0000920527-01-500017.txt : 20011107 0000920527-01-500017.hdr.sgml : 20011107 ACCESSION NUMBER: 0000920527-01-500017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20011030 ITEM INFORMATION: Other events FILED AS OF DATE: 20011102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSS WORLD MEDICAL INC CENTRAL INDEX KEY: 0000920527 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 592280364 STATE OF INCORPORATION: FL FISCAL YEAR END: 0329 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23832 FILM NUMBER: 1774210 BUSINESS ADDRESS: STREET 1: 4345 SOUTHPOINT BLVD STREET 2: STE 250 CITY: JACKSONVILLE STATE: FL ZIP: 32216 BUSINESS PHONE: 9043323000 MAIL ADDRESS: STREET 1: 4345 SOUTHPOINT BLVD STREET 2: STE 250 CITY: JACKSONVILLE STATE: FL ZIP: 32216 FORMER COMPANY: FORMER CONFORMED NAME: PHYSICIAN SALES & SERVICE INC /FL/ DATE OF NAME CHANGE: 19940318 8-K 1 form8k.txt FORM 8K PRESS RELEASE SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 30, 2001 PSS WORLD MEDICAL, INC. ---------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 0-23832 59-2280364 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 4345 Southpoint Boulevard Jacksonville, Florida 32216 --------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (904) 332-3000 --------------- (Registrant's telephone number, including area code) Item 5. Other Events. ------------ During the fiscal quarter ended June 30, 2001, PSS World Medical, Inc. (the "Company") elected to early adopt the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). After conducting the required transitional impairment test to evaluate the carrying value of its goodwill, the Company determined that it must record a goodwill impairment loss of $90.1 million (net of income taxes of $14.4 million) at its imaging business segment. As required by SFAS 142, the Company has reported this loss as a change in accounting principal and recorded the loss as of the first day of the fiscal year of adoption. Please refer to the press release attached as Exhibit 99.1 to this Form 8-K, for further information. Item 7. Financial Statements and Exhibits. ---------------------------------- 99.1 Press Release dated October 30, 2001. 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. PSS WORLD MEDICAL, INC. (Registrant) Date: November 2, 2001 By: /s/ David A. Smith ------------------------ Name: David A. Smith Title: President EXHIBIT INDEX 99.1 Press Release dated October 30, 2001. EX-99 3 release.txt EXHIBIT 99.1 - PRESS RELEASE NEWS RELEASE Contact: Richard E. Hansen Director, Investor Relations 904-332-3287 PSS WORLD MEDICAL REPORTS SECOND QUARTER RESULTS All Objectives Met or Exceeded Highlights: o All objectives met or exceeded for quarter o Cash conversion cycle at all-time low of 51.2 days o Return on committed capital increases to 10.2% o Strong sequential revenue growth at the physician division o Steady daily revenue growth at the long-term care division o Imaging equipment bookings grow 25% o Imaging division restructuring begins o Adoption of SFAS 142 eliminates over $100 million of goodwill Jacksonville, Florida (October 30, 2001) - PSS World Medical, Inc. (Nasdaq/NM:PSSI) showed continued improvement in fundamentals as the Company announced today unaudited results for the second fiscal quarter and six months ended September 28, 2001. David A. Smith, president, said, "Now that we have stabilized our business by paying off bank debt and rebuilding associate morale, the launch of our offensive programs, SRx and ANSWERS, is beginning to gain revenue momentum. Daily revenues in both the physician and long-term care businesses are showing significant growth as more of our sales professionals utilize these programs." Smith also stated, "In the second half of the year, we will focus on implementing our plans for additional revenue growth plus the restructuring and rebuilding of our back office and distribution business model. Our future business model will continue to be based on customer satisfaction, strengthening the teamwork of our associates, and partnerships with our vendors - all contributing to long-term profitability. "We recently added Bill Midgley as vice president of supply chain management to assist with the implementation of our plans. Bill is a great addition and a real veteran of supply chain innovation with over 15 years of experience at Sony. We have also engaged Heidrick & Struggles to begin a search for a chief financial officer for the Company." PSSI Announces Second Quarter Results Page 2 October 30, 2001 The Company continued to make progress towards its goals in the following areas: Capital and Cost Reductions: o Capital deployed reduction. The Company reduced capital deployed by $7.5 million in the second quarter and $45.7 million for the six months. o Average committed capital reductions and returns. Average committed capital decreased $14.6 million in the second quarter and $44.2 million for the six months. For the second quarter, return on average committed capital for the Company increased to 10.2%, with the physician division increasing to 19.5%. o Working capital changes. The Company made inventory safety stock investments of over $5 million in its imaging business during the quarter for the implementation of its centralized purchasing program. The Company reported the following working capital results for the six months compared with fiscal year end 2001: o Receivables days decreased from 48.6 to 46.7 o Inventory turns increased from 8.4 to 8.5 o Cash conversion cycle dropped from 60.2 days to 51.2 days o Debt-to-capitalization ratio improved from 32.2% to 29.8% Offensive Initiatives: o SRx. During the second quarter, the Company achieved the following positive results from the launch of its third phase of the specialty solutions programs for OB-GYN physicians: o Approximately 40% of the sales force utilizing program o Revenue and gross profit growth over 10% for all products on program o Over 1,800 physician sites participating in OB-GYN program o ANSWERS. The Company is 85 days into the launch of the long-term care program with the following results: o Approximately 45% of the sales force utilizing program o 98 new customer contracts o $7.7 million of annualized revenue in program contracts o Strategic Business Units (SBUs). The Company had its first full quarter in the new imaging business organization structure with the following results: o Equipment bookings are up 25% since April o Service contract revenue is up 8.7% during the last six months o Surgical SBU eliminated due to lack of profit potential o Women's health SBU revenues up 68% in the quarter David Smith concluded by saying, "We have traction in all of the programs we initiated 12 months ago. We are building upon our foundation for long-term, continued shareholder value by undertaking the remainder of our major strategic initiatives in the third and fourth quarters. Restructuring charges will be associated with these strategies, but will be an important step to eliminate costs and build the right infrastructure on the new foundation." For the three months ended September 28, 2001, net sales increased 0.5% to $448.4 million compared with $446.2 million for the same period last year. Net income for the quarter increased to $3.4 million, or $0.05 per diluted share, versus a loss of $1.0 million, or $0.01 per diluted share, for the prior year period. For the six months ended September 28, 2001, net sales decreased 2.5% to $895.1 million compared with $917.8 million for the same period last year. Net income for the first half of fiscal 2002, excluding the cumulative effect of an accounting change as required by SFAS 142, increased 64.9% to $6.1 million, or $0.09 per diluted share, versus $3.7 million, or $0.05 per diluted share, for the prior year period. PSSI Announces Second Quarter Results Page 8 October 30, 2001 Early Adoption of SFAS 142. During the quarter ended June 30, 2001, PSS World Medical elected to early adopt the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). Upon adoption, SFAS 142 requires an initial transitional impairment test to evaluate the carrying value of goodwill. To assist in the implementation of SFAS 142, the Company retained the services of a consulting firm specializing in business valuations to evaluate the carrying value of goodwill at each of its business segments. As of September 28, 2001, the Company has completed the transitional impairment test and recorded a goodwill impairment loss of $90.1 million (net of income taxes of $14.4 million) at its Imaging business segment. Under SFAS 142, impairment losses resulting from the transitional impairment test are reported as a change in accounting principal and recorded as of the first day of the fiscal year of adoption. Accordingly, the Company has presented this loss as a change in accounting in the accompanying consolidated statements of operations as of March 31, 2001. A listen-only simulcast and 30-day replay of PSS World Medical's second quarter conference call will be available online at www.pssworldmedical.com or www.streetevents.com on October 30, 2001, beginning at 11:00 a.m. Eastern time. PSS World Medical, Inc. is a specialty marketer and distributor of medical products to physicians, long-term care providers and imaging consumers through its three business units to customers in all 50 states. Since its inception in 1983, PSS has become a leader in all three market segments that it serves with a focused market approach to customer services, a consultative sales force, strategic acquisitions, strong arrangements with product manufacturers and a unique culture of performance. Additional financial information pertaining to PSS World Medical financial results may be found by visiting the Company's website at www.pssworldmedical.com, and selecting "Investor Relations" and "Additional Financial Information." If you should need assistance accessing the information, please call Investor Relations at 904-332-3000. All statements in this release that are not historical facts, including, but not limited to, statements regarding anticipated growth in revenue, gross margins and earnings, statements regarding the Company's current business strategy, the Company's projected sources and uses of cash, and the Company's plans for future development and operations, are based upon current expectations. These statements are forward looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause results to differ materially are the following: the availability of sufficient capital to finance the Company's business plans on terms satisfactory to the Company; competitive factors; the ability of the Company to adequately defend or reach a settlement of outstanding litigations and investigations involving the Company or its management; changes in labor, equipment and capital costs; changes in regulations affecting the Company's business; future acquisitions or strategic partnerships; general business and economic conditions; and other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission. Many of these factors are outside the control of the Company. The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. Glossary of Terms: SRx. SRx is the Physician division's automated marketing program tailored to physician specialties, combining disease states, pharmaceutical therapeutics, diagnostic tests, and reimbursement. ANSWERS. ANSWERS is the Long Term Care division's best-practice marketing program, which aligns the best practices of nursing homes with the most efficient distribution activities, producing savings for both customers and distributors. PSS WORLD MEDICAL, INC. Unaudited Consolidated Statements of Operations (In millions, except per share data)
Three Months Ended Six Months Ended ------------------ --------------------------- Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Net sales $ 448.4 $ 446.2 $ 895.1 $ 917.8 Cost of goods sold 343.9 344.6 688.9 702.0 ----------- ----------- ----------- ---------- Gross profit 104.5 101.6 206.2 215.8 General and administrative expenses 69.2 65.6 137.0 134.5 Selling expenses 27.1 28.7 53.6 58.1 International business exit charge - - (0.5) - Special charges 0.3 4.2 0.9 7.8 ----------- ----------- ----------- ---------- Income from operations 7.9 3.1 15.2 15.4 Other income (expense): Interest expense (3.0) (4.7) (7.2) (9.7) Interest and investment income 0.1 0.6 0.3 1.3 Other income 0.5 0.7 1.4 1.5 ----------- ----------- ----------- ---------- (2.4) (3.4) (5.5) (6.9) Income (loss) before provision for income taxes and cumulative effect of accounting change 5.5 (0.3) 9.7 8.5 Provision for income taxes 2.1 0.7 3.6 4.8 ----------- ----------- ----------- ---------- Income (loss) before cumulative effect of accounting change 3.4 (1.0) 6.1 3.7 Cumulative effect of accounting change (net of income taxes of $14.4) - - (90.1) - ----------- ----------- ----------- ----------- Net income (loss) $ 3.4 $ (1.0) $ (84.0) $ 3.7 =========== =========== =========== ========== Earnings per share - basic: Income (loss) before cumulative effect of accounting change $ 0.05 $ (0.01) $ 0.09 $ 0.05 Cumulative effect of accounting change - - (1.27) - ----------- ----------- ----------- ----------- Net income (loss) $ 0.05 $ (0.01) $ (1.18) $ 0.05 =========== =========== =========== ========== Earnings per share - diluted: Income (loss) before cumulative effect of accounting change $ 0.05 $ (0.01) $ 0.09 $ 0.05 Cumulative effect of accounting change - - (1.26) - ----------- ----------- ----------- ----------- Net income (loss) $ 0.05 $ (0.01) $ (1.17) $ 0.05 =========== =========== =========== ========== Weighted average shares (in thousands): Basic 71,165 71,187 71,166 71,187 Diluted 71,832 71,206 71,649 71,258
PSS WORLD MEDICAL, INC. Unaudited Condensed Consolidated Balance Sheet (In millions, except per share data)
September 28, 2001 ------------- ASSETS Current Assets: Cash and cash equivalents $ 24.2 Marketable securities 0.2 Accounts receivable, net 235.5 Inventories, net 161.5 Prepaid expenses and other 43.7 ------------- Total current assets 465.1 Property and equipment, net 80.8 Other Assets: Goodwill 60.6 Intangibles, net 17.0 Other 32.6 ------------- Total assets $ 656.1 ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Bank revolver $ 10.9 Accounts payable 143.0 Accrued expenses 34.5 Other 13.7 ------------- Total current liabilities 202.1 Long-term debt 125.0 Other 8.1 ------------- Total liabilities 335.2 ------------- Shareholders' Equity: Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares issued and outstanding - Common stock, $.01 par value; 150,000,000 shares authorized, 71,161,086 shares issued and outstanding at September 28, 2001 0.7 Additional paid-in capital 349.3 Accumulated deficit (29.1) ------------- Total shareholders' equity 320.9 ------------- Total liabilities and shareholders' equity $ 656.1 =============
PSS WORLD MEDICAL, INC. Unaudited Condensed Consolidated Statement Of Cash Flows (In millions)
Three Months Ended September 28, 2001 -------------- Cash Flows From Operating Activities: Net income $ 3.4 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3.0 Amortization of intangible assets 1.5 Amortization of debt issuance costs 0.3 Provision for doubtful accounts 1.5 Changes in operating assets and liabilities, net of effects from business acquisitions: Accounts receivable (7.9) Inventories, net 0.9 Prepaid expenses and other current assets 8.2 Other assets (2.6) Accounts payable, accrued expenses, and other liabilities 5.0 ------------- Net cash provided by operating activities 13.3 ------------- Cash Flows From Investing Activities: Proceeds from sales and maturities of marketable securities 0.1 Capital expenditures (5.7) Payments on non-compete agreements (0.2) ------------- Net cash used in investing activities (5.8) ------------- Cash Flows From Financing Activities: Proceeds from borrowings 42.9 Repayment of borrowings (54.5) ------------- Net cash used in financing activities (11.6) ------------- Net decrease in cash and cash equivalents (4.1) Cash and cash equivalents, beginning of period 28.3 ------------- Cash and cash equivalents, end of period $ 24.2 =============
PSS WORLD MEDICAL, INC. Unaudited Operating Highlights (In millions)
Three Months Ended Six Months Ended ------------------------ --------------------------- Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2001 2000 2001 2000 ----------- ----------- ----------- ------------- Segment Data Net Sales: Physician division $ 176.1 $ 170.2 $ 347.4 $ 348.1 Imaging division 176.6 183.0 356.2 379.4 Long-term care division 95.7 89.9 191.1 182.1 International and other - 3.1 0.4 8.2 ----------- ----------- ----------- ---------- $ 448.4 $ 446.2 $ 895.1 $ 917.8 =========== =========== =========== ========== Operating Income (Loss): Physician division $ 6.4 $ 1.9 $ 12.1 $ 13.2 Imaging division 0.1 1.4 0.3 3.6 Long-term care division 2.3 1.8 4.0 3.6 International and other (0.9) (2.0) (1.2) (5.0) ----------- ----------- ----------- ---------- $ 7.9 $ 3.1 $ 15.2 $ 15.4 =========== =========== =========== ==========
Cash Conversion Highlights:
Cash DSO DOH DIP Conversion Days -------------------- -------------------- -------------------- -------------------- FY 02 FY 02 FY 02 FY 02 FY 02 FY 02 FY 02 FY 02 Q1 Q2 Q1 Q2 Q1 Q2 Q1 Q2 --------- --------- --------- --------- --------- --------- --------- --------- Physician division 46.4 46.2 42.4 41.6 34.9 41.1 53.9 46.7 Imaging division 40.8 41.8 42.3 46.6 34.6 36.7 48.5 51.7 Long-term division 58.7 56.5 36.1 35.4 32.8 34.9 62.0 57.0 --------- --------- --------- --------- --------- --------- --------- --------- Consolidated 47.0 46.7 41.4 42.4 34.7 37.9 53.7 51.2 --------- --------- --------- --------- --------- --------- --------- ---------
-END - PSS WORLD MEDICAL, INC. Unaudited Operating Highlights (In millions)
Fiscal Year 2001 Fiscal Year 2002 ------------------------------------------------- ---------------------- First Second Third Fourth First Second Operations: Quarter Quarter Quarter Quarter Quarter Quarter -------- ----------- ----------- ------------- ------------ --------- Revenue: Physician division $ 177.9 $ 170.2 $ 168.7 $ 172.6 $ 171.3 $ 176.1 Imaging division 196.4 183.0 180.8 177.7 179.6 176.6 Long-term division 92.2 89.9 92.6 92.9 95.4 95.7 International and other 5.1 3.1 7.3 4.4 0.4 - --------- --------- --------- -------- -------- --------- $ 471.6 $ 446.2 $ 449.4 $ 447.6 $ 446.7 $ 448.4 EBITDA: Physician division $ 13.2 $ 3.8 $ 8.7 $ 0.8 $ 7.4 $ 8.1 Imaging division 5.2 4.6 2.9 (1.0) 2.5 2.6 Long-term division 3.0 3.0 (18.7) 1.9 2.5 2.9 International and other (2.8) (1.9) (19.8) (4.1) 0.1 (0.7) ---------- ---------- ---------- --------- -------- -------- $ 18.6 $ 9.5 $ (26.9) $ (2.4) $ 12.5 $ 12.9 Ratio to Revenues: Gross margin percentage 24.2% 22.8% 23.3% 21.4% 22.8% 23.3% SG&A expenses percentage 21.6% 22.0% 31.1% 23.2% 21.1% 21.5% Operating income percentage 2.6% 0.7% (7.8%) (1.9%) 1.6% 1.8% Asset Management: Operational working capital (1) $ 331.5 $ 333.8 $ 301.8 $ 272.3 $ 245.0 $ 254.0 Sequential quarter percent change (1.9%) 0.7% (9.6%) (9.8%) (10.0%) 3.7% Average committed capital $ 472.3 $ 472.8 $ 460.8 $ 433.2 $ 403.6 389.0 Return on committed capital (2) 13.7% 5.9% (27.1%) (4.7%) 9.6% 10.2% Capital expenditures investment 4.5 5.6 6.4 6.4 6.1 5.7 Bank debt $ 107.0 $ 113.8 $ 94.9 $ 66.8 $ 22.5 $ 10.9 Cash and cash equivalents 41.8 42.2 36.9 34.4 28.3 24.2 --------- --------- --------- -------- -------- -------- Net bank debt 65.2 71.6 58.0 32.4 (5.8) (13.3) Senior subordinated notes 125.0 125.0 125.0 125.0 125.0 125.0 --------- --------- --------- -------- -------- -------- Net debt $ 190.2 $ 196.6 $ 183.0 $ 157.4 $ 119.2 $ 111.7 --------- --------- --------- -------- -------- --------
(1) Operational working capital equals accounts receivables plus inventory minus accounts payable. (2) Return on committed capital equals EBIT plus amortization divided by the sum of total assets less cash, net intangibles, other current and non-current liabilities, and accounts payable For the quarter ended June 29, 2001, the return on committed capital calculation excludes the income statement impact of $90.1 million goodwill impairment loss that resulted from the adoption of SFAS 142.