Roto-Rooter Inc. Reports Third-Quarter Earnings of $.32 per Share
CINCINNATI--(BUSINESS WIRE)--Oct. 16, 2003--Roto-Rooter Inc. (NYSE:RRR) (OTCBB:CHEQP) today reported net income of $.32 per share for the third quarter, ended September 30, 2003, as compared with net income of $.72 per share in the 2002 third quarter. Net income in the year-ago third quarter included $.40 per share from discontinued operations.
Service revenues and sales from continuing operations for the 2003 third quarter were $75.2 million as compared with $75.3 million in the 2002 third quarter. Revenues of Roto-Rooter's Plumbing and Drain Service segment grew 5.2% to $63.3 million as compared with $60.2 million in the same prior-year quarter.
For the third quarter, Roto-Rooter's net cash provided by operating activities--that is, cash provided by operations before capital expenditures and other investing and financing activities--totaled $5.5 million in 2003 versus $10.7 million in 2002 which included $2.2 million from discontinued operations.
Year to date, for the nine months ended September 30, 2003, Roto-Rooter's net income was $.86 per share as compared with $1.66 per share in the same prior-year period. Net income for year-to-date 2003 included capital gains on the sales of investments of $.34 per share and severance charges of $.24 per share. Net income for the comparable 2002 period included income from discontinued operations of $.60 per share and capital gains on the sales of investments of $.08 per share.
Service revenues and sales from continuing operations for year-to-date 2003 totaled $230.1 million versus $235.3 million in 2002. Net cash provided by operating activities for the first nine months of 2003 amounted to $17.0 million versus $29.2 million for the comparable 2002 period which included $5.3 million from discontinued operations.
Commenting on the company's operations, Roto-Rooter President and Chief Executive Officer Kevin J. McNamara said, "We're encouraged by the 5% growth in revenues at the Plumbing and Drain Service segment in the 2003 third quarter versus the 2002 third quarter. In addition, within that segment, revenues from Roto-Rooter's franchising activities and product and equipment sales increased by 14% to $2.0 million in the 2003 third quarter. Also, in early October, Roto-Rooter completed the acquisition of the New Orleans franchise, which serves areas with a population of 1.1 million.
"Net income from the Plumbing and Drain Service segment totaled $1.9 million in the 2003 third quarter, 19% below the year-ago third quarter's net income of $2.4 million. Insurance and legal costs, along with investments in marketing and training, continue to negatively impact margins.
"Service America, our appliance and heating/air-conditioning repair segment, recorded net income of $51,000 in the 2003 third quarter compared with $166,000 in the 2002 third quarter. Revenues at Service America totaled $11.8 million, 22% below the year-ago third quarter. Nonetheless, through the nine months ended September 30, 2003, Service America has generated $2.9 million in net cash flow for the company."
Commenting on the company's financial activities, Mr. McNamara said, "Corporate Investing and Financing activities generated $1.3 million of income in the 2003 third quarter as compared with $642,000 in the prior-year third quarter. Of the $1.3 million, the redemption of our Vitas Healthcare Corporation preferred stock generated an aftertax capital gain of $1.2 million in August. The subsequent loss of Vitas' dividend payment accounted for a $301,000 decline in dividend income for the third quarter of 2003. Interest income also declined substantially when compared with the 2002 third quarter during which the company received an aftertax interest refund of $530,000 related to a tax refund on our 1997 sale of The Omnia Group."
Continuing, Mr. McNamara said, "Importantly, in October, Roto-Rooter exercised a portion of its Vitas warrants, acquiring 4,158,000 shares of Vitas common stock at a cost of $18 million. Roto-Rooter's holdings in Vitas represent approximately 37% of Vitas' outstanding common stock. On this basis, Roto-Rooter anticipates recording equity earnings from Vitas beginning in the 2003 fourth quarter. On a full-year basis, we expect the equity income from the Vitas earnings to exceed the dividend income Roto-Rooter historically recorded from the Vitas preferred stock.
"Roto-Rooter continues to hold a warrant for an additional 1,636,000 shares of Vitas common stock at a total price of $9 million. Assuming Roto-Rooter would exercise this remaining warrant, our total investment in the common shares of Vitas would represent approximately 45% of Vitas' outstanding shares."
Concluding, Mr. McNamara said, "Vitas Healthcare is the leading provider of hospice services in the United States with revenues exceeding $359 million for its most recently completed fiscal year, ended September 30, 2002. Roto-Rooter has held its investment in Vitas since 1991 and expects that Vitas will provide substantial future growth."
Reflecting its confidence in Roto-Rooter's solid financial position and future earnings potential, in August, the Board of Directors declared a quarterly dividend of $.12 per share, which was paid in September. This represented Roto-Rooter's 129th consecutive quarterly dividend.
Roto-Rooter Inc. (www.RotoRooter.com), headquartered in Cincinnati, is a New York Stock Exchange-listed corporation operating in the residential and commercial repair-and-maintenance-service industry through two wholly owned subsidiaries. Roto-Rooter is North America's largest provider of plumbing and drain cleaning services. Service America Network Inc. provides major-appliance and heating/air-conditioning repair, maintenance, and replacement services.
Statements in this press release or in other Roto-Rooter communications may relate to future events or Roto-Rooter's future performance. Such statements are forward-looking statements and are based on present information Roto-Rooter has related to its existing business circumstances. Investors are cautioned that such forward-looking statements are subject to inherent risk that actual results may differ materially from such forward-looking statements. Further, investors are cautioned that Roto-Rooter does not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations.
ROTO-ROOTER, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------------
2003 2002 2003 2002
------- ------- -------- --------
Continuing Operations
Service revenues
and sales $75,172 $75,322 $230,088 $235,257
------- ------- -------- --------
Cost of services
provided and
goods sold 44,215 44,314 135,978 139,446
General and
administrative
expenses 14,138 11,537 45,194(c) 36,699
Selling and marketing
expenses 11,003 10,304 33,420 33,085
Depreciation 2,983 3,424 9,025 10,402
------- ------- -------- --------
Total costs
and expenses 72,339 69,579 223,617 219,632
------- ------- -------- --------
Income from
operations 2,833 5,743 6,471 15,625
Interest expense (487) (709) (1,625) (2,245)
Distributions on
preferred securities (268) (268) (804) (809)
Other income--net 3,048(a) 268(b) 9,765(d) 3,810(e)
------- ------- -------- --------
Income before
income taxes 5,126(a) 5,034(b) 13,807(c,d) 16,381(e)
Income taxes (1,910) (1,856) (5,246) (5,953)
------- ------- -------- --------
Income from
continuing
operations 3,216(a) 3,178(b) 8,561(c,d) 10,428(e)
Discontinued
Operations - 3,929 - 5,920
------- ------- -------- --------
Net Income $ 3,216(a) $ 7,107(b) $ 8,561(c,d) $ 16,348(e)
======= ======= ======== ========
Earnings Per Share
Income from
continuing
operations $ 0.32(a) $ 0.32(b) $ 0.86(c,d) $ 1.06(e)
======= ======= ======== ========
Net income $ 0.32(a) $ 0.72(b) $ 0.86(c,d) $ 1.66(e)
======= ======= ======== ========
Average number of
shares outstanding 9,941 9,861 9,913 9,854
======= ======= ======== ========
Diluted Earnings
Per Share
Income from
continuing
operations $ 0.32(a) $ 0.32(b) $ 0.86(c,d) $ 1.06(e)
======= ======= ======== ========
Net income $ 0.32(a) $ 0.72(b) $ 0.86(c,d) $ 1.65(e)
======= ======= ======== ========
Average number of
shares outstanding 9,988 9,867 9,940 9,882
======= ======= ======== ========
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(a) Amounts for the third quarter of 2003 include a pretax gain of
$1,846,000 ($1,200,000 aftertax or $.12 per share) from the
redemption of the Company's investment in Vitas Healthcare
Corporation ("Vitas") preferred stock and pretax dividend income
from Vitas preferred stock of $371,000 ($328,000 aftertax or $.03
per share).
(b) Amounts for the third quarter of 2002 include pretax interest
income of $816,000 ($530,000 aftertax or $.05 per share) from
interest on a federal income tax refund relating to operations
discontinued in 1997 and pretax dividend income from Vitas
preferred stock of $712,000 ($629,000 aftertax or $.06 per share).
(c) Amounts for the first nine months of 2003 include a pretax charge
of $3,627,000 ($2,358,000 aftertax or $.24 per share) from
severance charges incurred in the first quarter of 2003.
(d) Amounts for the first nine months of 2003 include aggregate pretax
gains of $5,390,000 ($3,351,000 aftertax or $.34 per share) from
the redemption of Vitas preferred stock and the sales of
investments and pretax dividend income from Vitas preferred stock
of $1,794,000 ($1,585,000 aftertax or $.16 per share).
(e) Amounts for the first nine months of 2002 include a pretax gain of
$1,141,000 ($775,000 aftertax or $.08 per share) from the sales
of investments, pretax dividend income from Vitas preferred stock
of $2,135,000 ($1,886,000 aftertax or $.19 per share) and pretax
interest income of $816,000 ($530,000 aftertax or $.05 per share)
from interest on a federal income tax refund relating to
operations discontinued in 1997.
ROTO-ROOTER, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
September 30,
------------------
2003 2002(a)
-------- --------
Assets
Current assets
Cash and cash equivalents $ 72,607 $ 15,603
Accounts receivable less allowances 13,310 13,453
Inventories 8,548 10,111
Statutory deposits 9,852 12,304
Current deferred income taxes 7,204 8,442
Current assets of discontinued operations - 36,555
Prepaid expenses and other current assets 14,225 8,256
-------- --------
Total current assets 125,746 104,724
Investments of deferred compensation plans
held in trust 16,832 14,746
Other investments 5,546 36,768
Note receivable 12,500 -
Properties and equipment, at cost less
accumulated depreciation 47,456 49,309
Identifiable intangible assets less
accumulated amortization 2,450 3,042
Goodwill less accumulated amortization 113,437 131,144
Noncurrent assets of discontinued operations - 43,485
Other assets 16,908 13,399
-------- --------
Total Assets $340,875 $396,617
======== ========
Liabilities
Current liabilities
Accounts payable $ 5,033 $ 6,464
Current portion of long-term debt 463 366
Income taxes 7,294 7,465
Deferred contract revenue 16,053 20,390
Accrued insurance 16,844 17,293
Current liabilities of discontinued
operations - 11,071
Other current liabilities 20,347 20,677
-------- --------
Total current liabilities 66,034 83,726
Long-term debt 25,635 50,728
Mandatorily redeemable convertible preferred
securities of the Chemed Capital Trust 14,146 14,186
Deferred compensation liabilities 16,824 14,721
Noncurrent liabilities of discontinued
operations - 2,339
Other liabilities 10,105 9,620
-------- --------
Total Liabilities 132,744 175,320
-------- --------
Stockholders' Equity
Capital stock 13,452 13,461
Paid-in capital 169,406 168,359
Retained earnings 137,790 152,265
Treasury stock, at cost (110,492) (112,562)
Unearned compensation (3,389) (5,087)
Deferred compensation payable in Company stock 2,294 2,266
Notes receivable for shares sold (930) (946)
Accumulated other comprehensive income - 3,541
-------- --------
Total Stockholders' Equity 208,131 221,297
-------- --------
Total Liabilities and
Stockholders' Equity $340,875 $396,617
======== ========
Book Value Per Share $ 21.07 $ 22.59
======== ========
(a) Reclassified to conform to 2003 presentation
CONTACT: Roto-Rooter Inc.
Timothy S. O'Toole, 513-762-6702
SOURCE: Roto-Rooter Inc.