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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, 1996
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 9,839,229 Shares April 30, 1996
$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, 1996 and
December 31, 1995 3
Consolidated Statement of Income -
Three months ended
March 31, 1996 and 1995 4
Consolidated Statement of Cash Flows -
Three months ended
March 31, 1996 and 1995 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 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,
1996 1995
---------- ----------
Current assets
Cash and cash equivalents $ 41,965 $ 19,187
Marketable securities - 10,094
Accounts receivable, less allowances of $3,564 (1995 - $3,519) 81,758 87,177
Inventories
Raw materials 9,522 7,921
Finished goods and general merchandise 45,604 50,330
Statutory deposits 19,134 18,943
Other current assets 26,402 25,785
---------- ----------
Total current assets 224,385 219,437
Other investments 82,242 90,176
Properties and equipment, at cost less accumulated
depreciation of $49,549 (1995 - $47,074) 78,050 77,131
Identifiable intangible assets less accumulated amortization
of $3,155 (1995 - $2,886) 17,871 18,140
Goodwill less accumulated amortization of $21,911 (1995 - $20,978) 119,399 119,486
Other assets 9,223 7,498
---------- ----------
Total Assets $ 531,170 $ 531,868
========== ==========
LIABILITIES
Current liabilities
Accounts payable $ 24,372 $ 28,411
Bank notes and loans payable 25,000 25,000
Current portion of long-term debt 7,299 7,089
Income taxes 18,761 11,965
Deferred contract revenue 24,787 23,512
Other current liabilities 45,811 49,027
---------- ----------
Total current liabilities 146,030 145,004
Deferred income taxes 11,875 15,819
Long-term debt 83,655 85,368
Other liabilities and deferred income 34,135 36,030
Minority interest 42,492 40,990
---------- ----------
Total Liabilities 318,187 323,211
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock-authorized 15,000,000 shares $1 par;
issued 12,670,927 shares (1995 - 12,598,418 shares) 12,671 12,598
Paid-in capital 147,781 145,290
Retained earnings 134,264 127,141
Treasury stock - 2,814,148 shares (1995 - 2,784,192 shares),
at cost (82,538) (79,996)
Unearned compensation - ESOPs (31,916) (33,355)
Unrealized appreciation on investments 32,721 36,979
---------- ----------
Total Stockholders' Equity 212,983 208,657
---------- ----------
Total Liabilities and Stockholders' Equity $ 531,170 $ 531,868
========== ==========
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,
-----------------------
1996 1995
--------- ---------
Continuing Operations
Sales $ 99,763 $108,598
Service revenues 67,698 61,260
--------- ---------
Total sales and service revenues 167,461 169,858
--------- ---------
Cost of goods sold 68,590 74,607
Cost of services provided 41,113 38,159
Selling and marketing expenses 24,258 25,460
General and administrative expenses 23,516 22,071
Depreciation 2,973 2,865
--------- ---------
Total costs and expenses 160,450 163,162
--------- ---------
Income from operations 7,011 6,696
Interest expense (1,931) (2,103)
Other income - net 16,298 5,649
--------- ---------
Income before income taxes
and minority interest 21,378 10,242
Income taxes (7,974) (3,814)
Minority interest in earnings of subsidiaries (1,207) (1,043)
--------- ---------
Income from continuing operations 12,197 5,385
Discontinued Operations - 901
--------- ---------
Net Income $ 12,197 $ 6,286
========= =========
Earnings Per Common Share
Income from continuing operations $ 1.24 $ .55
========= =========
Net income $ 1.24 $ .64
========= =========
Average number of shares outstanding 9,867 9,863
========= =========
Cash Dividends Paid Per Share $ .52 $ .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,
-----------------------
1996 1995*
--------- ---------
Cash Flows From Operating Activities
Net income $ 12,197 $ 6,286
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investments (14,208) (3,732)
Depreciation and amortization 4,611 4,346
Provision for deferred income taxes (2,631) (451)
Minority interest in earnings of subsidiaries 1,207 1,043
Provision for uncollectible accounts receivable 459 520
Discontinued operations - (901)
Changes in operating assets and liabilities,
excluding amounts acquired in business combinations
(Increase)/decrease in accounts receivable 4,960 (1,195)
(Increase)/decrease in inventories and other
current assets 2,789 (1,015)
Increase in statutory deposits (191) (1,202)
Decrease in accounts payable, deferred contract
revenue and other current liabilities (5,307) (2,988)
Increase in income taxes 11,001 3,142
Other - net (2,771) (734)
--------- ---------
Net cash provided by operating activities 12,116 3,119
--------- ---------
Cash Flows From Investing Activities
Proceeds from sale of investments 26,556 4,933
Net Proceeds from sale of discontinued operations (4,294) (433)
Capital expenditures (4,177) (2,884)
Business combinations, net of cash acquired (2,198) (1,601)
Purchase of investments - (1,200)
Other - net 252 74
--------- ---------
Net cash provided/(used) by investing activities 16,139 (1,111)
--------- ---------
Cash Flows From Financing Activities
Dividends paid (5,137) (5,032)
Purchase of treasury stock (870) (517)
Issuance of capital stock 165 40
Repayment of long-term debt (64) (35)
Other - net 429 366
--------- ---------
Net cash used by financing activities (5,477) (5,178)
--------- ---------
Increase/(decrease) In Cash And Cash Equivalents 22,778 (3,170)
Cash and cash equivalents at beginning of period 19,187 4,722
--------- ---------
Cash and cash equivalents at end of period $ 41,965 $ 1,552
========= =========
See accompanying notes to unaudited financial statements.
* Reclassified to conform to 1996 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, 1995.
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.
4. During the first quarter of 1996, the Company sold
approximately one-third of its investment in Omnicare Inc.
("Omnicare"), realizing a pretax gain of $14,208,000
($8,924,000 aftertax or $.91 per share). Similarly in the
first quarter of 1995, the Company recorded pretax gains
aggregating $3,732,000 ($2,463,000 or $.25 per share) from
the sales of portions of its investments in Omnicare and Exel
Ltd. ("Exel").
Page 6 of 12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Financial Condition
- -------------------
Cash, cash equivalents and marketable securities
increased from $29.3 million at December 31, 1995 to $42.0
million at March 31, 1996, largely as a result of cash generated
by the sale of a portion of the Company's investment in Omnicare,
partially offset by purchases of treasury stock during the
period. The decline in other investments from $90.2 million at
December 31, 1995 to $82.2 million is attributable to the sale of
Omnicare stock, partially offset by the appreciation of the
Company's investments, largely Omnicare and Exel.
Income taxes increased from $12.0 million at
December 31, 1995 to $18.8 million at March 31, 1996, primarily
as a result of the accrual of income taxes on the sale of
Omnicare stock in the first quarter of 1996.
At March 31, 1996 Chemed had approximately $43.1
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,
-------------------
1996 1995
------- --------
Sales and Service
Revenues
- -----------------
National Sanitary Supply $ 77,277 $ 80,793
Roto-Rooter 47,783 43,727
Omnia 18,511 24,858
Patient Care 23,890 20,480
-------- -------
Total $167,461 $169,858
======== ========
Page 7 of 12
Operating Profit
- ----------------
National Sanitary Supply $ 1,884 $ 1,983
Roto-Rooter 4,199 3,874
Omnia 1,493 1,451
Patient Care 1,073 856
-------- --------
Total $ 8,649 $ 8,164
======== ========
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 1996 and 1995 are set
forth below:
Sales and Operating
Service Revenues Profit as a
% Increase/ % of Sales
(Decrease) (Operating Margin)
---------------- ---------------
1996 vs. 1995 1996 1995
---------------- ---------------
National Sanitary Supply (4)% 2.4% 2.5%
Roto-Rooter 9 8.8 8.9
Omnia (26) 8.1 5.8
Patient Care 17 4.5 4.2
Total (1) 5.2 4.8
================ ===============
Sales of the National Sanitary Supply segment for the
first quarter of 1996 totalled $77,277,000 as compared with
$80,793,000 in the prior year first quarter. This 4% decline was
attributable to the anticipated loss of a large fast-food
customer during the first quarter of 1996. Nonetheless, National
Sanitary Supply experienced significant growth in its core
sanitary maintenance business, especially in its western
operations, and is implementing programs to control expenses and
working capital. Additionally, management has begun new
marketing programs and is continuing geographic expansion which
should enhance future performance. Accordingly, the operating
margin for the first quarter of 1996 was 2.4%, essentially the
same as recorded during the comparable period of 1995.
Sales and service revenues for the Roto-Rooter segment
for the first quarter of 1996 totalled $47,783,000, an increase
of 9% over the $43,727,000 recorded in the first quarter of 1995.
Revenues of the plumbing services business, the drain cleaning
business and the service contract business increased 22%, 9% and
5%, respectively, for the first quarter of 1996, as compared with
Page 8 of 12
revenues recorded in the first quarter of 1995. These revenues
accounted for 25%, 33% and 27%, respectively, of Roto-Rooter's
total sales and service revenues during the 1996 period. The
operating margin of the Roto-Rooter segment in the first quarter
of 1996 was 8.8% as compared with 8.9% during the first quarter
of 1995.
Sales of the Omnia segment declined 26% in the first
quarter of 1996, from $24,858,000 in the prior year to
$18,511,000 in 1996. This expected decline is attributable to
the sale of Omnia's retail division in July 1995. Omnia's
wholesale sales for the first quarter of 1996, which includes the
sales of Central States Diversified ("CSD"), acquired in May
1995, increased 26% over wholesale sales for the first quarter of
1995. The operating margin improved from 5.8% during the first
quarter of 1995 to 8.1% during the first quarter of 1996,
primarily as a result of the acquisition of CSD and the higher
profit margins of Omnia's core wholesale and manufacturing
business.
Total revenues of the Patient Care segment increased
from $20,480,000 during the first quarter of 1995 to $23,890,000
in the first quarter of 1996. This revenue increase is
attributable to increased referrals as well as to growing demand
for home-based health care services. As a result of significant
revenue growth Patient Care leveraged its fixed expenses and
increased its operating margin from 4.2% during the first quarter
of 1995 to 4.5% during the first quarter of 1996.
Income from operations increased from $6,696,000 in the
first three months in 1995 to $7,011,000 during the first three
months of 1996, largely as a result of increases in operating
profit in the Roto-Rooter and Patient Care segments.
Other income--net increased from $5,649,000 in the
first quarter of 1995 to $16,298,000 in the first quarter of
1996, primarily as a result of larger investment gains recorded
in the 1996 period. During the first quarter of 1996 the Company
recorded gains on the sales of investments aggregating
$14,208,000 as compared with $3,732,000 during the first quarter
of 1995.
Income from continuing operations increased from
$5,385,000 aftertax ($.55 per share) in the 1995 quarter to
$12,197,00 aftertax ($1.24 per share) largely as a result of
larger investment gains recorded in the 1996 quarter. Excluding
investment gains for both periods, income from continuing
operations increased 10% from $2,922,000 aftertax ($.30 per
share) to $3,273,00 aftertax ($.33 per share) in the 1996
quarter.
Page 9 of 12
Net income increased from $6,286,000 ($.64 per share)
during the first quarter of 1995 to $12,197,000 ($1.24 per share)
during the first quarter of 1996. Discontinued operations for
1995 included a $901,000 aftertax adjustment to the tax provision
on the gain on the sale of 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 and E-3
(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, 1996 By Naomi C. Dallob
---------------------- -------------------------
Naomi C. Dallob, Vice
President and Secretary
Dated: May 10, 1996 By Arthur V. Tucker, Jr.
---------------------- -------------------------
Arthur V. Tucker, Jr.
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 share data) EXHIBIT 11
Income From
Continuing
Operations Net Income
-------------------- ------------------
Three Months Ended Three Months Ended
March 31, March 31,
-------------------- -------------------
1996 1995 1996 1995
-------------------- -------------------
Computation of Earnings Per Common
and Common Equivalent Share (a):
- ----------------------------------
Reported Income $ 12,197 $ 5,385 $12,197 $ 6,286
======= ======= ======= =======
Average number of shares used to
compute earnings per common share 9,867 9,863 9,867 9,863
Effect of unexercised stock options 70 34 70 34
------- ------- ------- -------
Average number of shares used to
compute earnings per common
and common equivalent share 9,937 9,897 9,937 9,897
======== ======= ======= =======
Earnings per common and
common equivalent share $ 1.23 $ .54 $ 1.23 $ .64
======== ======= ======= =======
Computation of Earnings Per
Common Share Assuming
Full Dilution (a):
- ---------------------------
Reported Income $12,197 $ 5,385 $12,197 $ 6,286
======= ======= ======= =======
Average number of shares used to
compute earnings per common share 9,867 9,863 9,867 9,863
Effect of unexercised stock options 70 34 70 34
------- ------- ------- -------
Average number of shares used to
compute earnings per common share
assuming full dilution 9,937 9,897 9,937 9,897
======= ======= ======= =======
Earnings per common share
assuming full dilution $ 1.23 $ .54 $ 1.23 $ .64
======= ======= ======= =======
- ------------------
(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-31-1996
JAN-01-1996
MAR-31-1996
41,865
100
85,322
(3,564)
55,126
224,385
127,599
(49,549)
531,170
146,030
83,655
0
0
12,671
200,312
531,170
99,763
167,461
68,590
109,703
0
459
1,931
21,378
7,974
12,197
0
0
0
12,197
1.24
1.24
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
208,133
119,472
(42,446)
510,988
142,005
90,975
0
0
12,414
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
