D&K Healthcare Resources Reports 1st Quarter Loss - Strong Independent and Regional Sales Growth in the First Quarter of Fiscal 2005.ST. LOUIS -- D&K Healthcare Resources, Inc. (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 :DKHR):
-- Company reports diluted loss per share of $(0.14) for the first
quarter of fiscal 2005, as a result of industry conditions
-- Independent and regional pharmacies sales for the quarter grew
38%, excluding the Walsh acquisition
-- National accounts sales of $38 million for the quarter were 5% of
total sales, compared to 27% in the prior year period
D&K Healthcare Resources, Inc. (NASDAQ: DKHR) reported today that due to lower sales in the national accounts trade class and lower 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. in the independent and regional 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 trade class, it had a net loss 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 of $(0.14) for the quarter ended September September: see month. 30, 2004. The Company's first fiscal quarter is historically the lowest in volume and gross profit and was further negatively impacted by a lack of price increases by pharmaceutical manufacturers and a slower than anticipated transition from a "buy and hold" to a "fee for service" industry model. As reported on October October: see month. 11, 2004 and in the Company's Annual Report, fewer than anticipated product price increases enacted by pharmaceutical manufacturers and changes in manufacturers' inventory management practices resulting in reduced availability of product have impacted revenues in the national accounts trade class. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the quarter in this trade class were $38.1 million compared to $127.9 million in the same quarter of last year. This represented approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 5% of total sales for the quarter compared to 27% in the same quarter of last year. Fewer than anticipated product price increases also resulted in lower gross profit margin in the independent and regional pharmacies trade class during the quarter ended September 30, 2004. Assuming that the majority of the anticipated price increases occur sometime during the fiscal year, a portion of this quarterly impact may be recovered in future periods. Sales trends in the independent and regional pharmacies trade class show continued growth with increases over the previous year of 38%, excluding Walsh Walsh has several meanings: Mathematics
"The well-publicized issues currently facing our industry combined to produce disappointing first quarter results for D&K," said J. Hord Armstrong, III, D&K Healthcare's Chairman and Chief Executive Officer. "We are, however, very pleased with the continued strong top line performance of our independent and regional 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. trade class and remain convinced con·vince tr.v. con·vinced, con·vinc·ing, con·vinc·es 1. To bring by the use of argument or evidence to firm belief or a course of action. See Synonyms at persuade. 2. that our disciplined focus on growing this part of our business will produce significant benefits when our industry works through this difficult period." Performance Highlights
-- Net sales in the independent and regional pharmacies trade class,
excluding Walsh HealthCare, increased 38% in the fiscal 2005 first
quarter driven primarily by new business wins and improving sales
trends in D&K's service territory.
-- National accounts sales declined to $38 million, or 5% of total
Company sales.
-- The inventory balance at September 30, 2004 was $551 million, up
$229 million or 71% compared to the year ago balance, and up 19%
compared to the June 30, 2004 balance. The higher inventory level
compared to a year ago reflects the Walsh acquisition and new
business growth. The sequential quarterly increase in inventory
reflects the lack of sales in the national accounts trade class
caused by fewer price increases and the beginning of a normal
seasonal increase.
-- The long-term debt balance at September 30, 2004 was $322 million
compared to $308 million at June 30, 2004 and $150 million a year
ago. The increase over last year relates primarily to the funding
of the Walsh acquisition.
-- A summary of net sales by class of trade for the fiscal 2005 first
quarter, follows.
Net Sales Summary
(In Thousands)
-------------------------------------------------------------------
First % Change
Quarter vs. First
Fiscal Quarter
2005 Fiscal
2004
-------------------------------------------------------------------
Independent and Regional Pharmacies (1) $653,983 +104.4
National Accounts 38,050 - 70.2
Other Healthcare Providers (2) 30,892 +11.0
PBI, Inc. 2,118 - 8.7
Software Services/Other 633 +14.6
Total $725,676 +51.6
(1) Includes Walsh sales of $213,080 in the fiscal 2005 first
quarter.
(2) Includes Walsh sales of $2,333 in the fiscal 2005 first
quarter.
-------------------------------------------------------------------
Company-wide Performance D&K reported gross profit of $23.1 million, up 27.5% compared to $18.1 million in the year ago quarter. The increase in gross profit results primarily from net sales growth in the independent and regional pharmacies trade class. Gross profit as a percent of sales, or gross margin, was 3.18% compared to last year's first quarter gross margin of 3.78%. The gross margin decline reflects fewer than anticipated product price increases in combination with current competitive market pressures. 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. increased to $21.8 million from $13.2 million in the year ago quarter, driven by the addition of the Walsh operations. Income from operations as a percent of sales, or operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , declined to 0.17% from 1.02% in last year's first quarter reflecting the impact of lower gross profit margins and the addition of Walsh operating expenses. Net interest expense increased to $4.1 million compared to $2.1 million in the year ago period, as average borrowings increased due to the Walsh acquisition, which was financed using the Company's existing revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility, and higher inventory levels. Outlook Management currently expects diluted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. to be within the range of $0.25 to $0.40 in fiscal year 2005. This outlook compares with $0.57 per diluted share earned in fiscal 2004, excluding legal settlement gains ($0.14 per diluted share). The Company targets net sales of $3.2 billion to $3.4 billion in fiscal 2005, compared to fiscal 2004 sales of $2.5 billion. "This outlook attempts to take into account the changing distribution industry model, changes in manufacturers' inventory management practices, changes in product pricing practices, and a higher scrutiny Scrutiny (Fr. scrutin, Late Lat. scrutinium, from scrutari, to search or examine thoroughly) is a careful examination or inquiry (as though there was a mistake). of the entire healthcare industry in an election year", said Armstrong. "These factors and others make near-term near-term adj. Of, for, or involving a short period of time in the near future. results difficult to project. We anticipate that our financial performance will improve over the remainder of the fiscal year compared to the first quarter." Other News On September 30, 2004, the Company completed the acquisition of the remaining 30% of Pharmaceutical Buyers, Inc. (PBI PBI protein-bound iodine. PBI abbr. protein-bound iodine PBI, n See iodine, protein-bound. PBI protein-bound iodine. ), a Colorado-based group purchasing organization A group purchasing organization is an entity that leverages the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members. Many GPOs are funded by administrative fees that are actually paid by the vendors. for alternate-site providers whose members include long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. providers, home infusion INFUSION, med. jur. A pharmaceutical operation, which consists in pouring a hot or cold fluid upon a substance, whose medical properties it is desired to extract. Infusion is also used for the product of this operation. Although infusion differs from decoction, (q.v. providers and medical equipment distributors. The purchase price was $12.4 million. Today's Conference Call Webcast Today, at 10:00 a.m. Eastern time, D&K Healthcare will host a live audio webcast of its discussion with the investment community regarding the Company's fiscal 2005 first-quarter results. The webcast can be accessed at www.dkhealthcare.com. Following the live discussion, a replay of the webcast will be available through November November: see month. 9, 2004. Company Description D&K Healthcare Resources, Inc., which had fiscal 2004 sales of $2.5 billion, is a full-service full-ser·vice adj. Associated with or offering complete service: full-service gasoline pumps; full-service banks. wholesale distributor of branded and generic Generic Describes the characteristics and/or experience of the total universe of a coupon of MBS sector type; that is, in contrast to a specific pool or collateral group, as in a specific CMO issue. pharmaceuticals and over-the-counter health and beauty aid products. Headquartered in St. Louis, D&K serves three classes of customers from eight distribution centers: independent and regional pharmacies with locations in one or more of 27 states, primarily in the Midwest Midwest or Middle West, region of the United States centered on the western Great Lakes and the upper-middle Mississippi valley. It is a somewhat imprecise term that has been applied to the northern section of the land between the Appalachians , Upper Midwest The Upper Midwest is a region of the United States with no universally agreed-upon boundary, but it almost always lies within the US Census Bureau's definition of the Midwest and includes the states of Minnesota and Wisconsin, as well as at least the Upper Peninsula of Michigan. and South; national accounts that operate locations in multiple regions of 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. ; and other healthcare providers including hospitals, alternate-site care providers, and pharmacy benefit management A Pharmacy Benefit Manager (PBM) is a third party administrator of prescription drug programs. They are primarily responsible for processing and paying prescription drug claims. companies in its primary distribution area. D&K also offers a number of proprietary information systems, marketing and business management solutions, and owns Pharmaceutical Buyers, Inc., a leading alternate-site group purchasing service located in Broomfield Broomfield can be: In the United Kingdom:
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. This press release contains forward-looking statements 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 forward-looking statements are inherently subject to risks and uncertainties. The company's actual results could differ materially from those currently anticipated due to a number of factors, including without limitation, the competitive nature of the wholesale pharmaceutical distribution industry with many competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. having substantially greater resources than D&K Healthcare, the company's ability to maintain or improve its operating margins with the industry's competitive pricing pressures, the company's customers and suppliers generally having the right to terminate Terminate (terminat.exe) was a shareware modem terminal and host program for MS-DOS and compatible operating systems developed from the early to the late 1990s by the Dane Bo Bendtsen. The last release (5. or reduce their purchases or shipments on relatively short notice, the ability to maintain prime vendor status with cooperative cooperative Organization owned by and operated for the benefit of those using its services. Cooperatives have been successful in such fields as the processing and marketing of farm products and the purchasing of other kinds of equipment and raw materials, and in the buying groups, the availability of investment purchasing opportunities, the company's ability to complete and integrate acquisitions successfully, the changing business and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. environment of the healthcare industry in which the company operates, including manufacturers' pricing or distribution policies or practices, changes in private and governmental reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. or in the delivery systems for healthcare products, changes in interest rates, and other factors set forth in reports and other documents filed by D&K Healthcare with the Securities and Exchange Commission from time to time. The reader should not place undue reliance on forward-looking statements, which speak only as of the date they are made. D&K Healthcare undertakes no obligation to publicly update or revise any forward-looking statements.
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
-------------------------------------------
(Unaudited)
September % of September % of
30, Net 30, Net %
2004 Sales 2003 Sales Change
-------------------------------------------
Net sales $725,676 100.00% $478,548 100.00% 51.6%
Cost of sales 702,613 96.82% 460,460 96.22% 52.6%
---------- ---------
Gross profit 23,063 3.18% 18,088 3.78% 27.5%
Operating expenses 21,816 3.01% 13,188 2.76% 65.4%
---------- ---------
Income from operations 1,247 0.17% 4,900 1.02% -74.6%
Other income (expense):
Interest expense, net (4,091) -0.56% (2,147) -0.45% 90.5%
Other, net (35) 0.00% 36 0.01% -197.2%
---------- ---------
Income before income tax
provision and
minority interest (2,879) -0.40% 2,789 0.58% -203.2%
Income tax provision 1,123 0.15% (1,088) -0.23% -203.2%
Minority interest (185) -0.03% (234) -0.05% -20.9%
---------- ---------
Net income (loss) $(1,941) -0.27% $1,467 0.31% -232.3%
========== =========
Earnings per share
- basic $(0.14) $0.11
Earnings per share
- diluted $(0.14) $0.10
Basic common shares
outstanding 14,058 13,956
Diluted common shares
outstanding 14,193 14,194
D&K HEALTHCARE RESOURCES, INC.
Supplemental Information to the Condensed Consolidated Statements of
Operations
Three Months Ended
-------------------------------
September 30, September 30,
2004 2003
------------- -------------
Reconciliation of non-GAAP
financial measurement:
Income from operations $1,247 $4,900
Depreciation and amortization 1,350 656
Other income, net (35) 36
------------- -------------
EBITDA (1) $2,562 $5,592
============= =============
(1) Earnings before interest, income taxes, depreciation and
amortization
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, June 30,
(In thousands) 2004 2004
------------- ---------
(Unaudited)
Assets
Cash $8,381 $12,499
Receivables 126,444 130,770
Inventories 550,747 461,295
Other current assets 30,606 29,736
------------- ---------
Total current assets 716,178 634,300
Property and equipment, net 24,569 24,494
Other assets 17,972 14,298
Goodwill, net of accumulated amortization 71,858 64,233
Other intangible assets, net of accumulated
amortization 10,127 6,546
------------- ---------
Total assets $840,704 $743,871
============= =========
Liabilities and Stockholders' Equity
Accounts payable $311,232 $219,580
Current portion long-term debt 926 676
Other current liabilities 22,539 31,144
------------- ---------
Total current liabilities 334,697 251,400
Long-term liabilities 3,053 2,663
Long-term debt 321,886 307,693
Deferred Income taxes 3,768 2,785
Stockholders' equity 177,300 179,330
------------- ---------
Total liabilities and stockholders' equity $840,704 $743,871
============= =========
D&K HEALTHCARE RESOURCES, INC.
EARNINGS PER SHARE RECONCILIATION
(In thousands, except per share data)
Three-Months ended September 30,
2004
------------------------------------
(Unaudited)
Income Shares Per-Share
(Numerator) (Denominator) Amount
(1)
------------------------------------
Basic Earnings per Share:
Net income (loss) available to
common stockholders $ (1,941) 14,058 $ (0.14)
Effect of Diluted Securities:
Options and warrants - 136
Convertible PBI securities (66) -
------------------------
Diluted Earnings per Share:
Net income (loss) available to
common stockholders plus assumed
conversions $ (2,007) 14,194 $ (0.14)
========================
(1) Outstanding shares computed
on a weighted average basis
D&K HEALTHCARE RESOURCES, INC.
EARNINGS PER SHARE RECONCILIATION
(In thousands, except per share data)
Three-Months ended September 30,
2003
---------------------------------
(Unaudited)
Income Shares Per-Share
(Numerator)(Denominator) Amount
(1)
---------------------------------
Basic Earnings per Share:
Net income (loss) available to common
stockholders $ 1,467 13,956 $ 0.11
Effect of Diluted Securities:
Options and warrants - 238
Convertible PBI securities (63) -
-----------------------
Diluted Earnings per Share:
Net income (loss) available to common
stockholders plus assumed
conversions $ 1,404 14,194 $ 0.10
=======================
(1) Outstanding shares computed on
a weighted average basis
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