-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CQRez/nr7CIzoa0zDPRowRVyzX9RFA2P9aADvw/EzRBHTR4JliA6u92BBHSgdkpo nAX3mHXusp0RDljcUEN7/g== 0001005477-01-003758.txt : 20010620 0001005477-01-003758.hdr.sgml : 20010620 ACCESSION NUMBER: 0001005477-01-003758 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010430 FILED AS OF DATE: 20010619 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IVC INDUSTRIES INC CENTRAL INDEX KEY: 0000916614 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221567481 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23624 FILM NUMBER: 1663484 BUSINESS ADDRESS: STREET 1: 500 HALLS MILL ROAD CITY: FREEHOLLD STATE: NJ ZIP: 07728 BUSINESS PHONE: 7323083000 MAIL ADDRESS: STREET 1: 500 HALLS MILL RD CITY: FREEHOLD STATE: NJ ZIP: 07728 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL VITAMIN CORP DATE OF NAME CHANGE: 19931228 10-Q 1 0001.txt FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended April 30, 2001 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 13(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the period from _______________ to ____________________ Commission file number 0-23624 IVC INDUSTRIES, INC. (exact name of Registrant as specified in its charter) DELAWARE 22-1567481 (State of Incorporation) (I.R.S. Employer Identification No.) 500 HALLS MILL ROAD, FREEHOLD, NEW JERSEY 07728 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (732) 308-3000 NOT APPLICABLE -------------- (former name, address and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 |X| No |_| Registrant had 2,099,051 shares of common stock outstanding as of June 1, 2001 ================================================================================ IVC INDUSTRIES, INC. Table of Contents Part I. Financial Information Page No. -------- Item 1. Financial Statements Independent Accountants' Review Report ......................... 3 Condensed Consolidated Balance Sheets as at April 30, 2001 and July 31, 2000 ............................... 4 Condensed Consolidated Statements of Income For The Three and Nine Months Ended April 30, 2001 and 2000 .... 5 Condensed Consolidated Statements of Cash Flows For the Nine Months Ended April 30, 2001 and 2000 .............. 6 Notes to Condensed Consolidated Financial Statements ........... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...................................... 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk ..... 13 Part II. Other Information Item 6. Reports on Form 8-K and Exhibits ............................... 14 Signature Page ................................................. 14 Item 1. Financial Statements. Independent Accountants' Review Report To the Board of Directors and Stockholders of IVC Industries, Inc. We have reviewed the accompanying condensed consolidated balance sheet of IVC Industries, Inc. as of April 30, 2001, and the related condensed consolidated statements of operations for the three months and nine months ended April 30, 2001 and condensed consolidated statement of cash flows for the nine months ended April 30, 2001. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has continuing losses from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet as of July 31, 2000, and the related statements of operations, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated October 26, 2000, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of July 31, 2000, is fairly stated, in all material respects in relation to the balance sheet from which it has been derived. /s/ AMPER POLITZNER & MATTIA, PA June 4, 2001, except for Note 2 and 4, dated June 13, 2001 Edison, New Jersey 3 IVC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands, Except as Noted or Per Share Information)
April 30, July 31, 2001 2000 --------- -------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 803 $ 648 Accounts receivable, net 7,875 6,330 Inventories 20,562 27,133 Deferred taxes 1,751 1,751 Prepaid expenses 296 252 Refundable income taxes 1,340 1,123 Other current assets 95 120 -------- -------- Total current assets 32,722 37,357 Property, plant and equipment, net 18,661 20,578 Due from related parties, net 517 493 Deferred taxes 1,637 1,163 Other assets 868 657 -------- -------- Total assets $ 54,405 $ 60,248 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt 2,286 2,365 Current portion of capital lease payable 270 230 Current portion of deferred gain on building sale 117 112 Accounts payable 8,674 10,039 Accrued expenses 4,124 5,351 Income taxes payable 26 91 -------- -------- Total current liabilities 15,497 18,188 Long-term debt - less current portion 22,360 22,653 Capital lease obligations 2,696 2,907 Deferred gain on building sale 804 893 -------- -------- Total liabilities 41,357 44,641 -------- -------- Shareholders' equity: Preferred stock, $.01 par value, 250,000 shares authorized: none issued -- -- Common stock, $.08 par value,4,500,000 shares authorized: issued and outstanding 2,099,051 as of April 30, 2001 and 2,088,092 as of April 30, 2000, respectively 168 167 Additional paid-in capital 11,580 11,553 Foreign currency translation adjustment (320) (263) Retained earnings 1,620 4,150 -------- -------- Total shareholders' equity 13,048 15,607 -------- -------- Total liabilities and shareholders' equity $ 54,405 $ 60,248 ======== ========
See notes to condensed consolidated financial statements 4 IVC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except as Noted or Per Share Information) (unaudited)
Three Months Ended Nine Months Ended April 30, April 30, ----------------------------- ----------------------------- 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Net sales $ 15,651 $ 17,234 $ 51,069 $ 68,271 Cost of sales 11,807 12,652 38,540 49,248 ----------- ----------- ----------- ----------- Gross profit 3,844 4,582 12,529 19,023 Selling, general and administrative expenses 4,664 6,444 14,171 20,701 ----------- ----------- ----------- ----------- Loss from operations (820) (1,862) (1,642) (1,678) Recovery, price fixing settlement -- 6,305 -- 16,305 Other expenses - net 631 705 2,121 1,764 ----------- ----------- ----------- ----------- Income (loss) before income taxes (1,451) 3,738 (3,763) 12,863 Income tax expense (benefit) (528) 1,507 (1,233) 5,198 ----------- ----------- ----------- ----------- Net income (loss) $ (923) $ 2,231 $ (2,530) $ 7,665 =========== =========== =========== =========== Net income (loss) per share - basic $ (0.44) $ 1.07 $ (1.21) $ 3.67 =========== =========== =========== =========== Net income (loss) per share - diluted $ (0.44) $ 1.07 $ (1.21) $ 3.67 =========== =========== =========== =========== Weighted average shares - basic 2,098,151 2,088,092 2,094,211 2,088,092 =========== =========== =========== =========== Weighted average shares - diluted 2,098,151 2,090,003 2,094,211 2,088,092 =========== =========== =========== ===========
See notes to condensed consolidated financial statements 5 IVC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)
Nine Months Ended April 30, ----------------------- 2001 2000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (2,530) $ 7,665 -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,155 1,951 Gain on sale of assets (63) Deferred income taxes (474) 729 Stock and options issued to non-employee directors 28 79 Changes in assets - (increase) decrease: Accounts receivable (1,545) 3,044 Inventories 6,571 (6,780) Prepaid expenses and other current assets (236) 1,425 Other assets (344) 1,000 Changes in liabilities - increase (decrease): Accounts payable and accrued expenses (2,592) (1,761) Income taxes payable (65) 1,826 -------- -------- Total adjustments 3,435 1,513 -------- -------- Net cash provided by operating activities 905 9,178 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (150) (2,983) -------- -------- Net cash used in investment activities (150) (2,983) -------- -------- CASH FLOWS FROM FINANCING ACTVITIES: Principal payments on long-term debt (19,568) 5,154 Proceeds from long-term debt 19,196 (10,489) Principal payments on capital lease obligations (171) (133) -------- -------- Net cash used by financing activities (543) (5,468) -------- -------- Foreign currency translation adjustment (57) (56) -------- -------- NET INCREASE IN CASH 155 671 CASH AND CASH EQUIVALENTS-BEGINNING 648 287 -------- -------- CASH AND CASH EQUIVALENTS-ENDING $ 803 $ 958 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 2,155 $ 1,827 ======== ======== Taxes $ 326 $ 633 ======== ========
See notes to condensed consolidated financial statements 6 IVC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands, Except as Noted or Per Share Information) (unaudited) Note 1 - Basis of Presentation and Other Matters: The accompanying interim period unaudited condensed consolidated financial statements do not include all disclosures provided in the annual consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto contained in the IVC Industries, Inc. (the "Company") Annual Report on Form 10-K for the year ended July 31, 2000, as filed with the Securities and Exchange Commission. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Certain amounts have been reclassified to conform with the current period presentation. Note 2 -Liquidity For the nine months ended April 30, 2001, the Company continued to experience losses from operations. These losses are attributable to an overall softness in the market for herbal and nutritional products, resulting in reduced sales levels for the Company. At April 30, 2001 the Company was not in compliance with the minimum tangible net worth covenant contained in the Company's Loan and Security Agreement with Congress Financial Corporation ("Congress"). On June 13, 2001 the Company entered into an Amended Agreement with Congress. Under the Amended Agreement, Congress has agreed to waive the event of default existing as of April 30, 2001, and the rate of interest was changed to the prime rate plus three percent, increasing to five percent in the event of termination or non-renewal of the loan, or if an event of default occurs. The Amended Agreement also provides for a $500,000 permanent special reserve, an amendment fee of $50,000, and requires the Company to maintain revised minimum tangible net worth amounts. The Company is also pursuing, among other initiatives; i) obtaining alternative sources of financing, ii) seeking additional sales opportunities within its core business, iii) seeking new sales opportunities through non-traditional channels of distribution, iv) reducing expenses to a level that would provide the Company with sufficient cash flows to meet its obligations, v) merger or sale of the Company, and or vi) a combination of any of the foregoing. 7 Although there can be no assurances that the Company will be able to achieve any of the foregoing initiatives, these financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. Note 3 - Inventories: Inventories consist of the following: April 30, July 31, 2001 2000 --------- -------- (unaudited) Finished goods $ 6,023 $ 7,579 Bulk and work in process 8,076 11,864 Raw materials and packaging components 6,463 7,690 ------- ------- Total inventories $20,562 $27,133 ======= ======= Note 4 - Long-Term Debt: On October 16, 2000 the Company entered into a new credit agreement with Congress Financial Corporation, a subsidiary of First Union Corporation, to replace a previously existing credit agreement. The agreement matures on October 16, 2003. The Company can borrow up to $25,000 under a revolving credit commitment and $5,500 under a term loan commitment, subject to borrowing base limitations, as defined. Borrowings under the revolving credit commitment bear interest at either .75% above First Union's "prime rate" or at the Company's option, a rate of 2.75% above the adjusted Eurodollar rate used by the bank. The interest rate on the term loan is .25% higher than the revolving loan rates outlined above. The notes are collateralized by substantially all of the Company's assets. The agreement requires the Company to maintain minimum tangible net worth and contains various restrictions customary in such financial arrangements, including limitations on the payment of cash dividends. At April 30, 2001 the Company was not in compliance with the minimum tangible net worth covenant contained in the Company's Loan and Security Agreement with Congress. On June 13, 2001 the Company entered into an Amended Agreement with Congress. Under the Amended Agreement, Congress has agreed to waive the event of default existing as of April 30, 2001, and the rate of interest was changed to the prime rate plus three percent, increasing to five percent in the event of termination or non-renewal of the loan, or if an event of default occurs. The Amended Agreement also provides for a $500,000 permanent special reserve, an amendment fee of $50,000, and requires the Company to maintain revised minimum tangible net worth amounts. 8 Note 5 - Net Income (Loss) Per Share: Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period, increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Note 6 - Comprehensive Income: As of August 1, 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for the reporting and displaying of comprehensive income. The following table presents the Company's comprehensive income (loss) for the three and nine month periods ended April 30, 2001 and 2000.
Three Months Ended Nine Months Ended April 30, April 30, 2001 2000 2001 2000 ------- ------- ------- ------- Net income (loss) $ (923) $ 2,231 $(2,530) $ 7,665 Other comprehensive income (loss) , net of tax: Foreign exchange translation adjustments (52) (23) (57) (56) ------- ------- ------- ------- Comprehensive income (loss) $ (975) $ 2,208 $(2,587) $ 7,609 ======= ======= ======= =======
Note 7 - Recovery, price fixing settlement: During the year ended July 31, 2000 the Company entered into price-fixing settlements with three suppliers. The settlement agreements included cash payments to the Company of $16,305. Of this amount, $6,305 was included in the statement of operations during the quarter ended April 30, 2000. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Dollars in Thousands, except As Noted or Per Share Information) Three Months Ended April 30, 2001 Compared to the Three Months Ended April 30, 2000 Results of Operations Net loss for the quarter ended April 30, 2001 was $923, equivalent to a basic and diluted loss of $.44 per share versus net income of $2,231, equivalent to basic and diluted earnings of $1.07 per share, for the quarter ended April 30, 2000. Net sales for the quarter ended April 30, 2001 were $15,652 as compared to $17,234 in the prior year's quarter, a decrease of $1,582 or 9.2%. This reduction was primarily attributable to a decrease in private label and branded sales to existing customers due to the softness in the overall market for vitamins, herbs and supplements, and increased price and product competition from competitors. Cost of sales for the quarter ended April 30, 2001 was $11,807, a decrease of $845 or 6.7% from $12,652 for the quarter ended April 30, 2000. Cost of sales increased 2.0% as a percentage of net sales over the prior year's period, primarily due to underutilization of capacity. Selling, general and administrative expenses for the quarter ended April 30, 2001 were $4,664, a decrease of $1,780 or 27.6% as compared to the prior year's quarter. The decrease is the result of lower salary costs due to cuts in staff, and lower promotional, commission and distribution costs due to reduced sales levels. Other expenses-net for the quarter ended April 30, 2001 were $631, representing interest expense of $671, which was offset in part by other miscellaneous income. Other expenses-net for the three months ended April 30, 2000 were $705. This amount principally represented interest expense of $681. Income taxes generally reflect the effect of statutory federal, state and Canadian income taxes and certain non-deductible expenses. The Company's effective tax rate was 36.4% during the three months ended April 30, 2001 and 40.3% during the three months ended April 30, 2000. Due to the Company's net loss for the three months ended April 30, 2001, an income tax benefit was recorded for the quarter. 10 Nine Months Ended April 30, 2001 Compared to the Nine Months Ended April 30, 2000 Results of Operations Net loss for the nine months ended April 30, 2001 was $2,530, equivalent to a basic and diluted loss of $1.21 per share, versus net income of $7,665, or $3.67 per basic and diluted share in the same period last year. The results for the prior year include an after-tax gain of $9,783 or $4.69 per share from the proceeds of a price-fixing settlement with a supplier. Excluding this one-time gain, the Company would have incurred a net loss of $2,118, or $1.01 per diluted share. Net sales for the nine months ended April 30, 2001 were $57,070 as compared to $68,271 in the prior year, a decrease of $17,201 or 25.2%. This reduction occurred as a result of weaker branded and private label sales due to the softness in the overall market for vitamins, herbs and supplements, and increased price and product competition from competitors. Cost of sales for the nine months ended April 30, 2001 was $38,540, or 75.5% of sales, compared to $49,248, or 72.1% of sales, for the nine months ended April 30, 2000. Cost of sales increased 3.3% as a percentage of sales versus the prior year's period as a result of underutilization of capacity. Selling, general and administrative expenses for the nine months ended April 30, 2001 were $14,171 or 27.8% of sales, as compared to $20,701 or 30.3% of sales in the same period of the prior year. The decrease is the result of lower salary costs due to cuts in staff, and lower promotional, commission and distribution costs due to reduced sales levels. Other expenses, net were $2,121 for the nine months ended April 30, 2001. This amount includes interest expense of $2,115. Other expenses, net for the nine months ended April 30, 2000, were $1,764. This amount included interest expense of $1,880, which was offset in part by other miscellaneous income. Income taxes generally reflect the effect of statutory federal, state and Canadian income taxes and certain non-deductible expenses. The Company's effective tax rate was 32.8% for the nine months ended April 30, 2001 as compared to 40.4% in the same period of 2000. Due to the Company's net loss for the nine months ended April 30, 2001, an income tax benefit was recorded for the period. 11 Liquidity and Capital Resources Net cash provided by operating activities for the nine months ended April 30, 2001 was $905. The increase in cash was primarily the result of a decrease in inventories of $6,571, and depreciation and amortization of $2,155. Offsetting these increases in cash were a net loss of $2,530, an increase in accounts receivable of $1,545, a decrease in accounts payable and accrued expenses of $2,592, and an increase in prepaid and other assets of $236. Cash used in investing activities for the nine months ended April 30, 2001 was $150 for additions to buildings and improvements and purchases of equipment. Cash used in financing activities for the nine months ended April 30, 2001 was $543 which consisted of the excess of borrowing repayments over actual borrowings for the period. On October 16, 2000 the Company entered into a new credit agreement with Congress Financial Corporation, a subsidiary of First Union Corporation, to replace a previously existing credit agreement. The agreement matures on October 16, 2003. The Company can borrow up to $25,000 under a revolving credit commitment and $5,500 under a term loan commitment, subject to borrowing base limitations, as defined. Borrowings under the revolving credit commitment bear interest at either .75% above First Union's "prime rate" or at the Company's option, a rate of 2.75% above the adjusted Eurodollar rate used by the bank. The interest rate on the term loan is .25% higher than the revolving loan rates outlined above. The notes are collateralized by substantially all of the Company's assets. The agreement requires the Company to maintain minimum tangible net worth and contains various restrictions customary in such financial arrangements, including limitations on the payment of cash dividends. At April 30, 2001 the Company was not in compliance with the minimum tangible net worth covenant contained in the Company's Loan and Security Agreement with Congress. On June 13, 2001 the Company entered into an Amended Agreement with Congress. Under the Amended Agreement, Congress has agreed to waive the event of default existing as of April 30, 2001, and the rate of interest was changed to the prime rate plus three percent, increasing to five percent in the event of termination or non-renewal of the loan, or if an event of default occurs. The Amended Agreement also provides for a $500,000 permanent special reserve, an amendment fee of $50,000, and requires the Company to maintain revised minimum tangible net worth amounts. 12 The Company is pursuing among other initiatives; i) obtaining alternative sources of financing, ii) seeking additional sales opportunities within its core business, iii) seeking new sales opportunities through non-traditional channels of distribution, iv) reducing expenses to a level that would provide the Company with sufficient cash flows to meet its obligations, v) merger or sale of the Company, and or vi) a combination of any of the foregoing. Although there can be no assurance that the Company will be able to achieve any of the foregoing initiatives, these financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. Forward Looking Statements This report, including Management's Discussion and Analysis, contains certain "forward-looking statements", within the meaning of Section 27A of the Securities Act of 1933, which represent the Company's expectations or beliefs, including, but not limited to, statements concerning industry performance, the Company's operations, performance, financial condition, growth and acquisition strategies, margins and growth in sales of the Company's products. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "intend", "could", "estimate" or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the Company's control, and actual results may differ materially depending on a variety of important factors, including beneficial or adverse trends in the domestic market for vitamins and nutritional supplements, the gain or loss of significant customers for the Company's products, the competitive environment in the vitamin and nutritional supplement industry, and the enactment or promulgation of new government legislation or regulation, as well as other risks and uncertainties that may be detailed from time to time in the Company's reports filed with the Securities and Exchange Commission. Item 3 Quantitative and Qualitative Disclosure about Market Risk The Company's principal financial instrument is long-term notes payable under a secured revolving credit agreement. The Company is affected by market risk exposure primarily through the effect of changes in interest rates on amounts payable by the Company under this credit agreement. Changes in these factors cause fluctuations in the Company's net income and cash flows. The Company does not utilize derivative financial instruments to hedge against changes in interest rates or for any other purpose. 13 Part II. Other Information. Item 6. - Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit Description of Number Exhibit ------ ------- 10 Amendment to the Loan and Security Agreement with Congress Financial Corporation. 11 Computation of earnings (loss) per share (b) Reports on Form 8-K A report on Form 8-K was filed on March 27, 2001, relating to a request for a NASDAQ hearing regarding the Company's listing status. SIGNATURES 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. Dated: June 14, 2001 By: /s/ E. Joseph Edell ------------------- ----------------------------- Chairman and Chief Executive Officer Dated: June 14, 2001 By: /s/ Thomas E. Bocchino ------------------- ----------------------------- Vice President and Chief Financial Officer 14 EX-10 2 0002.txt AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT AMENDMENT, dated June 13, 2001, by and between IVC INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION, a Delaware corporation ("Lender"). W I T N E S S E T H : WHEREAS, Lender and Borrower have entered into financing arrangements pursuant to which Lender may make loans and advances and provide other financial accommodations to Borrower as set forth in the Loan and Security Agreement, dated October 16, 2000, between Lender and Borrower (as amended hereby and as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement", and together with all agreements, documents and instruments at any time executed and/or delivered in connection therewith or related thereto, as from time to time amended and supplemented, collectively, the "Financing Agreements"). WHEREAS, Borrower has requested certain amendments to the Loan Agreement and Lender is willing to agree to such amendments, subject to the terms and conditions contained herein. WHEREAS, by this Amendment No. 1, Lender and Borrower desire and intend to evidence such amendments. NOW THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, the parties hereto agree as follows: 1. Definitions. (a) Additional Definitions. As used herein, the term "Amendment No. 1" shall mean this Amendment No. 1 to Loan and Security Agreement by and among Lender, Borrower, Guarantor and International Vitamin Overseas Sales Corp., as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, and the Loan Agreement and the other Financing Agreements are hereby amended to include, in addition and not in limitation, such definition. (b) Interpretation. For purposes of this Amendment No. 1, unless otherwise defined herein, all terms used herein, including, but not limited to, those terms used and/or defined in the recitals above, shall have the respective meanings assigned to such terms in the Loan Agreement. 2. Eurodollar Rate Loans. Notwithstanding any provision of the Loan Agreement or any of the other Financing Agreements to the contrary, from and after June 1, 2001: (a) Borrower shall not request and Lender shall not make any Eurodollar Rate Loans, except that any Eurodollar Rate Loans outstanding as of May 31, 2001 shall continue to be treated as Eurodollar Rate Loans until the end of the Interest Period currently in effect for such Eurodollar Rate Loans; (b) the Interest Rate in respect of all Loans made on or after such date shall be the Interest Rate applicable to Prime Rate Loans; and (c) Borrower shall not request that any Prime Rate Loans be converted to Eurodollar Rate Loans and Lender shall not be obligated to convert any such Prime Rate Loans to Eurodollar Rate Loans. 3. Borrowing Base. Section 1.6 of the Loan Agreement is hereby amended by adding the following new sentence at the end thereof: "Notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, commencing on May 1, 2001 and effective on the first day of each and every month thereafter, the percentage set forth in clause (b)(i) above shall be reduced by one (1%) percent, so that effective on May 1, 2001 such percentage in clause (b)(i) shall automatically and without further action be reduced from sixty (60%) percent to fifty-nine (59%) percent and such percentage shall thereafter continue to be so reduced by one (1%) percent as of the first day of each month thereafter. In the event that the percentage set forth in clause (b)(ii) is applicable or the percentage applicable to Eligible Inventory is otherwise reduced pursuant to Section 2.1(b) hereof, on and after any date that such other or reduced percentage may be applicable, such percentage shall be further reduced by one (1%) percent effective on the first day of each and every month thereafter automatically and without further action in the same manner as the percentage set forth in clause (b)(i) is to be reduced. Notwithstanding anything to the contrary contained in this Agreement or in any of the other Financing Agreements, on each date when any such reduction to such percentages as set forth above becomes effective, Borrower agrees absolutely and unconditionally to automatically and without notice or demand make a payment in respect of the Revolving Loans in an amount equal to the excess, if any, of the aggregate amount of the Revolving Loans outstanding on such date over the amount equal to the lesser of the Borrowing Base or the Revolving Loan Limit as set forth in Section 2.1(a) as so reduced in immediately available funds." 4. Interest Rate. Section 1.52 of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor: "1.52 "Interest Rate" shall mean, from and after May 1, 2001: (a) Subject to clause (b) below, as to Prime Rate Loans, a rate equal to three (3%) percent per annum in excess of the Prime Rate. -2- (b) Notwithstanding anything to the contrary contained in clause (a) above, the Interest Rate shall mean, at Lender's option, as to Prime Rate Loans, a rate equal to five (5%) percent per annum in excess of the Prime Rate (i) for the period (A) from and after the date of termination or non-renewal hereof until Lender has received full and final payment of all Obligations (notwithstanding entry of a judgement against Borrower) and (B) from and after the date of the occurrence of an Event of Default for so long as such Event of Default continuing, and (ii) on Loans to Borrower at any time outstanding in excess of the Borrowing Base or the Revolving Loan Limit (whether or not such excess(es) arise or are made with or without Lender's knowledge or consent and whether made before or after an Event of Default)." 5. Letter of Credit Accommodations. Section 2.2(b) is hereby deleted in its entirety and the following substituted therefor: "(b) In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, on and after May 1, 2001, Borrower shall pay to Lender a letter of credit fee at a rate equal to three and one-quarter (3 1/4%) percent per annum on the daily outstanding balance of the Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month, except that Borrower shall pay to Lender such letter of credit fee, at Lender's option, upon notice to Borrower, at a rate equal to five and one-quarter (5 1/4%) percent per annum on such daily outstanding balance for: (i) the period from and after the date of termination or non-renewal hereof until Lender has received full and final payment of all Obligations (notwithstanding entry of a judgment against Borrower) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Lender. Such letter of credit fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrower to pay such fee shall survive the termination or non-renewal of this Agreement." 6. Special Availability Reserve. Section 2 of the Loan Agreement is hereby amended by adding the following new Section 2.4 thereto: "2.4 Special Availability Reserve. Without limiting any other rights or remedies of Lender under this Agreement or any of the other Financing Agreements with respect to the establishment of Reserves or otherwise, Lender may on the date hereof establish a special Reserve permanently reducing the amount of Loans and Letter of Credit Accommodations otherwise available to Borrower in an amount equal to $500,000 (the "Special Availability Reserve"). The term "Reserves" as used herein shall include, without limitation, the Special Availability Reserve." 7. Inventory Appraisals. Section 7.3(d) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor: -3- "(d) Borrower shall, at its expense, on or before the date which is sixty (60) days from the date of Amendment No. 1 and thereafter on or before the date which is the last day of each succeeding three (3) month period, but at any time or times as Lender may request on or after an Event of Default, deliver or cause to be delivered to Lender written appraisals as to the Inventory in form, scope and methodology acceptable to Lender and by an appraiser acceptable to Lender, addressed to Lender and upon which Lender is expressly permitted to rely;" 8. Equipment and Real Property Appraisals. Section 7.4(a) of the Loan Agreement is hereby deleted in its entirety and the following is substituted therefor: "(a) (i) upon Lender's request, Borrower shall, at its expense, no more than once in any twelve (12) month period, but at any time or times as Lender may request on or after an Event of Default, deliver or cause to be delivered to Lender written appraisals as to the Equipment and/or the Real Property in form, scope and methodology acceptable to Lender and by an appraiser acceptable to Lender, addressed to Lender and upon which Lender is expressly permitted to rely and (ii) in addition, and without limitation, to the appraisals required to be delivered to Lender pursuant to clause (i) above, Borrower shall, at its expense, on or before the date which is sixty (60) days from the date of Amendment No. 1, deliver or cause to be delivered to Lender written appraisals as to the Equipment and/or the Real Property in form, scope and methodology acceptable to Lender and by an appraiser acceptable to Lender, addressed to Lender and upon which Lender is expressly permitted to rely;" 9. Adjusted Tangible Net Worth. Section 9.18 is hereby deleted in its entirety and the following substituted therefor: "9.18 Adjusted Tangible Net Worth. Borrower shall maintain Adjusted Tangible Net Worth of not less than the respective amount set forth below at all times during each period indicated: Minimum Adjusted Month Tangible Net Worth ----- ------------------ From May 31, 2001 through and $6,200,000 including July 31, 2001 From August 1, 2001 through and $5,400,000 including September 30, 2001 From October 1, 2001 through and $5,100,000 including January 31, 2002 From February 1, 2002 and for $5,000,000" -4- each month thereafter 10. Real Property Collateral. The first sentence of Section 9.19 of the Loan Agreement is hereby amended by deleting the reference to "January 31, 2001" and substituting "June 30, 2001" therefor. 11. Affirmative and Negative Covenants. Section 9 of the Loan Agreement is hereby amended by adding the following new Section 9.22 thereto: "9.22 Turnaround Consultant. On or before May 31, 2001, Borrower shall retain a consultant acceptable to Lender on terms acceptable to Lender as to matters specified by Lender, including, but not limited to, the evaluation of Borrower and the formulation of a strategy for enhancing the business performance of Borrower." 12. Default Waiver. (a) Subject to the terms and conditions set forth herein, Lender hereby waives the Event of Default arising under Section 10.1(a) of the Loan Agreement as a result of the failure of Borrower to maintain the Adjusted Tangible Net Worth as required under Section 9.18 of the Loan Agreement through the date immediately prior to the effectiveness of Amendment No. 1. (b) Lender has not waived, is not by this Amendment No. 1 waiving, and has no intention of waiving any Event of Default which have or may have occurred on or prior to the date hereof, whether or not continuing on the date hereof, or which may occur after the date hereof (whether the same or similar to the Event of Default referred to above or otherwise) and Lender specifically reserves all of the rights and remedies available to Lender as a result of any such Events of Default pursuant to the Loan Agreement, the other Financing Agreements, applicable law or otherwise, other than the Event of Default specifically referred to in Section 11(a) above. The foregoing waiver shall not be construed as a bar to or a waiver of any other or further Event of Default on any future occasion, whether similar in kind or otherwise and shall not constitute a waiver, express or implied, of any of the rights and remedies of Lender arising under the terms of the Loan Agreement or any other Financing Agreements on any future occasion or otherwise. 13. Extension of Time for Delivery of Certain Post-Closing Items. Section 1(e) of the letter agreement with respect to Certain Post-Closing Items, dated October 16, 2000, between Lender and Borrower is hereby amended by deleting the reference to "November 15, 2000" and substituting "June 30, 2001" therefor. 14. Termination of Special Reserve Agreement. The Special Reserve Agreement, dated October 16, 2000, by and between Borrower and Lender is hereby terminated and shall be of no further force and effect. 15. Amendment Fee. In consideration of the amendments set forth herein, Lender has charged account of Borrower maintained by Lender, an amendment fee in the aggregate amount of $50,000 which fee was fully earned as of May 1, 2001 and shall constitute part of the Obligations. -5- 16. Additional Representations, Warranties and Covenants. Borrower represents, warrants and covenants with and to Lender as follows, which representations, warranties and covenants are continuing and shall survive the execution and delivery hereof, and the truth and accuracy of, or compliance with each, together with the representations, warranties and covenants in the other Financing Agreements, being a continuing condition of the making of Loans by Lender to Borrower: (a) no Event of Default exists or has occurred as of the date of this Amendment No. 1 (after giving effect to the amendments to the Financing Agreements and waivers made by this Amendment No. 1); and (b) this Amendment No. 1 has been duly executed and delivered by each of Borrower, Guarantor and International Vitamin Overseas Sales Corp. and is in full force and effect as of the date hereof and the agreements and obligations of each of Borrower, Guarantor and International Vitamin Overseas Sales Corp. contained herein constitute legal, valid and binding obligations of each of Borrower, Guarantor and International Vitamin Overseas Sales Corp. enforceable against each of them in accordance with their respective terms. 17. Conditions Precedent. The effectiveness of the amendments and consents contained herein shall be subject to the satisfaction of each of the following, in a manner satisfactory to Lender and its counsel: (a) Lender shall have received this Amendment No. 1 duly authorized, executed and delivered by the parties hereto; and (b) no Event of Default, or event, act or condition which with notice or passage of time or both would constitute an Event of Default, shall exist or have occurred (after giving effect to the amendments to the Financing Agreements and waivers made by this Amendment No. 1). 18. Effect of this Amendment. Except as expressly set forth herein, no other amendments, consents, changes, modifications or waivers to the Financing Agreements are intended or implied, and in all other respects the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof and Borrower shall not be entitled to any other or further amendment, consent or waiver by virtue of the provisions of this Amendment No. 1 or with respect to the subject matter of this Amendment No. 1. To the extent of conflict between the terms of this Amendment No. 1 and the other Financing Agreements, the terms of this Amendment No. 1 shall control. The Loan Agreement and this Amendment No. 1 shall be read and construed as one agreement. 19. Further Assurances. The parties hereto shall execute and deliver such additional documents and take such additional action as may be necessary or desirable to effectuate the provisions and purposes of this Amendment No. 1. 20. Governing Law. The validity, interpretation and enforcement of this Amendment No. 1 and the other Financing Agreements and any dispute arising out of the relationship between the parties hereto whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York (without giving effect to principles of conflicts of laws). -6- 21. Binding Effect. This Amendment No. 1 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. 22. Headings. The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment No. 1. 23. Counterparts. This Amendment No. 1 may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment No. 1, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. Delivery of an executed counterpart of this Amendment No. 1 by telefacsimile shall have the same force and effect as delivery of an original executed counterpart of this Amendment No. 1. Any party delivering an executed counterpart of this Amendment No. 1 by telefacsimile also shall deliver an original executed counterpart of this Amendment No. 1, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment No. 1 as to such party or any other party. -7- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered by their authorized officers as of the day and year first above written. Very truly yours, CONGRESS FINANCIAL CORPORATION By: /s/ Thomas Martin ------------------------------- Title: Assistant Vice President ---------------------------- AGREED: IVC INDUSTRIES, INC. By: /s/ E.Joseph Edell --------------------------------- Title: Chief Executive Officer HALL LABORATORIES LTD. By: /s/ William Lederman --------------------------------- Title: President ------------------------------ INTERNATIONAL VITAMIN OVERSEAS SALES CORP. By: /s/ E. Joseph Edell --------------------------------- Title: President ------------------------------ -8- EX-11 3 0003.txt COMPUTATION OF EARNINGS (LOSS) PER SHARE IVC INDUSTRIES, INC. AND SUBSIDIARIES EXHIBIT 11 COMPUTATION OF EARNINGS (LOSS) PER SHARE (Dollars in Thousands, Except Per Share Information) (unaudited)
Three Months Ended Nine Months Ended April 30, April 30, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Basic: Net income (loss) $ (923) $ 2,231 $ (1,608) $ 7,665 Weighted average shares outstanding 2,098,151 2,088,092 2,094,211 2,088,092 =========== =========== =========== =========== Basic earnings (loss) per share $ (0.44) $ 1.07 $ (0.77) $ 3.67 =========== =========== =========== =========== Diluted: Net income (loss) $ (923) $ 2,231 $ (1,608) $ 7,665 Weighted average shares outstanding 2,098,151 2,088,092 2,094,211 2,088,092 Incremental shares under stock option plan -- 1,911 -- 3,178 ----------- ----------- ----------- ----------- Adjusted weighted average shares outstanding 2,098,151 2,090,003 2,094,211 2,091,270 =========== =========== =========== =========== Diluted earnings (loss) per share $ (0.44) $ 1.07 $ (0.77) $ 3.67 =========== =========== =========== ===========
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