Accredo Health, Inc. Announces Record Third Quarter Results; Third Quarter Earnings Increase 88%.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)--April 29, 2002 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 and nine months ended March 31, 2002. Net earnings increased 88% to $8,988,000, or $.33 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 March 31, 2002 compared to $4,789,000, or $.18 per diluted share, for the same period in fiscal 2001. For the nine months, net earnings increased 79% to $22,082,000, or $0.82 per diluted share, compared to $12,320,000, or $0.48 per diluted share, for the same period in fiscal 2001. Revenues for the quarter increased 44% to $178,497,000, compared to $124,280,000 for the same period in fiscal 2001. For the nine months, revenues increased 38% to $465,331,000 compared to $337,727,000 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 16.5% in the third quarter compared to 14% in the same period in fiscal 2001, 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 record revenues and earnings achieved in the third quarter as we again exceeded our estimates," said 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. . "On a same store basis, our revenues for the March quarter increased 29% and our earnings increased 55% when compared to the same quarter last year," continued Mr. Stevens. "This growth is attributed to strong SYNAGIS(R) revenues and the continued improvement in the availability of hemophilia hemophilia (hē'məfĭl`ēə,–fēl`yə), genetic disease in which the clotting ability of the blood is impaired and excessive bleeding results. factor and 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 ) and demonstrates the strength of our core business." Joel Kimbrough, Accredo's chief financial officer, added, "We are pleased with the continued overall revenue growth in our core products and the successful growth in seasonal revenue from SYNAGIS(R) during the third quarter. Sequentially, third quarter revenues grew 11% and net income grew 25% when compared to the second quarter. As a result of this growth, we are again increasing our FY 2002 estimates announced last quarter. We estimate that for our fiscal year ending June 30, 2002, we will achieve revenues in the $618,000,000 to $622,000,000 range and earnings per share of $1.09 to $1.11. Last quarter we had indicated estimates of revenues in the $610,000,000 to $620,000,000 range and earnings per share of $1.05 to $1.10. Assuming a continuing consistent supply of hemophilia and IVIG products, we are also increasing our estimate of gross profit margins to a range of 16.0% to 17.0%. These estimates assume no new indications for current product lines, new product launches or future acquisitions. In addition, these estimates do not include the expected acquisition of the Specialty Pharmaceutical Services division (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. ) of Gentiva Health Services Gentiva Health Services, headquartered in Long Island, New York, is one of the largest providers of health care and specialty pharmaceutical services in the United States. A publicly traded NASDAQ: GTIV company,[1] , Inc. (NASDAQ:GTIV) which we plan to close in our fourth quarter." Mr. Kimbrough continued, "Regarding the acquisition of SPS, the Securities and Exchange Commission (SEC) is currently reviewing the joint response by Accredo and Gentiva to its comments and the second amendment to the Form S-4 Registration Statement which was filed on April 22, 2002. We do not anticipate any significant remaining issues with the SEC review. We will set the shareholder meeting to approve the acquisition approximately 30 days following completion of that review with closing to occur after the shareholder vote. All other aspects of the acquisition continue to be on schedule, including the potential divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of the acute portion of the SPS business. Due to the timing of the shareholders' meeting shareholders' meeting n. a meeting, usually annual, of all shareholders of a corporation (although in large corporations only a small percentage attend) to elect the Board of Directors and hear reports on the company's business situation. and the closing of the transaction, we plan to discuss more specific revenue and earnings guidance for fiscal 2003 once the acquisition is completed. The SPS division recorded revenues of $739 million in calendar year 2001. We intend to retain approximately 75% of those revenues, and the acquisition will be immediately accretive to earnings." 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 are gross profit, EBITDA and net income margins improving? A1) For the March quarter, gross profit margins improved to 16.5%, EBITDA improved to 8.9% and net income improved to 5.0% primarily as a result of product mix changes with a larger percentage of our revenues generated from hemophilia and IVIG. Q2) What is the status of Recombinant recombinant /re·com·bi·nant/ (re-kom´bi-nant) 1. the new entity (e.g., gene, protein, cell, individual) that results from genetic recombination. 2. pertaining or relating to such an entity. See also under DNA. 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 we 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 March quarter was greater than the amount received in any quarterly period in the last twelve months. This allowed us to not only continue to serve our existing patients and to accept new hemophilia recombinant referrals throughout the quarter but also to return our patients' inventory levels back to normal amounts. While Bayer Corporation is still not releasing a material amount of recombinant product, we anticipate that product availability from all manufacturers will continue to improve in future quarters. Q3) Why does the revenue and earnings guidance indicate a sequential decline from the third quarter to the fourth quarter? A3) For fiscal year 2002, SYNAGIS(R), which is a seasonal drug for Accredo, will achieve revenues at the high end of the $60 to $65 million range announced last quarter. The majority of the revenue and the related earnings from SYNAGIS(R) are generated in the second and third quarters. We therefore expect a sequential decline in both revenues and earnings in the fourth quarter. Q4) Why did bad debts increase to 1.0% of net revenues in the quarter versus .6% in the previous quarter? A4) The cause of the increase in bad debts as a percentage of revenue is primarily due to the increased percentage of the Company's revenue from the sale of hemophilia factor and IVIG. Q5) What is your guidance for 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 for fiscal year 2002? A5) During the third quarter, cash flow from operations was impacted primarily by an increase in DSO See CSO. to 69 days and an increase in inventory levels. The increase in DSO is primarily due to product mix, which included strong revenues of SYNAGIS(R), hemophilia factor and IVIG. In addition, due to historical product shortages in hemophilia factor and IVIG, we added to our inventory levels as the product became available resulting in more inventory of these products on hand than in any period in our history. We would expect to see a reduction in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and inventory in the fourth quarter due to the end of the SYNAGIS(R) season. We estimate that for fiscal 2002, cash flow from operations will be approximately $24 to $26 million. Q6) What impact did the recent Food and Drug Administration's (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. ) approval of Rebif(R) for the treatment of multiple sclerosis multiple sclerosis (MS), chronic, slowly progressive autoimmune disease in which the body's immune system attacks the protective myelin sheaths that surround the nerve cells of the brain and spinal cord (a process called demyelination), resulting in damaged areas (MS) in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. have on Accredo? A6) On March 8, 2002, the FDA approved a fourth injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. product (Rebif(R)) for the treatment of multiple sclerosis. Rebif(R) becomes the third MS medication to compete with Biogen, Inc.'s market leading product, AVONEX(R). As expected, we have seen very few of Accredo's current AVONEX(R) patients switch to Rebif(R). We expect any potential effect on Accredo will be in the competition for newly diagnosed MS patients. While it is too soon after FDA approval of Rebif(R) to make any conclusions about its potential impact, Accredo experienced normal AVONEX(R) new patient referral volumes in the month of March. Q7) What is the status of your Centocor preferred distribution agreement for REMICADE(R)? A7) As previously disclosed, since the summer of 2001, we have been negotiating the status of our preferred relationship with Centocor. Both parties have agreed to terminate the current agreement effective July 1, 2002. Historically REMICADE(R) has represented less than one million dollars in net revenues per quarter for Accredo Health. Accredo Health, Incorporated and its two wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , Hemophilia Health Services health services Managed care The benefits covered under a health contract , Inc. and Nova Factor, Inc., provide specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. 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 Reimbursement Payment made to someone for out-of-pocket expenses has incurred. expertise and overnight drug delivery. As previously announced, the Company's conference call to discuss the third quarter results is scheduled for Monday, April 29, 2002, at 9:00 a.m. CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT . 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. CDT on April 29, 2002. 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 May 13, 2002 at 5:00 p.m. CDT. To access the replay call, dial 402/220-2491 and enter the code 11860840. 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. 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, satisfaction of approvals and conditions applicable to the SPS purchase transaction described above, the loss of a biopharmaceutical relationship, our inability to sell existing products, the impact of pharmaceutical industry regulation, the difficulty of predicting FDA 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 under the heading "Risk Factors" 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. , Accredo's latest quarterly report on 10-Q and the Form S-4 Registration Statement as amended jointly filed by Accredo and Gentiva Health Services, Inc.
Accredo Health, Incorporated
Condensed Consolidated Statements of Income
(amounts in thousands, except share data)
(Unaudited) (Unaudited)
Nine Months Ended Three Months Ended
March 31, March 31,
2002 2001 2002 2001
Net patient revenues $ 451,408 $ 325,814 $ 173,563 $ 120,406
Other revenue 12,478 11,075 4,362 3,551
Equity in net income
of joint ventures 1,445 838 572 323
----------------------- ------------------------
Total revenues 465,331 337,727 178,497 124,280
Cost of sales 391,766 289,320 148,995 106,861
----------------------- ------------------------
Gross profit 73,565 48,407 29,502 17,419
General &
administrative 31,154 21,861 11,851 7,650
Bad debts 3,826 4,729 1,770 1,535
Depreciation and
amortization 2,369 3,061 907 1,021
----------------------- ------------------------
Income from operations 36,216 18,756 14,974 7,213
Interest income, net 838 2,126 38 870
Minority interest in
consolidated
subsidiary (966) (476) (333) (170)
----------------------- ------------------------
Net income before
income taxes 36,088 20,406 14,679 7,913
Provision for income
taxes 14,006 8,086 5,691 3,124
----------------------- ------------------------
Net income $ 22,082 $ 12,320 $ 8,988 $ 4,789
======================= ========================
Earnings per share:
Basic $ 0.85 $ 0.50 $ 0.34 $ 0.19
Diluted $ 0.82 $ 0.48 $ 0.33 $ 0.18
Weighted average
shares outstanding:
Basic 26,075,638 24,700,863 26,174,890 25,662,716
Diluted 26,973,016 25,897,891 27,145,619 26,735,847
Condensed Consolidated Balance Sheets
(amounts in thousands)
(Unaudited)
March 31, June 30,
2002 2001
Cash & cash equivalents $ 1,103 $ 54,520
Marketable securities 1,000 2,000
Accounts receivable, net 129,179 76,952
Other current assets 86,295 51,666
Fixed assets, net 11,317 8,195
Other assets 140,436 95,911
-------------------------------
Total assets $ 369,330 $ 289,244
===============================
Current liabilities $ 148,834 $ 96,850
Long-term debt - -
Other liabilities 5,048 3,224
Stockholders' equity 215,448 189,170
-------------------------------
Total liabilities and
stockholders' equity $ 369,330 $ 289,244
===============================
Condensed Consolidated Statements of Cash Flow
(amounts in thousands)
(Unaudited) (Unaudited)
Nine Months Ended Three Months Ended
March 31, March 31,
2002 2001 2002 2001
Net cash provided by
(used in) operating
activities $ 3,472 $ 10,473 $ (5,481) $ 14,957
Net cash provided by
(used in) investing
activities (52,738) (4,121) (9,259) 8,560
Net cash provided by
(used in) financing
activities (4,151) 53,442 478 1,308
---------------------- ----------------------
Increase (decrease)
in cash and cash
equivalents $ (53,417) $ 59,794 $ (14,262) $ 24,825
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