Sales: $525.1 million
Stock Exchanges: New York
SICs: 7699 Repair Services, Not Elsewhere Classified; 5113 Industrial & Personal Service Paper
Chemed Corporation, headquartered in Cincinnati, Ohio, is a highly successful, diversified firm with large market shares in a variety of different areas. Areas of involvement include medical and dental supplies for the private-practice market, hospice care, and home healthcare services; commercial drain cleaning, plumbing, air-conditioning repair, pipe-cleaning, and appliance maintenance services; janitorial products and services; and pharmacy management for the long-term patient care market. The company’s Veratex Group, which provides products for the disposable dental and medical supplies market, serves over 30 percent of all private-practice dentists across the United States.
Chemed Corporation’s long history dates back to the founding of the DuBois Soap Company. In June 1920 a confident and ambitious salesman named T.V. DuBois decided to open his own business. DuBois established the DuBois Soap Company in a rented building, a small, four-story structure adjacent to the Ohio River. The fledgling operation made soap chips and powders for the city’s growing restaurant trade. Within a few short years, the firm was selling its products all over the state. As revenues increased, additional employees were added to the payroll.
DuBois Soap Company survived the bleak years of the Great Depression in good financial condition. During the late 1930s and early 1940s the company expanded its restaurant dishwashing product line to encompass a whole range of different items, including industrial cleaning and maintenance products for other industries. Soon DuBois was servicing restaurants, steel companies, heavy manufacturing firms, and food processing plants. With the rapid expansion of its product line, the company decided to increase the amount of space for its administrative and manufacturing facilities in Cincinnati. By the end of World War II, the company was producing a huge variety of cleaning and maintenance products and had developed a reputation as one of the leaders in the specialty chemical industry.
During the late 1940s and throughout the 1950s, DuBois developed its sales network and expanded its manufacturing plants. Three new facilities were built in California, New Jersey, and Texas. As DuBois’s revenues increased, the company came to the attention of W.R. Grace, a large conglomerate with holdings in the chemical, manufacturing, retail, fertilizer, food products, and restaurant industries. In 1964 Grace acquired DuBois and incorporated the company into its Specialty Products Group, renaming the firm the DuBois Chemicals Division. In 1971 Grace management transformed its specialty chemicals group, which included the DuBois Chemicals Division, into the Chemed Corporation. DuBois Chemicals developed and manufactured professional cleaning and maintenance chemicals, dispensing equipment, and processing compounds. It served as the single largest area of operation within Chemed. While Grace maintained ownership of the majority of Chemed stock, the company was given autonomy to develop its own products.
Another firm that remained an important part of Chemed Corporation in the mid-1990s was the National Sanitary Supply Company. Founded in 1929, National developed in much the same manner as DuBois. The company offered a variety of chemical products used to clean and maintain industrial, commercial, and institutional facilities. Goods produced by National over the years included floor finishes, trash liners, mops, buckets, brushes, paper and packaging products, and cleaning chemicals and equipment. By the time the company was purchased by Chemed in 1983, National had become the largest distributor of sanitary maintenance supplies in America.
The third major company to shape Chemed Corporation was Roto-Rooter, Inc. Founded in 1936, Roto-Rooter provided sewer and drain cleaning services. After a time it expanded its range of service to include plumbing repair and maintenance. The firm grew at such a rapid pace that management decided to establish a network of independent franchises that could conduct business throughout the United States. By the time Chemed purchased the company in 1980, Roto-Rooter has become the leading supplier of sewer and drain cleaning services across America. The company, which claimed that it had serviced more than two million customers, boasted that it had cleaned one out of every six clogged drains or sewers in the country.
Armed with the thriving DuBois and Roto-Rooter businesses, and with plans to acquire National Sanitary Supply already in motion, Chemed management decided to buy the remainder of W.R. Grace’s 16.7 million shares of Chemed stock. This transaction allowed Chemed to become a totally autonomous, independent corporation. It was listed on the New York Stock Exchange in 1982.
Even as Chemed developed into a successful independent organization, DuBois remained the cornerstone of its operations. Throughout the 1980s, Chemed grew as DuBois grew. DuBois manufactured and marketed hundreds of specialty chemical products—including paint strippers, cutting fluids, specialty lubricants, sanitation chemicals, and water treatment chemicals— for use as industrial cleaning and maintenance compounds. The company sold its product line to customers in a number of diverse industries. Public utilities, mining organizations, airlines, meat packers, breweries, dairy plants, railroads, metal finishers, publishing companies, hospitals, and retail establishments all purchased materials from DuBois. In the mid-1980s the company expanded its services to include laundry and linen supplies and uniform rentals. During this time DuBois expanded its product line to major overseas markets. By the end of the 1980s, the company had opened offices in Australia, England, France, Germany, Holland, Japan, Mexico, Saudi Arabia, Singapore, South Africa, Sweden, and Venezuela.
Chemed also established several new businesses during the 1980s. In 1981 Chemed established Omnicare, Inc., a company designed to supply pharmacy management services and distribute dental and medical supplies. Omnicare was divided into two operating divisions, the Sequoia Pharmacy Group and the Vera-tex Group. Sequoia provided services for more than 200 nursing homes, and by 1990 it represented over 20 percent of Omnicare revenues. The Veratex Group, a supplier of medical and dental products, grew even more rapidly. By 1990 the Veratex Group ranked third in America’s dressings and sponge market on the strength of its sales of over 800 different kinds of proprietary disposable paper, gauze, and cotton products to professionals working in the veterinary, medical, and dental fields.
National Sanitary Supply Company and Roto-Rooter also helped Chemed increase its revenues during the 1980s. By the early 1990s, National reported over 150,000 standing accounts across the country, with 22 distribution centers in 14 states. The performance of Roto-Rooter was even better. In 1990, a year when revenues from the company’s plumbing services increased 26 percent, the firm introduced a revolutionary drain and sewer cleaning product that broke down organic waste by biological means and converted it into water and harmless carbon dioxide. Roto-Rooter also made significant inroads toward expanding its base of operations through a franchising agreement that allowed the company to distribute products in Japan.
In the early 1990s, management at Chemed decided to concentrate on marketing and service-oriented businesses, rather than capital or production-intensive manufacturing. Although DuBois was the largest revenue and profit-generating division within Chemed, with sales of $275 million in 1990 and 2,800 employees, management thought it best to sell its flagship operation in order to refocus the company’s priorities. As a result, DuBois was sold for $243 million to Molson Companies, Ltd., the largest brewery in Canada and the sixth leading beer maker in the United States. Molson immediately combined DuBois with its Diversey Corporation subsidiary.
Chemed implemented a comprehensive restructuring program with the money garnered from the sale of DuBois. The revenue was immediately reinvested in the company’s growing healthcare business. Money was also funneled into Chemed’s appliance repair service interests. Chemed sold off Omnicare as well, but retained its highly profitable Veratex Group. Sales for Veratex amounted to over $95 million in 1994, but growing competition within the industry and significant changes in the healthcare industry forced the Veratex Group to reduce its work force and cut operating expenses. One development of interest in the industry, for example, was the decision by Tidi Wholesale, a leader in the manufacture of disposable medical and dental products, to merge its product line with Erving Healthcare, a producer of environmentally safe, recycled paper products.
National Sanitary Supply Company had offices in 71 locations across the United States in the mid-1990s. The company, which touts itself as a “one-stop shop” for its customers, is one of the largest distributors of sanitary maintenance supply products in the country. In 1995 the company offered more than 10,000 products used to clean and maintain all types of commercial, industrial, and institutional facilities.
Roto-Rooter is the largest supplier of drain cleaning and plumbing services in America. The company also maintains the country’s largest service contract business for the appliance, heating, and air conditioning repair markets. Roto-Rooter has increased its overseas operations as well. Entering the mid-1990s the company was an industry leader in Canada and operated 17 franchises in Japan. In 1994 the company expanded the number of its service technicians by 15 percent. All this activity contributed to greater revenues for Roto-Rooter. From 1993 to 1994, the company reported a 20 percent growth in plumbing revenues. But Roto-Rooter has enjoyed steady growth for a number of years. From 1984 to 1994, for instance, revenues exploded from $28.2 million to $171.9 million.
In addition to the Veratex Group, National Sanitary Supply Company, and Roto-Rooter, Chemed had one other major subsidiary in the mid-1990s: Patient Care, Inc. Founded in 1974 to provide comprehensive home-healthcare services in the New York, New Jersey, and Connecticut areas, Patient Care was acquired by Chemed in 1993. In the mid-1990s Patient Care’s work force included more than 4,500 nurses, home health care aides, speech therapists, physical therapists, occupational therapists, medical social workers, nutritionists, and other healthcare workers. Regarded by many as one of the anticipated solutions to the ever-increasing costs of in-patient health services, the $20 billion homecare industry has grown rapidly in the 1990s. Mindful that the homecare market is extremely fragmented, Patient Care claims that its own comprehensive line of healthcare services offers better resources and is more cost-effective than smaller home health agencies. In its first year with Chemed, Patient Care proved to be a valuable acquisition. From 1993 to 1994 Patient Care’s revenues grew from $53.5 million to $69 million.
Led by chairman and chief executive officer Edward L. Hutton, president Kevin J. McNamara, and Board of Directors chairman J. Peter Grace, Chemed seemed poised to take advantage of growing market trends in service-oriented industries such as home healthcare and plumbing and drain cleaning in the mid-1990s. Dividends continue to increase from its core interests, and management has seen further financial gains from investments in other firms like Vital Health Corporation and Exel Ltd.
Veratex Group; National Sanitary Supply Company; Roto-Rooter, Inc.; Patient Care, Inc.
Bastian, Lisa, and Jeffrey Waddle, “Corporate Profiles,” Cincinnati:City of Charm, 1992, pp. 308-309.
Chemed Annual Report, Cincinnati: Chemed Corporation, 1994.