Medical Action Industries Inc. (MDCI, Financial) filed Quarterly Report for the period ended 2010-06-30.
Medical Action Industries Inc. has a market cap of $222.21 million; its shares were traded at around $13.59 with a P/E ratio of 13.19 and P/S ratio of 0.77. MDCI is in the portfolios of Robert Olstein of Olstein Financial Alert Fund, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Distribution expenses (which are included in selling, general and administrative expenses) decreased $95 to $1,736 for the three months ended June 30, 2010 as compared to $1,831 for the three months ended June 30, 2009. The decrease in distribution expenses was primarily due to decreased labor costs, primarily overtime expenses, as a result of decreased sales volumes.
During the three months ended June 30, 2010, the Company incurred an extraordinary pre-tax loss of $1,455 relating to inventories damaged as a result of water damage caused by heavy rain. The inventories damaged were predominantly patient bedside utensils and did not negatively impact the Companys service levels with respect to this product class. The Companys insurance carrier has denied our claim for reimbursement of damages based on the position that the loss was caused by flooding which is not a covered peril. We are currently appealing this decision and our insurance broker has asserted a claim under its errors and omissions policies to provide reimbursement for our loss in the event that our appeal is denied. However, we cannot provide any assurances that any portion of the loss will be covered under our insurance policies or our insurance brokers. Furthermore, any reimbursement of loss associated with the claims submitted under these insurance policies is subject to a deductable of $500.
Cash provided by operating activities during the three months ended June 30, 2010 is primarily comprised of income from operations of $496, increases in (i) inventories of $2,587 (inclusive of the $1,455 extraordinary loss relating to inventories damaged as a result of flooding) (ii) accounts payable of $913 and (iii) prepaid expenses and other current assets of $502. 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.
Working capital at June 30, 2010 was $25,831 compared to $24,040 at March 31, 2010, and the current ratio at June 30, 2010 was 1.7 to 1 compared to 1.6 to 1 at March 31, 2010. The increase in working capital is primarily due to a decline in current liabilities of $2,746. The decrease is comprised of a decline in the current portion of long-term debt, which was partially offset by an increase of $913 in accounts payable.
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 7 Long-Term Debt of the Companys Notes to Consolidated Financial Statements in the Companys 2010 annual report on Form 10-K. The Credit Agreement, at inception and as amended, provided 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.
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Medical Action Industries Inc. has a market cap of $222.21 million; its shares were traded at around $13.59 with a P/E ratio of 13.19 and P/S ratio of 0.77. MDCI is in the portfolios of Robert Olstein of Olstein Financial Alert Fund, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Gross profit for the three months ended June 30, 2010 decreased $4,384 or 25.9% to $12,538 from $16,922 for the three months ended June 30, 2009. Gross profit as a percentage of net sales for the three months ended June 30, 2010 decreased to 18.8% from 23.9% for the three months ended June 30, 2009. Gross profit decreased as a result of increased resin costs of $2,519, decreased net sales of $1,606, net increases in inefficiencies in our manufacturing facilities of $866 and increased costs of products sourced from foreign suppliers, principally from China, of $169. These factors were partially offset by a decrease of $580 in inventory obsolescence and other cost of sales and a decrease of $194 in outbound freight costs.Distribution expenses (which are included in selling, general and administrative expenses) decreased $95 to $1,736 for the three months ended June 30, 2010 as compared to $1,831 for the three months ended June 30, 2009. The decrease in distribution expenses was primarily due to decreased labor costs, primarily overtime expenses, as a result of decreased sales volumes.
During the three months ended June 30, 2010, the Company incurred an extraordinary pre-tax loss of $1,455 relating to inventories damaged as a result of water damage caused by heavy rain. The inventories damaged were predominantly patient bedside utensils and did not negatively impact the Companys service levels with respect to this product class. The Companys insurance carrier has denied our claim for reimbursement of damages based on the position that the loss was caused by flooding which is not a covered peril. We are currently appealing this decision and our insurance broker has asserted a claim under its errors and omissions policies to provide reimbursement for our loss in the event that our appeal is denied. However, we cannot provide any assurances that any portion of the loss will be covered under our insurance policies or our insurance brokers. Furthermore, any reimbursement of loss associated with the claims submitted under these insurance policies is subject to a deductable of $500.
Cash provided by operating activities during the three months ended June 30, 2010 is primarily comprised of income from operations of $496, increases in (i) inventories of $2,587 (inclusive of the $1,455 extraordinary loss relating to inventories damaged as a result of flooding) (ii) accounts payable of $913 and (iii) prepaid expenses and other current assets of $502. 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.
Working capital at June 30, 2010 was $25,831 compared to $24,040 at March 31, 2010, and the current ratio at June 30, 2010 was 1.7 to 1 compared to 1.6 to 1 at March 31, 2010. The increase in working capital is primarily due to a decline in current liabilities of $2,746. The decrease is comprised of a decline in the current portion of long-term debt, which was partially offset by an increase of $913 in accounts payable.
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 7 Long-Term Debt of the Companys Notes to Consolidated Financial Statements in the Companys 2010 annual report on Form 10-K. The Credit Agreement, at inception and as amended, provided 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.
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