11-K 1 c96302e11vk.txt ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________. COMMISSION FILE NUMBER 0-20348 A. Full title of the plan and the address of the Plan, if different from that of the issuer named below: D & K HEALTHCARE RESOURCES, INC. 401 (K) PROFIT SHARING PLAN AND TRUST B. Name of the issuer of the securities held pursuant to the Plan and the address of its principal executive office: D & K HEALTHCARE RESOURCES, INC. 8235 FORSYTH BOULEVARD ST. LOUIS, MO 63105 D & K HEALTHCARE RESOURCES, INC. FORM 11-K REQUIRED INFORMATION (a) Financial Statements. Filed as part of this Report on Form 11-K are the financial statements and the schedules thereto of the D & K Healthcare Resources, Inc. 401 (k) Profit Sharing Plan and Trust as required by Form 11-K together with the report thereon of KPMG LLP, independent registered public accounting firm, dated June 24, 2005. (b) Exhibits. Exhibit 23 - Consent of Independent Registered Public Accounting Firm D & K HEALTHCARE RESOURCES, INC. FORM 11-K SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Trustee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. D & K HEALTHCARE RESOURCES, INC. 401 (K) PROFIT SHARING PLAN AND TRUST Date: June 28, 2005 By: /s/ Martin D. Wilson --------------------- Martin D. Wilson, Trustee D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Financial Statements and Supplemental Schedules December 31, 2004 and 2003 (With Report of Independent Registered Public Accounting Firm) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Trustee of the D&K Healthcare Resources, Inc. 401(k) Profit Sharing Plan and Trust: We have audited the accompanying statements of net assets available for benefits of the D&K Healthcare Resources, Inc. 401(k) Profit Sharing Plan and Trust (the Plan) as of December 31, 2004 and 2003, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2004 and 2003, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets (held at end of year) and reportable transactions are presented for purposes of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. /s/ KPMG LLP St. Louis, Missouri June 24, 2005 D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Statements of Net Assets Available for Benefits December 31, 2004 and 2003
2004 2003 ----------- ---------- Assets: Investments, at fair value $13,620,014 12,073,897 Participant contributions receivable 42,403 69,978 Employer contributions receivable 114,896 85,984 ----------- ---------- Net assets available for benefits $13,777,313 12,229,859 =========== ==========
See accompanying notes to financial statements. 2 D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Statements of Changes in Net Assets Available for Benefits Years ended December 31, 2004 and 2003
2004 2003 ----------- ---------- Additions: Participant contributions $ 1,255,989 1,094,314 Employer contributions 447,108 375,587 Interest income 47,343 29,165 Transfers from another plan 67,414 2,777,138 Net appreciation in the fair value of investments 442,007 2,406,255 ----------- ---------- Total additions 2,259,861 6,682,459 ----------- ---------- Deductions: Benefits paid to participants 679,800 588,411 Administrative expenses 32,607 28,529 ----------- ---------- Total deductions 712,407 616,940 ----------- ---------- Increase in net assets available for benefits 1,547,454 6,065,519 Net assets available for benefits at beginning of year 12,229,859 6,164,340 ----------- ---------- Net assets available for benefits at end of year $13,777,313 12,229,859 =========== ==========
See accompanying notes to financial statements. 3 D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Notes to Financial Statements December 31, 2004 and 2003 (1) DESCRIPTION OF THE PLAN The following description of the D&K Healthcare Resources, Inc. 401(k) Profit Sharing Plan and Trust (the Plan) is provided for financial statement purposes only. Participants should refer to the Plan document for more complete information. (a) GENERAL The Plan is a defined contribution plan established by D&K Healthcare Resources, Inc. (D&K or the Company) under the provisions of Section 401 (a) of the Internal Revenue Code (IRC), which includes a qualified cash or deferred salary arrangement as described in Section 401(k) of the IRC, for the benefit of eligible employees of the Company. The Plan was established January 1, 1995 to offer the employees of the Company a means of saving funds, on a pretax basis, for retirement. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974. Participation is voluntary. Full-time employees are eligible to participate in the Plan upon reaching age 21 and completing 30 days of regular service. The Plan is administered by executives of D&K, with additional administrative duties, such as loan processing, performed by Pension Associates of Wausau, Inc., a third-party plan administrator. The assets of the Plan are held in a trust by Nationwide Life Insurance Company (Nationwide). Pension Associates of Wausau, Inc. is a subsidiary of Nationwide Life Insurance Company. (b) CONTRIBUTIONS Plan participants may contribute up to 20% of their annual compensation, subject to certain limitations. Contributions may be made prior to federal and certain other income taxes pursuant to Section 401(k) of the IRC. The Company contribution is discretionary and is currently equivalent to 50% of employees' contributions up to a maximum contribution based on 6% of eligible compensation. As of January 1, 2004, the Plan allows for the employer matching contributions to the Plan to be in the form of D&K common stock or into the regular investment funds. Prior to January 1, 2004, the participants could not elect how the company match was allocated, as it was 100% invested in the stock of the Company. In January 2005, the Company's contribution to the Plan for the fourth quarter of 2004 was made in the form of 13,597 shares of D&K Healthcare Resources, Inc. common stock valued at $102,429 in addition to the cash contribution of $12,467. 4 (Continued) D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Notes to Financial Statements December 31, 2004 and 2003 (c) INVESTMENTS Participants direct contributions into any of twelve investment funds. These funds are as follows: Dreyfus A Bonds Plus, Fidelity Asset Manager, Neuberger & Berman Guardian Fund, American Century Ultra Fund, Oppenheimer Global Fund A, Virtuoso 1, Personal Portfolio Series 3 -- Conservative Intermediate-Term, Personal Portfolio Series 4 -- Intermediate-Term, Gartmore Small Company Fund, Gartmore S&P 500 Service, Pimco Total Return, and Van Kampen Comstock. Participants may change their investment elections daily. Employer contributions are invested only in the D&K Common Stock Fund. (d) VESTING Participants are always 100% vested in the value of their contributions and the earnings thereon. Vesting of Company contributions and the earnings thereon is determined based on participants' years of vesting service. Vesting service is any calendar year in which a participant was credited with at least 1,000 hours. The vesting schedule is as follows:
PERCENTAGE YEARS OF VESTING SERVICE VESTED ------------------------ ----------- 0 - 1 -- % 2 25 3 50 4 75 5 100 Death, disability, or retirement 100
(e) PAYMENTS OF BENEFITS Amounts in a participant's account and the vested portion of a participant's employer contributions are distributed upon retirement, death, disability, or other termination of employment. Distributions from the D&K Common Stock Fund are made in cash. Forfeitures of the nonvested amounts are used to reduce Company discretionary contributions. Forfeitures of $15,662 and $29,983 reduced employer contributions for the years ended December 31, 2004 and 2003, respectively. (f) LOANS TO EMPLOYEES Participants of the Plan may borrow funds from their accounts up to $50,000 or 50% of their vested balances, whichever is less. Loans are repayable through payroll deductions over one to five years. The interest rate is determined by the prime rate plus 1% on the day the loan is processed. At December 31, 2004, the range was 5.00% to 10.50%. The outstanding balance of loans to participants was $281,034 and $236,914 as of December 31, 2004 and 2003, respectively. (g) PLAN MEMBER ACCOUNTS Individual accounts are maintained for each participant to reflect the participant's share of the Plan's income, the Company's contribution, and the participant's contribution. 5 (Continued) D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Notes to Financial Statements December 31, 2004 and 2003 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) BASIS OF PRESENTATION The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting. Benefit payments to participants are recorded when paid. (b) USE OF ESTIMATES Certain amounts included in the financial statements are estimated based on currently available information and the plan administrator's judgment as to the outcome of future conditions and circumstances. Actual results could differ from these estimates. (c) ADMINISTRATIVE EXPENSES Substantially all administrative expenses are paid from Plan assets. (d) VALUATION OF INVESTMENTS Investments in mutual funds and D&K stock are valued using publicly stated quotes as of the close of business on the last day of the plan year. All investments of the Plan are listed at unit value, as determined by Nationwide. Unit value is calculated as the appreciation/depreciation of each mutual fund based on an original index of $1.00 per unit in relation to the net asset value per each fund's market listing. Investment transactions are accounted for on the trade-date basis. The Plan's guaranteed interest fund is included in the financial statements at December 31, 2004 and 2003 at contract value, which approximates market value as reported to the Plan by Nationwide. Contract value represents the deposits less withdrawals made under the contract plus interest earned through the end of the plan year. The guaranteed interest fund has an average yield approximating the guaranteed rate of return. The guaranteed interest fund has a quarterly interest guarantee that is based on the five-year U.S. Treasury Note yield, which was 2.29% and 2.41% at December 31, 2004 and 2003, respectively. The interest earned in this fund can change quarterly if the yield on the five-year U.S. Treasury Note index changes. Interest is credited to each participant's account. The Plan provides for investment in various investments and investment securities that, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Further, due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the statements of net assets available for benefits. (3) PLAN AMENDMENTS On March 4, 2003, employees in the Jewett Drug Company Retirement Plan (Jewett Plan) Were merged into the Plan. As part of that merger, the participants of the Jewett Plan became fully vested prior to the merger. The assets from the Jewett Plan were transferred into the Plan at fair value on the effective date of the transfer. The board of directors of the Plan approved the merger. A total of $2,777,138 was transferred into the Plan and allocated among investment options based on participant direction. 6 (Continued) D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Notes to Financial Statements December 31, 2004 and 2003 (4) INVESTMENTS The following presents investments that represent 5% or more of the Plan's net assets:
DECEMBER 31 ------------------------- 2004 2003 ----------- --------- Fidelity Asset Manager $ 1,717,920 1,600,294 Gartmore S&P 500 Service -- 624,075 Neuberger & Berman Guardian Fund -- 774,763 American Century Ultra Fund 2,070,397 1,754,348 Pimco Total Return -- 637,446 Virtuoso 1 1,281,828 1,228,236 Oppenheimer Global Fund A 2,760,319 2,071,434 Gartmore Small Company Fund 1,201,719 897,766 VanKampen Comstock 1,324,290 -- D&K Common Stock * 1,194,912 1,569,224
* Nonparticipant-directed. During 2004 and 2003, the Plan's investments (including realized and unrealized gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
DECEMBER 31 ------------------------- 2004 2003 ---------- --------- Appreciation (depreciation): Mutual funds $1,120,651 2,080,298 Common stock (678,644) 325,957 ---------- --------- $ 442,007 2,406,255 ========== =========
(5) NONPARTICIPANT-DIRECTED INVESTMENTS As of January 1, 2004, the plan allows for the employer matching contributions to the Plan to be in the form of D&K common stock or into the regular investment funds, resulting in all participant-directed investments for the year ended December 31, 2004. Employer matching contributions to the Plan in 2004 of $399,427 were made in the form of D&K common stock and $47,681 in cash. Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant-directed investments for December 31, 2003 is as follows:
DECEMBER 31, 2003 ------------ Net assets: Common stock and employer contributions receivable $ 1,655,208
7 (Continued) D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Notes to Financial Statements December 31, 2004 and 2003
DECEMBER 31, 2003 ------------ Changes in net assets: Contributions $ 375,587 Net appreciation 325,957 Participation termination and withdrawal payments (63,317) Administrative expenses (409) ------------ $ 637,818 ============
(6) TAX STATUS The Plan is a prototype plan and has not obtained a determination letter from the IRS; however, the plan administrator believes that the Plan is currently being operated in compliance with the applicable requirements of the IRC and was tax exempt through the year ended December 31, 2004. (7) DISTRIBUTION OF ASSETS UPON TERMINATION OF THE PLAN D&K reserves the right to terminate the Plan, in whole or in part, at any time. In the event of termination, all amounts credited to the participant accounts will become 100% vested. If the Plan is terminated at any time or contributions are completely discontinued and D&K determines that the Plan shall be terminated, all accounts shall be revalued as if the termination date were a valuation date and such accounts shall be distributed to participants. If the Plan is terminated or contributions completely discontinued, but D&K determines that the Plan shall be continued pursuant to the terms of the trust agreement, no further contributions shall be made by participants or the Company, but the trust shall be administered as though the Plan were otherwise in effect. No plans have been made to terminate the Plan at this time. (8) SUBSEQUENT EVENT On March 31, 2005 employees in the Walsh Healthcare Solutions, Inc., Walsh Distributions, LLC DBA Walsh Southwest, Walsh Heartland, LLC and Myhca, Inc. retirement plans (Walsh Plan) were merged into the Plan. As part of the merger, the participants of the Walsh Plan became fully vested prior to the merger. The assets from the Walsh Plan were transferred into the Plan at fair value on the effective date of the transfer. The board of directors of the Plan approved the merger. A total of $5,895,308 was transferred into the Plan and allocated among investment options based on participant direction. (9) RECONCILIATION TO FORM 5500 For the years ended december 31, 2004 and 2003, the plan had approximately $22,017 and $19,727, respectively, of pending distributions to participants who elected either a withdrawal or final payment of their benefits from the Plan. These amounts are recorded as a liability in the Plan's Form 5500; however, these amounts are not recorded as a liability in accordance with accounting principles generally accepted in the United States of America. 8 (Continued) D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Notes to Financial Statements December 31, 2004 and 2003 The following is a reconciliation of the net assets available for plan benefits per the financial statements to the Forms 5500, which were filed for the years ended December 31, 2004 and 2003:
2004 2003 ------------ ---------- Net assets available for plan benefits per the financial statements $ 13,777,313 12,229,859 Benefit obligations currently payable (health claims, death, and disability benefits) (22,017) (19,727) ------------ ---------- Net assets available for plan benefits per the Form 5500 $ 13,755,296 12,210,132 ============ ==========
The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500 for the years ended December 31, 2004 and 2003:
2004 2003 ------------ -------- Benefits paid to participants per the financial statements $ 679,800 588,411 Add amounts currently payable at year-end 22,017 19,727 Less amounts currently payable at prior year-end (19,727) (9,484) ----------- --------- Benefits paid to participants per the Form 5500 $ 682,090 598,654 =========== =========
9 SCHEDULE I D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Schedule H, line 4i--Schedule of Assets (Held at End of Year) December 31, 2004
(a) PARTY-IN- (b) (d) (e) INTEREST IDENTITY OF ISSUE, BORROWER, LESSOR, OR SIMILAR PARTY COST CURRENT VALUE --------- ----------------------------------------------------------- --------- -------------- Dreyfus A Bonds Plus $ -- 244,158 Fidelity Asset Manager -- 1,717,920 American Century Ultra Fund -- 2,070,397 Oppenheimer Global Fund A -- 2,760,319 * Gartmore S&P 500 Service -- 557,837 * Virtuoso 1 -- 1,281,828 Personal Portfolio Series 3--Conservative Intermediate-Term -- 191,162 Personal Portfolio Series 4--Intermediate-Term -- 401,637 * Gartmore Small Company Fund -- 1,201,719 Pimco Total Return -- 392,801 Van Kampen Comstock -- 1,324,290 Participant loans, 5.00% to 10.5% -- 281,034 * D&K Common Stock 1,131,815 1,194,912 -------------- $ 13,620,014 ==============
*Represents a party-in-interest allowable under ERISA regulations. See accompanying report of independent registered public accounting firm. 10 SCHEDULE II D&K HEALTHCARE RESOURCES, INC. 401(k) PROFIT SHARING PLAN AND TRUST Schedule H, line 4j--Schedule of Reportable Transactions Year ended December 31, 2004
PURCHASES SALES ------------------------- ----------------------------------------------------- IDENTITY OF PARTY INVOLVED NO. OF TRANS. COST NO. OF TRANS. COST SALES PRICE LOSS -------------------------- ------------- --------- ------------- --------- ----------- -------- D&K Common Stock* 11 $ 386,949 39 $ 147,506 74,539 (72,967)
*Represents a party-in-interest allowable under ERISA regulations. See accompanying report of independent registered public accounting firm. 11