Onetime items work to benefit of Longs. (Business).
Net income for the 53-week fiscal 2002 reached $47.2 million, up 5.1% from the $44.9 million posted in the prior 52-week year. However, earnings were down 15.1% to $48.5 million from $57.1 million after excluding various onetime gains, credits, charges and losses that reduced after-tax income by a net of $1.35 million in fiscal 2002 and by $12.2 million in fiscal 2001.
Full-year sales grew 6.7% to $4.3 billion from $4.03 billion, with pharmacy accounting for 43.8% of total drug store volume compared with 41.1% a year ago. On a comparative 52-week basis same-store sales increased 4% over fiscal 2001, as pharmacy volume jumped 10.9% and front-end results declined 0.8%. Prescription drug sales reimbursed through third parties represented 89.5% of total pharmacy business in fiscal 2002, up from 88.1% in fiscal 2001.
In the 14-week fourth quarter net income surged 172.2% to $21.8 million from $8.01 million in the prior year's 13-week period. But a far different picture emerges when onetime items are deducted, with after-tax income receding 5.6% to $22.1 million from $23.4 million. Longs booked net after-tax charges of $360,000 and $15.4 million in the fiscal 2002 and 2001 periods, respectively.
Total sales for the quarter escalated 9% to $1.21 billion from $1.11 billion. Same-store volume on an equal 13-week basis edged up 1.4%, as a 2.2% drop at the front end diluted a 6.8% gain in pharmacy. Third-party transactions accounted for 90.6% of total prescription sales in the just-completed period, up from 88.4% a year ago. All told, pharmacy accounted for 41.9% of total drug store sales in the period, compared with 39.3% a year ago.
In addition to the impact of the aforementioned onetime items, fourth quarter bottom-line results benefited from $2.9 million in after-tax income from Longs' wholly owned RxAmerica pharmacy benefits management company (PBM), versus $600,000 in the fiscal 2001 period, when the PBM was a joint venture of Longs and Albertson's Inc.
Net income for the quarter was also bolstered by a reduction in Longs' effective tax rate, partially offset by an increase in the LIFO provision. On a pretax basis profits rose 152.2% to $33.1 million.
Over the full year RxAmerica delivered $4.3 million in after tax income, reversing a $300,000 loss in fiscal 2001. Bottom-line results also reflect the lower effective tax rate, partially offset by the higher LIFO provision. Pretax income edged forward 1.3% to $72.3 million.
Taking a closer look at the drug chain's operating results, gross margins fell 0.5 points over the year to 25.6% and were down 0.7 points in the fourth quarter to 25.8%. Among other factors, margins for both the year and quarter were adversely affected by higher LIFO provisions, while the measurement for the full year was further impacted by inventory liquidation costs related to the company's fiscal 2001 store closure plan, which was carried out in fiscal 2002.
Meanwhile, operating and administrative costs rose 0.2 points over the year and 0.4 points in the quarter to 23.5% of sales and 22.7%, respectively.
In addition to the inventory liquidation charge factored into gross margins, pretax operating results reflect various additional onetime items (all reflected in the combined after-tax charges detailed earlier), including:
* A $25.6 million charge in the fiscal 2001 quarter and year related to the aforementioned store closing plan. Longs booked $1.5 million in credits associated with the plan in the fiscal 2002 quarter and year.
* A $2.1 million charge related to legal settlements and disputes in the fiscal 2002 quarter and year. In fiscal 2001 the retailer benefited from a $6.83 million gain in that category.
* A $1.6 million pretax loss in fiscal 2001 on the partial sale of joint-venture assets.
Moving further down the income statement, bottom-line comparisons were aided by favorable trends in interest expenses and income. Interest costs declined 22.7% to $3.65 million in the quarter and were down 9.6% over the year to $15.5 million. Interest income was unchanged at $348,000 in the quarter but climbed 74.5% during the year to $1.46 million.
On the expansion front, Longs opened 10 stores during the fourth quarter, increasing the number of units opened or acquired during the full year to 25. The 437-unit chain plans to launch between 25 and 30 stores in fiscal 2003.
Looking ahead, management projects total sales growth in the first quarter of fiscal 2003 of 2% to 3%, with same-store volume advancing in the 1% to 2% range. Earnings per diluted share are projected at 26 to 30 cents, down from 31 cents a year ago.
Over the 52-week year Longs forecasts total sales to edge up in the 1% to 2% range from 53-week fiscal 2002.
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|Title Annotation:||Longs Drug Stores|
|Comment:||Onetime items work to benefit of Longs. (Business).(Longs Drug Stores )|
|Publication:||Chain Drug Review|
|Article Type:||Brief Article|
|Date:||Mar 18, 2002|
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