Chronimed Reports Fiscal 2005 First Quarter Results; Merger with MIM on Track.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- Chronimed Inc. (Nasdaq:CHMD CHMD Change Mode Command ) reported its fiscal 2005 first quarter results ended October October: see month. 1, 2004. Total Company revenue was $142.6 million for the quarter, up $14.0 million or 11% from $128.6 million in the prior year's first quarter. Reported net income for the quarter was $1.2 million, or $0.09 per share. Excluding merger expenses and other income from a note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. , adjusted net income in the current quarter was $1.5 million, or $0.12 per share. Reported net income for last year's first quarter was $2.0 million or $0.15 per share. Excluding a non-cash tax benefit from last year's first quarter, adjusted net income in last year's first quarter was $1.4 million, or $0.11 per share. A reconciliation of reported 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 adjusted net income is addressed in the Question and Answer Section below in this earnings release. Henry F. Blissenbach, Chronimed's Chairman and Chief Executive Officer commented, "Despite the challenges of the quarter, especially the recent reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. reductions, I am pleased with our ability to hold operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: steady by continuing to leverage G&A expenses." Blissenbach continued, "Importantly, we had several positive developments during the quarter, including our selection as preferred provider of specialty medications for Innoviant, a 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. benefit manager, and our selection as exclusive distributor of HIV HIV (Human Immunodeficiency Virus), either of two closely related retroviruses that invade T-helper lymphocytes and are responsible for AIDS. There are two types of HIV: HIV-1 and HIV-2. HIV-1 is responsible for the vast majority of AIDS in the United States. medications for a federally funded project with Health Resources and Services Administration The Health Resources and Services Administration (HRSA) is an agency within the United States Department of Health and Human Services whose goal is to improve access to health care for those without insurance. (HRSA HRSA Health Resources & Services Administration (US) HRSA Historical Radio Society of Australia HRSA Hamilton Rating Scale for Anxiety HRSA Hotel and Restaurant Suppliers Association (Canada) ). Also, our StatScript specialty pharmacies This article is a list of major pharmacies (also known as chemists and drugstores) by country. Australia Pharmacies in Australia are mostly independently-owned by pharmacists, often operated as franchises of retail brands offered by the three major continued to grow at an impressive same-store rate of 22% over last year." The Company stated that its disease mix stayed relatively constant in the first quarter, while overall revenue grew 11% over the year ago quarter. Approximately 53% of this quarter's revenue is from HIV patients compared to 52% in the prior year quarter; 18% is from organ transplant organ transplant: see transplantation, medical. compared to 19% in the prior year quarter; and other diseases contributed 29%, same as the prior year quarter. The HIV revenue grew 14%, slowed due to declines in Fuzeon Fu·ze·on A trademark for the drug enfuvirtide. enfuvirtide Fuzeon Pharmacologic class: Human immunodeficiency-1 (HIV-1) fusion inhibitor Therapeutic class: Antiretroviral prescriptions; organ transplant grew 7%, negatively impacted by Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. price reductions; and remaining conditions grew 8%, driven by rheumatoid arthritis rheumatoid arthritis Chronic, progressive autoimmune disease causing connective-tissue inflammation, mostly in synovial joints. It can occur at any age, is more common in women, and has an unpredictable course. and 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 drugs growing a combined 74%. Gross profit dollars for the first quarter increased to $15.6 million from $15.2 million for the same period a year ago, despite a drop in the gross margin rate from 11.8% in the first quarter a year ago to 10.9% in this year's first quarter. The decline in the first quarter gross margin rate is primarily due to reductions in reimbursement from several payors. Reported operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the quarter were $14.0 million, or 9.8% of revenue compared to the prior year's operating expenses of $13.0 million, or 10.1% of revenue. Excluding the $0.9 million in pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta merger expenses, operating expenses were essentially flat at $13.1 million, improving to 9.2% of revenue. The 90 basis point improvement in operating expenses as a percent of revenue (excluding merger expenses) comes from the leveraging of general and administrative expenses over increasing volumes. Other income for this year's first quarter included $0.3 million for the collection of a fully reserved note receivable, or $0.01 per share. Mr. Blissenbach concluded, "We continue to take a hard look at our business and the actions required to improve revenue and margin performance going forward, particularly given the reimbursement pressures. We are also working closely with MIM MIM Metal Injection Molding MIM Mendelian Inheritance in Man MIM Mobile Instant-Messaging MIM Man in the Middle MIM Multilateral Initiative on Malaria MIM Metal-Insulator-Metal MIM Master of International Management MIM Made in Mexico Corporation to develop the strategies and integration plans for the new merged company, BioScrip(R). Now more than ever, I am convinced that our merger with MIM is necessary to create a stronger, more dynamic force in the marketplace." Question and Answer Section In addition to the information noted above, we are providing the following questions and answers regarding our business activities for the quarter: 1. Would you reconcile reported net income after tax under GAAP to adjusted net income after tax referred to in the earnings release?
Dollars in thousands, except EPS.
Three Months Ended
------------------------------------------
October 1, 2004 September 26, 2003
--------------------- --------------------
Net Income EPS Net Income EPS
---------- ---------- ---------- ---------
Reported under GAAP $1,152 $0.09 $2,003 $0.15
Merger expenses 546 0.04 - -
Other income from note
receivable (153) (0.01) - -
Non-cash tax benefit - - (597) (0.04)
--------------------- --------------------
As adjusted $1,545 $0.12 $1,406 $0.11
===================== ====================
2. What are the specific revenue, gross margin, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and earnings impacts of the recent first quarter reimbursement reductions referred to in this earnings release? In the first quarter, we experienced reductions in reimbursement from Florida Medicaid Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. effective July 2004, California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). Medicaid effective September 2004, and Aetna effective September 2004. The estimated impact of these recent first quarter reimbursement reductions on the three months ended October 1, 2004 was $600,000 and $0.03 per share. For the upcoming three months ending December 31, 2004, the Company will experience the full quarter impact of these reimbursement reductions, which is expected to be $1.2 million and $0.06 per share (an additional $600,000 and $0.03 per share against first quarter results). We expect this impact to be partially offset by our recently announced contracts with Innoviant and HRSA, which we are estimating will contribute approximately $0.01 per share in the second quarter ending December 31, 2004 and increasing upon full implementation. 3. What financial guidance are you providing for Chronimed's upcoming second quarter ending December 2004? Based on the information provided in this release, we believe that our December second quarter revenue and earnings per share will be approximately $145 million and $0.10, respectively, excluding merger expenses. Also, the ultimate loss of the Aetna contract, the timing of which is uncertain, will put downward pressure on revenue and earnings in the future. We estimate this downward pressure to be approximately $25 million in revenue and $0.03 per share in the first full quarter in which we lose the Aetna business, which we anticipate will occur after June 2005. 4. What financial guidance are you providing for the proposed new combination of Chronimed and MIM, named BioScrip, for calendar 2005? As communicated in a previous press release, we anticipate that BioScrip will deliver calendar 2005 revenue of approximately $1.2 billion and calendar 2005 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 of approximately $35 million, excluding restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , stock option expensing and other items. Conference Call Information Chronimed invites interested parties to participate in the fourth quarter financial results conference call on Thursday, October 28, 2004, 10:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . To participate in the conference call, dial 415-908-6244 at least five to ten minutes prior to the scheduled time In rallying, the Scheduled Time of any crew is the time, calculated at the beginning of the event, that they should arrive at any given control. It is different from Due Time in that Due Time is dynamic, ie it can change throughout the event as competitors drop time; whereas , and follow the operator's instructions. The conference call will also be webcast live over the Internet Internet 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 . To participate, logon See login. 1. (jargon) logon - login. 2. (networking) logon - In ACF/VTAM, an unformatted session-initiation request for a session between two logical units. to the Company's website at www.chronimed.com. If you are unable to join the live call, it will be archived on Chronimed's website. In addition, a recording of the conference call will be available for a 24-hour period beginning at 1 p.m. EDT. To access the replay during this period, call 800-633-8284 or 402-977-9140 and enter reservation number 21211997. About Chronimed Inc. Chronimed Inc. is a specialty pharmacy that distributes prescription drugs 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, and provides 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. therapy management services for people with certain conditions, including HIV/AIDS HIV/AIDS Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome , organ transplants, and diseases treated with biotech bi·o·tech n. Informal Biotechnology. biotech Noun short for biotechnology Noun 1. injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. medications. Chronimed works with patients, physicians and other health care providers, pharmaceutical manufacturers, health plans and insurers, and government agencies to improve clinical and economic outcomes. Chronimed's web site address is www.chronimed.com. Information contained in this press release and associated schedules, other than historical or current facts, should be considered 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. as defined in 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. These statements reflect management's current views of future events and financial performance that involve a number of risks and uncertainties. These factors include, but are not limited to, the following: our ability to maintain satisfactory on-going arrangements with biopharmaceutical manufacturers and wholesalers, and their ability to satisfy our volume, pricing, and product requirements; decrease in demand for drugs we handle; changes in Medicare or Medicaid reimbursement, rules and regulations; loss of relationships with, and/or significant reductions in reimbursements from, payors (including Aetna or other material contracts); negative cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. trends or financial difficulties by our payors; changes in or unknown violations of various federal, state, and local regulations; costs and other effects of legal or administrative proceedings An administrative proceeding is a non-judicial determination of fault or guilt and may include in some cases penalties of various forms. A "Captain's Mast", held by a commanding officer of a warship is one such proceeding. ; the adoption of new or changes to existing accounting policies and practices and the application of such policies and practices; the amount and rate of growth in our selling, general and administrative expenses; the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of a significant amount of our goodwill; the effects of and changes in, trade, monetary and fiscal policies, laws and regulations; other activities of government agencies; increased competition; our ability to obtain competitive financing to fund operations and growth; continuing qualifications to list our securities on a national stock exchange; developments in medical research affecting the treatment or cure of conditions for which we distribute medications; the ability of management and accounting controls to assure accurate and timely recognition of revenue and earnings; computer system, software, or hardware failures or malfunctions; loss or retirement of key executives or changes in ownership; and adverse publicity, news coverage, and reporting by independent analysts. These and other risks and uncertainties are discussed in further detail in the cautionary statement filed as Exhibit 99.1 as part of Chronimed's annual report and 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. filed with the Securities and Exchange Commission.
CHRONIMED INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
--------------------------
October 1, September 26,
2004 2003
----------------------------------------------------------------------
Revenue $142,625 $128,602
Yr to Yr Growth 10.9%
Cost of revenue 127,018 113,427
----------------------------------------------------------------------
Gross profit 15,607 15,175
% of Revenue 10.9% 11.8%
Operating expenses
Selling and marketing 1,490 1,322
General and administrative 10,586 10,703
Merger related costs 896 -
Bad debt 1,041 934
----------------------------------------------------------------------
Total operating expenses 14,013 12,959
% of Revenue 9.8% 10.1%
Income from operations 1,594 2,216
% of Revenue 1.1% 1.7%
Interest income 44 51
Other income 251 -
----------------------------------------------------------------------
Income before income taxes 1,889 2,267
Income tax expense (737) (264)
----------------------------------------------------------------------
Net income $1,152 $2,003
----------------------------------------------------------------------
% of Revenue 0.8% 1.6%
Basic net income per share $0.09 $0.16
Diluted net income per share $0.09 $0.15
----------------------------------------------------------------------
Basic weighted-average shares 12,823 12,583
Diluted weighted-average shares 12,982 13,096
CHRONIMED INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
October 1,
2004 July 2,
(unaudited) 2004
----------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $19,382 $16,624
Short-term investments 1,001 1,507
Accounts receivable (net of allowances
of $6,744 and $6,321, respectively) 40,942 41,932
Inventory 11,244 10,348
Prepaid expenses 2,686 1,441
Income taxes receivable 201 220
Deferred taxes 2,388 2,913
----------------------------------------------------------------------
Total current assets 77,844 74,985
Property and equipment, net 4,742 4,942
Goodwill 34,480 34,480
Other assets, net 147 147
----------------------------------------------------------------------
Total assets $117,213 $114,554
----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $14,695 $12,486
Accrued expenses 4,297 3,865
Accrued bonus 251 1,654
Income taxes payable - -
----------------------------------------------------------------------
Total current liabilities 19,243 18,005
Deferred taxes 2,201 1,938
Shareholders' equity
Preferred stock - -
Common stock, issued and outstanding
shares--12,824 and 12,823 respectively 128 128
Additional paid-in capital 58,338 58,332
Retained earnings 37,303 36,151
----------------------------------------------------------------------
Total shareholders' equity 95,769 94,611
----------------------------------------------------------------------
Total liabilities and shareholders'
equity $117,213 $114,554
----------------------------------------------------------------------
CHRONIMED INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
--------------------------
October 1, September 26,
2004 2003
----------------------------------------------------------------------
Operating activities
Net income $1,152 $2,003
Adjustments to reconcile income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 584 573
Deferred income taxes 788 -
Changes in operating assets and
liabilities:
Accounts receivable 990 (4,672)
Income taxes 19 73
Inventory (896) (760)
Accounts payable 2,209 (3,113)
Accrued expenses (971) (382)
Other assets (1,245) (579)
----------------------------------------------------------------------
Net cash provided by (used in)
operating activities 2,630 (6,857)
Investing activities
Purchases of property and equipment (384) (461)
Proceeds from sale of short-term
investments 506 -
----------------------------------------------------------------------
Net cash provided by (used in)
investing activities 122 (461)
Financing activities
Net proceeds from issuance of common
stock 6 437
----------------------------------------------------------------------
Net cash provided by financing
activities 6 437
Increase (Decrease) in cash and cash
equivalents 2,758 (6,881)
Cash and cash equivalents at beginning of
year 16,624 22,854
----------------------------------------------------------------------
Cash and cash equivalents at end of period $19,382 $15,973
----------------------------------------------------------------------
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