UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
September 11, 1996
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-8351 31-0791746
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) Number)
2600 Chemed Center, 255 East 5th Street, Cincinnati, OH 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(513) 762-6900
Page 1 of 15
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 14, 1996, Chemed Corporation (the "Company")
commenced a Tender Offer (the "Offer") to purchase any and all
outstanding shares of common stock of Roto-Rooter, Inc. for
$41.00 per share in cash. The Offer expired 12:00 Midnight, on
Wednesday, September 11, 1996. In accordance with the terms of
the Offer, stockholders tendered approximately 2,100,000 shares
of Roto-Rooter, Inc. common stock. Consequently, the Company's
ownership interest increased from 58%, immediately preceding the
Offer, to 97%.
On September 17, 1996, the Company's Board of Directors
authorized a second step merger between a newly formed
subsidiary, Chemed Acquisition Corp., and Roto-Rooter, Inc. to
acquire the 3% of Roto-Rooter, Inc. shares (approximately 161,000
shares) not tendered and purchased pursuant to the original
Offer. As a result, the Company now owns 100% of Roto-Rooter,
Inc.
The Company has acquired all of the outstanding shares of
Roto-Rooter common stock at an aggregate price of approximately
$100,000,000, including transaction related expenses,
representing a premium of $66,661,000 over the book value of the
stock acquired.
The funds required to effect the purchase of these shares
were obtained from a combination of cash on hand, from borrowings
under the Company's $85,000,000 revolving credit facility with
Bank of America National Trust and Savings Association ("Credit
Facility"), as agent, and from borrowings under uncommitted lines
of credit with various banks. The interest rate on the Credit
Facility is subject to readjustment every 30 days and the
interest rate on the lines of credit is adjusted daily. The
interest rates on the Credit Facility and the uncommitted lines
of credit range from 5.55% to 5.79%. It is possible that the
Company, in the future, may secure an alternative source of
financing with a longer term maturity that would increase the
interest rate on these funds by as much as 2.0% points under
current market conditions.
The Company presently has no plans or proposals which would
materially alter the ongoing operations of Roto-Rooter, Inc.
Page 2 of 15
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
The audited financial statements of Roto-Rooter, Inc. (CIK #
0000755548) as of and for the year ended December 31, 1995,
together with the report thereon of Price Waterhouse LLP,
independent accountants, have been previously filed in
Roto-Rooter, Inc.'s report on Form 10-K for the year ended
December 31, 1995. The unaudited Statements of Income and Cash
Flows for Roto-Rooter, Inc. for the six months ended June 30,
1996 and 1995 and the unaudited Balance Sheet as of June 30, 1996
have been previously filed in Roto-Rooter, Inc.'s report on Form
10-Q for the six month period ended June 30, 1996. These filings
are incorporated herein by reference.
(b) PRO FORMA FINANCIAL INFORMATION
The goal of pro forma financial information is to provide
information about the continuing impact of the Company's purchase
of 2,261,000 shares of Roto-Rooter, Inc. by showing how it might
have affected historical financial statements had the transaction
been consummated at an earlier date. To this end, the following
assumptions have been made in preparing the unaudited Pro Forma
Consolidated Statements of Income of Chemed Corporation and
Subsidiary Companies for the six months ended June 30, 1996 and
1995 and for the year ended December 31, 1995 and the unaudited
Pro Forma Consolidated Balance Sheet of the Company as of June
30, 1996:
(i) For purposes of preparing the unaudited Pro
Forma Consolidated Statements of Income, the
Company's acquisition of all outstanding
shares of Roto-Rooter, Inc. common stock at
the price of $41.00 per share, plus
additional transaction related expenses of
approximately $7,000,000 was assumed to have
occurred at the beginning of each fiscal
period presented.
(ii) For purposes of preparing the unaudited Pro
Forma Balance Sheet, the Company's
aforementioned acquisition of 2,261,000
shares of Roto-Rooter, Inc. common stock was
assumed to be consummated on the balance
sheet date.
(iii) The Company's earnings have been adjusted for
the increase in the Company's ownership
interest in Roto-Rooter, Inc.
(iv) The excess of the purchase price of $41.00
per share over the identifiable tangible and
Page 3 of 15
intangible assets of Roto-Rooter, Inc. has
been recorded as additional goodwill. At
December 31, 1995, Roto-Rooter, Inc. had net
worth of $74,986,000, identifiable intangible
assets of $12,336,000 and goodwill of
$53,179,000 recorded on its balance sheet.
The intangible assets primarily related to
trade names and customer lists, acquired in
conjunction with Roto-Rooter's 1991 and 1993
purchases of the predecessor companies that
now operate as the Service America
residential appliance and air-conditioning
repair business, which are being amortized
predominately over a forty year period.
Since the valuation and lives assigned to
these intangibles were based on appraisals
made at relatively recent dates, further
allocation of excess purchase price to these
items was not deemed necessary.
Roto-Rooter is the preeminent national
supplier of sewer and drain cleaning and
plumbing repair service. Its well recognized
name and base of business that has been
developed over the years have an indefinite
life span. Forty years has been chosen as
the appropriate life for goodwill since it is
the maximum permitted by generally accepted
accounting principles.
(v) The Company financed the acquisition of the
2,261,000 outstanding shares of Roto-Rooter,
Inc. using a combination of additional debt
and cash on hand. $19,000,000 was borrowed
under uncommitted lines of credit with
various banks, $50,000,000 was drawn down
against the Credit Facility and the
$31,000,000 balance of the purchase price was
funded from excess cash on hand. During the
six months ended June 30, 1996 and 1995, the
Company was assumed to incur interest expense
on this debt at rates of 5.63% and 6.60% per
annum, respectively (6.46% per annum during
the year ended December 31, 1995). In
addition, the Company is assumed to have
foregone interest income earned on its excess
cash at rates of 5.23 % and 6.76% per annum
during the six months ended June 30, 1996 and
1995, respectively (6.56% per annum during
the year ended December 31, 1995).
The unaudited pro forma financial statements of the Company
follow:
Page 4 of 15
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(in thousands)
Pro Forma
Adjustments
Add/ (Deduct)
-------------
Historical Note A Pro Forma
----------- ----------- -----------
ASSETS
Current Assets
Cash and cash equivalents $ 32,255 $ (31,000) $ 1,255
Accounts receivable, less allowances 87,358 - 87,358
Inventories 55,226 - 55,226
Statutory deposits 19,505 - 19,505
Other current assets 20,583 - 20,583
---------- ---------- -----------
Total current assets 214,927 (31,000) 183,927
Other investments 78,673 - 78,673
Properties and equipment, net 79,899 - 79,899
Identifiable intangible assets, net 17,686 - 17,686
Goodwill, net 119,121 66,661 185,782
Other assets 9,602 - 9,602
---------- ---------- -----------
Total Assets $ 519,908 $ 35,661 $ 555,569
========== ========== ===========
LIABILITIES
Current liabilities
Accounts payable $ 27,825 $ - $ 27,825
Bank notes and loans payable 25,000 69,000 94,000
Current portion of long-term debt 7,500 - 7,500
Income taxes 8,840 - 8,840
Deferred contract revenue 25,043 - 25,043
Other current liabilities 45,142 - 45,142
---------- ----------- -----------
Total current liabilities 139,350 69,000 208,350
Deferred income taxes 11,354 - 11,354
Long-term debt 81,969 - 81,969
Other liabilities and deferred income 32,314 - 32,314
Minority interest 43,668 (33,339) 10,329
---------- ----------- -----------
Total Liabilities 308,655 35,661 344,316
---------- ----------- -----------
STOCKHOLDERS' EQUITY
Capital stock 12,681 - 12,681
Paid-in capital 147,982 - 147,982
Retained earnings 134,896 - 134,896
Treasury stock (84,551) - (84,551)
Unearned compensation - ESOPs (30,473) - (30,473)
Unrealized appreciation on investments 30,718 - 30,718
---------- ----------- -----------
Total Stockholders' Equity 211,253 - 211,253
---------- ----------- -----------
Total Liabilities and
Stockholders' Equity $ 519,908 $ 35,661 $ 555,569
========== ============ ============
See accompanying notes to unaudited financial statements.
Page 5 of 15
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(in thousands except per share data)
Pro Forma Adjustments
Add/ (Deduct)
---------------------
Pro
Historical Note B Note C Note D Note E Forma
---------- ---------- ---------- ---------- --------- ---------
Continuing Operations
Sales $ 199,642 $ - $ - $ - $ - $ 199,642
Service revenues 138,290 - - - - 138,290
---------- ---------- ---------- ---------- --------- ---------
Total sales and
service revenues 337,932 - - - - 337,932
Cost of goods sold 136,703 - - 834 - 137,537
Cost of services provided 83,376 - - - - 83,376
Selling and marketing expenses 48,897 - - - - 48,897
General and administrative
expenses 47,913 - - - (181) 47,732
Depreciation 6,002 - - - - 6,002
---------- ---------- ---------- ---------- --------- ---------
Total costs and expenses 322,891 - - 834 (181) 323,544
---------- ---------- ---------- ---------- --------- ---------
Income from operations 15,041 - - (834) 181 14,388
Interest expense (3,831) - (1,942) - - (5,773)
Other income, net 21,479 - (811) - - 20,668
---------- ---------- ---------- ---------- --------- ---------
Income before income taxes and
minority interest 32,689 - (2,753) (834) 181 29,283
Income taxes (12,211) - 964 - (63) (11,310)
Minority interest in earnings of
subsidiaries (2,593) 2,243 - - - (350)
---------- ---------- ---------- ---------- --------- ---------
Net Income $ 17,885 $ 2,243 $ (1,789) $ (834) $ 118 $ 17,623
========== ========== =========== ========== ========= =========
Earnings per common share
Net income $ 1.82 $ 1.79
========== =========
Average Number of Shares 9,852 9,852
========== =========
See accompanying notes to unaudited financial statements.
Page 6 of 15
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(in thousands except per share data)
Pro Forma Adjustments
Add/ (Deduct)
---------------------
Pro
Historical Note B Note C Note D Note E Forma
---------- ---------- ---------- ---------- ---------- ----------
Continuing Operations
Sales $ 444,301 $ - $ - $ - $ - $ 444,301
Service revenues 254,864 - - - - 254,864
---------- ---------- ---------- ---------- ---------- ----------
Total sales and
service revenues 699,165 - - - - 699,165
Cost of goods sold 306,345 - - 1,667 - 308,012
Cost of services provided 157,461 - - - - 157,461
Selling and marketing expenses 99,162 - - - - 99,162
General and administrative
expenses 91,416 - - - (301) 91,115
Depreciation 11,819 - - - - 11,819
Nonrecurring expenses 538 - - - - 538
---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses 666,741 - - 1,667 (301) 668,107
---------- ---------- ---------- ---------- ---------- ----------
Income from operations 32,424 - - (1,667) 301 31,058
Interest expense (8,466) - (4,457) - - (12,923)
Other income, net 17,001 - (2,034) - - 14,967
---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes and
minority interest 40,959 - (6,491) (1,667) 301 33,102
Income taxes (15,614) - 2,272 - (105) (13,447)
Minority interest in earnings of
subsidiaries (4,906) 4,008 - - - (898)
---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations 20,439 4,008 (4,219) (1,667) 196 18,757
Discontinued operations 2,743 - - - - 2,743
---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 23,182 $ 4,008 $ (4,219) $ (1,667) $ 196 $ 21,500
========== ========== ========== ========== ========== ===========
Earnings per common share
Income from continuing
operations $ 2.07 $ 1.90
========== ==========
Net income $ 2.35 $ 2.18
========== ==========
Average Number of Shares 9,861 9,861
========== ==========
See accompanying notes to unaudited financial statements.
Page 7 of 15
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(in thousands except per share data)
Pro Forma Adjustments
Add/ (Deduct)
---------------------
Pro
Historical Note B Note C Note D Note E Forma
---------- ---------- ---------- ---------- ---------- ----------
Continuing Operations
Sales $ 225,458 $ - $ - $ - $ - $ 225,458
Service revenues 121,744 - - - - 121,744
---------- ---------- ---------- ---------- ---------- ----------
Total sales and
service revenues 347,202 - - - - 347,202
Cost of goods sold 155,443 - - 834 - 156,277
Cost of services provided 75,365 - - - - 75,365
Selling and marketing expenses 51,544 - - - - 51,544
General and administrative
expenses 44,479 - - - (160) 44,319
Depreciation 5,824 - - - - 5,824
---------- ---------- ---------- ---------- ----------- ----------
Total costs and expenses 332,655 - - 834 (160) 333,329
---------- ---------- ---------- ---------- ----------- ----------
Income from operations 14,547 - - (834) 160 13,873
Interest expense (4,222) - (2,277) - - (6,499)
Other income, net 10,376 - (1,047) - - 9,329
---------- ---------- ---------- ---------- ----------- ----------
Income before income taxes and
minority interest 20,701 - (3,324) (834) 160 16,703
Income taxes (7,841) - 1,163 - (56) (6,734)
Minority interest in earnings of
subsidiaries (2,170) 1,844 - - - (326)
---------- ---------- ---------- ---------- ----------- ----------
Income from continuing
operations 10,690 1,844 (2,161) (834) 104 9,643
Discontinued operations 901 - - - - 901
---------- ---------- ---------- ---------- ----------- ----------
Net Income $ 11,591 $ 1,844 $ (2,161) $ (834) $ 104 $ 10,544
========== ========== ========== ========== ========== ==========
Earnings per common share
Income from continuing
operations $ 1.08 $ 0.98
========== ==========
Net income $ 1.17 $ 1.07
========== ==========
Average Number of Shares 9,866 9,866
========== ==========
See accompanying notes to unaudited financial statements.
Page 8 of 15
CHEMED CORPORATION
EXPLANATORY NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1996, DECEMBER 31, 1995 AND JUNE 30, 1995
Note A - This adjustment reflects the impact of the Company's
acquisition of all 2,261,000 outstanding shares of Roto-Rooter,
Inc. at a price of $41.00 per share. The aggregate purchase
price of $100,000,000, including tranaction related expenses of
approximately $7,000,000, represented a premium of $66,661,000
over the book value of the stock acquired. This excess is
recorded as goodwill and the $33,339,000 book value of the
minority shareholders' interest in Roto-Rooter is eliminated.
Note B - This adjustment reflects the elimination of the minority
shareholders' interest in the earnings of Roto-Rooter resulting
from the Company's purchase of Roto-Rooter's outstanding minority
interest.
Note C - This adjustment reflects the increased amount of
aftertax interest expense that the Company would have incurred as
a result of borrowing an additional $69,000,000. It also
reflects the reduction in aftertax interest income that would
have resulted from the application of the Company's excess cash
on hand to fund the balance of the purchase price.
Note D - This adjustment reflects the impact of increased
goodwill amortization.
Note E - This adjustment reflects the impact of the elimination
of public company expenses, such as directors' fees, annual
report production costs and higher audit fees, that will no
longer be incurred by Roto-Rooter, Inc. now that it is a 100%-
owned subsidiary.
(c) EXHIBITS
(2) Certificate of Ownership and Merger
of Chemed Acquisition Corp. into
Roto-Rooter, Inc. E-1 - E-5
Page 9 of 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
CHEMED CORPORATION
BY: Arthur V. Tucker, Jr.
----------------------
Its: Vice President & Controller
---------------------------
Dated: September 24, 1996
------------------
Page 10 of 15
EXHIBIT 2
State of Delaware
Page 1
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF OWNERSHIP, WHICH MERGES:
"CHEMED ACQUISITION CORP.", A DELAWARE CORPORATION,
WITH AND INTO "ROTO-ROOTER, INC." UNDER THE NAME OF
"ROTO-ROOTER, INC.", A CORPORATION ORGANIZED AND EXISTING UNDER
THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS
OFFICE THE SEVENTEENTH DAY OF SEPTEMBER, A.D. 1996 AT 4:30
O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING
Edward J. Freel, Secretary of State
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
2017949 8100M 8107583
DATE:
960269316 09-17-96
E - 1
Page 11 of 15
STATE OF DELAWARE EXHIBIT 2
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:30 PM 09/17/1996
960269316-2663418
CERTIFICATE OF OWNERSHIP AND MERGER
OF
CHEMED ACQUISITION CORP.
INTO
ROTO-ROOTER, INC.
_______________________
Pursuant to Section 253
of the Delaware General
Corporation Law
_______________________
Pursuant to Section 253 of the Delaware General
Corporation Law (the "DGCL"), Chemed Acquisition Corp., a
Delaware corporation (the "Corporation"), hereby certifies the
following information relating to the merger (the "Merger") of
the Corporation with and into Roto-Rooter, Inc., a Delaware
corporation ("Roto-Rooter"):
FIRST: The names and states of incorporation of each
of the constituent corporations to the Merger are as follows:
Roto-Rooter, Inc., a Delaware corporation, and Chemed Acquisition
Corp., a Delaware corporation.
SECOND: The Corporation owns at least 90% of the
outstanding shares of the Common Stock, par value $1.00 per
share, of Roto-Rooter, and Roto-Rooter has no other class of
capital stock outstanding.
THIRD: The Board of Directors of the Corporation has
determined to merge the Corporation into Roto-Rooter under
Section 253 of the DGCL pursuant to the following resolutions
duly adopted by the Board of Directors of the Corporation on
September 17, 1996, on the terms set forth in such resolutions:
E - 2
Page 12 of 15
EXHIBIT 2
WHEREAS the Corporation owns at least 90% of the
outstanding shares of the common stock, par value $1.00 per
share, of Roto-Rooter, Inc., a Delaware corporation ("Roto-
Rooter"), and desires to merge itself into such subsidiary
(the "Merger");
NOW, THEREFORE, BE IT RESOLVED, that the Corporation be
merged into Roto-Rooter, pursuant to and in accordance with
Section 253 of the Delaware General Corporation Law (the
"Merger") and the proper officers of the Corporation be, and
each of them hereby is, authorized in the name and on behalf
of the Corporation to take any and all actions they deem
necessary or advisable in connection therewith;
RESOLVED that Roto-Rooter shall be the surviving
corporation in the Merger (the "Surviving Corporation");
RESOLVED that upon the Merger becoming effective:
(a) the issued and outstanding shares of common
stock of the Corporation shall be converted into and
become one million fully paid and nonassessable shares
of common stock, par value $1.00 per share, of the
Surviving Corporation, and certificates representing
such shares shall be issued to the sole stockholder of
the Corporation upon surrender by such sole stockholder
of the certificate or certificates that immediately
prior to the Merger represented the issued and
outstanding shares of common stock of the Corporation,
and the Surviving Corporation shall issue shares of
stock pro rata to the former holders of common stock of
the Corporation upon surrender of any certificates
therefore;
(b) each share of common stock, par value $1.00
per share, of Roto-Rooter ("Roto-Rooter Common Stock")
that is owned by Roto-Rooter or by any wholly-owned
subsidiary of Roto-Rooter and each share that is owned
by Chemed Corporation ("Chemed") (other than shares of
stock of Surviving Corporation held by Chemed pursuant
to clause (a) above), the Corporation or any other
wholly-owned subsidiary of Chemed shall automatically
be cancelled and retired and shall cease to exist, and
no consideration shall be delivered in exchange
therefor; and
E - 3
Page 13 of 15
EXHIBIT 2
(c) each share of Roto-Rooter Common Stock (other
than shares of Roto-Rooter Common Stock held by a
person who complies with all the provisions of Delaware
law concerning the right of holders of Roto-Rooter
Common Stock to demand appraisal of their shares of
Roto-Rooter Common Stock (a "Dissenting Stockholder")
and other than shares to be cancelled in accordance
with clause (b) above) issued and outstanding shall be
converted into the right to receive from the Surviving
Corporation in cash, without interest, $41.00 per share
(the "Merger Consideration") and all such shares shall
no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each
holder of a certificate that immediately prior to the
Merger represented any such shares shall cease to have
any rights with respect thereto, except the right to
receive the Merger Consideration, without interest,
upon the surrender of such certificate. If, after the
Merger becomes effective, any Dissenting Stockholder
withdraws his demand for appraisal or fails to perfect
or otherwise loses his right of appraisal, in any case
pursuant to Delaware law, his shares of Roto-Rooter
Common Stock shall be deemed to have been converted as
of the time the Merger became effective into the right
to receive the Merger Consideration and such shares
shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and
such Dissenting Stockholder shall cease to have any
rights with respect thereto, except the right to
receive the Merger Consideration, without interest,
upon the surrender of such certificate.
RESOLVED that the proper officers of the Corporation
be, and each of them hereby is, authorized, in the name and
on behalf of the Corporation, to execute and file a
certificate of ownership and merger with the Secretary of
the State of the State of Delaware in such form as the
officer or officers executing the same shall approve, the
signature of such officer or officers thereon to be
conclusive evidence of the approval of such form; and
RESOLVED that any and all actions heretofore or
hereafter taken by the proper officers of the Corporation
relating to and within the terms of this resolution are
hereby ratified and confirmed as the acts and deeds of the
Corporation.
E - 4
Page 14 of 15
EXHIBIT 2
FOURTH: The Merger has been approved by the sole
stockholder of the Corporation by written consent in accordance
with Section 228 of the DGCL.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Ownership and Merger to be executed by its duly
authorized officer on the 17th day of September 1996, and affirms
the statements contained therein as true and under penalties of
perjury.
CHEMED ACQUISITION CORP.,
by Kevin J. McNamara
_________________________
Name: Kevin J. McNamara
Title: President
E - 5
Page 15 of 15
