Accredo Health, Inc. Announces Record First Quarter Results; First Quarter Earnings Increase 75%.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)--Oct. 29, 2001 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 the quarter ended September 30, 2001. Net earnings increased 75% to $5,877,000, or $.22 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, 2001 compared to $3,364,000, or $.14 per diluted share, for the same period in fiscal 2001. Revenues for the quarter increased 27% to $126,648,000, compared to $99,577,000 for the same period in fiscal 2001. 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 15.5% and earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
"We are very pleased with the first quarter's results as we again exceeded our earnings estimate," stated David D. Stevens, Accredo chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Our improvements in both the gross profit and EBITDA margins were the result of a return to a more normalized hemophilia hemophilia (hē'məfĭl`ēə,–fēl`yə), genetic disease in which the clotting ability of the blood is impaired and excessive bleeding results. factor product availability and rapid growth of our intravenous immunoglobulin Intravenous immunoglobulin (IVIG) is a blood product administered intravenously. It contains the pooled IgG immunoglobulins (antibodies extracted from the plasma of over a thousand blood donors). IVIG's effects last between 2 weeks and 3 months. (IVIG IVIG Intravenous immunoglobulin, see there ) product line, which includes the recent acquisition of Pharmacare Resources, Inc." "Our general and administrative expenses were impacted in the quarter by several initiatives to support our growth," continued Mr. Stevens. "We have added personnel to support MedImmune's seasonal product, Synagis(R), for Respiratory Synctial Virus (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 ). The majority of Synagis(R) treatments began in October and will end in March. We also have substantially expanded our facilities in anticipation of strong growth in Synagis(R) and potential new products. The benefits of this expansion will be realized beginning in the second quarter as we enter the Synagis(R) season." Joel Kimbrough, chief financial officer, commented, "In addition to reporting strong margins and earnings, we also generated $4.5 million of cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses during the quarter." Mr. Kimbrough added that, "We are pleased with the continued overall revenue growth in our products, which will be supplemented in the next two quarters with revenue from the seasonal drug Synagis(R) for the treatment of RSV in infants. We are increasing our fiscal year 2002 earnings and revenue estimates announced last quarter to an earnings range of $.89 to $.94 per share and a revenue range of $565 to $585 million. These estimates assume no new indications for current product lines, new product launches or acquisitions." In addition to the previous discussions, we are providing the following questions and answers related to our operating results and our ongoing business: Q1) Gross margin increased to 15.5% in the September quarter. What was the cause for the increase and what is the outlook for future quarters? A1) Gross margins for our individual product lines continue to be stable. However, a change in product mix resulted in an increase in the composite gross margin this quarter. The primary drivers of the change in product mix were Synagis(R), hemophilia factor and IVIG. Revenues from the seasonal drug Synagis(R), which has a lower margin than most of our other products, represented a much smaller percentage of net revenues than in the previous quarter. During the quarter, we also experienced some relief in the supply of hemophilia factor, which has a higher margin than most of our other products, resulting in approximately $1.8 million more revenue from this product than in the previous quarter. In addition, we had increased revenue from the product IVIG which has a higher margin than most of our other products. In the second and third quarters of fiscal 2002, Synagis(R) will represent a much larger percentage of our revenues; therefore, we should see a return to our historical gross margin range of 14% to 15%. Q2) What is the status of Recombinant Factor VIII factor VIII n. A factor in the clotting of blood, a deficiency of which is associated with hemophilia A. Also called antihemophilic factor, antihemophilic globulin, antihemophilic globulin A, product availability? A2) The amount of recombinant hemophilia factor VIII product that Accredo Health received from Baxter International Baxter International Inc. (NYSE: BAX), is a global healthcare company with 48,000 employees and 2006 sales of US$10.4 billion. Its headquarters is in Deerfield, Illinois. , Inc. and Genetics Institute, Inc. during the September quarter was slightly greater than the amount received in the June quarter. This allowed us to not only continue to serve our patients, but also to accept new hemophilia recombinant referrals throughout the quarter. While Bayer Corporation is still not releasing a material amount of recombinant product, we anticipate that product availability will slightly improve in the December quarter. Because Accredo Health still has not been able to restore its inventory of recombinant hemophilia product to historical levels, we did not choose to fulfill certain demand that continues to exist from our March quarter. We still intend to capture those revenues in the future when our inventory levels have been restored to historical levels. Q3) What is the potential impact to Accredo Health if changes are made in Medicare reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. for hemophilia product based on recommendations issued by the U. S. General Accounting Office's review of AWP AWP Awaiting Parts (military equipment status) AWP Average Wholesale Price AWP Annual Work Plan AWP Associated Writing Programs AWP Amusement with Prizes AWP Any Willing Provider AWP Aerial Work Platform payment methodology? A3) No decisions on changing Medicare reimbursement have been made by either the U. S. House Subcommittee on Health and Oversight & Investigations or the General Accounting Office. However, since Accredo Health receives less than 2% of its net revenues from Medicare, we anticipate no material impact on our future financial results from potential changes in Medicare payment Noun 1. medicare payment - a check reimbursing an aged person for the expenses of health care medicare check bank check, check, cheque - a written order directing a bank to pay money; "he paid all his bills by check" methodology. Q4) Why did bad debts decrease to .8% of net revenues in the quarter versus 1.1% in the previous quarter? A4) The cause of the decrease in bad debts as a percentage of revenue is primarily due to the increased percentage of the Company's revenue that was reimbursed by prescription card benefit plans as opposed to major medical benefit plans. The majority of the reimbursement provided by prescription card benefit plans are subject to much lower co-payment and deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). amounts (typically $10-$15 per prescription) resulting in lower bad debt. Q5) What was the impact of implementing SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142, Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , on the first quarter earnings? A5) Application of the non-amortization provisions of the pronouncement resulted in an increase in 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 of approximately $.016 for the first quarter. Q6) What was the financial impact to Accredo Health from the September 11 tragic terrorist attack? A6) Accredo Health experienced minimal short-term and immaterial Not essential or necessary; not important or pertinent; not decisive; of no substantial consequence; without weight; of no material significance. immaterial adj. long-term financial impact in business interruption from the tragic terrorist attack on September 11. Most of our patients inject in·ject v. 1. To introduce a substance, such as a drug or vaccine, into a body part. 2. To treat by means of injection. or infuse in·fuse v. 1. To steep or soak without boiling in order to extract soluble elements or active principles. 2. To introduce a solution into the body through a vein for therapeutic purposes. our products in the privacy of their homes. Typically patients receive a monthly shipment of product from Accredo Health and, therefore, maintain between ten and thirty days of inventory. While we were unable to ship our pharmaceutical products for two days, we did capture that revenue in our shipments on the Thursday and Friday subsequent to the attack. A limited number of our Cerezyme and IVIG patients infuse in their physician's offices. Many of these patients missed their scheduled infusion and, therefore, we lost that associated revenue. We estimate that the short-term revenue impact was less than $1.5 million to Accredo Health. Accredo Health, Incorporated and its two wholly-owned subsidiaries, Hemophilia Health Services health services Managed care The benefits covered under a health contract , Inc. and Nova Factor, Inc., provide specialized contract pharmacy and related services pursuant to agreements with biopharmaceutical drug manufacturers relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the treatment of patients with certain costly, chronic diseases. The Company's services include collection of timely drug utilization and patient compliance information, patient education and monitoring through the use of written materials and telephonic consultation, reimbursement expertise and overnight drug delivery. As previously announced, the Company's conference call to discuss the first quarter results is scheduled for Monday, October 29, 2001, at 9:00 a.m. CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. . 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. CST on October 29, 2001. A replay of the call will be available, and there will also be a playback of the conference call available over the Internet beginning approximately one hour after the end of the conference call. Both the replay of the call and the Internet playback option will be available until November 2, 2001 at 5:00 p.m. CST. To access the replay call, dial 402/220-2491 and enter the code 9957785. 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 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, 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, including without limitation, cautionary statements made in Accredo's 2001 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. under the heading "Risk Factors".
Accredo Health, Incorporated
Condensed Consolidated Statements of Income
(amounts in thousands, except share data)
(Unaudited)
Three Months Ended
September 30
2001 2000
Net patient service revenues $ 122,295 $ 95,597
Other revenue 3,907 3,769
Equity in net income of joint ventures 446 211
----------------------------
Total revenues 126,648 99,577
Cost of services 107,012 85,008
----------------------------
Gross profit 19,636 14,569
General & administrative 8,481 6,636
Bad debts 1,055 1,552
Depreciation and amortization 691 1,013
----------------------------
Income from operations 9,409 5,368
Interest income, net 514 374
Minority interest in consolidated
subsidiary (319) (149)
----------------------------
Net income before income taxes 9,604 5,593
Provision for income taxes 3,727 2,229
----------------------------
Net income $ 5,877 $ 3,364
============================
Earnings per share:
Basic $ 0.23 $ 0.15
Diluted $ 0.22 $ 0.14
Weighted average shares outstanding:
Basic 25,996,817 23,017,730
Diluted 26,848,897 24,311,402
Condensed Consolidated Balance Sheets
(amounts in thousands)
(Unaudited)
September 30, June 30,
2001 2001
Cash & cash equivalents $ 53,324 $ 54,520
Marketable securities 5,500 2,000
Accounts receivable, net 80,530 76,952
Other current assets 56,411 51,666
Fixed assets, net 10,081 8,195
Other assets 96,119 95,911
----------------------------
Total assets $ 301,965 $ 289,244
============================
Current liabilities $ 100,877 $ 96,850
Long-term debt -- --
Other liabilities 3,622 3,224
Stockholders' equity 197,466 189,170
----------------------------
Total liabilities and stockholders'
equity $ 301,965 $ 289,244
============================
Condensed Consolidated Statements of Cash Flow
(amounts in thousands)
(Unaudited)
Three Months Ended
September 30
2001 2000
Net cash provided by (used in) operating
activities $ 4,461 $ (2,909)
Net cash used in investing activities (6,385) (662)
Net cash provided by financing activities 728 51,845
----------------------------
Increase (decrease) in cash and cash
equivalents $ (1,196) $ 48,274
============================
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