UNITED STATES
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, 1996 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) 662-3200
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 7, 1997, there were 18,513,673 shares of Common Stock, par value
$1.00 per share and 6,300,501 shares of Preferred Stock, par value $.50 per
share, outstanding.
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1996
INDEX
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements.
Condensed Consolidated Statements of Operations-
Three Months Ended December 31, 1996 and 1995
(Unaudited) 4
Condensed Consolidated Balance Sheets-
December 31, 1996 (Unaudited) and
September 30, 1996 5
Condensed Consolidated Statements of Cash Flows-
Three Months Ended December 31, 1996 and 1995
(Unaudited) 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 11-15
PART II. OTHER INFORMATION:
Item 5. Other Information. 16
Item 6. Exhibits and Reports on Form 8-K. 16-17
2
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
3
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------------
1996 1995
--------- --------
<S> <C> <C>
Revenues $ 35,483 $ 32,093
Costs and Expenses:
Cost of sales and operating 15,589 14,128
Selling and administrative 5,989 5,430
Restructuring -- 2,200
Depreciation and amortization 7,367 7,423
---------- ---------
28,945 29,181
---------- ---------
Operating Income 6,538 2,912
Other (Charges) Credits:
Interest expense (6,513) (6,711)
Equity participation - repurchase of MEDIQ/PRN warrant (11,047) --
Market appreciation - Cardinal Health stock 5,192 --
Other - net 465 414
---------- ---------
Loss from Continuing Operations before
Income Taxes and Extraordinary Item (5,365) (3,385)
Income Tax Expense (Benefit) 2,126 (1,015)
--------- ----------
Loss before Discontinued Operations and Extraordinary Item (7,491) (2,370)
Discontinued Operations (net of taxes) 37,241 1,002
Extraordinary Item - Early Retirement of Debt (net of taxes) (6,464) 1,001
--------- ---------
Net Income (Loss) $ 23,286 $ (367)
========= =========
Earnings per share:
Primary:
Continuing Operations $ (.30) $ (.09)
Discontinued Operations 1.47 .04
Extraordinary Item (.25) .04
--------- ---------
Net Income (Loss) $ .92 $ (.01)
========= =========
Weighted Average Shares Outstanding 25,262 24,581
========= =========
Fully Diluted:
Continuing Operations $ (.24) $ (.06)
Discontinued Operations 1.27 .03
Extraordinary Item (.22) .03
--------- ---------
Net Income (Loss) $ .81 $ --
========= =========
Weighted Average Shares Outstanding 29,230 29,978
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Dec. 31, Sept. 30
1996 1996
--------- ---------
(Unaudited) (See Note)
Assets
<S> <C> <C>
Current Assets:
Cash $ 4,411 $ 3,219
Marketable equity securities 89,604 --
Accounts receivable - net 37,496 30,233
Inventories 6,432 6,614
Deferred income taxes 4,185 2,447
Other current assets 3,796 2,280
--------- ---------
Total Current Assets 145,924 44,793
Investment in discontinued operations - restricted -- 54,717
Note receivable from MHM 3,775 3,967
Note receivable from NutraMax 13,617 --
Property, plant and equipment - net 121,326 122,706
Goodwill - net 56,827 58,321
Deferred financing fees 9,254 4,225
Other assets 8,810 9,134
--------- ---------
Total assets $ 359,533 $ 297,863
========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 8,405 $ 8,907
Accrued expenses 17,957 17,937
Investment in discontinued operations - net 5,050 --
Federal and state taxes payable 4,732 (310)
Current portion of long-term debt 8,515 8,520
--------- ---------
Total Current Liabilities 44,659 35,054
Senior debt 219,651 192,461
Subordinated debt 27,833 41,229
Deferred income taxes and other liabilities 26,395 11,674
Stockholders' Equity 40,995 17,445
--------- ---------
Total Liabilities and Stockholders' Equity $ 359,533 $ 297,863
========= =========
</TABLE>
Note: The balance sheet at September 30, 1996 has been condensed from the
audited financial statements at that date.
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------------
1996 1995
--------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 23,286 $ (367)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities (36,212) 4,188
--------- ---------
Net cash provided by (used in) operating activities (12,926) 3,821
Cash flows from investing activities:
Proceeds from sale of equipment and other assets -- 824
Proceeds from sale of discontinued operations 25,265 1,500
Purchase of equipment (5,036) (4,968)
Repurchase of MEDIQ/PRN warrant (12,500) --
Other (205) (283)
--------- ---------
Net cash provided by (used in) investing activities 7,524 (2,927)
Cash flows from financing activities:
Borrowings 214,000 12,042
Debt repayments (199,519) (14,099)
Deferred financing fees (8,151) --
Exercise of stock options 264 --
--------- ---------
Net cash provided by (used in) financing activities 6,594 (2,057)
--------- ---------
Increase (decrease) in cash 1,192 (1,163)
--------- ---------
Cash:
Beginning balance 3,219 2,966
--------- ---------
Ending balance $ 4,411 $ 1,803
========= =========
Supplemental disclosure of cash flow information:
Interest paid $ 7,927 $ 3,838
========= =========
Supplemental disclosure of non-cash investing and financing activities:
Equipment financed with long-term debt and capital leases $ -- $ 2,740
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
6
<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, 1996 and the
condensed consolidated statements of operations and cash flows for the three
months ended December 31, 1996 and 1995 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, 1996 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, 1996 Annual Report on Form 10-K.
The results of operations for the period ended December 31, 1996 are not
necessarily indicative of the operating results for the full year.
Note B - Discontinued Operations
On December 31, 1996, the Company sold to NutraMax Products, Inc. ("NutraMax";
NASDAQ:NMPC), all of the 4,037,258 shares of NutraMax common stock owned by the
Company at a price of $9.00 per share. The Company received from NutraMax $19.9
million in cash and an interest-bearing promissory note (the "note") in the
amount of $16.4 million. The note matures in July 2003 and bears interest at
7.5% per annum for the first eighteen months. The note is payable when NutraMax
shares owned by the Company, which currently are held in escrow in support of
the Company's 7.50% Exchangeable Subordinated Debentures due 2003, are delivered
to NutraMax upon release from escrow. The NutraMax shares are to be released
from escrow upon the purchase or redemption of the 7.50% debentures. The note
does not bear a market rate of interest for its full term. Accordingly, the
Company discounted the note to $13.6 million and recognized an after-tax gain of
$4.6 million, or $.18 per share. The cash proceeds from this transaction were
used to reduce borrowings under the Credit Agreement (See Note C).
On November 6, 1996, the Company sold substantially all of the assets of MEDIQ
Mobile X-Ray Services, Inc. to Symphony Diagnostics, Inc., a subsidiary of
Integrated Health Services, Inc. (NYSE:IHS) for $5.3 million in cash and shares
of Integrated Health Services common stock with a value of $5.2 million with the
possibility of the Company receiving additional cash consideration based upon
the occurrence of certain future events. The loss on the disposal of these
assets was recorded in fiscal 1996.
On October 11, 1996, PCI Services, Inc., was acquired by Cardinal Health, Inc
("Cardinal"). As a result, the Company received 966,000 shares of Cardinal stock
which, based on the closing price on October 11, 1996, had a market value of
$79.2 million. The Company recognized an after-tax gain of $31.8 million on this
transaction in the first quarter of fiscal 1997. In December 1996, Cardinal's
common stock split 3 for 2 and, as of December 31, 1996, the Company owned
1,449,000 shares which had an aggregate market value of $84.4 million based upon
the closing price of $58.25 per share on that date. Accordingly, the Company
recognized market appreciation of $5.2 million on the Cardinal shares in the
first quarter of fiscal 1997. The
7
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note B - Discontinued Operations (Continued)
Company sold its Cardinal shares in January 1997 and recognized an additional
pretax gain of $4 million. The Company used a significant portion of the
proceeds to reduce borrowings under the Credit Agreement (See Note C). The
remaining proceeds of approximately $8.2 million were placed in a restricted
account with the Company's lender and such proceeds are available, upon
compliance with certain covenants to repay future indebtedness or to make
investments.
The Company anticipates that the disposal of Health Examinetics, Inc. and
InnoServ Technologies, Inc., its remaining discontinued operations, will be
completed in fiscal 1997.
The investment in discontinued operations as of December 31, 1996 consisted of
(in thousands):
Current assets $ 3,661
Current liabilities 7,046
--------
Net current liabilities (3,385)
Net fixed assets 2,592
Other noncurrent liabilities (4,257)
---------
$ (5,050)
========
Revenues from discontinued operations were $1.5 million and $9.8 million in the
first quarter of fiscal 1997 and 1996, respectively.
Note C - Long-Term Debt
On October 1, 1996, the Company, together with MEDIQ/PRN entered into a $260
million Credit Agreement with a group of lenders (the "Credit Agreement"). The
Credit Agreement provides for four separate loans, a Term A loan ($35 million),
a Term B loan ($100 million), an Acquisition Revolver ($100 million) and a
Working Capital Revolver ($25 million). The amounts available under the Credit
Agreement allowed the Company to refinance substantially all of its existing
senior debt, its outstanding lines of credit, all of MEDIQ/PRN's subordinated
debt, and MEDIQ/PRN's $100 million 11 1/8% Senior Secured Notes due 1999. As of
December 31, 1996, the Company had $55 million available under the Acquisition
Revolver and $4 million available under the Working Capital Revolver both of
which were available to the Company upon compliance with certain financial
covenants and/or ratios. In January 1997, the Acquisition Revolver and Working
Capital Revolver were repaid in full from a portion of the proceeds received
from the sale of the Cardinal shares (See Note B).
On January 24, 1997, the Company executed an amendment to the Credit Agreement
increasing the Term B loan by $45 million and the Working Capital Revolver by $5
million. The additional funds are available at the time of consummation of the
acquisition of Universal Hospital Services, Inc. ("Universal") (See Note F).
8
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note C - Long-Term Debt (Continued)
The loans bear interest at either the prime rate plus a factor or at a
Eurodollar rate plus a factor. The factor changes quarterly based upon the
Company's leverage ratio. The Company's interest rate on the Term A loan, the
Acquisition Revolver and the Working Capital Revolver is prime (8.25% at
December 31, 1996) plus 1.25% or Eurodollar (5.625% at December 31, 1996) plus
2.75% and the interest rate on the Term B loan is prime plus 1.75% or Eurodollar
plus 3.25%. The loans are collateralized by substantially all of the assets of
the Company.
In accordance with the terms of the Credit Agreement, effective November 15,
1996, the Company entered into interest rate hedge transactions which terminate
in January 2000. Under one of these transactions, on $50 million of borrowings,
the Company's base Eurodollar borrowing rate is fixed at 6.26% per annum,
instead of a floating Eurodollar rate. Under the second hedge transaction, on an
additional $50 million of borrowings, the Company's base Eurodollar rate cannot
be lower than 5.25% or greater than 7.43%.
As a result of the refinancing, the Company recognized in the first quarter of
1997, an extraordinary charge of $13 million ($6.7 million net of taxes)
resulting from the write-off of deferred charges and premiums incurred related
principally to the tender offer to purchase the $100 million 11 1/8% Senior
Secured Notes due 1999, and a non-recurring charge of $11 million for the
repurchase of a warrant to purchase 10% of MEDIQ/PRN issued in connection with
financing the KCI acquisition in 1994. The non-recurring charge is reflected in
Other Charges on the Company's Condensed Consolidated Statement of Income.
In October 1996, the Company repurchased $6.7 million of its 7.5% Exchangeable
Debentures at a discount in the open market. The Company recognized an
extraordinary gain of $.3 million, net of taxes and the write-off of deferred
charges related to the debentures in the first quarter of 1997.
Under the terms of the Company's 7.25% Subordinated Convertible Debentures due
2006 ("debentures"), the Company is required to offer to repurchase or redeem a
portion of the debentures if stockholders' equity is $40 million or less at the
end of two consecutive fiscal quarters. As of June 30, 1994 and through
September 30, 1996, the Company's stockholders' equity was less than $40
million. In December 1996 and January 1997, the Company repurchased in the open
market $6.26 million of its debentures at prices approximating face value in
order to satisfy a portion of its redemption obligation. In January 1997, the
Company, through a Special Mandatory Redemption Obligation Offer made to all
bond holders of record on December 28, 1996, repurchased an additional $4.99
million of debentures representing the remaining balance of its obligation to
purchase $11.25 million of debentures for the period ended December 31, 1996. In
addition, the Company repurchased an additional $4.6 million of debentures in
January 1997. The Company's Stockholders' Equity exceeded $40 million as of
December 31, 1996, and as a result, the Company no longer has an obligation to
offer to repurchase or redeem its debentures on June 30, 1997.
On February 13, 1997, the Company notified all holders of its 7.25% subordinated
convertible debentures that the Company has elected to redeem on February 28,
1997 (the "Redemption Date") all of the outstanding debentures at a redemption
price equal to 100% of the principal
9
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note C - Long-Term Debt (Continued)
amount thereof, together with interest accrued from December 1, 1996 to the
Redemption Date, for a total payment of $1,017.52 per $1,000 principal amount of
debentures. The Company intends to fund the redemption with proceeds from its
existing Credit Agreement, as amended. Accordingly, as of December 31, 1996, the
outstanding balance of the debentures, $27 million has been classified as senior
debt in the Company's Condensed Consolidated Balance Sheet. The debentures were
originally issued in 1986, and an aggregate principal amount of $13.3 million
are currently outstanding.
Note D - 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 E - Commitments and Contingencies
On February 10, 1997, the Company was sued in the Superior Court of New Jersey
by its former wholly-owned subsidiary, MHM Services, Inc. ("MHM"; formerly
Mental Health Management, Inc.). The suit challenges the validity of a note
receivable the Company and MHM entered into upon the spin-off of MHM to MEDIQ's
shareholders in August 1993. The Company believes this suit has no merit and
intends to defend the suit vigorously. In addition, MHM has not made the
required February installment on the note. On February 11, 1997 the Company gave
notice to MHM of its default on the note and declared all sums outstanding under
the note to be immediately due and payable. The Company does not believe an
additional reserve on the carrying value of the note receivable is necessary at
this time and is pursuing collection efforts.
Note F - Acquisition of Universal Hospital Services, Inc.
On February 11, 1997, the Company entered into a definitive agreement with
Universal Hospital Services, Inc. ("Universal") (NASDAQ; UHOS) to acquire the
outstanding shares of Universal for $17.50 per share. Including the assumption
of debt, the total purchase price is approximately $138 million. Universal
provides movable medical equipment to over 3,300 hospitals and alternate care
providers principally through Pay-per-Use equipment management programs. Under
Universal's rental programs, health care providers are charged a per use rental
fee based on actual usage. In addition, Universal sells disposable supplies
related to the equipment it rents. Universal operates in 46 states in five
primary categories - critical care, monitoring, newborn care, respiratory care
and specialty beds.
The transaction is structured as a cash merger that is expected to close in late
March 1997 and is subject to approval by a majority of Universal's shareholders
and Hart Scott-Rodino clearance. The Company will fund the transaction out of
its available funds and existing Credit Agreement, as amended.
Note G - New Accounting Pronouncement
Effective October 1, 1996, the Company formally adopted SFAS No. 123
"Accounting for Stock-based Compensation Plans." The Company will adopt this
statement by disclosing the proforma net income and net earnings per share
amounts assuming the fair value method in the fiscal year end 1997 financial
statements, as required. As a result, the adoption of this statement will not
have any impact on reported results of operations and financial position.
10
<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, 1996 and results of operations for the three month periods ended
December 31, 1996 and 1995. 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 for the year ended September 30, 1996 to which the reader is
directed for additional information.
Results of Operations
Revenues from continuing operations were $35.5 million for the first quarter of
fiscal 1997, as compared to $32.1 million in the prior year period, an increase
of $3.4 million, or 11%. The revenue growth was attributable to a 4.5% increase
in rental revenue and an 11% increase in other revenue, primarily from the sale
of repair parts, accessories and disposable products, and outsourcing services.
The growth in rental revenues was achieved primarily by increased volume through
an expanded customer base, despite a continuing trend in the marketplace of
better utilization of equipment by customers. The Company expects this trend to
continue, with increased potential for its CAMP(R) and CAMP Plus(R) programs as
customers seek to reduce capital and operating expenses.
Operating income increased $3.6 million, or 125%, to $6.5 million, for the first
quarter of fiscal 1997, as compared to $2.9 million in the prior year period.
The improvement in operating income was primarily attributable to revenue growth
and reductions in corporate overhead of $.6 million related to the downsizing of
corporate functions and consolidation of certain activities with the operations
of MEDIQ/PRN that occured in connection with a restructuring. In the first
quarter of fiscal 1996 the Company incurred a restructuring charge of $2.2
million in connection with the downsizing.
Interest expense decreased 3% to $6.5 million for the first quarter of fiscal
1997 primarily as a result of lower interest rates associated with the
refinancing that occurred on October 1, 1996.
In October 1996, the Company incurred a non-recurring charge of $11 million
for the repurchase of a warrant to purchase 10% of MEDIQ/PRN issued in
connection with financing the KCI acquisition in 1994.
The Company's effective tax rates were disproportionate compared to the
statutory rate as a result of the nondeductibility of the expense associated
with the repurchase of the MEDIQ/PRN warrant, goodwill amortization and
non-recognition of certain operating losses for state income tax purposes.
On December 31, 1996, the Company sold to NutraMax Products, Inc. ("NutraMax";
NASDAQ:NMPC), all of the 4,037,258 shares of NutraMax common stock owned by the
Company at a price of $9.00 per share. The Company received from NutraMax $19.9
million in cash and an interest-bearing promissory note (the "note") in the
amount of $16.4 million. The note matures in July 2003 and bears interest at
7.5% per annum for the first eighteen months. The note is payable when NutraMax
shares owned by the Company, which currently are held in escrow in support of
the Company's 7.50% Exchangeable Subordinated Debentures due 2003, are delivered
to NutraMax upon release from escrow. The NutraMax shares are to be released
from escrow upon the purchase or redemption of the 7.50% debentures. The note
does not bear a market rate of interest for its full term. Accordingly, the
Company discounted the note to $13.6 million and recognized an after-tax gain of
$4.6 million, or $.18 per share. The cash proceeds from this transaction were
used to reduce borrowings under the Credit Agreement.
11
<PAGE>
On November 6, 1996, the Company sold substantially all of the assets of MEDIQ
Mobile X-Ray Services, Inc. to Symphony Diagnostics, Inc., a subsidiary of
Integrated Health Services, Inc. (NYSE:IHS) for $5.3 million in cash and shares
of Integrated Health Services common stock with a value of $5.2 million with the
possibility of the Company receiving additional cash consideration based upon
the occurrence of certain future events. The loss on the disposal of these
assets was recorded in fiscal 1996.
On October 11, 1996, PCI Services, Inc., was acquired by Cardinal Health, Inc.
("Cardinal"). As a result, the Company received 966,000 shares of Cardinal stock
which, based on the closing price on October 11, 1996, had a market value of
$79.2 million. The Company recognized an after-tax gain of $31.8 million on this
transaction in the first quarter of fiscal 1997. In December 1996, Cardinal's
common stock split 3 for 2 and, as of December 31, 1996, the Company owned
1,449,000 shares which had an aggregate market value of $84.4 million based upon
the closing price of $58.25 per share on that date. Accordingly, the Company
recognized market appreciation of $5.2 million on the Cardinal shares in the
first quarter of fiscal 1997. The Company sold its Cardinal shares in January
1997 for $88.4 million and recognized an additional pretax gain of $4 million.
The Company used a significant portion of the proceeds to reduce borrowings
under the Credit Agreement. The remaining proceeds of approximately $8.2 million
were placed in a restricted account with the Company's lender and such proceeds
are available, upon compliance with certain covenants to repay future
indebtedness or to make investments.
Revenues and operating loss from discontinued operations were $1.5 million and
$.2 million, respectively, as compared to revenues and operating income of $9.8
million and $1.5 million, respectively, 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 fiscal
1996.
As a result of the refinancing, the Company recognized in the first quarter of
1997, an extraordinary charge of $13 million ($6.7 million net of taxes)
resulting from the write-off of deferred charges and premiums incurred related
principally to the tender offer to purchase the $100 million 11 1/8% Senior
Secured Notes due 1999.
In October 1996, the Company repurchased $6.7 million of its 7.5% Exchangeable
Debentures at a discount in the open market. The Company recognized an
extraordinary gain of $.3 million, net of taxes and the write-off of deferred
charges related to the debentures in the first quarter of 1997.
12
<PAGE>
The current period reflects several significant non-recurring transactions
as discussed above. In addition, the Company refinanced a significant portion of
its debt and reduced its average borrowing rate. The following table provides a
proforma analysis of the Company's results of operations as if the Company (a)
had not repurchased the MEDIQ/PRN warrant, (b) applied the proceeds from the
sales of its investments in discontinued operations in the first quarter of 1997
to its outstanding debt as of October 1, 1996 and (c) tax affected the
adjustments described in (a) and (b).
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1996 Proforma December 31, 1996
Actual Adjustments Proforma
------------------ ----------- -------------------
<S> <C> <C> <C>
Revenues $ 35,483 $ 35,483
Operating Income 6,538 6,538
Other (Charges) Credits:
Interest expense (6,513) 2,582(b) (3,931)
Equity participation - repurchase of
MEDIQ/PRN warrant (11,047) 11,047(a) --
Market appreciation - Cardinal Health
stock 5,192 (5,192)(b) --
Other - net 465 465
-------- --------
Loss from Continuing Operations before
Income Taxes and Extraordinary Item (5,365) 3,072
Income Tax Expense 2,126 (732)(c) 1,394
-------- --------
Loss from Continuing Operations $ (7,491) $ 1,678
======== ========
</TABLE>
Liquidity and Capital Resources
Cash used in operating activities was $12.9 million in the current quarter,
as compared to cash provided by operations of $3.8 million in the prior year
period. The decrease was primarily attributable to the payment of interest on
indebtedness more frequently under the Company's new credit facility as compared
to semi-annually in the prior year period, and lower collections of accounts
receivable which were temporarily affected by the implementation of a new
computer system.
Net cash provided by investing activities was $7.5 million, and consisted
cash proceeds from the sales of certain assets of Mobile X-Ray and the Company's
investment in NutraMax aggregating $25.3 million, partially offset by capital
expenditures for equipment of $5.0 million and the repurchase of the MEDIQ/PRN
warrant for $12.5 million.
Net cash provided by financing activities consisted of borrowings of $214
million related to the refinancing, partially offset by debt repayments of
$171.6 million related to the refinancing, $19 million of scheduled debt service
and revolver activity, $8.9 million of subordinated debenture repurchases and
deferred financing fees of $8.2 million related to the refinancing.
On October 1, 1996, the Company, together with MEDIQ/PRN entered into a
$260 million Credit Agreement with a group of lenders (the "Credit Agreement").
The Credit Agreement provides for four separate loans, a Term A loan ($35
million), a Term B loan ($100 million), an Acquisition Revolver ($100 million)
and a Working Capital Revolver ($25 million). The amounts available under the
Credit Agreement allowed the Company to refinance substantially all of its
existing senior debt, its outstanding lines of credit, all of MEDIQ/PRN's
subordinated debt, and MEDIQ/PRN's $100 million 11 1/8% Senior Secured Notes due
1999. As of December 31, 1996, the Company had $55 million available under the
Acquisition Revolver and $4 million available under the Working Capital Revolver
both of which were available to the Company upon compliance with certain
financial covenants and/or ratios. In January 1997, the Acquisition Revolver and
Working Capital Revolver were repaid in full from a portion of the proceeds
received from the sale of the Cardinal shares.
13
<PAGE>
The loans bear interest at either the prime rate plus a factor or at a
Eurodollar rate plus a factor. The factor changes quarterly based upon the
Company's leverage ratio. The Company's interest rate on the Term A loan, the
Acquisition Revolver and the Working Capital Revolver is prime (8.25% at
December 31, 1996) plus 1.25% or Eurodollar (5.625% at December 31, 1996) plus
2.75% and the interest rate on the Term B loan is prime plus 1.75% or Eurodollar
plus 3.25%. The loans are collateralized by substantially all of the assets of
the Company.
In accordance with the terms of the Credit Agreement, effective November 15,
1996, the Company entered into interest rate hedge transactions which terminate
in January 2000. Under one of these transactions, on $50 million of borrowings,
the Company's base Eurodollar borrowing rate is fixed at 6.26% per annum,
instead of a floating Eurodollar rate. Under the second hedge transaction, on an
additional $50 million of borrowings, the Company's base Eurodollar rate cannot
be lower than 5.25% or greater than 7.43%.
Under the terms of the Company's 7.25% Subordinated Convertible Debentures due
2006, (the "debentures") the Company is required to offer to repurchase or
redeem a portion of the debentures if stockholders' equity is $40 million or
less at the end of two consecutive fiscal quarters. As of June 30, 1994 and
through September 30, 1996, the Company's stockholders' equity was less than $40
million. In December 1996 and January 1997, the Company repurchased in the open
market $6.26 million of its debentures at prices approximating face value in
order to satisfy a portion of its redemption obligation. In January 1997, the
Company, through a Special Mandatory Redemption Obligation Offer made to all
bond holders of record on December 28, 1996, repurchased an additional $4.99
million of debentures representing the remaining balance of its obligation to
purchase $11.25 million of debentures for the period ended December 31, 1996. In
addition, the Company repurchased an additional $4.6 million of debentures in
January 1997. The Company's Stockholders' Equity exceeded $40 million as of
December 31, 1996, and as a result, the Company no longer has an obligation to
offer to repurchase or redeem its debentures on June 30, 1997.
On February 13, 1997, the Company notified all holders of its 7.25% subordinated
convertible debentures that the Company has elected to redeem on February 28,
1997 (the "Redemption Date") all of the outstanding debentures at a redemption
price equal to 100% of the principal amount thereof, together with interest
accrued from December 1, 1996 to the Redemption Date, for a total payment of
$1,017.52 per $1,000 principal amount of debentures. The Company intends to fund
the redemption with proceeds from its existing Credit Agreement, as amended. The
debentures were originally issued in 1986, and an aggregate principal amount of
$13.3 million are currently outstanding.
The Company may also use a portion of the new credit facility to redeem or
repurchase its 7.50% exchangeable subordinated debentures. However, except to
the extent required by the terms of the indenture pursuant to which this
debenture was issued, there can be no assurance that any such redemption or
repurchase will occur.
On February 11, 1997, the Company entered into a definitive agreement with
Universal Hospital Services, Inc. ("Universal") (NASDAQ; UHOS) to acquire the
outstanding shares of Universal for $17.50 per share. Including the assumption
of debt, the total purchase price is approximately $138 million. Universal
provides movable medical equipment to over 3,300 hospitals and alternate care
providers principally through Pay-per-Use equipment management programs. Under
Universal's rental programs, health care providers are charged a per use rental
fee based on actual usage. In addition, Universal sells disposable supplies
related to the equipment it rents. Universal operates in 46 states in five
primary categories - critical care, monitoring, newborn care, respiratory care
and specialty beds. The transaction is structured as a cash merger that is
expected to close in late March 1997 and is subject to approval by a majority of
Universal's shareholders and Hart Scott-Rodino clearance. The Company will fund
the transaction out of its available funds and existing Credit Agreement, as
amended.
14
<PAGE>
The Company expects that its primary sources of liquidity for operating
activities will be generated through cash flows from MEDIQ/PRN. Proceeds from
the sale of discontinued operations and miscellaneous assets will be used to
repay long-term debt. The Company believes that sufficient funds will be
available from operating cash flows, the sale of assets and its credit facility
to meet the Company's anticipated operating and capital requirements.
15
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1996
PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION.
On February 11, 1997, the Company entered into a definitive agreement with
Universal Hospital Services, Inc. ("Universal") (NASDAQ; UHOS) to acquire the
outstanding shares of Universal for $17.50 per share. Including the assumption
of debt, the total purchase price is approximately $138 million. Universal
provides movable medical equipment to over 3,300 hospitals and alternate care
providers principally through Pay-per-Use equipment management programs. Under
Universal's rental programs, health care providers are charged a per use rental
fee based on actual usage. In addition, Universal sells disposable supplies
related to the equipment it rents. Universal operates in 46 states in five
primary categories - critical care, monitoring, newborn care, respiratory care
and specialty beds. The transaction is structured as a cash merger that is
expected to close in late March or early April 1997 and is subject to approval
by a majority of Universal's shareholders and Hart Scott-Rodino clearance. The
Company will fund the transaction out of its available funds and existing Credit
Agreement, as amended.
On February 13, 1997, the Company notified all holders of its 7.25% subordinated
convertible debentures that the Company has elected to redeem on February 28,
1997 (the "Redemption Date") all of the outstanding debentures at a redemption
price equal to 100% of the principal amount thereof, together with interest
accrued from December 1, 1996 to the Redemption Date, for a total payment of
$1,017.52 per $1,000 principal amount of debentures. The Company intends to fund
the redemption with proceeds from its existing Credit Agreement, as amended. The
debentures were originally issued in 1986, and an aggregate principal amount of
$13.3 million are currently outstanding.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 4.1(a) - Amendment to Credit Agreement, dated January 24, 1997.
Exhibit 11 - Computation of Net Income Per Share appears on page 19.
Exhibit 27 - Financial Data Schedule appears on page 20.
(b) Reports on Form 8-K
The Company filed the following report on Form 8-K during the quarter
ended December 31, 1996:
Date of Earliest Event Requiring Report: October 11, 1996
Date of Filing: October 17, 1996
Items Reported: Item 2
Subject: Completion of the previously announced
acquisition of PCI Services,
Inc. by Cardinal Health, Inc.
Date of Earliest Event Requiring Report: December 31, 1996
Date of Filing: February 4, 1997
Items Reported: Items 2, 5 and 7
Subject: Sale of Cardinal Health, Inc. common stock in
January 1997 and consummation of previously
announced sale of Company's investment in
NutraMax Products, Inc. on December 31, 1996.
16
<PAGE>
MEDIQ INCORPORATED AND SUBSIDIARIES
Quarter Ended December 31, 1996
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, 1997
- -----------------
(Date)
/s/ Michael F. Sandler
----------------------------
Michael F. Sandler
Senior Vice President - Finance
and Chief Financial Officer
17
<PAGE>
AMENDMENT NO. 1 TO THE
CREDIT AGREEMENT
Dated as of January 24, 1997
AMENDMENT NO. 1 TO THE CREDIT AGREEMENT, among MEDIQ/PRN LIFE
SUPPORT SERVICES, INC., a Delaware corporation (the "Borrower"), MEDIQ
INCORPORATED, a Delaware corporation ("MEDIQ"), PRN HOLDINGS, INC., a Delaware
corporation (together with MEDIQ, the "Parent Guarantors"), the banks, financial
institutions and other institutional lenders parties to the Credit Agreement
referred to below (collectively, the "Lenders") and Banque Nationale de Paris as
administrative agent (the "Administrative Agent") for the Lenders and
NationsBank N.A., as documentation agent (the "Documentation Agent").
PRELIMINARY STATEMENTS:
(1) The Borrower, the Parent Guarantors, the Lenders, the
Administrative Agent and the Documentation Agent have entered into a Credit
Agreement dated as of October 1, 1996 (the "Credit Agreement"). Capitalized
terms not otherwise defined in this Amendment have the same meanings as
specified in the Credit Agreement.
(2) The Borrower seeks to acquire Universal Hospital Services,
Inc., a Minnesota corporation ("UHS"), (the "UHS Acquisition") and, in order to
finance, together with advances under the existing Facilities, such acquisition,
has requested that certain Lenders (the "Affected Lenders" or the "Incremental
Term B Lenders") increase their Commitments under the Term B Facility (the
"Incremental Term B Commitments") and the Working Capital Facility, and amend
certain provisions of the Credit Agreement in order to provide such financing
and for certain other purposes.
(3) The Required Lenders and the Affected Lenders are, on the
terms and conditions stated below, willing to grant the request of the Borrower
and the Borrower and such Lenders have agreed to amend the Credit Agreement as
hereinafter set forth.
SECTION 1. Amendments to the Credit Agreement. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 2(a) hereof, hereby amended as
follows:
(a) Section 1.01 is amended by inserting therein the
following definitions in appropriate alphabetical order:
"'BERS' means Biomedical Equipment Rental and Sales,
Inc., a Subsidiary of UHS.
"'UHS' means Universal Hospital Services, Inc., a
Minnesota corporation.
"'UHS Acquisition' means the acquisition of the common
stock of UHS by the Borrower or any of the Borrower's
Ongoing Subsidiaries, as permitted under this Agreement."
<PAGE>
"'UHS Acquisition Closing Date' means any Business Day
on which the UHS Acquisition occurs."
(b) The definition of "Acquisition Facility Sublimit" in
Section 1.01 is amended by deleting clause (iii) thereof and
substituting therefor the following:
"(iii) the excess of the aggregate amount of Subordinated
Notes outstanding at such time over the principal amount of
the NutraMax Note to the extent secured by the NutraMax Letter
of Credit multiplied by 66%."
(c) The definition of "Borrower's Account" is amended by
deleting therefrom the account number "200877-001-91" and
substituting therefor the account number "202330-001-77".
(d) The definition of "EBITDA" is amended by inserting
immediately before the proviso thereto the following:
"and (g) all one-time expenses of the Borrower and its
Affiliates incurred in connection with the UHS Acquisition for
severance expenses, lease related expenses and facility
closure expenses".
(e) The definition of "Leverage Ratio" is amended (i) by
inserting in the seventh line thereof, immediately preceding the
words ", so long as", the phrase "multiplied by 66%", and (ii) by
adding at the end thereof the following: ",except with respect to
the UHS Acquisition, in which case the 12-month trailing EBITDA of
UHS shall be adjusted for the EBITDA of BERS included in such
calculation for the period of time that said EBITDA of BERS is not
actually reflected in the aforesaid EBITDA of UHS, in which case
such EBITDA of UHS shall be the pro forma EBITDA of UHS and BERS
for such period."
(f) The definition of "Senior Leverage Ratio" is amended by
adding at the end thereof the following: ",except with respect to
the UHS Acquisition, in which case the 12-month trailing EBITDA of
UHS shall be adjusted for the EBITDA of BERS included in such
calculation for the period of time that said EBITDA of BERS is not
actually reflected in the aforesaid EBITDA of UHS, in which case
such EBITDA of UHS shall be the pro forma EBITDA of UHS and BERS
for such period."
(g) The definition of "Term B Borrowing" is amended by adding
at the end thereof the following:
"and Incremental Term B Advances made on the UHS Acquisition
Closing Date."
(h) Section 2.01(b) is amended by (i) inserting "(i)"
immediately after the heading "The Term B Advances" and (ii)
adding a new clause (ii) at the end thereof to read as follows:
"(ii) Each Incremental Term B Lender severally
agrees, on the terms and conditions hereinafter set forth, to
make a single advance to the Borrower on the UHS Acquisition
Closing Date in an amount not to exceed such Incremental Term
B Lender's Incremental Term B Commitment as set forth in
Schedule I hereto (each such advance being an "Incremental
Term B Advance"). Such Term B Borrowing shall consist of
Incremental Term B Advances made simultaneously by the
Incremental Term B Lenders ratably according to their
Incremental Term B Commitments. Amounts borrowed under this
Section 2.01(b)(ii) and repaid or prepaid may not be
reborrowed."
(i) The table contained in Section 2.04(a) is amended by (i)
deleting each figure "8,500,000" therein and substituting for each
such figure the figure "13,000,000" and (ii) deleting each figure
"15,000,000" therein and substituting for each such figure the
figure "21,750,000".
2
<PAGE>
(j) Section 2.14(a) is amended by adding at the end thereof
the following:
"and, on the UHS Acquisition Closing Date, an aggregate amount
of up to $45,000,000 of Incremental Term B Advances to finance
a portion of the UHS Acquisition".
(k) Section 2.14(c) is amended by inserting therein,
immediately after "Section 5.01(p)", the following:
", to provide up to $5,000,000 of the financing for the UHS
Acquisition".
(l) Section 4.01(i) is amended by inserting therein,
immediately after "provided that", the following:
", other than with respect to the UHS Acquisition as permitted
under Section 5.02(f)(i),".
(m) Section 5.01(n) is amended by substituting for the date
"November 15, 1996" the phrase "the date that is 45 days following
the UHS Acquisition Closing Date" and by adding after the phrase
"the Term B Facilities " the parenthetical "(including the
Incremental Term B Advances)".
(n) Section 5.02(b)(ii)(B) is amended by deleting therein the
figure "$100,000,000" and substituting therefor the figure
"$140,000,000".
(o) Section 5.02(b)(ii) is amended by adding at the end
thereof a new subsection (H) to read as follows:
"intercompany Debt owed to the Borrower in connection with the
UHS Acquisition, so long as such Debt is evidenced by an
intercompany note in form and substance satisfactory to the
Administrative Agent, and".
(p) Section 5.02(f)(i) is amended (i) by inserting in the
second line thereof, immediately following "Acquisition Advances",
the following ", Working Capital Advances, Incremental Term B
Advances" and (ii) by inserting therein, immediately before
"provided that", the following:
"or constituting the purchase of at least 90% of the common
stock of UHS in a transaction approved by the Board of
Directors of UHS so long as UHS becomes a wholly owned
Subsidiary of the Borrower on the UHS Acquisition Closing Date
in a transaction approved by the Board of Directors of UHS or
constituting the payment of consideration for the merger of
UHS and the Borrower or a wholly owned Subsidiary of the
Borrower,"
(q) Section 5.02(f)(i)(2) is amended by adding at the end
thereof the following:
"except with respect to the UHS Acquisition, in which case
such Leverage Ratio shall not be more than 3.75 to 1.0".
(r) Section 5.02(f)(i)(3) is amended by adding at the end
thereof the following:
"except with respect to the UHS Acquisition, in which case
such amount shall not exceed 6.5 multiplied by the 12-month
trailing EBITDA of UHS (adjusted for the EBITDA of BERS
included in such calculation for the period of time
that said EBITDA of BERS is not actually reflected in the
aforesaid EBITDA of UHS, in which case such EBITDA of UHS
shall be the pro forma EBITDA of UHS and BERS for such
period)".
(s) Section 5.02(f)(i)(4) is amended by (i) deleting therefrom
the following:
3
<PAGE>
"shall not exceed $100,000,000"
and (ii) adding at the end thereof the following:
"plus the aggregate amount of Advances made by the Lenders and
used for all such Investments outstanding at any time on and
after the UHS Acquisition Closing Date shall not exceed
$140,000,000."
(t) Section 5.04(f) is amended by inserting in the eighth line
thereof immediately after the word "Investments" the following: ",
except with respect to the UHS Acquisition, in which case the
12-month trailing EBITDA of UHS shall be adjusted for the EBITDA
of BERS included in such calculation for the period of time that
said EBITDA of BERS is not actually reflected in the aforesaid
EBITDA of UHS, in which case such EBITDA of UHS shall be the pro
forma EBITDA of UHS and BERS for such period."
(u) Schedule 1 is supplemented by adding with respect to the
Working Capital Commitment of each of BNP and NationsBank,
$2,500,000, and adding Incremental Term B Commitments for each of
BNP and NationsBank, in the amount of $22,500,000.
SECTION 2. Conditions of Effectiveness. (a) This Amendment
shall become effective as of the date first above written when, and only when,
the Administrative Agent shall have received (x) counterparts of this Amendment
executed by the Borrower, the Required Lenders and each Affected Lender, or, as
to any of the Lenders, advice satisfactory to the Administrative Agent that such
Lender has executed this Amendment and (y) for the ratable account of the
Lenders, 1/10% of the sum of the Term A Advances, the Term B Advances, the
Acquisition Commitments and the Working Capital Commitments as such Advances and
Commitments shall be outstanding immediately prior to the effectiveness of this
Amendment (i.e. $260,000). The effectiveness of this Amendment is conditioned
upon the accuracy of the factual matters described herein. This Amendment is
subject to the provisions of Section 9.01 of the Credit Agreement.
(b) This Amendment shall be null and void and of no effect if,
on or before April 23, 1997 (or such later date before July 15, 1997 as the
Affected Lenders may consent to in writing), the following conditions shall not
have been satisfied:
(1) The Administrative Agent shall not have additionally
received all of the following documents, each such document
(unless otherwise specified) dated the date of receipt thereof by
the Administrative Agent (unless otherwise specified) and in
sufficient copies for each Lender, in form and substance
satisfactory to the Administrative Agent (unless otherwise
specified):
(i) Certified copies of (x) the resolutions of the
Board of Directors of (A) the Borrower approving this
Amendment, the Collateral Documents, amendments or
supplements thereto contemplated hereby and the matters
contemplated hereby and thereby and (B) each other Loan
Party evidencing approval of the Consent, the Collateral
Documents, amendments or supplements thereto contemplated
hereby and the matters contemplated hereby and thereby and
(y) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to
this Amendment, the Consent, the Collateral Documents,
amendments or supplements thereto contemplated hereby and
the matters contemplated hereby and thereby;
(ii) A certificate of the Secretary or an Assistant
Secretary of the Borrower and each other Loan Party
certifying the names and true signatures of the officers of
the Borrower and such other Loan Party authorized to sign
this Amendment, the Consent, the Collateral Documents,
amendments or supplements thereto contemplated hereby to any
of which they are or are to be a party and the other
documents to be delivered hereunder and thereunder;
4
<PAGE>
(iii) Counterparts of a consent with respect to this
Amendment No. 1, in form satisfactory to the Administrative
Agent, executed by each of the Loan Parties (other than the
Borrower);
(iv) A favorable opinion of Drinker, Biddle & Reath,
counsel for the Loan Parties, as to such matters as the
Administrative Agent may reasonably request;
(v) A certificate signed by a duly authorized officer
of the Borrower stating that:
(x) The representations and warranties contained in
the Loan Documents as amended hereby, Section 3 hereof,
and in each of the Collateral Documents and amendments
and supplements thereto delivered pursuant to this
Section 2 are correct on and as of the date of such
certificate as though made on and as of such date other
than any such representations or warranties that, by
their terms, refer to a date other than the date of such
certificate; and
(y) No event has occurred and is continuing that
constitutes a Default; and
(vi) Notes payable to the order of the Affected
Lenders; and
(2) Each of the following conditions shall have
been satisfied:
(i) The Borrower and any additional Loan
Party, as appropriate, shall have delivered all such
documents, agreements, certificates or instruments as
shall be required or as the Administrative Agent
shall have requested pursuant to Section 5.01(o);
(ii) All governmental and third party
consents and approvals necessary in connection with
the UHS Acquisition shall have been obtained and
remain in effect, and all applicable waiting periods
shall have expired without any action being taken by
any competent authority, and no law or regulation
shall be applicable which, in the case of any of the
foregoing, restrains, prevents or imposes materially
adverse conditions upon the rights of any Loan Party
to transfer or otherwise dispose of shares of UHS
acquired in the tender offer, if applicable, the
exercise by any transferee of any Loan Party of all
ownership rights with respect to the shares of UHS
stock acquired in connection with any such tender
offer or otherwise owned by any Loan Party, or the
consummation of a merger if not completed prior to
the UHS Acquisition Closing Date;
(iii) All Advances made by the Lender
Parties shall be in compliance with Regulations G, T,
U and X of the Board of Governors of the Federal
Reserve System; and
(iv) The Borrower shall have retained
Murray, Devine & Co. to prepare and deliver a letter
attesting to the Solvency of the Borrower after
giving effect to the acquisition of UHS.
SECTION 3. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
indicated in the recital of the parties to this Amendment.
(b) The execution, delivery and performance by each Loan Party
of this Amendment and the Loan Documents, as amended hereby, to which
it is or is to be a party, and the consummation of the transactions
contemplated hereby, are within such Loan Party's corporate powers,
have been duly authorized by all necessary corporate
5
<PAGE>
action and do not (i) contravene each such Loan Party's charter or
by-laws, (ii) violate any law (including, without limitation, the
Securities Exchange Act of 1934, as amended, and the Racketeer
Influenced and Corrupt Organizations Chapter of the Organized Crime
Control Act of 1970), rule or regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal
Reserve System), or any order, writ, judgment, injunction, decree,
determination or award, binding on or affecting any Loan Party or any
of its Subsidiaries or any of their properties, (iii) conflict with or
result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
instrument binding on or affecting any Loan Party, any of their
Subsidiaries or any of their properties or (iv) except for the Liens
created under the Collateral Documents, as amended hereby, or any
amendments or supplements thereto contemplated hereby, result in or
require the creation or imposition of any Lien upon or with respect to
any of the properties of any Loan Party or any of its Subsidiaries.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery,
recordation, filing or performance by any Loan Party of this Amendment,
any of the Collateral Documents or any amendments or supplements
thereto contemplated hereby to which each such Loan Party is or is to
be a party, or any of the Loan Documents, as amended hereby, to which
it is or is to be a party except for such approvals as shall have been
obtained by the UHS Acquisition Closing Date.
(d) This Amendment and each of the Collateral Documents and
amendments and supplements thereto contemplated hereby to which each
Loan Party is a party have been duly executed and delivered by each
such Loan Party. This Amendment and each of the other Loan Documents,
as amended hereby, to which each Loan Party is a party are, and each of
the other Collateral Documents and amendments and supplements thereto
contemplated hereby to which each such Loan Party is or is to be a
party, when delivered hereunder, will be, legal, valid and binding
obligations of each such Loan Party, enforceable against each such Loan
Party in accordance with their respective terms, including as to each
entity that shall become a Loan Party on the UHS Acquisition Closing
Date, as to each such Loan Party on the UHS Acquisition Closing Date.
(e) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of their Subsidiaries
(including, without limitation, any Environmental Action) pending or
threatened before any court, governmental agency or arbitrator that (i)
would be reasonably likely to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of this
Amendment, the Collateral Documents, any amendments or supplements
thereto contemplated hereby or any of the other Loan Documents, as
amended hereby, or the consummation of any of the transactions
contemplated hereby.
6
<PAGE>
(f) As of the UHS Acquisition Closing Date, the Collateral
Documents and amendments or supplements thereto consisting of security
agreements or mortgages to which any Loan Party is or is to be a party,
when delivered hereunder, will create valid and perfected first
priority liens and security interests in and to the Collateral covered
thereby, securing the payment of the Secured Obligations (in each case,
as defined in such Collateral Documents or amendment or supplement
thereto); and the execution, delivery and performance of this
Amendment, each of the Collateral Documents and any amendments or
supplements thereto contemplated hereby do not adversely affect the
Liens created under any of the Collateral Documents.
SECTION 4. Reference to and Effect on the Loan Documents. (a)
On and after the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the Notes and each of
the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement, as amended by this Amendment.
(b) The Credit Agreement, the Notes and each of the other Loan
Documents, as specifically amended by this Amendment, are and shall
continue to be in full force and effect and are hereby in all respects
ratified and confirmed. Without limiting the generality of the
foregoing, the Collateral Documents and all of the Collateral described
therein do and shall continue to secure the payment of all Obligations
of the Loan Parties under the Loan Documents, in each case as amended
by this Amendment.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any Lender or the Agent under
any of the Loan Documents, nor constitute a waiver of any provision of
any of the Loan Documents.
(d) Except as otherwise provided in this Amendment, from and
after the UHS Acquisition Closing Date, all references to (i) Term B
Lenders shall include the Incremental Term B Lenders, (ii) Term B
Advances shall include all Term B Advances made by the Incremental Term
B Lenders and (iii) Term B Commitments shall mean the Incremental Term
B Commitments of the Incremental Term B Lenders hereunder.
SECTION 5. Costs, Expenses. The Borrower agrees to pay on demand all
costs and expenses of the Agent in connection with the preparation, execution,
delivery and administration, modification and amendment of this Amendment, and
the other instruments and documents to be delivered hereunder (including,
without limitation, the reasonable fees and expenses of counsel for the Agent)
in accordance with the terms of Section 9.04 of the Credit Agreement.
SECTION 6. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
7
<PAGE>
SECTION 7. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
MEDIQ/PRN LIFE SUPPORT
SERVICES, INC.
By /s/
----------------------------------
Title:
BANQUE NATIONALE DE PARIS, as
Administrative Agent and as Lender
By /s/
-----------------------------------
Title:
By /s/
-----------------------------------
Title:
NATIONSBANK, N.A., as
Documentation Agent and as Lender
By /s/
----------------------------------=
Title:
8
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By /s/
------------------------------------
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By /s/
-----------------------------------
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By /s/
-----------------------------------
Title:
By /s/
-----------------------------------
Title:
FIRST SOURCE FINANCIAL, LLP
By: First Source Financial, Inc.
as Agent/Manager
By /s/
-----------------------------------
Title:
METROPOLITAN LIFE INSURANCE COMPANY
By /s/
------------------------------------
Title:
9
<PAGE>
LASALLE NATIONAL BANK
By /s/
-----------------------------------
Title:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /s/
-----------------------------------
Title:
MELLON BANK, N.A.
By /s/
-----------------------------------
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By /s/
-----------------------------------
Title:
PILGRIM AMERICA PRIME RATE TRUST
By /s/
-----------------------------------
Title:
SUMMIT BANK
By /s/
-----------------------------------
Title:
10
<PAGE>
USTRUST
By /s/
-----------------------------------
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/
-----------------------------------
Title:
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS B.V.
By its Managing Director, ABN
TRUSTCOMPANY (NEDERLAND) B.V.
By /s/
-----------------------------------
Title:
By /s/
-----------------------------------
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By /s/
-----------------------------------
Title:
SENIOR DEBT PORTFOLIO
By Boston Management and Research, as
Investment Advisor
By /s/
-----------------------------------
Title:
11
<PAGE>
CERES FINANCE LTD.
By /s/
-----------------------------------
Title:
CAPTIVA FINANCE LTD.
By /s/
-----------------------------------
Title:
AMARA-1 FINANCE LTD.
By /s/
-----------------------------------
Title:
AMARA-2 FINANCE LTD.
By /s/
-----------------------------------
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By Merrill Lynch Asset Management,
L.P., as Investment Advisor
By /s/
-----------------------------------
Title:
12
EXHIBIT 11
MEDIQ INCORPORATED AND SUBSIDIARIES
Computation of Net Income Per Share
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
December 31,
------------------------
1996 1995
-------- --------
Computation of Primary Earnings Per Share:
Net Income (Loss) $ 23,286 $ (367)
======== ========
Weighted average of primary shares:
Common stock 18,500 17,853
Preferred stock 6,301 6,374
Assumed conversion of options 461 354
-------- --------
Total 25,262 24,581
======== ========
Primary Earnings Per Share $ .92 $ (.01)
======== ========
Computation of Fully Diluted Earnings Per Share:
Net Income (Loss) $ 23,286 $ (367)
Interest and amortization of
deferred costs on convertible
debentures - net of tax 326 456
-------- --------
Total $ 23,612 $ 89
======== ========
Weighted average of fully diluted shares:
Common stock 18,500 17,853
Preferred stock 6,301 6,374
Assumed conversion of options 532 354
Assumed conversion of convertible
debentures 3,897 5,397
-------- --------
Total 29,230 29,978
======== ========
Fully Diluted Earnings Per Share $ .81 $ --
======== ========
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 4,411
<SECURITIES> 89,604
<RECEIVABLES> 40,196
<ALLOWANCES> 2,700
<INVENTORY> 6,432
<CURRENT-ASSETS> 145,924
<PP&E> 236,078
<DEPRECIATION> 114,752
<TOTAL-ASSETS> 359,533
<CURRENT-LIABILITIES> 44,659
<BONDS> 247,484
<COMMON> 19,202
0
3,339
<OTHER-SE> 18,454
<TOTAL-LIABILITY-AND-EQUITY> 359,533
<SALES> 0
<TOTAL-REVENUES> 35,483
<CGS> 0
<TOTAL-COSTS> 28,945
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,513
<INCOME-PRETAX> (5,365)
<INCOME-TAX> 2,126
<INCOME-CONTINUING> (7,491)
<DISCONTINUED> 37,241
<EXTRAORDINARY> (6,464)
<CHANGES> 0
<NET-INCOME> 23,286
<EPS-PRIMARY> .92
<EPS-DILUTED> .81
</TABLE>
