View:
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2001
Commission File Number 1-8351
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-0791746
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2600 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
(513) 762-6900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Amount Date
Capital Stock 9,832,687 Shares October 31, 2001
$1 Par Value
Page 1 of 16
CHEMED CORPORATION AND
SUBSIDIARY COMPANIES
Index
Page No.
--------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
September 30, 2001
December 31, 2000 3
Consolidated Statement of Income -
Three months and nine months ended
September 30, 2001 and 2000 4
Consolidated Statement of Cash Flows
Nine months ended
September 30, 2001 and 2000 5
Notes to Unaudited Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10 - 15
PART II. OTHER INFORMATION 16
Page 2 of 16
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(in thousands except share and per share data)
September 30, December 31,
2001 2000
------------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 20,147 $ 10,280
Accounts receivable less allowances of $5,151
(2000 - $5,137) 51,292 54,571
Inventories 11,231 10,503
Statutory deposits 13,293 14,046
Other current assets 17,947 17,070
--------- ---------
Total current assets 113,910 106,470
Other investments 35,331 37,099
Properties and equipment, at cost less accumulated
depreciation of $69,101 (2000 - $64,757) 69,459 75,177
Identifiable intangible assets less accumulated
amortization of $8,335 (2000 - $7,749) 10,954 11,633
Goodwill less accumulated amortization of $35,181
(2000 - $31,524) 165,684 169,083
Other assets 24,062 21,913
--------- ---------
Total Assets $ 419,400 $ 421,375
========= =========
LIABILITIES
Current liabilities
Accounts payable $ 10,904 $ 11,102
Current portion of long-term debt 11,373 14,376
Income taxes 10,571 11,862
Deferred contract revenue 22,816 24,973
Other current liabilities 46,248 44,629
--------- ---------
Total current liabilities 101,912 106,942
Long-term debt 58,088 58,391
Other liabilities 26,951 27,637
--------- ---------
Total Liabilities 186,951 192,970
--------- ---------
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF THE CHEMED CAPITAL TRUST 14,520 14,641
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock-authorized 700,000 shares without par
value; none issued
Capital stock-authorized 15,000,000 shares $1 par;
issued 13,437,781 (2000 - 13,317,906) shares 13,438 13,318
Paid-in capital 166,436 162,618
Retained earnings 156,690 153,909
Treasury stock-3,605,904(2000 - 3,467,753) shares, at cost (110,386) (105,249)
Unearned compensation (12,264) (16,683)
Deferred compensation payable in company stock 3,270 5,500
Accumulated other comprehensive income 2,227 3,237
Notes receivable for shares sold (1,482) (2,886)
--------- ---------
Total Stockholders' Equity 217,929 213,764
--------- ---------
Total Liabilities and Stockholders' Equity $ 419,400 $ 421,375
========= =========
See accompanying notes to unaudited financial statements.
Page 3 of 16
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
Continuing Operations
Service revenues and sales $117,498 $121,652 $359,487 $363,995
-------- -------- -------- --------
Cost of services provided and
cost of goods sold 71,781 72,913 218,661 220,144
Selling and marketing expenses 11,583 13,117 33,836 35,171
General and administrative
expenses 24,504 23,946 75,476 72,926
Depreciation 4,031 3,728 12,058 11,254
Other charges 4,031 - 4,031 -
-------- -------- -------- --------
Total costs and expenses 115,930 113,704 344,062 339,495
-------- -------- -------- --------
Income from operations 1,568 7,948 15,425 24,500
Interest expense (1,373) (1,664) (4,325) (5,233)
Distributions on preferred
securities (275) (282) (830) (856)
Other income, net 165 1,916 2,769 7,104
-------- -------- -------- --------
Income before income taxes 85 7,918 13,039 25,515
Income taxes 7 (3,210) (5,003) (9,902)
-------- -------- -------- --------
Income from continuing operations 92 4,708 8,036 15,613
Discontinued operations - (73) (1,973) 37
-------- -------- -------- --------
Net Income $ 92 $ 4,635 $ 6,063 $ 15,650
======== ======== ======== ========
Earnings Per Common Share
Income from continuing operations $ .01 $ .48 $ .83 $ 1.58
======== ======== ======== ========
Net income $ .01 $ .48 $ .62 $ 1.59
======== ======== ======== ========
Average number of shares
outstanding 9,690 9,742 9,721 9,867
======== ======== ======== ========
Diluted Earnings per Common Shares
Income from continuing operations $ .01 $ .48 $ .82 $ 1.57
======== ======== ======== ========
Net income $ .01 $ .47 $ .62 $ 1.57
======== ======== ======== ========
Average number of shares
outstanding 9,798 10,253 9,850 10,319
======== ======== ======== ========
Cash Dividends Paid Per Share .11 .10 .33 .30
======== ======== ======== ========
See accompanying notes to unaudited financial statements.
Page 4 of 16
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
----------------------
2001 2000*
--------- --------
Cash Flows From Operating Activities
Net income $ 6,063 $ 15,650
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,162 17,394
Discontinued operations 1,973 (37)
Provision for uncollectible accounts receivable 1,921 1,137
Gains on sale of investments (993) (2,662)
Provision for deferred income taxes (11) 1,225
Changes in operating assets and liabilities,
excluding amounts acquired in business combinations
(Increase)/decrease in accounts receivable (129) 361
Increase in inventories (728) (994)
(Increase)/decrease in statutory deposits 753 (361)
Increase in other current assets (1,048) (3,794)
Increase/(decrease) in accounts payable, deferred
contract revenue and other current liabilities 1,020 (327)
Increase in income taxes 179 3,537
Other - net 1,390 914
-------- --------
Net cash provided by continuing operations 28,552 32,043
Net cash used by discontinued operations (55) (144)
-------- --------
Net cash provided by operating activities 28,497 31,899
-------- --------
Cash Flows From Investing Activities
Capital expenditures (11,272) (13,128)
Proceeds from sale of property and equipment 3,520 310
Net outflows from discontinued operations (3,190) (2,804)
Business combinations--net of cash acquired (2,020) (12,495)
Proceeds from sale of investments 1,377 3,424
Other-net 66 (457)
-------- ---------
Net cash used by investing activities (11,519) (25,150)
-------- --------
Cash Flows From Financing Activities
Repayment of long-term debt (3,306) (7,090)
Dividends paid (3,292) (3,022)
Purchase of treasury stock (1,201) (5,395)
Other - net 688 (371)
-------- --------
Net cash used by financing activities (7,111) (15,878)
-------- --------
Increase/(Decrease) In Cash And Cash Equivalents 9,867 (9,129)
Cash and cash equivalents at beginning of period 10,280 17,282
-------- --------
Cash and cash equivalents at end of period $ 20,147 $ 8,153
======== ========
*Reclassified to conform to 2001 presentation.
See accompanying notes to unaudited financial statements.
Page 5 of 16
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with Rule 10-01 of SEC
Regulation S-X. Consequently, they do not include all the
disclosures required under generally accepted accounting
principles for complete financial statements. However, in
the opinion of the management of Chemed Corporation (the
"Company"), the financial statements presented herein contain
all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial
position, results of operations and cash flows of the Company
and its consolidated subsidiaries ("Chemed"). For further
information regarding Chemed's accounting policies, refer to
the consolidated financial statements and notes included in
Chemed's Annual Report on Form 10-K for the year ended
December 31, 2000.
2. Sales and service revenues and aftertax earnings by business
segment follow below (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2001 2000 2001 2000
-------- -------- -------- --------
Service Revenues and Sales
--------------------------
Roto-Rooter $ 65,406 $ 68,678 $200,960 $206,208
Patient Care 34,894 34,498 105,674 101,096
Service America 17,198 18,476 52,853 56,691
-------- -------- -------- --------
Total $117,498 $121,652 $359,487 $363,995
======== ======== ======== ========
Aftertax Earnings
-----------------
Roto-Rooter $ 1,268(a) 5,084 $ 8,930(a) 14,673
Patient Care 604 487 1,899 1,439
Service America (310)(b) 186 635(b) 1,027
-------- ------ -------- -------
Total segment earnings 1,562 5,757 11,464 17,139
Corporate
Overhead (1,387) (1,154) (4,018) (3,726)
Net investing and
financing income/(loss) (83) 105 (113) 401
Gains on sales of
investments - - 703 1,799
Discontinued operations - (73) (1,973) 37
-------- -------- -------- --------
Net income $ 92 $ 4,635 $ 6,063 $ 15,650
======== ======== ======== ========
(a) Amounts include Roto-Rooter's aftertax cost of its overtime wage settlement with
the Department of Labor ($1,800,000).
(b) Amounts include Service America's aftertax impairment loss related to the closing
of its Tucson branch ($620,000).
3. Earnings per common share are computed using the weighted
average number of shares of capital stock outstanding.
Diluted earnings per common share are computed as follows
(in thousands except per share data):
Page 6 of 16
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2001 2000 2001 2000
------- ------- ------- -------
Income from Continuing Operations
- ---------------------------------
Reported income $ 92 $ 4,708 $ 8,036 $15,613
Aftertax interest on Trust
Securities -(a) 196 -(a) 575
------- ------- ------- -------
Adjusted income $ 92 $ 4,904 $ 8,036 $16,188
======= ======= ======= =======
Average number of shares outstanding 9,690 9,742 9,721 9,867
Effect of conversion of the
Trust Securities -(a) 413 -(a) 370
Effect of nonvested stock awards 108 97 112 81
Effect of unexercised stock options - 1 17 1
------- ------- ------- -------
Average number of shares used to
compute diluted earnings per
common share 9,798 10,253 9,850 10,319
======= ======= ======= =======
Diluted earnings per common share $ .01 $ .48 $ .82 $ 1.57
======= ======= ======= =======
Net Income
- ----------
Reported income $ 92 $ 4,635 $ 6,063 $15,650
Aftertax interest on Trust
Securities -(a) 196 -(a) 575
------- ------- ------- -------
Adjusted income $ 92 $ 4,831 $ 6,063 $16,225
======= ======= ======= =======
Average number of shares outstanding 9,690 9,742 9,721 9,867
Effect of conversion of the
Trust Securities -(a) 413 -(a) 370
Effect of nonvested stock awards 108 97 112 81
Effect of unexercised stock options - 1 17 1
------- ------- ------- -------
Average number of shares used to
compute diluted earnings per
common share 9,798 10,253 9,850 10,319
======= ======= ======= =======
Diluted earnings per common share $ .01 $ .47 $ .62 $ 1.57
======= ======= ======= =======
(a) The impact of the Trust Securities on earnings per share from continuing
operations is anti-dilutive for the three and nine-month periods ended September 30,
2001. Therefore, the Trust Securities are excluded from diluted earnings per share
computations.
4. The Company had total comprehensive income of $167,000,
$6,048,000, $5,053,000 and $15,048,000 for the three- and
nine-month periods ended September 30, 2001 and 2000,
respectively. The other comprehensive income relates to the
cumulative unrealized appreciation/depreciation on its
available-for-sale securities.
5. During the first quarter of 2001, the U.S. Department of
Labor ("DOL") initiated a nationwide investigation into the
pay practices for commissioned service technicians employed
within the Roto-Rooter segment. The issue in question was
whether commissioned service technicians are entitled to
overtime pay for time worked in excess of 40 hours. During
the third quarter of 2001, Roto-Rooter reached resolution
with the DOL and agreed to make overtime payments to
specified employees and former employees. The cost of this
Page 7 of 16
settlement, including payroll taxes and estimated legal
costs, is $3,000,000 and is included in "other charges" in
the statement of income in the third quarter.
Roto-Rooter completed a conversion of its pay plan for these
employees earlier this year. Accordingly, management does
not anticipate that this issue will have any significant
impact on operating earnings on a going-forward basis.
6. Effective for the second quarter of 2001, Chemed decided to
discontinue its Cadre Computer segment. In the third
quarter, Chemed completed the sale of the business and assets
of Cadre Computer to a company owned by the former Cadre
Computer employees for a note receivable which has been fully
reserved.
Data relating to discontinued operations include the
following (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2001 2000 2001 2000
------- -------- ------- --------
Cadre Computer income/(loss) before
income taxes $ (165) $ (111) $ (734) $ 60
Income tax benefit/(expense) 58 38 255 (23)
Minority interest 6 - 46 -
------ ------ ------- -------
Cadre Computer net income/(loss) (101) (73) (433) 37
Adjustment to loss/(loss) on disposal,
net of income tax expense/(benefit)
of $54 and $(829) 101 - (1,540) -
------ ------ ------- -------
Income/(loss) from discontinued operations $ - $ (73) $(1,973) $ 37
====== ====== ======= =======
Net service revenues and sales of Cadre
Computer $1,557 $2,129 $ 5,088 $ 6,538
====== ====== ======= =======
7. During the third quarter of 2001, Service America recorded an
impairment loss of $1,031,000 on the valuation of the assets
of its Tucson branch which it closed in October 2001. The
loss related primarily to goodwill and other intangibles
($815,000), property and equipment ($145,000) and various
other assets ($71,000). The impairment loss is included in
"other charges" on the income statement.
The Tucson Branch recorded pretax losses of $124,000, nil,
$216,000 and $373,000 for the three- and nine-month periods
ended September 30, 2001 and 2000, respectively. It is
anticipated that the branch will incur approximately $235,000
of additional costs (primarily severance pay) and losses
during the remainder of 2001.
Page 8 of 16
8. Statement of Financial Accounting Standards No. 133
("SFAS133") Accounting for Derivative Instruments and Hedging
Activities, is effective for calendar year 2001. Since the
Company does not invest in derivative or hedging instruments,
adoption of SFAS133 has no impact on the Company's financial
statements.
Page 9 of 16
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Financial Condition
- -------------------
There were no significant changes in the Company's balance
sheet from December 31, 2000 to September 30, 2001.
Vitas Healthcare Corporation ("Vitas"), the privately-held
provider of hospice services to the terminally ill in which the
Company carries an investment of $27 million of redeemable preferred
stock, refinanced its debt obligations in April 2001. In connection
therewith, the Company and Vitas agreed to extend the maturity of
Vitas' redeemable preferred stock to April 1, 2007. In addition,
Vitas issued a warrant to the Company for the purchase of
approximately 1.6 million shares of its common stock.
Vitas' operating results and net income continue to meet
its management's expectations. On the basis of current information,
management believes the Company's investment in Vitas is fully
recoverable and that no impairment exists.
On June 20, 2001, Chemed's $85 million revolving line of
credit with Bank of America expired. It is anticipated that another
line of credit will be established during the next several months.
Chemed had approximately $18.5 million of unused lines of credit
with various banks at September 30, 2001. Management believes its
liquidity and sources of capital are satisfactory for the Company's
needs in the foreseeable future.
Results of Operations
- ---------------------
Data relating to (a) the increase or decrease in service
revenues and sales from continuing operations and (b) aftertax
earnings as a percent of service revenues and sales for each segment
are set forth below:
Service Revenues Aftertax Earnings/(Loss)
and Sales - as a % of Revenues
% Increase/(Decrease) (Aftertax Margin)
--------------------- -----------------------
2001 vs. 2000 2001 2000
--------------------- --------- ---------
Three Months Ended
September 30,
- ------------------
Roto-Rooter (5)% 1.9% 7.4%
Patient Care 1 1.7 1.4
Service America (7) (1.8) 1.0
Total (3) 1.3 4.7
Page 10 of 16
Nine Months Ended
September 30,
- ------------------
Roto-Rooter (3)% 4.4% 7.1%
Patient Care 5 1.8 1.4
Service America (7) 1.2 1.8
Total (1) 3.2 4.7
Third Quarter 2001 versus Third Quarter 2000
- --------------------------------------------
Service revenues and sales of the Roto-Rooter segment for
the third quarter of 2001 totaled $65,406,000, a decline of 5%
versus the $68,678,000 recorded in the third quarter of 2000.
Revenues of the drain cleaning business increased slightly and
revenues of the plumbing services business declined 7% for the third
quarter of 2001, as compared with revenues for 2000. Each of these
businesses' revenues accounts for approximately 42% of Roto-Rooter's
total revenues and sales. The overall revenue decline can be
partially ascribed to the economic slowdown as Roto-Rooter is
experiencing lower demand for elective, non-emergency plumbing and
drain cleaning services. The aftertax margin during the third
quarter of 2001 was 1.9% versus 7.4% in the 2000 quarter. Excluding
the nonrecurring charge for the overtime wage settlement ($1,800,000
aftertax) the margin for the 2001 third quarter was 4.7%. The
decline versus 2000 is attributable to a lower gross profit margin,
largely due to higher liability insurance costs during 2001.
Service revenues of the Patient Care segment increased 1%
from $34,498,000 in the third quarter of 2000 to $34,894,000 in the
third quarter of 2001. The aftertax margin of this segment
increased from 1.4% in the third quarter of 2000 to 1.7% in 2001,
largely as the result of a higher gross profit margin in 2001.
Service revenues and sales of the Service America segment
declined 7% from $18,476,000 in the third quarter of 2000 to
$17,198,000 in the third quarter of 2001. This decline is the
result of insufficient new service contracts to offset the loss of
expiring annual service contracts. The aftertax margin of this
segment was a negative 1.8% during the third quarter of 2001 versus
1.0% in 2000. Excluding the impairment loss on the assets of the
Tucson branch ($620,000 aftertax), the margin for 2001 was 1.8%.
The higher aftertax margin during 2001 is attributable to a higher
gross profit margin in 2001, partially offset by higher selling and
administrative expenses, as a percent of revenues.
Income from operations declined from $7,948,000 in the
third quarter of 2000 to $1,568,000 in the third quarter of 2001.
Excluding Roto-Rooter's overtime wage settlement ($3,000,000) and
Service America's impairment loss ($1,031,000), income from
operations for the third quarter of 2001 was $5,599,000, a decline
Page 11 of 16
of 30% from 2000. Similarly, earnings before interest, taxes,
depreciation and amortization before capital gains and nonrecurring
charges ("EBITDA") declined 26% from $15,141,000 in the third
quarter of 2000 to $11,285,000 in 2001. Both declines are primarily
due to lower operating profit of the Roto-Rooter segment.
Interest expense declined from $1,664,000 in the third
quarter of 2000 to $1,373,000 in the third quarter of 2001, largely
as a result of lower debt levels in the year 2001.
Other income-net declined from $1,916,000 in the third
quarter of 2000 to $165,000 in the third quarter of 2001 due
primarily to incurring losses on trust assets used to fund deferred
compensation liabilities in 2001 versus gains on such assets in
2000. These gains or losses included in other income are entirely
offset by increases or reductions in operating expenses.
Income from continuing operations declined from $4,708,000
($.48 per share) in the third quarter of 2000 to $92,000 ($.01 per
share) in the third quarter of 2001. Excluding the overtime wage
settlement and the impairment loss ($2,420,000 aftertax), income
from continuing operations in 2001 was $2,512,000 ($.26 per share).
The decline versus the prior year period is primarily due to lower
aftertax earnings of the Roto-Rooter segment.
Net income for the third quarter of 2000 includes a
$73,000 loss recorded by the Cadre Computer segment which was
discontinued in 2001.
Nine Months Ended September 30, 2001 versus September 30, 2000
- --------------------------------------------------------------
Service revenues and sales of the Roto-Rooter segment for
the first nine months of 2001 totaled $200,960,000, a decline of 3%
versus the $206,208,000 recorded in the first nine months of 2000.
Revenues of the drain cleaning business increased 1% and revenues of
the plumbing services business declined 3% for the first nine months
of 2001, as compared with revenues for 2000. The overall revenue
decline in 2001 is largely attributable to the economic slowdown as
Roto-Rooter is experiencing lower demand for elective, non-emergency
plumbing and drain cleaning services. The aftertax margin during
the first nine months of 2001 was 4.4% versus 7.1% in the 2000
period. Excluding the nonrecurring charge for the overtime wage
settlement the margin for the 2001 quarter was 5.3%. The decline
versus 2000 is attributable to a lower gross profit margin, largely
due to higher liability insurance costs during 2001.
Service revenues of the Patient Care segment increased 5%
from $101,096,000 in the first nine months of 2000 to $105,674,000
in the first nine months of 2001. The aftertax margin of this
Page 12 of 16
segment increased from 1.4% in the first nine months of 2000 to 1.8%
in 2001, largely as the result of a higher gross profit margin in
2001.
Service revenues and sales of the Service America segment
declined 7% from $56,691,000 in the first nine months of 2000 to
$52,853,000 in the first nine months of 2001. This decline is
largely the result of insufficient new service contracts to offset
the expiration of existing service contracts. The aftertax margin
of this segment was 1.2% during the first nine months of 2001 versus
1.8% in 2000. Excluding the impairment loss on the assets of the
Tucson branch ($620,000 aftertax), the margin for 2001 was 2.4%.
The higher aftertax margin during 2001 is attributable to a higher
gross profit margin in 2001, partially offset by higher selling and
administrative expenses, as a percent of revenues.
Income from operations declined from $24,500,000 in the
first nine months of 2000 to $15,425,000 in the first nine months of
2001. Excluding Roto-Rooter's overtime wage settlement ($3,000,000)
and Service America's impairment loss ($1,031,000), income from
operations for the first nine months of 2001 was $19,456,000, a
decline of 21% from 2000. Similarly, earnings before interest,
taxes, depreciation and amortization before capital gains and
nonrecurring charges ("EBITDA") declined 16% from $44,820,000 in the
first nine months of 2000 to $37,800,000 in 2001. Both declines are
primarily due to lower operating profit of the Roto-Rooter segment.
Interest expense declined from $5,233,000 in the first
nine months of 2000 to $4,325,000 in the first nine months of 2001,
largely as a result of lower debt levels in the year 2001.
Other income-net declined from $7,104,000 in the first
nine months of 2000 to $2,769,000 in the first nine months of 2001
due primarily to larger capital gains on the sales of investments in
2000 ($2,662,000) versus 2001 ($993,000) and to incurring losses on
trust assets used to fund deferred compensation liabilities in 2001
versus gains on such assets in 2000. These market gains or losses
on trust assets included in other income are entirely offset by
increases or reductions in operating expenses.
Income from continuing operations declined from
$15,613,000 ($1.58 per share and $1.57 per diluted share) in the
first nine months of 2000 to $8,036,000 ($.83 per share and $.82 per
diluted share) in the first nine months of 2001. Excluding capital
gains on the sales of investments, and overtime wage settlement and
the impairment loss (which total $2,420,000 aftertax), income from
continuing operations in 2001 was $9,753,000 ($1.00 per share and
$.99 per diluted share) versus $13,814,000 ($1.40 per share and
$1.39 per diluted share). The decline versus the prior year period
is primarily due to lower aftertax earnings of the Roto-Rooter
segment.
Page 13 of 16
Net income for the first nine months includes the results
of the Cadre Computer segment which was discontinued in the second
quarter of 2001. Included in the 2001 loss from discontinued
operations is a loss on the disposal of Cadre Computer amounting to
$1,540,000.
Accounting for Business Combinations and Intangible Assets
- ----------------------------------------------------------
During June 2001, the Financial Accounting Standards Board
approved the issuance of Statement of Financial Accounting Standards
No. 141 ("SFAS141"), Business Combinations, and Statement of
Financial Accounting Standards No. 142 ("SFAS142"), Goodwill and
Other Intangible Assets. For Chemed these statements will generally
become effective January 1, 2002, although business combinations
initiated after July 1, 2001 are subject to the non-amortization and
purchase accounting provisions.
Specifically, SFAS142 stipulates that goodwill is no
longer subject to amortization, but must be evaluated annually for
impairment beginning January 1, 2002. Chemed estimates that the
non-amortization provision will increase its diluted earnings per
share by approximately $.40 to $.45 per share in the year 2002. The
assessment of goodwill for impairment is a complex issue in which a
company must determine, among other things, the fair value of each
defined component of its operating segments. It is, therefore, not
possible at this time to predict the impact, if any, which the
impairment assessment provisions of SFAS142 will have on Chemed's
financial statements.
Accounting for Asset Retirement Obligations
- -------------------------------------------
During June 2001, the Financial Accounting Standards Board
approved the issuance of Statement of Financial Accounting Standards
No. 143 ("SFAS143"), Accounting for Asset Retirement Obligations.
This statement becomes effective for fiscal years beginning after
June 15, 2002 and requires all entities to recognize legal
obligations associated with the retirement of tangible long-lived
assets that result from the acquisition, construction or development
and/ or normal operation of a long-lived asset.
Since the Company has no material asset retirement
obligations, the adoption of SFAS 143 in 2003 will not have a
material impact on its financial statements.
Page 14 of 16
Accounting for the Impairment or Disposal of Long-Lived Assets
- --------------------------------------------------------------
During August 2001, the Financial Accounting Standards
Board approved the issuance of Statement of Financial Accounting
Standards No. 144 ("SFAS144"), Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement becomes effective for
fiscal years beginning after December 15, 2001 and modifies
accounting for impairment of long-lived assets to be held and used,
disposed of by sale or otherwise disposed. It is currently
anticipated that adoption of SFAS144 in 2002 will not materially
impact the Company's financial statements.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 Regarding Forward-Looking Information
- -------------------------------------------------------------
This report contains statements which are subject to
certain known and unknown risks, uncertainties, contingencies and
other factors that could cause actual results to differ materially
from such statements. The Company's ability to deal with the
unknown outcomes of these events, many of which are beyond its
control, may affect the reliability of its projections and other
financial matters.
Page 15 of 16
PART II -- OTHER INFORMATION
- ----------------------------
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
--------
None required.
(b) Reports on Form 8-K
-------------------
None were filed in the quarter ended September 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Chemed Corporation
-------------------
(Registrant)
Dated: November 14, 2001 By Naomi C. Dallob
----------------- -------------------------
Naomi C. Dallob, Vice
President and Secretary
Dated: November 14, 2001 By Arthur V. Tucker, Jr.
----------------- -------------------------
Arthur V. Tucker, Jr.
Vice President and
Controller (Principal
Accounting Officer)
Page 16 of 16