-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NbW663G7UKp7pXwdOs/ZLcrQr1pEas1lm508440INmVkFnHJAegy83ThRuNrNovx sfdksTDbJ6XTIQMNU6cimw== 0000950131-01-501106.txt : 20010504 0000950131-01-501106.hdr.sgml : 20010504 ACCESSION NUMBER: 0000950131-01-501106 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: D & K HEALTHCARE RESOURCES INC CENTRAL INDEX KEY: 0000888914 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 431465483 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20348 FILM NUMBER: 1621528 BUSINESS ADDRESS: STREET 1: 8000 MARYLAND AVENUE STREET 2: SUITE 920 CITY: ST. LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3147273485 MAIL ADDRESS: STREET 1: 8000 MARYLAND AVENUE STREET 2: SUITE 920 CITY: ST. LOUIS STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: D & K WHOLESALE DRUG INC/DE/ DATE OF NAME CHANGE: 19930328 10-Q 1 d10q.txt FORM 10-Q Page 1 of 17 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File No. 0-20348 D & K HEALTHCARE RESOURCES, INC. (Exact name of registrant as specified in its charter) DELAWARE 43-1465483 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 8000 MARYLAND AVENUE, SUITE 920, ST. LOUIS, MISSOURI (Address of principal executive offices) 63105 (Zip Code) (314) 727-3485 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ______X______YES ____________NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value 4,281,631 ---------------------------- ------------- (class) (May 1, 2001) Page 2 of 17 D & K HEALTHCARE RESOURCES, INC. AND SUBSIDIARIES Index Page No. --------- Part I. Financial Information --------------------- Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 2001 and June 30, 2000 3 Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended March 31, 2001 and March 31, 2000 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2001 and March 31, 2000 5 Notes to Condensed Consolidated Financial Statements 6 - 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 - 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 Part II. Other Information ------------------ Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 15 Page 3 of 17 Part I. Financial Information Item 1. Financial Statements. D & K HEALTHCARE RESOURCES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands)
Assets March 31, June 30, 2001 2000 --------------- ------------ (Unaudited) Cash $4,160 $3,661 Receivables 65,456 29,923 Inventories 176,765 202,467 Other current assets 1,235 1,443 --------------- ------------ Total current assets 247,616 237,494 --------------- ------------ Net property and equipment 9,432 8,184 Investment in affiliates 5,175 5,199 Other assets 924 1,026 Intangible assets 41,625 42,516 -------------- ------------ Total assets $304,772 $294,419 ============== =========== Liabilities and Stockholders' Equity Current maturities of long-term debt $312 $305 Accounts payable 143,005 134,834 Accrued expenses 10,446 8,799 -------------- ------------ Total current liabilities 153,763 143,938 -------------- ------------ Long-term liabilities 1,046 700 Revolving line of credit 91,543 97,990 Long-term debt, excluding current maturities 1,399 1,657 Deferred income taxes 4,869 4,869 -------------- ------------ Total liabilities 252,620 249,154 -------------- ------------ Stockholders' equity: Common stock 46 45 Paid-in capital 30,808 30,334 Retained earnings 26,845 20,433 Less treasury stock (5,547) (5,547) -------------- ------------ Total stockholders' equity 52,152 45,265 -------------- ------------ Total liabilities and stockholders' equity $304,772 $294,419 ============== ===========
See notes to condensed consolidated financial statements. Page 4 of 17 D & K HEALTHCARE RESOURCES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except share and per share data)
Three Months Ended Nine Months Ended March 31, March 31, March 31, March 31, 2001 2000 2001 2000 --------- --------- --------- --------- Net sales $490,469 $427,236 $1,196,646 $1,087,699 Cost of sales 469,896 411,777 1,146,057 1,047,249 -------- -------- ----------- ---------- Gross profit 20,573 15,459 50,589 40,450 Operating expenses 11,740 8,914 30,895 24,565 -------- -------- ----------- ---------- Income from operations 8,833 6,545 19,694 15,885 Other income (expense): Interest expense, net (3,325) (2,554) (9,011) (6,713) Other, net (262) 234 4 549 -------- -------- ----------- ---------- (3,587) (2,320) (9,007) (6,164) -------- -------- ----------- ---------- Income before income tax provision 5,246 4,225 10,687 9,721 Income tax provision 2,046 1,627 4,168 3,743 -------- -------- ----------- ---------- Net income $ 3,200 $ 2,598 $ 6,519 $ 5,978 ======== ======== =========== ========== Earnings per common share: Basic earnings per share $0.76 $0.63 $1.55 $1.42 Diluted earnings per share $0.70 $0.59 $1.46 $1.33 Basic common shares outstanding 4,238,473 4,163,481 4,215,861 4,264,921 Diluted common shares outstanding 4,595,990 4,470,022 4,515,896 4,591,125
See notes to condensed consolidated financial statements. Page 5 of 17 D & K HEALTHCARE RESOURCES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Nine Months Ended March 31, March 31, 2001 2000 --------- --------- Cash flows from operating activities: Net income $ 6,519 $ 5,978 Adjustments to reconcile net income to net cash flows from operating activities: Amortization of debt issuance costs 822 568 Depreciation and amortization 2,509 2,277 Equity in net income of PBI (426) (476) Changes in operating assets and liabilities: Increase in accounts receivable, net (35,533) (38,788) Decrease (Increase) in inventories 25,702 (64,355) Decrease (Increase) in other current assets 382 (58) Increase in accounts payable 8,171 71,685 Increase in accrued expenses 1,647 5,246 Other, net 55 (434) --------- --------- Cash flows from operating activities 9,848 (18,357) Cash flows from investing activities: Cash invested in affiliate (500) (750) Cash dividend from affilitates 450 350 Proceeds from sale of fixed assets 0 9 Purchases of property and equipment (2,366) (2,043) --------- --------- Cash flows from investing activities (2,416) (2,434) Cash flows from financing activities: Borrowings under revolving line of credit 469,939 353,780 Repayments under revolving line of credit (476,386) (325,173) Principal payments on long-term debt (251) (371) Proceeds from exercise of stock options 475 268 Purchase of treasury stock 0 (4,603) Debt issuance costs (710) (649) --------- --------- Cash flows from financing activities (6,933) 23,252 Increase in cash 499 2,461 Cash, beginning of period 3,661 708 --------- --------- Cash, end of period $ 4,160 $ 3,169 ========= ========= Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 9,344 $ 6,137 Income taxes 4,544 1,853
See notes to condensed consolidated financial statements. D & K HEALTHCARE RESOURCES, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. The Company is a full-service, regional wholesale drug distributor, supplying customers from facilities in Missouri, Florida, Kentucky, Minnesota, and South Dakota. The Company distributes a broad range of pharmaceuticals and related products to its customers in more than 24 states primarily in the Midwest and South. The Company also develops and markets sophisticated pharmacy systems software through two wholly owned subsidiaries, Tykon, Inc., and Viking Computer Services. In addition, the Company owns a 50% equity interest in Pharmaceutical Buyers, Inc. (PBI), a leading alternate site group purchasing organization. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by generally accepted accounting principles for interim reporting, which are less than those required for annual reporting. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair representation have been included. The results of operations for the three-month and nine-month periods ended March 31, 2001 are not necessarily indicative of the results to be expected for the full fiscal year. In the fourth quarter of the fiscal year ended June 30, 2000, the Company changed its method of determining the cost of inventories to the first-in, first-out method from the last-in, first-out method. Accordingly, previously reported figures have been restated to reflect the effect of the accounting change. Certain reclassifications have been made to the prior period's financial statements to conform to the current year presentation. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company's 2000 Annual Report to Stockholders. Note 2. Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128), requires the computation of basic and diluted earnings per share. Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share are computed using the component mentioned above for the basic computation with the addition of: (1) the dilutive effect of outstanding stock options and warrants (calculated using the treasury stock method); and (2) common shares issuable upon conversion of certain convertible PBI stock. The diluted computation for the three-month and nine-month periods ended March 31, 2001 adds to income the earnings that would be included in the Company's consolidated net income for the periods as if the Page 7 of 17 convertible PBI stock had been converted to the Company's common stock at the beginning of the period. The reconciliation of the numerator and denominator of the basic and diluted earnings per common share computations is as follows: (in thousands except per share amounts)
Quarter Ended March 31, 2001 Quarter Ended March 31, 2000 ------------------------------------------------- -------------------------------------------------- Per- Per- Income Shares Share Income Shares Share (Numerator) (Denominator)(1) Amount (Numerator) (Denominator)(1) Amount ------------ --------------- ------------ ------------ --------------- ------------ Basic Earnings Per Share: Net income available to common stockholders $3,200 4,238 $0.76 $2,598 4,163 $0.63 Effect of Dilutive Securities: Options and warrants 158 107 Convertible PBI stock 2 200 43 200 ------------ --------------- ------------ --------------- Diluted EPS: Net Income available to common stockholders plus assumed conversions $3,202 4,596 $0.70 $2,641 4,470 $0.59 ------------ --------------- ------------ ------------ --------------- ------------ Nine-Months Ended March 31, 2001 Nine-Months Ended March 31, 2000 ------------------------------------------------- -------------------------------------------------- Income Shares Per-Share Income Shares Per-Share (Numerator) (Denominator)(1) Amount (Numerator) (Denominator)(1) Amount ------------ --------------- ------------ ------------ --------------- ------------ Basic Earnings Per Share: Net income available to common stockholders $6,519 4,216 $1.55 $5,978 4,265 $1.42 Effect of Dilutive Securities: Options and warrants 100 126 Convertible PBI stock 94 200 105 200 ------------ --------------- ------------ --------------- Diluted EPS: Net Income available to common stockholders plus assumed conversions $6,613 4,516 $1.46 $6,083 4,591 $1.33 ------------ --------------- ------------ ------------ --------------- ------------
(1) - Outstanding shares computed on a weighted average basis Note 3. In August 1998, the Company, through a bankruptcy remote subsidiary, D & K Receivables Corp. ("D&KRC"), entered into a sales agreement that provided the Company with a three-year revolving accounts receivable securitization facility (the "Securitization"). Under this facility and pursuant to a purchase and contribution agreement between the Company and D&KRC, the Company sells to D&KRC, on a non-recourse basis, all rights and interests in its accounts receivable. Pursuant to the receivables purchase agreement, D&KRC in turn sells certain interests in the accounts receivable pool owned by D&KRC under similar terms to a third party purchaser. At March 31, 2001, the maximum allowable amount of receivables eligible to be sold was $117 million. The amount available at any settlement date varies based upon the level of eligible receivables. Under this agreement, $117 million of accounts receivable were sold as of March 31, 2001. This sale is Page 8 of 17 reflected as a reduction in accounts receivable in the accompanying condensed consolidated balance sheets and as operating cash flows in the accompanying condensed consolidated statements of cash flows for the nine-month period ended March 31, 2001. Accordingly, the Company's trade accounts receivable and long-term debt at March 31, 2001 are net of $117 million, which represent accounts receivable that were sold under the Securitization. The Securitization bears interest based on 30-day commercial paper rates plus program and liquidity fees of 0.71%. In addition, the Company has a revolving line of credit that, as of June 30, 2000, provided a maximum borrowing capacity of $120 million based upon eligible inventories. The advances currently bear interest at the daily LIBOR plus 2.25%. The Company also has the option to pay interest on the obligation at prime plus .25% per annum. Effective September 30, 2000, the Company executed a one-year extension, to August 2002, of its revolving credit facility and increased availability under the facility to $130 million year round. The facility had been capped at $95 million with a $25 million seasonal overline. On May 4, 2000, the Company fixed $20 million of the revolving line of credit at a nominal rate of 7.30%, expiring in August 2001. In October 2000, this arrangement was renegotiated to a rate of 6.99% with a termination date of August 2002 and was again renegotiated in April 2001 to a rate of 6.19% with a termination date of August 2005. The Company also has an interest rate collar agreement, whereby the LIBOR on $10 million of the outstanding revolving line of credit balance shall not exceed 6.75%. If the LIBOR is less than 5.25%, then the LIBOR rate on $7.5 million of the outstanding revolving line of credit balance shall not be less than 5.25%. In addition, the Company has an additional interest rate collar agreement on $40 million of the outstanding revolving line of credit, whereby the LIBOR shall not exceed 6.85% nor be less than 4.93%. At March 31, 2001, the LIBOR was 5.08%. Both of these agreements expire in August 2001. In October 2000, a $50 million interest rate cap agreement was executed with the LIBOR rate capped at 7.25%. This agreement is for the period August 2001 through August 2002. Note 4. The Company accounts for its 50% investment in PBI under the equity method. Equity income is recorded net, after reduction of goodwill amortization based on the excess of the amount paid for its interest in PBI over the fair value of PBI's underlying net assets at the date of the original investment. The Company's equity in the net income of PBI totaled $61,337 and $197,000 for the three-month periods ended March 31, 2001 and March 31, 2000, respectively ($130,000 and $266,000, respectively, before goodwill amortization). The Company's equity in the net income of PBI totaled $426,000 and $476,000 for the nine-month periods ended March 31, 2001 and March 31, 2000, respectively ($633,000 and $683,000, respectively, before goodwill amortization). Page 9 of 17 Certain other shareholders of PBI have the option to exchange their combined 20% ownership interests in PBI for a fixed number of shares of the Company's common stock under the terms of the original purchase agreement. Those options, which have been determined to be dilutive at March 31, 2001, are included in the reconciliation of the basic and diluted earnings per share computation in Note 2 above. Note 5. Pursuant to Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information", the Company has three identifiable business segments, only one of which, wholesale drug distribution, meets the quantitative thresholds for separate disclosure prescribed in SFAS No. 131. This segment is described in Note 1. The Company's equity investment in PBI (see Note 4) is a second segment. Two wholly owned software subsidiaries, VC Services, Inc. (dba Viking Computer Services, Inc.) and Tykon, Inc. constitute the third segment. Viking markets a pharmacy management software system and Tykon developed and markets a proprietary PC-based order entry/order confirmation system to the drug distribution industry. These two segments are combined as Other in the table below. Though the wholesale drug distribution segment operates from several different facilities, the nature of its products and services, the types of customers and the methods used to distribute its products are similar and thus they have been aggregated for presentation purposes. The Company operates principally in the United States. Intersegment sales have been recorded at amounts approximating market. Page 10 of 17
For the three months ended For the nine months ended (in thousands) March 31, March 31, March 31, March 31, 2001 2000 2001 2000 --------- --------- ---------- ---------- Sales to unaffiliated customers - Wholesale drug distribution $489,666 $426,524 $1,194,111 $1,085,466 Other 803 712 2,535 2,233 -------- -------- ---------- ---------- Total $490,469 $427,236 $1,196,646 $1,087,699 Intersegment sales - Wholesale drug distribution $ - $ - $ - $ - Other 250 65 652 221 Intersegment eliminations (250) (65) (652) (221) -------- -------- ---------- ---------- Total $ - $ - $ - $ - Net Sales - Wholesale drug distribution $489,666 $426,524 $1,194,111 $1,085,466 Other 1,053 777 3,187 2,454 Intersegment eliminations (250) (65) (652) (221) -------- -------- ---------- ---------- Total $490,469 $427,236 $1,196,646 $1,087,699 Gross Profit - Wholesale drug distribution $ 20,119 $ 14,809 $ 49,139 $ 38,480 Other 454 650 1,450 1,970 -------- -------- ---------- ---------- Total $ 20,573 $ 15,459 $ 50,589 $ 40,450 Pre-tax income (loss) Wholesale drug distribution $ 5,216 $ 3,841 $ 10,186 $ 8,599 Other 30 384 501 1,122 -------- -------- ---------- ---------- Total $ 5,246 $ 4,225 $ 10,687 $ 9,721
There has been no material change in total assets from the amount disclosed in the last annual report. There are no differences from the last annual report in the basis of segmentation or in the basis of measurement of segment profit or loss. Note 6. In June, 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which we were required to adopt beginning on July 1, 2000. The adoption of this standard did not have a material impact on us. The Financial Accounting Standards Board has proposed a new accounting standard, "Business Combinations and Intangible Assets-Accounting for Goodwill." The proposed standard has not been finalized. The Company anticipates that the standard will be adopted either in its present form or in a modified form early in its next fiscal year. Under the proposal, the Company and other companies would no longer be required or permitted to amortize goodwill reflected on its balance sheet. The Company would, however, be required to evaluate goodwill reflected on its balance sheet to determine whether the goodwill is impaired under the guidelines of the proposed standard. If the Company determines that the goodwill is impaired, the Company would be required to write- off a portion of the goodwill. As of March 31, 2001, the Company had approximately $42.0 million of goodwill on its balance sheet. Page 11 of 17 D & K HEALTHCARE RESOURCES, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The discussion below is concerned with material changes in financial condition and results of operations in the condensed consolidated balance sheets as of March 31, 2001 and June 30, 2000, and in the condensed consolidated statements of operations for the three-month and nine-month periods ended March 31, 2001 and March 31, 2000. The Company recommends that this discussion be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's 2000 Annual Report to Stockholders. In the fourth quarter of the fiscal year ended June 30, 2000, the Company changed its method of determining the cost of inventories to the first-in, first-out method from the last-in, first-out method. Accordingly, previously reported figures have been restated to reflect the effect of the accounting change. Forward Looking Statements Certain statements in this document regarding future events, prospects, projections or financial performance are forward looking statements. Such forward looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and may also be identified by words such as "anticipates," "believes," "estimates," "expects," "intends" and similar expressions. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in or suggested by such forward looking statements. These risks and uncertainties include the Company's ability to compete in a competitive industry, with many competitors having substantially greater resources than the Company and the Company's customers generally having the right to terminate their contracts with the Company or reduce purchasing levels on relatively short notice without penalty, changes in interest rates, the Company's ability to maintain or improve its operating margin with the industry's competitive pricing pressures, the changing business and regulatory environment, including possible changes in reimbursement for healthcare products and in manufacturers' pricing or distribution policies, the continued availability of investment buying opportunities, the loss of one or more key suppliers for which alternative sources may not be available, and the ability to integrate recently acquired businesses. Readers are cautioned not to place undue reliance on these forward-looking statements that reflect the Company's views as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statements. Results of Operations: --------------------- Net Sales Net sales increased $63.2 million to $490.5 million, or 14.8%, for the quarter ended March 31, 2001, compared to the corresponding period of the Page 12 of 17 prior year. Sales growth was primarily to the independent and regional pharmacy trade and the national pharmacy chain groups. Sales to independent and regional pharmacies increased $30.9 million to $189.4 million, as a result of the net increase in sales to existing customers and the addition of new customers. National pharmacy chain sales increased $139.5 million to $273.5 million, over the third quarter of fiscal 2000 due to infrastructure investments and a focused effort on this trade class. Sales to healthcare providers decreased $106.9 million to $27.1 million, as a result of the loss of two mail order customers during the fourth quarter of fiscal 2000. Net sales increased $108.9 million to $1.2 billion, or 10.0% for the nine months ended March 31, 2001, compared to the corresponding period of the prior year. Sales growth was primarily in the independent and regional pharmacy and national pharmacy chain groups. Sales to independent and regional pharmacies increased $69.5 million to $546.3 million, or 14.6%, as a result of the net increase in sales to existing customers and the addition of new customers. National pharmacy chain sales increased $324.7 million to $575.7 million, or 129.3%, over the first nine months of fiscal 2000 due to infrastructure investments and a focused effort on this trade class, while sales to healthcare providers decreased $285.3 million to $72.6 million, or 79.7%, as a result of the loss of two mail order customers during the fourth quarter of fiscal 2000. In addition, the quarter and nine months ended March 31, 2001 contained $34.4 million and $73.2 million, respectively, in "dock-to- dock" sales, which are not included in net sales due to the Company's accounting policy of recording only the commission on such transactions as a reduction to cost of sales in its consolidated statements of operations. "Dock-to-dock" sales were $9.7 million and $35.4 million, respectively, for the quarter and nine months ended March 31, 2000. Gross Profit Gross profit increased 33.1% to $20.6 million for the quarter ended March 31, 2001, compared to the corresponding period of the prior year. As a percentage of net sales, gross margin increased from 3.62% to 4.19% for the quarter ended March 31, 2001, compared to the corresponding period of the prior year. The increase in gross margin percentage was due to the discontinuance of lower gross margin percentage business from the mail order customers mentioned above. Gross profit increased 25.1% to $50.6 million for the nine months ended March 31, 2001, compared to the corresponding period of the prior year. As a percentage of net sales, gross margin increased from 3.72% to 4.23% for the nine months ended March 31, 2001, compared to the corresponding period of the prior year. The increase in gross margin percentage was due to sales mix as a result of the discontinuance of lower gross margin percentage business from the mail order customers mentioned above. Page 13 of 17 Operating Expenses Operating expenses increased $2.8 million to $11.7 million, or 31.7%, for the quarter and increased $6.3 million, or 25.8%, to $30.9 million for the nine months ended March 31, 2001 compared to the corresponding periods of the prior year. The ratio of operating expenses to net sales for the quarter increased to 2.39% from 2.09% while the ratio for the first nine months of fiscal 2001 was 2.58%, a 32 basis point increase from the comparable period of the prior year. The increase in operating expenses and the ratio of operating expenses to net sales for the quarter and nine-month period ended March 31, 2001 resulted primarily from a shift in sales mix to accounts requiring a higher level of service and related expense. Interest Expense, Net Net interest expense increased $0.8 million to $3.3 million, or 30.2%, for the quarter and increased $2.3 million to $9.0 million, or 34.2% for the nine months ended March 31, 2001, compared to the corresponding periods of the prior year. Weighted average borrowings for the quarter (including receivables sold under the Securtization) were $186 million with a weighted average interest rate of 7.04% compared to $139 million and 7.27% for the same quarter of the prior year. For the nine months ended March 31, 2001, weighted average borrowings increased from $109 million to $155 million and weighted average interest rates increased from 6.94% to 8.64% compared to the nine months ended March 31, 2000. Income Tax Provision The Company's effective income tax rate of 39% is the rate expected to be applicable for the full fiscal year ending June 30, 2001. This rate was different from the statutory blended federal and state rates primarily because of the amortization of intangible assets that are not deductible for federal and state income tax purposes. The effective rate is slightly higher than the corresponding period of last year due to the impact of the sales mix on the blended state income tax rate. Financial Condition: ------------------- Liquidity and Capital Resources The Company's working capital requirements are generally met through a combination of internally generated funds, borrowings under its revolving line of credit and the Securitization facility, and trade credit from its suppliers. The following measures are utilized by the Company as key indicators of the Company's liquidity and working capital management:
March 31, June 30, 2001 2000 --------- -------- Working capital (000's) $93,853 $93,556 Current ratio 1.61 to 1 1.65 to 1
Page 14 of 17 Working capital and current ratio at March 31, 2001 are consistent with June 30, 2000 levels. Increases in accounts receivable related to seasonal sales patterns and growth have been offset by inventory decreases and accounts payable increases tied to timing of inventory receipts and related payments. The Company invested $2,366,000 in capital assets in the nine-month period ended March 31, 2001, as compared to $2,043,000 in the corresponding period in the prior year. The 2001 expenditures were primarily related to the new Enterprise Resource Planning computer system being implemented during fiscal 2001. This system integrates sales order management, inventory management, transportation management, customer service, accounts payable, accounts receivable, general ledger and financial reporting. The Company believes that continuing investment in capital assets is necessary to achieve its goal of improving operational efficiency, thereby enhancing its productivity and profitability. Cash outflows from financing activities totaled $6.9 million for the nine-month period ended March 31, 2001 as compared to cash inflows of $23.3 million for the corresponding period in the prior year. During the current year, the Securtization increased which made available funds for repayment of the revolving credit facility. During the previous year, the inflows were associated with borrowings under the revolving credit facilities utilized to finance inventory builds. Effective September 30, 2000, the Company executed a one-year extension, to August 2002, of its revolving credit facility and increased availability under the facility to $130 million year round. The facility had been capped at $95 million with a $25 million seasonal overline. In addition, at March 31, 2001, the Securitization provided a maximum capacity of $117.0 million. At March 31, 2001, $117.0 million was utilized. The Company has begun negotiations to increase the Securitization and the revolving credit facility to $150 million each and to extend their terms to August 2005. Management believes that, together with internally generated funds, the Company's available capital resources will be sufficient to meet its foreseeable capital requirements. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's primary exposure to market risk consists of changes in interest rates on borrowings. An increase in interest rates would adversely affect the operating results and the cash flow available to fund operations and expansion. Based on the average variable borrowings, a change of 25 basis points in the average variable borrowing rate would result in a change of approximately $0.4 million in annual interest expense. The recent reduction in interest rates should have a positive impact on the Company's short-term interest expense. The Company continually monitors this risk and reviews the potential benefits of entering into hedging transactions, such as interest rate collar agreements, to mitigate the exposure to interest rate fluctuations. At March 31, 2001, the Company had several arrangements as disclosed in Note 3. Page 15 of 17 D & K HEALTHCARE RESOURCES, INC. AND SUBSIDIARIES Part II. Other Information - ------- ----------------- Item 4. Submission of Matters to a Vote of Security Holders None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index on page 17. (b) Reports on Form 8-K None Page 16 of 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. D & K HEALTHCARE RESOURCES, INC. Date: April 30, 2001 By: /s/ J. Hord Armstrong, III -------------- -------------------------- J. Hord Armstrong, III Chairman of the Board and Chief Executive Officer By: /s/ Thomas S. Hilton -------------------------- Thomas S. Hilton Senior Vice President Chief Financial Officer (Principal Financial & Accounting Officer) Page 17 of 17 EXHIBIT INDEX ------------- Exhibit No. Description - ---------- ----------- 3.1* Restated Certificate of Incorporation, filed as an exhibit to registrant's Registration Statement on Form S-1 (Reg. No. 33-48730). 3.2* Certificate of Amendment to the Restated Certificate of Incorporation of D&K Wholesale Drug, Inc filed as an exhibit to the registrant's Annual Report on Form 10-K for the year ended June 30, 1998. 3.3** Certificate of Designations for Senior B Junior Participating Preferred Stock of D&K Healthcare Resources, Inc. dated November 12, 1998. 3.4* By-laws of the registrant, as currently in effect, filed as an exhibit to registrant's Registration Statement on Form S-1 (Reg. No. 33-48730). 4.1* Form of certificate for Common Stock, filed as an exhibit to registrant's Registration Statement on Form S-1 (Reg. No. 33-48730). 4.2* Form of Rights Agreement dated as of November 12, 1998 between registrant and Harris Trust and Savings Bank as Rights Agent, which includes as Exhibit B the form of Right Certificate, filed as an exhibit to Form 8-K dated November 17, 1998. 10.1** First Amendment to the Fifth Amended and Restated Loan and Security Agreement, dated March 7, 2001, by and among Fleet Capital Corporation, the registrant, Jaron, Inc., and Jewett Drug Co. 10.2** Fourth Amendment to the Receivables Purchase Agreement, dated February 2, 2001, between registrant, Blue Keel Funding, LLC and Fleet National Bank. 10.3** Fifth Amendment to the Receivables Purchase Agreement, dated March 31, 2001, between registrant, Blue Keel Funding, LLC and Fleet National Bank. 10.4** Sixth Amendment to the Receivables Purchase Agreement, dated April 24, 2001, between registrant, Blue Keel Funding, LLC and Fleet National Bank. * Incorporated by reference. ** Filed herewith EX-3.3 2 dex33.txt CERTIFICATE OF DESIGNATIONS Exhibit 3.3 CERTIFICATE OF DESIGNATIONS BY BOARD OF DIRECTORS AS TO THE DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES B JUNIOR PARTICIPATING PREFERRED STOCK of D & K HEALTHCARE RESOURCES, INC. D & K Healthcare Resources, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation") the Restated Certificate of Incorporation of which was filed in the Office of the Secretary of State of Delaware on December 24, 1987, and which has been amended on several occasions since that date (as amended, the "Restated Certificate of Incorporation"), does by its Chairman of the Board and Chief Executive Officer, and its Secretary, and under its corporate seal, hereby certify as follows: First: That the Restated Certificate of Incorporation provides that the total number of shares which the Corporation may issue is as follows: "This corporation is authorized to issue two classes of stock designated respectively Common Stock ("Common") and Preferred Stock ("Preferred"). The total number of shares of Common that this corporation shall have authority to issue is ten million (10,000,000) with a par value of $.01, and the total number of shares of Preferred that this corporation shall have authority to issue is one million (1,000,000) at no par value." Second: That the Restated Certificate of Incorporation provides that the Board of Directors of the Corporation is authorized to provide for the issuance of the shares of Preferred in one or more series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. There were no shares of Preferred Stock authorized and issued through the day preceding the date hereof. Third: That pursuant to the authority so vested in the Board of Directors, at a meeting duly convened and held on the 12th day of November, 1998, the Board of Directors adopted the following resolutions: "RESOLVED, that there be created a Series B Junior Participating Preferred Stock (the "Series B Preferred Stock"), the number of shares of such Series B Preferred to be 300,000 which the Corporation may issue, and which shall have the following powers, preferences and relative, optional, participating and other special rights and qualifications, limitations, restrictions and other distinguishing characteristics: Section 1. Designation and Amount. The shares of such series shall be designated as "Series B Junior Participating Preferred Stock" (the "Series B Preferred Stock") and the number of shares constituting the Series B Preferred Stock shall be 300,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series B Preferred Stock. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series B Preferred Stock with respect to dividends, the holders of shares of Series B Preferred Stock, in preference to the holders of Common Stock, $0.01 par value (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the tenth day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non- cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common 2 Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series B Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series B Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment 3 of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other Certificate of Designations or Certificate of Amendment creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series B Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series B Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series B Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except dividends paid ratably on the Series B Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange 4 for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series B Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series B Preferred Stock, or any shares of stock ranking on a parity with the Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series B Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations or Certificate of Amendment creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received the greater of (i) $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (ii) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, 5 then in each such case the aggregate amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series B Preferred Stock shall not be redeemable. Section 9. Rank. The Series B Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock. Section 10. Amendment. The Restated Certificate of Incorporation of the Corporation, as heretofore amended, shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series B Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series B Preferred Stock, voting together as a single class. Section 11. Expiration of Rights Agreement. In the event that the Rights Agreement dated as of November 12, 1998 between the Corporation and Harris Trust and Savings Bank is terminated or expires prior to the issuance of any shares of Series B Preferred Stock, all shares of Series B Preferred Stock shall become authorized but 6 unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth in the Restated Certificate of Incorporation, as amended, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. FURTHER RESOLVED, that the statements contained in the foregoing resolution creating and designating the Series B Preferred Stock and fixing the number, powers, preferences and relative, optional, participating and other special rights and qualifications, limitations, restrictions and other distinguishing characteristics thereof shall be deemed to be included in and be a part of the Restated Certificate of Incorporation pursuant to the provisions of Sections 104 and 151 of the General Corporation Law of the State of Delaware." Fourth: That the said resolutions of the Board of Directors, and the creation and authorization of issuance thereby of the Series B Convertible Preferred Stock and the determination thereby of the provisions applicable to such series as described in the resolution contained in the Third article hereof, were duly adopted by the Board of Directors in accordance with Section 151 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, D & K Healthcare Resources, Inc. has caused its corporate seal to be hereunto affixed and this Certificate to be signed by J. Hord Armstrong III, its Chairman of the Board and Chief Executive Officer, this 12th day of November, 1998. D & K HEALTHCARE RESOURCES, INC. By ------------------------------------- Dennis A. White Vice President (CORPORATE SEAL) ATTEST: Daniel E. Kreher Assistance Secretary 7 EX-10.1 3 dex101.txt FIRST AMENDMENT TO THE FIFTH AMEND Exhibit 10.1 FIRST AMENDMENT TO FIFTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT --------------------------- THIS FIRST AMENDMENT TO FIFTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Amendment") is made as of March __, 2001, by and among FLEET CAPITAL CORPORATION, a Rhode Island corporation (the "Lender"), and D&K HEALTHCARE RESOURCES, INC. ("D & K"), JARON, INC. ("Jaron") and JEWETT DRUG CO., a South Dakota corporation ("Jewett") (D & K, Jaron and Jewett are sometimes hereinafter referred to individually as "Borrower" and collectively as "Borrowers"). Preliminary Statements ---------------------- A. Lender, and Borrowers are parties to that certain Fifth Amended and Restated Loan and Security Agreement dated as of September 30, 2000 (as amended, restated or renewed from time to time, the "Loan Agreement"). Capitalized terms used herein and not otherwise defined shall have the meanings given them in the Loan Agreement. B. D & K and Lender have agreed to amend the provisions thereof relating to the Fixed Charge Covenant and to allow for regular dividend payments to shareholders, within the limits and as otherwise set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Distributions. The Loan Agreement is hereby amended by deleting Subsection 8.2.7 [relating to Distributions] in its entirety and replacing it with the following new Subsection 8.2.7: 8.2.7 Distributions. Declare or make, or permit any Subsidiary of Borrower to declare of make, and Distributions, except for (a) dividends of Jaron to D&K, provided that not less than 5 business days prior to the payment of such dividend, D&K shall give Lender written notice describing the amount of such dividend, and (b) dividends of D&K in an aggregate amount of not more than $1,000,000 in each fiscal year, subject to the further compliance with the financial covenants set forth in this Loan Agreement after giving effect to such dividend. 2. Cash Flow to Fixed Charges. The Loan Agreement is hereby amended by deleting Subsection 8.3(D) [relating to Cash Flow to Fixed Charges] in its entirety and replacing it with the following new Subsection 8.3(D): 8.3(D) Cash Flow to Fixed Charges. Commencing with the fiscal quarter ending March 31, 2001, maintain for each fiscal quarter of Borrowers a ratio of Cash Flow to Fixed Charges of not less than 1.3 to 1.0, measured as of the end of each fiscal quarter for the immediately preceding twelve month period. 3. Definitions. The Appendix to the Loan Agreement is hereby amended by deleting the definition of Cash Flow in its entirety and replacing it the following new definition: Cash Flow - in any period means EBITDA for such period minus the sum of (i) cash taxes paid for such period, (ii) Capital Expenditures paid in such period which were not financed, and (iii) dividends declared or paid in such period. 4. No Claims. Borrowers acknowledge that there are no existing claims, defenses (personal or otherwise) or rights of set-off or recoupment whatsoever with respect to any of the Loan Documents. Borrowers agree that this Amendment in no way acts as a release or relinquishment of any Liens in favor of the Lender securing payment of the Obligations. 5. Miscellaneous. Except as expressly set forth herein, there are no agreements or understandings, written or oral, between any Borrower and Lender relating to the Loan Agreement and the other Loan Documents that are not fully and completely set forth herein or therein. Except to the extent specifically waived or amended herein or in any of the documents, instruments, or agreements delivered in connection herewith, all terms and provisions of the Loan Agreement and the other Loan Documents are hereby ratified and reaffirmed and shall remain in full force and effect in accordance with the respective terms thereof. This Agreement may be executed in one or more counterparts, and by different parties on different counterparts. All such counterparts shall be deemed to be original documents and together shall constitute one and the same agreement. A signature of a party delivered by facsimile or other electronic transmission shall be deemed to be an original signature of such party. IN WITNESS WHEREOF, this Amendment has been executed and delivered by the duly authorized representatives of the parties as of the date first above written. FLEET CAPITAL CORPORATION By: /s/ Edward M. Bartkowski ------------------------ Edward M. Bartkowski, Senior Vice President D & K HEALTHCARE RESOURCES, INC. By: /s/ Thomas S. Hilton -------------------- Thomas S. Hilton, Senior Vice President & CFO JARON, INC. By: /s/ Thomas S. Hilton -------------------- Thomas S. Hilton, Vice President JEWETT DRUG CO. By: /s/ Thomas S. Hilton -------------------- Thomas S. Hilton, Vice President EX-10.2 4 dex102.txt FOURTH AMENDMENT TO THE RECEIVABLES PURCHASE Exhibit 10.2 FOURTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT ------------------------------ This Fourth Amendment to Receivables Purchase Agreement, dated as of February 2, 2001 (this "Amendment"), is among D&K RECEIVABLES CORPORATION, a Delaware corporation ("Seller"), D&K HEALTHCARE RESOURCES, INC., a Delaware corporation ("Parent"), BLUE KEEL FUNDING, LLC, a Delaware limited liability company ("Purchaser"), and FLEET NATIONAL BANK, a national banking association, as administrator for Purchaser (in such capacity, the "Administrator"). BACKGROUND 1. Seller, Parent, Purchaser and the Administrator are parties to that certain Receivables Purchase Agreement, dated as of August 7, 1998, as amended by the First Amendment to Receivables Purchase Agreement, dated as of December 17, 1998, by the Second Amendment to Receivables Purchase Agreement, dated as of June 1, 1999, and by the Third Amendment to Receivables Purchase Agreement, dated as of March 31, 2000 (the "Receivables Purchase Agreement"). 2. The parties hereto desire to amend the Receivables Purchase Agreement in certain respects as set forth herein. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Receivables Purchase Agreement. SECTION 2. Purchase Limit. Section 1.01 of the Receivables Purchase Agreement is hereby amended by deleting the number "$75,000,000" where it appears in clause (a) thereof and substituting therefor the phrase "$100,000,000 for the period from February 2, 2001 until April 1, 2001 and $75,000,000 from and after April 1, 2001". SECTION 3. Dynamic Loss Reserve Percentage. The definition of "Dynamic Loss Reserve Percentage" that appears in Appendix A to the Receivables Purchase Agreement is hereby amended by deleting the word "three" where it appears in the description of the Loss Horizon therein and substituting therefor the word "two". SECTION 4. Loss Reserve. The definition of "Loss Reserve" that appears in Appendix A to the Receivables Purchase Agreement is hereby amended by deleting the number "8%" where it appears in clause (A)(1) thereof and substituting therefor the number "10%". SECTION 5. Representations and Warranties. Each of Parent and Seller hereby represents and warrants that, after giving effect to this Amendment, (i) the representations and warranties contained in Article VI of the Receivables Purchase Agreement are true and correct on and as of the date hereof and shall be deemed to have been made on such date (except that any such representation or warranty that is expressly stated as being made only as of a specified earlier date shall be true and correct in all material respects as of such earlier date) and (ii) no Liquidation Event or Unmatured Liquidation Event has occurred and is continuing. SECTION 6. Effectiveness. This Amendment shall become effective upon the receipt by the Administrator of (i) copies of this Amendment duly executed by Seller and Parent, (ii) the fee required to be paid in connection herewith as set forth in the fee letter dated as of the date hereof with the Administrator and (iii) a certificate of the Secretary or Assistant Secretary of each of Seller and Parent certifying (A) that the certificate of incorporation and by- laws of such Person previously delivered to the Administrator have not been amended, except as set forth in such certificate, or revoked, (B) that attached thereto are resolutions of its Board of Directors approving this Amendment and (C) the names and true signatures of the officers authorized on its behalf to execute and deliver this Amendment. SECTION 7. Miscellaneous. The Receivables Purchase Agreement, as amended hereby, remains in full force and effect. Any reference to the Receivables Purchase Agreement from and after the date hereof shall be deemed to refer to the Receivables Purchase Agreement as amended hereby. This Amendment may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Seller, on demand, shall pay, or reimburse the Administrator for, all of the costs and expenses, including legal fees and disbursements, incurred by the Administrator or Purchaser in connection with this Amendment. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be executed and delivered by its duly authorized officer as of the date first above written. D&K RECEIVABLES CORPORATION By: /s/ Thomas S. Hilton ---------------- Name: Thomas S. Hilton ---------------- Title: Senior Vice President & CFO --------------------------- D&K HEALTHCARE RESOURCES, INC. By: /s/ Thomas S. Hilton ---------------- Name: Thomas S. Hilton ---------------- Title: Senior Vice President & CFO --------------------------- BLUE KEEL FUNDING, LLC, as Purchaser By: /s/ Bernard J. Angelo ----------------- Name: Bernard J. Angelo ----------------- Title: Vice President -------------- FLEET NATIONAL BANK, as the Administrator By: /s/ Paul Schmieder -------------- Name: Paul Schmieder -------------- Title: Vice President -------------- EX-10.3 5 dex103.txt FIFTH AMENDMENT TO THE RECEIVABLES PURCHASE Exhibit 10.3 FIFTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT ------------------------------ This Fifth Amendment to Receivables Purchase Agreement, dated as of March 30, 2001 (this "Amendment"), is among D&K RECEIVABLES CORPORATION, a Delaware corporation ("Seller"), D&K HEALTHCARE RESOURCES, INC., a Delaware corporation ("Parent"), BLUE KEEL FUNDING, LLC, a Delaware limited liability company ("Purchaser"), and FLEET NATIONAL BANK, a national banking association, as administrator for Purchaser (in such capacity, the "Administrator"). BACKGROUND 1. Seller, Parent, Purchaser and the Administrator are parties to that certain Receivables Purchase Agreement, dated as of August 7, 1998, as amended by the First Amendment to Receivables Purchase Agreement, dated as of December 17, 1998, by the Second Amendment to Receivables Purchase Agreement, dated as of June 1, 1999, by the Third Amendment to Receivables Purchase Agreement, dated as of March 31, 2000, and by the Fourth Amendment to Receivables Purchase Agreement, dated as of February 2, 2001 (the "Receivables Purchase Agreement"). 2. The parties hereto desire to amend the Receivables Purchase Agreement in certain respects as set forth herein. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Receivables Purchase Agreement. SECTION 2. Purchase Limit. Section 1.01 of the Receivables Purchase Agreement is hereby amended by (i) deleting the number "$100,000,000" where it appears therein and substituting therefor the number "$117,000,000" and (ii) by deleting each reference to "April 1, 2001" that appears therein, and substituting therefor "May 1, 2001". SECTION 3. Representations and Warranties. Each of Parent and Seller hereby represents and warrants that, after giving effect to this Amendment, (i) the representations and warranties contained in Article VI of the Receivables Purchase Agreement are true and correct on and as of the date hereof and shall be deemed to have been made on such date (except that any such representation or warranty that is expressly stated as being made only as of a specified earlier date shall be true and correct in all material respects as of such earlier date) and (ii) no Liquidation Event or Unmatured Liquidation Event has occurred and is continuing. SECTION 4. Miscellaneous. The Receivables Purchase Agreement, as amended hereby, remains in full force and effect. Any reference to the Receivables Purchase Agreement from and after the date hereof shall be deemed to refer to the Receivables Purchase Agreement as amended hereby. This Amendment may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Seller, on demand, shall pay, or reimburse the Administrator for, all of the costs and expenses, including legal fees and disbursements, incurred by the Administrator or Purchaser in connection with this Amendment. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be executed and delivered by its duly authorized officer as of the date first above written. D&K RECEIVABLES CORPORATION By: /s/ Thomas S. Hilton ---------------- Name: Thomas S. Hilton ---------------- Title: Senior Vice President & CFO --------------------------- D&K HEALTHCARE RESOURCES, INC. By: /s/ Thomas S. Hilton ---------------- Name: Thomas S. Hilton ---------------- Title: Senior Vice President & CFO --------------------------- BLUE KEEL FUNDING, LLC, as Purchaser By: /s/ Bernard J. Angelo ----------------- Name: Bernard J. Angelo ----------------- Title: Vice President -------------- FLEET NATIONAL BANK, as the Administrator By: /s/ Paul Schmieder -------------- Name: Paul Schmieder -------------- Title: Vice President -------------- EX-10.4 6 dex104.txt SIXTH AMENDMENT TO THE RECEIVABLES PURCHASE Exhibit 10.4 SIXTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT ------------------------------ This Sixth Amendment to Receivables Purchase Agreement, dated as of April 24, 2001 (this "Amendment"), is among D&K RECEIVABLES CORPORATION, a Delaware corporation ("Seller"), D&K HEALTHCARE RESOURCES, INC., a Delaware corporation ("Parent"), BLUE KEEL FUNDING, LLC, a Delaware limited liability company ("Purchaser"), and FLEET NATIONAL BANK, a national banking association, as administrator for Purchaser (in such capacity, the "Administrator"). BACKGROUND 1. Seller, Parent, Purchaser and the Administrator are parties to that certain Receivables Purchase Agreement, dated as of August 7, 1998, as amended by the First Amendment to Receivables Purchase Agreement, dated as of December 17, 1998, by the Second Amendment to Receivables Purchase Agreement, dated as of June 1, 1999, by the Third Amendment to Receivables Purchase Agreement, dated as of March 31, 2000, by the Fourth Amendment to Receivables Purchase Agreement, dated as of February 2, 2001 and by the Fifth Amendment, dated as of March 30, 2001 (the "Receivables Purchase Agreement"). 2. The parties hereto desire to amend the Receivables Purchase Agreement in certain respects as set forth herein. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Receivables Purchase Agreement. SECTION 2. Purchase Limit. Section 1.01 of the Receivables Purchase Agreement is hereby amended by deleting each reference to "May 1, 2001" that appears therein, and substituting therefor "June 1, 2001". SECTION 3. Representations and Warranties. Each of Parent and Seller hereby represents and warrants that, after giving effect to this Amendment, (i) the representations and warranties contained in Article VI of the Receivables Purchase Agreement are true and correct on and as of the date hereof and shall be deemed to have been made on such date (except that any such representation or warranty that is expressly stated as being made only as of a specified earlier date shall be true and correct in all material respects as of such earlier date) and (ii) no Liquidation Event or Unmatured Liquidation Event has occurred and is continuing. SECTION 4. Miscellaneous. The Receivables Purchase Agreement , as amended hereby, remains in full force and effect. Any reference to the Receivables Purchase Agreement from and after the date hereof shall be deemed to refer to the Receivables Purchase Agreement as amended hereby. This Amendment may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Seller, on demand, shall pay, or reimburse the Administrator for, all of the costs and expenses, including legal fees and disbursements, incurred by the Administrator or Purchaser in connection with this Amendment. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be executed and delivered by its duly authorized officer as of the date first above written. D&K RECEIVABLES CORPORATION By: /s/ Thomas S. Hilton ---------------- Name: Thomas S. Hilton ---------------- Title: Senior Vice President & CFO --------------------------- D&K HEALTHCARE RESOURCES, INC. By: /s/ Thomas S. Hilton ---------------- Name: Thomas S. Hilton ---------------- Title: Senior Vice President & CFO --------------------------- BLUE KEEL FUNDING, LLC, as Purchaser By: /s/ Bernard J. Angelo ----------------- Name: Bernard J. Angelo ----------------- Title: Vice President -------------- FLEET NATIONAL BANK, as the Administrator By: /s/ Paul Schmieder -------------- Name: Paul Schmieder -------------- Title: Vice President -------------- -----END PRIVACY-ENHANCED MESSAGE-----