Accredo Health, Inc. Announces Record First Quarter Results; First Quarter Earnings Increase 30%.Business Editors MEMPHIS Memphis, city, ancient Egypt Memphis (mĕm`fĭs), ancient city of Egypt, capital of the Old Kingdom (c.3100–c.2258 B.C.), at the apex of the Nile delta and 12 mi (18 km) from Cairo. , Tenn.--(BUSINESS WIRE)--Nov. 3, 2003 Accredo Health, Incorporated (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ACDO ACDO Air Carrier District Office ACDO Assistant Command Duty Officer ) today reported record results for its first quarter ended September 30, 2003. Net earnings increased 30% to $17,508,000, or $0.36 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the quarter ended September 30, 2003 compared to $13,463,000, or $0.28 per diluted share, for the same period in fiscal 2003. Revenues for the quarter increased 6% to $334,984,000 compared to $316,661,000 for the same period in fiscal 2003. In addition, gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. improved to 22.7% and earnings before interest, taxes depreciation and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) as a percentage of total revenues improved to 10.3% for the quarter ended September 30, 2003, compared to 20.5% and 8.8%, respectively, for the same period in fiscal 2003. An explanation and reconciliation of net income under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) to EBITDA is discussed in the question and answer section of this press release. David D. Stevens, Accredo's chairman and chief executive officer remarked, "We are encouraged by the continued improvements in margins and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. from same store sales Same Store Sales A statistic used in retail industry analysis. It compares sales of stores that have been open for a year or more. Notes: This statistic allows investors to determine what portion of new sales has come from sales growth and what portion from the opening of made during the September quarter. We expect that our results will be further positively impacted by a number of events that have transpired over the last six months including: the launch of five new products (Aldurazyme(R), Aralast(TM), Fabrazyme(R), Xolair Xo·lair A trademark for the drug omalizumab. omalizumab Xolair Pharmacologic class: Recombinant DNA-derived immunoglobulin G subclass 1 (IgG1) monoclonal antibody Therapeutic class: (R) and Zemaira(TM)), the conversion to a new liquid formulation formulation /for·mu·la·tion/ (for?mu-la´shun) the act or product of formulating. American Law Institute Formulation of AVONEX(R), the introduction of the new generation hemophilia hemophilia (hē'məfĭl`ēə,–fēl`yə), genetic disease in which the clotting ability of the blood is impaired and excessive bleeding results. product Advate, the acquisition of certain specialty pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. assets from Alpha Therapeutic Services, Inc. ("ATS") and our selection as one of three specialty pharmacy providers for RAPTIVA(TM)." Stevens further commented, "Six of the seven new products referenced have been awarded to Accredo Health as one of a select group of specialty pharmacy distributors. While these new products may not contribute significantly to our current fiscal year revenues and profitability, they should become significant during the next two fiscal years." Joel R. Kimbrough, Accredo's chief financial officer, added, "We are pleased with the continued overall revenue growth, which will be supplemented in the next two quarters with revenue from the seasonal drug Synagis Synagis™ Immunology A humanized monoclonal antibody for preventing winter RSV in children. See RSV. (R) for the treatment of RSV RSV respiratory syncytial virus; Rous sarcoma virus. RSV abbr. respiratory syncytial virus RSV 1 Respiratory syncytial virus, see there 2 Rous sarcoma virus, see there in infants. As a reminder, we began distributing certain products on a consignment The delivery of goods to a carrier to be shipped to a designated person for sale. A Bailment of goods for sale. A consignment is an arrangement resulting from a contract in which one person, the consignor, either ships or entrusts goods to another, the basis and sold our infertility infertility, inability to conceive or carry a child to delivery. The term is usually limited to situations where the couple has had intercourse regularly for one year without using birth control. business during fiscal 2003 eliminating revenues from these products in future periods. In the September 2002 quarter, our revenues from these products amounted to approximately $16 million. Excluding the $16 million, total revenues increased 11% from the September 2002 to the September 2003 quarter." Mr. Kimbrough continued, "As a result of our recently announced acquisition of the assets of ATS, we are increasing our previously announced fiscal year 2004 revenues and earnings estimates. We estimate that for our fiscal year ending June 30, 2004, we will achieve revenues in the $1.50 billion to $1.55 billion range and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of within a range of $1.57 to $1.62. We had previously provided estimates for fiscal 2004 of $1.49 billion to $1.54 billion in revenues and $1.54 to $1.59 in diluted earnings per share. These estimates do assume a reduction in the Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. and MediCal reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. rates based upon information we have at this time. These estimates assume no new indications for current product lines, potential new product lines or future acquisitions and could be impacted upon final resolution by Medicare and MediCal of the reimbursement rate changes now being considered. In addition, we have not included RAPTIVA(TM) in our revised estimates Revised estimate The third estimate of GDP released about three months after the measurement period. but will do so when we have adequate financial projections." In addition to the previous discussions, we are providing the following questions and answers related to our operating results and our on-going business: Q1) What is the reconciliation of net income under GAAP to EBITDA? A1) When we refer to EBITDA, we mean net income before minority interest, interest expense (income), income tax expense, and depreciation and amortization. We have included the EBITDA information because we consider it to be a good indication of our ability to generate cash flow in order to liquidate To pay and settle the amount of a debt; to convert assets to cash; to aggregate the assets of an insolvent enterprise and calculate its liabilities in order to settle with the debtors and the creditors and apportion the remaining assets, if any, among the stockholders or owners of the our liabilities and reinvest re·in·vest tr.v. re·in·vest·ed, re·in·vest·ing, re·in·vests To invest (capital or earnings) again, especially to invest (income from securities or funds) in additional shares. in our Company. EBITDA is not a measurement of financial performance under GAAP and should not be considered a substitute for net income as a measure of performance or for cash flow as a measure of liquidity. A reconciliation of net income under GAAP to EBITDA for the quarters ended September 30 is as follows (in thousands):
2003 2002
------- -------
Net income $17,508 $13,463
Minority interest in income of unconsolidated
joint venture 482 484
Interest expense, net 2,276 2,446
Income tax expense 11,140 9,034
Depreciation and amortization 2,955 2,340
------- -------
EBITDA $34,361 $27,767
======= =======
EBITDA as a percentage of total revenues 10.3% 8.8%
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Q2) What changes have been made to the income statement for the September 2002 quarter? A2) As discussed last quarter, management determined that the recognition of revenue is upon the delivery of product to the patient (which typically occurs one day after shipment), and the Company has no further obligation related to such product. Previously, the Company considered the delivery to occur when the product was shipped. As a result, the impact on the September 2002 financial results was a decrease in revenues from $321,765,000 (as previously reported) to $316,661,000 and a reduction in net income from $13,970,000, or $0.29 per diluted share, (as previously reported) to $13,463,000, or $0.28 per diluted share. In addition, amortization of debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay costs amounting to $371,000 has been reclassified from amortization expense to interest expense in the September 2002 quarter. The reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of the amortization expense to interest expense did not impact net income. Q3) Why did gross profit margins increase to 22.7% in the September 2003 quarter compared to 20.5% achieved in the same quarter last year and to the 22.2% achieved in the June 2003 quarter? A3) For the September 2003 quarter, gross profit margins improved to 22.7% compared to 20.5% in the same quarter last year. The improvement is primarily a result of product mix changes. We derived a larger percentage of our revenues from higher margin products in the September 2003 quarter when compared to the same quarter last year. We also experienced a 50 basis point improvement in gross profit margin from 22.2% in the June 2003 quarter to 22.7% in the September 2003 quarter. The improvement is also due to changes in product mix including the reduction in revenue from Synagis(R). We expect our overall gross margin percentage to be in the 19.5% to 20.5% range in the second and third quarters of fiscal 2004. The anticipated decrease from the 22.7% gross margin percentage achieved in the September 2003 quarter can be attributed to sales of the seasonal drug Synagis(R), which has a lower gross margin than the composite gross margin, and changes in the Medicare and MediCal reimbursement rates due to be in effect January 1, 2004. Q4) Why were general and administrative expenses 10.3% of revenue compared to 9.7% in the same quarter last year and the 9.9% reported in the June 2003 quarter? A4) The general and administrative expenses increased to 10.3% in the September 2003 quarter from 9.7% in the same quarter last year and 9.9% in the June 2003 quarter as a result of start up costs related to the upcoming Synagis(R) season and the launch of new products. In addition, we incurred increased audit fees as a result of the change to Deloitte & Touche LLP LLP - Lower Layer Protocol for the fiscal 2003 audit. As disclosed in our proxy filing, we incurred approximately $1.7 million of audit fees for the fiscal 2003 audit, of which approximately $1.4 million was incurred in the September 2003 quarter compared to $162,500 incurred for the fiscal 2002 audit and expensed in the September 2002 quarter. As previously announced, the Company's conference call to discuss the first quarter results is scheduled for Monday, November 3, 2003, at 9:00 a.m. CT. The conference call will be web-cast live on the Accredo Health, Incorporated web site. Interested parties may access the web-cast at www.accredohealth.com beginning at 9:00 a.m. CT on November 3, 2003. A replay of the call will be available, and there will also be a playback Playback could mean:
Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the beginning approximately one hour after the end of the conference call. The replay of the call will be available until November 28, 2003 at 5:00 p.m. CT. To access the replay call, dial 402-220-2491 and enter the code 19696334. The Internet playback option will be available until November 3, 2004. To access the Internet playback, go to www.accredohealth.com. In addition to historical information, certain of the statements in the preceding paragraphs, particularly those anticipating future financial performance, business prospects and growth and operating strategies constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements may be identified by words such as anticipate, believe, estimate, expect, intend, predict, hope or similar expressions. Such statements, which include estimated financial information or results and the quoted comments of Mr. Stevens and Mr. Kimbrough above, are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements, including, without limitation, the loss of a biopharmaceutical relationship, our inability to sell existing products, difficulties integrating acquisitions, the impact of pharmaceutical industry regulation, the difficulty of predicting FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. and other regulatory authority Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities approvals, the regulatory environment and changes in healthcare policies and structure, acceptance and demand for new pharmaceutical products and new therapies, the impact of competitive products and pricing, the ability to obtain products from suppliers, reliance on strategic alliances, the ability to expand through joint ventures and acquisitions, the ability to maintain pricing arrangements with suppliers that preserve margins, the need for and ability to obtain additional capital, the seasonality and variability of operating results, the Company's ability to implement its strategies and achieve its objectives and the risks and uncertainties described in reports filed by Accredo with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , including without limitation, cautionary statements under the heading "Risk Factors" made in Accredo's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for its year ended June 30, 2003.
Accredo Health, Incorporated
Condensed Consolidated Statements of Income
(amounts in thousands, except share data)
(Unaudited)
Three Months Ended
September 30
2003 2002
--------------------------
Net patient revenue $ 326,039 $ 307,431
Other revenue 8,397 8,885
Equity in net income of joint ventures 548 345
--------------------------
Total revenues 334,984 316,661
Cost of sales 258,897 251,596
--------------------------
Gross profit 76,087 65,065
General & administrative 34,552 30,744
Bad debts 7,174 6,554
Depreciation and amortization 2,955 2,340
--------------------------
Income from operations 31,406 25,427
Interest expense, net (2,276) (2,446)
Minority interest in consolidated
subsidiary (482) (484)
--------------------------
Net income before income taxes 28,648 22,497
Provision for income taxes 11,140 9,034
--------------------------
Net income $ 17,508 $ 13,463
==========================
Earnings per share:
Basic $ 0.37 $ 0.29
Diluted $ 0.36 $ 0.28
Weighted average shares outstanding:
Basic 47,848,126 47,106,209
Diluted 48,554,127 48,309,648
Condensed Consolidated Balance Sheets
(amounts in thousands)
(Unaudited)
September 30, June 30,
2003 2003
Cash & cash equivalents $ 49,121 $ 48,006
Accounts receivable, net 312,224 307,982
Other current assets 145,717 145,894
Fixed assets, net 31,192 31,681
Other assets 379,871 381,220
--------------------------
Total assets $ 918,125 $ 914,783
==========================
Current liabilities $ 193,801 $ 206,008
Long-term debt 174,375 178,438
Other liabilities 19,102 17,629
Stockholders' equity 530,847 512,708
--------------------------
Total liabilities and stockholders'
equity $ 918,125 $ 914,783
==========================
Condensed Consolidated Statements of Cash Flow
(amounts in thousands)
(Unaudited)
Three Months Ended
September 30
2003 2002
Net cash provided by operating activities $ 7,824 $ 3,997
Net cash used in investing activities (3,062) (7,382)
Net cash used in financing activities (3,647) (28,642)
--------------------------
Increase (decrease) in cash and cash
equivalents $ 1,115 $ (32,027)
==========================
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