D&K Healthcare Resources Reports Q2 Fiscal 2003 Results and Updates Full-Year Guidance.Business Editors/Health/Medical Writers ST. LOUIS--(BUSINESS WIRE)--Jan. 22, 2003 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 :DKWD DKWD Disk Write Data ): - 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 $0.18 for the second quarter of fiscal 2003 - Earnings per share in-line In-line Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations. with guidance provided in October October: see month. 2002 - Updates full-year fiscal 2003 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. guidance range to $0.97 - $1.05, before SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142 charge D&K Healthcare Resources, Inc. (NASDAQ: DKWD) today reported results for the fiscal 2003 second quarter ended December December: see month. 31, 2002 and provided updated earnings guidance for full-year fiscal 2003.
Summary Financial Results
(in millions, except per share data)
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Q2 FY '03 Q2 FY '02
12/31/02 12/31/01 % Change
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Net Sales $530.8 $591.7 - 10.3%
EBITDA (1) $8.3 $11.6 -27.8%
Net Income $2.7 $4.6 - 42.4%
Diluted EPS $0.18 $0.31 - 41.9%
Diluted Shares Outstanding 14.583 14.730 - 1.0%
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(1) 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 is defined as income from operations plus depreciation and amortization. "We made progress during the second quarter in our efforts to broaden our national 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. chain trade class, helping to offset trends we began to experience early in the fiscal year," said J. Hord Armstrong, III, chairman and chief executive officer of D&K Healthcare Resources. "Our actions to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. the business are working. Second quarter results were in-line with our expectations, and reinforce our confidence in our full-year outlook." Martin D. Wilson, president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , commented, "As we expected, our results in both principal trade classes continue to reflect more challenging industry conditions as compared to the robust sales activity we achieved last year. Challenges include slower than expected sales growth in the independent and regional pharmacy trade class and fewer attractively priced purchasing opportunities within our national pharmacy chain trade class. However, these conditions have been partially offset by our progress in broadening our national chain business base, with new customers, suppliers and products." Performance Review D&K Healthcare 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 declined 10.3 percent to $530.8 million compared to $591.7 million a year ago, driven primarily by a decline in sales in the national pharmacy chain trade class, although partially offset by higher sales in the independent and regional pharmacy trade class. 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 Net sales in the independent and regional pharmacy trade class increased 7.0 percent to $293.1 million, compared to the year-ago period. The rate of sales growth in the second quarter was lower than that in last year's second quarter. This slower rate of sales growth mirrors sales trends across the independent and regional pharmacy sector, and reflects D&K Healthcare's unusually strong sales performance in last year's second quarter. D&K Healthcare believes that moderating growth in the independent and regional pharmacy sector reflects the continuing effects of the general economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. , growing healthcare funding constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. on insurance providers and governmental bodies, and the increased influence of generic drugs generic drug, a drug sold or prescribed under the nonproprietary name of its active ingredients or under a generally descriptive name rather than under a brand or trade name. and fewer new drug approvals. The outlook is for continued moderation in sales growth in this trade class, reflecting both pharmacy sector conditions and company performance to-date. National Pharmacy Chains As anticipated, sales trends in this trade class reflect the continued impact of fewer attractively priced purchasing opportunities, particularly from our largest supplier in fiscal 2002. Reflecting these trends, net sales in the national pharmacy chain trade class declined 30.6 percent to $199.2 million, compared to last year's second quarter. However, progress was made in the second quarter towards diversifying the composition of sales in the national pharmacy chain trade class. D&K Healthcare expanded the array of branded pharmaceuticals it offers and broadened its supplier and customer base. These initiatives, and other planned efforts are expected to benefit the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. predictability, profitability and growth of this trade class. Company-wide Performance D&K Healthcare achieved a gross profit margin 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. of 4.00 percent, compared to last year's second quarter gross profit margin of 4.14 percent. The decline results primarily from a lower gross margin in the national pharmacy chain trade class due to fewer attractively priced purchasing opportunities. 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. declined 3.4 percent on a dollar basis but increased as a percent of sales. Accordingly, income from operations as a percent of sales in the quarter was 1.45 percent compared to 1.78 percent in last year's quarter. Interest Expense, EBITDA, and Share Repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. Net interest expense increased 15.2 percent to $2.9 million compared to the year-ago period, as average borrowings increased to support increased inventory levels, partially offset by lower average interest rates. On a weighted average basis, second quarter fiscal 2003 interest rates were 90 basis points lower than in last year's second quarter. Inventory levels increased since June 30, 2002, reflecting seasonal trends and positioning the company to benefit from anticipated product price increases. EBITDA (income from operations plus depreciation and amortization) decreased 27.8 percent to $8.3 million compared to last year's second quarter. This decline was driven by the decrease in gross profit, but partially offset by slightly lower operating expenses. During the second quarter of fiscal 2003, D&K Healthcare repurchased 86,250 shares of its common stock at an average price of $8.75, bringing to 100,000, the total number of shares purchased under its one million share repurchase authorization The right or permission to use a system resource; the process of granting access. See access control. announced in September 2002. Outlook and Updated Financial Guidance 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 for the third quarter of fiscal 2003 to be within the range of $0.31 to $0.36 compared to $0.49 in the year-ago period. Full-year fiscal 2003 diluted EPS, before the cumulative effect of an accounting change related to the adoption of SFAS 142, are now expected to be in the range of $0.97 to $1.05, compared to the previous guidance range of $0.95 to $1.05. In fiscal year 2002 the company reported diluted EPS of $1.42. For the full year, the company continues to target sales of approximately $2.3 billion, net income of $14.4 to $15.6 million, before the cumulative effect of an accounting change related to the adoption of SFAS 142. Including SFAS 142, full year net income and EPS guidance is $10.2 to $11.4 million, and $0.68 to $0.76 per share, respectively. Company Description D&K Healthcare Resources, Inc., which had sales of over $2 billion in fiscal 2002, is a leading wholesale distributor of pharmaceutical, healthcare and beauty aid products. Headquartered in St. Louis, the company serves independent and regional pharmacy customers in 24 states primarily in the Midwest, 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, as well as national pharmacy chains, from six distribution facilities located in Missouri Missouri, state, United States Missouri (mĭz  r`ē, –ə), one of the midwestern states of the United States. , Florida, Kentucky Kentucky, state, United StatesKentucky (kəntŭk`ē, kĭn–), one of the so-called border states of the S central United States. It is bordered by West Virginia and Virginia (E); Tennessee (S); the Mississippi R. (2), Minnesota and South Dakota South Dakota (dəkō`tə), state in the N central United States. It is bordered by North Dakota (N), Minnesota and Iowa (E), Nebraska (S), and Wyoming and Montana (W). . In addition, D&K Healthcare offers a variety of value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. including inventory management, 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. services, information technology systems and 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. marketing programs. The company also owns a 70 percent equity interest in Pharmaceutical Buyers, Inc., a leading alternate-site 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. based in Boulder Boulder, city, United States Boulder, city (1990 pop. 83,312), seat of Boulder co., N central Colo.; inc. 1871. A Rocky Mountain resort and a suburb of Denver, it is the seat of the Univ. of Colorado (1876). , CO. More information about D&K Healthcare may be found on the company's corporate 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 web site at www.dkwd.com. 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 having substantially greater resources than D&K Healthcare, the company's ability to maintain or improve its operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: with the industry's competitive pricing pressures, the company's customers and suppliers generally having the right to terminate or reduce their purchases or shipments on relatively short notice, the availability of investment purchasing opportunities, the changing business and regulatory environment of the healthcare industry in which the company operates, including manufacturer's pricing or distribution policies or practices, 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. D&K Healthcare undertakes no obligation to publicly update or revise any forward-looking statements.
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERAITONS
(In thousands, except per share data)
Three Months Ended
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(Unaudited)
% of % of %
Dec. 31, Net Dec. 31, Net Change
2002 Sales 2001 Sales
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Net sales $530,843 100.00% $591,698 100.00% -10.3%
Cost of sales 509,621 96.00% 567,203 95.86% -10.2%
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Gross profit 21,222 4.00% 24,495 4.14% -13.4%
Operating expenses 13,506 2.54% 13,987 2.36% -3.4%
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Income from operations 7,716 1.45% 10,508 1.78% -26.6%
Other income (expense):
Interest expense, net (2,899) -0.55% (2,516) -0.43% 15.2%
Other, net 17 0.00% (140) -0.02% -112.1%
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Pretax earnings 4,834 0.91% 7,852 1.33% -38.4%
Income tax provision (1,958) -0.37% (3,028) -0.51% -35.3%
Minority interest (201) -0.04% (182) -0.03% 10.4%
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Net income $2,675 0.50% $4,642 0.78% -42.4%
========= =========
EBITDA $8,348 1.57% $11,568 1.96% -27.8%
Earnings per share - basic $0.18 $0.33
Earnings per share - diluted $0.18 $0.31
Basic common shares outstanding 14,470 14,258
Diluted common shares
outstanding 14,583 14,730
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERAITONS
(In thousands, except per share data)
Six Months Ended
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(Unaudited)
% of % of %
Dec. 31, Net Dec. 31, Net Change
2002 Sales 2001 Sales
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Net sales $1,064,809 100.00% $1,120,789 100.00% -5.0%
Cost of sales 1,022,534 96.03% 1,074,436 95.86% -4.8%
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Gross profit 42,275 3.97% 46,353 4.14% -8.8%
Operating expenses 27,050 2.54% 27,769 2.48% -2.6%
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Income from operations 15,225 1.43% 18,584 1.66% -18.1%
Other income (expense):
Interest expense, net (5,412) -0.51% (4,392) -0.39% 23.2%
Other, net (37) 0.00% (208) -0.02% -82.2%
----------- -----------
Pretax earnings 9,776 0.92% 13,984 1.25% -30.1%
Income tax provision (3,910) -0.37% (5,370) -0.48% -27.2%
Minority interest (329) -0.03% (385) -0.03% -14.5%
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Income before cumulative
effect of accounting change 5,537 0.52% 8,229 0.73% -32.7%
Cumulative effect of
accounting change (4,249) -0.40% - 0.00%
----------- -----------
Net income $1,288 0.12% $8,229 0.73% -84.3%
=========== ===========
EBITDA $16,494 1.55% $20,757 1.85% -20.5%
Earnings per share - basic
Net income before cumulative
effect of accounting change $0.38 $0.58
Cumulative effect of
accounting change $(0.29) $-
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Net income $0.09 $0.58
Earnings per share - diluted
Net income before cumulative
effect of accounting change $0.37 $0.56
Cumulative effect of
accounting change $(0.29) $-
----------- -----------
Net income $0.08 $0.56
Basic common shares
outstanding 14,512 14,100
Diluted common shares
outstanding 14,717 14,580
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
Dec. 31, June 30,
(in thousands) 2002 2002
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(unaudited)
Assets
Cash $9,558 $11,754
Accounts receivable 26,533 31,217
Inventories 452,326 364,244
Other current assets 8,146 6,699
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Total current assets 496,563 413,914
Property and equipment, net 11,683 11,104
Other assets 6,815 5,024
Goodwill, net of accumulated amortization 44,105 51,131
Other intangible assets, net of accumulated
amortization 1,891 1,965
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Total assets $561,057 $483,138
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Liabilities and Stockholders' Equity
Accounts payable $216,578 $215,777
Current portion of long-term debt 1,870 2,270
Other current liabilities 12,526 13,231
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Total current liabilities 230,974 231,278
Long-term liabilities 3,718 2,757
Long-term debt 159,303 81,457
Deferred income taxes - 249
Stockholders' equity 167,062 167,397
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Total liabilities and stockholders' equity $561,057 $483,138
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Q2 Conference Call Webcast Reminder Conference Call Webcast: Today, Wednesday, January 22, at 10:00 a.m. ET Webcast and Replay: www.dkwd.com/irevents.htm or www.companyboardroom.com |
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