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Company Profile
Headquartered in Hauppauge, New York, Medical Action Industries Inc.
develops, manufactures, markets and distributes a variety of disposable,
surgical related products. The Company's products are marketed primarily to
acute care facilities in domestic and certain international markets, and is
expanding its end-user base to include physician, dental and veterinary offices.
Medical Action is the leading manufacturer and distributor of sterile laparotomy
sponges and sterile operating room towels in the United States. The Company's
products are marketed through an extensive network of independent distributors,
direct sales personnel and manufacturers' representatives. Medical Action has
preferred vendor agreements with national distributors, as well as sole source
and/or committed contracts with nearly every major group purchasing alliance.
The Company also manufactures its products under private label contracts to
other distributors and medical suppliers. Medical Action's manufacturing,
packaging and warehousing activities are conducted in its Arden, North Carolina
facility.
Selected Financial Data
<TABLE>
<CAPTION>
Year ended March 31, 1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
OPERATIONS DATA
Net Sales $57,500,109 $54,640,129 $46,000,309 $38,846,290 $35,111,326
Income (loss) before income taxes 3,167,424 2,756,096 1,642,572 1,204,310 (246,695)
Net income (loss) 1,915,437 1,684,243 971,347 710,743 (183,146)
Net income (loss) per common share:
Basic .23 .21 .12 .09 (.02)
Diluted .21 .19 .12 .09 (.02)
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BALANCE SHEET DATA
Total assets $40,152,793 $31,880,894 $24,993,552 $24,390,336 $24,328,602
Working capital (1) 14,194,637 11,108,552 10,228,286 10,334,499 11,034,593
Long-term debt including capital
leases (less current portion) 13,210,729 6,142,900 3,558,674 4,387,958 7,328,626
Shareholders' equity (2) 17,896,379 15,535,456 13,417,942 12,273,367 11,209,191
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</TABLE>
(1) See Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(2) There were no cash dividends declared in any of the periods presented above.
The cover of this year's annual report reflects Medical Action Industries'
commitment to establishing and expanding strategic partnerships worldwide, and
being recognized as a market leader with a reputation for manufacturing and
marketing quality medical devices. At the end of this past fiscal year, Medical
Action completed its sixth transaction in the past five years with the
acquisition of the medical products division of Acme United Corporation. This
acquisition, our largest to date, will significantly increase revenue and be
accretive to earnings in fiscal 2000. Our formula for success can be
characterized by our dedication to innovation, efficiency, reliability and
opportunity. As a result of executing this strategy, we achieved record revenues
in fiscal 1999 for the fourth consecutive year and recorded the highest net
income in Medical Action's twenty-two year history on the strength of our
diverse product offerings, comprehensive and unparalleled distribution network
and focus of our management team. Our utilization of electronic data
interchange, which accounts for more than 80% of all customer orders received,
and expertise at reducing our distributors' inventory investment, continues to
demonstrate Medical Action's supply chain excellence and selection as the
healthcare partner of choice. It is clear that our market leadership position
and the consolidation within the healthcare industry will be a platform of
opportunity for Medical Action well into the new millennium.
<PAGE>
[GRAPHIC]
To Our Shareholders, Customers, Healthcare Partners And Teammates
We are pleased to report another year of impressive accomplishments for
Medical Action Industries Inc. As the past twenty-two years have demonstrated,
there are few, if any, challenges that the Medical Action team cannot meet and
master. The foundations and resources are in place to build a diversified,
global medical device manufacturer that will flourish in this ever-changing
market. In response to the opportunities presented by the changing healthcare
environment, Medical Action in fiscal 1999 took an aggressive and proactive
approach to enhance its position as a market leader.
This past year was a year in which several key milestones were achieved. We
assimilated fiscal 1998 acquisitions, fostered strategic relationships with
hospital purchasing alliances, successfully launched our wound care dressings
program throughout Latin America by entering into an exclusive supply and
distribution agreement with Johnson & Johnson Medical, completed the most
significant transaction to date by acquiring the medical products division of
Acme United Corporation in March 1999, and generated record revenues and
reported the highest net income in the Company's history. These accomplishments
will provide even greater opportunities for growth and profitability for Medical
Action in the future.
Medical Action completed fiscal 1999 with its best financial performance
ever and is moving forward with a focused strategy in fiscal 2000. The
successful strides made during this past fiscal year were reflected in our
financial performance. Net sales increased 5% to a record $57,500,000, compared
with $54,640,000 in fiscal 1998. Significantly, as a result of the acquisition
in March 1999, our backlog of orders at year end exceeded $700,000, all of which
will be shipped in the first quarter of fiscal 2000. Net income for the year
rose 14% to a record $1,915,000, compared with $1,684,000 one year ago. Earnings
per basic share increased to a record $0.23 from $0.21 and earnings per diluted
share increased to a record $0.21 from $0.19. The record net sales level for
fiscal 1999 was primarily attributable to greater domestic penetration in each
of the Company's core products, including an increase of $1,283,000, or 19%, in
net sales of the SBW product line, which includes net sales from Dayhill Corp.,
acquired in October 1997; a $585,000, or 18%, increase in net sales of gauze
sponges; and a $465,000, or 10%, increase in our QuanTech product line.
During fiscal 1999 we continued to strengthen our balance sheet as
shareholders' equity increased to $17,896,000, or $2.09 per outstanding share,
and total assets increased to $40,153,000. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") reached $4,974,000, a 17% increase from
fiscal 1998 and more than three times greater than in fiscal 1995.
We remain the market leader in the sales of sterile disposable laparotomy
sponges, sterile disposable operating room towels and medical sterilization
packaging to hospitals in the United States. Medical Action's financial
philosophy is
Net Income (in dollars)
711,000 971,000 1,684,000 1,915,000
1996 1997 1998 1999
[CHART]
1
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[GRAPHIC]
"OUR GREATEST STRENGTH IS OUR DETERMINATION NOT TO BE CONSTRAINED BY THE
LIMITATIONS AND PRECEPTIONS OF OTHERS. WE ARE WILLING TO INVEST IN OUR
LONG-TERM VISION."
based on a simple commitment to increasing shareholder value. As an industry
leader and low-cost manufacturer, we seek to build upon our core business by
continuing to provide unsurpassed service to customers while producing favorable
returns to our shareholders. The Company has invested heavily in building the
financial, capital and human resources necessary to achieve these goals.
We would be remiss if we did not admit that we are, however, disappointed in
the performance of our common stock during the past twelve months. Another
challenge, and one that I have personally accepted for fiscal 2000, is to
address the market pricing of our common stock. DESPITE being recognized by our
peers as a market leader, DESPITE posting another record year in revenues and
earnings, DESPITE consummating a major acquisition which is accretive to
earnings immediately, DESPITE being awarded several new contracts with group
purchasing organizations, DESPITE moving our geographical reach into Latin
America --- we have not been able to achieve a market valuation commensurate to
that of our peer group. We believe that our consistent performance and vision of
future growth for Medical Action will be recognized. We would like to reassure
our shareholders that our management team, with significant stock ownership of
your Company, is committed to maximizing shareholder return more than ever. Have
no doubt that we are prepared to do whatever it takes to increase awareness of
our success story to the investment community.
In last year's annual report, we discussed how acquisitions are an important
component of our corporate strategy. During this past fiscal year, we were able
to assimilate our fiscal 1998 acquisitions - the specialty packaging business of
Dayhill Corporation acquired in October 1997, the ATI PyMaH line of
sterilization pouches purchased in November 1997, as well as the sponge counter
product lines of Sage Products Inc. acquired in January 1998 into our
manufacturing facility in Arden, North Carolina. We also anticipate reaping
significant operating efficiencies in fiscal 2000 in our manufacturing processes
as a result of the cost saving initiatives implemented this past year.
Fiscal 1999 saw Medical Action complete its largest transaction to date with
the acquisition of the medical products division of Acme United Corporation
("Acme Healthcare"). Acme Healthcare is one of the first companies to design and
sell disposable instrument kits and trays, and is principally comprised of three
product categories --- (i) kit and tray products including suture removal trays,
I.V. start kits and central line trays; (ii) net, padding, wound care and
antiseptic products including Acu-Dyne(Registered), an anti-microbial solution
of povidone iodine prep swabs and a line of proprietary Tubegauz(Registered)
elastic netting used in dressing retention; and (iii) instrument packs which
include a broad line of sterile instruments such as hemostats, scalpels and
forceps.
Net Sales (in dollars)
38,846,000 46,000,000 54,640,000 57,500,000
1996 1997 1998 1999
[CHART]
2
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[GRAPHIC]
With the healthcare system in the United States changing so rapidly,
financial stability, adaptability and the ability to react quickly will be
fundamental to our success. Industry dynamics, including increasing
consolidation of manufacturers, distributors, hospitals and group purchasing
organizations (GPOs), together with the cost pressures of a managed care
environment, are providing greater incentives to reducing the number of
duplicate vendors for product lines distributed to hospitals and healthcare
facilities.
Medical Action, because of our preferred vendor status, is strategically
positioned to benefit from increased volume as other, less efficient vendors are
eliminated. At the same time, there are tough regulatory standards for the
medical device industry that present formidable barriers to entry for new
competitors. Medical Action's mission is simple --- to be the supplier of choice
throughout the healthcare supply chain. As customers become more selective in
choosing their suppliers, they increasingly require us to adhere to the highest
quality standards.
While quality is not new to Medical Action, we are proud that in fiscal 1999
we achieved ISO 9002 quality registration of our manufacturing facility in
Arden, North Carolina. ISO 9002 is the international quality standard which
reinforces Medical Action's commitment to competing in the global marketplace.
With our commitment to increasing our global presence, we have also obtained CE
Marking for our operating room towels, which is a requirement in order to sell
in the European community.
Our dedication for more than the past decade in developing and maintaining
our long-standing relationships have been built on trust, innovation and
service. Combining our supply chain excellence and strategic alliances has
created a strong bond with our customers. We are committed to reducing the cost
of our products and increasing efficiencies throughout the supply chain to
enhance our competitive edge. Medical Action has maintained its position as an
industry leader by focusing its efforts on exceptional customer service.
By remaining focused on being the supplier of choice throughout the
healthcare supply chain, we have achieved preferred vendor status with firms
that ship more than 80% of the products distributed to the hospital market. Our
national accounts team continues to focus on the emerging external influences on
hospital purchasing decisions, namely GPOs and distributors. By leveraging our
domestic market share, low-cost supplier position and leadership in supply chain
excellence, Medical Action's portfolio of sole source and/or committed contracts
with GPOs is both extensive and complete.
Our strategy going forward is unchanged from the one we shared with you for
the past several years --- Acquisition, Acquisition and Acquisition.
Consolidation within the healthcare industry is a platform of opportunity for
our highly focused, flexible and well-capitalized Company. We will use our
financial resources, distribution channels and acquisitions to broaden our
product and market base. In fiscal 1999, we laid secure foundations for future
growth. Our already
Shareholder's Equity (in dollars)
12,273,000 13,418,000 15,535,000 17,896,000
1996 1997 1998 1999
[CHART]
3
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[GRAPHIC]
"MEDICAL ACTION HAS A STRONG COMMITMENT TO QUALITY, INTEGRITY AND CUSTOMER
SATISFACTION. THROUGH STRATEGIC TEAM WORK AND INTERNAL DEVELOPMENT, WE ARE
GLOBALIZING OUR BUSINESS AND EMPOWERING OUR EMPLOYEES TO ACHIEVE. THE RESULTS
REFLECT THE HALLMARK OF MEDICAL ACTION --- FINANCIAL STRENGTH AND FLEXIBILITY."
powerful sales and marketing team has been strengthened by our GPO and
distribution agreements. We have made operational efficiency a priority in our
recently acquired manufacturing facility in Arden, North Carolina. Our planning
for fiscal 2000 includes increasing revenue and profitability of acquired
product lines. We will also work continuously to identify operational and
administrative cost savings from our acquisitions. With this expectation of
improved profitability and our continued efforts to expand Medical Action's core
businesses, our long-term strategy for revenue and income growth is on target.
We believe favorable industry dynamics combined with our strong market position,
reputation for excellent service, and our solid financial condition make our
growth initiatives realistic.
Acquisition candidates will continue to be evaluated on their ability to add
breadth to product lines, provide vehicles into new markets or new geographical
regions, and improve manufacturing efficiencies. We will also continue to focus
on internal product development within all of our businesses.
The people of Medical Action are the foundation of our dynamic, growing
company. We would like to take this opportunity to acknowledge the work,
dedication and commitment of Medical Action's employees in achieving the
exceptional performance that has become the way we do business every day. We are
pleased with our strategies and performance, and we are confident that we have
the drive and discipline to do even better. We have a strong balance sheet,
enviable channels of distribution, highly motivated and talented employees and a
vision that embraces change. We will continue to build upon our strengths and
expand our global presence in the competencies we need to maintain our momentum.
We would also like to acknowledge the loyal customers, distributors and
suppliers who continuously support our efforts and the shareholders, who will
provide the financial basis for our growth.
We look forward to reporting the progress of our Company as we move into the
new millennium.
/s/ Paul D. Meringolo
Paul D. Meringolo
Chairman of the Board,
Chief Executive Officer and President
4
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following management's discussion and analysis describes material
changes in the results of operations of Medical Action Industries Inc. ("Medical
Action" or the "Company") during the three years ended March 31, 1999 and the
Company's financial condition at that date. Trends of a material nature are
discussed to the extent known and considered relevant.
Certain statements in this discussion constitute forward looking statements
as defined by the Private Securities Litigation Reform Act of 1995. Statements
indicating the Company "plans", "expects", "estimates" or "believes" are forward
looking statements that involve known and unknown risks, including the Company's
future economic performance and financial results. The forward looking
statements relate to (i) expansion of the Company's market share, (ii) the
Company's growth into new markets, (iii) internal development of new products
and product lines, (iv) procurement of export visas for operating room towels
from China, which may impact their availability and pricing, and (v) retention
of the Company's earnings for use in the operation and expansion of its
business.
Important factors and risks that could cause actual results to differ
materially from those referred to in the forward looking statements include, but
are not limited to, the effect of economic and business conditions, the impact
of healthcare reform, opportunities for acquisitions, the Company's ability to
effectively integrate acquired companies, the ability of the Company to maintain
its gross profit margins, the ability to obtain additional financing to expand
the Company's business, the ability to successfully compete with the Company's
competitors that have greater financial resources, the availability and possible
increases in raw material prices for operating room towels, the impact of
current or pending legislation and regulation, as well as the risks described
from time to time in the Company's filings with Securities and Exchange
Commission, which includes its Annual Report on Form 10-K and Quarterly Reports
on Form 10-Q.
The forward looking statements are based on current expectations and
involve a number of known and unknown risks and uncertainties that could cause
actual results, performance and/or achievements of the Company to differ
materially from any future results, performance or achievements, expressed or
implied, by the forward looking statements, and that in light of the significant
uncertainties inherent in forward looking statements, the inclusion of such
statements should not be regarded as a representation by the Company or any
other person that the objectives or plans of the Company will be achieved. The
Company undertakes no obligation to update periodically any forward looking
statement, whether as a result of new information, future events or otherwise.
RESULTS OF OPERATIONS
Fiscal 1999 Compared to Fiscal 1998
Net sales for the fiscal year ended March 31, 1999 increased 5% to
$57,500,000 from $54,640,000 for the fiscal year ended March 31, 1998. The
increase in net sales was primarily attributable to a $1,283,000 or 19% increase
in net sales of the SBW product line which includes a full year of net sales
from Dayhill Corporation, acquired in October 1997; a $585,000 or 18% increase
in net sales of gauze sponges and a $465,000 or 10% increase in net sales of the
QuanTech product line. Management believes that the increase in net sales was
primarily due to greater domestic market penetration.
The Company presently obtains a portion of its raw materials for operating
room towels from China. These operating room towels are designated as a textile,
for which an export visa is required. These export visas could adversely impact
the availability and pricing of operating room towels. In the event that these
quota restrictions reduce the availability of operating room towels, the Company
will accelerate its procurement of operating room towels from China and secure
operating room towels from sources outside of China. Management presently
anticipates that it will be able to meet the Company's requirements of operating
room towels through fiscal 2000.
Gross profit increased $918,000 or 7%, to $13,284,000 for the fiscal year
ended March 31, 1999 as compared to $12,366,000 for the prior fiscal year. Gross
profit as a percentage of sales for the fiscal year ended March 31, 1999
remained at 23% as compared to the prior fiscal year. The increase in gross
profit dollars for the fiscal year ended March 31, 1999 was due to increased
sales volume and increased manufacturing efficiencies at the Company's
manufacturing facility in North Carolina which were partially offset by
increased raw material costs.
Selling, general and administrative expenses increased by $795,000 to
$9,541,000 for the fiscal year ended March 31, 1999 from $8,746,000 for the
prior fiscal year. As a percentage of net sales, selling, general and
administrative expenses increased to 17% as compared to 16% the prior fiscal
year. The increase in selling, general and administrative expense dollars and as
a percentage of sales was primarily attributable to increased selling expenses
associated with achieving higher net sales.
Restructuring charges of $260,000 were incurred for the fiscal year ended
March 31, 1998 as a result of the Company's consolidation and sale of its
Asheville, North Carolina manufacturing facility and two leased warehouse
facilities into a newly acquired facility in Arden, North Carolina.
Interest expense, net decreased 5% from $603,000 or 1% of net sales to
$576,000 or 1% of net sales for the fiscal years ended
5
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March 31, 1998 and March 31, 1999, respectively. The decrease in interest
expense was attributable to a decrease in the average principal loan balances
outstanding during the fiscal year ended March 31, 1999 as compared to the
fiscal year ended March 31, 1998. The decrease in principal loan balances
outstanding during the year was primarily attributable to net cash provided from
operating activities during fiscal 1999.
Net income for the fiscal year ended March 31, 1999 was $1,915,000, or $.23
per basic share and $.21 per diluted share as compared to $1,684,000, or $.21
per basic and $.19 per diluted share, for the fiscal year ended March 31, 1998.
The increase in net income was attributable to the increase in net sales and
gross profits, the non-reoccurrence of restructuring charges and the decrease in
interest expense, which were partially offset by an increase in selling, general
and administrative expenses.
Fiscal 1998 Compared to Fiscal 1997
Net sales for the fiscal year ended March 31, 1998 increased 19% to
$54,640,000 from $46,000,000 for the fiscal year ended March 31, 1997. The
increase in net sales was primarily attributable to a $5,087,000 or 38% increase
in net sales of operating room towels; a $1,064,000 or 28% increase in net sales
of the QuanTech product line, an increase of $938,000 or 5% in net sales of
laparotomy sponges and a $810,000 or 14% increase in net sales of the SBW
product line which includes net sales from Dayhill Corp. acquired in October
1997. Net sales of operating room towels and laparotomy sponges increased by 28%
and 3% in unit sales, respectively. Management believes that the increase in net
sales of operating room towels, the QuanTech product line, laparotomy sponges
and the SBW product line was primarily due to greater domestic market
penetration.
The Company presently obtains substantially all of its raw materials for
operating room towels from China. These operating room towels are designated as
a textile, for which an export visa is required. These export visas could
adversely impact the availability and pricing of operating room towels. In the
event that these quota restrictions reduce the availability of operating room
towels, the Company will accelerate its procurement of operating room towels
from China and, to a lesser extent, secure operating room towels from sources
outside of China. Management presently anticipates that it will be able to meet
the Company's requirements of operating room towels through fiscal 1999, however
higher pricing for such raw materials which the Company began incurring in the
fourth quarter of fiscal 1998, due to the availability of export visas, could
adversely effect the Company.
Gross profit increased $2,693,000, or 28%, to $12,366,000 for the fiscal
year ended March 31, 1998 as compared to $9,673,000 for the prior fiscal year.
Gross profit as a percentage of sales for the fiscal year ended March 31, 1998
increased to 23% from 21% as compared to the prior fiscal year. The increase in
gross profit dollars and gross profit as a percentage of net sales for the
fiscal year ended March 31, 1998 was due to increased sales volume and lower per
unit manufacturing costs resulting from improved efficiency at the Company's
manufacturing facilities in North Carolina.
Selling, general and administrative expenses increased by $1,371,000 to
$8,746,000 for the fiscal year ended March 31, 1998 from $7,375,000 for the
prior fiscal year. As a percentage of net sales, selling, general and
administrative expenses remained at 16.0% as compared to the prior fiscal year.
The increase in selling, general and administrative expense dollars was
primarily attributable to selling expenses associated with achieving higher net
sales.
Restructuring charges of $260,000 were incurred for the fiscal year ended
March 31, 1998 as a result of the Company's consolidation and sale of its
Asheville, North Carolina manufacturing facility and two leased warehouse
facilities into a newly acquired facility in Arden, North Carolina.
Interest expense decreased 8% from $655,000 or 1.4% of net sales to $603,000
or 1.1% of net sales for the fiscal years ended March 31, 1997 and March 31,
1998, respectively. The decrease in interest expense was attributable to a
decrease in the average principal loan balances outstanding during the fiscal
year ended March 31, 1998 as compared to the fiscal year ended March 31, 1997.
The decrease in principal loan balances outstanding during the year was
primarily attributable to net cash provided from operating activities during
fiscal 1998.
Net income for the fiscal year ended March 31, 1998 was $1,684,000, or $.21
per basic share and $.19 per diluted share as compared to $971,000, or $.12 per
basic and diluted share, for the fiscal year ended March 31, 1997. The increase
in net income was attributable to the increase in net sales and gross profits
and the decrease in interest expense, which were partially offset by an increase
in selling, general and administrative expenses and restructuring charges.
Liquidity and Capital Resources
Current assets have increased $1,908,000 to $22,744,000 at March 31, 1999
from $20,836,000 at March 31, 1998. The increase was primarily attributable to a
$1,925,000 increase in inventory which resulted primarily due to the acquisition
of the medical products division of Acme United Corporation on March 22, 1999.
The Company had working capital of $14,195,000 with a current ratio of 2.66 at
March 31, 1999 as compared to working capital of $11,109,000 with a current
ratio of 2.14 at March 31, 1998. Total borrowings outstanding were $18,380,000
with a debt to equity ratio of 1.03 at March 31, 1999 as compared to $12,923,000
with a debt to equity ratio of .83 at March 31, 1998.
6
<PAGE>
The increase in total borrowings outstanding at year-end is primarily due to the
acquisition of the medical products division of Acme United Corporation on March
22, 1999.
On March 18, 1999, the Company signed a Loan Agreement and Revolving Credit
Note with its existing bank. The Agreement, which expires on March 31, 2003,
contains a borrowing limit of $20,000,000. The Credit Agreement bears interest
at either the prime lending rate or at the libor rate plus applicable margins.
Long term funds available under this Agreement amounted to $7,940,000 at March
31, 1999 as defined in the borrowing base formula. The loan amount is
collateralized by all of the assets of the Company and contains certain
restrictive covenants, which among other matters, impose limitations with
respect to the incurrence of liens, payment of dividends, guarantees, mergers,
acquisitions, capital expenditures and specified sales of assets. At March 31,
1999, the Company was in compliance with all such covenants and financial
ratios.
The Company has financed its operations primarily through cash flow from
operations and borrowings from its existing credit facilities. At March 31,
1999, the Company had a cash balance of $672,000 as compared to $275,000 at
March 31, 1998. The Company's operating activities provided cash of $4,079,000
and $415,000 for the years ended March 31, 1999 and 1998, respectively. Net cash
provided during the year ended March 31, 1999 consisted primarily of net income
from operations, depreciation and amortization, decreases in inventories,
accounts receivable and increases in accounts payable and accrued expenses.
Investing activities used net cash of $8,299,000 and $4,728,000 during the
years ended March 31, 1999 and 1998, respectively. The principal uses were
purchase price and related acquisition costs of $7,287,000 for the purchase of
the medical products division of Acme United Corporation on March 22, 1999,
purchases of property and equipment of $783,000 and loans to officers of
$228,000.
Financing activities provided cash of $4,616,000 and $4,312,000 during the
years ended March 31, 1999 and 1998, respectively. Financing activities
generated cash primarily from net borrowings through its existing credit
facility of $4,310,000 and from proceeds from employees exercising Company stock
options of $306,000.
At March 31, 1999, the Company did not have any material commitments for
capital expenditures.
The Company believes that the anticipated future cash flow from operations,
coupled with its cash on hand and available funds under its revolving credit
agreement, will be sufficient to meet its working capital requirements for
fiscal 2000. Management believes that it will be able to meet the anticipated
demand for operating room towels in fiscal 2000.
The Company has substantially completed its program to prepare computer
systems and applications for the Year 2000. The Company expects to incur
additional internal staff costs as well as consulting and other expenses related
to enhancements necessary to complete the systems for the Year 2000. The Company
is also communicating with customers and suppliers with whom it conducts
business to help identify and resolve any potential Year 2000 issues. Management
has not quantified the remaining Year 2000 compliance and related expenses to be
incurred, however, management believes the remaining costs will not have a
material effect on its financial position.
The Company believes that the relatively moderate rates of inflation in 1999
and 1998 have not had a significant impact on sales and profitability.
Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to interest rate change market risk with respect to
its credit facility with a financial institution which is priced based on the
prime rate of interest plus a spread of up to 1/4%, libor rate plus a spread of
up to 2 1/2%, or at 1 1/4% over the prevailing bankers acceptance rate. The
spread over prime and libor rates is determined based upon the Company's
performance with regard to agreed upon financial ratios. The Company decides at
its sole discretion as to whether borrowings will be at prime, libor or bankers
acceptance rates. At March 31, 1999, $12,060,000 was outstanding under the
credit facility. Changes in the prime rate, libor rates or bankers acceptance
rates during fiscal 2000 will have a positive or negative effect on the
Company's interest expense. Each 1% fluctuation in the interest rate will
increase or decrease interest expense for the Company by approximately $121,000
on an annualized basis.
In addition, the Company is exposed to interest rate change market risk
with respect to the proceeds received from the issuance and sale by the Buncombe
County Industrial and Pollution Control Financing Authority Industrial
Development Revenue Bonds. At March 31, 1999, $5,320,000 was outstanding for
these Bonds. The Bonds bear interest at a variable rate determined weekly.
During fiscal 1999, the interest rate on the Bonds approximated 3.5%. Each 1%
fluctuation in interest rates will increase or decrease interest expense on the
Bonds by approximately $53,000 on an annualized basis.
A significant portion of the Company's raw materials are purchased from
India and China. All such purchases are transacted in U.S. dollars. The
Company's financial results, therefore, could be impacted by factors such as
changes in foreign currency, exchange rates or weak economic conditions in
foreign countries in the procurement of such raw materials. To date, sales of
the Company's products outside the United States have not been significant.
7
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BALANCE SHEETS
MEDICAL ACTION INDUSTRIES INC.
<TABLE>
<CAPTION>
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March 31, 1999 1998
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 672,116 $ 275,316
Accounts receivable, less allowance for doubtful accounts
of $128,998 at March 31, 1999 and $117,086 at March 31, 1998 ............ 6,065,886 6,420,108
Inventories ............................................................... 15,501,826 13,577,197
Prepaid expenses .......................................................... 299,653 359,870
Deferred income taxes ..................................................... 117,786 120,200
Other current assets ...................................................... 87,198 82,999
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Total current assets ......................................................... 22,744,465 20,835,690
Property and equipment, net .................................................. 8,370,448 7,879,663
Due from officers ............................................................ 283,206 212,538
Intangibles, less accumulated amortization of
$657,448 at March 31, 1999 and $496,448 at March 31, 1998 ................. 8,205,328 2,410,557
Other assets ................................................................. 549,346 542,446
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Total assets $40,152,793 $31,880,894
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................................... $ 1,880,212 $ 1,441,248
Accrued expenses, payroll and taxes ....................................... 1,087,593 983,051
Current portion of capital lease obligations .............................. 162,455 140,338
Notes payable to bank ..................................................... 4,059,568 6,982,501
Other note payable ........................................................ 1,000,000 ---
Current portion of long-term debt ......................................... 360,000 180,000
- -----------------------------------------------------------------------------------------------------------------------
Total current liabilities .................................................... 8,549,828 9,727,138
Deferred income taxes ........................................................ 495,857 475,400
Capital lease obligations, less current portion ............................. 250,729 382,900
Long-term debt, less current portion ......................................... 12,960,000 5,760,000
- -----------------------------------------------------------------------------------------------------------------------
22,256,414 16,345,438
- -----------------------------------------------------------------------------------------------------------------------
Shareholders' equity :
Preferred stock, 5,000,000 shares authorized, $.001 par value:
none issued at March 31,1999 and 1998 ...................................... --- ---
Common stock, 15,000,000 shares authorized, $.001 par value:
issued 8,574,289 shares at March 31, 1999 and 8,401,039
shares at March 31, 1998 ................................................... 8,574 8,401
Additional paid-in capital, net ............................................. 9,057,193 8,611,880
Retained earnings ........................................................... 8,830,612 6,915,175
- -----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ................................................... 17,896,379 15,535,456
Commitments and contingencies
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $40,152,793 $31,880,894
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
STATEMENTS OF EARNINGS
MEDICAL ACTION INDUSTRIES INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Year ended March 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales ................................................ $57,500,109 $54,640,129 $46,000,309
Cost of sales ............................................ 44,216,462 42,274,066 36,327,173
- ------------------------------------------------------------------------------------------------------------
Gross profit ............................................. 13,283,647 12,366,063 9,673,136
- ------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses ............. 9,540,639 8,746,190 7,375,479
Interest expense, net .................................... 575,584 603,330 655,085
Restructuring charges .................................... - 260,447 -
- ------------------------------------------------------------------------------------------------------------
10,116,223 9,609,967 8,030,564
- ------------------------------------------------------------------------------------------------------------
Income before income taxes ............................... 3,167,424 2,756,096 1,642,572
Income tax expense ....................................... 1,251,987 1,071,853 671,225
- ------------------------------------------------------------------------------------------------------------
Net income .............................................. $ 1,915,437 $ 1,684,243 $ 971,347
- ------------------------------------------------------------------------------------------------------------
Net income per common share
Basic ................................................. $ .23 $ .21 $ .12
Diluted ............................................... $ .21 $ .19 $ .12
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
STATEMENT OF SHAREHOLDERS' EQUITY
MEDICAL ACTION INDUSTRIES INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional Deferred Retained Total Shareholders'
Shares Amount Paid-In Capital Compensation Earnings Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1996 ................ 8,199,789 $8,200 $8,423,066 $(417,484) $4,259,585 $12,273,367
Issuance of common stock:
Pursuant to Stock Incentive Plan ..... 10,000 10 23,740 (23,750)
On exercise of stock options ......... 20,500 20 30,005 30,025
Amortization of deferred compensation.... 145,109 145,109
Net tax liability from vesting of
stock under Restricted Management
Stock Bonus Plan and exercise
of non-qualified options ............. (1,906) (1,906)
Net income .............................. 971,347 971,347
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1997................ 8,230,289 8,230 8,474,905 (296,125) 5,230,932 13,417,942
Issuance of common stock:
Pursuant to Stock Incentive Plan ..... 20,000 20 46,390 (46,390) 20
On exercise of stock options, net .... 161,375 161 161,998 162,159
Amortization of deferred compensation ... 120,968 120,968
Cancelation of bonus stock issued
under Restricted Management
Stock Bonus Plan ..................... (10,625) (10) (24,052) 24,052 (10)
Tax benefit from vesting of stock
under Restricted Management
Stock Bonus Plan and exercise
of non-qualified options ............. 150,134 150,134
Net income .............................. 1,684,243 1,684,243
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1998 ............... 8,401,039 8,401 8,809,375 (197,495) 6,915,175 15,535,456
Issuance of common stock:
On exercise of stock options, net .... 174,500 174 148,191 148,365
Amortization of deferred
compensation ......................... 128,592 128,592
Fair value of warrants granted for
Acme acquisition ..................... 73,500 73,500
Cancelation of bonus stock issued
under Restricted Management
Stock Bonus Plan ..................... (1,250) (1) (3,124) 3,127 2
Tax benefit from vesting of stock
under Restricted Management
Stock Bonus Plan and exercise
of non-qualified options ............. 95,027 95,027
Net income .............................. 1,915,437 1,915,437
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 31,1999 ................ 8,574,289 $8,574 $9,122,969 $ (65,776) $8,830,612 $17,896,379
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an intergral part of this statement.
10
<PAGE>
STATEMENTS OF CASH FLOWS
MEDICAL ACTION INDUSTRIES INC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Year ended March 31, 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income .............................................................. $1,915,437 $1,684,243 $971,347
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................................... 912,025 778,329 687,799
Provision for doubtful accounts ................................... 27,000 28,000 25,000
Deferred income taxes ............................................. 22,871 (31,113) 24,589
Deferred compensation ............................................. 128,592 120,968 145,109
Loss on sale of property and equipment ............................ - 60,808 -
Changes in operating assets and liabilities, net
of acquisitions:
Accounts receivable ............................................ 327,222 (80,501) (78,869)
Inventories .................................................... 259,317 (2,302,162) (456,304)
Prepaid expenses, other current assets and
other receivables ............................................ 80,597 47,683 32,462
Other assets ................................................... (92,900) (22,801) (85,431)
Accounts payable ............................................... 333,964 (488,158) 329,559
Accrued income taxes ........................................... - 160,116 (116,189)
Accrued expenses, payroll and taxes ............................ 164,990 459,756 (242,882)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ............................... 4,079,115 415,168 1,236,190
- --------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase price and related acquisition costs ............................ (7,287,467) (302,765) -
Purchases of property and equipment ..................................... (782,934) (5,699,382) (214,691)
Proceeds from sale of property, plant and equipment ..................... - 1,335,797 92,000
Loan to Chairman of the Board ........................................... - - (59,000)
Repayment of loan to Chairman of the Board .............................. - - 59,000
Loans to officers - net ................................................. (228,168) (61,288) (195,000)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ................................... (8,298,569) (4,727,638) (317,691)
- --------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from revolving line of credit, term loan
and long-term borrowings ............................................. 11,811,137 12,039,116 2,707,512
Principal payments on revolving line of credit, term
loan, long-term debt and capital lease obligations.................... (7,500,750) (7,932,588) (3,884,624)
Proceeds from exercise of common stock purchase warrants
and employee stock options ........................................... 305,867 205,919 30,025
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities ..................... 4,616,254 4,312,447 (1,147,087)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash ............................................. 396,800 (23) (228,588)
Cash at beginning of year ............................................... 275,316 275,339 503,927
- --------------------------------------------------------------------------------------------------------------------------
Cash at end of year ..................................................... $ 672,116 $ 275,316 $275,339
- --------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures:
Interest paid ........................................................ $ 695,505 $ 786,572 $656,841
- --------------------------------------------------------------------------------------------------------------------------
Income taxes paid .................................................... $1,182,681 $ 942,850 $762,824
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MEDICAL ACTION INDUSTRIES INC. o MARCH 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. Leases meeting the criteria for
capitalization are recorded at the present value of future lease payments.
Maintenance and repairs are charged to operations as incurred and expenditures
for major improvements are capitalized. The carrying amount and related
accumulated depreciation of assets sold or otherwise disposed of are removed
from the accounts and any resulting gain or loss is reflected in operations in
the year of disposal. Depreciation of property and equipment is provided on a
straight-line basis over the estimated useful lives of the related assets
(buildings-40 years; factory equipment-10 to 20 years; fixtures and other
equipment-3 to 5 years). Accelerated methods of depreciation are used for tax
purposes. Amortization of leasehold improvements is provided on the
straight-line method over the period of their economic or related lease lives,
whichever is less.
Revenue Recognition
The Company recognizes income (sales) as products are shipped and title passes
to customers.
Concentration of Credit Risk
The Company manufactures and distributes disposable medical products principally
to medical product distributors, hospital buying groups and hospitals located
throughout the United States. The Company performs credit evaluations of its
customers' financial condition and does not require collateral. Receivables are
generally due within 60-90 days. Credit losses relating to customers have
historically been minimal and within management's expectations. (See Note 14 for
major customers.)
Use of Estimates and Fair Value of Financial Instruments
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The Company has estimated the fair value of financial instruments using
available market information and other valuation methodologies in accordance
with Financial Accounting Standards No. 107. "Disclosures About Fair Value of
Financial Instruments." Management of the Company believes that the fair value
of financial instruments, consisting of cash, accounts receivable, accounts
payable, notes payable and debt, approximate carrying value due to the immediate
or short-term maturity associated with its cash, accounts receivable and
accounts payable, notes payable and the interest rates associated with its debt.
Currency
All of the Company's sales and purchases were transacted in U.S. dollars.
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share. Statement 128 replaced the
previously reported primary and fully diluted earnings per share with the basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements. Note 11 displays a table showing the
computation of basic and diluted earnings per share.
Reclassifications
The Company has reclassified certain prior year information to conform with the
current year's presentation.
Stock Compensation
The Company measures compensation plans using the intrinsic value method and as
provided in Note 12 pro forma disclosures of the effect on net income and
earnings per share as if the fair value-based method had been applied in
measuring compensation expense.
Intangibles
Intangibles, consisting primarily of goodwill and trademarks, represent the
excess of the aggregate price paid by the Company over the fair market value of
the tangible assets acquired in business aquisitions accounted for as a
purchase. Goodwill and other identifiable intangible assets are amortized on a
straight-line basis from 10 to 20 years.
The Company reviews for the impairment of long-lived assets and certain
identifiable intangibles (including the excess of cost over fair value of net
assets acquired and property and equipment) whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized when estimated future cash
flows expected to result from the use of the asset and its eventual disposition
is less than its carrying amount. The Company has not identified any such
impairment losses.
2. INVENTORIES
Inventories consist of the following:
- -------------------------------------------------------------
March 31, 1999 1998
- -------------------------------------------------------------
Finished goods ............... $ 6,740,436 $ 5,781,229
Raw materials ................ 8,761,390 7,795,968
- -------------------------------------------------------------
Total ........................ $15,501,826 $13,577,197
- -------------------------------------------------------------
12
<PAGE>
3. ACQUISITIONS
On March 22, 1999, the Company acquired certain assets of the medical products
business of Acme United Corporation, a Connecticut Corporation ("Acme"). The
purchase price for the assets acquired was $8,475,967 of which $7,475,967 was
paid at or prior to closing, with the balance to be paid over the three (3)
month period ending on or about June 15, 1999. Included in the payment at
closing was the fair value of Warrants (valued at $73,500) to purchase 50,000
shares of its common stock at a purchase price of $2.84 per share.
The assets acquired included principally inventory, factory and office equipment
and trademarks, used in the manufacture of Acme's medical products, including
(i) kit and tray products including suture removal trays, I.V. start kits and
central line trays; (ii) net, padding, wound care and antiseptic products
including Acu-Dyne(Registered) , an anti-microbacterial solution of povidone
iodine prep swabs and a line of proprietary Tubegauz(Registered) elastic netting
used in dressing retention; and (iii) instrument packs which include a broad
line of sterile instruments such as hemostats, scalpels and forceps. The
acquisition has been accounted for as a purchase and the operations of Acme have
been included in the Company's Statement of Earnings since the acquisition
date. The excess of the purchase price and related expenses over the net
tangible assets acquired amounted to $5,956,000 and is being amortized over
twenty (20) years.
Proforma information is not presented as complete historical operating results
of Acme are not available.
The following table summarizes the assets acquired from Acme:
Inventory ................................... $2,183,946
Factory and Office Equipment ................ 336,250
Intangibles ................................. 5,955,771
- -----------------------------------------------------------
$8,475,967
- -----------------------------------------------------------
On January 7, 1998, the Company acquired certain assets relating to the sponge
counter product lines of Sage Products, Inc. ("Sage"). The purchase price for
the acquired assets was $300,000 in cash, (which was paid at closing). The
assets acquired included customer lists, patent and trademarks, and the
equipment used in connection with or required for the manufacture of the Sage
Product Line. The acquisition has been accounted for as a purchase and the
operations relating to the product lines acquired from Sage have been included
in the Company's Statement of Earnings since the acquisition date. The excess of
the purchase price and related expenses over the net assets acquired amounted to
$216,498 and is being amortized over ten (10) years.
On October 30, 1997, the Company acquired certain assets of the specialty
medical packaging and collection systems for the containment and transport of
biohazardous waste business of Dayhill Corporation ("Dayhill"). The purchase
price for the acquired assets consisted of the assumption of approximately
$593,000 of Dayhill's liabilities. The acquisition has been accounted for as a
purchase and the operations of Dayhill have been included in the Company's
Statement of Earnings since the acquisition date. The excess of the purchase
price and related expenses over the net assets acquired amounted to $20,964 and
is being amortized over ten (10) years.
4. PROPERTY AND EQUIPMENT
Property and equipment (including those arising from capital leases) are
summarized as follows:
- --------------------------------------------------------------
March 31, 1999 1998
- --------------------------------------------------------------
Land and building ............... $ 4,923,099 $4,923,099
Factory equipment ............... 6,605,989 5,547,470
Furniture and fixtures .......... 515,508 479,842
Leasehold improvements .......... 57,115 57,115
Capital leases-equipment ........ 772,459 735,833
Automobiles and trucks .......... 6,820 6,820
- --------------------------------------------------------------
12,880,990 11,750,179
Less accumulated depreciation
and amortization .............. 4,510,542 3,870,516
- --------------------------------------------------------------
$ 8,370,448 $7,879,663
- --------------------------------------------------------------
Depreciation expense amounted to $665,025 and $550,576 in the fiscal years ended
March 31, 1999 and 1998 respectively.
5. RELATED PARTY TRANSACTIONS
At various times during fiscal 1999, the Company made net loans to certain
officers which totaled $228,168 bringing the cumulative total to $484,456 at
March 31, 1999 from $256,288 at March 31, 1998.
These loans, which are non-interest bearing, are payable on demand, however, the
Company does not presently anticipate demanding repayment. The loans are
classified as non-current assets except for the portions which involve the
purchase of Company stock in the amounts of $43,750 and $157,500 during the
fiscal years ended March 31, 1998 and 1999, respectively, which have been
deducted from Shareholders' equity.
In October 1997, the Company entered into a Consulting Agreement with the
Company's former Chief Executive Officer and Chairman of the Board. The
Consulting Agreement provides for an annual fee of $275,000, payable in equal
monthly installments, for the ten (10) year period ending December 31, 2007. The
consulting services to be provided to the Company include, but are not limited
to, the evaluation of the progress of the Company's business development,
analysis of the Company's financial condition and proposed operations and the
13
<PAGE>
projected financial results thereof. In addition, the Consulting Agreement
provides that the Company's former Chief Executive Officer will not, either
directly or indirectly, engage in any business competitive to that being carried
on by the Company.
6. INCOME TAXES
Income tax expense (benefit) consists of the following:
- --------------------------------------------------------------
March 31, 1999 1998 1997
- --------------------------------------------------------------
Current:
Federal ............. $1,057,160 $ 960,492 $561,315
State ............... 171,956 142,474 85,321
Deferred .............. 22,871 (31,113) 24,589
- --------------------------------------------------------------
$1,251,987 $1,071,853 $671,225
- --------------------------------------------------------------
The following table indicates the significant elements contributing to the
difference between the statutory federal tax rate and the Company's effective
tax rate for 1999, 1998 and 1997:
- -------------------------------------------------------------
March 31, 1999 1998 1997
- -------------------------------------------------------------
Statutory rate ................ 34.0% 34.0% 34.0%
State taxes ................... 3.4 3.4 3.4
Nondeductible expenses ........ 1.8 2.0 3.1
Other ......................... .3 (0.5) 0.4
- -------------------------------------------------------------
Effective tax rate ............ 39.5% 38.9% 40.9%
- -------------------------------------------------------------
The components of deferred tax assets and deferred tax liabilities at March 31,
1999 and 1998 are as follows:
- -------------------------------------------------------------
March 31, 1999 1998
- -------------------------------------------------------------
Deferred tax assets
Inventory valuation
allowance .................... $ 68,767 $ 75,700
Allowance for doubtful
accounts ..................... 49,019 44,500
- -------------------------------------------------------------
Total deferred tax assets ......... 117,786 120,200
- -------------------------------------------------------------
Deferred tax liabilities
Depreciation and amortization ..... $495,857 $475,400
- -------------------------------------------------------------
Management has determined that, based on the history of taxable earnings and its
expectations for the future, taxable income will more likely than not be
sufficient to fully realize deferred tax assets and, accordingly, has not
reduced deferred tax assets by a valuation allowance.
7. LEASES
The Company leases various warehouse and office space under noncancelable
operating leases expiring at various times through fiscal 2001. The Company also
leases certain equipment and vehicles under noncancelable capital and operating
leases expiring in various years through fiscal 2004.
The following is a schedule of future minimum payments, by year and in the
aggregate, under capital leases and noncancelable operating leases with initial
or remaining terms of one year or more at March 31, 1999:
- --------------------------------------------------------------
Capital Operating
Leases Leases
- --------------------------------------------------------------
Year ended March 31,
2000 .................................. 193,368 228,435
2001 .................................. 183,069 211,506
2002 .................................. 84,209 32,669
2003 .................................. 1,902 10,142
2004 .................................. - 4,907
- --------------------------------------------------------------
Total minimum lease payments .......... 462,548 487,659
Amounts representing interest ......... 49,365
- --------------------------------------------------------------
Present value of net minimum
lease payments ($162,455 of
which is current) ................... 413,183
- --------------------------------------------------------------
Equipment acquired under capital leases was $36,626 in fiscal 1999. Rental
expense under operating leases was $254,162, $472,978 and $566,095 for the
fiscal years ended March 31, 1999, 1998 and 1997 respectively.
8. LONG TERM DEBT
- ------------------------------------------------------------------
March 31, 1999 1998
- ------------------------------------------------------------------
Revolving credit agreement (a) ..... $ 2,000,000 $ 440,000
Term loan (a) ...................... 6,000,000 ---
Industrial Revenue Bonds (b) ....... 5,320,000 5,500,000
- ------------------------------------------------------------------
$13,320,000 5,940,000
Less current portion ............... 360,000 180,000
- ------------------------------------------------------------------
$12,960,000 $5,760,000
- ------------------------------------------------------------------
(A) On March 18, 1999, the Company signed a Loan Agreement and Revolving
Credit Note with its existing bank. This agreement, which expires on March 31,
2003, replaces the Fourth Amended and Restated Revolving Credit Note and
Agreement with the same bank. The credit agreement provides for a borrowing of
$20,000,000 and is divided into two types of borrowing facilities (i) a term
loan with a principal amount of up to six million ($6,000,000) dollars and (ii)
revolving credit loans which amounts may be borrowed, repaid and rebor-
14
<PAGE>
rowed up to $14,000,000. Interest on the term loan (6.43% at March 31, 1999)
shall equal the prime rate plus the prime applicable margin if any or at the
Company's option at the adjusted libor rate plus the libor applicable margin.
The margin's range from prime rate to prime rate plus 1/4% for prime rate loans
and libor plus 1 1/2% to libor plus 2 1/2% for libor rate loans. The rate is
determined quarterly based on agreed upon financial ratios. Interest on
revolving credit loans (6.43% at March 31, 1999) shall equal the prime rate or
at the Company's option at the libor rate plus the applicable margin. The libor
margin ranges from libor plus 1 1/2% to libor plus 2 1/4%. The rates are
determined quarterly based on agreed upon financial ratios. The revolving credit
agreement also has sublimits of $8,500,000 of banker's acceptances which bear
interest at 1 1/4% over the prevailing banker's acceptances rate, and a
$4,000,000 sublimit for letters of credit. Banker's acceptances at March 31,
1999 and 1998 in the amount of $4,060,000 and $6,983,000 respectively, have been
classified as notes payable. The weighted average interest rate in such short
term borrowings outstanding was 7.25% and 7.43% at March 31, 1999 and 1998
respectively. The term loan is payable in twenty-three (23) quarterly principal
installments of $250,000, commencing on July 1, 2000 and continuing quarterly
thereafter until April 1, 2006, when any remaining principal amount shall be due
and payable. In the event that the Company generates excess cash folw as defined
in the agreement, the Company will make a cash flow recapture payment on the
term loan beginning the fiscal year ending March 31, 2000. Borrowings on the
revolving credit agreement are further limited to 80% of eligible accounts
receivable, as defined, and 55% of eligible inventory, as defined, with a
sublimit of $9,000,000. Borrowings under this agreement are collateralized by
all the assets of the Company, and the agreement contains certain restrictive
covenants, which among other matters, impose limitations with respect to the
incurrence of liens, guarantees, mergers, acquisitions, capital expenditures,
specified sales of assets and prohibits the payment of dividends. The Company is
also required to maintain various financial ratios with which it is in
compliance at March 31, 1999.
(B) On July 9, 1997 the Company acquired approximately 32 acres of land
located in Arden, North Carolina and an existing 205,000 square foot building
located thereon (the "Arden Facility"). The purchase price for the Arden
Facility was $2,900,000, which was paid at closing. The acquisition of the Arden
Facility was financed with the proceeds from the issuance and sale by The
Buncombe County Industrial Facilities and Pollution Control Financing Authority
of its $5,500,000 Industrial Development Revenue Bonds (Medical Action
Industries Inc. Project), Series 1997 (the "Bonds"). Interest on the Bonds is
payable on the first business day of each January, April, July and October
commencing October, 1997 and ending July, 2013. Principal payments are due and
payable in 60 consecutive quarterly installments of $90,000 commencing October
1, 1998 and ending July 1, 2013 with a final maturity payment of $190,000. The
Bonds bear interest at a variable rate, determined weekly. The interest rate on
the Bonds at March 31, 1998 was 3.9% per annum. In connection with the issuance
of the Bonds, the Company entered into a Letter of Credit and Reimbursement
Agreement dated as of July 1, 1997 with a bank for approximately $5,800,000 (the
"Reimbursement Agreement") to support principal and interest payments of the
Bonds and requires payment of an annual fee of .85% of the remaining balance.
The Company also entered into a Remarketing Agreement, pursuant to which the
Remarketing Agent will use its best efforts to arrange for a sale in the
secondary market of such Bonds. The Remarketing Agreement provides for the
payment of an annual fee of .125% of the remaining balance.
As of March 31, 1998 the Company has used all of the $5,500,000 proceeds from
the Bonds for the purchase and rehabilitation of the Arden Facility and for the
acqusition of machinery and equipment.
Maturities of long term debt are as follows at March 31, 1999:
- -----------------------------------------------------------
2000 ........................................ 360,000
2001 ........................................ 1,110,000
2002 ........................................ 1,360,000
2003 ........................................ 3,360,000
2004 ........................................ 1,360,000
Thereafter .................................. 5,770,000
- -----------------------------------------------------------
13,320,000
- -----------------------------------------------------------
9. OTHER NOTE PAYABLE
In connection with the acquisition of Acme (see Note 3), the Company signed a
note in the amount of $1,000,000. The note is payable providing that Acme is in
compliance with the terms of the production and transition schedule as set forth
in the Transition Plan, as amended. If Acme is timely in meeting the transition
schedule, payments will be made as follows: (i) $200,000 on April 15, 1999; (ii)
$400,000 on May 15, 1999 and $400,000 with the transfer of the final piece of
equipment which is anticipated to be on or about June 15, 1999. The Company has
made scheduled payments of $600,000 through May 15, 1999.
10. RESTRUCTURING CHARGES
As a result of the Company's consolidation of its Asheville manufacturing
facility and two leased warehouse facilities into the new Arden Facility, which
was completed in the fourth quarter of fiscal 1998, the Company has recorded
$260,447 of pre-tax restructuring charges. The restructuring charges include
lease termination fees, net loss on the sale of the manufacturing facility in
Asheville, North Carolina, and costs incurred for moving inventory and equipment
to the recently acquired Arden Facility. As of March 31, 1998, all expenses have
been incurred pertaining to the above mentioned charges.
15
<PAGE>
11. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share.
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
NUMERATOR:
Net income for basic
and diluted earnings per share .......... $1,915,437 $1,684,243 $971,347
================================================================================
DENOMINATOR:
Denominator for basic
earnings per share -
weighted average shares ............... 8,465,770 8,201,585 8,088,349
Effect of dilutive securities:
Employee stock options ..................... 453,370 642,557 232,158
Non-vested restricted stock ................ 47,381 89,731 122,591
Warrants ................................... 22,377 29,654 0
- --------------------------------------------------------------------------------
Dilutive potential common shares ........... 523,128 761,942 354,749
Denominator for diluted earnings
per share - adjusted
weighted average shares ................. 8,988,898 8,963,527 8,443,098
================================================================================
Basic earnings per share ................... $.23 $.21 $.12
================================================================================
Diluted earnings per share ................. $.21 $.19 $.12
================================================================================
12. SHAREHOLDERS' EQUITY AND STOCK PLANS
In 1984, the Company's Board of Directors and stockholders approved a Restricted
Management Stock Bonus Plan (the "Bonus Plan"). Under the Bonus Plan, which
expired in May 1994, 500,000 shares of the Company's common stock may be sold to
executives and other key salaried employees at par value ($.001 per share).
Shares issued under the Bonus Plan vest in four equal installments on the
second, third, fourth and fifth anniversaries of the date of issuance. Except
for those shares which have vested, shares issued under the Bonus Plan may not
be sold, transferred or otherwise disposed of unless they are first offered to
the Company at par value. At March 31, 1999, 477,688 shares had been issued, of
which 460,657 have vested.
In 1984, The Company's Board of Directors and stockholders approved an Incentive
Stock Option Plan (the "Incentive Option Plan"). The Incentive Option Plan,
which expired in May 1994, authorized the granting, to key employees, of options
to purchase an aggregate of 350,000 shares of the Company's common stock at the
fair market value at the date of grant. Options vest over a two year period and
expire five years from date of grant unless employment is terminated, in which
event, subject to certain exceptions, the options terminate three months
subsequent to date of termination. At March 31, 1995, there were no shares
available for granting of future options. During fiscal 1997, all remaining
outstanding options expired.
During fiscal 1990, the Company's Board of Directors and stockholders approved a
Non-Qualified Stock Option Plan (the "Non-Qualified Option Plan"). The
Non-Qualified Option Plan, as amended, authorizes the granting to employees of
the Company options to purchase an aggregate of 2,150,000 shares of the
Company's common stock. The options are granted at the fair market price or at a
value that is not less than 85% of the fair market value on the date of grant.
The options are exercisable in two equal installments on the first and second
anniversary of the date of grant. Options expire from five to ten years from the
date of grant unless the employment is terminated, in which event, subject to
certain exceptions, the options terminate two months subsequent to date of
termination. At March 31, 1999 there were 800,000 shares available for granting
of future options. The number of shares exercisable at March 31 1999, 1998 and
1997 were 517,000, 423,500 and 456,000, respectively.
In 1994, the Company's Board of Directors and stockholders approved the 1994
Stock Incentive plan (the "Incentive Plan"), which, as amended, covers 850,000
shares of the Company's common stock. The Incentive Plan, which expires in 2004,
permits the granting of incentive stock options, shares of restricted stock and
non-qualified stock options. All officers and key employees of the Company and
its affiliates are eligible to participate in the Incentive Plan. The Incentive
Plan is administered by the Stock Option Committee of the Board of Directors,
which determines the persons to whom, and the times at which awards will be
granted. In addition, the Stock Option Committee decides the type of awards to
be granted and all other related terms and conditions of the awards. The per
share exercise price of any option may not be less than the fair market value of
a share of common stock at the time of grant. Grants outstanding at March 31,
1999 vest in two equal installments on the first and second anniversary of the
date of grant. Future grants may have different vesting schedules. At March 31,
1999, there were 10,000 shares available for future grants. At March 31, 1999,
30,000 shares of restricted stock are outstanding, 20,000 of which have vested.
Furthermore, the number of non-qualified options exercisable at March 31, 1999,
1998, and 1997 were 512,500, 372,500 and 135,000 respectively. No incentive
options have been issued under this plan.
The Company's 1996 Non-Employee Director Stock Option Plan (the "Director Plan")
was approved by the stockholders in August 1996 and covers 100,000 shares of the
Company's common stock. Under the terms of the Director Plan, each non-employee
director of the Company will be granted each year an option to purchase 2,500
shares of the Company's common stock. The authorization for grants under the
Director Plan will expire after the annual meeting in 2006. The Company believes
that the Director Plan will encourage stock ownership by non-employee directors,
thus benefiting stockholders by giving such directors a propriety interest in
the Company. Also, the Director Plan will enhance the Company's ability to
attract, retain and suitably reward directors of exceptional ability, upon whose
leadership and management skills the Company's future rests in large part. At
March 31, 1999 there were 85,000 shares available for granting of future
options. All of the shares granted were exercisable at March 31, 1999.
16
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Pursuant to the Acme acquisition (see note 3), the Company approved the issuance
of a ten-year warrant to purchase the Company's Common Stock. The warrant, which
expires on March 22, 2009, permits Acme to purchase 50,000 shares of Common
Stock at $2.84 per share.
Pursuant to an employment agreement expiring in August 1998, the Board of
Directors approved the issuance of a five-year warrant to purchase the Company's
common stock to the former principal stockholder of QuanTech, Inc. The warrant,
which expires on August 10, 1999, permits the holder to purchase 80,592 shares
of common stock at $2.1875 per share, the market value on the date of grant.
Pursuant to an employment agreement expiring in October 2000, the Board of
Directors approved the issuance of a five-year warrant to purchase the Company's
common stock to a former principal stockholder of Dayhill Corporation. The
warrant, which expires on October 30, 2002, permits the holder to purchase
70,000 shares of common stock at $3.94 per share, the market value on the date
of grant.
In accordance with the provisions of SFAS No. 123, the Company has elected to
apply APB 25 and related interpretations in accounting for its stock-based
awards because, as discussed below, the alternative fair value accounting
provided for under SFAS No. 123 requires use of option valuation models that
were not developed for use in valuing such stock-based awards. For the years
ended March 31, 1999, 1998, and 1997, all stock-based awards were granted with
an exercise price equal to the fair market value on their date of grant.
Therefore, under the provisions of APB 25, no compensation expense has been
recognized with respect to such awards. If the Company had elected to recognize
compensation expense based on the fair value of the stock-based awards granted
at grant date as prescribed by SFAS No. 123, net income and earnings per share
would have been reduced to the pro forma amounts indicated in the table below :
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1999 1998 1997
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Net income-as reported .................. $1,915,437 $1,684,243 $971,347
Net income-pro forma .................... 1,469,023 1,342,724 791,826
Earnings per share- as reported:
Basic ................................. $.23 $.21 $.12
Diluted ............................... .21 .19 .12
Earnings per share - pro forma:
Basic ................................. .17 .16 .09
Diluted ............................... .16 .15 .09
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<TABLE>
<CAPTION>
Option activity under the option plans during the three years ended March 31, 1999 is summarized as follows:
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Incentive Option Plan Non-Qualified Option Plan
Number of Option Price Number of Option Price
Shares Per Share Shares Per Share
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at April 1, 1996 ....... 147,500 $2.50 6l8,500 $.97-$4.125
Granted ....................... -- -- 303,250 $1.69-$2.38
Exercised ..................... -- -- (20,500) $.97-$1.75
Cancelled ..................... (147,500) $2.50 (20,500) $.97-$2.50
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Balance at March 31, 1997 ...... -- -- 880,750 $.97-$2.50
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Granted ....................... -- -- 303,000 $2.09-$3.25
Exercised ..................... -- -- (186,375) $.97-$2.19
Cancelled ..................... -- -- (147,875) $.97-$3.00
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Balance at March 31, 1998 ...... -- -- 849,500 $.97-$3.25
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Granted ....................... -- -- 184,000 $2.69-$3.38
Exercised ..................... -- -- (174,500) $.97-$2.38
Cancelled ..................... -- -- (59,000) $3.00-$3.38
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Balance at March 31, 1999 ...... -- -- 800,000 $.97-$3.88
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<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1996 Non Employee Weighted
1994 Stock Incentive Plan Directors Stock Option Plan Average
Number of Option Price Number of Option Price Option Price
Shares Per Share Shares Per Share Per Share
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1996 ....... 270,000 $.97-$2.19 -- -- $ 2.09
Granted ....................... 205,000 $1.88-$2.38 -- -- 1.88
Exercised ..................... -- -- -- -- 1.46
Cancelled ..................... -- -- -- -- 1.71
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Balance at March 31, 1997 ...... 475,000 $.97-$2.38 -- -- $1.71
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Granted ....................... 75,000 $3.25 7,500 $3.00 2.82
Exercised ..................... -- -- -- -- 1.57
Cancelled ..................... -- -- -- -- 1.75
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Balance at March 31, 1998 ...... 550,000 $.97-$3.25 7,500 $3.00 $2.02
- ----------------------------------------------------------------------------------------------------------
Granted ....................... 260,000 $2.63-$3.38 7,500 $3.25 $3.18
Exercised ..................... -- -- -- -- 1.75
Cancelled ..................... -- -- -- -- 3.28
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Balance at March 31, 1999 ...... 810,000 $.97-$3.38 15,000 $3.00-$3.25 $2.32
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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The fair value of the Company's stock-based awards is estimated on the date of
grant using the Black-Scholes option-pricing model assuming no expected
dividends and the following weighted average assumptions:
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1999 1998 1997
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Expected stock price volatility ...... .702 .710 .625
Risk-free interest rate .............. 5.49% 6.43% 6.25%
Expected life of options ............. 4 YEARS 4 years 4 years
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The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock-based awards have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The weighted average fair value of stock-based awards granted is $1.82 in fiscal
1999, $1.74 in fiscal 1998 and $1.02 in fiscal 1997. The weighted-average
remaining contractual life of all stock-based awards outstanding is 3.2 years in
fiscal 1999 and 1998 and 3.3 years in fiscal 1997. The weighted-average exercise
price of all stock-based awards exercisable at March 31, 1999, 1998 and 1997 is
$1.92, $1.69 and $1.65, respectively. The pro forma effect on net income in
fiscal 1997 is not representative of the pro forma effect on net income in
future years because it does not take into consideration pro forma compensation
expense related to grants made prior to fiscal 1996.
13. RETIREMENT PLAN
Effective April 1, 1988, the Company adopted a retirement plan for all of its
employees pursuant to section 401(k) of the Internal Revenue Code. Subject to
the terms and conditions of the plan, each eligible employee may contribute up
to 15% of his or her compensation as defined therein. In addition, the Plan
provides for a discretionary matching company contribution of 25% of the
employee's contribution up to a maximum of 6% of their compensation. The
Company's contribution vests over a period of four years and amounted to $47,509
in 1999, $40,085 in 1998 and $41,276 in 1997.
14. OTHER MATTERS
(A) The Company operates in one industry, disposable medical products.
(B) The Company presently obtains a portion of its raw materials for
operating room towels from China. These operating room towels are designated as
a textile, for which an export visa is required. These export visas could
adversely impact the availability and pricing of operating room towels. In the
event that these quota restrictions reduce the availability of operating room
towels, the Company will accelerate its procurement of operating room towels
from China and secure operating room towels from sources outside of China.
Management presently anticipates that it will be able to meet the Company's
requirements of operating room towels through fiscal 2000.
(C) Sales to Allegiance Healthcare Corp., Owens and Minor Inc. and McKesson
General Medical (the "Distributors") accounted for approximately 25%, 25% and
11% of net sales, respectively, for the fiscal year ended March 31, 1999, and
24%, 23% and 10%, respectively for the fiscal year ended March 31, 1998, and
18%, 23% and 10%, respectively for the fiscal year ended March 31, 1997.
Although the Distributors may be deemed in a technical sense to be major
purchasers of the Company's products, the Distributors typically serve as a
distributor under a purchase order or supply agreement between the customer and
the Company and do not purchase for their own accounts. The Company, therefore,
does not believe it is appropriate to categorize the Distributors as actual
customers.
(D) Product development costs charged to expense were $446,000, $364,000 and
$315,000 for the years ended March 31, 1999, 1998 and 1997, respectively.
(E) The Company is a party to lawsuits arising out of the conduct of its
ordinary course of business, including those related to product liability and
the sale and distribution of its products, which management believes are covered
by insurance. While the results of such lawsuits cannot be predicted with
certainty, management does not expect that the ultimate liabilities, if any,
will have a material adverse effect on the financial position or results of
operations of the Company.
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STATEMENT OF MANAGEMENT RESPONSIBILITY
The financial statements included in this annual report have been prepared
by the management of Medical Action Industries Inc. which has primary
responsibility for the integrity and objectivity of the statements. The
financial statements were prepared in conformity with generally accepted
accounting principles and include, where necessary, certain estimates and
judgments by management deemed appropriate in light of existing circumstances.
Management is also responsible for maintaining a system of internal
accounting controls designed to provide reasonable assurance that transactions
are properly authorized and recorded and the Company's assets are safeguarded
against material loss and unauthorized use or disposal. To accomplish this,
management has developed prescribed policies and procedures encompassing all
facets of the Company's accounting system. These policies and procedures are
continuously monitored by management and are updated or modified as needed.
The fiscal 1999 financial statements of the Company have been audited by
Grant Thornton LLP, independent certified public accountants. Their accompanying
report is based on an audit conducted in accordance with generally accepted
auditing standards. As part of their audit, they perform a review of internal
accounting controls and financial reporting matters for the purpose of
determining the amount of reliance to place on those controls relating to the
audit tests they perform.
The Company's Board of Directors maintains an Audit Committee consisting
of outside directors who meet periodically with management and separately with
the independent auditors to review financial reporting matters and to discuss
issues relating to their audit.
/s/ Paul D. Meringolo /s/ Richard G. Satin
Paul D. Meringolo, Chairman of Richard G. Satin, Vice
the Board, Chief Executive President of Operations
Officer and President and General Counsel
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REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
Medical Action Industries Inc.
We have audited the accompanying balance sheets of Medical Action Industries
Inc. as of March 31, 1999 and 1998, and the related statements of earnings,
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Medical Action Industries
Inc. as of March 31, 1999 and 1998, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Grant Thornton LLP
Melville, N.Y.
May 28, 1999
Stockholders and Board of Directors
Medical Action Industries Inc.
We have audited the accompanying statements of earnings, shareholders'
equity and cash flows of Medical Action Industries Inc. for the year ended March
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Medical
Action Industries Inc. for the year ended March 31, 1997, in conformity with
generally accepted accounting principles. Melville, N.Y. May 23, 1997
/s/ Ernst & Young LLP
Melville, N.Y.
May 23, 1997
20
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CORPORATE INFORMATION AND DIRECTORY
BOARD OF DIRECTORS
PAUL D. MERINGOLO
Chairman of the Board,
Chief Executive Officer and President
RICHARD G. SATIN
Vice President of Operations and General Counsel
BERNARD WENGROVER
Certified Public Accountant
DR. PHILIP F. CORSO
Assistant Clinical Professor of Surgery - Yale
University School of Medicine; Senior Attending
and Emeritus Chief of Plastic Surgery Bridgeport
and Norwalk Hospitals
DR. THOMAS A. NICOSIA
Fellow of the American College of Cardiology.
Affiliated with St. Francis and North Shore
University Hospitals
EXECUTIVE OFFICERS
PAUL D. MERINGOLO
Chairman of the Board,
Chief Executive Officer and President
RICHARD G. SATIN
Vice President of Operations and General Counsel
DANIEL F. MARSH
Vice President - Sales and Marketing
ERIC LIU
Vice President-International Operations
OPERATIONS MANAGEMENT
VICTOR BACCHIONI
Corporate Controller
STEVE FERRERA
Director of Sales and Marketing-OEM Division
WILLIAM C. GILBERT
Vice President-Manufacturing
HOWARD LASTER
National Accounts Manager
PHILIP R. MERINGOLO
Director of Information Systems
JOHN NIE
National Sales Manager
INDEPENDENT AUDITORS
Grant Thornton LLP
One Huntington Quadrangle
Melville, New York 11747
REGISTRAR & TRANSFER AGENT
American Stock Transfer and Trust Company
40 Wall Street
New York, New York 10005
SEC FORM 10-K
If you would like a copy of our Annual Report
on SEC Form 10-K for the fiscal year ended
March 31, 1999, you may obtain it without
charge. Direct your request to
Medical Action Industries Inc.,
Corporate Secretary, 150 Motor
Parkway, Hauppauge, New York 11788.
DUPLICATE MAILINGS
When a stockholder owns shares in more than
one account or when several stockholders live
at the same address, they may receive multiple
copies of the Annual Report or other mailings.
For further information on how to eliminate
multiple mailings, contact American Stock
Transfer and Trust Company at (718)921-8293.
COMPANY FACILITIES
Executive Offices
150 Motor Parkway
Hauppauge, New York 11788
Manufacturing and
Distribution Facilities
25 Heywood Road
Arden, North Carolina 28704
92 Central Avenue
Farmingdale, New York 11735
1938 E. Pomona Street
Santa Ana, California 92705
ANNUAL STOCKHOLDERS' MEETING
The Annual Stockholders' Meeting of Medical
Action will be held on Tuesday, August 17,
1999 at the offices of Medical Action Industries
Inc., 150 Motor Parkway, lower level,
Hauppauge, New York. A Form of Proxy and
Proxy Statement is being mailed to stockholders
of record with this report.
STOCK TRADING
Medical Action's common stock trades on The NASDAQ Stock Market(Service Mark)
under the symbol MDCI. As of June 1, 1999, there were approximately 500
stockholders of record, which does not include approximately 3,500 beneficial
owners of shares held in the names of brokers or other nominees. The following
table sets forth, for the periods indicated, the high and low prices per share
of Medical Action Common Stock as reported by the National Market tier of the
NASDAQ Stock Market(Service Mark):
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Fiscal 1999 Fiscal 1998
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High Low High Low
First Quarter 4-9/16 3-5/16 3-15/16 2
Second Quarter 3-7/8 2-1/2 3-7/8 2-7/8
Third Quarter 3-1/2 2-9/16 4-7/32 2-11/16
Fourth Quarter 3-1/2 2-9/16 4-1/4 2-15/16
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MEDICAL ACTION INDUSTRIES INC.
Executive Offices:
150 Motor Parkway
Suite 205
Hauppauge, NY 11788
(516) 231-4600 Fax (516) 231-3075
[email protected]
WWW.MEDICAL-ACTION.COM
