SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
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, 1995 Commission File Number: 1-8147
MEDIQ Incorporated
(Exact name of registrant as specified in its charter)
Delaware 51-0219413
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One MEDIQ Plaza, Pennsauken, New Jersey 08110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (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 9, 1996, there were 18,377,193 shares of Common Stock, par value
$1.00 per share and 6,349,928 shares of Preferred Stock, par value $.50 per
share, outstanding.
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1995
INDEX
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements.
Condensed Consolidated Statements of Operations-
Three Months Ended December 31, 1995 and 1994
(Unaudited) 4
Condensed Consolidated Balance Sheets-
December 31, 1995 (Unaudited) and
September 30, 1995 5
Condensed Consolidated Statements of Cash Flows-
Three Months Ended December 31, 1995 and 1994
(Unaudited) 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 10-12
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K. 13
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Revenues $ 32,093 $ 31,842
Costs and expenses:
Operating 14,128 13,821
Selling and administrative 5,430 6,242
Restructuring 2,200 --
Depreciation and amortization 7,499 7,103
------ ------
29,257 27,166
------ ------
Operating income 2,836 4,676
Other (charges) credits:
Interest expense (6,635) (7,403)
Equity in earnings of unconsolidated affiliates 1,517 1,071
Other - net 414 430
------ ------
Loss from continuing operations before
income taxes and extraordinary item (1,868) (1,226)
Income tax benefit (500) (610)
------ ------
Loss from continuing operations before
discontinued operations and extraordinary item (1,368) (616)
Discontinued operations -- 405
Extraordinary item - early retirement
of debt (net of taxes) 1,001 --
------ ------
Net loss $ (367) $ (211)
====== ======
Earnings per share:
Loss from continuing operations $ (.05) $ (.03)
Discontinued operations -- .02
Extraordinary item .04 --
------ ------
Net loss $ (.01) $ (.01)
====== ======
Weighted average shares outstanding 24,581 24,447
====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1995 1995
---- ----
(Unaudited) (See Note)
Assets
<S> <C> <C>
Current assets:
Cash $ 1,803 $ 2,966
Accounts receivable - net 31,806 27,884
Investment in discontinued operations 18,529 19,009
Inventories 4,726 4,181
Deferred income taxes 3,933 4,310
Other current assets 3,137 5,095
-------- --------
Total current assets 63,934 63,445
Investments in unconsolidated affiliates 44,609 43,092
Investment in discontinued operations 8,135 8,061
Note receivable from MHM 10,542 10,733
Property, plant and equipment - net 133,883 132,823
Goodwill - net 60,818 61,744
Other assets 14,050 14,272
-------- --------
Total assets $335,971 $334,170
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to financial institutions $ 12,325 $ --
Accounts payable 8,266 6,694
Accrued expenses 26,104 20,691
Current portion of long-term debt 34,751 37,300
-------- --------
Total current liabilities 81,446 64,685
Senior debt 134,666 136,949
Subordinated debt 70,931 81,907
Deferred income taxes and other liabilities 17,778 19,112
Stockholders' equity 31,150 31,517
-------- --------
Total liabilities and stockholders' equity $335,971 $334,170
======== ========
</TABLE>
Note: The balance sheet at September 30, 1995 has been condensed from the
audited financial statements at that date.
See Notes to Condensed Consolidated Financial Statements
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (367) $ (211)
Adjustments to reconcile net loss to
net cash provided by operating activities 4,188 1,109
-------- --------
Net cash provided by operating activities 3,821 898
Cash flows from investing activities:
Proceeds from sale of equipment and other assets 824 469
Proceeds from sale of discontinued operations 1,500 --
Purchase of equipment (4,968) (1,807)
Other (283) 125
-------- --------
Net cash used in investing activities (2,927) (1,213)
Cash flows from financing activities:
Borrowings 12,042 3,019
Debt repayments (14,099) (3,984)
-------- --------
Net cash used in financing activities (2,057) (965)
-------- --------
Decrease in cash (1,163) (1,280)
Cash:
Beginning balance 2,966 1,495
-------- --------
Ending balance $ 1,803 $ 215
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 3,838 $ 4,375
======== ========
Supplemental disclosure of non-cash investing and
financing activities:
Equipment financed with long-term debt and capital leases $ 2,740 $ 1,936
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
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, 1995 and the
condensed consolidated statements of operations and cash flows for the three
months ended December 31, 1995 and 1994 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, 1995 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, 1995 Annual Report on Form 10-K.
The results of operations for the period ended December 31, 1995 are not
necessarily indicative of the operating results for the full year.
Note B - Discontinued Operations
In the second quarter of fiscal 1995, the Company adopted a plan to sell four
non-core businesses, Medifac, Inc., Health Examinetics, Inc., MEDIQ Mobile X-Ray
Services, Inc. and MEDIQ Imaging Services, Inc., within twelve months. During
fiscal 1995, the Company sold Medifac and MEDIQ Imaging Services. In the fourth
quarter, the Company revised the plan to include the operations of HealthQuest,
Inc., which is anticipated to be sold in fiscal 1996. As a result, operating
results and net assets of these businesses have been reported as discontinued
operations. Discontinued operations also include the Company's equity investment
in InnoServ Technologies, Inc. ("InnoServ", formerly MMI Medical, Inc.), which
is anticipated to be distributed to the Company's shareholders during fiscal
1996. The Company's prior year consolidated financial statements have been
restated to report the net assets and operating results of these businesses as
discontinued operations.
The Company anticipates that the disposal of Mobile X-Ray, Health Examinetics
and HealthQuest will be completed in fiscal 1996. The estimated loss on the sale
of these operations was recorded in fiscal 1995.
The investment in discontinued operations as of December 31, 1995 consisted of
(in thousands):
Current assets $13,168
Current liabilities 9,197
-------
Net current assets 3,971
Net fixed assets 4,933
Other noncurrent assets 9,625
-------
18,529
Investment in InnoServ 8,135
-------
$26,664
=======
The investment in InnoServ, which is expected to be distributed to the Company's
shareholders in the form of a dividend, is classified as a long-term asset.
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note B - Discontinued Operations (Continued)
Revenues from discontinued operations were $9.8 million and $19.1 million in the
first quarter of fiscal 1996 and 1995, respectively.
Note C - Inventories
Inventories, which consist primarily of repair parts for rental equipment and
finished goods held for sale, are stated at the lower of cost (first-in,
first-out method) or market.
Note D - Investments in Unconsolidated Affiliates
As of December 31, 1995, the Company's ownership interests in NutraMax
Products, Inc. and PCI Services, Inc. were 47.4% and 46.9%, respectively.
Summarized income statement information for NutraMax and PCI is presented below.
NutraMax Products, Inc.
Thirteen Weeks Ended
---------------------------------
Dec. 30, Dec. 31,
1995 1994
-------- --------
Net sales $18,148,000 $15,123,000
Gross profit 5,577,000 4,602,000
Net income 1,330,000 1,238,000
PCI Services, Inc.
Three Months Ended December 31,
-------------------------------
1995 1994
---- ----
Net revenue $37,092,000 $28,610,000
Gross profit 8,675,000 6,024,000
Net income 2,117,000 1,041,000
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note E - Long-Term Debt
Under the terms of its 7.25% subordinated convertible debentures due 2006, the
Company is required to offer to repurchase a portion of the debentures if
stockholders' equity is $40 million or less at the end of two consecutive fiscal
quarters. Since June 30, 1994, the Company's stockholders' equity has been less
than $40 million. In October and November 1995, the Company repurchased an
aggregate of $11.25 million of its debentures at a discount in the open market
and through a private transaction, which resulted in a pretax gain of $1.5
million, or $1.0 million net of taxes. This gain was recorded as an
extraordinary item in the Company's Condensed Consolidated Statement of
Operations. The Company is required to either repurchase or redeem $11.25
million of debentures prior to June 30, 1996 and semi-annually thereafter until
all of the debentures are repurchased or stockholders' equity is more than $40
million. As of December 31, 1995, $22.5 million of the debentures have been
classified as a current liability.
In December 1995, the Company's $13.4 million revolving credit facility was
extended to December 1996 and increased to $15.0 million with interest reduced
to the prime rate plus 1/2%. In addition, as amended, the facility will be
reduced by an amount equal to 50% of the net cash proceeds from the sale of
discontinued operations and certain other assets. As of December 31, 1995, $8.7
million was outstanding under this facility which was included in Notes Payable
to Financial Institutions in the Condensed Consolidated Balance Sheet.
Note F - Stock Options
In the first quarter of fiscal 1995, the Company granted stock options to
acquire 100,000 and 980,000 shares of common stock at $4.00 per share and $4.53
per share, respectively, to 35 officers and managers of the Company and certain
subsidiaries, including 250,000 options to Mr. Thomas E. Carroll, the Company's
President and Chief Executive Officer.
Note G - Restructuring Charge
In the first quarter of fiscal 1996, the Company recorded a restructuring charge
of $2.2 million for employee severance costs incurred in connection with a plan
approved by the Board of Directors to downsize corporate functions and
consolidate certain activities with the operations of MEDIQ/PRN. The plan is
expected to result in the termination of 29 employees in fiscal 1996. The
Company anticipates reductions in corporate expenses of approximately $1.3
million in 1996 and $2.0 million annually thereafter as a result of the
downsizing and consolidation of corporate activities.
Note H - Subsequent Event
On January 31, 1996, SpectraCair, a 50% owned joint venture of MEDIQ/PRN,
acquired certain rental assets from Bio Clinic Corporation, a subsidiary of
Sunrise Medical, Inc.. These assets will expand the joint venture's business of
renting air therapy bed and mattress systems throughout the United States.
<PAGE>
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, 1995 and results of operations for the three month periods ended
December 31, 1995 and 1994. This discussion should be read in conjunction with
the financial statements included elsewhere herein and the Management's
Discussion and Analysis and Financial Statement sections of the Company's Annual
Report on Form 10-K to which the reader is directed for additional information.
Discontinued Operations
In the second quarter of fiscal 1995, the Company adopted a plan to sell its
non-core businesses: MEDIQ Mobile X-Ray Services, Inc., MEDIQ Imaging Services,
Inc., Medifac, Inc., and Health Examinetics, Inc. In the fourth quarter of
fiscal 1995, the Company expanded its plan to include the operations of
HealthQuest, Inc. These operations, in addition to the Company's equity
investment in InnoServ Technologies, Inc. (formerly MMI Medical, Inc.), which is
anticipated to be distributed to the Company's shareholders in fiscal 1996, are
reported as discontinued operations.
In June 1995, the Company sold Medifac and related assets to the management of
Medifac for approximately $11 million, consisting of $6 million in cash and $5
million in notes, and the assumption of $26.9 million of non-recourse debt.
In August 1995, the Company sold the assets of MEDIQ Imaging to NMC Diagnostic
Services, Inc., a division of W.R. Grace & Co., for approximately $17 million in
cash and the assumption of $9.7 million of debt.
The Company anticipates that the disposal of Mobile X-Ray, Health Examinetics
and HealthQuest will be completed in fiscal 1996.
Results of Operations
Revenues were $32.1 million for the first quarter of fiscal 1996, as compared to
$31.8 million in the prior year period. MEDIQ/PRN's revenues for the first
quarter of fiscal 1996 increased to $31.3 million, as compared to 1995 revenues
of $30.8 million. This increase was primarily attributable to increased sales of
disposables and parts and increased levels of service and reconditioning
revenue. Revenues from the Company's other operating activities (before
intercompany eliminations) were $839,000 in the current quarter, as compared to
$933,000 in the prior year period.
<PAGE>
Operating income decreased $1.9 million, to $2.8 million, for the first quarter
of fiscal 1996, as compared to $4.7 million in the prior year period. The
decrease in operating income was primarily attributable to a restructuring
charge of $2.2 million for employee severance costs incurred in connection with
a plan approved by the Board of Directors to downsize corporate functions and
consolidate certain activities with the operations of MEDIQ/PRN. MEDIQ/PRN's
operating income decreased $251,000, which was primarily attributable to
increased depreciation as a result of increased levels of rental assets.
Operating income from the Company's other operating activities was $92,000,
which was consistent with the prior year. Corporate overhead decreased $634,000
primarily as a result of the reduction in corporate personnel in connection with
the restructuring plan discussed above. The Company expects this trend of
decreased corporate overhead to continue throughout fiscal 1996.
Interest expense decreased 10% to $6.6 million for the first quarter of fiscal
1996 from $7.4 million in the prior year period as a result of the repurchase of
$11.25 million of subordinated convertible debentures and debt service of
approximately $13.5 million of term loans related to the KCI acquisition,
partially offset by the 1% increase in the interest rate related to MEDIQ/PRN's
$100 million of senior secured notes.
The Company's equity in the earnings of its unconsolidated affiliates was $1.5
million, as compared to $1.1 million in the prior year period. The increase was
primarily attributable to the improved operating results of PCI and NutraMax.
Revenues and operating income from discontinued operations were $9.8 million and
$1.5 million, respectively, as compared to $19.1 million and $1.9 million in the
prior year period. Estimated operating results from discontinued operations
through the expected date of disposal were included in the estimated loss on
disposal recognized in the fourth quarter of fiscal 1995.
In October and November 1995, the Company repurchased an aggregate of $11.25
million of its 7.25% subordinated convertible debentures at a discount in the
open market and through a private transaction resulting in a pretax gain of $1.5
million ($1.0 million, net of taxes). This gain has been reflected as an
extraordinary item in the Company's Consolidated Statement of Operations.
Income Taxes
The Company's effective tax rates were disproportionate compared to the
statutory rate as a result of goodwill amortization and non-recognition of
certain operating losses for state income tax purposes.
Liquidity and Capital Resources
Cash provided by operating activities was $3.8 million in the current quarter,
as compared to $898,000 in the prior year period. The increase was primarily
attributable to improved operating results, exclusive of the restructuring
charge, and the stabilization of accounts receivable growth resulting from the
KCI acquisition, partially offset by other working capital fluctuations. As of
December 31, 1995, the Company had cash of $1.8 million and a working capital
deficit of $17.5 million. Current liabilities include $22.5 million representing
the portion of the 7.25% subordinated convertible debentures expected to be
repurchased by December 31, 1996.
<PAGE>
Net cash used in investing activities was $2.9 million, and consisted
principally of capital expenditures for equipment of $5.0 million, partially
offset by collections on a note receivable from the sale of discontinued
operations of $1.5 million.
Net cash used in financing activities consisted of borrowings of $12.0 million
and debt repayments of $14.1 million. As of December 31, 1995, the Company had
$3.7 million outstanding under lines of credit aggregating $16.0 million. The
amount of available credit fluctuates based upon the amount of eligible accounts
receivable.
Under the terms of its 7.25% subordinated convertible debentures due 2006, the
Company is required to offer to repurchase a portion of the debentures if
stockholders' equity is $40 million or less at the end of two consecutive fiscal
quarters. Since June 30, 1994, the Company's stockholders' equity has been less
than $40 million. In October and November 1995, the Company repurchased an
aggregate of $11.25 million of its debentures at a discount in the open market
and through a private transaction. The Company is required to either repurchase
or redeem $11.25 million of debentures prior to June 30, 1996 and semi-annually
thereafter until all of the debentures are repurchased or stockholders' equity
is more than $40 million. As of December 31, 1995, $22.5 million of the
debentures have been classified as a current liability.
In December 1995, the Company's $13.4 million revolving credit facility was
extended to December 1996 and increased to $15.0 million with interest reduced
to the prime rate plus 1/2%. In addition, as amended, the facility will be
reduced by an amount equal to 50% of the net cash proceeds from the sale of
discontinued operations and certain other assets. As of December 31, 1995, $8.7
million was outstanding under this facility.
The Company expects that its primary sources of liquidity for operating
activities will continue to be generated through cash flows from MEDIQ/PRN and
the sale of discontinued operations and miscellaneous assets. The proceeds from
such sales and MEDIQ/PRN's cash flows will be used to repay long-term debt. The
Company believes that sufficient funds will be available from operating cash
flows and the sale of assets to meet the Company's anticipated operating and
capital requirements, including obligations to redeem or repurchase in the open
market a portion of the 7.25% subordinated convertible debentures. In addition,
the Company is currently evaluating the possibility of refinancing all or a
portion of its consolidated senior and subordinated debt, but there can be no
assurances that such refinancing will occur.
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1995
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 10 - Bernard J. Korman Severance Agreement.
Exhibit 11 - Computation of Net Income Per Share.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed the following report on Form 8-K during the quarter ended
December 31, 1995:
Date of Earliest Event Requiring Report: October 19, 1995
Date of Filing: November 6, 1995
Items Reported: Item 5
Subject: Board of Directors accepts recommendation of its Special
Committee to reject the two outstanding offers to acquire
the Company and terminate any further efforts to sell the
Company at the present time; resignation of Bernard J.
Korman, President and Chief Executive Officer;
announcement of the election of Thomas E. Carroll as
President and Chief Executive Officer of the Company.
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1995
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, 1996
- ------------------
(Date) /s/ Michael F. Sandler
--------------------------
Michael F. Sandler
Senior Vice President - Finance
and Chief Financial Officer
<PAGE>
<PAGE>
AGREEMENT dated as of this 1st day of January, 1996 by and among MEDIQ,
Incorporated, a Delaware corporation on its own behalf and on behalf of its
subsidiary corporations and its officers, directors and employees and the
officers, directors and employees of its subsidiary corporations, ('MEDIQ' or
'Company') and Bernard J. Korman on his own behalf and on behalf of his
executors, administrator, successors and assigns ('Mr. Korman').
W I T N E S S E T H:
WHEREAS, Mr. Korman has been employed by MEDIQ as its President and Chief
Executive Officer and he has served as a member of MEDIQ's Board of Directors
and as a director of Nutramax, PCI, MHM, and MMI, all affiliates of MEDIQ or its
principal stockholders;
WHEREAS, Mr. Korman is a participant in and has certain rights with respect
to the Company's deferred compensation plan, employees savings plan and pension
plan, as well as options to purchase Company stock, which expire on January 23,
1996, all as are set forth in Schedule I appended hereto;
WHEREAS, in connection with a change in the Company's business direction,
Mr. Korman's employment as President and Chief Executive Officer of MEDIQ
terminated on October 23, 1995 and in connection therewith has made certain
claims against MEDIQ with respect to compensation and severance;
WHEREAS, since October 23, 1995 MEDIQ has tendered Mr. Korman and Mr.
Korman has received the appropriate documentation permitting him to elect to
preserve his rights to continue certain benefits at his expense under COBRA;
WHEREAS, the parties hereto desire to compromise and settle all claims
which each may have against the other.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is acknowledged, the
parties hereto, intending to be legally bound hereby agree as follows:
1. Resignation from Employment. Mr. Korman hereby acknowledges and
affirms that his employment as President and Chief Executive Officer of
MEDIQ and its subsidiary MEDIQ/PRN terminated as of October 23, 1995. He
has or will promptly relinquish and return all Company property including
credit cards, computers, lists and accounts.
2. Board Positions. Mr. Korman resigns effective January 1, 1996 as a
director of MEDIQ. Mr. Korman will not be slated for election as a director
at MEDIQ's 1996 annual meeting, and it is understood that MEDIQ and its
principal stockholders are free to take such action as they deem
appropriate with respect to the slating or voting for the election of Mr.
Korman to the boards of directors of Nutramax, PCI, MHM and MMI. Mr. Korman
agrees that, if not so slated or voted for, he will make no challenge to
the decision of MEDIQ or its principal stockholders. In addition, upon
MEDIQ's written request, Mr. Korman will affirmatively inform any of these
companies that he is unwilling to be slated for election as a director.
3. Severance. MEDIQ shall pay Mr. Korman as severance pay
$1,185,000.00 in 36 equal monthly installments, the first three such
payments being due seven days after execution of this Agreement and
subsequent payments being due on the 15th day of each month thereafter. Mr.
Korman acknowledges that these payments will be subject to any required
withholding of federal, state and local taxes. In the event of his death
prior to his receipt of the entire severance, the remaining installments
shall be paid to Mr. Korman's wife, if she survives him, or to his estate
if his wife predeceases him, in either case in a lump sum at its then
present value discounted at the then prime interest rate plus one percent.
Such severance shall be in full satisfaction of all obligations, including
claims for bonus, to Mr. Korman except for his vested rights under various
Company plans listed in Schedule I. MEDIQ's severance obligations hereunder
shall cease immediately in the event that Mr. Korman shall materially
breach his obligations under Paragraph 2, 5 or 6(a) of this Agreement.
<PAGE>
4. Cooperation. For a reasonable period following the execution and
delivery of this Agreement, Mr. Korman shall make himself reasonably
available (with due consideration as to Mr. Korman's other commitments)
upon request of MEDIQ to assist MEDIQ with regard to matters where he, as
the former CEO, has unique knowledge or perspective. Mr. Korman shall be
reimbursed for all out-of-pocket expenses (including first class air travel
and accommodations) incurred in connection with any such assistance.
5. Non-Disclosure of Confidential Information. Mr. Korman shall not
without the prior written consent of MEDIQ, use or disclose in any manner,
directly or indirectly, any non-public information concerning MEDIQ or any
of its subsidiaries.
6. Non-Disparagement. (a) Mr. Korman shall make no statement which is
directly disparaging of or is otherwise negative about MEDIQ, its officers
or directors or about its subsidiaries or their officers, directors and
employees.
(b) MEDIQ shall make no statement which is directly disparaging of
or is otherwise negative about Mr. Korman.
7. Release. (a) In consideration of the benefits herein provided and
as a material inducement for MEDIQ to enter into and perform its
obligations under this Agreement, Mr. Korman hereby releases MEDIQ, its
subsidiaries and their respective shareholders, affiliates, officers,
directors, employees, agents and representatives and each of them from and
against any and all claims which Mr. Korman may have against them or any of
them arising out of events occurring prior to the date of this Agreement,
including but not limited to, any claim for employment discrimination,
wrongful termination, breach of any agreement, express or implied, written
or oral, or any other claim arising under any federal, state, or local
common or statutory law including claims of age discrimination.
(b) As a material inducement for Mr. Korman to enter into this
Agreement, MEDIQ hereby releases Mr. Korman from and against any and all
claims which any of them may have against him arising out of events
occurring prior to the date of this Agreement.
(c) Notwithstanding the mutual releases as set forth in the
foregoing subparagraphs (a) and (b), nothing contained herein shall
affect the right of any party hereto to enforce the terms of this
Agreement, and it is understood that Mr. Korman retains all rights to
indemnification as a director or officer of MEDIQ or as a director or
officer of its subsidiaries as provided under the respective By-laws of
those corporations and applicable law and that this release does not
purport to affect any of Mr. Korman's rights under the plans listed on
Schedule I.
8. Confidentiality. Each party hereto agrees that the terms and
conditions of this Agreement shall remain strictly confidential and shall
not be disclosed by any party to any person who is not a party to this
Agreement (with the exception of a spouse, financial advisor, accountant or
attorney of a party) unless such disclosure is required by law.
9. Certain Representations. Each party hereto represents and agrees
that he or it has consulted with counsel, that he or it fully understands
the terms of this Agreement and is free and voluntarily entering into this
Agreement in consideration of the covenants and agreements herein set
forth. Mr. Korman represents that he has had 21 days to consider this
Agreement before its execution, and that he may revoke his Agreement for a
period of seven days after he has executed it.
10. Legal Fees. Each party hereto shall bear his or its respective
legal fees in connection with the negotiation and the consummation of this
Agreement.
11. Entire Understanding. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject hereof and
may be modified or amended only in writing signed by each of the parties
hereto.
2
<PAGE>
12. New Jersey. This Agreement shall be construed and interpreted
under the laws of the State of New Jersey.
13. Non-Admission. MEDIQ does not concede and expressly denies that
it has violated any law, statute, ordinance, contract, duty, or obligation
whatsoever, or that it committed any tort or engaged in any wrongful
conduct with respect to Mr. Korman.
14. No Reemployment. By this Agreement, Mr. Korman agrees that Mr.
Korman shall neither apply for employment nor seek reinstatement of
employment with MEDIQ in the future. Mr. Korman hereby waives any rights
that may accrue to Mr. Korman and releases MEDIQ from any liability that
may arise against it because of any rejection of any application for
employment with MEDIQ that Mr. Korman may make notwithstanding this
provision.
15. Notices. Any notice required or permitted hereunder shall be
given to a party in writing at the respective address set forth below by
certified or registered mail, return receipt requested, or at such other
address as a party may provide by written notice:
<TABLE>
<S> <C>
To Mr. Korman: Bernard J. Korman
3001 Red Lion Road
Philadelphia, PA 19114-1123
To MEDIQ: MEDIQ INCORPORATED
One Mediq Plaza
Pennsauken, NJ 08110-1400
</TABLE>
16. Agreement Binding. This Agreement shall be binding upon the parties
hereto, their respective successors and assigns, heirs and administrators, as
the case may be.
17. PCI Compensation. MEDIQ acknowledges that if Mr. Korman continues to
play a role in the sale of PCI and makes a significant positive contribution
thereto, MEDIQ may, in MEDIQ's discretion, pay Mr. Korman a bonus in connection
therewith.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
/s/_Bernard J. Korman_________________
Bernard J. Korman
MEDIQ
By:_/s/_Michael J. Rotko______________
Chairman
3
<PAGE>
SCHEDULE I
LIST OF MR. KORMAN'S ACCOUNTS
MEDIQ Employees Savings Plan
Executive Security Plan (it being understood that Mr. Korman's deferred benefit
account under the Executive Security Plan will continue to be credited at the
retirement interest yield until his normal retirement date (age 65) and will be
amortized using the same rate)
MEDIQ Employees Pension Plan (full benefits payable as of November 1, 1996)
Stock options in respect of 500,000 shares of MEDIQ stock pursuant to
certificate dated as of August 25, 1993
Rights to continued medical and dental benefits under COBRA
4
EXHIBIT 11
MEDIQ INCORPORATED AND SUBSIDIARIES
Computation of Net Income Per Share
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------
1995 1994
---- ----
<S> <C> <C>
Computation of Primary Earnings Per Share:
Net Loss $ (367) $ (211)
======== ========
Weighted average of primary shares:
Common stock 17,853 17,740
Preferred stock 6,374 6,427
Assumed conversion of options 354 280
-------- --------
Total 24,581 24,447
======== ========
Primary Earnings Per Share $ (.01) $ (.01)
======== ========
Computation of Fully Diluted Earnings Per Share (1):
Net Loss $ (367) $ (211)
Interest and amortization of
deferred costs on convertible
debentures - net of tax 456 579
-------- --------
Total $ 89 $ 368
======== ========
Weighted average of fully diluted shares:
Common stock 17,853 17,740
Preferred stock 6,374 6,427
Assumed conversion of options 354 295
Assumed conversion of convertible
debentures 5,397 6,897
-------- --------
Total 29,978 31,359
======== ========
Fully Diluted Earnings Per Share $ -- $ (.01)
======== ========
</TABLE>
(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%.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 1,803
<SECURITIES> 0
<RECEIVABLES> 34,223
<ALLOWANCES> 2,417
<INVENTORY> 4,726
<CURRENT-ASSETS> 63,934
<PP&E> 229,260
<DEPRECIATION> 95,377
<TOTAL-ASSETS> 335,971
<CURRENT-LIABILITIES> 81,446
<BONDS> 205,597
<COMMON> 19,145
0
3,367
<OTHER-SE> 8,638
<TOTAL-LIABILITY-AND-EQUITY> 335,971
<SALES> 0
<TOTAL-REVENUES> 32,093
<CGS> 0
<TOTAL-COSTS> 29,257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,635
<INCOME-PRETAX> (1,868)
<INCOME-TAX> (500)
<INCOME-CONTINUING> (1,368)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,001
<CHANGES> 0
<NET-INCOME> (367)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
