Current Report
 
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 11, 2002
 
 
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
 
 
Delaware
  
1-8351
  
31-0791746
(State or other jurisdiction
of incorporation)
  
(Commission File Number)
  
(I.R.S. Employer
Identification 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

 
ITEM 2.    ACQUISITION OR DISPOSITION OF ASSETS
 
On October 11, 2002, Patient Care Inc. (“Patient Care”), a wholly owned subsidiary of Chemed Corporation (“Company”), sold all of the issued and outstanding stock of National Home Care Inc. (“NHC”), a wholly owned subsidiary of Patient Care, to PCI Holding Corp. (“PCI-H”), a Delaware corporation. Immediately thereafter, the Company sold all of the issued and outstanding stock of Patient Care to PCI-A Holding Corp. (“PCI-A”), a Delaware corporation. PCI-H and PCI-A are owned by an investor group that includes Schroder Ventures Life Sciences Group, Oak Investment Partners, Prospect Partners and Salix Ventures.
 
The cash proceeds to the Company from the sale of Patient Care totaled $57.5 million, of which $5 million was placed in escrow pending settlement of specified contingencies. In addition, the Company received a senior subordinated note receivable (“Note”) in the amount of $12.5 million and a common stock purchase warrant for the purchase of 2% of the outstanding stock of PCI-H. The Note is due October 11, 2007 and bears interest at the annual rate of 7.5% through September 30, 2004, 8.5% from October 1, 2004 through September 30, 2005 and 9.5% thereafter. The warrant has an estimated fair value of $1.4 million.
 
Patient Care provides home-healthcare services primarily in the New York-New Jersey-Connecticut area. Services provided include skilled nursing; home health aide; physical, speech, occupational therapy; and medical social work. There is no material relationship between PCI-H, PCI-A, Patient Care, NHC, the Company, any of the Company’s affiliates, any Company director or officer or any associate of any such directors or officers.
 
The proceeds will be used to fund future acquisitions and general corporate purposes.
 
The Company anticipates that a portion of the cash proceeds from this transaction will be used to retire borrowings under its revolving credit agreement with Bank One, N.A. At September 30, 1997 the Company had borrowings of $25 million outstanding under this agreement. The balance of the proceeds will be available for the funding of future acquisitions and general corporate purposes.
 
ITEM 7.    FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
 
(a)
 
Financial Statements of Businesses Acquired.
Not applicable.
 
(b)
 
Pro Forma Financial Information (Unaudited). The following assumptions have been made in preparing the unaudited Pro Forma Consolidated Statements of Operations of Chemed Corporation and Subsidiary Companies (“Chemed”) for the year ended December 31, 2001 and for the six months ended June 30, 2001 and 2002 and the unaudited Pro Forma Consolidated Balance Sheet of Chemed as of June 30, 2002:
 
 
(i)
 
For purposes of preparing the unaudited Pro Forma Condensed Consolidated Statements of Operations, the dispositions of NHC and Patient Care were assumed to have occurred at the beginning of each fiscal period presented.
 
 
(ii)
 
For purposes of preparing the unaudited Pro Forma Consolidated Balance Sheet, the dispositions of NHC and Patient Care were assumed to have occurred on June 30, 2002.
 

 
 
(iii)
 
The unaudited pro forma consolidated financial statements presented herein are shown for illustrative purposes only and are not necessarily indicative of the future financial position or future results of operations of Chemed, or of the financial position or results of operations that would have actually occurred had the transactions been in effect as of the date or for the periods presented.
 
 
(iv)
 
The unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements and related notes of Chemed.
 
The unaudited pro forma consolidated financial statements of Chemed follow on the next page:
 

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
(in thousands except share and per share data)
 
           
Adjustments —Add/(Deduct)
           
    
Historical
     
Patient Care (a)
     
Other
       
Pro Forma
  
ASSETS
                                      
Current Assets
                                      
Cash and cash equivalents
   
$
11,456
 
   
$
458
 
   
$
52,071
(b)
     
$
63,985
 
Accounts receivable less allowances of $5,201
(pro forma—$4,281)
   
 
50,792
 
   
 
(35,998
)
   
 
—  
 
     
 
14,794
 
Inventories
   
 
10,070
 
   
 
—  
 
   
 
—  
 
     
 
10,070
 
Statutory deposits
   
 
12,282
 
   
 
—  
 
   
 
—  
 
     
 
12,282
 
Prepaid expenses
   
 
16,583
 
   
 
(2,286
)
   
 
—  
 
     
 
14,297
 
    
                      
Total current assets
   
 
101,183
 
   
 
(37,826
)
   
 
52,071
 
     
 
115,428
 
Other investments
   
 
37,692
 
   
 
—  
 
   
 
—  
 
     
 
37,692
 
Properties and equipment, at cost less accumulated depreciation of $72,687 (pro forma—$63,957)
   
 
62,349
 
   
 
(12,360
)
   
 
—  
 
     
 
49,989
 
Identifiable intangible assets less accumulated amortization of $8,426 (pro forma—$6,859)
   
 
3,685
 
   
 
(488
)
   
 
—  
 
     
 
3,197
 
Goodwill less accumulated amortization of $35,541
(pro forma—$30,450)
   
 
161,852
 
   
 
(30,673
)
   
 
—  
 
     
 
131,179
 
Other assets
   
 
27,174
 
   
 
1,494
 
   
 
19,951
(b)
     
 
48,619
 
    
                      
Total Assets
   
$
393,935
 
   
$
(79,853
)
   
$
72,022
 
     
$
386,104
 
    
                      
LIABILITIES
                                      
Current liabilities
                                      
Accounts Payable
   
$
9,097
 
   
$
(1,588
)
   
$
—  
 
     
$
7,509
 
Current portion of long-term debt
   
 
366
 
   
 
—  
 
   
 
—  
 
     
 
366
 
Income taxes
   
 
4,433
 
   
 
22
 
   
 
540
(c)
     
 
4,995
 
Deferred contract revenue
   
 
21,202
 
   
 
—  
 
   
 
—  
 
     
 
21,202
 
Other current liabilities
   
 
46,676
 
   
 
(9,759
)
   
 
2,450
(c)
     
 
39,367
 
    
                      
Total current liabilities
   
 
81,774
 
   
 
(11,325
)
   
 
2,990
(c)
     
 
73,439
 
Long-term debt
   
 
55,810
 
   
 
—  
 
   
 
—  
 
     
 
55,810
 
Other liabilities
   
 
26,545
 
   
 
—  
 
   
 
—  
 
     
 
26,545
 
    
                      
Total Liabilities
   
 
164,129
 
   
 
(11,325
)
   
 
2,990
 
     
 
155,794
 
    
                      
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SECURITIES OF THE CHEMED CAPITAL TRUST
   
 
14,186
 
   
 
—  
 
   
 
—  
 
     
 
14,186
 
    
                      
STOCKHOLDERS’ EQUITY
                                      
Capital stock—authorized 15,000,000 shares $1 par;
issued 13,460,755 shares
   
 
13,461
 
   
 
—  
 
   
 
—  
 
     
 
13,461
 
Paid in capital
   
 
168,448
 
   
 
—  
 
   
 
—  
 
     
 
168,448
 
Retained earnings
   
 
146,240
 
   
 
(68,528
)
   
 
69,032
(b)
     
 
146,744
 
Treasury stock—3,665,835 shares, at cost
   
 
(112,568
)
   
 
—  
 
   
 
—  
 
     
 
(112,568
)
Unearned compensation
   
 
(5,480
)
   
 
—  
 
   
 
—  
 
     
 
(5,480
)
Deferred compensation payable in company stock
   
 
2,253
 
   
 
—  
 
   
 
—  
 
     
 
2,253
 
Accumulated other comprehensive income
   
 
4,205
 
   
 
—  
 
   
 
—  
 
     
 
4,205
 
Notes receivable for shares sold
   
 
(939
)
   
 
—  
 
   
 
—  
 
     
 
(939
)
    
                      
Total Stockholders’ Equity
   
 
215,620
 
   
 
(68,528
)
   
 
69,032
 
     
 
216,124
 
    
                      
Total Liabilities and Stockholders’ Equity
   
$
393,935
 
   
$
(79,853
)
   
$
72,022
 
     
$
386,104
 
    
                      
(a)
 
Historical balance sheet of Patient Care
(b)
 
Proceeds from sale of Patient Care
(c)
 
Accrual of expenses and income taxes on sale of Patient Care

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(in thousands except share and per share data)
 
               
Adjustments —Add/(Deduct)
           
      
Historical
       
Patient Care (a)
       
Other(b)
       
Pro Forma
  
Continuing Operations
                                            
Service revenues and sales
     
$
477,116
 
     
$
(139,208
)
     
$
—  
 
     
$
337,908
 
      
                          
Cost of services provided and cost of goods sold
     
 
295,477
 
     
 
(89,862
)
     
 
—  
 
     
 
205,615
 
General and administrative expenses
     
 
101,141
 
     
 
(44,769
)  
     
 
—  
 
     
 
56,372
 
Selling and marketing expenses
     
 
45,569
 
     
 
—  
 
     
 
—  
 
     
 
45,569
 
Depreciation
     
 
16,109
 
     
 
(1,715
)
     
 
—  
 
     
 
14,394
 
Restructuring and similar expenses
     
 
26,126
 
     
 
(1,392
)
     
 
—  
 
     
 
24,734
 
      
                          
Total costs and expenses
     
 
484,422
 
     
 
(137,738
)
     
 
—  
 
     
 
346,684
 
      
                          
Income/(loss) from operations
     
 
(7,306
)
     
 
(1,470
)
     
 
—  
 
     
 
(8,776
)
Interest expense
     
 
(5,424
)
     
 
—  
 
     
 
—  
 
     
 
(5,424
)
Distributions on preferred securities
     
 
(1,113
)
     
 
—  
 
     
 
—  
 
     
 
(1,113
)
Other income—net
     
 
3,780
 
     
 
1,208
 
     
 
938
 
     
 
5,926
 
      
                          
Income/(loss) before income taxes
     
 
(10,063
)
     
 
(262
)
     
 
938
 
     
 
(9,387
)
Income taxes
     
 
3,362
 
     
 
(264
)
     
 
(328
)
     
 
2,770
 
      
                          
Income/(loss) from continuing operations
     
$
(6,701
)
     
$
(526
)
     
$
610
 
     
$
(6,617
)
      
                          
Earnings/(Loss) Per Share
                                            
Income/(loss) from continuing operations
     
$
(0.69
)
                           
$
(0.68
)
      
                          
Average number of shares outstanding
     
 
9,714
 
                           
 
9,714
 
Diluted Earnings/(Loss) Per Share
                                            
Income/(loss) from continuing operations
     
$
(0.69
)
                           
$
(0.68
)
      
                          
Average number of shares outstanding
     
 
9,714
 
                           
 
9,714
 
Earnings Excluding Goodwill Amortization
                                            
Income/(loss) from continuing operations
     
$
(2,080
)
                           
$
(2,729
)
      
                          
Earnings/(loss) per share
                                            
Income/(loss) from continuing operations
     
$
(0.21
)
                           
$
(0.28
)
      
                          
Average number of shares outstanding
     
 
9,714
 
                           
 
9,714
 
Diluted earnings/(loss) per share
                                            
Income/(loss) from continuing operations
     
$
(0.21
)
                           
$
(0.28
)
      
                          
Average number of shares outstanding
     
 
9,714
 
                           
 
9,714
 
(a)
 
Historical income statement of Patient Care.
(b)
 
Interest income on note receivable from the sale of Patient care, computed at 7.5% per annum.

5

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(in thousands except share and per share data)
 
               
Adjustments —Add/(Deduct)
           
      
Historical
       
Patient Care (a)
       
Other (b)
       
Pro Forma
  
Continuing Operations
                                            
Service revenues and sales
     
$
241,989
 
     
$
(70,780
)
     
$
—  
 
     
$
171,209
 
      
                          
Cost of services provided and cost of goods sold
     
 
146,880
 
     
 
(45,066
)
     
 
—  
 
     
 
101,814
 
General and administrative expenses
     
 
50,972
 
     
 
(22,493
)
     
 
—  
 
     
 
28,479
 
Selling and marketing expenses
     
 
22,253
 
     
 
—  
 
     
 
—  
 
     
 
22,253
 
Depreciation
     
 
8,027
 
     
 
(859
)
     
 
—  
 
     
 
7,168
 
      
                          
Total costs and expenses
     
 
228,132
 
     
 
(68,418
)
     
 
—  
 
     
 
159,714
 
      
                          
Income/(loss) from operations
     
 
13,857
 
     
 
(2,362
)
     
 
—  
 
     
 
11,495
 
Interest expense
     
 
(2,952
)
     
 
—  
 
     
 
—  
 
     
 
(2,952
)
Distributions on preferred securities
     
 
(555
)
     
 
—  
 
     
 
—  
 
     
 
(555
)
Other income—net
     
 
2,604
 
     
 
708
 
     
 
469
 
     
 
3,781
 
      
                          
Income/(loss) before income taxes
     
 
12,954
 
     
 
(1,654
)
     
 
469
 
     
 
11,769
 
Income taxes
     
 
(5,010
)
     
 
359
 
     
 
(164
)
     
 
(4,815
)
      
                          
Income/(loss) from continuing operations
     
$
7,944
 
     
$
(1,295
)
     
$
305
 
     
$
6,954
 
      
                          
Earnings/(Loss) Per Share
                                            
Income/(loss) from continuing operations
     
$
0.82
 
                           
$
0.71
 
      
                          
Average number of shares outstanding
     
 
9,737
 
                           
 
9,737
 
Diluted Earnings/(Loss) Per Share
                                            
Income/(loss) from continuing operations
     
$
0.80
 
                           
$
0.70
 
      
                          
Average number of shares outstanding
     
 
9,885
 
                           
 
9,885
 
Earnings Excluding Goodwill Amortization
                                            
Income/(loss) from continuing operations
     
$
10,258
 
                           
$
8,901
 
      
                          
Earnings/(loss) per share
                                            
Income/(loss) from continuing operations
     
$
1.05
 
                           
$
0.91
 
      
                          
Average number of shares outstanding
     
 
9,737
 
                           
 
9,737
 
Diluted earnings/(loss) per share
                                            
Income/(loss) from continuing operations
     
$
1.04
 
                           
$
0.90
 
      
                          
Average number of shares outstanding
     
 
9,885
 
                           
 
9,885
 
(a)
 
Historical income statement of Patient Care.
(b)
 
Interest income on note receivable from the sale of Patient care, computed at 7.5% per annum.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(in thousands except share and per share data)
 
               
Adjustments—Add/(Deduct)
           
      
Historical
       
Patient Care (a)
       
Other (b)
       
Pro Forma
  
Continuing Operations
                                            
Service revenues and sales
     
$
233,604
 
     
$
(73,669
)
     
$
—  
 
     
$
159,935
 
      
                          
Cost of services provided and cost of goods sold
     
 
140,643
 
     
 
(45,511
)
     
 
—  
 
     
 
95,132
 
General and administrative expenses
     
 
48,798
 
     
 
(23,724
)
     
 
—  
 
     
 
25,074
 
Selling and marketing expenses
     
 
22,869
 
     
 
—  
 
     
 
—  
 
     
 
22,869
 
Depreciation
     
 
7,990
 
     
 
(1,012
)
     
 
—  
 
     
 
6,978
 
      
                          
Total costs and expenses
     
 
220,300
 
     
 
(70,247
)
     
 
—  
 
     
 
150,053
 
      
                          
Income/(loss) from operations
     
 
13,304
 
     
 
(3,422
)
     
 
—  
 
     
 
9,882
 
Interest expense
     
 
(1,536
)
     
 
—  
 
     
 
—  
 
     
 
(1,536
)
Distributions on preferred securities
     
 
(541
)
     
 
—  
 
     
 
—  
 
     
 
(541
)
Other income—net
     
 
3,049
 
     
 
493
 
     
 
469
 
     
 
4,011
 
      
                          
Income/(loss) before income taxes
     
 
14,276
 
     
 
(2,929
)
     
 
469
 
     
 
11,816
 
Income taxes
     
 
(5,035
)
     
 
938
 
     
 
(164
)
     
 
(4,261
)
      
                          
Income/(loss) from continuing operations
     
$
9,241
 
     
$
(1,991
)
     
$
305
 
     
$
7,555
 
      
                          
Earnings/(Loss) Per Share
                                            
Income/(loss) from continuing operations
     
$
0.94
 
                           
$
0.77
 
      
                          
Average number of shares outstanding
     
 
9,850
 
                           
 
9,850
 
Diluted Earnings/(Loss) Per Share
                                            
Income/(loss) from continuing operations
     
$
0.93
 
                           
$
0.77
 
      
                          
Average number of shares outstanding
     
 
10,274
 
                           
 
10,274
 
Earnings Excluding Goodwill Amortization
                                            
Income/(loss) from continuing operations
     
$
9,241
 
                           
$
7,555
 
      
                          
Earnings/(loss) per share
                                            
Income/(loss) from continuing operations
     
$
0.94
 
                           
$
0.77
 
      
                          
Average number of shares outstanding
     
 
9,850
 
                           
 
9,850
 
Diluted earnings/(loss) per share
                                            
Income/(loss) from continuing operations
     
$
0.93
 
                           
$
0.77
 
      
                          
Average number of shares outstanding
     
 
10,274
 
                           
 
10,274
 
(a)
 
Historical income statement of Patient Care.
(b)
 
Interest income on note receivable from the sale of Patient care, computed at 7.5% per annum.

 
(c)
 
EXHIBITS
 
SK 601 Ref. No.
   
Description
  2.1
   
Stock Purchase Agreement dated as of May 8, 2002 by and between PCI Holding Corp. and Chemed Corporation.
  2.2
   
Amendment No. 1 to Stock Purchase Agreement dated as of October 11, 2002 by and among PCI Holding Corp., PCI-A Holding Corp. and Chemed Corporation.
  2.3
   
Senior Subordinated Promissory Note dated as of October 11, 2002 by and among PCI Holding Corp. and Chemed Corporation.
  2.4
   
Common Stock Purchase Warrant dated as of October 11, 2002 by and between PCI Holding Corp. and Chemed Corporation.
99.1
   
Press release, dated October 11, 2002.
 
 
CERTIFICATION AND SIGNATURES
 
The undersigned hereby certify that this report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, 15U.S.C. section 78(m) or 78(o)(d) and that information contained herein fairly presents, in all material respects, the financial condition and results of operations of Registrant.
 
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 thereunto duly authorized.
 
         
CHEMED CORPORATION
         
(Registrant)
Dated:  October 11, 2002
   
By
   
/s/    Kevin J. McNamara
         
Kevin J. McNamara
(President and Chief Executive Officer)
Dated:  October 11, 2002
   
By
   
/s/    Timothy S. O’Toole
         
Timothy S. O’Toole
(Executive Vice President and Treasurer –
Principal Financial Officer)
Dated:  October 11, 2002
   
By
   
/s/    Arthur V. Tucker, Jr.
         
Arthur V. Tucker, Jr.
(Vice President and Controller
Principal Accounting Officer)