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Medical Action Industries Inc. Reports Operating Results (10-Q)

February 11, 2013 | About:
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10qk

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Medical Action Industries Inc. (MDCI) filed Quarterly Report for the period ended 2012-12-31.

Medical Action Industries has a market cap of $94.6 million; its shares were traded at around $5.8 with and P/S ratio of 0.2. Medical Action Industries had an annual average earning growth of 0.9% over the past 10 years.

Highlight of Business Operations:

During the three months ended December 31, 2012 and 2011, we reported revenues of $109,399 and $112,969, respectively. Our net income (loss) and earnings (loss) per basic and diluted share during the three months ended December 31, 2012 and 2011 amounted to ($55,503) or ($3.39) per basic and diluted share, and $1,825 or $0.11 per basic and diluted share, respectively. The net loss for the three months ended December 31, 2012 includes a goodwill impairment charge of, net of applicable taxes of $56,848, based on the results of the Company s annual assessment of goodwill as of December 31, 2012. Net income for the three months ended December 31, 2011 included a benefit of $1,807, net of applicable taxes, from a reduction in the Company's bonus accrual which was precipitated by the failure to meet certain operational performance objectives.

Selling, general and administrative expenses amounted to $15,899 and $13,327 during the three months ended December 31, 2012 and 2011, respectively. The increase is primarily due to $2,070 in higher compensation-related expenses, $449 in professional services associated with the renegotiation of our credit agreement and $434 in higher GPO administration fees resulting from a change in the mix of sales and a new GPO agreement. The increases were partially offset by declines of $136 in depreciation expense and $245 in all other selling, general and administrative expenses. Compensation expenses during the three months ended December 31, 2011 benefitted by $2,618 due to a reduction in the Company s bonus accrual which was precipitated by the failure to meet certain operational performance objectives.

Selling, general and administrative expenses amounted to $48,009 and $44,110 during the nine months ended December 31, 2012 and 2011, respectively. The increase is primarily due to $3,067 in higher compensation-related expenses, $1,491 in higher GPO administration fees resulting from an increase in sales and a new GPO agreement and $1,049 in professional services associated with the renegotiation of our credit agreement. These increases were partially offset by declines of $545 in depreciation expense and $1,164 in all other selling, general and administrative expenses. Compensation expenses during the nine months ended December 31, 2011 benefitted by $2,618 due to a reduction in the Company s bonus accrual which was precipitated by the failure to meet certain operational performance objectives.

The New Credit Agreement provides for a $51,000 secured term loan and a $25,000 secured revolving credit facility. The revolving credit facility is used to finance the working capital needs and general corporate purposes of the Company and its subsidiaries and for permitted acquisitions. As of December 31, 2012, $49,000 in a term loan and $5,300 in a revolving loan were outstanding under the New Credit Agreement. The New Credit Agreement requires us to comply with specified financial covenants relating to (i) maximum annual capital expenditures of $4,000, (ii) a minimum fixed charge coverage ratio of 1.00 to 1.00 on a rolling four fiscal quarter basis and (iii) minimum earnings before interest, taxes, depreciation and amortization for certain specified quarterly periods through the expiration of the loans, including $3,000 for the fiscal quarter ending on June 30, 2012, $7,500 for the two consecutive fiscal quarter period ending September 30, 2012, $13,750 for the three consecutive fiscal quarter period ending December 31, 2012, $18,000 for the four consecutive fiscal quarter period ending March 31, 2013, $21,000 for the four consecutive fiscal quarter period ending June 30, 2013, $22,000 for the four quarter fiscal period ending September 30, 2013 and December 31, 2013 and $25,000 for the four quarter fiscal periods ending March 31, 2014 and June 30, 2014. In addition, the Company has committed to certain post-closing conditions, including providing the Lenders with monthly financial statements, quarterly updates of financial projections and filed mortgages on our North Carolina, West Virginia and Tennessee facilities. As of December 31, 2012, the Company is in compliance with all covenants and financial ratios under the New Credit Agreement. Borrowings under the New Credit Agreement are collateralized by substantially all of the assets of the Company and its subsidiaries, and the agreement contains certain restrictive covenants, which, among other matters, impose limitations with respect to the incurrence of indebtedness, granting of liens, guarantees of obligations, mergers, acquisitions, capital expenditures, making loans or investments, specified sales of assets and prohibits the declaration and payment of dividends.

The New Credit Agreement requires us to comply with specified financial covenants relating to (i) maximum annual capital expenditures of $4,000, (ii) a minimum fixed charge coverage ratio of 1.00 to 1.00 on a rolling four fiscal quarter basis and (iii) minimum earnings before interest, taxes, depreciation and amortization for certain specified quarterly periods through the expiration of the loans, including $3,000 for the fiscal quarter ending on June 30, 2012, $7,500 for the two consecutive fiscal quarter period ending September 30, 2012, $13,750 for the three consecutive fiscal quarter period ending December 31, 2012, $18,000 for the four consecutive fiscal quarter period ending March 31, 2013, $21,000 for the four consecutive fiscal quarter period ending June 30, 2013, $22,000 for the four quarter fiscal period ending September 30, 2013 and December 31, 2013 and $25,000 for the four quarter fiscal periods ending March 31, 2014 and June 30, 2014. In addition, the Company has committed to certain post-closing conditions, including providing the Lenders with monthly financial statements, quarterly updates of financial projections and filed mortgages on our North Carolina, West Virginia and Tennessee facilities. As of December 31, 2012, the Company is in compliance with all covenants and financial ratios under the New Credit Agreement.

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