EX-99 3 a4450161_ex991.txt D&K EXHIBIT 99.1 Exhibit 99.1 D&K Healthcare Resources Reports Fourth-Quarter and Full-Year Fiscal 2003 Results ST. LOUIS--(BUSINESS WIRE)--Aug. 7, 2003--D&K Healthcare Resources, Inc. (Nasdaq: DKHR) -- Company reports diluted earnings per share of $0.29 for the fourth quarter -- Initiates earnings guidance for fiscal 2004; diluted earnings per share of $1.10 to $1.20 D&K Healthcare Resources, Inc. (Nasdaq: DKHR) today reported diluted earnings per share (EPS) of $0.29 on net income of $4.2 million for the fourth quarter fiscal 2003 ended June 30, 2003. The results compare with year-ago fourth quarter diluted EPS of $0.37 on net income of $5.5 million. For the full fiscal year 2003, diluted EPS were $0.65 on net income of $9.7 million compared with net income of $21.1 million, or diluted EPS of $1.42 in fiscal 2002. Results for fiscal 2003 were reduced by one-time charges for an accounting change related to the adoption of SFAS No. 142 and the termination of the company's accounts receivable securitization program. These one-time charges reduced EPS by $0.38 and net income by $5.4 million. Excluding these one-time charges diluted EPS were $1.03 on net income of $15.1 million in fiscal 2003. Fiscal 2003 fourth quarter sales decreased 16.9% to $530.0 million and full-year sales declined 9.4% to $2,223.4 million compared with the year ago periods. These declines were largely anticipated, primarily due to fewer attractively priced purchase opportunities in the national accounts trade class, particularly from one supplier that accounted for 2002 fourth quarter and full year sales of approximately $116 million and $554 million, respectively. Excluding sales related to attractively priced purchase opportunities from this supplier, year-over-year sales grew 1.6% in the fiscal 2003 fourth quarter and 12.7% for the year. "We finished a difficult year by establishing a broader business base for our national accounts division, increasing both the number of suppliers and the number of products we carry by more than 30%. We also solidified our position as a strong regional distributor to independent and regional pharmacies in our markets," said J. Hord Armstrong, III, chairman and chief executive officer of D&K Healthcare Resources. "We remain very focused on our efforts to broaden and diversify the composition of sales in the national accounts trade class and expect to report further progress in fiscal 2004. We are pleased with the growth we achieved this year in the independent and regional pharmacy trade class, particularly in light of the challenging industry and economic conditions. We look forward to reestablishing our growth momentum to further drive shareholder value." Fourth-Quarter and Full-Year Performance Review D&K Healthcare net sales declined 16.9% to $530.0 million compared to $637.7 million in the year ago fourth quarter. The lower sales reflect the anticipated decline in the national accounts trade class, partially offset by higher sales in the independent and regional pharmacies and healthcare providers trade classes, and Pharmaceutical Buyers, Inc. (PBI) and software services lines of business. A summary of net sales for fourth-quarter and full-year fiscal 2003 follows. Net Sales Summary ---------------------------------------------------------------------- % % (In thousands) Change Full- Change vs. Q4 Year vs. Q4 F03 F02 F03 F02 ---------------------------------------------------------------------- Independent and Regional Pharmacies $296,227 +4.9% $1,156,460 +6.2% National Accounts 203,345 -38.7 929,582 -25.4 -- Without F02 sales from single supplier (1) -- -5.7 -- +22.2 Healthcare Providers 27,410 +27.5 126,333 +17.5 PBI, Inc. 2,086 +31.0 7,768 +3.0 Software Services/Other 892 +29.5 3,245 +19.7 Total $529,960 -16.9 $2,223,388 -9.4 -- Without F02/F03 sales from single supplier (1) -- +1.6 -- +12.7 ---------------------------------------------------------------------- (1) Excludes sales related to attractively priced purchase opportunities from a single supplier in Q4 F02 of approximately $116,000, for the full-year F02 of approximately $554,000, and for the full-year F03 of approximately $83,000. ---------------------------------------------------------------------- Independent and Regional Pharmacies Net sales in the independent and regional pharmacies trade class increased 4.9% to $296.2 million, compared with $282.4 million in the year ago period. The rate of sales growth in the fourth quarter was lower than the prior year's fourth quarter; however, the fourth-quarter growth rate showed sequential quarterly improvement. The moderation in year-over-year sales growth reflects slowing growth in the healthcare sector and the difficult comparison to year-ago sales, which benefited from acquisition and industry consolidation activities. National Accounts Net sales in the national accounts trade class declined 38.7% to $203.3 million compared with $331.5 million a year ago. Sales trends in this trade class continue to reflect fewer attractively priced purchase opportunities, particularly from one supplier that contributed significant sales in fiscal 2002. Lower fourth quarter sales also reflect the impact of fewer product price increases. Martin D. Wilson, president and chief operating officer, commented, "Our efforts to broaden our national accounts trade class have been very successful this year, but fourth quarter sales were lower than we anticipated. The fourth quarter is historically a difficult period to predict planned purchases and sales in this class and such variability is not uncommon. We anticipate that our sales levels in this class of trade will return to seasonally typical levels in the near future." D&K's national accounts trade class serves as a secondary-source supplier of branded and generic pharmaceuticals to national pharmacy chains, mass merchandisers, supermarket chains and other national customers. Many factors, particularly the timing and amount of product price increases, the availability of product from pharmaceutical manufacturers, and customer demand, can influence revenues and earnings in this class of trade. In the fiscal 2003 fourth quarter, there were fewer product price increases enacted by pharmaceutical manufacturers resulting in lower activity in this trade class. During the fourth quarter, D&K Healthcare continued to broaden and diversify its national accounts class of trade 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 a fourth quarter 2003 gross profit margin of 4.04% compared with 4.10% in 2002. The decline in gross profit margin results primarily from lower sales and gross margin in the national accounts trade class due to fewer attractively priced purchasing opportunities. Operating expenses decreased 11.9% in the 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 1.70% from 1.89% in last year's fourth quarter also due to lower sales in national accounts. Fourth quarter inventory levels declined compared with the prior quarter, reflecting typical seasonal trends and the lower level of activity in the national accounts trade class resulting primarily from fewer product price increases. Net interest expense remained steady at $2.5 million. The company benefited from a lower tax rate in the fourth quarter reflecting lower full-year effective tax rates. Through August 1, 2003, D&K Healthcare has repurchased 600,000 shares of its common stock at an average price of $9.78 per share under its one million-share repurchase authorization announced in September 2002. Outlook D&K Healthcare management expects diluted EPS of $1.10 to $1.20 for fiscal year 2004. This outlook compares with the $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) and one-time securitization termination costs ($0.08 per diluted share). Management expects fiscal 2004's earnings breakdown by quarter to reflect historical seasonal trends. At this time, the company estimates first quarter earnings in fiscal 2004 to be in the range of $0.15 to $0.20 per diluted share on sales of $500 million to $525 million. This first-quarter 2004 outlook compares with diluted EPS of $0.19 in the first quarter of fiscal 2003. However, first quarter 2003 results include approximately $83 million in sales related to attractively priced purchase opportunities from one supplier in the national accounts trade class which are not likely to be available in the 2004 period. Other company expectations for fiscal 2004 include: -- Net sales in the range of $2.4 billion to $2.5 billion. -- Gross profit as a percent of sales in the range of 3.9% to 4.0%. -- Operating earnings as a percent of sales in the range of 1.6% to 1.7%. 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 2003 fourth-quarter and full-year results. The Webcast can be accessed at www.dkhealthcare.com. Following the live discussion, a replay of the Webcast will be archived for two weeks on the company's Web site. Company Description D&K Healthcare Resources, Inc., is a leading wholesale distributor of branded and generic pharmaceuticals and over-the-counter health and beauty aid products. Headquartered in St. Louis, the company serves independent and regional pharmacy customers in 24 states primarily in the Midwest, Upper Midwest and South, as well as national pharmacy chains, from six distribution facilities located in Missouri, Florida, Kentucky (2), Minnesota and South Dakota. In addition, D&K Healthcare offers a variety of value-added services including inventory management, cost containment, information technology systems and specialized marketing programs. The company also owns a 70 percent equity interest in Pharmaceutical Buyers, Inc., a leading alternate-site group purchasing organization based in Boulder, CO. More information about D&K Healthcare may be found on the company's corporate Web site 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 changing business and regulatory environment of the healthcare industry in which the company operates, including manufacturer's 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. (financial tables follow) D&K HEALTHCARE RESOURCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended ------------------------------------------- (Unaudited) % of % of June 30, Net June 30, Net % 2003 Sales 2002 Sales Change ------------------------------------------- Net sales $529,960 100.00% $637,718 100.00% -16.9% Cost of sales 508,555 95.96% 611,587 95.90% -16.8% ----------- ----------- Gross profit 21,405 4.04% 26,131 4.10% -18.1% Operating expenses 12,382 2.34% 14,051 2.20% -11.9% ----------- ----------- Income from operations 9,023 1.70% 12,080 1.89% -25.3% Other income (expense): Interest expense, net (2,482) -0.47% (2,480) -0.39% 0.1% Other, net 19 0.00% 28 0.00% -32.1% ----------- ----------- Pretax earnings 6,560 1.24% 9,628 1.51% -31.9% Income tax provision (2,200) -0.42% (3,973) -0.62% -44.6% Minority interest (198) -0.04% (126) -0.02% 57.1% ----------- ----------- Income before cumulative effect of accounting change 4,162 0.79% 5,529 0.87% -24.7% Cumulative effect of accounting change, net - 0.00% - 0.00% ----------- ----------- Net income $4,162 0.79% $5,529 0.87% -24.7% =========== =========== Earnings per share - basic $0.30 $0.38 Earnings per share - diluted $0.29 $0.37 Basic common shares outstanding 13,962 14,496 Diluted common shares outstanding 14,169 14,875 D&K HEALTHCARE RESOURCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Twelve Months Ended ------------------------------------------- % of % of June 30, Net June 30, Net % 2003 Sales 2002 Sales Change ------------------ ------------------------ Net sales $2,223,388 100.00% $2,453,748 100.00% -9.39% Cost of sales 2,132,689 95.92% 2,350,917 95.81% -9.28% ----------- ----------- Gross profit 90,699 4.08% 102,831 4.19%-11.80% Operating expenses 54,312 2.44% 56,492 2.30% -3.86% ----------- ----------- Income from operations 36,387 1.64% 46,339 1.89%-21.48% Other income (expense): Interest expense, net (10,660) -0.48% (9,719) -0.40% 9.68% Securitization termination costs (2,008) -0.09% - 0.00% 0.00% Other, net (13) 0.00% (710) -0.03%-98.17% ----------- ----------- Pretax earnings 23,706 1.07% 35,910 1.46%-33.98% Income tax provision (9,058) -0.41% (14,113) -0.58%-35.82% Minority interest (713) -0.03% (738) -0.03% -3.39% ----------- ----------- Income before cumulative effect of accounting change 13,935 0.63% 21,059 0.86%-33.83% Cumulative effect of accounting change, net (4,249) -0.19% - 0.00% ----------- ----------- Net income $9,686 0.44% $21,059 0.86%-54.01% =========== =========== Earnings per share - basic Net income before cumulative effect of accounting change $0.98 $1.48 Cumulative effect of accounting change $(0.30) $ - ----------- ----------- Net income $0.68 $1.48 Earnings per share - diluted Net income before cumulative effect of accounting change $0.95 $1.42 Cumulative effect of accounting change $(0.30) $ - ----------- ----------- Net income $0.65 $1.42 Basic common shares outstanding 14,328 14,247 Diluted common shares outstanding 14,513 14,678 D&K HEALTHCARE RESOURCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, June 30, (in thousands) 2003 2002 --------- --------- Assets Cash $14,301 $11,754 Accounts receivable 122,982 31,217 Inventories 257,984 364,244 Other current assets 8,862 6,699 --------- --------- Total current assets 404,129 413,914 Property and equipment, net 11,140 11,104 Other assets 11,511 5,024 Goodwill, net of accumulated amortization 44,105 51,131 Other intangible assets, net of accumulated amortization 1,810 1,965 --------- --------- Total assets $472,695 $483,138 ========= ========= Liabilities and Stockholders' Equity Accounts payable $173,342 $215,777 Current portion long-term debt 1,677 2,270 Other current liabilities 13,471 13,231 --------- --------- Total current liabilities 188,490 231,278 Long-term liabilities 3,703 2,757 Long-term debt 110,423 81,457 Deferred Income taxes - 249 Stockholders' equity 170,079 167,397 --------- --------- Total liabilities and stockholders' equity $472,695 $483,138 ========= ========= D&K HEALTHCARE RESOURCES, INC. EARNINGS PER SHARE RECONCILIATION (In thousands, except per share data) Three-Months ended Three-Months ended June 30, 2003 June 30, 2002 -------------------------- ------------------------- Income Shares Per Income Shares Per (Nume- (Denomi- Share (Nume- (Denomi- Share rator) nator)(1) Amount rator) nator)(1) Amount ------- ---------- ------ ------- --------- ------- (Unaudited) (Unaudited) Basic Earnings per Share: Net income available to common stockholders $4,162 13,962 $0.30 $5,529 14,496 $0.38 Effect of Diluted Securities: Options and warrants - 207 - 379 Convertible PBI securities (53) - (24) - ------------------- ------------------- Diluted Earnings per Share: Net income available to common stockholders plus assumed conversions $4,109 14,169 $0.29 $5,505 14,875 $0.37 =================== =================== Twelve-Months ended Twelve-Months ended June 30, 2003 June 30, 2002 -------------------------- ------------------------- Income Shares Per Income Shares Per (Nume- (Denomi- Share (Nume- (Denomi- Share rator) nator)(1) Amount rator) nator)(1) Amount -------------------------- ------------------------- Basic Earnings per Share: Net income available to common shareholders before cumulative effect of accounting change $13,935 14,328 $0.98 $21,059 14,247 $1.48 Cumulative Effect of Accounting Change, net (4,249) - ($0.30) $0 - - ------------------------- -------------------------- 9,686 14,328 $0.68 $1.48 Effect of Diluted Securities: Options and warrants - 185 - 421 Convertible PBI securities (182) - (169) 10 ------------------ ------------------ Diluted Earnings per Share: Net income available to common stockholders plus assumed conversions $9,504 14,513 $0.65 $20,890 14,678 $1.42 ================== ================== (1) Outstanding shares computed on a weighted average basis D&K HEALTHCARE RESOURCES, INC. Supplemental Information to the Condensed Consolidated Statements of Operations (In thousands, except per share data) Three Months Ended ----------------------------------- June 30, June 30, 2003 2002 ------------------ --------------- Reconciliation of non-GAAP financial measurement : Income from operations $9,023 $12,080 Depreciation and amortization 592 1,208 Other income, net 19 28 ------------------ --------------- EBITDA $9,634 $13,316 ================== =============== Twelve Months Ended ----------------------------------- June 30, June 30, 2003 2002 ------------------ --------------- Reconciliation of non-GAAP financial measurement : Income from operations $36,387 $46,339 Depreciation and amortization 2,492 4,453 Other income, net (13) (710) ------------------ --------------- EBITDA $38,866 $50,082 ================== =============== CONTACT: D&K Healthcare Resources, Inc. Investor Relations: Molly R. Salky, 314-290-2671 www.dkhealthcare.com