EXHIBIT 99.1
Financial Contact: Joel Kimbrough
901.385.3621
Investor Relations Contact: Kerry Finney
901.381.7442
For Immediate Release
ACCREDO HEALTH, INC. ANNOUNCES THIRD QUARTER RESULTS
Memphis, TN, May 5, 2003 - Accredo Health, Incorporated (NASDAQ:ACDO) today
reported results for the quarter and nine months ended March 31, 2003. Revenues
for the quarter increased 105% to $366.6 million compared to $178.5 million for
the same period in fiscal 2002. Revenues for the nine months increased 126% to
$1,052.7 million compared to $465.3 million for the same period in fiscal 2002.
The company's net loss for the quarter was $17,769,000, or $0.37 per share,
compared to net income of $8,988,000, or $0.22 per diluted share, for the same
period in fiscal 2002. Net earnings for the nine months were $13,250,000, or
$0.27 per diluted share, compared to $22,082,000, or $0.55 per diluted share,
for the same period in fiscal 2002.
The third quarter and nine month results include a special charge of $58.5
million ($35.7 million after tax) to increase the allowance for doubtful
accounts related to the accounts receivable of the SPS division. This charge
reduced net income for the quarter and nine months ended March 31, 2003 by $35.7
million and earnings per share by $0.74. Excluding this charge, net earnings
were $17,931,000, or $0.37 per diluted share, for the quarter and $48,950,000,
or $1.01 per diluted share, for the nine months ended March 31, 2003. The
attached financial statements include a table that summarizes the impact of the
special charge on net income and diluted earnings per share computed in
accordance with generally accepted accounting principles (GAAP).
David D. Stevens, Accredo's chief executive officer commented, "Although our
sales growth slowed in the March quarter, our margins and level of expenses
continue to meet or exceed our expectations. We believe that this slow down in
revenue growth is a short-term issue. We have taken a number of actions to
enhance our sales growth. We believe we have the appropriate number of staff and
the right people to regain our momentum. Although we will not see significant
results immediately from these adjustments, early indications suggest a positive
impact. We believe our current business model is unique, which provides
significant advantages in the market place both now and in the future."
Mr. Stevens further remarked, "In addition, we are excited about the FDA
approval of Genzyme's new products, Aldurazyme(R) and Fabrazyme(R), and our
continued relationship with the manufacturer. We will be assisting Genzyme in
the launch of these two products during the June quarter, and we are excited
about the opportunity to help serve these chronic patient populations. We
believe our selection as one of the two specialty pharmacy providers for these
medications continues to validate our niche strategy. In addition, we look
forward to the potential approval and launch of other new drugs during the
calendar year."
Joel R. Kimbrough, Accredo's chief financial officer added, "We are pleased with
the continued improvement in our gross profit margins. For the quarter, gross
profit margin improved to 20.8% compared to 16.5% in the same quarter last year
and 20.2% in the December 2002 quarter. In addition, we generated $16.3 million
of cash from operations in the March quarter, and we estimate that we will
generate $60 to $65 million for the year ending in June 2003."
Mr. Kimbrough continued, "We announced on April 8, 2003 that we were lowering
our estimates for the 2003 fiscal year to a range of $1.20 to $1.25 as a result
of lower than anticipated revenues. In addition, we announced that we were
examining the adequacy of the reserves of the accounts receivable, and that the
impact of any potential charge was not reflected in the revised guidance. As a
result of the $35.7 million after tax charge ($0.74 per share) discussed above,
we are lowering our fiscal 2003 earnings per share estimate to a range of $0.58
to $0.60. Excluding the impact of the special charge, the earnings estimate
range for fiscal 2003 would be $1.32 to $1.34. In addition, we estimate that for
our fiscal year ending June 2004, we will achieve revenues in the $1.475 billion
to $1.525 billion range and earnings per share of $1.53 to $1.58. These
estimates do not include the revenues from Genzyme's new products, Aldurazyme(R)
or Fabrazyme(R). In addition, these estimates assume no new indications for
current product lines, potential new product lines or future acquisitions.
Excluding the fiscal 2003 revenues from Bio-Technology General Corp.'s products
Oxandrin(R) and Delatestryl(R) which we are now distributing on a consignment
basis, the fiscal 2004 revenue estimate represents a 13% to 17% increase."
IN ADDITION TO THE PREVIOUS DISCUSSIONS, WE ARE PROVIDING THE FOLLOWING
QUESTIONS AND ANSWERS RELATED TO OUR OPERATING RESULTS AND OUR ON-GOING
BUSINESS:
Q1) WHY DID YOU TAKE THE SPECIAL CHARGE IN THE MARCH QUARTER?
A1) We determined that the collection rates and other data used in the method
for estimating the reserves for contractual expense and bad debts had not
provided a sufficient reserve against the recorded accounts receivable for the
SPS division, which we acquired on June 13, 2002. During the March quarter, we
conducted an evaluation of the collection rates and other data used in the
reserve estimation at June 13, 2002. As a result of the evaluation made in the
March quarter, we recorded a charge to earnings of $58.5 million and increased
the accounts receivable reserve for the same amount. If the collection rates and
the other data we used in the method for estimating the reserves during the
March quarter had also been used prior to sale of the SPS division,
approximately $56.8 million of the charge would have been recorded as of June
13, 2002.
We had previously announced that we were working with our external auditors to
determine the appropriate accounting method for an adjustment to the reserve if
it was determined that an adjustment was needed. We had indicated that an
increase in the reserve, if any, could result in an adjustment to the purchase
price recorded by the company for the SPS acquisition or in a charge against the
company's fiscal 2003 earnings. The additional reserve has been recorded as a
charge to earnings in the March quarter.
Q2) WHY DID GROSS PROFIT MARGINS IMPROVE TO 20.8% IN THE MARCH QUARTER COMPARED
TO THE 16.5% ACHIEVED IN THE SAME QUARTER LAST YEAR AND TO THE 20.2% GENERATED
IN THE DECEMBER 2002 QUARTER?
A2) For the March quarter, gross profit margins improved to 20.8% compared to
16.5% in the same quarter last year. The improvement is primarily a result of
product mix changes. We derived a larger percentage of our revenues from higher
margin products in the March quarter when compared to the same quarter last
year.
We also experienced a 60 basis point improvement in gross margin from 20.2% in
the December quarter to 20.8% in the March quarter, which was higher than we had
anticipated. Although most of our products have maintained a consistent gross
profit margin, we did benefit from lower acquisition costs on some of the
products we distribute.
Q3) WHY WERE GENERAL AND ADMINISTRATIVE EXPENSES 9.2% OF REVENUE COMPARED TO
6.6% IN THE SAME QUARTER LAST YEAR? WHAT IS THE OUTLOOK FOR FUTURE QUARTERS?
A3) The general and administrative expenses increased to 9.2% in the March
quarter from 6.6% in the same quarter last year primarily as a result of product
mix. Our higher margin products, which were a larger percentage of our total
revenues in the March 2003 quarter, have higher general and administrative
expenses than many of the other product lines we distribute. We expect G&A as a
percentage of total revenues to increase to a range of 9.5% to 10.0% in the
fourth quarter as the revenues from the seasonal drug Synagis(R) decrease
significantly.
Q4) WHY WAS BAD DEBT EXPENSE 2.1% OF REVENUE COMPARED TO 1.0% IN THE SAME
QUARTER LAST YEAR?
A4) The increase in bad debts as a percentage of revenues is primarily due to
the SPS acquisition, which resulted in an increase in the percentage of our
revenues that were reimbursed by major medical benefit plans versus prescription
card benefits. The majority of the reimbursements provided by major medical
benefit plans are subject to much higher co-payment and deductible amounts
resulting in higher bad debts.
Q5) WHY DOES THE REVENUE AND EARNINGS GUIDANCE INDICATE A SEQUENTIAL DECLINE
FROM THE THIRD QUARTER TO THE FOURTH QUARTER?
A5) For fiscal year 2003, Synagis(R) will achieve revenues in the range of $75
to $80 million, a 20% to 25% increase over last year, which does not include the
revenues recorded by our unconsolidated joint ventures. The majority of the
Synagis(R) revenue and the related earnings are generated in the second and
third quarters. We also previously announced that we would begin distributing
Bio-Technology General Corp.'s products Oxandrin(R) and Delatestryl(R) on a
consignment basis. Therefore, we will no longer record the revenue for the sale
of these products. The transition to this new arrangement was completed in the
March quarter. Revenues from Oxandrin(R) and Delatestryl(R) amounted to
approximately $21 million in the March quarter. As a result of these events, we
expect a sequential decline in both revenues and earnings in the fourth quarter.
Q6) WHAT IS THE STATUS OF THE PREVIOUSLY ANNOUNCED SALE OF THE INFERTILITY
BUSINESS?
A6) On April 1, we sold the infertility business that was acquired as part of
the BioPartners In Care, Inc. acquisition in December 2001. In connection with
the sale, we have entered into an agreement with the buyer to provide pharmacy
and back office services for a period of up to 180 days while the buyer obtains
necessary licenses and contracts. During this transition period, we will
continue to recognize revenue from the sale of infertility products which
amounted to approximately $1.8 million in the March quarter.
Q7) WHAT IS THE STATUS OF THE SPECIALTY PHARMACY INJECTABLE CONTRACT WITH AETNA?
A7) We are pleased to announce that we have extended our contract with Aetna
under the current terms of the agreement.
As previously announced, the Company's conference call to discuss the third
quarter results is scheduled for Monday, May 5, 2003, at 9:00 a.m. CDT. The
conference call will be web-cast live on the Accredo Health, Incorporated web
site. Interested parties may access the web-cast at www.accredohealth.com
beginning at 9:00 a.m. CDT on May 5, 2003. A replay of the call will be
available, and there will also be a playback of the conference call available
over the Internet beginning approximately one hour after the end of the
conference call. Both the re-play of the call and the Internet playback option
will be available until May 16, 2003 at 5:00 p.m. CDT. To access the replay
call, dial 402-220-2491 and enter the code 16187177. To access the Internet
playback, go to www.accredohealth.com.
In addition to historical information, certain of the statements in the
preceding paragraphs, particularly those anticipating future financial
performance, business prospects and growth and operating strategies constitute
forward-looking statements within the meaning of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Such statements may be
identified by words such as anticipate, believe, estimate, expect, intend,
predict, hope or similar expressions. Such statements, which include estimated
financial information or results and the quoted comments of Mr. Stevens and Mr.
Kimbrough above, are based on management's current expectations and are subject
to a number of factors and uncertainties which could cause actual results to
differ materially from those described in the forward-looking statements,
including, without limitation, the loss of a biopharmaceutical relationship, our
inability to sell existing products, difficulties integrating the SPS division,
the impact of pharmaceutical industry regulation, the difficulty of predicting
FDA and other regulatory authority approvals, the regulatory environment and
changes in healthcare policies and structure, acceptance and demand for new
pharmaceutical products and new therapies, the impact of competitive products
and pricing, the ability to obtain products from suppliers, reliance on
strategic alliances, the ability to expand through joint ventures and
acquisitions, the ability to maintain pricing arrangements with suppliers that
preserve margins, the need for and ability to obtain additional capital, the
seasonality and variability of operating results, the Company's ability to
implement its strategies and achieve its objectives and the risks and
uncertainties described in reports filed by Accredo with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
including without limitation, cautionary statements under the heading "Risk
Factors" made in Accredo's Quarterly Report on Form 10-Q for its quarter ended
December 31, 2002.
ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED) (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2003 2002 2003 2002
Net patient revenues $ 1,024,132 $ 451,408 $ 357,828 $ 173,563
Other revenue 27,259 12,478 8,336 4,362
Equity in net income of joint ventures 1,345 1,445 405 572
-------------------------- --------------------------
Total revenues 1,052,736 465,331 366,569 178,497
Cost of sales 836,938 391,766 290,267 148,995
-------------------------- --------------------------
Gross profit 215,798 73,565 76,302 29,502
General & administrative 97,174 31,154 33,761 11,851
Bad debts 21,985 3,826 7,743 1,770
Special charges(1) 58,500 -- 58,500
Depreciation and amortization 8,658 2,369 3,085 907
-------------------------- --------------------------
Income (loss) from operations 29,481 36,216 (26,787) 14,974
Interest income (expense), net (6,084) 838 (2,014) 38
Minority interest in consolidated subsidiary (1,510) (966) (507) (333)
-------------------------- --------------------------
Net income (loss) before income taxes 21,887 36,088 (29,308) 14,679
Provision for income tax expense (benefit) 8,637 14,006 (11,539) 5,691
-------------------------- --------------------------
Net income (loss) $ 13,250 $ 22,082 $ (17,769) $ 8,988
========================== ==========================
Earnings (loss) per share:
Basic $ 0.28 $ 0.56 $ (0.37) $ 0.23
Diluted $ 0.27 $ 0.55 $ (0.37) $ 0.22
Weighted average shares outstanding:
Basic 47,419,325 39,113,457 47,698,820 39,262,335
Diluted 48,488,663 40,459,524 48,541,507 40,718,429
(1) The company recorded a special charge in the March 2003 quarter to
increase the allowance for doubtful accounts related to the accounts
receivable of the SPS division.
THE FOLLOWING TABLE SUMMARIZES THE IMPACT OF THE SPECIAL CHARGE ON NET INCOME
AND DILUTED EARNINGS PER SHARE COMPUTED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP).
(UNAUDITED) (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2003 2002 2003 2002
Net income (loss) computed in accordance with GAAP $ 13,250 $ 22,082 $(17,769) $ 8,988
Add back special charge, net of income tax benefit 35,700 -- 35,700 --
----------------------- -----------------------
Adjusted net income $ 48,950 $ 22,082 $ 17,931 $ 8,988
======================= =======================
Diluted earnings (loss) per share (GAAP) $ 0.27 $ 0.55 $ (0.37) $ 0.22
Add back special charge, net of income tax benefit 0.74 -- 0.74 --
----------------------- -----------------------
Adjusted diluted earnings per share $ 1.01 $ 0.55 $ 0.37 $ 0.22
======================= =======================
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
MARCH 31, JUNE 30,
2003 2002
Cash & cash equivalents $ 32,062 $ 42,913
Accounts receivable, net 311,718 335,253
Other current assets 159,264 155,043
Fixed assets, net 30,650 23,796
Other assets 382,183 367,824
-----------------------
Total assets $915,877 $924,829
=======================
Current liabilities $228,704 $223,429
Long-term debt 182,500 224,688
Other liabilities 9,298 5,658
Stockholders' equity 495,375 471,054
-----------------------
Total liabilities and stockholders' equity $915,877 $924,829
=======================
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(AMOUNTS IN THOUSANDS)
(UNAUDITED) (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2003 2002 2003 2002
Net cash provided by (used in) operating activities $ 48,650 $ 3,472 $ 16,344 $ (5,481)
Net cash provided by (used in) investing activities (35,133) (52,738) (22,545) (9,259)
Net cash provided by (used in) financing activities (24,368) (4,151) 1,920 478
----------------------- -----------------------
Increase (decrease) in cash and cash equivalents $(10,851) $(53,417) $ (4,281) $(14,262)
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