FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
__ 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 000-23249
PRIORITY HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-1927379
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
285 West Central Parkway, Suite 1704
Altamonte Springs, Florida 32714
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 869-7001
No Change
(Former name, former address and former fiscal year,
if changed since last report)
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 August 1, 1998, the number of shares outstanding of each of the issuer's
classes of common stock were as follows:
Class A Common Stock - 10,214,286
Class B Common Stock - 2,300,922
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
PRIORITY HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(000's omitted except share data)
(unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Six-month period ended Three-month period ended
June 30, June 30,
1998 1997 1998 1997
-----------------------------------------------------------------------
Net sales......................................... $ 122,053 $ 108,597 $ 63,924 $ 56,503
Cost of products sold............................. 108,307 97,252 56,994 50,725
--------- --------- -------- ------
Gross profit...................................... 13,746 11,345 6,930 5,778
Selling, general and administrative expense....... 6,215 5,242 3,048 2,592
Depreciation and amortization..................... 622 571 311 285
--------- --------- -------- ------
Earnings from operations.......................... 6,909 5,532 3,571 2,901
Interest (income) expense, net.................... (306) 498 (198) 321
---------- --------- -------- ------
Earnings before income taxes...................... 7,215 5,034 3,769 2,580
Provision for income taxes........................ 2,868 2,013 1,498 1,031
---------- --------- -------- ------
Net earnings...................................... $ 4,347 $ 3,021 $ 2,271 $ 1,549
=========== =========== ========== =========
Earnings per share:
Basic..................................... $.35 $.30 $.18 $.15
Diluted................................... $.35 $.30 $.18 $.15
Weighted average shares outstanding:
Basic..................................... 12,515,208 10,214,286 12,515,208 10,214,286
Diluted................................... 12,550,170 10,214,286 12,593,341 10,214,286
</TABLE>
(See accompanying notes to consolidated financial statements.)
<PAGE>
PRIORITY HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(000's omitted except share data)
(unaudited)
<TABLE>
<S> <C> <C>
June 30, December 31,
1998 1997
------------------------------------
ASSETS:
Current assets:
Cash and cash equivalents............................................ $ 9,525 $ 9,484
Accounts receivable, less allowance for doubtful accounts of
$454 for 1998 and $402 for 1997............................... 44,547 43,643
Receivable from parent............................................. 15,393 5,290
Finished goods inventory.............................................. 16,039 25,082
Deferred income taxes................................................. 869 869
Other current assets.................................................. 316 166
-------- -------
86,689 84,534
-------- -------
Fixed assets, at cost...................................................... 2,892 2,492
Less: accumulated depreciation........................................ 1,253 997
-------- -------
1,639 1,495
-------- -------
Intangibles, net 6,906 7,273
-------- -------
Total assets................................................ $ 95,234 $ 93,302
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable...................................................... $ 22,695 $ 24,754
Other current liabilities............................................. 2,208 2,292
Subordinated note payable to parent................................ 6,000 --
-------- -------
30,903 27,046
-------- -------
Long-term obligations...................................................... -- 272
-------- -------
Deferred income taxes...................................................... 101 101
-------- -------
Subordinated note payable to parent........................................ -- 6,000
-------- -------
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized, none
issued and outstanding............................................. -- --
Common stock
Class A, $0.01 par value, 15,000,000 shares authorized,
10,214,286 issued and outstanding............................. 102 102
Class B, $0.01 par value, 40,000,000 shares
authorized, ................. 23 23
2,300,922 issued and outstanding......................................
Additional paid in capital....................................... 52,907 52,907
Retained earnings................................................ 11,198 6,851
--------- -------
Total shareholders' equity.................................. 64,230 59,883
--------- -------
Commitments and contingencies.............................................. -- --
--------- -------
Total liabilities and shareholders' equity.................. $ 95,234 $ 93,302
======== ========
</TABLE>
(See accompanying notes to consolidated financial statements.)
<PAGE>
PRIORITY HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
(unaudited)
<TABLE>
<S> <C> <C>
Six-month period
ended
June 30,
1998 1997
-------------------------------------
Cash flow from operating activities:
Net income........................................... $ 4,347 $ 3,021
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization......................................... 622 571
Loss on disposal of fixed assets................................... -- 85
Deferred income taxes................................................. -- 14
Change in assets and liabilities:
Accounts receivable................................................... (904) (10,637)
Finished goods inventory.............................................. 9,043 (2,042)
Trade accounts payable................................................ (2,059) 3,360
Other current assets and liabilities.................................. (233) 142
------- -------
Net cash provided (used) by operating
activities.................................................... 10,816 (5,486)
------- -------
Cash flow from investing activities:
Purchase of fixed assets.............................................. (400) (285)
------- -------
Net cash used by investing activities............................ (400) (285)
------- -------
Cash flow from financing activities:
Net change in amounts due to /from parent............................. (10,103) 4,495
Payments on long-term obligations..................................... (272) (195)
-------- --------
Net cash provided (used) by financing
activities.................................................... (10,375) 4,300
-------- --------
Net increase (decrease) in cash............................................ 41 (1,471)
Cash and cash equivalents at beginning of period........................... 9,484 1,656
-------- --------
Cash and cash equivalents at end of period................................. $ 9,525 $ 185
=========== ============
Supplemental cash flow information:
Interest paid......................................................... $ 231 $ 385
Income taxes paid..................................................... $ 2,868 $ 1,999
</TABLE>
(See accompanying notes to consolidated financial statements.)
<PAGE>
PRIORITY HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The accompanying consolidated financial statements have been prepared by
the Company without audit. Certain information and footnote disclosures,
including significant accounting policies, normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes that the
financial statements for the three and six month periods ended June 30,
1998 and 1997 include all necessary adjustments for fair presentation.
Results for any interim period may not be indicative of the results of the
entire year.
2. IV-1, Inc. ("IV-1") and IV-One Services, Inc.("IV-One Services") have been
named as defendants in a second amended counterclaim filed by Amgen, Inc.
("Amgen") on May 14, 1996, in the Circuit Court of the Eighteenth Judicial
District of Seminole County, Florida. Amgen has asserted that these
entities tortiously interfered with a license agreement (the "License
Agreement") between Amgen and Ortho Pharmaceutical Corporation ("Ortho").
Pursuant to this agreement, Amgen licensed Ortho to sell EPO for use
in the treatment of non-dialysis patients, while Amgen reserved the
exclusive right to sell EPO for use in the treatment of dialysis patients
Amgen has asserted that, prior to the purchase of IV-1 and IV-One
Services by the Company, these entities induced Ortho to sell EPO to them
for resale in the dialysis market in contravention of the License
Agreement. Amgen has also alleged that IV-1 and IV-One Services were
involved in a civil conspiracy to circumvent the terms of the License
Agreement to allow the resale of EPO to the dialysis market. Furthermore,
Amgen has asserted unfair competition claims against IV-1, including
that IV-1 manufactured and distributed unapproved prefilled syringes of
EPO and another product manufactured by Amgen in container systems
unapproved by Amgen. Amgen did not specify a time frame for the acts
complained of in the civil conspiracy and unfair competition allegations.
In each count, Amgen has demanded an unspecified amount of compensatory
damages, including costs and interest.
The Company believes that the sellers of IV-1, IV-One Services and Charise
Charles, Ltd., Inc. ("Charise Charles") are contractually obligated to
provide legal defense and to indemnify the Company for losses and
liabilities with respect to this litigation, to the extent that the alleged
acts occurred prior to the purchase of such entities by the Company. To
date, the sellers have provided the legal defense for IV-1 and IV-One
Services in the litigation. Indemnification from the sellers of IV-1 and
IV-One Services is limited to no more than $1.5 million and indemnification
from the sellers of Charise Charles is limited to no more than $2.0
million. The Company does not expect the Amgen litigation to be material to
the Company's results of operations, financial condition or cash flows;
however, no assurance can be given that this litigation will not have a
material adverse effect on the Company. In addition, Amgen is the Company's
largest supplier. Consequently, this litigation presents the risk of
adversely affecting the Company's business relationship with Amgen, which
could have a material adverse effect on the Company.
The Company is also subject to ordinary and routine litigation incidental
to its business, none of which is material to the Company's results of
operations, financial condition, or cash flows.
On November 14, 1995, an investigator for the Food and Drug Administration
(the "FDA"), accompanied by an inspector from the State of Florida Board of
Pharmacy, inspected the Company's pharmacy in Altamonte Springs, Florida.
At the end of the inspection, the FDA investigator issued an FDA Form-483,
which is the form used by FDA investigators to identify any observed or
suspected noncompliance with the laws administered by the agency. The FDA
Form-483 identified the facility as a pharmacy/repackager and listed three
observations related to certain requirements that the FDA typically imposes
on manufacturers of sterile products. The Company advised the FDA in
December 1995 that the Company believes it is not, within the statutory or
regulatory meaning of these terms, a repackager or a manufacturer. A second
inspection of the same facility occurred on June 26, 1997, in which the FDA
investigator was again accompanied by Florida pharmacy authorities. The FDA
investigator issued a substantially identical FDA Form-483 at the end of
that inspection. The Florida State Board of Pharmacy did not issue any
deficiencies regarding the operations of the Altamonte Springs pharmacy in
either of these inspections.
On March 16, 1992, the FDA issued a Compliance Policy Guide (CPG 460.200),
which explains the criteria the FDA uses to distinguish between pharmacy
operations that are properly regulated under state law and drug
manufacturing regulated by the FDA. The Company's response to the FDA in
December 1995 cited this CPG and explained the Company's contention that,
according to the FDA's own criteria, the facility is a pharmacy properly
regulated under state and local laws.
On November 21, 1997, the President signed into law the FDA Modernization
Act of 1997, which, among a number of other items, adds a new section on
pharmacy compounding to the Federal Food, Drug and Cosmetic Act. In this
provision, Congress clarified a gray area by explicitly identifying the
circumstances in which pharmacies may compound drugs without the need for
filing a New Drug Application, observing the FDA's Good Manufacturing
Practice regulations or complying with certain other specific Federal Food,
Drug and Cosmetic Act requirements. Congress provided that the term
"compounding" does not include mixing or reconstituting that is done in
accordance with directions contained in approved labeling provided by the
manufacturer of the product. The Company believes that, as a result of this
amendment, so long as it follows the manufacturer's approved labeling in
each case, and prepares drugs only for identified individual patients using
licensed practitioners, the Company's activities should be regulated by the
Florida State Board of Pharmacy and not be subjected by the FDA to a full
New Drug Application requirement demonstrating the basic safety and
effectiveness of the drugs.
If the Company is correct and its operations are limited to those engaged
in by pharmacies, there should be no material adverse effect from the FDA
Form-483s because the Company believes it is currently in compliance in all
material respects with applicable state and local laws. If the Company is
deemed to be a sterile product manufacturer or a sterile product
repackager, it would be subject to additional regulatory requirements. If
for some reason the FDA or other legal authorities decide that the Company
must file for approval of a New Drug Application, such an event could have
a material adverse effect on the Company.
There can be no assurance that future legislation, future rulemaking, or
active enforcement by the FDA of a determination that the Company is a drug
manufacturer will not have a material adverse effect on the business of the
Company.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Forward Looking Statements.
Certain statements included in this quarterly report, which are not
historical facts, are forward looking statements. Such forward looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward looking statements
represent the Company's expectations or beliefs and involve certain risks
and uncertainties including, but not limited to, changes in interest rates,
competitive pressures, changes in customer mix, changes in third party
reimbursement rates, financial stability of major customers, investment
procurement opportunities, changes in government regulations or the
interpretation thereof and the ability of the Company and the entities with
which it transacts business to modify or redesign their computer systems to
work properly in the year 2000, which could cause actual results to differ
from those in the forward looking statements. The forward looking
statements by their nature involve substantial risks and uncertainties,
certain of which are beyond the Company's control, and actual results may
differ materially depending on a variety of important factors.
Results of Operations.
Net sales increased to $122.1 million in the first six months of 1998 from
$108.6 million in the first six months of 1997, an increase of 12%. The
increase was generated from a 42% increase in sales by the Company's
Priority Pharmacy division ("Priority Pharmacy") and a 10% increase in
sales by the Company's Priority Distribution division ("Priority
Distribution"). Net sales increased to $63.9 million in the three months
ended June 30, 1998, from $56.5 million in the three months ended June 30,
1997, an increase of 13%. The increase was generated from a 52% increase in
sales by Priority Pharmacy and a 10% increase in sales by Priority
Distribution. The growth reflected primarily the addition of new customers,
new product introductions, additional sales to existing customers and, to a
lesser extent, the acquisition of Grove Way Pharmacy and inflationary price
increases.
Gross margin increased to $13.7 million in the first six months of 1998
from $11.3 million in the first six months of 1997, an increase of 21%.
Gross margin as a percentage of net sales increased in the first six months
of 1998 to 11.3% from 10.4% in the first six months of 1997. Gross margin
increased to $6.9 million in the three months ended June 30, 1998, from
$5.8 million in the three months ended June 30, 1997, an increase of 19%.
Gross margin as a percentage of net sales increased in the three months
ended June 30, 1998, to 10.8% from 10.2% in the three months ended June 30,
1997. The increase in gross margin reflected increased sales by both
Priority Distribution and Priority Pharmacy. The increase in gross margin
as a percentage of net sales was primarily attributed to the change in
sales mix. Priority Distribution generated more sales of higher gross
margin items; and Priority Pharmacy experienced increased sales, which
generate higher gross margins than Priority Distribution. Competition
continues to exert pressure on margins, particularly those of Priority
Distribution.
Selling, general and administrative ("SGA") expense increased to $6.2
million in the first six months of 1998 from $5.2 million in the first six
months of 1997, an increase of 19%. SGA expense as a percentage of net
sales increased to 5.1% in the first six months of 1998 from 4.8% in the
first six months of 1997. SGA expense increased to $3.0 million in the
three months ended June 30, 1998, from $2.6 million in the three months
ended June 30, 1997, an increase of 15%. SGA expense as a percentage of net
sales increased in the three months ended June 30, 1998, to 4.8% from 4.6%
in the three months ended June 30, 1997. The increase in SGA expense as a
percentage of net sales resulted from incurring expenses associated with
the Company's Columbus, Ohio facility, which opened in November, 1997,
training costs from hiring additional sales personnel at Priority Pharmacy,
and increased overall costs of being a publicly traded company. Management
continually monitors SGA expense and remains focused on controlling these
increases through improved technology and efficient asset management.
Depreciation and amortization ("D&A") increased to $622,000 in the first
six months of 1998 from $571,000 in the first six months of 1997, an
increase of 9%. D&A increased to $311,000 in the three months ended June
30, 1998, from $285,000 in the three months ended June 30, 1997, an
increase of 9%. The increase in D&A was primarily the result of
depreciation of new equipment, particularly in management information
systems.
Interest income, net, equaled $306,000 in the first six months of 1998 as
opposed to interest expense, net, which equaled $498,000 in the first six
months of 1997. Interest income, net, equaled $198,000 in the three months
ended June 30, 1998 as opposed to interest expense, net, which equaled
$321,000 in the three months ended June 30, 1997. In the first six months
of 1998, interest income of $186,000 and $356,000 was primarily related to
amounts earned by investing funds received from the October, 1997 initial
public offering of the Company's Class B Common Stock (the "Offering") in
overnight repurchase agreements with a major financial institution and
loaning funds to Bindley Western Industries, Inc. ("BWI"), respectively. In
the three months ended June 30, 1998, interest income of $75,000 and
$244,000 was primarily related to amounts earned by investing funds
received from the Offering in overnight repurchase agreements with a major
financial institution and loaning funds to BWI, respectively. This interest
income was partially offset by interest expense of $218,000 in the first
six months of 1998 and $109,000 in the three months ended June 30, 1998,
for interest due on the subordinated note issued to BWI on March 31, 1997.
The interest income on the loans to BWI was calculated by applying BWI's
average incremental borrowing rate to the average outstanding loans. During
the first six months of 1998 the average outstanding loans to BWI were
$11.2 million. During the three months ended June 30, 1998, the average
outstanding loans to BWI were $15.3 million. During the first six months of
1997 and in the three months ended June 30, 1997, the interest expense was
primarily related to borrowings from BWI. During the first six months of
1997 the average outstanding borrowings from BWI were $11.6 million. During
the three months ended June 30, 1997, the average outstanding borrowings
from BWI were $12.8 million. The interest expense on the borrowings was
calculated by applying BWI's average incremental borrowing rate to the
average outstanding borrowings. BWI's average incremental borrowing rate
was 6.4 % in both the first six months of 1998 and 1997 and the three
months ended June 30, 1998 and 1997.
The Company participates in the consolidated federal and state income tax
returns filed by BWI. BWI charges federal and state income tax expense to
the Company as if the Company filed its own separate federal and state
income tax returns. The provisions for income taxes represented 40% of
earnings before taxes for both the first six months of 1998 and 1997 and
the three months ended June 30, 1998 and 1997.
Liquidity - Capital Resources.
Net cash provided by operating activities. The Company's operations
generated $10.8 million in cash during the first six months of 1998.
Accounts receivable increased $904,000 during the first six months of 1998,
which was a direct result of increased sales. Inventory decreased $9.0
million during the first six months of 1998, due to the liquidation of
inventory purchased to take advantage of the 1997 year end buy-in
opportunities and the Company's concerted effort to closely monitor
inventory and maintain it at an optimal level. The $2.1 million decrease in
accounts payable during the first six months of 1998, partially reduced the
cash provided from the decrease in inventory; this decrease is primarily
attributable to the timing of payments and the decrease in inventory.
Depreciation and amortization totaled $622,000 during the first six months
of 1998.
Net cash used by investing activities. Capital expenditures during the
first six months of 1998 totaled $400,000. The Company expects that capital
expenditures during the last six months of 1998 will be approximately
$250,000 and during 1999 will be approximately $800,000. The Company
anticipates that these expenditures will relate primarily to the purchase
of computer hardware and software and telecommunications equipment.
Net cash used by financing activities. During the first six months of 1998,
the Company's receivable from BWI increased by $10.1 million, primarily due
to loaning BWI excess funds available.
The Company's principal capital requirements have been to fund working
capital needs to support internal growth, for acquisitions and for capital
expenditures. The Company's principal working capital needs are for
inventory and accounts receivable. Management controls inventory levels in
order to minimize carrying costs and maximize purchasing opportunities. The
Company sells inventory to its customers on various payment terms. This
requires significant working capital to finance inventory purchases and
entails accounts receivable exposure in the event any of its major
customers encounter financial difficulties. Although the Company monitors
closely the creditworthiness of its major customers, there can be no
assurance that the Company will not incur some collection loss on major
customer accounts receivable in the future.
Historically, the Company has financed its operations through capital
contributions and advances from BWI. These advances were repaid with a
portion of the proceeds of the Company's Offering. In connection with the
Offering, BWI has made available to the Company a $30.0 million line of
credit, which the Company may utilize until December 31, 1998. Outstanding
principal amounts under the line will bear interest, payable quarterly, at
a rate equal to the rate then paid by BWI under its primary line of credit
agreement.
Management believes that the net proceeds from the Offering, together with
cash from operations and borrowings from BWI, will be sufficient to meet
the Company's working capital needs for at least two years.
Year 2000 Compliance.
The Company is in the process of conducting a thorough review of its
computer systems to identify and address all code changes, testing, and
implementation procedures necessary to make its systems year 2000
compliant. The Company presently believes that with modifications to
existing software, the year 2000 problem will pose no significant
operational problems for the Company's computer systems as so modified and
converted, and the Company expects to be fully compliant by the end of
fiscal 1998. There can be no assurance, however, that the systems of other
companies with which the Company transacts business will be updated or
converted in a timely manner, or that such failure will not have a material
adverse effect on the Company's operations. The Company estimates that
during fiscal 1998 it will incur approximately $75,000 for the cost of this
project, which includes the cost of updating non-compliant code.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Note 2 to the Notes to Consolidated
Financial Statements (unaudited) set forth elsewhere in this Report is
incorporated herein by reference.
Item 2. Changes in Securities and Use of Proceeds.
(d) Use of Proceeds
The Company's Registration Statement on Form S-1 (File No. 333-34463)
was declared effective on October 23, 1997. There has been no change in the
Use of Proceeds since that reported in the Company's Form 10-Q for the
quarter ended March 31, 1998.
Item 4. Submission of Matters to a Vote of Security Holders.
a) The annual meeting of the shareholders of the Company was held on May
21, 1998.
b) The following directors were elected at the meeting to serve until the
annual meeting of shareholders in the year 2001:
Votes For Votes Against Abstentions
Michael D. McCormick 32,506,663 0 58,170
Thomas J. Salentine 32,506,663 0 58,170
In addition, the following directors continue in office until the annual
meeting of shareholders in the year indicated:
Robert L. Myers 1999
Richard W. Roberson 1999
William E. Bindley 2000
Rebecca M. Shanahan 2000
c) Other matters voted upon and the results of the voting were as follows:
1) The shareholders voted 32,561,833 in the affirmative and 500
votes in the negative, with 2,500 abstentions, to appoint
Price Waterhouse Coopers LLP as auditors of the Company.
2) The shareholders voted 31,450,653 in the affirmative and
492,684 in the negative, with 32,205 abstentions and 589,291
broker non-votes, to approve the adoption of the Company's
1997 Stock Option and Incentive Plan.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 10-O Revolving Credit Promissory Note by BWI
in favor of the Company.
Exhibit 27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None.
<PAGE>
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.
August 14, 1998 PRIORITY HEALTHCARE CORPORATION
BY: /s/ DONALD J. PERFETTO
Donald J. Perfetto
Vice President and
Chief Financial Officer
REVOLVING CREDIT PROMISSORY NOTE
U.S. $25,000,000.00 October 29, 1997
FOR VALUE RECEIVED, on or before December 31, 1999 (the
"Maturity Date"), BINDLEY WESTERN INDUSTRIES, INC., an Indiana corporation
(hereinafter called "Maker"), unconditionally promises to pay to the order of
PRIORITY HEALTHCARE CORPORATION, an Indiana corporation ("Lender"), at 285 West
Central Parkway, Altamonte Springs, Florida, or at such other place as the
holder hereof may direct in writing, the principal sum of Twenty Five Million
Dollars ($25,000,000.00), or such lesser amount as may be then outstanding, with
interest on the balance of principal outstanding from time to time from the date
hereof at a variable rate per annum equal to the "Incremental Borrowing Rate" of
Maker, as in effect from time to time, until the entire principal balance is
paid in full. For purposes hereof, the term "Incremental Borrowing Rate" shall
mean the per annum rate then in effect for advances to Maker under its Amended
and Restated Credit Agreement dated as of December 31, 1991, among Maker, Bank
One, Indiana, NA in its individual capacity and as agent for the other banks
party thereto, as such Amended and Restated Credit Agreement is amended and in
effect from time to time, or if such Amended and Restated Credit Agreement shall
no longer be in effect then the rate of interest then charged for advances under
any replacement revolving credit agreement of Maker.
All amounts payable under this Note shall be payable without
relief from valuation and appraisement laws, and with all collection costs and
attorneys' fees.
Interest accruing during each calendar quarter shall be due
and payable quarterly, on or before the fifth (5th) day of the next succeeding
calendar quarter, commencing on the fifth (5th) day of the calendar quarter
immediately following the date of this Note, and continuing thereafter until the
entire unpaid principal balance of this Note is paid in full. All payments, as
received, shall be applied first to the payment of interest accrued to the date
of receipt of payment and the balance, if any, shall be applied to principal.
The principal of this Note, and accrued, unpaid interest
thereon, shall be due and payable in full on the Maturity Date. The principal of
this Note may be prepaid in whole or in part without premium or penalty.
All payments of principal and interest shall be made in lawful
money of the United States of America and in immediately available funds.
Interest shall be calculated on the basis that an entire year's interest is
earned in 360 days. If any payment falls due on a day on which the holder is not
generally open for the conduct of its business, the due date thereof shall be
extended to the next succeeding day on which the holder is so open for business
and interest will be payable at the rate stated herein in respect of such
extension.
Maker and endorser(s), jointly and severally, waive demand and
presentment for payment, protest, notice of protest and notice of nonpayment or
dishonor of this Note and each of them consents to all extensions of the time of
payment thereof.
This Note evidences the obligation of Maker to repay loan
advances made from time to time under a credit facility in the maximum principal
sum of Twenty Five Million Dollars ($25,000,000.00). At Lender's sole
discretion, the principal of this Note may be borrowed, repaid, and reborrowed
from time to time prior to the Maturity Date. Maker's principal indebtedness on
this Note at any particular time shall be represented by the total of all loan
advances made to such time, less all principal payments made to such time. Maker
and all endorsers hereby authorize Lender and any holder of this Note to make
notations on the attached Schedule of Advances and Payments of Principal of all
advances made to Maker hereunder and all payments of principal.
Upon default in the payment of any installment of interest due
under this Note, which default shall remain uncured for a period of ten (10)
days from the date such installment is due, or at any time thereafter during the
continuance of such default, Lender shall be entitled by written notice to Maker
to declare the entire unpaid balance of principal and interest on this Note to
be immediately due and payable, whereupon the same shall become and be
immediately due and payable.
Signed and delivered as of the 29th day of October, 1997.
BINDLEY WESTERN INDUSTRIES, INC.
By: /s/ THOMAS J. SALENTINE
Name: Thomas J. Salentine
Title: Executive Vice President
(Principal Financial Officer)
SCHEDULE OF ADVANCES AND PAYMENTS OF PRINCIPAL
Unpaid
Amount of Principal
Amount of Principal Balance Notation
Date Advance Paid of Note Made By:
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This is the attached Schedule of Advances and Payments of
Principal referred to in the Revolving Credit Promissory Note dated October 29,
1997, made by Bindley Western Industries, Inc. to the order of Priority
Healthcare Corporation.
Bindley Western Industries, Inc.
By:/s/ Thomas J. Salentine
Name: Thomas J. Salentine
Title: Executive Vice President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001037975
<NAME> Priority Healthcare
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 9,525
<SECURITIES> 0
<RECEIVABLES> 44,547
<ALLOWANCES> 454
<INVENTORY> 16,039
<CURRENT-ASSETS> 86,689
<PP&E> 2,892
<DEPRECIATION> 1,253
<TOTAL-ASSETS> 95,234
<CURRENT-LIABILITIES> 30,903
<BONDS> 0
0
0
<COMMON> 125
<OTHER-SE> 64,105
<TOTAL-LIABILITY-AND-EQUITY> 95,234
<SALES> 122,053
<TOTAL-REVENUES> 122,053
<CGS> 108,307
<TOTAL-COSTS> 114,838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 126
<INTEREST-EXPENSE> 237
<INCOME-PRETAX> 7,215
<INCOME-TAX> 2,868
<INCOME-CONTINUING> 4,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,347
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
