------
Total $8,673
======
</TABLE>
Total rent expense for the year ended December 31, 1995 was $1,888,000 (1994
- -- $1,681,000; 1993 -- $1,368,000).
- --------------------------------------------------------------------------------
NOTE 8. NONRECURRING EXPENSES
Nonrecurring expenses of $538,000 ($355,000 aftertax or $.07 per share) were
recorded in the third quarter of 1995 related to legal, investment banking and
other expenses as a result of discussions with Roto-Rooter's 58% majority
stockholder, Chemed, regarding Chemed's potential acquisition of the minority
shares in Roto-Rooter. The discussions were terminated in August 1995.
15
<PAGE> 9
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
NOTE 9. BUSINESS COMBINATIONS
During 1995, the Company acquired four independently owned Roto-Rooter
franchises and the service contract business of Prime Management Group, Inc. in
five separate purchase transactions. The aggregate purchase price of these
transactions was $2,490,000.
During 1994, the Company acquired three independently owned Roto-Rooter
franchises in three separate purchase transactions. The aggregate purchase price
of these acquisitions was $1,624,000.
During 1993, the Company acquired seven independently owned Roto-Rooter
franchises in seven separate purchase transactions. The aggregate purchase price
of these acquisitions was $2,411,000.
In addition, on July 16, 1993, the Company, through its 70%-owned subsidiary,
Service America Systems, Inc. ("Service America"), acquired 100% of the
outstanding common shares of Encore Service Systems, Inc. ("Encore"), a Florida
corporation headquartered in Boca Raton, Florida. Encore primarily provides
residential air conditioning and appliance repair services through service
contracts in Florida and Arizona. The Company and Chemed funded the Encore
acquisition in a 70%:30% ratio.
The purchase price, including transaction-related expenses for the Encore
acquisition, was $17,600,000 and was funded as follows (amounts in thousands):
<TABLE>
<S> <C>
Cash from the Company $12,320
Cash from Chemed 1,056
Long-Term Debt Provided by Chemed 4,224
-------
$17,600
=======
</TABLE>
Chemed's investment in Encore (through Service America) and its share of the
earnings of Service America subsequent to the acquisition are shown as minority
interest in these financial statements. Long-term debt to Chemed is payable on
January 1, 1997, although management expects the term of the debt will be
extended. The interest rate on the debt is fixed at 8.15%.
The purchase price paid by Service America for Encore under the terms of the
agreement was $17,000,000 in cash at closing, plus contingent payments based
upon achievement of certain sales and earnings levels during the 36-month period
following closing of this transaction (the maximum amount payable under the
contingent payments is $8,800,000).
Based on Encore's results through December 31, 1995, a sales-based contingent
payment of $3,800,000 was earned in full and is due in July 1996. The present
value of this payment is $3,679,000 and is recorded in both intangible assets
(excess of cost over net assets acquired) and other current liabilities. Because
it was a noncash transaction, this transaction was not reflected in the
Consolidated Statement of Cash Flows. Management does not anticipate any
additional contingent payments.
All of the aforementioned business combinations were accounted for as
purchase transactions and have been included in the Consolidated Statement of
Income from the dates of acquisition. All of these acquired businesses are
primarily engaged in providing repair and maintenance services.
Summarized unaudited pro forma financial data, which assume that the
above-described business combinations were made at the beginning of the year
preceding the year of acquisition, follow (amounts in thousands):
<TABLE>
<CAPTION>
For the Year Ended
December 31,
------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Total Operating Revenues $181,697 $176,274 $161,062
</TABLE>
Pro forma consolidated information is presented for informational purposes
only and does not purport to be indicative of results which would actually have
been obtained if the combinations had been in effect for the periods indicated
or which may be obtained in the future. Pro forma net income and earnings per
share are not provided as pro forma results do not differ materially from actual
reported results.
Assets acquired and liabilities assumed with respect to these acquisitions
have been recorded at their estimated fair values at the date of acquisition. A
summary of the allocation of the purchase price of net assets acquired and
liabilities assumed in business combinations follows (amounts in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1994 1993
------ ------ --------
<S> <C> <C> <C>
Intangible Assets $1,982 $1,574 $ 23,552
Working Capital (10) 17 (12,918)
Properties, Equipment and Other 621 33 4,571
Deferred Taxes -- -- (763)
Other Assets (Primarily
Statutory Reserves) -- -- 6,275
------ ------ --------
2,593 1,624 20,717
Less: Cash and Cash
Equivalents Acquired (103) -- (706)
------ ------ --------
Total Net Assets $2,490 $1,624 $ 20,011
====== ====== ========
</TABLE>
- --------------------------------------------------------------------------------
NOTE 10. OTHER CURRENT LIABILITIES
At December 31, 1995, other current liabilities included accrued insurance of
$10,535,000 (1994 -- $9,589,000).
16
<PAGE> 10
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
NOTE 11. INCOME TAXES
On January 1, 1993, the Company adopted Financial Accounting Standards No.
109 ("FAS 109"), "Accounting for Income Taxes." FAS 109 was adopted on a
prospective basis.
The implementation of FAS 109 did not have a material effect on the
consolidated Statement of Income for the year ended December 31, 1993.
The provision for income taxes comprises the following (amounts in
thousands):
<TABLE>
<CAPTION>
For the Year Ended
December 31,
------------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Current
Federal $6,450 $6,191 $5,894
State and Local 935 839 651
Deferred (311) (316) (574)
------ ------ ------
Total Income Tax Provision $7,074 $6,714 $5,971
====== ====== ======
Income Taxes Paid $6,707 $5,968 $7,131
====== ====== ======
</TABLE>
Deferred tax assets (liabilities) are comprised as follows (amounts in
thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
------- -------
<S> <C> <C>
Insurance $ 3,321 $ 3,017
Pensions 1,122 946
Bad Debts 321 315
Other 1,186 1,108
------- -------
Gross Deferred Tax Assets 5,950 5,386
------- -------
Depreciation (2,384) (2,340)
Intangibles (1,512) (902)
Advertising (1,124) (956)
Other (458) (466)
------- -------
Gross Deferred Tax Liabilities (5,478) (4,664)
------- -------
Net Deferred Tax Assets $ 472 $ 722
======= =======
</TABLE>
The difference between the statutory U.S. federal income tax rate and the
effective tax rate is explained as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31,
--------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. Federal
Income Tax Rate 35.0% 35.0% 34.0%
Absence of Income Tax Benefit
on Intangibles Amortization 3.8 4.7 3.8
State and Local Income Taxes,
Less Federal Income Tax Benefit 3.6 3.5 3.0
Other Items -- Net (0.4) (0.5) 0.8
---- ---- ---
Effective Tax Rate 42.0% 42.7% 41.6%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
NOTE 12. RELATED PARTY TRANSACTIONS
In addition to the transactions involving Chemed described in Note 9, the
Company conducts the following transactions with Chemed.
Roto-Rooter has an agreement with Chemed under which Roto-Rooter pays a
stipulated fee based on Chemed's cost for providing certain administrative,
financial, internal audit and legal services, and other staff functions to the
Company. The Company also rents space for its corporate headquarters from
Chemed. The method by which such fees and expenses are determined and allocated
is deemed reasonable by management. For the years ended December 31, 1995, 1994
and 1993, fees and expenses of $796,000, $741,000 and $616,000, respectively,
were paid to Chemed.
Roto-Rooter also has an agreement with Chemed under which funds in excess of
the Company's working capital requirements are deposited with Chemed. These
unsecured deposits earned interest at a rate determined on the basis of United
States Treasury Notes and are payable upon demand. Advances made by Chemed to
the Company carry the same terms and interest rates as the Company's demand
deposits with Chemed. For the years ended December 31, 1995, 1994 and 1993,
interest income of $1,424,000, $618,000 and $540,000, respectively, was earned
on these deposits, while interest expense of $631,000, $603,000 and $351,000 was
incurred on long-term debt due to Chemed in 1995, 1994 and 1993.
Total interest paid by the Company for the years ended December 31, 1995,
1994 and 1993 was $753,000, $705,000 and $444,000 which includes interest paid
on debt with outsiders as well as Chemed.
- --------------------------------------------------------------------------------
NOTE 13. PENSION AND RETIREMENT PLANS
All employees of the Company who meet certain age and service requirements
are eligible to participate in the various contributory and noncontributory
defined contribution plans. Expenses of the Company related to pension and other
similar plans for the year ended December 31, 1995 were $1,996,000 (1994 --
$1,700,000; 1993 -- $1,500,000).
- --------------------------------------------------------------------------------
NOTE 14. INTANGIBLE ASSETS
A summary of intangible assets follows (amounts in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
-------- --------
<S> <C> <C>
Excess of Cost over Net Assets Acquired $ 64,359 $ 61,675
Tradename 7,170 7,100
Other Intangibles 6,869 6,800
-------- --------
Total Intangibles 78,398 75,575
Accumulated Amortization (12,883) (10,371)
-------- --------
Net Intangible Assets $ 65,515 $ 65,204
======== ========
</TABLE>
Amortization expense for the year ended December 31, 1995 was $2,492,000
(1994 -- $2,214,000; 1993 -- $1,704,000).
17
<PAGE> 11
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
NOTE 15. LEGAL PROCEEDINGS
On July 18, 1995, an association of certain Roto-Rooter franchisees filed a
lawsuit in the United States District Court for the Southern District of
Florida, Miami Division, against Roto-Rooter Corporation, Roto-Rooter, Inc. and
Chemed Corporation. Plaintiffs allege that the defendants breached the Franchise
Agreements and the implied covenant of good faith and fair dealing by requiring
that renewing franchisees execute the Franchise Agreements with certain revised
provisions. These provisions cover fees, advertising expenditures, territorial
rights, termination, trademarks and sales reporting. Plaintiffs seek a
declaratory judgment that these are unreasonable revisions which are
impermissible under the terms of the Franchise Agreement. Plaintiffs also seek
unspecified amounts of compensatory damages, lost profits, lost future profits,
lost goodwill, costs and attorneys' fees. The Company disputes these claims and
will vigorously defend its rights under the Franchise Agreement. The Company
believes that the disposition of this matter will not have a material effect on
the financial position of the Company.
- --------------------------------------------------------------------------------
NOTE 16. FINANCIAL INSTRUMENTS
The following methods and assumptions are used in estimating the fair value
of Roto-Rooter's financial instruments:
For cash and cash equivalents, demand deposits with Chemed Corporation,
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 long-term debt, fair value is calculated by discounting the future cash
outlays associated with each debt instrument using interest rates currently
available to Roto-Rooter for debt issues with similar terms and remaining
maturities.
The estimated fair values of the Company's financial instruments are as
follows (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, December 31,
1995 1994
--------------------- --------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Demand Deposits
with Chemed $12,974 $12,974 $ 9,037 $ 9,037
Statutory Deposits 18,943 18,943 14,408 14,408
Long-Term Debt,
Including Current Portion 1,002 1,058 890 859
Long-Term Debt
with Chemed 8,424 8,534 8,424 8,444
Acquisition Performance
Payment Included in
Other Noncurrent Liabilities -- -- 3,448 3,409
Acquisition Performance
Payment Included in
Other Current
Liabilities 3,679 3,690 -- --
</TABLE>
================================================================================
UNAUDITED QUARTERLY FINANCIAL DATA
Following is a summary of the Company's quarterly results of operations for
1995 and 1994 (amounts in thousands except per share data):
<TABLE>
<CAPTION>
1995 First Quarter Second Quarter Third Quarter Fourth Quarter Total Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Operating Revenues $43,727 $43,271 $45,280 $47,444 $179,722
======= ======= ======= ======= ========
Gross Profit $17,081 $16,923 $17,861 $19,079 $ 70,944
======= ======= ======= ======= ========
Net Income $ 2,251 $ 2,225 $ 2,280 $ 2,921 $ 9,677
======= ======= ======= ======= ========
Earnings Per Common Share $ 0.44 $ 0.44 $ 0.45 $ 0.57 $ 1.90
======= ======= ======= ======= ========
Average Number of Shares Outstanding 5,081 5,088 5,106 5,130 5,101
======= ======= ======= ======= ========
- -------------------------------------------------------------------------------------------------------------
1994
- -------------------------------------------------------------------------------------------------------------
Total Operating Revenues $41,536 $41,900 $43,057 $45,437 $171,930
======= ======= ======= ======= ========
Gross Profit $15,590 $15,574 $16,686 $17,969 $ 65,819
======= ======= ======= ======= ========
Net Income $ 1,849 $ 1,906 $ 2,329 $ 2,687 $ 8,771
======= ======= ======= ======= ========
Earnings Per Common Share $ .37 $ .38 $ .46 $ .53 $ 1.73
======= ======= ======= ======= ========
Average Number of Shares Outstanding 5,055 5,068 5,069 5,071 5,066
======= ======= ======= ======= ========
</TABLE>
18
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The following table summarizes key items from the Consolidated Statement of
Income.
<TABLE>
<CAPTION>
Percentage of
Total Operating Revenues
----------------------------------
Year Ended December 31,
----------------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Total Operating Revenues 100.0% 100.0% 100.0%
Total Costs and Expenses Before
Nonrecurring Charges 90.8 90.7 89.5
Nonrecurring Charges 0.3 -- --
----- ----- -----
Total Costs and Expenses 91.1 90.7 89.5
----- ----- -----
Income from Operations 8.9 9.3 10.5
Interest Expense (0.5) (0.5) (0.3)
Other Income -- Net 1.0 0.3 0.3
----- ----- -----
Pretax Income 9.4 9.1 10.5
Income Taxes 4.0 3.9 4.4
Minority Interest -- 0.1 0.3
----- ----- -----
Net Income 5.4% 5.1% 5.8%
===== ===== =====
</TABLE>
1995 VS. 1994
In 1995, the Company's total operating revenues increased to $179,722,000 or
4.5% over 1994 revenues. Excluding Encore Maintenance and Management ("M&M")( a
business which was sold effective March 31, 1995), Roto-Rooter's total operating
revenues for 1995 were $178,963,000, or 8.0% above comparable revenues of
$165,643,000 in 1994. The increase in operating revenues, excluding M&M, in 1995
was primarily due to higher sewer and drain cleaning and plumbing revenues.
Sewer and drain cleaning revenues increased to $58,149,000, or 10.1% above the
$52,793,000 reported in 1994. Plumbing revenues grew to $43,209,000 in 1995,
$6,161,000 or 16.6% above comparable 1994 revenues. Service contract revenues
were $50,241,000 in 1995 or 0.3% above comparable revenues reported in 1994.
Roto-Rooter's operating profit margin decreased from 9.3% for the year ended
December 31, 1994, to 8.9% for the year ended December 31, 1995 primarily as a
result of two items. First, during 1995, Roto-Rooter incurred expenses of
$538,000 pretax ($355,000 and 7 cents-per-share aftertax) related to legal,
investment banking and other expenses as a result of discussions with
Roto-Rooter's 58% majority stockholder, Chemed Corporation ("Chemed"), regarding
Chemed's potential acquisition of the minority shares of Roto-Rooter. The
discussions were terminated in August 1995. These nonrecurring expenses
accounted for 0.3 of the 0.4 percentage point decline in margin. In addition,
the company's service contract business experienced a higher-than-expected
increase in service calls completed per contract in 1995 which resulted in a
decline in margin on its service contract revenues. The company is working to
stabilize the number of jobs completed per contract by improving the first-time
fix rate and by solving more problems over the phone by educating customers
about how to solve simple problems.
Cash reserves (made up of cash and cash equivalents, demand deposits with
Chemed and statutory deposits) totaled $34,267,000 at December 31, 1995, a
$9,885,000 or 40.5% increase above the balance of $24,382,000 at December 31,
1994. The Company's Other Income -- Net increased from 0.3 percent of operating
revenues in 1994 to 1.0 percent of operating revenues in 1995, primarily as a
result of the higher interest-earning cash reserves. Due to the increase in
Other Income -- Net, the Company's pretax margin increased from 9.1% in 1994 to
9.4% in 1995.
Roto-Rooter's effective income tax rate declined from 42.7% of pretax profit
in 1994 to 42.0% of pretax profit in 1995 due primarily to lower amortization of
nondeductible intangibles in 1995.
Net income increased from $8,771,000 in 1994 to $9,677,000 in 1995, an
increase of 10.3%. Earnings, excluding the nonrecurring charges, increased to
$10,032,000, or 14.4% above 1994. The increase in net income primarily resulted
from higher sewer and drain cleaning and plumbing sales and higher interest
earned on the Company's growing cash reserves.
Earnings per share increased 9.8% from $1.73 in 1994 to $1.90 in 1995.
Earnings per share, before nonrecurring expenses, increased to $1.97 in 1995, an
increase of 13.9% over comparable earnings per share in 1994. There was no
material change in the average number of shares outstanding in 1995 and 1994.
1994 VS. 1993
In 1994, the Company's total operating revenues increased to $171,930,000 or
26.0% over 1993 revenues. The increase in operating revenues in 1994 was
primarily due to the acquisition of Encore Service Systems, Inc. ("Encore") by
Roto-Rooter's 70%-owned subsidiary, Service America Systems, Inc. ("Service
America," previously Convenient Home Services, Inc.) and excellent sewer and
drain cleaning and plumbing revenue growth.
Excluding businesses acquired on or after January 1, 1993, total operating
revenues for 1994 would have been $131,588,000, or 13.6% above the comparable
revenues of $115,836,000 in 1993. Sewer and drain cleaning revenues increased to
$52,793,000 or 9.1% above the $48,384,000
19
<PAGE> 13
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
reported in 1993. Plumbing revenues grew to $37,048,000 in 1994, or 20.5% above
the comparable 1993 revenues.
Roto-Rooter's operating profit margin decreased from 10.5% for the year ended
December 31, 1993, to 9.3% for the year ended December 31, 1994. There were
several items affecting Roto-Rooter's operating profit margin in 1994 when
compared with 1993.
Favorably affecting Roto-Rooter's operating profit margin was a decline in
insurance costs from 4.4% of total operating revenues in 1993 to 2.9% of total
operating revenues in 1994. Prior to 1993, Roto-Rooter had experienced several
years of rising insurance costs as a percentage of total operating revenues.
Offsetting the lower insurance costs as a percent of total operating revenues
were (1) the Encore acquisition, which as expected, had lower margins than those
margins achieved in the Company's other repair and maintenance businesses, and
(2) higher material and labor costs as a percent of total operating revenues.
The higher material usage costs resulted from higher material usage per
service call in the service contract business, and a changing sales mix to jobs
that have a higher material cost component. The higher material usage per
service call in the service contract business is being addressed in part by
enhancing the training of new service technicians in areas where reduced
materials could be used on service calls. In the service contract business,
material usage costs, as a percent of sales, were lower in the fourth quarter of
1994 as compared with the first nine months of 1994. In 1995, material costs per
service call improved from $14.14 per call in 1994 to $13.59 per call in 1995.
The higher labor costs, as a percent of sales, resulted from expansion of the
service technician manpower in the Company's service contract business faster
than the rate of service contract growth (during the first two quarters of 1994)
and expansion of the plumbing and drain cleaning labor force. In addition, the
Company made investments in labor in key areas of the business which are
important to future growth. These investments were primarily sales and training
related. The Company was successful during the second half of 1994 in bringing
manpower levels in its service contract business in line with its service
contract growth.
The Company's effective income tax rate increased from 41.6% of pretax profit
in 1993 to 42.7% of pretax profit in 1994 due primarily as a result of
nondeductible intangibles amortization resulting from the Encore acquisition and
higher state income taxes.
Net income increased from $7,973,000 in 1993 to $8,771,000 in 1994, an
increase of 10.0%. The increase in net income resulted primarily from excellent
internal sales growth and lower insurance costs as a percent of total operating
revenues.
Earnings per share increased 8.8% from $1.59 in 1993 to $1.73 in 1994. There
was no material change in the average number of shares outstanding in 1994 and
1993.
INFLATION
The Company has generally been able to pass along cost increases to its
customers in the form of price increases. Consequently, inflation has not had,
nor is it expected to have, a material impact on the Company's results of
operations.
LIQUIDITY AND CAPITAL RESOURCES
During 1995, as noted on the Consolidated Statement of Cash Flows, the
Company generated $14,598,000 of cash from operating activities. This amount was
well in excess of the amounts needed to finance capital expenditures and
dividends of $5,544,000 and $3,286,000, respectively. After these uses, the
Company still had $5,768,000 of cash available for business acquisitions and
other uses.
At December 31, 1995, the Company's current ratio was 1:1. This represented
an improvement from the .93:1 current ratio at December 31, 1994 and resulted
from higher earnings and cash generated from operations. The Company's total
debt, as a percentage of its stockholders' equity, has improved from 13.7% at
December 31, 1994 to 12.7% at December 31, 1995.
The following table illustrates Roto-Rooter's continuing ability to generate
cash from operations to finance its operating requirements (amounts in
thousands):
<TABLE>
<CAPTION>
December 31,
----------------------------------------
Total
1993-1995 1995 1994 1993
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Cash Provided
by Operating
Activities $ 39,627 $14,598 $12,506 $12,523
Cash Used for:
Capital
Expenditures (18,643) (5,544) (6,214) (6,885)
Dividends (8,891) (3,286) (2,939) (2,666)
-------- ------- ------- -------
Cash Available
for Business
Acquisitions
and Other Uses $12,093 $ 5,768 $ 3,353 $ 2,972
======== ======= ======= =======
</TABLE>
20
<PAGE> 14
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
For the three years ended December 31, 1995, the Company made net cash
payments in the amounts of $2,043,000, $1,132,000 and $14,731,000,
respectively, for business acquisitions. During the three-year period ended
December 31, 1995, the total cash generated and available for business
acquisitions and other uses of $12,093,000 was exceeded by the cash used for
business acquisitions of $17,906,000 by $5,813,000. The excess of cash used for
business acquisitions over the amount of total cash generated and available for
business acquisitions and other uses was funded by cash and cash equivalents on
hand, demand deposits with Chemed Corporation and long-term debt with Chemed.
The Company believes it can adequately meet its capital requirements for the
continuation of the growth of its present operations from its current cash
position, demand deposits with Chemed, working capital generated by operations,
and borrowings from Chemed and other parties. Currently, the Company has not
established independent banking relationships. Management believes, however,
that the Company would be able to obtain independent bank credit should the need
arise. Also, management believes the public securities market would provide an
additional source of financing.
Stockholders' equity at December 31, 1995, was $74,986,000 as compared with
$67,747,000 at December 31, 1994, an increase of $7,239,000. The Company has no
long-term commitments which would have a significant effect on its consolidated
financial condition or the results of its operations.
In November 1987, the Company's Board of Directors approved a program to
repurchase shares of Roto-Rooter Common Stock. At December 31, 1995, the Company
had authority from the Board of Directors to spend up to $2,258,000 for the
purchase of shares of Roto-Rooter Common Stock, subject to certain price and
other restrictions.
Under certain loan agreements and guarantees that Chemed had in place at
December 31, 1995, Chemed and Roto-Rooter, as a subsidiary of Chemed, are
subject to certain financial restrictions. Because of Chemed's control of
Roto-Rooter, these restrictions could limit Roto-Rooter's ability to incur debt
and to create liens on its properties. As of December 31, 1995, Chemed was
permitted to incur additional debt of $99,147,000, of which, secured debt or
debt of subsidiaries could not be more than $37,752,000. Because of
Roto-Rooter's expectations with respect to its future financial needs, it is not
anticipated that these restrictions will have a material effect on the Company.
REPORTING ON STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued
FASB Statement No. 123 ("FAS No. 123"), "Accounting for Stock-Based
Compensation," which allows for a choice of accounting methods for transactions
that are within the scope of Accounting Principles Board Opinion No. 25 ("APB
No. 25") "Accounting for Stock Issued to Employees." Roto-Rooter does not plan
to adopt the fair value based method for accounting for stock options or similar
equity instruments as described in FAS No. 123, but will provide the pro forma
disclosures required by FAS No. 123 effective for fiscal years beginning after
December 15, 1995.
Because the Company does not issue stock options to non-employees and as a
result of the Company's election to continue to account for issuance of stock
options under APB No. 25, it is expected that the provisions of FAS No. 123 will
not have a material impact on the Company's results of operations or financial
position.
21
<PAGE> 15
SELECTED FINANCIAL DATA
(amounts in thousands except per share data, number of employees, ratios and
percentages)
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Operating Revenues $ 179,722 $ 171,930 $ 136,428 $ 104,688 $ 84,774 $ 75,230
========= ========= ========= ========= ========= =========
Depreciation and Amortization $ 7,646 $ 7,227 $ 5,169 $ 3,831 $ 3,131 $ 2,811
========= ========= ========= ========= ========= =========
Income before Cumulative Effect of
Changes in Accounting Principles $ 9,677(a) $ 8,771 $ 7,973 $ 6,625 $ 5,880 $ 5,705
========= ========= ========= ========= ========= =========
Net Income $ 9,677(a) $ 8,771 $ 7,973 $ 6,625 $ 5,880 $ 5,705
========= ========= ========= ========= ========= =========
Earnings Per Common Share before
Cumulative Effect of Changes in Accounting
Principles $ 1.90(a) $ 1.73 $ 1.59 $ 1.33 $ 1.18 $ 1.15
========= ========= ========= ========= ========= =========
Earnings Per Common Share $ 1.90(a) $ 1.73 $ 1.59 $ 1.33 $ 1.18 $ 1.15
========= ========= ========= ========= ========= =========
Average Number of Shares Outstanding 5,101 5,066 5,027 4,994 4,974 4,957
========= ========= ========= ========= ========= =========
Cash Dividends Per Common Share $ 0.64 $ 0.58 $ 0.53 $ 0.48 $ 0.45 $ 0.42
========= ========= ========= ========= ========= =========
BALANCE SHEET DATA:
Cash, Demand Deposits with Chemed
and Statutory Deposits $ 34,267 $ 24,382 $ 19,690 $ 22,501 $ 13,103 $ 15,960
Working Capital (116) (3,274) (10,544) 4,243 364 13,821
Intangible Assets -- Net 65,515 65,204 62,299 40,911 41,111 21,208
Total Assets 149,869 137,383 128,957 93,522 83,345 60,545
Long-Term Debt 9,384 9,102 8,843 4,782 4,347 488
Stockholders' Equity 74,986 67,747 61,510 55,840 51,030 46,954
OTHER FINANCIAL INFORMATION:
Cash Provided by Operating Activities $ 14,598 $ 12,506 $ 12,523 $ 15,052 $ 11,482 $ 10,641
Cash Provided by Operating Activities
Per Dollar of Net Income $ 1.51 $ 1.43 $ 1.57 $ 2.27 $ 1.95 $ 1.87
Capital Expenditures 5,544 6,214 6,885 3,698 3,533 3,623
Current Ratio 1.00 0.93 0.79 1.15 1.02 2.32
Total Debt $ 9,546 $ 9,314 $ 9,016 $ 5,081 $ 4,476 $ 679
Total Debt to Equity Ratio 12.7% 13.7% 14.7% 9.1% 8.8% 1.4%
Book Value Per Share $ 14.60 $ 13.36 $ 12.24 $ 11.18 $ 10.26 $ 9.47
Effective Tax Rate 42.0% 42.7% 41.6% 41.7% 37.8% 37.9%
Return on Average Equity 13.6% 13.6% 13.6% 12.4% 12.0% 12.6%
Dividend Payout Ratio 34.0% 33.5% 33.4% 36.2% 38.2% 36.5%
Number of Employees 2,599 2,478 2,260 1,722 1,589 1,286
</TABLE>
(a) Net income includes $355,000 aftertax and earnings per share includes seven
cents per share aftertax loss resulting from nonrecurring charges related
to Chemed's attempted acquisition of the minority shares in Roto-Rooter.
(b) Net income includes $282,000 aftertax and earnings per share includes six
cents per share aftertax gain resulting from two changes in accounting
principles effective January 1, 1988.
22
<PAGE> 16
<TABLE>
<CAPTION>
1989 1988 1987 1986
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Operating Revenues $ 66,842 $ 62,255 $ 55,233 $ 45,292
========= ========= ========= =========
Depreciation and Amortization $ 2,448 $ 2,314 $ 2,135 $ 1,765
========= ========= ========= =========
Income before Cumulative Effect of
Changes in Accounting Principles $ 5,623 $ 5,504 $ 4,516 $ 3,594
========= ========= ========= =========
Net Income $ 5,623 $ 5,786(b) $ 4,516 $ 3,594
========= ========= ========= =========
Earnings Per Common Share before
Cumulative Effect of Changes in Accounting
Principles $ 1.14 $ 1.13 $ 0.93 $ 0.74
========= ========= ========= =========
Earnings Per Common Share $ 1.14 $ 1.19(b) $ 0.93 $ 0.74
========= ========= ========= =========
Average Number of Shares Outstanding 4,953 4,867 4,869 4,848
========= ========= ========= =========
Cash Dividends Per Common Share $ 0.36 $ 0.29 $ 0.23 $ 0.19
========= ========= ========= =========
BALANCE SHEET DATA:
Cash, Demand Deposits with Chemed
and Statutory Deposits $ 12,395 $ 11,050 $ 6,037 $ 5,978
Working Capital 12,074 10,192 6,989 5,233
Intangible Assets -- Net 21,266 17,930 17,406 17,921
Total Assets 54,279 48,848 42,619 39,238
Long-Term Debt 207 162 233 307
Stockholders' Equity 43,389 38,808 33,766 30,827
OTHER FINANCIAL INFORMATION:
Cash Provided by Operating Activities $ 9,259 $ 10,520 $ 6,083 $ 5,526
Cash Provided by Operating Activities
Per Dollar of Net Income $ 1.65 $ 1.82 $ 1.35 $ 1.54
Capital Expenditures 2,650 3,086 3,658 3,854
Current Ratio 2.67 2.35 2.12 1.92
Total Debt $ 518 $ 407 $ 496 $ 373
Total Debt to Equity Ratio 1.2% 1.0% 1.5% 1.2%
Book Value Per Share $ 8.75 $ 7.90 $ 6.96 $ 6.34
Effective Tax Rate 37.1% 38.1% 43.2% 49.8%
Return on Average Equity 13.7% 15.9% 14.0% 12.3%
Dividend Payout Ratio 31.7% 24.4% 24.8% 25.6%
Number of Employees 1,212 1,070 986 853
</TABLE>
(a) Net income includes $355,000 aftertax and earnings per share includes seven
cents per share aftertax loss resulting from nonrecurring charges related
to Chemed's attempted acquisition of the minority shares in Roto-Rooter.
(b) Net income includes $282,000 aftertax and earnings per share includes six
cents per share aftertax gain resulting from two changes in accounting
principles effective January 1, 1988.
23
<PAGE> 17
OFFICERS AND DIRECTORS
OFFICERS
- --------------------------------------------------------------------------------
EDWARD L. HUTTON
Chairman
KEVIN J. MCNAMARA
Vice Chairman
WILLIAM R. GRIFFIN
President and Chief Executive Officer
DOUGLAS B. HARPER
Executive Vice President; President of
Roto-Rooter Corporation, a subsidiary
LAWRENCE J. GILLIS
Vice President; President of
Roto-Rooter Services Company, a subsidiary
PATRICK L. JOHNSON
Vice President; President of
Service America Systems, Inc., a subsidiary
BRIAN A. BRUMM
Vice President, Treasurer and Chief Financial Officer
NAOMI C. DALLOB
Secretary and General Counsel
MARK W. STEPHENS
Assistant Treasurer
DIRECTORS
- --------------------------------------------------------------------------------
EDWARD L. HUTTON
Chairman of Roto-Rooter, Inc.; Chairman and Chief
Executive Officer of Chemed Corporation
WILLIAM R. GRIFFIN
President and Chief Executive Officer of Roto-Rooter, Inc.;
Executive Vice President of Chemed Corporation
BRIAN A. BRUMM
Vice President, Treasurer and Chief Financial Officer of
Roto-Rooter, Inc.
JAMES A. CUNNINGHAM
Senior Chemical Advisor
Schroder Wertheim, Inc.
NAOMI C. DALLOB
Secretary and General Counsel of Roto-Rooter, Inc.;
Vice President and Secretary of Chemed Corporation
CHARLES H. ERHART, JR.
Former President of W.R. Grace & Co. (Retired)
NEAL GILLIATT
President of Neal Gilliatt/Stuart Watson, Inc.
LAWRENCE J. GILLIS
Vice President of Roto-Rooter, Inc.; President of
Roto-Rooter Services Company, a subsidiary
DOUGLAS B. HARPER
Executive Vice President of Roto-Rooter, Inc.;
President of Roto-Rooter Corporation, a subsidiary
WILL J. HOEKMAN
Executive Vice President of Firstar Bank (Des Moines, Iowa)
THOMAS C. HUTTON
Vice President of Chemed Corporation
PATRICK L. JOHNSON
Vice President of Roto-Rooter, Inc.;
President of Service America Systems, Inc., a subsidiary
SANDRA E. LANEY
Senior Vice President and Chief Administrative
Officer of Chemed Corporation
KEVIN J. MCNAMARA
Vice Chairman of Roto-Rooter, Inc.; President of Chemed Corporation
TIMOTHY S. O'TOOLE
Executive Vice President and Treasurer of Chemed Corporation
D. WALTER ROBBINS, JR.
Consultant
JEROME E. SCHNEE
Professor of Management at the University of Cincinnati,
College of Business Administration
24
<PAGE> 18
STOCKHOLDER INFORMATION
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------
CORPORATE HEADQUARTERS
2500 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202
(513) 762-6690
- --------------------------------------------------------------------------------
TRANSFER AGENT AND REGISTRAR
Chemical Mellon Shareholder Services LLC
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
(800) 756-3353
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
Cincinnati, OH 45202
- --------------------------------------------------------------------------------
FORM 10-K
Additional information about Roto-Rooter, Inc. is available in its Annual Report
on Form 10-K. Copies will be furnished without charge by writing to Investor
Relations, Roto-Rooter, Inc., 2500 Chemed Center, 255 East Fifth Street,
Cincinnati, OH 45202.
- --------------------------------------------------------------------------------
ANNUAL MEETING
The Annual Meeting of Stockholders of Roto-Rooter, Inc. will be held on Monday,
May 20, 1996 at 11:30 a.m. in the Grand Ballroom of The Phoenix Club, 812 Race
Street, Cincinnati, Ohio.
- --------------------------------------------------------------------------------
NUMBER OF STOCKHOLDERS
The approximate number of Roto-Rooter, Inc. stockholders of record was 202 on
December 31, 1995 and 209 on December 31, 1994. These figures do not include
stockholders with shares held under beneficial ownership in nominee name or
within clearinghouse positions of brokerage firms and banks.
- --------------------------------------------------------------------------------
MARKET FOR COMMON STOCK
The Company's common stock is included in the NASDAQ National Market System and
is traded under the symbol "ROTO."
- --------------------------------------------------------------------------------
COMMON STOCK AND DIVIDEND DATA
The following table sets forth the high/low closing market prices for
Roto-Rooter Common Stock for 1995 and 1994. Also shown are dividends per share
paid by quarter during these years.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Closing
--------------------- Dividends
1995 High Low Paid
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
First Quarter $28 $19-1/2 $.15
Second Quarter 28-1/2 24-1/2 .15
Third Quarter 37 28 .17
Fourth Quarter 37-3/4 30-1/2 .17
- ------------------------------------------------------------------------------
1994
- ------------------------------------------------------------------------------
First Quarter $32 $28 $.14
Second Quarter 32 24 .14
Third Quarter 26-1/2 22-1/2 .15
Fourth Quarter 25-3/4 19-1/2 .15
</TABLE>
[RECYCLE LOGO] Printed on recycled paper
25
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF ROTO-ROOTER, INC.
The following is a list of subsidiaries of the Company as of
December 31, 1995. Each of the companies is incorporated under the laws of the
jurisdiction under which it is listed and, in the case of each United States
company, under the laws of the state following its name. The percentage given
for each company represents the percentage of voting securities of such company
owned by the Company or, where indicated, subsidiaries of the Company as at
December 31, 1995.
All of the companies listed below are included in the
consolidated financial statements as of December 31, 1995.
Amira Services, Inc. (Florida, 100% by Service America Systems, Inc.)
Encore Service Systems, Inc. (Florida, 100% by Service America Systems, Inc.)
Nurotoco of Massachusetts, Inc. (Massachusetts, 100% by Roto-Rooter Services
Company)
Nurotoco of New Jersey, Inc. (Delaware, 80% by Roto-Rooter Services Company)
OnCall Craftsmen, Inc. (Ohio, 100% by Roto-Rooter Services Company)
Roto-Rooter Canada, Ltd. (British Columbia, 100% by Roto-Rooter Services
Company)
Roto-Rooter Corporation (Iowa, 100% by Roto-Rooter, Inc.)
Roto-Rooter Development Company (Delaware, 100% by Roto-Rooter 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)
Service America Systems, Inc. (Florida, 70% by Roto-Rooter, Inc. and 30% by
Chemed)
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-20285) and
in the Registration Statements on Form S-8 (Nos. 33-1795, 33-20285, 33-46179,
33-65246 and 33-64747) of Roto-Rooter, Inc. of our report dated February 1, 1996
appearing on page 9 of the 1995 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page S-2 of this Form 10-K.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
March 28, 1996
<PAGE> 1
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 6, 1996
/s/ James A. Cunningham
--------------------------
James A. Cunningham
<PAGE> 2
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 7, 1996
/s/ Charles H. Erhart, Jr.
--------------------------
Charles H. Erhart, Jr.
<PAGE> 3
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 19, 1996
/s/ Neal Gilliatt
--------------------------
Neal Gilliatt
<PAGE> 4
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1996
/s/ Lawrence J. Gillis
--------------------------
Lawrence J. Gillis
<PAGE> 5
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1996
/s/ Douglas B. Harper
--------------------------
Douglas B. Harper
<PAGE> 6
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 11, 1996
/s/ Will J. Hoekman
--------------------------
Will J. Hoekman
<PAGE> 7
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 15, 1996
/s/ Thomas C. Hutton
--------------------------
Thomas C. Hutton
<PAGE> 8
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 6, 1996
/s/ Patrick L. Johnson
--------------------------
Patrick L. Johnson
<PAGE> 9
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 6, 1996
/s/ Sandra E. Laney
--------------------------
Sandra E. Laney
<PAGE> 10
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 18, 1996
/s/ Kevin J. McNamara
--------------------------
Kevin J. McNamara
<PAGE> 11
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 12, 1996
/s/ Timothy S. O'Toole
--------------------------
Timothy S. O'Toole
<PAGE> 12
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 6, 1996
/s/ D. Walter Robbins, Jr.
--------------------------
D. Walter Robbins, Jr.
<PAGE> 13
POWER OF ATTORNEY
The undersigned director of ROTO-ROOTER, INC. ("Company")
hereby appoints EDWARD L. HUTTON, WILLIAM R. GRIFFIN and NAOMI C. DALLOB as his
true and lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and all
amendments thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to act without the
other.
Dated: March 9, 1996
/s/ Jerome E. Schnee
--------------------------
Jerome E. Schnee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995 FOR 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> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 15,324
<SECURITIES> 0
<RECEIVABLES> 7,666
<ALLOWANCES> 1,050
<INVENTORY> 7,823
<CURRENT-ASSETS> 54,615
<PP&E> 43,742
<DEPRECIATION> 18,621
<TOTAL-ASSETS> 149,869
<CURRENT-LIABILITIES> 54,731
<BONDS> 0
0
0
<COMMON> 5,413
<OTHER-SE> 69,573
<TOTAL-LIABILITY-AND-EQUITY> 149,869
<SALES> 0
<TOTAL-REVENUES> 179,722
<CGS> 0
<TOTAL-COSTS> 108,778
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 672
<INTEREST-EXPENSE> 984
<INCOME-PRETAX> 16,837
<INCOME-TAX> 7,074
<INCOME-CONTINUING> 9,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,677
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 1.87
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 FOR ROTO-ROOTER, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000755548
<NAME> ROTO-ROOTER, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 9,974
<SECURITIES> 0
<RECEIVABLES> 7,477
<ALLOWANCES> 884
<INVENTORY> 7,163
<CURRENT-ASSETS> 43,691
<PP&E> 39,851
<DEPRECIATION> 14,638
<TOTAL-ASSETS> 137,383
<CURRENT-LIABILITIES> 46,965
<BONDS> 0
0
0
<COMMON> 5,276
<OTHER-SE> 62,471
<TOTAL-LIABILITY-AND-EQUITY> 137,383
<SALES> 0
<TOTAL-REVENUES> 171,930
<CGS> 0
<TOTAL-COSTS> 106,111
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 610
<INTEREST-EXPENSE> 839
<INCOME-PRETAX> 15,729
<INCOME-TAX> 6,714
<INCOME-CONTINUING> 8,771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,771
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.72
</TABLE>
