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 JuneSeptember 30, 2002
Commission File Number 1-8351
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-0791746
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2600 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
(513) 762-6900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periodsperiod that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ------- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Amount Date
Capital Stock 9,795,7009,795,144 Shares JulyOctober 31, 2002
$1 Par Value
Page 1 of 1724
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES
Index
Page No.
--------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
JuneSeptember 30, 2002 and
December 31, 2001 3
Consolidated Statement of Income -
Three months and sixnine months ended
JuneSeptember 30, 2002 and 2001 4
Consolidated Statement of Cash Flows
-
SixNine months ended
JuneSeptember 30, 2002 and 2001 5
Notes to Unaudited Financial Statements 6 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11 - 15
Item 4. Controls and Procedures 16
PART II. OTHER INFORMATION 1617 - 1724
Page 2 of 1724
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)
JuneSeptember 30, December 31,
2002 2001
--------- -----------2001*
------------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 11,45615,603 $ 9,0088,725
Accounts receivable less allowances of $5,201$3,605
(2001 - $4,971) 50,792 49,238$4,091) 14,771 15,128
Inventories 10,07010,111 10,424
Statutory deposits 12,28212,304 13,331
Prepaid expenses 16,583 18,052
---------- ----------15,092 16,041
Current assets of discontinued operations 36,555 36,404
--------- ---------
Total current assets 101,183104,436 100,053
Other investments 37,69236,768 38,492
Properties and equipment, at cost less accumulated
depreciation of $72,687$63,470 (2001 - $69,738) 62,349 67,588$61,567) 49,309 54,549
Identifiable intangible assets less accumulated
amortization of $8,426$7,014 (2001 - $8,024) 3,685 4,037$6,545) 3,042 3,461
Goodwill less accumulated amortization of $35,548$30,448
(2001 - $35,541) 161,852 161,075$30,450) 131,144 130,402
Noncurrent assets of discontinued operations 43,485 44,905
Other assets 27,174 25,266
---------- ----------26,827 26,422
--------- ---------
Total Assets $ 393,935395,011 $ 396,511
========== ==========398,284
========= =========
LIABILITIES
Current liabilities
Accounts payable $ 9,0976,464 $ 11,6519,126
Current portion of long-term debt 366 353
Income taxes 4,433 1,2625,859 2,312
Deferred contract revenue 21,20220,390 22,194
Current liabilities of discontinued operation 11,071 10,422
Other current liabilities 46,676 49,650
---------- ----------37,970 40,703
--------- ---------
Total current liabilities 81,77482,120 85,110
Long-term debt 55,81050,728 61,037
Noncurrent liabilities of discontinued operations 2,339 1,773
Other liabilities 26,54524,341 27,842
---------- ------------------- ---------
Total Liabilities 164,129 173,989
---------- ----------159,528 175,762
--------- ---------
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF THE CHEMED CAPITAL TRUST 14,186 14,239
---------- ------------------- ---------
STOCKHOLDERS' EQUITY
Capital stock-authorized 15,000,000 shares $1 par;
issued 13,460,755 shares (2001 - 13,437,781 shares)13,437,781) shares 13,461 13,438
Paid-in capital 168,448168,359 167,542
Retained earnings 146,240152,265 139,163
Treasury stockstock-3,665,611(2001 - 3,665,8353,606,085) shares,
(2001 - 3,606,085 shares), at cost (112,568)(112,562) (110,424)
Unearned compensation (5,480)(5,087) (7,436)
Deferred compensation payable in company stock 2,2532,266 3,288
Accumulated other comprehensive income 4,2053,541 4,214
Notes receivable for shares sold (939)(946) (1,502)
---------- ------------------- ---------
Total Stockholders' Equity 215,620221,297 208,283
---------- ------------------- ---------
Total Liabilities and Stockholders' Equity $ 393,935395,011 $ 396,511
========== ==========398,284
========= =========
* Reclassified for operations discontinued in 2002
See accompanying notes to unaudited financial statements.
Page 3 of 1724
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share data)
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
------------------ ------------------
2002 2001 * 2002 2001 *
-------- -------- ----------------- --------
Continuing Operations
Service revenues and sales $116,569 $120,789 $233,604 $241,989$ 75,322 $ 82,604 $235,257 $253,813
-------- -------- -------- --------
Cost of services provided and
cost of goods sold 69,565 73,433 140,643 146,88044,314 49,455 139,446 151,269
Selling and marketing expenses 10,832 11,353 22,869 22,25310,304 11,540 33,085 33,704
General and administrative expenses 24,575 25,648 48,798 50,97211,537 13,486 36,699 42,054
Depreciation 3,996 4,015 7,990 8,0273,424 3,604 10,402 10,772
Other charges - 4,031 - 4,031
-------- -------- -------- --------
Total costs and expenses 108,968 114,449 220,300 228,13269,579 82,116 219,632 241,830
-------- -------- -------- --------
Income from operations 7,601 6,340 13,304 13,8575,743 488 15,625 11,983
Interest expense (763) (1,466) (1,536) (2,952)(709) (1,373) (2,245) (4,324)
Distributions on preferred securities (271) (278) (541) (555)(268) (275) (809) (830)
Other income--net 268 455 3,810 3,766
-------- --------- -------- --------
Income/(loss) before income - net 720 845 3,049 2,604taxes 5,034 (705) 16,381 10,595
Income taxes (1,856) 193 (5,953) (4,458)
--------- -------- -------- --------
--------
Income before income taxes 7,287 5,441 14,276 12,954
Income taxes (2,718) (2,111) (5,035) (5,010)
-------- ------- -------- --------
IncomeIncome/(loss) from continuing
operations 4,569 3,330 9,241 7,9443,178 (512) 10,428 6,137
Discontinued operations - (1,869) - (1,973)Operations 3,929 604 5,920 (74)
-------- --------------- -------- --------
Net Income $ 4,5697,107 $ 1,46192 $ 9,24116,348 $ 5,9716,063
======== ======== ======== ========
Earnings Per Common Share
IncomeIncome/(loss) from continuing
operations $ .46.32 $ .34(.05) 1.06 $ .94 $ .82.63
======== -------- -------- --------======== ======== ========
Net income $ .46.72 $ .15.01 $ .941.66 $ .61.62
======== ======== ======== ========
Diluted Earnings Per Share
IncomeIncome/(loss) from continuing
operations $ .46.32 $ .34(.05) 1.06 $ .93 $ .80.62
======== ======== ======== ========
Net income $ .46.72 $ .16.01 $ .931.65 $ .60.62
======== ======== ======== ========
EarningsAdjusted Income From Continuing Operations
Excluding Goodwill Amortization
Adjusted Income
Income from continuing operations $ 4,569 $ 4,485 $ 9,241 $ 10,258
-------- -------- -------- --------
Net income $ 4,5693,178 $ 2,616461 $ 9,24110,428 $ 8,285
-------- -------- -------- --------9,057
======== ======== ======== ========
Adjusted Earnings Per Share
Income from continuing operationsearnings per share $ .46.32 $ .46.05 $ .94 $ 1.05
-------- -------- -------- --------
Net income $ .46 $ .27 $ .94 $ .85
-------- -------- -------- --------
Adjusted Diluted Earnings Per Share
Income from continuing operations $ .46 $ .451.06 $ .93
======== ======== ======== ========
Adjusted diluted earning per
share $ 1.04
-------- -------- -------- --------
Net income.32 $ .46.05 $ .271.06 $ .93 $ .84
-------- -------- -------- --------.92
======== ======== ======== ========
Average numberNumber of shares outstandingShares Outstanding
Earnings Per Share 9,857 9,728per share 9,861 9,690 9,854 9,721
======== ======== ======== ========
Diluted earnings per share 9,867 9,690 9,882 9,850
9,737
-------- -------- -------- --------
Diluted Earnings Per Share 10,282 10,257 10,274 9,885
-------- -------- -------- --------======== ======== ======== ========
Cash Dividends Paid Per Share $ .11 $ .11 $ .22 $ .22.33 .33
======== ======== ======== ========
* Reclassified for operations discontinued in 2002
See accompanying notes to unaudited financial statements.
Page 4 of 1724
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
SixNine Months Ended
JuneSeptember 30,
-------------------------------------------
2002 20012001*
--------- --------
Cash Flows From Operating Activities
Net income $ 9,24116,348 $ 5,9716,063
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,471 12,113
Provision for uncollectible
accounts receivable 1,295 1,26610,954 16,070
Discontinued operations (5,920) 74
Gains on sale of investments (1,141) (993)
Provision for uncollectible accounts receivable 1,335 1,651
Provision for deferred income taxes 922 774
Discontinued Operations - 1,973397 (809)
Changes in operating assets and liabilities,
excluding amounts acquired in business combinations
(Increase)/decreaseDecrease in accounts receivable (2,789) 1,809(918) (658)
(Increase)/decrease in inventories 354 (587)313 (728)
(Increase)/decrease in other current
assets 1,067 (3,293)prepaid expenses 1,141 (754)
Decrease in statutory deposits 1,049 416
Decrease1,027 753
Increase/(decrease) in accounts payable, deferred
contract revenue and other current liabilities (5,847) (1,736)(6,494) 2,606
Increase in income taxes 3,882 1024,538 290
Other - net 1,298 (842)2,354 1,181
-------- --------
Net cash provided by continuing operations 17,802 16,97323,934 24,746
Net cash providedused by discontinued operations - 4845,287 4,896
-------- --------
Net cash provided by operating activities 17,802 17,45729,221 29,642
-------- --------
Cash Flows From Investing Activities
Capital expenditures (6,072) (7,202)(8,951) (10,713)
Proceeds from sale of investments 1,917 1,377
Net outflows from discontinued operations (1,852) (2,536)
Business combinations--net of cash acquired (1,229) -
Other - net 1,613 (809)(1,230) (1,358)
Net (proceeds)/outflows from discontinued operations 569 (3,190)
Other-net 1,328 2,365
-------- --------
Net cash used by investing activities (5,623) (9,170)(6,367) (11,519)
-------- --------
Cash Flows From Financing Activities
RetirementRepayment of long-term debt (10,214) (3,231)(15,296) (3,306)
Proceeds from issuances of long-term debt 5,000 -
Dividends paid (3,252) (3,292)
Purchase of treasury stock (3,181) (1,197)
Dividends paid (2,168) (2,200)(3,196) (1,201)
Other - net 832 685768 688
-------- --------
Net cash provided/(used)used by financing activities (9,731) (5,943)(15,976) (7,111)
-------- --------
Increase/(Decrease)Increase In Cash andAnd Cash Equivalents 2,448 2,3446,878 11,012
Cash and cash equivalents at beginning of period 9,008 10,2808,725 9,978
-------- --------
Cash and cash equivalents at end of period $ 11,45615,603 $ 12,62420,990
======== ========
*Reclassified for operations discontinued in 2002.
See accompanying notes to unaudited financial statements.
Page 5 of 1724
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with Rule 10-01 of SEC
Regulation S-X. Consequently, they do not include all the
disclosures required under generally accepted accounting
principles for complete financial statements. However, in
the opinion of the management of Chemed Corporation (the
"Company"), the financial statements presented herein contain
all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial
position, results of operations and cash flows of the Company
and its consolidated subsidiaries ("Chemed"). For further
information regarding Chemed's accounting policies, refer to
the consolidated financial statements and notes included in
Chemed's Annual Report on Form 10-K for the year ended
December 31, 2001.
2. SalesService revenues and service revenuessales and aftertax earnings by business
segment follow below (in thousands):
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
-------------- ------- ---------- ------------------------------- ---------------------
2002 2001 2002 2001
--------- --------- ----------------- -------- -------- --------
Service Revenues and Sales
------------------------------------------
Roto-Rooter $ 63,09560,234 $ 67,098 $ 128,374 $ 135,554
Patient Care 37,487 35,839 73,669 70,78065,406 $188,608 $200,960
Service America 15,987 17,852 31,561 35,655
--------- --------- --------- ---------15,088 17,198 46,649 52,853
-------- -------- -------- --------
Total $ 116,56975,322 $ 120,789 $ 233,604 $ 241,989
========= ========= ========= =========82,604 $235,257 $253,813
======== ======== ======== ========
Aftertax Earnings
-----------------Earnings/(Loss)
------------------------
Roto-Rooter $ 4,4133,744 1,268 (a) $ 3,581 $ 7,892 $ 7,662
Patient Care 1,124 715 1,991 1,29511,636 8,930(a)
Service America 59 483 386 945166 (310)(b) 552 635(b)
-------- --------- --------- --------- ----------------- --------
Total segment earnings 5,596 4,779 10,269 9,9023,910 958 12,188 9,565
Corporate
Overhead (844) (1,387) (3,022) (4,018)
Gains on sales of
investments - - 775 703
Overhead (1,206) (1,418) (2,178) (2,631)
Net investing and
financing income/
(expense) 179 (31) 375 (30)income
/(expense) 112 (83) 487 (113)
Discontinued operations - (1,869) - (1,973)
--------- --------- --------- ---------3,929 604 5,920 (74)
-------- -------- -------- --------
Net income $ 4,5697,107 $ 1,46192 $ 9,24116,348 $ 5,971
========= ========= ========= =========6,063
======== ======== ======== ========
Adjusted Aftertax
Segment Earnings
(a)
----------------------------------------
Roto-Rooter $ 4,4133,744 $ 4,3503,838(c,d) $ 7,89211,636 $ 9,203
Patient Care 1,124 899 1,991 1,66213,041(c,d)
Service America 59 685 386 1,351
--------- --------- ---------166 513(c,e) 552 1,864(c,e)
-------- -------- -------- --------
Adjusted segment earnings $ 5,5963,910 $ 5,9344,351 $ 10,26912,188 $ 12,216
========= ========= =========14,905
======== ======== ======== ========
(a) AdjustedAmounts include Roto-Rooter's aftertax cost of its overtime wage settlement
with the Department of Labor ($1,800,000).
(b) Amounts include Service America's aftertax impairment loss related to the
closing of its Tucson branch ($620,000).
(c) Amounts exclude the amortization of goodwill in 2001.
(d) Amounts exclude Roto-Rooter's aftertax cost of its overtime wage settlement
with the Department of Labor ($1,800,000).
(e) Amounts exclude Service America's aftertax impairment loss related to the
closing of its Tucson branch ($620,000).
Page 6 of 1724
3. Earnings per common share are computed using the weighted
average number of shares of capital stock outstanding. The
impact of the Trust Securities on earnings per share from
continuing operations is anti-dilutive for all periods
presented. Therefore, the Trust Securities are excluded
from diluted earnings per share computations.
Diluted earnings per common share are computed below (in thousands
except per share data):
Income from Continuing Operations Net Income
----------------------------------------- ---------------------------------------
Income Shares Income Per Income Shares Income
Per
(Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
----------- ------------- ------------------- ----------- ------------- -----------------
For the Three Months
Ended JuneSeptember 30,
- ------------------------------------------
2002
Earnings $ 4,569 9,8573,178 9,861 $ .46.32 $ 4,569 9,8577,107 9,861 $ .46.72
======== =======
Conversion of
trust securities 176 384 176 384
Dilutive stock
options - 416 - 416
------- --------- --------- ---------
Diluted Earnings $ 4,745 10,2823,178 9,867 $ .46.32 $ 4,745 10,2827,107 9,867 $ .46.72
======= ========= ======== ========= ========= =======
2001
Earnings/(loss)(a) $ (512) 9,690 $ (.05) $ 92 9,690 $ .01
======= ========= ======== ========= ========= =======
For the Nine Months
Ended September 30,
- ---------------------
2002
Earnings $10,428 9,854 $ 1.06 $ 16,348 9,854 $ 1.66
======== =======
Dilutive stock
options - 28 - 28
------- --------- --------- ---------
Diluted Earnings $10,428 9,882 $ 1.06 $ 16,348 9,882 $ 1.65
======= ========= ======== ========= ========= =======
2001
Earnings $ 3,330 9,7286,137 9,721 $ .34.63 $ 1,461 9,7286,063 9,721 $ .15.62
======== =======
Conversion of
trust securities 181 394 181 394
Nonvested stock
awards - 110112 - 110112
Dilutive stock
options - 2517 - 2517
------- --------- --------- ---------
Diluted Earnings $ 3,511 10,2576,137 9,850 $ .34.62 $ 1,642 10,2576,063 9,850 $ .16.62
======= ========= ======== ========= ========= =======
For the SixPeriods Ended Adjusted Earnings from Continuing Operations Excluding Goodwill Amortization
----------------------------------------------------------------------------------
September 30, 2001 For the Three Months Ended June 30,For the Nine Months Ended
- ------------------
2002--------------------- -------------------------------------- -------------------------------------
Earnings $ 9,241 9,850461 9,690 $ .94.05 $ 9,241 9,8509,057 9,721 $ .94.93
======== =======
Conversion of
trust securities 352 384 352 384Nonvested stock
awards - -(a) - 112
Dilutive stock
options - 40-(a) - 4017
------- --------- --------- ---------
Diluted Earnings $ 9,593 10,274461 9,690 $ .93.05 $ 9,593 10,2749,057 9,850 $ .93
======= ========= ======== ========= ========= =======
2001
Earnings $ 7,944 9,737 $ .82 $ 5,971 9,737 $ .61
======== =======
Conversion of
trust securities(b) - - - -
Nonvested stock
awards - 115 - 115
Dilutive stock
options - 33 - 33
------- --------- --------- ---------
Diluted Earnings $ 7,944 9,885 $ .80 $ 5,971 9,885 $ .60
======= ========= ======== ========= ========= =======
Adjusted Earnings (a)
For the Three Months
Ended June 30, 2001
- ---------------------
Earnings $ 4,485 9,728 $ .46 $ 2,616 9,728 $ .27
======== =======
Conversion of
trust securities 181 394 181 394
Nonvested stock
awards - 110 - 110
Dilutive stock
options - 25 - 25
------- --------- --------- ---------
Diluted Earnings $ 4,666 10,257 $ .45 $ 2,797 10,257 $ .27
======= ========= ======== ========= ========= =======
Adjusted Earnings (a)
For the Six Months
Ended June 30, 2001
- --------------------
Earnings $10,258 9,737 $ 1.05 $ 8,285 9,737 $ .85
======== =======
Conversion of
trust securities(b) - - - -
Nonvested stock
awards - 115 - 115
Dilutive stock
options - 33 - 33
------- --------- --------- ---------
Diluted Earnings $10,258 9,885 $ 1.04 $ 8,285 9,885 $ .84.92
======= ========= ======== ========= ========= =======
(a) Adjusted to exclude amortization of goodwill in 2001.
(b) The impact of the Trust Securities on earnings per shareSince income from continuing operations is anti-dilutivea loss for the sixthree months ended Juneending September 30, 2001.2001, the
impact of stock awards and stock options is anti-dilutive. Therefore, the Trust Securitiesnonvested stock awards and stock
options are excluded from all diluted earnings per share computations for the six months ended June 30, 2001.
Page 7 of 17
computations.
4. The Company hadCompany's total comprehensive income of $4,472,000,
$1,352,000, $9,232,000 and $4,731,000 forcomprises the three months and six
months ended Junefollowing
(in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2002 and 2001 respectively.2002 2001
-------- -------- -------- --------
Net Income $ 7,107 $ 92 $ 16,348 $ 6,063
Other Comprehensive
income/(loss) (664) 75 (673) (1,165)
-------- -------- -------- --------
Total comprehensive income $ 6,443 $ 167 $ 15,675 $ 4,898
======== ======== ======== ========
The other comprehensive income relates to the cumulative unrealized
appreciation/depreciation on itsthe Company's available-for-sale
securities.
Page 7 of 24
5. On October 11, 2002, the Company completed the sale of Patient
Care, Inc. ("Patient Care"), a wholly owned subsidiary, to an
investor group that includes Schroeder Ventures Life Sciences
Group, Oak Investment Partners, Prospect Partners and Salix
Ventures. Patient Care provides home-healthcare services primarily
in the New York-New Jersey-Connecticut area.
The cash proceeds to the Company from the sale of Patient Care
total $57.5 million, of which $5 million was placed in escrow
pending settlement of specified contingencies. In addition, the
Company received a senior subordinated note receivable ("Note") for
$12.5 million and a common stock purchase warrant for the purchase
of 2% of the outstanding stock of the purchasing company. The Note
is due October 11, 2007 and bears interest at the annual rate of
7.5% through September 30, 2004, 8.5% from October 1, 2004 through
September 30, 2005 and 9.5% thereafter. The warrant has an
estimated fair value of $1.4 million.
The Company will record a small gain on the sale of Patient Care in
the fourth quarter of 2002. Data relating to discontinued
operations include the following (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
2002 2001 2002 2001
-------- ------- --------- ---------
Service Revenues and Sales
From Discontinued Operations $ 37,515 $ 36,451 $ 111,184 $ 110,762
------------------------------- ======== ======== ========= =========
Income from Discontinued Operations
-----------------------------------
Refund of income taxes related to
the sale of The Omnia Group in
1997 $ 2,861 $ - $ 2,861 $ -
-------- -------- --------- ---------
Operating results of Patient Care(a)
Income before income tax 2,249 790 5,178 2,444
Income taxes (1,181) (186) (2,119) (545)
-------- -------- --------- ---------
Net Income 1,068 604 3,059 1,899
-------- -------- --------- ---------
Operating results of Cadre Computer
Loss before income tax - (165) - (734)
Income tax benefit/(expense) - 58 - 255
Minority interest - 6 - 46
-------- -------- --------- ---------
Net Loss - (101) - (433)
-------- --------- --------- ---------
Adjustment to loss/(loss on disposal)
of Cadre Computer
Income/(loss) before income
tax - 155 - (2,369)
Income tax benefit/(expense) - (54) - 829
-------- -------- --------- ---------
Net income/(loss) - 101 - (1,540)
-------- -------- --------- ---------
Total discontinued operations $ 3,929 $ 604 $ 5,920 $ (74)
======== ======== ========= =========
(a) During the first six monthsthird quarter of 2002, Patient Care recorded a favorable pretax adjustment of
$1,041,000 to prior years' cost reports. In addition, Patient Care recorded an unfavorable
pretax adjustment of $440,000 for expenses related to a 1997 business combination. The net
aftertax impact of these adjustments increased net income by $361,000.
September 30, December 31,
2002 2001
------------- ------------
Asset and Liabilities of Discontinued Operations
------------------------------------------------
Assets
Accounts receivable, less allowances $ 34,826 $ 34,110
Other current assets 1,729 2,294
Properties and equipment less accumulated
depreciation 11,963 13,039
Goodwill less accumulated amortization 30,458 30,673
Other noncurrent assets 1,064 1,193
------------- ------------
Total Assets $ 80,040 $ 81,309
============= ============
Liabilities
Accounts payable $ 1,148 $ 2,525
Other current liabilities 9,923 7,897
Deferred income taxes 2,339 1,773
------------- ------------
Total Liabilities $ 13,410 $ 12,195
============= ============
Page 8 of 24
6. During 2002, one purchase business combination was completed within
the Roto-Rooter segment for a purchase price of $1,229,000$1,230,000 in cash. The purchase price was
allocated as follows: $1,104,000 to goodwill, $50,000 to
identifiable intangible assets and $75,000 to other assets.
The business acquired provides drain cleaning and plumbing services
under the Roto-Rooter name. The results of operations of this
business in 2002 are not material.
6. Accruals relating to restructuring charges recorded in 2001 totaled
approximately $2.2 million at June 30, 2002 compared with $3.5
million at December 31, 2001. The changes relate primarily to
payments made during the current year.
7. On May 8, 2002, Chemed announced it entered into an agreement to
sell its wholly owned Patient Care subsidiary to an investor group
led by Schroder Ventures Life Sciences Group. Chemed expects to
receive gross cash payments of approximately $70 million and to
recognize an aftertax loss of approximately $1 million on the sale.
Completion of the sale is not presently considered probable because
it is contingent upon regulatory approvals and the purchaser's
receipt of financing commitments by September 1, 2002. If these
uncertainties are resolved, the sale is expected to close before
the end of 2002.
Patient Care's net incomepurchase price was allocated as follows (in thousands):
Reported Adjusted (a)
-------- ------------
For the three months ended June 30, 2002Identifiable intangible assets $ 1,124 $1,124
For the three months ended June 30, 2001 715 899
For the six months ended June 30, 2002 1,991 1,991
For the six months ended June 30, 2001 1,295 1,662
For the year ended December 31, 2001 526 3,325
(a) Adjusted to exclude the amortization of goodwill for 2001 and to exclude
restructuring and similar expenses and other nonrecurring charges in the
fourth quarter of 2001.
8.50
Goodwill 1,104
Other assets 76
-------
Total $ 1,230
=======
7. The Company is party to lawsuits in the normal course of business,
none of which is expected to have a material impact on its
operating results. This includes 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 baseless. Due to the
complex legal and other issues involved, it is not presently
possible to estimate the amount of liability, if any, related to
this matter.
Page 8 of 17
9.8. Effective July 1, 2001, Chemed adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, for all business combinations initiated after June
30, 2001. Effective January 1, 2002, Chemed adopted the provisions
of SFAS No. 141 for all purchase business combinations initiated prior to July 1,after
December 31, 2001. The adoption of the provisions of SFAS No. 141
did not materially impact the Company's financial statements.
Effective January 1, 2002, Chemed adopted the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets. The adoption of
the provisions of SFAS No. 141 did not
materially impact the Company's financial statements.
The adoption of SFAS No. 142 eliminates the amortization of goodwill as of the
effective date of adoption. AmortizationFor continuing operations,
amortization of goodwill for the secondthird quarter of 2001 is
$1,250,000$1,026,000 ($1,155,000973,000 net of income tax benefit), and wasis included in
cost of services and cost of goods sold in the consolidated
statement of income. For the first sixnine months of 2001,
amortization of goodwill for continuing operations is $2,505,000$3,081,000
($2,314,0002,920,000 net of income tax benefit).
In addition, SFAS No. 142 requires that goodwill be evaluated annually
for impairment beginning in 2002 for each component of itsan operating
segments.segment. The first, or transition, evaluation must be
donewas performed as of
January 1, 2002 and must be completed by June 30, 2002.
Forduring the purposesecond quarter. As of
impairment testing,January 1, 2002, the Company has determined its reporting components areto
be Service America, Patient Care, Roto-
RooterRoto-Rooter Services (plumbing
and drain cleaning services), Roto-Rooter Franchising and Products
(manufacturing, sale and franchising of Roto-Rooter products and
services) and Roto-Rooter HVAC/non-Roto-
Rooternon-Roto-Rooter brands (heating,
ventilating and air-conditioningair conditioning repair services and non-Roto-Rooter-brandednon-Roto-
Rooter-branded drain cleaning and plumbing services). The
Page 9 of 24
Company's impairment tests indicatetest indicates that none of the goodwill for
any of its reporting components is impaired.
10.9. On January 1, 2002, Chemed adopted the provisions of SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.
The adoption of SFAS No. 144 did not materially impact the
Company's financial statements.
11.10. In August 2001, the Financial Accounting Standards Board approved
the issuance of SFAS No. 143, Accounting for Asset Retirement
Obligations. This statement becomesbecame effective for fiscal years
beginning after June 15, 2002, and requires recognizing legal
obligations associated with the retirement of tangible long-lived
assets that result from the acquisition, construction, development
or normal operation of a long-lived asset. Since the Company has
no material asset retirement obligations, the adoption of SFAS No.
143 in 2003 will not have a material impact on Chemed's financial
statements.
Page 9 of 17
In April 2002, the FASB approved the issuance of SFAS No. 145,
Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13 and Technical Corrections. This statement is
generally effective for transactions occurring after May 15, 2002.
The adoption of SFAS No. 145 is not expected to have a material
impact on Chemed's financial statements.
In July 2002, the FASB approved the issuance of SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities.
Generally, SFAS No. 146 stipulates that defined exit costs
(including restructuring and employee termination costs) are to be
recorded on an incurred basis rather than on a commitment basis as
is presently required. This statement is effective for exit or
disposal activities initiated after December 31, 2002. The Company
currently anticipates that adoption of this statement in 2003 will
not have a material impact on its financial statements.
Page 10 of 1724
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Financial Condition
- -------------------
The declineThere are no unusual changes in other current liabilities from $49.7 million at
December 31, 2001 to $46.7 million at June 30, 2002 is due largely to
the paymentbalance sheet accounts during
the first nine months of liabilities for 2001 supplemental thrift and profit-
sharing contributions and incentive compensation. The decline in
accounts payable from $11.7 million at December 31, 2001 to $9.1
million at June 30, 2002 is primarily due to the timing of cash
payments at the end of the periods. Income taxes increased from $1.3
million at December 31, 2001 to $4.4 million at June 30, 2002 primarily
due to the refund of overpaid estimated federal taxes for 2001 in March
2002 and to the accrual of current income taxes in 2002.
At JuneSeptember 30, 2002, Chemed had approximately $27.7$29.2 million of unused
lines of credit with various banks. In addition to the $15.6 million
balance in cash and cash equivalents at September 30, 2002, $52.5 cash
was received in October 2002 from the sale of Patient Care. Management
believes its liquidity and sources of capital are satisfactory for the
Company's needs in the foreseeable future. Proceeds from the pending sale of
the Company's
Patient Care subsidiary will be used for acquisitions debt repayment and other corporate purposes.
Results of Operations
- ---------------------
Data relating to (a) the increase or decrease in service revenues and sales
and (b) aftertax earningsearnings/(loss) as a percent of service revenues and
sales for each segment are set forth below:
Service Revenues Aftertax Earnings as a % of Revenues
and Sales - % (Aftertax Margin)
-----------------------------------------
Increase/(Decrease)----------------------------------------
Decrease 2001 2001
------------------
2002 vs. 2001 2002 Reported Adjusted(a)
------------------ -------- -------- -----------
Three Months Ended
JuneSeptember 30,
- ------------------
Roto-Rooter (8)% 6.2% 1.9% 5.9%
Service America (12) 1.1 (1.8) 3.0
Total (9) 5.2 1.2 5.3
Nine Months Ended
September 30,
- ------------------
Roto-Rooter (6)% 7.0% 5.3%6.2% 4.4% 6.5%
Patient Care 5 3.0 2.0 2.5
Service America (10) 0.4 2.7(12) 1.2 1.2 3.5
Total (7) 5.2 3.8 Total (3) 4.8 4.0 4.9
Six Months Ended
June 30,
- ------------------
Roto-Rooter (5)% 6.1% 5.7% 6.8%
Patient Care 4 2.7 1.8 2.3
Service America (11) 1.2 2.7 3.8
Total (3) 4.4 4.1 5.05.9
(a) Adjusted to exclude amortization of goodwill, in 2001.
SecondRoto-Rooter's wage settlement with
the Department of Labor, and Service America's impairment loss.
Third Quarter 2002 versus SecondThird Quarter 2001
- ------------------------------------------------------------------------------------------
Service revenues and sales of the Roto-Rooter segment for the
secondthird quarter of 2002 totaled $63,095,000,$60,234,000, a decline of 6%8% versus the
$67,098,000$65,406,000 recorded in the secondthird quarter of 2001. Revenues of the
drain cleaning business and the plumbing services business declined Page 11 of 17
1%6%
and 6%5%, respectively, for the secondthird quarter of 2002, as compared with
revenues for 2001. Each of these businesses' revenues accounts for 44%
and 42%41%, respectively, of Roto-Rooter's total revenues and sales. Excluding revenues of businesses acquired or divested in 2001
or 2002, revenues of this segment for the second quarter of 2002
declined 4% versus revenues for the second quarter of 2001. The
aftertax margin of this segment during the secondthird quarter of 2002 was
7.0%6.2% as compared with 6.5%5.9% on an adjusted basis (excluding the cost of
the wage settlement and excluding amortization of goodwill) during the
secondPage 11 of 24
third quarter of 2001. Most of this increase is attributable to a
higher gross profit margin in the 2002 quarter.
Service revenues of the Patient Care segment increased 5% from
$35,839,000 in the second quarter of 2001 to $37,487,000 in the second
quarter of 2002. The aftertax margin of this segment increased from
2.5% on an adjusted basis (excluding goodwill amortization) in the
second quarter of 2001 to 3.0% in the second quarter of 2002, largely
as the result of a higher gross profit margin in 2002, partially offset
by higher general and administrative expenses (as a percent of
revenues) in the 2002 quarter.
Service revenues and sales of the Service America segment
declined 10%12% from $17,852,000$17,198,000 in the secondthird quarter of 2001 to
$15,987,000$15,088,000 in the secondthird quarter of 2002. This decline is attributable
to lowera decline in contract renewals in 2002, lower retail sales in 2002
and the divestment of the Tucson branch in the fourth quarter of 2001.
The aftertax margin of this segment was .4%1.1% in the secondthird quarter of
2002 as compared with 3.8%3.0% on an adjusted basis (excluding goodwill
amortization)amortization and excluding the Tucson branch closing costs) in the secondthird
quarter of 2001. This decline is attributable to a lower gross profit
margin in the 2002 quarter, primarily as the result of higher labor
costs (as a percent of revenues) in 2002.
Income from operations increased from $6,340,000$488,000 in the secondthird
quarter of 2001 to $7,601,000$5,743,000 in the secondthird quarter of 2002. On an
adjusted basis, excluding goodwill amortization in 2001 ($1,250,000)1,026,000), the cost
of Roto-Rooter's wage settlement ($3,000,000) and the cost of Service
America's branch closing ($1,031,000), income from operations for 2001
was $7,590,000.$5,545,000. Earnings before interest, taxes, depreciation and
amortization before capital gains ("EBITDA") declined slightly from $12,813,000$9,801,000 in
the secondthird quarter of 2001 to $12,518,000$9,591,000 in the secondthird quarter of 2002.
Interest expense declined from $1,466,000$1,373,000 in the secondthird quarter of
2001 to $763,000,$709,000, as a result of refinancing long-term debt at lower
interest rates in December 2001. Lower debt levels during the year
2002 also
contributed to this decline.
Other income-net declined from $845,000$455,000 in the secondthird quarter of
2001 to $720,000$268,000 in the secondthird quarter of 2002 primarily as the result of
lower interest rates on invested cash in the secondthird quarter of 2002, as
compared with interest rates in 2001.
The effective income tax rate during the secondthird quarter of 2002
was 37.3%36.9% as compared with 38.8%27.4% during the secondthird quarter of 2001.
Excluding the amortization of goodwill in 2001, the effective tax rate
Page 12 of 17
for the secondthird quarter of 2001 was 33.0%. The higher rate in 2002
(versus the adjusted rate in 2001)43.6%, which is primarily attributable
to favorable tax adjustments, the domestic dividend exclusion and a
relatively low level of adjusted pretax earnings in the 2001 quarter and to a slightly higher
effective state and local tax rate in 2002.
Incomequarter.
Income/(loss) from continuing operations increased from $3,330,000a loss of
$512,000 ($.34.05 per share) in the secondthird quarter of 2001 to $4,569,000income of
$3,178,000 ($.46.32 per share) in the secondthird quarter of 2002. Excluding
amortization of goodwill ($1,155,000973,000 aftertax), adjusted income from
continuing operations for the secondthird quarter of 2001 was $4,485,000$461,000 ($.46.05
per shareshare). If the cost of Roto-Rooter's wage settlement and $.45the cost
of Service America's branch closing (a combined aftertax total of
$2,420,000, or $.25 per diluted share). are also excluded from earnings for the
third quarter of 2001, adjusted earnings for 2001's third quarter were
$.30 per share.
Page 12 of 24
Net income increased from $1,461,000$92,000 ($.15.01 per share and $.16 per
diluted share) in the secondthird
quarter of 2001 to $4,569,000$7,107,000 ($.46.72 per share) in the secondthird quarter of
2002. The results for 20012002 include a
loss on discontinued operations of
$1,869,000$3,929,000 ($.19.40 per shareshare), comprising a tax refund of $2,861,000
related to the sale of The Omnia Group (sold in 1997) and $.18earnings of
$1,068,000 from Patient Care operations (sold in October 2002). The
results for 2001 include discontinued operations of $604,000 ($.06 per
diluted share) and goodwill amortizationfrom the earnings of $1,155,000 aftertax
($.12 per share and $.11 per diluted share). Beginning January 1,
2002, goodwill is not amortized.
SixPatient Care.
Nine Months Ended JuneSeptember 30, 2002 Versus JuneSeptember 30, 2001
- -----------------------------------------------------------------------------------------------------------------
Service revenues and sales of the Roto-Rooter segment for the
first sixnine months of 2002 totaled $128,374,000,$188,608,000, a decline of 5%6% versus
the $135,554,000$200,960,000 recorded in the first sixnine months of 2001. Revenues
of the drain cleaning business and the plumbing services business
declined 2%3% and 6%, respectively, for the first sixnine months of 2002, as
compared with revenues for 2001. Excluding revenues of businesses
acquired or divested in 2001 or 2002, revenues of this segment for the
first six months of 2002 declined 4% versus revenues for the first six
months of 2001. The aftertax margin of this segment
during the first sixnine months of 2002 was 6.1%6.2% as compared with 6.8%6.5% on
an adjusted basis (excluding amortization of goodwill) during the first
sixnine months of 2001. Most of this decline is attributable to a lower
gross profit margin as the result of increased labor costs being a higher percent of revenues
in the 2002 period.
Service revenues of the Patient Care segment increased 4% from
$70,780,000 in the first six months of 2001 to $73,669,000 in the
first six months of 2002. The aftertax margin of this segment
increased from 2.3% on an adjusted basis (excluding goodwill
amortization) in the first six months of 2001 to 2.7% in the first six
months of 2002, largely as the result of a higher gross profit margin
in 2002, partially offset by higher general and administrative
expenses (as a
percent of revenues) in the 2002 period.
Service revenues and sales of the Service America segment
declined 11%12% from $35,655,000$52,853,000 in the first sixnine months of 2001 to
$31,561,000$46,649,000 in the first sixnine months of 2002. This decline is
attributable to lowera decline in contract renewals in 2002, lower retail
sales in 2002 and the divestment of the Tucson branch in the fourth
quarter of 2001. The aftertax margin of this segment was 1.2% in the
first sixnine months of 2002, as compared with 3.8%3.5% on an adjusted Page 13 of 17
basis
(excluding goodwill amortization)amortization and excluding the cost of the Tucson
branch closing) in the first sixnine months of 2001. This decline is
attributable to a lower gross profit margin in the 2002 quarter,
primarily as the result of higher labor costs (as a percent of
revenues) in 2002.
Income from operations declinedincreased from $13,857,000$11,983,000 in the first
sixnine months of 2001 to $13,304,000$15,625,000 in the first sixnine months of 2002.
On an adjusted basis, excludingexcluding: goodwill amortization in 2001
($2,505,000),3,081,000); the cost of Roto-Rooter's wage settlement; and the cost
of the Tucson branch closing; income from operations for the 2001
period was $16,362,000. Also,$19,095,000. The decline in adjusted operating income from
2001 to 2002 is attributable to lower operating profit recorded by both
Roto-Rooter and Service America, partially offset by lower corporate
overhead. For the same reasons, earnings before interest, taxes,
depreciation and amortization before capital gains ("EBITDA") declined
11%12% from $26,515,000$33,263,000 in the first sixnine months of 2001 to $23,603,000$29,165,000 in
the first six months of 2002. These declines
are primarily attributable to the decline in Roto-Rooter's operating
profit during the first sixnine months of 2002.
Interest expense declined from $2,952,000$4,324,000 in the first sixnine
months of 2001 to $1,536,000,$2,245,000, as a result of refinancing long-term debt
Page 13 or 24
at lower interest rates in December 2001. Lower debt levels during the
year 2002 also contributed to this decline.
Other income-net increased slightly from $2,604,000$3,766,000 in the first
sixnine months of 2001 to $3,049,000$3,810,000 in the first sixnine months of 2002 as the
result of higher capital gains and higher gains on investments held in
deferred compensation trusts in the 2002 period.2002.
The effective income tax rate during the first sixnine months of
2002 was 35.3%36.3% as compared with 38.7%42.1% during the first sixnine months of
2001. Excluding the amortization of goodwill in 2001, the effective tax
rate for the first sixnine months of 2001 was 33.6%33.8%. The higher rate in
2002 (versus the adjusted rate in 2001) is primarily attributable to
larger favorable tax adjustments in the 2001 period.
Income from continuing operations increased from $7,944,000$6,137,000
($.82.63 per share and $.80$.62 per diluted share) in the first sixnine months of
2001 to $9,241,000$10,428,000 ($.941.06 per share and $.93 per diluted share) in the first sixnine months of 2002.
Excluding amortization of goodwill ($2,314,0002,920,000 aftertax), adjusted
income from continuing operations was $10,258,000$9,057,000 ($1.05.93 per share and
$1.04$.92 per diluted share) in the first sixnine months of 2001 as compared
with $9,241,000$10,428,000 ($.941.06 per share) in the first nine months of 2002. If
capital gains ($775,000, or $.08 per share in 2001 and $703,000, or
$.08 per share in 2002), the cost of Roto-Rooter's wage settlement and
the cost of Service America's branch closing (combined aftertax total
of $2,420,000, or $.25 per share) are also excluded from earnings for
the first nine months of the respective years, adjusted earnings for
2001's third quarter were $.98 per share.
Net income increased from $6,063,000 ($.62 per share) in the
first nine months of 2001 to $16,348,000 ($1.66 per share and $.93$1.65 per
diluted share) in the first sixnine months of 2002. Income from continuingThe results for 2002
include discontinued operations for the first six months of 2002 and 2001 includes aftertax capital
gains of $775,000$5,920,000 ($.08.60 per share and $.07 per diluted share) and
$703,000 ($.08 per share and $.06$.59
per diluted share), respectively.
Net income increasedcomprising a tax refund of $2,861,000 related to
the sale of The Omnia Group (sold in 1997) and earnings of $3,059,000
from $5,971,000 ($.61 per share and $.60 per
diluted share)Patient Care operations (sold in the first six months of 2001 to $9,241,000 ($.94 per
share and $.93 per diluted share) in the first six months of 2002. Net
income for the first six months of 2002 and 2001 includes aftertax
capital gains of $775,000 ($.08 per share and $.07 per diluted share)
and $703,000 ($.08 per share and $.06 per diluted share),
respectively. In addition, theOctober 2002). The results for
2001 include a net loss on discontinued operations of $1,973,000$74,000 ($.21.01 per
share and $.20nil per diluted share). Discontinued operations in 2001
include $1,899,000 from the operations of Patient Care, a loss on the
sale of Cadre Computer of $1,540,000 and goodwill amortizationa loss from Cadre Computer
operations of $2,314,000 aftertax ($.24
per share).
Page 14 of 17
$433,000.
Recent Accounting Statements
- ----------------------------
In August 2001, the Financial Accounting Standards Board
("FASB") approved the issuance of SFAS No. 143, Accounting for Asset
Retirement Obligations. This statementIt becomes effective for fiscal years
beginning after June 15, 2002, and requires all entities to recognizerecognizing legal
obligations associated with the retirement of tangible long-
livedlong-lived
assets that result from the acquisition, construction, or
development and/or
normal operation of a long-lived asset. Since the Company has no
material asset retirement obligations, the adoption of SFAS No. 143 in
2003 will not have a material impact on Chemed's financial statements.
Page 14 of 24
In April 2002, the FASB approved the issuance of SFAS No.no. 145,
Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13 and Technical Corrections. This statementIt is generally effective
for transactions occurring after May 15, 2002. TheIts adoption of SFAS No. 145 is not
expected to have a material impact on Chemed's financial statements.
In July 2002, the FASB approved the issuance of SFAS No. 146,
Accounting for Costs Associated with Exit ofor Disposal Activities.
Generally, SFAS No. 146 stipulates that defined exit costs (including
restructuring and employee termination costs) are to be recorded on an
incurred basis rather than on a commitment basis, as is presently
required. This statement is effective for exit or disposal activities
initiated after December 31, 2002. The Company currently anticipates
thatits adoption of this statement in 2003 will not have a material impact on its financial
statements.statements
Safe harborHarbor Statement under the Private Securities Litigation
Reform Act of 1995 Regarding Forward-Looking Information
- -------------------------------------------------------------
This report contains statements which are subject to certain
known and unknown risks, uncertainties, contingencies and other factors
that could cause actual results to differ materially from these
statements and trends. The Company's ability to deal with the unknown
outcomes of these events, many of which are beyond its control, may
affect the reliability of its projections and other financial matters.
Page 15 of 1724
PART II -- OTHER INFORMATION
- ----------------------------
Item 4. SubmissionControls 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. Management necessarily applies its judgment in assessing
the costs and benefits of Matterssuch controls and procedures which, by their
nature, can provide only reasonable assurance regarding management's
control objectives.
Within 90 days prior to a Votethe date of Security Holders
- ------- ---------------------------------------------------
(a) Chemed heldthis report, the Company
carried out an evaluation, under the supervision of the Company's
President and Chief Executive Officer, with the participation of its
Annual MeetingExecutive Vice President and Treasurer and its Vice President and
Controller, of Shareholders on May 20,
2002.
(b) The namesthe effectiveness of directors elected atthe design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon this Annual Meetingevaluation, the Company's President and
Chief Executive Officer, Executive Vice President and Treasurer and
Vice President and Controller concluded the Company's disclosure
controls and procedures are as
follows:
Edward L. Hutton Sandra E. Laney
Kevin J. McNamara Spencer S. Lee
Rick L. Arquilla John M. Mount
Charles H. Erhart, Jr. Timothy S. O'Toole
Joel F. Gemunder Donald E. Saunders
Patrick P. Grace George J. Walsh, III
Thomas C. Hutton Frank E. Wood
Walter L. Krebs
(c) The stockholders ratified the Board of Directors' selection
of PricewaterhouseCoopers LLP as independent accountants foreffective in timely alerting them to
material information relating to the Company and its consolidated
subsidiaries forrequired to be included in the year
2002. 8,809,683 votes were castCompany's Exchange Act
reports. There have been no significant changes in favor of the proposal,
89,472 votes were cast against it, 20,266 votes abstained,
and there were no broker non-votes.
(d) The stockholders then voted on the approval and adoption of
the 2002 Executive Long-Term Incentive Plan: 7,837,040 votes
were castinternal controls
or in favor of the proposal, 897,422 were cast against
it, 184,959 votes abstained, and there were no broker non-
votes.
5. The stockholders then voted on the approval and adoption of
the 2002 Stock Incentive Plan: 7,172,729 votes were cast in
favor of the proposal, 1,602,340 votes were cast against it,
144,352 votes abstained, and there were no broker non-votes.
With respectother factors that could significantly affect internal controls
subsequent to the election of directors,date the number of
votes cast for each nominee was as follows:
Votes For Votes Withheld
---------- --------------
Edward L. Hutton 7,690,268 1,229,152
Kevin J. McNamara 7,708,560 1,210,861
Rick L. Arquilla 7,715,379 1,204,041
Charles H. Erhart, Jr. 7,669,143 1,220,278
Joel F. Gemunder 7,712,533 1 206,887
Patrick P. Grace 7,704,008 1 215,413
Thomas C. Hutton 7,708,832 1,210,588
Walter L. Krebs 7,712,627 1 206,794
Sandra E. Laney 7,708,837 1 210,583
Spencer S. Lee 7,714,560 1,204,860
John M. Mount 7,713,155 1,206,265
Timothy S. O'Toole 7,716,535 1,202,885
Donald E. Saunders 7,705,574 1,213,847Company carried out its evaluation.
Page 16 of 1724
George J. Walsh, III 7,713,305 1,206,116
Frank E. Wood 7,710,762 1,208,658PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
--------
None required.Exhibit No. Description
----------- -----------
99.1 Certification by Kevin J. McNamara pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002.
99.2 Certification by Timothy S. O'Toole pursuant
to Section 906 of The Sarbanes-Oxley Act of
2002.
99.3 Certification by Arthur V. Tucker, Jr. pursuant
to Section 906 of The Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
-------------------
None wereA Current Report on Form 8-K, dated October 11, 2002, was
filed inOctober 18, 2002. The report disclosed the quarter ended June 30, 2002.
CERTIFICATION AND SIGNATURES
The undersigned hereby certify that this report fully complies
with the requirementsOctober 11,
2002 sale of section 13(a) or 15(d)Patient Care, Inc. ("Patient Care"), formerly a
wholly owned subsidiary of the Securities Exchange Act of 1934, 15 U.S.C. section 78m or
78(o)(d) and that informationCompany. Pro forma financial
statements contained herin fairly presents,
in all material respects,therein present the financial conditionposition
and results of operations of Registrant.the Company excluding Patient
Care as of June 30, 2002, for the six months ended June 30,
2002 and 2001, and for the year ended December 31, 2001.
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: AugustNovember 12, 2002 By Kevin J. McNamara
--------------- ------------------------------------------ -----------------------
Kevin J. McNamara
(President and Chief
Executive Officer)
Dated: AugustNovember 12, 2002 By Timothy S. O'Toole
--------------- ------------------------------------------ -----------------------
Timothy S. O'Toole
(Executive Vice President And Treasurer - Principal
Financial Officer)and
Treasurer)
Dated: AugustNovember 12, 2002 By Arthur V. Tucker, Jr.
--------------- ------------------------------------------ -----------------------
Arthur V. Tucker, Jr.
(Vice President and Controller - Principal
Accounting Officer)Controller)
Page 17 of 1724
CERTIFICATIONS PURSUANT TO RULE 13A -14 OF THE EXCHANGE ACT OF 1934
I, Kevin J. McNamara, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Chemed
Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations, and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
Page 18 of 24
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weakness.
Date: November 12, 2002 Kevin J. McNamara
----------------- -----------------------
Kevin J. McNamara
(President and Chief
Executive Officer)
I, Timothy S. O'Toole, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Chemed
Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations, and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
Page 19 of 24
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weakness.
Date: November 12, 2002 Timothy S. O'Toole
----------------- -----------------------
Timothy S. O'Toole
(Executive Vice President and
Treasurer)
I, Arthur V. Tucker, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Chemed
Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations, and cash flows of the registrant as of, and for,
the periods presented in this quarter report;
Page 20 of 24
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weakness.
Date: November 12, 2002 Arthur V. Tucker, Jr.
----------------- --------------------------
Arthur V. Tucker, Jr.
(Vice President and
Controller)
Page 21 of 24
EXHIBIT 99.1
CERTIFICATION BY KEVIN J. MCNAMARA
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned, as President and Chief Executive Officer of Chemed
Corporation ("Company"), does hereby certify that:
1) the Company's Quarterly Report of Form 10-Q for the quarter
ending September 30, 2002 ("Report"), fully complies with the
requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Dated: November 12, 2002 By: Kevin J. McNamara
----------------- -----------------------
Kevin J. McNamara
(President and Chief
Executive Officer)
Page 22 of 24
EXHIBIT 99.2
CERTIFICATION BY TIMOTHY S. O'TOOLE
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned, as Executive Vice President and Treasurer of Chemed
Corporation ("Company"), does hereby certify that:
1) the Company's Quarterly Report of Form 10-Q for the quarter
ending September 30, 2002 ("Report"), fully complies with the
requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Dated: November 12, 2002 By Timothy S. O'Toole
----------------- -----------------------
Timothy S. O'Toole
(Executive Vice President and
Treasurer)
Page 23 of 24
EXHIBIT 99.3
CERTIFICATION BY ARTHUR V. TUCKER, JR.
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned, as Vice President and Controller of Chemed Corporation
("Company"), does hereby certify that:
1) the Company's Quarterly Report of Form 10-Q for the quarter
ending September 30, 2002 ("Report"), fully complies with the
requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Dated: November 12, 2002 By Arthur V. Tucker, Jr.
----------------- -----------------------
Arthur V. Tucker, Jr.
(Vice President and Controller)
Page 24 of 24