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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended: December 31, 1993
Commission File Number: 1-8147
MEDIQ INCORPORATED
(Exact name of registrant as specified in its charter)
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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)
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Registrant's telephone number, including area code: (609) 665-9300
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 February 4, 1994, there were 17,416,011 shares of Common
Stock, par value $1.00 per share and 6,427,563 shares of Preferred
Stock, par value $.50 per share, outstanding.
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MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1993
INDEX
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Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements.
Condensed Consolidated Statements of Operations-
Three Months Ended December 31, 1993 and 1992
(Unaudited) 4
Condensed Consolidated Balance Sheets-
December 31, 1993 (Unaudited) and
September 30, 1993 5
Condensed Consolidated Statements of Cash Flows-
Three Months Ended December 31, 1993 and 1992
(Unaudited) 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 9-11
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K. 12
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MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1993
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
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MEDIQ INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended
December 31,
1993 1992
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Revenues $ 40,473 $ 46,107
Costs and Expenses:
Operating 20,811 23,757
Selling and administrative 11,626 11,327
Depreciation and amortization 6,766 5,851
39,203 40,935
Operating Income 1,270 5,172
Other (Charges) Credits:
Interest expense (6,213) (5,817)
Equity participation -- 2,188
Equity in earnings of unconsolidated
subsidiaries 865 794
Other - net 2,342 382
Income (Loss) from Continuing Operations
before Income Taxes (Benefit) and
Extraordinary Charge (1,736) 2,719
Income Taxes (Benefit) (474) 1,007
Income (Loss) from Continuing Operations
before Extraordinary Charge (1,262) 1,712
Discontinued Operations -- 247
Extraordinary Charge - Early Retirement of Debt -- (45)
Net Income (Loss) $ (1,262) $ 1,914
Earnings Per Share:
Income (Loss) from Continuing Operations $ (.05) $ .07
Discontinued Operations -- .01
Extraordinary Charge -
Early Retirement of Debt -- --
Net Income (Loss) $ (.05) $ .08
Weighted Average Shares Outstanding 24,308 24,329
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See Notes to Condensed Consolidated Financial Statements
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MEDIQ INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
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<CAPTION>
Dec. 31, Sept. 30,
1993 1993
(Unaudited) (See Note)
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Assets
Current assets:
Cash and cash equivalents $ 16,266 $ 18,123
Accounts receivable - net 38,814 37,152
Inventories 9,196 9,086
Deferred income taxes 7,269 --
Income taxes refundable 3,290 3,495
Other current assets 7,703 5,303
Total current assets 82,538 73,159
Equity investments 35,558 34,693
Note receivable from MHM 11,500 11,500
Rental equipment - net 107,302 107,914
Property, plant and equipment - net 34,382 47,169
Goodwill - net 39,624 36,865
Net investment in leases 28,768 16,156
Other assets 23,713 23,805
Total assets $ 363,385 $ 351,261
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to financial institutions $ 2,883 $ 1,434
Accounts payable 10,186 8,757
Accrued expenses 24,895 22,326
Other current liabilities 2,899 2,781
Current portion of long-term debt 22,062 22,217
Total current liabilities 62,925 57,515
Senior debt - recourse 120,980 120,162
Senior debt - nonrecourse 26,762 25,382
Subordinated debt 86,229 86,229
Deferred income taxes 15,768 9,225
Other liabilities 8,086 8,174
Stockholders' equity 42,635 44,574
Total liabilities and stockholders' equity $363,385 $ 351,261
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Note: The balance sheet at September 30, 1993 has been condensed
from the audited financial statements at that date.
See Notes to Condensed Consolidated Financial Statements
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MEDIQ INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended
December 31,
1993 1992
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Cash Flows From Operating Activities:
Net income (loss) $(1,262) $ 1,914
Adjustments to reconcile net income (loss) to
net cash provided by operating activities 4,974 5,423
Cash provided by operating activities 3,712 7,337
Cash Flows From Investing Activities:
Proceeds from sale of assets 536 6,311
Acquisitions (1,633) --
Expenditures for:
Rental equipment (2,344) (2,228)
Property, plant and equipment (449) (4,518)
Other 193 (1,203)
Net cash used in investing activities (3,697) (1,638)
Cash Flows From Financing Activities:
Borrowings 2,948 1,688
Repayments (4,182) (5,315)
Dividends (638) --
Other -- 205
Net cash used in financing activities (1,872) (3,422)
Increase (decrease) in cash and cash equivalents (1,857) 2,277
Cash and Cash Equivalents:
Beginning balance 18,123 7,025
Ending balance $16,266 $ 9,302
Supplemental disclosure of cash flow information:
Interest paid $ 3,887 $ 4,517
Income taxes paid $ 63 $ 766
Supplemental disclosure of non-cash investing and
financing activities:
Equipment financed with debt and capital leases $ 2,978 $ 6,285
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See Notes to Condensed Consolidated Financial Statements
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MEDIQ INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Condensed Consolidated Financial Statements
The condensed consolidated balance sheet as of December 31, 1993
and the condensed consolidated statements of operations and cash
flows for the three months ended December 31, 1993 and 1992 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 December 31, 1993 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, 1993 Annual Report on
Form 10-K. The results of operations for the period ended
December 31, 1993 are not necessarily indicative of the operating
results for the full year.
Note B - Inventories
Inventories which consist primarily of parts and supplies are
stated at the lower of cost (first-in, first-out method) or
market.
Note C - Income Taxes
Effective October 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes", which supersedes SFAS No. 96. The
Company adopted SFAS No. 96 in fiscal 1990. The effect of the
adoption of SFAS No. 109 upon the provision for income taxes was
not significant for the three months ended December 31, 1993.
Note D - Equity Investments
As of December 31, 1993, the Company's ownership interest in
NutraMax Products, Inc. and PCI Services, Inc. was 47.7% and 42%,
respectively.
Summarized income statement information for NutraMax and PCI is
presented below.
NutraMax Products, Inc.
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Thirteen Weeks Ended
Jan. 1, Dec. 31,
1994 1992
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Net sales $ 10,201,000 $ 6,614,000
Gross profit 3,260,000 2,705,000
Net income 662,000 781,000
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MEDIQ INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note D - Equity Investments (continued)
PCI Services, Inc.
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Three Months Ended December 31,
1993 1992
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Net revenue $ 27,917,000 $ 21,574,000
Gross profit 5,614,000 4,156,000
Net income 1,305,000 884,000
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Note E - Sale of Assets
The Company recorded a pretax gain of $1.9 million ($1.4 million
net of taxes) which is included in "Other Credits" in the first quarter of
fiscal 1994 relating to the Company's investment in New West
Eyeworks, Inc. representing proceeds from a divestiture in fiscal 1988.
New West Eyeworks, Inc. completed an initial public offering in December 1993.
In connection with such offering, the Company received cash in the amount of
$1.9 million and stock with a fair market value of $1.0 million.
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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 December 31, 1993 and results of operations
for the three month periods ended December 31, 1993 and 1992.
This discussion should be read in conjunction with the
Management's Discussion and Analysis section included in the
Company's Annual Report on Form 10-K (pages 11-17) to which the
reader is directed for additional information.
Prior year segment information has been restated to conform
to the present year presentation.
Results of Operations
Revenues were $40.5 million for the first quarter of fiscal
1994, as compared to $42.0 million in the prior year period,
exclusive of revenues of $4.1 million from operations sold in
fiscal 1993. MEDIQ/PRN's revenues for the first quarter of
fiscal 1994 decreased 5%, to $18.9 million, as compared to 1993
revenues of $19.8 million. This decrease reflects lower volume
of business in the acute care hospital sector of the industry.
MEDIQ/PRN is mitigating such impact by continued expansion into
the home healthcare and alternative care markets and increased
operating efficiencies. Revenues from the Diagnostic Imaging
Services Group for the first quarter of fiscal 1994 of $10.2
million were consistent with the prior year. This segment
experienced an increase in procedures, particularly ultrasound
and nuclear imaging services as a result of geographic expansion
through acquisitions, while reductions in third party
reimbursement rates adversely impacted revenues for the quarter.
Revenues from MEMS increased 11% to $4.6 million as a result of continued
growth in its Asset Management Program and new services for MRI equipment.
Revenues from the Company's other operating activities were $6.2 million
in the current quarter, as compared to $11.5 million in the prior year period.
The decrease in revenues of $5.3 million from these activities was
primarily attributable to divestitures in 1993.
Costs and expenses increased $2.6 million, or 7%, to $39.2
million, as compared to $36.6 million in the prior year period,
exclusive of costs and expenses of $4.3 million from operations sold in fiscal
1993. The increase was primarily attriubutable to increased volume of the
Diagnostic Imaging Services Group.
Operating income decreased to $1.3 million, or 3% of
revenues, for the first quarter of fiscal 1994, as compared to
$5.2 million, or 11% of revenues, in the prior year quarter. The
decrease in operating income was primarily attributable to the
Company's core businesses, MEDIQ/PRN and the Diagnostic Imaging
Services Group. MEDIQ/PRN's operating income decreased $2.3
million, or 52%. This decrease resulted from lower revenues from
acute care hospitals and increased operating and administrative
expenses. Operating income from the Diagnostic Imaging Services
Group for the first quarter of 1994 decreased $1.8 million
reflecting additional costs associated with increased volume
combined with the reduction in reimbursement rates. Operating
income from MEMS increased to $.1 million, as compared to a loss
of $.4 million in the prior year quarter, as a result of
increased revenues associated with the Asset Management Program
and new services for MRI equipment. Operating income from other operating
activities decreased by $.4 million. This decrease was primarily
attributable to Medifac's operations which experienced delays in
constructions projects.
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Interest expense increased 7% to $6.2 million for the first
quarter of fiscal 1994 from $5.8 million as a result of increased
borrowings associated with the expansion of MEDIQ/PRN and the
Diagnostic Imaging Services Group.
Pretax loss from continuing operations was $1.7 million for
the first quarter of fiscal 1994, as compared to income of $2.7
million in the prior year period. The Company recorded a pretax
gain of $1.9 million ($1.4 million net of taxes) in the first
quarter of fiscal 1994 relating to the Company's investment in New West
Eyeworks, Inc. representing proceeds from a divestiture in fiscal 1988.
New West Eyeworks, Inc. completed an initial public offering in December 1993.
In connection with such offering, the Company received cash in the amount of
$1.9 million and stock with a fair market value of $1.0 million. Pretax
income in the prior year quarter included income of $2.2 million, representing
an equity participation related to the issuance of common stock by
PCI Services, Inc. ("PCI").
The Company's equity in the earnings of its unconsolidated
subsidiaries, PCI and NutraMax Products, Inc. was $.9 million in
the first quarter of fiscal 1994, as compared to $.8 million in
the prior year period.
Income Taxes
The Company's effective tax rates were disproportionate
compared to the statutory rate as a result of goodwill
amortization, earnings of the Company's equity investments and
the non-recognition of certain operating losses for state income
tax purposes.
Effective October 1, 1993, the Company adopted the
provisions of Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes", which supersedes
SFAS No. 96. The Company adopted SFAS No. 96 in fiscal 1990.
The effect of the adoption of SFAS No. 109 upon the provision for
income taxes was not significant for the three months ended December
31, 1993.
Liquidity and Capital Resources
Cash provided by operating activities was $3.7 million in
the current quarter, as compared to $7.3 million in the prior
year period. The decrease was principally a result of lower
earnings for the current quarter. As of December 31, 1993, the
Company had working capital of $19.6 million, including cash and
cash equivalents of $16.3 million. Subsequent to December 31,
1993, the Company repaid the outstanding principal balance of its
6% convertible debentures utilizing $11.6 million of its
available cash and cash equivalents. As of December 31, 1993,
the Company had $2.9 million outstanding under available lines of
credit totalling $14.0 million.
Net cash used in investing activities was $3.7 million and
consisted principally of capital expenditures for equipment of
$2.8 million and the acquisition of businesses of $1.6 million.
Net cash used in financing activities was $1.9 million and consisted of
borrowings of $2.9 million offset by repayments of $4.2 million and dividends
of $.6 million.
The Company believes that the combination of its existing
working capital, anticipated funds to be generated from
operations and the sale of assets, together with existing credit
facilities will be sufficient to meet anticipated operating and
capital needs. Depending upon future growth of the Company's
core businesses, additional financing may be required.
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MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1993
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PART II. OTHER INFORMATION
PAGE
Item 6. EXHIBITS AND REPORTS ON FORM 8-K NUMBER
(a) Exhibits
Exhibit 11 - Computation of Net Income Per Share 14
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MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1993
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)
February 14, 1994
(Date) /s/ Michael F. Sandler
Michael F. Sandler
Senior Vice President - Finance
and Chief Financial Officer
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EXHIBIT 11
MEDIQ INCORPORATED AND SUBSIDIARIES
Computation of Net Income Per Share
(in thousands, except per share amounts)
(Unaudited)
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Three Months Ended
December 31,
1993 1992
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Computation of Primary Earnings Per Share:
Net Income (Loss) $(1,262) $ 1,914
Weighted average of primary shares:
Common stock 17,408 16,945
Preferred stock 6,456 7,753
Assumed conversion of options 444 631
Total 24,308 24,329
Primary Earnings (Loss) Per Share $ (.05) $ .08
Computation of Fully Diluted Earnings Per Share (1)
Net Income (Loss) $(1,262) $ 1,914
Interest and amortization of
deferred costs on convertible
debentures - net of tax 690 690
Total $ (572) $ 2,604
Weighted average of fully diluted shares:
Common stock 17,408 16,945
Preferred stock 6,456 6,753
Assumed conversion of options 444 741
Assumed conversion of convertible 6,379 6,380
debentures
Total 30,687 30,819
Fully Diluted Earnings Per Share $ (.02) $ .08
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(1) This calculation is submitted in accordance with Regulation S-K
item 601(b)(11) although not required by footnote 2 to
paragraph 14 of APB opinion No. 15, because it is anti-dilutive
or results in dilution of less than 3%.
