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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/ X / Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1993
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 No. 1-8351
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0791746
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2600 CHEMED CENTER, 255 EAST FIFTH STREET, CINCINNATI, OHIO 45202-4726
(Address of principal executive offices) (Zip Code)
(513) 762-6900
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- -----------------------
Capital Stock--Par Value $1 Per Share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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. x
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 New York
Stock Exchange -- Composite Transaction Listing on March 18, 1994 ($34-3/4 per
share), was $285,189,149.
At March 18, 1994, 9,845,166 shares of Chemed Corporation Capital Stock
(par value $1 per share) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
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1993 Annual Report to Stockholders Parts I, II and IV
(specified portions)
Proxy Statement for Annual Meeting Part III
to be held May 16, 1994
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CHEMED CORPORATION
1993 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-- Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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PART I
ITEM 1. BUSINESS
GENERAL
Chemed Corporation was incorporated in Delaware in 1970 as a subsidiary
of W. R. Grace & Co. and succeeded to the business of W. R. Grace & Co.'s
Specialty Products Group as of April 30, 1971 and remained a subsidiary of W.
R. Grace & Co. until March 10, 1982. As used herein, "Company" refers to
Chemed Corporation, "Chemed" refers to Chemed Corporation and its subsidiaries
and "Grace" refers to W. R. Grace & Co. and its subsidiaries.
On March 10, 1982, the Company transferred to Dearborn Chemical Company,
a wholly-owned subsidiary of the Company, the business and assets of the
Company's Dearborn Group, including the stock of certain subsidiaries within
the Dearborn Group, plus $185 million in cash, and Dearborn Chemical Company
assumed the Dearborn Group's liabilities. Thereafter, on March 10, 1982 the
Company transferred all of the stock of Dearborn Chemical Company to Grace in
exchange for 16,740,802 shares of the capital stock of the Company owned by
Grace with the result that Grace no longer has any ownership interest in the
Company.
On December 31, 1986, the Company completed the sale of substantially all
of the business and assets of Vestal Laboratories, Inc., a wholly-owned
subsidiary ("Vestal"). The Company received cash payments aggregating
approximately $67.4 million over the four-year period following the closing,
the substantial portion of which was received on December 31, 1986.
On April 2, 1991, the Company completed the sale of DuBois Chemicals,
Inc. ("DuBois"), a wholly-owned subsidiary, to the Diversey Corporation
("Diversey"), a subsidiary of The Molson Companies Ltd. Under the terms of the
sale, Diversey agreed to pay the Company net cash payments aggregating
$223,386,000, including deferred payments aggregating $32,432,000. As of
December 31, 1993, the Company had received cash payments totaling
$203,580,000.
On December 21, 1992, the Company acquired The Veratex Corporation and
related businesses ("Veratex Group") from Omnicare, Inc., a publicly traded
affiliate in which Chemed maintains a 25.7%-ownership interest (27% ownership
interest at December 31, 1993). The purchase price was $62,120,000 in cash
paid at closing, plus a post-closing payment of $1,514,000 (paid in April 1993)
based on the net assets of Veratex.
During 1993, the Company conducted its business operations in three
segments: National Sanitary Supply Company ("National Sanitary Supply"),
Roto-Rooter, Inc. ("Roto-Rooter"), and Veratex Group ("Veratex").
Effective January 1, 1994, the Company acquired all the capital stock of
Patient Care, Inc. ("Patient Care"), for cash payments aggregating $20,582,000,
including deferred payments with a present value of $6,582,000, plus 17,500
shares of the Company's Capital Stock. Additional cash payments of up to
$10,400,000 may be made, the amount being contingent upon the earnings of
Patient Care during the three-year period ending December 31, 1995.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The required segment and geographic data for the Company's continuing
operations (as described below) for the three years ended December 31, 1991,
1992 and 1993, are shown in the "Sales and Profit Statistics by Business
Segment" and the "Additional Segment Data" on pages 32, 33 and 36 of the 1993
Annual Report to Stockholders and are incorporated herein by reference.
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DESCRIPTION OF BUSINESS BY SEGMENT
The information called for by this item is included within Note 1 of the
Notes to Financial Statements appearing on page 23 of the 1993 Annual Report to
Stockholders and is incorporated herein by reference.
PRODUCT AND MARKET DEVELOPMENT
Each segment of Chemed's business engages in a continuing program for the
development and marketing of new products. While new product and new market
development are important factors for the growth of each active segment of
Chemed's business, Chemed does not expect that any new product or marketing
effort, including those in the development stage, will require the investment
of a material amount of Chemed's assets.
RAW MATERIALS
The principal raw materials needed for each active segment of Chemed's
United States manufacturing operations are purchased from United States
sources. No segment of Chemed experienced any material raw material shortages
during 1993, although such shortages may occur in the future. Products
manufactured and sold by Chemed's active business segments generally may be
reformulated to avoid the adverse impact of a specific raw material shortage.
PATENTS, SERVICE MARKS AND LICENSES
The Roto-Rooter(R) trademark and service mark have been used and
advertised since 1935 by Roto-Rooter Corporation, a wholly-owned subsidiary of
Roto-Rooter, Inc., a 59%-owned subsidiary of the Company. The Roto-Rooter(R)
marks are among the most highly recognized trademarks and service marks in the
United States. Chemed considers the Roto-Rooter(R) marks to be a valuable
asset and a significant factor in the marketing of Roto-Rooter's franchises,
products and services and the products and services provided by its
franchisees.
INVENTORIES
Chemed maintains local warehousing and delivery arrangements throughout
the United States to provide prompt delivery service to its customers.
Inventories on hand for each active segment are not considered high in relation
to industry standards for the business involved. In general, terms and
conditions of sale for each segment follow usual and customary industry
standards.
COMPETITION
NATIONAL SANITARY SUPPLY
Chemed considers National Sanitary Supply (with its subsidiaries Century
Papers, Inc. and NSS Development) to be a leader in the janitorial maintenance
supply distribution market in the western, southwestern and midwestern United
States (Arizona, California, Colorado, Indiana, Louisiana, Michigan,
Mississippi, Missouri, Nevada, New Mexico, Ohio, Oklahoma, Oregon, Tennessee,
Texas, Utah and Washington). This subsidiary markets a broad line of cleaning
chemicals, paper goods, plastic products, waste handling products and other
janitorial supplies to a wide range of customers. The market for sanitary
maintenance and paper supplies is highly competitive and entry is relatively
easy. Competition is, however, highly fragmented in most geographic markets.
In the United States, approximately 9,000 firms compete in the sanitary
maintenance supply distribution business on a local or regional basis. The
principal competitive factors in this market are the level of service provided;
range of products offered; speed, efficiency and reliability of delivery; and
price. There are a number of local janitorial supply companies that compete
with National Sanitary Supply in its market. The principal competitive factors
in the janitorial supply market in order of importance are breadth of product
line, prompt delivery and price. While remaining price competitive, National
Sanitary Supply maintains a product line that is generally broader
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than its competitors and has earned an excellent reputation for prompt delivery
and customer service.
Federal, state and local governmental agencies accounted for
approximately 6 percent of National Sanitary Supply's total sales for 1993.
These sales are attributable to over 4,000 different agencies whose purchasing
decisions are made separately. While it is believed that the loss of the sales
to these agencies in the aggregate would be material, the decentralized
purchasing decisions make the loss of a significant number of such accounts at
any given time unlikely. National Sanitary Supply also had sales to one
customer, Sonic Corporation, which comprised approximately 13 percent of sales
in 1993. This customer is a fast-food restaurant chain consisting of
approximately 1,150 franchises and 120 company-owned restaurants. Sales to
this customer consisted primarily of low-margin food-service products such as
paper napkins, plates and cups. Other than sales to the aforementioned
entities, no one customer accounts for more than two percent of net sales.
ROTO-ROOTER
All aspects of the sewer, drain, and pipe cleaning, and appliance and
plumbing repair businesses are highly competitive. Competition is, however,
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.
No individual customer or market group is critical to the total sales of
this segment.
VERATEX
In distributing medical and dental products, Veratex competes with
numerous mail-order businesses; medical, dental and veterinary supply houses;
and manufacturers of disposable paper, cotton and gauze products. Veratex
competes in this market on the basis of customer service, product quality and
price. At times, its pricing policy has been subject to considerable
competitive pressures, limiting the ability to implement price increases.
No individual customer or market group is critical to the total sales of
this segment.
RESEARCH AND DEVELOPMENT
Chemed engages in a continuous program directed toward the development of
new products and processes, the improvement of existing products and processes,
and the development of new and different uses of existing products. The
research and development expenditures from continuing operations have not been
nor are they expected to be material.
ENVIRONMENTAL MATTERS
Chemed's operations are subject to various federal, state and local laws
and regulations regarding the environmental aspects of the manufacture and
distribution of chemical products. Chemed, to the best of its knowledge, is
currently in compliance in all material respects with the environmental laws
and regulations affecting its operations. Such environmental laws, regulations
and enforcement proceedings have not required Chemed to make material increases
in or modifications to its capital expenditures and they have not had a
material adverse effect on sales or net income.
In connection with the sale of DuBois to the Diversey Corporation, the
Company contractually assumed for a period of ten years the estimated liability
for potential environmental cleanup and related costs arising from the sale of
DuBois up to a maximum of $25,500,000. The Company has accrued $15,500,000
with respect to these potential liabilities. Prior to the sale of DuBois,
DuBois had been designated as a Potentially
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Responsible Party ("PRP") at fourteen Superfund sites by the U.S. Environmental
Protection Agency ("USEPA"). With respect to all of these sites, the Company
has been unable to locate any records indicating it disposed of waste of any
kind at such sites. Nevertheless, it settled claims at five such sites at
minimal cost. In addition, because there were a number of other financially
responsible companies designated as PRPs relative to these sites, management
believes that it is unlikely that such actions will have a material effect on
the Company's financial condition or results of operations. With respect to
one of these sites, the Company's involvement is based on the location of one
of its manufacturing plants. Currently, the USEPA and the state governmental
agency are attempting to resolve jurisdictional issues, and action against PRPs
is not proceeding.
Capital expenditures for the purposes of complying with environmental
laws and regulations during 1994 and 1995 with respect to continuing operations
are not expected to be material in amount; there can be no assurance, however,
that presently unforeseen legislative or enforcement actions will not require
additional expenditures.
EMPLOYEES
On December 31, 1993, Chemed had a total of 4,834 employees; 4,796 were
located in the United States and 38 were in Canada.
ITEM 2. PROPERTIES
Chemed has plants and offices in various locations in the United States.
The major facilities operated by Chemed are listed below by industry segment.
All "owned" property is held in fee and is not subject to any major
encumbrance. Except as otherwise shown, the leases have terms ranging from one
year to thirteen years. Management does not foresee any difficulty in renewing
or replacing the remainder of its current leases. Chemed considers all of its
major operating properties to be maintained in good operating condition and to
be generally adequate for present and anticipated needs.
Location Type Owned Leased
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NATIONAL SANITARY SUPPLY
Los Angeles, CA Office, manufacturing and -- 190,000 sq. ft.
distribution center
Tempe, AZ Office and distribution center 69,000 sq. ft. --
San Francisco Office and distribution center -- 66,000 sq. ft.
(Area), CA
Denver, CO Office and distribution center -- 56,000 sq. ft.
Marion, IN Office and distribution center 30,000 sq. ft. --
Tupelo, MS Office and distribution center -- 33,000 sq. ft.
Kansas City, MO Office and distribution center -- 25,000 sq. ft.
St. Louis, MO Office and distribution center -- 16,000 sq. ft.
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Location Type Owned Leased
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(NATIONAL SANITARY SUPPLY - CONTINUED)
Las Vegas, NV Office and distribution center 24,000 sq. ft. --
Albuquerque, NM Office and distribution center -- 38,000 sq. ft.
Dayton, OH Office and distribution center -- 19,000 sq. ft.
Toledo, OH Office and distribution center -- 65,000 sq. ft.
Oklahoma City, OK Office and distribution center 15,000 sq. ft. 76,000 sq. ft.
Portland, OR Office and distribution center 56,000 sq. ft. --
Memphis, TN Office and distribution center -- 66,000 sq. ft.
Amarillo, TX Office and distribution center -- 25,000 sq. ft.
Austin, TX Office and distribution center -- 18,000 sq. ft.
Beaumont, TX Office and distribution center -- 14,000 sq. ft.
Corpus Christi, TX Office and distribution center -- 60,000 sq. ft.
Dallas, TX Office and distribution center 54,000 sq. ft. --
El Paso, TX Office and distribution center 18,000 sq. ft. --
Houston, TX Office and distribution center -- 102,000 sq. ft.
Laredo, TX Office and distribution center -- 10,000 sq. ft.
McAllen, TX Office and distribution center -- 9,000 sq. ft.
San Antonio, TX Office and distribution center -- 40,000 sq. ft.
Salt Lake City, UT Office and distribution center -- 20,000 sq. ft.
Seattle, WA Office and distribution center -- 15,000 sq. ft.
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Location Type Owned Leased
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Branch Sales Branch sales offices 3,000 sq. ft. 189,000 sq. ft.
Offices (1)
ROTO-ROOTER
Cincinnati, OH Office and service facilities 6,000 sq. ft. 21,000 sq. ft.
West Des Moines, IA Office, manufacturing and distribution 29,000 sq. ft. --
facilities
Northeastern Office and service facilities 43,000 sq. ft. 22,000 sq. ft.
U.S. Area (2)
Central U.S. Office and service facilities 36,000 sq. ft. 23,000 sq. ft.
Area (3)
Mid-Atlantic U.S. Office and service facilities 55,000 sq. ft. 91,000 sq. ft.
Area (4)
Western U.S. Area (5) Office and service facilities 26,000 sq. ft. 36,000 sq. ft.
Canada (6) Office and service facilities -- 7,000 sq. ft.
VERATEX
Troy, MI Office and distribution center -- 81,000 sq. ft.
Detroit, MI Manufacturing facility 64,000 sq. ft. --
Lexington, KY Office and distribution center -- 152,000 sq. ft.
Lakeland, FL (7) Office, manufacturing and distribution -- 76,000 sq. ft.
center
Rialto, CA Office, manufacturing and distribution 132,000 sq. ft. --
center
CORPORATE
Cincinnati, OH (8) Corporate offices and related -- 42,000 sq. ft.
facilities
New York, NY Corporate offices -- 2,000 sq. ft.
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(1) Comprising forty separate facilities throughout the western, midwestern, and southwestern United States.
(2) Comprising locations in Baltimore and Jessup, Maryland; Stoughton and Woburn, Massachusetts; Stratford and Bloomfield,
Connecticut; West Seneca, West Hempstead, Bayside and Mount Kisco, New York; and Cranston, Rhode Island.
(3) Comprising locations in Atlanta, Georgia; Birmingham, Alabama; Charlotte, North Carolina; Hillard and Cleveland, Ohio; Memphis
and Nashville, Tennessee; Wilmerding, Pennsylvania; and St. Louis, Missouri.
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(4) Comprising locations in Pennsauken and North Brunswick, New Jersey;
Jacksonville, Medley, Pompano Beach, Ft. Myers, St. Petersburg, Boca
Raton, Deerfield Beach, Daytona Beach and Orlando, Florida; Virginia
Beach and Fairfax, Virginia; Levittown, Pennsylvania; Raleigh, North
Carolina; and Newark, Delaware.
(5) Comprising locations in Houston and San Antonio, Texas; Addison, Elk
Grove Village and Posen, Illinois; Denver, Colorado; Pearl City, Hawaii;
Minneapolis, Minnesota; Tacoma, Washington; and Phoenix, Arizona.
(6) Comprising locations in Delta, British Columbia and Boucherville, Quebec.
(7) Comprising of former office, manufacturing and warehouse facilities that
are presently under lease to an outside third party.
(8) Excludes 88,000 square feet in current Cincinnati, Ohio, office
facilities that are sublet to an outside party -- portions of this space
may revert to the Company beginning in 1998. Includes 31,000 square feet
leased for the Company's corporate office facilities.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office First Elected
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Edward L. Hutton 74 Chairman and Chief Executive Officer November 3, 1993 (1)
Jon D. Krahulik 49 President and Chief Operating Officer November 3, 1993 (2)
Paul C. Voet 47 Executive Vice President May 20, 1991 (3)
Timothy S. O'Toole 38 Executive Vice President and May 18, 1992 (4)
Treasurer
Kevin J. McNamara 40 Executive Vice President, Secretary November 3, 1993 (5)
and General Counsel
Sandra E. Laney 50 Senior Vice President and Chief November 3, 1993 (6)
Administrative Officer
Arthur V. Tucker 44 Vice President and Controller May 20, 1991 (7)
(1) Mr. E. L. Hutton is the Chairman and Chief Executive Officer of the Company and has held these positions since November 1993.
Previously, from April 1970 to November 1993, Mr. E. L. Hutton held the positions of President and Chief Executive Officer of
the Company. Mr. E. L. Hutton is the father of Mr. T. C. Hutton, a director and a Vice President of the Company, an uncle of
Mr. J. D. Krahulik, the President and Chief Operating Officer and a director of the Company, and an uncle of Mr. A. C. Hutton,
a Vice President and a nominee for director of the Company.
(2) Mr. J. D. Krahulik is the President and Chief Operating Officer of the Company and has held this position since November 1993.
Previously, from February 1993 to November 1993 he served the Company as Vice Chairman of the Board of Directors of the
Company. From December 1990 to November 1993 he was an Associate Justice of the Supreme Court of Indiana, and prior to that
he was a partner in the law firm of Bingham, Summers Welsh & Spilman (Indianapolis, Indiana) from 1975 to December 1990. Mr.
J. D. Krahulik is the nephew of Mr. E. L. Hutton, Chairman, Chief Executive Officer and a director of the Company, a cousin of
Mr. T. C. Hutton, a Vice President and a director of the Company, and a cousin of Mr. A. C. Hutton, a Vice President and a
nominee for director of the Company.
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(3) Mr. P. C. Voet is an Executive Vice President of the Company and has held
this position since May 1991. From May 1988 to November 1993, he served
the Company as Vice Chairman. Mr. Voet is President and Chief Executive
Officer of National Sanitary Supply.
(4) Mr. T. S. O'Toole is an Executive Vice President and the Treasurer of the
Company and has held these positions since May 1992 and February 1989,
respectively. From May 1988 to February 1989, he served as Vice
President and a Director of Taxes of the Company.
(5) Mr. K. J. McNamara is an Executive Vice President, Secretary and General
Counsel of the Company and has held these positions since November 1993,
August 1986 and August 1986, respectively. He previously held the
positions of Vice Chairman of the Company, from May 1992 to November
1993, and Vice President of the Company, from August 1986 to May 1992.
(6) Ms. S. E. Laney is Senior Vice President and the Chief Administrative
Officer of the Company and has held these positions since November 1993
and May 1991, respectively. Previously, from May 1984 to November 1993,
she held the position of Vice President of the Company.
(7) Mr. A. V. Tucker is a Vice President and Controller of the Company and
has held these positions since February 1989. From May 1983 to February
1989, he held the position of Assistant Controller of the 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 16, 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Capital Stock (par value $1 per share) is traded on the New
York Stock Exchange under the symbol CHE. The range of the high and low sale
prices on the New York Stock Exchange and dividends paid per share for each
quarter of 1992 and 1993 are set forth below.
Closing Dividends Paid
High Low Per Share
------------------------------------------------------------------------------
1993
First Quarter $29-1/2 $26-1/4 $.50
Second Quarter 30-7/8 25-3/4 .50
Third Quarter 31-3/4 29-7/8 .50
Fourth Quarter 32-3/4 29-3/4 .51
1992
First Quarter 29-3/8 25 .50
Second Quarter 29-3/8 26-1/4 .50
Third Quarter 32 25-7/8 .50
Fourth Quarter 27-3/8 24-3/8 .50
Future dividends are necessarily dependent upon the Company's earnings
and financial condition, compliance with certain debt covenants and other
factors not presently determinable.
As of March 18, 1994, there were approximately 6,096 stockholders of
record of the Company's Capital Stock. This number only includes stockholders
of record and does not include stockholders with shares beneficially held for
them in nominee name or within clearinghouse positions of brokers, banks or
other institutions.
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ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item for the five years ended December
31, 1993 is set forth on pages 34 and 35 of the 1993 Annual Report to
Stockholders and the information for such five years 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 37 through
40 of the 1993 Annual Report to Stockholders and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the report thereon
of Price Waterhouse dated February 1, 1994, appearing on pages 17 through 30 of
the 1993 Annual Report to Stockholders, along with the Supplementary Data
(Unaudited Summary of Quarterly Results) appearing on page 31, 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 REGISTRANT.
The directors of the Company are:
J. Peter Grace Jon D. Krahulik
Edward L. Hutton Sandra E. Laney
James A. Cunningham Kevin J. McNamara
James H. Devlin John M. Mount
Charles H. Erhart, Jr. Timothy S. O'Toole
Joel F. Gemunder D. Walter Robbins, Jr.
Neal Gilliatt Arthur V. Tucker
William R. Griffin Paul C. Voet
Will J. Hoekman Hugh A. Westbrook
Thomas C. Hutton
Except with respect to the age and business experience of Messrs. Gilliatt,
Hoekman, and Tucker, the information required under this Item with respect to
directors is set forth in the Company's 1994 Proxy Statement which is
incorporated herein by reference. The information with respect to Messrs.
Gilliatt and Hoekman is set forth below and the information with respect to Mr.
Tucker is in footnote (7) under "Executive Officers of the Company" in Part I
of this Annual Report on Form 10-K.
(1) Mr. Gilliatt is President of Neal Gilliatt/Stuart Watson, Inc., New York,
New York (Management Consulting) and has held this position since April
1982. On April 1, 1982, he retired as Chairman of the Executive
Committee of the Interpublic Group of Companies, Inc., New York, New York
(advertising and related communications), having held that position since
February 1980. Mr. Gilliatt is a director of Consolidated Products,
Inc., National Sanitary Supply, Omnicare and Roto-Rooter. Mr. Gilliatt
is 76.
(2) Mr. Hoekman is a Senior Vice President of Firstar Bank, Des Moines, Iowa,
and has held this position since November 1980. Mr. Hoekman is a
director of Roto-Rooter. Mr. Hoekman is 48.
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ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth in the Company's 1994
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 1994
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 1994
Proxy Statement, which is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
EXHIBITS
3.1 Certificate of Incorporation of Chemed Corporation.*
3.2 By-Laws of Chemed Corporation.*
10.1 Agreement and Plan of Merger among Diversey U.S. Holdings, Inc.,
D. C. Acquisition Inc., Chemed Corporation and DuBois Chemicals,
Inc., dated as of February 25, 1991.*
10.2 Stock Purchase Agreement between Omnicare, Inc. and Chemed
Corporation, dated as of August 5, 1992.*
10.3 1978 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.4 1981 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.5 1983 Incentive Stock Option Plan, as amended through May 20,
1991.*,**
10.6 1986 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.7 1988 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.8 1993 Stock Incentive Plan.**
10.9 Executive Salary Protection Plan, as amended through November 3,
1988.*,**
10.10 Excess Benefits Plan, as amended effective November 1, 1985.*,**
10.11 Non-Employee Directors' Deferred Compensation Plan.*,**
10.12 Directors Emeriti Plan.*,**
10.13 Employment Contracts with Executives.*,**
10.14 Amendment No. 5 to Employment Contracts with Executives.**
11. Statement re: Computation of Earnings Per Common Share.
13. 1993 Annual Report to Stockholders.
21. Subsidiaries of Chemed Corporation.
10
13
23. Consent of Independent Accountants.
24. Powers of Attorney.
* This exhibit is being filed by means of incorporation by reference (see
Index to Exhibits on page E-1). Each other exhibit is being filed with
this Annual Report on Form 10-K.
** Management contract or compensatory plan or arrangement.
FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statements and Financial Statement Schedules on
page S-1.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1993.
11
14
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.
CHEMED CORPORATION
March 29, 1994 By /s/ Edward L. Hutton
--------------------
Edward L. Hutton
Chairman 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.
Signature Title Date
--------- ----- ----
/s/ Edward L. Hutton Chairman and Chief Executive Officer
----------------------- and a Director (Principal Executive
Edward L. Hutton Officer)
/s/ Timothy S. O'Toole Executive Vice President and Treasurer
----------------------- and a Director
Timothy S. O'Toole (Principal Financial Officer)
/s/ Arthur V. Tucker Vice President and Controller and a March 29, 1994
----------------------- Director
Arthur V. Tucker (Principal Accounting Officer)
J. Peter Grace* Thomas C. Hutton*
James A. Cunningham* Jon D. Krahulik*
James H. Devlin* Sandra E. Laney*
Charles H. Erhart, Jr.* Kevin J. McNamara* --Directors
Joel F. Gemunder* John M. Mount*
Neal Gilliatt* D. Walter Robbins, Jr.*
William R. Griffin* Paul C. Voet*
Will J. Hoekman* Hugh A. Westbrook
- ------------------------
* Kevin J. McNamara by signing his 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 29, 1994 /s/ Kevin J. McNamara
- ----------------------- --------------------------------
Date Kevin J. McNamara
(Attorney-in-Fact)
12
15
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
1991, 1992 AND 1993
CHEMED CORPORATION CONSOLIDATED FINANCIAL PAGE(S)
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17*
Statement of Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18*
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19*
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20*
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21*
Consolidated Statement of Changes in Stockholders' Equity . . . . . . . . . . . . . . . . . . . . 22*
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23-30*
Sales and Profit Statistics by Business Segment . . . . . . . . . . . . . . . . . . . . . . . . . 32-33*
Additional Segment Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36*
Report of Independent Accountants on Financial Statement
Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Schedule I -- Marketable Securities - Other Investments . . . . . . . . . . . . . . . . . . . . . S-3
Schedule VIII -- Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . S-4
Schedule X -- Supplementary Income Statement Information . . . . . . . . . . . . . . . . . . . . S-5
* Indicates page numbers in Chemed Corporation 1993 Annual Report to Stockholders.
- ------------------------
The consolidated financial statements of Chemed Corporation listed above,
appearing in the 1993 Annual Report to Stockholders, are incorporated herein by
reference. The Financial Statement Schedules 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
16
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Chemed Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 1, 1994 appearing on page 17 of the 1993 Annual Report to
Stockholders of Chemed Corporation (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 Schedules listed in Item 14
of this Form 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
/s/ Price Waterhouse
PRICE WATERHOUSE
Cincinnati, Ohio
February 1, 1994
S-2
17
CHEMED CORPORATION AND SUBSIDIARY COMPANIES SCHEDULE I
MARKETABLE SECURITIES -- OTHER INVESTMENTS
(in thousands except share and warrant data)
- ------------------------------------------------------------------------------------------------------------------------
Amount Included in
Name of Issuer and Amortized Market Value at December 31, 1993
Title of Issue Number of shares Cost of Issue December 31, 1993 Balance Sheet
- ------------------------------------------------------------------------------------------------------------------------
Gradison Government Income Fund 73,774 shares $ 1,000 $ 993 $ 1,000
Other - 200 200 200
-------------------
Total Marketable Securities $ 1,200
===================
Vitas Healthcare Corporation: (a)
9 % Cumulative Nonconvertible
Preferred Stock 270,000 shares $ 26,020 $ 28,195 $ 26,020
Warrants 2 warrants 1,500 4,730 1,500
EXEL, Ltd.: (b)
Common Stock 416,000 shares 4,160 18,460 4,160
Future Healthcare, Inc.:
Other - 5,977 9,686 5,977
-------------------
Total Other Investments $ 37,657
===================
- -----------------------------------------------------------------------------------------------------------------------
Number of shares/ Amount Included in
Name of Issuer and Principal Amount Amortized Market Value at December 31, 1992
Title of Issue of Bonds and Notes Cost of Issue December 31, 1992 Balance Sheet
- -----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Notes (c) $ 20,000 $ 20,976 $ 20,859 $ 20,976
Overland Express Variable Rate
Government Fund 1,087,739 shares 11,000 10,823 11,000
American Adjustable Rate Term Trust 100,000 shares 1,000 988 1,000
Other - 201 201 201
-------------------
Total Marketable Securities $ 33,177
===================
Vitas Healthcare Corporation: (a)
9 % Cumulative Nonconvertible
Preferred Stock 270,000 shares $ 25,744 $ 25,744 $ 25,744
Warrants 2 warrants 1,500 1,500 1,500
EXEL, Ltd.: (b)
Common Stock 500,000 shares 5,000 23,625 5,000
Options 75,000 shares - 2,794 -
Future Healthcare, Inc.:
Other - 3,259 4,620 3,259
-------------------
Total Other Investments $ 35,503
===================
- ------------------
(a) Initial investment in this privately held corporation was made in
December 1991. At December 31, 1992, fair value was not readily
determinable without commissioning an independent appraisal which was not
considered cost justified. During 1993, Vitas Healthcare Corporation
(Vitas) obtained additional outside financing and obtained a valuation
of its common stock from an independent investment banking firm. The
market value at December 31, 1993, is based on the difference between
that appraisal and Chemed's exercise price. The value of the 9%
Cumulative Preferred Stock is based on the present value of the mandatory
redemption payments, using an interest rate of 7.5%, a rate which
management believes to be reasonable given Vitas' financial performance
and current market conditions.
(b) Trading restrictions on these shares expired in February 1993 and July
1993.
(c) All securities of the U.S. Government are grouped together and shown as a
single item.
S-3
18
SCHEDULE VIII
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS (a)
(in thousands)
===============================================================================================
Additions
-------------------------
Charged Applicable
(Credited) to
Balance at to Costs Companies Balance
Beginning and Acquired Deductions at End
Description of Period Expenses in Period (b) of Period
- -----------------------------------------------------------------------------------------------
Allowances for
doubtful accounts (c)-
For the year 1993.......... $ 1,837 $ 1,766 $ 19 $ (1,231) $ 2,391
========= ========= ========= ========= =========
For the year 1992.......... $ 1,910 $ 1,616 $ 222 $ (1,911) $ 1,837
========= ========= ========= ========= =========
For the year 1991.......... $ 1,695 $ 1,774 $ - $ (1,559) $ 1,910
========= ========= ========= ========= =========
Valuation accounts for
investments in subsidiaries
and affiliates (d)-
For the year 1993.......... $ - $ - $ - $ - $ -
========= ========= ========= ========= =========
For the year 1992.......... $ 68 $ - $ - $ (68) $ -
========= ========= ========= ========= =========
For the year 1991.......... $ 68 $ - $ - $ - $ 68
========= ========= ========= ========= =========
Allowances for doubtful
accounts - notes
receivable (d)-
For the year 1993.......... $ 312 $ 253 $ - $ (72) $ 493
========= ========= ========= ========= =========
For the year 1992.......... $ 319 $ - $ - $ (7) $ 312
========= ========= ========= ========= =========
For the year 1991.......... $ 422 $ - $ - $ (103) $ 319
========= ========= ========= ========= =========
- ------------------
(a) Amounts are presented on a continuing operations basis.
(b) Deductions include accounts considered uncollectible or written off,
payments, companies divested, etc.
(c) Classified in consolidated balance sheet as a reduction of accounts
receivable.
(d) Classified in consolidated balance sheet as a reduction of other
assets.
S-4
19
SCHEDULE X
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION (a)
(in thousands)
=========================================================================
Charged to Costs and Expenses
Item 1993 1992 1991
- -------------------------------------------------------------------------
Maintenance and repairs.................. $ 4,835 $ 3,967 $ 3,742
======= ======= =======
Advertising costs........................ $ 9,465 $ 6,203 $ 5,744
======= ======= =======
(a) Amounts are presented on a continuing operations basis.
S-5
20
INDEX TO EXHIBITS
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
3.1 Certificate of Incorporation of Chemed Form S-3 4.1
Corporation Reg. No. 33-44177
11/26/91
3.2 By-Laws of Chemed Corporation Form 10-K 3
3/23/89
10.1 Agreement and Plan of Merger among Diversey U. Form 8-K 1
S. Holdings, Inc., D. C. Acquisition Inc., 3/11/91
Chemed Corporation and DuBois Chemicals, Inc.,
dated as of February 25, 1991
10.2 Stock Purchase Agreement between Omnicare, Inc. Form 10-K 5
and Chemed Corporation dated as of August 5, 3/25/93
1992
10.3 1978 Stock Incentive Plan, as amended through Form 10-K 6
May 20, 1991 3/27/92
10.4 1981 Stock Incentive Plan, as amended through Form 10-K 7
May 20, 1991 3/27/92
10.5 1983 Incentive Stock Option Plan, as amended Form 10-K 8
through May 20, 1991 3/27/92
10.6 1986 Stock Incentive Plan, as amended through Form 10-K 9
May 20, 1991 3/27/92
10.7 1988 stock Incentive Plan, as amended through Form 10-K 10
May 20, 1991 3/27/92
10.8 1993 Stock Incentive Plan *
10.9 Executive Salary Protection Plan, as amended Form 10-K 11
through November 3, 1988 3/28/89
10.10 Excess Benefits Plan, as amended effective Form 10-Q 3
November 1, 1985 11/12/85
10.11 Non-Employee Directors' Deferred Compensation Form 10-K 12
Plan 3/24/88
10.12 Directors Emeriti Plan Form 10-Q 2
5/12/88
10.13 Employment Contracts with Executives Form 10-K 18
3/28/89
10.14 Amendment No. 5 to Employment Contracts with *
Executives
11 Statement re: Computation of Earnings Per *
Common Share
13 1993 Annual Report to Stockholders *
21
21 Subsidiaries of Chemed Corporation *
23 Consent of Independent Accountants *
24 Powers of Attorney *
- -----------------------
* Filed herewith
1
EXHIBIT 10.8
================================================================================
CHEMED CORPORATION
1993 STOCK INCENTIVE PLAN
================================================================================
(approved 5/17/93)
2
CHEMED CORPORATION
1993 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 Capital 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.
CAPITAL STOCK: The Capital 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: Chemed Corporation, a Delaware corporation.
FAIR MARKET VALUE: As applied to any date, the mean between the high
and low sales prices of a share of Capital Stock on the principal stock
exchange on which the Corporation is listed, or, if it is not so listed, the
mean between the bid and the ask prices of a share of Capital Stock in the
over-the-counter market as reported by the National Association of Securities
Dealers Automated Quotation System on such date or, if no such sales or prices
were made or quoted on such date, on the next preceding date on which there
were sales or quotes of Capital Stock on such exchange or market, as the case
may be; provided, however, that, if the Capital 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 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,
Capital Stock or other property, awarded by the Corporation or a Subsidiary
prior or subsequent to the date of the
3
2
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 Capital Stock.
PERFORMANCE UNIT: A unit representing a share of Capital 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 Capital 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 l993 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 Capital 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.
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:
4
3
(a) Subject to the provisions of paragraph (c) and of this section 4
and of section 8, the aggregate number of shares of Capital Stock which may be
issued or transferred pursuant to Stock Incentives granted under this Plan
shall not exceed 250,000 shares.
(b) The maximum aggregate number of shares of Capital 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 Capital Stock and shares of
Capital 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 Capital 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.
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 Capital Stock subject to such Stock Award shall be
valued at not less than l00% 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 Capital 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
5
4
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 Capital 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 Capital
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.
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 Capital Stock or in
a combination of cash and such shares. Shares of Capital 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 l00% of the Fair Market Value of a share of Capital 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
6
5
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 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, pursuant to which 20 percent or more of the shares of the
Corporation's Capital Stock have been purchased; (3) the stockholders of the
Corporation have approved (i) an agreement to merge or consolidate with or into
another corporation and the Corporation is not the surviving corporation or
(ii) an agreement to sell or otherwise dispose of all or substantially all of
the assets of the Corporation (including a plan of liquidation); or (4) during
any period of two consecutive years, 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 and, after his death, only by his estate or by a person who
acquired the right to exercise the Option by will or the laws of descent and
distribution. 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.
7
6
(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 Capital Stock issued or transferred upon the exercise of an
Option.
(f) No Option nor any right thereunder may be assigned or transferred by
the optionee except by will or the laws of descent and distribution. 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 Capital 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
upon the exercise of an Option shall be paid in cash, in such other form as the
Incentive Committee may authorize from time to time, including the surrender of
shares of Capital Stock or the withholding of shares of Capital Stock to be
issued to the optionee. 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
8
7
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 Capital Stock shall be
effected, or the outstanding shares of Capital 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 Capital Stock entitled to receive a dividend payable in Capital
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.
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 17, 2003.
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
9
8
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 Capital 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
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 Capital Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Incentive except
as to such shares of Capital 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.
10
9
(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 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 Capital 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 Capital
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 (viii) 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.
1
EXHIBIT 10.14
AMENDMENT NO. 5
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 17, 1993 between _________________
("Employee") and Chemed Corporation (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated as of May 2, 1988 and amended May 15, 1989, May 21, 1990, May
20, 1991 and May 18, 1992 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to further 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 May 17, 1993, as
follows:
A. The date, amended as of May 18, 1992, set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of May 3, 1998
is hereby substituted therefor.
B. For clarification purposes only, Section 3.4(b) of the Employment
Agreement is hereby rewritten in its entirety to read as follows:
"(b) If the Company shall terminate Employee's employment hereunder
Without Cause, the Company shall pay Employee monthly severance
payments at an annual rate equal to 150% of the sum of (i) the
Employee's then current base salary plus (ii) the amount of the
annual incentive bonus most recently paid or approved to be paid to
Employee in respect of the previous year, plus (iii) the fair market
value of all shares of Chemed Corporation capital stock subject to
stock awards granted to Employee under one or more stock incentive
plans of Chemed Corporation which have vested during the 12 months
prior to the Employee's termination, such fair market value to be
determined as of the date of vesting of any such shares. Such
monthly severance payments shall be made for a period equal to the
balance of the term of employment provided for in Section 1.2."
2
C. The amount of unrestricted stock award recognized in lieu of
incentive compensation in 1992 is $______________.
Except as specifically amended in 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
---------------------
CHEMED CORPORATION
---------------------
Kevin J. McNamara
Vice Chairman, Secretary
and General Counsel
2
3
SCHEDULE TO EXHIBIT 10.14
Current
Minimum Current (a) Expiration
Annual Stock Award Date of
Name and Position Base Salary Compensation Agreement
- ----------------- ----------- ------------ -----------
E. L. Hutton $422,000 $273,217.70 1998
Chairman and CEO
P. C. Voet 227,196 10,778.11 1998
Executive Vice President
K. J. McNamara 128,298 16,557.63 1998
Executive Vice President, Secretary and
General Counsel
T. S. O'Toole 80,023 30,860.15 1998
Executive Vice President and Treasurer
A. C. Hutton 104,471 6,413.12 1998
Vice President
T. C. Hutton 118,739 10,269.03 1998
Vice President
S. E. Laney 79,798 18,669.59 1998
Senior Vice President
and Chief Administrative Officer
A. V. Tucker 70,207 3,933.04 1998
Vice President and Controller
- ----------------
(a) Amount of unrestricted stock award recognized in lieu of incentive compensation in 1993.
1
EXHIBIT 11
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE AS SHOWN
IN ANNUAL REPORT ON FORM 10-K
(in thousands except per share data)
===============================================================================
1993
-----------------------
Income
from
Continuing
Operations Net Income
- -------------------------------------------------------------------------------
Computation of Earnings per Common
and Common Equivalent Share: (a)
Reported income..................................... $ 17,142 $ 19,480
========== ==========
Average number of shares used to compute
earnings per common share.......................... 9,778 9,778
Effect of unexercised stock options................. 52 52
---------- ----------
Average number of shares used to compute
earnings per common and common equivalent share.... $ 9,830 $ 9,830
========== ==========
Earnings per common and common
equivalent share................................... $ 1.74 $ 1.98
========== ==========
Computation of Earnings per Common
Share Assuming Full Dilution: (a)
Reported income.................................... $ 17,142 $ 19,480
========== ==========
Average number of shares used to compute
earnings per common share.......................... 9,778 9,778
Effect of unexercised stock options................. 59 59
---------- ----------
Average number of shares used to compute
earnings per common share assuming full dilution... 9,837 9,837
Earnings per share ========== ==========
assuming full dilution............................. $ 1.74 $ 1.98
========== ==========
- -------------------
(a) This calculation is submitted in accordance with Regulation S-K
Item 601(b)(11) although not required by APB Opinion No. 15 because
it results in dilution of less than 3%.
2
EXHIBIT 11
(continued)
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE AS SHOWN
IN ANNUAL REPORT ON FORM 10-K
(in thousands except per share data)
===============================================================================
1992
-----------------------
Income
from
Continuing
Operations Net Income
- -------------------------------------------------------------------------------
Computation of Earnings per Common
and Common Equivalent Share: (a)
Reported income..................................... $ 14,251 $ 15,651
========= =========
Average number of shares used to compute
earnings per common share.......................... 9,803 9,803
Effect of unexercised stock options................. 41 41
--------- ---------
Average number of shares used to compute
earnings per common and common equivalent share.... $ 9,844 $ 9,844
========= =========
Earnings per common and common
equivalent share................................... $ 1.45 $ 1.59
========= =========
Computation of Earnings per Common
Share Assuming Full Dilution: (a)
Reported income.................................... $ 14,251 $ 15,651
========= =========
Average number of shares used to compute
earnings per common share.......................... 9,803 9,803
Effect of unexercised stock options................. 48 48
--------- ---------
Average number of shares used to compute
earnings per common share assuming full dilution... 9,851 9,851
Earnings per share ========= =========
assuming full dilution............................. $ 1.45 $ 1.59
========= =========
- ------------------
(a) This calculation is submitted in accordance with Regulation S-K
Item 601(b)(11) although not required by APB Opinion No. 15 because
it results in dilution of less than 3%.
3
EXHIBIT 11
(continued)
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE AS SHOWN
IN ANNUAL REPORT ON FORM 10-K
(in thousands except per share data)
===============================================================================
1991
-----------------------
Income
from
Continuing
Operations Net Income
- -------------------------------------------------------------------------------
Computation of Earnings per Common
and Common Equivalent Share: (a)
Reported income..................................... $ 11,037 $ 52,967
========= =========
Average number of shares used to compute
earnings per common share.......................... 10,059 10,059
Effect of unexercised stock options................. 5 5
--------- ---------
Average number of shares used to compute
earnings per common and common equivalent share.... $ 10,064 $ 10,064
========= =========
Earnings per common and common
equivalent share................................... $ 1.10 $ 5.26
========= =========
Computation of Earnings per Common
Share Assuming Full Dilution: (a)
Reported income.................................... $ 11,037 $ 52,967
========= =========
Average number of shares used to compute
earnings per common share.......................... 10,059 10,059
Effect of unexercised stock options................. 36 36
--------- ---------
Average number of shares used to compute
earnings per common share assuming full dilution... 10,095 10,095
Earnings per share ========= =========
assuming full dilution............................. $ 1.09 $ 5.25
========= =========
- ------------------
(a) This calculation is submitted in accordance with Regulation S-K
Item 601(b)(11) although not required by APB Opinion No. 15 because
it results in dilution of less than 3%.
1
Exhibit 13
FINANCIAL REVIEW
CONTENTS
==================================================================
Statement of Accounting Policies 18
Consolidated Statement of Income 19
Consolidated Balance Sheet 20
Consolidated Statement of Cash Flows 21
Consolidated Statement of Changes
in Stockholders' Equity 22
Notes to Financial Statements 23
Unaudited Summary of Quarterly Results 31
Sales and Profit Statistics by Business Segment 32
Selected Financial Data 34
Additional Segment Data 36
Management's Discussion and Analysis of Financial
Condition and Results of Operations 37
PRICE WATERHOUSE
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Chemed Corporation
In our opinion, the consolidated financial statements appearing on pages 18
through 30 and pages 32, 33 and 36 of this report present fairly, in all
material respects, the financial position of Chemed Corporation and its
subsidiaries at December 31, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1993, 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 audit 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.
As discussed in the Statement of Accounting Policies and Note 6 of the Notes
to Financial Statements, the Company changed its method of accounting for
income taxes in 1993.
/s/ PRICE WATERHOUSE
Cincinnati, Ohio
February 1, 1994
17
2
STATEMENT OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. All significant intercompany transactions
have been eliminated. Long-term investments in affiliated companies
representing ownership interests of 20% to 50% are accounted for using the
equity method.
CASH EQUIVALENTS
Cash equivalents comprise short-term, highly liquid investments that have
been purchased within three months of their date of maturity.
INVENTORIES
Inventories are stated at the lower of cost or market. The average cost or
the first-in, first-out ("FIFO") method is used for determining the value of
inventories.
DEPRECIATION AND PROPERTIES AND EQUIPMENT
Depreciation of properties and equipment is computed using the straight-line
method over the estimated useful lives of the assets. 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
the resulting gain or loss is reflected currently in income.
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
Goodwill and identifiable intangible assets arise from business combinations
accounted for as purchase transactions and are amortized using the
straight-line method over the estimated useful lives but not in excess of 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
goodwill or identifiable intangible assets have been impaired, a write-down to
fair value is made.
REVENUE RECOGNITION
Revenues received under prepaid contractual service agreements are
recognized on a straight-line basis over the life of the contract. All other
sales and service revenues are recognized when the products are delivered or
the services are provided.
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." For the
years 1988 through 1992, income taxes were accounted for under rules specified
in SFAS No. 96, "Accounting for Income Taxes."
COMPUTATION OF EARNINGS PER SHARE
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.
PENSIONS AND RETIREMENT PLANS
The Company's major pension and retirement plans and other similar employee
benefit plans are defined contribution plans. Contributions are based on
employees' compensation and are funded currently.
EMPLOYEE STOCK OWNERSHIP PLANS ("ESOPs")
Contributions to the Company's ESOPs are based on established debt repayment
schedules and approximate contributions previously made to other employee
benefit plans. The Company's policy is to record its ESOP expense by applying
the transition rule under the level principal amortization concept.
RECLASSIFICATIONS
Certain amounts in the 1992 and 1991 financial statements have been
reclassified to conform with the 1993 presentation.
18
3
CONSOLIDATED STATEMENT OF INCOME
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
For the Years Ended December 31, 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
CONTINUING OPERATIONS
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $401,372 $305,301 $274,416
Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . 123,721 95,661 77,866
-------- -------- --------
Total sales and service revenues . . . . . . . . . . . . . . . . . 525,093 400,962 352,282
-------- -------- --------
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . 269,284 208,679 187,777
Cost of services provided . . . . . . . . . . . . . . . . . . . . . . 79,909 53,766 41,428
Selling and marketing expenses . . . . . . . . . . . . . . . . . . . 89,784 71,800 64,438
General and administrative expenses . . . . . . . . . . . . . . . . . 54,136 45,189 43,240
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,817 6,348 5,899
-------- -------- --------
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . 501,930 385,782 342,782
-------- -------- --------
Income from operations . . . . . . . . . . . . . . . . . . . . . . . 23,163 15,180 9,500
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . (8,889) (5,732) (5,731)
Other income--net (Note 5) . . . . . . . . . . . . . . . . . . . . . 13,656 12,736 14,253
-------- -------- --------
Income before income taxes, equity earnings
and minority interest . . . . . . . . . . . . . . . . . . . . . 27,930 22,184 18,022
Income taxes (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . (9,278) (6,531) (5,405)
Equity in earnings of affiliate (Note 3) . . . . . . . . . . . . . . 2,299 1,745 1,179
Minority interest in earnings of subsidiaries (Note 1) . . . . . . . (3,809) (3,147) (2,759)
-------- -------- --------
Income from continuing operations . . . . . . . . . . . . . . . . 17,142 14,251 11,037
DISCONTINUED OPERATIONS (NOTE 4) . . . . . . . . . . . . . . . . . . . . . . . 687 1,400 41,930
-------- -------- --------
Income before cumulative effect of a change in accounting principle . . . . . . 17,829 15,651 52,967
Cumulative effect of a change in accounting principle (Note 6) . . . . . . . . 1,651 -- --
-------- -------- --------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,480 $ 15,651 $ 52,967
-------- -------- --------
-------- -------- --------
EARNINGS PER COMMON SHARE
Income from continuing operations . . . . . . . . . . . . . . . . . . $ 1.75 $ 1.45 $ 1.10
-------- -------- --------
-------- -------- --------
Income before cumulative effect of a change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . $ 1.82 $ 1.60 $ 5.27
-------- -------- --------
-------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.99 $ 1.60 $ 5.27
-------- -------- --------
-------- -------- --------
Average number of shares outstanding . . . . . . . . . . . . . . . . 9,778 9,803 10,059
-------- -------- --------
-------- -------- --------
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
19
4
CONSOLIDATED BALANCE SHEET
Chemed Corporation and Subsidiary Companies
- ------------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
December 31, 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents (Note 7) . . . . . . . . . . . . . . . . . . . . . $ 14,615 $ 14,527
Marketable securities, at cost which approximates market (Note 7) . . . . . 1,200 33,177
Accounts receivable less allowances of $2,391 (1992--$1,837) . . . . . . . . 58,350 54,051
Current portion of note receivable (Note 8) . . . . . . . . . . . . . . . . 5,627 5,525
Inventories (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,745 47,581
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,677 7,025
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,214 161,886
Investment in affiliate (Note 3) . . . . . . . . . . . . . . . . . . . . . . 30,656 28,501
Other investments, at cost (Note 14) . . . . . . . . . . . . . . . . . . . . 37,657 35,503
Properties and equipment, at cost less accumulated depreciation (Note 10) . 70,758 62,872
Note receivable (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . 10,413 14,921
Identifiable intangible assets less accumulated amortization of $884
(1992--$244) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,166 11,551
Goodwill less accumulated amortization of $14,073 (1992--$11,573) . . . . . 94,867 78,390
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,522 11,320
-------- --------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $430,253 $404,944
-------- --------
-------- --------
LIABILITIES
Current liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,124 $ 22,019
Bank notes and loans payable (Note 11) . . . . . . . . . . . . . . . . . . . 25,000 --
Current portion of long-term debt (Note 12) . . . . . . . . . . . . . . . . 5,688 25,250
Income taxes (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,448 22,361
Deferred contract revenue (Note 2) . . . . . . . . . . . . . . . . . . . . . 23,783 9,060
Other current liabilities (Note 13) . . . . . . . . . . . . . . . . . . . . 28,606 25,267
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 127,649 103,957
-------- --------
Long-term debt (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . 98,059 103,778
Other liabilities and deferred income (Note 13) . . . . . . . . . . . . . . 35,383 34,949
Minority interest (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . 32,011 28,749
-------- --------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 293,102 271,433
-------- --------
STOCKHOLDERS' EQUITY
Capital stock--authorized 15,000,000 shares $1 par;
issued 12,087,894 (1992--11,922,189) shares . . . . . . . . . . . . . . . . 12,088 11,922
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,095 128,442
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,851 100,030
Treasury stock--2,289,120 (1992--2,163,733) shares, at cost . . . . . . . . . (63,914) (60,077)
Unearned compensation--ESOPs (Note 12) . . . . . . . . . . . . . . . . . . . . (42,969) (46,806)
-------- --------
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . 137,151 133,511
-------- --------
Commitments and contingencies (Notes 2, 13, 16 and 18)
Total Liabilities and Stockholders' Equity . . . . . . . . . . . $430,253 $404,944
-------- --------
-------- --------
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
20
5
CONSOLIDATED STATEMENT OF CASH FLOWS
Chemed Corporation and Subsidiary Companies
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,480 $ 15,651 $ 52,967
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization . . . . . . . . . . . . . . . . . 13,123 9,234 8,101
Gain on sale of investments . . . . . . . . . . . . . . . . . . (6,695) (2,877) (4,009)
Minority interest in earnings of subsidiaries (Note 1) . . . . . 3,809 3,147 2,759
Provision for uncollectible accounts receivable . . . . . . . . 2,018 1,616 1,774
Cumulative effect of a change in accounting principle
(Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,651) -- --
Provision for deferred income taxes (Note 6) . . . . . . . . . . 1,328 (1,583) (698)
Discontinued operations (Note 4) . . . . . . . . . . . . . . . . (687) (1,400) (41,930)
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations:
Increase in accounts receivable . . . . . . . . . . . . . . (4,588) (4,896) (3,851)
(Increase)/decrease in inventories and other
current assets . . . . . . . . . . . . . . . . . . . . . . (4,932) 831 (400)
Increase in accounts payable, deferred contract
revenue and other current liabilities . . . . . . . . . . 3,397 1,986 4,502
Increase/(decrease) in income taxes (Note 6) . . . . . . . . (1,828) (187) 863
Other--net . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,088) (5,602) (200)
-------- -------- -----------
Net cash provided by continuing operations . . . . . . . . . . . 17,686 15,920 19,878
Net cash provided by discontinued operations . . . . . . . . . . -- -- 306
-------- -------- -----------
Net cash provided by operating activities . . . . . . . . 17,686 15,920 20,184
-------- -------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities (Note 7) . . . . . . . . 78,858 239,820 1,324,241
Purchases of marketable securities (Note 7) . . . . . . . . . . . . . (47,114) (195,800) (1,397,255)
Business combinations, net of cash acquired (Note 2) . . . . . . . . (25,762) (68,247) (21,052)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (13,851) (8,232) (11,416)
Proceeds from sale of other investments . . . . . . . . . . . . . . . 9,193 2,133 --
Purchase of other investments (Note 14) . . . . . . . . . . . . . . . (4,396) (903) (29,019)
Net proceeds from sale of discontinued operations (Note 4) . . . . . 1,468 1,366 155,739
Other--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 834 2,399 (2,268)
-------- -------- -----------
Net cash provided/(used) by investing activities . . . . . . (770) (27,464) 18,970
-------- -------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(decrease) in bank notes and loans payable
(Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 (5,000) (7,200)
Repayment of long-term debt (Note 12) . . . . . . . . . . . . . . . . (21,452) (1,644) (1,239)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,659) (19,603) (19,820)
Issuance of capital stock (Note 17) . . . . . . . . . . . . . . . . . 4,263 2,345 969
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . (3,837) (6,433) (7,841)
Proceeds from issuance of long-term debt (Note 12) . . . . . . . . . -- 50,825 --
Other--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,143) (278) 1,061
-------- -------- -----------
Net cash provided/(used) by financing activities . . . . . . (16,828) 20,212 (34,070)
-------- -------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . 88 8,668 5,084
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . 14,527 5,859 775
-------- -------- -----------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . $ 14,615 $ 14,527 $ 5,859
-------- -------- -----------
-------- -------- -----------
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
21
6
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Chemed Corporation and Subsidiary Companies
- ------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Unearned
Treasury Compen-
Capital Paid-in Retained Stock-- sation--
Stock Capital Earnings at Cost ESOPs Total
- ------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1990 . . . . . . . . . $ 11,735 $ 124,320 $ 70,835 $ (45,803) $ (51,583) $ 109,504
Net income . . . . . . . . . . . . . . . . . . -- -- 52,967 -- -- 52,967
Dividends paid ($1.97 per share) . . . . . . . -- -- (19,820) -- -- (19,820)
Purchases of treasury stock . . . . . . . . . . -- -- -- (7,841) -- (7,841)
Decrease in unearned compensation
--ESOPs (Note 12) . . . . . . . . . . . . . . -- -- -- -- 2,613 2,613
Issuance of capital stock (Note 17) . . . . . . 95 1,982 -- -- -- 2,077
Other . . . . . . . . . . . . . . . . . . . . . -- (93) -- -- -- (93)
-------- --------- --------- ---------- --------- ---------
Balance at December 31, 1991 . . . . . . . . 11,830 126,209 103,982 (53,644) (48,970) 139,407
Net income . . . . . . . . . . . . . . . . . . -- -- 15,651 -- -- 15,651
Dividends paid ($2.00 per share) . . . . . . . -- -- (19,603) -- -- (19,603)
Purchases of treasury stock . . . . . . . . . . -- -- -- (6,433) -- (6,433)
Stock awards and exercise of stock options
(Note 17) . . . . . . . . . . . . . . . . . . 92 2,253 -- -- -- 2,345
Decrease in unearned compensation
--ESOPs (Note 12) . . . . . . . . . . . . . . -- -- -- -- 2,164 2,164
Other . . . . . . . . . . . . . . . . . . . . . -- (20) -- -- -- (20)
-------- --------- --------- ---------- --------- ---------
Balance at December 31, 1992 . . . . . . . . 11,922 128,442 100,030 (60,077) (46,806) 133,511
Net income . . . . . . . . . . . . . . . . . . -- -- 19,480 -- -- 19,480
Dividends paid ($2.01 per share) . . . . . . . -- -- (19,659) -- -- (19,659)
Stock awards and exercise of stock
options (Note 17) . . . . . . . . . . . . . . 166 4,097 -- -- -- 4,263
Purchases of treasury stock . . . . . . . . . . -- -- -- (3,837) -- (3,837)
Decrease in unearned compensation
--ESOPs (Note 12) . . . . . . . . . . . . . . -- -- -- -- 3,837 3,837
Other . . . . . . . . . . . . . . . . . . . . . -- (444) -- -- -- (444)
-------- --------- --------- ---------- --------- ---------
Balance at December 31, 1993 . . . . . . . . $ 12,088 $ 132,095 $ 99,851 $ (63,914) $ (42,969) $ 137,151
-------- --------- --------- ---------- --------- ---------
-------- --------- --------- ---------- --------- ---------
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
22
7
NOTES TO FINANCIAL STATEMENTS
1. SEGMENTS OF THE BUSINESS
The continuing operations of the Company are classified in the following
business segments, the definitions of which are based primarily on the
operating structure of the Company:
--The National Sanitary Supply segment includes the consolidated operations
of National Sanitary Supply Company ("National Sanitary Supply"), an 87%-owned
subsidiary, which sells and distributes sanitary maintenance and paper supplies
including cleaners, floor finishes, hand soaps, paper towels and tissues,
cleaning equipment, packaging supplies, business paper and general maintenance
products used by commercial, institutional and industrial businesses.
--The Roto-Rooter segment includes the consolidated operations of
Roto-Rooter Inc. ("Roto-Rooter"), a 59%-owned subsidiary, which provides repair
and maintenance services to residential and commercial accounts. Such services
include sewer, drain and pipe cleaning, plumbing services and appliance repair
and maintenance services and are delivered through both company-owned and
franchised locations. Roto-Rooter also manufactures and sells certain products
and equipment used to provide such services.
--The Veratex segment includes the combined operations of the businesses
comprising the Company's Veratex Group, which manufactures and distributes
medical, dental and veterinary supplies to office-based physicians, dentists
and veterinarians and to medical and dental dealers throughout the United
States. Products include disposable paper, cotton and gauze proprietary
products and various other dental, medical, veterinary and pharmaceutical
products.
Financial data by business segment are shown on pages 32, 33 and 36 of this
annual report. The segment data for 1993, 1992 and 1991 are an integral part
of these financial statements.
Substantially all of the Company's sales and service revenues from
continuing operations are generated from business within the United States.
2. BUSINESS COMBINATIONS
On July 16, 1993, Convenient Home Services Inc. ("Convenient") (30% owned
by the Company and 70% owned by Roto-Rooter) completed the acquisition of 100%
of the outstanding common shares of Encore Service Systems Inc. ("Encore").
Encore principally provides residential air conditioning and appliance repair
services through service warranty contracts in Florida and Arizona.
The purchase price paid by Convenient was $17,000,000 in cash at closing,
plus contingent payments based upon achievement of certain sales and earnings
objectives during the 36-month period following closing of the transaction (up
to a maximum of $8,800,000). In addition, Convenient also granted the seller a
four-year warrant exercisable between 36 and 48 months after the date of close
to purchase 15% of the outstanding stock of Convenient on a fully diluted
basis. This warrant is exercisable only if the seller elects not to take the
contingent payments discussed above.
Also during 1993, nine other business combinations were completed within
the Roto-Rooter, National Sanitary and Veratex segments for an aggregate
purchase price of $8,762,000 in cash.
Effective December 1, 1992, the Company acquired The Veratex Corporation
and related businesses ("Veratex") from Omnicare Inc. ("Omnicare"), a publicly
traded affiliate in which Chemed maintains a 27%-ownership interest. The
purchase price was $62,120,000 in cash paid at closing, plus a post-closing
payment of $1,514,000 (paid in April 1993) based on the net assets of Veratex.
Also in 1992, Roto-Rooter acquired four independently owned franchises, engaged
primarily in the sewer-, drain- and pipe-cleaning services business, and
National Sanitary Supply acquired four janitorial supply businesses.
During 1991, Chemed completed a merger agreement with Convenient, whereby
Roto-Rooter and the Company acquired 70%- and 30%-ownership interests in
Convenient, respectively, for approximately $20,550,000 in cash. Convenient
provides appliance maintenance and repair services through prepaid contractual
agreements for periods generally not in excess of one year. In addition,
Roto-Rooter acquired six independently owned franchises, engaged primarily in
the sewer-, drain- and pipe-cleaning services business, and National Sanitary
Supply acquired two janitorial supply businesses.
Unaudited pro forma financial data, which assume that the above-mentioned
business combinations were completed at the beginning of the year preceding the
year of acquisition, are summarized as follows (in thousands, except per share
data):
For the Years Ended December 31,
---------------------------------
1993 1992 1991
-------- -------- --------
Total sales
and service
revenues $556,752 $532,351 $455,212
Income from
continuing
operations 17,240 15,657 10,776
Earnings per
share--income
from continuing
operations 1.76 1.60 1.07
23
8
The excess of the purchase price over the fair value of the net assets
acquired in business combinations is classified as goodwill. A summary of net
assets acquired in business combinations follows (in thousands):
December 31,
--------------------------------
1993 1992 1991
-------- -------- --------
Working capital $(13,370) $ 25,300 $ (3,928)
Properties and equipment 3,633 18,454 2,899
Identifiable intangible
assets 11,100 7,994 3,800
Goodwill 19,700 16,869 17,857
Other assets and
liabilities, net 5,405 (370) 3,343
-------- -------- --------
Total net assets 26,468 68,247 23,971
Less--cash and cash
equivalents acquired (706) -- (2,919)
-------- -------- --------
Net cash used $ 25,762 $ 68,247 $ 21,052
-------- -------- --------
-------- -------- --------
3. EQUITY INTEREST IN AFFILIATE (OMNICARE)
The Company holds a 27% interest in Omnicare Inc., a public company
operating in the healthcare industry whose stock is traded on the New York
Stock Exchange. At December 31, 1993, the Company's investment in Omnicare of
$30,656,000 was $3,451,000 in excess of its equity interest. The market value
of the Company's investment at December 31, 1993, based on that day's closing
market price of $32, was $81,293,000. Chemed received cash dividends from
Omnicare totaling $407,000 during 1993 (1992--$357,000; 1991--$306,000).
Summarized financial data for Omnicare follow (in thousands):
For the Years Ended December 31,
----------------------------------
1993 1992 1991
-------- -------- --------
Sales and service
revenues $159,574 $102,994 $ 38,317
Gross profit 44,866 30,328 10,656
Income from
continuing
operations 8,734 3,448 1,182
Net income 9,014(a) 12,158(b) 4,420
December 31,
-----------------------
1993 1992
-------- --------
Current assets $111,242 $ 52,165
Noncurrent assets 107,553 79,228
-------- --------
Total assets $218,795 $131,393
-------- --------
-------- --------
Current liabilities $ 34,165 $ 31,625
Noncurrent liabilities 88,046 11,019
-------- --------
Total liabilities $122,211 $ 42,644
-------- --------
-------- --------
- ---------------
(a) Amount includes $280,000 from the cumulative effect of adopting SFAS No.
109, effective January 1, 1993.
(b) Amount includes a gain of $5,198,000 from the sale of Veratex to the
Company in December 1992. For the purpose of computing the Company's share of
Omnicare's earnings for 1992, this gain was excluded from Omnicare's net
income. Accordingly, the Company's share of this gain ($1,423,000) was recorded
as a reduction of the excess of the Company's investment over its share of
Omnicare's book value at December 31, 1992.
4. DISCONTINUED OPERATIONS
On April 2, 1991, the Company completed the sale of its DuBois Chemicals
Inc. ("DuBois") subsidiary to Diversey Corporation ("Diversey"), a subsidiary
of The Molson Companies Limited. In exchange for its equity interest, the
Company will receive net cash payments aggregating approximately $216,131,000,
including deferred payments with a present value of $25,177,000 at the sale
date. A $43,699,000 gain (net of income taxes totaling $44,609,000) on the sale
of DuBois was recorded in the second quarter of 1991.
During the first quarter of 1991, DuBois recorded sales and service
revenues of $68,729,000, a loss before income taxes of $1,028,000 and a net
aftertax loss of $594,000.
Discontinued operations, as shown on the accompanying consolidated
statement of income, comprise the following (in thousands):
For the Years Ended
December 31,
------------------------------
1993 1992 1991
------- ------- -------
Adjustment to the
expense accruals
related to the gain
on the sale of DuBois $ 687 $ -- $ --
Adjustment to the
tax provision on
the gain on the
sale of DuBois -- 1,400 --
Gain on the sale
of DuBois -- -- 43,699
Adjustments for losses
incurred on operations
discontinued in 1986 -- -- (1,175)
Operating results
of DuBois -- -- (594)
------- ------- -------
Total discontinued
operations $ 687 $ 1,400 $41,930
------- ------- -------
------- ------- -------
24
9
5. OTHER INCOME--NET
Other income--net comprises the following
(in thousands):
For the Years Ended
December 31,
---------------------------
1993 1992 1991
---- ---- ----
Gain on sales of
investments $ 6,695 $ 2,877 $ 4,009
Interest income 3,763 5,882 9,616
Dividend income 3,113 3,457 192
Other--net 85 520 436
------- ------- -------
Total other income
--net $13,656 $12,736 $14,253
------- ------- -------
------- ------- -------
6. INCOME TAXES
The provision for income taxes comprises the following (in thousands):
For the Years Ended
December 31,
---------------------------
1993 1992 1991
---- ---- ----
Continuing Operations:
Current
U.S. federal $ 6,243 $ 7,278 $ 5,791
U.S. state and local 1,664 790 312
Foreign 44 46 --
Deferred
U.S. federal 1,327 (1,535) (673)
U.S. state and local -- (48) (25)
------- ------- -------
Total $ 9,278 $ 6,531 $ 5,405
------- ------- -------
------- ------- -------
Discontinued Operations:
Current
U.S. federal $ 170 $ (678) $34,103
U.S. state and local -- -- 12,199
Foreign -- -- 281
Deferred
U.S. federal 183 (722) (2,611)
U.S. state and local -- -- (389)
------- -------- -------
Total $ 353 $ (1,400) $43,583
------- -------- -------
------- -------- -------
A summary of the significant temporary differences that give rise to
deferred income tax assets/(liabilities) follows (in thousands):
December 31,
---------------
1993 1992
---- ----
Accrued insurance expense $ 5,006 $ 4,618
Payments related to
discontinued operations 4,773 3,348
Employee benefit accruals 882 380
Bad debt allowances 871 753
Deferred compensation 765 586
Purchase accounting adjustments -- 937
Other 3,629 2,873
----- -----
Gross deferred income tax assets 15,926 13,495
------ ------
Accelerated tax depreciation (5,505) (4,917)
Amortization of intangible assets (1,246) (1,024)
Cash to accrual adjustments (869) (819)
Equity earnings of affiliate (799) (661)
Gain on subsidiary's sale of stock (659) (659)
Other (1,906) (1,721)
------- -------
Gross deferred income
tax liabilities (10,984) (9,801)
------- -------
Net deferred income tax assets $ 4,942 $ 3,694
------- -------
------- -------
The deferred income taxes were included in the following accounts in
the Company's consolidated balance sheet (in thousands):
December 31,
---------------
1993 1992
---- ----
Other current assets $5,316 $2,539
Other assets -- 1,155
Other liabilities and deferred income (374) --
------ ------
Net deferred income tax assets $4,942 $3,694
------ ------
------ ------
Based on the Company's history of prior operating earnings and its
expectations for the future, management has determined that the operating
income of the Company will more likely than not be sufficient to ensure the
full realization of these net deferred tax assets.
The difference between the effective tax rate for continuing operations
and the statutory U.S. federal income tax rate is explained as follows:
For the Years Ended
December 31,
-------------------------
1993 1992 1991
---- ---- ----
Statutory U.S. federal
income tax rate 34.0% 34.0% 34.0%
State and local income taxes,
less federal income tax
benefit 3.9 2.4 1.0
Tax benefit on dividends
paid to ESOPs (3.4) (4.3) (5.8)
Goodwill amortization 3.1 3.0 2.9
Favorable tax adjustments (2.5) (3.6) (3.0)
Domestic dividend exclusion (2.4) (3.1) --
Other--net .5 1.0 .9
---- ---- ----
Effective tax rate 33.2% 29.4% 30.0%
---- ---- ----
---- ---- ----
25
10
Effective January 1, 1993, the Company adopted SFAS No. 109 and
realized a gain from the cumulative effect of a change in accounting principle
in the amount of $1,651,000 ($.17 per share) during the first quarter of 1993.
Substantially all of the taxable income from continuing operations
relates to domestic operations.
Provision has not been made for additional taxes on $22,760,000 of
undistributed consolidated earnings of Roto-Rooter Inc. (a 59%-owned domestic
subsidiary), including $19,601,000 relating to periods prior to 1993.
Those earnings have been and will continue to be reinvested. Should Chemed
elect to sell its interest in Roto-Rooter rather than to effect a tax-free
liquidation, additional taxes amounting to $7,966,000 would be incurred at
current income tax rates.
The total amount of income taxes paid during the year ended December
31, 1993, was $9,913,000 (1992-- $10,970,000; 1991--$36,668,000).
7. CASH EQUIVALENTS AND MARKETABLE SECURITIES
Included in cash and cash equivalents at December 31, 1993, are cash
equivalents in the amount of $14,538,000 (1992--$14,331,000). The cash
equivalents at both dates consist of investments in various money market funds
and repurchase agreements yielding interest at a weighted average rate of 3.6%
in 1993 and 3.2% in 1992.
From time to time throughout the year, the Company invests its excess
cash in repurchase agreements directly with major commercial banks. Although
the collateral is not physically held by the Company, the term of such
repurchase agreements is less than 10 days. Investments of significant amounts
are spread among a number of banks and the amounts invested in each bank are
varied constantly.
A summary of marketable securities follows (in thousands):
December 31,
--------------
1993 1992
---- ----
Various adjustable-rate securities
funds, with a weighted average
yield of 6.8% (1992--5.3%) $ 1,000 $12,000
U.S. Treasury Notes, maturing
between January 1995 and
December 1996, with a
weighted average yield of 4.7% -- 20,976
All other 200 201
------- -------
Total marketable securities $ 1,200 $33,177
------- -------
------- -------
8. NOTE RECEIVABLE
As a part of the agreement to purchase DuBois, Diversey issued a note to
the Company in the gross amount of $30,000,000, payments for which began on
April 2, 1992, in five annual installments of $6,000,000 each. As no rate of
interest was specified in the note, interest has been imputed at 10% per annum.
The balance of the note receivable comprises the following (in thousands):
December 31,
--------------
1993 1992
---- ----
Gross amount of note
receivable outstanding $18,000 $24,000
Less amount representing imputed
interest (1,960) (3,554)
------ ------
Present value of note receivable 16,040 20,446
Less current portion (5,627) (5,525)
------ ------
Note receivable, less current
portion $10,413 $14,921
------- -------
------- -------
9. INVENTORIES
A summary of inventories follows (in thousands):
December 31,
--------------
1993 1992
---- ----
Raw materials $ 6,977 $ 6,395
Finished goods and general
merchandise 47,768 41,186
------- -------
Total inventories $54,745 $47,581
------- -------
------- -------
10. PROPERTIES AND EQUIPMENT
A summary of properties and equipment follows (in thousands):
December 31,
--------------
1993 1992
---- ----
Land $ 6,340 $ 6,340
Buildings 25,560 24,726
Machinery 47,209 38,342
Transportation equipment 23,598 18,786
Projects under construction 2,003 1,532
----- -----
Total properties and equipment 104,710 89,726
Less accumulated depreciation (33,952) (26,854)
------- -------
Net properties and equipment $ 70,758 $ 62,872
-------- --------
-------- --------
11. BANK NOTES AND LOANS PAYABLE
In December 1993, the Company entered into a revolving credit/term loan
agreement ("RT Agreement") with PNC Bank, Ohio, National Association to borrow
up to $20,000,000 at any time during the three-year period ending December 31,
1996. At that date, the outstanding borrowings must either be repaid or
converted to a term loan repayable in four equal semiannual installments.
Borrowing under the RT Agreement is subject to maintaining certain financial
covenants, and the interest rate is based on various stipulated market rates of
interest.
During 1990, the Company entered into a revolving credit agreement
("Credit Agreement") with Bank of America to borrow up to $25,000,000 at any
time during the five-year period ending August 23, 1995. Borrowing under the
Credit Agreement is subject to maintaining certain financial covenants, and the
interest rate is based on various stipulated market rates of interest.
26
11
At December 31, 1993, the Company had $25,000,000 of borrowings
outstanding under the Credit Agreement and none under the RT Agreement. In
addition to these agreements, the Company had $34,250,000 of unused lines of
credit with various banks at December 31, 1993.
The Company's short-term borrowings provide temporary capital for
operations. There are no restrictions on any cash balances maintained at the
banks. Information relating to short-term borrowings is summarized below (in
thousands, except percentages):
For the Years Ended
December 31,
----------------------------
1993 1992 1991
------- ------- -------
Aggregate borrowings
outstanding:
Average month-
end balance $ 4,583 $ 7,392 $ 9,371
Maximum month-
end balance 25,000 10,000 28,150
Weighted average
interest rate:
On average
borrowings(a) 3.4% 5.3% 6.5%
On year-end
borrowings 3.8 n.a. 4.6
(a) Calculated by dividing the actual interest expense by the average month-end
balance.
12. LONG-TERM DEBT
A summary of the Company's long-term debt follows (in thousands):
December 31,
-------------------
1993 1992
-------- --------
Senior Notes:
8.15%, due 2004 $ 50,000 $ 50,000
Series A--10.07%, due 1993 -- 20,000
Series B--10.67%, due
1993 - 2003 10,000 11,000
Employee Stock Ownership
Plans Loan Guarantees:
6.57% (1992--6.67%),
due 1993 - 2000 42,969 46,806
Other 778 1,222
-------- --------
Subtotal 103,747 129,028
Less current portion (5,688) (25,250)
-------- --------
Long-term debt less
current portion $ 98,059 $103,778
-------- --------
-------- --------
SENIOR NOTES
On December 22, 1992, the Company borrowed $50,000,000 from several
insurance companies. Principal is repayable in five annual installments of
$10,000,000 beginning on December 15, 2000, and bears interest at the rate of
8.15% per annum. Interest is payable on June 15 and December 15 of each year.
On November 10, 1988, the Company borrowed $31,000,000 from a
consortium of insurance companies. Of this amount, $21,000,000 was due and paid
on November 1, 1993. The remaining $10,000,000 bears interest at the rate of
10.67% with remaining annual principal payments of $1,000,000 due on November
1, 1994 through 2003. Interest on both series of notes is payable on May 1 and
November 1 of each year.
EMPLOYEE STOCK OWNERSHIP PLANS ("ESOPs") LOAN
GUARANTEES
In connection with the adoption and subsequent modification of two
ESOPs during the years 1987 through 1990, the Company guaranteed loans from The
Fifth Third Bank (Cincinnati, Ohio) to the ESOPs. In January 1992, the Company
refinanced $44,157,000 of these loans with various institutional lenders at
reduced interest rates. Payments by the ESOPs, including both principal and
interest, are to be made in quarterly installments over the next seven years,
the final payments being due on June 30, 2000. The loans, secured in part by
the unallocated shares of the Company's capital stock held by the ESOP trusts,
currently bear interest at an average annual rate of 6.57% (1992--6.67%). Such
rates are subject to adjustments for changes in interest rates of specified
U.S. Treasury obligations, U.S. federal statutory income tax rates and certain
federal tax law changes.
The market value of the unallocated shares of the Company's capital stock
held by the ESOPs at December 31, 1993, based on that day's closing price of
$30.50 was $32,101,000 as compared with aggregate loan guarantees of
$42,969,000.
OTHER
Other long-term debt has arisen from the assumption of loans in
connection with various acquisitions. Interest rates range from 5% to 15%, and
the obligations are due on various dates through 1999.
The following is a schedule by year of required long-term debt
payments as of December 31, 1993 (in thousands):
1994 $ 5,688
1995 6,346
1996 7,023
1997 12,432
1998 10,521
After 1998 61,737
---------
Total long-term debt $ 103,747
---------
---------
The various loan agreements contain certain covenants which could
restrict the amount of cash dividend payments, treasury stock purchases and
certain other transactions of the Company. The Company does not anticipate that
the restrictions imposed by the agreements will materially restrict its future
operations or ability to pay dividends.
The total amount of interest paid during the year ended December 31,
1993, was $8,893,000 (1992--$5,371,000; 1991--$7,020,000).
27
12
13. OTHER LIABILITIES
At December 31, 1993, other current liabilities included accrued
insurance liabilities of $10,929,000 (1992--$8,617,000).
Liabilities for estimated expenses related to the sale of DuBois during
1991 are included in the following accounts on the consolidated balance sheet
(in thousands):
December 31,
---------------------
1993 1992
-------- --------
Other current liabilities $ 4,195 $ 5,326
Other liabilities and deferred
income 26,895 27,297
-------- --------
Total $ 31,090 $ 32,623
-------- --------
-------- --------
Included in other liabilities and deferred income at December 31, 1993
and 1992, is an accrual of $14,723,000 for the Company's estimated liability
for potential environmental cleanup and related costs arising from the sale of
DuBois. The Company is contingently liable for additional DuBois-related
environmental cleanup and related costs up to a maximum of $10,000,000, for
which no provision has been accrued.
14. FINANCIAL INSTRUMENTS
The following methods and assumptions are used in estimating the fair
value of each class of the Company's financial instruments:
-- For cash and cash equivalents, accounts receivable 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 marketable securities, fair value is based upon quoted market
prices.
-- For other investments and other assets, fair value is based upon
quoted market prices for these or similar securities, if available. Included in
other investments is the Company's investment in privately held Vitas
Healthcare Corporation ("Vitas") which provides noncurative care to chronically
ill patients. At December 31, 1992, a reasonable estimate of fair value could
not be made without commissioning a costly outside appraisal. During 1993,
Vitas obtained additional outside financing and recently obtained a valuation
of its common stock from an independent investment banking firm. The market
value of the Common Stock Purchase Warrants at December 31, 1993, is based on
the difference between that appraisal and Chemed's exercise price. The value of
the 9% Cumulative Preferred Stock is based on the present value of the
mandatory redemption payments, using an interest rate of 7.5%, a rate which
management believes is reasonable in view of Vitas' improving financial
performance and current market conditions.
-- For the note receivable from Diversey, the fair value is determined
by discounting the remaining future installment payments using a rate of 6%
(1992--8%), a rate considered by management to reflect current market
conditions.
-- The fair value of the Company's long-term debt is estimated by
discounting the future cash outlays associated with each debt instrument using
interest rates currently available to the Company for debt issues with similar
terms and remaining maturities.
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
December 31, 1993 December 31, 1992
---------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -----
Marketable
securities $ 1,200 $ 1,193 $ 33,177 $ 32,871
Other invest-
ments:
Vitas--
Preferred
Stock 26,020 28,195 25,744 n.a.
Warrants 1,500 4,730 1,500 n.a.
EXEL Ltd. 4,160 18,460 5,000 26,419
All other 5,977 9,686 3,259 4,620
Restricted de-
posits
included in
other assets 13,176 13,176 4,523 4,523
Note receivable:
Current
portion 5,627 5,910 5,525 5,882
Noncurrent
portion 10,413 10,836 14,921 15,158
Long-term debt:
Current
portion 5,688 5,464 25,250 33,944
Noncurrent
portion 98,059 99,710 103,778 94,454
15. PENSION AND RETIREMENT PLANS
Retirement obligations under various plans cover substantially all
full-time employees who meet age and/or service eligibility requirements. The
major plans providing retirement benefits to the Company's employees are
defined contribution plans.
The Company has established two ESOPs which purchased a total of
$56,000,000 of the Company's capital stock. As a result of the sale of DuBois
in 1991, the ESOPs, which formerly covered substantially all Chemed
headquarters and DuBois employees not covered by collective bargaining
agreements, covered only Chemed headquarters employees during the last nine
months of 1991. In 1992, substantially all employees of National Sanitary
Supply not covered by collective bargaining agreements became participants in
one of the ESOPs. Similarly, in 1993, qualifying employees of Veratex became
participants in the Company's ESOPs. A portion of the excess cost of the ESOPs,
which arose due to the withdrawal of the DuBois employees from the ESOPs, was
charged against the gain on the sale of discontinued operations.
28
13
Expenses charged to continuing operations for the Company's pension
and profit-sharing plans, ESOPs (including amounts classified as interest
expense) and other similar plans comprise the following (in thousands):
For the Years Ended
December 31,
-----------------------------------------------
1993 1992 1991
------- ------- -------
ESOPs:
Principal payments $ 3,837 $ 2,164 $ 2,612
Interest payments 2,968 3,255 4,328
Dividends received
by the ESOP
trusts (2,819) (2,818) (3,055)
Interest income
earned by the
ESOP trusts (4) (5) (5)
------- ------- -------
Subtotal 3,982 2,596 3,880
Less ESOP costs
allocated to
discontinued
operations (350) -- (2,055)
Pension, profit
sharing and other
similar plans 1,813 2,221 2,249
------- ------- -------
Total $ 5,445 $ 4,817 $ 4,074
------- ------- -------
------- ------- -------
Interest expense on ESOP debt allocated to discontinued operations
totaled $244,000 in 1993 and $1,209,000 in 1991.
16. LEASE ARRANGEMENTS
The Company, as lessee, has operating leases which cover its corporate
office headquarters; various plant, warehouse and office facilities; office
equipment; and plant and transportation equipment. The remaining terms of these
leases range from one year to 13 years, and in most cases, management expects
that these leases will be renewed or replaced by other leases in the normal
course of business. All major plants and warehouses and substantially all
equipment are either owned by the Company or covered by an option to purchase
at a fixed price.
The following is a summary of future minimum rental payments and
sublease rentals to be received under operating leases that have initial or
remaining noncancelable terms in excess of one year at December 31, 1993 (in
thousands):
1994 $ 9,136
1995 7,930
1996 7,205
1997 5,534
1998 4,053
After 1998 27,873
--------
Total minimum rental payments 61,731
Less minimum sublease rentals (22,513)
--------
Net minimum rental payments $ 39,218
--------
--------
Total rental expense incurred under operating leases follows (in
thousands):
For the Years Ended
December 31,
------------------------------------------------
1993 1992 1991
------- --------- ---------
Total rental payments $ 9,216 $ 7,057 $ 5,545
Less sublease rentals (3,440) (3,268) (2,064)
------- -------- --------
Net rental expense $ 5,776 $ 3,789 $ 3,481
------- -------- --------
------- -------- --------
17. STOCK INCENTIVE PLANS
The Company has six Stock Incentive Plans under which 2,150,000 shares
of Chemed Capital Stock may be or have been issued to key employees pursuant to
the grant of stock awards and/or options to purchase such shares. Options to
purchase 628,967 shares were outstanding at December 31, 1993, and options or
other stock incentives covering 300,827 shares were then available for
issuance. All options granted under these plans provide for a purchase price
equal to the market value of the stock at the date of grant. The latest plan,
covering 250,000 shares, was adopted in May 1993.
Under the plan adopted in 1983, both nonstatutory and incentive stock
options have been granted. Incentive stock options granted under the 1983 plan
become exercisable in full six months following the date of the grant;
nonstatutory options granted under the 1983 plan become exercisable in four
annual installments commencing six months after the date of grant.
The other plans are not qualified, restricted or incentive stock
option plans under the Internal Revenue Code. Additional options may not be
granted under the plans adopted in 1978, 1981 and 1983 covering a total of
1,150,000 shares, but a number of options granted under those plans remains
outstanding. Options granted under the 1986, 1988 and 1993 plans become
exercisable six months following the date of grant in either three or four
equal annual installments.
29
14
The changes in outstanding stock options and other data follow:
1993 1992
------------------------ --------------------------
Number Number
of Average of Average
Shares Price Shares Price
------ ------- ------ -------
Options out-
standing at
January 1 573,474 $ 25.57 440,548 $ 26.15
Options
granted 250,950 28.56 268,950 25.38
Options
exercised (165,055) 23.34 (74,069) 23.20
Options ter-
minated
or
canceled (30,402) 31.90 (61,955) 31.69
------- -------
Options out-
standing at
Decem-
ber 31 628,967 27.04 573,474 25.57
------- -------
------- -------
Options exer-
cisable at
Decem-
ber 31 332,978 253,138
------- -------
------- -------
Shares
available
for grant
of stock
awards
and stock
options 300,827 301,804
------- -------
------- -------
During 1993, the Company granted stock awards covering 650
(1992--18,441) shares under its Stock Incentive Plans. The shares of capital
stock were issued to directors and key employees at no cost and generally are
restricted as to the transfer of ownership. Restrictions covering either
one-fourth or one-third of each holder's shares lapse annually commencing one
year after the date of grant.
18. SUBSEQUENT EVENT
Effective January 1, 1994, Chemed acquired all of the capital stock of
Patient Care Inc. ("Patient Care") for cash payments aggregating $20,582,000,
including deferred payments with a present value of $6,582,000, plus 17,500
shares of Chemed Capital Stock. Additional cash payments of up to $10,400,000
may be made, the amount being contingent upon the earnings of Patient Care
during the three-year period ended December 31, 1995. In conjunction with the
purchase of Patient Care, an application for the transfer of ownership of one
region of Patient Care was made with a state regulatory agency and is expected
to be approved in 1994.
With 1993 revenue of approximately $53,000,000, Patient Care
emphasizes personal care in the home, with services including skilled nursing;
medical social-work; nutrition; and other specialized services.
30
15
UNAUDITED SUMMARY OF QUARTERLY RESULTS
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------------------------------------
(in thousands, except per share data) First Second Third Fourth Total
1993 Quarter Quarter Quarter Quarter Year
- --------------------------------------------------------------------------------------------------------------
Continuing Operations
Total sales and service revenues . . . . . . $120,519 $127,241 $139,824 $137,509 $525,093
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . $ 41,009 $ 43,143 $ 45,718 $ 46,030 $175,900
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Income from operations . . . . . . . . . . . $ 3,892 $ 5,300 $ 7,086 $ 6,885 $ 23,163
Interest expense . . . . . . . . . . . . . . (2,273) (2,258) (2,311) (2,047) (8,889)
Other income--net . . . . . . . . . . . . . . 4,670 4,979 1,974 2,033 13,656
-------- -------- -------- -------- --------
Income before income taxes, equity in
earnings of affiliate and minority
interest . . . . . . . . . . . . . . . . 6,289 8,021 6,749 6,871 27,930
Income taxes . . . . . . . . . . . . . . . . (1,964) (2,762) (2,230) (2,322) (9,278)
Equity in earnings of affiliate . . . . . . . 479 478 689 653 2,299
Minority interest in earnings of subsidiaries (726) (873) (1,050) (1,160) (3,809)
-------- -------- -------- -------- --------
Income from continuing operations . . . . . 4,078 4,864 4,158 4,042 17,142
Discontinued Operations . . . . . . . . . . . -- 687 -- -- 687
-------- -------- -------- -------- --------
Income before cumulative effect of
a change in accounting principle . . . . . . 4,078 5,551 4,158 4,042 17,829
Cumulative effect of a change
in accounting principle . . . . . . . . . . . 1,651 -- -- -- 1,651
-------- -------- -------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . $ 5,729 $ 5,551 $ 4,158 $ 4,042 $ 19,480
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings Per Common Share
Income from continuing operations $ .42 $ .50 $ .43 $ .41 $ 1.75
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Income before cumulative effect of
a change in accounting principle . . . . . $ .42 $ .57 $ .43 $ .41 $ 1.82
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . $ .59 $ .57 $ .43 $ .41 $ 1.99
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average number of shares outstanding . . . . 9,766 9,770 9,781 9,794 9,778
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
1992
- --------------------------------------------------------------------------------------------------------------
Continuing Operations
Total sales and service revenues . . . . . . $ 92,458 $ 98,258 $102,670 $107,576 $400,962
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . $ 31,636 $ 33,599 $ 35,260 $ 38,022 $138,517
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Income from operations . . . . . . . . . . . $ 2,826 $ 3,329 $ 4,171 $ 4,854 $ 15,180
Interest expense . . . . . . . . . . . . . . (1,387) (1,365) (1,371) (1,609) (5,732)
Other income--net . . . . . . . . . . . . . . 3,315 4,643 2,654 2,124 12,736
-------- -------- -------- -------- --------
Income before income taxes, equity in
earnings of affiliate and minority interest 4,754 6,607 5,454 5,369 22,184
Income taxes . . . . . . . . . . . . . . . . (1,354) (1,986) (1,530) (1,661) (6,531)
Equity in earnings of affiliate . . . . . . . 403 453 495 394 1,745
Minority interest in earnings of subsidiaries (667) (726) (834) (920) (3,147)
-------- -------- -------- -------- --------
Income from continuing operations . . . . . 3,136 4,348 3,585 3,182 14,251
Discontinued Operations . . . . . . . . . . . . -- -- 1,400 -- 1,400
-------- -------- -------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . $ 3,136 $ 4,348 $ 4,985 $ 3,182 $ 15,651
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings Per Common Share
Income from continuing operations . . . . . . $ .32 $ .44 $ .37 $ .33 $ 1.45
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . $ .32 $ .44 $ .51 $ .33 $ 1.60
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average number of shares outstanding . . . . 9,852 9,815 9,794 9,752 9,803
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
31
16
SALES AND PROFIT STATISTICS BY BUSINESS SEGMENT (a)
Chemed Corporation and Subsidiary Companies
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except percentages and footnote data)
% of % of
Total Total
1993 1984 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
SALES AND SERVICE REVENUES FROM CONTINUING OPERATIONS (b)
National Sanitary Supply . . . . . . . . . . . . . . . 57% 67% $296,865 $288,731
Roto-Rooter . . . . . . . . . . . . . . . . . . . . . 26 33 136,428(d) 104,688
Veratex . . . . . . . . . . . . . . . . . . . . . . . 17 -- 91,800 7,543(d)
---- ---- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . 100% 100% $525,093 $400,962
---- ---- -------- --------
---- ---- -------- --------
OPERATING PROFIT FROM CONTINUING OPERATIONS (c)
National Sanitary Supply . . . . . . . . . . . . . . . 31% 53% $ 9,093 $ 9,171
Roto-Rooter . . . . . . . . . . . . . . . . . . . . . 49 47 14,371(d) 11,253
Veratex . . . . . . . . . . . . . . . . . . . . . . . 20 -- 5,660 607(d)
---- ---- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . 100% 100% $ 29,124 $ 21,031
---- ---- -------- --------
---- ---- -------- --------
(a) The data are presented on a continuing operations basis, thus excluding
DuBois Chemicals Inc., sold in April 1991, and Vestal Laboratories Inc., sold
in December 1986. The data for 1993, 1992 and 1991 are covered by the report of
independent accountants.
(b) Intersegment sales are not material. Total sales by segment consist of
sales and services to unaffiliated companies. The Company does not derive 10%
or more of its sales and service revenues from any one customer.
(c) Operating profit is total sales and service revenues less operating
expenses and includes 100% of all consolidated operations. In computing
operating profit, none of the following items has been added or deducted:
general corporate expenses; interest expense; other income--net; income taxes;
equity in earnings of affiliate; minority interest in earnings of subsidiaries;
discontinued operations; extraordinary items; and cumulative effect of changes
in accounting principles.
32
17
- --------------------------------------------------------------------------------------------------------------------------
1991 1990 1989 1988 1987 1986 1985 1984
- --------------------------------------------------------------------------------------------------------------------------
$267,508 $265,424 $262,351 $179,191(d) $ 92,618 $ 80,010(d) $ 63,777 $ 56,509
84,774(d) 75,230 66,842 62,255 55,233 45,292 36,306 28,368(d)
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
$352,282 $340,654 $329,193 $241,446 $147,851 $125,302 $100,083 $ 84,877
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
$ 8,504 $ 10,165 $ 10,762 $ 8,507(d) $ 6,157 $ 5,966(d) $ 5,665 $ 4,922
8,499(d) 8,049 7,762 8,267 7,573 6,849 5,581 4,428(d)
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
$ 17,003 $ 18,214 $ 18,524 $ 16,774 $ 13,730 $ 12,815 $ 11,246 $ 9,350
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
(d) The following significant business combinations, all in the United States,
have been accounted for as purchase transactions:
Amounts Reported
in Year Acquired
----------------------------------------
Business Effective Date Sales and Operating
Name Segment of Acquisition Service Revenues Profit
- ------------------------ ------------------------- ------------------- -------------------- -----------
Encore Service
Systems Inc. Roto-Rooter July 1993 $18,576,000 $784,000
Veratex Group Veratex December 1992 7,543,000 607,000
Convenient Home
Services Inc. Roto-Rooter August 1991 5,557,000 773,000
Century Papers Inc. National Sanitary Supply July 1988 71,650,000 --*
National Sanitary Supply
acquisitions National Sanitary Supply Various 1986 9,778,000 --*
Roto-Rooter franchises Roto-Rooter Various 1984 3,153,000 139,000
*Operations were integrated into existing operations and amounts are not
determinable.
33
18
SELECTED FINANCIAL DATA
Chemed Corporation and Subsidiary Companies
- -------------------------------------------
(in thousands, except per share data, employee numbers, footnote data, ratios
and percentages)
1993 1992 1991
- ------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Continuing operations
Total sales and service revenues . . . . . . . . . . $ 525,093 $ 400,962 $ 352,282
Gross profit . . . . . . . . . . . . . . . . . . . . 175,900 138,517 123,077
Depreciation . . . . . . . . . . . . . . . . . . . . 8,817 6,348 5,899
Income from operations . . . . . . . . . . . . . . . 23,163 15,180 9,500
Income/(loss) from continuing operations . . . . . . 17,142 14,251 11,037
Discontinued operations(a) . . . . . . . . . . . . . . 687 1,400 41,930
Extraordinary gain . . . . . . . . . . . . . . . . . . -- -- --
Cumulative effect of changes in accounting principles . 1,651 -- --
Net income . . . . . . . . . . . . . . . . . . . . . . 19,480 15,651 52,967
Earnings per common share:
Assuming full dilution--
Income/(loss) from continuing operations(b) . . . 1.75 1.45 1.10
Net income . . . . . . . . . . . . . . . . . . . . 1.99 1.60 5.27
Primary--
Income/(loss) from continuing operations(b) . . . 1.75 1.45 1.10
Net income . . . . . . . . . . . . . . . . . . . . 1.99 1.60 5.27
Average number of shares outstanding:
Assuming full dilution . . . . . . . . . . . . . . . 9,778 9,803 10,059
Primary . . . . . . . . . . . . . . . . . . . . . . . 9,778 9,803 10,059
Dividends per share . . . . . . . . . . . . . . . . . . $ 2.01 $ 2.00 $ 1.97
FINANCIAL POSITION--YEAR-END
Cash, cash equivalents and marketable securities . . . $ 15,815 $ 47,704 $ 83,044
Working capital . . . . . . . . . . . . . . . . . . . . 17,565 57,929 78,663
Properties and equipment, at cost less accumulated
depreciation . . . . . . . . . . . . . . . . . . . . 70,758 62,872 44,391
Total assets . . . . . . . . . . . . . . . . . . . . . 430,253 404,944 364,335
Long-term debt . . . . . . . . . . . . . . . . . . . . 98,059 103,778 77,928
Stockholders' equity . . . . . . . . . . . . . . . . . 137,151 133,511 139,407
Book value per share:
Assuming full dilution . . . . . . . . . . . . . . . 14.00 13.68 14.08
Primary . . . . . . . . . . . . . . . . . . . . . . . 14.00 13.68 14.08
OTHER STATISTICS--CONTINUING OPERATIONS
Net cash provided/(used) by continuing operations . . . $ 17,686 $ 15,920 $ 19,878
Capital expenditures . . . . . . . . . . . . . . . . . 13,851 8,232 11,416
Number of employees . . . . . . . . . . . . . . . . . . 4,834 3,856 3,325
Number of sales and service representatives . . . . . . 2,552 1,790 1,665
Dividend payout ratio(d) . . . . . . . . . . . . . . . 101.0% 125.0% 37.4%
Debt to total capital ratio:
Total debt basis . . . . . . . . . . . . . . . . . . 43.2 44.3 34.5
Senior debt basis . . . . . . . . . . . . . . . . . . 43.2 44.3 34.5
Return on average equity(d) . . . . . . . . . . . . . . 14.3 11.6 42.5
Return on average total capital employed(d) . . . . . . 9.7 8.7 24.4
Current ratio . . . . . . . . . . . . . . . . . . . . . 1.14 1.56 1.93
(a) Discontinued operations data include accrual adjustments in 1992 and 1993
related to the gain on the sale of DuBois Chemicals Inc. ("DuBois"); DuBois,
sold in April 1991; adjustments to accruals in 1991 and 1988 related to
operations discontinued in 1986; and Vestal Laboratories Inc., sold in December
1986.
(b) Earnings per share assuming full dilution from continuing operations for
years prior to 1989 are greater than the corresponding primary amounts due to
the antidilutive impact of the convertible debt on earnings per common share
from continuing operations.
34
19
1990 1989 1988 1987 1986 1985 1984
- ---------------------------------------------------------------------------------------
$ 340,654 $ 329,193 $ 241,446 $ 147,851 $ 125,302 $ 100,083 $ 84,877
118,235 110,618 87,071 65,577 57,145 45,267 38,702
5,413 4,811 3,738 3,049 2,484 1,958 1,477
11,147 11,281 9,529 7,636 6,259 5,928 5,029
3,737 4,024 1,142 1,049 (4,893)(c) 2,701 1,600
12,817 22,158 22,246 19,313 42,314 19,157 18,510
-- -- -- -- 212 -- --
-- -- 732 -- -- -- --
16,554 26,182 24,120 20,362 37,633(c) 21,858 20,110
.36 .40 .36 .39 (.18)(c) .52 .43
1.60 2.61 2.47 2.15 3.68(c) 2.27 2.11
.36 .40 .12 .12 (.55)(c) .31 .18
1.60 2.61 2.60 2.28 4.21(c) 2.49 2.29
10,371 10,042 10,879 11,006 11,008 10,946 11,004
10,371 10,042 9,280 8,939 8,946 8,787 8,793
$ 1.96 $ 1.84 $ 1.72 $ 1.60 $ 1.56 $ 1.52 $ 1.48
$ 775 $ 5,346 $ 4,033 $ 4,387 $ 26,165 $ 5,845 $ 1,193
14,377 28,236 24,740 10,064 22,108 16,264 12,131
36,802 38,574 36,335 25,034 22,882 18,160 16,592
277,169 285,600 276,276 218,314 234,984 195,932 176,801
82,151 85,834 90,405 46,504 47,328 57,373 70,483
109,504 119,121 109,276 111,754 120,392 93,540 82,020
10.75 11.61 13.19 14.69 15.22 12.90 12.12
10.75 11.61 11.65 12.71 13.41 10.56 9.42
$ 13,760 $ 9,537 $ 7,589 $ (6,335) $ (4,817) $ 737 $ 453
7,128 7,723 10,259 5,597 6,475 4,476 5,042
2,965 2,851 2,633 1,796 1,657 1,221 1,160
1,409 1,356 1,223 967 853 626 625
122.5% 70.5% 66.2% 70.2% 37.1% 61.0% 64.6%
42.4 40.3 43.5 29.3 26.5 37.1 45.4
42.4 34.9 29.2 3.8 1.5 8.6 13.5
13.8 22.3 20.6 17.0 38.7 26.0 25.4
9.8 14.0 14.9 13.5 24.1 17.1 16.5
1.27 1.61 1.55 1.32 1.56 1.60 1.69
(c) Included in income from continuing operations, net income and the
corresponding earnings per share amounts for 1986 is an aftertax loss of
$3,635,000 for the cost of terminating interest rate exchange arrangements.
(d) These computations are based on the net income and, with respect to return
on average capital employed, various related adjustments.
35
20
ADDITIONAL SEGMENT DATA(a)
Chemed Corporation and Subsidiary Companies
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
National Sanitary Supply . . . . . . . . . . . . . . . . . $109,952 $110,337 $106,223
Roto-Rooter . . . . . . . . . . . . . . . . . . . . . . . 125,280 79,997 75,398
Veratex . . . . . . . . . . . . . . . . . . . . . . . . . 78,468 67,770 --
-------- -------- --------
Total identifiable assets . . . . . . . . . . . . . . . 313,700 258,104 181,621
Corporate assets(b) . . . . . . . . . . . . . . . . . . . 116,553 146,840 182,714
-------- -------- --------
Total assets . . . . . . . . . . . . . . . . . . . . $430,253 $404,944 $364,335
-------- -------- --------
-------- -------- --------
CAPITAL EXPENDITURES
National Sanitary Supply . . . . . . . . . . . . . . . . . $ 2,688 $ 3,949 $ 4,408
Roto-Rooter . . . . . . . . . . . . . . . . . . . . . . . 6,885 3,698 3,533
Veratex . . . . . . . . . . . . . . . . . . . . . . . . . 3,743 448 --
-------- -------- --------
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . 13,316 8,095 7,941
Corporate assets . . . . . . . . . . . . . . . . . . . . . 535 137 3,475
-------- -------- --------
Total capital expenditures . . . . . . . . . . . . . $ 13,851 $ 8,232 $ 11,416
-------- -------- --------
-------- -------- --------
DEPRECIATION AND AMORTIZATION(c)
National Sanitary Supply . . . . . . . . . . . . . . . . . $ 4,752 $ 4,716 $ 4,150
Roto-Rooter . . . . . . . . . . . . . . . . . . . . . . . 5,169 3,831 3,131
Veratex . . . . . . . . . . . . . . . . . . . . . . . . . 2,113 162 --
-------- -------- --------
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . 12,034 8,709 7,281
Corporate assets . . . . . . . . . . . . . . . . . . . . . 1,089 525 820
-------- -------- --------
Total depreciation and amortization . . . . . . . . . $ 13,123 $ 9,234 $ 8,101
-------- -------- --------
-------- -------- --------
RECONCILIATION OF OPERATING PROFIT TO INCOME
BEFORE INCOME TAXES, EQUITY EARNINGS AND MINORITY INTEREST
Total operating profit . . . . . . . . . . . . . . . . . . $ 29,124 $ 21,031 $ 17,003
Interest expense . . . . . . . . . . . . . . . . . . . . . (8,889) (5,732) (5,731)
Corporate expenses, net of investment income(d) . . . . . 7,695 6,885 6,750
-------- -------- --------
Income before income taxes, equity earnings and
minority interest . . . . . . . . . . . . . . . . . $ 27,930 $ 22,184 $ 18,022
-------- -------- --------
-------- -------- --------
(a) The Additional Segment Data are covered by the report of independent
accountants.
(b) Corporate assets consist primarily of cash and cash equivalents, marketable
securities, properties and equipment, investment in affiliate and other
investments.
(c) Depreciation and amortization include amortization of identifiable
intangible assets, goodwill and other assets.
(d) Amounts are not allocable to segments and are included in various
categories in the Consolidated Statement of Income.
36
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Significant transactions impacting the Company's consolidated cash flows
and financial position during 1993 and at December 31, 1993, include the
following:
--During 1993, the Company completed the acquisition of Encore Service
Systems Inc. ("Encore") and nine other purchase business combinations for
cash outlays aggregating $25.8 million;
--In November 1993, the Company repaid $21 million of its Series A and
Series B Senior Notes due 1993; and,
--During 1993, the Company increased its short-term borrowings by $25.0
million.
As a result of deploying a significant portion of its excess cash and
incurring additional short-term borrowings, the Company's current ratio was
1.1:1 at December 31, 1993, as compared with 1.6:1 at the end of 1992.
Additionally, the ratio of total debt to total capital declined from 44% at
December 31, 1992, to 43% at the end of 1993. Excluding the debt guarantees of
the ESOPs, the total debt to total capital ratios were 29% and 28%,
respectively, at December 31, 1993 and 1992.
Including the unused portion of its committed credit lines with Bank of
America and PNC Bank, the Company had $34.3 million of unused lines of
short-term credit with various banks at December 31, 1993.
At December 31, 1993, the Company had authority from the Board of Directors
to purchase shares of the Company's capital stock up to a cost of approximately
$11.8 million. Should the market price of the stock be such that it represents
an attractive investment for the Company, additional shares may be purchased
under such authority. National Sanitary Supply and Roto-Rooter have combined
unused authorities totaling $3.8 million at December 31, 1993, to repurchase
shares of their own common stocks.
CASH FLOW
The Company's cash flows for 1993 and 1992 may be summarized as follows (in
millions):
For the Years Ended
December 31,
--------------------
1993 1992
------ ------
Cash provided by operating activities $ 17.7 $ 15.9
Capital expenditures (13.9) (8.2)
------ ------
Cash available for dividends
before other financing and
investing activities 3.8 7.7
Cash dividends (19.7) (19.6)
Net other investing/financing
activities 16.0 20.6
------ ------
Increase in cash and
cash equivalents $ .1 $ 8.7
------ ------
------ ------
The increase in cash provided by operating activities from $15.9 million in
1992 to $17.7 million in 1993 is largely attributable to The Veratex Group
("Veratex"), acquired in December 1992. Veratex and Roto-Rooter accounted for
the major portion of the increase in capital expenditures for 1993.
Cash flow from operating activities is expected to continue to grow in 1994
and later years, while the increase in capital expenditures is expected to
moderate. During 1993, the Company supplemented its operating cash flow with
gains from the sale of investments aggregating $4.3 million after taxes.
Management continues to view the Company's investment portfolio, along with its
27% equity interest in Omnicare Inc. ("Omnicare"), as potential sources of cash
during the interim period in which the Company's dividend payout ratio exceeds
100%. Should favorable market conditions continue, it is anticipated that
additional sales of investments will be made in 1994.
Consistent with management's long-term strategy of increasing dividends at
a lesser rate than earnings to reduce its payout ratio, the Board of Directors
declared a quarterly dividend of $.51 per share of capital stock in February
1994, payable in March 1994 (versus $.50 per share paid in March 1993).
Nonetheless, the dividend rate is set each quarter with a long-term perspective
taking into consideration the Company's financial position, earnings and cash
flow, as well as interest rates, market conditions and other economic factors.
37
22
COMMITMENTS
The Company's lease for corporate and general office facilities covers the
period from April 1991 to April 2006 and includes space which has been
subleased to the Company's former DuBois Chemicals Inc. subsidiary ("DuBois")
for varying terms expiring in the years 1998 through 2003. As a result, the
Company had net lease commitments aggregating $39.2 million at December 31,
1993.
Because Company contributions previously made to other benefit or
retirement plans have been used to fund the ESOP debt requirements, the loss of
DuBois' contributions to the ESOPs initially had a significant impact on the
funding of the ESOPs. During 1992, however, the employees of National Sanitary
Supply became participants in one of the Company's ESOPs, and a major portion
of the ESOP loans was refinanced in January 1992 at lower interest rates.
Furthermore, in 1993, qualifying employees of Veratex became participants in
the ESOPs. Therefore, on both a short- and long-term basis, it is not
anticipated that the funding of ESOP contributions will have a significant
impact on the Company's ability to satisfy its long-term obligations.
As a part of the DuBois sale agreement, the Company agreed to reimburse the
purchaser for a specified portion of the liability for estimated environmental
cleanup and related costs arising from the operations of DuBois prior to the
sale date. The Company accrued $15.5 million in 1991 for its estimated share
of these costs and is contingently liable for additional cleanup and related
costs up to a maximum of $10.0 million, for which no provision has been
accrued. Through December 31, 1993, the Company has reimbursed the purchaser
of DuBois $777,000 for prior years' environmental and related costs of DuBois.
Effective January 1, 1994, Chemed acquired all of the capital stock of
Patient Care Inc. ("Patient Care") for cash payments aggregating $20,582,000,
including deferred payments with a present value of $6,582,000, plus 17,500
shares of Chemed Capital Stock. Additional cash payments of up to $10,400,000
may be made, the amount being contingent upon Patient Care's earnings during
the three-year period ended December 31, 1995. The acquisition was funded with
the Company's excess cash and marketable securities and short-term borrowings.
The above obligations and contingencies notwithstanding, it is management's
opinion that the Company has no long-range commitments which would have a
significant impact on its liquidity, financial condition or the results of its
operations. The Company's various loan agreements and guarantees of
indebtedness contain certain restrictive covenants; however, management
believes that such covenants will not adversely affect the operations of the
Company.
RESULTS OF OPERATIONS
Set forth below by business segment are data relating to growth in sales
and service revenues and operating profit margin:
Percent Increase in Sales
and Service Revenues
-------------------------
1993 1992
vs. 1992 vs. 1991
-------- --------
National Sanitary Supply 3% 8%
Roto-Rooter 30 23
Veratex n.a. n.a.
Total 31 14
Operating Profit
as a Percent of Sales
and Service Revenues
(Operating Margin)
----------------------
1993 1992 1991
---- ---- ----
National Sanitary Supply 3.1% 3.2% 3.2%
Roto-Rooter 10.5 10.7 10.0
Veratex 6.2 8.0 n.a.
Total 5.5 5.2 4.8
1993 VERSUS 1992
Sales of the National Sanitary Supply segment increased 3% to $296,865,000
in 1993. This sales growth was achieved by a unit volume increase of 5%,
offset in part by industry-wide deflationary pricing. As a result of tight
expense controls over personnel costs and bad debt expenses, the operating
margin of this segment declined only slightly during 1993.
A prolonged period of deflationary pricing coupled with continuing weak
economic conditions could have an unfavorable impact on the profitability of
the National Sanitary Supply segment. Management expects to mitigate these
economic factors with more efficient operations, by promoting higher-margin
products, and through periodic price increases, when possible.
Sales and services revenues of the Roto-Rooter segment for 1993 totaled
$136,428,000, an increase of 30% over the revenues recorded in 1992. Excluding
Encore, acquired by Roto-Rooter's and Chemed's jointly owned Convenient Home
Services Inc. ("Convenient") subsidiary, total revenues of this segment for
1993 increased 13% over revenues recorded in 1992. Also during 1993, plumbing
revenues rose 21% to $30,749,000 and drain-cleaning revenues grew 10% to
$48,384,000 as compared with revenues recorded in 1992.
38
23
The operating margin of the Roto-Rooter segment declined slightly from 10.7%
during 1992 to 10.5% in 1993, primarily due to the acquisition of Encore, which
has lower operating margins than Roto-Rooter's other businesses. Roto-Rooter
management expects that changes being made in operating methods and procedures
will result in raising Encore's operating margins to levels equivalent to those
of Roto-Rooter's other lines of business over the next several years.
Sales of the Veratex segment, acquired effective December 1, 1992, for
1993 totaled $91,800,000, an increase of 8% over full-year sales for 1992.
During 1993, Veratex contributed $5,660,000 to the Company's operating profit
as compared with $607,000 for the month of December 1992. The operating margin
of 8.0% recorded in December 1992 was unusually high due to three extra selling
days falling in that month. The 6.2% margin recorded in 1993 is more
indicative of Veratex's ongoing operating performance.
Consolidated sales and service revenues for 1993 totaled $525,093,000, an
increase of 31% over revenues recorded in 1992. Excluding the sales of Veratex
and Encore, total sales and service revenues for 1993 increased 5% over
revenues recorded in 1992. The improvement of the total operating margin from
5.2% in 1992 to 5.5% in 1993 was largely attributable to the acquisition of
Veratex late in 1992.
Income from operations increased 53% from $15,180,000 in 1992 to
$23,163,000 in 1993, primarily as a result of the acquisitions of Veratex and
Encore.
Interest expense increased by $3,157,000, from $5,732,000 in 1992 to
$8,889,000 in 1993, largely as a result of the issuance in December 1992 of the
$50,000,000 8.15% Senior Notes, due 2004. Lower interest expense on the ESOP
debt, coupled with the scheduled repayment of $21,000,000 of Series A and B
Senior Notes (which carried interest rates slightly in excess of 10% per
annum), partially offset the increased interest expense of the 8.15% Senior
Notes.
Other income--net for 1993 totaled $13,656,000 as compared with
$12,736,000 for 1992, an increase of $920,000. This increase was attributable
to larger gains on the sales of investments ($6,695,000 in 1993 versus
$2,877,000 in 1992), partially offset by lower interest income in 1993. The
decline in interest income primarily was due to lower interest rates on cash
equivalents and marketable securities in 1993.
For 1993, the Company's effective tax rate was 33.2% as compared with
29.4% in 1992, primarily due to a higher effective state and local tax rate in
1993. In addition, a lower ESOP dividend tax credit and a lower domestic
dividend exclusion as a percent of pretax income in 1993 contributed to the
higher effective rate.
Chemed's equity in the earnings of Omnicare increased 32% from $1,745,000
in 1992 to $2,299,000 in 1993 primarily as a result of the continuing growth of
Omnicare's pharmacy services business which serves the long-term-care market.
Omnicare's sales and income from continuing operations for 1993 increased 55%
and 153%, respectively, over amounts recorded in 1992.
Income from continuing operations increased 20% from $14,251,000 ($1.45
per share) in 1992 to $17,142,000 ($1.75 per share) in 1993, as a result of the
earnings contribution of Veratex, the significant earnings growth recorded by
Roto-Rooter, and the higher level of investment gains in 1993 ($4,274,000 after
taxes, or $.44 per share, in 1993 versus $1,899,000 after taxes, or $.19 per
share, in 1992). In addition, earnings for 1993 were reduced by $.10 per
share, due to the negative carry on the Company's 8.15% Senior Notes (versus
the lower rate of earnings on the Company's short-term investments). It is
anticipated that the acquisition of Patient Care effective January 1, 1994,
will eliminate the impact of the negative carry.
Net income for 1993 increased 24% to $19,480,000 ($1.99 per share) from
$15,651,000 ($1.60 per share). Earnings for 1993 included $1,651,000 ($.17 per
share) from the cumulative effect of adopting Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes" and $687,000 ($.07
per share) from the favorable adjustment of accruals related to the 1991 sale
of DuBois. For 1992, earnings included $1,400,000 ($.15 per share) relating to
an adjustment of income taxes on the sale of DuBois.
1992 VERSUS 1991
The National Sanitary Supply segment reported sales of $288,731,000 during
1992, an increase of 8% over amounts recorded in 1991. Excluding the impact of
acquisitions, this segment's sales for 1992 increased by 4% over sales for
1991. The operating margin for National Sanitary Supply was 3.2% for both 1991
and 1992.
The Roto-Rooter segment reported sales and service revenues of
$104,688,000 during 1992, an increase of 23% over amounts recorded in 1991.
Excluding the impact of acquisitions (primarily Convenient), this segment's
sales for 1992 increased 8% over sales for 1991. Plumbing revenues for 1992,
which account for approximately one-fourth of total revenues, increased 20%
over amounts recorded during 1991. The operating margin for Roto-Rooter
improved from 10.0% in 1991 to 10.7% in 1992, largely as a result of favorable
sales growth in company-owned operations, particularly from repair and
maintenance plumbing services, coupled with continued effective cost
management.
Veratex, acquired effective December 1, 1992, contributed $7,543,000 and
$607,000, respectively, to the
39
24
Company's sales and service revenues and operating profit in 1992. Excluding
Veratex and other businesses acquired in 1991 and 1992, the consolidated sales
and service revenues of the Company increased by 5% in 1992 as compared with
revenues for 1991.
Income from operations increased by $5,680,000, from $9,500,000 in 1991 to
$15,180,000 in 1992, primarily as a result of: (a) a full year's profit
contribution in 1992 by Convenient versus four months' contribution in 1991;
(b) growth in sales and service revenues of Roto-Rooter's and National Sanitary
Supply's basic businesses; (c) the lack of the expense of a Company
contribution to the Chemed Foundation in 1992; (d) the acquisition of Veratex
in December 1992; and, (e) the improved operating margin of the Roto-Rooter
segment.
Other income--net decreased from $14,253,000 to $12,736,000 as a result of
a decline in gains on the sales of marketable securities and other investments
in 1992 as compared with 1991.
Chemed's share of the earnings of Omnicare increased from $1,179,000 in
1991 to $1,745,000 in 1992 primarily as a result of the growth of Omnicare's
pharmacy services business. Omnicare's income from continuing operations
(which excludes earnings from Veratex) increased 192% from $1,182,000 in 1991
to $3,448,000 in 1992. Omnicare recorded a gain of $5,198,000 on its sale of
Veratex to the Company in December 1992. For the purpose of computing the
Company's share of Omnicare's earnings in 1992, this gain was excluded from
Omnicare's net income.
Chemed's income from continuing operations increased 29% from $11,037,000
($1.10 per share) in 1991 to $14,251,000 ($1.45 per share) in 1992 largely as a
result of strong performances by Roto-Rooter, National Sanitary Supply and
Omnicare in 1992.
Net income, which in 1991 included a net gain of $41,930,000 from
discontinued operations (primarily from the sale of DuBois), declined from
$52,967,000 ($5.27 per share) in 1991 to $15,651,000 ($1.60 per share) in 1992.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," effective
for fiscal years commencing after December 15, 1993. SFAS No. 112 requires
companies to account for postemployment benefits (benefits after employment
ceases but before retirement begins) on an accrual basis, as is presently
required for pension benefits. Generally, the cost of postemployment benefits
provided by the Company is either paid for by the employee or is accrued in the
period in which the benefits are earned. Consequently, the implementation of
the provisions of SFAS No. 112 in the first quarter of 1994 will not have a
material impact on the Company's financial position or results of operations.
ACCOUNTING FOR DEBT AND EQUITY INVESTMENTS
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective for fiscal years
commencing after December 15, 1993. Generally, SFAS No. 115 requires most
investments in debt and equity securities to be recorded at their fair value,
unless it is the intent of the company to hold the security until maturity.
Unrealized gains and losses on "trading" securities are charged or credited to
earnings, while such gains and losses on securities classified as "available
for sale" are recorded in a separate component of equity.
Effective January 1, 1994, the Company is required to adopt SFAS No. 115
and will recognize an increase in its stockholders' equity balance of
approximately $13 million, representing the aftertax unrealized gain on its
debt and equity securities classified as "available for sale." Since its
"trading" securities have a book value that is essentially the same as market
value, adoption of SFAS No. 115 will have little impact on the Company's
results of operations.
EMPLOYERS' ACCOUNTING FOR EMPLOYEE STOCK
OWNERSHIP PLANS
In November 1993, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SOP") No. 93-6, "Employers' Accounting for
Employee Stock Ownership Plans." Adoption of this statement in 1994 is
required for ESOP shares purchased after December 31, 1992. Since all of the
Company's ESOP shares were purchased prior to 1993, adoption of SOP No. 93-6 is
optional. Presently, it is not anticipated that the Company will adopt the
provisions of SOP No. 93-6 in 1994.
REPORTING ON ADVERTISING COSTS
In December 1993, AcSEC issued SOP No. 93-7, "Reporting on Advertising
Costs," which requires that advertising costs, except costs of direct response
advertising, be expensed no later than the first time the advertising has taken
place. Adoption of this statement is required for fiscal years beginning after
June 15, 1994.
Because substantially all of the Company's advertising costs relate to
either direct response advertising or are expensed within the 12-month period
in which they are incurred, adoption of SOP No. 93-7 in 1995 will not
materially impact the Company's results of operations or financial position.
40
1
EXHIBIT 21
SUBSIDIARIES OF CHEMED CORPORATION
The following is a list of subsidiaries of the Company as of
December 31, 1993. Other subsidiaries which have been omitted from the list
would not, when considered in the aggregate, constitute a significant
subsidiary. Each of the companies is incorporated 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, 1993.
All of the majority owned companies listed below are included in
the consolidated financial statements as of December 31, 1993. All 20% to
50%-owned companies listed below are included in the consolidated financial
statements on an equity basis, except as noted below.
Amira Services, Inc. (Florida, 100% by Convenient Home Services, Inc.)
Cardinal Paper Company (Oklahoma, 100% by Century Papers, Inc.)
Century Papers, Inc. (Texas, 100% by National Sanitary Supply Company)
Convenient Home Services, Inc. (Florida, 70% by Roto-Rooter, Inc. and
30% by Chemed)
Encore Service Systems, Inc. (Florida, 100% by Convenient Home Services,
Inc.)
Encore Maintenance and Management, Inc. (Florida, 100% by Encore Service
Systems, Inc.)
Jet Resource, Inc. (Delaware, 100%)
National Sanitary Supply Company (Delaware, 88%)
National Sanitary Supply Development, Inc. (Delaware, 100% by National
Sanitary Supply Company)
Nurotoco of Massachusetts, Inc. (Massachusetts, 100% by Roto-Rooter
Services Company)
Nurotoco of New Jersey, Inc. (Delaware, 80% by Roto-Rooter Services
Company)
OCR Holding Company (Nevada, 100%)
Omnia, Inc. (Delaware, 100% by Chemed Corporation)
Omnicare, Inc. (Delaware, 27% by OCR Holding Company)
Roto-Rooter Corporation (Iowa, 100% by Roto-Rooter, Inc.)
Roto-Rooter Development Company (Delaware, 100% by Roto-Rooter Corporation)
Roto-Rooter, Inc. (Delaware, 60%)
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; included within the consolidated financial statements as a
consolidated subsidiary)
Tidi Products, Inc. (Delaware, 100% by OCR Holding Company)
Unidisco, Inc. (Delaware, 100% by OCR Holding Company)
The Veratex Corporation (Delaware, 100% by OCR Holding Company)
1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-28594, 33-9549, 2-87202, 2- 80712 and
33-65244) of Chemed Corporation of our report dated February 1, 1994 appearing
on page 17 of the 1993 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 Schedules, which appears on
page S-2 of this Form 10-K.
/s/ Price Waterhouse
PRICE WATERHOUSE
Cincinnati, Ohio
March 29, 1994
1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, l993, 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, 1994
/s/ J. Peter Grace
-----------------------------
J. Peter Grace
2
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 21, 1994
/s/ Edward L. Hutton
-----------------------------
Edward L. Hutton
3
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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, 1994
/s/ James A. Cunningham
-----------------------------
James A. Cunningham
4
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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, 1994
/s/ James H. Devlin
-----------------------------
James H. Devlin
5
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 20, 1994
/s/ Charles H. Erhart, Jr.
-----------------------------
Charles H. Erhart, Jr.
6
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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, 1994
/s/ Joel F. Gemunder
-----------------------------
Joel F. Gemunder
7
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 22, 1994
/s/ Neal Gilliatt
-----------------------------
Neal Gilliatt
8
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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, 1994
/s/ William R. Griffin
-----------------------------
William R. Griffin
9
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 17, 1994
/s/ Will J. Hoekman
-----------------------------
Will J. Hoekman
10
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 17, 1994
/s/ Thomas C. Hutton
-----------------------------
Thomas C. Hutton
11
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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, 1994
/s/ Jon D. Krahulik
-----------------------------
Jon D. Krahulik
12
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA as her 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, 1993, 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 21, 1994
/s/ Sandra E. Laney
-----------------------------
Sandra E. Laney
13
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 16, 1994
/s/ Kevin J. McNamara
-----------------------------
Kevin J. McNamara
14
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 21, 1994
/s/ Timothy S. O'Toole
-----------------------------
Timothy S. O'Toole
15
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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, 1994
/s/ D. Walter Robbins, Jr.
-----------------------------
D. Walter Robbins, Jr.
16
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 17, 1994
/s/ Arthur V. Tucker
-----------------------------
Arthur V. Tucker
17
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 17, 1994
/s/ Paul C. Voet
-----------------------------
Paul C. Voet
18
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby
appoints EDWARD L. HUTTON and KEVIN J. McNAMARA 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, 1993, 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 21, 1994
/s/ John M. Mount
-----------------------------
John M. Mount
