Accredo Health, Inc. Comments on CMS Remodulin Reimbursement Change and Increases Fiscal 2005 Earnings per Share Estimate.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. -- 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 that the Centers for Medicare and Medicaid Services The Centers for Medicare and Medicaid Services (CMS), previously known as the Health Care Financing Administration (HCFA), is a federal agency within the United States Department of Health and Human Services (DHHS) that administers the Medicare program and (CMS (1) See content management system and color management system. (2) (Conversational Monitor System) Software that provides interactive communications for IBM's VM operating system. ) instructed the Durable Medical Equipment Durable medical equipment is a term of art used to describe certain Medicare benefits, that is, whether Medicare may pay for the item. The item is defined by Title XVIII the Social Security Act: mil·li·gram n. Abbr. mg A metric unit of mass equal to one thousandth (10-3) of a gram. . The adjustment is retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a to January 1, 2004, and allows Medicare DMERC DMERC Durable Medical Equipment Regional Carrier providers to rebill all relevant claims that were reimbursed at reduced rates during that period. Since January 1, 2004, the effective date of the Medicare Prescription Drug prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, , Improvement and Modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, Act of 2003 (MMA (Microcomputer Managers Association, Inc.) A membership organization with chapters throughout the U.S. that was devoted to educating personnel responsible for personal computers. It disbanded in 1996. Mma - A fast Mathematica-like system, in Allegro CL by R. Fateman, 1991. ), the DMERCs established payment rates for the 10 mg Remodulin(R) vial vial a small bottle. size at rates that are below the Company's acquisition cost of the drugs. In addition, one regional DMERC was paying all Remodulin(R) vial sizes at the same rate per milligram as that of the 10 mg vial, thus reducing the Company's reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. for all Medicare recipients of Remodulin(R) in that region. The notification issued by CMS did not address Medicare reimbursement levels for Flolan(R), another product distributed by Accredo and dispensed for the treatment of pulmonary 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. The Company intends to continue to pursue adjustment to the amounts reimbursed by Medicare for Flolan(R). As announced yesterday in the Company's first quarter press release, Accredo has recorded revenues associated with the 10 mg concentration of Remodulin(R) at Medicare's reduced level of reimbursement since January 1, 2004. As a result of the retroactive price adjustment from CMS and in accordance with 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 , the Company will record the cumulative effect of this adjustment in the quarter ended September 30, 2004. This adjustment will result in additional net patient revenue of approximately $3.6 million and will increase previously released net income by approximately $2.2 million for the quarter ended September 30, 2004. Furthermore, previously released 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 will increase from $0.26 to $0.31 for the quarter ended September 30, 2004. Of the $3.6 million in cumulative additional net patient revenue recorded in the September 2004 quarter, approximately $2.3 million related to Remodulin(R) dispensed during the fiscal year ended June 30, 2004. This adjustment has no affect on the consolidated cash flows of the Company for the three months ended September 30, 2004. Taking into account the adjustment for changes in Remodulin(R) pricing announced by CMS, revenues for the quarter increased 25% to $419,734,000 compared to $334,984,000 for the quarter ended September 30, 2003. Net earnings decreased 14% to $15,037,000, or $0.31 per diluted share, for the quarter ended September 30, 2004 compared to $17,508,000, or $0.36 per diluted share, for the quarter ended September 30, 2003. In addition, the Company expensed approximately $4.4 million ($2.7 million net of tax, or $0.05 per diluted share) in unamortized debt issuance costs associated with the replacement and expansion of its senior credit facility during the quarter ended September 30, 2004. Excluding the charge, diluted earnings per share would be $0.36 for the quarter ended September 30, 2004. For the September 2004 quarter, 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. , as adjusted, are 18.4% compared to 22.7% in the same quarter last year and 20.7% in the June 2004 quarter. David D. Stevens, Accredo's chairman and chief executive officer remarked, "We are clearly pleased with this announcement and believe that CMS appropriately addressed reimbursement inequities related to Remodulin(R). More importantly, this is good news for all pulmonary arterial hypertension patients that need continued access to this product." Joel R. Kimbrough, Accredo's chief financial officer, added, "In light of the numerous reimbursement challenges that are occurring, we view this as a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. resolution to this issue. As a result of these reimbursement changes, we are increasing our diluted earnings per share estimate from a range of $1.45 to $1.53 to a range of $1.53 to $1.60 for fiscal 2005. We are reaffirming our previous estimate of fiscal 2005 revenues in the range of $1.85 to $1.90 billion." 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, 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, 2004.
Accredo Health, Incorporated
Condensed Consolidated Statements of Income
(amounts in thousands, except share data)
(Unaudited)
Three Months Ended
September 30
As Previously
Released Revised
2004 2004 2003
Net patient revenue $406,856 $410,464 $326,039
Other revenue 8,665 8,665 8,397
Equity in net income of joint
ventures 605 605 548
----------------------------------
Total revenues 416,126 419,734 334,984
Cost of sales 342,491 342,491 258,897
----------------------------------
Gross profit 73,635 77,243 76,087
General & administrative 35,983 35,983 34,552
Bad debts 5,600 5,600 7,174
Depreciation and amortization 3,839 3,839 2,955
----------------------------------
Income from operations 28,213 31,821 31,406
Interest expense, net (7,281) (7,281) (2,276)
Minority interest in consolidated
subsidiary (207) (207) (482)
----------------------------------
Net income before income taxes 20,725 24,333 28,648
Provision for income taxes 7,869 9,296 11,140
----------------------------------
Net income $12,856 $15,037 $17,508
==================================
Earnings per share:
Basic $0.26 $0.31 $0.37
Diluted $0.26 $0.31 $0.36
Weighted average shares outstanding:
Basic 48,653,474 48,653,474 47,848,126
Diluted 49,093,243 49,093,243 48,554,127
Condensed Consolidated Balance Sheets
(amounts in thousands)
(Unaudited)
September 30, 2004
As Previously June 30,
Released Revised 2004
Cash & cash equivalents $81,596 $81,596 $42,743
Accounts receivable, net 342,476 346,084 325,642
Inventories 145,542 145,542 128,323
Other current assets 49,939 49,939 52,370
Fixed assets, net 42,535 42,535 41,283
Other assets 578,499 578,499 407,821
----------------------------------
Total assets $1,240,587 $1,244,195 $998,182
==================================
Current liabilities $223,003 $224,430 $192,504
Long-term debt 370,312 370,312 174,866
Other liabilities 29,165 29,165 28,869
Stockholders' equity 618,107 620,288 601,943
----------------------------------
Total liabilities and stockholders'
equity $1,240,587 $1,244,195 $998,182
==================================
Condensed Consolidated Statements of Cash Flow
(amounts in thousands)
(Unaudited)
Three Months Ended
September 30,
As Previously
Released Revised
2004 2004 2003
Net cash provided by operating
activities $32,263 $32,263 $7,456
Net cash used in investing
activities (191,100) (191,100) (1,894)
Net cash provided by (used in)
financing activities 197,690 197,690 (4,447)
----------------------------------
Increase in cash and cash
equivalents $38,853 $38,853 $1,115
==================================
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