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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
October 16, 2003
ROTO-ROOTER, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8351 31-0791746
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) Number)
2600 Chemed Center, 255 East 5th Street, Cincinnati, OH 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(513) 762-6900
Page 1 of 2
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a) Financial Statements of Businesses Acquired
Not Applicable
b) Pro Forma Financial Information
Not Applicable
c) Exhibits
(99.1) Registrant's press release dated
October 16, 2003.
Item 12. Results of Operations and Financial Condition
Roto-Rooter, Inc. reported its results of operations for the
third quarter of 2003 on October 16.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
ROTO-ROOTER, INC.
Dated: October 21, 2003 By: /s/ Arthur V. Tucker, Jr.
----------------- -----------------------------
Arthur V. Tucker, Jr.
Vice President and Controller
Page 2 of 2
Roto-Rooter, pg. 1
CONTACT: Timothy S. O'Toole FOR IMMEDIATE RELEASE
(513) 762-6702
Roto-Rooter Inc. Reports Third-Quarter Earnings of $.32 per Share
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CINCINNATI, October 16, 2003--Roto-Rooter Inc. (NYSE:RRR)
(OTCBB:CHEQP) today reported net income of $.32 per share for the third quarter, ended
September 30, 2003, as compared with net income of $.72 per share in the 2002 third quarter.
Net income in the year-ago third quarter included $.40 per share from discontinued operations.
Service revenues and sales from continuing operations for the 2003 third quarter
were $75.2 million as compared with $75.3 million in the 2002 third quarter. Revenues of Roto-
Rooter's Plumbing and Drain Service segment grew 5.2% to $63.3 million as compared with
$60.2 million in the same prior-year quarter.
For the third quarter, Roto-Rooter's net cash provided by operating activities--that
is, cash provided by operations before capital expenditures and other investing and financing
activities--totaled $5.5 million in 2003 versus $10.7 million in 2002 which included $2.2 million
from discontinued operations.
Year to date, for the nine months ended September 30, 2003,
Roto-Rooter's net income was $.86 per share as compared with $1.66 per share in the same
prior-year period. Net income for year-to-date 2003 included capital gains on
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Roto-Rooter, pg. 2
the sales of investments of $.34 per share and severance charges of $.24 per share. Net income
for the comparable 2002 period included income from discontinued operations of $.60 per share
and capital gains on the sales of investments of $.08 per share.
Service revenues and sales from continuing operations for year-to-date 2003
totaled $230.1 million versus $235.3 million in 2002. Net cash provided by operating activities
for the first nine months of 2003 amounted to $17.0 million versus $29.2 million for the
comparable 2002 period which included $5.3 million from discontinued operations.
Commenting on the company's operations, Roto-Rooter President and Chief
Executive Officer Kevin J. McNamara said, "We're encouraged by the 5% growth in revenues at
the Plumbing and Drain Service segment in the 2003 third quarter versus the 2002 third quarter.
In addition, within that segment, revenues from
Roto-Rooter's franchising activities and product and equipment sales increased by 14% to $2.0
million in the 2003 third quarter. Also, in early October, Roto-Rooter completed the acquisition
of the New Orleans franchise, which serves areas with a population of 1.1 million.
"Net income from the Plumbing and Drain Service segment totaled $1.9 million in
the 2003 third quarter, 19% below the year-ago third quarter's net income of $2.4 million.
Insurance and legal costs, along with investments in marketing and
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Roto-Rooter, pg. 3
training, continue to negatively impact margins.
"Service America, our appliance and heating/air-conditioning repair segment,
recorded net income of $51,000 in the 2003 third quarter compared with $166,000 in the 2002
third quarter. Revenues at Service America totaled $11.8 million, 22% below the year-ago third
quarter. Nonetheless, through the nine months ended September 30, 2003, Service America has
generated $2.9 million in net cash flow for the company."
Commenting on the company's financial activities, Mr. McNamara said,
"Corporate Investing and Financing activities generated $1.3 million of income in the 2003 third
quarter as compared with $642,000 in the prior-year third quarter. Of this $1.3 million, the
redemption of our Vitas Healthcare Corporation preferred stock generated an aftertax capital gain
of $1.2 million in August. The subsequent loss of Vitas' dividend payment accounted for a
$301,000 decline in dividend income for the third quarter of 2003. Interest income also declined
substantially when compared with the 2002 third quarter during which the company received an
aftertax interest refund of $530,000 related to a tax refund on our 1997 sale of The Omnia
Group."
Continuing, Mr. McNamara said, "Importantly, in October, Roto-Rooter exercised
a portion of its Vitas warrants, acquiring 4,158,000 shares of Vitas common stock at a cost of
$18 million. Roto-Rooter's holdings in Vitas represent approximately 37% of Vitas' outstanding
common stock. On this basis, Roto-Rooter anticipates
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Roto-Rooter, pg. 4
recording equity earnings from Vitas beginning in the 2003 fourth quarter. On a full-year basis,
we expect the equity income from the Vitas earnings to exceed the dividend income Roto-Rooter
historically recorded from the Vitas preferred stock.
"Roto-Rooter continues to hold a warrant for an additional 1,636,000 shares of
Vitas common stock at a total price of $9 million. Assuming Roto-Rooter would exercise this
remaining warrant, our total investment in the common shares of Vitas would represent
approximately 45% of Vitas' outstanding shares."
Concluding, Mr. McNamara said, "Vitas Healthcare is the leading provider of
hospice services in the United States with revenues exceeding $359 million for its most recently
completed fiscal year, ended September 30, 2002. Roto-Rooter has held its investment in Vitas
since 1991 and expects that Vitas will provide substantial future growth."
Reflecting its confidence in Roto-Rooter's solid financial position and future
earnings potential, in August, the Board of Directors declared a quarterly dividend of $.12 per
share, which was paid in September. This represented
Roto-Rooter's 129th consecutive quarterly dividend.
Roto-Rooter Inc. (www.RotoRooter.com), headquartered in Cincinnati, is a New
York Stock Exchange-listed corporation operating in the residential and commercial repair-and-
maintenance-service industry through two wholly owned subsidiaries. Roto-Rooter is North
America's largest provider of plumbing and drain
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Roto-Rooter, pg. 5
cleaning services. Service America Network Inc. provides major-appliance and heating/air-
conditioning repair, maintenance, and replacement services.
Statements in this press release or in other Roto-Rooter communications may
relate to future events or Roto-Rooter's future performance. Such statements are forward-
looking statements and are based on present information Roto-Rooter has related to its existing
business circumstances. Investors are cautioned that such forward-looking statements are
subject to inherent risk that actual results may differ materially from such forward-looking
statements. Further, investors are cautioned that Roto-Rooter does not assume any obligation to
update forward-looking statements based on unanticipated events or changed expectations.
###
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ROTO-ROOTER, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
2003 2002 2003 2002
----------- ----------- ---------- -----------
Continuing Operations
Service revenues and sales $ 75,172 $ 75,322 $ 230,088 $ 235,257
-------------------------- ----------- ----------- ---------- ----------
Cost of services provided and goods sold 44,215 44,314 135,978 139,446
General and administrative expenses 14,138 11,537 45,194 (c) 36,699
Selling and marketing expenses 11,003 10,304 33,420 33,085
Depreciation 2,983 3,424 9,025 10,402
----------- ----------- ---------- ----------
Total costs and expenses 72,339 69,579 223,617 219,632
----------- ----------- ---------- ----------
Income from operations 2,833 5,743 6,471 15,625
Interest expense (487) (709) (1,625) (2,245)
Distributions on preferred securities (268) (268) (804) (809)
Other income--net 3,048 (a) 268 (b 9,765 (d) 3,810 (e)
----------- ----------- ---------- ----------
Income before income taxes 5,126 (a) 5,034 (b) 13,807 (c,d) 16,381 (e)
Income taxes. (1,910) (1,856) (5,246) (5,953)
----------- ----------- ---------- ----------
Income from continuing operations 3,216 (a) 3,178 (b) 8,561 (c,d) 10,428 (e)
Discontinued Operations - 3,929 - 5,920
----------- ----------- ---------- ----------
Net Income $ 3,216 (a) $ 7,107 (b) $ 8,561 (c,d) $ 16,348 (e)
=========== =========== ========== ==========
Earnings Per Share
Income from continuing operations $ 0.32 (a) $ 0.32 (b) $ 0.86 (c,d) $ 1.06 (e)
=========== =========== ========== ==========
Net income $ 0.32 (a) $ 0.72 (b) $ 0.86 (c,d) $ 1.66 (e)
=========== =========== ========== ==========
Average number of shares outstanding 9,941 9,861 9,913 9,854
=========== =========== ========== ==========
Diluted Earnings Per Share
Income from continuing operations $ 0.32 (a) $ 0.32 (b) $ 0.86(c,d) $ 1.06 (e)
=========== =========== ========== ==========
Net income $ 0.32 (a) $ 0.72 (b) $ 0.86(c,d) $ 1.65 (e)
=========== =========== ========== ==========
Average number of shares outstanding 9,988 9,867 9,940 9,882
=========== =========== ========== ==========
-------------------
(a) Amounts for the third quarter of 2003 include a pretax gain of $1,846,000 ($1,200,000 aftertax or $.12 per share)
from the redemption of the Company's investment in Vitas Healthcare Corporation ("Vitas") preferred stock and
pretax dividend income from Vitas preferred stock of $371,000 ($328,000 aftertax or $.03 per share).
(b) Amounts for the third quarter of 2002 include pretax interest income of $816,000 ($530,000 aftertax or $.05 per
share) from interest on a federal income tax refund relating to operations discontinued in 1997 and pretax dividend
income from Vitas preferred stock of $712,000 ($629,000 aftertax or $.06 per share).
(c) Amounts for the first nine months of 2003 include a pretax charge of $3,627,000 ($2,358,000 aftertax or $.24 per
share) from severance charges incurred in the first quarter of 2003.
(d) Amounts for the first nine months of 2003 include aggregate pretax gains of $5,390,000 ($3,351,000 aftertax or
$.34 per share) from the redemption of Vitas preferred stock and the sales of investments and pretax
dividend income from Vitas preferred stock of $1,794,000 ($1,585,000 aftertax or $.16 per share).
(e) Amounts for the first nine months of 2002 include a pretax gain of $1,141,000 ($775,000 aftertax or $.08 per
share) from the sales of investments, pretax dividend income from Vitas preferred stock of $2,135,000
($1,886,000 aftertax or $.19 per share) and pretax interest income of $816,000 ($530,000 aftertax or $.05
per share) from interest on a federal income tax refund relating to operations discontinued in 1997.
ROTO-ROOTER, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
September 30,
---------------------------
2003 2002*
---------- ----------
Assets
Current assets
Cash and cash equivalents $ 72,607 $ 15,603
Accounts receivable less allowances 13,310 13,453
Inventories 8,548 10,111
Statutory deposits 9,852 12,304
Current deferred income taxes 7,204 8,442
Current assets of discontinued operations - 36,555
Prepaid expenses and other current assets 14,225 8,256
---------- ----------
Total current assets 125,746 104,724
Investments of deferred compensation plans held in trust 16,832 14,746
Other investments 5,546 36,768
Note receivable 12,500 -
Properties and equipment, at cost less accumulated
depreciation 47,456 49,309
Identifiable intangible assets less accumulated amortization 2,450 3,042
Goodwill less accumulated amortization 113,437 131,144
Noncurrent assets of discontinued operations - 43,485
Other assets 16,908 13,399
---------- ----------
Total Assets $ 340,875 $ 396,617
========== ==========
Liabilities
Current liabilities
Accounts payable $ 5,033 $ 6,464
Current portion of long-term debt 463 366
Income taxes 7,294 7,465
Deferred contract revenue 16,053 20,390
Accrued insurance 16,844 17,293
Current liabilities of discontinued operations - 11,071
Other current liabilities 20,347 20,677
---------- ----------
Total current liabilities 66,034 83,726
Long-term debt 25,635 50,728
Mandatorily redeemable convertible preferred securities of
the Chemed Capital Trust 14,146 14,186
Deferred compensation liabilities 16,824 14,721
Noncurrent liabilities of discontinued operations - 2,339
Other liabilities 10,105 9,620
---------- ----------
Total Liabilities 132,744 175,320
---------- ----------
Stockholders' Equity
Capital stock 13,452 13,461
Paid-in capital 169,406 168,359
Retained earnings 137,790 152,265
Treasury stock, at cost (110,492) (112,562)
Unearned compensation (3,389) (5,087)
Deferred compensation payable in Company stock 2,294 2,266
Notes receivable for shares sold (930) (946)
Accumulated other comprehensive income - 3,541
---------- ----------
Total Stockholders' Equity 208,131 221,297
---------- ----------
Total Liabilities and Stockholders'
Equity $ 340,875 $ 396,617
========== ==========
Book Value Per Share $ 21.07 $ 22.59
========== ==========
*Reclassified to conform to 2003 presentation