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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X] THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
or
Transition Report Pursuant to Section 13 or 15(d) of the
[ ] Securities Exchange Act of 1934
For the Transition period from _______________ to ______________
Commission File Number: 1-8351
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0791746
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2600 Chemed Center, 255 East Fifth Street, Cincinnati, Ohio 45202-4726
(Address of principal executive offices) (Zip Code)
(513) 762-6900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Capital Stock - Par Value $1 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of said stock on the New York Stock
Exchange-Composite Transaction Listing on March 19, 1998 ($40.81 per share),
was $398,136,360.
At March 19, 1998, 10,102,073 shares of Chemed Corporation Capital Stock
(par value $1 per share) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
-------- ------------------
1997 Annual Report to Stockholders (Specified Portions) Parts I, II and IV
Proxy Statement for Annual Meeting Part III
to be held May 18, 1998.
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CHEMED CORPORATION
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business........................................................ 1
Item 2. Properties...................................................... 5
Item 3. Legal Proceedings............................................... 8
Item 4. Submission of Matters to a Vote of Security Holders............. 8
Executive Officers of the Registrant............................ 8
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters............................................. 9
Item 6. Selected Financial Data......................................... 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 9
Item 8. Financial Statements and Supplementary Data..................... 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................. 10
PART III
Item 10. Directors and Executive Officers of the Registrant.............. 10
Item 11. Executive Compensation.......................................... 10
Item 12. Security Ownership of Certain Beneficial Owners and
Management...................................................... 10
Item 13. Certain Relationships and Related Transactions.................. 10
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K..................................................... 10
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PART I
ITEM 1. BUSINESS
GENERAL
Chemed Corporation was incorporated in Delaware in 1970 as a subsidiary
of W. R. Grace & Co. and succeeded to the business of W. R. Grace & Co.'s
Specialty Products Group as of April 30, 1971 and remained a subsidiary of W. R.
Grace & Co. until March 10, 1982. As used herein, "Company" refers to Chemed
Corporation, "Chemed" refers to Chemed Corporation and its subsidiaries and
"Grace" refers to W. R. Grace & Co. and its subsidiaries.
On March 10, 1982, the Company transferred to Dearborn Chemical Company,
a wholly owned subsidiary of the Company, the business and assets of the
Company's Dearborn Group, including the stock of certain subsidiaries within the
Dearborn Group, plus $185 million in cash, and Dearborn Chemical Company assumed
the Dearborn Group's liabilities. Thereafter, on March 10, 1982 the Company
transferred all of the stock of Dearborn Chemical Company to Grace in exchange
for 16,740,802 shares of the capital stock of the Company owned by Grace with
the result that Grace no longer has any ownership interest in the Company.
On December 31, 1986, the Company completed the sale of substantially all
of the business and assets of Vestal Laboratories, Inc., a wholly owned
subsidiary ("Vestal"). The Company received cash payments aggregating
approximately $67.4 million over the four-year period following the closing, the
substantial portion of which was received on December 31, 1986.
On April 2, 1991, the Company completed the sale of DuBois Chemicals,
Inc. ("DuBois"), a wholly owned subsidiary, to the Diversey Corporation
("Diversey"), then a subsidiary of The Molson Companies Ltd. Under the terms of
the sale, Diversey agreed to pay the Company net cash payments aggregating
$223,386,000, including deferred payments aggregating $32,432,000.
On December 21, 1992, the Company acquired The Veratex Corporation and
related businesses ("Veratex Group") from Omnicare, Inc., a publicly traded
company in which Chemed currently maintains a 1 percent ownership interest. The
purchase price was $62,120,000 in cash paid at closing, plus a post-closing
payment of $1,514,000 (paid in April 1993) based on the net assets of Veratex.
Effective January 1, 1994, the Company acquired all the capital stock of
Patient Care, Inc. ("Patient Care"), for cash payments aggregating $20,582,000,
including deferred payments with a present value of $6,582,000, plus 17,500
shares of the Company's Capital Stock. An additional cash payment of $1,000,000
was made on March 31, 1996 and another payment of $1,000,000 was made on March
31, 1997.
In July 1995, the Company's Omnia Group (formerly Veratex Group)
completed the sale of the business and assets of its Veratex Retail division to
Henry Schein, Inc. ("HSI") for $10 million in cash plus a $4.1 million note for
which payment was received in December 1995.
Effective September 17, 1996, the Company completed a merger of a
subsidiary of the Company, Chemed Acquisition Corp., and Roto-Rooter, Inc.
pursuant to a Tender Offer commenced on August 8, 1996 to acquire any and all of
the outstanding shares of Common Stock of Roto-Rooter, Inc. for $41.00 per share
in cash.
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On September 24, 1997, the Company completed the sale of its wholly owned
businesses comprising the Omnia Group to Banta Corporation for $50 million in
cash and $2.3 million in deferred payments.
Effective September 30, 1997, the Company completed a merger between its
81- percent-owned subsidiary, National Sanitary Supply Company, and a wholly
owned subsidiary of Unisource Worldwide, Inc. for $21.00 per share, with total
payments of $138.3 million.
The Company now conducts its business operations in three segments:
Roto-Rooter Group ("Roto-Rooter"), Patient Care and Service America Systems,
Inc. ("Service America").
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The required segment and geographic data for the Company's continuing
operations (as described below) for the three years ended December 31, 1995,
1996 and 1997, are shown in the "Sales and Profit Statistics by Business
Segment" and the "Additional Segment Data" on pages 30, 31 and 34 of the 1997
Annual Report to Stockholders and are incorporated herein by reference.
DESCRIPTION OF BUSINESS BY SEGMENT
The information called for by this item is included within Note 1 of the
Notes to Financial Statements appearing on page 21 of the 1997 Annual Report to
Stockholders and is incorporated herein by reference.
PRODUCT AND MARKET DEVELOPMENT
Each segment of Chemed's business engages in a continuing program for the
development and marketing of new services and products. While new products and
services and new market development are important factors for the growth of each
active segment of Chemed's business, Chemed does not expect that any new
products and services or marketing effort, including those in the development
stage, will require the investment of a material amount of Chemed's assets.
RAW MATERIALS
The principal raw materials needed for Chemed's United States
manufacturing operations are purchased from United States sources. No segment of
Chemed experienced any material raw material shortages during 1997, although
such shortages may occur in the future. Products manufactured and sold by
Chemed's active business segments generally may be reformulated to avoid the
adverse impact of a specific raw material shortage.
PATENTS, SERVICE MARKS AND LICENSES
The Roto-Rooter(R) trademark and service mark have been used and
advertised since 1935 by Roto-Rooter Corporation, a wholly owned subsidiary of
Roto-Rooter, Inc., a 100 percent-owned subsidiary of the Company. The
Roto-Rooter(R) marks are among the most highly recognized trademarks and service
marks in the United States. Chemed considers the Roto-Rooter(R) marks to be a
valuable asset and a significant factor in the marketing
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of Roto-Rooter's franchises, products and services and the products and services
provided by its franchisees.
COMPETITION
ROTO-ROOTER
All aspects of the sewer, drain, and pipe cleaning, and plumbing repair
businesses are highly competitive. Competition is, however, fragmented in most
markets with local and regional firms providing the primary competition. The
principal methods of competition are advertising, range of services provided,
speed and quality of customer service, service guarantees, and pricing.
No individual customer or market group is critical to the total sales of
this segment.
PATIENT CARE
The home healthcare services industry and, in particular, the nursing and
personal care segment is highly competitive. Patient Care competes with numerous
local, regional and national home healthcare services companies. Patient Care
competes on the basis of quality, cost-effectiveness and its ability to service
its referral base quickly throughout its regional markets.
Patient Care has contracts with several customers, the loss of any one or
more of which could have a material adverse effect on this segment.
SERVICE AMERICA
All aspects of the HVAC and appliance repair and maintenance service
industry are highly competitive. Competition is, however, fragmented in most
markets with local and regional firms providing the primary competition. The
principal methods of competition are advertising, range of services provided,
speed and quality of customer service, service guarantees, and pricing.
RESEARCH AND DEVELOPMENT
Chemed engages in a continuous program directed toward the development of
new products and processes, the improvement of existing products and processes,
and the development of new and different uses of existing products. The research
and development expenditures from continuing operations have not been nor are
they expected to be material.
GOVERNMENT REGULATIONS
Roto-Rooter's franchising activities are subject to various federal and
state franchising laws and regulations, including the rules and regulations of
the Federal Trade Commission (the "FTC") regarding the offering or sale of
franchises. The rules and regulations of the FTC require that Roto-Rooter
provide all prospective franchisees with specific information regarding the
franchise program and Roto-Rooter in the form of a detailed franchise offering
circular. In addition, a number of states require Roto-Rooter to register its
franchise offering prior to offering or selling franchises
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in the state. Various state laws also provide for certain rights in favor of
franchisees, including (i) limitations on the franchisor's ability to terminate
a franchise except for good cause, (ii) restrictions on the franchisor's ability
to deny renewal of a franchise, (iii) circumstances under which the franchisor
may be required to purchase certain inventory of franchisees when a franchise is
terminated or not renewed in violation of such laws, and (iv) provisions
relating to arbitration. Roto-Rooter's ability to engage in the plumbing repair
business is also subject to certain limitations and restrictions imposed by
state and local licensing laws and regulations.
Service America's operations are regulated by the Florida and Arizona
Departments of Insurance. In accordance with certain Florida regulatory
requirements, Service America maintains cash with the Department of Insurance
and is also required to maintain additional unencumbered reserves. In addition,
Service America's air conditioning and appliance repair and maintenance business
is also subject to certain limitations imposed by state and local business laws
and regulations.
Patient Care's activities are subject to various federal and state laws
and regulations. Changes in the law, new interpretations of existing laws, or
changes in payment methodology, may have a dramatic effect on the definition of
permissible or impermissible activities, the relative costs associated with
doing business and the amount of reimbursement by both government and other
third-party payors. In addition to specific legislative and regulatory
influences, efforts to reduce the growth of the federal budget and the Medicare
and the Medicaid programs have resulted in enactment of the Balanced Budget Act
of 1997. This law contains several provisions affecting Medicare payment for the
coverage of home healthcare services which directly or indirectly, together with
Medicaid payments, accounted for 82 percent of Patient Care's net revenue in
1997. Certain of these provisions are expected to have an adverse effect on
Patient Care. In addition, state legislatures periodically consider various
healthcare reform proposals. Congress and state legislatures can be expected to
continue and review and assess alternative healthcare delivery systems and
payment methodologies, and public debate of these issues can be expected to
continue in the future. The ultimate timing or effect of such additional
legislative efforts cannot be predicted and may impact Patient Care in different
ways. No assurance can be given that any such efforts will not have a material
adverse effect on Patient Care.
Certain of Patient Care's employees are subject to state laws and
regulations governing professional practice. Patient Care's operations are
subject to periodic survey by governmental and private accrediting entities to
assure compliance with applicable state licensing, and Medicare and Medicaid
certification and accreditation standards, as the case may be. From time to time
in the ordinary course of business, Patient Care, like other healthcare
companies, receives survey reports containing deficiencies for alleged failure
to comply with applicable requirements. Patient Care reviews such reports and
takes appropriate corrective action. The failure to effect such action or to
obtain, renew or maintain any of the required regulatory approvals,
certifications or licences could materially adversely affect Patient Care's
business, and could prevent the programs involved from offering products and
services to patients. There can be no assurance that either the states or the
federal government will not impose additional regulations upon the activities of
Patient Care which might materially adversely affect Patient Care.
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ENVIRONMENTAL MATTERS
Roto-Rooter's operations are subject to various federal, state, and local
laws and regulations regarding environmental matters and other aspects of the
operation of a sewer and drain cleaning and plumbing services business. For
certain other activities, such as septic tank pumping, Roto-Rooter is subject to
state and local environmental health and sanitation regulations. Compliance with
federal, state and local laws governing discharge of materials into the
environment have not had nor are expected to have a material effect upon the
operations of Roto-Rooter.
In connection with the sale of DuBois to the Diversey Corporation, the
Company contractually assumed for a period of ten years the estimated liability
for potential environmental cleanup and related costs arising from the sale of
DuBois up to a maximum of $25,500,000. The Company had accrued $15,500,000 with
respect to these potential liabilities. Based upon an updated assessment of the
Company's environmental-related liability by the Company's environmental
adviser, this accrual was reduced in 1997 and now has a balance of $7,242,000.
Prior to the sale of DuBois, DuBois had been designated as a Potentially
Responsible Party ("PRP") at fourteen Superfund sites by the U.S. Environmental
Protection Agency ("USEPA"). With respect to all of these sites, the Company has
been unable to locate any records indicating it disposed of waste of any kind at
such sites. Nevertheless, it settled claims at five such sites at minimal cost.
In addition, because there was a number of other financially responsible
companies designated as PRPs relative to these sites, management believes that
it is unlikely that such actions will have a material effect on the Company's
financial condition or results of operations. With respect to one of these
sites, the Company's involvement is based on the location of one of its
manufacturing plants. Currently, the USEPA and the state governmental agency are
attempting to resolve jurisdictional issues, and action against PRPs is not
proceeding.
Chemed, to the best of its knowledge, is currently in compliance in all
material respects with the environmental laws and regulations affecting its
operations. Such environmental laws, regulations and enforcement proceedings
have not required Chemed to make material increases in or modifications to its
capital expenditures and they have not had a material adverse effect on sales or
net income. Capital expenditures for the purposes of complying with
environmental laws and regulations during 1998 and 1999 with respect to
continuing operations are not expected to be material in amount; there can be no
assurance, however, that presently unforeseen legislative or enforcement actions
will not require additional expenditures.
EMPLOYEES
On December 31, 1997, Chemed had a total of 6,849 employees; 6,775 were
located in the United States and 74 were in Canada.
ITEM 2. PROPERTIES
Chemed has plants and offices in various locations in the United States
and Canada. The major facilities operated by Chemed are listed below by industry
segment. All "owned" property is held in fee and is not subject to any major
encumbrance. Except as otherwise shown, the leases have terms ranging from one
year to eleven years. Management does not foresee any difficulty in renewing or
replacing the remainder of its current leases. Chemed considers all of its major
operating properties to be maintained in good operating condition and to be
generally adequate for present and anticipated needs.
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Location Type Owned Leased
-------- ---- ----- ------
ROTO-ROOTER GROUP
Cincinnati, OH (1) Office and service 22,000 sq. ft. 24,000 sq. ft.
facilities
West Des Moines, Office, manufacturing and 29,000 sq. ft. --
IA distribution center facilities
Northeastern Office and service 27,000 sq. ft. 73,000 sq. ft.
U.S. Area (2) facilities
Central U.S. Office and service 17,000 sq. ft. 39,000 sq. ft.
Area (3) facilities
Mid-Atlantic Office and service 18,000 sq. ft. 24,000 sq. ft.
U.S. Area (4) facilities
Midwestern U.S. Office and service 10,000 sq. ft. 28,000 sq. ft.
Area (5) facilities
Southeastern U.S. Office and service 22,000 sq. ft. 14,000 sq. ft.
Area (6) facilities
Western U.S. Office and service 19,000 sq. ft. 33,000 sq. ft.
Area (7) facilities
Canada (8) Office and service -- 11,000 sq. ft.
facilities
PATIENT CARE
New Jersey (9) Office -- 65,000 sq.ft.
Connecticut (10) Office -- 44,000 sq.ft.
New York (11) Office -- 41,000 sq. ft.
Louisville, KY Office -- 6,000 sq. ft.
SERVICE AMERICA
Florida (12) Office and service 46,000 sq. ft. 48,000 sq. ft.
facilities
Arizona (13) Office and service -- 11,000 sq. ft.
facilities
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Location Type Owned Leased
-------- ---- ----- ------
CORPORATE
Cincinnati, OH (14) Corporate offices and -- 36,000 sq. ft.
related facilities
Detroit, MI (15) Former production 64,000 sq. ft. --
facility
- ------------------------------
(1) Includes 6,000 square feet that formerly housed a service facility.
(2) Comprising locations in Stoughton, Springfield, West Springfield and
Woburn, Massachusetts; West Stratford, Groton and Bloomfield, Connecticut;
Buffalo, West Seneca, Staten Island, Rochester, Farmingdale and Hawthorne,
New York; and Cranston, Rhode Island.
(3) Comprising locations in Atlanta, Decatur, Keenesaw and Newnan, Georgia;
Birmingham, and Adamsville, Alabama; Memphis and Nashville, Tennessee;
Charlotte, North Carolina; and St. Louis, Missouri.
(4) Comprising locations in Pennsauken and North Brunswick, New Jersey;
Levittown, Pennsylvania; Fairfax, Virginia; Newark, Delaware; and Baltimore
and Jessup, Maryland.
(5) Comprising locations in Cleveland and Columbus, Ohio; Indianapolis,
Indiana; and Pittsburgh and Wilmerding, Pennsylvania.
(6) Comprising locations in Jacksonville, Longwood, Miami and Orlando, Florida;
Raleigh, North Carolina; and Virginia Beach, Virginia.
(7) Comprising locations in Houston and San Antonio, Texas; Addison, Schaumburg
and Posen, Illinois; Commerce City, Colorado; Honolulu, Hawaii; Minneapolis
and St. Paul, Minnesota; Tacoma, Washington; and Fresno, California.
(8) Comprising locations in Port Coquitlam, British Columbia; and Winnipeg,
Manitoba.
(9) Comprising locations in Princeton, Jersey City, Ridgewood, Montclair,
Westfield, and West Orange, New Jersey.
(10) Comprising locations in Greenwich, Madison, Newington, Norwalk, East Haven,
Stratford, Waterbury, Stamford, Bridgeport and Danbury, Connecticut.
(11) Comprising locations in Brooklyn, Manhattan, Queens, Bronx and Staten
Island, New York.
(12) Comprising locations in Pompano Beach, Miami, Fort Myers, St. Petersburg,
Orlando, West Palm Beach, Deerfield Beach, and Delray Beach, Florida.
(13) Comprising locations in Phoenix and Tucson, Arizona.
(14) Excludes 103,000 square feet in current Cincinnati, Ohio office facilities
that are sublet to outside parties - portions of this space may revert to
the Company
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beginning in 1998. Includes 27,000 square feet leased for the Company's
corporate office facilities.
(15) Comprises a former production facility of the Omnia Group which was sold to
Banta Corporation in September 1997. The facility is being leased to Banta
Corporation under an agreement which expires September 1998.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office First Elected
- ---------------- --- ------------------------------------ --------------------
Edward L. Hutton 78 Chairman and Chief Executive Officer November 3, 1993 (1)
Kevin J. McNamara 44 President August 2, 1994 (2)
Paul C. Voet 51 Executive Vice President May 20, 1991 (3)
Timothy S. O'Toole 42 Executive Vice President and May 18, 1992 (4)
Treasurer
Sandra E. Laney 54 Senior Vice President and Chief November 3, 1993 (5)
Administrative Officer
Arthur V. Tucker, 48 Vice President and Controller May 20, 1991 (6)
Jr.
(1) Mr. E. L. Hutton is the Chairman and Chief Executive Officer of the Company
and has held these positions since November 1993. Previously, from April
1970 to November 1993, Mr. E. L. Hutton held the positions of President and
Chief Executive Officer of the Company. Mr. E. L. Hutton is the father of
Mr. T. C. Hutton, a director and a Vice President of the Company.
(2) Mr. K. J. McNamara is President of the Company and has held this position
since August 1994. Previously, he served as an Executive Vice President,
Secretary and General Counsel of the Company, since November 1993, August
1986 and August 1986, respectively. He previously held the position of Vice
President of the Company, from August 1986 to May 1992.
(3) Mr. P. C. Voet is an Executive Vice President of the Company and has held
this position since May 1991. From May 1988 to November 1993, he served the
Company as Vice Chairman.
(4) Mr. T. S. O'Toole is an Executive Vice President and the Treasurer of the
Company and has held these positions since May 1992 and February 1989,
respectively. Mr. O'Toole is Chairman and Chief Executive Officer of
Patient Care, Inc. and has held these positions since April 1995.
(5) Ms. S. E. Laney is Senior Vice President and the Chief Administrative
Officer of the Company and has held these positions since November 1993 and
May 1991, respectively. Previously, from May 1984 to November 1993, she
held the position of Vice President of the Company.
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(6) Mr. A. V. Tucker, Jr. is a Vice President and Controller of the Company and
has held these positions since February 1989. From May 1983 to February
1989, he held the position of Assistant Controller of the Company.
Each executive officer holds office until the annual election at the next
annual organizational meeting of the Board of Directors of the Company which is
scheduled to be held on May 18, 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Capital Stock (par value $1 per share) is traded on the New
York Stock Exchange under the symbol CHE. The range of the high and low sale
prices on the New York Stock Exchange and dividends paid per share for each
quarter of 1996 and 1997 are set forth below.
Closing
-------
Dividends Paid
High Low Per Share
--------------------------------------------------------------
1997
----
First Quarter $37-1/2 35-1/2 $.52
Second Quarter 37-7/16 31-1/2 .52
Third Quarter 39-5/16 35-1/16 .52
Fourth Quarter 43 38-1/16 .53
1996
----
First Quarter $40-1/8 $36-7/8 $.52
Second Quarter 39 35-7/8 .52
Third Quarter 39-1/8 35-1/2 .52
Fourth Quarter 39 35-1/8 .52
Future dividends are necessarily dependent upon the Company's earnings
and financial condition, compliance with certain debt covenants and other
factors not presently determinable.
As of March 19, 1998, there were approximately 5,514 stockholders of
record of the Company's Capital Stock. This number only includes stockholders of
record and does not include stockholders with shares beneficially held for them
in nominee name or within clearinghouse positions of brokers, banks or other
institutions.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item for the five years ended
December 31, 1997 is set forth on pages 32 and 33 of the 1997 Annual Report to
Stockholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information called for by this Item is set forth on pages 36
through 39 of the 1997 Annual Report to Stockholders and is incorporated herein
by reference.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the report thereon
of Price Waterhouse, LLP dated February 2, 1998, appearing on pages 15 through
30 and 34 of the 1997 Annual Report to Stockholders, along with the
Supplementary Data (Unaudited Summary of Quarterly Results) appearing on page
35, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors of the Company are:
Edward L. Hutton
James H. Devlin
Charles H. Erhart, Jr.
Joel F. Gemunder
Lawrence J. Gillis
Patrick P. Grace
Thomas C. Hutton
Walter L. Krebs
Sandra E. Laney
Kevin J. McNamara
John M. Mount
Timothy S. O'Toole
D. Walter Robbins, Jr.
Paul C. Voet
George J. Walsh III
The additional information required under this Item with respect to the
directors and executive officers is set forth in the Company's 1998 Proxy
Statement and in Part I hereof under the caption "Executive Officers of the
Registrant" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth in the Company's 1998
Proxy Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required under this Item is set forth in the Company's 1998
Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item is set forth in the Company's 1998
Proxy Statement, which is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
EXHIBITS
3.1 Certificate of Incorporation of Chemed Corporation.*
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3.2 By-Laws of Chemed Corporation.*
10.1 Agreement and Plan of Merger among Diversey U.S. Holdings, Inc.,
D. C. Acquisition Inc., Chemed Corporation and DuBois Chemicals,
Inc., dated as of February 25, 1991.*
10.2 Stock Purchase Agreement between Omnicare, Inc. and Chemed
Corporation, dated as of August 5, 1992.*
10.3 Agreement and Plan of Merger among National Sanitary Supply
Company, Unisource Worldwide, Inc. and TFBD, Inc. dated as of
August 11, 1997.*
10.4 1981 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.5 1983 Incentive Stock Option Plan, as amended through May 20,
1991.*,**
10.6 1986 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.7 1988 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.8 1993 Stock Incentive Plan.*,**
10.9 1995 Stock Incentive Plan.*,**
10.10 1997 Stock Incentive Plan.**
10.11 Directors Emeriti Plan.*,**
10.12 Employment Contracts with Executives.*,**
10.13 Amendment No. 9 to Employment Contracts with Executives.**
10.15 Split Dollar Agreement with Executives.*,**
10.16 Split Dollar Agreement with Edward L. Hutton.*,**
10.17 Split Dollar Agreement with Paul C. Voet.*,**
10.18 Amendment No. 7 to Employment Agreement with Edward L.
Hutton.*,**
10.19 Excess Benefits Plan, as restated and amended, effective April 1,
1997.**
10.20 Non-Employee Directors' Deferred Compensation Plan.*,**
10.21 Stock Purchase Agreement by and Among Banta Corporation, Chemed
Corporation and OCR Holding Company as of September 24, 1997.*
10.22 Amendment No. 3 to Employment Contract with James H. Devlin.**
10.23 Employment Contracts with John M. Mount and Walter L. Krebs.**
10.24 Employment Contract with Lawrence J. Gillis.**
13. 1997 Annual Report to Stockholders.
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21. Subsidiaries of Chemed Corporation.
23. Consent of Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule +
* This exhibit is being filed by means of incorporation by reference (see
Index to Exhibits on page E-1). Each other exhibit is being filed with this
Annual Report on Form 10-K.
** Management contract or compensatory plan or arrangement.
+ Not filed herewith.
FINANCIAL STATEMENT SCHEDULE
See Index to Financial Statements and Financial Statement Schedule on
page S-1.
REPORTS ON FORM 8-K
A Form 8-K was filed October 9, 1997 announcing Chemed
Corporation's sale of its wholly owned businesses comprising The Omnia Group to
Banta Corporation for $50 million in cash and $2.3 million in deferred payments;
and Chemed's sale of National Sanitary Supply Company to Unisource Worldwide,
Inc. for approximately $120.2 million.
12
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHEMED CORPORATION
March 27, 1998 By /s/ Edward L. Hutton
-------------------------------------
Edward L. Hutton
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Edward L. Hutton Chairman and Chief
- -------------------- Executive Officer and a
Edward L. Hutton Director (Principal
Executive Officer)
/s/ Timothy S. O'Toole Executive Vice President
- ---------------------- and Treasurer and a
Timothy S. O'Toole Director
(Principal Financial
Officer)
/s/ Arthur V.Tucker,Jr. Vice President and March 27, 1998
- ----------------------- Controller
Arthur V. Tucker, Jr. (Principal Accounting
Officer)
------
James H. Devlin* Sandra E. Laney*
Charles H. Erhart, Jr.* Kevin J. McNamara*
Joel F. Gemunder* John M. Mount*
Lawrence J. Gillis* D. Walter Robbins, Jr.* --Directors
Patrick P. Grace* Paul C. Voet*
Thomas C. Hutton* George J. Walsh III*
Walter L. Krebs*
------
- --------
* Naomi C. Dallob by signing her name hereto signs this document on
behalf of each of the persons indicated above pursuant to powers of
attorney duly executed by such persons and filed with the Securities
and Exchange Commission.
March 27, 1998 /s/ Naomi C. Dallob
- ---------------------- ----------------------------
Date Naomi C. Dallob
(Attorney-in-Fact)
13
16
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
1995, 1996 AND 1997
CHEMED CORPORATION CONSOLIDATED FINANCIAL PAGE(S)
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants............................... 15*
Statement of Accounting Policies.................................16*
Consolidated Statement of Income.................................17*
Consolidated Balance Sheet.......................................18*
Consolidated Statement of Cash Flows.............................19*
Consolidated Statement of Changes in Stockholders' Equity........20*
Notes to Financial Statements....................................21-29*
Sales and Profit Statistics by Business Segment..................30-33*
Additional Segment Data..........................................34*
Report of Independent Accountants on Financial Statement
Schedule.......................................................S-2
Schedule II -- Valuation and Qualifying Accounts.................S-3-S-4
* Indicates page numbers in Chemed Corporation 1997 Annual Report to
Stockholders.
- ------------
The consolidated financial statements of Chemed Corporation listed above,
appearing in the 1997 Annual Report to Stockholders, are incorporated herein by
reference. The Financial Statement Schedule should be read in conjunction with
the consolidated financial statements listed above. Schedules not included have
been omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto as listed above.
S-1
17
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Chemed Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 2, 1998 appearing on page 15 of the 1997 Annual Report to
Stockholders of Chemed Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14 of
this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
February 2, 1998
S-2
18
SCHEDULE II
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS (a)
(in thousands)
Dr/(Cr)
Additions
-----------------------------------
(Charged) (Charged) Applicable
Credited Credited to
Balance at to Costs to Other Companies Balance
Beginning and Accounts Acquired Deductions at End
Description of Period Expenses (b) in Period (c) of Period
- --------------------------------------------------------------------------------------------------------------
Allowances for doubtful
accounts (d)
For the year 1997......... $ (1,583) $ (702) $ -- $ (974) $ 633 $ (2,626)
======== ======= ======== ======== ======== ========
For the year 1996......... $ (1,496) $ (877) $ (78) $ ( 16) $ 884 $ (1,583)
======== ======= ======== ======== ======== ========
For the year 1995......... $ (1,214) $ (835) $ (72) $ -- $ 625 $ (1,496)
======== ======= ======== ======== ======== ========
Allowances for doubtful
accounts - notes
receivable (e)
For the year 1997......... $ (120) $ -- $ -- $ -- $ 97 $ (23)
======== ======= ======== ======== ======== ========
For the year 1996......... $ (247) $ 8 $ 78 $ -- $ 41 $ (120)
======== ======= ======== ======== ======== ========
For the year 1995......... $ (267) $ (64) $ 72 $ -- $ 12 $ (247)
======== ======= ======== ======== ======== ========
Valuation allowance for
available-for-sale securities
For the year 1997......... $ 40,096 $ -- $ 2,844 $ -- $(12,235) $ 30,705
======== ======= ======== ======== ======== ========
For the year 1996......... $ 56,030 $ -- $ 12,232 $ -- $(28,166) $ 40,096
======== ======= ======== ======== ======== ========
For the year 1995......... $ 31,729 $ -- $ 33,379 $ -- $ (9,078) $ 56,030
======== ======= ======== ======== ======== ========
S-3
19
- -------------------------
(a) Amounts are presented on a continuing operations basis.
(b) With respect to the valuation allowance for available-for-sale securities,
additions credited to other accounts comprise an increase in net
unrealized holding gains.
(c) With respect to allowances for doubtful accounts, deductions include
accounts considered uncollectible or written off, payments, companies
divested, etc. With respect to valuation allowance for available-for-sale
securities, deductions comprise net realized gains on sales of investments.
(d) Classified in consolidated balance sheet as a reduction of accounts
receivable.
(e) Classified in consolidated balance sheet as a reduction of other assets.
S-4
20
INDEX TO EXHIBITS
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------ ----------- -----------
3.1 Certificate of Incorporation of Form S-3 4.1
Chemed Corporation Reg. No. 33-44177
11/26/91
3.2 By-Laws of Chemed Corporation Form 10-K 2
3/28/89
10.1 Agreement and Plan of Merger Form 8-K 1
among Diversey U.S. Holdings, 3/11/91
Inc., D.C. Acquisition Inc.,
Chemed Corporation and DuBois
Chemicals, Inc., dated as of
February 25, 1991
10.2 Stock Purchase Agreement between Form 10-K 5
Omnicare, Inc. and Chemed 3/25/93
Corporation dated as of August 5,
1992
10.3 Agreement and Plan of Merger Form 8-K 1
among National Sanitary 10/13/97
Supply Company, Unisource
Worldwide, Inc. and TFBD, Inc.
10.4 1981 Stock Incentive Plan, as Form 10- K 7
amended through May 20, 1991 3/27/92
10.5 1983 Incentive Stock Option Plan, Form 10-K 8
as amended through May 20, 1991 3/27/92
10.6 1986 Stock Incentive Plan, as Form 10-K 9
amended through May 20, 1991 3/27/92
10.7 1988 Stock Incentive Plan, as Form 10-K 10
amended through May 20, 1991 3/27/92
10.8 1993 Stock Incentive Plan Form 10-K 10.8
3/29/94
10.9 1995 Stock Incentive Plan Form 10-K 10.14
3/28/96
10.10 1997 Stock Incentive Plan *
10.11 Directors Emeriti Plan Form 10-Q 10.12
5/12/88
21
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
10.12 Employee Contracts with Form 10-K 10.13
Executives 3/28/89
10.13 Amendment No. 9 to Employment *
Contracts with Executives
10.15 Split Dollar Agreements Form 10-K 10.16
3/28/96
10.16 Split Dollar Agreement with Form 10-K 10.17
Edward L. Hutton 3/28/96
10.17 Split Dollar Agreement with Form 10-K 10.18
Paul C. Voet 3/28/96
10.18 Amendment No. 7 to Employment Form 10-K
Agreement with Edward L. Hutton 3/27/97
10.19 Excess Benefits Plan, as restated * 10.9
and amended, effective April 1,
1997
10.20 Non-Employee Directors' Deferred Form 10-K 10.10
Compensation Plan 3/24/88
10.21 Stock Purchase Plan by and Form 8-K 1
among Banta Corporation, Chemed 10/13/97
Corporation and OCR Holding
Company
10.22 Amendment No. 3 to Employment *
Contract with James H. Devlin
10.23 Employment Contracts with John *
M. Mount and Walter L. Krebs
10.24 Employment Contract with Lawrence *
J. Gillis
13 1997 Annual Report to Stockholders *
21 Subsidiaries of Chemed Corporation *
23 Consent of Independent Accountants *
24 Powers of Attorney *
2
22
27 Financial Data Schedule +
- ---------------------
* Filed herewith.
+ Not filed herewith.
3
1
EXHIBIT 10.10
================================================================================
CHEMED CORPORATION
1997 STOCK INCENTIVE PLAN
AS APPROVED MAY 19, 1997
================================================================================
2
CHEMED CORPORATION
1997 STOCK INCENTIVE PLAN
1. PURPOSES: The purposes of this Plan are (a) to secure for the
Corporation the benefits of incentives inherent in ownership of Capital Stock by
Key Employees, (b) to encourage Key Employees to increase their interest in the
future growth and prosperity of the Corporation and to stimulate and sustain
constructive and imaginative thinking by Key Employees, (c) to further the
identification of interest of those who hold positions of major responsibility
in the Corporation and its Subsidiaries with the interests of the Corporation's
stockholders, (d) to induce the employment or continued employment of Key
Employees and (e) to enable the Corporation to compete with other organizations
offering similar or other incentives in obtaining and retaining the services of
competent executives.
2. DEFINITIONS: Unless otherwise required by the context, the following
terms when used in this Plan shall have the meanings set forth in this section
2.
BOARD OF DIRECTORS: The Board of Directors of the Corporation.
CAPITAL STOCK: The Capital Stock of the Corporation, par value $l.00
per share, or such other class of shares or other securities as may be
applicable pursuant to the provisions of section 8.
CORPORATION: Chemed Corporation, a Delaware corporation.
FAIR MARKET VALUE: As applied to any date, the mean between the high
and low sales prices of a share of Capital Stock on the principal stock exchange
on which the Corporation is listed, or, if it is not so listed, the mean between
the bid and the ask prices of a share of Capital Stock in the over-the-counter
market as reported by the National Association of Securities Dealers Automated
Quotation System on such date or, if no such sales or prices were made or quoted
on such date, on the next preceding date on which there were sales or quotes of
Capital Stock on such exchange or market, as the case may be; provided, however,
that, if the Capital Stock is not so listed or quoted, Fair Market Value shall
be determined in accordance with the method approved by the Incentive Committee,
and, provided further, if any of the foregoing methods of determining Fair
Market Value shall not be consistent with the regulations of the Secretary of
the Treasury or his delegate at the time applicable
1
3
to a Stock Incentive of the type involved, Fair Market Value in the case of such
Stock Incentive shall be determined in accordance with such regulations and
shall mean the value as so determined.
INCENTIVE COMMITTEE: The Incentive Committee designated to
administer this Plan pursuant to the provisions of section 10.
INCENTIVE COMPENSATION: Bonuses, extra and other compensation
payable in addition to a salary or other base amount, whether contingent or
discretionary or required to be paid pursuant to an agreement, resolution or
arrangement, and whether payable currently or on a deferred basis, in cash,
Capital Stock or other property, awarded by the Corporation or a Subsidiary
prior or subsequent to the date of the approval and adoption of this Plan by the
stockholders of the Corporation.
KEY EMPLOYEE: An employee of the Corporation or of a Subsidiary who
in the opinion of the Incentive Committee can contribute significantly to the
growth and successful operations of the Corporation or a Subsidiary. The grant
of a Stock Incentive to an employee by the Incentive Committee shall be deemed a
determination by the Incentive Committee that such employee is a Key Employee.
For the purposes of this Plan, a director or officer of the Corporation or of a
Subsidiary shall be deemed an employee regardless of whether or not such
director or officer is on the payroll of, or otherwise paid for services by, the
Corporation or a Subsidiary.
OPTION: An option to purchase shares of Capital Stock.
PERFORMANCE UNIT: A unit representing a share of Capital Stock,
subject to a Stock Award, the issuance, transfer or retention of which is
contingent, in whole or in part, upon attainment of a specified performance
objective or objectives, including, without limitation, objectives determined by
reference to or changes in (a) the Fair Market Value, book value or earnings per
share of Capital Stock, or (b) sales and revenues, income, profits and losses,
return on capital employed, or net worth of the Corporation (on a consolidated
or unconsolidated basis) or of any one or more of its groups, divisions,
Subsidiaries or departments, or (c) a combination of two or more of the
foregoing factors.
PLAN: The 1997 Stock Incentive Plan herein set forth as the same may
from time to time be amended.
STOCK AWARD: An issuance or transfer of shares of Capital Stock at
the time the Stock Incentive is granted or as soon thereafter as practicable, or
an undertaking to issue or
2
4
transfer such shares in the future, including, without limitation, such an
issuance, transfer or undertaking with respect to Performance Units.
STOCK INCENTIVE: A stock incentive granted under this Plan in one of
the forms provided for in section 3.
SUBSIDIARY: A corporation or other form of business association of
which shares (or other ownership interests) having 50% or more of the voting
power are owned or controlled, directly or indirectly, by the Corporation.
3. GRANTS OF STOCK INCENTIVES:
(a) Subject to the provisions of this Plan, the Incentive Committee
may at any time, or from time to time, grant Stock Incentives under this Plan
to, and only to, Key Employees.
(b) Stock Incentives may be granted in the following forms:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) and (d) of this
section 4 and of section 8, the aggregate number of shares of Capital Stock
which may be issued or transferred pursuant to Stock Incentives granted under
this Plan shall not exceed 500,000 shares; provided, however, that the maximum
aggregate number of shares of Capital Stock which may be issued or transferred
pursuant to Stock Incentives in the form of Stock Awards, shall not exceed
250,000 shares.
(b) The maximum aggregate number of shares of Capital Stock which
may be issued or transferred under the Plan to directors of the Corporation or
of a Subsidiary shall not exceed 100,000 shares.
(c) Authorized but unissued shares of Capital Stock and shares of
Capital Stock held in the treasury, whether acquired by the Corporation
specifically for use under this Plan or otherwise, may be used, as the Incentive
Committee may from time to time determine, for purposes of this Plan, provided,
however, that any shares acquired or held by the Corporation for the purposes of
this Plan shall, unless and until transferred to a Key Employee in accordance
with the terms and conditions of a Stock Incentive, be and at all times remain
treasury shares of the Corporation, irrespective of whether such shares are
entered
3
5
in a special account for purposes of this Plan, and shall be available for any
corporate purpose.
(d) If any shares of Capital Stock subject to a Stock Incentive
shall not be issued or transferred and shall cease to be issuable or
transferable because of the termination, in whole or in part, of such Stock
Incentive or for any other reason, or if any such shares shall, after issuance
or transfer, be reacquired by the Corporation or a Subsidiary because of an
employee's failure to comply with the terms and conditions of a Stock Incentive,
the shares not so issued or transferred, or the shares so reacquired by the
Corporation or a Subsidiary shall no longer be charged against any of the
limitations provided for in paragraphs (a) or (b) of this section 4 and may
again be made subject to Stock Incentives.
5. STOCK AWARDS: Stock Incentives in the form of Stock Awards shall be
subject to the following provisions:
(a) A Stock Award shall be granted only in payment of Incentive
Compensation that has been earned or as Incentive Compensation to be earned,
including, without limitation, Incentive Compensation awarded concurrently with
or prior to the grant of the Stock Award.
(b) For the purposes of this Plan, in determining the value of a
Stock Award, all shares of Capital Stock subject to such Stock Award shall be
valued at not less than 100 percent of the Fair Market Value of such shares on
the date such Stock Award is granted, regardless of whether or when such shares
are issued or transferred to the Key Employee and whether or not such shares are
subject to restrictions which affect their value.
(c) Shares of Capital Stock subject to a Stock Award may be issued
or transferred to the Key Employee at the time the Stock Award is granted, or at
any time subsequent thereto, or in installments from time to time, as the
Incentive Committee shall determine. In the event that any such issuance or
transfer shall not be made to the Key Employee at the time the Stock Award is
granted, the Incentive Committee may provide for payment to such Key Employee,
either in cash or in shares of Capital Stock from time to time or at the time or
times such shares shall be issued or transferred to such Key Employee, of
amounts not exceeding the dividends which would have been payable to such Key
Employee in respect of such shares (as adjusted under section 8) if they had
been issued or transferred to such Key Employee at the time such Stock Award was
granted. Any amount payable in shares of Capital Stock under the terms of a
Stock Award may, at the discretion of the Corporation, be paid in cash, on each
date on which delivery of shares would otherwise have been made, in an amount
equal to
4
6
the Fair Market Value on such date of the shares which would otherwise have been
delivered.
(d) A Stock Award shall be subject to such terms and conditions,
including, without limitation, restrictions on sale or other disposition of the
Stock Award or of the shares issued or transferred pursuant to such Stock Award,
as the Incentive Committee may determine; provided, however, that upon the
issuance or transfer of shares pursuant to a Stock Award, the recipient shall,
with respect to such shares, be and become a stockholder of the Corporation
fully entitled to receive dividends, to vote and to exercise all other rights of
a stockholder except to the extent otherwise provided in the Stock Award. Each
Stock Award shall be evidenced by a written instrument in such form as the
Incentive Committee shall determine, provided the Stock Award is consistent with
this Plan and incorporates it by reference.
6. OPTIONS: Stock Incentives in the form of Options shall be subject to
the following provisions:
(a) The maximum aggregate number of Stock Incentives in the form of
Options which may be granted to an individual employee of the Corporation or a
Subsidiary in any calendar year shall not exceed 50,000 Options.
(b) Upon the exercise of an Option, the purchase price shall be paid
in cash or, if so provided in the Option or in a resolution adopted by the
Incentive Committee(and subject to such terms and conditions as are specified in
the Option or by the Incentive Committee), in shares of Capital Stock or in a
combination of cash and such shares. Shares of Capital Stock thus delivered
shall be valued at their Fair Market Value on the date of exercise. Subject to
the provisions of section 8, the purchase price per share shall be not less than
100 percent of the Fair Market Value of a share of Capital Stock on the date the
Option is granted.
(c) Each Option shall be exercisable in full or in part six months
after the date the Option is granted, or may become exercisable in one or more
installments and at such time or times, as the Incentive Committee shall
determine. Unless otherwise provided in the Option, an Option, to the extent it
is or becomes exercisable, may be exercised at any time in whole or in part
until the expiration or termination of the Option. Any term or provision in any
outstanding Option specifying when the Option is exercisable or that it be
exercisable in installments may be modified at any time during the life of the
Option by the Incentive Committee, provided, however, no such modification of an
outstanding Option shall, without the consent of the optionee, adversely affect
any Option theretofore granted to him. An
5
7
Option will become immediately exercisable in full if at any time during the
term of the Option the Corporation obtains actual knowledge that any of the
following events has occurred, irrespective of the applicability of any
limitation on the number of shares then exercisable under the Option: (1) any
person within the meaning of Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934 (the "1934 Act"), other than the Corporation or any of its
subsidiaries, has become the beneficial owner, within the meaning of Rule 13d-3
under the 1934 Act, of 30 percent or more of the combined voting power of the
Corporation's then outstanding voting securities; (2) the expiration of a tender
offer or exchange offer, other than an offer by the Corporation, pursuant to
which 20 percent or more of the shares of the Corporation's Capital Stock have
been purchased; (3) the stockholders of the Corporation have approved (i) an
agreement to merge or consolidate with or into another corporation and the
Corporation is not the surviving corporation or (ii) an agreement to sell or
otherwise dispose of all or substantially all of the assets of the Corporation
(including a plan of liquidation); or (4) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least a majority thereof, unless
the nomination for the election by the Corporation's stockholders of each new
director was approved by a vote of at least one-half of the persons who were
directors at the beginning of the two-year period.
(d) Each Option shall be exercisable during the life of the optionee
only by him or a transferee or assignee permitted by paragraph (g) of this
section (6) and, after his death, only by his estate or by a person who acquired
the right to exercise the Option pursuant to one of the provisions of paragraph
(g) of this section (6). An Option, to the extent that it shall not have been
exercised, shall terminate when the optionee ceases to be an employee of the
Corporation or a Subsidiary, unless he ceases to be an employee because of his
resignation with the consent of the Incentive Committee (which consent may be
given before or after resignation), or by reason of his death, incapacity or
retirement under a retirement plan of the Corporation or a Subsidiary. Except as
provided in the next sentence, if the optionee ceases to be an employee by
reason of such resignation, the Option shall terminate three months after he
ceases to be an employee. If the optionee ceases to be an employee by reason of
such death, incapacity or retirement, or if he should die during the three-month
period referred to in the preceding sentence, the Option shall terminate fifteen
months after he ceases to be an employee. Where an Option is exercised more than
three months after the optionee ceased to be an employee, the Option may be
exercised only to the extent it could have been exercised three months after he
ceased to be an employee. A leave of absence for military or governmental
service or for other purposes shall not, if approved by the Incentive Committee,
be deemed a termination
6
8
of employment within the meaning of this paragraph (d); provided, however, that
an Option may not be exercised during any such leave of absence. Notwithstanding
the foregoing provisions of this paragraph (d) or any other provision of this
Plan, no Option shall be exercisable after expiration of the term for which the
Option was granted, which shall in no event exceed ten years. Where an Option is
granted for a term of less than ten years, the Incentive Committee, may, at any
time prior to the expiration of the Option, extend its term for a period ending
not later than ten years from the date the Option was granted.
(e) Options shall be granted for such lawful consideration as the
Incentive Committee shall determine.
(f) Neither the Corporation nor any Subsidiary may directly or
indirectly lend any money to any person for the purpose of assisting him to
purchase or carry shares of Capital Stock issued or transferred upon the
exercise of an Option.
(g) No Option nor any right thereunder may be assigned or
transferred by the optionee except:
(i) by will or the laws of descent and distribution;
(ii) pursuant to a qualified domestic relations order
as defined by the Internal Revenue Code of 1986, as
amended, or by the Employee Retirement Income
Security Act of 1974, as amended, or the rules
thereunder;
(iii) by an optionee who, at the time of the transfer, is
not subject to the provisions of Section 16 of the
1934 Act, provided such transfer is to, or for the
benefit of (including but not limited to trusts for
the benefit of), the optionee's spouse or lineal
descendants of the optionee's parents; or
(iv) by an optionee who, at the time of the transfer,
is subject to the provisions of Section 16 of the
1934 Act, to the extent, if any, such transfer
would be permitted under Securities and Exchange
Commission Rule 16b-3 or any successor rule
thereto, as such rule or any successor rule
thereto may be in effect at the time of the
transfer.
If so provided in the Option or if so authorized by the Incentive
Committee and subject to such terms and conditions as are specified in the
Option or by the Incentive Committee, the Corporation may, upon or without the
request of the holder of the Option and at any time or from time to time, cancel
all or a portion of the Option then subject to exercise and either (i) pay
7
9
the holder an amount of money equal to the excess, if any, of the Fair Market
Value, at such time or times, of the shares subject to the portion of the Option
so canceled over the aggregate purchase price of such shares, or (ii) issue or
transfer shares of Capital Stock to the holder with a Fair Market Value, at such
time or times, equal to such excess.
(h) Each Option shall be evidenced by a written instrument, which shall
contain such terms and conditions, and shall be in such form, as the Incentive
Committee may determine, provided the Option is consistent with this Plan and
incorporates it by reference. Notwithstanding the preceding sentence, an Option,
if so granted by the Incentive Committee, may include restrictions and
limitations in addition to those provided for in this Plan.
(i) Any federal, state or local withholding taxes payable by an
optionee or awardee upon the exercise of an Option or upon the removal of
restrictions of a Stock Award shall be paid in cash or in such other form as the
Incentive Committee may authorize from time to time, including the surrender of
shares of Capital Stock or the withholding of shares of Capital Stock to be
issued to the optionee or awardee. All such shares so surrendered or withheld
shall be valued at Fair Market Value on the date such are surrendered to the
Corporation or authorized to be withheld.
7. COMBINATIONS OF STOCK AWARDS AND OPTIONS: Stock Incentives
authorized by paragraph (b)(iii) of section 3 in the form of combinations of
Stock Awards and Options shall be subject to the following provisions:
(a) A Stock Incentive may be a combination of any form of Stock
Award with any form of Option; provided, however, that the terms and conditions
of such Stock Incentive pertaining to a Stock Award are consistent with section
5 and the terms and conditions of such Stock Incentive pertaining to an Option
are consistent with section 6.
(b) Such combination Stock Incentive shall be subject to such other
terms and conditions as the Incentive Committee may determine, including,
without limitation, a provision terminating in whole or in part a portion
thereof upon the exercise in whole or in part of another portion thereof. Such
combination Stock Incentive shall be evidenced by a written instrument in such
form as the Incentive Committee shall determine, provided it is consistent with
this Plan and incorporates it by reference.
8. ADJUSTMENT PROVISIONS: In the event that any recapitalization, or
reclassification, split-up or consolidation of shares of Capital Stock shall be
effected, or the outstanding shares of Capital Stock are, in connection with a
merger or consolidation of the Corporation or a sale by the Corporation of
8
10
all or a part of its assets, exchanged for a different number or class of shares
of stock or other securities of the Corporation or for shares of the stock or
other securities of any other corporation, or a record date for determination of
holders of Capital Stock entitled to receive a dividend payable in Capital Stock
shall occur (a) the number and class of shares or other securities that may be
issued or transferred pursuant to Stock Incentives, (b) the number and class of
shares or other securities which have not been issued or transferred under
outstanding Stock Incentives, (c) the purchase price to be paid per share or
other security under outstanding Options, and (d) the price to be paid per share
or other security by the Corporation or a Subsidiary for shares or other
securities issued or transferred pursuant to Stock Incentives which are subject
to a right of the Corporation or a Subsidiary to reacquire such shares or other
securities, shall in each case be equitably adjusted.
9. TERM: This Plan shall be deemed adopted and shall become effective
on the date it is approved and adopted by the stockholders of the Corporation.
No Stock Incentives shall be granted under this Plan after May 19, 2007.
10. ADMINISTRATION:
(a) The Plan shall be administered by the Incentive Committee, which
shall consist of no fewer than three persons designated by the Board of
Directors. Grants of Stock Incentives may be granted by the Incentive Committee
either in or without consultation with employees, but, anything in this Plan to
the contrary notwithstanding, the Incentive Committee shall have full authority
to act in the matter of selection of all Key Employees and in determining the
number of Stock Incentives to be granted to them.
(b) The Incentive Committee may establish such rules and
regulations, not inconsistent with the provisions of this Plan, as it deems
necessary to determine eligibility to participate in this Plan and for the
proper administration of this Plan, and may amend or revoke any rule or
regulation so established. The Incentive Committee may make such determinations
and interpretations under or in connection with this Plan as it deems necessary
or advisable. All such rules, regulations, determinations and interpretations
shall be binding and conclusive upon the Corporation, its Subsidiaries, its
stockholders and all employees, and upon their respective legal representatives,
beneficiaries, successors and assigns and upon all other persons claiming under
or through any of them.
(c) Members of the Board of Directors and members of the Incentive
Committee acting under this Plan shall be fully
9
11
protected in relying in good faith upon the advice of counsel and shall incur no
liability except for gross negligence or willful misconduct in the performance
of their duties.
11. GENERAL PROVISIONS:
(a) Nothing in this Plan nor in any instrument executed pursuant
hereto shall confer upon any employee any right to continue in the employ of the
Corporation or a Subsidiary, or shall affect the right of the Corporation or of
a Subsidiary to terminate the employment of any employee with or without cause.
(b) No shares of Capital Stock shall be issued or transferred
pursuant to a Stock Incentive unless and until all legal requirements applicable
to the issuance or transfer of such shares, in the opinion of counsel to the
Corporation, have been complied with. In connection with any such issuance or
transfer, the person acquiring the shares shall, if requested by the
Corporation, give assurances, satisfactory to counsel to the Corporation, that
the shares are being acquired for investment and not with a view to resale or
distribution thereof and assurances in respect of such other matters as the
Corporation or a Subsidiary may deem desirable to assure compliance with all
applicable legal requirements.
(c) No employee (individually or as a member of a group), and no
beneficiary or other person claiming under or through him, shall have any right,
title or interest in or to any shares of Capital Stock allocated or reserved for
the purposes of this Plan or subject to any Stock Incentive except as to such
shares of Capital Stock, if any, as shall have been issued or transferred to
him.
(d) The Corporation or a Subsidiary may, with the approval of the
Incentive Committee, enter into an agreement or other commitment to grant a
Stock Incentive in the future to a person who is or will be a Key Employee at
the time of grant, and, notwithstanding any other provision of this Plan, any
such agreement or commitment shall not be deemed the grant of a Stock Incentive
until the date on which the Company takes action to implement such agreement or
commitment.
(e) In the case of a grant of a Stock Incentive to an employee of a
Subsidiary, such grant may, if the Incentive Committee so directs, be
implemented by the Corporation issuing or transferring the shares, if any,
covered by the Stock Incentive to the Subsidiary, for such lawful consideration
as the Incentive Committee may specify, upon the condition or understanding that
the Subsidiary will transfer the shares to the employee in accordance with the
terms of the Stock Incentive specified by the Incentive Committee pursuant to
the provisions
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12
of this Plan. Notwithstanding any other provision hereof, such Stock Incentive
may be issued by and in the name of the Subsidiary and shall be deemed granted
on the date it is approved by the Incentive Committee, on the date it is
delivered by the Subsidiary or on such other date between said two dates, as the
Incentive Committee shall specify.
(f) The Corporation or a Subsidiary may make such provisions as it
may deem appropriate for the withholding of any taxes which the Corporation or a
Subsidiary determines it is required to withhold in connection with any Stock
Incentive.
(g) Nothing in this Plan is intended to be a substitute for, or
shall preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or fringe benefits to
employees generally, or to any class or group of employees, which the
Corporation or any Subsidiary or other affiliate now has or may hereafter
lawfully put into effect, including, without limitation, any retirement,
pension, group insurance, stock purchase, stock bonus or stock option plan.
12. AMENDMENTS AND DISCONTINUANCE:
(a) This Plan may be amended by the Board of Directors upon the
recommendation of the Incentive Committee, provided that, without the approval
of the stockholders of the Corporation, no amendment shall be made which (i)
increases the aggregate number of shares of Capital Stock that may be issued or
transferred pursuant to Stock Incentives as provided in paragraph (a) of section
4, (ii) increases the maximum aggregate number of shares of Capital Stock that
may be issued or transferred under the Plan to directors of the Corporation or
of a Subsidiary as provided in paragraph (b) of section 4, (iii) increases the
maximum aggregate number of Stock Incentives, in the form of Options, which may
be granted to an individual employee as provided in paragraph (a) of section 6,
(iv) withdraws the administration of this Plan from the Incentive Committee, (v)
permits any person who is not at the time a Key Employee of the Corporation or
of a Subsidiary to be granted a Stock Incentive, (vi) permits any Option to be
exercised more than ten years after the date it is granted, (vii) amends section
9 to extend the date set forth therein or (viii) amends this section 12.
(b) Notwithstanding paragraph (a) of this section 12, the Board of
Directors may amend the Plan to take into account changes in applicable
securities laws, federal income tax laws and other applicable laws. Should the
provisions of Rule 16b-3, or any successor rule, under the Securities Exchange
Act of 1934 be amended, the Board of Directors may amend the Plan in accordance
therewith.
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13
(c) The Board of Directors may by resolution adopted by a majority
of the entire Board of Directors discontinue this Plan.
(d) No amendment or discontinuance of this Plan by the Board of
Directors or the stockholders of the Corporation shall, without the consent of
the employee, adversely affect any Stock Incentive theretofore granted to him.
12
1
EXHIBIT 10.13
AMENDMENT NO. 9
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 19, 1997 between ____________ ("Employee")
and Chemed Corporation (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated as of May 2, 1988 and amended May 15, 1989, May 21, 1990, May
20, 1991, May 18, 1992, May 17, 1993, May 16, 1994, May 15, 1995 and May 20,
1996 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to further amend the
Employment Agreement in certain respects.
NOW, THEREFORE, Employee and the Company mutually agree that the
Employment Agreement shall be amended, effective as of May 19, 1997, as follows:
A. The date, amended as of May 20, 1996, set forth in Section 1.2
of the Employment Agreement, is hereby deleted and the date of
May 3, 2002 is hereby substituted therefor.
B. The base salary amount set forth in the first sentence of
Section 2.1 of the Employment Agreement is hereby deleted and
the base salary amount of $_______ per annum is hereby
substituted.
C. The amount of unrestricted stock award recognized in lieu of
incentive compensation in 1996 is $______. Except as
specifically amended in this Amendment No. 9
to Employment Agreement, the Employment Agreement, as amended,
2
shall continue in full force and effect in accordance with its terms, conditions
and provisions.
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
---------------------
CHEMED CORPORATION
---------------------
Kevin J. McNamara
President
3
SCHEDULE TO EXHIBIT 10.13
Minimum Current
Annual Current (a) Expiration
Base Salary Stock Award Date of
Name and Position and Bonus Compensation Agreement
- ----------------- ------------ ------------ ----------
Kevin J. McNamara 283,728.00 51,063.00 5/3/2002
President 38,285.00
Paul C. Voet 289,500.00 89,482.00 5/3/2002
Executive Vice President 85,000.00
Timothy S. O'Toole 171,525.00 47,206.00 5/3/2002
Executive Vice President 23,857.00
and Treasurer
Sandra E. Laney 174,825.00 41,652.00 5/3/2002
Senior Vice President and 37,455.00
Chief Administrative Officer
Arthur V. Tucker 109,000.00 12,993.00 5/3/2002
Vice President and Controller 17,102.00
Thomas C. Hutton 167,825.00 19,088.00 5/3/2002
Vice President 16,477.00
- -----------------
(a) Amount of unrestricted stock award recognized in lieu of incentive
compensation in 1996.
1
EXHIBIT 10.19
CHEMED CORPORATION
EXCESS BENEFIT PLAN
As Restated and Amended
Effective January 1, 1987
1. Purpose of the Plan
To induce the employment or continued employment of key employees and
to enable the Company and its Subsidiaries to compete with other corporations
offering comparable benefits in obtaining and retaining the services of
competent executives, in order that the interests of the Company and its
Subsidiaries may be advanced.
2. Definitions
Unless otherwise required by the context, the following terms when used
in this Plan shall have the meanings set forth in this section.
(a) "Base Plans": The General Retirement Plan, the
Employees Savings and Investment Plan, the Sales Retirement Plan,
the Sales Thrift Plan, and the Chemed Employee Stock Ownership
Plan.
(b) "Beneficiary": As defined in Section 10.2.
(c) "Benefit Amounts": As described in Section 7.
(d) "Board of Directors": The Board of Directors of the Company.
(e) "Chemed Employee Stock Ownership Plan": The Chemed Employee Stock
Ownership Plan, adopted effective November 1, 1987.
(f) "Code": The Internal Revenue Code of 1986, as amended
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from time to time.
(g) "Committee": The Committee designated to administer the Plan
pursuant to the provisions of Section 3.
(h) "Company": Chemed Corporation, a Delaware corporation.
(i) "Compensation": The amount of annual compensation paid to an
Employee during each calendar year commencing with the year 1983 when computed,
as the case may be, in accordance with the definition of "Compensation" as set
forth in each of the following pension, profit sharing or thrift plans of the
Company:
General Retirement Plan
Employees Saving and Investment Plan
General Pension Plan
Sales Retirement Plan
Sales Thrift Plan
Chemed Employee Stock Ownership Plan
(j) "Earnings (Loss) Factor": As described in Section 7.3.
(k) "Effective Date": January 1, 1983.
(l) "Eligible Employee": A management or highly compensated Employee
other than a Union Employee who (i) participates in or who, but for the Section
415 limitations of the Code, would participate in, any one or more of the
General Retirement Plan, General Thrift Plan, the Sales Retirement Plan and the
Sales Thrift Plan and, Chemed Employee Stock Ownership Plan, and (ii) is
designated by the Committee from time to time as eligible to participate in the
Plan. The Company may revoke the designation at any time if the Committee
determines that the Employee ceases to be a management or highly compensated
Employee.
(m) "Employee": Any person who is employed by the Company or a
Subsidiary.
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(n) "Excess Benefit Plan" or "Plan": The Excess Benefit Plan of the
Company herein set forth as the same may from time to time be amended.
(o) "Excess Benefit Plan Statement": The quarterly statement provided
to a Participant pursuant to Section 6.3.
(p) "General Pension Plan": The Chemed General Pension Plan, as
amended, including the amendment thereto effective January 1, 1984. The General
Pension Plan was terminated effective October 31, 1985.
(q) "General Retirement Plan": The Chemed General Retirement Plan,
adopted effective January 1, 1984, as amended August 1, 1985.
(r) "General Thrift Plan": The Employees Savings and Investment Plan,
adopted effective July 1, 1971, as amended, and as further amended and restated
effective August 1, 1985.
(s) "Permanent Disability": Disability retirement from employment by
the Company due to a physical or mental disability which permanently disables
the Employee from performing the customary duties of his regular job with the
Company.
(t) "Plan Year": The calendar year commencing with the calendar year
1983.
(u) "Quarter": The three-month period beginning January 1, April 1,
July 1 and October 1 of each Plan Year.
(v) "Retirement": Any of (a) normal retirement from employment by the
Company or a Subsidiary at age 65; (b) early retirement from employment by the
Company or a Subsidiary from
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age 55 to age 65 with not less than 10 Years of Service; (c) postponed
retirement from employment by the Company after age 65.
(w) "Sales Employee": As defined in the Sales Thrift Plan.
(x) "Sales Retirement Plan": The Chemed Sales Retirement Plan, adopted
effective August 1, 1985.
(y) "Sales Thrift Plan": The Sales Retirement and Thrift Plan of the
Company, adopted effective January 1, 1983, and as amended and restated and
renamed as the Sales Thrift Plan effective August 1, 1985.
(z) "Severance": Termination of employment with the Company or a
Subsidiary under any circumstances other than death, Retirement or Permanent
Disability.
(aa) "Subsidiary": A corporation or other form of business association
of which shares (or other ownership interests) having 50% or more of the voting
power are owned or controlled, directly or indirectly, by the Company.
(bb) "Union Employee": An Employee with respect to whom compensation,
hours of work, or conditions of employment are determined through collective
bargaining with a recognized bargaining agent.
(cc) "Valuation Date": The last business day of each month.
(dd) "Value of Account": The value of the amounts credited to an
account of a Participant as of a Valuation Date.
3. Administration
(a) The Plan shall be administered by the Compensation Committee of the
Board of Directors provided that such Committee
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shall consist of no fewer than three (3) directors of the Company, and provided
further, that no member of the Committee shall be eligible to participate in the
Plan while serving on the Committee.
(b) The Committee may establish such rules and regulations, not
inconsistent with the provisions of the Plan, as it deems necessary for the
proper administration of the Plan, and may amend or revoke any rule or
regulation so established. The Committee may make such determinations and
interpretations under or in connection with the Plan as it deems necessary or
advisable. All such rules, regulations, determinations and interpretations,
subject to the provisions of Section 4.03 of the By-Laws of the Company, shall
be binding and conclusive upon the Company, each Subsidiary, its shareholders,
Employees, Participants, and upon their respective legal representatives,
beneficiaries, successors and assigns and upon all other persons claiming under
or through any of them.
(c) Any action required or permitted to be taken by the Committee under
this Plan may be taken in accordance with Article IV of the By-Laws of the
Company even though, because of a vacancy or vacancies as a result of
resignations or otherwise, the total number of directors who are then members of
the Committee shall be less than three.
(d) Members of the Board of Directors and members of the Committee
acting under the Plan shall be fully protected in relying in good faith upon the
advice of counsel and shall incur
6
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no liability except for gross negligence or willful misconduct in
the performance of their duties.
4. Participation
4.1 General. Each Eligible Employee who was a Participant in the
General Pension Plan on October 31, 1985 shall be a Participant. In addition,
each Eligible Employee for whom or in respect of whom benefits payable from or
contributions by the Company or a Subsidiary to any of the Base Plans shall have
been limited, restricted or otherwise less than the benefits payable from or
contributions by the Company or a Subsidiary pursuant to the general terms and
provisions of such plans by reason of the application of benefit and/or
contribution limitations imposed by the Code and/or the regulations issued
thereunder, or any comparable law which may hereafter be enacted including any
regulations issued thereunder, shall be a Participant in the Plan. The
personnel, payroll and other records of the Company or any Subsidiary shall be
conclusive evidence for the purpose of determining all matters relating to
benefits under this Plan, including Compensation and the period of employment of
any and all Employees, Eligible Employees and Participants.
4.2 Participation Date. Each Participant shall be deemed to have
commenced his participation in the Plan effective on the first day of the Plan
Year during which he became a Participant.
4.3 Continuance of Participation. Each Participant's participation in
the Plan shall continue until the first to occur of the following events:
7
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(a) his death;
(b) his Severance;
(c) his Retirement;
(d) his Permanent Disability; or,
(e) termination of the Plan.
5. Contributions
5.1 Participants' Contributions. No contributions to the Plan shall be
required of or permitted to be made by any Participant.
5.2 Company Contributions. No contributions to a separate trustee or
otherwise shall be required to be made by the Company or any Subsidiary for the
purpose of establishing a fund for the payment of benefits to any Participant or
Beneficiary under this Plan. Instead, all such accrued benefits, whether or not
currently payable, shall be paid when due from the general funds of the Company
or from a grantor trust or series of grantor trusts established for this
purpose.
6. Reserve Fund; Participant Accounts
6.1 General Fund. The Company shall establish on its book of account a
reserve fund equal to the present value of all benefits currently accrued in
favor of Participants pursuant to the Plan. The amount of such reserve fund
shall, at all times, be considered as a general obligation of the Company in
favor of all Participants generally.
6.2 Participant Accounts. The Company shall establish for each
Participant a separate account or accounts to which shall be
8
-8-
credited monthly all Benefit Amounts pursuant to Sections 7.1 and 7.2 plus or
minus the Earnings (Loss) Factor as to each such account pursuant to Section 7.3
hereof.
6.3 Statements of Participant's Accounts. The Committee shall, as soon
as practicable after the end of each Quarter, cause to be delivered or mailed to
each Participant having an account balance a statement (the "Excess Benefit Plan
Statement") setting forth the status of the account of such Participant as of
the end of such Quarter. Such statement shall be deemed to have been accepted as
correct unless written notice to the contrary is received by the Committee
within 30 days after the mailing thereof.
7. Benefit Amounts
7.1 Initial and Annual Benefit Amounts. The Benefit Amounts to be
credited initially and monthly to the account of each Participant whose
designation described in Section 2(k) is not revoked shall be an amount
determined as follows:
(a) As to the General Pension Plan for Plan Years thereunder
prior to 1984 - An amount necessary to fund the present value of the additional
accrued benefit of the Participant (including his beneficiaries) under such plan
as at December 31, 1983 which, but for the annual benefit limitations as set
forth in Section 415 of the Code, would have been provided to the Participant or
his beneficiaries pursuant to the stated terms and provisions of such plan. In
determining the amount, as above, all actuarial assumptions applicable to such
plan on
9
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December 31, 1983 shall be utilized.
(b) As to each of the Base Plans - The amount by which all
Company contributions to the account (or accounts) of the Participant for each
month of each Plan Year commencing on and after January 1, 1983 under each such
plan is less than the amount which would have been so contributed by the Company
or a Subsidiary without regard to (i) the annual contribution limitations as set
forth in Section 415 of the Code, (ii) the actual deferral percentage limitation
imposed upon "highly compensated employees" (as defined and applied in Section
401(k) (5) of the Code) as set forth in Sections 401(k)(3)(a)(ii) of the Code,
(iii) the limitation on compensation as set forth in Section 401(a)(17) of the
Code and (iv) the contribution percentage requirement as set forth in Section
401(m) of the Code.
7.2 Earnings (Loss) Factor. In addition to the Benefit Amount(s) which
may be credited monthly to each Participant's account under this Plan, there
shall be credited or debited monthly an Earnings (Loss) Factor amount computed
as follows:
(a) As to each Participant's Corporation Contribution Account
under each of the General Retirement Plan and the Sales Retirement Plan - An
amount determined by application of the percentage of investment earnings (or
investment loss) experienced by the Trust Fund established under each such plan
during the preceding month to the aggregate amount then credited to the
Participant's account hereunder in respect of such plan(s)
10
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pursuant to subsection (b) of Section 7.1.
(b) As to each Participant's Employer Contribution Account
under the General Thrift Plan or Chemed Employee Stock Ownership Plan - An
amount determined by application of the percentage of investment earnings (or
investment loss) experienced by the Chemed Stock Fund of such plan during the
preceding month to the aggregate amount then credited to the Participant's
account hereunder in respect of such plan pursuant to subsection (b) of Section
7.1.
(c) As to each Participant's "Retirement" account under the
Sales Thrift Plan prior to August 1, 1985 - An amount determined by application
of the percentage of investment earnings (or investment loss) experienced by the
Fixed Income Fund A-1 of such plan during the preceding month to the aggregate
amount then credited to the Participant's account hereunder in respect of such
plan pursuant to subsection (b) of Section 7.1.
(d) As to each Participant's Employer Contribution Account on
and after August 1, 1985 and each Participant's "Thrift" account for periods
prior to August 1, 1985 under the Sales Thrift Plan - An amount determined by
application of the percentage of investment earnings (or investment loss)
experienced by the Chemed Stock Fund of such plan during the preceding month to
the aggregate amount then credited to the Participant's account hereunder in
respect of such plan pursuant to subsection (b) of Section 7.1.
11
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8. Vesting
8.1 Full Vesting. Participants will have a fully vested interest in all
amounts credited to their accounts hereunder upon Retirement, Severance while
eligible for Retirement, Permanent Disability or upon death prior to Retirement
or Permanent Disability.
8.2 Partial Vesting. Participants will have a fully vested interest in
each amount credited to their accounts under this Plan to the same extent as if
such amounts had been contributed to their accounts under each of the Base
Plans.
8.3 Forfeitures. If a Participant's employment by the Company shall
terminate for any reason other than death, Permanent Disability, Retirement or
Severance while eligible for Retirement, he shall forfeit the unvested portion
of his accounts in the Plan. All amounts so forfeited shall revert to the credit
of the Company.
9. In-Service Withdrawals
9.1 Upon written request of a Participant filed with the Company at
least 30 days in advance of a Valuation Date, a Participant who has attained age
65 and who is concurrently effecting a withdrawal of his entire account balance
under any or all of the Base Plans shall have the right to withdraw, and the
Company shall pay to the Participant an amount equal to the value, as of such
Valuation Date, of all or such portion of his accounts established under this
Plan in respect to the Base Plan(s) under which he is effecting a concurrent
withdrawal as
12
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the Participant shall so request, but the amount of any such withdrawal shall be
limited and restricted to the same extent and to the same circumstances as would
otherwise be permitted under the terms and provisions of the applicable Base
Plan(s), provided, however, the consent of the Participant's spouse or any other
person shall not be required as to any withdrawal under this Plan.
9.2 In the event of any in-service withdrawal by a Participant of all
or any portion of his account(s) established under this Plan in respect of the
General Retirement Plan and/or the Sales Retirement Plan, for purposes of
Section 7.2 of this Plan, the Participant's employment with the Company shall be
deemed to have terminated as of the Valuation Date in respect of which such
in-service withdrawal was made. Thereupon, the benefit amount provided under
Section 7.2 of this Plan shall be determined, and if any Benefit Amount is then
accrued in favor of the Participant, such amount shall be paid to the
Participant. In such event and upon payment of such amount, if any, to the
Participant, all further rights or potential rights of a Participant (including
his Beneficiary) for a benefit pursuant to or under said Section 7.2 shall lapse
and the Company's obligations, if any, to the Participant (including his
Beneficiary) in respect thereof shall be deemed to have been satisfied in full,
whether or not any such Benefit Amount is then accrued in favor of the
Participant.
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10. Distribution of Benefits; Beneficiary
10.1 Upon termination of a Participant's employment with
the Company or a Subsidiary, as the case may be, his account(s) established
pursuant to this Plan shall be valued as of the first Valuation Date thereafter
and the aggregate value of the fully vested portion thereof as at the date of
such termination of employment shall be promptly (within 60 days) paid by the
Company in one lump sum to the Participant, or in the event of his death, to his
Beneficiary.
10.2 As used herein the term "Beneficiary" of a Participant shall mean
the person or persons (which may include, without limitation, the Participant's
estate or one or more trusts or other entities) designated by such Participant
in a "Designation of Beneficiary" form filed with the Company pursuant to this
Plan or, if no such form has been so filed, then the term "Beneficiary" of a
Participant shall mean the person or persons (which may include, without
limitation, the Participant's estate or one or more trusts or other entities)
designated by such Participant as his Beneficiary pursuant to the provisions of
the General Pension Plan and each of the Base Plans. In the event the
Participant has designated a different Beneficiary(ies) under each of said
plans, then the Beneficiary under this Plan with respect to amounts contributed
to this Plan in respect of the General Pension Plan shall be the Participant's
Beneficiary(ies) designated under the General Pension Plan and, with respect to
amounts contributed to this Plan in respect of each of the Base
14
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Plans, the Participant's Beneficiary(ies) designated under each of the Base
Plans, as the case may be. Such "Designation of Beneficiary" form pursuant to
this Plan shall be in such form as the Committee may from time to time prescribe
or accept. Participant may at any time change any such Designation of
Beneficiary by filing a new form with the Company. If Participant has not made
any such designation, or if any such Beneficiary shall not have survived the
Participant, or if any such designation shall not be effective, "Beneficiary"
shall mean the Participant's estate. In the event the Company has any doubt as
to the proper person or persons entitled to receive payments due hereunder, the
Company shall have the right to withhold such payments until the matter is
decided by a court of competent jurisdiction.
11. General Provisions
(a) Nothing in the Plan nor in any instrument executed pursuant hereto
shall confer upon any employee any right to continue in the employ of the
Company or a Subsidiary, or shall affect the right of the Company or of a
Subsidiary to terminate the employment of any employee with or without cause.
(b) The Company or a Subsidiary may make such provisions as it may deem
appropriate for the withholding of any taxes which the Company or a Subsidiary
determines it is required to withhold in connection with any payment hereunder.
(c) Nothing in the Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of,
15
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any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
which the Company or any Subsidiary now has or may hereafter lawfully put into
effect, including, without limitation, any retirement, pension, thrift, group
insurance, stock purchase, stock bonus or stock option plan.
(d) The Plan may be amended or terminated by the Board of Directors at
any time in whole or in part provided, however, that no such amendment or
termination shall adversely affect that portion of a Participant's account(s)
hereunder which is fully vested. Upon termination of the Plan, all fully vested
amounts credited to the Participant's account(s) as at the date of such
termination shall be promptly paid to the Participant.
(e) In the event any dispute pertaining to the Plan shall arise between
the Company and an Employee (including a Participant) which shall not be
resolved after good faith negotiation, either the Employee of the Company, or
both, may submit the disputed issue to the Committee for resolution. All such
submissions shall be in writing, addressed to the Secretary of the Committee and
shall set forth the issue and all relevant facts known to the submitting party.
The Committee may determine the issue in such manner as it shall determine and
may (but need not) request the disputant Employee and one or more
representatives of the Company to appear before the Committee for the purpose of
presenting such matters of fact as the Committee shall specify. The decision of
the Committee as to any issue
16
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presented to it involving this Plan shall be conclusive and final and binding on
all concerned parties, unless, within thirty days after receipt of the
Committee's decision, the disputant Employee files a written notice with the
Secretary of the Committee requesting that the issue be presented to the Board
of Directors for final resolution. As promptly thereafter as is reasonably
practicable, the issue shall be presented to and resolved finally and
conclusively by the Board of Directors based upon all facts presented to it by
the Committee, the Company and the disputant Employee.
17
CHEMED CORPORATION
EXCESS BENEFIT PLAN
AMENDMENT NO. 1
Effective January 1, 1995, Section 7.1(b) of the Chemed Corporation
Excess Benefit Plan shall be amended in its entirety as follows:
(b) As to each of the Base Plans - The amount by which all Company
contributions to the account (or accounts) of the Participant for each month of
each Plan Year commencing on and after January 1, 1983 under each such plan is
less than the amount which would have been so contributed by the Company or a
Subsidiary without regard to (i) the annual contribution limitations as set
forth in Section 415 of the Code, (ii) the actual deferral percentage limitation
imposed upon "highly compensated employees" (as defined and applied in Section
401(k)(3)(a)(ii) of the Code, (iii) the limitation on compensation as set forth
in Section 401(a)(17) of the Code, (iv) the contribution percentage requirement
as set forth in Section 401(m) of the Code and (v) any amounts contributed to
the Chemed Corporation Deferred Compensation Plan.
CERTIFICATE
The undersigned, Secretary of Chemed Corporation, hereby certifies that
the foregoing is a true and correct copy of Amendment No. 1 to its Excess
Benefit Plan.
Signed at Cincinnati, Ohio this 9th day of February, 1995.
/s/ Naomi C. Dallob
-------------------
Secretary
18
CHEMED CORPORATION
EXCESS BENEFIT PLAN
AMENDMENT NO. 2
The Chemed Corporation Excess Benefit Plan (the "Plan") is hereby
amended, effective January 1, 1997, in the following respects.
1. Sections 2(a), 2(e), 2(i) and 2(l) of the Plan are hereby amended in
their entirety as follows:
2(a) "Base Plans": The General Retirement Plan, the Employees
Savings and Investment Plan and the Chemed Employee Stock
Ownership Plans I and II.
2(e) "Chemed Employee Stock Ownership Plans I and II": The
Chemed Employee Stock Ownership Plan I, adopted
effective November 1, 1987 and the Chemed Employee
Stock Ownership Plan II, adopted effective August 1,
1988.
2(i) "Compensation": The amount of annual compensation
paid to an Employee during each calendar year
commencing with the year 1983 when computed, as the
case may be, in accordance with the definition of
"Compensation" as set forth in each of the following
pension, profit sharing or thrift plans of the
Company:
General Retirement Plan
Employees Savings and Investment Plan
General Pension Plan
Chemed Employee Stock Ownership Plans I and II
2(l) "Eligible Employee": A management or highly compensated
Employee other than a Union Employee who (i) participates
in or who, but for the Section 415 limitations of the Code,
would participate in, any one or more of the General
Retirement Plan, General Thrift Plan and Chemed Employee
Stock Ownership Plans I and II, and (ii) is designated by
the Committee from time to time as eligible to participate
in the Plan. The Company may revoke the designation at any
time if the Committee determines that the Employee ceases
to be a management or highly compensated Employee.
2. Section 2 is hereby amended by deleting Sections 2(w), 2(x) and
2(y).
19
3. Section 7.2 of the Plan is hereby amended in its entirety to read as
follows:
7.2 Earnings (Loss) Factor. In addition to the Benefit
Amount(s) which may be credited monthly to each
Participant's account under this Plan, there shall be
credited or debited monthly an Earning (Loss) Factor
amount computed as follows:
(a) As to each Participant's Corporation Contribution
Account under the General Retirement Plan - An
amount determined by application of the percentage
of investment earnings (or investment loss)
experienced by the Trust Fund established under
each such plan during the preceding month to the
aggregate amount then credited to the
Participant's account hereunder in respect of such
plan(s) pursuant to subsection (b) of Section 7.1.
(b) As to each Participant's Employer Contribution
Account under the General Thrift Plan or Chemed
Employee Stock Ownership Plans I and II - An
amount determined by application of the percentage
of investment earnings (or investment loss)
experienced by the Chemed Stock Fund of such plan
during the preceding month to the aggregate amount
then credited to the Participant's account
hereunder in respect of such plan pursuant to
subsection (b) of Section 7.1.
4. Section 9.2 of the Plan is hereby amended in its entirety to read as
follows:
9.2 In the event of any in-service withdrawal by a Participant
of all or any portion of his account(s) established under
this Plan in respect of the General Retirement Plan for
purposes of Section 7.2 of this Plan, the Participant's
employment with the Company shall be deemed to have
terminated as of the Valuation Date in respect of which
such in-service withdrawal was made. Thereupon, the benefit
amount provided under Section 7.2 of this Plan shall be
determined, and if any Benefit Amount is then accrued in
favor of the Participant, such amount shall be paid to the
Participant. In such event and upon payment of such amount,
if any, to the Participant, all further rights or potential
rights of a Participant (including his Beneficiary) for a
benefit pursuant to or under said Section 7.2 shall lapse
and the Company's obligations, if any, to the Participant
(including his Beneficiary) in respect thereof shall be
20
deemed to have been satisfied in full, whether or not any
such Benefit Amount is then accrued in favor of the
Participant.
5. Section 10.1 of the Plan is hereby amended in its entirety to read
as follows:
10.1 Upon termination of a Participant's employment with
the Company or a Subsidiary, as the case may be, his
account(s) established pursuant to this Plan shall be
valued as of the first Valuation Date thereafter and
the aggregate value of the fully vested portion
thereof as at the date of such termination of
employment shall be promptly (within 60 days) paid by
the Company to the Participant, or in the event of
his death, to his Beneficiary.
Any vested amounts payable from the Participants'
account on behalf of the Chemed General Retirement
Plan shall be paid in one lump sum. Any vested
amounts payable on behalf of the Chemed Employees
Savings and Investment Plan or Chemed Employee Stock
Ownership Plans I and II shall be paid in whole
shares of Chemed stock credited to his/her account(s)
plus cash in lieu of any fractional shares of Chemed
stock.
6. In all other respects, the Chemed Excess Benefit plan shall remain
unchanged.
CERTIFICATE
The undersigned, Secretary of Chemed Corporation, hereby certifies that
the foregoing is a true and correct copy of Amendment No. 2 to its Excess
Benefit Plan.
Signed at Cincinnati, Ohio this 7th day of January, 1997.
/s/ Naomi C. Dallob
--------------------------
Naomi C. Dallob, Secretary
21
CHEMED CORPORATION
EXCESS BENEFIT PLAN AMENDMENT NO. 3
The Chemed Corporation Excess Benefit Plan (the "Plan") is hereby
amended effective April 1, 1997 as follows:
1. Section 3(a) shall be rewritten in its entirety to read as follows:
(a) The Plan shall be administered by the Company's Benefit
Plan Committee. Each member of the Committee who is also a
Participant in the Plan shall abstain from voting or
participating in any decision with respect to such
Participant's Accounts under the Plan, including but
not limited to, approval of the Participant's
directed investments under Section 7.2(c).
2. Section 7.2(c) shall be added to read as follows:
(c) Notwithstanding any provision herein to the contrary,
a Participant may direct the investment of the
Participant's Accounts in respect of the Chemed Stock
Ownership Plans I and II, provided all the following
requirements are satisfied:
(i) the Participant must have attained age fifty-eight
(58),
(ii) such directed investments shall be subject to
restrictions and procedures established by the
Committee and limited to the investment funds then
offered under the Employees Savings & Investment
Plan, the Chemed Stock Fund and/or such other
fund(s) as may be selected by the Committee,
(iii) the Participant's directed investment shall
be subject to the approval of the Committee.
3. In all other respects, the Plan shall remain in full force and
effect.
CERTIFICATE
The undersigned, Secretary of Chemed Corporation, hereby certifies that
the foregoing is a true and correct copy of Amendment No. 3 to its Excess
Benefit Plan.
Signed at Cincinnati, Ohio as of this 1st day of April, 1997.
/s/ Naomi C. Dallob
--------------------------
Naomi C. Dallob, Secretary
1
EXHIBIT 10.22
AMENDMENT NO. 3
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 19, 1997 between James H.
Devlin ("Employee") and Chemed Corporation (the "Company").
WHEREAS, Employee and the Company have entered into an
Employment Agreement dated as of May 16, 1994 and amended May 15, 1995 and May
20, 1996 ("Employment Agreement"); and
WHEREAS, Employee and the Company desire to further amend the
Employment Agreement in certain respects.
NOW, THEREFORE, Employee and the Company mutually agree that the
Employment Agreement shall be amended, effective as of May 19, 1997, as follows:
A. The date, amended as of May 20, 1996, set forth in Section 1.2
of the Employment Agreement, is hereby deleted and the date of
May 16, 2002 is hereby substituted therefor.
B. The base salary amount set forth in the first sentence of
Section 2.1 of the Employment Agreement is hereby deleted and
the base salary amount of $225,300 per annum is hereby
substituted.
C. The amount of unrestricted stock award recognized in lieu of
incentive compensation in 1996 is $26,666. Except as
specifically amended in this Amendment No. 3
to Employment Agreement, the Employment Agreement, as amended, shall continue in
full force and effect in accordance with its terms, conditions and provisions.
2
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of the date first above written.
EMPLOYEE
/s/ James H. Devlin
-----------------------------
CHEMED CORPORATION
/s/ Kevin J. McNamara
-----------------------------
Kevin J. McNamara
President
2
1
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 5th day of November, 1997 by and
between John M. Mount residing at 6685 Miralake Drive, Cincinnati, Ohio 45243
("Employee"), and Chemed Corporation, a Delaware corporation (Chemed and its
subsidiaries referred to as the "Company").
WHEREAS, the Company has employed Employee and desires to
continue to employ Employee as a senior executive and Employee desires to work
for the Company in such capacity on the terms and conditions hereinafter
provided;
WHEREAS, Employee is a key senior executive of the Company
with major responsibilities for planning, directing, coordinating and
controlling overall corporate operations;
WHEREAS, in such capacity Employee will develop or have access
to all or substantially all of the business methods and confidential information
relating to the Company, including but not limited to, its financial performance
and results, its product formulae, its manufacturing organization and methods,
its product research and development policies and programs, its service
techniques, its purchasing organization and methods, its sales organization and
methods, its pricing of products, its market development and expansion plans,
its personnel policies and training and development programs, and its customer
and supplier relationships; and franchising programs and franchisee
relationships;
2
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT
Section 1.1 Position and Duties.
(a) The Company agrees to employ Employee and Employee agrees to work
for the Company as a senior executive. Employee shall have such duties and
authority as are normally associated with his office. Employee will also serve
in such other management capacities as may be mutually agreed upon from time to
time. While employed hereunder, Employee shall devote his full time, effort,
skill and attention to the affairs of the Company. During the term of his
employment hereunder, Employee shall not render any services to any other person
that might be in competition with the Company or any of its subsidiaries or
affiliates or in conflict with his position as a senior executive of the Company
or his duty of undivided loyalty to the Company. Section 1.2 Term. Unless sooner
terminated in accordance with the provisions hereof, the term of employment
shall commence on November 5, 1997 and shall continue until November 5, 2000. 2.
COMPENSATION Section 2.1 Base Salary. While employed hereunder the Company shall
pay Employee a base salary of $200,000 per annum or such higher amount or
amounts as the Company may from time to time approve. The base salary shall be
due and payable at the same times and intervals at which salary payments are
made to other senior executives.
2
3
Section 2.2 Incentive Compensation. Employee will be entitled to
participate in all incentive compensation and bonus plans as such have been
maintained by the Company for its senior executives generally. The Employee's
annual incentive compensation will be payable, with respect to each calendar
year, on or before February 10 in the following year.
Section 2.3 Employee Benefits. Employee shall be entitled to
participate in and receive rights and benefits under those "fringe"
benefit plans which Service America Systems, Inc. provides for its
headquarters executives generally, which at the present time
include:
Deferred Compensation Plan
Cafeteria Plan
Flexible Spending Plan (Reimbursement Account)
Group Health Insurance
Group Term Life and AD&D Insurance
Stock Incentive Plans
Long-Term Disability Insurance
Voluntary Group Accident Insurance
Business Travel Accident Insurance
Tuition Reimbursement Program
Optional Term Life Insurance
Employee's participation in such plans will be in accordance with and subject to
the terms and provisions thereof.
Section 2.4 Pension. Employee will be eligible to participate
in the Service America Systems, Inc.'s Retirement and Savings Plan
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4
("Retirement Plan") and in the Excess Benefit Plan in accordance with and
subject to their respective provisions.
Section 2.5 Miscellaneous.
(a) Company will pay or reimburse Employee for his reasonable
business expenses in accordance with Company policies.
(b) Employee will be entitled to paid vacation in accordance
with current Company policy. Employee will be entitled to payment for unused
vacation time in accordance with Company policy.
(c) Subject to Section 1.1(a) of this Agreement, compliance
with applicable laws relating to interlocking directorships, the Company's
policies on conflicts of interest and improper payments and accounting records
contained in a statement entitled "Policies on Business Ethics" and to any other
current applicable Company policy, during the term of Employee's employment
hereunder, Employee will be permitted to accept election, and to serve as, a
director of other entities. Employee will be permitted to retain all fees and
other benefits resulting from his service as a director of any such entity.
(d) The Company shall promptly pay upon demand any
reasonable legal fees incurred by Employee in connection with any
enforcement of his rights under this Agreement.
3. TERMINATION.
Section 3.1 Termination of Employment. The employment of Employee
shall terminate prior to the expiration of the term specified in Section 1.2
upon the occurrence of either of the following prior to such time:
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5
(a) The death of Employee;
(b) The termination by the Company of Employee's employment for
Cause pursuant to Section 3.2.
The termination by the Company of Employee's employment hereunder for
any reason other than those specified in paragraphs (a) and (b) above shall
hereinafter be referred to as a termination "Without Cause". Any disability of
an Employee shall not be grounds for termination.
Section 3.2 For Cause. The Company may, at any time by written
notice to the Employee, terminate his services hereunder for Cause. Such notice
shall specify the event or events and the actions or failure to act constituting
Cause. The term "Cause", as used herein, shall mean and be limited to the
occurrence of one or more of the following events:
(a) His conviction, by a court of competent jurisdiction, of a felony,
which through lapse of time or otherwise is not subject to appeal;
(b) His commission of an act of fraud upon, or an act evidencing
material dishonesty toward, the Company; or
(c) Any willful failure by him to observe or perform his material
agreements herein contained.
If the basis for discharge is pursuant to paragraph (c) above,
Employee shall have thirty (30) days from his receipt of the notice of
termination for Cause to cure the actions or failure to act specified in such
notice and, in the event of any such cure within such period, such conduct shall
not constitute Cause hereunder.
5
6
Section 3.3 Consequences of Termination.
(a) If Employee's employment hereunder shall terminate
pursuant to any of the provisions of this Article 3, his base salary and
incentive compensation referred to in Sections 2.1 and 2.2 shall cease to accrue
forthwith.
(b) If the Company shall terminate Employee's employment hereunder
Without Cause, the Company shall pay Employee monthly severance payments at an
annual rate equal to 150% of the sum of (i) the Employee's then current base
salary plus (ii) the amount of the annual incentive bonus most recently paid or
approved to be paid to Employee in respect of the previous year, plus (iii) the
fair market value of all shares of Chemed Corporation capital stock subject to
stock awards granted to Employee under one or more stock incentive plans of
Chemed Corporation which have vested during the 12 months prior to the
Employee's termination, such fair market value to be determined as of the date
of vesting of any such shares. Such monthly severance payments shall be made for
a period equal to the balance of the term of employment provided for in
Section 1.2.
(c) In the event that Employee's employment hereunder shall terminate
pursuant to any of the provisions of this Article 3, the rights of Employee
under any incentive compensation plan referred to in Section 2.2, under the
executive or employee benefit plans or arrangements referred to in Section 2.3
and Section 2.4 or otherwise, shall be determined in accordance with the terms
and provisions of such plans, arrangements and options applicable to an employee
whose
6
7
employment has terminated in the manner that occurred, except that a termination
Without Cause shall be treated as a retirement under a retirement plan of the
Company for the purposes of the Company stock incentive plans.
4. OTHER COVENANTS OF EMPLOYEE.
Section 4.1 Employee shall have no right, title or interest in any
reports, studies, memoranda, correspondence, manuals, records, plans, or other
written, printed or otherwise recorded materials of any kind belonging to or in
the possession of the Company or its subsidiaries, or in any copies, pictures,
duplicates, facsimiles or other reproductions, recordings, abstracts or
summaries thereof and Employee will promptly surrender to the Company any such
materials (other than materials which have been published or otherwise have
lawfully been made available to the public generally) in his possession upon the
termination of his employment or any time prior thereto upon request of the
Company.
Section 4.2 Without the prior written consent of the Company, Employee
shall not at any time (whether during or after his employment with the Company)
use for his own benefit or purposes or for the benefit or purposes of any other
person, firm, partnership, association, corporation or business organization,
entity or enterprise, or disclose (except in the performance of his duties
hereunder) in any manner to any person, firm, partnership, association,
corporation or business organization, entity or enterprise,
7
8
any trade secret, or other confidential or proprietary information, data,
know-how or knowledge (including, but not limited to, that relating to financial
policies, product composition, manufacturing organization and methods, research
and development policies and programs, service techniques, purchasing
organization and methods, sales organization and methods, product pricing,
market development and expansion plans, personnel policies and training and
development programs, customer and supplier relationships, and franchising
programs and franchisee relationships) belonging to, or relating to the affairs
of, the Company or its subsidiaries.
Section 4.3 Employee shall promptly disclose to the Company (and to no
one else) all improvements, discoveries and inventions that may be of
significance to the Company or its subsidiaries made or conceived alone or in
conjunction with others (whether or not patentable, whether or not made or
conceived at the request of or upon the suggestion of the Company during or out
of his usual hours of work or in or about the premises of the Company or
elsewhere) while in the employ of the Company, or made or conceived within six
months after the termination of his employment by the Company, if resulting
from, suggested by or relating to such employment. All such improvements,
discoveries and inventions shall, to the extent that they are patentable, be the
sole and exclusive property of the Company and are hereby assigned to the
Company. At the request of the Company and at its cost and without liability to
Employee, Employee shall assist the Company, or any person or persons from time
to time designated by it, in obtaining the grant of patents in
8
9
the United States and/or in such other country or countries as may be designated
by the Company covering such improvements, discoveries and inventions and shall
in connection therewith execute such applications, statements or other
documents, furnish such information and data and take all such other action
(including, but not limited to, the giving of testimony) as the Company may from
time to time request.
Section 4.4 The obligations of Employee set forth in this Article 4
are in addition to and not in limitation of any obligations which would
otherwise exist as a matter of law. The provisions of this Article 4 shall
survive the termination of Employee's employment hereunder.
5. CERTAIN REMEDIES
Section 5.1 Breach by the Company. In the event that the Company shall
fail, in any material respect, to observe and perform its obligations hereunder,
the Employee may give written notice to the Company specifying the nature of
such failure. If within thirty (30) days after its receipt of such notice the
Company shall not have remedied such failure, the Employee shall have the right
and option to treat such failure as termination of his employment by the Company
Without Cause, to cease rendering services hereunder and thereafter to receive
the severance benefits and have the other rights and obligations provided for in
Article 3 hereof in the case of a termination by the Company Without Cause. The
parties agree that a material breach by the Company for purposes of this ss.5.1
shall include, but not be limited to, a material reduction in Employee's title,
authority or responsibilities from those he was
9
10
exercising on the date of execution of this Agreement. The remedy provided for
in this Section 5.1 shall be in addition to and not in limitation of any other
remedies which would otherwise exist as a matter of law.
Section 5.2 Breach by the Employee. Employee acknowledges and agrees
that the Company's remedy at law for any breach of any of Employee's obligations
under Sections 1.1(a), 4.1, 4.2 and 4.3 would be inadequate, and agrees and
consents that temporary and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of any such sections,
without the necessity of proof of actual damage.
6. GENERAL PROVISIONS
Section 6.1 Representations and Warranties. Employee represents and
warrants to the Company that he is free to enter into the agreement and that he
has no prior or other obligations or commitments of any kind to anyone that
would in any way hinder or interfere with his acceptance of, or the full,
uninhibited and faithful performance of, his employment hereunder or the
exercise of his best efforts as an employee of the Company.
Section 6.2 Understandings; Amendments. Except as otherwise provided
herein, this Agreement sets forth the entire agreement and understanding of the
parties concerning the subject matter hereof and supersedes all prior
agreements, arrangements and understandings between Employee and the Company
concerning such subject matter. No representation, promise, inducement or
statement of intention has been made by or on behalf of either party hereto that
is not set forth in this Agreement or the
10
11
documents referred to herein. This Agreement may not be amended or modified
except by a written instrument specifically referring to this agreement executed
by the parties hereto.
Section 6.3 Notices.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and may either be delivered personally to
the addressee or be mailed, registered mail, postage prepaid, as follows:
If to the Company:
Chemed Corporation
2600 Chemed Center
Cincinnati, OH 45202
Attn: President
with a copy to:
Secretary
Chemed Corporation
2600 Chemed Center
Cincinnati, OH 45202
If to Employee:
6685 Miralake Drive
Cincinnati, Ohio 45243
(b) Either party may change the address to which any such notices or
communications are to be directed to it by giving written notice to the other
party in the manner provided in the preceding paragraph (a).
Section 6.4 Assignments; Binding Effect.
(a) Employee acknowledges that the services to be rendered by him are
unique and personal. Accordingly, Employee may not assign any of his rights or
delegate any of his duties or obligations under this Agreement. This Agreement
shall be binding
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12
upon, and to the extent herein permitted shall inure to the benefit of,
Employee's heirs, legatees and legal representatives.
(b) The Company may not assign this Agreement or its rights hereunder
except to a successor of all or substantially all of the business and assets of
the Company. This Agreement shall be binding upon, and shall inure to the
benefit of, the Company's successors and permitted assigns.
Section 6.5 Waivers. The failure of either party hereto at any time or
from time to time to require performance of any of the other party's obligations
under this agreement shall in no manner affect the right to enforce any
provision of this Agreement at a subsequent time, and the waiver of any rights
arising out of any breach shall not be construed as a waiver of any rights
arising out of any subsequent breach.
Section 6.6 Severance Plans. Amounts paid hereunder are in addition to
any amounts payable under the Company severance plans, without offset or
reduction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
CHEMED CORPORATION
By: /s/ Kevin J. McNamara
----------------------------
Kevin J. McNamara, President
EMPLOYEE
/s/ John M. Mount
--------------------------------
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13
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 5th day of November, 1997 by and
between Walter L. Krebs residing at 2495 Legends Way, Crestview Hills, Kentucky
41017 ("Employee"), and Chemed Corporation, a Delaware corporation (Chemed and
its subsidiaries referred to as Company").
WHEREAS, the Company has employed Employee and desires to
continue to employ Employee as a senior executive and Employee desires to work
for the Company in such capacity on the terms and conditions hereinafter
provided;
WHEREAS, Employee is a key senior executive of the Company
with major responsibilities for planning, directing, coordinating and
controlling overall corporate operations;
WHEREAS, in such capacity Employee will develop or have access
to all or substantially all of the business methods and confidential information
relating to the Company, including but not limited to, its financial performance
and results, its product formulae, its manufacturing organization and methods,
its product research and development policies and programs, its service
techniques, its purchasing organization and methods, its sales organization and
methods, its pricing of products, its market development and expansion plans,
its personnel policies and training and development programs, and its customer
and supplier relationships; and franchising programs and franchisee
relationships;
1
14
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants and agreements herein contained, the parties
hereto agree as follows:
1. EMPLOYMENT
Section 1.1 Position and Duties.
(a) The Company agrees to employ Employee and Employee agrees to work
for the Company as a senior executive. Employee shall have such duties and
authority as are normally associated with his office. Employee will also serve
in such other management capacities as may be mutually agreed upon from time to
time. While employed hereunder, Employee shall devote his full time, effort,
skill and attention to the affairs of the Company. During the term of his
employment hereunder, Employee shall not render any services to any other person
that might be in competition with the Company or any of its subsidiaries or
affiliates or in conflict with his position as a senior executive of the Company
or his duty of undivided loyalty to the Company.
Section 1.2 Term. Unless sooner terminated in accordance with the
provisions hereof, the term of employment shall commence on November 5, 1997 and
shall continue until November 5, 2000.
2. COMPENSATION
Section 2.1 Base Salary. While employed hereunder the Company shall
pay Employee a base salary of $130,000 per annum or such higher amount or
amounts as the Company may from time to time approve. The base salary shall be
due and payable at the same
2
15
times and intervals at which salary payments are made to other senior
executives.
Section 2.2 Incentive Compensation. Employee will be entitled to
participate in all incentive compensation and bonus plans as such have been
maintained by the Company for its senior executives generally. The Employee's
annual incentive compensation will be payable, with respect to each calendar
year, on or before February 10 in the following year.
Section 2.3 Employee Benefits. Employee shall be entitled to
participate in and receive rights and benefits under those "fringe" benefit
plans which Service America Systems, Inc. provides for its headquarters
executives generally, which at the present time include:
Deferred Compensation Plan
Cafeteria Plan
Flexible Spending Plan (Reimbursement Account)
Group Health Insurance
Group Term Life and AD&D Insurance
Stock Incentive Plans
Long-Term Disability Insurance
Voluntary Group Accident Insurance
Business Travel Accident Insurance
Tuition Reimbursement Program
Optional Term Life Insurance
Employee's participation in such plans will be in accordance with and subject to
the terms and provisions thereof.
3
16
Section 2.4 Pension. Employee will be eligible to participate in the
Service America System, Inc.'s Retirement and Savings Plan ("Retirement Plan")
and in the Excess Benefit Plan in accordance with and subject to their
respective provisions.
Section 2.5 Miscellaneous.
(a) Company will pay or reimburse Employee for his reasonable business
expenses in accordance with Company policies.
(b) Employee will be entitled to paid vacation in accordance with
current Company policy. Employee will be entitled to payment for unused vacation
time in accordance with Company policy.
(c) Subject to Section 1.1(a) of this Agreement, compliance with
applicable laws relating to interlocking directorships, the Company's policies
on conflicts of interest and improper payments and accounting records contained
in a statement entitled "Policies on Business Ethics" and to any other current
applicable Company policy, during the term of Employee's employment hereunder,
Employee will be permitted to accept election, and to serve as, a director of
other entities. Employee will be permitted to retain all fees and other benefits
resulting from his service as a director of any such entity.
(d) The Company shall promptly pay upon demand any reasonable legal
fees incurred by Employee in connection with any enforcement of his rights under
this Agreement.
3. TERMINATION.
Section 3.1 Termination of Employment. The employment of Employee
shall terminate prior to the expiration of the term
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17
specified in Section 1.2 upon the occurrence of either of the following prior to
such time:
(a) The death of Employee;
(b) The termination by the Company of Employee's employment for Cause
pursuant to Section 3.2.
The termination by the Company of Employee's employment hereunder for
any reason other than those specified in paragraphs (a) and (b) above shall
hereinafter be referred to as a termination "Without Cause". Any disability of
an Employee shall not be grounds for termination.
Section 3.2 For Cause. The Company may, at any time by written notice
to the Employee, terminate his services hereunder for Cause. Such notice shall
specify the event or events and the actions or failure to act constituting
Cause. The term "Cause", as used herein, shall mean and be limited to the
occurrence of one or more of the following events:
(a) His conviction, by a court of competent jurisdiction, of a felony,
which through lapse of time or otherwise is not subject to appeal;
(b) His commission of an act of fraud upon, or an act evidencing
material dishonesty toward, the Company; or
(c) Any willful failure by him to observe or perform his material
agreements herein contained.
If the basis for discharge is pursuant to paragraph (c) above,
Employee shall have thirty (30) days from his receipt of the notice of
termination for Cause to cure the actions or failure to act specified in such
notice and, in the event of any such cure
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18
within such period, such conduct shall not constitute Cause hereunder.
Section 3.3 Consequences of Termination.
(a) If Employee's employment hereunder shall terminate pursuant to any
of the provisions of this Article 3, his base salary and incentive compensation
referred to in Sections 2.1 and 2.2 shall cease to accrue forthwith.
(b) If the Company shall terminate Employee's employment hereunder
Without Cause, the Company shall pay Employee monthly severance payments at an
annual rate equal to 150% of the sum of (i) the Employee's then current base
salary plus (ii) the amount of the annual incentive bonus most recently paid or
approved to be paid to Employee in respect of the previous year, plus (iii) the
fair market value of all shares of Chemed Corporation capital stock subject to
stock awards granted to Employee under one or more stock incentive plans of
Chemed Corporation which have vested during the 12 months prior to the
Employee's termination, such fair market value to be determined as of the date
of vesting of any such shares. Such monthly severance payments shall be made for
a period equal to the balance of the term of employment provided for in Section
1.2.
(c) In the event that Employee's employment hereunder shall terminate
pursuant to any of the provisions of this Article 3, the rights of Employee
under any incentive compensation plan referred to in Section 2.2, under the
executive or employee benefit plans or arrangements referred to in Section 2.3
and Section 2.4 or otherwise, shall be
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19
determined in accordance with the terms and provisions of such plans,
arrangements and options applicable to an employee whose employment has
terminated in the manner that occurred, except that a termination Without Cause
shall be treated as a retirement under a retirement plan of the Company for the
purposes of the Company stock incentive plans.
4. OTHER COVENANTS OF EMPLOYEE.
Section 4.1 Employee shall have no right, title or interest in any
reports, studies, memoranda, correspondence, manuals, records, plans, or other
written, printed or otherwise recorded materials of any kind belonging to or in
the possession of the Company or its subsidiaries, or in any copies, pictures,
duplicates, facsimiles or other reproductions, recordings, abstracts or
summaries thereof and Employee will promptly surrender to the Company any such
materials (other than materials which have been published or otherwise have
lawfully been made available to the public generally) in his possession upon the
termination of his employment or any time prior thereto upon request of the
Company.
Section 4.2 Without the prior written consent of the Company, Employee
shall not at any time (whether during or after his employment with the Company)
use for his own benefit or purposes or for the benefit or purposes of any other
person, firm, partnership, association, corporation or business organization,
entity or enterprise, or disclose (except in the performance of his duties
hereunder) in any manner to any person, firm, partnership, association,
corporation or business organization, entity or enterprise,
7
20
in any manner to any person, firm, partnership, association, corporation or
business organization, entity or enterprise, any trade secret, or other
confidential or proprietary information, data, know-how or knowledge (including,
but not limited to, that relating to financial policies, product composition,
manufacturing organization and methods, research and development policies and
programs, service techniques, purchasing organization and methods, sales
organization and methods, product pricing, market development and expansion
plans, personnel policies and training and development programs, customer and
supplier relationships, and franchising programs and franchisee relationships)
belonging to, or relating to the affairs of, the Company or its subsidiaries.
Section 4.3 Employee shall promptly disclose to the Company (and to no one else)
all improvements, discoveries and inventions that may be of significance to the
Company or its subsidiaries made or conceived alone or in conjunction with
others (whether or not patentable, whether or not made or conceived at the
request of or upon the suggestion of the Company during or out of his usual
hours of work or in or about the premises of the Company or elsewhere) while in
the employ of the Company, or made or conceived within six months after the
termination of his employment by the Company, if resulting from, suggested by or
relating to such employment. All such improvements, discoveries and inventions
shall, to the extent that they are patentable, be the sole and exclusive
property of the Company and are hereby assigned to the Company. At the request
of the Company and at its cost and without liability to Employee,
8
21
Employee shall assist the Company, or any person or persons from time to time
designated by it, in obtaining the grant of patents in the United States and/or
in such other country or countries as may be designated by the Company covering
such improvements, discoveries and inventions and shall in connection therewith
execute such applications, statements or other documents, furnish such
information and data and take all such other action (including, but not limited
to, the giving of testimony) as the Company may from time to time request.
Section 4.4 The obligations of Employee set forth in this Article 4 are
in addition to and not in limitation of any obligations which would otherwise
exist as a matter of law. The provisions of this Article 4 shall survive the
termination of Employee's employment hereunder.
5. CERTAIN REMEDIES
Section 5.1 Breach by the Company. In the event that the Company shall
fail, in any material respect, to observe and perform its obligations hereunder,
the Employee may give written notice to the Company specifying the nature of
such failure. If within thirty (30) days after its receipt of such notice the
Company shall not have remedied such failure, the Employee shall have the right
and option to treat such failure as termination of his employment by the Company
Without Cause, to cease rendering services hereunder and thereafter to receive
the severance benefits and have the other rights and obligations provided for in
Article 3 hereof in the case of a termination by the Company Without Cause. The
parties agree that a material breach by the Company for purposes of this
Section 5.1
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22
shall include, but not be limited to, a material reduction in Employee's title,
authority or responsibilities from those he was exercising on the date of
execution of this Agreement. The remedy provided for in this Section 5.1 shall
be in addition to and not in limitation of any other remedies which would
otherwise exist as a matter of law.
Section 5.2 Breach by the Employee. Employee acknowledges and agrees
that the Company's remedy at law for any breach of any of Employee's obligations
under Sections 1.1(a), 4.1, 4.2 and 4.3 would be inadequate, and agrees and
consents that temporary and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of any such sections,
without the necessity of proof of actual damage.
6. GENERAL PROVISIONS
Section 6.1 Representations and Warranties. Employee represents and
warrants to the Company that he is free to enter into the agreement and that he
has no prior or other obligations or commitments of any kind to anyone that
would in any way hinder or interfere with his acceptance of, or the full,
uninhibited and faithful performance of, his employment hereunder or the
exercise of his best efforts as an employee of the Company.
Section 6.2 Understandings; Amendments. Except as otherwise provided
herein, this Agreement sets forth the entire agreement and understanding of the
parties concerning the subject matter hereof and supersedes all prior
agreements, arrangements and understandings between Employee and the Company
concerning such subject matter. No representation, promise, inducement or
10
23
statement of intention has been made by or on behalf of either party hereto that
is not set forth in this Agreement or the documents referred to herein. This
Agreement may not be amended or modified except by a written instrument
specifically referring to this Agreement executed by the parties hereto.
Section 6.3 Notices.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and may either be delivered personally to
the addressee or be mailed, registered mail, postage prepaid, as follows:
If to the Company:
Chemed Corporation
2600 Chemed Center
Cincinnati, OH 45202
Attn: President
with a copy to:
Secretary
Chemed Corporation
2600 Chemed Center
Cincinnati, OH 45202
If to Employee:
2495 Legends Way
Crestview Hills, Kentucky 41017
(b) Either party may change the address to which any such notices or
communications are to be directed to it by giving written notice to the other
party in the manner provided in the preceding paragraph (a).
Section 6.4 Assignments; Binding Effect.
(a) Employee acknowledges that the services to be rendered by him are
unique and personal. Accordingly, Employee may
11
24
not assign any of his rights or delegate any of his duties or obligations under
this Agreement. This Agreement shall be binding upon, and to the extent herein
permitted shall inure to the benefit of, Employee's heirs, legatees and legal
representatives.
(b) The Company may not assign this Agreement or its rights hereunder
except to a successor of all or substantially all of the business and assets of
the Company. This Agreement shall be binding upon, and shall inure to the
benefit of, the Company's successors and permitted assigns.
Section 6.5 Waivers. The failure of either party hereto at any time or
from time to time to require performance of any of the other party's obligations
under this agreement shall in no manner affect the right to enforce any
provision of this Agreement at a subsequent time, and the waiver of any rights
arising out of any breach shall not be construed as a waiver of any rights
arising out of any subsequent breach.
Section 6.6 Severance Plans. Amounts paid hereunder are in addition to
any amounts payable under the Company severance plans, without offset or
reduction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
CHEMED CORPORATION
By: /s/ Kevin J. McNamara
----------------------------
Kevin J. McNamara, President
EMPLOYEE
/s/ Walter L. Krebs
----------------------------
12
1
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 19th day of May, 1997 by and between
Lawrence J. Gillis residing at 9036 Terwilliger Ridge Drive, Cincinnati, Ohio
45249 ("Employee"), and Chemed Corporation, a Delaware corporation (the
"Company").
WHEREAS, the Company has employed Employee and desires to
continue to employ Employee as a senior executive and Employee desires to work
for the Company or its subsidiaries in such capacity on the terms and conditions
hereinafter provided;
WHEREAS, Employee is a key senior executive of the Company
with major responsibilities for planning, directing, coordinating and
controlling overall corporate operations;
WHEREAS, in such capacity Employee will develop or have access
to all or substantially all of the business methods and confidential information
relating to the Company, including but not limited to, its financial performance
and results, its product formulae, its manufacturing organization and methods,
its product research and development policies and programs, its service
techniques, its purchasing organization and methods, its sales organization and
methods, its pricing of products, its market development and expansion plans,
its personnel policies and training and development programs, and its customer
and supplier relationships; and franchising programs and franchisee
relationships;
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2
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT
Section 1.1 Position and Duties.
(a) The Company agrees to employ Employee and Employee agrees to work
for the Company as a senior executive. Employee shall have such duties and
authority as are normally associated with his office. Employee will also serve
in such other management capacities as may be mutually agreed upon from time to
time. While employed hereunder, Employee shall devote his full time, effort,
skill and attention to the affairs of the Company. During the term of his
employment hereunder, Employee shall not render any services to any other person
that might be in competition with the Company or any of its subsidiaries or
affiliates or in conflict with his position as a senior executive of the Company
or his duty of undivided loyalty to the Company.
Section 1.2 Term. Unless sooner terminated in accordance with the
provisions hereof, the term of employment shall commence on May 19, 1997 and
shall continue until May 19, 2000.
2. COMPENSATION
Section 2.1 Base Salary. While employed hereunder the Company shall
pay Employee a base salary of $250,000 per annum or such higher amount or
amounts as the Company may from time to time approve. The base salary shall be
due and payable at the same times and intervals at which salary payments are
made to other senior executives.
2
3
Section 2.2 Incentive Compensation. Employee will be entitled to
participate in all incentive compensation and bonus plans as such have been
maintained by the Company for its senior executives generally. The Employee's
annual incentive compensation will be payable, with respect to each calendar
year, on or before February 10 in the following year.
Section 2.3 Employee Benefits. Employee shall be entitled to
participate in and receive rights and benefits under those "fringe" benefit
plans which the Company provides for its executives generally, which at the
present time include:
Deferred Compensation Plan
Cafeteria Plan
Flexible Spending Plan (Reimbursement Account)
Group Health Insurance
Group Term Life and AD&D Insurance
Stock Incentive Plans
Long-Term Disability Insurance
Voluntary Group Accident Insurance
Business Travel Accident Insurance
Tuition Reimbursement Program
Optional Term Life Insurance
Employee's participation in such plans will be in accordance with and subject to
the terms and provisions thereof.
Section 2.4 Pension. Employee will continue to participate in
Roto-Rooters's Retirement and Thrift Plan ("Retirement Plan") and in the Excess
Benefit Plan in accordance with and subject to their respective provisions.
3
4
Section 2.5 Miscellaneous.
(a) Company will pay or reimburse Employee for his reasonable business
expenses in accordance with Company policies.
(b) Employee will be entitled to paid vacation in accordance with
current Company policy. Employee will be entitled to payment for unused vacation
time in accordance with Company policy.
(c) Subject to Section 1.1(a) of this Agreement, compliance with
applicable laws relating to interlocking directorships, the Company's policies
on conflicts of interest and improper payments and accounting records contained
in a statement entitled "Policies on Business Ethics" and to any other current
applicable Company policy, during the term of Employee's employment hereunder,
Employee will be permitted to accept election, and to serve as, a director of
other entities. Employee will be permitted to retain all fees and other benefits
resulting from his service as a director of any such entity.
(d) The Company shall promptly pay upon demand any reasonable legal
fees incurred by Employee in connection with any enforcement of his rights under
this Agreement.
3. TERMINATION.
Section 3.1 Termination of Employment. The employment of Employee
shall terminate prior to the expiration of the term specified in Section 1.2
upon the occurrence of any of the following prior to such time:
(a) The death of Employee;
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5
(b) The termination by the Company of Employee's employment for Cause
pursuant to Section 3.2.
The termination by the Company of Employee's employment hereunder for
any reason other than those specified in paragraphs (a) and (b) above shall
hereinafter be referred to as a termination "Without Cause". Any disability of
an employee shall not be grounds for termination.
Section 3.2 For Cause. The Company may, at any time by written notice
to the Employee, terminate his services hereunder for Cause. Such notice shall
specify the event or events and the actions or failure to act constituting
Cause. The term "Cause", as used herein, shall mean and be limited to the
occurrence of one or more of the following events:
(a) His conviction, by a court of competent jurisdiction, of a felony,
which through lapse of time or otherwise is not subject to appeal;
(b) His commission of an act of fraud upon, or an act evidencing
material dishonesty toward, the Company; or
(c) Any willful failure by him to observe or perform his material
agreements herein contained.
If the basis for discharge is pursuant to paragraph (c) above,
Employee shall have thirty (30) days from his receipt of the notice of
termination for Cause to cure the actions or failure to act specified in such
notice and, in the event of any such cure within such period, such conduct shall
not constitute Cause hereunder.
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6
Section 3.3 Consequences of Termination.
(a) If Employee's employment hereunder shall terminate pursuant to any
of the provisions of this Article 3, his base salary and incentive compensation
referred to in Section Section 2.1 and 2.2 shall cease to accrue forthwith.
(b) If the Company shall terminate Employee's employment hereunder
Without Cause, the Company shall pay Employee monthly severance payments at an
annual rate equal to 150% of the sum of (i) the Employee's then current base
salary plus (ii) the amount of the annual incentive bonus most recently paid or
approved to be paid to Employee in respect of the previous year, plus (iii) the
fair market value of all shares of Chemed Corporation capital stock and its
subsidiaries' common stock subject to stock awards granted to Employee under one
or more stock incentive plans of Chemed Corporation or of any of its
subsidiaries which have vested during the 12 months prior to the Employee's
termination, such fair market value to be determined as of the date of vesting
of any such shares. Such monthly severance payments shall be made for a period
equal to the balance of the term of employment provided in Section 1.2.
(c) In the event that Employee's employment hereunder shall terminate
pursuant to any of the provisions of this Article 3, the rights of Employee
under any incentive compensation plan referred to in Section 2.2, under the
executive or employee benefit plans or arrangements referred to in Section 2.3
and Section 2.4 or otherwise, shall be determined in accordance with the terms
and provisions of such plans, arrangements and options applicable to an employee
whose employment has terminated in the manner that occurred, except that
6
7
a termination Without Cause shall be treated as a retirement under a retirement
plan of the Company for the purposes of the Company stock incentive plans.
4. OTHER COVENANTS OF EMPLOYEE.
Section 4.1 Employee shall have no right, title or interest in any
reports, studies, memoranda, correspondence, manuals, records, plans, or other
written, printed or otherwise recorded materials of any kind belonging to or in
the possession of the Company or its subsidiaries, or in any copies, pictures,
duplicates, facsimiles or other reproductions, recordings, abstracts or
summaries thereof and Employee will promptly surrender to the Company any such
materials (other than materials which have been published or otherwise have
lawfully been made available to the public generally) in his possession upon the
termination of his employment or any time prior thereto upon request of the
Company.
Section 4.2 Without the prior written consent of the Company, Employee
shall not at any time (whether during or after his employment with the Company)
use for his own benefit or purposes or for the benefit or purposes of any other
person, firm, partnership, association, corporation or business organization,
entity or enterprise, or disclose (except in the performance of his duties
hereunder) in any manner to any person, firm, partnership, association,
corporation or business organization, entity or enterprise,
7
8
information, data, know-how or knowledge (including, but not limited to, that
relating to financial policies, product composition, manufacturing organization
and methods, research and development policies and programs, service techniques,
purchasing organization and methods, sales organization and methods, product
pricing, market development and expansion plans, personnel policies and training
and development programs, customer and supplier relationships) belonging to, or
relating to the affairs of, the Company or its subsidiaries.
Section 4.3 Employee shall promptly disclose to the Company (and to no
one else) all improvements, discoveries and inventions that may be of
significance to the Company or its subsidiaries made or conceived alone or in
conjunction with others (whether or not patentable, whether or not made or
conceived at the request of or upon the suggestion of the Company during or out
of his usual hours of work or in or about the premises of the Company or
elsewhere) while in the employ of the Company, or made or conceived within six
months after the termination of his employment by the Company, if resulting
from, suggested by or relating to such employment. All such improvements,
discoveries and inventions shall, to the extent that they are patentable, be the
sole and exclusive property of the Company and are hereby assigned to the
Company. At the request of the Company and at its cost and without liability to
Employee, Employee shall assist the Company, or any person or persons from time
to time designated by it, in obtaining the grant of patents in the United States
and/or in such other country or countries as may be designated by the Company
covering such improvements,
8
9
discoveries and inventions and shall in connection therewith execute such
applications, statements or other documents, furnish such information and data
and take all such other action (including, but not limited to, the giving of
testimony) as the Company may from time to time request.
Section 4.4 The obligations of Employee set forth in this Article 4
are in addition to and not in limitation of any obligations which would
otherwise exist as a matter of law. The provisions of this Article 4 shall
survive the termination of Employee's employment hereunder.
5. CERTAIN REMEDIES
Section 5.1 Breach by the Company. In the event that the Company shall
fail, in any material respect, to observe and perform its obligations hereunder,
the Employee may give written notice to the Company specifying the nature of
such failure. If within thirty (30) days after its receipt of such notice the
Company shall not have remedied such failure, the Employee shall have the right
and option to treat such failure as termination of his employment by the Company
Without Cause, to cease rendering services hereunder and thereafter to receive
the severance benefits and have the other rights and obligations provided for in
Article 3 hereof in the case of a termination by the Company Without Cause. The
parties agree that a material breach by the Company for purposes of this Section
5.1 shall include, but not be limited to, a material reduction in Employee's
title, authority or responsibilities from those he was exercising on the date of
execution of this Agreement. The remedy provided for in this Section 5.1 shall
be in addition to and not in
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10
limitation of any other remedies which would otherwise exist as a matter of law.
Section 5.2 Breach by the Employee. Employee acknowledges and agrees
that the Company's remedy at law for any breach of any of Employee's obligations
under Section Section 1.1(a), 4.1, 4.2 and 4.3 would be inadequate, and agrees
and consents that temporary and permanent injunctive relief may be granted in
any proceeding that may be brought to enforce any provision of any such
sections, without the necessity of proof of actual damage.
6. GENERAL PROVISIONS
Section 6.1 Representations and Warranties. Employee represents and
warrants to the Company that he is free to enter into the agreement and that he
has no prior or other obligations or commitments of any kind to anyone that
would in any way hinder or interfere with his acceptance of, or the full,
uninhibited and faithful performance of, his employment hereunder or the
exercise of his best efforts as an employee of the Company.
Section 6.2 Understandings; Amendments. Except as otherwise provided
herein, this Agreement sets forth the entire agreement and understanding of the
parties concerning the subject matter hereof and supersedes all prior
agreements, arrangements and understandings between Employee and the Company
concerning such subject matter. No representation, promise, inducement or
statement of intention has been made by or on behalf of either party hereto that
is not set forth in this Agreement or the documents referred to herein. This
Agreement may not be amended or
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11
modified except by a written instrument specifically referring to this Agreement
executed by the parties hereto.
Section 6.3 Notices.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and may either be delivered personally to
the addressee or be mailed, registered mail, postage prepaid, as follows:
If to the Company:
Chemed Corporation
2600 Chemed Center
Cincinnati, OH 45202
Attn: President
with a copy to:
Secretary
Chemed Corporation
2600 Chemed Center
Cincinnati, OH 45202
If to Employee:
9036 Terwilliger Ridge Drive
Cincinnati, OH 45249
(b) Either party may change the address to which any such notices or
communications are to be directed to it by giving written notice to the other
party in the manner provided in the preceding paragraph (a).
Section 6.4 Assignments; Binding Effect.
(a) Employee acknowledges that the services to be rendered by him are
unique and personal. Accordingly, Employee may not assign any of his rights or
delegate any of his duties or obligations under this Agreement. This Agreement
shall be binding
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12
upon, and to the extent herein permitted shall inure to the benefit of,
Employee's heirs, legatees and legal representatives.
(b) The Company may not assign this Agreement or its rights hereunder
except to a successor of all or substantially all of the business and assets of
the Company. This Agreement shall be binding upon, and shall inure to the
benefit of, the Company's successors and permitted assigns.
Section 6.5 Waivers. The failure of either party hereto at any time or
from time to time to require performance of any of the other party's obligations
under this agreement shall in no manner affect the right to enforce any
provision of this Agreement at a subsequent time, and the waiver of any rights
arising out of any breach shall not be construed as a waiver of any rights
arising out of any subsequent breach.
Section 6.6 Severance Plans. Amounts paid hereunder are in addition to
any amounts payable under the Company severance plans, without offset or
reduction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
CHEMED CORPORATION
By: /s/ N. C. Dallob
-------------------------
EMPLOYEE
/s/ Lawrence J. Gillis
--------------------------
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Exhibit 13
FINANCIAL HIGHLIGHTS
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1997 1996(a) Change
- --------------------------------------------------------------------------------------------------------------------
Continuing Operations
Sales and Service Revenues .............................. $341,729,000 $301,213,000 13%
Income Before Capital Gains ............................. $9,425,000 $7,386,000 28%
Income from Continuing Operations(b) .................... $17,077,000 $25,117,000 (32)%
Discontinued Operations .................................... $13,160,000 $7,211,000 82%
Net Income(b) .............................................. $30,237,000 $32,328,000 (6)%
Earnings Per Common Share
Income Before Capital Gains ............................. $.95 $.75 27%
Income from Continuing Operations(b) .................... $1.72 $2.56 (33)%
Net Income(b) ........................................... $3.04 $3.30 (8)%
Average Number of Shares Outstanding .................... 9,940,000 9,801,000 1%
Diluted Earnings Per Common Share
Income Before Capital Gains ............................. $.94 $.74 27%
Income from Continuing Operations(b) .................... $1.71 $2.54 (33)%
Net Income(b) ........................................... $3.02 $3.26 (7)%
Average Number of Shares Outstanding .................... 10,014,000 9,879,000 1%
Dividends Per Share ........................................ $2.09 $2.08 --%
Number of Shareholders ..................................... 5,365 5,685 (6)%
Number of Employees (c)..................................... 6,849 5,884 16%
Return on Average Equity ................................... 13.8% 15.3% (1.5) pts.
(a) Average shares and earnings per share have been restated to conform to
accounting rules effective in December 1997.
(b) Amounts include pretax gains from sales of investments of $12,235,000
($7,652,000 aftertax) in 1997 and $28,166,000 ($17,731,000 aftertax)
in 1996.
(C) Continuing operations
Revenues from Continuing Operations
(in millions)
91 92 93 94 95 96 97
Average Annual Growth 26% $84.8 $104.7 $136.4 $241.0 $270.4 $301.2 $341.7
Income
(in millions)
91 92 93 94 95 96 97
Average Annual Growth
Continuing Operations 17% $53.0 $15.7 $19.5 $43.9 $23.2 $32.3 $30.2
Net Income (9)% $36.8 $ 8.7 $ 7.6 $ 7.0 $11.7 $25.1 $17.1
1
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Financial Review
Contents
- - Statement of Accounting Policies .......................... 16
- - Consolidated Statement of Income .......................... 17
- - Consolidated Balance Sheet ................................ 18
- - Consolidated Statement of Cash Flows ...................... 19
- - Consolidated Statement of Changes
in Stockholders' Equity ................................... 20
- - Notes to Financial Statements ............................. 21
- - Sales and Profit Statistics by Business Segment ........... 30
- - Selected Financial Data ................................... 32
- - Additional Segment Data ................................... 34
- - Unaudited Summary of Quarterly Results .................... 35
- - Management's Discussion and Analysis of
Financial Condition and Results of Operations ............. 36
PRICE WATERHOUSE LLP [LOGO]
Report of Independent Accountants
To the Stockholders and Board of Directors of Chemed Corporation
In our opinion, the consolidated financial statements appearing on pages 16
through 30 and on page 34 of this report present fairly, in all material
respects, the financial position of Chemed Corporation and its subsidiaries
("the Company") at December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Cincinnati, Ohio
February 2, 1998
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STATEMENT OF ACCOUNTING POLICIES
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
Principles of Consolidation
The consolidated financial statements include the accounts of Chemed
Corporation and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated.
Cash Equivalents
Cash equivalents comprise short-term highly liquid investments that have
been purchased within three months of their date of maturity.
Other Investments
Other investments are recorded at their estimated fair values. In
calculating realized gains and losses on the sales of investments, the
specific-identification method is used to determine the cost of investments
sold.
Inventories
Inventories are stated at the lower of cost or market. For determining the
value of inventories, the first-in, first-out ("FIFO") method is used.
Depreciation and Properties and Equipment
Depreciation of properties and equipment is computed using the
straight-line method over the estimated useful lives of the assets. Expenditures
for maintenance, repairs, renewals and betterments that do not materially
prolong the useful lives of the assets are expensed as incurred. The cost of
property retired or sold and the related accumulated depreciation are removed
from the accounts, and the resulting gain or loss is reflected currently in
income.
Intangible Assets
Goodwill and identifiable intangible assets arise from purchase business
combinations and are amortized using the straight-line method over the estimated
useful lives of the assets, but not in excess of 40 years.
The lives of the Company's gross intangible assets at December 31, 1997,
are (in thousands):
1 - 10 years $ 3,892
11 - 30 years 3,077
31 - 40 years 171,550
The Company periodically makes an estimation and valuation of the future
benefits of its intangible assets based on key financial indicators. If the
projected undiscounted cash flows of a major business unit indicate that
goodwill or identifiable intangible assets have been impaired, a write-down to
fair value is made.
Revenue Recognition
Revenues received under prepaid contractual service agreements are
recognized on a straight-line basis over the life of the contract. All other
service revenues and sales are recognized when the services are provided or the
products are delivered.
Computation of Earnings Per Share
Effective December 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share. Accordingly, all
prior years' average share and per share data have been restated to comply with
SFAS 128.
Earnings per common share are computed using
the weighted average number of shares of capital stock outstanding. Diluted
earnings per common share reflect the dilutive impact of the Company's
outstanding stock options and nonvested stock awards.
Employee Stock Ownership Plans
Contributions to the Company's Employee Stock Ownership Plans ("ESOP") are
based on established debt repayment schedules. Shares are allocated to
participants based on the principal and interest payments made during the
period. The Company's policy is to record its ESOP expense by applying the
transition rule under the level-principal amortization concept.
Stock-Based Compensation Plans
The Company uses Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, to account for stock-based compensation.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications
In September 1997, the Company sold The Omnia Group (previously 100% owned)
and National Sanitary Supply Company (previously 81% owned). These businesses
are classified as discontinued operations and prior years' financial statements
have been reclassified to reflect their operating results, net assets and cash
flows as discontinued operations.
16
4
CONSOLIDATED STATEMENT OF INCOME
Chemed Corporation and Subsidiary Companies
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
For the Years Ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Continuing Operations
Sales and service revenues ........................................... $341,729 $301,213 $270,449
---------- --------- ---------
Cost of goods sold and services provided ............................. 212,647 182,773 167,037
General and administrative expenses .................................. 76,047 70,223 62,268
Selling and marketing expenses ....................................... 24,931 23,383 20,537
Depreciation ......................................................... 8,622 7,353 6,505
---------- --------- ---------
Total costs and expenses .......................................... 322,247 283,732 256,347
---------- --------- ---------
Income from operations ............................................... 19,482 17,481 14,102
Interest expense ..................................................... (10,552) (8,267) (7,895)
Other income--net (Note 4) ........................................... 18,951 36,069 18,621
---------- --------- ---------
Income before income taxes and minority interest .................. 27,881 45,283 24,828
Income taxes (Note 5) ................................................ (10,804) (17,202) (9,105)
Minority interest in earnings of subsidiary (Note 1) ................. -- (2,964) (4,008)
---------- --------- ---------
Income from continuing operations .................................... 17,077 25,117 11,715
Discontinued Operations (Note 3) ........................................... 13,160 7,211 11,467
---------- --------- ---------
Net Income ................................................................. $ 30,237 $ 32,328 $ 23,182
========== ========= =========
Commencement DateEarnings Per Common Share (Note 14)
Income from continuing operations .................................... $ 1.72 $ 2.56 $ 1.19
========== ========= =========
Net income ........................................................... $ 3.04 $ 3.30 $ 2.36
========== ========= =========
Average number of shares outstanding ................................. 9,940 9,801 9,830
========== ========= =========
Diluted Earnings Per Common Share (Note 14)
Income from continuing operations .................................... $ 1.71 $ 2.54 $ 1.18
========== ========= =========
Net income ........................................................... $ 3.02 $ 3.26 $ 2.33
========== ========= =========
Average number of shares outstanding ................................. 10,014 9,879 9,898
========== ========= =========
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
17
5
CONSOLIDATED BALANCE SHEET
Chemed Corporation and Subsidiary Companies
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
December 31, 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents (Note 6) ............................................ $ 70,958 $ 14,028
Accounts receivable less allowances of $2,626 (1996--$1,583) .................. 42,142 31,555
Inventories (Note 7) .......................................................... 8,743 8,350
Statutory deposits ............................................................ 16,137 19,962
Current portion of redeemable preferred stock (Note 15) ....................... 27,136 16,443
Other current assets (Note 5) ................................................. 12,352 9,037
--------- ---------
Total current assets ....................................................... 177,468 99,375
Net assets of discontinued operations (Note 3) ................................... -- 140,138
Other investments (Note 15) ...................................................... 40,406 62,098
Properties and equipment, at cost less accumulated depreciation (Note 8) ......... 53,089 40,661
Identifiable intangible assets less accumulated amortization of $4,194
(1996--$2,851) ................................................................ 13,645 12,390
Goodwill less accumulated amortization of $17,677 (1996--$14,501) ................ 143,003 138,203
Other assets ..................................................................... 21,227 16,496
--------- ---------
Total Assets ......................................................... $448,838 $509,361
========= =========
Liabilities
Current liabilities
Accounts payable .............................................................. $ 8,774 $ 8,959
Bank notes and loans payable (Note 9) ......................................... -- 5,000
Current portion of long-term debt (Note 10) ................................... 5,313 12,526
Income taxes (Note 5) ......................................................... 12,460 3,333
Deferred contract revenue ..................................................... 25,489 24,735
Other current liabilities (Note 11) ........................................... 42,329 35,826
--------- ---------
Total current liabilities .................................................. 94,365 90,379
Deferred income taxes (Note 5) ................................................... -- 2,974
Long-term debt (Note 10) ......................................................... 83,720 158,140
Other liabilities (Note 11) ...................................................... 42,633 39,977
--------- ---------
Total Liabilities .................................................... 220,718 291,470
--------- ---------
Stockholders' Equity
Capital stock--authorized 15,000,000 shares $1 par;
issued 13,019,722 shares (1996--12,767,565 shares) ............................ 13,020 12,768
Paid-in capital .................................................................. 158,485 150,296
Retained earnings ................................................................ 148,680 139,262
Treasury stock--2,942,205 shares (1996--2,815,655 shares), at cost ............... (88,063) (82,943)
Unearned compensation (Note 12) .................................................. (23,959) (27,554)
Unrealized appreciation on investments (Note 15) ................................. 19,957 26,062
--------- ---------
Total Stockholders' Equity ........................................... 228,120 217,891
--------- ---------
Commitments and contingencies (Notes 11 and 13)
Total Liabilities and Stockholders' Equity ........................... $448,838 $509,361
========= =========
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
18
6
CONSOLIDATED STATEMENT OF CASH FLOWS
Chemed Corporation and Subsidiary Companies
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net income ......................................................... $ 30,237 $ 32,328 $ 23,182
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization ................................ 15,163 11,778 10,630
Discontinued operations (Note 3) ............................. (13,160) (7,211) (11,467)
Gains on sales of investments ................................ (12,235) (28,166) (9,078)
Provision for deferred income taxes (Note 5) ................. (1,820) (2,707) (916)
Provision for uncollectible accounts receivable .............. 702 869 899
Minority interest in earnings of subsidiaries ................ -- 2,964 4,008
Changes in operating assets and liabilities, excluding amounts
acquired in business combinations:
Decrease/(increase) in accounts receivable ............. (7,327) 162 (4,977)
Decrease/(increase) in statutory reserve requirements .. 3,825 (1,019) (4,535)
Decrease/(increase) in inventories and
other current assets ................................ (762) (914) 103
Increase in accounts payable, deferred contract revenue
and other current liabilities ....................... 2,209 6,327 2,746
Increase/(decrease) in income taxes (Note 5) ........... 7,565 (715) (3,290)
Other--net ................................................... (650) (177) (1,920)
--------- --------- ---------
Net cash provided by continuing operations ................... 23,747 13,519 5,385
Net cash provided by discontinued operations ................. 9,699 23,123 14,040
--------- --------- ---------
Net cash provided by operating activities .................... 33,446 36,642 19,425
--------- --------- ---------
Cash Flows from Investing Activities
Net proceeds from sales of discontinued operations (Note 3) ........ 154,691 (2,140) 2,401
Capital expenditures ............................................... (20,117) (10,988) (9,219)
Business combinations, net of cash acquired (Note 2) ............... (14,669) (9,668) (3,957)
Proceeds from sales of investments ................................. 14,060 42,501 32,437
Investing activities of discontinued operations .................... (6,792) (8,148) 125
Purchase of Roto-Rooter minority interest .......................... (2,734) (96,247) --
Other--net ......................................................... 1,514 306 (1,964)
--------- --------- ---------
Net cash provided/(used) by investing activities ............. 125,953 (84,384) 19,823
--------- --------- ---------
Cash Flows from Financing Activities
Repayment of long-term debt (Note 10) .............................. (96,487) (1,240) (1,204)
Proceeds from issuance of long-term debt (Note 10) ................. 35,000 85,000 --
Dividends paid ..................................................... (21,000) (20,440) (20,319)
Prepayment of ESOP debt (Note 10) .................................. (16,201) -- --
Decrease in bank notes and loans payable ........................... (5,000) (20,000) --
Purchases of treasury stock ........................................ -- (3,653) (2,966)
Other--net ......................................................... 1,219 1,700 295
--------- --------- ---------
Net cash provided/(used) by financing activities ............. (102,469) 41,367 (24,194)
--------- --------- ---------
Increase/(decrease) in cash and cash equivalents ......................... 56,930 (6,375) 15,054
Cash and cash equivalents at beginning of year ........................... 14,028 20,403 5,349
--------- --------- ---------
Cash and cash equivalents at end of year ................................. $ 70,958 $ 14,028 $ 20,403
========= ========= =========
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
19
7
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
Chemed Corporation and Subsidiary Companies
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Unrealized
Appreci-
Treasury Unearned ation on
Capital Paid-in Retained Stock-- Compen- Invest-
Stock Capital Earnings at Cost sation ments Total
- -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 ............... $ 12,369 $138,733 $123,993 $ (71,230) $ (38,486) $ 20,941 $186,320
Net income ............................... -- -- 23,182 -- -- -- 23,182
Dividends paid ($2.06 per share) ......... -- -- (20,319) -- -- -- (20,319)
Increase in unrealized appreciation
on investments (Note 15) .............. -- -- -- -- -- 16,038 16,038
Decrease in unearned compensation
--ESOPs (Note 12) ...................... -- -- -- -- 5,131 -- 5,131
Purchases of treasury stock .............. -- -- -- (2,966) -- -- (2,966)
Stock awards and exercise
of stock options (Note 16) ............ 229 6,972 -- (5,800) -- -- 1,401
Other .................................... -- (415) 285 -- -- -- (130)
-------- -------- -------- -------- -------- -------- --------
Balance, December 31, 1995 ......... 12,598 145,290 127,141 (79,996) (33,355) 36,979 208,657
Net income ............................... -- -- 32,328 -- -- -- 32,328
Dividends paid ($2.08 per share) ......... -- -- (20,440) -- -- -- (20,440)
Decrease in unrealized appreciation
on investments (Note 15) .............. -- -- -- -- -- (10,917) (10,917)
Decrease in unearned compensation
--ESOPs (Note 12) ...................... -- -- -- -- 5,801 -- 5,801
Reclassification of employee
benefit trust assets .................. -- -- -- 5,085 -- -- 5,085
Purchases of treasury stock .............. -- -- -- (3,653) -- -- (3,653)
Stock awards and exercise
of stock options (Note 16) ............ 170 5,382 -- (4,379) -- -- 1,173
Other -- (376) 233 -- -- -- (143)
-------- -------- -------- -------- -------- -------- --------
Balance, December 31, 1996 ......... 12,768 150,296 139,262 (82,943) (27,554) 26,062 217,891
Net income ............................... -- -- 30,237 -- -- -- 30,237
Dividends paid ($2.09 per share) ......... -- -- (21,000) -- -- -- (21,000)
Decrease in unrealized appreciation
on investments (Note 15) .............. -- -- -- -- -- (6,105) (6,105)
Decrease in unearned compensation
--ESOPs (Note 12) ...................... -- -- -- -- 5,788 -- 5,788
Stock awards and exercise
of stock options (Note 16) ............ 252 8,558 -- (5,120) (2,193) -- 1,497
Other .................................... -- (369) 181 -- -- -- (188)
-------- -------- -------- -------- -------- -------- --------
Balance, December 31, 1997 ......... $ 13,020 $158,485 $148,680 $(88,063) $(23,959) $ 19,957 $228,120
======== ======== ======== ======== ======== ======== ========
The Statement of Accounting Policies and the accompanying Notes to Financial
Statements are integral parts of this statement.
20
8
NOTES TO FINANCIAL STATEMENTS
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
1. SEGMENTS AND NATURE OF THE BUSINESS
Chemed is a diversified public corporation with strategic positions in
plumbing, drain cleaning, and heating, ventilating and air conditioning ("HVAC")
services (Roto-Rooter); home healthcare services (Patient Care); and residential
appliance and air conditioning repair services (Service America). Relative
contributions to operating profit are 66%, 21%, and 13% in 1997, respectively.
During 1997, the Company redefined its reportable segments to present Service
America as a separate segment since it is no longer managed as a part of the
Roto-Rooter Group. All prior years' segment data have been reclassified to
reflect this change.
The business segments are defined as follows:
- The Roto-Rooter segment includes the combined operations of the
Roto-Rooter Group ("Roto-Rooter"), a group of wholly owned businesses that
provide repair and maintenance services to residential and commercial accounts.
Such services include sewer, drain and pipe cleaning, plumbing and HVAC services
and are delivered through both company-owned and franchised locations.
Roto-Rooter also manufactures and sells certain products and equipment used to
provide such services.
- The Patient Care segment includes the consolidated operations of the
wholly owned businesses comprising the Company's Patient Care Group ("Patient
Care"), which offers complete, professional home-healthcare services primarily
in the New York-New Jersey-Connecticut area. Services provided to patients at
home include skilled nursing; home health aid; physical, speech, respiratory and
occupational therapies; medical social work; nutrition; and other specialized
services.
- The Service America segment includes the consolidated operations of the
wholly owned businesses comprising the Company's Service America Systems Group
("Service America"). The group provides HVAC and appliance repair and
maintenance services primarily to residential customers through service
contracts and retail sales. In addition, Service America sells air conditioning
equipment and duct cleaning services.
Substantially all of the Company's sales and service revenues from
continuing operations are generated from business within the United States.
Within the Patient Care segment, one customer's balance at December 31, 1997,
accounts for approximately 10% of the Company's consolidated accounts receivable
balance. In addition, substantially all of that segment's accounts receivable at
December 31, 1997 ($27.6 million), are due from customers located in the
northeastern United States.
Management closely monitors accounts receivable balances and has
established policies regarding the extension of credit and compliance therewith.
The Patient Care segment historically has experienced a relatively low level of
losses on the collection of its receivables.
Approximately 37% of Patient Care's net revenues are derived from services
provided directly to patients with coverage under the federal government's
Medicare program or under joint federal-and-state-sponsored Medicaid programs.
In addition, 45% of Patient Care's revenues arise from contractual arrangements
with other certified home-health agencies to provide services to recipients
under these entitlement programs.
Financial data by business segment are shown on pages 30, 31 and 34 of this
annual report. The segment data for 1997, 1996 and 1995 are integral parts of
these financial statements.
2. BUSINESS COMBINATIONS
During 1997, 12 business combinations were completed within the Patient
Care and Roto-Rooter segments for aggregate purchase prices of $12,698,000 in
cash. The Patient Care acquisition is a home healthcare provider and the
Roto-Rooter acquisitions are primarily in the business of providing plumbing
repair, HVAC and drain cleaning services.
Effective September 1, 1996, the Company acquired all of the outstanding
shares of Roto-Rooter Inc. it did not already own (approximately 2,261,000
shares) for $41 per share in cash. As a result, the Company's ownership interest
in Roto-Rooter increased from 58% to 100%. The aggregate estimated purchase
price of $102,100,000, including acquisition-related expenses, represents a
premium of $67,900,000 (goodwill) over the fair value of the net assets
acquired.
During 1996, six business combinations were completed within the
Roto-Rooter and Patient Care segments for aggregate purchase prices of
$3,642,000 in cash. Also during 1995, five business combinations were completed
in the Roto-Rooter segment for aggregate purchase prices of $2,490,000 in cash.
Other than the impact on sales and service revenues, the results of
businesses acquired in 1997 were not material to the Company's results of
operations. Unaudited pro forma sales and service revenues, assuming the
businesses acquired in 1997 had been acquired effective January 1, 1996, total
$354,484,000 and $331,772,000 for 1997 and 1996, respectively. The results of
business combinations completed in 1996 and 1995 were not material to the
Company's results of operations.
21
9
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
The following data present the unaudited pro forma consolidated results of
the Company, assuming the 42% minority interest in Roto-Rooter had been acquired
on January 1 of each period presented (in thousands, except per share data):
For the Years Ended
December 31,
-------------------
1996 1995
------- -------
Income from continuing operations $25,170 $10,751
Net income 32,381 22,218
Earnings per share:
Income from
continuing operations 2.57 1.09
Net income 3.30 2.26
Diluted earnings per share:
Income from
continuing operations 2.54 1.08
Net income 3.27 2.23
The excess of the purchase price over the fair value of the net assets
acquired in business combinations is classified as goodwill. A summary of net
assets acquired in business combinations by the Company's continuing
operations, all of which have been recorded under purchase accounting rules,
follows (in thousands):
December 31,
--------------------------------
1997 1996 1995
-------- -------- --------
Working capital $ 2,961 $ 4,292 $ (3,366)
Identifiable intangible
assets 1,105 246 869
Goodwill 11,449 3,243 3,864
Other assets and
liabilities--net (827) 1,901 4,693
-------- -------- --------
Total net assets 14,688 9,682 6,060
Less--cash and
cash equivalents
acquired (19) (14) (103)
--present value
of deferred
payments -- -- (2,000)
-------- -------- --------
Net cash used $14,669 $ 9,668 $ 3,957
======== ======== ========
3. DISCONTINUED OPERATIONS
Effective September 20, 1997, the Company sold all of the wholly owned
businesses comprising The Omnia Group ("Omnia") to Banta Corporation for $50.7
million in cash plus deferred payments with a present value of $1.5 million. The
Company recognized a loss of $19.2 million (net of income tax benefit of $1.2
million) on the sale of Omnia. Significant operating data related to Omnia are
presented below (in thousands):
For the Years Ended
December 31,
--------------------------------
1997 1996 1995
-------- -------- --------
Sales and service
revenues $49,754 $72,479 $87,803
======== ======== ========
Income before
income taxes $ 2,977 $ 3,460 $ 6,312
Income taxes (1,172) (1,031) (2,435)
-------- -------- --------
Net income $ 1,805 $ 2,429 $ 3,877
======== ======== ========
On September 30, 1997, Chemed's 81%-owned subsidiary, National Sanitary
Supply Company ("National"), was merged with TFBD Inc., a wholly owned
subsidiary of Unisource Worldwide Inc. ("Unisource"). In exchange for its
ownership interest in National, Chemed received $120.2 million in cash. In
addition, Unisource repaid approximately $18.1 million of intercompany
borrowings owed to Chemed by National. The Company recognized a gain of $28.7
million (net of income tax of $32.4 million) on the sale of National.
Significant operating data related to National are presented below (in
thousands):
For the Years Ended
December 31,
-------------------------------------
1997 1996 1995
---------- --------- ---------
Sales and service
revenues $235,301 $310,125 $340,913
========== ========= =========
Income before
income taxes $ 2,542 $ 8,642 $ 9,819
Income taxes (997) (3,633) (4,074)
Minority interest (281) (827) (898)
---------- --------- ---------
Net income $ 1,264 $ 4,182 $ 4,847
========== ========= =========
22
10
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
Discontinued operations, as shown in the accompanying Consolidated
Statement of Income, comprise the following (in thousands):
For the Years Ended
December 31,
--------------------------------
1997 1996 1995
-------- -------- --------
Net gain on sale
of operations
discontinued in 1997 $ 9,493 $ -- $ --
Income from operations
discontinued in 1997 3,069 6,611 8,724
Adjustments relating to
the settlement of tax
issues arising from
the sale of operations
discontinued in 1994 598 -- --
Accrual adjustments
relating to operations
discontinued in 1991 -- 600 2,743
-------- -------- --------
Total discontinued
operations $13,160 $ 7,211 $11,467
======== ======== ========
The assets and liabilities of Omnia and National have also been
reclassified in the Consolidated Balance Sheet as net assets of discontinued
operations. The components of net assets of discontinued operations at December
31, 1996, comprise the following (in thousands):
Current assets $ 95,077
Properties and equipment, at cost
less accumulated depreciation 42,597
Goodwill less accumulated amortization 48,730
Other assets 5,815
Current liabilities (36,290)
Deferred income taxes (3,675)
Other liabilities (1,296)
Minority interest (10,820)
----------
Net assets of discontinued operations $140,138
==========
4. OTHER INCOME--NET
Other income--net of continuing operations comprises the following (in
thousands):
For the Years Ended
December 31,
--------------------------------
1997 1996 1995
-------- -------- --------
Gain on sales of
investments $12,235 $28,166 $ 9,078
Interest income 3,687 4,505 6,353
Dividend income 2,920 3,110 3,190
Other--net 109 288 --
-------- -------- --------
Total other income
--net $18,951 $36,069 $18,621
======== ======== ========
5. INCOME TAXES
The provision for income taxes comprises the following (in thousands):
For the Years Ended
December 31,
--------------------------------
1997 1996 1995
-------- -------- --------
Continuing operations:
Current
U.S. federal $ 9,752 $17,927 $ 8,873
U.S. state and local 1,985 1,826 1,165
Foreign 245 156 (17)
Deferred
U.S. federal (971) (2,710) (940)
Foreign (207) 3 24
-------- -------- --------
Total $10,804 $17,202 $ 9,105
======== ======== ========
Discontinued operations:
Current
U.S. federal $26,853 $ 4,127 $ 7,860
U.S. state and local 5,807 (265) (3,116)
Deferred U.S. federal (54) (136) (978)
-------- -------- --------
Total $32,606 $ 3,726 $ 3,766
======== ======== ========
23
11
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
A summary of the significant temporary differences that give rise to
deferred income tax assets/(liabilities) follows (in thousands):
December 31,
-------------------
1997 1996
-------- -------
Accruals related to
discontinued operations $ 8,005 $ 7,123
Accrued insurance expense 4,903 4,475
Deferred compensation 4,577 3,758
Amortization of intangibles 2,441 2,735
Severance payments 2,123 2,674
Other 4,866 4,376
-------- -------
Gross deferred income
tax assets 26,915 25,141
-------- -------
Market valuation of investments (10,743) (14,034)
Accelerated tax depreciation (4,572) (4,573)
Cash to accrual adjustments (1,470) (1,305)
Investment basis difference (359) (1,132)
Other (1,328) (1,558)
-------- -------
Gross deferred income
tax liabilities (18,472) (22,602)
-------- -------
Net deferred income
tax assets $ 8,443 $ 2,539
======== =======
Based on the Company's history of prior operating earnings and its
expectations for future growth, management has determined that the operating
income of the Company will, more likely than not, be sufficient to ensure the
full realization of the deferred income tax assets.
Included in other current assets at December 31, 1997, are deferred income
tax assets of $8,076,000 (December 31, 1996--$5,513,000). Included in other
assets at December 31, 1997, are deferred tax assets of $367,000.
The difference between the effective tax rate for continuing operations and
the statutory U.S. federal income tax rate is explained as follows:
For the Years Ended
December 31,
---------------------------
1997 1996 1995
----- ---- ----
Statutory U.S. federal
income tax rate 35.0% 35.0% 35.0%
Nondeductible amortization
of goodwill 5.0 2.1 3.2
State and local income taxes,
less federal income tax
benefit 4.6 2.6 3.1
Domestic dividend exclusion (2.6) (1.6) (2.9)
Tax benefit on dividends
paid to ESOPs (2.6) (1.5) (2.6)
Other--net (.6) 1.4 .9
----- ---- ----
Effective tax rate 38.8% 38.0% 36.7%
===== ==== ====
The total amount of income taxes paid during the year ended December 31,
1997, was $36,849,000 (1996--$26,513,000; 1995--$18,253,000).
6. CASH EQUIVALENTS
Included in cash and cash equivalents at December 31, 1997, are cash
equivalents in the amount of $69,479,000 (1996--$11,122,000). The cash
equivalents at both dates consist of investments in various money market funds
and repurchase agreements yielding interest at a weighted average rate of 5.9%
in 1997 and 5.2% in 1996.
From time to time throughout the year, the Company invests its excess cash
in repurchase agreements directly with major commercial banks. The collateral is
not physically held by the Company, but the term of such repurchase agreements
is less than 10 days. Investments of significant amounts are spread among a
number of banks, and the amounts invested in each bank are varied constantly.
7. INVENTORIES
A summary of inventories of continuing operations follows (in thousands):
December 31,
------------------
1997 1996
------- ------
Raw materials $ 709 $ 720
Finished goods and general
merchandise 8,034 7,630
------- ------
Total inventories $8,743 $8,350
======= ======
8. PROPERTIES AND EQUIPMENT
A summary of properties and equipment of continuing operations follows (in
thousands):
December 31,
--------------------
1997 1996
--------- --------
Land $ 2,449 $ 2,074
Buildings 16,033 13,117
Transportation equipment 25,138 17,784
Machinery and equipment 20,728 17,168
Furniture and fixtures 20,248 16,870
Projects under construction 4,672 2,836
--------- --------
Total properties
and equipment 89,268 69,849
Less accumulated depreciation (36,179) (29,188)
--------- --------
Net properties
and equipment $53,089 $40,661
========= ========
24
12
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
9. BANK NOTES AND LOANS PAYABLE
At December 31, 1996, the Company had $5,000,000 of borrowings outstanding
under an uncommitted line of credit with Sanwa Bank Ltd. In addition, the
Company had approximately $34,153,000 of unused lines of credit with various
banks at December 31, 1997.
The Company's short-term borrowings provide temporary capital for
operations. There are no restrictions on any cash balances maintained at the
banks. The weighted average interest rate on short-term borrowings at December
31, 1996, was 6.2%.
10. LONG-TERM DEBT
A summary of the Company's long-term debt follows (in thousands):
December 31,
----------------------
1997 1996
--------- --------
Senior notes:
8.15%, due 2000 - 2004 $ 50,000 $ 50,000
7.31%, due 2005 - 2009 25,000 --
10.67%, due 1997 - 2003 6,000 7,000
Revolving credit:
6.00%, due 2001 -- 85,000
Employee Stock Ownership
Plans loan guarantees:
7.17% (1996--6.83%),
due 1997 - 2000 5,565 27,554
Other 2,468 1,112
--------- --------
Subtotal 89,033 170,666
Less current portion (5,313) (12,526)
--------- --------
Long-term debt, less
current portion $ 83,720 $158,140
========= ========
Revolving Credit Agreement
In June 1996, the Company entered into an amended revolving credit
agreement with Bank of America National Trust and Savings Association to borrow
up to $85,000,000 at any time during the five-year period ending June 20, 2001.
Unpaid principal is due on June 20, 2001. The interest rate is based on various
stipulated market rates of interest.
Senior Notes
In March 1997, the Company borrowed $25,000,000 from several insurance
companies. Principal is repayable in five annual installments of $5,000,000
beginning on March 15, 2005, and bears interest at the rate of 7.31% per annum.
Interest is payable on March 15 and September 15 of each year.
In December 1992, the Company borrowed $50,000,000 from several insurance
companies. Principal is repayable in five annual installments of $10,000,000
beginning on December 15, 2000, and bears interest at the rate of 8.15% per
annum. Interest is payable on June 15 and December 15 of each year.
In November 1988, the Company borrowed $31,000,000 from a consortium of
insurance companies. Of this amount, $21,000,000 was due and paid on November 1,
1993, and annual installments of $1,000,000 were due and paid November 1, 1994
through 1997. The remaining $6,000,000 bears interest at the rate of 10.67% with
annual principal payments of $1,000,000 due on November 1, 1998 through 2003.
Interest is payable on May 1 and November 1 of each year.
Employee Stock Ownership Plans ("ESOPs")
Loan Guarantees
The Company has guaranteed ESOP loans made by various institutional
lenders. Payments by the ESOPs, including both principal and interest, are to be
made in quarterly installments over the next three years, the final payments
being due on June 30, 2000. The loans, secured in part by the unallocated shares
of the Company's capital stock held by the ESOP trusts, currently bear interest
at an average annual rate of 7.17% (1996--6.83%). Such rates are subject to
adjustments for changes in interest rates of specified U.S. Treasury
obligations, U.S. federal statutory income tax rates and certain federal tax law
changes.
The market value of the unallocated shares of the Company's capital stock
held by the ESOPs at December 31, 1997, based on that day's closing price of
$41.44 was $18,742,000 as compared with aggregate loan guarantees of $5,565,000.
Other
Other long-term debt has arisen from debt incurred in connection with
various acquisitions. Interest rates range from 6% to 8%, and the obligations
are due on various dates through 2009.
The following is a schedule by year of required long-term debt payments as
of December 31, 1997 (in thousands):
1998 $ 5,313
1999 3,344
2000 11,811
2001 11,228
2002 11,080
After 2002 46,257
--------
Total long-term debt $89,033
========
25
13
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
The various loan agreements contain certain covenants which could restrict
the amount of cash dividend payments, treasury stock purchases and certain other
transactions of the Company. Under the most restrictive of these covenants
(i.e., the interest coverage ratio for the most recent four quarters), the
Company estimates that it is limited to taking on additional debt during 1998
ranging from $3.5 million in the first quarter to between $31 and $50 million in
the fourth quarter. In addition, the Company cannot permit its net worth to fall
below $146.2 million and is limited to incurring additional annual net rentals
under operating leases with terms of three years or more aggregating $9.1
million. Also, the Company must maintain an interest coverage ratio of at least
3.0. At December 31, 1997, the Company's interest coverage ratio was 3.0.
The total amount of interest paid during the year ended December 31, 1997,
was $9,949,000 (1996--$10,705,000; 1995--$7,972,000).
11. OTHER LIABILITIES
At December 31, 1997, other current liabilities of continuing operations
included accrued insurance liabilities of $14,143,000 and accrued wages of
$6,014,000 (1996--$12,315,000 and $5,082,000, respectively).
Included in other liabilities at December 31, 1997,
is an accrual of $7,242,000 for the Company's estimated liability for potential
environmental cleanup and related costs arising from the sale of DuBois
Chemicals Inc. ("DuBois") in April 1991. The Company is contingently liable for
additional DuBois-related environmental cleanup and related costs up to a
maximum of $14,665,000. On the basis of a continuing evaluation of the Company's
potential liability by the Company's environmental adviser, management believes
that it is not probable this additional liability will be paid. Accordingly, no
provision for this contingent liability has been recorded. Although it is not
presently possible to reliably project the timing of payments related to the
Company's potential liability for environmental costs, management believes that
any adjustments to its recorded liability will not materially adversely affect
its financial position or results of operations.
12. PENSION AND RETIREMENT PLANS
Retirement obligations under various plans cover substantially all
full-time employees who meet age and/or service eligibility requirements. The
major plans providing retirement benefits to the Company's employees are defined
contribution plans.
The Company has established two ESOPs which purchased a total of
$56,000,000 of the Company's capital stock. Until December 1997, the ESOPs were
financed by loans from banks and insurance companies, and payment was guaranteed
by the Company. Due to the sales of Omnia and National in 1997, the Company
decided to restructure the ESOPs and internally financed approximately $16.2
million of the $21.8 million ESOP loans outstanding at December 31, 1997. Prior
to September 30, 1997, substantially all Chemed headquarters and Omnia employees
and substantially all employees of National Sanitary Supply, not covered by
collective bargaining agreements, were participants in the ESOPs. Beginning
January 1, 1998, eligible employees of Roto-Rooter will participate in the ESOPs
with Chemed headquarters employees. During 1997 and prior years, eligible
employees of Roto-Rooter and Patient Care were covered by other defined
contribution plans.
Expenses charged to continuing operations for the Company's pension and
profit-sharing plans, ESOPs, excess benefit plans and other similar plans
comprise the following (in thousands):
For the Years Ended
December 31,
----------------------------
1997 1996 1995
------- ------ ------
ESOPs:
Interest expense $ 336 $ 216 $ 307
Compensation cost 1,426 1,527 1,583
Pension, profit-sharing
and other similar plans 3,152 3,216 2,431
------ ------ ------
Total $4,914 $4,959 $4,321
====== ====== ======
Dividends on ESOP shares
used for debt service $2,570 $2,676 $2,758
====== ====== ======
At December 31, 1997, there were 754,629 allocated shares (December 31,
1996--668,471 shares) and 452,281 unallocated shares (December 31, 1996--598,611
shares) in the ESOP trusts.
26
14
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
The Company has a directors' deferred compensation plan and an excess
benefit plan for key employees whose participation in the ESOPs is limited by
ERISA rules. Benefits are denominated in shares of the Company's stock. The
value of these benefits is invested in shares of the Company's stock and in
mutual funds, which are held by grantor trusts. The trusts' assets are included
in other assets, and the corresponding liability is included in other
liabilities. At December 31, 1997, these trusts held 151,489 shares of the
Company's stock (December 31, 1996--145,453 shares) and mutual fund investments
with a market value of approximately $187,000.
13. LEASE ARRANGEMENTS
The Company, as lessee, has operating leases which cover its corporate
office headquarters; various plant, warehouse and office facilities; office
equipment; and transportation equipment. The remaining terms of these leases
range from one year to 10 years, and in most cases, management expects that
these leases will be renewed or replaced by other leases in the normal course of
business. All major plants and warehouses and substantially all equipment are
owned by the Company.
The following is a summary of future minimum rental payments and sublease
rentals to be received under operating leases that have initial or remaining
noncancelable terms in excess of one year at December 31, 1997 (in thousands):
1998 $ 8,320
1999 7,244
2000 6,319
2001 5,571
2002 4,901
After 2002 16,032
--------
Total minimum rental payments 48,387
Less minimum sublease rentals (8,017)
--------
Net minimum rental payments $40,370
========
Total rental expense incurred under operating leases for continuing
operations follows (in thousands):
For the Years Ended
December 31,
---------------------------
1997 1996 1995
------- ------- -------
Total rental payments $9,993 $8,690 $7,563
Less sublease rentals (2,426) (3,881) (3,554)
------- ------- -------
Net rental expense $7,567 $4,809 $4,009
======= ======= =======
14. EARNINGS PER SHARE
Diluted earnings per share were calculated as follows (in thousands, except
per share data):
Income from Continuing Operations Net Income
------------------------------------- ---------------------------------------
Income Shares Income Income Shares Income
For the Years Ended December 31, (Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
- -------------------------------- ---------- ------------- -------- ---------- ------------- ---------
1997
Earnings per share $17,077 9,940 $1.72 $30,237 9,940 $3.04
====== =====
Nonvested stock awards -- 34 -- 34
Dilutive stock options -- 40 -- 40
Subsidiary stock options -- -- (10) --
-------- -------- -------- --------
Diluted earnings per share $17,077 10,014 $1.71 $30,227 10,014 $3.02
======== ======== ====== ======== ======== =====
1996
Earnings per share $25,117 9,801 $2.56 $32,328 9,801 $3.30
===== =====
Nonvested stock awards -- 19 -- 19
Dilutive stock options -- 59 -- 59
Subsidiary stock options (48) -- (99) --
-------- -------- -------- --------
Diluted earnings per share $25,069 9,879 $2.54 $32,229 9,879 $3.26
======== ======== ===== ======== ======== =====
1995
Earnings per share $11,715 9,830 $1.19 $23,182 9,830 $2.36
===== =====
Nonvested stock awards -- 18 -- 18
Dilutive stock options -- 50 -- 50
Subsidiary stock options (57) -- (119) --
-------- -------- -------- --------
Diluted earnings per share $11,658 9,898 $1.18 $23,063 9,898 $2.33
======== ======== ===== ======== ======== =====
27
15
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
Earnings per share from discontinued operations were $1.32, $.74 and $1.17
in 1997, 1996 and 1995, respectively. Similarly, diluted earnings per share from
discontinued operations were $1.31, $.72 and $1.15, respectively.
During 1995 and 1997, all stock options outstanding were dilutive at some
time during the year. Options to purchase shares of capital stock at $38.75 per
share were outstanding during the last seven months of 1996, but were excluded
from the computation of diluted earnings per share because the options' exercise
price was greater than the average market price of the shares. At December 31,
1997, 172,050 of these options were outstanding.
15. FINANCIAL INSTRUMENTS
The following methods and assumptions are used in estimating the fair value
of each class of the Company's financial instruments:
- For cash and cash equivalents, accounts receivable, statutory deposits
and accounts payable, the carrying amount is a reasonable estimate of fair value
because of the liquidity and short-term nature of these instruments.
- For other investments and other assets, fair value is based upon quoted
market prices for these or similar securities, if available. Included in other
investments is the noncurrent portion of the Company's investment in privately
held Vitas Healthcare Corporation ("Vitas"), which provides noncurative care to
chronically ill patients. Since it is not considered practicable to obtain an
appraisal of the value of Vitas Common Stock Purchase Warrants, it has been
assumed that the market value of the Vitas warrants is equal to book value at
December 31, 1997, and December 31, 1996 ($1,500,000). The value of the Vitas 9%
Cumulative Preferred Stock is based on the present value of the mandatory
redemption payments, using an interest rate of 9% (1996--15%), rates which
management believes are reasonable in view of risk factors attendant to the
investment.
- The fair value of the Company's long-term debt is estimated by
discounting the future cash outlays associated with each debt instrument using
interest rates currently available to the Company for debt issues with similar
terms and remaining maturities.
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
Carrying Fair
December 31, Amount Value
- ----------------------------- --------- ---------
1997
Other investments(a) $ 67,542 $ 67,542
Long-term debt 89,033 90,880
1996
Other investments(a) 78,541 78,541
Long-term debt 170,666 172,184
(a) Amounts for 1997 include $27,136,000 representing the current portion
of Vitas preferred stock, which is recorded in current assets on the balance
sheet (1996--$16,443,000).
The Company has classified its investments in equity securities and certain
debt securities as available-for-sale. Investments included in cash equivalents
are considered to be trading securities.
Disclosures regarding the Company's investments, all of which are equity
securities classified as available-for-sale, are summarized below (in
thousands):
December 31,
--------------------
1997 1996
--------- --------
Aggregate fair value $67,542 $78,541
Gross unrealized holding gains 30,705 41,422
Gross unrealized holding losses -- 1,326
Amortized cost 36,837 38,445
The chart below summarizes information with respect to available-for-sale
securities sold during the period (in thousands):
For the Years Ended
December 31,
--------------------------------
1997 1996 1995
-------- -------- --------
Proceeds from sale $14,060 $42,501 $32,437
Gross realized gains 12,248 28,188 9,088
Gross realized losses 13 22 10
Included in other investments at December 31, 1996, is the noncurrent
portion of the Company's investment in Vitas mandatorily redeemable preferred
stock with a fair value of $9,150,000 at December 31, 1996.
16. STOCK INCENTIVE PLANS
The Company has eight Stock Incentive Plans under which 3,150,000 shares of
Chemed Capital Stock are issued to key employees pursuant to the grant of stock
awards and/or options to purchase such shares. All options granted under these
plans provide for a purchase price equal to the market value of the stock at the
date of grant. The latest plan, covering 500,000 shares, was adopted in May
1997.
28
16
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
Under the plan adopted in 1983, both nonstatutory and incentive stock
options have been granted. Incentive stock options granted under the 1983 plan
become exercisable in full six months following the date of the grant;
nonstatutory options granted under the 1983 plan become exercisable in four
annual installments commencing six months after the date of grant.
The other plans are not qualified, restricted or incentive stock option
plans under the Internal Revenue Code. Options generally become exercisable six
months following the date of grant in either three or four equal annual
installments.
Data relating to the Company's stock issued to employees follow:
1997 1996 1995
------------------- ------------------- -------------------
Number Number Number
of Average of Average of Average
Shares Price Shares Price Shares Price
------- -------- ------- -------- ------- --------
Stock options:
Outstanding at January 1 . 644,025 $ 33.70 627,666 $ 31.05 553,472 $ 29.38
Granted .................. 212,800 35.94 180,900 38.74 291,650 32.57
Exercised ................ (166,712) 31.45 (148,903) 28.61 (208,668) 28.77
Forfeited ................ (10,100) 34.94 (14,888) 33.96 (7,738) 30.81
Expired .................. -- -- (750) 36.38 (1,050) 31.81
-------- -------- --------
Outstanding at December 31 680,013 34.93 644,025 33.70 627,666 31.05
======== ======== ========
Exercisable at December 31 369,279 34.03 320,467 32.34 325,385 30.03
======== ======== ========
Stock awards issued ......... 86,149 35.48 20,791 39.63 20,538 33.55
======== ======== ========
The weighted average contractual life of options outstanding at December
31, 1997, was 8.0 years. The range of exercise prices for these options was from
$21.94 to $38.75. At December 31, 1997, there were 326,778 shares available for
granting of stock options and awards.
Total compensation cost recognized for stock awards for continuing
operations, including awards granted by Roto-Rooter Inc. (58% owned prior to
September 1996), was $886,000 in 1997 (1996--$1,106,000; 1995--$970,000). The
shares of capital stock were issued to key employees and directors at no cost
and generally are restricted as to the transfer of ownership. Restrictions
covering between 7% and 33% of each holder's shares lapse annually.
Summarized below are the pro forma results of operations of Chemed assuming
the provisions of the fair-value-based method of valuing stock options,
described in Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, had been applied to options granted in 1995, 1996 and
1997 (in thousands, except per share data):
For the Years Ended
December 31,
--------------------------------
1997 1996 1995
-------- -------- --------
Net income $29,802 $31,887 $22,931
Earnings per share 3.00 3.25 2.33
Diluted earnings per share 2.98 3.22 2.30
Per share average fair value
of options granted 5.74 6.93 5.31
In view of the fact that the fair value method of accounting is applied to
option grants issued only during 1995, 1996 and 1997, the preceding pro forma
data do not reflect the full impact of applying such fair value method to
Chemed's stock options.
The fair values of employee stock options were estimated using the
Black-Scholes option pricing model and following key assumptions:
For the Years Ended
December 31,
--------------------------
1997 1996 1995
----- ---- ----
Average risk-free interest rate 6.6% 6.5% 7.1%
Expected volatility 21.4 22.3 22.5
It has been assumed that the options have an expected life of six years.
For the 1997 computations, it was assumed that the annual dividend was increased
$.01 per share per quarter in the fourth quarter of every other year beginning
in 1999. For the 1996 and 1995 computations, it was assumed that the dividend
was increased $.01 per share per quarter in the third quarter of every other
year beginning in 1997. These assumptions should not be construed to be an
indication of future dividend amounts to be paid.
29
17
Sales and Profit Statistics by Business Segment(a)
Chemed Corporation and Subsidiary Companies
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands, except percentages and footnote data)
% of % of
Total Total
1997 1991 1997
- ---------------------------------------------------------------------------------------------------------------------------
Sales and Service Revenues from Continuing Operations(b)
Roto-Rooter ............................................................. 45% 93% $153,883
Patient Care ............................................................ 35 --- 121,143(d)
Service America ......................................................... 20 7 66,703
----- --- ----------
Total ................................................................ 100% 100% $341,729
===== ==== ==========
Operating Profit from Continuing Operations(c)
Roto-Rooter ............................................................. 66% 93% $ 17,989
Patient Care ............................................................ 21 --- 5,580(d)
Service America ......................................................... 13 7 3,643
----- ----- ----------
Total ................................................................ 100% 100% $ 27,212
===== ===== ==========
(a) The data are presented on a continuing operations basis, thus excluding The
Omnia Group and National Sanitary Supply Company, both sold in 1997, and DuBois
Chemicals Inc., sold in 1991. The data for 1997, 1996 and 1995 are covered by
the report of independent accountants.
(b) Intersegment sales are not material. Total sales by segment consist of sales
and services to unaffiliated companies.
(c) Operating profit is total sales and service revenues less operating expenses
and includes 100% of all consolidated operations. In computing operating profit,
none of the following items has been added or deducted: general corporate
expenses, interest expense, and other income--net.
30
18
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
$140,163 $121,999 $109,098 $ 95,555 $ 86,185 $ 79,217
99,565 90,727 69,064(d) -- -- --
61,485 57,723 62,832 40,873(d) 18,503 5,557(d)
--------- --------- --------- --------- --------- ---------
$301,213 $270,449 $240,994 $136,428 $104,688 $ 84,774
========= ========= ========= ========= ========= =========
$ 16,387 $ 13,786(e) $ 12,698 $ 10,463 $ 9,220 $ 7,918
5,632 4,989 2,790(d) -- -- --
2,728 2,122 3,269 3,908(d) 2,033 581(d)
--------- --------- --------- --------- --------- ---------
$ 24,747 $ 20,897 $ 18,757 $ 14,371 $ 11,253 $ 8,499
========= ========= ========= ========= ========= =========
(d) The following significant business combinations, all in the United States,
have been accounted for as purchase transactions:
Amounts Reported
in Year Acquired
--------------------------------
Business Effective Date Sales and Operating
Name Segment of Acquisition Service Revenues Profit
----------- -------- -------------- ---------------- ----------
Priority Care Inc. Patient Care April 1997 $16,262,000 $1,269,000
Patient Care Inc. Patient Care January 1994 69,064,000 2,790,000
Service America Network Inc. Service America July 1993 18,576,000 784,000
Service America Systems Inc. Service America August 1991 5,557,000 581,000
(e) Amount includes nonrecurring charges of $538,000 incurred as a result of
discussions related to Chemed's proposal to acquire the 42% minority interest in
Roto-Rooter.
31
19
SELECTED FINANCIAL DATA
Chemed Corporation and Subsidiary Companies
- --------------------------------------------------------------------------------------------
(in thousands, except per share data, employee numbers,
ratios and percentages)
1997 1996
- --------------------------------------------------------------------------------------------
Summary of Operations
Continuing operations
Total sales and service revenues ........................... $341,729 $301,213
Gross profit ............................................... 129,082 118,440
Depreciation ............................................... 8,622 7,353
Income from operations ..................................... 19,482 17,481
Income from continuing operations .......................... 17,077 25,117
Discontinued operations(a) .................................... 13,160 7,211
Cumulative effect of a change in accounting principle ......... -- --
Net income .................................................... 30,237 32,328
Earnings per common share:
Income from continuing operations .......................... $ 1.72 $ 2.56
Net income ................................................. 3.04 3.30
Average number of shares outstanding ....................... 9,940 9,801
Diluted earnings per common share:
Income from continuing operations .......................... $ 1.71 $ 2.54
Net income ................................................. 3.02 3.26
Average number of shares outstanding ....................... 10,014 9,879
Cash dividends per share ...................................... $ 2.09 $ 2.08
Financial Position--Year-End
Cash, cash equivalents and marketable securities .............. $ 70,958 $ 14,028
Working capital ............................................... 83,103 8,996
Properties and equipment, at cost less accumulated depreciation 53,089 40,661
Total assets .................................................. 448,838 509,361
Long-term debt ................................................ 83,720 158,140
Stockholders' equity .......................................... 228,120 217,891
Book value per share .......................................... $ 22.64 $ 21.89
Book value per share assuming dilution ........................ 22.54 21.76
Other Statistics--Continuing Operations
Net cash provided by continuing operations .................... $ 23,747 $ 13,519
Capital expenditures .......................................... 20,117 10,988
Number of employees(b) ........................................ 6,849 5,884
Number of sales and service representatives ................... 5,101 4,315
Dividend payout ratio(c) ...................................... 68.8% 63.0%
Debt to total capital ratio ................................... 28.1 44.6
Return on average equity(c) ................................... 13.8 15.3
Return on average total capital employed(c) ................... 9.8 10.9
Current ratio ................................................. 1.88 1.10
(a) Discontinued operations include National Sanitary Supply Company and The
Omnia Group, discontinued in 1997; accrual adjustments in 1997 related to the
gain on the sale of Omnicare Inc. ("Omnicare"); Omnicare, discontinued in 1994;
accrual adjustments from 1992 through 1996 related to the gain on the sale of
DuBois Chemicals Inc. ("DuBois"); DuBois, sold in 1991; and adjustments to
accruals in 1991 related to operations discontinued in 1986.
(b) Numbers reflect full-time-equivalent employees.
(c) These computations are based on net income and, with respect to return on
average capital employed, various related adjustments.
32
20
- ------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
$270,449 $240,994 $136,428 $104,688 $ 84,774
103,412 90,189 54,325 44,750 39,034
6,505 5,833 3,914 2,854 2,811
14,102 10,703 7,388 4,599 996
11,715 7,027 7,563 8,660 6,788
11,467 36,895 10,266 6,991 46,179
-- -- 1,651 -- --
23,182 43,922 19,480 15,651 52,967
$ 1.19 $ .71 $ .78 $ .89 $ .68
2.36 4.47 2.00 1.60 5.27
9,830 9,830 9,756 9,783 10,043
$ 1.18 $ .70 $ .76 $ .88 $ .67
2.33 4.42 1.97 1.59 5.27
9,898 9,907 9,824 9,838 10,055
$ 2.06 $ 2.04 $ 2.01 $ 2.00 $ 1.97
$ 30,497 $ 24,866 $ 20,133 $ 51,142 $ 82,994
7,159 (14,573) (29,070) 5,574 48,991
37,860 35,677 33,873 26,419 25,951
476,732 453,801 385,922 363,960 330,712
85,317 92,033 97,906 103,580 77,007
208,657 186,320 137,151 133,511 139,407
$ 21.18 $ 18.89 $ 14.00 $ 13.68 $ 14.08
21.06 18.76 13.91 13.62 14.07
$ 5,385 $ 13,378 $ 6,029 $ 8,583 $ 10,828
9,219 9,606 7,420 3,835 7,008
5,278 4,497 2,711 1,726 1,666
3,835 3,203 1,832 1,090 1,069
87.3% 45.6% 101.0% 125.0% 37.4%
32.8 36.6 44.2 45.2 34.8
11.9 28.4 14.3 11.6 42.5
9.3 16.4 9.7 8.7 24.4
1.07 .86 .68 1.08 1.82
33
21
ADDITIONAL SEGMENT DATA(A)
Chemed Corporation and Subsidiary Companies
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
For the Years Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
Identifiable Assets
Roto-Rooter .......................................... $ 148,352 $ 135,437 $ 61,920
Patient Care ......................................... 63,154 47,494 46,211
Service America ...................................... 70,266 72,908 72,971
--------- --------- ---------
Total identifiable assets ......................... 281,772 255,839 181,102
Corporate assets(b) .................................. 167,066 113,384 146,858
Discontinued operations .............................. -- 140,138 148,772
--------- --------- ---------
Total assets ................................... $ 448,838 $ 509,361 $ 476,732
========= ========= =========
Capital Expenditures
Roto-Rooter .......................................... $ 9,257 $ 4,764 $ 4,785
Patient Care ......................................... 2,566 2,484 2,608
Service America ...................................... 6,032 2,156 759
--------- --------- ---------
Subtotal .......................................... 17,855 9,404 8,152
Corporate assets ..................................... 2,262 1,584 1,067
--------- --------- ---------
Total capital expenditures ..................... $ 20,117 $ 10,988 $ 9,219
========= ========= =========
Depreciation and Amortization(c)
Roto-Rooter .......................................... $ 7,387 $ 5,299 $ 4,168
Patient Care ......................................... 1,951 1,609 1,463
Service America ...................................... 3,775 3,533 3,478
--------- --------- ---------
Subtotal .......................................... 13,113 10,441 9,109
Corporate assets ..................................... 2,050 1,337 1,521
--------- --------- ---------
Total depreciation and amortization ............ $ 15,163 $ 11,778 $ 10,630
========= ========= =========
Reconciliation of Operating Profit to Income
Before Income Taxes and Minority Interest
Total operating profit ............................... $ 27,212 $ 24,747 $ 20,897
Interest expense ..................................... (10,552) (8,267) (7,895)
Investment income, net of corporate expenses(d) ...... 11,221 28,803 11,826
--------- --------- ---------
Income before income taxes and minority interest $ 27,881 $ 45,283 $ 24,828
========= ========= =========
(a) The Additional Segment Data are covered by the report of independent
accountants.
(b) Corporate assets consist primarily of cash and cash equivalents, marketable
securities, properties and equipment and other investments.
(c) Depreciation and amortization include amortization of identifiable
intangible assets, goodwill and other assets.
(d) Amounts are not allocable to segments and are included in various
categories in the Consolidated Statement of Income.
34
22
UNAUDITED SUMMARY OF QUARTERLY RESULTS
Chemed Corporation and Subsidiary Companies
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
First Second Third Fourth Total
1997 Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------------------------------------------------
Continuing Operations
Total sales and service revenues ..................... $ 77,657 $ 86,019 $ 87,434 $ 90,619 $ 341,729
========== ========== ========== ========== ==========
Gross profit ......................................... $ 29,634 $ 31,735 $ 33,131 $ 34,582 $ 129,082
========== ========== ========== ========== ==========
Income from operations ............................... $ 4,217 $ 4,617 $ 5,226 $ 5,422 $ 19,482
Interest expense ..................................... (2,637) (2,915) (2,924) (2,076) (10,552)
Other income--net .................................... 10,392 4,482 1,298 2,779 18,951
---------- ---------- ---------- ---------- ----------
Income before income taxes ........................ 11,972 6,184 3,600 6,125 27,881
Income taxes ......................................... (4,595) (2,240) (1,494) (2,475) (10,804)
---------- ---------- ---------- ---------- ----------
Income from continuing operations .................... 7,377 3,944 2,106 3,650 17,077
Discontinued Operations .................................... 1,110 2,348 9,702 -- 13,160
---------- ---------- ---------- ---------- ----------
Net Income ................................................. $ 8,487 $ 6,292 $ 11,808 $ 3,650 $ 30,237
========== ========== ========== ========== ==========
Earnings Per Common Share
Income from continuing operations .................... $ .74 $ .40 $ .21 $ .37 $ 1.72
========== ========== ========== ========== ==========
Net income ........................................... $ .85 $ .63 $ 1.19 $ .37 $ 3.04
========== ========== ========== ========== ==========
Average number of shares outstanding ................. 9,928 9,930 9,937 9,965 9,940
========== ========== ========== ========== ==========
Diluted Earnings Per Common Share
Income from continuing operations .................... $ .74 $ .39 $ .21 $ .36 $ 1.71
========== ========== ========== ========== ==========
Net income ........................................... $ .85 $ .63 $ 1.18 $ .36 $ 3.02
========== ========== ========== ========== ==========
Average number of shares outstanding ................. 9,990 9,988 10,023 10,081 10,014
========== ========== ========== ========== ==========
1996
- ---------------------------------------------------------------------------------------------------------------------------------
Continuing Operations
Total sales and service revenues ..................... $ 71,673 $ 74,991 $ 75,170 $ 79,379 $ 301,213
========== ========== ========== ========== ==========
Gross profit ......................................... $ 27,551 $ 29,629 $ 29,083 $ 32,177 $ 118,440
========== ========== ========== ========== ==========
Income from operations ............................... $ 3,458 $ 4,388 $ 4,645 $ 4,990 $ 17,481
Interest expense ..................................... (1,734) (1,729) (2,069) (2,735) (8,267)
Other income--net .................................... 16,618 5,480 1,914 12,057 36,069
---------- ---------- ---------- ---------- ----------
Income before income taxes and minority interest .. 18,342 8,139 4,490 14,312 45,283
Income taxes ......................................... (6,811) (3,035) (1,801) (5,555) (17,202)
Minority interest in earnings of subsidiary .......... (1,072) (1,171) (721) -- (2,964)
---------- ---------- ---------- ---------- ----------
Income from continuing operations .................... 10,459 3,933 1,968 8,757 25,117
Discontinued Operations .................................... 1,738 1,755 2,496 1,222 7,211
---------- ---------- ---------- ---------- ----------
Net Income ................................................. $ 12,197 $ 5,688 $ 4,464 $ 9,979 $ 32,328
========== ========== ========== ========== ==========
Earnings Per Common Share
Income from continuing operations .................... $ 1.06 $ .40 $ .20 $ .89 $ 2.56
========== ========== ========== ========== ==========
Net income ........................................... $ 1.24 $ .58 $ .46 $ 1.02 $ 3.30
========== ========== ========== ========== ==========
Average number of shares outstanding ................. 9,834 9,802 9,755 9,815 9,801
========== ========== ========== ========== ==========
Diluted Earnings Per Common Share
Income from continuing operations .................... $ 1.05 $ .40 $ .20 $ .89 $ 2.54
========== ========== ========== ========== ==========
Net income ........................................... $ 1.23 $ .57 $ .45 $ 1.01 $ 3.26
========== ========== ========== ========== ==========
Average number of shares outstanding ................. 9,920 9,877 9,833 9,840 9,879
========== ========== ========== ========== ==========
35
23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
Financial Condition
Liquidity and Capital Resources
Significant factors affecting the Company's consolidated cash flows during
1997 and financial position at December 31, 1997, include the following:
- The Company generated nearly $155 million in cash from the sales of
The Omnia Group ("Omnia") and National Sanitary Supply Company
("National Sanitary");
- The Company reduced its debt by $66.5 million (excluding debt of the
ESOPs);
- Operations generated cash of $33.4 million;
- The Company used $16.2 million of cash to restructure its ESOPs and
reduce outside ESOP debt;
- Sales of investments generated cash proceeds of $14.1 million; and
- The Company's continuing operations used $14.7 million of cash to
finance business combinations.
As a result of the foregoing, the ratio of total debt to total capital
declined from 45% at December 31, 1996, to 28% at the end of 1997. Excluding the
debt guarantees of the Employee Stock Ownership Plans ("ESOPs"), the total debt
to total capital ratios were 26% and 38%, respectively, at December 31, 1997 and
1996. The Company's current ratio at December 31, 1997, was 1.9 as compared with
1.1 at December 31, 1996.
The Company had $119.2 million of unused lines of credit with various banks
at December 31, 1997.
Cash Flow
The Company's cash flows for 1997 and 1996 are summarized as follows (in
millions):
For the Years Ended
December 31,
------------------
1997 1996
------- -------
Cash from operations $ 33.4 $ 36.6
Proceeds from sales of investments 14.1 42.5
Cash dividends (21.0) (20.4)
Capital expenditures (20.1) (11.0)
------- -------
Cash excess after capital
requirements and dividends 6.4 47.7
Net proceeds from sales
of discontinued operations 154.7 (2.1)
Increase/(decrease) in short- and
long-term debt (excluding
ESOP debt obligations) (66.5) 63.8
Retirement of ESOP debt (16.2) --
Business combinations (14.7) (9.7)
Net investing and financing
activities of discontinued
operations (6.2) (8.0)
Purchase of Roto-Rooter
minority interest (2.7) (96.2)
Other--net 2.1 (1.9)
------- -------
Increase/(decrease) in cash
and cash equivalents $ 56.9 $ (6.4)
======= =======
For 1997, cash generated by operations, combined with the proceeds from the
sales of investments, aggregated $47.5 million as compared with aggregate
outlays of $41.1 million for cash dividends and capital expenditures. The sales
of Omnia and National Sanitary in 1997 permitted the Company to significantly
reduce its debt, restructure its ESOPs and increase its cash by nearly $57
million during the year.
Although total cash generated by operations in 1997 declined from 1996
levels, the Company's continuing operations generated cash of $23.7 million in
1997 as compared with $13.5 million in 1996. This increase was due largely to
the increased profitability of the Company's remaining operations. Based on
recent cash flow and earnings projections, it is expected that cash flow from
operations will continue to be supplemented by sales of investments in 1998 (and
to a lesser extent in later years) to fund the dividend and ordinary capital
expenditure requirements of the Company's operations. Management views the
Company's investment portfolio as a potential source of cash during the interim
period in which the
36
24
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
Company's dividend exceeds its core earnings from continuing operations (i.e.,
excluding gains on sales of investments). Unrealized aftertax gains on the
Company's available-for-sale investments amounted to $20.0 million at December
31, 1997 ($26.1 million at December 31, 1996). In February 1998, the Board of
Directors declared a quarterly dividend of $.53 per share of capital stock,
payable in March 1998 (an increase of $.01 per share versus the dividend paid in
the first quarter of 1997). The dividend rate is set each quarter with a
long-term perspective, taking into consideration the Company's financial
position, earnings and cash flow, as well as interest rates, market conditions
and other economic factors.
Commitments and Contingencies
The Company's lease for corporate and general office facilities covers the
period from April 1991 to April 2006. As a part of the 1991 sale of the
Company's former DuBois Chemicals Inc. subsidiary ("DuBois") to Diversey
Corporation ("Diversey"), a portion of this space was subleased to DuBois for
varying terms expiring in the years 1998 through 2004. At December 31, 1997, the
Company had net lease commitments aggregating $40.4 million.
In connection with the sale of DuBois, the Company provided allowances and
accruals relating to several long-term costs associated with DuBois, including
income tax matters, lease commitments and environmental costs. In the aggregate,
the Company believes these allowances and accruals are adequate as of December
31, 1997.
Based on an updated assessment of Chemed's environmental-related liability
under the DuBois sale agreement, Chemed's adviser has estimated Chemed's
liability to be $10.8 million. Through December 31, 1997, the Company has
reimbursed Diversey $3.6 million for environmental and related costs of DuBois.
As a result, at December 31, 1997, the accrued liability for these
environmental-related costs is $7.2 million and the Company is contingently
liable for additional cleanup and related costs up to a maximum of $14.7
million, for which no provision has been recorded.
The Company's various loan agreements and guarantees of indebtedness
contain certain restrictive covenants; however, management believes that such
covenants will not adversely affect the operations of the Company. Under the
most restrictive of these covenants (i.e., the interest coverage ratio test for
the latest four quarters) and based on current interest rates, the Company
estimates that its debt leeway (i.e., amount of additional debt that can be
incurred) could be as low as $3.5 million during the first two quarters of 1998.
Under the same conditions, however, the leeway is projected to range between $19
million and $50 million during the last half of 1998. The low leeway during the
first half of 1998 is due to the relatively high levels of debt carried during
the first few quarters of 1997. Since the Company has $71 million of cash and
cash equivalents at December 31, 1997, management does not believe that the low
debt leeway projected for the first half of 1998 will unduly limit the Company's
ability to make acquisitions or fund operations and capital projects.
Under other debt covenants, the Company cannot permit its net worth to fall
below $146.2 million (versus a balance of $228.1 million at December 31, 1997).
Also, the Company must maintain an interest coverage ratio of 3.0, and the
Company is limited to incurring net rentals under operating leases with terms of
three years or more aggregating $17.1 million. At December 31, 1997, the
Company's interest coverage ratio was 3.0 for the most recent four quarters, and
rentals under operating leases with terms of three or more years totaled $8.0
million for 1997. On a pro forma basis, assuming the current rate of interest
expense and earnings from continuing operations, the interest coverage ratio
would be 3.5.
Since 1991, the Company has carried an investment in the mandatorily
redeemable preferred stock ($27 million par value) of Vitas Healthcare
Corporation ("Vitas"), a privately held provider of hospice services to the
terminally ill. Vitas' current debt covenants did not permit it to pay the
preferred dividends that were due to Chemed on July 15, 1997, and January 15,
1998, totaling $2.4 million. Also in 1997, Vitas and the Company agreed to
reschedule to June 1998 the mandatory redemption of preferred stock previously
scheduled for June 30, 1997 ($12.3 million), December 31, 1997 ($4.1 million),
and June 30, 1998 ($5.4 million). These principal payments are now due October
1, 1998 (total of $21.8 million).
Vitas has recently recorded increased operating profits and net income and
is currently pursuing various long-term financing alternatives. On the basis of
information currently available, management believes its investment in Vitas is
fully recoverable and that no impairment exists.
It is management's opinion that the Company has no long-range commitments
that would have a significant impact on its liquidity, financial condition or
the results of its operations. Due to the nature of the environmental
liabilities, it is not possible to forecast the timing of the cash payments for
these potential liabilities. Based on the Company's available credit lines,
sources of borrowing and liquid investments, management believes its sources of
capital and liquidity are satisfactory for the Company's needs for the
foreseeable future.
37
25
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
Results of Operations
Set forth below by business segment are the growth in sales and service
revenues and operating profit margin:
Percent Increase
in Sales and Service Revenues
-----------------------------
1997 1996
vs. 1996 vs. 1995
-------- --------
Roto-Rooter 10% 15%
Patient Care 22 10
Service America 8 7
Total 13 11
Operating Profit
as a Percent of Sales
and Service Revenues
(Operating Margin)
----------------------------
1997 1996 1995
----- ----- -----
Roto-Rooter 11.7% 11.7% 11.3%
Patient Care 4.6 5.7 5.5
Service America 5.5 4.4 3.7
Total 8.0 8.2 7.7
1997 versus 1996
The Roto-Rooter segment recorded sales and service revenues of $153,883,000
during 1997, an increase of 10% versus revenues of $140,163,000 in 1996. This
growth was attributable primarily to revenue increases of 15% and 3%,
respectively, in Roto-Rooter's plumbing and sewer and drain cleaning businesses
for the 1997 period. Plumbing and sewer and drain cleaning revenues account for
39% and 43%, respectively, of this segment's total revenues. Roto-Rooter's
operating margin was 11.7% in 1997 and 1996.
Revenues of the Patient Care segment increased 22% from $99,565,000 in 1996
to $121,143,000 in 1997. Excluding the sales of Priority Care, acquired
effective April 1, 1997, sales for 1997 increased 5% versus sales for 1996. In
addition, the operating margin of this segment declined from 5.7% during 1996 to
4.6% during 1997 due to a reduction in gross margins as a result of market
pricing pressures.
The Service America segment recorded sales of $66,703,000 during 1997, an
increase of 8% versus sales of $61,485,000 recorded in 1996. The operating
margin of this segment increased from 4.4% during 1996 to 5.5% during 1997,
largely as the result of improved pricing on service contracts.
Income from operations increased from $17,481,000 in 1996 to $19,482,000 in
1997, primarily as a result of operating profit increases in the Roto-Rooter and
Service America segments.
Interest expense for 1997 totaled $10,552,000, an increase of $2,285,000
versus expense of $8,267,000 recorded in 1996. This increase was attributable to
additional debt incurred to finance the purchase of the Roto-Rooter minority
interest in September 1996. Most of this debt was retired in September 1997 with
the proceeds from the sales of Omnia and National Sanitary.
Other income declined from $36,069,000 in 1996 to $18,951,000 in 1997,
primarily as a result of lower gains on the sales of investments recorded in
1997.
The Company's effective income tax rate was 38.8% in 1997 as compared with
38.0% in 1996. The increase is primarily attributable to an increase in
nondeductible goodwill amortization and state and local income taxes.
Minority interest in earnings of the subsidiary declined from $2,964,000 in
1996 to nil in 1997, as the result of the purchase of the Roto-Rooter minority
interest in 1996 and the subsequent sale of National Sanitary in 1997
(previously an 81%-owned subsidiary).
Income from continuing operations declined from $25,117,000 ($2.56 per
share) in 1996 to $17,077,000 ($1.72 per share) in 1997. Excluding realized
investment gains ($7,652,000 in 1997 and $17,731,000 in 1996), income from
continuing operations increased 28% from $7,386,000 in 1996 ($.75 per share) to
$9,425,000 ($.95 per share) in 1997.
Net income for 1997 was $30,237,000 ($3.04 per share) and included
discontinued operations of $13,160,000 (primarily the operating results and the
net gain on the sales of Omnia and National Sanitary). Net income for 1996 was
$32,238,000 ($3.30 per share) and included $7,211,000 from discontinued
operations (primarily the operating results of Omnia and National Sanitary).
38
26
Chemed Corporation and Subsidiary Companies
- -------------------------------------------------------------------------------
1996 versus 1995
Sales and service revenues of the Roto-Rooter segment for 1996 totaled
$140,163,000, an increase of 15% over the $121,999,000 of revenues recorded for
1995. Plumbing revenues and drain cleaning revenues increased 20% and 12%,
respectively, versus revenues recorded in 1995. The operating margin of the
Roto-Rooter segment increased from 11.3% in 1995 to 11.7% in 1996, partially as
a result of $538,000 of nonrecurring costs incurred by Roto-Rooter in 1995 to
evaluate Chemed's proposal to acquire the 42% minority interest in Roto-Rooter
(the proposal was withdrawn in August 1995).
Revenues of the Patient Care segment increased 10% from $90,727,000 in 1995
to $99,565,000 in 1996, largely as a result of continued geographic expansion.
In addition, the operating margin of this segment increased from 5.5% during
1995 to 5.7% in 1996.
Revenues of the Service America segment increased 7% from $57,723,000 in
1995 to $61,485,000 in 1996. This segment's operating margin increased from 3.7%
in 1995 to 4.4% in 1996, primarily as a result of lower materials usage in 1996
and the sale of an unprofitable division in March 1995.
Income from operations increased from $14,102,000 in 1995 to $17,481,000 in
1996, primarily as a result of increases in operating profit by all segments.
Other income increased from $18,621,000 in 1995 to $36,069,000 in 1996,
primarily as a result of larger gains on the sales of investments during 1996 as
compared with gains recorded in 1995.
The effective tax rate for 1996 was 38.0% as compared with 36.7% for 1995.
The increase was attributable to lower dividend exclusions and ESOP dividend tax
credits (as a percentage of pretax income) in 1996.
Chemed's income from continuing operations increased 114% from $11,715,000
($1.19 per share) to $25,117,000 ($2.56 per share) in 1996 as a result of 24%
growth in income from operations, coupled with larger gains from the sales of
investments in 1996. Excluding realized investment gains ($17,731,000 in 1996
and $5,882,000 in 1995), income from continuing operations increased 27% from
$5,833,000 ($.59 per share) in 1995 to $7,386,000 ($.75 per share) in 1996.
Net income for 1996 included discontinued operations of $7,211,000,
primarily from the operations of Omnia and National Sanitary, which were
discontinued in 1997. In addition to the operating results of Omnia and National
Sanitary, discontinued operations in 1995 included $2,743,000 from favorable
adjustments to the tax accruals related to the sale of DuBois in 1991.
Year 2000
The Company is evaluating the potential impact of the "Year 2000" computer
issue. The Company's review of its computer systems has indicated that most of
its key operational and financial systems are Year 2000 compliant. Preliminary
plans have been made to update the remaining key systems during the current year
to make them Year 2000 compliant. The estimated additional costs to be incurred
by the Company to update its computer systems for the Year 2000 issue are not
material to the Company's financial position or results of operations.
The Company's Patient Care segment is directly or indirectly dependent upon
the electronic processing of Medicare and Medicaid claims (approximately $70
million annual revenues) through fiscal intermediaries of the Health Care
Financing Administration. The intermediaries' computer systems are not currently
Year 2000 compliant. The intermediaries have orally represented that they are
modifying their systems to be Year 2000 compliant in sufficient time to avoid
disruption to processing. Should the intermediaries fail to correct this problem
in a timely manner, the processing and payment of a significant portion of
Patient Care's revenues could be slowed.
Regulatory Environment
Healthcare reform legislation enacted by Congress challenges healthcare
providers to provide quality services while facing mounting pressure to contain
costs associated with entitlement programs funded by the federal government.
Patient Care is adapting to the demands of this regulatory environment by
eliminating certain high-cost programs and by leveraging its existing
infrastructure to increase productivity.
39
27
CORPORATE OFFICERS AND DIRECTORS
CORPORATE OFFICERS
Edward L. Hutton
Chairman & Chief Executive Officer
Kevin J. McNamara
President
Timothy S. O'Toole
Executive Vice President & Treasurer
Paul C. Voet
Executive Vice President
Sandra E. Laney
Senior Vice President & Chief Administrative Officer
Arthur V. Tucker, Jr.
Vice President & Controller
Naomi C. Dallob
Vice President & Secretary
James H. Devlin
Vice President
Lawrence J. Gillis
Vice President
Thomas C. Hutton
Vice President
David J. Lohbeck
Vice President
John M. Mount
Vice President
David G. Sparks
Vice President
Janelle M. Jessie
Assistant Vice President
Anthony D. Vamvas III
Assistant Vice President
Paula W. Kittner
Assistant Treasurer
Mark W. Stephens
Assistant Treasurer
Marianne Lamey
Assistant Controller
Laura A. Volker
Assistant Controller
Joyce A. Lawrence
Assistant Secretary
DIRECTORS
Edward L. Hutton
Chairman & Chief Executive Officer
of Chemed Corporation
Kevin J. McNamara
President of Chemed Corporation
James H. Devlin
Vice President of Chemed Corporation
Charles H. Erhart, Jr.
Former President of W.R. Grace & Co. (retired)
Joel F. Gemunder
President of Omnicare Inc.
Lawrence J. Gillis
Vice President of Chemed Corporation;
President & Chief Executive Officer of Roto-Rooter Services Company
Patrick P. Grace
Chief Financial Officer of Compucook Inc.
Thomas C. Hutton
Vice President of Chemed Corporation
Walter L. Krebs
Vice President, Finance, Chief Financial Officer & Treasurer
of Service America Systems Inc.
Sandra E. Laney
Senior Vice President & Chief Administrative Officer
of Chemed Corporation
John M. Mount
Vice President of Chemed Corporation; President & Chief Executive Officer of
Service America Systems Inc.
Timothy S. O'Toole
Executive Vice President & Treasurer of Chemed Corporation;
Chairman & Chief Executive Officer of Patient Care Inc.
D. Walter Robbins, Jr.
Consultant and former Vice Chairman
of W.R. Grace & Co. (retired)
Paul C. Voet
Executive Vice President of Chemed Corporation
George J. Walsh III
Corporate & Real Estate Partner, Gould & Wilkie
(Law Firm, New York, N.Y.)
DIRECTORS EMERITI
Neal Gilliatt
Herman B Wells
40
1
EXHIBIT 21
SUBSIDIARIES OF CHEMED CORPORATION
The following is a list of subsidiaries of the Company as of December
31, 1997. Other subsidiaries which have been omitted from the list would not,
when considered in the aggregate, constitute a significant subsidiary. Each of
the companies is incorporated under the laws of the state following its name.
The percentage given for each company represents the percentage of voting
securities of such company owned by the Company or, where indicated,
subsidiaries of the Company as at December 31, 1997.
All of the majority owned companies listed below are included in the
consolidated financial statements as of December 31, 1997.
Cadre Computer Resources, Inc. (Delaware 100%)
Complete Plumbing Services, Inc. (New York, 49% by Roto-Rooter Services
Company; included within the consolidated financial statements as a
consolidated subsidiary)
Elder Care Solutions, Inc. (Kentucky, 100% by Patient Care, Inc.)
Jet Resource, Inc. (Delaware, 100% by Chemed Corporation)
National Home Care, Inc. (New York, 100% by Patient Care, Inc.)
Nurotoco of Massachusetts, Inc. (Massachusetts, 100% by Roto-Rooter
Services Company)
Nurotoco of New Jersey, Inc. (Delaware, 80% by Roto-Rooter Services
Company)
OCR Holding Company (Nevada, 100%)
OCR Michigan, Inc. (Delaware, 100% by OCR Holding Company)
OnCall Craftsmen, Inc. (Ohio, 100% by Roto-Rooter Services Company)
Patient Care, Inc. (Delaware, 100%)
Patient Care Medical Services, Inc. (New Jersey, 100% by Patient Care,
Inc.)
Priority Care, Inc. (Connecticut, 100% by Patient Care, Inc.)
Roto-Rooter Canada, Ltd. (British Columbia, 100% by Roto-Rooter
Services Company)
Roto-Rooter Corporation (Iowa, 100% by Roto-Rooter Inc.)
Roto-Rooter Development Company (Delaware, 100% by Roto-Rooter
Corporation)
Roto-Rooter, Inc. (Delaware, 100%)
Roto-Rooter Management Company (Delaware, 100% by Roto-Rooter, Inc.)
Roto-Rooter Services Company (Iowa, 100% by Roto-Rooter, Inc.)
RR Plumbing Services Corporation (New York, 49% by Roto-Rooter Services
Company; included within the consolidated financial statements as a
consolidated subsidiary)
R.R. UK, Inc. (Delaware, 100% by Roto-Rooter, Inc.)
Service America Network, Inc. (Florida, 100% by Service America
Systems, Inc.)
Service America Systems, Inc. (Florida, 100%)
1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-28594, 33-9549, 2-87202, 2-80712, 33-65244,
33-61063 and 334525) of Chemed Corporation of our report dated February 2, 199
appearing on page 15 of the 1997 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page S-2 of this Form 10-K.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
March 27, 1998
1
Exhibit 24
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 16, 1998
/s/ James H. Devlin
-------------------------------
James H. Devlin
2
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 12, 1998
/s/ Charles H. Erhart, Jr.
-------------------------------
Charles H. Erhart, Jr.
3
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 11, 1998
/s/ Joel F. Gemunder
-------------------------------
Joel F. Gemunder
4
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 18, 1998
/s/ Lawrence J. Gillis
-------------------------------
Lawrence J. Gillis
5
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 17, 1998
/s/ Patrick P. Grace
-------------------------------
Patrick P. Grace
6
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 16, 1998
/s/ Thomas C. Hutton
-------------------------------
Thomas C. Hutton
7
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 16, 1998
/s/ Walter L. Krebs
-------------------------------
Walter L. Krebs
8
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as her true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 13, 1998
/s/ Sandra E. Laney
-------------------------------
Sandra E. Laney
9
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 11, 1998
/s/ Kevin J. McNamara
-------------------------------
Kevin J. McNamara
10
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 16, 1998
/s/ John M. Mount
-------------------------------
John M. Mount
11
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 12, 1998
/s/ D. Walter Robbins, Jr.
-------------------------------
D. Walter Robbins, Jr.
12
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 12, 1998
/s/ Paul C. Voet
-------------------------------
Paul C. Voet
13
POWER OF ATTORNEY
The undersigned director of CHEMED CORPORATION ("Company") hereby appoints
EDWARD L. HUTTON, KEVIN J. MCNAMARA and NAOMI C. DALLOB as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 12, 1998
/s/ George J. Walsh III
-------------------------------
George J. Walsh III
5
5
0000019584
CHEMED CORPORATION
1,000
US DOLLARS
3-MOS 6-MOS 9-MOS YEAR YEAR
DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1995
JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1995
MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996 DEC-31-1995
1 1 1 1 1
45,376 34,118 14,867 14,028 20,403
0 0 0 0 0
34,560 40,200 33,074 33,138 34,229
(1,621) (1,594) (1,567) (1,583) (1,496)
8,136 8,497 8,260 8,350 7,823
126,220 115,495 88,052 99,375 110,507
62,941 65,173 67,735 69,849 61,040
(24,715) (26,206) (27,761) (29,188) (23,180)
482,807 469,725 517,108 509,361 476,732
112,158 104,027 178,544 90,379 103,348
83,616 81,935 80,534 158,140 85,137
0 0 0 0 0
0 0 0 0 0
12,671 12,681 12,700 12,768 12,598
200,312 198,572 201,782 205,123 196,059
482,807 469,725 517,108 509,361 476,732
0 0 0 0 0
71,673 146,664 221,834 301,213 270,449
0 0 0 0 0
44,122 89,484 135,571 182,773 167,037
0 0 0 0 0
278 297 491 869 899
1,734 3,463 5,532 8,267 7,895
18,342 26,481 30,971 45,283 24,828
6,811 9,846 11,647 17,202 9,105
10,459 14,392 16,360 25,117 11,715
1,738 3,493 5,989 7,211 11,467
0 0 0 0 0
0 0 0 0 0
12,197 17,885 22,349 32,328 23,182
1.24 1.82 2.28 3.30 2.36
1.23 1.80 2.25 3.26 2.33
5
0000019584
CHEMED CORPORATION
1,000
U.S. DOLLARS
3-MOS 6-MOS 9-MOS
DEC-31-1997 DEC-31-1997 DEC-31-1997
JAN-01-1997 JAN-01-1997 JAN-01-1997
MAR-31-1997 JUN-30-1997 SEP-30-1997
1 1 1
20,268 14,328 131,495
0 0 0
35,367 40,437 39,708
(1,679) (2,551) (2,617)
8,769 8,590 8,706
107,608 110,414 206,619
72,056 78,968 84,463
(30,846) (32,357) (34,308)
498,530 512,264 495,479
89,989 91,034 135,072
158,065 164,002 90,339
0 0 0
0 0 0
12,858 12,868 12,923
200,078 205,072 214,314
498,530 512,264 495,479
0 0 0
77,657 163,676 251,110
48,023 102,307 156,610
0 0 0
0 0 0
13 237 330
2,637 5,552 8,476
11,972 18,156 21,756
4,595 6,835 8,329
7,377 11,321 13,427
1,110 3,458 13,160
0 0 0
0 0 0
8,487 14,779 26,587
.85 1.49 2.68
.85 1.48 2.66
