<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: APRIL 4, 1998 Commission File Number: 0-18671
NUTRAMAX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 061200464
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 BLACKBURN DRIVE, GLOUCESTER, MASSACHUSETTS 01930
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 282-1800
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes___ No X
------
As of May 14, 1998 there were 6,338,960 shares of Common Stock, par value $.001
per share, outstanding.
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
THIRTEEN WEEKS ENDED APRIL 4, 1998
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations -
Thirteen Weeks and Twenty Seven Weeks ended April 4, 1998 and
Thirteen Weeks and Twenty Six ended March 29, 1997 (Unaudited) 4
Condensed Consolidated Balance Sheets -
April 4, 1998 (Unaudited) and September 27, 1997 5
Condensed Consolidated Statements of Cash Flows -
Twenty Seven Weeks ended April 4, 1998 and
Twenty Six Weeks ended March 29, 1997 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10-14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
2
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
THIRTEEN WEEKS ENDED APRIL 4, 1998
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks Twenty-Seven Twenty-Six
Ended Ended Weeks Ended Weeks Ended
-------------- -------------- ------------- --------------
April 4, 1998 March 29, 1997 April 4, 1998 March 29, 1997
-------------- -------------- ------------- --------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
NET SALES $ 33,956 $ 25,178 $ 68,419 $ 47,213
COST OF SALES 25,809 18,641 51,683 34,625
-------------- -------------- ------------- --------------
GROSS PROFIT 8,147 6,537 16,736 12,588
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 5,115 3,521 10,021 6,595
-------------- -------------- ------------- --------------
OPERATING INCOME 3,032 3,016 6,715 5,993
OTHER INCOME (EXPENSE):
Interest expense (2,082) (1,382) (4,424) (1,802)
Interest income 5 45 10 102
Other 6 (6) 8 (33)
-------------- -------------- ------------- --------------
INCOME BEFORE INCOME TAX EXPENSE 961 1,673 2,309 4,260
INCOME TAX EXPENSE 337 670 875 1,717
-------------- -------------- ------------- --------------
NET INCOME $ 624 $ 1,003 $ 1,434 $ 2,543
============== ============== ============= ==============
BASIC EARNINGS PER SHARE:
Per share amount $ 0.11 $ 0.21 $ 0.25 $ 0.38
============== ============== ============= ==============
Weighted average shares 5,648 4,845 5,634 6,780
============== ============== ============= ==============
DILUTED EARNINGS PER SHARE:
Per share amount $ 0.11 $ 0.20 $ 0.25 $ 0.37
============== ============== ============= ==============
Weighted average shares 5,648 4,845 5,634 6,780
Effect of dilutive securities:
Stock options 87 62 81 19
Warrants 82 55 78 18
-------------- -------------- ------------- --------------
Adjusted weighted average shares 5,817 4,962 5,793 6,817
============== ============== ============= ==============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
April 4, 1998 September 27, 1997
------------------ ------------------
(Unaudited) (See Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 12 $ 243
Accounts receivable, net 18,573 19,618
Inventories 43,115 36,135
Deferred income taxes 866 823
Escrow receivable 750 2,876
Prepaid expenses and other 2,239 655
------------------ ------------------
TOTAL CURRENT ASSETS 65,555 60,350
PROPERTY, PLANT AND EQUIPMENT, net 47,540 44,456
RESTRICTED CASH 787 316
GOODWILL, net 22,576 22,934
OTHER ASSETS 5,277 4,703
------------------ ------------------
$ 141,735 $ 132,759
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,655 $ 13,427
Accrued payroll and related taxes 1,790 936
Accrued Interest 609 1,325
Accrued expenses - other 3,336 1,709
Current maturities of long-term debt 5,859 4,351
------------------ ------------------
TOTAL CURRENT LIABILITIES 24,249 21,748
Long-Term Debt, less current maturities 90,189 85,542
Deferred Income Taxes and Other Liabilities 1,884 1,884
Other Long Term Liabilities - 106
STOCKHOLDERS' EQUITY 25,413 23,479
------------------ ------------------
$ 141,735 $ 132,759
================== ==================
</TABLE>
Note: The balance sheet at September 27, 1997 has been condensed from the
audited financial statements at that date.
See notes to condensed consolidated financial statements.
5
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Twenty-Seven Twenty-Six Weeks
Weeks Ended April Ended March 29,
4, 1998 1997
----------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,434 $ 2,543
Adjustments to reconcile net income to net cash
provided by operating activities:
Non cash items primarily depreciation and amortization 3,535 2,613
Increase (decrease), net of effect of acquisitions:
Accounts receivable 1,045 1,152
Inventories (6,980) (2,688)
Accounts payable, accrued expenses and other (697) (256)
Federal and state taxes payable - (432)
----------------- ----------------
Net cash (used in) provided by operating activities (1,663) 2,932
CASH FLOWS FROM INVESTING ACTIVITIES:
Escrow received 2,126 -
Restricted Cash (471) 1,975
Purchases of property and equipment (5,365) (5,273)
Deferred packaging costs (625) (391)
Other (583) (21)
----------------- ----------------
Net cash used in investing activities (4,918) (3,710)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under Revolving Credit Facility and
other Long Term Debt 7,545 47,700
Stock Repurchase (126) (21,174)
Proceeds from exercise of stock options 583 542
Debt Repayments (1,471) (25,005)
Deferred Financing Costs (181) (1,026)
Other - (89)
----------------- ----------------
Net cash provided by (used in) financing activities 6,350 948
----------------- ----------------
NET INCREASE (DECREASE) IN CASH $ (231) $ 170
CASH:
Beginning of period $ 243 $ 294
----------------- ----------------
End of period $ 12 $ 464
----------------- ----------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ 99 $ 1,823
----------------- ----------------
Interest paid $ 5,029 $ 867
----------------- ----------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING & INVESTING ACTIVITIES:
Warrants issued in connection with debt financing $ - $ 888
----------------- ----------------
Note issued in exchange for stock repurchased $ - $ 16,372
----------------- ----------------
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The condensed consolidated balance sheet of NutraMax Products, Inc. and
Subsidiaries (the "Company") as of April 4, 1998, the condensed consolidated
statements of operations for the thirteen and twenty-seven weeks ended April 4,
1998 and the thirteen and twenty-six weeks ended March 29, 1997, and the
condensed consolidated statements of cash flows for the twenty-seven weeks ended
April 4, 1998 and the twenty-six weeks ended March 29, 1997 have been prepared
by the Company without audit. In the opinion of the Company, all adjustments
(consisting only of normal, recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at April 4, 1998,
and for all periods presented, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's September 27, 1997 Annual Report on Form 10-K, as amended. The
results of operations for the period ended April 4, 1998 are not necessarily
indicative of the operating results for the full year.
NOTE B - ACQUISITION
On September 11, 1997, the Company acquired certain assets and assumed certain
liabilities related to the first aid business of American White Cross, Inc. and
Weaver Manufacturing Corporation ("American White Cross" or "First Aid
business"). As of fiscal year end 1997, the Company had recorded an escrow
receivable of $1,125,000 that was purchased as part of the acquisition and an
escrow receivable of $1,751,000 related to purchase price adjustments. The
purchase price was finalized in December 1997 and the $1,751,000 was released
from escrow and returned to the Company during the quarter ended January 3,
1998. During the quarter ended April 4, 1998, $375,000 was released and
collected by the Company from the purchased escrow receivable associated with
the acquisition. Subsequent to the period ended April 4, 1998, an additional
$550,000 was released from the purchased escrow receivable and collected by the
Company. The Company is still in the process of obtaining appraisals on certain
assets acquired. The excess of purchase price over estimated fair value of
assets acquired may be adjusted based on the results of such appraisals.
7
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C - INVENTORY
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
<TABLE>
<CAPTION>
April 4, 1998 September 27, 1997
------------------ ------------------
<S> <C> <C>
Raw materials $16,638,000 $15,921,000
Finished goods 22,489,000 16,223,000
Work-in-process 1,656,000 1,953,000
Machine parts and factory supplies 2,332,000 2,038,000
------------------ ------------------
$43,115,000 $36,135,000
================== ==================
</TABLE>
NOTE D - DEBT
The Company's Revolving Credit Facility of $25,000,000 had an outstanding
balance of $24,429,000 on April 4, 1998. The interest rate was 8.7% based on
LIBOR plus 2.5% and the prime rate. The Revolving Credit Facility expires on
January 1, 2002.
A summary of Debt outstanding as of April 4, 1998 is as follows:
<TABLE>
<S> <C>
Revolving Credit Facility $24,429,000
Term Loans 48,885,000
Subordinated Debt 9,137,000
Industrial Development Bonds 6,900,000
MEDIQ Note 5,915,000
Mortgages 630,000
Capital Lease Obligation 152,000
------------------
$96,048,000
Less: Current maturities of long-term debt 5,859,000
------------------
Long Term Debt $90,189,000
==================
</TABLE>
The agreements evidencing the Senior Debt and the Senior Subordinated Debt
contain certain restrictive covenants including, without limitation, covenants
with respect to the ratio of total debt to EBITDA, operating cash flow, interest
coverage, capital expenditures, and prevent the payment of dividends. The
Company has requested and was granted waivers of the total debt to EBITDA and
operating cash flow covenants for the period ended April 4, 1998.
8
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E - ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
Effective September 28, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share." The
Company changed the method used to compute earnings per share and restated all
prior periods in accordance with SFAS No. 128. SFAS No. 128 supersedes
Accounting Principles Board Opinion No. 15 and is intended to simplify the
computation of earnings per share and to make the U.S. computations more
comparable with international computations by requiring the presentation of
basic and fully diluted earnings per share. The company's only dilutive common
stock equivalents are stock options and warrants.
NOTE F - INCOME TAXES
The provision for income tax expense for the twenty-seven weeks ended April 4,
1998 has been computed using an estimated effective tax rate for the year ended
October 3, 1998.
NOTE G - DUTCH AUCTION SELF TENDER
On October 29, 1997 the Company announced that it would purchase from its
stockholders in a Dutch Auction self tender up to 450,000 shares of its common
stock at a purchase price not greater than $12.75 per share nor less than $11.00
per share. The purpose of the offer was to provide added market liquidity for
stock holders who wished to sell their shares as a result of the Company's 1997
fourth quarter performance.
The offer expired on November 28, 1997. A total of 250,668 shares were
purchased and retired by the Company at a price of $12.75 per share. The offer
was financed by sales of 250,668 shares by the Company to: (i) Cape Ann
Investors, L.L.C., the Company's largest stockholder; (ii) Bernard J. Korman,
the Company's Chairman of the Board; (iii) Donald E. Lepone, the Company's
Chief Executive Officer; and (iv) Donald M. Gleklen, a member of the Board of
Directors of the Company.
In connection with the Dutch Auction self tender, the Company received from its
Senior and Subordinated lenders a waiver to allow for the purchase of its common
stock.
9
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE H - LITIGATION AND CONTINGENCIES
The Company has been named as a defendant in several legal proceedings which
have arisen in the normal course of business. Although the amount of litigation
that could result from any litigation cannot be predicted, in the opinion of
management, the Company's potential liability on all known claims would not have
a material adverse effect on the consolidated financial position or results of
operations of the Company.
The Company has conducted a review of its computer systems to identify those
areas that could be affected by Year 2000 failures. The Company believes that
its integrated manufacturing, accounting, distribution and order entry system
has built-in Year 2000 compliance. The impact of the Year 2000 on the Company's
customers and vendors is not yet known.
On July 8, 1997, the Commonwealth of Massachusetts Department of Revenue ("DOR")
notified the Company of its intent to assess the Company approximately $374,000,
including interest and penalties, relating to tax audits for fiscal years ending
1992 through 1994. Tax years 1995 and 1996 remain open. The amount relates
principally to the deductibility of certain expenses related to the Company's
wholly owned subsidiary, NutraMax Holdings, Inc., a Delaware company. The
Company attended a pre-assessment conference with the DOR on March 18, 1998, at
which the Company continued to vigorously defend its tax position. The Company
has not received any further notice from the DOR regarding its intent to assess.
Due to the uncertainties surrounding any assessments, no accrual has been
recorded in the accompanying financial statements.
NOTE I - COMMITMENTS
Leases - The Company leases certain of its administrative, manufacturing,
distribution and warehouse facilities under operating leases. The Company also
leases certain equipment under operating and capital leases. During the period
ended April 4, 1998, the Company entered into new lease agreements for a
distribution facility and certain equipment which increased the Company's annual
future minimum payments under noncancelable operating and capital leases by
approximately $480,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The following discussion addresses the financial condition of the Company
as of April 4, 1998 and its results of operations for the thirteen and twenty-
seven weeks then ended, compared with the thirteen and twenty-six week periods
last year. On September 11, 1997, the Company acquired certain assets and
assumed certain liabilities related to the first aid division of American White
Cross, Inc. and Weaver Manufacturing Corp. ("the First Aid business"). The
acquisition was accounted for as a purchase and the results of operations of the
First Aid business are included in the Company's Consolidated Operations for the
thirteen and twenty-seven weeks ended April 4, 1998. This discussion should be
read in conjunction with the Management's
10
<PAGE>
Discussion and Analysis section included in the Company's Annual Report on Form
10-K, as amended, for the year ended September 27, 1997 to which the reader is
directed for additional information.
Some of the information presented in this report constitutes forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Although the Company believes that its expectations are
based on reasonable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurance that actual results will not
differ materially from its expectations. Factors which could cause actual
results to differ from expectations include the timing and amount of new product
introductions by the Company, the timing of orders received from customers, the
gain or loss of significant customers, changes in the mix of products sold,
competition from brand name and other private label manufacturers, seasonal
changes in the demand for the Company's products, increases in the cost of raw
materials and changes in the retail market for health and beauty aids in
general. For additional information concerning these and other important
factors which may cause the Company's actual results to differ materially from
expectations and underlying assumptions, please refer to the Company's Annual
Report on Form 10-K, as amended, for the year ended September 27, 1997 and other
reports filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship that items in the Company's Condensed Consolidated Statements of
Operations bear to net sales.
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks Twenty-Seven Twenty-Six
Ended Ended Weeks Ended Weeks Ended
-------------- -------------- ------------- --------------
April 4, 1998 March 29, 1997 April 4, 1998 March 29, 1997
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
NET SALES 100% 100% 100% 100%
COST OF SALES 76 74 75 73
-------------- -------------- ------------- --------------
GROSS PROFIT 24 26 25 27
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 15 14 15 14
-------------- -------------- ------------- --------------
OPERATING INCOME 9 12 10 13
OTHER EXPENSE 6 5 7 4
-------------- -------------- ------------- --------------
INCOME BEFORE INCOME TAX EXPENSE 3 7 3 9
INCOME TAX EXPENSE 1 3 1 4
-------------- -------------- ------------- --------------
NET INCOME 2% 4% 2% 5%
============== ============== ============= ==============
</TABLE>
SECOND QUARTER 1998 COMPARED TO SECOND QUARTER 1997
Net sales for second quarter ended April 4, 1998 were $33,956,000, an
increase of $8,778,000, or 35%, over second quarter 1997 net sales of
$25,178,000. Of the increase in net sales, approximately $9,442,000 was
attributable to sales of First Aid products with increases in the
Opthalmics category of approximately $785,000 as well as increases in the
Cough/Cold category of approximately $608,000 offset by decreases in the
Feminine hygiene category of approximately $761,000 and the combined $1,189,000
decrease in the Adult Liquid Nutrition and Clotrimazole based yeast infection
medication sales. The reduction in Adult Liquid Nutritionals and Clotrimazole
based yeast infection medications is the result of a decision by the Company to
concentrate on products it directly manufacturers. The Company expects to
complete the phase out of Adult Liquid Nutritionals and Clotrimazole by the end
of this fiscal year.
11
<PAGE>
Gross profit for second quarter 1998 was $8,147,000 or 24% of net sales, as
compared to $6,537,000 or 26% of net sales for the prior year's quarter. The
decrease in gross margin percent is primarily attributable to continued
inefficiencies related to Cough/Cold products production. These inefficiencies
occcurred primarily during the fourth fiscal quarter of 1997 and related to the
delay in the completion of the continuous cooking line which delayed production
causing under absorbed labor and overhead which was capitalized into inventory.
Selling, general and administrative expenses for second quarter 1998 were
$5,115,000, or 15% of net sales, as compared to $3,521,000 or 14% of net sales
for the prior year's quarter. The $1,594,000 increase is primarily attributable
to expenses associated with operating the newly acquired First Aid Business as
well as increased broker commissions and freight expense related to increased
sales volume. The increase, as a percentage of net sales, is primarily
attributable to increased amortization of goodwill and deferred financing costs
associated with the purchase of the First Aid business.
Interest expense for the second quarter 1998 was $2,082,000 as compared to
$1,382,000 in the prior year's quarter. This increase is a result of the
increased debt associated with the acquisition of the First Aid business of
American White Cross.
Interest income for the quarter decreased due to the decreased balance of
the restricted cash associated with the IDB financing.
The effective income tax rate for the quarter was 35% which is 5% lower
than the prior year quarter. The decrease relates to benefits expected to be
realized as a result of the Company's implementation of certain state tax
planning strategies.
TWENTY-SEVEN WEEKS ENDED APRIL 4, 1998 COMPARED TO TWENTY-SIX WEEKS ENDED
MARCH 29, 1997
Net Sales for 1998 were $68,419,000, an increase of $21,206,000, or 45%
over 1997 sales of $47,213,000. Of the increase in net sales approximately
$18,025,000 was attributable to sales of First Aid products with added increases
in the Opthalmics category of approximately $1,584,000 as well as increases in
the Cough/Cold category of approximately $3,091,000 offset by a combined
$1,807,000 decrease in the Adult Liquid Nutrition and Clotrimazole based yeast
infection medication sales. The reduction in Adult Liquid Nutritionals and
Clotrimazole based yeast infection medications is the result of a decision by
the Company to concentrate on products it directly manufactures. The Company
expects to complete the phase out of Adult Liquid Nutritionals and Clotrimazole
by the end of this fiscal year.
Gross profit for the twenty-seven week period in 1998 was $16,736,000 or
25% of net sales, compared to $12,588,000 or 27% of net sales for the twenty-six
week period last year. The increase in gross margin dollars is attributable to
increased sales. The decrease in the gross margin percentage is primarily
attributable to continued inefficiencies related to Cough/Cold products
production, as discussed above.
Selling, general and administrative expenses for the twenty-seven week
period in 1998 was $10,021,000 or 15% of net sales, compared to $6,595,000 or
14% of net sales for the twenty-six week period last year. The $3,426,000
increase is primarily attributable to expenses
12
<PAGE>
associated with operating the newly acquired First Aid Business as well as
increased broker commissions and freight expense related to increased sales
volume. The increase, as a percentage of net sales, is primarily attributable to
increased amortization of goodwill and deferred financing costs associated with
the purchase of the First Aid business.
Interest expense for the twenty-seven week period in 1998 was $4,424,000 or
7% of net sales, compared to $1,802,000 or 4% of net sales for the twenty-six
week period last year. This increase is a result of the increased debt
associated with the acquisition of the First Aid business.
Interest income for the period decreased due to the decreased balance of
the restricted cash associated with the IDB financing.
The effective income tax rate for the quarter was 38% which is 2% lower
than the comparable prior year period. The decrease relates to benefits expected
to be realized as a result of the Company's implementation of certain state tax
planning strategies.
LIQUIDITY AND CAPITAL RESOURCES
As of April 4, 1998 the Company had working capital of $41,306,000 as
compared to working capital of $38,602,000 as of September 27, 1997. The
increase in working capital was primarily attributable to increased inventories
and a decrease in accounts payable. The Company has been building cough/cold
inventory in order to meet customer order requirements.
Net cash used in operating activities was $1,663,000 for the twenty-seven
weeks ended April 4, 1998, as compared to $2,932,000 provided by operating
activities in the twenty-six week period ended March 29, 1997. This decrease
was primarily attributable to a reduction in accounts payable, increased
inventories and interest payments.
Net cash used in investing activities was $4,918,000 for the twenty-seven
weeks ended April 4, 1998, consisting primarily of funds used for expenditures
of capital equipment offset by escrow proceeds received relating to the
acquisition of the First Aid business. The Company anticipates additional
capital expenditures of approximately $3,000,000 for the remainder of fiscal
1998. The expenditures relate primarily to additional manufacturing capacity
requirements and the purchase of its manufacturing facility in Gloucester, MA.
These expenditures are expected to be financed through cash generated from
operations and a mortgage note with respect to the building purchase.
Net cash provided by financing activities was $6,350,000 for the twenty-
seven weeks ended April 4, 1998, consisting of borrowings of $7,545,000
primarily resulting from the funding of increases in inventories offset by debt
repayments of $1,471,000. During the period ended April 4, 1998, the Company
entered into new lease agreements for a distribution facility and certain
equipment which increased the Company's annual future minimum payments under
noncancelable operating and capital leases by approximately $480,000.
The Company's Revolving Credit Facility of $25,000,000 had an outstanding
balance of $24,429,000 on April 4, 1998. The interest rate was 8.7% based on
LIBOR plus 2.5% and the prime rate. The Revolving Credit Facility expires on
January 1, 2002. The Company has requested and was granted waivers of the total
debt to EBITDA and operating cash flow covenants for the period ended April 4,
1998.
13
<PAGE>
The Company believes that its existing working capital, anticipated funds
to be generated from operations, funds available under the Revolving Credit
Facility and added financing related to the building purchase will be sufficient
to meet the Company's operating and capital needs during fiscal 1998. However,
depending upon future growth of the business, additional financing may be
required.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been named as a defendant in several legal proceedings
which have arisen in the normal course of business. Although the amount of
litigation that could result from any legal proceedings cannot be predicted, in
the opinion of management, the Company's potential liability on all known claims
would not have a material adverse effect on the consolidated financial position
or results of operations of the Company.
On July 8, 1997, the Commonwealth of Massachusetts Department of Revenue
("DOR") notified the Company of its intent to assess the Company approximately
$374,000, including interest and penalties, relating to tax audits for fiscal
years ending 1992 through 1994. Tax years 1995 and 1996 remain open. The amount
relates principally to the deductibility of certain expenses related to the
Company's wholly owned subsidiary, NutraMax Holdings, Inc., a Delaware company.
The Company attended a pre-assessment conference with the DOR on March 18, 1998,
at which the Company continued to vigorously defend its tax position. The
Company has not received any further notice from the DOR regarding its intent to
assess. Due to the uncertainties surrounding any assessments, no accrual has
been recorded in the accompanying financial statements.
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11 - Statement re: Computation of Per Share Earnings appears
on page 17.
Exhibit 27 - Financial Data Schedule appears on page 18.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed in the quarter ended April 4,1998.
15
<PAGE>
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
THIRTEEN WEEKS ENDED APRIL 4, 1998
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NutraMax Products, Inc.
--------------------------------
(Registrant)
May 19, 1998
------------------
(Date) /s/ Robert F. Burns
------------------------------------
Robert F. Burns
Vice President and
Chief Financial Officer
16
<PAGE>
EXHIBIT 11
NUTRAMAX PRODUCTS, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks Twenty-Seven Twenty-Six
Ended Ended Weeks Ended Weeks Ended
-------------- -------------- ------------- --------------
April 4, 1998 March 29, 1997 April 4, 1998 March 29, 1997
-------------- -------------- ------------- --------------
(share data in thousands)
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Net income per common share $ 0.11 $ 0.21 $ 0.25 $ 0.38
============== ============== ============= ==============
Weighted average number of shares outstanding 5,648 4,845 5,634 6,780
============== ============== ============= ==============
DILUTED EARNINGS PER SHARE:
Net income per common share $ 0.11 $ 0.20 $ 0.25 $ 0.37
============== ============== ============= ==============
Weighted average shares 5,648 4,845 5,634 6,780
Effect of dilutive securities:
Stock options 87 62 81 19
Warrants 82 55 78 18
-------------- -------------- ------------- --------------
Adjusted weighted average number of shares outstanding 5,817 4,962 5,793 6,817
============== ============== ============= ==============
</TABLE>
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-03-1998
<PERIOD-END> APR-04-1998
<CASH> 12
<SECURITIES> 0
<RECEIVABLES> 19,491
<ALLOWANCES> 918
<INVENTORY> 43,115
<CURRENT-ASSETS> 65,555
<PP&E> 67,054
<DEPRECIATION> 19,514
<TOTAL-ASSETS> 141,735
<CURRENT-LIABILITIES> 24,249
<BONDS> 90,189
0
0
<COMMON> 6
<OTHER-SE> 25,407
<TOTAL-LIABILITY-AND-EQUITY> 141,735
<SALES> 68,419
<TOTAL-REVENUES> 68,419
<CGS> 51,683
<TOTAL-COSTS> 51,683
<OTHER-EXPENSES> 10,021
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,424
<INCOME-PRETAX> 2,309
<INCOME-TAX> 875
<INCOME-CONTINUING> 1,434
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,434
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
