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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1995
Commission File Number 1-8351
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-0791746
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2600 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
(513) 762-6900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Amount Date
Capital Stock 9,868,060 Shares April 28, 1995
$1 Par Value
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Page 1 of 12
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES
Index
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1995 and
December 31, 1994 3
Consolidated Statement of Income -
Three months ended
March 31, 1995 and 1994 4
Consolidated Statement of Cash Flows -
Three months ended
March 31, 1995 and 1994 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 10
PART II. OTHER INFORMATION 11
Page 2 of 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands except share and per share data)
UNAUDITED
March 31, December 31,
1995 1994
---------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 1,552 $ 4,722
Marketable securities 29,540 19,517
Accounts receivable, less allowances of $3,260 (1994 - $2,974) 82,498 81,822
Current portion of note receivable 6,000 5,740
Inventories
Raw materials 7,105 8,086
Finished goods and general merchandise 53,573 52,187
Other current assets 12,255 11,245
---------- ----------
Total current assets 192,523 183,319
Other investments 79,222 85,073
Note receivable 5,455 5,455
Properties and equipment, at cost less accumulated
depreciation of $42,446 (1994 - $40,375) 77,026 77,116
Identifiable intangible assets less accumulated amortization
of $2,185 (1994 - $1,928) 21,004 21,192
Goodwill less accumulated amortization of $18,416 (1994 - $17,346) 114,022 113,417
Other assets 21,736 19,911
---------- ----------
Total Assets $ 510,988 $ 505,483
========== ==========
LIABILITIES
Current liabilities
Accounts payable $ 29,742 $ 31,386
Bank notes and loans payable 25,000 25,000
Current portion of long-term debt 6,575 6,391
Income taxes 19,458 17,233
Deferred contract revenue 23,962 22,630
Other current liabilities 37,268 40,026
---------- ----------
Total current liabilities 142,005 142,666
Deferred income taxes 9,523 7,606
Long-term debt 90,975 92,133
Other liabilities and deferred income 39,311 40,564
Minority interest 37,458 36,194
---------- ----------
Total Liabilities 319,272 319,163
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock-authorized 15,000,000 shares $1 par;
issued 12,414,400 (1994 - 12,369,212) shares 12,414 12,369
Paid-in capital 140,303 138,733
Retained earnings 125,322 123,993
Treasury stock - 2,546,340 (1994 - 2,504,641) shares, at cost (72,626) (71,230)
Unearned compensation - ESOPs (37,208) (38,486)
Unrealized appreciation on investments 23,511 20,941
---------- ----------
Total Stockholders' Equity 191,716 186,320
---------- ----------
Total Liabilities and Stockholders' Equity $ 510,988 $ 505,483
========== ==========
See accompanying notes to unaudited financial statements.
Page 3 of 12
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
(in thousands except per share data)
Three Months Ended
March 31,
-----------------------
1995 1994
--------- ---------
Continuing Operations
Sales $108,598 $ 97,585
Service revenues 61,260 54,484
--------- ---------
Total sales and service revenues 169,858 152,069
--------- ---------
Cost of goods sold 74,607 67,120
Cost of services provided 38,159 34,038
Selling and marketing expenses 25,460 23,307
General and administrative expenses 22,071 19,280
Depreciation 2,865 2,654
--------- ---------
Total costs and expenses 163,162 146,399
--------- ---------
Income from operations 6,696 5,670
Interest expense (2,103) (2,047)
Other income - net 5,649 3,129
--------- ---------
Income before income taxes
and minority interest 10,242 6,752
Income taxes (3,814) (2,680)
Minority interest in earnings of subsidiaries (1,043) (833)
--------- ---------
Income from continuing operations 5,385 3,239
Discontinued Operations 901 2,438
--------- ---------
Net Income $ 6,286 $ 5,677
========= =========
Earnings Per Common Share
Income from continuing operations $ .55 $ .33
========= =========
Net income $ .64 $ .58
========= =========
Average number of shares outstanding 9,863 9,824
========= =========
Cash Dividends Paid Per Share $ .51 $ .51
========= =========
See accompanying notes to unaudited financial statements.
Page 4 of 12
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(in thousands)
Three Months Ended
March 31,
-----------------------
1995 1994*
--------- ---------
Cash Flows From Operating Activities
Net income $ 6,286 $ 5,677
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,346 3,909
Gain on sale of investments (3,732) (1,643)
Minority interest in earnings of subsidiaries 1,043 833
Provision for uncollectible accounts receivable 520 418
Provision for deferred income taxes (451) (78)
Discontinued operations (901) (2,438)
Proceeds from sale of trading securities - 1,041
Purchase of trading securities - (1,000)
Changes in operating assets and liabilities,
excluding amounts acquired in business combinations
Increase in accounts receivable (1,195) (2,686)
(Increase)/decrease in inventories and other
current assets (1,015) 64
Increase/(decrease) in accounts payable,
deferred contract revenue and other
current liabilities (2,988) 2,011
Increase in income taxes 3,142 3,358
Other - net (1,936) (633)
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Net cash provided by operating activities 3,119 8,833
--------- ---------
Cash Flows From Investing Activities
Proceeds from sale of investments 4,933 3,457
Capital expenditures (2,884) (5,025)
Business combinations, net of cash acquired (1,601) (14,822)
Purchase of investments (1,200) (75)
Net Proceeds from sale of discontinued operations (433) 3,295
Other - net 74 130
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Net cash used by investing activities (1,111) (13,040)
--------- ---------
Cash Flows From Financing Activities
Dividends paid (5,032) (5,018)
Purchase of treasury stock (517) -
Issuance of capital stock 40 218
Repayment of long-term debt (35) (3,526)
Proceeds from issuance of long-term debt - 10,000
Other - net 366 751
--------- ---------
Net cash provided/(used) by financing activities (5,178) 2,425
--------- ---------
Decrease In Cash And Cash Equivalents (3,170) (1,782)
Cash and cash equivalents at beginning of period 4,722 14,615
--------- ---------
Cash and cash equivalents at end of period $ 1,552 $ 12,833
========= =========
See accompanying notes to unaudited financial statements.
* Reclassified to conform to 1995 presentation.
Page 5 of 12
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with Rule 10-01 of SEC
Regulation S-X. Consequently, they do not include all the
disclosures required under generally accepted accounting
principles for complete financial statements. However, in
the opinion of the management of Chemed Corporation (the
"Company"), the financial statements presented herein contain
all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial
position, results of operations and cash flows of the Company
and its consolidated subsidiaries ("Chemed"). For further
information regarding Chemed's accounting policies, refer to
the consolidated financial statements and notes included in
Chemed's Annual Report on Form 10-K for the year ended
December 31, 1994.
2. Primary earnings per common share are computed using the
weighted average number of shares of capital stock
outstanding and exclude the dilutive effect of outstanding
stock options as it is not material.
3. Following the resolution of various issues pertaining to the
Company's accruals for income taxes relative to the sale of
DuBois Chemicals Inc. ("DuBois") in 1991, the Company
recorded an adjustment of $1,365,000 ($901,000 net of federal
income taxes) to its state and local income tax provision in
the first quarter of 1995. This adjustment is classified as
"discontinued operations" in the statement of income.
"Discontinued operations" in 1994 includes a $1,817,000
aftertax gain on the sale of a portion of the Company's
investment in Omnicare, Inc. ("Omnicare") and $621,000
aftertax equity earnings in Omnicare. Prior to
December 1994, Chemed had maintained an equity investment in
Omnicare in excess of 20% and, accordingly, had accounted for
its investment using the equity method of accounting.
Page 6 of 12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Financial Condition
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Marketable securities increased from $19,517,000 at
December 31, 1994 to $29,540,000 at March 31, 1995. This
increase is attributable to the reclassification of an investment
in a U.S. Treasury Note, maturing in January 1996, in the amount
of $9,618,000 from noncurrent assets (other investments) to
current assets at March 31, 1995. There were no other material
changes in the balance sheet since December 31, 1994.
At March 31, 1995 Chemed had approximately $34.3
million of unused lines of credit with various banks. Management
believes its liquidity and sources of capital are satisfactory
for the Company's needs in the foreseeable future.
Results of Operations
- ---------------------
Sales and service revenues and operating profit from
continuing operations by business segment follow (in thousands):
Three Months Ended
March 31,
-------------------
1995 1994
------- --------
Sales and Service
Revenues
- -----------------
National Sanitary Supply $ 80,793 $ 71,460
Roto-Rooter 43,727 41,536
Veratex 24,858 23,966
Patient Care 20,480 15,107
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Total $169,858 $152,069
======== ========
Operating Profit
- ----------------
National Sanitary Supply $ 1,983 $ 1,487
Roto-Rooter 3,874 3,526
Veratex 1,451 1,621
Patient Care 856 496
-------- --------
Total $ 8,164 $ 7,130
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Page 7 of 12
Data relating to (a) growth in sales and service revenues and (b)
operating profit as a percent of sales and service revenues for
each segment for the first three months of 1995 and 1994 are set
forth below:
Sales and Operating Profit
Service Revenues as a % of Sales
% Increase (Operating Margin)
---------------- ---------------
1995 vs. 1994 1995 1994
---------------- ---------------
National Sanitary Supply 13% 2.5% 2.1%
Roto-Rooter 5 8.9 8.5
Veratex 4 5.8 6.8
Patient Care 36 4.2 3.3
Total 12 4.8 4.7
================ ===============
Sales of the National Sanitary Supply segment for the
first quarter of 1995 increased by 13% over sales for the first
quarter of 1994 as most locations recorded double-digit sales
gains. These gains were attributable to improved pricing,
especially in paper and plastic product categories; the debut of
a full-line product catalog; the introduction of proprietary
chemicals and equipment; and a stronger economy. In addition,
National Sanitary is investing in new sales and training programs
which are expected to stimulate sales and earnings growth
throughout 1995. As a result of the significant sales growth
during 1995, the operating margin of this segment improved from
2.1% during the first quarter of 1994 to 2.5% during the first
quarter of 1995.
The sales and service revenue for the Roto-Rooter
segment for the first quarter of 1995 totalled $43,727,000, an
increase of 5% over the $41,536,000 recorded in the first quarter
of 1994. Revenues of the drain cleaning business and the
plumbing services business for the first quarter of 1995, which
together account for approximately 56% of this segment's total
revenues, each increased 12% over revenues recorded during the
first quarter of 1994. Revenues of the service contract business
(Service America) for the first quarter of 1995, which account
for approximately one-third of this segment's total revenue,
declined by 6% as compared with revenues recorded in the first
quarter of 1994. This decrease was attributable to declining
sales of Service America's Maintenance and Management subsidiary,
which was sold effective March 31, 1995. The sale of this
marginally profitable business will allow management to focus its
efforts on the core appliance and air conditioning repair and
Page 8 of 12
maintenance business. The operating margin of the Roto-Rooter
segment increased from 8.5% during the first quarter of 1994 to
8.9% during the first quarter of 1995 primarily as a result of
good cost management during the period.
Sales of the Veratex segment increased 4% in the first
quarter of 1995, from $23,966,000 in the prior year to
$24,858,000 in 1995. The operating margin of this segment
declined from 6.8% during the first quarter of 1994 to 5.8%
during the comparable quarter of 1995. This decline is
attributable to a decline in the gross margin of the retail
business, as a result of growing price competition due to
industry market consolidation in the retail segment. The
wholesale market segment of Veratex, on the other hand, benefited
from price increases which have stabilized its margins during the
1995 period.
Total revenues of the Patient Care segment increased
from $15,107,000 in the first quarter of 1994 to $20,480,000 in
the first quarter of 1995. This 36% revenue increase is
primarily attributable to the opening of several new branches in
1994 and the first part of 1995. As a result of the significant
revenue growth, the operating margin of this segment increased
from 3.3% during the first quarter of 1994 to 4.2% during the
1995 quarter.
Income from operations increased from $5,670,000 in the
first three months of 1994 to $6,696,000 during the first three
months of 1995, largely as a result of higher operating margins
in the National Sanitary Supply, Roto-Rooter and Patient Care
segments.
Other income--net increased from $3,129,000 in the
first quarter of 1994 to $5,649,000 in the first quarter of 1995,
primarily as a result of larger investment gains recorded in the
1995 period. During the first quarter of 1995 the Company
recorded gains on the sales of investments aggregating $3,732,000
as compared with $1,643,000 recorded during the first quarter of
1994. Increased interest income, as a result of larger
investments in marketable securities during the 1995 period, also
contributed to the increase in other income--net.
The effective tax rate declined from 39.7% during the
first three months of 1994 to 37.2% during the first three months
of 1995, primarily as a result of lower state and local income
taxes recorded on investment gains in 1995 as compared with those
recorded in 1994.
Income from continuing operations increased from
$3,239,000 aftertax ($.33 per share) in the 1994 quarter to
$5,385,000 aftertax ($.55 per share) in the 1995 quarter largely
as a result of improved operating performance within most of the
Page 9 of 12
Company's segments coupled with larger investment gains in the
1995 quarter. Investment gains during the 1995 quarter totalled
$2,463,000 aftertax ($.25 per share) as compared with $871,000
aftertax ($.09 per share) during the 1994 quarter.
Net income increased from $5,677,000 ($.58 per share)
during the first quarter of 1994 to $6,286,000 ($.64 per share)
during the first quarter of 1995. Discontinued operations for
1994 included $621,000 equity in the earnings of Omnicare, Inc.
("Omnicare"), which was discontinued in the fourth quarter of
1994 and a $1,817,000 aftertax gain on the sale on a portion of
the Company's investment in Omnicare. Discontinued operations
for 1995 included a $901,000 aftertax adjustment to the tax
provision on the gain on the sale of the operations discontinued
in 1991.
Page 10 of 12
PART II -- OTHER INFORMATION
----------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Exhibit SK 601 Page
No. Ref. No. Description No.
------- -------- ------------------ ----------
1 (11) Statement re:
Computation of Per
Share Earnings E-1
2 (27) Financial Data
Schedule E-2
(b) Reports on Form 8-K - None
--------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
Chemed Corporation
-------------------------
(Registrant)
Dated: May 10, 1995 By Naomi C. Dallob
---------------------- -------------------------
Naomi C. Dallob, Vice
President and Secretary
Dated: May 10, 1995 By Arthur V. Tucker
---------------------- -------------------------
Arthur V. Tucker
Vice President and
Controller (Principal
Accounting Officer)
Page 11 of 12
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS
(in thousands except per thousands) EXHIBIT 11
Income From
Continuing
Operations Net Income
--------------------------------------
Three Months Ended Three Months Ended
March 31, March 31,
---------------------------------------
1995 1994 1995 1994
---------------------------------------
Computation of Earnings Per Common
and Common Equivalent Share (a):
- ----------------------------------
Reported Income $ 5,385 $ 3,239 $ 6,286 $ 5,677
======= ======= ======= =======
Average number of shares used to
compute earnings per common share 9,863 9,824 9,863 9,824
Effect of unexercised stock options 34 59 34 59
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Average number of shares used to
compute earnings per common
and common equivalent share 9,897 9,883 9,897 9,883
======= ======= ======= =======
Earnings per common and
common equivalent share $ .54 $ .33 $ .64 $ .57
======= ======= ======= =======
Computation of Earnings Per
Common Share Assuming
Full Dilution (a):
- ---------------------------
Reported Income $ 5,385 $ 3,239 $ 6,286 $ 5,677
======= ======= ======= =======
Average number of shares used to
compute earnings per common share 9,863 9,824 9,863 9,824
Effect of unexercised stock options 34 61 34 61
------- ------- ------- -------
Average number of shares used to
compute earnings per common share
assuming full dilution 9,897 9,885 9,897 9,885
======= ======= ======= =======
Earnings per common share
assuming full dilution $ .54 $ .33 $ .64 $ .57
======= ======= ======= =======
- ------------------
(a) This calculation is submitted in accordance with Regulation S-K Item 601 (b) (11)
although it is not required by APB Opinion No. 15 because it results in dilution of less than
3%.
E - 1
Page 12 of 12
5
0000019584
CHEMED CORPORATION
1,000
3-MOS
DEC-31-1995
JAN-01-1995
MAR-31-1995
1,552
29,540
85,758
(3,260)
60,678
192,523
119,472
(42,446)
510,988
142,005
90,975
12,414
0
0
179,302
510,988
108,598
169,858
74,607
112,766
0
520
2,103
10,242
3,814
5,385
901
0
0
6,286
.64
.64
