D&K Healthcare FY 2002 EPS Rise 41% to a Record $1.42
On a Record $2.45 Billion in Net Sales, a 49% Increase
ST. LOUIS--(BUSINESS WIRE)--Aug. 14,
2002-- Initiates FY 2003 Revenue and EPS Guidance and Reviews SFAS 142 Impact
D&K Healthcare Resources, Inc.
(NASDAQ: DKWD) today reported record fourth
quarter and full year net sales, earnings before interest, taxes, depreciation
and amortization (EBITDA), net income and diluted earnings per share for the
fiscal 2002 periods ended June 30, 2002. Summary Financial Results (in millions, except per share data, and adjusted for the 2-for-1 stock split effective April 12, 2002) ---------------------------------------------------------------------- Q4 '02 Q4 '01 Change FY '02 FY '01 Change ---------------------------------------------------------------------- Net Sales $ 637.7 $ 449.3 42% $ 2,453.7 $ 1,646.0 49% EBITDA $ 13.3 $ 8.1 64% $ 50.8 $ 30.3 68% Net Income $ 5.5 $ 2.6 111% $ 21.1 $ 9.1 130% Diluted EPS $ 0.37 $ 0.28 32% $ 1.42 $ 1.01 41% Diluted Shares 14,875 9,346 59% 14,678 9,132 61%
J. Hord
Armstrong, III, Chairman and Chief Executive Officer, commented, "Fueled by the
capital from our July 2001 follow-on equity offering and expanded credit
facilities, D&K again achieved new heights in fiscal 2002, surpassing every
performance goal set for each quarter and the full year. The wholesale
pharmaceutical distribution sector continues to play a highly valuable role
within the pharmaceutical supply chain, providing critical expertise,
infrastructure, efficiencies and value-added services to link manufacturers with
their customers. With positive long-term pharmaceutical demand trends, our
expanded capital base and our specialized distribution expertise, we believe
D&K is well positioned to support continued operating improvements in fiscal
2003."
Martin D. Wilson, President and
Chief Operating Officer, added, "D&K achieved substantial improvements
across both our independent and regional pharmacy and our national chain trade
classes. The independent and regional pharmacy trade class generated sales of
$283.4 million in the fourth quarter, an increase of $81.3 million, or 40.2%,
over the fourth quarter of last year, reflecting a mix of new customer wins and
internal growth within existing customers. Excluding revenue from our subsidiary
Diversified Healthcare, which we acquired in June 2001, our independent and
regional pharmacy trade class achieved growth of 23.2% in the year-to-year
fourth quarter comparisons and growth of 23.7% for all of fiscal 2002.
"D&K's national pharmacy chain
business achieved sales of $331.5 million in the fourth quarter, an increase of
50.1%, or $110.6 million, versus the year ago fourth quarter. This improvement
reflects our expertise and track record in providing specialized services to
manufacturers and selected national chains. We are also benefiting from industry
consolidation, causing both suppliers and national chains to establish
alternative supply relationships."
Mr. Wilson continued, "Consolidated
gross margin for the quarter totaled 4.10%, a four basis point improvement over
last year. Illustrating the growing economies of scale in D&K's business,
our operating margin for the quarter increased 28 basis points to 1.89%, up from
1.61% in the fourth quarter of fiscal 2001."
Thomas S. Hilton, Senior Vice
President and Chief Financial Officer, added, "D&K continued to benefit from
a combination of greater capital resources, excellent operational execution,
growing economies of scale and a favorable interest rate environment for another
record setting quarter and full year. Total weighted average borrowings
increased $49.8 million over the fourth quarter last year to $227.1 million
during the quarter, but were offset by a 260 basis point decline in weighted
average interest rates compared to the same period last year, substantially
accounting for the 15.9% decrease in net interest expense for the quarter."
D&K also announced that it has
increased its credit availability to $400 million from $300 million through two
facilities arranged by units of FleetBoston Financial. Fleet Capital has
provided a $200 million asset-based revolving facility, an increase of $50
million from the previous agreement. Additionally, Fleet Securities, Inc.'s
Asset Securitization Group structured and arranged a $200 million receivables
securitization facility, also representing an increase of $50 million from the
prior agreement. Both facilities will be used to fund working capital and will
expire in August of 2005.
Fiscal 2003 Revenue and Earnings
Guidance and Adoption of SFAS 142
Mr. Hilton continued, "Given the
strong industry and internal operating trends we expect to continue in fiscal
2003, we are providing initial guidance for FY 2003 of at least $2.8 billion in
net sales. With the continued competitive nature of our industry and the mix of
business that we anticipate for the upcoming year, we expect our gross margins
will approximate 4.1% for the year, allowing for some quarterly fluctuations.
Operating margin for fiscal 2003 should approach 2.0%, and we have budgeted a
modest increase in our effective interest rates, spread across the full year on
somewhat higher average borrowings.
"Accordingly, before one-time
charges related to the implementation of SFAS 142, we are projecting fiscal 2003
EPS of at least $1.75 and first quarter EPS of $0.30 to $0.31. Following our
traditional pattern, we expect approximately 60% of our earnings to be generated
in the second half of the year, which includes our seasonally strongest third
quarter."
Mr. Hilton added, "D&K has
adopted SFAS 142 concerning 'Goodwill and Other Intangible Assets,' effective
July 1, 2002, the start of our fiscal 2003 year. As a result of the related
impairment review currently underway, D&K anticipates it will record a
non-cash charge of approximately $7 million on a pre-tax basis, or $4.2 million,
or $0.28 per share, after tax, for the cumulative effect of the change in
accounting principle. The charge reflects impairment of goodwill related to the
June 1999 acquisition of Jewett Drug.
"Reflecting the expected impact of
the SFAS 142 impairment charge, D&K expects to report net earnings of
approximately $0.3 - $0.5 million for the first quarter of 2003, or
approximately $0.02 to $0.03 per share, compared with split adjusted earnings
per share of $0.25 in the first quarter of 2002. For the full fiscal 2003 year,
D&K expects to report net income per share of at least $1.47 after the
impairment charge. For comparison purposes, D&K's fiscal 2002 results
included goodwill amortization expense, net of taxes, totaling $1.2 million, or
$0.08 per share, for the full year, spread evenly across the quarters at $0.02
per share per quarter."
Certifications
In compliance with applicable law,
D&K's principal executive officer and principal financial officer will each
submit certifications with D&K's Annual Report on Form 10-K. Since D&K
has a June 30 fiscal year-end, its Annual Report on Form 10-K will be filed with
the SEC by September 30, 2002.
About D&K Healthcare Resources
With fiscal 2002 revenues of $2.45
billion, St. Louis-based D&K Healthcare Resources, Inc., is a wholesale
distributor of pharmaceutical and related healthcare and beauty aid products to
independent and regional pharmacies, national pharmacy chains and other
healthcare providers. D&K currently services customers in 24 states
primarily in the Midwest and South from distribution facilities in Cape
Girardeau, MO; Weston, FL; Lexington, KY; Minneapolis, MN; Aberdeen, SD; and
Owensboro, KY. D&K also offers a variety of additional services to its
customers, including inventory management, services designed to contain costs,
information technology systems and various marketing programs related to generic
pharmaceuticals and other products. In addition, D&K owns a 70% equity
interest in Pharmaceutical Buyers, Inc., a recognized alternate-site group
purchasing organization. D&K invites you to visit its Web site at http://www.dkwd.com.
Safe Harbor Provisions
This press release may contain
forward-looking statements within the meaning of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are inherently subject to risks and uncertainties. D&K'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, and D&K's customers and
suppliers generally having the right to terminate or reduce their purchases or
shipments on relatively short notice, the changing business and regulatory
environment of the healthcare industry in which D&K operates, changes in
interest rates and other factors set forth in reports and other documents filed
by D&K with the Securities and Exchange Commission from time to time.
D&K undertakes no obligation to publicly update or revise any
forward-looking statements.
Conference Call / Web Cast: Today,
Wednesday, August 14 at 3:30 p.m. EDT
Webcast and replay:
www.companyboardroom.com or www.dkwd.com/irevents.htm D&K HEALTHCARE RESOURCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended (Unaudited) --------------------------------------------------- June 30, % of June 30, % of % 2002 Net Sales 2001 Net Sales Change --------------------------------------------------- Net sales $ 637,718 100.00% $ 449,347 100.00% 41.9% Cost of sales 611,587 95.90% 431,112 95.94% 41.9% --------- --------- Gross profit 26,131 4.10% 18,235 4.06% 43.3% Operating expenses 14,051 2.20% 10,983 2.44% 27.9% --------- --------- Income from operations 12,080 1.89% 7,252 1.61% 66.6% Other income (expense): Interest expense, net (2,480) -0.39% (2,948) -0.66% -15.9% Other, net 28 0.00% 40 0.01% -30.0% --------- --------- Income before tax and minority interest 9,628 1.51% 4,344 0.97% 121.6% Income tax provision (3,973) -0.62% (1,719) 0.38% 131.1% Minority interest (126) -0.02% - --------- --------- Net income $ 5,529 0.87% $ 2,625 0.58% 110.6% ========= ========= EBITDA $ 13,288 2.08% $ 8,121 1.81% 63.6% Basic earnings per share* $ 0.38 $ 0.31 Diluted earnings $ 0.37 $ 0.28 per share* Basic common shares outstanding* 14,496 8,532 Diluted common shares outstanding* 14,875 9,346 * Shares and related EPS have been adjusted to reflect the 2-for-1 stock dividend effective April 12, 2002 D&K HEALTHCARE RESOURCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Twelve Months Ended --------------------------------------------------- June 30, % of June 30, % of % 2002 Net Sales 2001 Net Sales Change --------------------------------------------------- Net sales $ 2,453,748 100.00% $ 1,645,993 100.00% 49.1% Cost of sales 2,350,917 95.81% 1,577,169 95.82% 49.1% --------- --------- Gross profit 102,831 4.19% 68,824 4.18% 49.4% Operating expenses 56,492 2.30% 41,878 2.54% 34.9% --------- --------- Income from operations 46,339 1.89% 26,946 1.64% 72.0% Other income (expense): Interest expense, net (9,719) -0.40% (11,959) -0.73% -18.7% Other, net (710) -0.03% 44 0.00% N/M --------- --------- Income before tax and minority interest 35,910 1.46% 15,031 0.91% 138.9% Income tax provision (14,113) -0.58% (5,887) 0.36% 139.7% Minority interest (738) -0.03% - --------- --------- Net income $ 21,059 0.86% $ 9,144 0.56% 130.3% ========= ========= EBITDA $ 50,792 2.07% $ 30,324 1.84% 67.5% Basic earnings per share* $ 1.48 $ 1.08 Diluted earnings per share* $ 1.42 $ 1.01 Basic common shares outstanding* 14,247 8,478 Diluted common shares outstanding* 14,678 9,132 * Shares and related EPS have been adjusted to reflect the 2-for-1 stock dividend effective April 12, 2002 D&K HEALTHCARE RESOURCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 30, June 30, 2002 2001 ---- ---- Assets Cash $ 11,754 $ 7,516 Accounts receivable 31,217 45,131 Inventories 364,244 214,739 Other current assets 6,699 2,664 -------- -------- Total current assets 413,914 270,050 Property and equipment, net 11,104 9,703 Investment in PBI - 4,552 Other assets 58,120 45,899 -------- -------- Total assets $ 483,138 $ 330,204 ========= ========= Liabilities and Stockholders' Equity Accounts payable $ 215,777 $ 158,930 Current portion long-term debt 2,270 320 Other current liabilities 13,231 13,267 --------- --------- Total current liabilities 231,278 172,517 Long-term liabilities 2,757 2,300 Long-term debt 81,457 94,489 Deferred income taxes 249 3,388 Stockholders' equity 167,397 57,510 --------- --------- Total liabilities and stockholders' equity $ 483,138 $ 330,204 ========= =========
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