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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended: June 30, 1995
Commission File Number: 0-13821
ROTO-ROOTER, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1078130
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2500 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
(513) 762-6690
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Amount Date
Common Stock 5,096,853 Shares July 31, 1995
$1 Par Value
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Page 1 of 13
ROTO-ROOTER, INC. AND
SUBSIDIARY COMPANIES
Index
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 1995 and December 31, 1994 3
Consolidated Statement of Income -
Three and Six Months Ended
June 30, 1995 and 1994 4
Consolidated Statement of Cash Flows
Six Months Ended
June 30, 1995 and 1994 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote
of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
Exhibit 11. Computation of Per
Share Earnings E-1
Exhibit 27. Financial Data Schedule E-2
Page 2 of 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands except share and per share data)
UNAUDITED
June 30, December 31,
1995 1994*
---------- ------------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 1,825 $ 937
Demand Deposits with Chemed Corporation 11,885 9,037
Accounts Receivable, Less Allowance
(1995--$919; 1994--$884) 6,555 6,593
Inventories --
Raw Materials, Supplies, General Merchandise
and In Process 6,704 6,382
Finished Goods 946 781
Deferred Income Taxes 3,037 2,956
Statutory Deposits 15,884 14,408
Prepaid Expenses and Other Current Assets 2,709 2,597
---------- ----------
Total Current Assets 49,545 43,691
Property and Equipment, at Cost, Less Accumulated
Depreciation (1995--$16,585; 1994--$14,638) 24,474 25,213
Intangible Assets, Less Accumulated Amortization
(1995--$11,707; 1994--$10,371) 65,638 65,204
Other Assets 3,832 3,275
---------- ----------
Total Assets $ 143,489 $ 137,383
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 6,556 $ 6,513
Deferred Contract Revenue 24,015 22,631
Income Taxes 764 739
Other Current Liabilities 17,582 17,082
---------- ----------
Total Current Liabilities 48,917 46,965
Deferred Income Taxes 2,782 2,234
Deferred Compensation and Other
Noncurrent Liabilities 8,149 8,046
Long-Term Debt with Chemed Corporation 8,424 8,424
Minority Interest 4,049 3,967
---------- ----------
Total Liabilities 72,321 69,636
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock - Authorized 1,000,000 Shares,
$1.00 Par Value (None Issued) -- --
Common Stock - Authorized 10,000,000 Shares,
$1.00 Par Value (Issued 1995--5,300,366 Shares
and 1994--5,276,404 Shares) 5,300 5,276
Paid-In Capital 24,829 24,290
Retained Earnings 45,868 42,918
Treasury Stock, at Cost (1995--208,638 Shares and
1994--205,084 Shares) (4,829) (4,737)
---------- ----------
Total Stockholders' Equity 71,168 67,747
---------- ----------
Total Liabilities and Stockholders' Equity $ 143,489 $ 137,383
========== ==========
*Reclassified to conform to current year presentation.
See accompanying notes to unaudited financial statements.
Page 3 of 13
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share data)
UNAUDITED
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
1995 1994* 1995 1994*
-------- -------- -------- --------
Total Operating Revenues $ 43,271 $ 41,900 $ 86,998 $ 83,436
-------- -------- -------- --------
Cost of Services Provided and
Products Sold 26,348 26,326 52,994 52,272
Selling, General and
Administrative Expenses 11,329 10,248 22,610 20,524
Depreciation and Amortization 1,874 1,849 3,800 3,637
-------- -------- -------- --------
Total Costs and Expenses 39,551 38,423 79,404 76,433
-------- -------- -------- --------
Income from Operations 3,720 3,477 7,594 7,003
Interest Expense (240) (179) (488) (323)
Other Income - Net 463 137 907 199
-------- -------- -------- --------
Income before Income Taxes 3,943 3,435 8,013 6,879
Income Taxes 1,705 1,481 3,455 3,017
-------- -------- -------- --------
Income before Minority Interest 2,238 1,954 4,558 3,862
Minority Interest 13 48 82 107
-------- -------- -------- --------
Net Income $ 2,225 $ 1,906 $ 4,476 $ 3,755
======== ======== ======== ========
Earnings Per Common Share $ .44 $ .38 $ .88 $ .74
======== ======== ======== ========
Average Number of Shares
Outstanding 5,088 5,068 5,085 5,061
======== ======== ======== ========
Cash Dividends Paid Per Share $ .15 $ .14 $ .30 $ .28
======== ======== ======== ========
*Reclassified to conform to current year presentation.
See accompanying notes to unaudited financial statements.
Page 4 of 13
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
UNAUDITED
Six Months Ended
June 30,
---------------------
1995 1994
-------- --------
Cash Flows From Operating Activities:
Net Income $ 4,476 $ 3,755
Depreciation and Amortization 3,800 3,637
Provision for Deferred Income Taxes (310) 273
Changes in Operating Assets
and Liabilities 1,152 (5,028)
Change in Statutory Reserve Requirements (1,476) 742
Other (633) (734)
-------- --------
Net Cash Provided by Operating
Activities 7,009 2,645
-------- --------
Cash Flows from Investing Activities:
Capital Expenditures (2,137) (4,249)
Business Combinations (629) (119)
Proceeds from Disposition of Property
and Equipment 611 367
-------- --------
Net Cash Used for Investing
Activities (2,155) (4,001)
-------- --------
Cash Flows from Financing Activities:
Dividends Paid (1,526) (1,419)
Advances From/(To) Chemed Corporation (2,848) 1,622
All Other 408 597
-------- --------
Net Cash Provided by/(Used for)
Financing Activities (3,966) 800
-------- --------
Net Increase/(Decrease) in Cash and
Cash Equivalents 888 (556)
Cash and Cash Equivalents at
Beginning of Period 937 5,754
-------- --------
Cash and Cash Equivalents at End of Period $ 1,825 $ 5,198
======== ========
See accompanying notes to unaudited financial statements
Page 5 of 13
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with Rule 10-01 of SEC
Regulation S-X. Consequently, they do not include all the
disclosures required under generally accepted accounting
principles for complete financial statements. However, in
the opinion of the management of Roto-Rooter, Inc., the
financial statements presented herein contain all adjustments
(consisting of only normal recurring adjustments)
necessary to present fairly the financial position, results
of operations and cash flows of the company and its
consolidated subsidiaries. For further information regarding
Roto-Rooter's accounting policies and other financial information,
refer to the consolidated financial statements and footnotes
included in Roto-Rooter's Annual Report on Form
10-K for the year ended December 31, 1994.
2. Earnings per common share are computed using the weighted
average number of shares of common stock outstanding during
the respective periods and exclude the dilutive effect of
outstanding stock options as it is not material.
Page 6 of 13
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
FINANCIAL CONDITION
There were no material changes in financial condition from
December 31, 1994 to June 30, 1995.
RESULTS OF OPERATIONS
Second Quarter 1995 Versus Second Quarter 1994
----------------------------------------------
Total operating revenues for the second quarter of 1995
totaled $43,271,000, an increase of 3% over the $41,900,000 of
revenues recorded in the second quarter of 1994. For the second
quarter of 1995 plumbing revenues, which account for
approximately 24% of total revenues, and sewer and drain cleaning
revenues, which account for approximately 32% of total revenues,
increased 16% and 12%, respectively over amounts recorded in the
comparable quarter of 1994. Revenues from the company's service
contract business (Service America) for the second quarter of
1995, which account for approximately 33% of Roto-Rooter's total
revenues, declined 10% as compared with revenues recorded in the
second quarter of 1994. This decrease was attributable to the
sale of Service America's Maintenance & Management subsidiary
effective March 31, 1995. The sale of this business permits
management to focus on the core appliance and air conditioning
repair and maintenance business.
In addition, direct sales activities also continued to
produce results. In the second quarter of 1995, revenues from
business and industrial customers increased 21% over the prior
year's second quarter in company-owned Roto-Rooter operations.
Roto-Rooter has targeted accounts, typically in the food service
and property management industries, that need its services more
regularly than do homeowners. The company has established a
direct sales force in its company-owned operations to capture
more business from these markets.
Roto-Rooter's service contract business showed second quarter
increases in both the renewal rates for service contracts and new
contract sales as compared with the second quarter of 1994.
Income from operations increased to $3,720,000 in the three
months ended June 30, 1995 or 7% above the $3,477,000 reported in
Page 7 of 13
the three months ended June 30, 1994. Roto-Rooter began the year
with the objective of improving margins so that additional profit
growth could be realized from sales growth achieved in 1994 and
1995. The company has met this objective in the first two
quarters of 1995. Effective cost management, primarily in
company owned Roto-Rooter operations, resulted in Roto-Rooter's
operating profit margin increasing to 8.6% of revenues in the
second quarter of 1995 as compared with 8.3% in the second
quarter of 1994.
Another of Roto-Rooter's goals for 1995 is to rebuild its
cash reserves by generating excess cash flow from operations.
The company's success in generating additional cash from
operations and earning higher levels of interest on these cash
balances resulted in Other Income--Net increasing to $463,000 in
the second quarter of 1995, which compares with $137,000 earned
in the second quarter of 1994. This increase in Other Income--Net
resulted in the pretax margin increasing from 8.2% in the
second quarter of 1994 to 9.1% in the second quarter of 1995.
Net income for the second quarter of 1995 was $2,225,000, a
17% increase over the $1,906,000 reported in the comparable 1994
quarter. Earnings per share for the second quarter of 1995 were
44 cents, or 16% above the prior year second quarter earnings per
share of 38 cents.
First Six Months of 1995 versus First Six Months of 1994
--------------------------------------------------------
For the six months ended June 30, 1995, total operating
revenues increased to $86,998,000, or 4% above the $83,436,000
reported in the first six months of last year. For the first six
months of 1995, sewer/drain cleaning and plumbing revenues
increased 12% and 13%, respectively, over the comparable period
in 1994. Revenues from the company's service contract business
(Service America) declined 8% in the first six months of 1995 as
compared with the first six months of 1994. The decline in
Service America's revenues during 1995 was attributable to the
sale of its Maintenance & Management subsidiary during the first
quarter of 1995.
Income from operations increased to $7,594,000 for the first
six months of 1995, or 8% above the $7,003,000 reported in the
first six months of 1994. As a result of good cost management,
the company's operating margin increased from 8.4% for the first
six months of 1994 to 8.7% for the first six months of 1995.
As mentioned previously, along with improving operating
profit margins, one of the company's goals for 1995 is to rebuild
cash reserves by generating cash flow from operations. The
company began this task following the acquisition of Encore
Service Systems, Inc. in July 1993 and has continued this trend
Page 8 of 13
throughout 1994 and 1995. Increases in the company's interest
earning cash accounts, coupled with higher interest rates earned,
resulted in Other Income--Net increasing to $907,000 for the
first six months of 1995 as compared with $199,000 in the first
six months of 1994. The higher interest income, coupled with
improving operating profit margins resulted in the company's
pretax profit margin for the first six months of 1995 improving
to 9.2% as compared with 8.2% for the first six months of 1994.
Net income for the first six months of 1995 was $4,476,000, a
19% increase over the $3,755,000 reported in the comparable 1994
period. Earnings per share for the six months ended June 30,
1995 were 88 cents, or 19% above the prior year's first six
months earnings per share of 74 cents.
Page 9 of 13
PART II -- OTHER INFORMATION
----------------------------
Item 4. Submission of Matters to a Vote of Security Holders
(a) Roto-Rooter held its Annual Meeting of Stockholders on
May 15, 1995.
(b) The names of directors elected at this Annual Meeting are as
follows:
Edward L. Hutton Will J. Hoekman
William R. Griffin Thomas C. Hutton
Brian A. Brumm Patrick L. Johnson
James A. Cunningham Sandra E. Laney
Naomi C. Dallob Kevin J. McNamara
Charles H. Erhart, Jr. Timothy S. O'Toole
Neal Gilliatt D. Walter Robbins, Jr.
Lawrence J. Gillis Jerome E. Schnee
Douglas B. Harper
(c) The Stockholders then ratified the selection by the Board of
Directors of Price Waterhouse, LLP as independent
accountants for the Company and its consolidated
subsidiaries for the year 1995. Votes cast in favor of the
proposal were 4,872,092 and 3,579 were cast against it.
Votes abstained were 4,576 and zero were broker non-votes.
With respect to the election of directors, the number of
votes cast for each nominee was as follows:
Votes Votes Broker
Votes For Against Withheld Non-Votes
--------- -------- --------- ---------
E.L. Hutton 4,860,697 19,503 275 0
W.R. Griffin 4,860,847 19,353 125 0
B.A. Brumm 4,860,972 19,228 0 0
J.A. Cunningham 4,860,372 19,828 600 0
N.C. Dallob 4,860,447 19,753 525 0
C.H. Erhart, Jr. 4,860,072 20,128 900 0
N. Gilliatt 4,860,972 19,228 0 0
L.J. Gillis 4,860,972 19,228 0 0
D.B. Harper 4,860,347 19,853 625 0
W.J. Hoekman 4,860,972 19,228 0 0
T.C. Hutton 4,860,872 19,328 100 0
P.L. Johnson 4,860,972 19,228 0 0
S.E. Laney 4,860,872 19,328 100 0
K.J. McNamara 4,860,972 19,228 0 0
T.S. O'Toole 4,860,772 19,428 200 0
D.W. Robbins, Jr. 4,859,972 20,228 1,000 0
J.E. Schnee 4,860,247 19,953 725 0
Page 10 of 13
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Exhibit SK 601
No. Ref. No. Description Page No.
------- -------- ------------------ ----------
1 (11) Statement re:
Computation of Per
Share Earnings E-1
2 (27) Financial Data
Schedule E-2
(b) Reports on Form 8-K
--------------------
No reports on Form 8-K were filed during the quarter
ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
ROTO-ROOTER, INC.
-------------------------
(Registrant)
Dated: August 7, 1995 By: W.R. Griffin
---------------------- -------------------------
W.R. Griffin
President
Dated: August 7, 1995 By: B.A. Brumm
---------------------- -------------------------
B.A. Brumm
Vice President - Treasurer
and Chief Financial Officer
(Principal Accounting Officer)
Page 11 of 13