================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 2004
Commission File Number 1-8351
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-0791746
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2600 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
(513) 762-6900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Amount Date
Capital Stock 12,439,418 Shares June 30, 2004
$1 Par Value
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Page 1 of 35
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 2004 and
December 31, 2003 3
Consolidated Statement of Operations -
Three and six months ended
June 30, 2004 and 2003 4
Consolidated Statement of Cash Flows -
Six months ended
June 30, 2004 and 2003 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 18
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 31
Item 4. Controls and Procedures 31
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of
security holders 32
Item 6. Exhibits and Reports on Form 8-K 33
Page 2 of 35
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
JUNE 30, DECEMBER 31,
2004 2003
--------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 52,644 $ 50,587
Accounts receivable, less allowances of $10,918 (2003-$2,919) 59,032 13,592
Inventories 8,336 8,256
Statutory deposits 8,418 9,358
Prepaid income taxes 14,730 3,625
Current deferred income taxes 24,368 10,056
Prepaid expenses and other current assets 10,277 6,611
--------- ---------
Total current assets 177,805 102,085
Investments of deferred compensation plans held in trust 19,623 17,743
Other investments 1,445 25,081
Note receivable 12,500 12,500
Properties and equipment, at cost less accumulated
depreciation of $65,477 (2003-$62,646) 62,601 41,004
Identifiable intangible assets less accumulated
amortization of $2,903 (2003-$1,704) 24,392 592
Goodwill 450,988 105,335
Other assets 26,497 24,729
--------- ---------
Total Assets $ 775,851 $ 329,069
========= =========
LIABILITIES
Current liabilities
Accounts payable $ 43,143 $ 7,120
Current portion of long-term debt 5,552 448
Income taxes 259 26
Deferred contract revenue 16,060 14,362
Accrued insurance 21,366 16,013
Other current liabilities 56,351 21,123
--------- ---------
Total current liabilities 142,731 59,092
Convertible junior subordinated debentures - 14,126
Other long-term debt 289,551 25,931
Deferred compensation liabilities 19,622 17,733
Other liabilities 19,362 19,494
--------- ---------
Total Liabilities 471,266 136,376
--------- ---------
STOCKHOLDERS' EQUITY
Capital stock-authorized 40,000,000 shares $1 par;
issued 13,406,397 shares (2003-13,452,907 shares) 13,406 13,453
Paid-in capital 207,916 170,501
Retained earnings 118,248 119,746
Treasury stock - 966,979 shares (2003-3,508,663 shares),
at cost (32,702) (109,427)
Unearned compensation (4,081) (2,954)
Deferred compensation payable in company stock 2,337 2,308
Notes receivable for shares sold (539) (934)
--------- ---------
Total Stockholders' Equity 304,585 192,693
--------- ---------
Total Liabilities and Stockholders' Equity $ 775,851 $ 329,069
========= =========
See accompanying notes to unaudited financial statements.
Page 3 of 35
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- --------------------
2004 2003 2004 2003
-------- -------- -------- --------
Service revenues and sales $208,994 $ 77,271 $340,042 $154,916
-------- -------- -------- --------
Cost of services provided and goods sold
(excluding depreciation) 147,206 45,611 233,430 91,763
Selling, general and administrative
expenses 37,913 25,090 68,936 51,147
Depreciation 4,570 2,990 8,159 6,042
Long-term incentive compensation - - 9,058 -
-------- -------- -------- --------
Total costs and expenses 189,689 73,691 319,583 148,952
-------- -------- -------- --------
Income from operations 19,305 3,580 20,459 5,964
Interest expense (6,206) (867) (9,111) (1,674)
Loss on extinguishment of debt - - (3,330) -
Other income - net 231 2,455 1,810 6,717
-------- -------- -------- --------
Income before income taxes 13,330 5,168 9,828 11,007
Income taxes (5,833) (1,868) (5,336) (4,150)
Equity in income/(loss) of affiliate (Vitas) 821 - (3,284) -
-------- -------- -------- --------
Net Income $ 8,318 $ 3,300 $ 1,208 $ 6,857
======== ======== ======== ========
Earnings Per Share
Net income $ .67 $ .33 $ .10 $ .69
======== ======== ======== ========
Average number of shares outstanding 12,325 9,908 11,619 9,899
======== ======== ======== ========
Diluted Earnings Per Share
Net income $ .66 $ .33 $ .10 $ .69
======== ======== ======== ========
Average number of shares outstanding 12,677 9,942 11,848 9,922
======== ======== ======== ========
Cash Dividends Per Share $ .12 $ .12 $ .24 $ .24
======== ======== ======== ========
See accompanying notes to unaudited financial statements.
Page 4 of 35
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED JUNE 30,
-------------------------
2004 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,208 $ 6,857
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,498 6,399
Gains on sales of available-for-sale
investments - (3,544)
Provision for deferred income taxes (611) 288
Provision for uncollectible accounts receivable 2,470 106
Noncash long-term incentive compensation 5,808 -
Changes in operating assets and liabilities,
excluding amounts acquired in business
combinations
Decrease/(increase) in accounts receivable (102) 1,156
Decrease/(increase) in inventories (80) 794
Decrease in statutory deposits 940 2,228
Decrease/(increase) in prepaid expenses and
other current assets 13,580 (1,090)
Decrease in accounts payable, deferred
contract revenue and other current
liabilities (7,337) (3,943)
Increase in income taxes 5,364 1,037
Decrease/(increase) in other assets 4,386 (1,935)
Increase in other liabilities 783 2,377
Equity in loss of affiliate 3,284 -
Noncash expense of internally financed ESOPs 947 870
Other sources/(uses) 224 (101)
--------- ---------
Net cash provided by operating activities 41,362 11,499
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Business combinations, net of cash acquired (326,059) (1,538)
Return of merger deposit 10,000 -
Capital expenditures (7,649) (4,846)
Net uses from discontinued operations (1,082) (993)
Proceeds from sales of property and equipment 303 296
Proceeds from sales of available-for-sale investments - 4,493
Other sources/(uses) 42 (293)
--------- ---------
Net cash used by investing activities (324,445) (2,881)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 295,000 -
Issuance of capital stock, net of issuance costs 97,054 1,320
Repayment of long-term debt (93,602) (230)
Debt issuance costs (13,837) -
Repayment of stock subscriptions note receivable 8,053 -
Redemption of convertible trust preferred securities (2,736) -
Dividends paid (2,707) (2,376)
Purchases of treasury stock (2,228) (255)
Other sources 143 534
--------- ---------
Net cash provided/(used) by financing activities 285,140 (1,007)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 2,057 7,611
Cash and cash equivalents at beginning of year 50,587 37,731
--------- ---------
Cash and cash equivalents at end of period $ 52,644 $ 45,342
========= =========
See accompanying notes to unaudited financial statements.
Page 5 of 35
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements
1. STOCKHOLDERS' MEETING
On May 17, 2004, stockholders of Roto-Rooter, Inc. approved the
following:
(a) changing the company's name to Chemed Corporation. As used
herein, the terms "We", "Company" and "Chemed" refer to Chemed
Corporation or Chemed Corporation and its consolidated subsidiaries.
(b) increasing the number of authorized shares of Capital Stock from
15,000,000 shares to 40,000,000 shares.
2. BASIS OF PRESENTATION
We have prepared the accompanying unaudited consolidated financial
statements of Chemed in accordance with Rule 10-01 of SEC Regulation S-X.
Consequently, we have omitted certain disclosures required under generally
accepted accounting principles for complete financial statements. However, in
our opinion, the financial statements presented herein contain all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
financial position, results of operations and cash flows of the Company. These
financial statements should be read in conjunction with the Consolidated
Financial Statements and related notes included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2003. Certain 2003 amounts have
been reclassified to conform with the current period presentation.
We use Accounting Principles Board Opinion No. 25 ("APB 25"),
Accounting for Stock Issued to Employees, to account for stock-based
compensation. Since the Company's stock options qualify as fixed options under
APB 25 and since the option price equals the market price on the date of grant,
there is no compensation expense for stock options. Stock awards are expensed
during the period the related services are provided.
The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair-value-recognition
provisions of Financial Accounting Standards Board ("FASB") Statement No. 123,
Accounting for Stock-Based Compensation (as amended) (in thousands, except per
share data):
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net Income as reported $ 8,318 $ 3,300 $ 1,208 $ 6,857
Add: stock-based compensation expense
included in net income as reported,
net of income tax effects 23 11 3,823 45
Deduct: total stock-based employee compensation
determined under a fair-value-based
method for all stock options and
awards, net of income tax effects (1,001) (234) (5,020) (459)
--------- --------- --------- ---------
Pro Forma net income $ 7,340 $ 3,077 $ 11 $ 6,443
========= ========= ========= =========
Earning Per Share
As reported $ 0.67 $ 0.33 $ 0.10 $ 0.69
========= ========= ========= =========
Pro forma $ 0.60 $ 0.31 $ - $ 0.65
========= ========= ========= =========
Diluted earning per share
As reported $ 0.66 $ 0.33 $ 0.10 $ 0.69
========= ========= ========= =========
Pro forma $ 0.59 $ 0.31 $ - $ 0.65
========= ========= ========= =========
Page 6 of 35
We calculated the above data using the Black-Scholes option-valuation method to
value the Company's options granted in 2004 and prior years.
3. SEGMENTS
Due to the significant impact of our acquisition of Vitas Healthcare
Corporation ("Vitas") in February 2004, we re-evaluated the Company's segment
reporting of administrative expenses of the Corporate Office headquarters.
Previously, we included such expenses in the Plumbing and Drain Cleaning segment
because it comprised in excess of 80% of our business. Currently, Roto-Rooter
comprises 32% of Chemed's consolidated revenues and sales and 45% of its
operating profit. Accordingly, we now report corporate administrative expenses
and unallocated investing and financing income and expense not directly related
to any one segment as "Corporate." Corporate administrative expenses include the
stewardship, accounting and reporting, legal, tax and other costs of operating a
publicly-held corporation. Corporate investing and financing income and expenses
include the costs and income associated with corporate debt and investment
arrangements.
The Company's segments now comprise Vitas (palliative medical care and
related services to terminally ill patients through state-licensed and
federally-certified hospice programs), Roto-Rooter (sewer and drain cleaning and
plumbing repair and maintenance services to residential and commercial accounts)
and Service America (heating, ventilating and air conditioning ("HVAC") repair,
maintenance and replacement services to residential customers through service
contracts and retail sales). Prior period data have been reclassified to
maintain comparability.
Service revenues and sales and aftertax earnings by business segment
follow (in thousands):
Three Month Ended Six Month Ended
June 30, June 30,
----------------------- ---------------------------
2004 2003 2004 2003
--------- --------- --------- ----------
Service Revenue and Sales
Vitas (a) $ 130,240 $ - $ 181,352 $ -
Roto-Rooter 68,894 64,592 138,122 129,317
Service America 9,860 12,679 20,568 25,599
--------- --------- --------- ---------
Total $ 208,994 $ 77,271 $ 340,042 $ 154,916
========= ========= ========= ==========
Aftertax Earnings
Vitas (a) $ 7,907 $ - $ 10,504 $ -
Roto-Rooter 5,150 3,882 9,387 (b) 8,313
Service America (18) 49 119 (c) 103
--------- --------- --------- ---------
Total segment earnings 13,039 3,931 20,010 8,416
Corporate (5,542) (631) (15,518)(d) (1,559) (e)
Equity in income/(loss) of affiliate
(Vitas)(f) 821 - (3,284) -
--------- --------- --------- ---------
Net Income $ 8,318 $ 3,300 $ 1,208 $ 6,857
========= ========= ========= ==========
- ----------
(a) Amounts include consolidated operations of Vitas beginning on February 24,
2004, the date the Company acquired the controlling interest in Vitas.
(b) Amount includes $982,000 aftertax cost of payout under the Company's
Executive Long-Term Incentive Plan ("LTIP").
(c) Amount includes $170,000 aftertax cost of payout under the LTIP.
(d) Amount includes $4,742,000 aftertax cost of payout under the LTIP and
$2,164,000 aftertax loss on extinguishment of debt.
(e) Amount includes aftertax severance charges of $2,358,000 and $2,151,000
aftertax gain on sales of investments.
(f) Amount for 2004 represents the Company's 37% equity in the loss of Vitas
through February 23, 2004, including adjustments to the equity interest
occurring later in 2004. During the period January 1, 2004 through
February 23, 2004, Vitas incurred the following aftertax expenses related
to the sale of its business to the Company (in thousands):
Accrual for potential severance costs under key employee employment agreements $ 10,975
Legal and valuation costs 6,665
Loss on write off of Vitas' deferred debt costs 2,698
Other 592
--------
Total $ 20,930
========
Page 7 of 35
These charges reduced the Company's equity in Vitas by approximately
$4,621 during the first quarter of 2004. Subsequent adjustment to the
estimated severance accrual in the second quarter of 2004 increased the
Company's equity earnings in Vitas by $821.
4. DILUTED EARNINGS PER SHARE
Earnings per common share are computed using the weighted average number
of shares of capital stock outstanding. Diluted earnings per share for 2004 and
2003 are computed as follows (in thousands, except per share data):
Income Shares Income
(Numerator) (Denominator) Per Share
----------- ------------- ---------
For the Three Months Ended June 30,
2004
Net income $ 8,318 12,325 $ 0.67
=======
Impact of convertible junior
subordinated debentures 94 168
Dilutive stock options - 183
Nonvested stock awards - 1
------- -------
Diluted income $ 8,412 $12,677 $ 0.66
======= ======= =======
2003 (a)
Net income $ 3,300 $ 9,908 $ 0.33
=======
Dilutive stock options - 34
------- -------
Diluted income $ 3,300 $ 9,942 $ 0.33
======= ======= =======
For the Six Months Ended June 30,
2004
Net income $ 1,208 11,619 $ 0.10
=======
Dilutive stock options - 228
Nonvested stock awards - 1
------- -------
Diluted income $ 1,208 $11,848 $ 0.10
======= ======= =======
2003 (a)
Net income $ 6,857 $ 9,899 $ 0.69
=======
Dilutive stock options - 23
------- ------- -------
Diluted income $ 6,857 $ 9,922 $ 0.69
======= ======= =======
- ----------
(a) The impact of the convertible junior subordinated debentures has been
excluded from these computations because it is antidilutive to earnings
per share.
Due to the Company's level of earnings for the second quarter of 2003 and
for the first six months of 2004 and 2003, the Convertible Junior Subordinated
Debentures were anti-dilutive in those periods, and, therefore, were excluded
from the computation of diluted earnings per share. The debentures were
convertible into an average of 384,000 shares of capital stock during the second
quarter and first six months of 2003, and into 275,000 shares during the first
six months of 2004.
5. OTHER INCOME-NET
Other income-net comprises the following (in thousands):
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- ------------------------
2004 2003 2004 2003
------- ------- ------- -------
Interest income $ 551 $ 704 $ 1,112 $ 1,519
Market valuation gain/(loss)
trading securities (211) 1,217 785 565
Gain/(loss) on disposal of properties
and equipment (95) (129) (146) (199)
Dividend income - 607 - 1,223
Gain/(loss) on disposal of investments - - - 3,544
All other (14) 56 59 65
------- ------- ------- -------
Total $ 231 $ 2,455 $ 1,810 $ 6,717
======= ======= ======= =======
Page 8 of 35
6. COMPREHENSIVE INCOME
We had total comprehensive income of $3,232,000 and $4,389,000,
respectively, for the three-month and six-month periods ended June 30, 2003. The
difference between our net income and our comprehensive income in 2003 relates
to the cumulative unrealized appreciation/depreciation on available-for-sale
investments. For the 2004 periods, our total comprehensive income equals our net
income.
7. BUSINESS COMBINATIONS
On February 24, 2004, we completed the acquisition of the 63% of Vitas
Healthcare Corporation ("Vitas") common stock we did not previously own for cash
consideration of $322.9 million ("Acquisition"). In addition, we paid the former
chairman and chief executive officer of Vitas $25.0 million pursuant to a
noncompetition and consulting agreement and made severance payments totaling
$2.3 million to two other officers of Vitas. The total purchase price, including
$3.0 million of estimated expenses and the Company's $18.2 million prior
investment in Vitas, was $360.2 million.
The preliminary allocation of the purchase price to Vitas' assets and
liabilities is (in thousands):
Cash and cash equivalents $ 24,377
Other current assets 96,621
Property and equipment 22,332
Noncompetition agreement 18,000
Consulting agreement 7,000
Goodwill 342,794
Other assets 11,127
Current liabilities(including
severance of $15,062 (98,291)
Long-term debt (59,571)
Other liabilities (4,186)
---------
Subtotal 360,203
Less: investment in Vitas on
February 23, 2004 (18,162)
---------
Total purchase price 342,041
Plus: subsequent payments of
acquisition related accruals 5,211
Less: cash and cash equivalents
acquired (24,377)
---------
Net cash outlay $ 322,875
=========
We began including the consolidated Vitas results of operations in the Company's
financial statements as of February 24, 2004.
Vitas is the nation's largest provider of hospice services for patients
with severe, life-limiting illnesses. This type of care is aimed at making the
terminally ill patient's final days as comfortable and pain free as possible.
Vitas provides a comprehensive range of hospice services through 27 operating
programs covering many of the
Page 9 of 35
large population areas in the U.S. including Florida, California, Texas and
Illinois. Vitas has over 6,000 employees, including approximately 2,400 nurses
and 1,500 home health aides.
To fund the Acquisition and retire Vitas' and the Company's long-term
debt, we completed the following transactions ("Financing") on February 24,
2004:
- We borrowed $75.0 million under a new $135 million revolving
credit/term loan agreement at an initial weighted average interest
rate of 4.50%. Principal payments of $1.25 million are due quarterly
under the term loan beginning June 2004. The credit agreement
matures in February 2009.
- We sold 2 million shares of the Company's capital stock in a private
placement at a price of $50 per share, before expenses.
- We issued $110 million principal amount of floating rate senior
secured notes due February 2010 at an initial interest rate of
4.88%.
- We issued $150 million principal amount of 8.75% fixed rate senior
notes due February 2011.
- We incurred estimated financing and transaction fees and expenses of
approximately $15.9 million.
We are recording the Acquisition using the purchase method of accounting
using preliminary estimates of the fair values of Vitas' assets and liabilities
as of the date of the Acquisition. We engaged a professional valuation firm to
conduct a formal appraisal of Vitas' assets and liabilities and to assist us in
determining the fair values of Vitas' assets and liabilities, including the
identification and valuation of intangible assets acquired. We may identify
additional intangible assets, including customer contracts and related customer
relationships and other contract-based intangibles such as lease agreements and
service contracts. If we identify and value other intangible assets, goodwill
may be reduced. In addition, such additional intangible assets may have finite
lives and be subject to amortization. The final allocation of the Acquisition
consideration may result in significant differences from the preliminary amounts
reflected in the Company's financial statements as of and for the three and six
month periods ended June 30, 2004.
On a preliminary basis the noncompetition agreement and the consulting
agreement have been assigned lives equal to their contractual lives of eight
years and seven years, respectively. None of the goodwill associated with the
acquisition of Vitas is deductible for tax purposes. Goodwill is assumed to have
an indefinite life.
Page 10 of 35
The unaudited pro forma operating data of the Company for the three months
ended June 30, 2003 and for the six months ended June 30, 2004 and 2003, giving
effect to the Acquisition and Financing as if they had occurred on January 1 of
the respective periods follow (in thousands, except per share amounts):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Service revenues and sales $ 208,994 $ 183,516 $ 412,912 $ 361,343
--------- --------- --------- ---------
Cost of services provided and goods
sold (excluding depreciation) 147,206 128,295 292,278 255,366
Selling, general and administrative
expenses 37,913 39,459 77,598 77,914 (c)
Depreciation 4,570 4,973 9,287 9,953
Long-term incentive compensation - - 9,058 (a) -
--------- --------- --------- ---------
Total costs and expenses 189,689 172,727 388,221 343,233
--------- --------- --------- ---------
Income from operations 19,305 10,789 24,691 18,110
Interest expense (6,206) (6,437) (12,513) (12,727)
Loss on extinguishment of debt - - (3,330)(b) (3,330)(b)
Other income - net 231 1,946 1,851 5,646
--------- --------- --------- ---------
Income before income taxes 13,330 6,298 10,699 7,699
Income taxes (5,833) (2,801) (5,734) (3,943)
--------- --------- --------- ---------
Net income/(loss) $ 7,497 $ 3,497 $ 4,965 $ 3,756
========= ========= ========= =========
Earnings Per Share
Net income $ 0.61 $ 0.29 $ 0.41 $ 0.32
========= ========= ========= =========
Average shares outstanding 12,325 11,908 12,168 11,899
========= ========= ========= =========
Diluted Earnings Per Share
Net income $ 0.60 $ 0.29 $ 0.40 $ 0.32
========= ========= ========= =========
Average shares outstanding 12,677 11,942 12,397 11,922
========= ========= ========= =========
- ----------
(a) Amounts represent payouts under the Company's 2002 Executive Long-term
Incentive Plan. The aftertax costs of these payouts was $5,894,000 ($.48
per share).
(b) Amount represents the prepayment penalty incurred on the early
extinguishment of the Company's debt ($2,164,000 aftertax or $.18 per
share and $.17 per diluted share).
(c) Amount includes pretax charges of $3,627,000 ($2,358,000 aftertax, or $.20
per share) for severance charges.
(d) Amount includes a pretax gain of $3,544,000 ($2,151,000 aftertax, or $.18
per share) from the sales of available-for-sale investments.
We acquired the 63% of Vitas we did not previously own to enhance our
minority investment in Vitas, the nation's largest provider of hospice services.
We believe the investment will be financially advantageous to our shareholders
because the hospice market is fragmented and Vitas has the infrastructure to
capitalize on the growing hospice services market.
During the first six months of 2004, we completed two business
combinations within the Roto-Rooter segment for an aggregate purchase price of
$2,991,000 in cash. The acquired businesses provide drain cleaning and plumbing
services under the Roto-Rooter name. The results of operations of these
businesses are not material to the Company's results of operations.
We allocated the purchase price of these businesses as follows (in
thousands):
Goodwill $2,918
Other 266
------
Total $3,184
======
Page 11 of 35
8. 2002 EXECUTIVE LONG-TERM INCENTIVE PLAN
During January 2004, the price of the Company's stock exceeded $50 per
share for more than 10 consecutive trading days, fulfilling one of the
performance targets of the 2002 Executive Long-Term Incentive Plan ("LTIP"). In
February the Compensation/Incentive Committee of the Board of Directors
("CIC")approved a payout under the LTIP in the aggregate amount of $7.8 million
($2.8 million in cash and 84,633 shares of capital stock). The pretax expense of
this award, including payroll taxes and benefit costs, was $9,058,000
($5,894,000 aftertax or $.54 per share).
During June, the CIC approved guidelines covering the establishment of a
pool of 125,000 capital shares ("2004 LTIP Pool") to be distributed to eligible
members of management upon attainment of the following hurdles during the period
January 1, 2004 through December 31, 2007:
- 44,000 shares will be awarded if Chemed's cumulative pro forma
adjusted EBITDA (including the results of Vitas beginning on January
1, 2004) reaches $365 million within the four year period.
- 44,000 shares will be awarded if Chemed's stock price reaches the
following hurdles during any 30 trading days out of any 60-trading
day period during the four-year period:
- 11,000 shares for a stock price of $70.00
- an additional 16,500 shares for a stock price of $77.50
- an additional 16,550 shares for a stock price of $85.00.
- 22,000 shares represent a retention element, subject to a four-year,
time based vesting.
- 15,000 shares may be awarded at the discretion of the CIC.
On June 22, 2004, the CIC awarded 22,000 restricted shares of stock to key
employees of management under the retention component of the 2004 LTIP Pool.
These shares vest on December 31, 2007 for all participants still employed by
the Company. The cost of these awards, based on the fair value of the stock on
June 22, 2004, ($1,071,000) is being amortized on a straight line basis over the
42-month period ending December 31, 2007.
As of June 30, 2004, no accrual for awards under the remaining components
of the 2004 LTIP Pool was made since it is not probable that any of the awards
will be earned and paid.
9. PREPAID INCOME TAXES
Prepaid income taxes at June 30, 2004 totals $14,730,000, and includes the
estimated benefit on the loss that will be carried back to prior periods'
returns.
Page 12 of 35
10. OTHER CURRENT LIABILITIES
Other current liabilities include the following (in thousands):
June 30, December 31,
2004 2003
-------- ------------
Accrued salaries and wages $20,923 $ 1,945
Accrued severance 9,922 1,462
Other 25,506 17,716
------- -------
Total $56,351 $21,123
======= =======
Accrued severance includes $ 8,569,000 for potential costs under employment
contracts for eighteen employees of Vitas. Under the contracts these key
employees have the right, during the two-year period following the Company's
acquisition of Vitas, to terminate their employment and receive up to two years'
compensation as severance pay. As of July 31, 2004, six employees exercised
their rights under the employment contracts and are entitled to estimated
payouts aggregating $4,736,000, of which $3,416,000 has been paid as of June 30,
2004.
We have offered the remaining key employees replacement employment
contracts ("REC"). Under the REC's the key employees will receive stock awards
and stock options and may not be terminated without cause, but will forego the
unilateral right to voluntarily terminate their employment and receive severance
pay. As of July 31, 2004, seven Vitas employees, who previously held employment
contracts with Vitas, signed REC's and received restricted stock awards covering
26,430 shares of Chemed capital stock ($1,150,744). These awards vest during the
seven-year period ending May 2011 at the annual rates of 5%, 5%, 10%, 10%, 20%,
25% and 25%, respectively. Due to the graded vesting, the expense of the awards
will be recognized, in accordance with FASB interpretation No. 28, over the
seven year period at the rate of 25%, 20%, 18%, 14%, 12%, 8% and 3%,
respectively.
At the present time it is not possible to estimate how many additional
Vitas employees will elect to receive payments under their current employment
contracts.
11. 2003 SEVERANCE CHARGES
In March 2003, the Company and a corporate officer reached agreement
providing for termination of the officer's employment in exchange for payment
under her employment contract. The payments comprise a $1,000,000 lump sum
payment made in March 2003 and monthly payments of $52,788 beginning March 2003
and ending May 2007. The present value of these payments ($3,627,000) is include
in general and administrative expenses.
12. CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
We adopted the provisions of FASB Interpretation No. 46R ("FIN 46R"),
Consolidation of Variable Interest Entities - an interpretation of Accounting
Research Bulletin No. 51 (revised), effective January 1, 2004. Under FIN 46R,
the Company is not the primary beneficiary of the Chemed Capital Trust ("CCT")
and is not permitted to consolidate the accounts of the CCT. As a result, we
deconsolidated the
Page 13 of 35
Mandatorily Redeemable Preferred Securities of the Chemed Capital Trust
("Preferred Securities") and replaced them in the Company's consolidated balance
sheet with the Convertible Junior Subordinated Debentures ("CJSD"), which are
the sole assets of the CCT. The CJSD matured March 15, 2030 and bore interest at
the rate of $2.00 per annum per $27.00 principal amount, the same rate as
distributions on the Preferred Securities. Distributions on the Preferred
Securities have been reclassified as interest expense in the consolidated
statement of income. Other than the change in account captions, this change in
accounting has no impact on the Company's financial statements.
On April 7, 2004, we announced the calling of all Preferred Securities
outstanding as of May 18, 2004, at face value ($27.00 per security) plus accrued
dividends ($.35 per security). As a result, during the second quarter of 2004,
417,256 Preferred Securities were converted into 304,597 shares of capital stock
and 101,282 Preferred Securities were redeemed for $2,735,000 in cash. At June
30, 2004 there are no CJSD's or Preferred Securities outstanding.
13. OTHER LONG-TERM DEBT
In conjunction with the Vitas acquisition the Company retired its senior
notes due 2005 through 2009 and canceled its revolving credit agreement with
Bank One, N.A. ("Bank One"). To fund the Acquisition, the Company issued two
million shares of capital stock in a private placement and borrowed $335 million
as follows:
- $75 million drawn down under a $135 million secured revolving
credit/term loan facility ("New Credit Facility") with Bank
One. The facility comprises a $35 million term loan ("TL") and
$100 million revolving credit facility ("RCF"), including up
to $40 million in letters of credit. For the TL, principal
payments of $1,250,000 plus interest (LIBOR plus 3.50%) are
due quarterly beginning in June 2004. For the RCF, interest
payments (LIBOR plus 3.25%) are due at the end of the interest
period (30, 60 or 90 days as selected by the Company). The
current rate of interest on the TL is 4.60% per annum. Payment
of unpaid principal and interest is due February 2009. At June
30, 2004, $5 million of the TL is included in current
liabilities.
- $110 million from the issuance of privately placed floating
rate senior secured notes ("Floating Rate Notes") due 2010.
Interest payments (LIBOR plus 3.75%) are due quarterly
beginning in May 2004 and payment of unpaid principal and
interest is due February 2010. The current rate of interest on
the Floating Rate Notes is 5.00% per annum.
- $150 million from the issuance of privately placed 8.75%
senior notes ("Original Fixed Rate Notes") due 2011. Quarterly
interest payments are due beginning in May 2004 and payment of
unpaid principal and interest is due February 2011.
Page 14 of 35
In the second quarter of 2004, we filed a registration statement
covering up to $150 million principal amount of new 8.75% senior
notes due 2011 ("New Fixed Rate Notes"). Except for the lack of
transfer restrictions, the terms of the New Fixed Rate Notes are
substantially identical to those of the Original Fixed Rate Notes.
Pursuant to the Company's exchange offer, all holders of the
Original Fixed Rate Notes exchanged their notes for like principal
amounts of the New Fixed Rate Notes.
At June 30, 2004, long-term debt comprises the following (in thousands):
New Credit Facility
Term Loan $ 33,750
Floating Rate Notes 110,000
New Fixed Rate Notes 150,000
Other 1,353
---------
Subtotal 295,103
Less: current portion (5,552)
---------
Long-term debt $ 289,551
=========
At June 30, 2004, the Company has drawn down $31.4 million of letters of credit
("LOC") under the New Credit Facility. At June 30, 2004, the Company has $68.6
million of unused lines of credit under the New Credit Facility. Fees for the
New Credit Facility comprise an annual fee of $100,000 plus .5% per annum for
the unused portion of the RCF.
Bank One anticipates creating a borrowing syndicate to support the New
Credit Facility later in 2004. Should credit conditions change, Bank One, after
consultation with us, may change the terms of the New Credit Facility, including
the rates of interest payable and the required leverage and other financial
ratios.
Collectively, the New Credit Facility, the Floating Rate Notes and the New
Fixed Rate Notes provide for significant affirmative and restrictive covenants
including, without limitation, requirements or restrictions (subject to
exceptions) related to the following:
- use of proceeds of loans,
- restricted payments, including payments of dividends and retirement
of stock (permitting $.48 per share dividends so long as the
aggregate amount of dividends in any fiscal year does not exceed
$7.0 million and providing for additional principal prepayments on
the TL to the extent dividends exceed $5.0 million in any fiscal
year), with exceptions for existing employee benefit plans and stock
incentive plans,
- mergers and dissolutions,
- sales of assets,
- investments and acquisitions, liens, transactions with affiliates,
hedging and other financial contracts,
- restrictions on subsidiaries,
- contingent obligations, operating leases,
- guarantors,
Page 15 of 35
- collateral,
- sale and leaseback transactions,
- prepayments of indebtedness, and
- maximum annual capital expenditures of $20 million subject to
one-year carry-forwards on amounts not used during the previous
year.
In addition, the credit agreements provide that the Company will be
required to meet the following financial covenants, to be tested quarterly,
beginning with the quarter ending June 30, 2004:
- a minimum net worth requirement, which requires a net worth of at
least (i) $232 million plus (ii) 50% of consolidated net income (if
positive) beginning with the quarter ending June 30, 2004, plus
(iii) the net cash proceeds from issuance of the Company's capital
stock or capital stock of the Company's subsidiaries;
- a maximum leverage ratio, calculated quarterly, based upon the ratio
of consolidated funded debt to consolidated EBITDA, which will
require maintenance of a ratio of 5.5 to 1.00 through December 31,
2004, a ratio of 4.75 to 1.00 from January 1 through December 31,
2005, and 4.25 to 1.00 thereafter;
- a maximum senior leverage ratio, calculated quarterly, based upon
the ratio of senior consolidated funded debt to consolidated EBITDA
(which ratio excludes indebtedness in respect of the Fixed Rate
Notes), which will require maintenance of a ratio of 3.375 to 1.00
through December 31, 2004, a ratio of 2.875 to 1.00 from January 1
through December 31, 2005, and 2.625 to 1.00 thereafter; and
- a minimum fixed charge coverage ratio, based upon the ratio of
consolidated EBITDA minus capital expenditures to consolidated
interest expense plus consolidated current maturities (including
capitalized lease obligations) plus cash dividends paid on equity
securities plus expenses for taxes, which will require maintenance
of a ratio of 1.15 to 1.00 through December 31, 2004, a ratio of
1.375 to 1.00 from January 1 through December 31, 2005, and 1.50 to
1.00 thereafter.
Our calculations and projections indicate that we are in compliance
with all financial and debt covenants as of June 30, 2004, and will be in
compliance for the foreseeable future.
All of the borrowings under the New Credit Facility and the Floating Rate
Notes are guaranteed by the assets of and secured by the securities of
substantially all of the Company's subsidiaries.
Pursuant to the terms of the Floating Rate Notes, we filed a preliminary
registration statement registering the Floating Rate Notes within 90 days of
February 24, 2004. We are also required to file an effective registration
statement within 180 days of February 24, 2004. Should we fail to do so, the
interest rate on the Floating Rate Notes is increased .25% (up to a maximum of
1% per annum) for each quarter the required registration statement remains
unfiled.
Page 16 of 35
14. LOANS RECEIVABLE FROM INDEPENDENT CONTRACTORS
The Plumbing and Drain Cleaning segment sublicenses with independent
contractors to operate certain plumbing repair and drain cleaning businesses in
lesser-populated areas of the United States and Canada. At June 30, 2004, the
Company had notes receivable from its independent contractors totaling
$2,984,000 (December 31, 2003 - $2,599,000). In most cases these loans are fully
or partially secured by equipment owned by the contractor. The interest rates on
the loans range from 5% to 8% per annum and the remaining terms of the loans
range from one month to 6.0 years at June 30, 2004. During the quarter ended
June 30, 2004, we recorded revenues of $3,932,000 (2003 - $3,364,000) and pretax
profits of $986,000 (2003 - $1,110,000) from our independent contractors. During
the six months ended June 30, 2004, we recorded revenues of $8,023,000 (2003 -
$6,821,000) and pretax profits of $2,538,000 (2003 - $2,305,000) from our
independent contractors.
Effective January 1, 2004, we adopted the provisions of FIN 46R relative
to the Company's contractual relationships with its independent contractors. FIN
46R requires the primary beneficiary of a Variable Interest Entity ("VIE") to
consolidate the accounts of the VIE. We have evaluated our relationships with
our independent contractors based upon guidance provided in FIN 46R and have
concluded that many of the contractors who have loans payable to us may be
VIE's. Due to the limited financial data available from these independent
entities we have not been able to perform the required analysis to determine
which, if any, of these relationships are VIE's or the primary beneficiary of
these potential VIE relationships. We are continuing to request potential VIE
relationship. We believe consolidation, if required, of the accounts of any
VIE's for which the Company might be the primary beneficiary would not
materially impact the Company's financial position and results of operations.
15. LITIGATION
The Company is party to a class action lawsuit filed in the Third Judicial
Circuit Court of Madison County, Illinois, in June of 2000 by Robert Harris,
alleging certain Roto-Rooter plumbing was performed by unlicensed employees. The
Company contests these allegations and believes them without merit. Plaintiff
moved for a certification of a class of customers in 32 states who allegedly
paid for plumbing work performed by unlicensed employees. Plaintiff also moved
for a partial summary judgment on grounds the licensed apprentice plumber who
installed his faucet did not work under the direct personal supervision of a
licensed plumber. On June 19, 2002, the trial judge certified an Illinois-only
plaintiffs class and granted summary judgment for the named party Plaintiff on
the issue of liability, finding violation of the Illinois Plumbing License Act
and the Illinois Consumer Fraud Act, through Roto-Rooter's representation of the
licensed apprentice as a plumber. The court has not yet ruled on certification
of a class in the remaining 31 states. Due to complex
Page 17 of 35
legal and other issues involved, it is not presently possible to estimate the
amount of liability, if any, related to this matter.
On April 5, 2002, Michael Linn, an attorney, filed a class action
complaint against the Company in the Court of Common Pleas, Cuyahoga County,
Ohio. He alleged Roto-Rooter Services Company's miscellaneous parts charge,
ranging from $4.95 to $12.95 per job, violates the Ohio Consumer Sales Practices
Act. The Company contends that this charge, which is included within the
estimate approved by its customers, is a fully disclosed component of its
pricing. On February 25, 2003, the trial court certified a class of customers
who paid the charge from October 1999 to July 2002. The Company appealed this
order and on May 20, 2004 the Eight District Court of Appeals of Ohio overturned
the certification of this class action. Mr. Linn has sought review of the
decertification by the Ohio Supreme Court; the Company plans to oppose any such
review.
However, management cannot provide assurance the Company will ultimately
prevail in either of the above two cases. Regardless of outcome, such litigation
can adversely affect the Company through defense costs, diversion of
management's time, and related publicity.
The District Attorney of Suffolk County, New York is contemplating legal
proceedings against Roto-Rooter Services Company, an indirect subsidiary of the
Company, arising out of the disposal of restaurant grease trap waste,
originating in adjacent Nassau County, in Suffolk County disposal sites. The
Company believes the disposition of this matter will not have a material effect
on its financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The changes in most of the balance sheet accounts from December 31, 2003
to June 30, 2004 are due primarily to the acquisition of Vitas in February 2004.
Explanations for other changes in the balance sheet since December 31, 2003
include:
- The increase in prepaid income taxes from $3.6 million at December
31, 2003 to $14.7 million at June 30, 2004 is attributable to the
tax benefits recorded by Vitas on transaction costs of the merger
and to tax benefit on the Company's losses recorded in the first
quarter of 2004.
- The decline in other investments from $25.1 million at December 31,
2003 to $1.4 million at June 30, 2004, is attributable to
reclassifying our investment in Vitas from an equity-method
investment to an investment in a consolidated subsidiary, which is
now eliminated in consolidation.
- The current portion of long-term debt increased from $448,000 at
December 31, 2003 to $5.6 million at June 30, 2004 due to the
Company's borrowing under the term loan provisions of its New Credit
Facility, under which principal payments of $1.25 million are
payable quarterly.
Page 18 of 35
- The convertible junior subordinated debentures decreased from $14.1
million at December 31, 2003 to nil at June 30, 2004, due to our
calling these securities in April 2004. As a result, $11.3 million
of the debentures were converted into 304,597 shares of capital
stock and $2.7 million were redeemed for cash.
- Other long-term debt increased from $25.9 million at December 31,
2003 to $289.6 million at June 30, 2004 due to the Company's
borrowing under the New Credit Facility ($28.8 million), the
Floating Rate Notes ($110.0 million) and the Fixed Rate Notes
($150.0 million). Proceeds from these loans were used to finance the
purchase of Vitas, retire Vitas' debt ($67.0 million including
current portion) and retire the Company's senior debt due 2005 to
2009 ($28.3 million including a prepayment penalty of $3.3 million).
- From December 31, 2003 to June 30, 2004, paid in capital increased
$37.4 million and treasury stock declined $76.7 million largely due
to the issuance of 2 million shares of capital stock from treasury
at $50 per share to finance the purchase of Vitas.
At June 30, 2004, we had approximately $68.6 million available borrowing
capacity under our revolving credit agreement with Bank One. Management believes
its liquidity and sources of capital are satisfactory for the Company's needs in
the foreseeable future.
COMMITMENTS AND CONTINGENCIES
Collectively, the terms of the credit agreements provide that the Company
is required to meet various financial covenants, to be tested quarterly,
beginning with the quarter ending June 30, 2004. In connection therewith, we are
in compliance with all financial and other debt covenants as of June 30, 2004.
Under the New Credit Facility we are limited to investing a maximum of $3
million on acquisitions of businesses during the term of the agreement. For the
period beginning February 24, 2004 and ending July 31, 2004, we have spent $1.6
million on a business combination in the Roto-Rooter segment, leaving $1.4
million available spending for the period ending February 24, 2007. Should we
desire to complete an acquisition whose purchase price exceeds this unused
allowance, we would request a waiver of this covenant from the lender. There can
be no assurance that it would grant such waiver.
Bank One, as administrative agent for the Company's New Credit Facility,
is entitled, after consultation with us, to change certain aspects of the New
Credit Facility, to ensure a successful syndication of the facility. Because the
syndication is not yet complete, it is possible that Bank One may request
changes in the terms of the New Credit Facility. We cannot presently estimate
the financial impact of possible changes, if any, on our financial statements.
At June 30, 2004, we have current accounts receivable from Patient Care
("PC"), a former subsidiary, aggregating $2,487,000. This amount comprises
$1,251,000 for the estimated post-closing balance sheet adjustment due us and
$1,236,000 for reimbursement for expenses we have paid on behalf of PC. In
addition, we have an investment in a common stock warrant of PC ($1,445,000) and
a long-term note receivable due in
Page 19 of 35
2007 ($12.5 million). PC is current on its interest payments on the long-term
note, but is in arrears with respect to accounts receivable balances. During the
second quarter of 2004, we filed suit for collection of the balances due from PC
and in July, PC filed a counterclaim and third-party complaint alleging
violation of certain non-compete provisions of Chemed's Stock Purchase Agreement
with PC related to Chemed's acquisition of Vitas. We believe PC's counterclaim
is without merit. PC's business has been adversely impacted by a difficult
Medicaid reimbursement climate. As of February, 2004, PC has reduced its bank
debt and was in compliance with its debt covenants.
Should PC's business deteriorate significantly during the remainder of
2004, we may be required to record an impairment loss on our investments in or
receivables due from PC. At the present time we believe the balances are fully
collectible.
RESULTS OF OPERATIONS
SECOND QUARTER 2004 VERSUS SECOND QUARTER 2003-CONSOLIDATED RESULTS
The Company's service revenues and sales for the second quarter of 2004
increased 170% versus revenues for the second quarter of 2003. This $131.7
million increase was attributable to the following (dollar amounts in
thousands):
Increase/(Decrease)
------------------------
Amount Percent
--------- -------
Vitas $ 130,240 n.a.%
Plumbing and Drain Cleaning
Drain cleaning 1,636 6.3
Plumbing 1,554 6.1
Other 1,112 8.5
Service America
Service contracts (1,836) (19.9)
Demand services (983) (28.7)
---------
Total $ 131,723 170.5%
=========
Vitas' revenues for the second quarter of 2004 included revenues from the
following sources (in thousands):
Routine home care $ 88,969
Continuous home care 22,637
General inpatient care 18,454
Respite and custodial care 180
--------
Total $130,240
========
Approximately 96% of Vitas' revenues for the period was from Medicare and
Medicaid.
The increase in the drain cleaning revenues for the second quarter of 2004
versus 2003 comprises a .1% decline in the number of jobs performed and a 6.4%
increase in the average price per job. The increase in plumbing revenues for the
second quarter of 2004 versus 2003 comprised a 5.7% increase in the number of
jobs and a .4% increase in the average price per job. The increase in other
revenues for the
Page 20 of 35
second quarter of 2004 versus 2003 is attributable primarily to increases in
independent contractor operations and product sales.
The decline in Service America's service contract revenues is attributable
to selling insufficient new service contracts to replace contracts canceled or
not renewed. The average number of contracts in place during the second quarter
of 2004 was 17% lower than the 2003 quarter. As revenues from demand services
are largely dependent upon service contract customers, the decline in service
contracts in place was largely responsible for the decline in demand services in
2004.
The consolidated gross margin was 29.6% in the second quarter of 2004 as
compared with 41.0% in the second quarter of 2003, largely due to the
acquisition of Vitas in 2004. On a segment basis, Vitas' gross margin was 21.8%,
the Roto-Rooter segment's gross margin increased .4% point to 44.4%, largely due
to lower training wages as a percentage of revenues, in the second quarter of
2004 versus 2003. Service America's gross margin increased 2.2% points to 27.6%
due to reduced material costs as a percent of revenues. The lower material
costs, as a percent of revenues, is due primarily to lower inventory shrinkage.
Selling, general and administrative expenses ("SG&A") for the second
quarter of 2004 were $37,913,000, an increase of $12,823,000 (51.1%) versus the
second quarter of 2003. The increase is attributable to the following (in
thousands):
Increase/
(Decrease)
---------
Vitas SG&A (acquired in 2004) $ 13,330
Favorable market adjustments to
deferred compensation liabilities in
2004 versus unfavorable adjustments in
2003 - related to gains and losses
on the assets held in benefit trusts (1,428)
Higher yellow pages directory
advertising costs in 2004 1,075*
All other (154)
--------
Total $ 12,823
========
- ----------
* This increase occurred only within the Roto-Rooter segment.
Approximately half of the increase in yellow pages directory costs is due to the
timing of directories placed in service, and the remainder is due to increased
spending on yellow pages advertising. The market adjustments on deferred
compensation liabilities are entirely offset with equal and opposite
gains/(losses) on the assets securing those benefits included in other income -
net.
Page 21 of 35
Depreciation expense for the second quarter of 2004 increased $1,580,000
(52.8%) from $2,990,000 in the second quarter of 2003 to $4,570,000 in the 2004
quarter. This increase arises from the following (in thousands):
Increase/
(Decrease)
----------
Vitas depreciation (acquired in 2004) $ 1,861
Lower depreciation for Service America due largely to lower asset values in
2004 as a result of writing down assets in the fourth quarter of 2003 (134)
Lower depreciation for the Roto-Rooter segment
due to lower depreciation on service vehicles
due to declines in capital outlays (118)
Corporate (29)
-------
Total $ 1,580
=======
Income from operations increased $15,725,000 from $3,580,000 in the second
quarter of 2003 to $19,305,000 in the second quarter of 2004. The increase
comprises (in thousands):
Increase/
(Decrease)
----------
Income from operations of Vitas (acquired in 2004) $ 13,260
Higher gross profit of Roto-Rooter segment
due primarily to increase in service
revenues and gross profit 2,181
Favorable market adjustments to
deferred compensation liabilities in
2004 versus unfavorable adjustments in
2003 - related to gains and losses
on the assets held in benefit trusts 1,428
Higher yellow pages advertising costs in 2004 (1,075)
All other (69)
--------
Total $ 15,725
========
Interest expense, substantially all of which is incurred at Corporate,
increased from $867,000 in the second quarter of 2003 to $6,206,000 in the 2004
quarter. This increase is due to higher debt levels in 2004 as the result of
borrowing $335 million to fund the acquisition of Vitas in February 2004.
Other income declined $2,224,000 in the second quarter of 2004 versus the
second quarter of 2003. The decline is attributable to (in thousands):
Increase/
(Decrease)
---------
Positive market adjustments in 2003
to assets held in employee benefit
trusts, versus losses in 2004 $(1,428)
Lack of income from Vitas preferred stock
in 2004 (redeemed August 2003) (712)
All other (84)
-------
Total $(2,224)
=======
Page 22 of 35
The above increase in market adjustments for assets held in employee benefit
trusts in the 2003 quarter is entirely offset by higher expenses in the SG&A
category of the statement of income.
Our effective income tax rate increased from 36.1% in the second quarter
of 2003 to 43.8% in the second quarter of 2004. This increase is due to higher
corporate expenses in 2004 (for which there is no state tax benefit) and to the
lack of a domestic dividend exclusion in 2004.
Equity in the loss of Vitas for 2004 represents the Company's 37% share of
Vitas' loss for the period from January 1, 2004 through February 23, 2004, prior
to our acquiring a controlling interest in Vitas. During the second quarter of
2004, Vitas' liability for pre-acquisition transaction expenses was reduced
based on changed circumstances. Of the total adjustment 63% was recorded as a
reduction of goodwill and 37% (net of deferred income taxes) was recorded as an
adjustment of our equity in the earnings of Vitas ($821,000).
Net income for the second quarter of 2004 was $8,318,000 ($.67 per share
and $.66 per diluted share) as compared with $3,300,000 ($.33 per share) in
2003. Net income for 2004 included income of $821,000 ($.07 per share and $.06
per diluted share) from the favorable adjustment to the Company's equity in the
income of Vitas.
SECOND QUARTER 2004 VERSUS SECOND QUARTER 2003-SEGMENT RESULTS
The change in aftertax earnings for the second quarter of 2004 versus the
first quarter of 2003 is due to (in thousands):
Increase/
(Decrease)
----------
Earnings of Vitas, acquired in 2004 $ 7,907
Higher earnings of the Roto-Rooter
segment in 2004 1,268
Lower earnings/(loss) of the Service America
segment in 2004 (67)
Higher aftertax corporate costs in 2004 (4,911)
Favorable adjustment to the equity earnings
of Vitas in 2004 821
-------
Increase in net income in 2004 $ 5,018
=======
The higher aftertax earnings of Roto-Rooter in the second quarter of 2004
are attributable to higher service revenues and gross profit in the 2004 period.
Page 23 of 35
Higher aftertax corporate expenses in 2004 are attributable to (in
thousands):
Increase/
(Decrease)
----------
Higher aftertax interest expense in 2004
due to debt incurred to acquire Vitas $3,490
Lack of income from Vitas preferred stock
in 2004 628
Higher aftertax administrative costs in
2004 due largely to professional fees
incurred in connection with Sarbanes-
Oxley compliance efforts and higher
insurance costs in 2004 609
All other 184
------
Increase in corporate costs in 2004 $4,911
======
For the second quarter of 2004, the first full quarter of operations under
Chemed ownership, Vitas' service revenues and operating profit increased 23% and
22%, respectively, versus results for the second quarter of 2003. Driving these
increases was a 19% increase in average daily census ("ADC") of patients from
7,199 in the second quarter of 2003 to 8,582 patients in the second quarter of
2004.
FIRST SIX MONTHS OF 2004 VERSUS
FIRST SIX MONTHS OF 2003 - CONSOLIDATED RESULTS
The Company's service revenues and sales for the first six months of 2004
increased 120% versus revenues for the first six months of 2003. This $185.1
million increase was attributable to the following (dollar amounts in
thousands):
Increase/(Decrease)
-------------------
Amount Percent
------ -------
Vitas $ 181,352 n.a.%
Plumbing and Drain Cleaning
Drain cleaning 3,261 6.1
Plumbing 2,974 5.9
Other 2,570 8.5
Service America
Service contracts (3,005) (15.9)
Demand services (2,026) (30.4)
---------
Total $ 185,126 119.5%
=========
Vitas' revenues for 2004 (since the date of acquisition) included revenues
from the following sources (in thousands):
Routine home care $123,363
Continuous home care 31,796
General inpatient care 25,956
Respite and custodial care 237
--------
Total $181,352
========
Page 24 of 35
Approximately 96% of Vitas' revenues for the period came from Medicare and
Medicaid.
The increase in drain cleaning revenues for the first six months of 2004
versus 2003 was due entirely to an increase in the average price per job. The
increase in plumbing revenues for the first six months of 2004 versus 2003
comprised a 4.5% increase in the number of jobs and a 1.4% increase in the
average price per job. The increase in other revenues for the first six months
of 2004 versus 2003 is attributable primarily to increases in independent
contractor operations and product sales.
The decline in Service America's service contract revenues is attributable
to selling insufficient new service contracts to replace contracts canceled or
not renewed. The average number of contracts in place during the second quarter
of 2004 was 17% lower than the 2003 quarter. The decline in service contracts in
place during 2004 was largely responsible for the decline in demand services in
2004.
The consolidated gross margin was 31.4% in the first six months of 2004 as
compared with 40.8% in the first six months of 2003, largely due to the
acquisition of Vitas in 2004. On a segment basis, Vitas' gross profit margin was
21.5%, Roto-Rooter's gross profit margin increased .6% point to 44.5%, largely
due to lower training wages as a percentage of revenues in the 2004 period.
Service America's gross profit margin increased 4.4% points to 29.5% due to
reduced material costs as a percent of revenues. The lower material costs, as a
percent of revenues, is due primarily to improved inventory and cost control in
Service America's warehouse and service trucks.
SG&A for the first six months of 2004 was $68,936,000, an increase of
$17,789,000 (34.8%) versus the first six months of 2003. The increase is
attributable to the following (in thousands):
Increase/
(Decrease)
----------
Vitas SG&A (acquired in 2004) $ 18,720
Higher yellow pages directory
advertising costs in 2003 2,953*
Severance costs for a corporate officer
in 2003 (3,627)
All other (257)
--------
Total $ 17,789
========
- ----------
* This increase occurred only within the Roto-Rooter segment.
Approximately half of the increase in yellow pages directory costs is due to the
timing of directories placed in service, and the remainder is due increased
spending on yellow pages advertising.
Page 25 of 35
Depreciation expense for the first six months of 2004 increased $2,117,000
(35.0%) from $6,042,000 in the first six months of 2003 to $8,159,000 in the
2004 period. This increase arises from the following (in thousands):
Increase/
(Decrease)
----------
Vitas depreciation (acquired in 2004) $ 2,608
Lower depreciation for Service America due largely to lower asset
values in 2004 as a result of writing down assets in the fourth
quarter of 2003 (239)
Lower depreciation for the Roto-Rooter segment
due to lower depreciation on service vehicles
due to recent declines in capital outlays (204)
Corporate (48)
-------
Total $ 2,117
=======
Income from operations increased $14,495,000 from $5,964,000 in the first
six months of 2003 to $20,459,000 in the first six months of 2004. The increase
comprises (in thousands):
Increase/
(Decrease)
----------
Income from operations of Vitas (acquired in 2004) $ 17,748
Cost of LTIP in 2004 (9,058)
Higher gross profit of Roto-Rooter segment
due primarily to increase in service
revenues 4,758
Severance charges for corporate officer in 2003 3,627
Higher yellow pages advertising costs in 2004 (2,953)
Lower gross profit of Service America segment
due primarily to decline in revenues (376)
All other 749
--------
Total $ 14,495
========
Interest expense, substantially all of which is incurred at Corporate,
increased from $1,674,000 in the first six months of 2003 to $9,111,000 in the
2004 period. This increase is due to higher debt levels in 2004 to fund the
acquisition of Vitas.
Other income declined $4,907,000 in the first six months of 2004 versus
the first six months of 2003. The decline is attributable to (in thousands):
Increase/
(Decrease)
----------
Gains on the sales of available-for-sale
investments in 2003 $(3,544)
Lack of income from Vitas preferred
stock in 2004 (redeemed August 2003) (1,423)
All other 60
-------
Total $(4,907)
=======
Page 26 of 35
Our effective income tax rate increased from 37.7% in the first six months
of 2003 to 54.3% in the first six months of 2004. This increase is due to
significantly higher corporate expenses in 2004 (for which there is no state tax
benefit) and to the lack of a domestic dividend exclusion in 2004.
Equity in the loss of Vitas for 2004 represents the Company's 37% share of
Vitas' loss for the period from January 1, 2004 through February 23, 2004, prior
to our acquiring a controlling interest in Vitas. During the 2004 period Vitas
incurred aftertax expenses aggregating $17,233,000 related to the sale of its
business to the Company. The Company's aftertax share of these charges was
$3,800,000.
Net income for the first six months of 2004 was $1,208,000 ($.10 per
share) as compared with $6,857,000 ($.69 per share) in 2003. Income for 2004
included aftertax charges of $5,894,000 ($.51 per share and $.50 per diluted
share) for the cost of the LTIP payout, an aftertax loss of $3,284,000 ($.28 per
share) from the Company's equity in the loss of Vitas and an aftertax loss of
$2,164,000 ($.19 per share and $.18 per diluted share) on the retirement of the
Company's senior debt. Net income in 2003 includes an aftertax charge of
$2,358,000 ($.24 per share)of corporate severance charges and aftertax gains on
the sales of available-for-sale investments totaling $2,151,000($.22 per share).
FIRST SIX MONTHS OF 2004 VERSUS
FIRST SIX MONTHS OF 2003-SEGMENT RESULTS
The decline in aftertax earnings for the first six months of 2004 versus
the first six months of 2003 is due to (in thousands):
Increase/
(Decrease)
---------
Earnings of Vitas, acquired in 2004 $ 10,504
Higher aftertax corporate costs in 2004 (13,959)
Equity in Vitas' loss (attributable to
costs incurred by Vitas in connection
with the sale of Vitas to Chemed) (3,284)
Higher earnings of the Roto-Rooter
segment in 2004 1,074
Higher earnings of the Service America
segment in 2004 16
--------
Decline in net income in 2004 $ (5,649)
========
Page 27 of 35
Higher aftertax corporate expenses in 2004 are attributable to (in
thousands):
Increase/
(Decrease)
---------
Higher aftertax interest expense in 2004
due to debt incurred to acquire Vitas $ 4,841
Aftertax cost of the LTIP in 2004 (corporate
office employees) 4,742
Aftertax cost of corporate severance in
2003 (2,358)
Increases in other administrative costs in
2004 due largely to professional fees
incurred in connection with Sarbanes-
Oxley compliance efforts and higher
insurance costs in 2004 877
Loss on extinguishment of debt in 2004 2,164
Capital gains on the sales of available-for-
sale investments in 2003 2,151
Lack of income from Vitas preferred
stock in 2004 1,423
All other 119
--------
Increase in corporate costs in 2004 $ 13,959
========
The higher aftertax earnings of Roto-Rooter in the first six months of
2004 are attributable to higher service revenues and gross profit, partially
offset by Roto-Rooter's share of the LTIP costs ($982,000 aftertax).
The following data update previously provided historical financial and
operating data of Vitas, acquired in February 2004 (in thousands, except
percentages, days and dollars per day):
Page 28 of 35
2003 2004
---------------------- -------------------------------------------
Second Year-to-Date January 1 to February 24 to Second
Quarter June February 23 March 31 (a) Quarter
-------- ------------ ------------ -------------- --------
STATEMENT OF OPERATIONS
Service revenues and sales $106,245 $206,427 $72,870 $51,112 $ 130,240
-------- -------- -------- ------- ---------
Cost of services provided
and goods sold (excluding
depreciation) 82,684 163,603 58,848 40,486 101,790
Selling, general and
administrative expenses 13,557 25,142 8,186 5,391 13,329
Costs related to sate of
business -- -- 24,956(b) -- --
Depreciation 1,483 2,911 836 748 1,861
-------- -------- -------- ------- ---------
Total costs and expenses 97,724 191,656 92,826 46,625 116,980
-------- -------- -------- ------- ---------
Income/(loss) from operations 8,521 14,771 (19,956) 4,487 13,260
Interest expense (1,322) (2,666) (919) (28) (30)
Loss on extinguishment of debt -- -- (4,497)(b) -- --
Other income-net 203 353 41 31 176
-------- -------- -------- ------- ---------
Income/(loss) before
income taxes 7,402 12,458 (25,331) 4,490 13,406
Income taxes (2,963) (4,978) 6,996 (1,893) (5,499)
-------- -------- -------- ------- ---------
Net income/(loss) $ 4,439 $ 7,480 $(18,335) $ 2,597 $ 7,907
======== ======== ======== ======= =========
EBITDA (C)
Net income/(loss) $ 4,439 $ 7,480 $(18,335) $ 2,597 $ 7,907
Add/(deduct)
Interest expense 1,322 2,666 919 28 30
Income taxes 2,963 4,978 (6,996) 1,893 5,499
Depreciation 1,483 2,911 836 748 1,861
Amortization 7 13 4 323 813
-------- -------- -------- ------- --------
EB1TDA $ 10,214 $ 18,048 $(23,572) $ 5,589 $ 16,110
======== ======== ======== ======= ========
(a) We acquired Vitas on February 24,2004 and recorded estimated purchase
accounting adjustments to the value of Vitas' assets as of that date.
Amortization of such adjustments for the February 24, 2004 to March 31,
2004 period totaled $202,000 for increased depreciation and $327.000
for increased amortization of identifiable irrangable assets.
(b) Costs related to the sale of Vitas totaled $29,453,000 pretax
($20,930,000 aftertax). Such costs include legal and professional fees,
severance costs and a loss on writing off deferred debt issuance costs.
(c) EBITDA is income before interest expense, income taxes, depreciation and
amortization. We use EBITDA, in additional to net income, income/(loss)
from operations and cash flow from operating to assess our performance and
believe it is important for investors to be able to evaluate us using the
same measures used by management. We believe that EBITDA is an important
supplemental measure of operating performance because it provides
investors with an indication of our ability to fund our operating capital
expenditures and debt service requirements through earnings, We also
believe that EBITDA is a supplemental measurement tool used by analysts
and investors to help evaluate a company's overall operating performance
by including only transactions related to core cash operating business
activities. EBITDA as calculated by us is not necessarily comparable to
similarly titled measures reported by other companies. In addition EBITDA
is not prepared in accordance with accounting principles generally
accepted in the United States ("GAAP"). and should not: be considered as
alternatives for net income, income from operations, net cash provided
by operating activities or our other financial information determined
under GAAP, and should not be considered as a measure of our
profitability or liquidity. We believe the line on our consolidated
statement of income entitled net income/(loss) is the most directly
comparable GAAP measure to EBITDA, EBITDA, as calculated above includes
interest income, loss on extinguishment of debt and costs related to the
sale of Vias to the Company as follows (in thousands):
2003 2004
------------------------ -------------------------------------------
Second Year-to-Date January 1 to February 24 to Second
Quarter June February 23 March 31 Quarter
-------- ------------ ------------ -------------- --------
Interest income $ 203 $ 353 $ 41 $ 31 $ 65
Loss on extinguishment debt - - 4,497 - -
Costs related to sale of business - - 24,956 -
Page 29 of 35
2003 2004
------------------------------- ------------------------------
Second Year-to-Date Second Year-to-Date
Quarter June Quarter June (e)
--------- ------------ -------- ------------
OPERATING STATISTICS
Net revenue
Homecare $ 72,457 $139,946 $ 88,967 $171,949
Inpatient 17,307 34,256 18,634 37,412
Continuous care 16,481 32,225 22,639 44,861
--------- -------- -------- --------
Total $ 106,245 $206,427 $130,240 $254,222
========= ======== ======== ========
Net revenue as a percent of total
Homecare 68.2% 67.8% 68.3% 67.6%
Inpatient 16.3 16.6 14.3 14.7
Continuous care 15.5 15.6 17.4 17.7
--------- -------- -------- --------
Total 100.0% 100.0% 100.0% 100.0%
--------- -------- -------- --------
Average daily census ("ADC")
Homecare 3,764 3,654 4,709 4,525
Nursing home 2,746 2,702 3,048 2,991
--------- -------- -------- --------
Routine homecare 6,510 6,356 7,757 7,516
Inpatient 349 349 369 371
Continuous care 339 334 455 452
--------- -------- -------- --------
Total 7,198 7,039 8,582 8,339
========= ======== ======== ========
Average length of stay (days) 55.4 54.8 59.9 57.8
Median length of stay (days) 12.0 11.5 12.0 11.5
ADC by major diagnosis
Neurological 28.4% 28.5% 31.0% 30.6%
Cancer 26.0 26.4 23.3 23.6
Cardio 14.4 14.3 14.4 14.3
Respiratory 7.5 7.4 7.4 7.4
Other 23.7 23.4 23.9 24.1
--------- -------- -------- --------
Total 100.0% 100.0% 100.0% 100.0%
========= ======== ======== ========
Direct patient care margins (d)
Routine homecare 50.1% 48.9% 49.9% 49.3%
Inpatient 22.4 22.4 25.9 26.5
Continuous care 21.4 22.5 19.0 19.1
Homecare margin drivers
(dollars per patient day)
Labor costs $ 39.92 $ 41.67 $ 41.53 $ 42.78
Drug cost 8.93 8.90 9.24 8.94
Home medical equipment 5.64 5.69 5.80 5.76
Medical supplies 1.70 1.78 1.91 1.92
Inpatient margin drivers
(dollars per patient day)
labor costs $ 188.47 191.25 $ 202.08 $ 200.16
Continuous care margin drivers
(dollars per patient day)
Labor costs $ 397.23 $ 394.37 $ 421.84 $ 421.79
Bad debt expense as a percent of 1.3% 1.3% 1.1% 1.2%
revenues
Accounts receivable --
days of revenue outstanding 37.4 37.4 35.1 35.1
- ----------
(d) Amounts exclude indirect patient care costs.
(e) For the period January 1, 2004 to February 23, 2004, Vitas was 37%-owned
by the Company.
Page 30 of 35
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 REGARDING FORWARD-LOOKING INFORMATION
In addition to historical information, this report contains
forward-looking statements and performance trends that are based upon
assumptions subject to certain known and unknown risks, uncertainties,
contingencies and other factors. Variances in any or all of the risks,
uncertainties, contingencies, and other factors from the Company's assumptions
could cause actual results to differ materially from these forward-looking
statements and trends. The Company's ability to deal with the unknown outcomes
of these events, many of which are beyond the control of the Company, may affect
the reliability of its projections and other financial matters.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Chemed's primary market risk exposure relates to interest rate risk
exposure through its variable interest rate borrowings. At June 30, 2004, we
have a total of $143,750,000 of variable rate debt outstanding. Should the
interest rate on this debt increase 100 basis points, our annual interest
expense would increase $1,437,500. We estimate that the fair values of our
variable rate debt and fixed rate debt approximate their book values at June 30,
2004 ($143,750,000 and $151,353,000, respectively).
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management to allow timely
decisions regarding required disclosure.
The Company recently carried out an evaluation, under the
supervision of the Company's President and Chief Executive Officer, and with the
participation of the Vice President and Chief Financial Officer and the Vice
President and Controller, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures pursuant to Exchange Act Rules
13a-14/15d-14(a). Based upon the foregoing, the Company's President and Chief
Executive Officer, Vice President and Chief Financial Officer and Vice President
and Controller concluded that as of the date of this report the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company and its consolidated subsidiaries
required to be included in the Company's Exchange Act reports. There have been
no significant changes in internal control over financial reporting during the
first six months of 2004.
Page 31 of 35
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
(a) The Company held its annual meeting of stockholders on May 17, 2004.
(b) The names of directors elected at this annual meeting are as
follows:
Edward L. Hutton Thomas C. Hutton
Kevin J. McNamara Sandra E. Laney
Donald Breen, Jr. Timothy S. O'Toole
Charles H. Erhart, Jr. Donald E. Saunders
Joel F. Gemunder George J. Walsh
Patrick P. Grace Frank E. Wood
(c) The stockholders voted on the approval and adoption of the Company's
2004 Stock Incentive Plan: 4,550,207 votes were cast in favor of the
proposal, 1,831,174 votes were cast against it, 212,510 votes
abstained, and 2,517,122 were broker non-votes.
(d) The stockholders voted on the approval of an amendment to the
Company's 2002 Executive Long-Term Incentive Plan: 6,044,250 votes
were cast in favor of the proposal, 335,521 votes were cast against
it, 214,120 votes abstained, and 2,517,122 were broker non-votes.
(e) The stockholders voted on the approval of an amendment to the
Certificate of Incorporation increasing the number of authorized
shares of Capital Stock from 15,000,000 to 40,000,000: 7,568,904
votes were cast in favor of the proposal, 1,527,276 votes were cast
against it, 14,835 votes abstained, and there were no broker
non-votes.
(f) The stockholders voted on the approval of an amendment to the
Certificate of Incorporation changing the Company's name from
Roto-Rooter, Inc. to Chemed Corporation: 9,025,179 votes were cast
in favor of the proposal, 70,732 votes were cast against it, 15,103
votes abstained, and there were no broker non-votes.
Page 32 of 35
With respect to the election of directors, the number of votes cast for
each nominee was as follows:
For Withheld
--------- ---------
Edward L. Hutton 7,161,260 1,949,754
Kevin J. McNamara 7,434,721 1,676,293
Donald Breen, Jr 8,786,637 324,377
Charles H. Erhart, Jr 8,200,904 910,110
Joel F. Gemunder 8,602,283 508,731
Patrick P. Grace 8,267,600 843,413
Thomas C. Hutton 7,028,766 2,082,248
Sandra E. Laney 7,313,748 1,797,266
Timothy S. O'Toole 7,435,638 1,675,376
Donald E. Saunders 8,218,825 892,189
George J. Walsh, III 7,024,610 2,086,404
Frank E. Wood 8,600,194 510,820
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
Exhibit No. Description
- ----------- -----------
10.1 2002 Executive Long-Term Incentive Plan, as amended
May 18, 2004.
31.1 Certification by Kevin J. McNamara pursuant to Rule 13A - 14 of the
Exchange Act of 1934.
31.2 Certification by David P. Williams pursuant to Rule 13A - 14 of the
Exchange Act of 1934.
31.3 Certification by Arthur V. Tucker, Jr. pursuant to Rule 13A - 14 of
the Exchange Act of 1934.
32.1 Certification by Kevin J. McNamara pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification by David P. Williams pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.3 Certification by Arthur V. Tucker, Jr. pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Page 33 of 35
(b) Reports on Form 8-K
-------------------
- We filed a Current Report on Form 8-K, dated April 7, 2004, on
April 7, 2004. The report includes the Company's announcement
to optionally redeem its Convertible Junior Subordinated
Debentures due 2030 and all shares of Convertible Preferred
Trust Securities and Common Securities of the Chemed Capital
Trust.
- We filed a Current Report on Form 8-K, dated May 4, 2004, on
May 4, 2004. The report includes the Company's earnings
announcement for the first quarter.
- We filed a Current Report on Form 8-K, dated May 17, 2004 on
May 18, 2004. The report includes the Company's announcement
that, effective May 17, 2004, it changed its name to "Chemed
Corporation" and increased the number of authorized shares of
capital stock from 15 million to 40 million.
- We filed a Current Report on Form 8-K, dated May 17, 2004, on
May 27, 2004. The report includes the Company's announcement
to optionally redeem its Convertible Junior Subordinated
Debentures due 2030 and all shares of Convertible Preferred
Trust Securities and Common Securities of the Chemed Capital
Trust.
- We filed a Current Report on Form 8-K, July 2, 2004, was filed
on July 2, 2004. The report includes the Company's
announcement to extend by one week its offer to exchange its 8
3/4% Senior Notes Due 2011, which have been registered under
the U.S. Securities Act of 1933, as amended.
- We filed a Current Report on Form 8-K, dated August 3, 2004,
on August 3, 2004. The report includes the Company's earnings
announcement for the second quarter.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Chemed Corporation
------------------
(Registrant)
Dated: August 9, 2004 By Kevin J. McNamara
-----------------------------------
Kevin J. McNamara
(President and Chief
Executive Officer)
Dated: August 9, 2004 By David P. Williams
-----------------------------------
David P. Williams
(Vice President and Chief
Financial Officer)
Page 34 of 35
Dated: August 9, 2004 By Arthur V. Tucker, Jr.
-----------------------------------
Arthur V. Tucker, Jr.
(Vice President and Controller)
Page 35 of 35