Accredo Health, Inc. Announces Record Second Quarter Results.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. 2, 2004 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 31, 2003. Net earnings increased 13% to $19,909,000, or $0.41 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, 2003 compared to $17,556,000, or $0.36 per diluted share, for the same period in fiscal 2003. Revenues for the quarter increased 5% to $389,781,000 compared to $369,506,000 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 20.5% and earnings before minority interest, 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 9.8% for the quarter ended December 31, 2003, compared to 20.1% and 9.2%, 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 believe that calendar year 2003 was a validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. of our niche 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. model as we were selected by five premier biotech bi·o·tech n. Informal Biotechnology. biotech Noun short for biotechnology Noun 1. manufacturers to help launch and support six new products. Furthermore, all six products will be distributed through restricted access as more manufacturers recognize the benefits of our services, including our ability to deliver superior clinical outcomes. These six new products will substantially contribute to our future growth." Joel R. Kimbrough, Accredo's chief financial officer, added, "We are pleased with the continued overall revenue growth. In addition, based upon our results through the December quarter, we also expect to achieve 25% to 35% growth in our Synagis(R) revenues 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 in fiscal 2004. 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 December 2002 quarter, our revenues from these products amounted to approximately $24.5 million. Excluding the $24.5 million, total revenues increased 13% from the December 2002 to the December 2003 quarter." Mr. Kimbrough continued, "Based upon our results to date and the continuing unknown reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. environment related to MediCal, we are reiterating our previous revenue estimate range for our fiscal year ending June 30, 2004 of $1.50 billion to $1.55 billion and increasing our previous 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 estimate range from $1.57 to $1.62 to a new range of $1.58 to $1.63. In addition, we estimate that for our fiscal year ending June 30, 2005, we will achieve revenues in the $1.75 billion to $1.80 billion range and earnings per share of $1.82 to $1.87. These estimates do assume reductions in the MediCal reimbursement 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 MediCal of the reimbursement rate changes now being considered." 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, 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 December 31 is as follows (in thousands):
2003 2002
-------- --------
Net income $19,909 $17,556
Minority interest in consolidated subsidiary 571 519
Interest expense, net 2,125 2,365
Income tax expense 12,461 11,142
Depreciation and amortization 3,101 2,492
-------- --------
EBITDA $38,167 $34,074
======== ========
EBITDA as a percentage of total revenues 9.8% 9.2%
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Q2) What changes have been made to the income statement for the December 2002 quarter? A2) As discussed in the June 2003 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 December 2002 financial results was an increase in revenues from $364,402,000 (as previously reported) to $369,506,000 and an increase in net income from $17,049,000, or $0.35 per diluted share, (as previously reported) to $17,556,000, or $0.36 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 $370,000 has been reclassified from amortization expense to interest expense in the December 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 20.5% in the December 2003 quarter compared to 20.1% achieved in the same quarter last year and why the decrease from the 22.7% achieved in the September 2003 quarter? A3) For the December 2003 quarter, gross profit margins improved to 20.5% compared to 20.1% 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 2003 quarter when compared to the same quarter last year. We experienced a 220 basis point decrease in gross profit margin from 22.7% in the September 2003 quarter to 20.5% in the December 2003 quarter. The decrease is also due to changes in product mix primarily related to the increased revenue from the seasonal drug Synagis(R) which has a lower gross profit margin than our composite gross margin. We expect our overall gross margin percentage to be in the 19.5% to 20.5% range in the third quarter of fiscal 2004. Q4) Why were general and administrative expenses 8.8% of revenue in the December 2003 quarter compared to 10.3% reported in the September 2003 quarter? A4) The general and administrative expenses decreased to 8.8% in the December 2003 quarter from 10.3% in the September 2003 quarter as a result of the increased revenues from Synagis(R), which have lower general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. as a percentage of revenues than our overall costs, and the elimination of approximately $1.4 million of audit fees incurred in the September 2003 quarter related to the fiscal 2003 audit, which were not repeated in the December 2003 quarter. Q5) What is the status of proposed changes in Medicare and MediCal reimbursement rates? A5) The recently passed Medicare rate reduction that was effective January 1, 2004, excluded blood clotting factor blood clotting factor Coagulation factor, see there from the rate change 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 less 5% to AWP less 15%. The summary of these proposed changes is vague as to the impact, if any, on blood clotting factor reimbursement in fiscal 2005 and 2006. We do not believe that the ASP asp, popular name for several species of viper, one of which, the European asp (Vipera aspis), is native to S Europe. It is also a name for the Egyptian cobra (Naja haja). plus 6% reimbursement formula should affect blood clotting factor reimbursement during those periods. On December 23, 2003, the United States District Court for the Eastern District of California The U.S. District Court for the Eastern District of California is composed of six divisions. The Bakersfield division has jurisdiction over certain cases in Inyo and Kern counties and on federal lands and National Parks. issued an injunction injunction, in law, order of a court directing a party to perform a certain act or to refrain from an act or acts. The injunction, which developed as the main remedy in equity, is used especially where money damages would not satisfy a plaintiff's claim, or to enjoining en·join tr.v. en·joined, en·join·ing, en·joins 1. To direct or impose with authority and emphasis. 2. To prohibit or forbid. See Synonyms at forbid. the State of California from implementing a scheduled 5% reimbursement rate reduction paid to providers of the state's MediCal program, which was scheduled to take effect on January 1, 2004. The length of the injunction and the ultimate outcome of this litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. are uncertain at this time. In addition, MediCal's proposed change to ASP plus 20% as a reimbursement formula for blood clotting factor was to be effective January 1, 2004. Presently, there has been no clarification by the State of California as to the definition of ASP or other information to establish product reimbursement levels or planned implementation dates. The Company's earnings guidance includes an estimate of the effect from these proposed changes beginning January 1, 2004. As previously announced, the Company's conference call to discuss the second quarter results is scheduled for Monday, February 2, 2004, 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 February 2, 2004. A replay of the call will be available, and there will also be a playback Playback could mean:
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) (Unaudited)
Six Months Ended Three Months Ended
December 31, December 31,
2003 2002 2003 2002
Net patient revenue $704,278 $666,304 $378,239 $358,873
Other revenue 18,937 18,923 10,540 10,038
Equity in net income
of joint ventures 1,550 940 1,002 595
------------ ----------- ----------- -----------
Total revenues 724,765 686,167 389,781 369,506
Cost of sales 568,821 546,671 309,924 295,075
------------ ----------- ----------- -----------
Gross profit 155,944 139,496 79,857 74,431
General &
administrative
expenses 68,988 63,413 34,436 32,669
Bad debts 14,428 14,242 7,254 7,688
Depreciation and
amortization 6,056 4,833 3,101 2,492
------------ ----------- ----------- -----------
Income from
operations 66,472 57,008 35,066 31,582
Interest expense, net (4,401) (4,810) (2,125) (2,365)
Minority interest in
consolidated
subsidiary (1,053) (1,003) (571) (519)
------------ ----------- ----------- -----------
Net income before
income taxes 61,018 51,195 32,370 28,698
Provision for income
taxes 23,601 20,176 12,461 11,142
------------ ----------- ----------- -----------
Net income $37,417 $31,019 $19,909 $17,556
============ =========== =========== ===========
Earnings per share:
Basic $0.78 $0.66 $0.41 $0.37
Diluted $0.77 $0.64 $0.41 $0.36
Weighted average
shares outstanding:
Basic 47,921,203 47,279,578 47,994,280 47,452,947
Diluted 48,664,877 48,462,242 48,775,626 48,614,834
Condensed Consolidated Balance Sheets
(amounts in thousands)
(Unaudited)
December 31, June 30,
2003 2003
Cash & cash
equivalents $25,863 $48,006
Accounts receivable, net 352,094 307,982
Inventories 138,727 89,985
Other current assets 48,548 55,909
Fixed assets, net 32,676 31,681
Other assets 410,613 381,220
------------ -----------
Total assets $1,008,521 $914,783
============ ===========
Current liabilities $262,592 $206,008
Long-term debt 170,842 178,438
Other liabilities 21,723 17,629
Stockholders' equity 553,364 512,708
------------ -----------
Total liabilities and
stockholders' equity $1,008,521 $914,783
============ ===========
Condensed Consolidated Statements of Cash Flow
(amounts in thousands)
(Unaudited) (Unaudited)
Six Months Ended Three Months Ended
December 31, December 31,
2003 2002 2003 2002
Net cash provided by
operating activities $25,622 $31,876 $18,166 $28,084
Net cash used in
investing activities (41,400) (11,658) (39,506) (4,781)
Net cash provided by
(used in) financing
activities (6,365) (26,788) (1,918) 2,154
------------ ----------- ----------- -----------
Increase (decrease)
in cash and cash
equivalents $(22,143) $(6,570) $(23,258) $25,457
============ =========== =========== ===========
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