-----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, NIE8IJQ8xyCrHRsWzZ7HTQ5rQcOndhYWNyIDXN/bhPbd7FHGqF18IprJJrlGm5AT NTdZBs1gkJxsRsRJqbTUbw== 0001157523-03-005639.txt : 20031022 0001157523-03-005639.hdr.sgml : 20031022 20031022083033 ACCESSION NUMBER: 0001157523-03-005639 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031022 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20031022 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20348 FILM NUMBER: 03950817 BUSINESS ADDRESS: STREET 1: 8235 FORSYTH BLVD STREET 2: . CITY: ST. LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3147273485 MAIL ADDRESS: STREET 1: 8235 FORSYTH BLVD STREET 2: . CITY: ST. LOUIS STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: D & K WHOLESALE DRUG INC/DE/ DATE OF NAME CHANGE: 19930328 8-K 1 a4498587.txt D&K HEALTHCARE RESOURCES, INC. 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) October 22, 2003 (October 22, 2003) -------------------------------- D & K HEALTHCARE RESOURCES, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 000-20348 43-1465483 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 8235 Forsyth Blvd, St. Louis, MO 63105 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (314) 727-3485 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) D & K HEALTHCARE RESOURCES, INC. FORM 8-K Item 7. Financial Statements and Exhibits (c) Exhibits 99.1 Press release of D&K Healthcare Resources, Inc. dated October 22, 2003, reporting D&K's fiscal 2004 first quarter earnings results and announcing the agreement to acquire Walsh HealthCare Solutions, Inc. Item 9. Regulation FD Disclosure (See Item 12 below) Item 12. Disclosure of Results of Operations and Financial Condition On October 22, 2003, D & K Healthcare Resources, Inc. issued a press release reporting its fiscal 2004 first quarter earnings results and announcing it had entered into an agreement to acquire Walsh HealthCare Solutions, Inc. A copy of the press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference. The information in this Form 8-K is being furnished under Items 9 and 12 and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. 2 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 hereunto duly authorized. Date: October 22, 2003 D & K HEALTHCARE RESOURCES, INC. By: /s/ Thomas S. Hilton --------------------------------------------- Thomas S. Hilton Senior Vice-President and Chief Financial Officer 3 EXHIBIT INDEX ------------- Exhibit Number Description ------- ----------- 99.1 Press release of D&K Healthcare Resources, Inc. dated October 22, 2003, reporting D&K's fiscal 2004 first quarter earnings results and announcing the agreement to acquire Walsh HealthCare Solutions, Inc. 4 EX-99 3 a4498587ex991.txt D&K HEALTHCARE RESOURCES, INC. PRESS RELEASE Exhibit 99.1 D&K Healthcare Resources Reports First Quarter Fiscal 2004 Results and Enters Agreement to Acquire Walsh Healthcare Solutions ST. LOUIS--(BUSINESS WIRE)--Oct. 22, 2003--D&K Healthcare Resources, Inc. (Nasdaq:DKHR): -- Company lowers full-year earnings outlook -- Acquisition will strengthen and grow company's core distribution business and will be immediately accretive to earnings D&K Healthcare Resources, Inc. (Nasdaq: DKHR) today reported first quarter fiscal 2004 results and announced it has signed a definitive agreement to acquire Walsh HealthCare Solutions, Inc. ('Walsh') of Texarkana, Texas. D&K reported first quarter fiscal 2004 diluted earnings per share (EPS) of $0.10 on net income of $1.5 million for the first quarter of fiscal 2004 ended September 30, 2003. The results compare with a year-ago first quarter diluted EPS loss of $0.10 on a net loss of $1.4 million including the cumulative effect of an accounting change related to the adoption of SFAS No. 142. Excluding the cumulative effect of an accounting change diluted EPS last year were $0.19 on net income of $2.9 million. For the fiscal year, D&K now anticipates diluted EPS in the range $0.90 to $1.05. Earnings guidance anticipates continued reduced activity in the national accounts trade class and continued pressure on gross profit, and excludes modest accretion from the Walsh acquisition. Further details regarding the Walsh acquisition are included later in this release. D&K's previous guidance for fiscal 2004 was for full-year diluted EPS in the range of $1.10 to $1.20. "We did not meet our earnings goals in the first quarter and have now reevaluated our outlook for the full year," said J. Hord Armstrong, III, chairman and chief executive officer of D&K Healthcare Resources. "While we have reduced our expectations for the national accounts trade class, we remain encouraged by the sales growth in our core independent and regional pharmacies trade class and the prospects of adding Walsh HealthCare to our business base. "Our efforts to broaden our national accounts trade class have been successful; however, inventory purchase and sale opportunities in the first quarter have been more limited than we anticipated," Armstrong said. "Because we believe that this weakness will likely persist beyond the quarter, we are adjusting our outlook for the year. Since the close of the quarter we have focused on analyzing these trends in order to provide a revised outlook for the full year." First-Quarter Results Fiscal 2004 first quarter net sales declined 10.4% to $478.5 million compared to $534.0 million in the year ago first quarter. The lower sales reflect a decline in the national accounts trade class, partially offset by higher sales in the independent and regional pharmacies and other healthcare providers trade classes, and the Pharmaceutical Buyers, Inc. (PBI) line of business. The fiscal first quarter is historically the company's seasonally slowest sales period. A summary of net sales for first quarter fiscal 2004 follows. Net Sales Summary - ---------------------------------------------------------------------- Q1 F04 % Change (In thousands) vs. Q1 F03 - ---------------------------------------------------------------------- Independent and Regional Pharmacies $319,791 +13.7% National Accounts 127,893 -42.7 -- Without F03 sales from single supplier (1) -- -8.8 Other Healthcare Providers 27,835 +2.3 PBI, Inc. 2,319 +43.9 Software Services/Other 710 -11.9 Total $478,548 -10.4 -- Without F03 sales from single supplier (1) -- +6.1 - ---------------------------------------------------------------------- (1) Excludes sales related to attractively priced purchase opportunities from a single supplier in Q1 F03 of approximately $83,000. - ---------------------------------------------------------------------- Independent and Regional Pharmacies Net sales in the independent and regional pharmacies trade class increased 13.7% to $319.8 million, compared with $281.1 million in the year ago period. This rate of sales growth in the quarter is higher than both the year-ago first quarter and previous quarter. The company believes this sales growth reflects improved regional and independent retail pharmacy industry sales trends in the company's service territory as well as the impact of new business. National Accounts Net sales in the national accounts trade class declined 42.7% to $127.9 million compared with $223.2 million a year ago. Sales in this trade class continue to reflect fewer attractively priced purchase opportunities, particularly from one supplier that accounted for 2003 first quarter sales of approximately $83 million. Excluding sales related to attractively priced purchase opportunities from this supplier, year-over-year national accounts sales declined 8.8% in the fiscal 2004 first quarter. D&K believes the sales decline results from a continuation of trends identified in the fiscal 2003 fourth quarter and discussed in the company's Annual Report on Form 10-K filed on September 29, 2003. Fewer than anticipated product price increases enacted by pharmaceutical manufacturers resulting in lower activity in the national accounts trade class combined with changes in manufacturers' inventory management practices resulting in reduced availability of product, impacted revenue in this trade class. During fiscal 2003, D&K Healthcare significantly broadened and diversified the national accounts trade class by expanding the array of both branded and generic pharmaceuticals it offers and increasing the supplier and customer base. Company-wide Performance D&K Healthcare reported first quarter 2004 gross profit of $18.1 million compared to $21.1 million in 2003. The decline in gross profit was driven by lower national accounts sales and fewer product price increases, which also resulted in lower gross profit margins. Operating expenses declined 2.6% in the first quarter while operating expenses as a percent of sales increased due to lower sales in the national accounts trade class. Income from operations as a percent of sales in the quarter declined to 1.02% from 1.41% in last year's first quarter also due to the impact of lower sales in national accounts. First quarter inventory levels increased compared to the previous quarter (June 30, 2003), reflecting seasonal trends, while net interest expense declined to $2.1 million from $2.5 million in the year ago first quarter. Through October 17, 2003, D&K Healthcare has repurchased 656,500 shares of its common stock at an average price of $10.17 per share under its one million-share repurchase authorization announced in September 2002. Second-Quarter and Full-Year Outlook D&K Healthcare management expects diluted EPS of $0.90 to $1.05 for fiscal year 2004. Full year earnings guidance includes continued reduced activity in the national accounts trade class and continued pressure on gross profit. This outlook compares with $1.03 per diluted EPS earned in fiscal 2003, excluding the cumulative effect of an accounting change related to the adoption of SFAS No. 142 ($0.30 per diluted share). At this time, the company estimates second quarter fiscal 2004 earnings to be in the range of $0.10 to $0.15 per diluted share on sales of $500 million to $525 million. This second quarter 2004 outlook compares with diluted EPS of $0.18 in the second quarter of fiscal 2003. Agreement to Acquire Walsh HealthCare Solutions, Inc. D&K Healthcare has signed a definitive agreement to acquire Walsh HealthCare Solutions, Inc. of Texarkana, Texas. Walsh is a family-owned, full-service pharmaceutical distributor with distribution centers located in San Antonio and Texarkana, Texas and Paragould, Arkansas. Walsh reported net sales of approximately $900 million in its most recent fiscal year ended April 30, 2003. D&K Healthcare expects the acquisition to be immediately accretive to earnings per share with a modest earnings impact in fiscal 2004 and a significant earnings impact thereafter as integration activities take place. The transaction is expected to close by December 31, 2003. Closing of the transaction is subject to receipt of required regulatory approvals and other customary terms and conditions, as well as Walsh's acquisition of 100% of the equity interests in a joint venture to which it is a party. "Walsh HealthCare's culture, geographic reach, and customer base fits nicely with D&K's strategy of strengthening and growing our core distribution business," said Mr. Armstrong. "The D&K and Walsh combination will deepen our capabilities in existing markets and expand our market reach into new territory. We're very excited about welcoming their customers and employees to the D&K Healthcare family." The acquisition purchase price of $99 million in cash includes the repayment of all Walsh bank debt. The purchase price will be subject to adjustment based on the net working capital at closing. D&K will utilize its existing revolving credit facility to finance the transaction. Walsh, founded in 1920 as Walsh-Lumpkin Drug, is the sixth-largest regional pharmaceutical distributor in the United States. Walsh serves customers in Texas, Arkansas, Louisiana, Oklahoma, Kansas, Missouri, Illinois, Tennessee, Kentucky and Mississippi. Approximately 96% of Walsh's sales are to independent and regional pharmacy customers with the remaining 4% to hospitals and other healthcare providers. The distribution facilities in San Antonio and Paragould were opened in 1999 and 2000, respectively. Today's Conference Call Webcast Today, at 10:00 a.m. Eastern time, D&K Healthcare will host a live audio Webcast of its discussion with the investment community regarding the company's fiscal 2004 first-quarter results and the Walsh announcement. The Webcast can be accessed at www.dkhealthcare.com. Following the live discussion, a replay of the Webcast will be available for replay through November 5, 2003. Company Description D&K Healthcare Resources, Inc., which had fiscal 2003 sales of $2.2 billion, is a full-service wholesale distributor of branded and generic pharmaceuticals and over-the-counter health and beauty aid products. Headquartered in St. Louis, D&K serves three classes of customers from six distribution centers: independent and regional pharmacies with locations in one or more of 26 states, primarily in the Midwest, Upper Midwest and South; national accounts that operate locations in multiple regions of the United States; and other healthcare providers including hospitals, alternate-site care providers, and pharmacy benefit management companies in its primary distribution area. D&K also offers a number of proprietary information systems, marketing and business management solutions, and owns a 70% equity stake in Pharmaceutical Buyers, Inc., a leading alternate-site group purchasing service located in Boulder, CO. More information can be found at www.dkhealthcare.com. Forward-looking Statements This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are inherently subject to risks and uncertainties. The company's actual results could differ materially from those currently anticipated due to a number of factors, including without limitation, the competitive nature of the wholesale pharmaceutical distribution industry with many competitors having substantially greater resources than D&K Healthcare, the company's ability to maintain or improve its operating margins with the industry's competitive pricing pressures, the company's customers and suppliers generally having the right to terminate or reduce their purchases or shipments on relatively short notice, the availability of investment purchasing opportunities, the company's ability to complete and integrate acquisitions successfully, the changing business and regulatory environment of the healthcare industry in which the company operates, including manufacturers' pricing or distribution policies or practices, changes in private and governmental reimbursement or in the delivery systems for healthcare products, changes in interest rates, and other factors set forth in reports and other documents filed by D&K Healthcare with the Securities and Exchange Commission from time to time. The reader should not place undue reliance on forward-looking statements, which speak only as of the date they are made. D&K Healthcare undertakes no obligation to publicly update or revise any forward-looking statements. D&K HEALTHCARE RESOURCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended ------------------------------------------------ (Unaudited) % of % of September 30, Net September 30, Net % 2003 Sales 2002 Sales Change ------------------------------------------------ Net sales $478,548 100.00% $533,966 100.00% -10.4% Cost of sales 460,460 96.22% 512,913 96.06% -10.2% ------------ ------------- Gross profit 18,088 3.78% 21,053 3.94% -14.1% Operating expenses 13,188 2.76% 13,544 2.54% -2.6% ------------ ------------- Income from operations 4,900 1.02% 7,509 1.41% -34.7% Other income (expense): Interest expense, net (2,147) -0.45% (2,513) -0.47% -14.6% Other, net 36 0.01% (54) -0.01% -166.7% ------------ ------------- Income before income tax provision and minority interest 2,789 0.58% 4,942 0.93% -43.6% Income tax provision (1,088) -0.23% (1,952) -0.37% -44.3% Minority interest (234) -0.05% (128) -0.02% 82.8% ------------ ------------- Net income before cumulative effect of accounting change 1,467 0.31% 2,862 0.54% -48.7% Cumulative effect of accounting change, net - 0.00% (4,249) -0.80% ------------ ------------- Net income (loss) $1,467 0.31% $(1,387) -0.26% -205.8% ============ ============= Earnings per share - basic $0.11 $(0.09) Net income before cumulative effect of accounting change $0.11 $0.20 Cumulative effect of accounting change $- $(0.29) ------------ ------------- Net income (loss) $0.11 $(0.09) Earnings per share - diluted $0.10 $(0.10) Net income before cumulative effect of accounting change $0.10 $0.19 Cumulative effect of accounting change $- $(0.29) ------------ ------------- Net income (loss) $0.10 $(0.10) Basic common shares outstanding 13,956 14,553 Diluted common shares outstanding 14,194 14,850 D&K HEALTHCARE RESOURCES, INC. Supplemental Information to the Condensed Consolidated Statements of Operations Three Months Ended ---------------------------- September 30, September 30, 2003 2002 ------------- ------------- Reconciliation of non-GAAP financial measurement : Income from operations $4,900 $7,509 Depreciation and amortization 656 637 Other income, net 36 (54) ------------- ------------- EBITDA (a) $5,592 $8,092 ============= ============= (a) Earnings before interest, income taxes, depreciation and amortization D&K HEALTHCARE RESOURCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS September 30, June 30, (In thousands) 2003 2003 ------------- ---------- (Unaudited) Assets Cash $12,517 $14,301 Receivables 100,507 122,982 Inventories 321,856 257,984 Other current assets 11,114 8,862 ------------- ---------- Total current assets 445,994 404,129 Property and equipment, net 10,814 11,140 Other assets 8,933 11,511 Goodwill, net of accumulated amortization 44,105 44,105 Other intangible assets, net of accumulated amortization 1,769 1,810 ------------- ---------- Total assets $511,615 $472,695 ============= ========== Liabilities and Stockholders' Equity Accounts payable $174,357 $173,342 Current portion long-term debt 1,510 1,677 Other current liabilities 11,535 13,471 ------------- ---------- Total current liabilities 187,402 188,490 Long-term liabilities 3,707 3,703 Long-term debt 149,689 110,423 Stockholders' equity 170,817 170,079 ------------- ---------- Total liabilities and stockholders' equity $511,615 $472,695 ============= ========== D&K HEALTHCARE RESOURCES, INC. EARNINGS PER SHARE RECONCILIATION (In thousands, except per share data) Three-Months ended Three-Months ended September 30, 2003 September 30, 2002 ----------------------- ------------------------- (Unaudited) (Unaudited) Income Shares Per- Income Shares Per- (Numer- (Denomi- Share (Numer- (Denomi- Share ator) nator) (1) Amount ator) nator) (1) Amount ----------------------- ------------------------- Basic Earnings per Share: Net income before cumulative effect of accounting change, net $1,467 13,956 $0.11 $2,862 14,553 $0.20 Cumulative effect of accounting change, net - - (4,249) - (0.29) ----------------- ------------------------- Net income (loss) available to common stockholders 1,467 13,956 (1,387) 14,553 Effect of Diluted Securities: Options - 238 - 297 Convertible securities (63) - (29) - ----------------- ------------------ Diluted Earnings per Share: Net income (loss) available to common stockholders plus assumed conversions $1,404 14,194 $0.10 $(1,416) 14,850 $(0.10) ================= ================== (1) Outstanding shares computed on a weighted average basis CONTACT: D&K Healthcare Resources, Inc. Molly R. Salky, 314-290-2671 -----END PRIVACY-ENHANCED MESSAGE-----