-----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, RRnR9gaJjCuoFIg8P69XX3xhKnSXrveq1n2ZzrmoOZ0yEs18BPSix2xDmVlEV03U X+eKRD8tR/qw5B20JqGcIg== /in/edgar/work/20000720/0000950115-00-000924/0000950115-00-000924.txt : 20000920 0000950115-00-000924.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950115-00-000924 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 20000720 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIQ INC CENTRAL INDEX KEY: 0000350920 STANDARD INDUSTRIAL CLASSIFICATION: [7350 ] IRS NUMBER: 510219413 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-08147 FILM NUMBER: 675808 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/A 1 0001.txt QUARTER REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 10-Q/A QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended: March 31, 1999 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: (856) 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 requirements for the past 90 days. YES X NO --- ---- As of May 4, 1999, there were outstanding 1,074,823 shares of Common Stock, par value $.01. 1 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended March 31, 1999 INDEX
Page Number ------ Introductory Statement 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Operations- 4 Three and Six Months Ended March 31, 1999 and 1998 Condensed Consolidated Balance Sheets- 5 March 31, 1999 and September 30, 1998 Condensed Consolidated Statements of Cash Flows- 6 Six Months Ended March 31, 1999 and 1998 Notes to Condensed Consolidated Financial Statements 7 - 8 Item 2. Management's Discussion and Analysis of 9 - 12 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13
2 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended March 31, 1999 Introductory Statement This Form 10-Q/A is filed to amend the Form 10-Q for the quarter ended March 31, 1999 as filed on May 17, 1999. The purpose of this amended filing is to restate certain amounts within the financial statements and to conform applicable portions of Management's Discussion and Analysis of Financial Condition and Results of Operations and amounts within the Financial Data Schedule to the restated amounts. The effects of the restatement to the financial statements are more fully described in Note B of the Notes to Condensed Consolidated Financial Statements. All disclosures herein are as of the date of the original filing except as amended for the effects of the restatements. PART I. FINANCIAL INFORMATION Item 1. Financial Statements 3 MEDIQ INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts)
Three Months Ended Six Months Ended March 31, March 31, 1999 1998 1999 1998 -------- -------- -------- -------- (as restated, (as restated, see Note B) see Note B) Revenues: Rental $ 42,983 $ 36,599 $ 82,618 $ 69,993 Sales 7,486 7,285 16,077 13,979 Other 2,633 2,525 5,305 5,007 -------- -------- -------- -------- 53,102 46,409 104,000 88,979 Expenses of Operations: Cost of sales 5,948 5,779 12,392 11,270 Operating 18,697 14,003 36,047 28,449 Selling 6,091 3,938 13,065 7,557 General and administrative 5,926 4,534 12,374 9,348 Merger charges - 306 - 363 Depreciation and amortization 10,380 8,294 20,298 16,586 -------- -------- -------- -------- 47,042 36,854 94,176 73,573 -------- -------- -------- -------- Operating Income 6,060 9,555 9,824 15,406 Other (Charges) and Credits: Interest expense (13,555) (3,578) (26,812) (7,235) Other-net 286 251 392 479 -------- -------- -------- -------- (Loss) Income before Income Taxes (7,209) 6,228 (16,596) 8,650 Income Tax (Benefit) Expense (2,542) 2,799 (5,756) 3,888 -------- -------- -------- -------- Net (Loss) Income (4,667) 3,429 (10,840) 4,762 Dividends on Preferred Stock (4,486) -- (9,098) -- -------- -------- -------- -------- Net (Loss) Attributable to/Income Available for Common Shareholders $ (9,153) $ 3,429 $(19,938) $ 4,762 ======== ======== ======== ======== Basic Per Share Amount: Net (loss) attributable to/income available for common shareholders $ (8.51) $ .13 $ (18.55) $ .19 ======== ======== ======== ======== Diluted Per Share Amount: Net (loss) attributable to/income available for common shareholders $ (8.51) $ .13 $ (18.55) $ .18 ======== ======== ======== ======== Weighted Average Number of Common Shares Outstanding: Basic 1,075 25,635 1,075 25,624 ======== ======== ======== ======== Diluted 1,075 26,455 1,075 26,358 ======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements 4 MEDIQ INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, September 30, 1999 1998 ---------- ------------ (Unaudited) (See note below) (as restated, see Note B) Assets Current Assets: Cash $ 2,761 $ 2,411 Accounts receivable (net of allowance of $15,992 and $11,432, respectively) 57,973 52,659 Inventories 22,258 21,820 Other current assets 11,100 9,923 -------- -------- Total Current Assets 94,092 86,813 Property, Plant and Equipment (net of accumulated depreciation and amortization of $172,009 and $155,749, respectively) 103,786 103,917 Goodwill (net of accumulated amortization of $19,349 and $16,658, respectively) 115,923 91,121 Deferred Financing Costs (net of accumulated amortization of $2,040 and $862, respectively) 19,154 20,013 Other Assets 7,848 7,354 -------- -------- Total Assets $340,803 $309,218 ======== ======== Liabilities and Stockholders' Deficiency Current Liabilities: Accounts payable $ 12,399 $ 14,152 Accrued expenses 20,473 20,569 Other current liabilities 212 281 Current portion of long term debt 2,176 2,037 -------- -------- Total Current Liabilities 35,260 37,039 Senior Debt 327,765 277,490 Subordinated Debt 190,514 190,514 Deferred Income Taxes 8,263 14,019 Other Liabilities 4,145 2,472 Mandatorily Redeemable Preferred Stock 120,147 113,037 Stockholders' Deficiency (345,291) (325,353) -------- -------- Total Liabilities and Stockholders' Deficiency $340,803 $309,218 ======== ========
Note: The balance sheet at September 30, 1998 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 (Unaudited) (in thousands)
Six Months Ended March 31, 1999 1998 --------- ---------- (as restated, see Note B) Cash Flows From Operating Activities Net (loss) income $(10,840) $ 4,762 Adjustments to reconcile net (loss) income to net cash provided by operating activities 11,865 9,969 -------- -------- Net cash provided by operating activities 1,025 14,731 Cash Flows From Investing Activities Purchases of equipment (13,345) (15,275) Acquisitions (32,641) -- Collection of notes receivable -- 2,250 Other 468 384 -------- -------- Net cash used in investing activities (45,518) (12,641) Cash Flows From Financing Activities Borrowings 46,300 11,000 Debt repayments (1,138) (12,934) Other (319) 130 -------- -------- Net cash provided by (used in) financing activities 44,843 (1,804) -------- -------- Increase in cash 350 286 Cash: Beginning balance 2,411 3,639 -------- -------- Ending balance $ 2,761 $ 3,925 ======== ========
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, 1999 and the condensed consolidated statements of operations and cash flows for the three and six months ended March 31, 1999 and 1998 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, 1999 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, 1998 Annual Report on Form 10-K. The results of operations for the period ended March 31, 1999 are not necessarily indicative of the operating results for the full year. Certain reclassifications have been made to conform prior year balances to the current year presentation. Note B - Restatement Subsequent to the issuance of the financial statements for the periods ended March 31, 1999, the Company performed an extensive review of the adequacy of the reserves for doubtful accounts. The Company also reviewed the capitalization of accessories for its medical equipment. As a result of these reviews, the Company determined that certain adjustments should have been made. These adjustments in the aggregate for the three and six month periods ended March 31, 1999, respectively, increased the net loss attributable to common shareholders by $5.1 million, net of tax of $2.7 million, or $4.71 per share and $6.7 million, net of tax of $3.6 million, or $6.21 per share. The restatement on a pretax basis for the respective periods consisted of charges of $6.8 million and $8.9 million in additional provisions for doubtful accounts and $1.0 million and $1.4 million for the write off of accessory costs previously capitalized. Additional restatement effects on the financial statements were: statement of operations for the three and six month periods ended March 31, 1999, respectively - rental revenues reduced by $3.0 million and $4.5 million, operating expenses increased by $4.8 million and $5.8 million; balance sheet at March 31, 1999 - allowance for doubtful accounts increased and accounts receivable decreased by $8.9 million, property, plant and equipment decreased by $1.4 million, deferred income tax liability decreased by $3.6 million. Note C - Inventory March 31, September 30, 1999 1998 --------- ------------- (in thousands) Raw materials $ 1,716 $ 2,791 Finished goods 20,542 19,029 -------- --------- $ 22,258 $ 21,820 ======== ======== Note D - (Loss) Earnings Per Share Options and warrants to purchase shares of the Company's Common Stock were excluded from the computation of diluted earnings per share ("EPS") for the three and six months ended March 31, 1999 because they were antidilutive. The number of options and warrants outstanding at March 31, 1999 were 51,557 and 7 91,209, respectively. The weighted average number of common shares outstanding for diluted EPS for the three and six months ended March 31, 1998 included 820,000 and 734,000, respectively, incremental shares for the assumed exercise of stock options outstanding during the respective periods. The disparity in per share amounts for the respective periods presented in the Condensed Consolidated Statements of Operations was attributable to the Company's recapitalization in connection with its merger that occurred on May 29, 1998. Note E - Long Term Debt On January 31, 1999, the Company borrowed $27.8 million under its acquisition facility to fund two acquisitions. (see Note F) The weighted average variable interest rate incurred on this borrowing during the three months ended March 31, 1999 was 7.61%, and the rate at March 31, 1999 was 7.31%. Note F - Acquisitions The Company purchased the assets of one business in the first quarter and acquired two businesses in the second quarter of fiscal 1999. The aggregate purchase price and associated goodwill were $32.5 million and $24.4 million, respectively. The assets and businesses acquired principally relate to medical equipment and support surface rentals. The acquisitions were accounted for by the purchase method and, accordingly, the purchase prices were allocated to the assets acquired based on their estimated fair values on the dates of purchase. The aggregate excess of purchase prices over estimated fair values of net assets acquired was recorded as goodwill amortizable on a straight line basis over 20 years. Operations of the acquired assets and businesses have been included in the Company's results of operations from the respective acquisition dates. Proforma results of operations of the Company giving effect to the acquisitions are not presented because the acquisitions in the aggregate were not material. 8 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, 1999 and results of operations for the three and six month periods ended March 31, 1999 and 1998, and addresses other circumstances through, or that could be reasonably expected at, May 17, 1999. 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, 1998. This discussion has been revised to conform to the restatements discussed in Note B of the Notes to Condensed Consolidated Financial Statements. The following information contains forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. Unless otherwise specified, the forward looking statements contained herein were made at May 17, 1999. Although the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations as existed, or that could be reasonably expected, at May 17, 1999, there can be no assurance that actual results will not differ materially from its expectations. Readers are cautioned not to place undue reliance on these forward looking statements, which only address the circumstances that existed, or that could be reasonably expected, at May 17, 1999. Seasonality In the past, the Company's rentals have been somewhat 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. Restatement of Quarterly Financial Information Subsequent to the issuance of the financial statements for the periods ended March 31, 1999, the Company performed an extensive review of the adequacy of the reserves for doubtful accounts. The Company also reviewed the capitalization of accessories for its medical equipment. As a result of these reviews, the Company determined that certain adjustments should have been made. These adjustments in the aggregate for the three and six month periods ended March 31, 1999, respectively, increased the net loss attributable to common shareholders by $5.1 million, net of tax of $2.7 million, or $4.71 per share and $6.7 million, net of tax of $3.6 million, or $6.21 per share. The restatement on a pretax basis for the respective periods consisted of charges of $6.8 million and $8.9 million in additional provisions for doubtful accounts and $1.0 million and $1.4 million for the write off of accessory costs previously capitalized. Additional restatement effects on the financial statements were: statement of operations for the three and six month periods ended March 31, 1999, respectively - rental revenues reduced by $3.0 million and $4.5 million, operating expenses increased by $4.8 million and $5.8 million; balance sheet at March 31, 1999 - allowance for doubtful accounts increased and accounts receivable decreased by $8.9 million, property, plant and equipment decreased by $1.4 million, deferred income tax liability decreased by $3.6 million. Results of Operations Fiscal 1999 Compared to Fiscal 1998 Total revenues increased in the three months and six months ended March 31, 1999 by $6.7 million, or 14.4%, and $15.0 million, or 16.9%, respectively. These increases were attributed to increases in rental revenues of $6.4 million, or 17.4%, and $12.6 million, or 18.0%. The increases in rentals were primarily related to incremental revenues from acquisitions made since May 1998 of four businesses specializing in rentals of support surfaces and one business specializing in rentals of both medical equipment and support surfaces. Rentals of support surfaces increased by $8.0 million in the three months to $10.5 million and $16.6 million in the six months ended to $21.6 million principally due to acquisitions, partially offset by increased charges for reserves for doubtful accounts. Rentals of medical equipment decreased by $1.6 million in the three months to $32.5 million and $4.0 million in the six months ended to $61.0 9 million principally as a result of increased charges for reserves for doubtful accounts, pricing concessions granted to a large national account and decreased volume with the Company's largest revenue share arrangement, partially offset by increased volume of 3.2% and 2.5% in the respective periods in total average units on rent, increased revenues from other revenue share arrangements and incremental revenues from an acquisition. The Company's largest revenue share arrangement is scheduled to terminate in June 1999. The Company experienced pricing pressures as a result of increased competition from other rental providers, and expects this pressure to continue for the remainder of fiscal 1999. The increase in sales for the three and six months ended reflected increased sales of parts and disposables due to greater volume provided by product expansion, and the increase for the six months ended also reflected increased sales of equipment primarily in the first quarter fiscal 1999. The Company completed two acquisitions in the second quarter and one in the first quarter of fiscal 1999 that are expected to contribute combined annual revenues of approximately $11.0 million, based on the most recent annual revenues available for each acquisition. The increase in cost of sales in each current year period was consistent with the related increase in sales. The sales margin was 20.5% for the three months ended fiscal 1999 compared to 20.7% for the three months ended fiscal 1998. The sales margin for the six months ended fiscal 1999 was 22.9% compared to 19.4% for the six months ended fiscal 1998, reflecting more sales of equipment in the current year that have higher margins. Selling expenses increased $2.2 million, or 54.7%, in the three months ended and $5.5 million, or 72.9%, in the six months ended. These increases were due to increased sales support on a national basis for the Company's expanded support surfaces business. Operating and general and administrative expenses are viewed together because each covers a broad spectrum of expenses that crosses functions within the Company. These expenses increased by $6.1 million, or 32.8%, in the three months ended and $10.6 million, or 28.1%, in the six months ended. These increases were primarily due to: (i) increased infrastructure and employee costs associated with larger and expanded operations primarily related to the growth in the support surfaces business; (ii) increased service and repair and maintenance requirements associated with a larger and expanded equipment and product inventory; (iii) $.4 million and $.6 million in each respective period for management fees initiated in May 1998; (iv) increased provisions for bad debts of $.9 million and $1.4 million in each respective period; and (v) write off of accessory costs of $1.0 million and 1.4 million in each respective period. Depreciation and amortization increased in the three months by $2.1 million, or 25.2%, and in the six months by $3.7 million, or 22.4%. These increases resulted from additional depreciable equipment purchased and obtained in acquisitions and increased amortization of goodwill due to additional amounts incurred in acquisitions made since May 1998. Interest expense increased by $10.0 million, or 278.8%, in the three months and $19.6 million, or 270.6%, in the six months principally due to the substantially higher level of debt incurred in connection with the Company's recapitalization and acquisitions. The cash portion of this interest expense was $10.3 million and $20.2 million for the three and six months ended March 31, 1999, respectively. The remaining interest expense represented noncash accretion of the Company's 13% Senior Discount Debentures and amortization of deferred debt issuance costs. The effective income tax rate for the three months ended March 31, 1999 was 35.3% and 34.7% for the six months ended March 31, 1999, compared to 44.9% in each of the corresponding prior year periods. The rates in the current year periods were lower primarily due to losses for state income tax purposes, whereas there was taxable income for state tax purposes in the prior year periods. Accreted but unpaid dividends on preferred stock for the three and six months ended March 31, 1999 were $4.5 million and $9.1 million, respectively, compared to none in the corresponding prior year periods. These amounts reflected accretion of dividends on the three cumulative preferred stock series issued in connection with the Company's recapitalization in May 1998. For the six months ended March 31, 1999, there was a loss attributable to common shareholders of $19.9 million. Due to the amount of cash and noncash interest and preferred stock dividend requirements combined with noncash depreciation and amortization expected to be incurred in the future, it is likely that the 10 Company will continue to report a net loss attributable to common shareholders for the foreseeable future. The disparity in the weighted average number of common shares used in the earnings per share computations for each period resulted from the Company's merger and recapitalization in May 1998. Liquidity and Capital Resources Net cash provided by operating activities in the six months ended March 31, 1999 was $1.0 million compared to $14.7 million in the six months ended March 31, 1998. This variance was principally due to interest payments in the current year exceeding those in the prior year because of substantially greater amounts of indebtedness outstanding. The Company used its acquisition facility to fund $27.8 million of acquisitions and its revolving credit facility to fund $4.8 million for acquisitions, certain purchases of equipment and general corporate purposes. At March 31, 1999, borrowings outstanding under the acquisition and revolving credit facilities were $27.8 million and $18.5 million, respectively. At March 31, 1999, availability under the revolving credit facility was $17.7 million and $22.2 million under the acquisition facility. The weighted average interest rate on the term facility at March 31, 1999 was 7.88% compared to 8.50% at September 30, 1998. The term rate became fixed at 7.88% on December 10, 1998 and will remain fixed at this rate until June 10, 1999, at which time the rate will be subject to adjustment. The weighted average variable interest rate on the revolving credit facility incurred in the second quarter of fiscal 1999 was 8.00%, and the rate at March 31, 1999 was 7.57% compared to 8.15% at December 31, 1998 and 9.00% at September 30, 1998. The weighted average variable interest rate on the acquisition facility incurred in the second quarter of fiscal 1999 was 7.61%, and the rate at March 31, 1999 was 7.31%. No amount was outstanding under the acquisition facility until January 31, 1999. Decreases in the current year's weighted average variable interest rates are due to the Company's ability to take partial advantage of incrementally lower LIBOR rates as opposed to more stable higher prime rates. Year 2000 The Company continues to evaluate the risks associated with its operations as a result of Year 2000 compliance issues. The Company has evaluated these risks on three levels: internal and existing computer programs and applications; rental equipment and customers and suppliers. In evaluating these risks, the Company considered the material implications of each of these items on its operations on and subsequent to January 1, 2000. The Company's internal business information systems have been analyzed for Year 2000 compliance and the Company believes that these systems are Year 2000 compliant. The Company commenced testing of the compliance readiness of the internal business information systems in January 1999, and will continue testing on an ongoing basis. The Company utilizes certain third party network equipment and software products, which may or may not be Year 2000 compliant. While delays in the implementation of the Year 2000 solutions for such systems which may not be Year 2000 compliant could adversely effect the Company's operations, at this time, the Company believes that resolution of this Year 2000 issue will not have a material adverse effect on the Company's operations or results of operations. A significant portion of the Company's revenues and operating income is directly related to the Company's ability to rent its equipment. Should a material portion of such equipment not be Year 2000 compliant and, therefore, not suitable for its designed purpose, there could be a material adverse effect on the Company's results of operations. The Company believes that support surfaces rental equipment that has been manufactured by the Company is fully Year 2000 compliant. The Company has initiated formal communications with the equipment manufacturers for products the Company maintains in its inventory to determine the extent to which the Company's purchased rental equipment may be vulnerable to Year 2000 issues. To date, approximately 94% of the equipment manufacturers have responded to the Company's requests. As of March 31, 1999, based on the responses received by manufacturers of the related equipment, approximately 86% of the Company's rental fleet is fully Year 2000 compliant, as represented by the manufacturers. The Company has no means to validate these representations and must rely on the statements made by the manufacturers. For manufacturers that have not yet responded, the Company has a formal follow up plan that is currently being executed. The Company expects to complete the evaluation process of its rental fleet by July 31, 1999. To date, based on responses from the 11 equipment manufacturers, the Company believes it would need to spend approximately $4.0 million to bring its entire rental fleet into Year 2000 compliance, should the Company decide to do so. The Company anticipates that all known modifications to make its entire rental fleet Year 2000 compliant could be completed by October 31, 1999. The Company may decide not to modify its entire rental fleet, based on yet to be determined anticipated utilization of compliant equipment. Such determination would impact the amount expended on modifications and the timing of completion thereof. Currently, the Company is not able to estimate the costs associated with Year 2000 issues for rental equipment whose manufacturers have not yet replied. Percentages and anticipated timetables mentioned above have been adjusted from those contained in previous disclosures as a result of additional equipment obtained with recent acquisitions by the Company and to conform to the pace of compliance efforts of certain suppliers to the Company. The status of compliance is subject to further adjustment in accordance with future changing circumstances that cannot now be reliably known or anticipated. Although the Company has significant relationships with certain of its customers and suppliers, the Company has determined that no one individual customer or supplier could create a material adverse effect for the Company as a result of not being Year 2000 compliant. However, should a number of individual customers and/or suppliers be noncompliant, there could be a material adverse effect on the Company's operations and results of operations. The Company cannot predict the extent or dollar amount, if any, of such effect. Should a material portion of the Company's rental fleet not be Year 2000 compliant and, therefore, not suitable for its designed purpose, an interruption in or a failure of certain normal business activities or operations could occur. There can be no assurance that the systems of other companies on which the Company relies will be Year 2000 compliant and, therefore, not have a material adverse effect on the Company. The Company cannot predict the extent or dollar amount, if any, of such effect. The cost of compliance and the date on which the compliance will be completed are based on estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources and other factors. However, there can be no assurance that these estimates will be achieved. Actual results could differ materially from the projections. Specific factors that might cause a material change include, but are not limited to, the availability and cost of personnel trained in this area, the ability to obtain all necessary components or upgrade parts and similar uncertainties. The Company has investigated developing contingency plans for dealing with worst case scenarios regarding its rental fleet and overall operations. With respect to its equipment rentals, the Company believes that it is not necessary or practical to implement contingency measures; however, the Company will make available all of its Year 2000 compliant equipment to customers that desire to have sufficient back up units on hand for their own contingency plans. Concerning its internal systems, the Company performs ongoing testing of these and believes them to be Year 2000 compliant, so the Company believes that a contingency plan for their operation is not necessary. With respect to other operational aspects, the Company believes that developing a contingency plan for a worst case scenario is not feasible, and based on representations made by external service providers to the Company (for example, electricity and telecommunications), circumstances creating such an event are considered by the Company to be remote. Nevertheless, the absence of a contingency plan could have a material adverse effect on the Company's operations. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no changes during the three and six months ended March 31, 1999 in the way the Company managed its interest rate risk. At March 31, 1999, the Company's aggregate weighted average variable interest rate was 7.79% compared to 8.50% at September 30, 1998. The decrease in this rate was due to the Company's ability to take advantage of incrementally lower LIBOR rates concerning its term loan, revolving credit and acquisition loan facilities. 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule appears on page 15. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1999.
13 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended March 31, 1999 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) July 20, 2000 /s/ Kenneth K. Kreider - ------------- --------------------------- (Date) Kenneth K. Kreider Senior Vice President and Chief Financial Officer 14 EX-27 2 0002.txt FDS --
5 EXHIBIT 27 MEDIQ INCORPORATED AND SUBSIDIARIES Financial Data Schedule (Unaudited) 1000 6-MOS SEP-30-1999 MAR-31-1999 2,761 0 73,965 15,992 22,258 94,092 275,795 172,009 340,803 35,260 518,279 120,147 0 0 (345,291) 340,803 16,077 104,000 12,392 94,176 (392) 0 26,812 (16,596) (5,756) (10,840) 0 0 0 (10,840) (18.55) (18.55)
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