Accredo Health, Inc. Announces Record Second Quarter Results; Second Quarter Earnings Increase 136%, Revenues Increase 127%.Business Editors & Health/Medical Writers 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)--Feb. 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 second quarter ended December December: see month. 31, 2002. Net earnings increased 136% to $17,049,000, or $0.35 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 December 31, 2002 compared to $7,217,000, or $0.18 per diluted share, for the same period in fiscal 2002. Revenues for the quarter increased 127% to $364,402,000 compared to $160,186,000 for the same period in fiscal 2002. 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 20.2% 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 extremely gratified grat·i·fy tr.v. grat·i·fied, grat·i·fy·ing, grat·i·fies 1. To please or satisfy: His achievement gratified his father. See Synonyms at please. 2. with our financial performance achieved in the second quarter as we again exceeded our earnings estimates," said David D. Stevens Stevens, family of U.S. inventors. John Stevens, 1749–1838, b. New York City, was graduated from King's College (now Columbia Univ.) in 1768. , 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. . "These results were attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. during a period of significant transition for the company as we successfully integrated the Specialty Pharmaceutical Services (SPS (Standby Power System) A UPS system that switches to battery backup upon detection of power failure. See UPS. SPS - Symbolic Programming System. Assembly language for IBM 1620. ) acquisition," continued Mr. Stevens. "During the quarter, we completed the merger of virtually all of the operational and sales functions from the SPS acquisition. The one significant remaining integration task started in October October: see month. as we began migrating from the previous Accredo Health information system onto the SPS platform and will result in one common system throughout the company. This project is on schedule to be completed in our September September: see month. quarter. In addition, we exited the acute 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. business, acquired through the SPS acquisition, prior to our self-imposed self-im·posed adj. Imposed by oneself on oneself; voluntarily assumed or endured: self-imposed exile. Adj. 1. deadline of December 31, 2002. These accomplishments are possible only through our employees' absolute dedication to the patients we serve. We would like to publicly thank them for their devoted efforts." Joel R. Kimbrough, Accredo's chief financial officer added, "We are pleased with the continued overall revenue growth, especially in our market leading Pulmonary pulmonary /pul·mo·nary/ (pool´mo-nar?e) 1. pertaining to the lungs. 2. pertaining to the pulmonary artery. pul·mo·nar·y adj. Of, relating to, or affecting the lungs. Arterial arterial /ar·te·ri·al/ (-al) pertaining to an artery or to the arteries. ar·te·ri·al adj. 1. Of or relating to one or more arteries or to the entire system of arteries. 2. Hypertension hypertension or high blood pressure, elevated blood pressure resulting from an increase in the amount of blood pumped by the heart or from increased resistance to the flow of blood through the small arterial blood vessels (arterioles). , hemophilia hemophilia (hē'məfĭl`ēə,–fēl`yə), genetic disease in which the clotting ability of the blood is impaired and excessive bleeding results. and IVIG IVIG Intravenous immunoglobulin, see there franchises. We are continuously evaluating all of our product lines to determine the optimum means by which to achieve solid revenue growth while maintaining gross profit margin and improving profitability. The results for the second quarter reflect the success of that strategy as we saw improvements in our gross profit, EBITDA and net income margins when compared to the same quarter last year. In addition, we generated $28.3 million of cash from operations in the December quarter, our DSO See CSO. improved by approximately four days during the quarter and we have reduced our notes payable by $31.0 million since June 2002." Mr. Kimbrough continued, "We announced last quarter that we would begin distributing Bio-Technology General Corp.'s products Oxandrin(R) and Delatestryl(R) 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 resulting in a reduction in revenues. The transition to this new arrangement began in the second quarter and should be fully implemented by April 30. We had also announced our plans to sell in the third quarter the 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 that was acquired as part of the BioPartners In Care, Inc. acquisition. Revenues from Oxandrin(R), Delatestryl(R) and the infertility products amounted to approximately $25 million in the December quarter. In addition, due to significant discounting in certain markets, we have declined to accept Synagis Synagis™ Immunology A humanized monoclonal antibody for preventing winter RSV in children. See RSV. (R) referrals that do not meet our gross margin criteria, resulting in lower than anticipated revenues from this product. Finally, Biogen, Inc. announced last week that they were expecting their U.S. Avonex(R) revenue to grow approximately 0% to 2% in calendar year 2003. As a result of these events, we are modifying our previously announced fiscal year 2003 revenue estimate. We estimate that for our fiscal year ending June 30, 2003, we will achieve revenues in the $1.40 billion to $1.45 billion range. We had previously given guidance of $1.45 billion to $1.50 billion. However, we are confirming our previously announced fiscal year 2003 earnings estimates of $1.33 to $1.38 per share after giving effect for the three-for-two stock split that occurred in December 2002. In addition, we estimate that for our fiscal year ending June 30, 2004, we will achieve revenues in the $1.60 billion to $1.65 billion range, which represents growth of approximately 19% on a same product basis, and earnings per share of $1.66 to $1.73. These estimates assume the elimination of wholesale revenues from the sale of products from Bio-Technology General Corp. and the sale of our infertility business. These estimates also assume no new indications for current product lines, potential new product lines, or future acquisitions. In addition, these estimates do not include the potential approval and launch of Genzyme's new products, Aldurazyme(R) or Fabrazyme(R)." 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) Why did gross profit margins improve to 20.2% in the December quarter compared to the 15.2% achieved last year and to the previous guidance of 19.0% to 19.5% given for the December quarter? What is the outlook for future quarters? A1) For the December quarter, gross profit margins improved to 20.2% compared to 15.2% 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 December quarter when compared to the same quarter last year. We experienced a higher gross margin in the December quarter than we anticipated, although most of our products have maintained a consistent gross profit margin. We experienced significant discounting in our Synagis(R) product line during the quarter. While this business remains profitable, we declined to match discounts that did not meet our gross margin criteria in some markets, resulting in lower than anticipated Synagis(R) revenues. We have adopted this same strategy in the past, when similar pricing pressures occurred in the market. The lower Synagis(R) revenues resulted in an overall improvement in gross margins, since the acquisition cost for this product is higher than most of the other products we distribute. The reduction in our Synagis(R) revenues is not a reflection of the overall demand for Synagis(R) during the 2002-2003 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 season. The overall market demand for Synagis(R) appears to remain very strong. In fact, as reported by MedImmune last Thursday, 2002 sales of Synagis(R) in the U.S. grew 33 percent to $637 million. Assuming the trends previously discussed continue, we expect our overall gross margin percentage to be in the 19.5% to 20.0% range in the third quarter of fiscal 2003 and 20.0% to 20.5% in the fourth quarter compared to 16.5% and 18.6%, respectively, in the same quarters last year. The anticipated decrease from the 20.2% gross margin percentage achieved in the December quarter can be attributed to increased sales of Synagis(R) in the third quarter when compared to the second quarter, as has occurred in each year we have distributed this product. Likewise, the expected improvement in the fourth quarter can be attributed to the reduction in sales of Synagis(R), which is primarily distributed in our second and third quarters. Q2) Why were general and administrative expenses 9.0% of revenue compared to 6.8% in the same quarter last year? What is the outlook for future quarters? A2) The general and administrative expenses increased to 9.0% in the December quarter from 6.8% in the same quarter last year primarily as a result of product mix. Our higher margin products, which were a larger percentage of our total revenues in the December 2002 quarter, have higher general and administrative expenses than many of the other product lines we distribute. We expect G&A as a percentage of total revenues to remain in the 9.0% range in the third quarter of fiscal 2003 due to revenues from the seasonal drug Synagis(R) and increase to a range of 9.5% to 10% in the fourth quarter. Q3) Why was bad debt expense 2.1% of revenue compared to .6% in the same quarter last year? A3) The increase in bad debts as a percentage of revenues is primarily due to the SPS acquisition, which resulted in an increase in the percentage of our revenues that were reimbursed by major medical benefit plans versus prescription card benefits. The majority of the reimbursements provided by major medical benefit plans are subject to much higher co-payment co-payment Managed Care That portion of a claim or medical expense that a health plan member must pay out-of-pocket for specific medical services–eg, hospital care, drugs, office visits, etc; the insurer pays the remaining portion 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 resulting in higher bad debts. Q4) Why does the revenue and earnings guidance indicate a sequential decline from the third quarter to the fourth quarter? A4) For fiscal year 2003, Synagis(R) will achieve revenues in the range of $80 to $90 million, a 25% to 40% increase over last year, which does not include the revenues recorded by our unconsolidated joint ventures. The majority of the Synagis(R) revenue and the related earnings are generated in the second and third quarters. We also previously announced that we would begin distributing Bio-Technology General Corp.'s products Oxandrin(R) and Delatestryl(R) on a consignment basis. Therefore, we will no longer record the revenue for the sale of these products. The transition to this new arrangement began in the second quarter and will be fully implemented by the fourth quarter. In addition, we had also announced our plans to sell in the third quarter the infertility business that was acquired as part of the BioPartners In Care, Inc. acquisition in December 2001. Revenues from Oxandrin(R), Delatestryl(R) and the infertility products amounted to approximately $25 million in the December quarter. As a result of these events, we expect a sequential decline in both revenues and earnings in the fourth quarter. As previously announced, the Company's conference call to discuss the second quarter results is scheduled for Monday, February 3, 2003, 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 February 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. Both the replay of the call and the Internet playback option will be available until February 14, 2003 at 5:00 p.m. CST. To access the replay call, dial 402/220-2491 and enter the code 14982644. 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 the SPS division, 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 2002 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. .
Accredo Health, Incorporated
Condensed Consolidated Statements of Income
(amounts in thousands, except share data)
(Unaudited) (Unaudited)
Six Months Ended Three Months Ended
December 31, December 31,
2002 2001 2002 2001
Net patient revenues $666,304 $277,845 $353,769 $155,550
Other revenue 18,923 8,116 10,038 4,209
Equity in net income
of joint ventures 940 873 595 427
----------- ----------- ----------- -----------
Total revenues 686,167 286,834 364,402 160,186
Cost of sales 546,671 242,771 290,846 135,759
----------- ----------- ----------- -----------
Gross profit 139,496 44,063 73,556 24,427
General &
administrative
expenses 63,413 19,303 32,669 10,822
Bad debts 14,242 2,056 7,634 1,001
Depreciation and
amortization 5,573 1,462 2,862 771
----------- ----------- ----------- -----------
Income from
operations 56,268 21,242 30,391 11,833
Interest income
(expense), net (4,070) 800 (1,995) 286
Minority interest in
consolidated
subsidiary (1,003) (633) (519) (314)
----------- ----------- ----------- -----------
Net income before
income taxes 51,195 21,409 27,877 11,805
Provision for income
taxes 20,176 8,315 10,828 4,588
----------- ----------- ----------- -----------
Net income $31,019 $13,094 $17,049 $7,217
=========== =========== =========== ===========
Earnings per share:
Basic $0.66 $0.34 $0.36 $0.18
Diluted $0.64 $0.32 $0.35 $0.18
Weighted average shares outstanding:
Basic 47,279,578 39,039,020 47,452,947 39,082,812
Diluted 48,462,242 40,330,074 48,614,834 40,386,801
Condensed Consolidated Balance Sheets
(amounts in thousands)
(Unaudited)
December 31, June 30,
2002 2002
Cash & cash equivalents $36,343 $42,913
Accounts receivable, net 355,275 335,253
Other current assets 149,039 155,043
Fixed assets, net 28,928 23,796
Other assets 367,633 367,824
------------- -------------
Total assets $937,218 $924,829
============= =============
Current liabilities $232,006 $223,429
Long-term debt 186,563 224,688
Other liabilities 7,869 5,658
Stockholders' equity 510,780 471,054
------------- -------------
Total liabilities and stockholders' equity $937,218 $924,829
============= =============
Condensed Consolidated Statements of Cash Flow
(amounts in thousands)
(Unaudited) (Unaudited)
Six Months Ended Three Months Ended
December 31, December 31,
2002 2001 2002 2001
Net cash provided by
operating activities $32,306 $8,953 $28,309 $4,492
Net cash used in investing
activities (12,588) (43,479) (5,206) (37,094)
Net cash provided by (used
in) financing activities (26,288) (4,629) 2,354 (5,357)
----------- --------- ----------- ---------
Increase (decrease) in
cash and cash equivalents $(6,570) $(39,155) $25,457 $(37,959)
=========== ========= =========== =========
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