Medical Action Industries Inc. (MDCI) filed Quarterly Report for the period ended 2009-09-30.
Medical Action Industries develops manufactures markets and distributes a variety of disposable surgical related products. Through its existing direct sales force manufacturers' representatives and internal sales department their products are sold throughout the United States and certain international markets and is expanding their end-user base to include physician dental and veterinary offices. Medical Action Industries Inc. has a market cap of $177.5 million; its shares were traded at around $11.07 with a P/E ratio of 29.1 and P/S ratio of 0.6. Medical Action Industries Inc. had an annual average earning growth of 19.8% over the past 10 years. GuruFocus rated Medical Action Industries Inc. the business predictability rank of 3.5-star.
Highlight of Business Operations:
Management believes that the declines are attributable to a fluctuation in customer ordering patterns particularly impacting our operating room disposables and sterilization products and dressings and surgical sponges product categories, an increase in competitive pressures, a decline in hospital admission rates and elective surgeries, back order positions on certain products and the termination of certain sales agreements. The termination of these agreements negatively impacted the sales of disposable operating room towels and disposable laparatomy sponges in the amount of $2,411, urinals in the amount of $1,042, and crutches in the amount of $700 for the six months ended September 30, 2009 versus the six months ended September 30, 2008. These net unit volume declines were partially offset by volume increases primarily from our minor procedure kits and trays and containment systems for medical waste product categories which resulted from greater domestic market penetration.
Distribution expenses (which are included in selling, general and administrative expenses) decreased $296 to $3,741 for the six months ended September 30, 2009 as compared to $4,037 for
Cash provided by operating activities during the six months ended September 30, 2009 is primarily comprised of income from operations of $7,637, depreciation and amortization of $3,421, declines in (i) inventories of $7,920, (ii) prepaid income taxes of $1,357 and (iii) accrued expenses of $1,156 and an increase in accounts payable of $3,097. The cash provided by operating activities was used to fund the payment of debt as well as working capital requirements and the cost of capital expenditures.
Cash used in financing activities during the six months ended September 30, 2009 consisted primarily of payments on the Company’s credit facilities. During the six months ended September 30, 2009, the Company reduced its term loan by $3,250 and its revolving credit loan by $17,537.
On October 17, 2006, the Company entered into a credit agreement with certain lenders and a bank acting as administration agent for the lenders (the “Credit Agreement”) and is described in more detail in Note 9 “Long-Term Debt” of the Company’s “Notes to Consolidated Financial Statements” in the Company’s 2009 Annual Report on Form 10-K. The Credit Agreement, as amended April 7, 2009, provides for total borrowings of up to $85,000, consisting of (i) a term loan with a principal amount of $65,000, and (ii) a revolving credit loan, which amounts may be borrowed, repaid and re-borrowed up to $20,000.
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 (the “Bonds”). At September 30, 2009, $1,540 was outstanding for these Bonds. The Bonds bear interest at a variable rate determined weekly. During the six months ended September 30, 2009, the average interest rate on the Bonds approximated 0.7%. Each 1% fluctuation in interest rates will increase or decrease the interest expense on the Bonds by approximately $15 on an annualized basis.
MDCI is in the portfolios of Robert Olstein of Olstein Financial Alert Fund.
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