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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 June 30, 2003
Commission File Number 1-8351
ROTO-ROOTER, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-0791746
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2600 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
(513) 762-6900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate 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 9,873,083 Shares July 31, 2003
$1 Par Value
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Page 1 of 22
ROTO-ROOTER, INC. AND
SUBSIDIARY COMPANIES
Index
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 2003 and
December 31, 2002 3
Consolidated Statement of Income -
Three months and six months ended
June 30, 2003 and 2002 4
Consolidated Statement of Cash Flows -
Six months ended
June 30, 2003 and 2002 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Item 4. Controls and Procedures 19
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 20
Item 6. Exhibits and Reports on Form 8-K 21
Page 2 of 22
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(in thousands except share and per share data)
June 30, December 31,
2003 2002*
---- -----
ASSETS
Current assets
Cash and cash equivalents $ 45,342 $ 37,731
Accounts receivable, less allowances of $3,392
(2002 - $3,309) 15,188 16,071
Inventories 8,699 9,493
Statutory deposits 10,095 12,323
Current deferred income taxes 7,424 7,277
Prepaid expenses and other current assets 13,682 13,333
---------- ----------
Total current assets 100,430 96,228
Investments of deferred compensation plans held in trust 16,411 15,176
Other investments 32,789 37,326
Note receivable 12,500 12,500
Properties and equipment, at cost less accumulated
depreciation of $63,496 (2002 - $62,370) 46,906 48,361
Identifiable intangible assets less accumulated
amortization of $7,319 (2002 - $7,167) 2,599 2,889
Goodwill 112,903 110,843
Other assets 17,196 15,606
---------- ----------
Total Assets $ 341,734 $ 338,929
========== ==========
LIABILITIES
Current liabilities
Accounts payable $ 6,976 $ 5,686
Current portion of long-term debt 473 409
Income taxes 7,451 7,347
Deferred contract revenue 16,795 17,321
Accrued insurance 16,442 17,448
Other current liabilities 19,631 21,657
---------- ----------
Total current liabilities 67,768 69,868
Long-term debt 25,715 25,603
Mandatorily redeemable convertible preferred securities of
the Chemed Capital Trust 14,186 14,186
Deferred compensation liabilities 16,395 15,196
Other liabilities 10,955 10,799
---------- ----------
Total Liabilities 135,019 135,652
========== ==========
STOCKHOLDERS' EQUITY
Capital stock-authorized 15,000,000 shares $1 par;
issued 13,451,281 (2002 - 13,448,475) shares 13,451 13,448
Paid-in capital 169,402 168,299
Retained earnings 135,766 132,793
Treasury stock - 3,512,924 (2002 - 3,630,689) shares, at cost (110,681) (111,582)
Unearned compensation (3,824) (4,694)
Deferred compensation payable in Company stock 2,310 2,280
Notes receivable for shares sold (926) (952)
Accumulated other comprehensive income 1,217 3,685
---------- ----------
Total Stockholders' Equity 206,715 203,277
---------- ----------
Total Liabilities and Stockholders' Equity $ 341,734 $ 338,929
========== ==========
* Reclassified to conform to 2003 presentation
See accompanying notes to unaudited financial statements.
Page 3 of 22
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
2003 2002 2003 2002
---- ---- ---- ----
Continuing Operations
Service revenues and sales $ 77,271 $ 79,082 $154,916 $159,935
-------- -------- -------- --------
Cost of services provided and goods sold
(excluding depreciation) 45,611 46,624 91,763 95,132
General and administrative expenses 14,532 12,508 31,056 25,162
Selling and marketing expenses 11,339 10,788 22,417 22,781
Depreciation 2,990 3,486 6,042 6,978
-------- -------- -------- --------
Total costs and expenses 74,472 73,406 151,278 150,053
-------- -------- -------- --------
Income from operations 2,799 5,676 3,638 9,882
Interest expense (599) (763) (1,138) (1,536)
Distributions on preferred securities (268) (271) (536) (541)
Other income - net 2,454 953 6,717 3,542
-------- -------- -------- --------
Income before income taxes 4,386 5,595 8,681 11,347
Income taxes (1,594) (2,150) (3,336) (4,097)
-------- -------- --------- ---------
Income from continuing operations 2,792 3,445 5,345 7,250
Discontinued operations - 1,124 - 1,991
Net Income $ 2,792 $ 4,569 $ 5,345 $ 9,241
======== ======== ======== ========
Earnings Per Share
Income from continuing operations $ .28 $ .35 $ .54 $ .74
======== ======== ======== ========
Net income $ .28 $ .46 $ .54 $ .94
======== ======== ======== ========
Average number of shares outstanding 9,908 9,857 9,899 9,850
======== ======== ======== ========
Diluted Earnings Per Share
Income from continuing operations $ .28 $ .35 $ .54 $ .73
======== ======== ======== ========
Net income $ .28 $ .46 $ .54 $ .93
======== ======== ======== ========
Average number of shares outstanding 9,942 9,898 9,922 9,891
======== ======== ======== ========
Cash Dividends Per Share $ .12 $ .11 $ .24 $ .22
======== ======== ======== ========
See accompanying notes to unaudited financial statements.
Page 4 of 22
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Six Months Ended
June 30,
2003 2002*
---- -----
Cash Flows From Operating Activities
Net income $ 5,345 $ 9,241
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 6,399 7,371
Gains on sale of available-for-sale investments (3,544) (1,141)
Provision for deferred income taxes (526) 478
Provision for uncollectible accounts receivable 106 1,106
Discontinued operations - (1,991)
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations
Decrease/(increase) in accounts receivable 777 (712)
Decrease in inventories 794 354
Decrease in statutory deposits 2,228 1,049
Decrease/(increase) in prepaid expenses and other
current assets (618) 1,428
Decrease in accounts payable, deferred contract
revenue and other current liabilities (2,087) (5,722)
Increase in income taxes 1,037 2,854
Increase in other assets (1,556) (1,481)
Increase in other liabilities 2,376 645
Noncash expense of internally financed ESOPs 870 1,956
Other sources/(uses) (102) 916
--------- --------
Net cash provided by continuing operations 11,499 16,351
Net cash provided by discontinued operations - 2,192
--------- --------
Net cash provided by operating activities 11,499 18,543
Cash Flows From Investing Activities
Capital expenditures (4,846) (5,716)
Proceeds from sales of available-for-sale investments 4,493 1,917
Business combinations, net of cash acquired (1,538) (1,229)
Net uses by discontinued operations (993) (1,926)
Proceeds from sales of property and equipment 296 1,939
Investing activities from discontinued operations - (356)
Other uses (293) (252)
--------- --------
Net cash used by investing activities (2,881) (5,623)
--------- --------
Cash Flows From Financing Activities
Dividends paid (2,376) (2,168)
Issuance of capital stock 1,320 778
Purchases of treasury stock (255) (3,181)
Repayment of long-term debt (230) (10,214)
Proceeds from issuance of long-term debt - 5,000
Other sources 534 54
--------- --------
Net cash used by financing activities (1,007) (9,731)
--------- --------
Increase In Cash and Cash Equivalents 7,611 3,189
Cash and cash equivalents at beginning of period 37,731 8,725
--------- --------
Cash and cash equivalents at end of period $ 45,342 $ 11,914
========= ========
* Reclassified for operations discontinued in 2002
See accompanying notes to unaudited financial statements.
Page 5 of 22
ROTO-ROOTER, INC. AND SUBSIDIARY COMPANIES
Notes to Unaudited Financial Statements
1. On May 19, 2003, shareholders of Chemed Corporation approved
changing the company's name to Roto-Rooter, Inc. As used
herein, the term Company refers to Roto-Rooter Inc. or Roto-
Rooter Inc. and its subsidiaries.
2. 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 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. For further information regarding the
Company's accounting policies, refer to the consolidated
financial statements and notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002.
The Company uses Accounting Principles Board Opinion No. 25
("APB No. 25"), Accounting for Stock Issued to Employees, to
account for stock-based compensation. Since the Company's stock
options qualify as fixed options under APB No. 25 and since the
option price equals the market price on the date of grant, there
is no compensation expense for stock options. Stock awards are
expensed during the period the related services are provided.
The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair-value-
recognition provisions of Financial Accounting Standards Board
Statement No. 123, Accounting for Stock-Based Compensation (in
thousands, except per share data:)
Three Months Ended June 30,
---------------------------
2003 2002
--------- ---------
Net Income as reported $ 2,792 $ 4,569
Add: stock-based compensation expense
included in net income as reported,
net of income tax effects 11 30
Deduct: total stock-based employee
compensation determined under
a fair-value-based method for
all stock options and awards,
net of income tax effects (234) (222)
--------- ---------
Pro forma net income $ 2,569 $ 4,377
========= =========
Earnings Per Share
As reported $ .28 $ .46
========= =========
Pro forma $ .26 $ .44
========= =========
Diluted earnings per share
As reported $ .28 $ .46
========= =========
Pro forma $ .26 $ .44
========= =========
Page 6 of 22
Six Months Ended June 30,
-------------------------
2003 2002
------- ---------
Net Income as reported $ 5,345 $ 9,241
Add: stock-based compensation
expense included in net
income as reported, net of
income tax effects 45 60
Deduct: total stock-based employee
compensation determined
under a fair-value-based
method for all stock options
and awards, net of income
tax effects (459) (327)
------- -------
Pro forma net income $ 4,931 $ 8,974
======= =======
Earnings Per Share
As reported $ .54 $ .94
======= =======
Pro forma $ .50 $ .91
======= =======
Diluted earnings per share
As reported $ .54 $ .93
======= =======
Pro forma $ .50 $ .91
======= =======
3. During the second quarter of 2003, the administrative functions
for employee benefits, retirement services, risk management,
public relations, cash management and taxation of the corporate
office and the Plumbing and Drain Cleaning business were
combined to enable the Company to benefit from economies of
scale. In May 2003 the shareholders of the Company approved
changing the corporation's name from Chemed Corporation to Roto-
Rooter Inc. Due to these changes and the changing composition of
businesses comprising the Company over the past several years,
management re-evaluated the Company's segment reporting as it
relates to corporate office administrative expenses. The
discontinuance of businesses in 1997 (Omnia Group and National
Sanitary Supply), 2001 (Cadre Computer) and 2002 (Patient Care),
results in more than 80% of the Company's business represented
by Roto-Rooter's Plumbing and Drain Cleaning business.
To better reflect how executive management evaluates its
operations, the costs of the administrative functions of the
corporate office have been combined with the operating results
of the Plumbing and Drain Cleaning business (formerly the Roto-
Rooter Group) to form the Plumbing and Drain Cleaning segment.
The Service America segment remains essentially unchanged. Data
for the former Roto-Rooter Group and corporate office overhead
for all prior periods have been restated for comparability
purposes.
As in the past, unallocated investing and financing income and
expense includes interest income and expense dividend income and
other nonoperating income and expense related to unallocated
corporate assets and liabilities.
Page 7 of 22
Service revenues and sales and aftertax earnings by business
segment follow (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------------
2003 2002 2003 2002
-------- -------- --------- ---------
Service Revenues and Sales
- --------------------------
Plumbing and Drain Cleaning $ 64,592 $ 63,095 $ 129,317 $ 128,374
Service America 12,679 15,987 25,599 31,561
-------- -------- --------- ---------
Total $ 77,271 $ 79,082 $ 154,916 $ 159,935
======== ======== ========= =========
Aftertax Earnings
- -----------------
Plumbing and Drain Cleaning $ 2,446 $ 3,207 $ 2,466(a) $ 5,714
Service America 35 59 75 386
------- -------- --------- ---------
Total Segment Earnings $ 2,481 $ 3,266 $ 2,541 $ 6,100
Unallocated Investing and Financing
Income and Expense - Net 311 179 2,804(b) 1,150(c)
-------- -------- --------- ---------
Income from Continuing
Operations 2,792 3,445 5,345 7,250
Discontinued Operations - 1,124 - 1,991
-------- -------- --------- ---------
Net Income $ 2,792 $ 4,569 $ 5,345 $ 9,241
======== ======== ========= =========
- ------------------
(a) Amount includes aftertax severance charges of $2,358,000 ($.24 per share).
(b) Amount includes aftertax capital gain on the sales of investments of $2,151,000 ($.22
per share) in the first quarter of 2003.
(c) Amount includes aftertax capital gain on sales of investments of $775,000 ($.08 per
share) in the first quarter of 2002.
4. Other income--net from continuing operations comprises the
following (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ----------------------
2003 2002 2003 2002
------ ------- ------ -----
Market value adjustments
on trading investments of
deferred compensation trusts $1,217 $ (13) $ 565 $ (84)
Interest income 703 619 1,518 1,255
Dividend income 607 616 1,223 1,231
Gains on sales of
available-for-sale investments - - 3,544 1,141
Other (73) (269) (133) (1)
------ ------- ------ ------
Total $2,454 $ 953 $6,717 $3,542
====== ======= ====== ======
5. In March 2003, the Company and a corporate officer reached
agreement providing for termination of the officer's employment
in exchange for payment under her employment contract. The
contractual payments comprise a $1,000,000 lump sum payment made
in March 2003 and monthly payments of $52,788 beginning March
2003 and ending May 2007. The present value of these payments
($3,627,000) is included in general and administrative expenses.
Page 8 of 22
6. Earnings per common share are computed using the weighted
average number of shares of capital stock outstanding. Diluted
earnings per common share are computed below (in thousands
except per share data):
Income Shares Income
(Numerator) (Denominator) Per Share
----------- ------------- ---------
Income from Continuing Operations -
For the Three Months Ended June 30,
2003
Earnings $ 2,792 9,908 $ .28
=======
Dilutive stock options - 34
---------- -----
Diluted earning $ 2,792 9,942 $ .28
========== ===== =======
2002
Earnings $ 3,445 9,857 $ .35
=======
Dilutive stock options - 41
---------- -----
Diluted earning $ 3,445 9,898 $ .35
========== ===== =======
Net Income -
For the Three Months Ended June 30,
2003
Earnings $ 2,792 9,908 $ .28
=======
Dilutive stock options - 34
---------- -----
Diluted earning $ 2,792 9,942 $ .28
========== ===== =======
2002
Earnings $ 4,569 9,857 $ .46
=======
Dilutive stock options - 41
---------- -----
Diluted earning $ 4,569 9,898 $ .46
========== ===== =======
Income from Continuing Operations -
For the Six Months Ended June 30,
2003
Earnings $ 5,345 9,899 $ .54
=======
Dilutive stock options - 23
---------- -----
Diluted earning $ 5,345 9,922 $ .54
========== ===== =======
2002
Earnings $ 7,250 9,850 $ .74
=======
Dilutive stock options - 41
Diluted earning $ 7,250 9,891 $ .73
========== ===== =======
Net Income -
For the Six Months Ended June 30,
2003
Earnings $ 5,345 9,899 $ .54
=======
Dilutive stock options - 23
---------- -----
Diluted earning $ 5,345 9,922 $ .54
========== ===== =======
2002
Earnings $ 9,241 9,850 $ .94
=======
Dilutive stock options - 41
---------- -----
Diluted earning $ 9,241 9,891 $ .93
========== ===== =======
The impact of the convertible preferred securities has been excluded from the above
computations because it is antidilutive on earnings per share from continuing
operations for all periods presented.
7. The Company's total comprehensive income was (in thousands):
Three Months Ended Six Months Ended
-------------------- -------------------
June 30, June 30,
-------------------- -------------------
2003 2002 2003 2002
---- ---- ---- ----
Total Comprehensive
Income/(Loss) $ 2,724 $ 4,472 $ 2,877 $ 9,232
======= ======= ======= =======
The difference between the Company's net income and
comprehensive income is the unrealized appreciation or
depreciation on its available-for-sale securities.
Page 9 of 22
8. During 2003, three purchase business combinations were completed
within the Plumbing and Drain Cleaning segment for an aggregate
purchase price of $1,944,000 ($1,538,000 in cash and a note
payable for $406,000). The businesses acquired provide drain
cleaning and plumbing services under the Roto-Rooter name. The
results of operations of these businesses are not material.
The purchase prices were allocated as follows (in thousands):
Goodwill $ 1,793
Other 151
-------
Total purchase price 1,944
Less: Note payable (406)
-------
Cash outlay $ 1,538
=======
9. In the normal course of business the Company enters into various
guarantees and indemnifications in its relationships with
customers and others. Examples of these arrangements include
guarantees of service and product performance. The Company's
experience indicates guarantees and indemnifications do not
materially impact the Company's financial condition or results
of operations.
10. In August 2001, the Financial Accounting Standards Board
("FASB") approved the issuance of Statement of Financial
Accounting Standards ("SFAS")No. 143, Accounting for Asset
Retirement Obligations. This statement became effective for
fiscal years beginning after June 15, 2002, and requires
recognizing legal obligations associated with the retirement of
tangible long-lived assets that result from the acquisition,
construction, development or normal operation of a long-lived
asset. Since the Company has no material asset retirement
obligations, the adoption of SFAS No. 143 in 2003 did not have a
material impact on Roto-Rooter, Inc.'s financial statements.
11. In July 2002, the FASB approved the issuance of SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. Generally, SFAS No. 146 stipulates that defined
exit costs (including restructuring and employee termination
costs) are to be recorded on an incurred basis rather than on a
commitment basis, as is presently required. This statement is
effective for exit or disposal activities initiated after
December 31, 2002. The adoption of SFAS No. 146 in 2003 did not
have a material impact on Roto-Rooter, Inc.'s financial
statements.
12. In November 2002, the FASB approved the issuance of FASB
Interpretation ("FIN") No. 45, Guarantor's Accounting and
Disclosure for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. The initial recognition and initial
measurement provisions of the Interpretation are applicable to
guarantees issued or modified after December 31, 2002. The
adoption of FIN No. 45 in 2003 did not have a material impact on
Roto-Rooter, Inc.s financial statements.
Page 10 of 22
13. In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation--Transition and Disclosure. It is
effective for annual periods ending, and for interim periods
beginning, after December 15, 2002. Because the Company uses
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, to account for stock-based compensation,
the adoption of SFAS No. 148 in 2003 did not have a material
impact on Roto-Rooter, Inc.'s financial statements.
14. In January 2003, the FASB approved the issuance of FIN No. 46,
Consolidation of Variable Interest Entities. It is effective
for variable interest entities created after January 31, 2003,
and for variable interest entities in which an enterprise
obtains an interest after that date. The adoption of this
statement did not have a material impact on the Company's
financial statements.
15. In May 2003, the FASB approved the issuance of SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. As a result of
the issuance of this pronouncement, the Company now reports the
mandatorily redeemable convertible preferred securities of the
Chemed Capital Trust as a noncurrent liability rather than in
the "mezzanine" (i.e., between liabilities and equity) as
reported previously. This reclassification does not affect the
Company's compliance with its debt covenants. The adoption of
this statement did not impact the statement of income.
16. On August 7, 2003, Vitas Healthcare Corporation ("Vitas") gave
notice that it will retire the Company's investment in the 9%
Redeemable Preferred Stock Of Vitas on August 18, 2003. Cash
proceeds to the Company will total $27.3 million and the Company
will realize a pretax gain of approximately $1.8 million in the
third quarter of 2003. During 2003, the dividends on this
investment contributed $628,000 per quarter to the aftertax
earnings of the Company. Dividends will cease to accrue on
August 17, 2003.
The Company holds three warrants for the purchase of up to
approximately 48% of the outstanding common stock of Vitas. The
Board of Directors of the Company recently authorized the
exercise of all or a portion of these warrants.
Page 11 of 22
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Financial Condition
The decline in other investments from $37,326,000 at
December 31, 2002 to $32,789,000 at June 30, 2003 is due to the sale
of investments during the first quarter of 2003. The decline in
other current liabilities from $21,657,000 at December 31, 2002 to
$19,631,000 at June 30, 2003 is primarily due to the payment in the
first quarter of 2003 of incentive compensation and discretionary
thrift plan contributions for 2002. There are no other significant
changes in the balance sheet accounts during the first six months of
2003.
At June 30, 2003, Roto-Rooter, Inc. had approximately
$98.6 million of lines of credit with various banks. Management
believes its liquidity and sources of capital are satisfactory for
the Company's needs in the foreseeable future.
Results of Operations
Second Quarter 2003 versus Second Quarter 2002-Consolidated Results
The Company's service revenues and sales for the second
quarter of 2003 declined 2% versus revenues for the second quarter
of 2002. This $1.8 million decline was attributable to the
following (dollar amounts in thousands):
Increase/(Decrease)
------------------------
Amount Percent
------ -------
Service America
Service contracts $(2,312) (20.0)%
Demand services (996) (22.5)
Plumbing and Drain Cleaning
Plumbing 807 3.3
Drain cleaning (388) (1.5)
Other 1,078 9.0
-------
Total $(1,811) (2.3)%
=======
The decline in Service America's service contract revenues
is attributable to selling insufficient new service contracts to
replace contracts cancelled or not renewed. The annualized value of
contracts in place during the second quarter of 2003 was 20% lower
than the 2002 quarter. As revenues from demand services are largely
dependent upon service contract customers, the decline in service
contracts in place was largely responsible for the decline in demand
services in 2003.
The increase in plumbing revenues for the second quarter
of 2003 versus 2002 comprises a 1.8% increase in the number of jobs
performed, and a 1.5% increase in the average price per job. The
decline in drain cleaning revenues for the second quarter of 2003
versus 2002 comprised a 4.0% decrease in the number of jobs
partially offset by a 2.5% increase in the average price per job.
The increase in other revenues for the second quarter of 2003 versus
2002 is attributable to increases in product sales, industrial and
municipal sales and license revenues from contractor operations.
Page 12 of 22
The consolidated gross margin was 41% in the second quarters of 2003
and 2002. On a segment basis, the Plumbing and Drain Cleaning
segment's gross margin declined 1.2% points, primarily due to
increased labor costs. Service America's gross margin increased
1.0% points due to reduced labor costs as a result of recent
reductions in service technician headcount.
General and administrative expenses for the second quarter
of 2003 were $14,532,000, an increase of $2,024,000 (16.2%) versus
the second quarter of 2002. Of this increase, $1,230,000 was
attributable to market gains on assets of deferred compensation
trusts in the second quarter of 2003 versus a small loss in such
assets in 2002 (all within the Plumbing and Drain Cleaning segment).
These gains and losses are included in other income with an
equivalent charge or credit to general and administrative expenses
for the change in the related deferred compensation liability. The
remainder of the increase is primarily attributable to higher
expenses in the Plumbing and Drain cleaning segment as the result of
higher legal expenses during the 2003 quarter and normal salary and
wage increases during 2003.
Selling and marketing expenses for the second quarter of
2003 were $11,339,000, an increase of $551,000 (5.1%) versus the
second quarter of 2002. Selling and marketing expenses of the
Plumbing and Drain Cleaning segment increased $939,000 (10.3%) in
the 2003 quarter, largely as the result of higher expenses
(primarily wages and benefits) for centralized call centers. For
Service America, selling and marketing expenses declined $388,000
(23.6%) in 2003, primarily as the result of the reduction in the
number of employees.
Depreciation expense for the second quarter of 2003
declined $496,000 (14.2%) from $3,486,000 in the second quarter of
2002 to $2,990,000 in the 2003 quarter. $248,000 of this decline
relates to the Service America segment and $248,000 relates to the
Plumbing and Drain Cleaning segment. Both reductions were primarily
attributable to reduced depreciation on service vehicles, resulting
from recent declines in capital outlays.
Income from operations declined $2,877,000 (50.7%) from
$5,676,000 in the second quarter of 2002 to $2,799,000 in the second
quarter of 2003. Substantially all of this decline occurred within
the Plumbing and Drain Cleaning segment. $1,230,000 was
attributable to the aforementioned increase in deferred compensation
expense (which is completely offset in the "other income" line of
the statement of income). Higher call center expenses and higher
legal fees in the 2003 quarter contributed significantly to the
decline in income from operations.
Interest expense, substantially all of which is incurred
as Unallocated Investing and Financing income/expense, declined from
$763,000 in the second quarter of 2002 to $599,000 in the 2003
quarter. This decline is primarily attributable to lower debt
levels in 2003 as the result of using cash proceeds from the sale of
Patient Care late in 2002 to pay down the Company's revolving line
of credit.
Page 13 of 22
Other income increased $1,501,000 in the second quarter of
2003 versus the second quarter of 2002. Most of this increase
($1,230,000) is attributable to the aforementioned increase in
market adjustments for assets held in deferred compensation trusts
in the 2003 quarter (which is entirely offset in the "general and
administrative expense" category of the statement of income).
The Company's effective income tax rate declined from
38.4% in the second quarter of 2002 to 36.3% in the second quarter
of 2003. This decline is attributable to a lower effective state
and local tax rate in the Plumbing and Drain Cleaning segment and to
a larger dividend exclusion (Unallocated Investing and Financing
income/expense) as a percent of pretax income in the 2003 quarter
versus 2002.
Income from continuing operations for the second quarter
declined $653,000 from $3,445,000 ($.35 per share) in 2002 to
$2,792,000 ($.28 per share) in 2003. Most of this decline is
attributable to lower earnings of the Plumbing and Drain Cleaning
Segment in 2003.
Net income for the second quarter declined $1,769,000 from
$4,569,000 ($.46 per share) in 2002 to $2,792,000 ($.28 per share)
in 2003. Net income for the 2002 quarter included $1,124,000 ($.11
per share) from the operations of Patient Care sold in October 2002.
Second Quarter 2003 versus Second Quarter 2002-Segment Results
Data relating to the increase or decrease in service
revenues and sales and to aftertax earnings as a percent of sales
for each segment are set forth below:
Service Revenues Aftertax Earnings as a
and Sales Percent Percent of Revenues
Three Months Ended Increase/(Decrease) (Aftertax Margin)
---------------------
June 30, 2003 vs. 2002 2003 2002
------------------ ------------------ -------- ---------
Plumbing and Drain Cleaning 2 % 3.8% 5.1%
Service America (21) 0.3 0.4
Total (2) 3.2 4.1
The change in aftertax earnings for the second quarter of
2003 versus 2002 is summarized below (in thousands):
Increase/
(Decrease)
---------
Service America $ (24)
Plumbing and Drain Cleaning (761)
Unallocated Investing and Financing 132
---------
Income from continuing operations $ (653)
=========
The decline in the aftertax earnings and the related decline in the
aftertax margin of the Plumbing and Drain Cleaning segment is
primarily attributable to higher labor costs, higher call center
costs and higher legal expenses during the 2003 quarter. The
increase in Unallocated Investing and Financing income/expense is
attributable to interest income on the $12.5 million note receivable
from the sale of Patient Care in October 2002.
Page 14 of 22
Six Months 2003 versus Six Months 2002 - Consolidated Results
- -------------------------------------------------------------
The Company's service revenues and sales for the first six
months of 2003 declined 3% versus revenues for the first six months
of 2002. This $5.0 million decline was attributable to the
following (dollar amounts in thousands):
Increase/(Decrease)
Amount Percent
-------- --------
Service America
Service contracts $(4,313) (18.5)%
Demand services (1,649) (19.9)
Plumbing and Drain Cleaning
Plumbing 604 1.2
Drain cleaning (808) (1.5)
Other 1,147 4.6
-------
Total $(5,019) (3.1)%
=======
The decline in Service America's revenues is attributable
to selling insufficient new service contracts to replace contracts
cancelled or not renewed. The annualized value of contracts in
place during the first six months of 2003 was 19% lower than the
2002 period. The decline in service contracts in place was largely
responsible for the decline in demand services in 2003.
The increase in the plumbing revenues for the first six
months of 2003 versus 2002 comprises a 1.9% increase in the number
of jobs performed and a .7% decline in the average price per job.
The decline in drain cleaning revenues for the first six months of
2003 versus 2002 comprise a 4.0% decrease in the number of jobs
partially offset by a 2.5% increase in the average price per job.
The increase in other revenues for the first six months of 2003
versus 2002 is attributable to increases in industrial and municipal
sales and contractor operations.
The consolidated gross margin was 40.8% in the first six
months of 2003 and 40.5% in the 2002 period. On a segment basis,
the Plumbing and Drain Cleaning segment's gross margin was
essentially the same in both periods. Service America's gross
margin increased 1.1% points due to reduced labor costs as a result
of recent reductions in service technician headcount.
General and administrative expenses for the first six
months of 2003 were $31,056,000, an increase of $5,894,000 (23.4%)
versus the first six months of 2002. Expenses for the 2003 period
include a $3,627,000 charge from severance for a corporate officer
in 2003. In addition, $649,000 of this increase was attributable to
recording market gains on assets of deferred compensation trusts in
the first six months of 2003 versus a small loss in such assets in
2002 (all within the Plumbing and Drain Cleaning segment). These
gains and losses are included in other income with an equivalent
charge or credit to general and administrative expenses for the
change in the related deferred compensation liability. The
remainder of the increase is primarily attributable to higher
expenses in the Plumbing and Drain cleaning segment as the result of
higher legal expenses during the 2003 period and normal salary and
wage increases during 2003.
Page 15 of 22
Selling and marketing expenses for the first six months of
2003 were $22,417,000, a decline of $364,000 (1.6%) versus the first
six months of 2002. Selling and marketing expenses of the Plumbing
and Drain Cleaning segment increased $523,000, 2.7% in the 2003
period, largely as the result of higher salaries and wages in 2003.
For Service America selling and marketing expenses declined $887,000
(26.5%) in 2003, primarily as the result of the reduction in the
number of employees.
Depreciation expense for the first six months of 2003
declined $936,000 (13.4%) from $6,978,000 in the first six months of
2002 to $6,042,000 in the 2003 period. $458,000 of this decline
relates to the Service America segment and $478,000 relates to the
Plumbing and Drain Cleaning segment. Both reductions were primarily
attributable to reduced depreciation on service vehicles, resulting
from recent declines in capital outlays.
Income from operations declined $6,244,000 (63.2%) from
$9,882,000 in the first six months of 2002 to $3,638,000 in the
first six months of 2003. Most of this decline occurred withing the
Plumbing and Drain Cleaning segment. The previously mentioned
severance charge in the first quarter of 2003 accounted for
$3,627,000 of the decline while $649,000 of the decline was
attributable to the increase in deferred compensation expense
(which is completely offset in the "other income" line of the
statement of income). Higher call center expenses and higher legal
fees in the 2003 period contributed significantly to the decline in
income from operations.
Interest expense, substantially all of which is incurred
as Unallocated Investing and Financing income/expense, declined from
$1,536,000 in the first six months of 2002 to $1,138,000 in the 2003
period. This is primarily attributable to lower debt levels in 2003
as the result of using cash proceeds from the sale of Patient Care
in 2002 to pay down the Company's revolving line of credit.
Other income increased $3,175,000 in the first six months
of 2003 versus the first six months of 2002. This increase is
primarily attributable to larger capital gains on the sales of
investments ($3,544,000 in the first six months of 2003 versus
$1,141,000 in 2002) and the aforementioned increase in market
adjustments for assets held in deferred compensation trusts
($649,000) in the 2003 period (which is entirely offset in the
"general and administrative expense" category of the statement of
income).
The Company's effective income tax rate increased from
36.1% in the first six months of 2002 to 38.4% in the first six
months of 2003. This is primarily attributable to the lack of a
state income tax benefit on the severance charges incurred in 2003.
Income from continuing operations for the first six months
declined $1,905,000 from $7,250,000 ($.74 per share and $.73 per
diluted share) in 2002 to $5,345,000 ($.54 per share) in 2003.
Earnings for the first six months of 2003 included an aftertax
severance charge of $2,358,000 ($.24 per share) and aftertax capital
gains on the sales of investments of $2,151,000 ($.22 per share).
Earnings for 2002 included capital gains on the sales of investments
of $775,000 ($.08 per share).
Page 16 of 22
Net income for the first six months declined $3,896,000
from $9,241,000 ($.94 per share and $.93 per diluted share) in 2002
to $5,345,000 ($.54 per share) in 2003. Net income for the 2002
period included $1,991,000 ($.20 per share) from the operations of
Patient Care sold in October 2002.
Six Months 2003 versus Six Months 2002 - Segment Results
- --------------------------------------------------------
Data relating to the increase or decrease in service
revenues and sales and to aftertax earnings as a percent of sales
for each segment are set forth below:
Service Revenues Aftertax Earnings as a
and Sales Percent Percent of Revenues
Six Months Ended Increase/(Decrease) (Aftertax Margin)
----------------------
June 30, 2003 vs. 2002 2003 2002
------------------- ------------------ ------- -------
Plumbing and Drain Cleaning 1 % 1.9% 4.5%
Service America (19) 0.3 1.2
Total (3) 1.6 3.8
The change in aftertax earnings for the first six months
of 2003 versus 2002 is summarized below (in thousands):
Increase/
(Decrease)
----------
Service America $ (311)
Plumbing and Drain Cleaning (3,248)
Unallocated Investing and Financing 1,654
---------
Income from continuing operations $ (1,905)
=========
The decline in the aftertax earnings of Service America during the
first six months of 2003 versus 2002 is attributable largely to the
negative impact of leverage (relatively fixed general and
administrative expenses during a period of declining revenues). The
decline in the aftertax earnings and the related decline in the
aftertax margin of the Plumbing and Drain Cleaning segment is
primarily attributable to a severance charge incurred in the first
quarter of 2003 for a corporate officer ($2,358,000). The remainder
of the decline in this segment's earnings is attributable to higher
call center costs and higher legal expenses during the 2003 period.
The increase in Unallocated Investing and Financing income/expense
is attributable to larger aftertax capital gains in the 2003 period
($2,151,000 in 2003 versus $775,000 in 2002) and to interest income
on the $12.5 million note receivable from the sale of Patient Care
in October 2002 ($322,000).
Recent Accounting Statements
- ----------------------------
In August 2001, the Financial Accounting Standards Board
("FASB") approved the issuance of Statement of Financial Accounting
Standards ("SFAS")No. 143, Accounting for Asset Retirement
Obligations. This statement became effective for fiscal years
beginning after June 15, 2002, and requires recognizing legal
obligations associated with the retirement of tangible long-lived
assets that result from the acquisition, construction, development
Page 17 of 22
or normal operation of a long-lived asset. Since the Company has no
material asset retirement obligations, the adoption of SFAS No. 143
in 2003 did not have a material impact on Roto-Rooter, Inc.'s
financial statements.
In July 2002, the FASB approved the issuance of SFAS No.
146, Accounting for Costs Associated with Exit or Disposal
Activities. Generally, SFAS No. 146 stipulates that defined exit
costs (including restructuring and employee termination costs) are
to be recorded on an incurred basis rather than on a commitment
basis, as is presently required. This statement is effective for
exit or disposal activities initiated after December 31, 2002. The
adoption of SFAS No. 146 in 2003 did not have a material impact on
Roto-Rooter, Inc.'s financial statements.
In November 2002, the FASB approved the issuance of FASB
interpretation ("FIN") No. 45, Guarantor's Accounting and Disclosure
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. The initial recognition and initial measurement provisions
of the Interpretation are applicable to guarantees issued or
modified after December 31, 2002. The adoption of FIN No. 45 in 2003
did not have a material impact on Roto-Rooter, Inc.'s financial
statements.
In December 2002, the FASB issued SFAS No. 148, Accounting
for Stock-Based Compensation--Transition and Disclosure. It is
effective for annual periods ending, and for interim periods
beginning, after December 15, 2002. Because the Company uses
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, to account for stock-based compensation, the
adoption of SFAS No. 148 in 2003 did not have a material impact on
Roto-Rooter, Inc.'s financial statements.
In January 2003, the FASB approved the issuance of FIN No.
46, Consolidation of Variable Interest Entities. It is effective
for variable interest entities created after January 31, 2003, and
for variable interest entities in which an enterprise obtains an
interest after that date. The adoption of this statement did not
have a material impact on the Company's financial statements.
In May 2003, the FASB approved the issuance of SFAS No.
150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. As a result of the
issuance of this pronouncement, the Company now reports the
mandatorily redeemable convertible preferred securities of the
Chemed Capital Trust as a noncurrent liability rather than in the
"mezzanine" (i.e., between liabilities and equity) as reported
previously. This reclassification does not affect the Companys
compliance with its debt covenants. The adoption of this statement
did not impact the statement of income.
Page 18 of 22
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 Regarding Forward-Looking Information
- -------------------------------------------------------------
In addition to historical information, this report contains
forward-looking statements and performance trends that are based
upon assumptions subject to certain known and unknown risks,
uncertainties, contingencies and other factors. Variances in any or
all of the risks, uncertainties, contingencies, and other factors
from the Company's assumptions could cause actual results to differ
materially from these forward-looking statements and trends. The
Company's ability to deal with the unknown outcomes of these events,
many of which are beyond the control of the Company, may affect the
reliability of its projections and other financial matters.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures
that are designed to ensure that information required to be
disclosed in the Company's Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management to allow
timely decisions regarding required disclosure.
The Company recently carried out an evaluation, under the
supervision of the Company's President and Chief Executive Officer,
and with the participation of the Executive Vice President and
Treasurer and the Vice President and Controller, of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rules
13a-14/15d-14(a). Based upon the foregoing, the Company's President
and Chief Executive Officer, Executive Vice President and Treasurer
and Vice President and Controller concluded that as of the date of
this report the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating
to the Company and its consolidated subsidiaries required to be
included in the Company's Exchange Act reports. There have been no
significant changes in internal control over financial reporting
during the quarter ended June 30, 2003.
Page 19 of 22
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Roto-Rooter, Inc. held its annual meeting of stockholders
on May 19, 2003.
(b) The names of directors elected at this annual meeting are
as follows:
Edward L. Hutton Sandra E. Laney
Kevin J. McNamara Timothy S. O'Toole
Charles H. Erhart, Jr. Donald E. Saunders
Joel F. Gemunder George J. Walsh III
Patrick P. Grace Frank E. Wood
Thomas C. Hutton
(c) The stockholders ratified the selection by the Audit
Committee of the Board of Directors of
PricewaterhouseCoopers LLP as independent accountants for
the Company and its consolidated subsidiaries for the year
2003: 9,212,452 votes were cast in favor of the proposal,
148,890 votes were cast against it, 25,299 votes
abstained, and there were no broker non-votes.
(d) The stockholders then voted on the approval and adoption
of an amendment to the Certificate of Incorporation
changing the Company's name to Roto-Rooter, Inc.:
9,314,899 votes were cast in favor of the proposal, 51,156
votes were cast against it, 20,586 votes abstained, and
there were no broker non-votes.
With respect to the election of directors, the number of
votes cast for each nominee was as follows:
For Against
--------- ---------
Edward L. Hutton 8,085,483 1,301,158
Kevin J. McNamara 8,100,177 1,286,464
Charles H. Erhart, Jr. 8,157,616 1,229,025
Joel F. Gemunder 8,100,419 1,286,223
Patrick P. Grace 8,159,965 1,226,676
Thomas C. Hutton 8,095,422 1,291,219
Sandra E. Laney 7,843,740 1,542,901
Timothy S. O'Toole 8,103,108 1,283,533
Donald E. Saunders 8,090,958 1,295,683
George J. Walsh, III 8,169,375 1,217,266
Frank E. Wood 8,165,849 1,220,792
Page 20 of 22
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
--- --------
Exhibit No. Description
----------- -----------
31.1 Certification by Kevin J. McNamara
pursuant to Rule 13A - 14 of the
Exchange Act of 1934.
31.2 Certification by Timothy S. O'Toole
pursuant to Rule 13A - 14 of the
Exchange Act of 1934.
31.3 Certification by Arthur V. Tucker, Jr.
pursuant to Rule 13A - 14 of the
Exchange Act of 1934.
99.1 Certification by Kevin J. McNamara
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Timothy S. O'Toole
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.3 Certification by Arthur V. Tucker, Jr.
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
--- -------------------
- A Current Report on Form 8-K, dated May 19, 2003, was
filed May 21, 2003. The report includes the
Company's announcement of changing its name from
Chemed Corporation to Roto-Rooter, Inc.
- A Current Report on Form 8-K, dated July 17, 2003,
was filed July 21, 2003. The report includes the
Company's earnings announcement for the second
quarter.
- An Amended Current Report on Form 8-K/A, dated July
17, 2003, was filed July 21, 2003. The report
includes the Company's earnings announcement
(including a properly formatted balance sheet) for
the second quarter.
Page 21 of 22
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Roto-Rooter, Inc.
-----------------
(Registrant)
Dated: August 13, 2003 By /s/ Kevin J. McNamara
--------------- ---------------------
Kevin J. McNamara
(President and Chief
Executive Officer)
Dated: August 13, 2003 By /s/ Timothy S. O'Toole
--------------- ----------------------
Timothy S. O'Toole
(Executive Vice President
and Treasurer)
Dated: August 13, 2003 By /s/ Arthur V. Tucker, Jr.
--------------- -------------------------
Arthur V. Tucker, Jr.
(Vice President and
Controller)
Page 22 of 22
EXHIBIT 31.1
CERTIFICATION PURSUANT TO RULES 13a-14(a)/15d-14(a) OF THE
EXCHANGE ACT OF 1934
I, Kevin J. McNamara, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Roto-Rooter, Inc. ("registrant");
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations, and cash flows
of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rule 13a-15(f) and
15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by
others within those entities, particularly during the
period in which this report is being prepared;
b) designed such internal control over financial
reporting, or caused such internal control over
financial report to be designed under our supervision,
to provide reasonable assurance regarding the
reliability of financial reporting and the preparation
of financial statements for external purposes in
accordance with generally accepted accounting
principles;
E - 1
c) evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end
of the period covered by this report based on such
evaluation; and
d) disclosed in this report any change in the
registrant's internal control over financial reporting
that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the
registrant's internal control over financial reporting.
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board
of directors:
a) all significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to
record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
Date: August 13, 2003 /s/ Kevin J. McNamara
--------------- ---------------------
Kevin J. McNamara
(President and Chief
Executive Officer)
E - 2
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULES 13a-14(a)/15d-14(a) OF THE
EXCHANGE ACT OF 1934
I, Timothy S. O'Toole, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Roto-Rooter, Inc. ("registrant');
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations, and cash flows
of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rule 13a-15(f) and
15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by
others within those entities, particularly during the
period in which this report is being prepared;
b) designed such internal control over financial
reporting, or caused such internal control over
financial report to be designed under our supervision,
to provide reasonable assurance regarding the
reliability of financial reporting and the preparation
of financial statements for external purposes in
accordance with generally accepted accounting
principles;
E - 3
c) evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end
of the period covered by this report based on such
evaluation; and
d) disclosed in this report any change in the
registrant's internal control over financial reporting
that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the
registrant's internal control over financial reporting.
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board
of directors:
a) all significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to
record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
Date: August 13, 2003 /s/ Timothy S. O'Toole
--------------- ----------------------
Timothy S. O'Toole
(Executive Vice President
and Treasurer)
E - 4
EXHIBIT 31.3
CERTIFICATION PURSUANT TO RULES 13a-14(a)/15d-14(a) OF THE
EXCHANGE ACT OF 1934
I, Arthur V. Tucker, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Roto-Rooter, Inc. ("registrant");
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations, and cash flows
of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rule 13a-15(f) and
15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by
others within those entities, particularly during the
period in which this report is being prepared;
b) designed such internal control over financial
reporting, or caused such internal control over
financial report to be designed under our supervision,
to provide reasonable assurance regarding the
reliability of financial reporting and the preparation
of financial statements for external purposes in
accordance with generally accepted accounting
principles;
E- 5
c) evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end
of the period covered by this report based on such
evaluation; and
d) disclosed in this report any change in the
registrant's internal control over financial reporting
that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the
registrant's internal control over financial reporting.
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board
of directors:
a) all significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to
record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
Date: August 13, 2003 /s/ Arthur V. Tucker, Jr.
--------------- -------------------------
Arthur V. Tucker, Jr.
(Vice President and
Controller)
E - 6
EXHIBIT 32.1
CERTIFICATION BY KEVIN J. MCNAMARA
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned, as President and Chief Executive Officer of Roto-
Rooter, Inc. ("ompany"), does hereby certify that:
1) the Company' Quarterly Report on Form 10-Q for the
quarter ending June 30, 2003 ("Report"), fully complies
with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
2) the information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company.
Dated: August 13, 2003 /s/ Kevin J. McNamara
--------------- ---------------------
Kevin J. McNamara
(President and Chief
Executive Officer)
E - 7
EXHIBIT 32.2
CERTIFICATION BY TIMOTHY S. O'TOOLE
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned, as Executive Vice President and Treasurer of Roto-
Rooter, Inc. ("Company"), does hereby certify that:
1) the Company's Quarterly Report on Form 10-Q for the
quarter ending June 30, 2003 ("Report"), fully complies
with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
2) the information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company.
Dated: August 13, 2003 By /s/ Timothy S. O'Toole
--------------- -- ----------------------
Timothy S. O'Toole
(Executive Vice President
and Treasurer)
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EXHIBIT 32.3
CERTIFICATION BY ARTHUR V. TUCKER, JR.
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned, as Vice President and Controller of Roto-Rooter,
Inc. ("Company"), does hereby certify that:
1) the Company's Quarterly Report on Form 10-Q for the
quarter ending June 30, 2003 ("Report"), fully complies
with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
2) the information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company.
Dated: August 13, 2003 By /s/ Arthur V. Tucker, Jr.
--------------- -- -------------------------
Arthur V. Tucker, Jr.
(Vice President and
Controller)
E - 9