-----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, N4l/WbGrUAeJtsFff3HF+wY5HlkZmRXpjKb53lgF4wkSEA0OK5HAh3ACyJuY5wVa fjfXf9RIQGmjggz0vXw4Gg== 0000950134-96-003724.txt : 19960729 0000950134-96-003724.hdr.sgml : 19960729 ACCESSION NUMBER: 0000950134-96-003724 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960726 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GULF SOUTH MEDICAL SUPPLY INC CENTRAL INDEX KEY: 0000889885 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 640831411 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-23540 FILM NUMBER: 96599612 BUSINESS ADDRESS: STREET 1: 426 CHRISTINE DR CITY: RIDGELAND STATE: MS ZIP: 39157 BUSINESS PHONE: 6018565900 MAIL ADDRESS: STREET 1: 426 CHRISTINE DR CITY: RIDGELAND STATE: MS ZIP: 39157 10-Q/A 1 AMENDMENT NO.1 TO FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q/A Amendment No. 1 to Form 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934: For the quarterly period ended March 31, 1996 Transition report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934: For the transition period from __________ to __________ Commission file number: 0-23540 GULF SOUTH MEDICAL SUPPLY, INC. ------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 64-0831411 -------- ---------- (State or other (I.R.S. Employer jurisdiction of Identification No.) incorporation or organization) 426 CHRISTINE DR., RIDGELAND, MISSISSIPPI 39157 ----------------------------------------------- (Address of principal executive offices) (Zip Code) (601) 856-5900 -------------- (Registrant's telephone number, including area code) 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 March 31, 1996 there were 13,960,446 shares of common stock outstanding. 2 GULF SOUTH MEDICAL SUPPLY, INC. INDEX PART I FINANCIAL INFORMATION page ---- ITEM 1. FINANCIAL STATEMENTS Condensed Balance Sheets as of March 31, 1996 (unaudited) and December 31, 1995 Condensed Statements of Income (unaudited) for the three-months ended March 31, 1996 and 1995 Condensed Statements of Cash Flows (unaudited) for the three-months ended March 31, 1996 and 1995 Notes to Condensed Financial Statements (unaudited) SIGNATURES 3 GULF SOUTH MEDICAL SUPPLY, INC. CONDENSED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
March 31, December 31, 1996 1995 ----------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents....................................... $ 1,087 $ 2,147 Trade accounts receivable, less allowance for doubtful accounts of $1,651 in 1996 and $1,717 in 1995......................... 31,662 28,742 Inventories..................................................... 18,500 16,874 Prepaid income taxes............................................ - 1,032 Prepaid expenses and other...................................... 2,563 1,853 Deferred income taxes........................................... 664 664 ----------- ----------- Total current assets....................................... 54,476 51,295 Property and equipment: Land............................................................ 567 567 Building........................................................ 600 600 Equipment....................................................... 2,002 1,853 ----------- ----------- 3,169 3,020 Accumulated depreciation........................................ (973) (882) ----------- ----------- 2,196 2,138 Other assets: Goodwill........................................................ 1,110 1,141 Notes receivable from affiliate................................. 413 413 Other assets.................................................... 126 34 ----------- ----------- 1,649 1,588 ----------- ----------- Total assets.................................................... $ 58,321 $ 55,021 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable to bank............................................ $ - $ 1,403 Trade accounts payable.......................................... 7,927 9,913 Accrued expenses and other current liabilities.................. 2,042 1,351 Current portion of long-term debt............................... 5,800 2,400 ----------- ----------- Total current liabilities 15,769 15,067 Stockholders' equity: Preferred stock, $.01 par value: Authorized shares -- 1,000,000 Issued and outstanding shares -- none Common stock, $.01 par value: Authorized shares -- 30,000,000 Issued and outstanding shares -- 13,960,446 in 1996 and 13,918,096 in 1995......................................... 140 139 Paid-in-capital................................................. 22,327 22,052 Retained earnings.................................................. 20,085 17,763 ----------- ------------ Total stockholders' equity...................................... 42,552 39,954 ----------- ------------ Total liabilities and stockholders' equity...................... $ 58,321 $ 55,021 =========== ============
Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes. 1 4 GULF SOUTH MEDICAL SUPPLY, INC. CONDENSED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
Three Months Ended March 31, ---------------------------- 1996 1995 ----------- ----------- Net sales.................................... $ 40,235 $ 29,522 Cost of sales................................ 30,647 22,143 ----------- ----------- Gross profit................................. 9,588 7,379 Selling, general and administrative expenses. 5,189 4,236 Merger costs and expenses (Note 2)........... 512 - ----------- ----------- Operating income............................. 3,887 3,143 Interest expense............................. (52) (31) Interest income.............................. - 59 ----------- ----------- Income before income taxes................... 3,835 3,171 Income taxes................................. (1,513) (1,270) ----------- ----------- Net income................................... $ 2,322 $ 1,901 =========== =========== Net income per share......................... $ 0.17 $ 0.14 =========== =========== Weighted average shares outstanding.......... 14,047 13,948 =========== ===========
See accompanying notes. 2 5 GULF SOUTH MEDICAL SUPPLY, INC. CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
Three Months Ended March 31, -------------------------------- 1996 1995 ------------ ----------- OPERATING ACTIVITIES Net cash used in operating activities....................... $ (2,990) $ (1,011) INVESTING ACTIVITIES Purchases of equipment...................................... (146) (235) Increase in other assets.................................... (92) (10) ------------ ----------- Net cash used in investing activities....................... (238) (245) FINANCING ACTIVITIES Net borrowings under revolving line of credit............... 1,997 194 Proceeds from exercise of stock options..................... 171 92 ------------ ----------- Net cash provided by financing acitivities.................. 2,168 286 Net decrease in cash and cash equivalents................... (1,060) (970) Cash and cash equivalents at beginning of period............ 2,147 9,151 ------------ ----------- Cash and cash equivalents at end of period.................. $ 1,087 $ 8,181 ------------ ----------- NON-CASH TRANSACTIONS: Tax benefit of stock options exercised...................... $ 105 $ - ============ ===========
See accompanying notes. 3 6 GULF SOUTH MEDICAL SUPPLY, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1996 (IN THOUSANDS, EXCEPT SHARE DATA) 1. BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three-month period ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 1995 included in the Gulf South Medical Supply, Inc.'s Annual Report on Form 10-K. 2. ACQUISITIONS On February 29, 1996, the Company completed the acquisition of all outstanding common stock of Bayer Medical Service Systems, Inc. ("Bayer"). The Company issued 151,724 shares of its common stock in exchange for the outstanding common stock of Bayer. The share exchange was accounted for as a pooling of interests and accordingly, the Company's financial statements have been restated to include accounts and operations of Bayer for all periods prior to the share exchange. Separate results of operations for the periods prior to the share exchange with Bayer are as follows:
Three months ended March 31, ---------------------------------- 1996 1995 ------------ ------------ Net sales Gulf South $ 38,519 $ 27,008 Bayer 1,716 2,514 ------------ ------------ Combined $ 40,235 $ 29,522 Gross Gulf South $ 9,161 $ 6,707 Bayer 427 672 ------------ ------------ Combined $ 9,588 $ 7,379 Net Gulf South $ 2,321 $ 1,914 Bayer 1 (13) ------------ ------------ Combined $ 2,322 $ 1,901
4 7 In connection with the share exchange, $512 of merger costs and expenses ($315 after tax, or $.02 per share) were incurred and have been charged to expense in the quarter ended March 31, 1996. The merger costs and expenses related to legal, accounting and other costs incurred in combining the operations of the previously separate companies. 3. COMMON STOCK On May 23, 1995, a two-for-one stock split in the form of a stock dividend was completed by the Company. All share and per share data for the three month period ended March 31, 1995 presented herein have been restated for the effect of the stock split. 4. LONG-LIVED ASSETS Effective January 1, 1996, the Company adopted FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of . Statement No. 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The effect of this adoption was not material to the Company's financial position or operations. 5. STOCK COMPENSATION The Company accounts for its stock compensation arrangements under the provisions of APB 25, Accounting for Stock Issued to Employees. 6. CREDIT FACILITIES AND LONG-TERM DEBT The Company has a $15.0 million revolving credit facility which matures September 25, 1998, of which $9.2 million was available at March 31, 1996. Borrowings bear interest, at the option of the Company, at prime or at LIBOR plus 1% to 2.5% per annum. A facility fee of .125% per annum is charged on the unused portion of the revolving credit facility. Substantially all of the Company's assets would collateralize any borrowings in excess of $7.5 million. The revolving credit facility contains numerous restrictive covenants and financial ratio requirements. 7. NET INCOME PER COMMON SHARE Net income per common share is computed by dividing net income applicable to common stock based on the weighted average number of shares outstanding (as restated, see Note 2) during the three months ended March 31, 1996 and 1995 (14,047,309 and 13,947,724 shares, respectively). Common equivalent shares relating to the stock options exercisable at March 31, 1996 and 1995 have been calculated using the treasury stock method based on the higher of the average or the ending market value of the common stock during the three month periods ended March 31, 1996 and 1995. 5 8 8. SUBSEQUENT EVENTS Subsequent to March 31, 1996, the Company acquired certain operating assets of Express Care, L. P. for approximately $3.5 million. The transaction will be accounted for using the purchase method of accounting. 6 9 The Company faces intense competition from a variety of regional, local and national distributors. Barriers to entry in the long-term care distribution industry are relatively low, and the risk of new competitors entering the market, particularly on a local level, is high. In response to competitive pressures, the Company has in the past lowered, and may in the future lower, selling prices in order to maintain or increase market share, which has resulted, and may in the future result, in lower gross margins. Certain of the Company's current competitors, including many national hospital distributors, have substanitally greater capital resources, sales and marketing experience, and distribution capabilities than the Company. Because the national hospital distributors may have cost advantages over the Company due to their ability to purchase products in large volumes, the Company may experience significant pricing pressures from these and other competitors which could adversely affect the Company's operating results. A key element of the Company's growth strategy is to augment its internal growth with the acquisition of medical supply distributors, and inventory and facilities of such distributors, that serve complementary markets or that supplement the Company's presence in exisitng markets. In order to achieve anticipated benefits from these acquisitions, the Comapny must successfully integrate the acquired businesses with its existing operations, and no assurance can be given that the Company will be successful in this regard. In the past the Company has incurred one-time costs and expenses in connection with acquisitions and it is likely that similar one-time costs and expenses may be incurred in connection with future acquisitions, including the write-off of unsold inventory and unused assets. In addition, attractive acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers and the possible need to obtain regulatory approval. There can be no assurance that the Company will be able to complete future acquisitions. In order to finance such acquistions, it may be necessary for the Company to raise additional funds either through public or private financings, including bank borrowings. Any financing, if available at all, may be on terms which are not favorable to the Company. The Company may also issue shares of its Common Stock to acquire such businesses, which may result in dilution to the Company's existing stockholders. The Company depends on a limited number of large customers for a significant portion of its net sales. Consolidation among long-term care providers and the growth of the Company's business with large chains could increase such dependence. Significant declines in the level of purchases by one or more of these customers would have a material adverse effect on the Company's operating results. Although the Company has not to date experienced any failure to collect accounts receivable from its largest customers, an adverse change in the financial condition of any of these customers, including as a result of a change in governmental or private reimbursement programs, could have a material adverse effect upon the Company's opertaing results. In addition, the expansion of the Company's business with large chains has in the past resulted in competitive pricing pressures and lower operating margins and such pressure on margins may continue in the future. 9 10 A key element of the Company's growth strategy is to increase sales to existing and new customers, including large chains and independent operators, by adding one or more additional distribution centers or expanding existing distribution centers and by hiring additional direct sales or other personnel and through national account sales efforts. Such efforts will result in increased operating expenses. There can be no assurance that the establishment of new distribution centers, the expansion of existing distribution centers, the addition of new sales or other personnel or national account sales efforts will result in additional revenues or operations inocme. The expansion of the Company's business with large chains has in the past resulted in competitive pricing pressures and lower operating margins and such pressure on margins may continue in the future. As a result of changes occurring in the long-term care market, both the nature of the Company's customer base as well as products and services required by its customers are changing. The failure by the Company's management to effectively respond to and manage changing business conditions, including changes in customer requirements and changes to the Company's overall product mix, could have an adverse effect on the Company's operating results and gross margins. Because the Company believes that its success to date is dependent in part upon its ability to provide prompt, accurate and complete service to its customers on a price-competitive basis, any disruption in its day-to-day operations or material increases in its cost of procuring and delivering products could have an adverse effect on its operating results. In order to provide prompt and complete service to is customers, the Company maintains a significant investment in product inventory. Although the Company closely monitors its inventory exposure through a variety of inventory control procedures and policies, there can be no assurance that such procedures and policies will continue to be effective or that unforeseen product developments or price changes will not adversely affect the Company's operating results. 10 11 SIGNATURES 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. GULF SOUTH MEDICAL SUPPLY, INC. Date: July 26, 1996 By: /s/ Guy W. Edwards ---------------------------- Guy W. Edwards Senior Vice President and Chief Financial Officer 12 -----END PRIVACY-ENHANCED MESSAGE-----