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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition period from _______________ to ______________
Commission File Number: 1-8351
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0791746
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2600 Chemed Center, 255 East Fifth Street, Cincinnati, Ohio 45202-4726
(Address of principal executive offices) (Zip Code)
(513) 762-6900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Capital Stock - Par Value $1 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of said stock on the New York Stock
Exchange -Composite Transaction Listing on March 17, 2000 ($31.125 per share),
was $302,080,940.
At March 17, 2000, 10,236,277 shares of Chemed Corporation Capital Stock
(par value $1 per share) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Where Incorporated
-------- ------------------
1999 Annual Report to Stockholders (Specified Portions) Parts I, II and IV
Proxy Statement for Annual Meeting Part III
to be held May 15, 2000.
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CHEMED CORPORATION
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business............................................................. 1
Item 2. Properties........................................................... 5
Item 3. Legal Proceedings.................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders.................. 8
-- Executive Officers of the Registrant................................. 8
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.................................................. 9
Item 6. Selected Financial Data..............................................10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data..........................10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................11
PART III
Item 10. Directors and Executive Officers of the Registrant...................11
Item 11. Executive Compensation...............................................1l
Item 12. Security Ownership of Certain Beneficial Owners and
Management...........................................................11
Item 13. Certain Relationships and Related Transactions.......................11
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K..........................................................11
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PART I
ITEM 1. BUSINESS
GENERAL
Chemed Corporation was incorporated in Delaware in 1970 as a subsidiary
of W. R. Grace & Co. and succeeded to the business of W. R. Grace & Co.'s
Specialty Products Group as of April 30, 1971 and remained a subsidiary of W. R.
Grace & Co. until March 10, 1982. As used herein, "Company" refers to Chemed
Corporation, "Chemed" refers to Chemed Corporation and its subsidiaries and
"Grace" refers to W. R. Grace & Co. and its subsidiaries.
On March 10, 1982, the Company transferred to Dearborn Chemical Company,
a wholly owned subsidiary of the Company, the business and assets of the
Company's Dearborn Group, including the stock of certain subsidiaries within the
Dearborn Group, plus $185 million in cash, and Dearborn Chemical Company assumed
the Dearborn Group's liabilities. Thereafter, on March 10, 1982 the Company
transferred all of the stock of Dearborn Chemical Company to Grace in exchange
for 16,740,802 shares of the capital stock of the Company owned by Grace with
the result that Grace no longer has any ownership interest in the Company.
On December 31, 1986, the Company completed the sale of substantially all
of the business and assets of Vestal Laboratories, Inc., a wholly owned
subsidiary. The Company received cash payments aggregating approximately $67.4
million over the four-year period following the closing, the substantial portion
of which was received on December 31, 1986.
On April 2, 1991, the Company completed the sale of DuBois Chemicals,
Inc. ("DuBois"), a wholly owned subsidiary, to the Diversey Corporation
("Diversey"), then a subsidiary of The Molson Companies Ltd. Under the terms of
the sale, Diversey agreed to pay the Company net cash payments aggregating
$223,386,000, including deferred payments aggregating $32,432,000.
On December 21, 1992, the Company acquired The Veratex Corporation and
related businesses ("Veratex Group") from Omnicare, Inc., a publicly traded
company in which Chemed currently maintains a .5 percent ownership interest. The
purchase price was $62,120,000 in cash paid at closing, plus a post-closing
payment of $1,514,000 (paid in April 1993) based on the net assets of Veratex.
Effective January 1, 1994, the Company acquired all the capital stock of
Patient Care, Inc. ("Patient Care"), for cash payments aggregating $20,582,000,
including deferred payments with a present value of $6,582,000, plus 17,500
shares of the Company's Capital Stock. An additional cash payment of $1,000,000
was made on March 31, 1996 and another payment of $1,000,000 was made on March
31, 1997.
In July 1995, the Company's Omnia Group (formerly Veratex Group)
completed the sale of the business and assets of its Veratex Retail division to
Henry Schein, Inc. ("HSI") for $10 million in cash plus a $4.1 million note for
which payment was received in December 1995.
Effective September 17, 1996, the Company completed a merger of a
subsidiary of the Company, Chemed Acquisition Corp., and Roto-Rooter, Inc.
pursuant to a Tender Offer
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commenced on August 8, 1996 to acquire any and all of the outstanding shares of
Common Stock of Roto-Rooter, Inc. for $41.00 per share in cash.
On September 24, 1997, the Company completed the sale of its wholly owned
businesses comprising the Omnia Group to Banta Corporation for $50 million in
cash and $2.3 million in deferred payments.
Effective September 30, 1997, the Company completed a merger between its
81-percent-owned subsidiary, National Sanitary Supply Company, and a wholly
owned subsidiary of Unisource Worldwide, Inc. for $21.00 per share, with total
payments of $138.3 million.
The Company now conducts its business operations in three segments:
Roto-Rooter Group ("Roto-Rooter"), Patient Care and Service America Systems,
Inc. ("Service America").
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The required segment and geographic data for the Company's continuing
operations (as described below) for the three years ended December 31, 1997,
1998 and 1999, are shown in the "Segment Data" on pages 26 and 27 of the 1999
Annual Report to Stockholders and are incorporated herein by reference.
DESCRIPTION OF BUSINESS BY SEGMENT
The information called for by this item is included within Note 1 of the
Notes to Financial Statements appearing on page 17 of the 1999 Annual Report to
Stockholders and is incorporated herein by reference.
PRODUCT AND MARKET DEVELOPMENT
Each segment of Chemed's business engages in a continuing program for the
development and marketing of new services and products. While new products and
services and new market development are important factors for the growth of each
active segment of Chemed's business, Chemed does not expect that any new
products and services or marketing effort, including those in the development
stage, will require the investment of a material amount of Chemed's assets.
RAW MATERIALS
The principal raw materials needed for Chemed's United States
manufacturing operations are purchased from United States sources. No segment of
Chemed experienced any material raw material shortages during 1999, although
such shortages may occur in the future. Products manufactured and sold by
Chemed's active business segments generally may be reformulated to avoid the
adverse impact of a specific raw material shortage.
PATENTS, SERVICE MARKS AND LICENSES
The Roto-Rooter(R) trademark and service mark have been used and
advertised since 1935 by Roto-Rooter Corporation, a wholly owned subsidiary of
Roto-Rooter, Inc., a 100 percent-owned subsidiary of the Company. The
Roto-Rooter(R) marks are among the most highly recognized trademarks and service
marks in the United States. Chemed considers the Roto-Rooter(R) marks to be a
valuable asset and a significant factor in the marketing
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of Roto-Rooter's franchises, products and services and the products and services
provided by its franchisees.
COMPETITION
ROTO-ROOTER
All aspects of the sewer, drain, and pipe cleaning, HVAC services and
plumbing repair businesses are highly competitive. Competition is, however,
fragmented in most markets with local and regional firms providing the primary
competition. The principal methods of competition are advertising, range of
services provided, speed and quality of customer service, service guarantees,
and pricing.
No individual customer or market group is critical to the total sales of
this segment.
PATIENT CARE
The home healthcare services industry and, in particular, the nursing and
personal care segment is highly competitive. Patient Care competes with numerous
local, regional and national home healthcare services companies. Patient Care
competes on the basis of quality, cost-effectiveness and its ability to service
its referral base quickly throughout its regional markets.
Patient Care has contracts with several customers, the loss of any one or
more of which could have a material adverse effect on this segment.
SERVICE AMERICA
All aspects of the HVAC and appliance repair and maintenance service
industry are highly competitive. Competition is, however, fragmented in most
markets with local and regional firms providing the primary competition. The
principal methods of competition are advertising, range of services provided,
speed and quality of customer service, service guarantees, and pricing.
No individual customer or market group is critical to the total sales of
this segment.
RESEARCH AND DEVELOPMENT
Chemed engages in a continuous program directed toward the development of
new products and processes, the improvement of existing products and processes,
and the development of new and different uses of existing products. The research
and development expenditures from continuing operations have not been nor are
they expected to be material.
GOVERNMENT REGULATIONS
Roto-Rooter's franchising activities are subject to various federal and
state franchising laws and regulations, including the rules and regulations of
the Federal Trade Commission (the "FTC") regarding the offering or sale of
franchises. The rules and regulations of the FTC require that Roto-Rooter
provide all prospective franchisees
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with specific information regarding the franchise program and Roto-Rooter in the
form of a detailed franchise offering circular. In addition, a number of states
require Roto-Rooter to register its franchise offering prior to offering or
selling franchises in the state. Various state laws also provide for certain
rights in favor of franchisees, including (i) limitations on the franchisor's
ability to terminate a franchise except for good cause, (ii) restrictions on the
franchisor's ability to deny renewal of a franchise, (iii) circumstances under
which the franchisor may be required to purchase certain inventory of
franchisees when a franchise is terminated or not renewed in violation of such
laws, and (iv) provisions relating to arbitration. Roto-Rooter's ability to
engage in the plumbing repair business is also subject to certain limitations
and restrictions imposed by state and local licensing laws and regulations.
Service America's operations are regulated by the Florida and Arizona
Departments of Insurance. In accordance with certain Florida regulatory
requirements, Service America maintains cash with the Department of Insurance
and is also required to maintain additional unencumbered reserves. In addition,
Service America's air conditioning and appliance repair and maintenance business
is also subject to certain limitations imposed by state and local business laws
and regulations.
Patient Care's activities are subject to various federal and state laws
and regulations. Changes in the law, new interpretations of existing laws, or
changes in payment methodology, may have a dramatic effect on the definition of
permissible or impermissible activities, the relative costs associated with
doing business and the amount of reimbursement by both government and other
third-party payors. In addition to specific legislative and regulatory
influences, efforts to reduce the growth of the federal budget and the Medicare
and the Medicaid programs have resulted in enactment of the Balanced Budget Act
of 1997. This law contains several provisions affecting Medicare payment for the
coverage of home healthcare services which directly or indirectly, together with
Medicaid payments, accounted for 70 percent of Patient Care's net revenue in
1999. Certain of these provisions could have an adverse effect on Patient Care.
In addition, state legislatures periodically consider various healthcare reform
proposals. Congress and state legislatures can be expected to continue to review
and assess alternative healthcare delivery systems and payment methodologies,
and public debate of these issues can be expected to continue in the future. The
ultimate timing or effect of such additional legislative efforts cannot be
predicted and may impact Patient Care in different ways. No assurance can be
given that any such efforts will not have a material adverse effect on Patient
Care.
Certain of Patient Care's employees are subject to state laws and
regulations governing professional practice. Patient Care's operations are
subject to periodic survey by governmental and private accrediting entities to
assure compliance with applicable state licensing, and Medicare and Medicaid
certification and accreditation standards, as the case may be. From time to time
in the ordinary course of business, Patient Care, like other healthcare
companies, receives survey reports containing deficiencies for alleged failure
to comply with applicable requirements. Patient Care reviews such reports and
takes appropriate corrective action. The failure to effect such action or to
obtain, renew or maintain any of the required regulatory approvals,
certifications or licences could materially adversely affect Patient Care's
business, and could prevent the programs involved from offering products and
services to patients. There can be no assurance that either the states or the
federal government will not impose additional regulations upon the activities of
Patient Care which might materially adversely affect Patient Care.
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ENVIRONMENTAL MATTERS
Roto-Rooter's operations are subject to various federal, state, and local
laws and regulations regarding environmental matters and other aspects of the
operation of a sewer and drain cleaning, HVAC and plumbing services business.
For certain other activities, such as septic tank pumping, Roto-Rooter is
subject to state and local environmental health and sanitation regulations.
Service America's operations are also subject to various federal, state and
local laws and regulations regarding environmental matters and other aspects of
the operation of a HVAC and appliance repair and maintenance service industry.
In connection with the sale of DuBois to the Diversey Corporation, the
Company contractually assumed for a period of ten years the estimated liability
for potential environmental cleanup and related costs arising from the sale of
DuBois up to a maximum of $25,500,000. Based upon an updated assessment of the
Company's environmental-related liability by the Company's environmental
adviser, the Company has accrued $4,157,000 at December 31, 1999 to cover these
costs. Prior to the sale of DuBois, DuBois had been designated as a Potentially
Responsible Party ("PRP") at fourteen Superfund sites by the U.S. Environmental
Protection Agency ("USEPA"). With respect to all of these sites, the Company has
been unable to locate any records indicating it disposed of waste of any kind at
such sites. Nevertheless, it settled claims at five such sites at minimal cost.
In addition, because there was a number of other financially responsible
companies designated as PRPs relative to these sites, management believes that
it is unlikely that such actions will have a material effect on the Company's
financial condition or results of operations. With respect to one of these
sites, the Company's involvement is based on the location of one of its
manufacturing plants. Currently, the USEPA and the state governmental agency are
attempting to resolve jurisdictional issues, and action against PRPs is not
proceeding.
Chemed, to the best of its knowledge, is currently in compliance in all
material respects with the environmental laws and regulations affecting its
operations. Such environmental laws, regulations and enforcement proceedings
have not required Chemed to make material increases in or modifications to its
capital expenditures and they have not had a material adverse effect on sales or
net income. Capital expenditures for the purposes of complying with
environmental laws and regulations during 2000 and 2001 with respect to
continuing operations are not expected to be material in amount; there can be no
assurance, however, that presently unforeseen legislative or enforcement actions
will not require additional expenditures.
EMPLOYEES
On December 31, 1999, Chemed had a total of 7,817 employees; 7,769 were
located in the United States and 48 were in Canada.
ITEM 2. PROPERTIES
Chemed has plants and offices in various locations in the United States
and Canada. The major facilities operated by Chemed are listed below by industry
segment. All "owned" property is held in fee and is not subject to any major
encumbrance. Except as otherwise shown, the leases have terms ranging from one
year to eight years. Management does not foresee any difficulty in renewing or
replacing the remainder of its current leases. Chemed considers all of its major
operating properties to be maintained in good operating condition and to be
generally adequate for present and anticipated needs.
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Location Type Owned Leased
-------- ---- ----- ------
ROTO-ROOTER GROUP
Cincinnati, OH (1) Office and service 29,000 sq. ft. 28,000 sq. ft.
facilities
West Des Moines, Office, manufacturing and 29,000 sq. ft. --
IA distribution center facilities
Northeastern Office and service 31,000 sq. ft. 50,000 sq. ft.
U.S. Area (2) facilities
Central U.S. Office and service 26,000 sq. ft. 72,000 sq. ft.
Area (3) facilities
Mid-Atlantic Office and service 19,000 sq. ft. 30,000 sq. ft.
U.S. Area (4) facilities
Southeastern U.S. Office and service 18,000 sq. ft. 49,000 sq. ft.
Area (5) facilities
Western Central Office and service 19,000 sq. ft. 30,000 sq. ft.
U.S. Area (6) facilities
Western U.S. Office and service -- 60,000 sq. ft.
Area (7) facilities
Canada (8) Office and service -- 13,000 sq. ft.
facilities
PATIENT CARE
New Jersey (9) Office -- 56,000 sq. ft.
Connecticut (10) Office -- 42,000 sq. ft.
New York (11) Office -- 41,000 sq. ft.
Illinois (12) Office -- 2,000 sq. ft.
Ohio (13) Office -- 3,000 sq. ft.
Kentucky (14) Office -- 4,000 sq. ft.
Georgia (15) Office -- 2,000 sq. ft.
Washington, DC (16) Office -- 2,000 sq. ft.
Virginia (17) Office -- 2,000 sq. ft.
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Location Type Owned Leased
-------- ---- ----- ------
Maryland (18) Office -- 2,000 sq. ft.
SERVICE AMERICA
Florida (19) Office and service 46,000 sq. ft. 46,000 sq. ft.
facilities
Arizona (20) Office and service -- 17,000 sq. ft.
facilities
CORPORATE
Cincinnati, OH (21) Corporate offices and 8,000 sq. ft. 38,000 sq. ft.
related facilities
- ---------------------------------
(1) Includes 6,000 square feet that formerly housed a service facility.
(2) Comprising locations in Stoughton and Woburn, Massachusetts; West
Stratford; Connecticut; Farmingdale, Hawthorne, and Staten Island, New
York; Pennsauken and Brunswick, New Jersey; Levittown and Philadelphia,
Pennsylvania; Cranston, Rhode Island; and Newark, Delaware.
(3) Comprising locations in Adamsville and Birmingham, Alabama; Columbus,
Ohio; Indianapolis, Indiana; Memphis and Nashville, Tennessee;
Wilmerding and Pittsburgh, Pennsylvania; Buffalo, Rochester and West
Seneca, New York; Unionville, Connecticut; West Springfield,
Massachusetts; and St. Paul, Minnesota.
(4) Comprising locations in Baltimore and Jessup, Maryland; Independence,
Ohio; Virginia Beach and Fairfax, Virginia; Charlotte, Raleigh and
Durham, North Carolina; and Newnan, Georgia.
(5) Comprising locations in Atlanta, Decatur and Kennesaw, Georgia; Ft.
Lauderdale, Jacksonville, Miami, Orlando, Longwood, Tampa and Daytona
Beach, Florida
(6) Comprising locations in Minneapolis and Oakdale, Minnesota; Addison,
Thornton, Schaumburg and Glenview, Illinois; and St. Louis, Missouri.
(7) Comprising locations in Houston, San Antonio and Austin, Texas; Commerce
City, Colorado; Honolulu, Hawaii; Menlo Park, California; and Tacoma and
Bremerton, Washington.
(8) Comprising locations in Port Coquitlam, British Columbia; Montreal,
Quebec; and Winnipeg, Manitoba.
(9) Comprising locations in Princeton, Jersey City; Ridgewood, Montclair,
Westfield, and West Orange, New Jersey.
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(10) Comprising locations in Greenwich, Madison, Naugatuch, Newington,
Norwalk, New Haven, Stratford, Bridgeport and Danbury, Connecticut.
(11) Comprising locations in Brooklyn, Manhattan, Queens, Bronx and Staten
Island, New York.
(12) Comprising locations in Chicago and Glenview, Illinois.
(13) Comprising location in Columbus, Ohio.
(14) Comprising location in Louisville, Kentucky.
(15) Comprising location in Conyers, Georgia.
(16) Comprising location in Washington, D.C.
(17) Comprising location in Alexandria, Virginia.
(18) Comprising locations in Towson and Rockville, Maryland.
(19) Comprising locations in Pompano Beach, Miami, Fort Myers, St.
Petersburg, Orlando, West Palm Beach, Deerfield Beach and Delray Beach,
Florida.
(20) Comprising locations in Phoenix and Tucson, Arizona.
(21) Excludes 90,000 square feet in current Cincinnati, Ohio office
facilities that are sublet to outside parties - portions of this space
may revert to the Company beginning in 2000. Includes 36,000 square feet
leased for the Company's corporate office facilities.
ITEM 3. LEGAL PROCEEDINGS
On November 9, 1998, Paul Voet, who is an Executive Vice President
and a director of the Company, filed a lawsuit against the Company in the Court
of Common Pleas, Hamilton County, Ohio, in connection with the Company's sale of
its majority owned subsidiary, National Sanitary Supply Company, alleging that
the Company breached his employment agreement due to a material reduction in his
title, authority or responsibility. Mr. Voet is seeking a money judgment in the
principal amount of $6 million. The Company disputes these claims and believes
that the disposition of this matter will not have a material effect on the
financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE COMPANY
Name Age Office First Elected
- ------------------ --- ------------------------------------ --------------
Edward L. Hutton 80 Chairman and Chief Executive Officer November 3, 1993 (1)
Kevin J. McNamara 46 President August 2, 1994 (2)
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Paul C. Voet 53 Executive Vice President May 20, 1991 (3)
Timothy S. O'Toole 44 Executive Vice President and May 18, 1992 (4)
Treasurer
Sandra E. Laney 56 Senior Vice President and Chief November 3, 1993 (5)
Administrative Officer
Arthur V. Tucker, 50 Vice President and Controller May 20, 1991 (6)
Jr.
(1) Mr. E. L. Hutton is the Chairman and Chief Executive Officer of the
Company and has held these positions since November 1993. Previously,
from April 1970 to November 1993, Mr. E. L. Hutton held the positions of
President and Chief Executive Officer of the Company. Mr. E. L. Hutton
is the father of Mr. T. C. Hutton, a director and a Vice President of
the Company.
(2) Mr. K. J. McNamara is President of the Company and has held this
position since August 1994. Previously, he served as an Executive Vice
President, Secretary and General Counsel of the Company, since November
1993, August 1986 and August 1986, respectively. He previously held the
position of Vice President of the Company, from August 1986 to May 1992.
(3) Mr. P. C. Voet is an Executive Vice President of the Company and has
held this position since May 1991. From May 1988 to November 1993, he
served the Company as Vice Chairman.
(4) Mr. T. S. O'Toole is an Executive Vice President and the Treasurer of
the Company and has held these positions since May 1992 and February
1989, respectively. Mr. O'Toole is Chairman and Chief Executive Officer
of Patient Care, Inc. and has held these positions since April 1995.
(5) Ms. S. E. Laney is Senior Vice President and the Chief Administrative
Officer of the Company and has held these positions since November 1993
and May 1991, respectively. Previously, from May 1984 to November 1993,
she held the position of Vice President of the Company.
(6) Mr. A. V. Tucker, Jr. is a Vice President and Controller of the Company
and has held these positions since February 1989. From May 1983 to
February 1989, he held the position of Assistant Controller of the
Company.
Each executive officer holds office until the annual election at the next
annual organizational meeting of the Board of Directors of the Company which is
scheduled to be held on May 15, 2000.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Capital Stock (par value $1 per share) is traded on the New
York Stock Exchange under the symbol CHE. The range of the high and low sale
prices on the New York Stock Exchange and dividends paid per share for each
quarter of 1998 and 1999 are set forth below.
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Closing
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Dividends Paid
High Low Per Share
- -------------------------------------------------------------------------------
1999
First Quarter $33 13/16 $25 3/4 $.53
Second Quarter 33 7/8 26 5/16 .53
Third Quarter 33 7/16 29 1/4 .53
Fourth Quarter 30 1/8 24 15/16 .53
1998
First Quarter $42-5/16 $38 $.53
Second Quarter 41-1/4 32-9/16 .53
Third Quarter 34-11/16 25-9/16 .53
Fourth Quarter 34-7/8 28-1/8 .53
In November 1999, the Board of Directors adopted a new dividend policy,
whereby future dividends were reduced from $.53 per quarter to $.10 per quarter.
Future dividends are necessarily dependent upon the Company's earnings
and financial condition, compliance with certain debt covenants and other
factors not presently determinable.
As of March 17, 2000, there were approximately 4,118 stockholders of
record of the Company's Capital Stock. This number only includes stockholders of
record and does not include stockholders with shares beneficially held for them
in nominee name or within clearinghouse positions of brokers, banks or other
institutions.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item for the five years ended
December 31, 1999 is set forth on pages 28 and 29 of the 1999 Annual Report to
Stockholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information called for by this Item is set forth on pages 32
through 35 of the 1999 Annual Report to Stockholders and is incorporated herein
by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company has an insignificant number of financial instruments held
for trading purposes and does not hedge any of its market risks with derivative
instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the report thereon
of PricewaterhouseCoopers LLP dated February 1, 2000, appearing on pages 11
through 27 of the 1999 Annual Report to Stockholders, along with the
Supplementary Data (Unaudited Summary of Quarterly Results) appearing on page
31, are incorporated herein by reference.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors of the Company are:
Edward L. Hutton Sandra E. Laney
Rick L. Arquilla Spencer S. Lee
James H. Devlin Kevin J. McNamara
Charles H. Erhart, Jr. John M. Mount
Joel F. Gemunder Timothy S. O'Toole
Patrick P. Grace Donald E. Saunders
Thomas C. Hutton Paul C. Voet
Walter L. Krebs George J. Walsh III
The additional information required under this Item with respect to the
directors and executive officers is set forth in the Company's 2000 Proxy
Statement and in Part I hereof under the caption "Executive Officers of the
Registrant" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth in the Company's 2000
Proxy Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required under this Item is set forth in the Company's 2000
Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item is set forth in the Company's 2000
Proxy Statement, which is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
EXHIBITS
3.1 Certificate of Incorporation of Chemed Corporation.*
3.2 By-Laws of Chemed Corporation.*
4.1. Offer to Exchange Chemed Capital Trust Convertible Preferred
Securities for Shares of Capital Stock, dated as of December 23,
1999.*
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4.2 Chemed Capital Trust, dated as of December 23, 1999.*
4.3 Amended and Restated Declaration of Trust of Chemed Capital
Trust, dated February 7, 2000.*
10.1 Agreement and Plan of Merger among Diversey U.S. Holdings, Inc.,
D. C. Acquisition Inc., Chemed Corporation and DuBois Chemicals,
Inc., dated as of February 25, 1991.*
10.2 Stock Purchase Agreement between Omnicare, Inc. and Chemed
Corporation, dated as of August 5, 1992.*
10.3 Agreement and Plan of Merger among National Sanitary Supply
Company, Unisource Worldwide, Inc. and TFBD, Inc. dated as of
August 11, 1997.*
10.4 1981 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.5 1983 Incentive Stock Option Plan, as amended through May 20,
1991.*,**
10.6 1986 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.7 1988 Stock Incentive Plan, as amended through May 20, 1991.*,**
10.8 1993 Stock Incentive Plan.*,**
10.9 1995 Stock Incentive Plan.*,**
10.10 1997 Stock Incentive Plan.*,**
10.11 1999 Stock Incentive Plan. **
10.12 1999 Long-Term Employee Incentive Plan.
10.13 Employment Contracts with Executives.*,**
10.14 Amendment to Employment Contracts with Executives.**
10.15 Amendment No. 3 to Employment Contract with James H. Devlin.*,**
10.16 Employment Contracts with John M. Mount and Walter L. Krebs.*,**
10.17 Employment Contract with Lawrence J. Gillis.*,**
10.18 Amendment No. 7 to Employment Agreement with Edward L.
Hutton.*,**
10.19 Excess Benefits Plan, as restated and amended, effective April
1, 1997.*,**
10.20 Non-Employee Directors' Deferred Compensation Plan.*,**
10.21 Chemed/Roto-Rooter Savings & Retirement Plan, effective
January 1, 1999.*,**
10.22 Stock Purchase Agreement by and Among Banta Corporation, Chemed
Corporation and OCR Holding Company as of September 24, 1997.*
10.25 Directors Emeriti Plan.*,**
12
15
10.26 Second Amendment to Split Dollar Agreement with Executives.**
10.27 Split Dollar Agreement - II with James H. Devlin.*,**
10.28 Split Dollar Agreement with Sandra E. Laney.*,**
10.29 Split Dollar Agreement with Executives.*,**
10.30 Split Dollar Agreement with Edward L. Hutton.*,**
10.31 Split Dollar Agreement with Paul C. Voet.*,**
10.32 Split Dollar Agreement with John M. Mount**
10.33 Split Dollar Agreement with Spencer S. Lee**
10.34 Split Dollar Agreement with Rick L. Arquilla**
10.35 Form of Promissory Note under the Executive Stock Purchase
Plan.**
13. 1999 Annual Report to Stockholders.
21. Subsidiaries of Chemed Corporation.
23. Consent of Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule +
* This exhibit is being filed by means of incorporation by reference (see
Index to Exhibits on page E-1). Each other exhibit is being filed with
this Annual Report on Form 10-K.
** Management contract or compensatory plan or arrangement.
+ Not filed herewith.
FINANCIAL STATEMENT SCHEDULE
See Index to Financial Statements and Financial Statement Schedule on
page S-1.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
13
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHEMED CORPORATION
March 29, 2000 By /s/ Edward L. Hutton
----------------------------------
Edward L. Hutton
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Edward L. Hutton Chairman and Chief
- ------------------------- Executive Officer and a
Edward L. Hutton Director (Principal
Executive Officer)
/s/ Timothy S. O'Toole Executive Vice President
- ------------------------ and Treasurer and a
Timothy S. O'Toole Director
(Principal Financial Officer)
/s/ Arthur V.Tucker,Jr. Vice President and March 29, 2000
- ----------------------- Controller
Arthur V. Tucker, Jr. (Principal Accounting
Officer)
Rick L. Arquilla* Sandra E. Laney*
James H. Devlin* Spencer S. Lee*
Charles H. Erhart, Jr.* Kevin J. McNamara*
Joel F. Gemunder* John M. Mount* --Directors
Patrick P. Grace* Donald E. Saunders*
Thomas C. Hutton* Paul C. Voet*
Walter L. Krebs* George J. Walsh III*
- -------------------------------
* Naomi C. Dallob by signing her name hereto signs this document on behalf
of each of the persons indicated above pursuant to powers of attorney
duly executed by such persons and filed with the Securities and Exchange
Commission.
March 29, 2000 /s/ Naomi C. Dallob
- ----------------------- ----------------------------------
Date Naomi C. Dallob
(Attorney-in-Fact)6-14
14
17
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
1997, 1998 AND 1999
CHEMED CORPORATION CONSOLIDATED FINANCIAL PAGE(s)
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants............................... 11*
Statement of Accounting Policies.................................12*
Consolidated Statement of Income.................................13*
Consolidated Balance Sheet.......................................14*
Consolidated Statement of Cash Flows.............................15*
Consolidated Statement of Changes in Stockholders' Equity........16*
Consolidated Statement of Comprehensive Income...................16*
Notes to Financial Statements....................................17-25*
Segment Data.....................................................26-27*
Report of Independent Accountants on Financial Statement
Schedule.......................................................S-2
Schedule II -- Valuation and Qualifying Accounts.................S-3-S-4
* Indicates page numbers in Chemed Corporation 1999 Annual Report to
Stockholders.
- -------------------------------
The consolidated financial statements of Chemed Corporation listed above,
appearing in the 1999 Annual Report to Stockholders, are incorporated herein by
reference. The Financial Statement Schedule should be read in conjunction with
the consolidated financial statements listed above. Schedules not included have
been omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto as listed above.
S-1
18
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Chemed Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 1, 2000 appearing on page 11 of the 1999 Annual Report to
Stockholders of Chemed Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14 of
this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
- ---------------------------------
PRICEWATERHOUSECOOPERS LLP
Cincinnati, Ohio
February 1, 2000
S-2
19
SCHEDULE II
CHEMED CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS (a)
(in thousands)
Dr/(Cr)
ADDITIONS
-------------------------------------
(Charged) (Charged) Applicable
Credited Credited to
Balance at to Costs to Other Companies Balance
Beginning and Accounts Acquired Deductions at End
Description of Period Expenses (b) in Period (c) of Period
- --------------------------------------------------------------------------------------------------------------
Allowances for doubtful
accounts (d)
For the year 1999......... $ (3,601) $(2,235) $ - $ (25) $ 1,307 $ (4,554)
========= ======== ======== ========= ======== =========
For the year 1998......... $ (2,626) $(2,452) $ - $ (15) $ 1,492 $ (3,601)
========= ======== ======== ========= ======= =========
For the year 1997......... $ (1,583) $ (702) $ - $ (974) $ 633 $ (2,626)
========= ======== ======== ========= ======= =========
Allowances for doubtful
accounts - notes
receivable (e)
For the year 1999......... $ (23) $ - $ - $ - $ 23 $ -
========= ======== ======== ========= ======= =========
For the year 1998......... $ (23) $ - $ - $ - $ - $ (23)
========= ======== ======== ========= ======= =========
For the year 1997......... $ (120) $ - $ - $ - $ 97 $ (23)
========= ======== ======== ========= ======= =========
S-3
20
(Charged) (Charged) Applicable
Credited Credited to
Balance at to Costs to Other Companies Balance
Beginning and Accounts Acquired Deductions at End
Description of Period Expenses (b) in Period (c) of Period
- --------------------------------------------------------------------------------------------------------------
Valuation allowance for
available-for-sale securities
For the year 1999......... $ 20,406 $ - $(10,525) $ - $ (4,661) $ 5,220
========= ======== ========= ========= ======== ========
For the year 1998......... $ 30,705 $ - $ 2,290 $ - $(12,589) $ 20,406
========= ======== ========= ========= ========= ========
For the year 1997......... $ 40,096 $ - $ 2,844 $ - $(12,235) $ 30,705
========= ======== ========= ========= ========= ========
- -------------------------
(a) Amounts are presented on a continuing operations basis.
(b) With respect to the valuation allowance for available-for-sale
securities, amounts charged or credited to other accounts comprise
decreases or increases in net unrealized holding gains.
(c) With respect to allowances for doubtful accounts, deductions include
accounts considered uncollectible or written off, payments, companies
divested, etc. With respect to valuation allowance for
available-for-sale securities, deductions comprise net realized gains
on sales of investments.
(d) Classified in consolidated balance sheet as a reduction of accounts
receivable.
(e) Classified in consolidated balance sheet as a reduction of other
assets.
S-4
21
INDEX TO EXHIBITS
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
3.1 Certificate of Incorporation of Form S-3 4.1
Chemed Corporation Reg. No. 33-44177
11/26/91
3.2 By-Laws of Chemed Corporation Form 10-K 2
3/28/89
4.1 Offer to Exchange Chemed Capital Form T-3 T3E-1
Trust Convertible Trust Preferred 12/23/99
Securities for Shares of Capital
Stock, dated as of 12/23/99
4.2 Chemed Capital Trust, dated Schedule 13E-4 (b)(1)
as of 12/23/99 12/23/99
4.3 Amended and Restated Declaration Schedule 13E-4A (b)(2)
of Trust of Chemed Capital Trust, 2/7/00, Amendment
dated February 7, 2000 No. 2
10.1 Agreement and Plan of Merger Form 8-K 1
among Diversey U.S. Holdings, 3/11/91
Inc., D.C. Acquisition Inc.,
Chemed Corporation and DuBois
Chemicals, Inc., dated as of
February 25, 1991
10.2 Stock Purchase Agreement between Form 10-K 5
Omnicare, Inc. and Chemed 3/25/93
Corporation dated as of August 5,
1992
10.3 Agreement and Plan of Merger Form 8-K 1
among National Sanitary 10/13/97
Supply Company, Unisource
Worldwide, Inc. and TFBD, Inc.
10.4 1981 Stock Incentive Plan, as Form 10- K 7
amended through May 20, 1991 3/27/92
10.5 1983 Incentive Stock Option Plan, Form 10-K 8
as amended through May 20, 1991 3/27/92
10.6 1986 Stock Incentive Plan, as Form 10-K 9
amended through May 20, 1991 3/27/92
10.7 1988 Stock Incentive Plan, as Form 10-K 10
amended through May 20, 1991 3/27/92
22
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
10.8 1993 Stock Incentive Plan Form 10-K 10.8
3/29/94
10.9 1995 Stock Incentive Plan Form 10-K 10.14
3/28/96
10.10 1997 Stock Incentive Plan Form 10-K 10.10
3/27/98
10.11 1999 Stock Incentive Plan *
10.12 1999 Long-Term Employee *
Incentive Plan
10.13 Employment Contracts with Form 10-K 10.12
Executives 3/28/89
10.14 Amendment to Employment
Contracts with Executives *
10.15 Amendment No. 3 to Employment Form 10-K 10.22
Contract with James H. Devlin 3/27/98
10.16 Employment Contracts with John Form 10-K 10.23
M. Mount and Walter L. Krebs 3/27/98
10.17 Employment Contract with Lawrence Form 10-K 10.24
J. Gillis 3/27/98
10.18 Amendment No. 7 to Employment Form 10-K 10.18
Agreement with Edward L. Hutton 3/27/97
10.19 Excess Benefits Plan, as restated Form 10-K 10.9
and amended, effective April 1, 3/27/98
1997
10.20 Non-Employee Directors' Deferred Form 10-K 10.10
Compensation Plan 3/24/88
10.21 Chemed/Roto-Rooter Savings & Form 10-K 10.25
Retirement Plan, effective 3/25/99
January 1, 1999
2
23
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
10.22 Stock Purchase Plan by and Form 8-K 10.21
among Banta Corporation, Chemed 10/13/97
Corporation and OCR Holding
Company
10.25 Directors Emeriti Plan Form 10-Q 10.11
5/12/88
10.26 Second Amendment to Split Dollar *
Agreement with Executives
10.27 Split Dollar Agreement - II Form 10-K 10.27
with James H. Devlin 3/25/99
10.28 Split Dollar Agreement with Form 10-K 10.27
Sandra E. Laney 3/25/99
10.29 Split Dollar Agreements Form 10-K 10.15
with Executives 3/28/96
10.30 Split Dollar Agreement with Form 10-K 10.16
Edward L. Hutton 3/28/96
10.31 Split Dollar Agreement with Form 10-K 10.17
Paul C. Voet 3/28/96
10.32 Split Dollar Agreement with *
John M. Mount
10.33 Split Dollar Agreement with *
Spencer S. Lee
10.34 Split Dollar Agreement with *
Rick L. Arquilla
10.35 Form of Promissory Note under *
the Executive Stock Purchase Plan
13 1999 Annual Report to Stockholders *
21 Subsidiaries of Chemed Corporation *
23 Consent of Independent Accountants *
3
24
24 Powers of Attorney *
27 Financial Data Schedule *
- -----------------------------
* Filed herewith.
4