-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WjOsXernah1FUUYetFowkfbFSqv/ez446sNkxrwC0VaNjhODY84C1zVw4Sy+Sq1V 36sQElfqOkWQZI7Ck5I8NA== 0000950115-97-000200.txt : 19970222 0000950115-97-000200.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950115-97-000200 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIQ INC CENTRAL INDEX KEY: 0000350920 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS EQUIPMENT RENTAL & LEASING [7350] 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: 97534905 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 UNITED STATES 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 quarter ended: December 31, 1996 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) 662-3200 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 February 7, 1997, there were 18,513,673 shares of Common Stock, par value $1.00 per share and 6,300,501 shares of Preferred Stock, par value $.50 per share, outstanding. MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended December 31, 1996 INDEX Page Number PART I. FINANCIAL INFORMATION: Item 1. Financial Statements. Condensed Consolidated Statements of Operations- Three Months Ended December 31, 1996 and 1995 (Unaudited) 4 Condensed Consolidated Balance Sheets- December 31, 1996 (Unaudited) and September 30, 1996 5 Condensed Consolidated Statements of Cash Flows- Three Months Ended December 31, 1996 and 1995 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 11-15 PART II. OTHER INFORMATION: Item 5. Other Information. 16 Item 6. Exhibits and Reports on Form 8-K. 16-17 2 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended December 31, 1996 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 December 31, ------------------------ 1996 1995 --------- -------- Revenues $ 35,483 $ 32,093 Costs and Expenses: Cost of sales and operating 15,589 14,128 Selling and administrative 5,989 5,430 Restructuring -- 2,200 Depreciation and amortization 7,367 7,423 ---------- --------- 28,945 29,181 ---------- --------- Operating Income 6,538 2,912 Other (Charges) Credits: Interest expense (6,513) (6,711) Equity participation - repurchase of MEDIQ/PRN warrant (11,047) -- Market appreciation - Cardinal Health stock 5,192 -- Other - net 465 414 ---------- --------- Loss from Continuing Operations before Income Taxes and Extraordinary Item (5,365) (3,385) Income Tax Expense (Benefit) 2,126 (1,015) --------- ---------- Loss before Discontinued Operations and Extraordinary Item (7,491) (2,370) Discontinued Operations (net of taxes) 37,241 1,002 Extraordinary Item - Early Retirement of Debt (net of taxes) (6,464) 1,001 --------- --------- Net Income (Loss) $ 23,286 $ (367) ========= ========= Earnings per share: Primary: Continuing Operations $ (.30) $ (.09) Discontinued Operations 1.47 .04 Extraordinary Item (.25) .04 --------- --------- Net Income (Loss) $ .92 $ (.01) ========= ========= Weighted Average Shares Outstanding 25,262 24,581 ========= ========= Fully Diluted: Continuing Operations $ (.24) $ (.06) Discontinued Operations 1.27 .03 Extraordinary Item (.22) .03 --------- --------- Net Income (Loss) $ .81 $ -- ========= ========= Weighted Average Shares Outstanding 29,230 29,978 ========= =========
See Notes to Condensed Consolidated Financial Statements 4 MEDIQ INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
Dec. 31, Sept. 30 1996 1996 --------- --------- (Unaudited) (See Note) Assets Current Assets: Cash $ 4,411 $ 3,219 Marketable equity securities 89,604 -- Accounts receivable - net 37,496 30,233 Inventories 6,432 6,614 Deferred income taxes 4,185 2,447 Other current assets 3,796 2,280 --------- --------- Total Current Assets 145,924 44,793 Investment in discontinued operations - restricted -- 54,717 Note receivable from MHM 3,775 3,967 Note receivable from NutraMax 13,617 -- Property, plant and equipment - net 121,326 122,706 Goodwill - net 56,827 58,321 Deferred financing fees 9,254 4,225 Other assets 8,810 9,134 --------- --------- Total assets $ 359,533 $ 297,863 ========= ========= Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 8,405 $ 8,907 Accrued expenses 17,957 17,937 Investment in discontinued operations - net 5,050 -- Federal and state taxes payable 4,732 (310) Current portion of long-term debt 8,515 8,520 --------- --------- Total Current Liabilities 44,659 35,054 Senior debt 219,651 192,461 Subordinated debt 27,833 41,229 Deferred income taxes and other liabilities 26,395 11,674 Stockholders' Equity 40,995 17,445 --------- --------- Total Liabilities and Stockholders' Equity $ 359,533 $ 297,863 ========= =========
Note: The balance sheet at September 30, 1996 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)
Three Months Ended December 31, ------------------------- 1996 1995 --------- ---------- Cash Flows from Operating Activities: Net income (loss) $ 23,286 $ (367) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities (36,212) 4,188 --------- --------- Net cash provided by (used in) operating activities (12,926) 3,821 Cash flows from investing activities: Proceeds from sale of equipment and other assets -- 824 Proceeds from sale of discontinued operations 25,265 1,500 Purchase of equipment (5,036) (4,968) Repurchase of MEDIQ/PRN warrant (12,500) -- Other (205) (283) --------- --------- Net cash provided by (used in) investing activities 7,524 (2,927) Cash flows from financing activities: Borrowings 214,000 12,042 Debt repayments (199,519) (14,099) Deferred financing fees (8,151) -- Exercise of stock options 264 -- --------- --------- Net cash provided by (used in) financing activities 6,594 (2,057) --------- --------- Increase (decrease) in cash 1,192 (1,163) --------- --------- Cash: Beginning balance 3,219 2,966 --------- --------- Ending balance $ 4,411 $ 1,803 ========= ========= Supplemental disclosure of cash flow information: Interest paid $ 7,927 $ 3,838 ========= ========= Supplemental disclosure of non-cash investing and financing activities: Equipment financed with long-term debt and capital leases $ -- $ 2,740 ========= =========
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 December 31, 1996 and the condensed consolidated statements of operations and cash flows for the three months ended December 31, 1996 and 1995 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 December 31, 1996 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, 1996 Annual Report on Form 10-K. The results of operations for the period ended December 31, 1996 are not necessarily indicative of the operating results for the full year. Note B - Discontinued Operations On December 31, 1996, the Company sold to NutraMax Products, Inc. ("NutraMax"; NASDAQ:NMPC), all of the 4,037,258 shares of NutraMax common stock owned by the Company at a price of $9.00 per share. The Company received from NutraMax $19.9 million in cash and an interest-bearing promissory note (the "note") in the amount of $16.4 million. The note matures in July 2003 and bears interest at 7.5% per annum for the first eighteen months. The note is payable when NutraMax shares owned by the Company, which currently are held in escrow in support of the Company's 7.50% Exchangeable Subordinated Debentures due 2003, are delivered to NutraMax upon release from escrow. The NutraMax shares are to be released from escrow upon the purchase or redemption of the 7.50% debentures. The note does not bear a market rate of interest for its full term. Accordingly, the Company discounted the note to $13.6 million and recognized an after-tax gain of $4.6 million, or $.18 per share. The cash proceeds from this transaction were used to reduce borrowings under the Credit Agreement (See Note C). On November 6, 1996, the Company sold substantially all of the assets of MEDIQ Mobile X-Ray Services, Inc. to Symphony Diagnostics, Inc., a subsidiary of Integrated Health Services, Inc. (NYSE:IHS) for $5.3 million in cash and shares of Integrated Health Services common stock with a value of $5.2 million with the possibility of the Company receiving additional cash consideration based upon the occurrence of certain future events. The loss on the disposal of these assets was recorded in fiscal 1996. On October 11, 1996, PCI Services, Inc., was acquired by Cardinal Health, Inc ("Cardinal"). As a result, the Company received 966,000 shares of Cardinal stock which, based on the closing price on October 11, 1996, had a market value of $79.2 million. The Company recognized an after-tax gain of $31.8 million on this transaction in the first quarter of fiscal 1997. In December 1996, Cardinal's common stock split 3 for 2 and, as of December 31, 1996, the Company owned 1,449,000 shares which had an aggregate market value of $84.4 million based upon the closing price of $58.25 per share on that date. Accordingly, the Company recognized market appreciation of $5.2 million on the Cardinal shares in the first quarter of fiscal 1997. The 7 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note B - Discontinued Operations (Continued) Company sold its Cardinal shares in January 1997 and recognized an additional pretax gain of $4 million. The Company used a significant portion of the proceeds to reduce borrowings under the Credit Agreement (See Note C). The remaining proceeds of approximately $8.2 million were placed in a restricted account with the Company's lender and such proceeds are available, upon compliance with certain covenants to repay future indebtedness or to make investments. The Company anticipates that the disposal of Health Examinetics, Inc. and InnoServ Technologies, Inc., its remaining discontinued operations, will be completed in fiscal 1997. The investment in discontinued operations as of December 31, 1996 consisted of (in thousands): Current assets $ 3,661 Current liabilities 7,046 -------- Net current liabilities (3,385) Net fixed assets 2,592 Other noncurrent liabilities (4,257) --------- $ (5,050) ======== Revenues from discontinued operations were $1.5 million and $9.8 million in the first quarter of fiscal 1997 and 1996, respectively. Note C - Long-Term Debt On October 1, 1996, the Company, together with MEDIQ/PRN entered into a $260 million Credit Agreement with a group of lenders (the "Credit Agreement"). The Credit Agreement provides for four separate loans, a Term A loan ($35 million), a Term B loan ($100 million), an Acquisition Revolver ($100 million) and a Working Capital Revolver ($25 million). The amounts available under the Credit Agreement allowed the Company to refinance substantially all of its existing senior debt, its outstanding lines of credit, all of MEDIQ/PRN's subordinated debt, and MEDIQ/PRN's $100 million 11 1/8% Senior Secured Notes due 1999. As of December 31, 1996, the Company had $55 million available under the Acquisition Revolver and $4 million available under the Working Capital Revolver both of which were available to the Company upon compliance with certain financial covenants and/or ratios. In January 1997, the Acquisition Revolver and Working Capital Revolver were repaid in full from a portion of the proceeds received from the sale of the Cardinal shares (See Note B). On January 24, 1997, the Company executed an amendment to the Credit Agreement increasing the Term B loan by $45 million and the Working Capital Revolver by $5 million. The additional funds are available at the time of consummation of the acquisition of Universal Hospital Services, Inc. ("Universal") (See Note F). 8 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note C - Long-Term Debt (Continued) The loans bear interest at either the prime rate plus a factor or at a Eurodollar rate plus a factor. The factor changes quarterly based upon the Company's leverage ratio. The Company's interest rate on the Term A loan, the Acquisition Revolver and the Working Capital Revolver is prime (8.25% at December 31, 1996) plus 1.25% or Eurodollar (5.625% at December 31, 1996) plus 2.75% and the interest rate on the Term B loan is prime plus 1.75% or Eurodollar plus 3.25%. The loans are collateralized by substantially all of the assets of the Company. In accordance with the terms of the Credit Agreement, effective November 15, 1996, the Company entered into interest rate hedge transactions which terminate in January 2000. Under one of these transactions, on $50 million of borrowings, the Company's base Eurodollar borrowing rate is fixed at 6.26% per annum, instead of a floating Eurodollar rate. Under the second hedge transaction, on an additional $50 million of borrowings, the Company's base Eurodollar rate cannot be lower than 5.25% or greater than 7.43%. As a result of the refinancing, the Company recognized in the first quarter of 1997, an extraordinary charge of $13 million ($6.7 million net of taxes) resulting from the write-off of deferred charges and premiums incurred related principally to the tender offer to purchase the $100 million 11 1/8% Senior Secured Notes due 1999, and a non-recurring charge of $11 million for the repurchase of a warrant to purchase 10% of MEDIQ/PRN issued in connection with financing the KCI acquisition in 1994. The non-recurring charge is reflected in Other Charges on the Company's Condensed Consolidated Statement of Income. In October 1996, the Company repurchased $6.7 million of its 7.5% Exchangeable Debentures at a discount in the open market. The Company recognized an extraordinary gain of $.3 million, net of taxes and the write-off of deferred charges related to the debentures in the first quarter of 1997. Under the terms of the Company's 7.25% Subordinated Convertible Debentures due 2006 ("debentures"), the Company is required to offer to repurchase or redeem a portion of the debentures if stockholders' equity is $40 million or less at the end of two consecutive fiscal quarters. As of June 30, 1994 and through September 30, 1996, the Company's stockholders' equity was less than $40 million. In December 1996 and January 1997, the Company repurchased in the open market $6.26 million of its debentures at prices approximating face value in order to satisfy a portion of its redemption obligation. In January 1997, the Company, through a Special Mandatory Redemption Obligation Offer made to all bond holders of record on December 28, 1996, repurchased an additional $4.99 million of debentures representing the remaining balance of its obligation to purchase $11.25 million of debentures for the period ended December 31, 1996. In addition, the Company repurchased an additional $4.6 million of debentures in January 1997. The Company's Stockholders' Equity exceeded $40 million as of December 31, 1996, and as a result, the Company no longer has an obligation to offer to repurchase or redeem its debentures on June 30, 1997. On February 13, 1997, the Company notified all holders of its 7.25% subordinated convertible debentures that the Company has elected to redeem on February 28, 1997 (the "Redemption Date") all of the outstanding debentures at a redemption price equal to 100% of the principal 9 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note C - Long-Term Debt (Continued) amount thereof, together with interest accrued from December 1, 1996 to the Redemption Date, for a total payment of $1,017.52 per $1,000 principal amount of debentures. The Company intends to fund the redemption with proceeds from its existing Credit Agreement, as amended. Accordingly, as of December 31, 1996, the outstanding balance of the debentures, $27 million has been classified as senior debt in the Company's Condensed Consolidated Balance Sheet. The debentures were originally issued in 1986, and an aggregate principal amount of $13.3 million are currently outstanding. Note D - Inventories Inventories, which consist primarily of repair parts for rental equipment and finished goods held for sale, are stated at the lower of cost (first-in, first-out method) or market. Note E - Commitments and Contingencies On February 10, 1997, the Company was sued in the Superior Court of New Jersey by its former wholly-owned subsidiary, MHM Services, Inc. ("MHM"; formerly Mental Health Management, Inc.). The suit challenges the validity of a note receivable the Company and MHM entered into upon the spin-off of MHM to MEDIQ's shareholders in August 1993. The Company believes this suit has no merit and intends to defend the suit vigorously. In addition, MHM has not made the required February installment on the note. On February 11, 1997 the Company gave notice to MHM of its default on the note and declared all sums outstanding under the note to be immediately due and payable. The Company does not believe an additional reserve on the carrying value of the note receivable is necessary at this time and is pursuing collection efforts. Note F - Acquisition of Universal Hospital Services, Inc. On February 11, 1997, the Company entered into a definitive agreement with Universal Hospital Services, Inc. ("Universal") (NASDAQ; UHOS) to acquire the outstanding shares of Universal for $17.50 per share. Including the assumption of debt, the total purchase price is approximately $138 million. Universal provides movable medical equipment to over 3,300 hospitals and alternate care providers principally through Pay-per-Use equipment management programs. Under Universal's rental programs, health care providers are charged a per use rental fee based on actual usage. In addition, Universal sells disposable supplies related to the equipment it rents. Universal operates in 46 states in five primary categories - critical care, monitoring, newborn care, respiratory care and specialty beds. The transaction is structured as a cash merger that is expected to close in late March 1997 and is subject to approval by a majority of Universal's shareholders and Hart Scott-Rodino clearance. The Company will fund the transaction out of its available funds and existing Credit Agreement, as amended. Note G - New Accounting Pronouncement Effective October 1, 1996, the Company formally adopted SFAS No. 123 "Accounting for Stock-based Compensation Plans." The Company will adopt this statement by disclosing the proforma net income and net earnings per share amounts assuming the fair value method in the fiscal year end 1997 financial statements, as required. As a result, the adoption of this statement will not have any impact on reported results of operations and financial position. 10 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 December 31, 1996 and results of operations for the three month periods ended December 31, 1996 and 1995. This discussion should be read in conjunction with the financial statements included elsewhere herein and the Management's Discussion and Analysis and Financial Statement sections of the Company's Annual Report on Form 10-K for the year ended September 30, 1996 to which the reader is directed for additional information. Results of Operations Revenues from continuing operations were $35.5 million for the first quarter of fiscal 1997, as compared to $32.1 million in the prior year period, an increase of $3.4 million, or 11%. The revenue growth was attributable to a 4.5% increase in rental revenue and an 11% increase in other revenue, primarily from the sale of repair parts, accessories and disposable products, and outsourcing services. The growth in rental revenues was achieved primarily by increased volume through an expanded customer base, despite a continuing trend in the marketplace of better utilization of equipment by customers. The Company expects this trend to continue, with increased potential for its CAMP(R) and CAMP Plus(R) programs as customers seek to reduce capital and operating expenses. Operating income increased $3.6 million, or 125%, to $6.5 million, for the first quarter of fiscal 1997, as compared to $2.9 million in the prior year period. The improvement in operating income was primarily attributable to revenue growth and reductions in corporate overhead of $.6 million related to the downsizing of corporate functions and consolidation of certain activities with the operations of MEDIQ/PRN that occured in connection with a restructuring. In the first quarter of fiscal 1996 the Company incurred a restructuring charge of $2.2 million in connection with the downsizing. Interest expense decreased 3% to $6.5 million for the first quarter of fiscal 1997 primarily as a result of lower interest rates associated with the refinancing that occurred on October 1, 1996. In October 1996, the Company incurred a non-recurring charge of $11 million for the repurchase of a warrant to purchase 10% of MEDIQ/PRN issued in connection with financing the KCI acquisition in 1994. The Company's effective tax rates were disproportionate compared to the statutory rate as a result of the nondeductibility of the expense associated with the repurchase of the MEDIQ/PRN warrant, goodwill amortization and non-recognition of certain operating losses for state income tax purposes. On December 31, 1996, the Company sold to NutraMax Products, Inc. ("NutraMax"; NASDAQ:NMPC), all of the 4,037,258 shares of NutraMax common stock owned by the Company at a price of $9.00 per share. The Company received from NutraMax $19.9 million in cash and an interest-bearing promissory note (the "note") in the amount of $16.4 million. The note matures in July 2003 and bears interest at 7.5% per annum for the first eighteen months. The note is payable when NutraMax shares owned by the Company, which currently are held in escrow in support of the Company's 7.50% Exchangeable Subordinated Debentures due 2003, are delivered to NutraMax upon release from escrow. The NutraMax shares are to be released from escrow upon the purchase or redemption of the 7.50% debentures. The note does not bear a market rate of interest for its full term. Accordingly, the Company discounted the note to $13.6 million and recognized an after-tax gain of $4.6 million, or $.18 per share. The cash proceeds from this transaction were used to reduce borrowings under the Credit Agreement. 11 On November 6, 1996, the Company sold substantially all of the assets of MEDIQ Mobile X-Ray Services, Inc. to Symphony Diagnostics, Inc., a subsidiary of Integrated Health Services, Inc. (NYSE:IHS) for $5.3 million in cash and shares of Integrated Health Services common stock with a value of $5.2 million with the possibility of the Company receiving additional cash consideration based upon the occurrence of certain future events. The loss on the disposal of these assets was recorded in fiscal 1996. On October 11, 1996, PCI Services, Inc., was acquired by Cardinal Health, Inc. ("Cardinal"). As a result, the Company received 966,000 shares of Cardinal stock which, based on the closing price on October 11, 1996, had a market value of $79.2 million. The Company recognized an after-tax gain of $31.8 million on this transaction in the first quarter of fiscal 1997. In December 1996, Cardinal's common stock split 3 for 2 and, as of December 31, 1996, the Company owned 1,449,000 shares which had an aggregate market value of $84.4 million based upon the closing price of $58.25 per share on that date. Accordingly, the Company recognized market appreciation of $5.2 million on the Cardinal shares in the first quarter of fiscal 1997. The Company sold its Cardinal shares in January 1997 for $88.4 million and recognized an additional pretax gain of $4 million. The Company used a significant portion of the proceeds to reduce borrowings under the Credit Agreement. The remaining proceeds of approximately $8.2 million were placed in a restricted account with the Company's lender and such proceeds are available, upon compliance with certain covenants to repay future indebtedness or to make investments. Revenues and operating loss from discontinued operations were $1.5 million and $.2 million, respectively, as compared to revenues and operating income of $9.8 million and $1.5 million, respectively, in the prior year period. Estimated operating results from discontinued operations through the expected date of disposal were included in the estimated loss on disposal recognized in fiscal 1996. As a result of the refinancing, the Company recognized in the first quarter of 1997, an extraordinary charge of $13 million ($6.7 million net of taxes) resulting from the write-off of deferred charges and premiums incurred related principally to the tender offer to purchase the $100 million 11 1/8% Senior Secured Notes due 1999. In October 1996, the Company repurchased $6.7 million of its 7.5% Exchangeable Debentures at a discount in the open market. The Company recognized an extraordinary gain of $.3 million, net of taxes and the write-off of deferred charges related to the debentures in the first quarter of 1997. 12 The current period reflects several significant non-recurring transactions as discussed above. In addition, the Company refinanced a significant portion of its debt and reduced its average borrowing rate. The following table provides a proforma analysis of the Company's results of operations as if the Company (a) had not repurchased the MEDIQ/PRN warrant, (b) applied the proceeds from the sales of its investments in discontinued operations in the first quarter of 1997 to its outstanding debt as of October 1, 1996 and (c) tax affected the adjustments described in (a) and (b).
Three Months Ended Three Months Ended December 31, 1996 Proforma December 31, 1996 Actual Adjustments Proforma ------------------ ----------- ------------------- Revenues $ 35,483 $ 35,483 Operating Income 6,538 6,538 Other (Charges) Credits: Interest expense (6,513) 2,582(b) (3,931) Equity participation - repurchase of MEDIQ/PRN warrant (11,047) 11,047(a) -- Market appreciation - Cardinal Health stock 5,192 (5,192)(b) -- Other - net 465 465 -------- -------- Loss from Continuing Operations before Income Taxes and Extraordinary Item (5,365) 3,072 Income Tax Expense 2,126 (732)(c) 1,394 -------- -------- Loss from Continuing Operations $ (7,491) $ 1,678 ======== ========
Liquidity and Capital Resources Cash used in operating activities was $12.9 million in the current quarter, as compared to cash provided by operations of $3.8 million in the prior year period. The decrease was primarily attributable to the payment of interest on indebtedness more frequently under the Company's new credit facility as compared to semi-annually in the prior year period, and lower collections of accounts receivable which were temporarily affected by the implementation of a new computer system. Net cash provided by investing activities was $7.5 million, and consisted cash proceeds from the sales of certain assets of Mobile X-Ray and the Company's investment in NutraMax aggregating $25.3 million, partially offset by capital expenditures for equipment of $5.0 million and the repurchase of the MEDIQ/PRN warrant for $12.5 million. Net cash provided by financing activities consisted of borrowings of $214 million related to the refinancing, partially offset by debt repayments of $171.6 million related to the refinancing, $19 million of scheduled debt service and revolver activity, $8.9 million of subordinated debenture repurchases and deferred financing fees of $8.2 million related to the refinancing. On October 1, 1996, the Company, together with MEDIQ/PRN entered into a $260 million Credit Agreement with a group of lenders (the "Credit Agreement"). The Credit Agreement provides for four separate loans, a Term A loan ($35 million), a Term B loan ($100 million), an Acquisition Revolver ($100 million) and a Working Capital Revolver ($25 million). The amounts available under the Credit Agreement allowed the Company to refinance substantially all of its existing senior debt, its outstanding lines of credit, all of MEDIQ/PRN's subordinated debt, and MEDIQ/PRN's $100 million 11 1/8% Senior Secured Notes due 1999. As of December 31, 1996, the Company had $55 million available under the Acquisition Revolver and $4 million available under the Working Capital Revolver both of which were available to the Company upon compliance with certain financial covenants and/or ratios. In January 1997, the Acquisition Revolver and Working Capital Revolver were repaid in full from a portion of the proceeds received from the sale of the Cardinal shares. 13 The loans bear interest at either the prime rate plus a factor or at a Eurodollar rate plus a factor. The factor changes quarterly based upon the Company's leverage ratio. The Company's interest rate on the Term A loan, the Acquisition Revolver and the Working Capital Revolver is prime (8.25% at December 31, 1996) plus 1.25% or Eurodollar (5.625% at December 31, 1996) plus 2.75% and the interest rate on the Term B loan is prime plus 1.75% or Eurodollar plus 3.25%. The loans are collateralized by substantially all of the assets of the Company. In accordance with the terms of the Credit Agreement, effective November 15, 1996, the Company entered into interest rate hedge transactions which terminate in January 2000. Under one of these transactions, on $50 million of borrowings, the Company's base Eurodollar borrowing rate is fixed at 6.26% per annum, instead of a floating Eurodollar rate. Under the second hedge transaction, on an additional $50 million of borrowings, the Company's base Eurodollar rate cannot be lower than 5.25% or greater than 7.43%. Under the terms of the Company's 7.25% Subordinated Convertible Debentures due 2006, (the "debentures") the Company is required to offer to repurchase or redeem a portion of the debentures if stockholders' equity is $40 million or less at the end of two consecutive fiscal quarters. As of June 30, 1994 and through September 30, 1996, the Company's stockholders' equity was less than $40 million. In December 1996 and January 1997, the Company repurchased in the open market $6.26 million of its debentures at prices approximating face value in order to satisfy a portion of its redemption obligation. In January 1997, the Company, through a Special Mandatory Redemption Obligation Offer made to all bond holders of record on December 28, 1996, repurchased an additional $4.99 million of debentures representing the remaining balance of its obligation to purchase $11.25 million of debentures for the period ended December 31, 1996. In addition, the Company repurchased an additional $4.6 million of debentures in January 1997. The Company's Stockholders' Equity exceeded $40 million as of December 31, 1996, and as a result, the Company no longer has an obligation to offer to repurchase or redeem its debentures on June 30, 1997. On February 13, 1997, the Company notified all holders of its 7.25% subordinated convertible debentures that the Company has elected to redeem on February 28, 1997 (the "Redemption Date") all of the outstanding debentures at a redemption price equal to 100% of the principal amount thereof, together with interest accrued from December 1, 1996 to the Redemption Date, for a total payment of $1,017.52 per $1,000 principal amount of debentures. The Company intends to fund the redemption with proceeds from its existing Credit Agreement, as amended. The debentures were originally issued in 1986, and an aggregate principal amount of $13.3 million are currently outstanding. The Company may also use a portion of the new credit facility to redeem or repurchase its 7.50% exchangeable subordinated debentures. However, except to the extent required by the terms of the indenture pursuant to which this debenture was issued, there can be no assurance that any such redemption or repurchase will occur. On February 11, 1997, the Company entered into a definitive agreement with Universal Hospital Services, Inc. ("Universal") (NASDAQ; UHOS) to acquire the outstanding shares of Universal for $17.50 per share. Including the assumption of debt, the total purchase price is approximately $138 million. Universal provides movable medical equipment to over 3,300 hospitals and alternate care providers principally through Pay-per-Use equipment management programs. Under Universal's rental programs, health care providers are charged a per use rental fee based on actual usage. In addition, Universal sells disposable supplies related to the equipment it rents. Universal operates in 46 states in five primary categories - critical care, monitoring, newborn care, respiratory care and specialty beds. The transaction is structured as a cash merger that is expected to close in late March 1997 and is subject to approval by a majority of Universal's shareholders and Hart Scott-Rodino clearance. The Company will fund the transaction out of its available funds and existing Credit Agreement, as amended. 14 The Company expects that its primary sources of liquidity for operating activities will be generated through cash flows from MEDIQ/PRN. Proceeds from the sale of discontinued operations and miscellaneous assets will be used to repay long-term debt. The Company believes that sufficient funds will be available from operating cash flows, the sale of assets and its credit facility to meet the Company's anticipated operating and capital requirements. 15 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended December 31, 1996 PART II. OTHER INFORMATION Item 5. OTHER INFORMATION. On February 11, 1997, the Company entered into a definitive agreement with Universal Hospital Services, Inc. ("Universal") (NASDAQ; UHOS) to acquire the outstanding shares of Universal for $17.50 per share. Including the assumption of debt, the total purchase price is approximately $138 million. Universal provides movable medical equipment to over 3,300 hospitals and alternate care providers principally through Pay-per-Use equipment management programs. Under Universal's rental programs, health care providers are charged a per use rental fee based on actual usage. In addition, Universal sells disposable supplies related to the equipment it rents. Universal operates in 46 states in five primary categories - critical care, monitoring, newborn care, respiratory care and specialty beds. The transaction is structured as a cash merger that is expected to close in late March or early April 1997 and is subject to approval by a majority of Universal's shareholders and Hart Scott-Rodino clearance. The Company will fund the transaction out of its available funds and existing Credit Agreement, as amended. On February 13, 1997, the Company notified all holders of its 7.25% subordinated convertible debentures that the Company has elected to redeem on February 28, 1997 (the "Redemption Date") all of the outstanding debentures at a redemption price equal to 100% of the principal amount thereof, together with interest accrued from December 1, 1996 to the Redemption Date, for a total payment of $1,017.52 per $1,000 principal amount of debentures. The Company intends to fund the redemption with proceeds from its existing Credit Agreement, as amended. The debentures were originally issued in 1986, and an aggregate principal amount of $13.3 million are currently outstanding. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: Exhibit 4.1(a) - Amendment to Credit Agreement, dated January 24, 1997. Exhibit 11 - Computation of Net Income Per Share appears on page 19. Exhibit 27 - Financial Data Schedule appears on page 20. (b) Reports on Form 8-K The Company filed the following report on Form 8-K during the quarter ended December 31, 1996: Date of Earliest Event Requiring Report: October 11, 1996 Date of Filing: October 17, 1996 Items Reported: Item 2 Subject: Completion of the previously announced acquisition of PCI Services, Inc. by Cardinal Health, Inc. Date of Earliest Event Requiring Report: December 31, 1996 Date of Filing: February 4, 1997 Items Reported: Items 2, 5 and 7 Subject: Sale of Cardinal Health, Inc. common stock in January 1997 and consummation of previously announced sale of Company's investment in NutraMax Products, Inc. on December 31, 1996. 16 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended December 31, 1996 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. MEDIQ Incorporated -------------------- (Registrant) February 14, 1997 - ----------------- (Date) /s/ Michael F. Sandler ---------------------------- Michael F. Sandler Senior Vice President - Finance and Chief Financial Officer 17 EX-4.1A 2 AMENDMENT TO CREDIT AGREEMENT AMENDMENT NO. 1 TO THE CREDIT AGREEMENT Dated as of January 24, 1997 AMENDMENT NO. 1 TO THE CREDIT AGREEMENT, among MEDIQ/PRN LIFE SUPPORT SERVICES, INC., a Delaware corporation (the "Borrower"), MEDIQ INCORPORATED, a Delaware corporation ("MEDIQ"), PRN HOLDINGS, INC., a Delaware corporation (together with MEDIQ, the "Parent Guarantors"), the banks, financial institutions and other institutional lenders parties to the Credit Agreement referred to below (collectively, the "Lenders") and Banque Nationale de Paris as administrative agent (the "Administrative Agent") for the Lenders and NationsBank N.A., as documentation agent (the "Documentation Agent"). PRELIMINARY STATEMENTS: (1) The Borrower, the Parent Guarantors, the Lenders, the Administrative Agent and the Documentation Agent have entered into a Credit Agreement dated as of October 1, 1996 (the "Credit Agreement"). Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Credit Agreement. (2) The Borrower seeks to acquire Universal Hospital Services, Inc., a Minnesota corporation ("UHS"), (the "UHS Acquisition") and, in order to finance, together with advances under the existing Facilities, such acquisition, has requested that certain Lenders (the "Affected Lenders" or the "Incremental Term B Lenders") increase their Commitments under the Term B Facility (the "Incremental Term B Commitments") and the Working Capital Facility, and amend certain provisions of the Credit Agreement in order to provide such financing and for certain other purposes. (3) The Required Lenders and the Affected Lenders are, on the terms and conditions stated below, willing to grant the request of the Borrower and the Borrower and such Lenders have agreed to amend the Credit Agreement as hereinafter set forth. SECTION 1. Amendments to the Credit Agreement. The Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2(a) hereof, hereby amended as follows: (a) Section 1.01 is amended by inserting therein the following definitions in appropriate alphabetical order: "'BERS' means Biomedical Equipment Rental and Sales, Inc., a Subsidiary of UHS. "'UHS' means Universal Hospital Services, Inc., a Minnesota corporation. "'UHS Acquisition' means the acquisition of the common stock of UHS by the Borrower or any of the Borrower's Ongoing Subsidiaries, as permitted under this Agreement." "'UHS Acquisition Closing Date' means any Business Day on which the UHS Acquisition occurs." (b) The definition of "Acquisition Facility Sublimit" in Section 1.01 is amended by deleting clause (iii) thereof and substituting therefor the following: "(iii) the excess of the aggregate amount of Subordinated Notes outstanding at such time over the principal amount of the NutraMax Note to the extent secured by the NutraMax Letter of Credit multiplied by 66%." (c) The definition of "Borrower's Account" is amended by deleting therefrom the account number "200877-001-91" and substituting therefor the account number "202330-001-77". (d) The definition of "EBITDA" is amended by inserting immediately before the proviso thereto the following: "and (g) all one-time expenses of the Borrower and its Affiliates incurred in connection with the UHS Acquisition for severance expenses, lease related expenses and facility closure expenses". (e) The definition of "Leverage Ratio" is amended (i) by inserting in the seventh line thereof, immediately preceding the words ", so long as", the phrase "multiplied by 66%", and (ii) by adding at the end thereof the following: ",except with respect to the UHS Acquisition, in which case the 12-month trailing EBITDA of UHS shall be adjusted for the EBITDA of BERS included in such calculation for the period of time that said EBITDA of BERS is not actually reflected in the aforesaid EBITDA of UHS, in which case such EBITDA of UHS shall be the pro forma EBITDA of UHS and BERS for such period." (f) The definition of "Senior Leverage Ratio" is amended by adding at the end thereof the following: ",except with respect to the UHS Acquisition, in which case the 12-month trailing EBITDA of UHS shall be adjusted for the EBITDA of BERS included in such calculation for the period of time that said EBITDA of BERS is not actually reflected in the aforesaid EBITDA of UHS, in which case such EBITDA of UHS shall be the pro forma EBITDA of UHS and BERS for such period." (g) The definition of "Term B Borrowing" is amended by adding at the end thereof the following: "and Incremental Term B Advances made on the UHS Acquisition Closing Date." (h) Section 2.01(b) is amended by (i) inserting "(i)" immediately after the heading "The Term B Advances" and (ii) adding a new clause (ii) at the end thereof to read as follows: "(ii) Each Incremental Term B Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance to the Borrower on the UHS Acquisition Closing Date in an amount not to exceed such Incremental Term B Lender's Incremental Term B Commitment as set forth in Schedule I hereto (each such advance being an "Incremental Term B Advance"). Such Term B Borrowing shall consist of Incremental Term B Advances made simultaneously by the Incremental Term B Lenders ratably according to their Incremental Term B Commitments. Amounts borrowed under this Section 2.01(b)(ii) and repaid or prepaid may not be reborrowed." (i) The table contained in Section 2.04(a) is amended by (i) deleting each figure "8,500,000" therein and substituting for each such figure the figure "13,000,000" and (ii) deleting each figure "15,000,000" therein and substituting for each such figure the figure "21,750,000". 2 (j) Section 2.14(a) is amended by adding at the end thereof the following: "and, on the UHS Acquisition Closing Date, an aggregate amount of up to $45,000,000 of Incremental Term B Advances to finance a portion of the UHS Acquisition". (k) Section 2.14(c) is amended by inserting therein, immediately after "Section 5.01(p)", the following: ", to provide up to $5,000,000 of the financing for the UHS Acquisition". (l) Section 4.01(i) is amended by inserting therein, immediately after "provided that", the following: ", other than with respect to the UHS Acquisition as permitted under Section 5.02(f)(i),". (m) Section 5.01(n) is amended by substituting for the date "November 15, 1996" the phrase "the date that is 45 days following the UHS Acquisition Closing Date" and by adding after the phrase "the Term B Facilities " the parenthetical "(including the Incremental Term B Advances)". (n) Section 5.02(b)(ii)(B) is amended by deleting therein the figure "$100,000,000" and substituting therefor the figure "$140,000,000". (o) Section 5.02(b)(ii) is amended by adding at the end thereof a new subsection (H) to read as follows: "intercompany Debt owed to the Borrower in connection with the UHS Acquisition, so long as such Debt is evidenced by an intercompany note in form and substance satisfactory to the Administrative Agent, and". (p) Section 5.02(f)(i) is amended (i) by inserting in the second line thereof, immediately following "Acquisition Advances", the following ", Working Capital Advances, Incremental Term B Advances" and (ii) by inserting therein, immediately before "provided that", the following: "or constituting the purchase of at least 90% of the common stock of UHS in a transaction approved by the Board of Directors of UHS so long as UHS becomes a wholly owned Subsidiary of the Borrower on the UHS Acquisition Closing Date in a transaction approved by the Board of Directors of UHS or constituting the payment of consideration for the merger of UHS and the Borrower or a wholly owned Subsidiary of the Borrower," (q) Section 5.02(f)(i)(2) is amended by adding at the end thereof the following: "except with respect to the UHS Acquisition, in which case such Leverage Ratio shall not be more than 3.75 to 1.0". (r) Section 5.02(f)(i)(3) is amended by adding at the end thereof the following: "except with respect to the UHS Acquisition, in which case such amount shall not exceed 6.5 multiplied by the 12-month trailing EBITDA of UHS (adjusted for the EBITDA of BERS included in such calculation for the period of time that said EBITDA of BERS is not actually reflected in the aforesaid EBITDA of UHS, in which case such EBITDA of UHS shall be the pro forma EBITDA of UHS and BERS for such period)". (s) Section 5.02(f)(i)(4) is amended by (i) deleting therefrom the following: 3 "shall not exceed $100,000,000" and (ii) adding at the end thereof the following: "plus the aggregate amount of Advances made by the Lenders and used for all such Investments outstanding at any time on and after the UHS Acquisition Closing Date shall not exceed $140,000,000." (t) Section 5.04(f) is amended by inserting in the eighth line thereof immediately after the word "Investments" the following: ", except with respect to the UHS Acquisition, in which case the 12-month trailing EBITDA of UHS shall be adjusted for the EBITDA of BERS included in such calculation for the period of time that said EBITDA of BERS is not actually reflected in the aforesaid EBITDA of UHS, in which case such EBITDA of UHS shall be the pro forma EBITDA of UHS and BERS for such period." (u) Schedule 1 is supplemented by adding with respect to the Working Capital Commitment of each of BNP and NationsBank, $2,500,000, and adding Incremental Term B Commitments for each of BNP and NationsBank, in the amount of $22,500,000. SECTION 2. Conditions of Effectiveness. (a) This Amendment shall become effective as of the date first above written when, and only when, the Administrative Agent shall have received (x) counterparts of this Amendment executed by the Borrower, the Required Lenders and each Affected Lender, or, as to any of the Lenders, advice satisfactory to the Administrative Agent that such Lender has executed this Amendment and (y) for the ratable account of the Lenders, 1/10% of the sum of the Term A Advances, the Term B Advances, the Acquisition Commitments and the Working Capital Commitments as such Advances and Commitments shall be outstanding immediately prior to the effectiveness of this Amendment (i.e. $260,000). The effectiveness of this Amendment is conditioned upon the accuracy of the factual matters described herein. This Amendment is subject to the provisions of Section 9.01 of the Credit Agreement. (b) This Amendment shall be null and void and of no effect if, on or before April 23, 1997 (or such later date before July 15, 1997 as the Affected Lenders may consent to in writing), the following conditions shall not have been satisfied: (1) The Administrative Agent shall not have additionally received all of the following documents, each such document (unless otherwise specified) dated the date of receipt thereof by the Administrative Agent (unless otherwise specified) and in sufficient copies for each Lender, in form and substance satisfactory to the Administrative Agent (unless otherwise specified): (i) Certified copies of (x) the resolutions of the Board of Directors of (A) the Borrower approving this Amendment, the Collateral Documents, amendments or supplements thereto contemplated hereby and the matters contemplated hereby and thereby and (B) each other Loan Party evidencing approval of the Consent, the Collateral Documents, amendments or supplements thereto contemplated hereby and the matters contemplated hereby and thereby and (y) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Amendment, the Consent, the Collateral Documents, amendments or supplements thereto contemplated hereby and the matters contemplated hereby and thereby; (ii) A certificate of the Secretary or an Assistant Secretary of the Borrower and each other Loan Party certifying the names and true signatures of the officers of the Borrower and such other Loan Party authorized to sign this Amendment, the Consent, the Collateral Documents, amendments or supplements thereto contemplated hereby to any of which they are or are to be a party and the other documents to be delivered hereunder and thereunder; 4 (iii) Counterparts of a consent with respect to this Amendment No. 1, in form satisfactory to the Administrative Agent, executed by each of the Loan Parties (other than the Borrower); (iv) A favorable opinion of Drinker, Biddle & Reath, counsel for the Loan Parties, as to such matters as the Administrative Agent may reasonably request; (v) A certificate signed by a duly authorized officer of the Borrower stating that: (x) The representations and warranties contained in the Loan Documents as amended hereby, Section 3 hereof, and in each of the Collateral Documents and amendments and supplements thereto delivered pursuant to this Section 2 are correct on and as of the date of such certificate as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a date other than the date of such certificate; and (y) No event has occurred and is continuing that constitutes a Default; and (vi) Notes payable to the order of the Affected Lenders; and (2) Each of the following conditions shall have been satisfied: (i) The Borrower and any additional Loan Party, as appropriate, shall have delivered all such documents, agreements, certificates or instruments as shall be required or as the Administrative Agent shall have requested pursuant to Section 5.01(o); (ii) All governmental and third party consents and approvals necessary in connection with the UHS Acquisition shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority, and no law or regulation shall be applicable which, in the case of any of the foregoing, restrains, prevents or imposes materially adverse conditions upon the rights of any Loan Party to transfer or otherwise dispose of shares of UHS acquired in the tender offer, if applicable, the exercise by any transferee of any Loan Party of all ownership rights with respect to the shares of UHS stock acquired in connection with any such tender offer or otherwise owned by any Loan Party, or the consummation of a merger if not completed prior to the UHS Acquisition Closing Date; (iii) All Advances made by the Lender Parties shall be in compliance with Regulations G, T, U and X of the Board of Governors of the Federal Reserve System; and (iv) The Borrower shall have retained Murray, Devine & Co. to prepare and deliver a letter attesting to the Solvency of the Borrower after giving effect to the acquisition of UHS. SECTION 3. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction indicated in the recital of the parties to this Amendment. (b) The execution, delivery and performance by each Loan Party of this Amendment and the Loan Documents, as amended hereby, to which it is or is to be a party, and the consummation of the transactions contemplated hereby, are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate 5 action and do not (i) contravene each such Loan Party's charter or by-laws, (ii) violate any law (including, without limitation, the Securities Exchange Act of 1934, as amended, and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970), rule or regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), or any order, writ, judgment, injunction, decree, determination or award, binding on or affecting any Loan Party or any of its Subsidiaries or any of their properties, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of their Subsidiaries or any of their properties or (iv) except for the Liens created under the Collateral Documents, as amended hereby, or any amendments or supplements thereto contemplated hereby, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery, recordation, filing or performance by any Loan Party of this Amendment, any of the Collateral Documents or any amendments or supplements thereto contemplated hereby to which each such Loan Party is or is to be a party, or any of the Loan Documents, as amended hereby, to which it is or is to be a party except for such approvals as shall have been obtained by the UHS Acquisition Closing Date. (d) This Amendment and each of the Collateral Documents and amendments and supplements thereto contemplated hereby to which each Loan Party is a party have been duly executed and delivered by each such Loan Party. This Amendment and each of the other Loan Documents, as amended hereby, to which each Loan Party is a party are, and each of the other Collateral Documents and amendments and supplements thereto contemplated hereby to which each such Loan Party is or is to be a party, when delivered hereunder, will be, legal, valid and binding obligations of each such Loan Party, enforceable against each such Loan Party in accordance with their respective terms, including as to each entity that shall become a Loan Party on the UHS Acquisition Closing Date, as to each such Loan Party on the UHS Acquisition Closing Date. (e) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of their Subsidiaries (including, without limitation, any Environmental Action) pending or threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Amendment, the Collateral Documents, any amendments or supplements thereto contemplated hereby or any of the other Loan Documents, as amended hereby, or the consummation of any of the transactions contemplated hereby. 6 (f) As of the UHS Acquisition Closing Date, the Collateral Documents and amendments or supplements thereto consisting of security agreements or mortgages to which any Loan Party is or is to be a party, when delivered hereunder, will create valid and perfected first priority liens and security interests in and to the Collateral covered thereby, securing the payment of the Secured Obligations (in each case, as defined in such Collateral Documents or amendment or supplement thereto); and the execution, delivery and performance of this Amendment, each of the Collateral Documents and any amendments or supplements thereto contemplated hereby do not adversely affect the Liens created under any of the Collateral Documents. SECTION 4. Reference to and Effect on the Loan Documents. (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment. (b) The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations of the Loan Parties under the Loan Documents, in each case as amended by this Amendment. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) Except as otherwise provided in this Amendment, from and after the UHS Acquisition Closing Date, all references to (i) Term B Lenders shall include the Incremental Term B Lenders, (ii) Term B Advances shall include all Term B Advances made by the Incremental Term B Lenders and (iii) Term B Commitments shall mean the Incremental Term B Commitments of the Incremental Term B Lenders hereunder. SECTION 5. Costs, Expenses. The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment, and the other instruments and documents to be delivered hereunder (including, without limitation, the reasonable fees and expenses of counsel for the Agent) in accordance with the terms of Section 9.04 of the Credit Agreement. SECTION 6. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. 7 SECTION 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. MEDIQ/PRN LIFE SUPPORT SERVICES, INC. By /s/ ---------------------------------- Title: BANQUE NATIONALE DE PARIS, as Administrative Agent and as Lender By /s/ ----------------------------------- Title: By /s/ ----------------------------------- Title: NATIONSBANK, N.A., as Documentation Agent and as Lender By /s/ ----------------------------------= Title: 8 THE FIRST NATIONAL BANK OF BOSTON By /s/ ------------------------------------ Title: CAISSE NATIONALE DE CREDIT AGRICOLE By /s/ ----------------------------------- Title: CREDITANSTALT CORPORATE FINANCE, INC. By /s/ ----------------------------------- Title: By /s/ ----------------------------------- Title: FIRST SOURCE FINANCIAL, LLP By: First Source Financial, Inc. as Agent/Manager By /s/ ----------------------------------- Title: METROPOLITAN LIFE INSURANCE COMPANY By /s/ ------------------------------------ Title: 9 LASALLE NATIONAL BANK By /s/ ----------------------------------- Title: MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By /s/ ----------------------------------- Title: MELLON BANK, N.A. By /s/ ----------------------------------- Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By /s/ ----------------------------------- Title: PILGRIM AMERICA PRIME RATE TRUST By /s/ ----------------------------------- Title: SUMMIT BANK By /s/ ----------------------------------- Title: 10 USTRUST By /s/ ----------------------------------- Title: VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By /s/ ----------------------------------- Title: RESTRUCTURED OBLIGATIONS BACKED BY SENIOR ASSETS B.V. By its Managing Director, ABN TRUSTCOMPANY (NEDERLAND) B.V. By /s/ ----------------------------------- Title: By /s/ ----------------------------------- Title: MERRILL LYNCH PRIME RATE PORTFOLIO By /s/ ----------------------------------- Title: SENIOR DEBT PORTFOLIO By Boston Management and Research, as Investment Advisor By /s/ ----------------------------------- Title: 11 CERES FINANCE LTD. By /s/ ----------------------------------- Title: CAPTIVA FINANCE LTD. By /s/ ----------------------------------- Title: AMARA-1 FINANCE LTD. By /s/ ----------------------------------- Title: AMARA-2 FINANCE LTD. By /s/ ----------------------------------- Title: MERRILL LYNCH PRIME RATE PORTFOLIO By Merrill Lynch Asset Management, L.P., as Investment Advisor By /s/ ----------------------------------- Title: 12 EX-11 3 COMPUTATION PER SHARE EXHIBIT 11 MEDIQ INCORPORATED AND SUBSIDIARIES Computation of Net Income Per Share (in thousands, except per share amounts) (Unaudited) Three Months Ended December 31, ------------------------ 1996 1995 -------- -------- Computation of Primary Earnings Per Share: Net Income (Loss) $ 23,286 $ (367) ======== ======== Weighted average of primary shares: Common stock 18,500 17,853 Preferred stock 6,301 6,374 Assumed conversion of options 461 354 -------- -------- Total 25,262 24,581 ======== ======== Primary Earnings Per Share $ .92 $ (.01) ======== ======== Computation of Fully Diluted Earnings Per Share: Net Income (Loss) $ 23,286 $ (367) Interest and amortization of deferred costs on convertible debentures - net of tax 326 456 -------- -------- Total $ 23,612 $ 89 ======== ======== Weighted average of fully diluted shares: Common stock 18,500 17,853 Preferred stock 6,301 6,374 Assumed conversion of options 532 354 Assumed conversion of convertible debentures 3,897 5,397 -------- -------- Total 29,230 29,978 ======== ======== Fully Diluted Earnings Per Share $ .81 $ -- ======== ======== EX-27 4 ART. 5 FOR FORM 10-Q
5 1,000 3-MOS SEP-30-1997 DEC-31-1996 4,411 89,604 40,196 2,700 6,432 145,924 236,078 114,752 359,533 44,659 247,484 19,202 0 3,339 18,454 359,533 0 35,483 0 28,945 0 0 6,513 (5,365) 2,126 (7,491) 37,241 (6,464) 0 23,286 .92 .81
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