D&K Healthcare Resources Reports Third Quarter Fiscal 2004 Results.Business Editors/Health/Medical Writers ST. LOUIS--(BUSINESS WIRE)--April 21, 2004 D&K Healthcare Resources, Inc. (Nasdaq: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 $0.38 for the third quarter of fiscal 2004 in line with company's earnings forecast -- 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 increased 20 percent 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, excluding the Walsh Walsh has several meanings: Mathematics
acquisition -- Walsh acquisition integration proceeding on plan D&K Healthcare Resources, Inc. (Nasdaq:DKHR) today announced 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 2004, ending March 31, 2004, were $0.38 compared to $0.29 in the prior year's quarter. Net income was $5.4 million in the third quarter of fiscal 2004, compared to $4.2 million a year ago. During the third quarter, results benefited from the addition of Walsh HealthCare, acquired on December December: see month. 5, 2003, and strong organic sales growth in the independent and regional pharmacies trade class. 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 were at the high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. of the company's forecasted range of $0.35 to $0.40. For the first nine months of fiscal 2004 diluted EPS were $0.49, compared to $0.37 in fiscal 2003. Net income was $7.0 million for the first nine months of fiscal 2004 versus $5.5 million a year ago. "During the third quarter, D&K delivered strong sales growth in our core independent and regional pharmacies business," said J. Hord Armstrong, III, chairman and chief executive officer of D&K Healthcare Resources, Inc. "Our strategy of focusing on the independent and regional pharmacies trade class and our distinct capabilities to service this customer segment continue to prove successful. The Walsh HealthCare acquisition expands our market reach and furthers our customer service capabilities to this customer class. Our Walsh integration activities continue to move forward as planned. "The national accounts trade class performed as expected and will continue to become a smaller portion of our total company sales," added Armstrong. Third Quarter Highlights -- Net sales growth of 33 percent was driven by the Walsh HealthCare acquisition (sales of $201.1 million in the third quarter fiscal 2004) and strong organic sales growth in the independent and regional pharmacies trade class, partially offset by a decline in sales in the national accounts trade class and the other healthcare providers trade class. -- Net sales in the independent and regional pharmacies trade class, excluding Walsh HealthCare, increased 20 percent driven by new business wins, and improving regional and independent 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. sales trends in our service territory. -- The inventory balance at March 31, 2004 was $502.0 million, up 44 percent compared to the year ago balance, but down 21 percent compared to the December 31, 2003 balance. The higher inventory level compared to year ago reflects the Walsh acquisition. The sequential One after the other in some consecutive order such as by name or number. quarterly decline in inventory reflects the normal seasonal sell-down in inventory that occurs in the March quarter. -- 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, 2004 was $384.0 million reflecting the Walsh HealthCare acquisition completed on December 5, 2003. Net debt-to-total capital at March 31, 2004 stood at 67.8 percent, down from the December 31, 2003 level of 71.4 percent. Performance Review In the third quarter of fiscal 2004, D&K Healthcare net sales increased 32.7 percent to $833.9 million compared to $628.6 million a year ago, driven primarily by the Walsh acquisition and higher sales in the independent and regional pharmacy trade class, partially offset by a decline in sales in the national accounts trade class and the other healthcare providers trade class. Excluding Walsh, sales were comparable at $632.8 million versus $628.6 million in the year ago third quarter. A summary of net sales for the third-quarter and first nine months of fiscal 2004, including the Walsh acquisition, follows.
Net Sales Summary
(In Thousands)
----------------------------------------------------------------------
Third % Change First Nine % Change
Quarter vs. Months of vs.
of Third Fiscal First
Fiscal Quarter 2004 Nine
2004 Fiscal Months
2003 of
Fiscal
2003
----------------------------- --------- -------- ----------- ---------
Independent and Regional
Pharmacies(1) $541,023 +89.2% $1,257,332 +46.2%
National Accounts 261,197 -14.0 472,825 -34.9
-- Without fiscal 2003 sales
from single supplier(2) -- -- -- -26.5
Other Healthcare Providers(3) 28,850 -20.1 83,638 -15.5
PBI, Inc. 2,100 +6.1 6,697 +17.9
Software Services/Other 763 +5.1 2,934 +24.7
Total $833,933 +32.7 $1,823,426 +7.7
-- Without fiscal 2003 sales
from single supplier(2) -- -- -- +13.2
----------------------------- --------- -------- ----------- ---------
(1) Includes Walsh sales in the third quarter of fiscal 2004 of
$198,656.
(2) Excludes sales related to attractively priced purchase
opportunities from a single supplier in the first nine months of
fiscal 2003 of approximately $83,000.
(3) Includes Walsh sales in the third quarter of fiscal 2004 of
$2,475.
----------------------------------------------------------------------
Independent and Regional Pharmacies Net sales in the independent and regional pharmacies trade class increased 89.2 percent to $541.0 million in the fiscal 2004 third quarter, compared to the year-ago period. Excluding Walsh, revenues increased 19.7 percent to $342.4 million compared to the year ago third quarter. During the third quarter new account wins exceeded losses nearly 3-to-1. With the addition of Walsh HealthCare, D&K now operates seven full-service full-ser·vice adj. Associated with or offering complete service: full-service gasoline pumps; full-service banks. distribution centers and services markets in a 27-state region. National Accounts Changes in manufacturers' inventory management practices impacted the national accounts trade class during fiscal 2004. Changes in the timing of manufacturers' product price increases impacted this trade class in the second quarter fiscal 2004. Reflecting these changes, third quarter fiscal 2004 net sales in the national accounts trade class declined 14.0 percent to $261.2 million compared to last year's third quarter. As anticipated, sales in the national accounts trade class declined as a percent of D&K's total sales. In the third quarter of fiscal 2004, national accounts sales were 31 percent of total sales compared to 48 percent in the year ago quarter. Company-wide Performance D&K reported gross profit as a percent of sales, or gross margin, of 4.22 percent compared to last year's third quarter 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. The decline reflects competitive market pressures. Operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. increased to $21.4 million from $14.9 million in the year ago quarter, reflecting the addition of 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 1.65 percent from 1.93 percent in last year's third quarter reflecting the impact of lower gross profit margins and the addition of Walsh 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. . Net interest expense increased to $4.5 million compared to $2.8 million in the year-ago period, as average borrowings increased due to the Walsh acquisition, which was financed using our 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. Outlook Management currently expects diluted EPS for the fourth quarter of fiscal 2004 to be within the range of $0.08 to $0.13 compared to $0.29 in the fourth quarter of fiscal 2003. Sales for the fourth quarter of fiscal 2004 are expected to be in the range of $700 million to $750 million compared to $530.0 million in the year-ago period. The lower year over year earnings outlook results primarily from anticipated lower sales and earnings in the national accounts trade class. Given the results to-date and the range of anticipated fourth quarter results, full-year fiscal 2004 diluted EPS, excluding the impact of a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. legal settlement recognized in the second quarter of fiscal 2004, are expected to be in the range of $0.53 to $0.58. In fiscal year 2003, the company reported diluted EPS of $1.03, before the impact of one-time charges for an accounting change related to the adoption of 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 and the termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of the company's 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 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. program. These one-time charges reduced EPS by $0.38 and net income by $5.4 million. For the fiscal 2004 full year, the company targets sales of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.5 billion, compared to fiscal 2003 sales of $2.2 billion. Other News D&K expects to file a Form S-3 shelf registration statement with the Securities and Exchange Commission by the end of April 2004. The shelf registration statement will allow D&K to sell, from time to time in one or more offerings, up to $200 million of any combination of debt and equity securities described in the registration statement. At this time, D&K does not have plans to sell any of these securities. This press release shall not constitute an offer to sell or the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of an offer to buy any securities. 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 2004 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 5, 2004. Company Description D&K Healthcare Resources, Inc., which had fiscal 2003 sales of $2.2 billion, is a full-service 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 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. , 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 a 70% equity stake in 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 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. (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 %
2004 Sales 2003 Sales Change
-------- --------- -------- ------- ------
Net sales $833,933 100.00% $628,618 100.00% 32.7%
Cost of sales 798,756 95.78% 601,600 95.70% 32.8%
-------- --------
Gross profit 35,177 4.22% 27,018 4.30% 30.2%
Operating expenses 21,436 2.57% 14,881 2.37% 44.0%
-------- --------
Income from operations 13,741 1.65% 12,137 1.93% 13.2%
Other income (expense):
Interest expense, net (4,502) -0.54% (2,765) -0.44% 62.8%
Securitization
termination costs - (2,008)
Other, net (107) -0.01% 3 0.00% n/m
-------- --------
Pretax earnings 9,132 1.10% 7,367 1.17% 24.0%
Income tax provision (3,561) -0.43% (2,947) -0.47% 20.8%
Minority interest (167) -0.02% (185) -0.03% -9.7%
-------- --------
Income before cumulative
effect of accounting
change 5,404 0.65% 4,235 0.67% 27.6%
Cumulative effect of
accounting change, net - 0.00% - 0.00%
-------- --------
Net income (loss) $ 5,404 0.65% $ 4,235 0.67% 27.6%
======== ========
Earnings per share - basic
Net income before
cumulative effect of
accounting change $ 0.39 $ 0.30
Cumulative effect of
accounting change - -
-------- --------
Net income $ 0.39 $ 0.30
Earnings per share -
diluted
Net income before
cumulative effect of
accounting change $ 0.38 $ 0.29
Cumulative effect of
accounting change - -
-------- --------
Net income $ 0.38 $ 0.29
Basic common shares
outstanding 13,928 14,334
Diluted common shares
outstanding 14,108 14,459
Supplemental Information to the Condensed Consolidated
Statements of Operations
(In thousands)
Three Months Ended
----------------------------
Mar. 31, 2004 Mar. 31, 2003
Reconciliation of non-GAAP financial
measurement:
Income from operations $13,741 $12,137
Depreciation and amortization 1,407 632
Other income, net (107) 3
------------- -------------
EBITDA $15,041 $12,772
============= =============
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 %
2004 Sales 2003 Sales Change
---------- -------- ---------- ------- -------
Net sales $1,823,426 100.00% $1,693,427 100.00% 7.7%
Cost of sales 1,750,706 96.01% 1,624,134 95.91% 7.8%
---------- ----------
Gross profit 72,720 3.99% 69,293 4.09% 4.9%
Operating expenses 50,471 2.77% 41,931 2.48% 20.4%
---------- ----------
Income from
operations 22,249 1.22% 27,362 1.62% -18.7%
Other income
(expense):
Interest expense,
net (9,980) -0.55% (8,178) -0.48% 22.0%
Securitization
termination costs (2,008)
Other, net 224 0.01% (33) 0.00% n/m
---------- ----------
Pretax earnings 12,493 0.69% 17,143 1.01% -27.1%
Income tax provision (4,872) -0.27% (6,857) -0.40% -28.9%
Minority interest (573) -0.03% (514) -0.03% 11.5%
---------- ----------
Income before
cumulative effect of
accounting change 7,048 0.39% 9,772 0.58% -27.9%
Cumulative effect of
accounting change,
net - 0.00% (4,249) -0.25% -100.0%
---------- ----------
Net income (loss) $ 7,048 0.39% $ 5,523 0.33% 27.6%
========== ==========
Earnings per share -
basic
Net income before
cumulative effect of
accounting change $ 0.51 $ 0.67
Cumulative effect of
accounting change - (0.29)
---------- ----------
Net income $ 0.51 $ 0.38
Earnings per share -
diluted
Net income before
cumulative effect of
accounting change $ 0.49 $ 0.66
Cumulative effect of
accounting change - (0.29)
---------- ----------
Net income $ 0.49 $ 0.37
Basic common shares
outstanding 13,937 14,453
Diluted common shares
outstanding 14,144 14,632
Supplemental Information to the Condensed Consolidated
Statements of Operations
(In thousands)
Nine Months Ended
----------------------------
Mar. 31, 2004 Mar. 31, 2003
Reconciliation of non-GAAP financial
measurement:
Income from operations $22,249 $27,362
Depreciation and amortization 2,722 1,900
Other income, net 224 (33)
-------------- -------------
EBITDA $25,195 $29,229
============== =============
D&K HEALTHCARE RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Mar. 31, June 30,
(in thousands) 2004 2003
----------- ----------
(unaudited)
Assets
Cash $ 12,208 $ 14,301
Accounts receivable 186,495 122,982
Inventories 502,008 257,984
Other current assets 26,848 8,862
----------- ----------
Total current assets 727,559 404,129
Property and equipment, net 23,473 11,140
Other assets 14,992 11,511
Goodwill, net of accumulated amortization 63,416 44,105
Other intangible assets, net of accumulated
amortization 6,722 1,810
----------- ----------
Total assets $ 836,162 $ 472,695
=========== ==========
Liabilities and Stockholders' Equity
Accounts payable $ 245,901 $ 173,342
Current portion long-term debt 819 1,677
Other current liabilities 22,306 13,471
----------- ----------
Total current liabilities 269,026 188,490
Long-term liabilities 3,552 3,703
Long-term debt 384,017 110,423
Deferred income taxes 3,089 -
Stockholders' equity 176,478 170,079
----------- ----------
Total liabilities and stockholders' equity $ 836,162 $ 472,695
=========== ==========
D&K HEALTHCARE RESOURCES, INC.
EARNINGS PER SHARE RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Three-Months ended Three-Months ended
March 31, 2004 March 31, 2003
------------------------ ------------------------
Income Shares Per Income Shares Per
(Nume- (Denomi- Share (Nume- (Denomi- Share
rator) nator)(1) Amount rator) nator)(1) Amount
------- --------- ------ ------- --------- ------
Basic Earnings per
Share:
Net income available
to common
stockholders $5,404 13,928 $0.39 $4,235 14,334 $0.30
Effect of Diluted
Securities:
Options and warrants - 180 - 125
Convertible PBI
securities (30) - (47) -
------- --------- ------- ---------
Diluted Earnings per
Share:
Net income available
to common
stockholders plus
assumed conversions $5,374 14,108 $0.38 $4,188 14,459 $0.29
======= ========= ======= =========
Nine-Months ended Nine-Months ended
March 31, 2004 March 31, 2003
------------------------ ------------------------
Income Shares Per Income Shares Per
(Nume- (Denomi- Share (Nume- (Denomi- Share
rator) nator)(1) Amount rator) nator)(1) Amount
------- --------- ------ ------- --------- ------
Basic Earnings per
Share:
Net income available
to common
shareholders before
cumulative effect of
accounting change $7,048 13,937 $0.51 $9,772 14,453 $0.67
Cumulative Effect of
Accounting Change,
net - - - (4,249) - (0.29)
------- --------- ------ ------- --------- ------
7,048 13,937 0.51 5,523 14,453 0.38
Effect of Diluted
Securities:
Options and warrants - 207 - 179
Convertible PBI
securities (147) - (128) -
------- --------- ------- ---------
Diluted Earnings per
Share:
Net income available
to common
stockholders plus
assumed conversions $6,901 14,144 $0.49 $5,395 14,632 $0.37
======= ========= ======= =========
(1) Outstanding shares computed on a weighted average basis
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