-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, flUtR5yLGaI4nQ+V8CjvRz3TN7RBc3tffQRtEehTEOGsxWneO8YqDXOsnTXtqHYi r7CBDJw9E1VuxEds69YmkQ== 0000950115-94-000226.txt : 19940831 0000950115-94-000226.hdr.sgml : 19940831 ACCESSION NUMBER: 0000950115-94-000226 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 DATE AS OF CHANGE: 19940830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIQ INC CENTRAL INDEX KEY: 0000350920 STANDARD INDUSTRIAL CLASSIFICATION: 8090 IRS NUMBER: 510219413 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08147 FILM NUMBER: 94544502 BUSINESS ADDRESS: STREET 1: ONE MEDIQ PLZ CITY: PENNSAUKEN STATE: NJ ZIP: 08110 BUSINESS PHONE: 6096656300 MAIL ADDRESS: STREET 1: ONE MEDIQ PLZ CITY: PENNSAUKEN STATE: NJ ZIP: 08110 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 1994 Commission File Number: 1-8147 MEDIQ INCORPORATED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 51-0219413 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) ONE MEDIQ PLAZA, PENNSAUKEN, NEW JERSEY 08110 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (609) 665-9300 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 ________ As of August 5, 1994, there were 17,729,014 shares of Common Stock, par value $1.00 per share and 6,417,688 shares of Preferred Stock, par value $.50 per share, outstanding. MEDIQ INCORPORATED AND SUBSIDIARIES QUARTER ENDED JUNE 30, 1994 PART I. FINANCIAL INFORMATION: ITEM 1. FINANCIAL STATEMENTS. Condensed Consolidated Statements of Operations -- Three and Nine Months ended June 30, 1994 and 1993 (Unaudited).................................................................................. 4 Condensed Consolidated Balance Sheets -- June 30, 1994 (Unaudited) and September 30, 1993............................................. 5 Condensed Consolidated Statements of Cash Flows-- Nine Months ended June 30, 1994 and 1993 (Unaudited).................................................................................. 6 Notes to Condensed Consolidated Financial Statements (Unaudited)....................................................................... 7-9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................ 10-13
PART II. OTHER INFORMATION: ITEM 5. OTHER INFORMATION.............................................................................. 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................... 18
2 MEDIQ INCORPORATED AND SUBSIDIARIES QUARTER ENDED JUNE 30, 1994 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. 3 MEDIQ INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, -------------------- ------------------------ 1994 1993 1994 1993 --------- --------- ----------- ----------- Revenues........................................................ $ 43,043 $ 42,902 $ 128,490 $ 134,599 Costs and expenses: Operating..................................................... 22,553 20,930 65,543 67,412 Selling and administrative.................................... 12,656 11,336 34,991 34,072 Depreciation and amortization................................. 7,091 6,112 20,875 17,942 --------- --------- ----------- ----------- 42,300 38,378 121,409 119,426 --------- --------- ----------- ----------- Operating income................................................ 743 4,524 7,081 15,173 Other (charges) credits: Interest expense.............................................. (6,077) (5,773) (18,212) (17,399) Equity in earnings of unconsolidated subsidiaries............. 1,044 1,337 3,056 3,269 Equity participation.......................................... 63 1,073 116 3,383 Other -- net.................................................. 339 91 3,074 518 --------- --------- ----------- ----------- Income (loss) from continuing operations before income tax expense (benefit) and extraordinary charge...................... (3,888) 1,252 (4,885) 4,944 Income tax expense (benefit).................................... (1,039) 284 (948) 1,485 --------- --------- ----------- ----------- Income (loss) from continuing operations........................ (2,849) 968 (3,937) 3,459 Income from discontinued operations............................. -- 149 -- 838 Extraordinary charge -- early retirement of debt................ -- (615) -- (953) --------- --------- ----------- ----------- Net income (loss)............................................... $ (2,849) $ 502 $ (3,937) $ 3,344 ========= ========= =========== =========== Earnings per share: Income (loss) from continuing operations...................... $ (.12) $ .04 $ (.16) $ .14 Income from discontinued operations........................... -- .01 -- .04 Extraordinary charge -- early retirement of debt.............. -- (.03) -- (.04) --------- --------- ----------- ----------- Net income (loss)............................................. $ (.12) $ .02 $ (.16) $ .14 ========= ========= =========== =========== Weighted average shares outstanding............................. 24,418 24,117 24,373 24,285 ========= ========= =========== ===========
See Notes to Condensed Consolidated Financial Statements 4 MEDIQ INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, SEPT. 30, 1994 1993 ----------- ----------- (UNAUDITED) (SEE NOTE) ASSETS Current assets: Cash and cash equivalents............................................................. $ 5,394 $ 18,123 Accounts receivable -- net............................................................ 40,325 37,152 Inventories........................................................................... 8,064 9,086 Deferred income taxes................................................................. 4,177 -- Prepaid income taxes.................................................................. -- 3,495 Other current assets.................................................................. 7,814 5,303 ----------- ----------- Total current assets............................................................... 65,774 73,159 Equity investments...................................................................... 37,864 34,693 Note receivable from MHM................................................................ 11,500 11,500 Rental equipment -- net................................................................. 104,635 107,914 Property, plant and equipment -- net.................................................... 36,792 47,169 Goodwill -- net......................................................................... 42,101 36,865 Net investment in leases................................................................ 28,552 16,156 Other assets............................................................................ 18,914 23,805 ----------- ----------- Total assets............................................................................ $ 346,132 $ 351,261 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to financial institutions............................................... $ 5,067 $ 1,434 Accounts payable...................................................................... 8,496 8,757 Accrued expenses...................................................................... 23,460 22,326 Other current liabilities............................................................. 1,087 2,781 Current portion of long-term debt..................................................... 12,072 22,217 ----------- ----------- Total current liabilities.......................................................... 50,182 57,515 Senior debt -- recourse................................................................. 124,280 120,162 Senior debt -- nonrecourse.............................................................. 26,699 25,382 Subordinated debt....................................................................... 86,229 86,229 Deferred income taxes................................................................. 11,425 9,225 Other liabilities..................................................................... 7,619 8,174 Stockholders' equity.................................................................... 39,698 44,574 ----------- ----------- Total liabilities and stockholders' equity.............................................. $ 346,132 $ 351,261 =========== ===========
Note: The balance sheet at September 30, 1993 has been condensed from the audited financial statements at that date. See Notes to Condensed Consolidated Financial Statements 5 MEDIQ INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED JUNE 30, -------------------- 1994 1993 --------- --------- Cash Flows From Operating Activities: Net income (loss)........................................................................ $ (3,937) $ 3,344 Adjustments to reconcile net income (loss) to net cash provided by operating activities............................................................................ 13,729 10,267 --------- --------- Net cash provided by operating activities................................................ 9,792 13,611 Cash Flows From Investing Activities: Proceeds from sale of subsidiaries and assets............................................ 1,089 9,575 Acquisitions............................................................................. (3,808) (1,413) Purchase of rental equipment............................................................. (5,415) (8,239) Purchase of property, plant and equipment................................................ (1,126) (4,486) Proceeds from sale of investments........................................................ 1,948 -- Other.................................................................................... 1,243 1,037 --------- --------- Net cash used in investing activities.................................................... (6,069) (3,526) Cash Flows From Financing Activities: Borrowings............................................................................... 11,369 148 Debt repayments.......................................................................... (26,298) (12,203) Dividends................................................................................ (1,921) (1,267) Proceeds from exercise of stock options.................................................. 398 366 --------- --------- Net cash used in financing activities.................................................... (16,452) (12,956) --------- --------- Decrease in cash and cash equivalents...................................................... (12,729) (2,871) Cash and Cash Equivalents: Beginning balance........................................................................ 18,123 7,025 --------- --------- Ending balance........................................................................... $ 5,394 $ 4,154 ========= ========= Supplemental disclosure of cash flow information: Interest paid............................................................................ $ 15,555 $ 16,362 ========= ========= Income taxes refunded.................................................................... $ 2,715 $ 943 ========= ========= Supplemental disclosure of non-cash investing and financing activities: Equipment financed with debt and capital leases.......................................... $ 8,563 $ 16,590 ========= ========= Liabilities assumed/incurred in connection with acquisitions............................. $ 7,663 $ -- ========= =========
See Notes to Condensed Consolidated Financial Statements 6 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheet as of June 30, 1994, the condensed consolidated statements of operations for the three and nine months ended June 30, 1994 and 1993, and the condensed consolidated statements of cash flows for the nine months then ended have been prepared by the Company, without audit. In the opinion of management, all adjustments (consisting only of normal, recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 1994 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 1993 Annual Report on Form 10-K. The results of operations for the period ended June 30, 1994 are not necessarily indicative of the operating results for the full year. NOTE B -- INVENTORIES Inventories which consist primarily of parts and supplies are stated at the lower of cost (first-in, first-out method) or market. NOTE C -- INCOME TAXES Effective October 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards ('SFAS') No. 109, 'Accounting for Income Taxes', which supersedes SFAS No. 96. The Company adopted SFAS No. 96 in fiscal 1990. The effect of the adoption of SFAS No. 109 upon the provision for income taxes was not significant for the three and nine month periods ended June 30, 1994. NOTE D -- RENTAL EQUIPMENT AND PROPERTY, PLANT AND EQUIPMENT
JUNE 30, SEPTEMBER 30, 1994 1993 ----------- ------------- (IN THOUSANDS) Rental equipment.................................................... $ 171,255 $ 161,707 Less accumulated depreciation and amortization...................... 66,620 53,793 ----------- ------------- $ 104,635 $ 107,914 Property, plant and equipment: Machinery and equipment........................................... $ 45,907 $ 41,369 Building and improvements......................................... 20,028 31,296 Land.............................................................. 2,200 2,200 ----------- ------------- 68,135 74,865 Less accumulated depreciation and amortization...................... 31,343 27,696 ----------- ------------- $ 36,792 $ 47,169 =========== ============
Depreciation and amortization expense related to rental equipment for the nine months ended June 30, 1994 and 1993 was $13,630,000 and $11,282,000, respectively. Depreciation and amortization expense related to property, plant and equipment for the nine months ended June 30, 1994 and 1993 was $4,898,000 and $4,804,000, respectively. 7 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE E -- EQUITY INVESTMENTS As of June 30, 1994, the Company's ownership interest in NutraMax Products, Inc. and PCI Services, Inc. was 47.4% and 42%, respectively. Summarized income statement information for NutraMax and PCI is presented below. NUTRAMAX PRODUCTS, INC.
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED ------------------------------ ------------------------------ JULY 2, JUNE 30, JULY 2, JUNE 30, 1994 1993 1994 1993 -------------- -------------- -------------- -------------- Net sales.......................... $ 15,399,000 $ 7,608,000 $ 40,577,000 $ 22,480,000 Gross profit....................... 4,808,000 2,958,000 12,696,000 9,182,000 Net income......................... 1,185,000 1,121,000 2,957,000 2,928,000 Company's share of net income...... 562,000 546,000 1,409,000 1,442,000
PCI SERVICES, INC.
THREE MONTHS ENDED JUNE 30, NINE MONTHS ENDED JUNE 30, ------------------------------ ------------------------------ 1994 1993 1994 1993 -------------- -------------- -------------- -------------- Net revenue........................ $ 31,427,000 $ 29,026,000 $ 89,757,000 $ 80,384,000 Gross profit....................... 6,364,000 6,566,000 17,971,000 16,843,000 Net income......................... 1,146,000 1,883,000 3,922,000 4,271,000 Company's share of net income...... 482,000 791,000 1,647,000 1,827,000
NOTE F -- LONG TERM DEBT In January 1994, the Company retired $11.6 million of its 6% convertible subordinated debentures representing the remaining outstanding balance. The indenture pursuant to which the Company's 7 1/4% Convertible Subordinated Debentures due 2006 were issued contains a provision requiring the Company to offer to repurchase 15% of the outstanding debentures if the Company's 'net worth' (as defined in the indenture), as of the last day of two consecutive fiscal quarters, is $40.0 million or less. The Company's net worth as of June 30, 1994 was $39.7 million. Should the Company's net worth not exceed $40.0 million at September 30, 1994, the Company would be required to make an offer to repurchase 15%, or $11.3 million of the debentures. Under the terms of the indenture, the repurchase obligation which would otherwise be required is deemed to be satisfied to the extent of debentures previously retired by the Company. In fiscal 1988, the Company repurchased and retired $23.3 million principal amount of debentures. In addition, based upon anticipated results of operations and asset sales, the Company does not anticipate that the Company's net worth will be less than $40.0 million as of September 30, 1994. 8 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE G -- SALE OF ASSETS In December 1993, the Company recorded a pretax gain of $1.9 million ($1.4 million net of taxes), which is included in 'Other credits', as a result of the sale of a portion of its investment in New West Eyeworks, Inc. which completed an initial public offering in December 1993. In connection with such offering, the Company received cash in the amount of $1.9 million and stock with a fair market value of $1.0 million. NOTE H -- SUBSEQUENT EVENT On August 4, 1994, the Company completed the merger of its subsidiary, MEDIQ Equipment and Maintenance Services, Inc. and a subsidiary of MMI Medical, Inc. ('MMI') (NASDAQ:MMIM). Under the terms of the merger agreement, the Company received 2,050,000 shares of MMI common stock, representing approximately a 40% equity interest in MMI, and warrants to purchase at $6.25 per share an additional 325,000 shares of MMI common stock. It is anticipated that the Company will distribute the 2,050,000 shares of MMI common stock to its shareholders in the future. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion addresses the financial condition of the Company as of June 30, 1994 compared with September 30, 1993 and its results of operations for the three and nine months ended June 30, 1994 and 1993. This discussion should be read in conjunction with the Management's Discussion and Analysis section included in the Company's Annual Report on Form 10-K (pages 11-17) to which the reader is directed for additional information. Prior year segment information has been restated to conform to the present year presentation. RESULTS OF OPERATIONS On August 4, 1994, the Company completed the merger of its subsidiary, MEDIQ Equipment and Maintenance Services, Inc. ('MEMS') and a subsidiary of MMI Medical, Inc. ('MMI'). Under the terms of the merger agreement, the Company received 2,050,000 shares of MMI common stock, representing approximately a 40% equity interest in MMI, and warrants to purchase at $6.25 per share an additional 325,000 shares of MMI common stock. It is anticipated that the Company will distribute the 2,050,000 shares of MMI common stock to MEDIQ stockholders in the future. From the date of the merger, the operations of MEMS will not be included in the Company's results of operations. Instead, the Company will include its 40% share of MMI's earnings as part of the Company's equity in the earnings of unconsolidated subsidiaries in the Company's results of operations. The merger of MEMS and MMI is not anticipated to have a material impact on the Company's results of operations or cash flows. Third Quarter 1994 Compared with Third Quarter 1993 Revenues were $43.0 million for the third quarter of fiscal 1994, as compared to $42.9 million in the prior year quarter. MEDIQ/PRN's revenues were $18.1 million, as compared to 1993 revenues of $18.9 million. MEDIQ/PRN continued expansion into the home healthcare, nursing home and alternative care markets resulting in higher revenues from these activities which were offset by decreased revenues from acute care hospitals as a result of softness in that sector of the industry. Revenues from the Diagnostic Imaging Services Group increased to $12.8 million, as compared to $12.1 million in the prior year quarter. This segment experienced an increase in procedures, particularly ultrasound and nuclear imaging services, as a result of geographic expansion through acquisitions, while reductions in third party reimbursement rates adversely impacted revenues for the quarter. Revenues from MEMS increased 7% to $4.5 million as a result of continued growth in its Asset Management Program and new services for MRI equipment. Revenues from the Company's other operating activities were consistent with the prior year quarter at $7.0 million. Operating income decreased to $.7 million, or 2% of revenues for the third quarter of fiscal 1994, as compared to $4.5 million, or 11% of revenues in the prior year quarter. The decrease in operating income was primarily attributable to the Diagnostic Imaging Services Group and MEDIQ/PRN. The Diagnostic Imaging Services Group's operating income decreased $2.2 million reflecting additional bad debt reserves and additional costs associated with increased volume combined with reductions in reimbursement rates. The Company has taken steps to offset the decrease in operating margins by expanding into new geographic areas, entering new market segments and adding to its product line. MEDIQ/PRN's operating income decreased $1.8 million as a result of lower revenues from acute care hospitals and increased operating and depreciation expenses. The operating loss from MEMS decreased to $.2 million, as compared to $.3 million in the prior year quarter, as a result of increased revenues associated with its Asset Management Program and new services for MRI equipment. Operating income increased by $.3 million as a result of reductions in parent company overhead. Interest expense increased 5% to $6.1 million for the third quarter of fiscal 1994 from $5.8 million as a result of increased borrowings associated with the expansion of MEDIQ/PRN and the Diagnostic Imaging Services Group. 10 The pretax loss from continuing operations was $3.9 million for the third quarter of fiscal 1994, as compared to income of $1.3 million in the prior year quarter. The prior year quarter included $1.1 million of income related to the issuance of common stock by NutraMax in connection with an acquisition in June 1993. The Company's equity in earnings of its unconsolidated subsidiaries, PCI and NutraMax, decreased to $1.0 million from $1.3 million in the prior year quarter. Nine Months Ended June 30, 1994 Compared with Nine Months Ended June 30, 1993 Revenues were $128.5 million for the nine months ended June 30, 1994, as compared to $134.6 million in the prior year period. MEDIQ/PRN's revenues were $57.9 million, a decrease of $1.6 million from the corresponding period in 1993. The decrease was primarily attributable to decreased revenues from acute care hospitals as a result of softness in that sector of the industry, which has been mitigated by continued expansion into the home healthcare, nursing home and alternative care markets. Revenues from the Diagnostic Imaging Services Group increased $.9 million to $35.0 million. This segment experienced an increase in procedures, particularly ultrasound and nuclear imaging services, as a result of geographic expansion through acquisitions, while reductions in third party reimbursement rates adversely impacted revenues. Revenues from MEMS increased 13% to $14.0 million as a result of continued growth in its Asset Management Program and new services for MRI equipment, partially offset by decreased CT revenues. Revenues from the Company's other operating activities decreased to $19.7 million in the current period, as compared to $26.6 million in the prior year period, primarily attributable to divestitures in 1993. Operating income decreased to $7.1 million, or 6% of revenues, for the current period, as compared to $15.2 million, or 11% of revenues, in the prior year period. The decrease in operating income was primarily attributable to the Diagnostic Imaging Services Group and MEDIQ/PRN. Operating income from the Diagnostic Imaging Services Group decreased $5.8 million reflecting additional bad debt reserves and additional costs associated with increased volume combined with reductions in reimbursement rates. MEDIQ/PRN's operating income decreased $4.3 million as a result of lower revenues from acute care hospitals and increased operating and depreciation expenses. The operating loss from MEMS decreased $.9 million to $.1 million, as a result of increased revenues associated with its Asset Management Program and new services for MRI equipment. Operating income from other operating activities decreased to $.7 million primarily as a result of delays in the start of several new development projects at Medifac partially offset by the elimination of losses associated with operations sold in 1993. Operating income increased by $.5 million as a result of reductions in parent company overhead. Interest expense increased 5% to $18.2 million for the current period from $17.4 million as a result of increased borrowings associated with the expansion of MEDIQ/PRN and the Diagnostic Imaging Services Group. The pretax loss from continuing operations was $4.9 million for the nine months ended June 30, 1994, as compared to income of $4.9 million in the prior year period. In December 1993, the Company recorded a pretax gain of $1.9 million ($1.4 million net of taxes) as a result of the sale of a portion of its investment in New West Eyeworks, Inc. which completed an initial public offering in December 1993. In connection with such offering, the Company received cash in the amount of $1.9 million and stock with a fair market value of $1.0 million. Pretax income in the prior year included income of $3.4 million, representing an equity participation related to the issuance of common stock by PCI in December 1992 and NutraMax in June 1993. The Company's equity in earnings of its unconsolidated subsidiaries, PCI and NutraMax, was $3.1 million, as compared to $3.3 million in the prior period. 11 INCOME TAXES The Company's effective tax rate was disproportionate as compared to the statutory rate as a result of goodwill amortization, earnings of the Company's equity investments and the non-recognition of certain operating losses for state income tax purposes. Effective October 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards ('SFAS') No. 109, 'Accounting for Income Taxes', which supersedes SFAS No. 96. The Company adopted SFAS No. 96 in fiscal 1990. The effect of the adoption of SFAS No. 109 upon the provision for income taxes was not significant for the three and nine month periods ended June 30, 1994. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $9.8 million for the nine months ended June 30, 1994, as compared to $13.6 million in the prior year period. The decrease was primarily a result of lower earnings in the current period. As of June 30, 1994, working capital was $15.6 million, including cash and cash equivalents of $5.4 million, and availability under lines of credit totalled approximately $9 million. Net cash used in investing activities was $6.1 million for the nine months ended June 30, 1994. Expenditures for acquisitions totalled $3.8 million, of which $2.8 million related to expansion of the Diagnostic Imaging Services Group with the balance attributable to an acquisition by MEDIQ/PRN. Capital expenditures totalled $15.1 million, of which $8.6 million were financed with long-term debt and capital leases. Net cash used in financing activities was $16.5 million for the nine months ended June 30, 1994, and consisted of borrowings of $11.4 million, offset by repayments of notes payable and long-term debt of $26.3 million, including $11.8 million of 6% convertible subordinated debentures representing the principal balance outstanding as of their maturity in January 1994 and accrued interest. In addition, the Company paid quarterly cash dividends totalling $1.9 million for the nine months ended June 30, 1994. The indenture pursuant to which the Company's 7 1/4% Convertible Subordinated Debentures due 2006 were issued contains a provision requiring the Company to offer to repurchase 15% of the outstanding debentures if the Company's 'net worth' (as defined in the indenture), as of the last day of two consecutive fiscal quarters, is $40.0 million or less. The Company's net worth as of June 30, 1994 was $39.7 million. Should the Company's net worth not exceed $40.0 million at September 30, 1994, the Company would be required to make an offer to repurchase 15%, or $11.3 million of the debentures. Under the terms of the indenture, the repurchase obligation which would otherwise be required is deemed to be satisfied to the extent of debentures previously retired by the Company. In fiscal 1988, the Company repurchased and retired $23.3 million principal amount of debentures. In addition, based upon anticipated results of operations and asset sales, the Company does not anticipate that the Company's net worth will be less than $40.0 million as of September 30, 1994. The Company believes that its existing working capital, anticipated funds to be generated from operations and the sale of assets, together with existing credit facilities will be sufficient to meet anticipated operating and capital needs. Depending upon future growth of the Company's core businesses, additional financing may be required. 12 MEDIQ INCORPORATED AND SUBSIDIARIES QUARTER ENDED JUNE 30, 1994 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION On August 4, 1994, the Company completed the merger of its subsidiary, MEDIQ Equipment and Maintenance Services, Inc. ('MEMS') and a subsidiary of MMI Medical, Inc. ('MMI'). Under the terms of the merger agreement, the Company received 2,050,000 shares of MMI common stock, representing approximately a 40% equity interest in MMI, and warrants to purchase at $6.25 per share an additional 325,000 shares of MMI common stock. It is anticipated that the Company will distribute the 2,050,000 shares of MMI common stock to MEDIQ stockholders in the future. From the date of the merger, the Company will include its 40% share of MMI's earnings as part of the Company's equity in the earnings of unconsolidated subsidiaries in the Company's results of operations. The undersigned registrant hereby files the required pro forma financial information pursuant to Item 7(b) of its Form 8-K requirements as related to the merger of its subsidiary. The following unaudited pro forma condensed consolidated statements of operations of the Company for the nine month period ended June 30, 1994 and the year ended September 30, 1993 give effect to the merger of MEMS and MMI as if it occurred at the beginning of fiscal 1993. The pro forma condensed consolidated balance sheet of the Company as of June 30, 1994 gives effect to the merger as if it occurred on that date. The pro forma financial information does not necessarily reflect the results of operations or the financial position of the Company which would have actually resulted had the event referred to above, or in the notes to the pro forma financial information, been consummated as of the dates indicated. 13 MEDIQ INCORPORATED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS NINE MONTHS ENDED JUNE 30, 1994 (in thousands)
MEDIQ LESS: PRO FORMA MEDIQ HISTORICAL MEMS(3) ADJUSTMENTS PRO FORMA ----------- --------- --------------- ----------- Revenues...................................................... $ 128,490 $ 14,008 $ 114,482 Costs and expenses: Operating................................................... 65,543 11,355 54,188 Selling and administrative.................................. 34,991 1,650 33,341 Depreciation and amortization............................... 20,875 1,114 19,761 ----------- --------- ----------- 121,409 14,119 107,290 ----------- --------- ----------- Operating income.............................................. 7,081 (111) 7,192 Other (charges) credits: Interest expense............................................ (18,212) (166) (18,046) Equity in earnings of unconsolidated subsidiaries........... 3,056 -- 200(1) 3,256 Equity participation........................................ 116 -- 116 Other -- net................................................ 3,074 -- 3,074 ----------- --------- ----------- Income (loss) from continuing operations before income tax expense (benefit)........................................... (4,885) (277) (4,408) Income taxes (benefit)........................................ (948) (86) 14(2) (848) ----------- --------- ----------- Income (Loss) from continuing operations...................... $ (3,937) $ (191) $ (3,560) =========== ========= =========== Earnings (Loss) per share from continuing operations.......... $ (0.16) $ (0.15) =========== =========== Weighted average shares outstanding........................... 24,373 24,373 =========== ===========
Notes to Pro Forma Adjustments: (1) Represents the Company's 40% equity in earnings of MMI. MMI's earnings were based on unaudited information for the nine months ended April 1994, adjusted to include MEMS' net loss of $191.000. Anticipated reductions in expenses derived by economies of scale were not reflected in the Company's 40% equity interest in MMI. (2) Represents the tax provision related to the Company's equity in earnings of MMI. (3) Obtained from MEMS' unaudited interim financial statements. 14 MEDIQ INCORPORATED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 1993 (in thousands)
MEDIQ LESS: PRO FORMA MEDIQ HISTORICAL MEMS(3) ADJUSTMENTS PRO FORMA ----------- --------- ------------- ----------- Revenues...................................................... $ 174,834 $ 16,875 $ 157,959 Costs and expenses: Operating................................................... 88,158 14,561 73,597 Selling and administrative.................................. 46,231 2,370 43,861 Depreciation and amortization............................... 24,979 1,224 23,755 ----------- --------- ----------- 159,368 18,155 141,213 ----------- --------- ----------- Operating income.............................................. 15,466 (1,280) 16,746 Other (charges) credits: Interest expense............................................ (23,347) (264) (23,083) Equity in earnings of unconsolidated subsidiaries........... 4,343 -- 655(1) 4,998 Equity participation........................................ 3,519 -- 3,519 Other -- net................................................ 2,009 -- 2,009 ----------- --------- ----------- Income (loss) from continuing operations before income tax expense (benefit)............................................. 1,990 (1,544) 4,189 Income taxes (benefit)........................................ (1,624) (506) 45(2) (1,073) ----------- --------- ----------- Income (Loss) from continuing operations...................... $ 3,614 $ (1,038) $ 5,262 =========== ========= =========== Earnings per share from continuing operations................. $ 0.15 $ 0.22 =========== =========== Weighted average shares outstanding........................... 24,366 24,366 =========== ===========
Notes to Pro Forma Adjustments: (1) Represents the Company's 40% equity in earnings of MMI. MMI's earnings were based on unaudited information for the twelve months ended July 1993, adjusted to include MEMS' net loss of $1,038,000. Anticipated reductions in expenses derived by economies of scale were not reflected in the Company's 40% equity interest in MMI. (2) Represents the tax provision related to the Company's equity in earnings of MMI. (3) Obtained from MEMS' audited financial statements. 15 MEDIQ INCORPORATED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1994 (in thousands)
MEDIQ LESS PRO FORMA MEDIQ HISTORICAL MEMS(2) ADJUSTMENTS PRO FORMA ----------- --------- ------------- ----------- Assets: Current Assets Cash and cash equivalents................................... $ 5,394 $ 550 $ 4,844 Accounts receivable -- net.................................. 40,325 1,630 38,695 Inventories................................................. 8,064 5,871 2,193 Deferred income taxes....................................... 4,177 825 3,352 Other current assets........................................ 7,814 152 7,662 ----------- --------- ----------- Total current assets..................................... 65,774 9,028 56,746 Equity investments............................................ 37,864 -- 9,517(1) 47,381 Note receivable from MHM...................................... 11,500 -- 11,500 Rental equipment -- net....................................... 104,635 -- 104,635 Property, plant and equipment -- net.......................... 36,792 3,469 33,323 Goodwill -- net............................................... 42,101 1,097 41,004 Net investment in leases...................................... 28,552 -- 28,552 Other assets.................................................. 18,914 1,011 17,903 ----------- --------- ----------- Total Assets.................................................. $ 346,132 $ 14,605 $ 341,044 =========== ========= =========== Liabilities and Stockholders' Equity: Current Liabilities Notes payable to financial institutions..................... $ 5,067 -- $ 5,067 Accounts payable............................................ 8,496 1,405 7,091 Accrued expenses............................................ 23,460 1,109 22,351 Other current liabilities................................... 1,087 160 927 Current portion of long term debt........................... 12,072 801 11,271 ----------- --------- ----------- Total current liabilities................................ 50,182 3,475 46,707 Senior debt -- recourse....................................... 124,280 1,308 122,972 Senior debt -- nonrecourse.................................... 26,699 -- 26,699 Subordinated debt............................................. 86,229 -- 86,229 Deferred income taxes......................................... 11,425 305 11,120 Other liabilities............................................. 7,619 -- 7,619 Stockholders' equity.......................................... 39,698 9,517 9,517(1) 39,698 ----------- --------- ----------- Total liabilities and stockholders' equity.................... $ 346,132 $ 14,605 $ 341,044 =========== ========= ===========
Notes to Pro Forma Adjustments: (1) Reflects the investment in MMI common stock and warrants. (2) Obtained from unaudited interim financial statements. 16
PAGE NUMBER ----------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 11 -- Computation of Net Income Per Share 19 Exhibit 27 -- Financial Data Schedule 20 (b) Reports on Form 8-K A report on Form 8-K, dated pursuant to Item 5 was filed in May 1994 to announce the executions of the merger agreement for the merger of MEMS and a subsidiary of MMI as described elsewhere herein.
17 MEDIQ INCORPORATED AND SUBSIDIARIES QUARTER ENDED JUNE 30, 1994 SIGNATURE Pursuant to the requirements 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. Dated: August 15, 1994 __________MEDIQ Incorporated__________ (Registrant) _______/s/ Michael F. Sandler_______ Michael F. Sandler Senior Vice President-Finance and Chief Financial Officer
18 EX-11 2 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 MEDIQ INCORPORATED AND SUBSIDIARIES COMPUTATION OF NET INCOME PER SHARE (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, -------------------- -------------------- 1994 1993 1994 1993 --------- --------- --------- --------- COMPUTATION OF PRIMARY EARNINGS PER SHARE: Net Income (loss).................................................. $ (2,849) $ 502 $ (3,937) $ 3,344 ========= ========= ========= ========= Weighted average of primary shares: Common stock..................................................... 17,698 17,275 17,541 17,133 Preferred stock.................................................. 6,441 6,514 6,448 6,614 Assumed conversion of options.................................... 279 328 384 538 --------- --------- --------- --------- Total............................................................ 24,418 24,117 24,373 24,285 ========= ========= ========= ========= Primary Earnings (Loss) Per Share.................................. $ (.12) $ .02 $ (.16) $ .14 ========= ========= ========= ========= COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (1): Net Income (loss).................................................. $ (2,849) $ 502 $ (3,937) $ 3,344 Weighted average of fully diluted shares: Common stock..................................................... 17,698 17,275 17,541 17,133 Preferred stock.................................................. 6,441 6,514 6,448 6,614 Assumed conversion of options.................................... 279 328 384 574 --------- --------- --------- --------- Total............................................................ 24,418 24,117 24,373 24,321 ========= ========= ========= ========= Fully Diluted Earnings (Loss) Per Share............................ $ (.12) $ .02 $ (.16) $ .14 ========= ========= ========= =========
(1) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB opinion No. 15, because it is anti-dilutive or results in dilution of less than 3%. Paragraph 40 of APB opinion No. 15 states that computations of fully diluted earnings per share for each period should exclude those securities whose conversion, exercise or other contingent issuance would have the effect of increasing the earnings per share amount or decreasing the loss per share amount for such period. 1 EX-27 3 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 1,000 9-MOS SEP-30-1994 JUN-30-1994 5,394 0 50,219 (9,894) 8,064 65,774 239,390 97,963 346,132 50,182 237,208 19,062 0 3,409 17,227 346,132 0 128,490 0 121,409 (6,246) 0 18,212 (4,885) 948 (3,937) 0 0 0 (3,937) (.16) (.16)
-----END PRIVACY-ENHANCED MESSAGE-----