D&K Healthcare Resources Reports 3rd Quarter Income - Continued Strong Independent and Regional Sales Growth.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 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 of $0.25 for the third quarter of fiscal 2005, --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 sales for the quarter grew 33% --Company revises guidance for remainder of fiscal 2005 D&K Healthcare Resources, Inc. (NASDAQ:DKHR) reported today that diluted earnings per share (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. ) for the third quarter of fiscal 2005 were $0.25 compared to $0.38 in the prior year quarter. The reduction in EPS from last year reflects the transition from a "buy and hold" to a "fee for service" industry model which decrease the contribution by the national accounts trade class as it reduced the amount of inventory available to this trade class. Similar to the Company's first and second quarter results, product price increases were lower than previous years, contributing to the unfavorable quarterly results. Sales in the independent and regional pharmacies trade class increased 33% over last year, continuing the strong growth shown during the first half of fiscal 2005. "We continue to face the industry issues that are creating a period of uncertainty for wholesale drug distributors," said J. Hord Armstrong, III, D&K Healthcare's Chairman and Chief Executive Officer. "Despite industry issues, D&K delivered strong third quarter sales growth in our core 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. business. Our strategy of focusing on our distinct capabilities to service this customer segment continues to produce very positive top line growth, which we believe will produce favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. earnings as industry issues are resolved over the next several quarters." Performance Highlights --Net sales in the independent and regional pharmacies trade class increased 33% in the fiscal 2005 third quarter driven primarily by new business wins and improving sales trends in D&K's service territory. --The inventory balance at March 31, 2005 was $431 million, down $71 million or 14.1% compared to the year ago balance, and down 6.5% compared to the June June: see month. 30, 2004 balance. Inventory was also down 29.5% from December December: see month. 31, 2004 levels. The decreases in inventory reflect a combination of the normal seasonal sell-down of inventory that occurs in the March quarter and the impact of the transition to the "fee for service" industry model that continue to reduce special purchasing opportunities. --The long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. balance at March 31, 2005 was $267 million compared to $308 million at June 30, 2004 and $384 million a year ago. These decreases relate primarily to lower inventory levels. The balance also represents a reduction of $177 million from December 31, 2004 levels. --A summary of 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 by class of trade for the third quarter and first nine months of fiscal 2005 follows.
Net Sales Summary
(In Thousands)
----------------------------------------------------------------------
% Change % Change
vs. vs. First
Third Third First Nine Nine
Quarter Quarter Months of Months of
of Fiscal Fiscal Fiscal Fiscal
2005 2004 2005 2004
-------------------------- ---------- --------- ----------- ----------
Independent and Regional
Pharmacies(1) $722,177 +33.4 $2,059,739 +63.7%
National Accounts 168,817 -35.4 333,260 -29.5
Other Healthcare
Providers(2) 29,406 +1.9 88,993 +6.4
PBI, Inc. 2,371 +12.9 6,977 +4.2
Software Services/Other 1,079 +104.0 3,395 +44.8
---------- -----------
Total $923,850 +10.8 $2,492,364 +36.7
-------------------------- ---------- --------- ----------- ----------
The Walsh acquisition was completed on December 5, 2003. As such, the
nine month percentage change calculation includes a six month period
benefited by additional Walsh sales, as follows:
(1) Nine month sales figures include Walsh sales of $424,456 for the
six months ended December 31, 2004. The corresponding period of
fiscal 2004 included $52,949 related to Walsh.
(2) Nine month sales figures include Walsh sales of $4,845 for the six
months ended December 31, 2004. The corresponding period of fiscal
2004 included $1,430 related to Walsh.
Company-wide Performance D&K reported gross profit of $34.1 million, down 2.9% compared to $35.2 million in the year ago quarter. Gross profit as a percent of sales, or gross margin, was 3.70% compared to last year's second quarter gross margin of 4.22%. The gross profit and margin declines reflect lower 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 $22.7 million from $21.4 million in the year ago quarter, driven by higher volume, but decreased as a percentage of sales from 2.57% to 2.46%. 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 1.23% from 1.65% in last year's third quarter reflecting the impact of 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. . Net interest expense increased to $5.4 million compared to $4.5 million in the year ago period, primarily as a result of higher interest rates that were partially offset by lower average borrowing levels. Outlook Management currently expects 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. EPS to be within the range of $0.10 to $0.15 in fiscal year 2005. This outlook compares with $0.71 per diluted share earned in fiscal 2004, which included two legal settlement gains ($0.14 per diluted share). The Company targets net sales of $3.25 billion to $3.3 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, and changes in product pricing practices," said Armstrong. "The revised earnings guidance from last quarter is a reflection of lower than anticipated price increases by manufacturers and competitive market pressures." Other News As previously announced, the distribution center in Paragould, Arkansas Paragould is a city in Greene County, Arkansas, United States. According to 2006 Census Bureau estimates, the population of the city is 23,775. ranking it as the state's 17th largest city, behind Russellville. ceased delivery operations in April 2005. The majority of the customers from this distribution center are now served by either our Cape Girardeau, Missouri “Cape Girardeau” redirects here. For the Cape Girardeau meteorite of 1846, see Meteorite falls. Cape Girardeau (pronounced /ˈkʰeɪp dʒəˈɹɑɹdoʊ/) (French: distribution center or our newly-opened distribution center outside Birmingham, Alabama Birmingham (pronounced [ˈbɝmɪŋˌhæm]) is the largest city in the U.S. state of Alabama and is the county seat of Jefferson County. . The Company also announced that the Owensboro, Kentucky Owensboro is the third largest city in Kentucky and the county seat of Daviess County.GR6 It is located on U.S. Highway 60 about 32 miles southeast of Evansville, Indiana and is the principal city of the Owensboro, Kentucky Metropolitan Statistical Area. distribution center will be consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: into our Lexington Lexington. 1 City (1990 pop. 225,366), seat of Fayette co., N central Ky., in the heart of the bluegrass region; inc. 1832, made coextensive with Fayette co. 1974. and Cape Girardeau Cape Girardeau (jĭrär`dō, jērərdō`), city (1990 pop. 61,633), Cape Girardeau co., SE Mo., overlooking the Mississippi River; founded 1793, inc. as a city 1843. facilities by fiscal year end. 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 third-quarter results. The webcast can be accessed at www.dkhealthcare.com. Following the live discussion, a replay of the webcast will be available through May 12, 2005. 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)
Mar. 31, % of Mar. 31, % of %
2005 Net Sales 2004 Net Sales Change
----------------------------------------------
Net sales $923,850 100.00% $833,933 100.00% 10.8%
Cost of sales 889,705 96.30% 798,756 95.78% 11.4%
--------- ---------
Gross profit 34,145 3.70% 35,177 4.22% -2.9%
Operating expenses 22,740 2.46% 21,436 2.57% 6.1%
--------- ---------
Income from
operations 11,405 1.23% 13,741 1.65% -17.0%
Other income (expense):
Interest expense, net (5,421) -0.59% (4,502) -0.54% 20.4%
Other, net (130) -0.01% (107) -0.01% 21.5%
--------- ---------
Pretax earnings 5,854 0.63% 9,132 1.10% -35.9%
Income tax provision (2,301) -0.25% (3,561) -0.43% -35.4%
Minority interest - 0.00% (167) -0.02% -100.0%
--------- ---------
Net income $3,553 0.38% $5,404 0.65% -34.3%
========= =========
Earnings per share -
basic $0.25 $0.39
Earnings per share -
diluted $0.25 $0.38
Basic common shares
outstanding 14,102 13,928
Diluted common shares
outstanding 14,177 14,108
Supplemental Information to the
Condensed Consolidated Statements of Operations
(In thousands)
Three Months Ended
------------------------------
Mar. 31, Mar. 31,
2005 2004
--------- ---------
Reconciliation of non-
GAAP financial
measurement :
Income from operations $11,405 $13,741
Depreciation and
amortization 1,451 1,407
Other income, net (130) (107)
--------- ---------
EBITDA $12,726 $15,041
========= =========
EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. The company believes EBITDA is a relevant measure of
financial performance as it is a more representative measure of
operating cash flow.
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Nine Months Ended
-------------------------------------------
(Unaudited)
Mar. 31, % of Mar. 31, % of %
2005 Net Sales 2004 Net Sales Change
--------------------------------------------------
Net sales $2,492,364 100.00% $1,823,426 100.00% 36.7%
Cost of sales 2,409,033 96.66% 1,750,706 96.01% 37.6%
----------- -----------
Gross profit 83,331 3.34% 72,720 3.99% 14.6%
Operating expenses 66,618 2.67% 50,471 2.77% 32.0%
----------- -----------
Income from
operations 16,713 0.67% 22,249 1.22% -24.9%
Other income
(expense):
Interest expense,
net (14,933) -0.60% (9,980) -0.55% 49.6%
Other, net (14) 0.00% 224 0.01% n/m
----------- -----------
Pretax earnings 1,766 0.07% 12,493 0.69% -85.9%
Income tax
provision (707) -0.03% (4,872) -0.27% -85.5%
Minority interest (185) -0.01% (573) -0.03% -67.7%
----------- -----------
Net income $874 0.04% $7,048 0.39% -87.6%
=========== ===========
Earnings per share
- basic $0.06 $0.51
Earnings per share
- diluted $0.06 $0.49
Basic common shares
outstanding 14,125 13,937
Diluted common
shares outstanding 14,238 14,144
Supplemental Information to the
Condensed Consolidated Statements of Operations
(In thousands)
Nine Months Ended
---------------------------------
Mar. 31, Mar. 31,
2005 2004
----------- -----------
Reconciliation of
non-GAAP financial
measurement :
Income from
operations $16,713 $22,249
Depreciation and
amortization 4,245 2,722
Other income, net (14) 224
----------- -----------
EBITDA $20,944 $25,195
=========== ===========
EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. The company believes EBITDA is a relevant measure of
financial performance as it is a more representative measure of
operating cash flow.
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Mar. 31, June 30,
(in thousands) 2005 2004
----------- ---------
(unaudited)
Assets
Cash $7,082 $12,499
Accounts receivable 166,877 130,770
Inventories 431,219 461,295
Other current assets 28,383 29,736
----------- ---------
Total current assets 633,561 634,300
Property and equipment, net 23,679 24,494
Other assets 19,282 14,298
Goodwill, net of accumulated amortization 72,197 64,233
Other intangible assets, net of accumulated
amortization 9,664 6,546
----------- ---------
Total assets $758,383 $743,871
=========== =========
Liabilities and Stockholders' Equity
Accounts payable $273,620 $219,580
Current portion long-term debt 2,504 676
Other current liabilities 26,543 31,144
----------- ---------
Total current liabilities 302,667 251,400
Long-term liabilities 1,383 2,663
Long-term debt 266,929 307,693
Deferred income taxes 5,577 2,785
Stockholders' equity 181,827 179,330
----------- ---------
Total liabilities and stockholders' equity $758,383 $743,871
=========== =========
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