D&K Healthcare Resources Reports Q3 Fiscal 2003 Results and Provides Q4 Earnings Guidance.Business Editors ST. LOUIS--(BUSINESS WIRE)--April 28, 2003 D&K Healthcare Resources, Inc. (Nasdaq:DKWD DKWD Disk Write Data ): -- Company reports one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. termination costs of $2.0 million pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern , $1.2 million net of tax, or $0.08 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 -- Including one-time costs, 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. were $0.29; excluding one-time costs, diluted EPS were $0.37 D&K Healthcare Resources, Inc. (Nasdaq:DKWD) today reported results for the fiscal 2003 third quarter ended March 31, 2003 and provided earnings guidance for the fourth quarter. As previously announced, in conjunction with its new $600 million credit agreement, the company recognized one-time securitization termination costs in the third quarter of $2.0 million pretax, $1.2 million net of tax, or $0.08 per diluted share. Including one-time securitization termination costs, the company reported diluted EPS of $0.29 for the third quarter of fiscal 2003 as compared to $0.49 one year ago. Excluding these one-time costs, diluted EPS were $0.37. The table below provides a summary of the third quarter results and the impact of the one-time costs.
Q3 Fiscal 2003 Financial Highlights
For the quarter ended 3/31/03
(in millions, except per share data)
Impact of Excluding
One-Time One-Time
Reported Costs (1) Costs
----------- ----------- ----------
Net Sales $628.6 $- $628.6
EBITDA (2) $12.8 $- $12.8
Pretax Earnings $7.4 $2.0 $9.4
Net Income $4.2 $1.2 $5.4
Diluted EPS $0.29 $0.08 $0.37
(1) In third quarter fiscal 2003, D&K Healthcare Resources, Inc. terminated an accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying securitization program. One-time securitization termination costs recognized in the third quarter were $2.0 million pretax, $1.2 million net of tax, or $0.08 per diluted share. (2) 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 earnings before interest, taxes, depreciation, amortization and securitization termination costs. The company believes EBITDA is a relevant measure of financial performance. A reconciliation of EBITDA to income from operations as determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles appears in the supplemental information to the condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. consolidated statements of operations, included in the financial tables. "We are pleased with the continued progress we've we've Contraction of we have. we've have made in broadening our national accounts business this quarter," said J. Hord Armstrong, III, chairman and chief executive officer of D&K Healthcare Resources. "We continue to make our efforts 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 composition of sales in this trade class a top priority. In addition, the completion of our new $600 million credit agreement gives us both greater capacity and greater flexibility to broaden and grow our company." Third Quarter 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 9.6 percent to $628.6 million compared to $695.2 million in the year ago third quarter. The lower sales reflect the anticipated decline in the national accounts trade class, although partially offset by higher 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 and the smaller other healthcare providers trade classes. Independent and Regional Pharmacies Net sales in the independent and regional pharmacies trade class increased 3.6 percent to $286.0 million, compared to $276.0 million in the year ago period. The rate of sales growth in the third quarter was lower than the rate of growth achieved in last year's third quarter. The moderation in sales growth reflects slow growth trends in the health care sector. Martin D. Wilson Wilson, city (1990 pop. 36,930), seat of Wilson co., E N.C., in a rich agricultural region; inc. 1849. It is a commercial and industrial center with a large tobacco market. Manufactures include textile goods (especially clothing), metal products, and processed foods. , 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 have seen over the past several quarters, sales growth in our independent and regional business has continued to slow. Several factors contribute to this slow growth environment -- the general economic slow down, 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)]. , the impact of generic drug 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. conversions, the impact of over-the-counter drug over-the-counter drug A therapeutic agent that does not require a prescription, which the FDA feels can be safely self-prescribed by non-physicians. Cf Prescription drug, Under-the-counter. conversions, and fewer new drug introductions -- are all challenges facing our industry. Furthermore, we have experienced a decline in distribution center consolidation activity in our markets, which has tempered our new account wins compared to last year. We are confident that when industry growth trends improve, D&K will be well positioned to maximize all growth opportunities." Reflecting both industry trends and company performance to-date, D&K Healthcare reduced the outlook for sales growth in the 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. The company reduced the sales growth outlook from 7 to 9 percent growth to 4 to 7 percent growth for the full year fiscal 2003. National Accounts (formerly National Pharmacy Chains) Consistent with company guidance, net sales declined 21.2 percent to $303.8 million, compared to $385.8 million a year ago. Sales trends in this trade class continue to reflect the impact of fewer attractively priced purchasing opportunities, particularly from our largest supplier in fiscal 2002. Comparing sales in the current quarter to the year ago quarter - excluding sales associated with attractively priced purchases from our largest supplier in fiscal 2002, which were approximately $190 million in the year ago quarter - results in sales growth of approximately 55 percent. This sales growth reflects ongoing efforts to broaden the composition of sales. D&K Healthcare continued to expand the array of branded pharmaceuticals it offers and broaden both the supplier and customer base. In recognition of the changing composition of this trade class, D&K Healthcare has renamed the class 'national accounts', formerly referred to as 'national pharmacy chains'. 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 4.30 percent, compared to last year's third quarter gross profit margin of 4.36 percent. The decline results primarily from lower sales and gross margin in the national accounts division 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. increased slightly to 2.37 percent of sales compared to 2.11 percent last year. Income from operations as a percent of sales in the quarter declined to 1.93 percent from 2.25 percent in last year's third quarter. Inventory levels at March 31, 2003 declined compared to December December: see month. 31, 2002 reflecting typical seasonal trends for D&K Healthcare's business. Net interest expense remained steady at $2.8 million. On a weighted average basis, third quarter fiscal 2003 interest rates were 20 basis points lower than in last year's third quarter. Through April 25, 2003, D&K Healthcare has repurchased 600,000 shares of its common stock at an average price of $9.78 per share, under its one million 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. authorization The right or permission to use a system resource; the process of granting access. See access control. announced in September September: see month. 2002. One-Time Securitization Termination Costs D&K Healthcare announced on March 31, 2003 that it had entered into a new $600 million credit facility. The credit facility, an asset-based senior secured 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, increased the company's available credit from $430 million to $600 million. The new single credit facility replaced a $230 million revolving bank line of credit and a $200 million accounts receivable securitization program. One-time costs associated with terminating the accounts receivable securitization program were recognized in the third quarter of fiscal 2003. These costs totaled $2.0 million pretax, $1.2 million net of tax, or $0.08 per diluted share. Borrowings under the new credit facility are reported as 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. on the company's balance sheet. The accounts receivable securitization program had been reported as off-balance sheet financing. Year-to-Date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. Fiscal 2003 Results For the first nine months of fiscal 2003, diluted EPS were $0.37 compared to $1.05 for the first nine months of fiscal 2002. Amounts recognized in the first nine months of fiscal 2003 associated with the cumulative effect of an accounting change ($0.29 per diluted share) and the one-time securitization termination costs ($0.08 per diluted share) reduced diluted EPS by $0.37. The table below provides a summary of the fiscal 2003 nine month results, and the impact of the cumulative effect of an accounting change and one-time costs.
Fiscal Year 2003 Nine Month Financial Highlights
For the Nine Months Ended 3/31/03
(in millions, except per share data)
Excluding
Impact of Effect of an
Cumulative Accounting
Effect of Impact of Change and
Accounting One-Time One-Time
Reported Change (1) Costs (2) Costs
----------- ----------- ----------- ------------
Net Sales $1,693.4 - $- $1,693.4
EBITDA (3) $29.2 - $- $29.2
Pretax Earnings $17.1 - $2.0 $19.1
Net Income $5.5 $4.2 $1.2 $10.9
Diluted EPS $0.37 $0.29 $0.08 $0.74
(1) In first quarter fiscal 2003, D&K Healthcare Resources, Inc. implemented 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 No. 142, "Goodwill and Other Intangible Assets". The non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. associated with this accounting change recognized in the first quarter was $4.2 million net of tax, or $0.29 per diluted share. (2) In third quarter fiscal 2003, D&K Healthcare Resources, Inc. terminated an accounts receivable securitization program. One-time securitization termination costs recognized in the third quarter were $2.0 million pretax, $1.2 million net of tax, or $0.08 per diluted share. (3) EBITDA is defined as earnings before interest, taxes, depreciation, amortization and securitization termination costs. The company believes EBITDA is a relevant measure of financial performance. A reconciliation of EBITDA to income from operations as determined in accordance with generally accepted accounting principles appears in the supplemental information to the condensed consolidated statements of operations, included in the financial tables. Outlook D&K Healthcare management currently expects diluted EPS for the fourth quarter of fiscal 2003 to be within the range of $0.26 to $0.31 compared to $0.37 in the year-ago period. Full-year fiscal 2003 diluted EPS, including the cumulative effect of an accounting change related to the adoption of SFAS No.142 ($0.29 per diluted share) and one-time securitization termination costs ($0.08 per diluted share), are expected to be in the range of $0.63 to $0.68. Excluding the SFAS No. 142 charge and securitization termination costs, full year net EPS guidance is $1.00 to $1.05 per share. This range compares to the previous guidance range of $0.97 to $1.05. In fiscal year 2002 the company reported diluted EPS of $1.42. For the full year, the company targets sales of approximately $2.3 billion, net income of $14.7 to $15.4 million, excluding the cumulative effect of an accounting change related to the adoption of SFAS No. 142 and one-time securitization termination costs. Company Description D&K Healthcare Resources, Inc., is a leading wholesale distributor of pharmaceutical, healthcare and beauty aid products. Headquartered in St. Louis Louis, titular duke of Burgundy Louis, 1682–1712, titular duke of Burgundy; grandson of King Louis XIV of France. He became heir to the throne on the death (1711) of his father, Louis the Great Dauphin. , the company serves independent and regional pharmacy customers in 24 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, 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 Florida, state, United StatesFlorida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and , Kentucky Kentucky, state, United States Kentucky (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 Minnesota, state, United States Minnesota (mĭn'ĭsō`tə), upper midwestern state of the United States. It is bordered by Lake Superior and Wisconsin (E), Iowa (S), South Dakota and North Dakota (W), and the Canadian provinces 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. Q3 Conference Call Webcast Reminder Conference Call Webcast: Today, Monday Monday: see week. , April 28, 2003 at 10:00 a.m. ET Webcast and Replay: www.dkwd.com or www.companyboardroom.com (financial tables follow)
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
---------------------------------------------
(Unaudited)
% of % of
Mar. 31, Net Mar. 31, Net %
2003 Sales 2002 Sales Change
---------- ------- --------- ------- --------
Net sales $628,618 100.00% $695,241 100.00% -9.58%
Cost of sales 601,600 95.70% 664,894 95.64% -9.52%
---------- ---------
Gross profit 27,018 4.30% 30,347 4.36% -10.97%
Operating expenses 14,881 2.37% 14,672 2.11% 1.42%
---------- ---------
Income from operations 12,137 1.93% 15,675 2.25% -22.57%
Other income (expense):
Interest expense, net (2,765) -0.44% (2,847) -0.41% -2.88%
Securitization
termination costs (2,008) -0.33% - 0.00%
Other, net 3 0.00% (528) -0.08% -100.57%
---------- ---------
Pretax earnings 7,367 1.17% 12,300 1.77% -40.11%
Income tax provision (2,947) -0.47% (4,770) -0.69% -38.22%
Minority interest (185) -0.03% (228) -0.03% -18.86%
---------- ---------
Net income $4,235 0.67% $7,302 1.05% -42.00%
========== =========
Earnings per share -
basic $0.30 $0.51
Earnings per share -
diluted $0.29 $0.49
Basic common shares
outstanding 14,334 14,366
Diluted common shares
outstanding 14,459 14,775
Supplemental Information to the Condensed
Consolidated Statements of Operations
Three Months Ended
--------------------------
Mar. 31, Mar. 31,
2003 2002
-------- --------
Reconciliation of
non-GAAP financial
measurement:
Income from operations $12,137 $15,675
Depreciation and
amortization 632 1,072
Other income, net 3 (528)
-------- --------
EBITDA $12,772 $16,219
======== ========
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Nine Months Ended
-----------------------------------------------
(Unaudited)
% of % of
Mar. 31, Net Mar. 31, Net %
2003 Sales 2002 Sales Change
----------- ------- ----------- ------- -------
Net sales $1,693,427 100.00% $1,816,030 100.00% -6.75%
Cost of sales 1,624,134 95.91% 1,739,330 95.78% -6.62%
----------- -----------
Gross profit 69,293 4.09% 76,700 4.22% -9.66%
Operating expenses 41,931 2.48% 42,441 2.34% -1.20%
----------- -----------
Income from operations 27,362 1.62% 34,259 1.89% -20.13%
Other income (expense):
Interest expense, net (8,177) -0.48% (7,239) -0.40% 12.96%
Securitization
termination costs (2,008) -0.12% - 0.00% 0.00%
Other, net (34) 0.00% (737) -0.04% -95.39%
----------- -----------
Pretax earnings 17,143 1.01% 26,283 1.45% -34.78%
Income tax provision (6,857) -0.40% (10,140) -0.56% -32.38%
Minority interest (514) -0.03% (612) -0.03% -16.01%
----------- -----------
Income before
cumulative effect of
accounting change 9,772 0.58% 15,531 0.86% -37.08%
Cumulative effect of
accounting change, net (4,249) -0.25% - 0.00%
----------- -----------
Net income $5,523 0.33% $15,531 0.86% -64.44%
=========== ===========
Earnings per share -
basic
Net income before
cumulative effect of
accounting change $0.67 $1.09
Cumulative effect of
accounting change $(0.29) $-
----------- -----------
Net income $0.38 $1.09
Earnings per share -
diluted
Net income before
cumulative effect of
accounting change $0.66 $1.05
Cumulative effect of
accounting change $(0.29) $-
----------- -----------
Net income $0.37 $1.05
Basic common shares
outstanding 14,453 14,199
Diluted common shares
outstanding 14,632 14,655
Supplemental Information to the Condensed
Consolidated Statements of Operations
Nine Months Ended
----------------------------
Mar. 31, Mar. 31,
2003 2002
-------- --------
Reconciliation of
non-GAAP financial
measurement:
Income from operations $27,362 $34,259
Depreciation and
amortization 1,900 3,245
Other income, net (34) (737)
-------- --------
EBITDA $29,228 $36,767
======== ========
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Mar. 31, June 30,
(in thousands) 2003 2002
--------- ---------
(unaudited)
Assets
Cash $8,172 $11,754
Accounts receivable 145,426 31,217
Inventories 347,566 364,244
Other current assets 7,596 6,699
--------- ---------
Total current assets 508,760 413,914
Property and equipment, net 11,342 11,104
Deferred Income taxes - -
Other assets 12,654 5,024
Goodwill, net of accumulated amortization 44,105 51,131
Other intangible assets, net of accumulated
amortization 1,851 1,965
--------- ---------
Total assets $578,712 $483,138
========= =========
Liabilities and Stockholders' Equity
Accounts payable $203,875 $215,777
Current portion long-term debt 1,682 2,270
Other current liabilities 13,250 13,231
--------- ---------
Total current liabilities 218,807 231,278
Long-term liabilities 3,519 2,757
Long-term debt 188,882 81,457
Deferred Income taxes - 249
Stockholders' equity 167,504 167,397
--------- ---------
Total liabilities and stockholders' equity $578,712 $483,138
========= =========
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion