-----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, NuWIF43EzjWKEncAFDOz8nMx6w10Wnw72viN3m1dyn3vDirIPo/FK+3xpUJBfFFR L1KQLfD5LVi5UisbLUxq5w== 0000950115-97-000712.txt : 19970509 0000950115-97-000712.hdr.sgml : 19970509 ACCESSION NUMBER: 0000950115-97-000712 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970508 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: 97597997 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: March 31, 1997 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 May 2, 1997, there were 19,365,319 shares of Common Stock, par value $1.00 per share and 6,282,701 shares of Preferred Stock, par value $.50 per share, outstanding. 1 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended March 31, 1997 INDEX Page Number PART I. FINANCIAL INFORMATION: Item 1. Financial Statements. Condensed Consolidated Statements of Operations- Three and Six Months Ended March 31, 1997 and 1996 (Unaudited) 4 Condensed Consolidated Balance Sheets- March 31, 1997 (Unaudited) and September 30, 1996 5 Condensed Consolidated Statements of Cash Flows- Six Months Ended March 31, 1997 and 1996 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 12-17 PART II. OTHER INFORMATION: Item 4. Submission of Matters to a Vote of Security Holders 18 Item 6. Exhibits and Reports on Form 8-K. 18 2 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended March 31, 1997 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 Six Months Ended March 31, March 31, -------------------- ------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Revenue: Rental $ 32,524 $ 31,077 $ 61,246 $ 58,808 Sales 5,731 2,508 9,459 4,552 Other 4,311 3,414 7,344 5,732 -------- -------- -------- -------- 42,566 36,999 78,049 69,092 Costs and Expenses: Cost of sales 4,680 1,639 7,754 3,561 Operating 14,800 12,400 27,315 24,606 Selling and administrative 5,533 5,386 11,522 10,816 Restructuring -- -- -- 2,200 Depreciation and amortization 7,364 7,413 14,731 14,836 -------- -------- -------- -------- 32,377 26,838 61,322 56,019 -------- -------- -------- -------- Operating Income 10,189 10,161 16,727 13,073 Other (Charges) Credits: Interest expense (5,409) (6,881) (11,922) (13,592) Equity participation - repurchase of MEDIQ/PRN warrants -- -- (11,047) -- Gain on sale and market appreciation of Cardinal Health stock 4,021 -- 9,213 -- Gain on NutraMax note receivable 1,195 -- 1,195 -- Other - net 679 (32) 1,144 382 -------- -------- -------- -------- Income (loss) from Continuing Operations before Income Taxes and Extraordinary Item 10,675 3,248 5,310 (137) Income Tax Expense 4,318 1,975 6,444 960 -------- -------- -------- -------- Income (loss) before Discontinued Operations and Extraordinary Item 6,357 1,273 (1,134) (1,097) Discontinued Operations (net of taxes) (66) 1,542 37,175 2,544 Extraordinary Item - Early Retirement of Debt (net of taxes) (462) -- (6,926) 1,001 -------- -------- -------- -------- Net Income $ 5,829 $ 2,815 $ 29,115 $ 2,448 ======== ======== ======== ======== Earnings per share: Continuing Operations $ .25 $ .05 $ (.05) $ (.04) Discontinued Operations -- .06 1.46 .10 Extraordinary Item (.02) -- (.27) .04 -------- -------- -------- -------- Net Income $ .23 $ .11 $ 1.14 $ .10 ======== ======== ======== ======== Weighted Average Shares Outstanding 25,739 24,845 25,501 24,713 ======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements 4 MEDIQ INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
Mar. 31, Sept. 30 1997 1996 ---------- ---------- (Unaudited) (See Note) Assets ------ Current Assets: Cash $ 2,939 $ 3,219 Accounts receivable - net 39,837 30,233 Inventories 11,328 6,614 Deferred income taxes 4,962 2,447 Other current assets 3,501 2,280 -------- -------- Total Current Assets 62,567 44,793 Property, plant and equipment - net 117,332 122,706 Goodwill - net 56,116 58,321 Investment in discontinued operations - restricted 5,425 64,967 Notes receivable 14,551 7,328 Deferred financing fees 8,613 4,225 Marketable equity securities - restricted 5,200 -- Other Assets 6,959 5,773 -------- -------- Total assets $276,763 $308,113 ======== ======== Liabilities and Stockholders' Equity ------------------------------------ Current Liabilities: Accounts payable $ 9,247 $ 8,907 Accrued expenses 26,638 27,877 Current portion of long-term debt 8,039 8,520 -------- -------- Total Current Liabilities 43,924 45,304 Senior debt 134,118 192,461 Subordinated debt 13,850 41,229 Deferred income taxes 29,022 7,254 Other liabilities 2,766 4,420 Stockholders' Equity 53,083 17,445 -------- -------- Total Liabilities and Stockholders' Equity $276,763 $308,113 ======== ========
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)
Six Months Ended March 31, --------------------------- 1997 1996 ---- ---- Cash Flows from Operating Activities: Net income $ 29,115 $ 2,448 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Income from discontinued operations (37,175) (2,544) Gain on sale of Cardinal shares (9,213) -- Equity participation-repurchase of MEDIQ/PRN warrants 11,047 -- Other - net (4,242) 7,554 -------- -------- Net cash provided by (used in) operating activities (10,468) 7,458 Cash Flows from Investing Activities: Proceeds from sale of discontinued operations 120,790 1,500 Proceeds from sale of equipment and other assets 546 3,046 Purchase of equipment (8,005) (9,804) Note receivable from SpectraCair -- (3,250) Repurchase of MEDIQ/PRN warrant (12,500) (1,625) Other (3,043) (1,688) -------- -------- Net cash provided by (used in) investing activities 97,788 (11,821) Cash Flows from Financing Activities: Borrowings 214,000 22,210 Debt repayments (293,126) (19,088) Deferred financing fees (8,746) -- Exercise of stock options 272 1,419 -------- -------- Net cash provided by (used in) financing activities (87,600) 4,541 -------- -------- Increase (decrease) in cash (280) 178 -------- -------- Cash: Beginning balance 3,219 2,966 -------- -------- Ending balance $ 2,939 $ 3,144 ======== ======== Supplemental disclosure of cash flow information: Interest paid $ 13,034 $ 12,489 ======== ======== Income taxes paid $ 3,249 $ 366 ======== ======== Supplemental disclosure of non-cash investing and financing activities: Conversion of 7.25% subordinated debentures into common stock $ 6,251 $ -- ======== ======== Equipment financed with long-term debt and capital leases $ -- $ 1,539 ======== ========
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 March 31, 1997 and the condensed consolidated statements of operations and cash flows for the six months ended March 31, 1997 and 1996 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 March 31, 1997 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 March 31, 1997 are not necessarily indicative of the operating results for the full year. Note B - Revenues The Company derives revenues from the following sources: (1) rental - rental of moveable medical equipment, (2) sales - sales of disposable products, spare parts and equipment and (3) other - logistical services, revenue-share arrangements, maintenance and reconditioning services and management consulting services. Note C - Discontinued Operations On May 7, 1997, the Company sold the stock of Health Examinetics, Inc. to the management of Health Examinetics for approximately $1.7 million, consisting of $.1 million in cash and $1.6 million in notes. The sale resulted in a net loss which is included in the estimated net loss on the disposal of discontinued operations recorded in fiscal 1996. On December 31, 1996, the Company sold to NutraMax Products, Inc. ("NutraMax"), 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 with decreasing interest rates over the remaining term. The Note is payable when NutraMax shares owned by the Company, which are held in escrow in support of the Company's 7.50% Exchangeable Subordinated Debentures due 2003 (the "7.50% debentures"), are delivered to NutraMax upon release from escrow. The NutraMax shares are 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. In the second quarter of 1997, the Company repurchased $14 million of the 7.50% debentures in the open market (See Note D) which resulted in the release of 913,922 shares of NutraMax common stock from escrow. The shares were delivered to NutraMax resulting in a cash payment. 7 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note C - Discontinued Operations (Continued) on the Note of $7.1 million and the realization of a $1.2 million pretax gain as a result of the recognition of a portion of the discount on the Note. The gain is reflected in Other Income on the Company's Condensed Consolidated Statement of Operations. On November 6, 1996, the Company sold substantially all of the assets of MEDIQ Mobile X-Ray Services, Inc. ("Mobile X-Ray") to Symphony Diagnostics, Inc., a subsidiary of Integrated Health Services, Inc. ("IHS", NYSE:IHS) for $5.3 million in cash and shares of IHS common stock with a guaranteed value of $5.2 million with the possibility of the Company receiving additional cash consideration based upon the occurrence of certain future events. The Company anticipates the sale of the IHS shares in fiscal 1997 with the proceeds to be used to reduce borrowings under the Credit Agreement. 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 $32.6 million on this transaction. 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 and recognized an additional pretax gain of $4 million. The Company anticipates that the disposal of InnoServ Technologies, Inc., its remaining discontinued operation, will be completed in fiscal 1997. The investment in discontinued operations as of March 31, 1997 consisted of (in thousands): Current assets $6,116 Current liabilities 880 ------ Net current assets 5,236 Other noncurrent assets - net 189 ------ $5,425 ====== Revenues from discontinued operations were $3.3 million and $20.1 million for the six months ended March 31, 1997 and 1996, respectively. Note D - 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 provided 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). Borrowings under the Credit Agreement provided the funds for the Company to refinance substantially all of its existing senior debt, its outstanding lines of credit and all of MEDIQ/PRN's subordinated 8 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note D - Long-Term Debt (Continued) debt and $100 million 11 1/8% Senior Secured Notes (the "Refinancing"). On January 24, 1997, the Company executed an amendment to the Credit Agreement to increase the amounts which may be borrowed under 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 G). Substantially all of the cash proceeds from the sale of NutraMax stock, Mobile X-Ray assets and Cardinal stock were used to reduce borrowings under the Credit Agreement. As of March 31, 1997, the Company had $100 million available under the Acquisition Revolver and $19.5 million available under the Working Capital Revolver, both of which were available to the Company upon continued compliance with certain financial covenants and/or ratios. Borrowings under the Credit Agreement bear interest at either the prime rate plus a factor or at a Eurodollar rate plus a factor. The factor may change quarterly based upon the Company's leverage ratio as defined in the Credit Agreement. The Company's interest rate on the Term A loan, the Acquisition Revolver and the Working Capital Revolver is prime (8.50% at March 31, 1997) plus 1.25% or Eurodollar (5.60% at March 31, 1997) plus 2.75% and the interest rate on the Term B loan is either prime plus 1.75% or Eurodollar plus 3.25%. The loans are collateralized by substantially all of the assets of the Company. In May 1997, as a result of an improvement in the Company's leverage ratio, the Company's factors on the Term A loan, the Acquisition Revolver and the Working Capital Revolver will change to 0.5% for prime and 2.00% for Eurodollar. The factor on the Term B loan will change to 1.25% for prime and 2.75% for Eurodollar. 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, and a non-recurring charge of $11 million for the repurchase of warrants 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 Operations. During fiscal 1997, the Company repurchased an aggregate of $21.9 million of the 7.50% debentures at a discount in the open market, $14 million of which were purchased in the second quarter (See Note C). The Company recognized an extraordinary gain in connection with the repurchase of the 7.50% debentures and write-offs of related deferred charges in the amount of $51,000, net of taxes through March 31, 1997. During fiscal 1997, the Company repurchased or redeemed $23 million of the 7.25% Subordinated Convertible Debentures due 2006 ("7.25% debentures"). The Company recognized an extraordinary loss in connection with the repurchase of the 7.25% debentures and 9 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note D - Long-Term Debt (Continued) write-offs of related deferred charges in the amount of $.2 million. The remaining balance of $6.2 million of the 7.25% debentures were converted into 833,446 shares of the Company's common stock. Note E - Inventories Inventories, which consist primarily of finished goods held for sale and repair parts for rental equipment, are stated at the lower of cost (first-in, first-out method) or market. Note F - Income Taxes As a result of the sale of the Company's investments in PCI, NutraMax and Cardinal (See Note C), the Company has utilized all of its available net operating loss and capital loss carryforwards, all of its Investment Tax Credits and Rehabilitation Tax Credits and a portion of its alternative minimum tax credit carryforwards. Note G - 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, beginning in February 1997, MHM has not made the required monthly installments 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. Investigations and Legal Proceedings - MEDIQ Imaging Services, Inc., the assets of which were sold by the Company in August 1995, was notified in January 1995 that it was the subject of a criminal and civil investigation by the United States Attorney's Office for the District of New Jersey and the Department of Health and Human Services. In March 1997, the Company was advised by the U.S. Government that the criminal investigation has been terminated, however, the Company remains the subject of a civil investigation. Reference is made to Note I in the Company's Annual Report on Form 10-K for additional information. 10 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note H - 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. 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. On April 4, 1997, the shareholders of Universal approved the acquisition subject to Hart-Scott-Rodino approval. On April 10, 1997, the Company and Universal received a request for additional information from the Federal Trade Commission ("FTC") in connection with the Company's Hart-Scott-Rodino filing. This "second request" extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, during which the FTC is permitted to review the transaction. The waiting period will expire on the twentieth calendar day after the FTC has determined that the companies have substantially complied with the FTC's request. The transaction is structured as a cash merger and is anticipated to be funded with available funds and proceeds from the existing Credit Agreement. 11 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note I - New Accounting Pronouncements For fiscal 1997, the Company has formally adopted SFAS No. 123, "Accounting for Stock-based Compensation Plans," which will result in disclosure of the proforma net income and net earnings per share amounts assuming the fair value method in the fiscal year end 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. The Financing Accounting Standards Board has issued SFAS No. 128, "Earnings Per Share," which will result in changes to the computation and presentation of earnings per share. The Company will be required to adopt this standard during its quarter ended December 31, 1997 with earlier adoption not permitted. At this time, the Company has not determined the impact this standard will have on the Company's earnings per share. 12 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 March 31, 1997 and results of operations for the six month periods ended March 31, 1997 and 1996. 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. Seasonality The Company's rental business is seasonal, with demand historically peaking during periods of increased hospital census, which generally occur in the winter months during the Company's second fiscal quarter. Results of Operations Second Quarter 1997 Compared with Second Quarter 1996 Revenues from continuing operations were $42.6 million for the second quarter of fiscal 1997, as compared to $37 million in the prior year period, an increase of $5.6 million, or 15%. The revenue growth was attributable to a 5% increase in rental revenue, a 129% increase in sales and a 26% increase in other revenue. The growth in rental revenue was primarily attributable to a sustained flu season in the second quarter of fiscal 1997 as compared to the prior year period. The increase in sales was derived primarily from a significant distribution contract which was in place during the entire second quarter of fiscal 1997 as compared to a portion of the prior year period as well as increases in sales of disposable products in the current period as a result of additional volume. The increase in other revenue was achieved principally through a new revenue-sharing arrangement for certain rental products and revenues from outsourcing services. Operating income was consistent with the prior year period at $10.2 million, as a result of the Company's growth in non-rental activities which provide a lower gross margin than the rental business and the Company making additional investments of people and other resources in the second quarter of fiscal 1997 to accelerate the growth in non-rental activities. In addition, the sustained flu season resulted in higher variable costs in the second quarter of fiscal 1997 as compared to the prior year period. Interest expense decreased 21% to $5.4 million for the second quarter of fiscal 1997 primarily as a result of substantial reductions of debt and lower interest rates associated with the refinancing that occurred on October 1, 1996. In January 1997, the Company sold its Cardinal Health, Inc. ("Cardinal") shares for $88.4 million and realized a pretax gain of $9.2 million. The Company recognized $5.2 million of this gain as market appreciation in the first quarter of 1997. Accordingly, $4.0 million of pretax gain was recorded in the second quarter of 1997. In the second quarter of fiscal 1997, the Company repurchased $14 million of the 7.50% Exchangeable Subordinated Debentures ("7.50% debentures") in the open market which resulted in the release of 913,922 shares of NutraMax Products, 13 Inc. ("NutraMax") common stock from escrow. The shares were delivered to NutraMax resulting in a cash payment on the NutraMax note receivable (the "Note") of $7.1 million and the realization of a $1.2 million pretax gain as a result of the recognition of a portion of the discount on the Note. The Company's effective tax rate was disproportionate compared to the statutory rate as a result of goodwill amortization and non-recognition of certain operating losses and non-operating gains for state income tax purposes. Revenues and operating income from discontinued operations were $1.8 million and $9,000, respectively, as compared to revenues and operating income of $10.3 million and $2.1 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 repurchases of the Company's 7.25% Subordinated Convertible Debentures ("7.25% debentures") and 7.50% debentures, the Company recognized in the second quarter of 1997 an extraordinary charge of $.7 million ($.5 million net of taxes) resulting primarily from the write-off of related deferred charges. 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 on October 1, 1996. The following table provides a proforma analysis of the Company's results of operations as if the Company: (a) applied the proceeds from the sales of its investments in Cardinal and Integrated Health Services, Inc. ("IHS") to its outstanding debt as of October 1, 1996, (b) received all cash from the sale of NutraMax and applied the proceeds to its outstanding debt as of October 1, 1996, and (c) tax effected the adjustments described in (a) and (b).
Three Months Ended Three Months Ended March 31, 1997 Proforma March 31, 1997 Actual Adjustments Proforma ------------------ ----------- ------------------ Revenues $ 42,566 $ 42,566 Operating Income 10,189 10,189 Other (Charges) Credits: Interest expense (5,409) 694 (a),(b) (4,715) Gain on sale of Cardinal Health stock 4,021 (4,021) (a) -- Gain on NutraMax note receivable 1,195 (1,195) (b) -- Other - net 679 679 -------- -------- Income from Continuing Operations before Income Taxes and Extraordinary Item 10,675 6,153 Income Tax Expense 4,318 1,496 (c) 2,822 --------- -------- Net Income from Continuing Operations $ 6,357 $ 3,331 ========= ======== Per Share Data: Net Income from Continuing Operations $ .25 $ .13 ========= ========
14 Six Months Ended March 31, 1997 Compared with Six Months Ended March 31, 1996 Revenues from continuing operations were $78 million for the six months ended March 31, 1997, as compared to $69.1 million in the prior year period, an increase of $8.9 million, or 13%. The revenue growth was attributable to a 4% increase in rental revenue, a 108% increase in sales, and a 28% increase in other revenue. The growth in rental revenue was primarily attributable to a sustained flu season and increased volume through an expanded customer base. The increase in sales was derived primarily from a significant distribution contract which was in place during the entire six months ended March 31, 1997 as compared to a portion of the second quarter of fiscal 1996 as well as increases in sales of disposable products in the current period as a result of additional volume. The increase in other revenue was achieved principally through a new revenue-sharing arrangement for certain rental products and revenues from outsourcing services. Operating income increased $1.5 million, or 10% to $16.7 million, for the six months ended March 31, 1997, as compared to $15.3 million, exclusive of a $2.2 million restructuring charge, in the prior year period. The restructuring charge was incurred in connection with the downsizing of corporate functions and consolidation of certain activities with the operations of MEDIQ/PRN. The improvement in operating income was attributable to the growth of revenues from non-rental activities with lower gross margins and reductions in corporate overhead of $.7 million related to the downsizing of corporate functions. This improvement was partially offset by an additional investment of people and other resources in the second quarter of fiscal 1997 to accelerate the growth of the Company's non-rental activities and higher variable costs associated with the sustained flu season. Interest expense decreased 12% to $11.9 million for the six months ended March 31, 1997 primarily as a result of substantial reductions of debt and 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 warrants to purchase 10% of MEDIQ/PRN issued in connection with financing the KCI acquisition in 1994. The Company's effective tax rate was disproportionate compared to the statutory rate as a result of the non-deductibility of the expense associated with the repurchase of the MEDIQ/PRN warrants, goodwill amortization and non-recognition of certain operating losses and non-operating gains for state income tax purposes. On December 31, 1996, the Company sold to NutraMax, 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 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 with decreasing interest rates over the remaining term. The Note is payable when NutraMax shares owned by the Company, which are held in escrow in support of the Company's 7.50% debentures 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. 15 On November 6, 1996, the Company sold substantially all of the assets of MEDIQ Mobile X-Ray Services, Inc. ("Mobile X-Ray") to Symphony Diagnostics, Inc., a subsidiary of IHS, for $5.3 million in cash and shares of IHS common stock with a guaranteed value of $5.2 million with the possibility of the Company receiving additional cash consideration based upon the occurrence of certain future events. The Company anticipates the sale of the IHS shares in fiscal 1997 with the proceeds to be used to reduce the borrowings under the Credit Agreement (See Liquidity and Capital Resources). The loss on the disposal of these assets was recorded in fiscal 1996. On October 11, 1996, PCI Services, Inc., was acquired by 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 $32.6 million on this transaction. 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. Revenues and operating loss from discontinued operations were $3.3 million and $.2 million, respectively, as compared to revenues and operating income of $20.1 million and $3.6 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 and repurchases of the Company's 7.25% and 7.50% debentures, the Company recognized an extraordinary charge of $13.3 million ($6.9 million net of taxes) resulting primarily from the write-off of related deferred charges and premiums incurred related principally to the tender offer to purchase the $100 million 11 1/8% Senior Secured Notes due 1999. 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 warrants, (b) applied the proceeds from the sales of its investments in discontinued operations in the first quarter of fiscal 1997 to its outstanding debt as of October 1, 1996 and (c) tax effected the adjustments described in (a) and (b). 16
Six Months Ended Six Months Ended March 31, 1997 Proforma March 31, 1997 Actual Adjustments Proforma ---------------- ----------- ---------------- Revenues $ 78,049 $ 78,049 Operating Income 16,727 16,727 Other (Charges) Credits: Interest expense (11,922) 3,276 (b) (8,646) Equity participation - repurchase of MEDIQ/PRN warrants (11,047) 11,047 (a) -- Gain on sale of Cardinal Health stock 9,213 (9,213) (b) -- Gain on NutraMax note receivable 1,195 (1,195) (b) -- Other - net 1,144 1,144 -------- -------- Income from Continuing Operations before Income Taxes and Extraordinary Item 5,310 9,225 Income Tax Expense 6,444 (2,228) (c) 4,216 -------- -------- Net Income (Loss) from Continuing Operations $ (1,134) $ 5,009 ======== ======== Per Share Data: Net Income (Loss) from Continuing Operations $ (.05) $ .20 ======== ========
Liquidity and Capital Resources Cash used in operating activities was $10.5 million in the six months ended March 31, 1997, as compared to cash provided by operations of $7.5 million in the prior year period. The decrease in cash flows from operating activities in the current period was primarily attributable to an increase in accounts receivable associated with the Company's revenue growth, higher inventories to support the increase in the Company's sales activities, and the payment of income taxes. Net cash provided by investing activities was $97.8 million, and consisted of cash proceeds from the sales of the Company's investments in NutraMax and Cardinal stock and certain assets of Mobile X-Ray aggregating $120.8 million, partially offset by capital expenditures for equipment of $8.0 million and the repurchase of the MEDIQ/PRN warrants for $12.5 million. Net cash used in financing activities consisted of debt repayments of $293.1 million related to the refinancing, subordinated debenture repurchases and debt service and deferred financing fees of $8.7 million related to the refinancing. These cash disbursements were partially offset by borrowings of $214 million. 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 provided 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 provided the funds for the Company to refinance substantially all of its existing senior debt, its outstanding lines of credit, all of MEDIQ/PRN's subordinated debt and $100 million 11 1/8% Senior Secured Notes (the "Refinancing"). On January 24, 1997, the Company executed an amendment to the Credit Agreement to increase 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 Health Services, Inc. ("Universal") (Note G). Substantially all of the cash proceeds from the sale of NutraMax stock, Mobile X-Ray assets and Cardinal stock were used to reduce borrowings under the Credit Agreement. As of March 31, 1997, the Company had 17 $100 million available under the Acquisition Revolver and $19.5 million available under the Working Capital Revolver both of which were available to the Company upon continued compliance with certain financial covenants and/or ratios. Borrowings under the Credit Agreement bear interest at either the prime rate plus a factor or at a Eurodollar rate plus a factor. The factor may change quarterly based upon the Company's leverage ratio. As of March 31, 1997 the Company's interest rate on the Term A loan, the Acquisition Revolver and the Working Capital Revolver is prime (8.50% at March 31, 1997) plus 1.25% or Eurodollar (5.60% at March 31, 1997) 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. On May 1, 1997, the Company elected a six month Eurodollar rate of 6.06% for $30 million of the Term A loan and $99 million of the Term B loan. In May 1997, as a result of an improvement in the Company's leverage ratio, the Company's factors on the Term A loan, the Acquisition Revolver and the Working Capital Revolver will change to 0.5% for prime and 2.00% for Eurodollar. The factor on the Term B loan will change to 1.25% for prime and 2.75% for Eurodollar. 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%. During fiscal 1997, the Company repurchased an aggregate of $21.9 million of the 7.50% debentures at a discount in the open market. The Company recognized an extraordinary gain in connection with the repurchase of the 7.50% debentures and write-offs of related deferred charges in the amount of $51,000, net of taxes through March 31, 1997. The Company has borrowed on its new credit facility to redeem or repurchase a portion of the 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 additional redemption or repurchase will occur. During fiscal 1997, the Company repurchased or redeemed $23 million of the 7.25% debentures. The Company recognized an extraordinary loss in connection with the repurchase of the 7.25% debentures and write-offs of deferred related charges in the amount of $.2 million. The Company funded the repurchase/redemption with proceeds from its Credit Agreement. The remaining balance of $6.2 million of the 7.25% debentures were converted into 833,446 shares of the Company's common stock. On February 11, 1997, the Company entered into a definitive agreement with Universal 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. 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. On April 4, 1997, the shareholders of Universal approved the acquisition subject to Hart-Scott-Rodino approval. On April 10, 1997, the Company and Universal received a request for additional information from the Federal Trade Commission ("FTC") in connection with the Company's Hart-Scott-Rodino filing. This "second request" extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, during which the FTC is permitted to review the transaction. The waiting period will expire on the twentieth calendar day after the FTC has determined that the companies have substantially complied with the FTC's request. The transaction is structured as a cash merger and is anticipated to be funded with available funds and proceeds from the existing Credit Agreement. 18 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. 19 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended 31, 1997 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The 1997 Annual Meeting of Stockholders of the Company was held on March 5, 1997. Stockholders of the Company elected the Board of Directors. No broker non-votes were recorded. The following is a presentation of the voting results from the March 5, 1997 Annual Stockholders' Meeting: Nominee For Withheld ------- --- -------- Michael J. Rotko 51,164,528 213,699 Jacob A. Shipon 15,382,023 120,444 Thomas E. Carroll 51,170,806 207,421 Michael F. Sandler 51,179,758 92,449 Sheldon M. Bonovitz 15,013,764 488,703 Mark S. Levitan 15,466,195 36,272 H. Scott Miller 15,456,675 45,702 Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: Exhibit 4.1(b) - Amendment to Credit Agreement, dated April 1, 1997. Exhibit 11 - Computation of Net Income Per Share. Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K The Company filed the following report on Form 8-K during the quarter ended March 31, 1997: 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. 20 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended March 31, 1997 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) May 8, 1997 (Date) /s/ Michael F. Sandler ----------------------------------- Michael F. Sandler Senior Vice President -- Finance and Chief Financial Officer 21 EX-4.1(B) 2 AMENDMENT NO. 2 AND WAIVER TO THE CREDIT AGREEMENT EXHIBIT 4.1 (b) AMENDMENT NO. 2 AND WAIVER TO THE CREDIT AGREEMENT Dated as of April 1, 1997 AMENDMENT NO. 2 AND WAIVER 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, as amended by Amendment No. 1 dated as of January 24, 1997 (as so amended, the "Credit Agreement"). Capitalized terms not otherwise defined in this Amendment and Waiver have the same meanings as specified in the Credit Agreement. (2) The Borrower seeks to acquire (the "UHS Acquisition") Universal Hospital Services, Inc., a Minnesota corporation ("UHS") and has requested that the Required Lenders amend and waive certain provisions of the Credit Agreement in order to permit the Borrower to acquire UHS for a purchase price greater than $140,000,000 and incur certain one time extraordinary charges associated with the acquisition and the operations of UHS. (3) The Required 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 and waive the Credit Agreement as hereinafter set forth. SECTION 1. Amendments to the Credit Agreement. Section 1.01 of the Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 3(a) hereof, hereby amended as follows: (1) The definition of "EBITDA" is amended by deleting clause (g) thereof in its entirety and substituting therefor the following: "(g) all one-time expenses of the Borrower and its Affiliates incurred in connection with the UHS Acquisition for (i) acquisition expenses, lease related expenses, facility closure expenses and professional and other fees, and (ii) the write-down of UHS's Demand Positive Airway Pressure Devices inventory. SECTION 2. Waiver. The provisions of Section 5.02(f)(i)(4) are hereby waived solely to the extent that such section limits the aggregate amount of Investments outstanding after giving effect to the UHS Acquisition to $140,000,000. SECTION 3. Conditions of Effectiveness. This Amendment and Waiver shall become effective as of the date first above written when, and only when, the Administrative Agent shall have received counterparts of this Amendment and Waiver executed by the Borrower and the Required Lenders, or, as to any of the Lenders, advice satisfactory to the Administrative Agent that such Lender has executed this Amendment and Waiver. The effectiveness of this Amendment and Waiver is conditioned upon the accuracy of the factual matters described herein. This Amendment and Waiver is subject to the provisions of Section 9.01 of the Credit Agreement. SECTION 4. 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 and Waiver. (b) The execution, delivery and performance by each Loan Party of this Amendment and Waiver 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 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 and Waiver, 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. (d) This Amendment and Waiver 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 Waiver 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. (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 and Waiver, 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. SECTION 5. Reference to and Effect on the Loan Documents. (a) On and after the effectiveness of this Amendment and Waiver, 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 and Waiver. (b) The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended by this Amendment and Waiver, 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 and Waiver. (c) The execution, delivery and effectiveness of this Amendment and Waiver 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. SECTION 6. 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 Waiver, 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 7. Execution in Counterparts. This Amendment and Waiver 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 and Waiver by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment and Waiver. SECTION 8. Governing Law. This Amendment and Waiver 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 and Waiver 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/ Jay M. Kaplan --------------------------------- Title: Sr. Vice-President BANQUE NATIONALE DE PARIS, as Administrative Agent and as Lender By /s/ Allan Mustacchi --------------------------------- Title: Vice-President By /s/ Stephen Kovacs --------------------------------- Title: Vice-President NATIONSBANK, N.A., as Documentation Agent and as Lender By /s/ Michael S. Sylvester --------------------------------- Title: Officer THE FIRST NATIONAL BANK OF BOSTON By /s/ Kimberly Harris --------------------------------- Title: Vice-President CAISSE NATIONALE DE CREDIT AGRICOLE By /s/ Craig Welsh --------------------------------- Title: First Vice-President CREDITANSTALT CORPORATE FINANCE, INC. By /s/ Clifford L. Wells --------------------------------- Title: Vice-President By /s/ Stacy Harmon --------------------------------- Title: Senior Associate FIRST SOURCE FINANCIAL, LLP By: First Source Financial , Inc. as Agent/Manager By /s/ James W. Wilson --------------------------------- Title: Senior Vice-President METROPOLITAN LIFE INSURANCE COMPANY By /s/ James R. Dughi --------------------------------- Title: Assistant Vice-President LASALLE NATIONAL BANK By /s/ Olga Georgien --------------------------------- Title: First Vice-President MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By /s/ Michael P. Hermsen --------------------------------- Title: Managing Director MELLON BANK, N.A. By --------------------------------- Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By --------------------------------- Title: PILGRIM AMERICA PRIME RATE TRUST By /s/ Michael J. Bacevich --------------------------------- Title: Vice-President SUMMIT BANK By /s/ Gail S. Powers --------------------------------- Title: Vice-President USTRUST By /s/ Thomas Z. Macina --------------------------------- Title: Vice-President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By /s/ Kathleen A. Zarn --------------------------------- Title: Vice-President RESTRUCTURED OBLIGATIONS BACKED BY SENIOR ASSETS B.V. By its Managing Director, ABN TRUST COMPANY (NEDERLAND) B.V. By /s/ Christopher E. Jansen --------------------------------- Title: Managing Director By --------------------------------- Title: MERRILL LYNCH PRIME RATE PORTFOLIO By --------------------------------- Title: SENIOR DEBT PORTFOLIO By Boston Management and Research, as Investment Advisor By --------------------------------- Title: CERES FINANCE LTD. By /s/ John H. Cullinane --------------------------------- Title: Director CAPTIVA FINANCE LTD. By /s/ John H. Cullinane --------------------------------- Title: Director AMARA-1 FINANCE LTD. By --------------------------------- Title: AMARA-2 FINANCE LTD. By --------------------------------- Title: MERRILL LYNCH PRIME RATE PORTFOLIO By Merrill Lynch Asset Management, L.P., as Investment Advisor By --------------------------------- Title: CONSENT Dated as of April 1, 1997 Reference is made to Amendment No. 2 and Waiver dated as of April 1, 1997 (the "Amendment and Waiver"), to the Credit Agreement dated as of October 1, 1996, as amended by amendment No. 1 dated as of January 24, 1997 (as so amended, the "Credit Agreement"; unless otherwise defined herein, capitalized terms being used herein as therein defined) among MEDIQ/PRN Life Support Services, Inc., a Delaware corporation, as Borrower, PRN Holdings, Inc. a Delaware corporation and MEDIQ Incorporated, as Parent Guarantors, Banque Nationale de Paris, as Administrative Agent, and certain other Lender Parties party thereto. Each of the undersigned, as a Loan Party party to certain of the Loan Documents, hereby consents to the Amendment and Waiver and hereby confirms and agrees that (a) notwithstanding the effectiveness of such Amendment and Waiver, each Loan Document to which it is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that, on and after the effectiveness of such Amendment and Waiver, each reference in such Loan Document to the "Credit Agreement", "thereunder", "thereof" or words of like import shall mean and be a reference to the Credit Agreement, as amended by such Amendment and Waiver, and (b) the Collateral Documents to which such Loan Party is a party and all of the Collateral described therein do, and shall continue to, secure the payment of all of the Secured Obligations (in each case, as defined therein). MEDIQ INVESTMENT SERVICES, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Vice-President & CFO MEDIQ MANAGEMENT SERVICES, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Chief Financial Officer MEDIQ SURGICAL EQUIPMENT SERVICES, INC. By /s/ Thomas E. Carroll --------------------------------- Name: Thomas E. Carroll Title: President VALUE-MED PRODUCTS, INC. By /s/ Thomas E. Carroll --------------------------------- Name: Thomas E. Carroll Title: President MEDIQ MOBILE X-RAY SERVICES, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Chief Financial Officer HEALTH EXAMINETICS, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Vice-President THERA-KINETICS ACQUISITION CORPORATION By /s/ Thomas E. Carroll --------------------------------- Name: Thomas E. Carroll Title: President MDTC HADDON, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Chief Financial Officer MEDIQ DIAGNOSTIC CENTERS, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Chief Financial Officer MEDIQ DIAGNOSTICS CENTERS-I INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Chief Financial Officer MEDIQ IMAGING SERVICES, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Vice-President & CFO AMERICAN CARDIOVASCULAR IMAGING LABS, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Chief Financial Officer ALPHA HEALTH CONSULTANTS, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Chief Financial Officer P. I. CORPORATION By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Vice-President & CFO MEDIQ SERVICES, INC. By /s/ Michael F. Sandler --------------------------------- Name: Michael F. Sandler Title: Chief Financial Officer EX-11 3 COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11 MEDIQ INCORPORATED AND SUBSIDIARIES Computation of Net Income Per Share (in thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended March 31, March 31, ----------------------- ------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Computation of Primary Earnings Per Share: - ------------------------------------------ Net Income $ 5,829 $ 2,815 $ 29,115 $ 2,448 ======== ======== ======== ======= Weighted average of primary shares: Common stock 18,742 18,275 18,621 18,064 Preferred stock 6,300 6,351 6,301 6,362 Assumed conversion of options 697 219 579 287 ----- -------- -------- ------- Total 25,739 24,845 25,501 24,713 ======== ======== ======== ======= Primary Earnings Per Share $ .23 $ .11 $ 1.14 $ .10 ======== ======== ======== ======= Computation of Fully Diluted Earnings Per Share (1) Net Income $ 5,829 $ 2,815 $ 29,115 $ 2,448 Interest and amortization of deferred costs on debentures - net of tax -- 456 -- 911 -------- -------- -------- ------- Total $ 5,829 $ 3,271 $ 29,115 $ 3,359 ======== ======== ======== ======= Weighted average of fully diluted shares: Common stock 18,742 18,275 18,621 18,064 Preferred stock 6,300 6,351 6,301 6,363 Assumed conversion of options 765 351 648 353 Assumed conversion of convertible -- 5,397 -- 5,397 debentures -------- -------- -------- ------- Total 25,807 30,374 25,570 30,177 ======== ======== ======== ======= Fully Diluted Earnings Per Share $ .23 $ .11 $ 1.14 $ .11 ======== ======== ======== =======
(1) This calculation is provided in accordance with Regulation S-K, Item 601(b)(II) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15, because it is anti-dilutive on results in dilution of less than 3%. EX-27 4 ART.5 FOR FORM 10-Q
5 MEDIQ INCORPORATED AND SUBSIDIARIES 1,000 6-MOS SEP-30-1997 MAR-31-1997 2,939 0 42,646 2,809 11,328 62,567 238,395 121,063 276,763 43,924 147,968 0 3,337 20,039 29,707 276,763 9,459 68,590 7,754 53,568 0 0 11,922 5,310 6,444 (1,134) 37,175 (6,926) 0 29,115 1.14 1.14
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